EXHIBIT 10.1
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is entered into as of the20th
day of September, 2001 by and among CyPost Corporation, a Delaware corporation
with offices at 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxxx X0X 0X0 ("CyPost"); Xxxxx Xxxxx Xxxxxxxxx, an individual with
an address at X.X. Xxx 000, Xxxxx Xxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0 ("KSM");
and Pacific Gate Capital Corporation, a corporation with an address at X.X. Xxx
000, Xxxxx Xxx, Xxxxxxx Xxxxxxxx, Xxxxxx VON 2EO ("PGCC").
WHEREAS, several shareholders of CyPost have, through their respective
counsel, requested that CyPost investigate whether KSM has engaged in
transactions in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act:"); and
WHEREAS, CyPost has conducted such an investigation with the full
cooperation of KSM, who has supplied CyPost with, among other things, brokerage
statements and accountant's statements; and
WHEREAS, for purposes of determining KSM's beneficial ownership of CyPost
common stock during the period September 20, 1999 (the date on which CyPost
became fully reporting under the Exchange Act) through June 15, 2001 (the
"Recovery Period"), KSM is deemed to be the beneficial owner of all CyPost
shares owned by (i) KSM, (ii) KSM's wife, and (iii) PGCC, a corporation owned by
KSM; and
WHEREAS, at all times during the Recovery Period, KSM was the beneficial
owner, directly or indirectly, of more than 10% of CyPost's common stock; and
WHEREAS, during the Recovery Period, KSM and those persons whose ownership
of CyPost common stock is attributable to KSM for purposes of Section 16(b) of
the Exchange Act, made numerous purchases and sales of CyPost common stock; and
WHEREAS, CyPost determined that numerous violations of Section 16(b) had
taken place and, unable to resolve the matter in a timely fashion, CyPost filed
a Summons and Complaint against KSM in the United States District Court for the
Southern District of New York seeking recovery of KSM's short swing profits
during the Recovery Period (Cypost Corporation x. Xxxxx Xxxxx Xxxxxxxxx, 01 Civ.
(5447)(the "Litigation"); and
WHEREAS, CyPost and KSM have subsequently agreed that the amount of short
swing profits realized by KSM, including persons whose beneficial ownership of
CyPost common stock is attributable to KSM for Section 16(b) purposes, during
the Recovery Period is $2,498,449.46 (the "Recoverable Amount"); and
WHEREAS, KSM has made no purchases or sales of CyPost common stock,
directly or indirectly, subsequent to the Recovery Period, and
WHEREAS, KSM, as the assignee of Monet Management Group Ltd., is the payee
on an 8% demand note dated June 19, 2001 issued by CyPost in the principal
amount of $1,302,496.30 plus interest accrued until September 20,2001 in the
amount of $26,476.97 (the "KSM Note"); and
WHEREAS, KSM has agreed to cancel the KSM Note in partial satisfaction of
his Section 16(b) liability to CyPost; and
WHEREAS, various individuals (the "Noteholders") are the payees on demand
notes dated June 19, 2001 issued by CyPost in the aggregate principal amount of
$1,017,291.94 together with $15,906.63 in interest accrued on the principal
amount from June 19,2001 until September 20,2001(the "Noteholder Notes"); and
WHEREAS, the Noteholders have assigned their rights under the Noteholder
Notes to KSM, who has agreed to cancel the Noteholder Notes in partial
satisfaction of his Section 16(b) liability to CyPost; and
WHEREAS, PGCC is the payee on 8% demand notes dated August 25, 2000 and
September 11, 2000, respectively, issued by CyPost in the aggregate principal
amount of $25,000 plus accrued interest until September 20,2001 in the amount of
$2,066.67(the "PGCC Notes"); and
WHEREAS, PGCC has agreed to cancel the PGCC Notes in partial satisfaction
of KSM's Section 16(b) liability to CyPost; and
WHEREAS, KSM has agreed to pay the balance of the Recoverable Amount by
issuing to CyPost, KSM's $109,210.95, 5 year, 5% note and CyPost has agreed to
accept same in accordance with the terms of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. CANCELLATION OF KSM NOTE.
KSM hereby returns the KSM Note for cancellation and authorizes CyPost to
apply the $1,328,973.27 due thereunder to the satisfaction of KSM's Section
16(b) liability to CyPost.
2. CANCELLATION OF NOTEHOLDER NOTES.
KSM hereby returns the Noteholder Notes for cancellation and authorizes
CyPost to apply the $1,033,198.57 due thereunder to the satisfaction of KSM's
Section 16(b) liability to CyPost.
3. CANCELLATION OF PGCC NOTE.
PGCC hereby returns the PGCC Notes for cancellation and authorizes CyPost
to apply the $27,066.67 due thereunder to the satisfaction of KSM's Section
16(b) liability to CyPost.
