SETTLEMENT AGREEMENT AND MUTUAL RELEASE
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This Settlement Agreement and Release ( the "Agreement") is made on and
entered into as of June 30, 2000, by and between Telenetics Corporation, a
California corporation ("Telenetics"), on the one hand, and Drake & Xxxxxxxx,
Inc. ("DDI"), a Nevada corporation, Xxxxx Xxxxxxxxx, Global Financial Group,
Inc. ("GFG"), and Xxxxxxx Xxxxxxxxx (sometimes collectively "DDI/GFG"), on the
other. This Agreement is entered into with reference to the following facts:
RECITALS
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A. On or about August 19, 1999, DDI filed a complaint against
Telenetics in the Orange County Superior Court as Case Xx. 000000 ("Xxxx Xx.
000000"). Telenetics subsequently filed a cross-complaint against DDI in Case
No. 813430. Xxxxx Xxxxxxxxx is the sole owner of DDI.
B. On or about May 18, 2000, GFG filed a complaint against Telenetics
in the United States District Court for the Southern District of New York as
Case No. 00-CIV-3767 ("Case No. 00-CIV-3767"). On July 5, 2000, a thirty-day
order to dismiss was entered by the court in Case No. 00-CIV-3767. Xxxxxxx
Xxxxxxxxx is the sole owner of GFG.
C. Telenetics denies the allegations made by DDI in Case No. 813430 and
denies the allegations made by GFG in Case No. 00-CIV-3767, and DDI denies the
allegations made by Telenetics in Case No. 813430.
D. The parties to this Agreement wish to settle all differences between
them which arise out of, or which in any way are connected with, any of the
claims, allegations, causes of action and/or contentions set forth in Xxxx Xx
000000 and Case No. 00-CIV-3767, and/or which arise out of, or which in any way
are or may be connected with, the past relationship between DDI/GFG, and each of
them, on the one hand, and Telenetics, on the other. This Agreement encompasses
all claims which Telenetics and DDI/GFG, and each of them, have or may have
against any of the other of them, including the claims in Xxxx Xx 000000 and
Case No. 00-CIV-3767, any claims which could have been asserted in Xxxx Xx
000000 and/or Case No. 00-CIV-3767, and any claims which arise out of, or which
in any way are or may be connected with, the past relationships between DDI/GFG,
and each of them, on the one hand, and Telenetics, on the other.
E. Without acknowledging the validity of any other party's rights,
claims or defenses in connection with the subject matter of Xxxx Xx 000000 and
Case No. 00-CIV-3767, and in order for the parties to this Agreement to settle
all differences between them, and in consideration of the mutual covenants,
agreements and promises set forth in this Agreement, and other good and valuable
consideration which each of the parties to this Agreement hereby acknowledges
receiving, each party to this Agreement agrees as follows:
AGREEMENT
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1. The foregoing Recitals shall be part of this Agreement.
2. Telenetics shall issue to DDI/GFG, in the aggregate as to all of
them, (1) 50,000 shares (the "Shares") of Telenetics common stock; and (2)
five-year warrants (the "Warrants") to purchase 200,000 shares of Telenetics
common stock ("Warrant Shares") at an exercise price equal to $5.00 per share.
At the request of DDI/GFG, the Shares and the Warrants shall be issued as
follows: Web Commerce Corporation, 12,500 Shares; Xxxxx Xxxxxxxxx, 12,500 Shares
and 96,000 Warrants; Xxxxxxx XxxXxxxxxxx, 9,000 Shares; W. Xxxxx Xxxxxxx, 8,000
Shares; Xxxxxx X. Xxxxxxxxx, 8,000 Shares; Xxxxxxx Xxxxx, 100,000 Warrants; J.
Xxxxxxx Xxxxxxxxxxxx, 2,000 Warrants; and Xxxxxxx X. XxxXxxxxx, 2,000 Warrants.
Telenetics further agrees to file a registration statement (the "Registration
Statement") with the Securities and Exchange Commission ("SEC") on or before
August 1, 2000 covering the resale of the Shares and the Warrant Shares, and
Telenetics further agrees to use its best efforts to have the Registration
Statement declared effective as promptly as practicable after it is filed and to
maintain the registration of the Shares and the Warrant Shares until the earlier
of (i) one year after the Warrants have been exercised or (ii) the date that the
Shares and the Warrant Shares have been sold or may be sold pursuant to Rule 144
or another registration exemption. Telenetics shall promptly provide DDI/GFG
with copies of: (i) the Registration Statement as filed; (ii) all comments made
by the SEC in response to the filing; and (iii) any correspondence or subsequent
filings with the SEC regarding the Registration Statement or comments thereto.
The Shares and the Warrant Shares will have what is commonly called "piggyback"
rights.
