EXHIBIT 10.43
MUTUAL RELEASE AND SETTLEMENT AGREEMENT
dated as of
September 30, 2007
between
CRYSTAL PARADISE HOLDINGS, INC.
and
AMCON DISTRIBUTING CO.
TRINITY SPRINGS, INC.
MUTUAL RELEASE AND SETTLEMENT AGREEMENT
This Mutual Release and Settlement Agreement ("Agreement") is
dated
September 30, 2007 (the "Effective Date"), by and between
Crystal
Paradise Holdings, Inc., an Idaho corporation, also known as
Trinity
Springs, Ltd. ("CPH"), AMCON Distributing Co., a Delaware
corporation
("AMCON"), and Trinity Springs, Inc., a Delaware corporation
("TSI").
CPH, AMCON, and TSI may each be referred to as a "Party" or
collectively as the "Parties."
RECITALS
A. On December 21,
2006, CPH filed an action against TSI and AMCON in
the Fourth Judicial District of the State of Idaho (the "Court")
(Case
No. CV 06-1034) (the "Lawsuit"). CPH asserted claims for (i)
foreclosure; (ii) breach of the asset purchase agreement between
the
Parties dated April 24, 2004, as amended (the "2004 Purchase
Agreement"), and related promissory notes and water royalty
obligations; (iii) quantum meruit; (iv) unjust enrichment; and
(v)
collection and enforcement of its security interest. In addition, CPH
sought a declaratory judgment that: (i) AMCON and TSI are obligated
to
perform under the 2004 Purchase Agreement and other agreements
related
to the asset purchase transaction; (ii) the actions of AMCON and
TSI
constituted events of default; (iii) TSI has not cured the events
of
default; (iv) TSI's obligations are accelerated under certain
promissory notes; and (v) AMCON is liable to CPH under a guaranty
and
suretyship agreement for all amounts owing to CPH under the
2004
Purchase Agreement and related agreements.
B. On May 29, 2007,
TSI and AMCON responded and filed counterclaims
against CPH in the Lawsuit for (i) breach of the 2004 Purchase
Agreement; (ii) breach of the implied covenant of good faith and
fair
dealing; (iii) fraudulent misrepresentation; (iv) fraudulent
inducement of AMCON; (v) breach of representations and warranties
in
the 2004 Purchase Agreement; (vi) negligence; (vii) unjust
enrichment;
and (viii) setoff for failure to mitigate damages. In addition, AMCON
and TSI sought a declaratory judgment that (i) the 2004
Purchase
Agreement is unenforceable against the parties, (ii) AMCON and TSI
are
excused from performance under the 2004 Purchase agreement, and
(iii)
CPH, TSI, and AMCON are required to return each other to their
pre-contractual positions.
C. The Parties desire
to dismiss the Lawsuit in its entirety with
prejudice, settle all outstanding claims, and release the other
Parties from any claims and causes of action on the terms and
conditions set forth herein.
AGREEMENT
The Parties, intending to be legally bound, agree as follows:
ARTICLE 1
OPTION TO ACQUIRE ASSETS
1.1 OPTION TO ACQUIRE
ASSETS
Upon the terms and subject to the conditions set forth in this
Agreement, TSI hereby grants to CPH the exclusive option (the
"Option") to acquire from TSI, all of TSI's right, title, and
interest
in and to all of TSI's property and assets possessed by or for
which
TSI has any rights of ownership or use as of September 30,
2007,
whether real, personal, or mixed, tangible and intangible, or
every
kind and description, wherever located, including the following
(but
excluding the Excluded Assets as set forth in Section 1.2)
(collectively, the "Assets"), on an "AS IS, WHERE IS" basis, except
as
set forth in Section 3.1(f).
