Document:

Exhibit
10.1

 

SETTLEMENT
AGREEMENT AND MUTUAL RELEASE 

 

This Settlement Agreement and Mutual Release (the “Agreement”) is
entered into this       day of December 2004
(the “Date”), by and among Primary Business Systems, Inc. (“PBS Inc”), Primary
Business Systems, L.L.C., (“PBS LLC”), Rick Matthews (“Matthews”), Suburban
Capital Corporation (“Suburban”), Pine Services, Inc. (“Pine”), and Frank
Custable, Jr. (“Custable”).  PBS Inc, PBS
LLC, Matthews, Suburban, Pine and Custable are sometimes collectively referred
to herein as the “Parties.”

 

Recitals

 

WHEREAS, on or about
September 27, 2002, PINE and PBS LLC entered into that certain stock
purchase agreement (“Stock Purchase Agreement”) for the purchase by PBS LLC
from Pine shares Common Stock of in Sharecom, Inc., now known as PBS Inc.,
representing approximately 59.7% of the then outstanding shares of PBS Inc, for
a purchase price of $550,000 payable within 36 months of the date thereof;

 

WHEREAS,
on or about November,       , 2002, Suburban and
PBS Inc and PBS LLC entered into that certain advisory agreement (the “Advisory
Agreement”) pursuant to which Suburban agreed to provide certain consulting
services and programs to PBS Inc and PBS LLC in exchange for shares of PBS
Inc.; and

 

WHEREAS,
on or about November 29, 2002, Matthews, Amanda Sinclair, Connie Mathews
(sometimes referred to as the Matthews Family”) and PBS Inc. entered into a
Stock Acquisition Agreement (“Stock Acquisition Agreement”) whereby PBS Inc
acquired all of the ownership interests of PBS LLC from the Matthews Family in
exchange for a number of shares of PBS Inc sufficient to provide the Matthews
Family with approximately 90% of the outstanding shares of PBS Inc.;

 

 

WHEREAS
a dispute arose among the parties regarding the quality and quantities of
certain services and products to be provided by Pine and Suburban to PBS Inc
and PBS LLC;

 

WHEREAS, Suburban
filed a lawsuit against PBS LLC, PBS Inc and Ed Wells (“Wells”) styled Suburban Capital Corporation v. Primary Business
Systems, L.L.C., et al., Case No. 03-CV-4194, in the United States
District Court of the Northern District of Illinois, Eastern Division alleging
breach of the Advisory Agreement (the “Suburban Lawsuit”);

 

WHEREAS,
Pine filed a lawsuit against PBS LLC styled Pine
Services, Inc. v. Primary Business Systems L.L.C., Case No.
03-CV-7832, in the United States District Court for the Northern District of
Illinois, Eastern Division alleging a breach of the Stock Purchase Agreement
(the “Pine lawsuit”);

 

WHEREAS,
PBS LLC filed a lawsuit against Pine and Custable styled Primary Business Systems, LLC v. Frank Custable, Jr.
and Pine Services, Inc., Cause No. 2003-CI-19857, in the 285th
Judicial District Court, Bexar County, Texas alleging fraud and breach of
contract (the “First PBS Lawsuit”).  PBS
LLC also filed suit against Suburban in a lawsuit styled Primary Business Systems, LLC v. Suburban Capital
Corporation, Case No. 2004-CI-02171, in the 37th Judicial
District, Bexar County, Texas (the “Second PBS Lawsuit”);

 

WHEREAS,
the Court entered a default judgment against Pine and Custable in the amount of
$4,700,000.00 (the “Judgment”) in the First PBS Lawsuit, which Pine and
Custable appealed in a suit styled Frank
Custable and Pine Services, Inc.
v. Primary Business Systems, LLC, Appeals No. 04-04-        ,
before the Fourth Court of Appeals for the State of Texas (the “Appeal”,
together with the Suburban Lawsuit, the Pine Lawsuit, the First PBS Lawsuit and
the Second PBS Lawsuit, the “Lawsuits”);

 

 

WHEREAS,
PBS LLC, PBS Inc and Matthews deny all claims made by Suburban, Pine and
Custable in the Lawsuits, and Suburban, Pine and Custable deny all claims made
by PBS LLC in the Lawsuits; and

 

WHEREAS, the Parties
acknowledge that a bona fide dispute and controversy exists between and among
them, both as to liability and damages, if any, relating to the facts in
question and underlying the Lawsuit; and

 

WHEREAS,
the Parties have reached an agreement to compromise and settle their disputes;
and