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3. After the execution of this Agreement by all parties and the filing
by Telenetics of the Registration Statement with respect to the Shares and
Warrant Shares, and provided the Registration Statement becomes effective, DDI
shall, within ten days after the Registration Statement becomes effective, file
a request for dismissal, with prejudice, in Case No. 813430. GFG agrees that it
will not take any steps to attempt to reinstate or refile Case No. 00-CIV-3767
within the thirty-day period pending since Case No. 00-CIV-3767 was dismissed by
the court or file any other complaint which raises the same or similar claims as
raised in Case No. 00-CIV-3767. In the event the Registration Statement does not
become effective, this Agreement shall, at the option of DDI/GFG, become
voidable and of no further force and effect, and in that event any consideration
received pursuant to this Agreement, including the entirety of the 50,000 Shares
and the 200,000 Warrants referred to in paragraph 2, shall be returned to
Telenetics. In the event the Registration Statement does not become effective,
DDI/GFG shall have up to ten days from being advised in writing that the
Registration Statement has not become effective to exercise its option to
declare this Agreement void and, in the event the Agreement is declared void,
shall have ten days after exercising the option to return any consideration
received pursuant to this Agreement, including the entirety of the 50,000 Shares
and the 200,000 Warrants referred to in paragraph 2, to Telenetics. The option
to declare this Agreement void in the event the Registration Statement does not
become effective may be exercised only by DDI, Xxxxx Xxxxxxxxx, GFG, and Xxxxxxx
Xxxxxxxxx collectively, and not by any one or more of them individually with
respect to only a portion of the consideration provided pursuant to this
Agreement.
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4. Except for any obligations imposed by this Agreement, DDI/GFG, and
each of them, on the one hand, and Telenetics, on the other, and each of their
respective attorneys, agents, successors, predecessors, parent companies,
affiliated companies, related companies, partners, officers, directors,
shareholders, representatives, employees, assigns and heirs, and each of them,
past and present, hereby release and forever discharge each other party and each
of his or its respective attorneys, agents, successors, predecessors, parent
companies, affiliated companies, related companies, partners, officers,
directors, shareholders, representatives, employees, assigns and heirs, and each
of them, past and present, with respect to any and all claims, demands,
liabilities, obligations, debts, attorneys' fees, costs, accounts, actions, or
causes of action which any of the parties have or claim to have as of the date
of this Agreement, in law or equity, whether known or unknown, which pertain to
or which arise out of the facts, circumstances, and/or events which are
asserted, or could have been asserted, in Case No. 813430 and/or Case No.
00-CIV-3767, and/or which pertain to, arise out of, or in any way are or may be
connected with the past relationships between DDI/GFG, and each of them, on the
one hand, and Telenetics, on the other. DDI/GFG, and each of them, warrant to
Telenetics, and Telenetics warrants to DDI/GFG, and each of them, that they have
no knowledge of any claim or claims that have been or may be filed concerning
the same or similar claims as the claims which have been asserted, respectively,
by DDI/GFG and Telenetics in Case No. 813430 and Case No. 00-CIV-3767. GFG and
Xxxxxxx Xxxxxxxxx, and each of them, agree to indemnify and defend Telenetics,
including with respect to any attorneys' fees and costs, and hold Telenetics
harmless from and against any claims asserted by any other persons or entities
associated with or affiliated with GFG or Xxxxxxx Xxxxxxxxx, or either of them,
whose rights are derivative of the rights of GFG or Xxxxxxx Xxxxxxxxx, or either
of them, which pertain to or which arise out of the facts, circumstances,
relationships, and/or events which are asserted, or could have been asserted, in
Case No. 00-CIV-3767. DDI and Xxxxx Xxxxxxxxx, and each of them, agree to
indemnify and defend Telenetics, including with respect to any attorneys' fees
and costs, and hold Telenetics harmless from and against any claims asserted by
any other persons or entities associated with or affiliated with DDI or Xxxxx
Xxxxxxxxx, or either of them, whose rights are derivative of the rights of DDI
or Xxxxx Xxxxxxxxx, or either of them, which pertain to or which arise out of
the facts, circumstances, relationships, and/or events which are asserted, or
could have been asserted, in Case No. 813430.
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5. As a condition of this Agreement, and in furtherance of the release
provisions set forth in this Agreement, the parties expressly waive any and all
rights and benefits conferred upon them by the provisions of section 1542 of the
Civil Code of the State of California with respect to any of the matters
described or set forth in this Agreement. Section 1542 of the Civil Code of the
State of California states:
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.
The parties acknowledge that except for matters expressly represented
or recited in this Agreement, the facts and law in relation to this matter and
the claims released by the terms of this Agreement may turn out to be different
from the facts or law as now known to each party and/or his or its agents and/or
representatives, including his or its counsel. Each party expressly assumes the
risk of the existence of different or presently unknown facts or law and agrees
that this Agreement shall in all respects be effective and binding as to each
party despite the possibility of the existence of new or different facts or law.