(a) All Real Property,
including but not limited to the Real Property
described in Schedule 1.1(a);
(b) All Tangible
Personal Property, including but not limited to
those items described in Schedule 1.1(b);
(c) The Raw Materials
Inventories, including but not limited to the
Raw Materials Inventories described in Schedule 1.1(c);
(d) All TSI Contracts
listed in Schedule 1.1(d);
(e) All data and
Records in the possession of TSI or AMCON related to
the operations of TSI or Trinity Springs, Ltd. ("TSLtd")
including
prior client and customer lists and Records, research and
development
reports and Records, production reports and Records, service
and
warranty Records, equipment logs, operating guides and manuals,
and
other similar documents and Records;
(f) All of the
intangible rights and property of TSI, including
Intellectual Property Assets, goodwill, telephone, telecopy,
and
e-mail addresses and listings and those Marks, Copyrights, and
Net
Names listed in Schedule 1.1(f);
(g) All insurance
benefits, including rights and proceeds, arising
from or relating to the Assets or the Assumed Liabilities prior to
the
Closing Date, unless expended in accordance with this
Agreement;
(h) All claims of TSI
and, to the extent applicable, of TSLtd against
third parties relating to the Assets, whether choate or
inchoate,
known or unknown, contingent or noncontingent, including but
not
limited to all such claims listed in Schedule 1.1(h);
(i) All of TSI's Water
Rights; and
(j) All rights of TSI
relating to deposits and prepaid expenses,
claims for refunds and right to offset in respect thereof.
1.2 EXCLUDED
ASSETS
Notwithstanding anything to the contrary contained in Section 1.1
or
elsewhere in this Agreement, the following assets will not be part
of
any assignment, transfer or delivery of Assets contemplated under
this
Agreement, are excluded from the Assets, shall remain the property
of
TSI from and after the Effective Date, and represent assets for
which
TSI shall have full rights of ownership or use, including but
not
limited to rights of disposition, after the Effective Date (the
"Excluded Assets").
(a) All cash and cash
equivalents;
(b) All minute books,
stock Records, and corporate seals;
(c) Those rights
relating to deposits and prepaid expenses, and
claims for refunds and rights to offset in respect thereof
specifically listed in Schedule 1.2(d);
(d) All insurance
policies with respect to TSI and rights thereunder;
(e) All personnel
Records and other Records (including financial and
accounting Records) that TSI is required by law to retain in
its
possession;
(f) All claims for
refund of Taxes and other governmental charges of
whatever nature;
(g) All rights of TSI
under this Agreement, the Bill of Sale, and the
Assignment and Assumption Agreement;
(h) All of TSI's Net
Operating Losses; and
(i) The additional assets of TSI
specifically listed in Schedule
1.2(j).
1.3 LIABILITIES
(a) ASSUMED
LIABILITIES. If CPH
exercises the Option, CPH will
assume and agree to discharge only the following "Assumed
Liabilities." Except
for the Assumed Liabilities, CPH will not assume
and shall in no event be liable for (and TSI shall retain and
pay,
perform, or otherwise discharge) any debt, obligation,
responsibility
or Liability of TSI (which TSI shall retain and pay, perform or
discharge before Closing).
(i) the Liabilities of TSI that are
due and payable with respect to
acts or omissions occurring in the periods after the Closing
Date
under the TSI Contracts listed on Schedule 1.1(d);
(ii) the Liabilities of TSI for acts or
omissions occurring in the
periods after the Closing Date under the Governmental
Authorizations
assigned to TSI;
(iii) state and local real estate and
personal property taxes and
water and sewer use charges assessed on the Assets payable at any
time
after the Closing Date;
(iv) the Permitted Encumbrances;
and
(v) any liabilities arising solely
from CPH's ownership and
operation of the Assets after Closing.