 

WHEREAS, the Parties
have and do hereby compromise, settle and resolve all pending disputes, claims,
actions, suits, demands, causes of action, debts, liabilities, agreements,
contracts, or promises that would have been asserted or which were asserted by
and between the Parties;

 

NOW
THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND COVENANTS SET FORTH
HEREIN AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY
OF WHICH ARE HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:

 

1.               It is the intent of
the Parties to rescind or unwind the transactions completed under the Stock
Purchase Agreement and the Stock Acquisition Agreement.  Further, the Parties acknowledge and agree
that PBS Inc, as a reporting company subject to the Securities and Exchange Act
of 1934, as amended, (the “Act”) and rules and regulations (“Rules”) of the
Securities and Exchange Commission (“SEC”), shall be required to make certain
filings under the Act (“SEC Filings”) with respect to the transactions
contemplated hereby (including, without limitation Section 6 hereof), and
except as specifically stated otherwise herein, the transactions contemplated
hereby may not become effective until such filings and

 

 

all applicable timeframes required under the
Act and the Rules have been completed. 
Pine and Custable shall provide any information reasonably required by
PBS Inc in connection with the SEC Filings.

 

2.               PBS LLC shall
receive the sum of $200,000.00 USD, jointly and severally, from Pine and
Custable in full settlement of all claims that PBS LLC, PBS Inc, Matthews, or
the Matthews Family have asserted or could have asserted in the Lawsuits and in
satisfaction of the Judgment.  Such
amount shall be wired to the trust account of Loeffler Tuggey Pauerstein
Rosenthal LLP according to the instructions on Exhibit “A” in the amounts and
on the dates described herein paragraph 2:

 

a.               $50,000 USD
immediately upon the execution of this Agreement, but not later than two (2)
days after the date of this Agreement;

 

b.              $50,000 USD no later
than six (6) months following the Date of this Agreement;

 

c.               $50,000 USD no
later than one (1) year following the Date of this Agreement; and

 

d.              $50,000 USD no later
than 30 months following the Date of this Agreement.

 

3.               Pine and Custable
shall execute the secured promissory note and security agreement attached
hereto as Exhibit “B” (the “Note”).  Matthews shall transfer ownership
of 59.7% of the outstanding shares of PBS Inc (or 51,766,968 common shares)
currently held by Ed Wells in escrow (the “Control Block Shares”) back to Pine
and such share certificate(s) shall remain in the possession of Ed Wells as
escrow agent pursuant to the escrow agreement attached hereto as Exhibit “C”.  The Control Block Shares or a number
equivalent to 59.7% of the outstanding shares of Primary Business Systems, Inc.,
f/k/a Sharecom, Inc., shall serve as collateral for the payment in full of the
principal and interest on the Note, as more described therein.  In the event of any uncured default of the
payments described

 

 

both in paragraph 2(b) through 2(d) and in the
Note, the sole recourse of any party under this Agreement shall be enforcement
of the terms of the Note and the security agreement.

 

4.               In light of the
rescission of the transactions with Pine, without the shares in PBS Inc
represented thereby, the Matthews Family would have had no business purpose in
entering into the Stock Acquisition Agreement, and therefore, the Matthews
family shall effect the reversal of those 2,696,256 common shares of PBS Inc
transferred to them and those members of PBS LLC in consideration for the
transfer of 100% of the shares of PBS LLC as set forth under the Stock
Acquisition Agreement.  In exchange, PBS
Inc shall transfer all the shares of PBS LLC, to Matthews and his nominees as
stated in Exhibit “D” to this Agreement. and Primary HR Services, LLC

 

5.               In light of the
rescission of the transactions with Pine, without the shares in PBS Inc.
represented thereby, the Matthews Family would have had no business purpose in
selling its ownership in Primary HR Services, L.L.C. or AHJR, Inc. to PBS Inc.,
and therefore Matthews shall effect the reversal of those shares of PBS Inc
transferred to him and those shareholders of AHJR, Inc., d/b/a Concord Staffing
Services and Primary HR Services, L.L.C. in consideration for the transfer of 100%
of the shares of AHJR, Inc., d/b/a Concord Staffing Services and Primary HR
Services, L.L.C.  In exchange, PBS Inc
shall transfer all the shares of AHJR, Inc., d/b/a Concord Staffing Services
and Primary HR Services, L.L.C to Matthews and his nominees as stated in
Exhibit “D2” to this Agreement.

