Exhibit 10.40
SETTLEMENT
AGREEMENT
AND MUTUAL GENERAL
RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL
GENERAL RELEASE (the “Agreement”), entered into as of
the 5th day of February, 2009 (“Effective Date”), by
and between Basin Water, Inc., a Delaware corporation (“Basin
Water”), BionBasin, Inc., a Delaware corporation
(“BION”), Opus Trust, Inc., a Nevis corporation
(“Opus Trust”), and Martin A. Benowitz, individually
and as Trustee of the Martin A. Benowitz Qualified Profit Sharing
Plan (the “Plan”) (Martin A. Benowitz individually and
in his role as trustee of the Plan sometimes hereinafter are
referred to collectively as “Benowitz”), is made with
respect to the following facts:
R E C I T A L
S
A. Opus Trust and Benowitz sometimes
hereinafter are referred to collectively as the “Settling
Claimants.” Basin Water, BION, Opus Trust and Benowitz
sometimes hereinafter are referred to individually as a
“Party” and collectively as the
“Parties.”
B. BION and Opus Trust previously
entered into that certain Unit Purchase Agreement (the
“Purchase Agreement”), dated as of March 30, 2006.
Pursuant to the Purchase Agreement, among other things:
(i) Opus Trust agreed to purchase, and BION agreed to sell,
two (2) standard ion exchange units, commonly identified as
Salinas Unit #15 (“Unit 15”) and Salinas Unit #108
(“Unit 108,” and together with Unit 15, collectively
the “Units”); (ii) Opus Trust agreed to pay One
Million Five Hundred Thousand Dollars ($1,500,000.00) (the
“Purchase Price”) in exchange for the Units; and
(iii) BION agreed to issue Opus Trust five hundred thousand
(500,000) shares (the “BION Stock”) of its common
stock, to be held as collateral for the payment of the Purchase
Price. The Purchase Agreement superseded that certain letter
agreement (the “Letter Agreement”), dated as of
December 28, 2005, between Opus Trust and Basin
Water.
C. On or about June 28, 2008,
an uninsured motorist allegedly fell asleep while driving, and as a
result, his van struck and damaged Salinas Unit # 108. Thereafter,
Basin Water determined that the damage to Unit 108 was so extensive
that it needed to be replaced.
D. Basin Water and BION have
asserted that Section 16.2 of the Purchase Agreement requires
Opus Trust to insure the Units. Opus Trust failed to insure the
Units, and to offset damages incurred in replacing Unit 108, Basin
Water has withheld certain amounts payable with respect to Unit
15.
E. Opus Trust disputes that it was
or is required to insure the Units. It also has alleged certain
securities and other claims against Basin Water or BION arising out
of or related to Benowitz’s acquisition of Basin Water common
stock, Benowitz’s sale of Basin Water common stock, Opus
Trust’s purchase of the Units, Opus Trust’s acquisition
of the BION Stock, Basin Water’s sale to Benowitz and Opus
Trust of nitrate water treatment units instead of BION water
treatment units, and Basin Water’s withholding of amounts
payable with respect to the Units.
F. The disputes described in
Recitals C and D above, and any other disputes and/or disagreements
between Benowitz and Opus Trust, on the one hand, and Basin Water
and BION, on the other hand, sometimes hereinafter are referred to
collectively as the “Dispute.”
G. On the terms and conditions set
forth below, the Parties now desire to fully and finally settle and
compromise their Dispute.
NOW, THEREFORE, in consideration of
the mutual covenants herein contained, and for other good and
valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Parties hereto agree as
follows:
OPERATIVE
PROVISIONS
1. Settlement Terms . Subject
to the terms and conditions of this Agreement, and in full
settlement of this Dispute: (a) Basin Water agrees to pay
Settling Claimants One Hundred Twenty-Five Thousand Dollars
($125,000) (the “Settlement Payment”) and, at the
request of Opus Trust, transfer to Opus Trust 150,000 shares (the
“EWC Shares”) of common stock in Empire Water
Corporation (“EWC”) owned by Basin Water Resources,
Inc. (“BWR”), a wholly-owned subsidiary of Basin Water;
and (b) Settling Claimants agree to transfer all right, title
and interest in and to the Units and in and to the BION Stock to
Basin Water. The Settling Claimants shall be responsible to
apportion and distribute the Settlement Payment and the EWC Shares
among themselves as they deem appropriate, and the Settling
Claimants, on a joint and several basis, shall save, indemnify,
hold harmless and defend (with counsel acceptable to the Basin
Releasing Parties (as defined in Section 5 below) the Basin
Released Parties with respect to any claim or controversy that may
arise with respect to the apportionment and distribution of the
Settlement Payment and the EWC Shares.
