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Exhibit 10.3
SETTLEMENT AGREEMENT AND RELEASE
THIS
SETTLEMENT AGREEMENT AND RELEASE ("Agreement") is dated as of
May 23, 2007 by and between CROSS COUNTRY CAPITAL PARTNERS,
L.P. ("Cross Country"), and VOIP, INC. ("VoIP").
WHEREAS,
Cross Country and VoIP entered into a certain Subscription
Agreement dated as of August 26, 2005, as amended on November
16, 2005 (the “Subscription
Agreement”);
WHEREAS,
pursuant to the Subscription Agreement, Cross Country
purchased from VoIP a certain number of warrants and shares of
VoIP’s stock;
WHEREAS,
on or about September 25, 2006 Cross Country brought an action
against VoIP entitled
Cross Country Capital Partners, LP v. VoIP, Inc.
,
Cause No. 06-10030 (the “Action”) in the District Court
for Dallas County, Texas, 116
th Judicial
District, (the "Court"), whereby Cross Country asserted claims
against VoIP alleging that VoIP breached certain provisions of the
Subscription Agreement (the “Claims”);
WHEREAS,
on or about February 5, 2007, Cross Country filed
Plaintiff’s First Amended Original Petition alleging
additional breaches of the Subscription Agreement by
VoIP;
WHEREAS,
VoIP denies that it is liable for the relief sought in the
Action, but acknowledges that it does not have sufficient cash
to satisfy the claims made in the Action;
WHEREAS,
VoIP currently only has the means to satisfy payment of bona
fide claims through the issuance to Cross Country of
authorized shares, pursuant to Section 3(a)(10) of the
Securities Act of 1933; and
WHEREAS,
all of the parties are mutually desirous of settling this
matter;
NOW,
THEREFORE, in consideration of the terms and conditions
hereinafter set forth, the sufficiency of which is hereby
acknowledged, the parties do hereby agree as
follows:
1.
The
foregoing recitals are true and correct.
2.
SETTLEMENT SHARES .
As soon as practicable following entry of an order by the Court in
accordance with Paragraph 4 herein, and subject to subparagraphs
2(a) and (b) below, VoIP shall cause to be issued 12,500,000 free
trading shares of VoIP common stock to Cross Country (the
"Settlement Shares"). The strike price of the 1,537,500 Class D
Warrants and 687,500 Class D Warrants currently owned by Cross
Country shall be changed to $0.18 (the “New Strike
Price”) and Cross Country shall continue to own such warrants
at the New Strike Price.
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(a) |
Of
the 12,500,000 Settlement Shares, 6,250,000 such shares (the
“Volume Limitation Shares”) are subject to the
following restriction: During any ninety (90) day period,
Cross
Country may only sell an amount of the Volume Limitation Shares in
an aggregate amount up to 1% of the outstanding common stock of
VoIP as shown by the most recent report or statement published by
VoIP. After every sale as contemplated herein, Cross Country will
provide evidence of such sale through a confirming monthly
statement or on another comparable document;
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(b) |
The
remaining 6,250,000 Settlement Shares (the “Remaining
Settlement Shares”) may be disposed of by Cross Country at
such time or times thereafter, and in such manner, as it deems
appropriate in its sole discretion; provided, however, that Cross
Country shall provide VoIP with two (2) days prior notice of any
such disposition.
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3.
SECOND CLOSING .
Any rights to a Second Closing pursuant to paragraph 1(b) of the
Subscription Agreement shall be null and void.
4.
FAIRNESS HEARING .
Promptly upon execution hereof (but in any event within three (3)
Business Days thereof), VoIP and Cross Country agree, pursuant to
15 U.S.C. §77(a)(10), to submit the terms and conditions of
this Agreement to the Court for a hearing on the fairness of such
terms and conditions, for the issuance of an exemption from
registration of the Settlement Shares and an Order approving the
Agreement. VoIP avers it is a “reporting issuer” that
files reports with the SEC under Section 13 of the Securities and
Exchange Act of 1934 (the “Exchange Act”); VoIP avers
it is current in all its filing required under the Exchange Act;
and Cross Country avers it has access to, and has accessed all such
filings. In connection with such a Fairness Hearing, VoIP, the
issuer of the securities, and Cross Country, the proposed person to
whom the securities are to be issued, agree that the value of the
Settlement Shares utilized to satisfy the Claims is fair and
reasonable. This Agreement shall become binding upon the parties
only upon entry of an order by the Court substantially in the form
annexed hereto as Exhibit A (the “Order”); and in the
event the Order is not so entered, this Agreement shall be null and
void.
5.
NECESSARY ACTION .
At all times after the execution of this Agreement and entry of the
Order by the Court, e
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