 

6.               Matthews, Amanda
Sinclair and Connie Matthews shall (i) return 24,677,630 shares of PBS Inc to
PBS Inc, following which, as a result of the completion of the transactions
under this Agreement the Matthews Family shall not own, of record or
beneficially, any shares of Common Stock of PBS Inc., based on the following:

 

 

a.               In light of the
rescission of the transactions with Pine, without the shares in PBS Inc.
represented thereby, the Matthews Family would have had no business purpose in
selling its ownership in Primary HR Services, L.L.C. or AHJR, Inc. to PBS Inc.,
and therefore Matthews shall effect the reversal of those shares of PBS Inc
transferred to him and those shareholders of AHJR, Inc., d/b/a Concord Staffing
Services and Primary HR Services, L.L.C. in consideration for the transfer of
100% of the shares of AHJR, Inc., d/b/a Concord Staffing Services and Primary
HR Services, L.L.C.  In exchange, PBS Inc
shall transfer all the shares of AHJR, Inc., d/b/a Concord Staffing Services
and Primary HR Services, L.L.C to Matthews and his nominees as stated in
Exhibit “D2” to this Agreement; and

 

b.              The cancellation by
the Matthews Family of all debt owed by PBS, Inc. to the Matthews Family,
including but not limited to the $593,294.00 owed to Matthews as deferred
compensation; and

 

c.               The cancellation by
PBS Inc. of the $61,549.00 owed by to it by Consumers Insurance Agency, Inc.

 

7.               Matthews, Amanda
Sinclair and Connie Matthews shall resign as officers and directors of PBS Inc.
upon the transfer of the shares described in this Agreement.

 

8.               Suburban, Pine and
Custable hereby fully and finally release, remises and discharge PBS Inc and
PBS LLC and all of its members, venturers, directors, shareholders partners, affiliated
companies or partnerships, officers, agents, attorneys, and employees,
including but not limited to Patrick Matthews, Amanda Sinclair, and Connie
Matthews (together, the “PBS Releasees”) of and from all claims, demands,
debts, liabilities, suits, actions, causes of action, rights, or damages (the “Claims”),
whether known or unknown to

 

 

Suburban, Pine or Custable and whether fixed
or contingent, that Suburban, Pine or Custable now has, in the past had, or in
the future may have against the PBS Releasees, or any of them, based on,
arising out of, or related to any act, fact, conduct, omission, contract,
agreement, representation, statement, occurrence, event, or other matter that
took place in whole or in part prior to the date of this Agreement, including
but not limited to: (i) all Claims based on, arising out of, or related to any
verbal agreement between or among the Parties, the Stock Purchase Agreement or
the Advisory Agreement; (ii) all Claims or any dealings or transaction between
or among Suburban, Pine, Custable and the PBS Releasees; and (iii) all Claims
that were alleged in, or that could have been alleged in the Lawsuit by
Suburban, Pine or Custable against the PBS Releasees.  Notwithstanding the foregoing, this Agreement
does not release, remise, or discharge PBS LLC or the PBS Releasees from any
obligation or liability based on or arising out of this Agreement and this
Agreement shall not be construed to release any party from any obligation or
liability based on or arising out of its terms and provisions.

 

9.               PBS LLC, PBS Inc
and Matthews hereby fully and finally releases, remises and discharges
Suburban, Pine, Custable and all of its or his, venturers, partners, directors,
officers, agents, attorneys, and employees (the “Custable Releasees”) of and
from all claims, demands, debts, liabilities, suits, actions, causes of action,
rights, or damages (the “Claims”), whether known or unknown to PBS LLC, PBS Inc
or Matthews and whether fixed or contingent, that PBS LLC, PBS Inc or Matthews
now has, in the past had, or in the future may have against the Custable
Releasees, or any of them, based on, arising out of, or related to any act,
fact, conduct, omission, contract, agreement, representation, statement,
occurrence, event, or other matter that took place in whole or in part prior to

 

 

the date of this Agreement, including but not
limited to: (i) all Claims based on, arising out of or related to any verbal
agreement between the Parties, the Stock Purchase Agreement, or the Advisory
Agreement; (ii), any dealings or transactions between or among PBS LLC, PBS
Inc, Matthews or the Custable Releasees; and (ii) all Claims that were alleged
in, or that could have been alleged in the Lawsuit by PBS LLC, PBS Inc or
Matthews.  Notwithstanding the foregoing,
this Agreement does not release, remise, or discharge the Custable Releasees
from any obligation or liability based on or arising out of this Agreement and
this Agreement shall not be construed to release any party from any obligation
or liability based on or arising out of its terms and provisions.