6. Each of the parties represents and warrants that he or it has not
heretofore assigned, transferred or subrogated, or purported to assign, transfer
or subrogate, to any person or entity, any of the claims released in this
Agreement. Each of the parties agrees that he or it shall indemnify each of the
other parties, including with respect to any attorneys' fees and costs, and hold
each of the other parties harmless from and against any claims based on or
arising from any such assignment, transfer or subrogation, or any attempted
assignment, transfer or subrogation, of any of the claims released in this
Agreement.
7. Each of the parties agrees to execute and deliver to each other
party all necessary documents and to take such additional action as may be
necessary or reasonably required to effectuate the terms, conditions,
provisions, and intent of this Agreement.
8. Each party executing this Agreement, or any related documents on
behalf of each of the parties, represents and warrants that he or it has been
duly authorized to execute this Agreement and any such related documents.
9. Each of the parties acknowledges that he or it has carefully read
this Agreement and knows and understands the contents and effect of this
Agreement, and each of the parties further acknowledges that he or it is signing
this Agreement by his or its own free act.
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10. Each of the parties acknowledges that he or it has been advised to
seek legal counsel in connection with this matter and the provisions and
execution of this Agreement, and each of the parties acknowledges that he or it
either has consulted with his or its own legal counsel or has had a full
opportunity to consult with his or its own legal counsel in connection with this
matter, the terms, conditions, and provisions of this Agreement, and the
execution of this Agreement.
11. This Agreement has been entered into in the County of Orange, State
of California, and all of the terms, conditions and provisions of this Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of California.
12. If any term, condition or provision of this Agreement, other than
paragraph 2 of this Agreement, is later held to be invalid, void or
unenforceable, the remaining terms, conditions and provisions of this Agreement
nevertheless shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
13. This Agreement and all of its terms, conditions and provisions
shall be binding upon and shall inure to the benefit of each of the parties and
each of the parties' respective representatives, successors and assigns.
14. Each of the parties shall bear and be responsible for his or its
own attorneys' fees and costs incurred in connection with all aspects of Xxxx
Xx. 000000 and Case No. 00-CIV-3767, the preparation of this Agreement, and each
of the parties' respective performance under this Agreement.
15. Except as may expressly be provided otherwise in this Agreement,
this Agreement contains the entire agreement and understanding concerning the
subject matter set forth in this Agreement and replaces any prior negotiations
or agreements between the parties, whether written and/or oral.
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16. Each of the parties agrees that no particular party or parties to
this Agreement shall be deemed to be the author of this Agreement or any
particular term, provision or condition of this Agreement. Each of the parties
further agrees that any ambiguities shall be resolved and the terms, provisions
and conditions of this Agreement shall be construed and interpreted without
regard to which party or parties may have suggested, drafted, revised, or
otherwise authored this Agreement or any of its particular terms, provisions or
conditions. Each of the parties further agrees that this Agreement shall be
construed and interpreted as if drafted jointly by all of the parties.
17. It is understood that this Agreement is entered into in compromise
of disputed claims and that neither this settlement, nor the performance of any
term of this Agreement, shall be construed as an admission of liability on the
part of any of the parties to this Agreement.
18. Any disputes arising under this Agreement shall be resolved in
accordance with the laws of the State of California in the County of Orange,
State of California.
19. This Agreement may not be changed, altered or modified except in a
writing signed by each of the parties and/or duly authorized representatives of
each of the parties.
20. This Agreement may be executed in counterparts, including facsimile
counterparts, and all such executed counterparts, including with facsimile
signatures, together shall constitute one original Agreement which shall be
binding on all of the parties to this Agreement notwithstanding that all of the
parties are not signatory to the original or the same counterpart(s).
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Dated: July 25, 2000 TELENETICS CORPORATION
By: /s/ Xxxxxxx Armani
Its: President
Dated: July 25, 2000 DRAKE & XXXXXXXX, INC.
By: /s/ Xxxxx Xxxxxxxxx
Its: President
Dated: July 25, 2000 /s/ Xxxxx Xxxxxxxxx
XXXXX XXXXXXXXX
Dated: July 25, 2000 GLOBAL FINANCIAL GROUP, INC.
By: /s/ Xxxxxxx Xxxxxxxxx W.V.
Its: Owner
Dated: July 25, 2000 /s/ Xxxxxxx Xxxxxxxxx W.V.
XXXXXXX XXXXXXXXX
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APPROVED AS TO FORM:
XXXXX & XXXXXX, LLP
By: /s/ Xxxxx Xxxxxxx
Xxxxx X. Xxxxxxx
Attorneys for Telenetics Corporation
XXXXXX, XXXXXXXXX & XXXXXXX
BY: /s/ Xxxx Xxxxxx
Xxxx X. Xxxxxx, Xx.
Attorneys for Drake & Xxxxxxxx, Inc. and Xxxxx
Xxxxxxxxx
Xxxxxxx XxxXxxxxxxx, Esq.
BY: /s/ Xxxxxxx XxxXxxxxxxx
Xxxxxxx XxxXxxxxxxx, Esq.
Attorneys for Global Financial Group, Inc. and
Xxxxxxx Xxxxxxxxx
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