EXHIBIT 10.4
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
1. PARTIES. This settlement agreement and mutual release ("Mutual Release") is
effective as of the date set forth below, by and between CyNet, Inc. ("CyNet"),
Xxx Xxxxx ("Xxxxx"), Xxxxx Xxxxxxxx ("Xxxxxxxx"), and CyFax, Inc. ("CyFax")
collectively referred to as the parties ("Parties").
2. FACTS.
2.1 In 1996 and 1997, Xxxxxxxx rendered various services to the Company
including assistance with the formation of the business, marketing, and
financial consulting. On January 1, 1996, CyNet and Xxxxx Xxxxxxxx entered into
a financial advisory agreement. On September 15, 1996, CyNet entered into an
exclusive agent management agreement with CyFax and its president, Xxxxx
Xxxxxxxx. These agreements and any other verbal or written agreements between
the Parties with respect to contractual or other arrangements with respect to
services to be rendered to CyNet by Xxxxxxxx or CyFax are hereinafter referred
to as "Agreements".
2.2 Pursuant to an August 31, 1996 letter ("August Correspondence"), CyNet
and Xxxxxxxx entered into an agreement whereby, among other arrangements, CyNet
agreed to xxxxx Xxxxxxxx the rights to shares of CyNet stock to be issued in
grants, warrants or any way deemed mutually beneficial to CyNet and Xxxxxxxx. An
October 30, 1997 letter ("October Correspondence") from CyNet modified the
previous agreement by agreeing to pay to Xxxxxxxx different consideration.
Between the August Correspondence and the October Correspondence and thereafter,
various discussions and arrangements with respect to certain proposed stock
rights were discussed by the Parties and the August Correspondence, October
Correspondence, and other verbal and written discussions among the Parties are
hereinafter referred to as "CyNet Correspondence".
2.3 Pursuant to the CyNet Correspondence, CyNet agreed to issue Xxxxxxxx
and CyFax certain compensation through the issuance of certain CyNet securities
(the written and subsequent verbal discussions with respect to any and all
obligations or rights to issue CyNet securities and cash to Xxxxxxxx and/or
CyFax are hereinafter referred to as "Stock Rights").
2.4 The Parties have disagreed as to their respective obligations, rights
and benefits in connection with the CyNet Correspondence, Agreements and the
Stock Rights, but have agreed to settle any and all differences that may have
arisen in the relationship. CyNet and Xxxxx understand that Xxxxxxxx and CyFax
will release CyNet and Xxxxx from any liability with respect to the CyNet
Correspondence, Stock Rights and the Agreements on the terms and conditions set
forth herein. Xxxxxxxx and CyFax understand that CyNet and Xxxxx will release
Xxxxxxxx and CyFax from any and all future, current and past obligations to
CyNet in rendering any services pursuant to the Agreements and CyNet
Correspondence.
3. MUTUAL RELEASE.
3.1 In consideration of the agreements and covenants set forth hereinabove
and hereinbelow, the sufficiency of which Xxxxxxxx and CyFax hereby acknowledge
and confess, Xxxxxxxx and CyFax, for themselves, their agents, servants,
directors, officers, shareholders, representatives, successors, employees and
assigns, TO THE EXTENT LEGALLY ALLOWED, hereby covenant and agree as follows:
3.1.1 That Xxxxxxxx and CyFax hereby release, acquit and
forever discharge CyNet and Xxxxx, their agents, servants,
representatives, successors, employees and assigns from any
and all rights, obligations, claims, demands and causes of
action, whether in contract or in tort, arising from or
relating to the CyNet Correspondence, Agreements and/or Stock
Rights, including all obligations arising therefrom, and
omissions and/or conduct of CyNet and Xxxxx and/or their
agents, servants, representatives, successors, employees and
assigns, relating to the CyNet Correspondence, Agreements and
Stock Rights.
3.2 In consideration of the agreements and covenants set forth hereinabove
and hereinbelow, the sufficiency of which is hereby acknowledged and confessed,
CyNet and Xxxxx, for themselves and their agents, servants, representatives,
successors, employees and assigns TO THE EXTENT LEGALLY ALLOWED, hereby covenant
and agree as follows:
3.2.1 That they hereby release, acquit and forever discharge
Xxxxxxxx and CyFax, their agents, servants, representatives,
successors, employees, directors, officers and assigns, from
any and all rights, obligations, claims, demands and causes of
action, whether in contract or in tort, arising from or
relating to the CyNet Correspondence and/or Agreements,
including obligations arising therefrom, and omissions and/or
conduct of CyNet and Xxxxx relating to the CyNet
Correspondence and/or Agreements.
4. CONSIDERATION FOR XXXXXXXX'X AND CYFAX'S XXXXXXX.Xx consideration for the
release by Xxxxxxxx and CyFax set forth in section 3.1 hereof, CyNet and Xxxxx
agree that CyNet will issue (i) warrants to purchase an aggregate of 2,200,000
shares of Class B non-voting common stock ("Class B Common Stock") at $1 per
share to Xxxxxxxx, as evidenced in the forms attached hereto as Exhibit "A";
(ii) 500,000 shares of class A common stock ("Class A Common Stock") to Xxxxx
Xxxxxxxx; (iii) 200,000 shares of Class A Common Stock to CyFax, Inc. for
termination of the exclusive agent management agreement; and (iv) payment in the
amount of $51,000 to Xxxxxxxx. The issuance of the warrants, the issuances of
the Class A Common Stock and the payment in the amount of $51,000 are
hereinafter referred to as "CyNet Consideration." In the event that the Company
converts Class B Common Stock to Class A Common Stock, the Company will adjust
the warrants to purchase Class B Common Stock accordingly. Xxxxxxxx and CyFax
acknowledge that they will receive substantial benefits from this.