 

10.         PBS Inc hereby fully and
finally releases, remises and discharges Matthews, PBS LLC, the Matthews Family
and all of its or his, venturers, partners, directors, officers, agents,
attorneys, and employees (the “Matthews Releasees”) of and from all claims,
demands, debts, liabilities, suits, actions, causes of action, rights, or
damages (the “Claims”), whether known or unknown to PBS Inc whether fixed or
contingent, that PBS Inc now has, in the past had, or in the future may have
against the Matthews Releasees, or any of them, based on, arising out of, or
related to any act, fact, conduct, omission, contract, agreement,
representation, statement, occurrence, event, or other matter that took place
in whole or in part prior to the date of this Agreement, including but not
limited to: (i) all Claims based on, arising out of or related to any verbal
agreement between the Parties, the Stock Purchase Agreement, or the Advisory
Agreement; (ii), any dealings or transactions between or among PBS Inc or the
Matthews Releasees; and (ii) all Claims that were alleged in, or that could
have been alleged in the Lawsuits by PBS Inc. 
Notwithstanding the foregoing, this Agreement does not release, remise,
or discharge the

 

 

Matthews Releasees from any obligation or
liability based on or arising out of this Agreement and this Agreement shall
not be construed to release any party from any obligation or liability based on
or arising out of its terms and provisions.

 

11.         The Parties agree to
submit to the Court orders of dismissal with prejudice as to each of their
respective Claims in the Suburban Lawsuit, the Pine Lawsuit, the First PBS
Lawsuit, the Second PBS Lawsuit and the Appeal in the forms attached hereto as
Exhibits “E1” through “E4” immediately upon the completion of the actions
described in paragraphs 3, 4, 5, 6 and 11. 
PBS LLC agrees to present the fully executed order attached as Exhibit “E1”
relating to the Second PBS Lawsuit to the Presiding Court of Bexar County,
Texas and provide conformed copies of the signed order to Suburban no later
than three (3) days from the date of the order.   PBS LLC also agrees to present the fully
executed order attached as Exhibit “E2” relating to the Appeal to the Clerk of
the Fourth Court of Appeals, sitting in Bexar County, Texas and provide
conformed copies of the signed order to Custable and Pine no later than three
(3) days from the date of the order. 
Suburban agrees to present the order attached hereto as Exhibit “E3”
relating to the Suburban Lawsuit to the Clerk for the United States District
Court of the Northern District of Illinois, Eastern Division and provide
conformed copies of the signed order to PBS LLC and Matthews no later than
three (3) days from the date of the order. 
Pine agrees to present the order attached hereto as Exhibit “E4”
relating to the Pine Lawsuit to the Clerk for the United States District Court
of the Northern District of Illinois, Eastern Division and provide conformed
copies of the signed order to PBS LLC and Matthews no later than three (3) days
from the date of the order.

 

 

12.         PBS Inc shall use
reasonable efforts to cause a proxy statement filing (or information statement
filing) to be filed in accordance with SEC Rules relating to the transactions
contemplated herein to be filed within 45 days of the date hereof, and to
obtain “clearance” from the SEC with respect to such filing as soon as possible
and to thereafter submit or mail such filing to its shareholders in accordance
with the SEC rules and the laws of the State of Nevada.  Pine, Suburban and Custable hereby
acknowledge that certain information may be required from them with respect to
the SEC filings and will cooperate with PBS Inc with respect to its reasonable
requests.  Further, Pine, Suburban and
Custable shall provide the names and other necessary identifying information of
the individuals who shall become officers and directors of PBS Inc following
the completion of the transactions discussed herein.

 

13.         The Parties agree that no
Party shall intentionally disparage the business reputation of any other Party
nor take any actions that are harmful to the other Party’s goodwill with
current or prospective customers, employees, agents, business partners, the
media or the public.  The Parties
recognize that such actions would cause irreparable harm for which there is no
adequate remedy at law and that the aggrieved Party may seek in state or
federal court, and is entitled to, a temporary restraining order and to
preliminary and permanent injunctive relief to stop any such conduct or
statements for any breach or threatened breach of this Section 7 for a
period of two (2) years after the date of the Agreement.  Bexar County, Texas shall be the exclusive
venue for any action pursuant to this Section 7.

