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Title: |
Settlement Agreement |
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Date: |
2001 |
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$54 |
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#1167250 |
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<SEQUENCE>3
<FILENAME>file002.txt
<DESCRIPTION>SETTLEMENT AGREEMENT
<TEXT>
SETTLEMENT AGREEMENT
This settlement agreement ("Agreement") is made as of this 14th day of
August, 2001, by and among (i) Log On America, Inc. ("LOA"), (ii) Credit Suisse
First Boston Corporation ("CSFBC") and (iii) Marshall Capital Management, Inc.
("MCM").
WHEREAS, LOA and MCM are parties to (A) a Securities Purchase Agreement,
dated as of February 23, 2000 (the "Series A Purchase Agreement"), pursuant to
which LOA issued and sold to MCM (i) shares of its Series A Convertible
Preferred Stock (the "Series A Stock") in accordance with the terms of a
Certificate of Designations, Preferences and Rights (the "Series A
Certificate"), and (ii) Warrant (the "Series A Warrant") entitling the holder
thereof to purchase shares of the Company's common stock (the "Common Stock")
and (B) a Registration Rights Agreement, dated as of February 23, 2000 (the
"Series A Registration Agreement")(the Series A Purchase Agreement, the Series A
Certificate, the certificate(s) representing shares of Series A Stock held by
MCM, the Series A Warrant, and the Series A Registration Rights Agreement are
collectively referred to herein as the "Series A Transaction Documents");
WHEREAS, LOA sued MCM and others in the action Log On America, Inc. v.
Promethean Asset Management, LLC, 00 Civ. 6218 (RMB)(the "Initial Action");
WHEREAS, LOA sued CSFBC in the action Log on America v. Credit Suisse
First Boston Corporation, 01 Civ. 0272 (RMB)(MHD) ("Second Action"); and
WHEREAS LOA, CSFBC, and MCM desire to resolve the disputes raised
respectively between LOA and MCM in the Initial Action and between LOA and CSFBC
in the Second Action and in all other respects resolve any and all disputes
between LOA and both CSFBC and MCM;
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt
1
<PAGE>
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
1. At or about the time that this Agreement is executed and delivered by
the parties hereto, LOA will execute (a) a stipulation of dismissal with
prejudice of the entire Second Action in the form attached hereto as Exhibit A;
and (b) a notice of dismissal with prejudice of the Initial Action with regard
to MCM in the form attached hereto as Exhibit B, and will deliver such documents
into escrow with counsel for CSFBC and MCM, Solomon, Zauderer, Ellenhom,
Frischer & Sharp ("Solomon, Zauderer"). Upon payment of the amount described in
paragraph 2 below, Solomon, Zauderer may release such stipulation and notice to
CSFBC and MCM, and CSFBC and MCM thereafter may file such stipulation and notice
without any further notice to LOA.
2. CSFBC shall pay the amount of $3.25 million to LOA by wire transfer or
check within five (5) business days following the execution and delivery of this
Agreement by the parties.
3. Upon tender by CSFBC of the amount described in paragraph 2 above, and
the delivery by MCM of(i) certificate(s) representing 7,500 shares of Series A
Stock for cancellation and (ii) the Series A Warrant for cancellation, LOA shall
(i) issue and deliver to MCM 7,500 shares of a new series of preferred stock
(the "Series B Stock") pursuant to a Certificate of Designations, Preferences
and Rights in the form attached hereto as Exhibit C (the "Series B Certificate
of Designation"); (ii) execute and deliver to MCM a registration rights
agreement in the form attached hereto as Exhibit D (the "Series B Registration
Rights Agreement"), covering the registration of the resale by MCM of the Common
Stock issuable upon conversion of the Series B Stock; and (iii) execute and
deliver to MCM the exchange agreement in the form attached hereto as Exhibit E
(the "Exchange Agreement") pursuant to which MCM will exchange (a) 7,500 shares
of Series A Stock held by MCM and (b) the Series A Warrant for 7,500 shares of
Series B stock. Prior to the issuance of the Series B Stock to MCM, LOA will
file the Series B Certificate of Designation with the Secretary of State of the
State of Delaware
2
<PAGE>
and deliver a file-stamped copy thereof to MCM. The Series B Stock, the Exchange
Agreement, the Series B Certificate of Designation and the Series B Registration
Rights Agreement are collectively referred to herein as the "Series B
Transaction Documents".
4. Simultaneously with LOAs actions under paragraph 3 above, MCM shall (i)
execute the Series B Registration Rights Agreement and Exchange Agreement, and
(ii) deliver to LOA (a) the 7,500 shares of Series A Stock held by MCM and (b)
the Series A Warrant.
