SETTLEMENT AGREEMENT AND RELEASERelease Agreement |
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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,
116th
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.
| (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,
each party hereto agrees to take or cause to be taken all such necessary action
including, without limitation, the execution and delivery of such further
instruments and documents, as may be reasonably requested by any party for
such
purposes or otherwise necessary to complete or perfect the transaction
contemplated hereby.
6. CONFIDENTIALITY
AGREEMENT.
At all
times prior to execution of this Agreement, the parties hereto agree to not
disclose to any other person any o