(b) RETAINED
LIABILITIES. From and
after the Effective Date, TSI
shall retain and before Closing pay, perform, or discharge the
following Liabilities (the "Retained Liabilities"):
(i) Secured promissory note payable to
Allen D. Petersen in the
principal amount of $1,000,000 dated December 14, 2004;
(ii) Promissory note payable to
Nebraska Distributing Co. in the
principal amount of $500,000 dated March 30, 2005;
(iii) Subordinated promissory note
payable to Aristide Investments,
L.P. in the principal amount of $250,000 dated August 8, 2005;
(iv) Subordinated promissory note
payable to Draupnir LLC in the
principal amount of $250,000 dated August 8, 2005;
(v) Subordinated promissory note
payable to Draupnir LLC in the
principal amount of $400,000 dated October 20, 2005;
(vi) Subordinated promissory note
payable to Draupnir LLC in the
principal amount of $200,000 dated November 7, 2005;
(vii) Subordinated promissory note
payable to Draupnir LLC in the
principal amount of $150,000 dated December 1, 2005;
(viii) Trade accounts payable due and
owed by TSI as of the
Effective Effective Date totaling approximately $881,000, and all
such
trade accounts due and owed thereafter;
(ix) Any amounts owed
by TSI or AMCON to LaSalle Bank NA as of the
Effective Date totaling approximately $1,000,000, and all such
other
amounts owed to LaSalle Bank NA owed thereafter;
(x) Any amounts owed by TSI to AMCON
as of the Effective Date
totaling approximately $2,900,000, and all such amounts owed
thereafter; and
(xi) Any other
Liability of TSI, whether known or unknown,
contingent or absolute, other than the Assumed Liabilities.
1.4 OPTION PERIOD
(a) CPH may elect to
exercise the Option, by providing written notice
to TSI and AMCON at any time before 5:00 pm, MST, on August 31,
2008
(the "Initial Option Period").
(b) CPH shall have the
right to extend the Option until 5:00 pm, MST,
on March 31, 2009 (the "Option Expiration Date") by (i)
providing
written notice to TSI and AMCON before 5:00 pm, MST on August
31,
2008, and (ii) foregoing its right to payment of all interest
accrued
or to be accrued with respect to the period from the Effective
Date
through the Initial Option Period. If CPH does not provide
written
notice before the expiration of the Initial Option Period or
the
Option Expiration Date, as the case may be, the Option shall
automatically terminate and CPH shall release its security
interests
as provided in Section 2.1(e).
ARTICLE 2
CONSIDERATION FOR OPTION; MUTUAL RELEASES
2.1 CONSIDERATION FOR
OPTION
(a) TERMINATION OF
2004 PURCHASE AGREEMENT. As of the Effective
Date, the 2004 Purchase Agreement shall be terminated by mutual
agreement of the Parties and none of the Parties shall have any
further obligations, liabilities, or rights of any kind
thereunder,
including, without limitation, any water royalties and
previously
accrued payment obligations of any kind; provided that CPH shall
be
entitled to retain any and all funds otherwise received prior to
the
Effective Date pursuant to the 2004 Purchase Agreement.
(b) CANCELLATION OF
EXISTING NOTES. As of
the Effective Date, CPH
shall unconditionally cancel and forever discharge TSI and AMCON
from
any unfulfilled obligations under (i) the Promissory Note made by
TSI
to the order of CPH in the principal amount of $500,000, dated
June
17, 2004 (the "3-Year Note") and (ii) the Promissory Note made by
TSI
to the order of CPH in the principal amount of $2,828,400, dated
June
17, 2004 (the "10-Year Note"). None of the Parties shall have
any
further obligations, liabilities, or rights of any kind
thereunder.
CPH shall deliver the original 3-Year Note and the original
10-Year
Note promptly following the Effective Date with notations that each
is
cancelled and paid in full.
(c) ISSUANCE OF NEW
NOTE. Concurrently
with the execution and
delivery of this Agreement, TSI shall issue to CPH a promissory
note
in the principal amount of Five Million Dollars ($5,000,000.00)
and
bearing interest at a rate of five percent (5%) per annum,
compounded
annually, which principal and accrued interest shall be due and
payable on September 30, 2012, in the form attached to this
Agreement
as Exhibit A (the "Note").
(d) AMENDMENT OF
GUARANTY. Concurrently
with the execution and
delivery of this Agreement, AMCON shall amend and restate that
certain
Guaranty and Suretyship Agreement dated June 17, 2004 to
reflect
AMCON's guarantee of payment in full of the principal and
interest
under the Note, in the form attached to this Agreement as Exhibit
B
(the "Guaranty").