5. Upon the due issuance and delivery of 7,500 shares of Series B Stock,
and the execution and delivery of the Series B Registration Rights Agreement, to
MCM pursuant to paragraph 3 above, LOA and MCM's rights and obligations under
the Series A Transaction Documents and shares of Series A Stock and Series A
Warrant held by MCM, will be extinguished and of no further force or effect.
6. Effective upon (i) receipt by LOA of the payment described in paragraph
2 above, (ii) the ordering by the Court (as defined below) of the stipulation of
dismissal and Notice and Order of Dismissal described in paragraph 1; (iii) the
issuance and delivery of Series B Stock described in paragraph 3 to MCM; (iv)
the execution and delivery of the Series B Registration Rights Agreement and
Exchange Agreement by LOA and MCM; (v) delivery of certificates for 7,500 shares
of Series A Stock by MCM to LOA for cancellation; and (vi) delivery of the
Series A Warrant by MCM to LOA for cancellation (clauses (i) -- (vi) being
referred to as the "Release Conditions"), LOA, and its parents, subsidiaries,
affiliates, officers, directors, agents, employees, representatives, record and
beneficial security holders, successors and assigns, ("LOA Parties") hereby
fully release and forever discharge both CSFBC, and its parents, subsidiaries,
affiliates, officers, directors, agents, employees, representatives, record and
beneficial security holders, successors and assigns ("CSFBC Parties") and MCM,
and its parents, subsidiaries, affiliates, officers, directors, agents,
employees, representatives, record and beneficial security holders, successors
and assigns ("MCM Parties") of and from any and all claims, demands, duties,
obligations, liabilities, rights, damages (including exemplary
3
<PAGE>
or punitive damages) or causes of action, whether known or unknown, at law or in
equity, contingent or matured, in contract or in tort, that the LOA Parties have
ever had, or ever may have, in any way arising out of any event, circumstance,
act or omission from the beginning of the world to the date of this Agreement
including without limitation those arising from, relating to, or concerning (i)
all claims and causes of action asserted in the Complaint filed in both the
Initial Action and the Second Action or (ii) the Series A Transaction Documents
and the Series A Stock and Warrant ("Released Claims"); provided, however, that
such release shall not apply to any obligation that any MCM Party may have at
any time under the Series B Transaction Documents or shares of Series B stock or
herein.
7. Effective upon satisfaction of the Release Conditions, the CSFBC
Parties and the MCM Parties hereby fully release and forever discharge the LOA
Parties of and from any and all claims, demands, duties, obligations,
liabilities, rights, damages (including exemplary or punitive damages) or causes
of action, whether known or unknown, at law or in equity, contingent or matured,
in contract or in tort, that the CSFBC Parties or the MCM Parties have ever had,
or ever may have, in any way arising out of any event, circumstance, act or
omission from the beginning of the world to the date of this Agreement including
without limitation those arising from, relating to, or concerning (i) all claims
and causes of action asserted in the Complaint filed in both the Initial Action
and the Second Action or (ii) the Series A Transaction Documents and the Series
A Stock; provided, however, that such release shall not apply to any obligations
that any LOA Party may have at any time under the Series B Transaction Documents
or shares of Series B stock or herein.
8. Nothing contained herein shall be deemed in anyway to release any
claims asserted against Promethean Asset Management LLC, HFTP Investment LLC,
Fisher Capital Ltd., Wingate Capital Ltd. and Citadel Limited Partnership
(collectively the "Preferred Investors") from any claims that LOA may have
against the Preferred Investors, including but not limited to the claims
asserted by LOA in the Initial Action and, the Preferred Investors shall not be
third-party beneficiaries under this agreement.
4
<PAGE>
9. The United States District Court for the Southern District of New York
(the "Court") shall retain jurisdiction to enforce the terms of this settlement.
This Agreement is to be governed by the laws of the State of New York without
giving effect to any provision thereof that would allow or require the
application of the laws of any other jurisdiction.
10. It is the intention of the parties to this Agreement to relieve the
CSFBC Parties and the MCM Parties, and each of them, from any claims for
contribution or indemnity to any other person or entity arising out of the
Released Claims. Therefore, the LOA Parties agree that they will reduce or
credit, against any judgment or settlement that they may obtain against any
person or entity, an amount equal to the full amount of any judgment that such
person may at any time obtain or have obtained against the CSFBC Parties and the
MCM Parties, or any of them, on any claim, for contribution or indemnification,
that relates to or arises out of any Released Claims. LOA shall take such action
as may be reasonably required to assure the effectuation of the reduction of
judgment as provided for herein.