2. Exchange of Settlement
Consideration . The exchange (the “Exchange”) of
settlement consideration contemplated by this Agreement shall take
place at 11:00 a.m., local time, at the offices of Buchanan
Ingersoll & Rooney, 707 Broadway, Suite 800, San Diego, CA
92101, on February 5, 2009, or at such other date, time or
place as the parties may agree (the “Settlement
Date”).
2.1 Deliveries by Basin Water and
BION to Opus Trust . At the Exchange, Basin Water shall deliver
or cause to be delivered to Opus Trust: (a) duplicate
originals of this Agreement, duly executed by Basin Water and BION;
(b) the Settlement Payment; and (c) a duly executed
assignment separate from certificate, substantially in the form of
Exhibit “A” attached hereto, transferring the EWC
Shares to Opus Trust and Benowitz. Basin Water shall pay the
Settlement Payment, at its election, by wire transfer via
“Fed Wire” of immediately available funds, or by
cashiers check drawn on a mutually agreeable bank.
2.2 Deliveries by Opus Trust
. At the Exchange, Opus Trust shall deliver or cause to be
delivered to Basin Water and BION: (a) duplicate originals of
this Agreement, duly executed by Opus Trust and Benowitz;
(b) a duly executed assignment separate from certificate,
substantially in the form of Exhibit “B” attached
hereto, transferring all of Opus Trust’s shares of BION Stock
to Basin Water; and (c) a duly executed transfer of title for
the Units, substantially in the form of Exhibit “C”
attached hereto.
3. Representations and Warranties
Concerning EWC Shares . In contemplation of the transfer of the
Securities to Opus Trust and Benowitz (sometimes hereinafter
collectively referred to as the “Transferee”), the
Transferee hereby represents, agrees and acknowledges as
follows:
3.1 Knowledge and Financial
Experience . Transferee has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of purchasing and investing in the EWC
Shares.
3.2 No Investment Advice .
None of Basin Water, BION, or any of their agents or affiliates has
given any investment advice or rendered any opinion to the
Transferee as to whether the purchase of an investment in the EWC
Shares is prudent or suitable, and Transferee is not relying on any
representation or warranty by the Company or any of its agents or
affiliates with respect to EWC.
3.3 Opportunity for Questions of
Basin Water, BION . Transferee acknowledges that Basin Water
and BION have offered (a) Transferee the opportunity to ask
questions and receive answers from Basin Water or BION or persons
acting on behalf of Basin Water or BION or their affiliates
(including BWR) with respect to the EWC Shares, (b) to furnish
Transferee with all other materials that it considers relevant to
an investment in EWC Shares and (c) to give Transferee the
opportunity to fully perform its due diligence in connection with
an investment in EWC Shares.
3.4 Opportunity for Questions of
EWC . Transferee represents that (a) it has had the
opportunity to ask questions and receive answers from EWC or
persons acting on behalf of EWC with respect to the EWC Shares,
(b) EWC has provided Transferee with access to all materials
that it considers relevant to an investment in the EWC Shares and
(c) EWC has given Transferee the opportunity to fully perform
its due diligence in connection with an investment in the EWC
Shares.
3.5 Independent Decision .
Transferee has access to all information that it believes is
necessary, sufficient or appropriate in connection with its
investment in the EWC Shares. Transferee has made an independent
decision to accept the EWC Shares based on the information
concerning the business and financial condition of EWC and other
information available to it, which it has determined are adequate
for that purpose, and in light of its financial circumstances, and
Transferee has not relied on any information (in any form, whether
written or oral) furnished by Basin Water or BION or on their
behalf in making that decision.
3.6 Release . Transferee
hereby expressly releases Basin Water and BION and their
affiliates, officers, employees, agents and controlling persons
from any and all liabilities arising from, in or in connection with
Transferee’s investment in the EWC Shares (including, without
limitation, any investment loss that it may suffer), and it hereby
agrees to make no claim (and it hereby waives and releases all
claims that it may otherwise have) with respect to such investment
in the EWC Shares, whether before or after the date of this
Agreement, against Basin Water and BION, their respective
affiliates (including BWR), officers, directors, shareholders,
principals, partners, agents, servants, employees, assigns,
representatives, attorneys and controlling persons (including,
without limitation, for any investment loss that it may suffer with
respect to the EWC Shares). Transferee hereby agrees that the
release and waiver contained in this paragraph is unconditional and
irrevocable.
3.7 No View for Resale .
Transferee is acquiring the EWC Shares for investment for
Transferee’s own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any
distribution thereof. Transferee further represents that it does
not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to any third
person with respect to any of the EWC Shares.
3.8 Accredited Investor .
Transferee is an “accredited investor” within the
meaning of Securities and Exchange Commission Rule 501 of
Regulation D, as presently in effect, under the Securities Act of
1933, as amended (the “Securities Act”).
3.9 No Registration .
Transferee acknowledges that its purchase of the EWC Shares has not
been registered under the Securities Act. Transferee acknowledges
that the EWC Shares must be held indefinitely unless subsequently
registered under the Securities Act, or an exemption from such
registration is available. Transferee is aware of the provisions of
Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the
satisfaction of certain conditions.