 

14.         The Parties shall not at
any time, intentionally divulge to any person or entity the terms, conditions,
details or language of this Agreement except (i) when required in the course

 

 

of performing each Party’s respective duties
hereunder, including but not limited to those disclosures necessary to the
United States Securities and Exchange Commission OR IN CONNECTION WITH ANY
REQUIRED DISCLOSURE WHICH PBS Inc MAY MAKE UNDER THE ACT OR THE SEC RULES, (ii)
with the other Parties’ express written consent, (iii) where required to be
disclosed by court order, subpoena or other government process, (iv) as
required to comply with any law, including the Internal Revenue Code, or (v) to
the Parties respective accountants and lawyers. 
The Parties shall not have responsibility for the divulgence of any
information which is in the public domain.

 

15.         Each of the Parties will
bear its own attorneys’ fees and court costs.

 

16.         The Parties agree and
acknowledge that the Agreement is entered into solely in order to resolve any
and all outstanding or contested claims and disputes so that the Parties may
avoid the substantial costs, expenses, and uncertainties associated with such
disputes, the trial of the Lawsuit, and any other potential litigation with respect
to same.  It is also expressly agreed and
acknowledged that neither the execution nor performance of any of the terms of
this Agreement shall constitute or be construed as an admission by any
signatory to this Agreement of any liability or any fact or any indication that
any of the claims or charges made by any of the Parties hereto against each
other have any merit.

 

17.         The Parties represent and
warrant that there has not been and will be no assignment or other transfer of
any interest in any Claim that is being released under this Agreement.  The signatories further represent and warrant
that there has not been and there will be no assignment or other transfer of
any interest in any Claim which either of them may have had

 

 

or now has against the other which arises in
any way out of the facts and circumstances alleged in or in any way related to
the Lawsuit.

 

18.         No breach of any
provision hereof can be waived unless done in writing.  Waiver of any one breach shall not be deemed
a waiver of any other breach of the same or other provision hereof.  This Agreement may be amended only by written
agreement executed by all Parties hereto.

 

19.         The Parties and their
counsel have reviewed this Agreement and both Parties have participated in
drafting the Agreement.  The Agreement
shall not be construed against any Party on the basis of which Party drafted
which provision of the Agreement.

 

20.         The Parties agree and
acknowledge that no promise, inducement, or agreement not herein expressed has
been made to them or any of their representatives and that this Agreement and
constitutes the entire agreement between the Parties.  The terms of this Agreement are contractual
in nature and not mere recitals.

 

21.         The Parties understand,
acknowledge, and agree that if any fact now believed to be true is found
hereafter to be other than, or different from, that which is now believed, each
expressly assumes the risk of such difference in fact and agrees that this
Agreement shall be, and will remain, effective notwithstanding any such
difference in fact.

 

22.         The Parties agree and
acknowledge that each of them has had the opportunity to confer with his or its
own counsel prior to the signing of this Agreement and that each Party fully
understands and voluntarily accepts the terms of this Agreement.

 

23.         This Agreement shall be
binding upon and inure to the benefit of, and be enforceable by, the
signatories hereto and their respective successors, heirs, administrators,
trustees, executors and assigns.

 

 

24.         This Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.  This Agreement may be
executed and delivered by facsimile and, when so delivered, shall be deemed an
original document and shall constitute the valid, binding, and enforceable
obligation of the party or parties so delivering this Agreement.  The signature of any party hereto on a
facsimile transmission of this Agreement shall be deemed an original signature
and shall have the same legal effect as an original signature on an original
document.  No Party hereto may contend
that this Agreement, when delivered by facsimile, is not a valid, binding, and
enforceable agreement by reason of the form of such delivery or that any
signature on any facsimile should not be deemed an original signature.

 

SIGNED this       
day of December 2004.

 

[SIGNATURES
APPEAR ON THE FOLLOWING PAGE.]

 

 

	
   

  	
  SUBURBAN CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PINE SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FRANK
  CUSTABLE, JR.

  
	
   

  	
   

  
	
   

  	
  PRIMARY BUSINESS SYSTEMS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PRIMARY BUSINESS SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUBURBAN CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Patrick Dey Matthews

  
							

 

 

 

Loeffler
Tuggey Pauerstein Rosenthal LLP

ATTORNEYS AT LAW

 

SAN ANTONIO

 

755 East Mulberry, Suite 200 • San Antonio, TX 78212

Tel 210.354.4300 • Fax 210.354.4034 • www.loefflerllp.com

 

AUSTIN • WASHINGTON DC

 

January 31, 2005

 

VIA FACSIMILE (630) 705-9764 AND

ELECTRONIC MAIL

James E.Musial, Esq. and

C.Michael Kendall, Esq.