11. Each party hereto, and each person signing this Agreement or any
Series B Transaction Document and any other documents related thereto on behalf
of such party, represents and warrants that it, he or she, as the case may be,
has full authority to do so. By signing this Agreement, each party represents
and warrants that no other person, partnership, creditor, or entity, affiliated
with or acting at the direction of, in concert with or on behalf of such party,
has or has had any interest in the claims, demands, obligations or causes of
action referred to in the Agreement and such party has the sole right and
exclusive authority to execute this Agreement and the Series B Transaction
Documents and has not transferred, conveyed or otherwise disposed of any of the
claims, demands, obligations, or causes of action referred to herein.
12. This Agreement and the Series B Transaction Documents represent the
entire agreement between the parties concerning the subject matter hereof and
supersedes
5
<PAGE>
all prior agreements and understandings (whether written or oral) between the
parties on any and all such issues. This Agreement is intended to be a binding
agreement between the parties and shall not be changed, modified, amended,
extended, terminated, waived or discharged except by an agreement in writing
signed by all parties hereto. This Agreement may be signed in counterparts.
13. Each of the parties has participated in the drafting of this Agreement
after consulting with counsel. Accordingly, no party shall maintain that the
language of this Agreement should be construed in any way by reason of the other
party's putative role as the drafter of the agreement.
14. Except as expressly set forth herein, neither party has relied on any
representations made by the other party in reaching this Agreement.
15. This Agreement shall be binding on, and shall inure to the benefit of,
the parties and their respective legal representatives, successor and assigns.
16. The parties hereto agree to sign such other and further documents as
may be necessary to give effect to this Agreement.
17. All actions provided for herein shall be deemed to have been effected
simultaneously.
18. Nothing contained herein constitutes an admission of liability by any
party, and each party expressly denies any such liability.
6
<PAGE>
19. The parties agree to cause any and all direct or indirect parents,
divisions, subsidiaries, affiliates, employees, agents, representatives, and
attorneys to abide by the terms of this Agreement.
Dated: August 14, 2001
GAFNER & SHORE, LLP SOLOMON, ZAUDERER, ELLENIIORN
FRISCHER & SHARP By:
By: /s/ Mark A. Berman By: /s/ Michael S. Lazaroff
----------------------- -------------------------
Steven J. Shore Harry Frischer
Mark A. Berman Michael S. Lazaroff
360 Lexington Avenue 45 Rockefeller Plaza
New York, New York 10017 New York, New York 10111
(212) 922-9250 (212) 956-3700
(212) 922-9335 (Fax) (212) 956-4068 (Fax)
Attorneys for Attorneys for Credit Suisse First Boston
Log On America, Inc. Corporation and Marshall Capital
Management, Inc.
<PAGE>
Exhibit C
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK
OF
LOG ON AMERICA, INC.
Log On America, Inc. (the "Company"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify,
that, pursuant to authority conferred upon the Board of Directors of the Company
by the Certificate of Incorporation, as amended, of the Company, and pursuant to
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Company at a meeting duly held, adopted resolutions (i)
authorizing a series of the Company's previously authorized preferred stock, par
value $0.01 per share, and (ii) providing for the designations, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of Seven Thousand Five Hundred (7,500)
shares of Series B Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 7,500 shares of Series B
Convertible Preferred Stock (the "Series B Shares"), par value $0.01 per share,
which shall have the following powers, designations, preferences and other
special rights:
(1) Dividends. The Series B Shares shall not bear any dividends.
(2) Distribution of Assets Upon Liquidation.
(a) Upon the occurrence of (x) any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, commenced by the Company or by its
creditors, as such, or relating to its assets or (y) the dissolution or other
winding up of the Company whether total or partial, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy proceedings,
or (z) any assignment for the benefit of creditors or any marshaling of the
material assets or material liabilities of the Company (each, a "Liquidation
Event"), no distribution shall be made to the holders of any shares of Junior
Securities unless, following the payment of preferential amounts on all Senior
Securities, each holder of a Series B Share shall have received the Stated Value
with respect to each Series B Share then held by such holder. In the event that
upon the occurrence of a Liquidation Event, and following the payment of
preferential amounts on all Senior Securities, the assets available for
distribution to the holders of the Series B Shares and the holders of Pari Passu
Securities are insufficient to pay the aggregate Stated Value payable with
respect to the Preferred Shares and the aggregate preferential amount payable
with respect to such Pari Passu Securities, the remaining assets of the Company
shall be distributed ratably among the Series B Shares and the shares of Pari
Passu Securities in proportion to the ratio that the preferential amount payable
on each such share (which shall be the Stated Value
<PAGE>
in the case of a Series B Share) bears to the aggregate preferential amount
payable on all such shares.
(b) After the payment of any preferential amounts on all Senior
Securities and payment of the full Stated Value with respect to each Series B
Share and the preferential amounts payable on any Pari Passu Securities, the
remaining assets of the Company legally available for distribution, if any,
shall be distributed ratably to the holders of the Junior Securities of the
Company.
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