4. ISSUANCE OF NOTE TO CYPOST.
To satisfy the $109,210.95 balance of KSM's Section 16(b) liability to
CyPost, KSM hereby issues his $109,210.95, 5 year 5% promissory note (the
"Balance Note") to CyPost in the form attached hereto as Exhibit A.
5. WITHDRAWAL OF LAWSUIT.
In consideration of the Cancellation of the KSM Note, the Noteholder Notes,
and the PGCC Note and KSM's delivery to CyPost of the Balance Note, and upon due
execution and delivery to Cypost of all documents called for by paragraphs 1
through 4 above, CyPost will promptly file a Notice of Voluntary Dismissal of
the Litigation, without prejudice, pursuant to Rule 41(a) of the Federal Rules
of Civil Procedure. In the event of KSM's default under the Balance Note, in
addition to its rights and remedies thereunder, Cypost shall be entitled to
reinstate or refile the Litigation and pursue such additional remedies as may be
available to it therein. It is agreed that the statute of limitations
applicable to the claim(s) asserted by Cypost in the Litigation shall be tolled
pending payment in full of the Balance Note.
6. RELEASE.
Effective upon KSM's payment in full of the Balance Note, CyPost releases
and discharges KSM, his administrators, heirs, successors and assigns from all
actions, causes of action, suits, debts due, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, damages, judgements, claims and demands in law
or in equity, which against KSM, CyPost or its successors or assigns ever had,
now has, or hereafter can, shall or may have for, upon, or by reason of KSM's
liability to CyPost pursuant to Section 16(b) of the Exchange Act, directly or
through PGCC or KSM's wife, in any way from the beginning of the world through
June 15, 2001.
7. ADVICE OF COUNSEL.
CyPost has had the benefit of the advice of counsel of its own choice in
the negotiating, drafting and execution of this Settlement Agreement. Said
counsel, Xxxxxx Gottbetter & Xxxxxxxx, LLP , represented solely CyPost in
connection herewith. KSM and PGCC have acted for themselves without the benefit
of advice of counsel. KSM and PGCC have been advised by CyPost and its counsel
that they are entitled to obtain, and that their best interests would be served
by, advice and representation by their own, independent, counsel and have been
urged by CyPost and its counsel to retain their own counsel for this purpose,
and KSM and PGCC had full opportunity to do so. Notwithstanding the foregoing,
KSM and PGCC have elected not to retain their own counsel, but rather to
represent themselves in connection with this Agreement. Such election, and
KSM's and PGCC's execution of this Settlement Agreement, were made knowingly and
voluntarily. This Agreement is the result of arms-length negotiations between
the parties. Accordingly, neither the entire Agreement nor any provision
contained herein shall be deemed to have been proposed or drafted by any party
or construed against any party. This Agreement shall be construed as a whole
according to its plain meaning.
8. FURTHER ACTIONS.
CyPost, KSM, and PGCC hereby agree to execute and deliver any and all
documents and to take any and all actions necessary to effect the transactions
contemplated hereby.
9. SEVERABILITY.
If one or more of the provisions of this Agreement shall be determined by a
court of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, the portion of such provision not so held, and the remaining provisions
of this Agreement shall be construed as if such invalid, illegal or
unenforceable provision were not included in them.
10. AMENDMENTS, MODIFICATIONS AND WAIVERS.
No provision of this Agreement may be waived, modified or amended except in
a written instrument signed by the party against whom such waiver, modification
or amendment is sought to be enforced. No waiver of any provision hereto shall
be deemed to be a waiver of any other provision or to imply any future waiver of
the same provision.
11. SUCCESSORS AND ASSIGNS.
The provisions hereof shall be binding upon and shall inure to the benefit
of the parties and their respective successors and assigns.
12. GOVERNING LAW.
This Agreement shall be governed, and construed in accordance with, the
laws of the Province of British Columbia. The parties agree to submit any
dispute under this Agreement to the exclusive jurisdiction of the courts of the
Province of British Columbia.
13. COUNTERPARTS.
This Agreement may be executed in one or more counterparts which, when
taken together, shall comprise one and the same document.
IN WITNESS WHEREOF, the undersigned have set their respective hands as of
the date first above written.