(e) SECURITY
AGREEMENT; SECURITY INSTRUMENTS. The Security Agreement
between TSI and CPH dated June 17, 2004 (the "Security
Agreement"),
and the Mortgage granted by TSI to CPH dated June 17, 2004 (the
"Mortgage," together with the Guaranty and Security Agreement,
the
"Security Instruments"), shall continue in full force and effect
until
the earlier of CPH's exercise of the Option or Option Expiration
Date;
provided that AMCON, TSI and CPH shall amend or replace such
documents
as may be necessary to reflect the terms of this Agreement,
specifically the Option set forth herein, but only to the extent
to
which such amendment or replacement will not adversely affect
the
priority or other rights of CPH with respect to the Assets, it
being
the intention of AMCON, TSI and CPH that CPH continue in, or be
placed
in, a position with respect to other existing or potential
creditors
or other claimants that will ensure possession by CPH of the
Assets
upon exercise of the Option. In the event that CPH does not
exercise
the Option, promptly following the Option Expiration Date, CPH
will
release all of its security interests in the Assets.
(f) REDEMPTION OF TSI
STOCK. As of the
Effective Date, CPH shall
transfer to TSI and TSI shall redeem from CPH all of the right,
title
and interest of CPH in and to the shares of common stock of TSI
(the
"Shares"). CPH shall
transfer the Shares to TSI free and clear of any
Encumbrance. CPH
waives any right, option, right of first refusal,
warrant, or any right to acquire shares of stock of other interest
in
TSI or AMCON. Promptly
following the execution and delivery of this
Agreement, CPH shall deliver to TSI the stock certificate
representing
the Shares, duly endorsed for transfer or a lost certificate
affidavit
in form reasonably acceptable to TSI, and a duly executed stock
power
to transfer and assign the Shares to TSI, in the form attached
hereto
as Exhibit C (the "Stock Power"), together with all other
necessary
endorsements, to TSI.
(g) MUTUAL RELEASE OF
CLAIMS.
(i) Release by CPH.
As of the Effective
Date, CPH, on behalf of
itself and its subsidiaries, predecessors and successors in
interest
(the "CPH Entities"), together with, but solely with respect to
acts
or omissions directly relating to their employment or other
engagement
by or contracts with one of the CPH Entities, all of its past,
present, and future officers, directors, principals,
stockholders,
attorneys, insurers, agents, employees, representatives, and
assigns
(collectively with the CPH Entities, the "CPH Parties"), shall
fully,
finally, and forever discharge and release TSI, AMCON, and
their
respective subsidiaries, predecessors and successors in interest
(the
"AMCON Entities"), together with, but solely with respect to acts
and
omissions directly relating to their employment or other
engagements
by or contracts with one of the AMCON Entities, their respective
past,
present, and future officers, directors, principals,
stockholders,
attorneys, insurers, agents, employees, representatives, and
assigns
(collectively, with the AMCON Entities, the "AMCON Parties"), from
any
and all Damages (including general, special, compensatory, and
punitive damages), Liabilities, and compensation of any kind or
nature, whether based on contract, tort, strict liability, or
other
theory of recovery, whether known or unknown, which CPH or the
CPH
Parties now has or may have on account of, or in any way growing
out
of, or which is the subject of: (i) the Lawsuit, (ii) the 2004
Purchase Agreement (including the water royalties contemplated
thereunder), the 3-Year Note, the 10-Year Note, the Security
Instruments, and all other related documents executed in
connection
with the transactions contemplated in the 2004 Purchase Agreement
(the
"CPH Released Claims"), excluding only any claims arising out of
any
AMCON or TSI breach of the terms of this Agreement. Solely for the
purpose of clarification and to correct any subsequent claims
of
ambiguity, TSI and AMCON understand and acknowledge that none of
the
CPH Parties is discharging or releasing any person or entity
that
previously had, currently has or may in the future have any
employment, engagement or contractual relationship with any of the
CPH
Parties with respect to acts or omissions relating to or
resulting
from that relationship, including by way of example only, and
without
excluding other persons or entities, any employee or officer
that
previously worked for TSLtd, any previous TSLtd shareholder or
any
previous, current or subsequent professional services firm, such
as
Holland & Hart and Perkins Coie, engaged by any of the CPH
Entities.
(ii) Release by TSI and AMCON.