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5. CONSIDERATION FOR CYNET'S AND XXXXX' RELEASES As consideration for the
releases by CyNet and Xxxxx set forth in Section 3.2 hereof, Xxxxxxxx and CyFax
agree that they have no further obligation under the Agreements and/or CyNet
Correspondence. CyNet and Xxxxx acknowledge that CyNet and Xxxxx will receive
substantial benefits from this.
6. TERMINATION OF ALL PREVIOUS AGREEMENTS. All previous agreements among
Xxxxxxxx and CyFax, CyNet and Xxxxx pertaining to the CyNet Correspondence,
Agreements and Stock Rights and any and all related agreements and obligations
are hereby terminated without further rights, obligations or liabilities of any
Party thereunder.
7. NO OTHER CAUSE OF ACTION. Neither Xxxxxxxx, CyFax, CyNet nor Xxxxx are aware
of any claims not being released herein against Xxxxxxxx, CyFax, CyNet or Xxxxx
arising from the CyNet Correspondence, Agreements or Stock Rights.
8. SECURITIES LAWS RESTRICTIONS. Xxxxxxxx and CyFax recognize that the issuance
of the Class A Common Stock and Class B Common Stock underlying the warrants
have not been registered under the Securities Act of 1933, as amended ("Act"),
nor under the securities laws of any state and, therefore, cannot be resold
unless the Class A and Class B Common Stock are registered under the Act or
unless an exemption from registration is available; no public agency has passed
upon the accuracy or adequacy of the sales of the shares; and Xxxxxxxx may not
sell the Class A and Class B Common Stock without registering them under the Act
and any applicable state securities laws unless exemptions from such
registration requirements are available with respect to any such sale.
"The securities represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933,
as amended ("Act") or the securities laws of any state. Such securities
may not be sold, pledged hypothecated or otherwise transferred without the
consent of the Company, except upon registration or upon delivery to the
Company of an opinion of counsel satisfactory to the Company that such
registration is not required, or evidence is satisfactory to the Company,
that any such transfer will not violate the Act or the securities laws of
any state.
9. FURTHER CONTRACTUAL RESTRICTIONS. Xxxxxxxx and CyFax understand that the
following contractual restriction will also be placed on the Class A Common
Stock certificate issued to Xxxxxxxx and CyFax and Class B Common Stock to be
issued upon exercise of the warrants issued to Xxxxxxxx:
"The securities represented by this certificate may not be sold,
transferred, pledged, or otherwise hypothecated prior to February 1, 1999,
unless consented to in writing by CyNet, Inc."
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In the event that contractual restrictions imposed upon the holders of
securities subject to the rescission offer that the Company will file with the
Securities and Exchange Commission, anticipated to be in December 1997 are less
onerous than the contractual restriction set forth above, the Company agrees to
modify this restriction so that this restriction imposed upon Xxxxxxxx and CyFax
will be no more onerous than that imposed upon all of the holders of stock
subject to the rescission offer, as set forth in the Prospectus filed with the
Securities and Exchange Commission.
10. CAPACITY. The Parties represent that they are lawfully authorized to execute
this Mutual Release. The Parties to this Mutual Release further represent that
they have read it in full before its execution and that they fully understand
the meaning, operation and effect of its terms.
11. PRIOR ASSIGNMENTS.Xxxxxxxx and CyFax represent that they have not assigned,
in whole or in part, any claims, demands and/or causes of action relating to the
CyNet Correspondence, Agreements or Stock Rights to any person or entity prior
to their execution of this Mutual Release. CyNet and Xxxxx represent that they
have not assigned, in whole or in part, any claim, demand and/or causes of
action relating to the CyNet Correspondence or Agreements of Xxxxxxxx and CyFax
to any person or entity prior to its execution of this Mutual Release.
12. BINDING EFFECT. This Mutual Release shall be binding on and inure to the
benefit of the Parties and their respective heirs, successors, assigns, agents,
employees and personal representatives.
13. MODIFICATION. No modification or amendment of this Mutual Release shall be
effective unless such modification or amendment shall be in writing and signed
by all Parties hereto.
14. ENTIRE AGREEMENT. This Mutual Release constitutes the entire agreement
between the Parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, wether oral or written, of the Parties in connection with the
subject matter hereof.
15. INTERPRETATION. The interpretation, construction and performance of this
Mutual Release shall be governed by the laws of the State of Texas. Whenever
used herein, the singular number shall include the plural, the plural shall
include the singular and the use of any gender shall be applicable to all
genders.
16. EXECUTION. This Mutual Release may be executed in several counterparts, each
of which shall be deemed an original, and such counterparts taken together shall
constitute but one and the same Mutual Release. This Mutual Release shall be
effective on the day and year first above written.
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17. SEVERABILITY. Whenever possible, each provision of this Mutual Release will
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Mutual Release is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Mutual Release.
IN WITNESS WHEREOF, intending to be legally bound, the Parties hereto have
executed this Mutual Release as of the 14th day of November, 1997.
CYFAX, INC.
By: XXXXX XXXXXXXX
Its: President
CYNET, INC.
By: XXX XXXXX
Its: CEO
/s/ XXX XXXXX
XXX XXXXX
/s/ XXXXX XXXXXXXX
XXXXX XXXXXXXX
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EXHIBIT "A"