CYPOST CORPORATION
By: /s/ Xxxxxx Sendoh
-------------------
Name: Xxxxxx Sendoh
Title: Chairman of the Board
/s/ Xxxxx Xxxxx Xxxxxxxxx
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Xxxxx Xxxxx Xxxxxxxxx
PACIFIC GATE CAPITAL CORPORATION
By: /s/ Xxxxx Xxxxx Xxxxxxxxx
---------------------------
Name: Xxxxx Xxxxx Xxxxxxxxx
Title:
EXHIBIT A
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PROMISSORY NOTE
Vancouver, British Columbia
US$109,210.95
September 20,2001
FOR VALUE RECEIVED, the undersigned, Xxxxx Xxxxx Xxxxxxxxx, an individual
with an address at X.X. Xxx 000, Xxxxx Xxx, Xxxxxxx Xxxxxxxx, Xxxxxx VON 2E0
(the "Obligor"), hereby promises to pay to the order of CyPost Corporation, a
Delaware Corporation with offices at 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0 (the "Holder"), the principal sum of
one hundred nine thousand, two hundred ten dollars and ninety five cents
(US$109,210.95) payable as set forth below. The Obligor also promises to pay to
the order of the Holder interest on the principal amount hereof at a rate per
annum equal to five percent (5%), which interest shall be payable at such time
as the principal is due hereunder. Interest shall be calculated on the basis of
the year of 365 days and for the number of days actually elapsed. Any amounts
of interest and principal not paid when due shall bear interest at the maximum
rate of interest allowed by applicable law. The payments of principal and
interest hereunder shall be made in coin or currency of the United States of
America which at the time of payment shall be legal tender therein for the
payment of public and private debts.
This Note shall be subject to the following additional terms and
conditions:
1. PAYMENTS.
Subject to Section 2 hereof, all principal and interest due hereunder
shall be paid in one (1) installment on September 19, 2006 (the "Maturity
Date"). In the event that any payment to be made hereunder shall be or become
due on Saturday, Sunday or any other day which is a legal bank holiday under the
laws of British Columbia, such payment shall be or become due on the next
succeeding business day.
2. PREPAYMENT.
The Obligor and the Holder understand and agree that the principal
amount of this Note plus accrued interest may be prepaid by the Obligor ,in
whole or in part, at any time prior to the Maturity Date without penalty.
3. PAYMENT IN STOCK.
Obligor, subject to agreement by the Holder, may pay all or part of
the principal and interest due hereunder, by transferring and delivering to
Holder, shares of Holder's common stock owned by Obligor. Such common stock will
be valued at the closing bid price for Holder's common stock on the business
date immediately preceding the date of delivery of such shares.
4 NO WAIVER.
No failure or delay by the Holder in exercising any right, power or
privilege under the Note shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law. No course of dealing between the Obligor and the Holder shall
operate as a waiver of any rights by the Holder.
5. WAIVER OF PRESENTMENT AND NOTICE OF DISHONOR.
The Obligor hereby waives presentment, notice of dishonor, protest and
all other demands and notices in connection with the delivery, acceptance,
performance or enforcement of this Note.
6. PLACE OF PAYMENT.
All payments of principal of this Note and the interest due hereon
shall be made at such place as the Holder may from time to time designate in
writing.
7. EVENTS OF DEFAULT.
The entire unpaid principal amount of this Note and the interest due
hereon shall, at the option of the Holder exercised by written notice to the
Obligor forthwith, become and be due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
if any one or more of the following events (herein called "Events of Default")
shall have occurred (for any reason whatsoever and whether such happening shall
be voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgement, decree or order of any court or
any order, rule or regulation of any administrative or governmental body ) and
be continuing at the time of such notice, that is to say:
(a) if default shall be made in the due and punctual payment of
the principal of this Note and the interest due thereon when and as the same
shall become due and payable, whether at maturity, or by acceleration or
otherwise, and such default have continued for a period of five (5) days;
(b) if the Obligor shall:
(i) admit in writing its inability to pay its debts generally as
they become due;
(ii) file a petition in bankruptcy or petition to take advantage
of any insolvency act; or
(iii) make assignment for the benefit of creditors; or
(c) if, under the provisions of any other law for the
relief or aid of debtors, any court or competent jurisdiction shall assume
custody or control of the whole or any substantial part of Obligor's property
and such custody or control shall not be terminated or stayed within (90) days
from the date of assumption of such custody or control.
8. REMEDIES.
In case any one or more of the Events of Default specified in Section
6 hereof shall have occurred and be continuing, the Holder may proceed to
protect and enforce its rights, whether for the specific performance of any
covenant or agreement contained in this Note or in aid of the exercise of any
power granted in this Note, or the Holder may proceed to enforce the payment of
all sums due upon the Note or enforce any other legal or equitable right of the
Holder.
9. SEVERABILITY.
In the event that one or more of the provisions of this Note shall
for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Note, but this Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
10. GOVERNING LAW.
This Note and the right and obligations of the Obligor and the Holder
shall be governed by and construed in accordance with the laws of the Province
of British Columbia.
IN WITNESS WHEREOF, the OBLIGOR has signed and sealed this Note as of the
___ day of September, 2001.
