SEC Contract Filing

Filing Date: 2016-10-03

Document Content:
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>ex10-1.htm
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
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<P id=PARA152 style="MARGIN-BOTTOM: 0px; TEXT-ALIGN: right; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Exhibit 10.1</B></FONT></P>
<P id=PARA153 style="MARGIN-BOTTOM: 0px; TEXT-ALIGN: left; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA1 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>SETTLEMENT </B><B>AND RELEASE </B><B>AGREEMENT</B></FONT></P>
<P id=PARA2 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA3 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">THIS SETTLEMENT AND RELEASE AGREEMENT (this &#8220;<U>Agreement</U>&#8221;), is entered into as of this 27<SUP style="vertical-align: baseline; position: relative; bottom:.33em;">th</SUP> day of September 2016 (the &#8220;<U>Effective Date</U>&#8221;) by and between DIFFUSION PHARMACEUTICALS INC., a Delaware corporation, which has its principal place of business at 2020 Avon Court # 4, Charlottesville, VA 22902 (&#8220;<U>Diffusion Inc.</U>&#8221;), <FONT style="TEXT-TRANSFORM: uppercase">Diffusion Pharmaceuticals, LLC</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">, a Virginia limited liability company and wholly-owned subsidiary of Diffusion Inc. which has its principal place of business at 2020 Avon Court # 4, Charlottesville, VA 22902 (&#8220;<U>Diffusion LLC</U>,&#8221; and collectively with Diffusion Inc., &#8220;<U>Diffusion</U>&#8221;), and <FONT style="TEXT-TRANSFORM: uppercase">DAVID G. Schmidt</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">, an individual and a resident of the state of Texas, whose current address is 2929 Westheimer Road #508, Houston, Texas 77098 (&#8220;<U>Schmidt</U>&#8221;). Adam Schiffer (&#8220;<U>Schiffer</U>&#8221;), Andrew Hicks (&#8220;<U>Hicks</U>&#8221;), and Logan Johnson (&#8220;<U>Johnson</U>&#8221;) (Schiffer, Hicks and Johnson, each, a &#8220;<U>Purchaser</U>;&#8221; and, collectively, the &#8220;<U>Purchasers</U>&#8221;) are also parties to this Agreement solely for the purposes of Sections 1, 2, 3, 4, 6(b) and 9 below. </FONT></FONT></FONT></P>
<P id=PARA4 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>&nbsp;</B></FONT></P>
<P id=PARA5 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>RECITALS</B></FONT></P>
<P id=PARA7 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA6 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">WHEREAS, Schmidt and Diffusion LLC are parties to certain agreements relating to Schmidt&#8217;s purchase of units of membership interest of Diffusion LLC (&#8220;<U>Units</U>&#8221;), including (a) a Subscription Agreement, dated as of October 30, 2009 (the &#8220;<U>Subscription Agreement</U>&#8221;); (b) a Convertible Promissory Note, dated December 15, 2009, in the principal amount of $1,500,005.50 (the &#8220;<U>2009 </U><U>Note</U>&#8221;); (c) a Notice of Conversion, dated December 15, 2009 (the &#8220;<U>Notice of Conversion</U>&#8221;) and (d) an Operating Agreement, dated as of February 25, 2005 (as subsequently amended, the &#8220;<U>Operating Agreement</U>&#8221;). </FONT></P>
<P id=PARA9 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA8 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">WHEREAS, (i) pursuant to the Subscription Agreement, the 2009 Note and the Notice of Conversion, Schmidt converted the entire amount of the 2009 Note into 428,573 Units on December 15, 2009 at a per-Unit conversion price of $3, (ii) in or about 2012, Diffusion LLC reduced the per-Unit conversion price under similar convertible promissory notes issued to other investors to $1 per-Unit, (iii) Schmidt has alleged in the Litigation (as defined below) that Diffusion LLC breached the terms of the 2009 Note and/or the Operating Agreement by not issuing him additional Units to put him in the position that he would have been if he had converted the 2009 Note at the reduced conversion price of $1 per Unit and/or by not offering him the right to purchase additional Units at a purchase price of $1 per Unit to maintain his percentage ownership of Diffusion LLC and (iv) Diffusion denies all such claims. </FONT></P>
<P id=PARA11 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA10 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">WHEREAS, (i) on September 21, 2015, Schmidt filed a Complaint against Diffusion LLC in the Albemarle County Circuit Court (the &#8220;<U>Court</U>&#8221;), commencing litigation which is proceeding in the Court as Case No. CL15-791 (the &#8220;<U>Litigation</U>&#8221;), (ii) in such Complaint, Schmidt asserted various claims and causes of ac