As of the Effective
Date, TSI and
AMCON, on behalf of themselves and the other AMCON Parties,
together
with, but solely with respect to acts or omissions directly
relating
to their employment or other engagements by or contracts with one
of
the AMCON Parties, shall fully, finally, and forever discharge
and
release each of the CPH Parties from any and all Damages
(including
general, special, compensatory, and punitive damages),
Liabilities,
and compensation of any kind or nature, whether based on
contract,
tort, strict liability, or other theory of recovery, whether known
or
unknown, which any of the AMCON Parties now has or may have on
account
of, or in any way growing out of, or which is the subject of: (i)
the
Lawsuit, (ii) the 2004 Purchase Agreement, the 3-Year Note, the
10-Year Note, the Security Instruments, and all other related
documents executed in connection with the transactions contemplated
in
the 2004 Purchase Agreement (the "AMCON Released Claims"),
excluding
only any claims arising out of CPH's breach of the terms of
this
Agreement and claims against the law firm of Perkins Coie.
Solely for
the purpose of clarification and to correct any subsequent claims
of
ambiguity, CPH understands and acknowledges that none of the
AMCON
Parties are discharging or releasing any person or entity that
previously had, currently has or may in the future have any
employment, engagement or contractual relationship with any of
the
AMCON Parties with respect to acts or omissions relating to or
resulting from that relationship, including by way of example
only,
and without excluding other persons or entities, any employee
or
officer that previously or currently works with any of the
AMCON
Parties, any previous TSLtd shareholder or any previous, current
or
subsequent professional services firm, such as Holland & Hart
or
Perkins Coie, engaged by any of the AMCON Parties.
(h) COVENANT NOT TO
SUE. The Parties shall
not sue or commence any
action at law, equity, or otherwise against each other for the
CPH
Released Claims or the AMCON Released Claims. The Parties, however,
may sue or commence any action at law, equity, or otherwise
against
each other for any excluded claims, including any rights of the
Parties pursuant to the Note, the Guaranty or the promises,
covenants
and commitments of each other under this Agreement.
(i) LIABILITY CONTESTED AND DENIED.
This settlement
between the
Parties as documented by this Agreement is a settlement of
disputed
claims between the Parties. Except as otherwise provided
herein,
nothing contained in this Agreement shall constitute an admission
of
fault or liability by any Party on any claim asserted or alleged.
The
Parties intend by this Agreement to fully, finally, and forever
resolve certain claims, and the Parties intend only to avoid
further
litigation. This
Agreement and the consideration provided are made
and accepted in good faith with the understanding by the Parties
of
the risks attendant to litigation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TSI AND AMCON
3.1 TSI
REPRESENTATIONS AND WARRANTIES
TSI represents and warrants to CPH as follows (which
representations
shall be made as of the Effective Date and shall be deemed to be
made
again at and as of the Closing):
(a) ORGANIZATION AND
GOOD STANDING. TSI is
a corporation duly
organized, validly existing and in good standing under the laws
of
Delaware. TSI is duly
qualified to do business as a foreign
corporation and is in good standing under the laws of Idaho.
(b) ENFORCEABILITY;
AUTHORITY. This
Agreement has been duly
authorized, executed and delivered by TSI and is the legal, valid
and
binding obligation of TSI, enforceable against TSI in accordance
with
its terms except to the extent that enforcement thereof may be
limited
by general principles of equity (regardless of whether enforcement
is
considered in a proceeding at law or in equity). TSI has the right,
power and authority to execute and deliver this Agreement and
all
other documents to be signed and delivered by TSI on signing and
at
the Closing, and to perform its obligations thereunder.
TSI is not
required to obtain the Consent from any Person in connection with
the
execution and delivery of this Agreement and all other documents to
be
signed and delivered by TSI or the consummation or performance of
any
of the Contemplated Transactions.
(c) CERTAIN
PROCEEDINGS. There is
no pending or threatened
Proceeding that challenges, or that may have the effect of
preventing
or making illegal, any of the Contemplated Transactions.
To the best
of TSI's Knowledge, no event has occurred or circumstance exists
that
is reasonably likely to give rise to or serve as a basis for
the
commencement of any such Proceeding.