3.10 No Exemption .
Transferee understands that none of Basin Water, BION or any of
their agents or affiliates (including BWR) makes any representation
as to the availability of any exemption under the Securities Act in
connection with Transferee’s purchase of the EWC
Shares.
3.11 Legend . Transferee
acknowledges that, to the extent applicable, each certificate
evidencing the EWC Shares shall be endorsed with the legends
substantially in the form set forth below, as well as any
additional legend imposed or required by EWC’s bylaws or
applicable state securities laws:
THE SHARES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION
IS NOT REQUIRED.
4. Release by Opus Trust,
Benowitz . Except for the performance of all terms, conditions,
duties and obligations set forth in this Agreement, and subject to
Section 7.6, Opus Trust and Benowitz, on their behalf and on
behalf of their affiliates, assigns, parent corporations,
subsidiaries, predecessors, and successors-in-interest, and their
respective officers, directors, shareholders, principals, partners,
agents, servants, employees, representatives and attorneys
(collectively the “Opus Trust Releasing Parties”),
hereby forever unconditionally release and discharge Basin Water
and BION, and their respective affiliates (including BWR), assigns,
parent corporations, subsidiaries, predecessors and
successors-in-interest, and their respective officers, directors,
shareholders, principals, partners, agents, servants, employees,
representatives and attorneys, from any and all rights,
liabilities, claims, demands, damages,
costs, fees, expenses, losses, judgments, liens,
interests, debts, actions and causes of action of every kind
whatsoever, including without limitation for breach of contract,
negligence, fraud or securities fraud (collectively, the
“Claims”) that Opus Trust and Benowitz have, had or may
have, arising or accruing on or before the date hereof, regardless
of whether asserted before, on or after the date hereof, and
regardless of whether known or unknown, in any way arising from or
relating to the Dispute, the Purchase Agreement or the Letter
Agreement (the “Opus Trust Released
Claims”).
5. Release by Basin Water,
BION . Except for the performance of all terms, conditions,
duties and obligations set forth in this Agreement, and subject to
Section 7.6, Basin Water and BION, on their behalf and on
behalf of their affiliates (including BWR), assigns, parent
corporations, subsidiaries, predecessors, and
successors-in-interest, and their respective officers, directors,
shareholders, principals, partners, agents, servants, employees,
representatives and attorneys (collectively the “Basin
Releasing Parties”), hereby forever unconditionally release
and discharge Opus Trust and Benowitz and their respective
affiliates, assigns, parent corporations, subsidiaries,
predecessors and successors-in-interest, and their respective
officers, directors, shareholders, principals, partners, agents,
servants, employees, representatives and attorneys, from any and
all Claims that Basin Water and BION have, had or may have, arising
or accruing on or before the date hereof, regardless of whether
asserted before, on or after the date hereof, and regardless of
whether known or unknown, in any way arising from or relating to
the Dispute, the Purchase Agreement or the Letter Agreement (the
“Basin Released Claims”).
6. Unknown Claims . Except
for the performance of all terms, conditions, duties and
obligations set forth in this Agreement, and subject to
Section 7.6, Opus Trust and Benowitz, on their behalf and on
behalf of the Opus Trust Releasing Parties, and Basin Water and
BION, on their behalf and on behalf of the Basin Releasing Parties,
understand and hereby agree that this Agreement shall act as a
release of any and all Opus Trust Released Claims and Basin
Released Claims, respectively, whether known or unknown, arising,
accruing or based on facts, events or circumstances in existence on
or before the Effective Date, whether known or unknown, suspected
to exist or not suspected to exist, that each of the Parties has,
had or may ever have against each of the other Parties relating to
the Opus Trust Released Claims and the Basin Released
Claims.
In this connection, each of Opus
Trust and Benowitz, on its behalf and on behalf of the Opus Trust
Releasing Parties, and Basin Water and BION, on its behalf and on
behalf of the Basin Releasing Parties, acknowledges that, except
for the performance of all terms, conditions, duties and
obligations set forth in this Agreement, and subject to
Section 7.6 hereof, each hereby releases the Opus Trust
Released Claims and Basin Released Claims, respectively, whether
such currently are known or unknown, foreseen or unforeseen,
suspected to exist or not suspected to exist, and each of the
Parties acknowledges that each has read, is familiar with,
understands and waives the provisions of California Civil Code
Section 1542, which provides as follows:
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.
Furthermore, each of the Parties
acknowledges that the foregoing waivers were separately bargained
for and are a key element of the consideration for entering into
this Agreement.
To the extent that Section 1542
or any similar law or statute may otherwise apply to the release
set forth in Section 3.7 hereof, Opus Trust and Benowitz
hereby waive and relinquish as to all matters released hereunder
all rights and benefits that they have, or may have,
unde