(d) NO CONFLICT.
Neither the execution
and delivery by TSI of this
Agreement nor the consummation by it of the Contemplated
Transactions
will violate, breach, be in conflict with, or constitute a
default
under, or permit the termination or the acceleration of maturity
of
any contract, agreement, or instrument, or any judgment, order,
injunction, or decree by which TSI is bound, or to which the
Assets
are subject.
(e) NO ASSIGNMENT OF
CLAIMS. TSI has not
made, nor caused to be
made, any assignment or transfer of any of their claims or causes
of
action covered by the releases in Section 2.1(g)(ii).
(f) TITLE TO THE
ASSETS. TSI owns good
and marketable title to
Assets, free and clear of any Encumbrances, other than
Permitted
Encumbrances and with respect to any Encumbrances in favor of CPH
or
its shareholders or arising from or related to the Lawsuit or
the
previous lawsuit (Case No. 04-506 in the Fifth Judicial District
of
the State of Idaho).
Without limiting the generality of the
foregoing, there are no leases, licenses, occupancy or related
agreements or tenancies affecting the Real Property. TSI has not
granted, other than to CPH, any outstanding option, right of
first
refusal or any other right with respect to the purchase of all or
any
portion of the Real Property.
3.2 AMCON
REPRESENTATIONS AND WARRANTIES
AMCON represents and warrants to CPH as follows (which
representations
shall be made as of the Effective Date and shall be deemed to be
made
again at and as of the Closing):
(a) ORGANIZATION AND
GOOD STANDING. AMCON
is a corporation duly
organized, validly existing and in good standing under the laws
of
Delaware.
(b) ENFORCEABILITY;
AUTHORITY. This
Agreement has been duly
authorized, executed and delivered by AMCON and is the legal,
valid
and binding obligation of AMCON, enforceable against AMCON in
accordance with its terms except to the extent that enforcement
thereof may be limited by general principles of equity (regardless
of
whether enforcement is considered in a proceeding at law or in
equity). AMCON has the
right, power, and authority to execute and
deliver this Agreement and all other documents to be signed and
delivered by AMCON on signing and at the Closing, and to perform
its
obligations thereunder. AMCON is not required to obtain
the Consent
from any Person in connection with the execution and delivery of
this
Agreement and all other documents to be signed and delivered by
AMCON
or the consummation or performance of any of the Contemplated
Transactions.
(c) CERTAIN
PROCEEDINGS. There is
no pending or threatened
Proceeding that challenges, or that may have the effect of
preventing
or making illegal, any of the Contemplated Transactions.
To the best
of AMCON's Knowledge, no event has occurred or circumstance
exists
that is reasonably likely to give rise to or serve as a basis for
the
commencement of any such Proceeding.
(d) NO CONFLICT.
Neither the execution
and delivery by AMCON of this
Agreement nor the consummation by it of the Contemplated
Transactions
will violate, breach, be in conflict with, or constitute a
default
under, or permit the termination or the acceleration of maturity
of
any contract, agreement, or instrument, or any judgment, order,
injunction, or decree by which AMCON is bound, or to which the
Assets
are subject.
(e) NO ASSIGNMENT OF
CLAIMS. AMCON has not
made, nor caused to be
made, any assignment or transfer of any of their claims or causes
of
action covered by the releases in Section 2.1(g)(ii).
3.3 LIMITATIONS ON
REPRESENTATIONS AND WARRANTIES.
EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, TSI AND AMCON MAKE
NO
REPRESENTATIONS OR WARRANTIES EXPRESS OR IMPLIED REGARDING THE
ASSETS,
ASSUMED LIABILITIES, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY, TITLE, NONINFRINGEMENT, OR FITNESS FOR
A
PARTICULAR PURPOSE, AND ALL SUCH REPRESENTATIONS AND WARRANTIES
ARE
HEREBY DISCLAIMED.
Acknowledged and agreed: TSI /s/AP AMCON /s/ AP CPH /s/ RB
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CPH
CPH represents and warrants to TSI as follows (which
representations
shall be made as of the Effective Date and shall be deemed to be
made
again