2121 W.Army Trail Rd., Ste.105

Addison, IL 60101

 

VIA FACSIMILE (210) 224-2035 AND

ELECTRONIC MAIL

Jo Beth Eubanks

Akin Gump Strauss Hauer & Feld LLP

300 Convent

Suite 1500

San Antonio, Texas 78205

 

Re :                          Global
Settlement Agreement by and among Primary Business Systems, L.L.C., Primary
Business Systems, Inc., Rick Matthews , Frank Custable, Jr., Pine Services,
Inc. and Suburban Capital Corporation (“Global Settlement Agreement”).

 

Dear Mr.Musial and Ms. Eubanks:

 

Based upon the recent discussions among the
parties and the additional funds recently transferred into the trust account of
DeLeon, Boggins & Icenogle, P.C., Primary Business Systems, L.L.C., Primary
Business Systems, Inc. and Rick Matthews (together, “PBS”) hereby withdraw
their claims of breach against Frank Custable, Jr., Pine Services, Inc. and
Suburban Capital Corporation of the Global Settlement Agreement and the
Mediation Agreement as described in my letter dated January 14, 2005.

 

This withdrawal is not intended, and should
not be construed as, a waiver of any other claims PBS may have against
Custable, Pine or Suburban for any current or future act or omission that may
constitute a breach or default of the Global Settlement Agreement or the
Mediation Agreement.

 

 

Furthermore, in recognition of the parties’
ongoing compromise, the parties hereby agree that the Execution Date as that
term is defined in the Global Settlement Agreement shall be January 31,
2005.  Please sign below where indicated
to reflect your clients understanding of and agreement to this written
amendment to the Global Settlement Agreement.

 

As always, if you have any questions, please
feel free to contact me be phone or email.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bryan A. Lopez

  
	
   

  	
  Attorney for Primary Business Systems,
  Inc.,

  
	
   

  	
  Primary Business Systems, L.L.C., and Rick

  
	
   

  	
  Matthews.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AGREED TO BY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Jim Musial

  
	
   

  	
  Attorney for Suburban Capital Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Jo Beth Eubanks

  
	
   

  	
  Attorney for Frank Custable, Jr.

  
	
   

  	
  And Pine Services, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
  cc:

  	
  Rick Matthews

  	
   

  
	
   

  	
  Tim Tuggey [FIRM]

  	
   

  
	
   

  	
  Jonathan D. Pauerstein [FIRM]

  	
   

  

 

2EXHIBIT
10.1

 

SRS LABS,
INC.

 

NON-EMPLOYEE
DIRECTOR COMPENSATION POLICY

 

On January 28, 2005, the
Board of Directors of SRS Labs, Inc. (the “Company”) approved the following
compensation policies with respect to the Company’s non-employee
directors.  These policies were adopted
by the Board and may be changed from time-to-time by the Board.

 

Cash
Compensation.   
Directors who also are employees of the Company are not paid any fees or
remuneration, as such, for their service on the Board or on any Board committee.  Each non-employee director of the Company
will receive an annual retainer of $12,000. 
In addition, the chairs and members of the standing committees of the
Board will receive the following supplemental annual retainers:

 

	
  Committee

  	
   

  	
  Chair

  	
   

  	
  Members

  	
   

  
	
  Audit

  	
   

  	
  $

  	
  12,000

  	
   

  	
  $

  	
  9,000

  	
   

  
	
  Compensation

  	
   

  	
  $

  	
  11,000

  	
   

  	
  $

  	
  8,000

  	
   

  
	
  Nomination &
  Corporate Governance

  	
   

  	
  $

  	
  8,000

  	
   

  	
  $

  	
  6,000

  	
   

  

 

The lead director will
also receive a supplemental annual retainer of $4,000. All non-employee
directors of the Company will also receive a $1,000 fee per meeting for each
Board meeting attended, and all non-employee director committee members will
also receive a $500 fee per meeting for each committee meeting attended. In
addition, each non-employee director who resides outside the Southern
California area is entitled to receive reimbursement for reasonable travel
expenses in accordance with the Company’s travel expense policy, with respect
to each Board or Board committee meeting held in Southern California that such
non-employee director attends in person.  
For Board or Board Committee meetings held outside the Southern
California area, each non-employee director is entitled to receive
reimbursement for reasonable travel expenses in accordance with the Company’s
travel policy for meetings such non-employee director attends in person.

 

Non-employee Directors’ Plan.    Each non-employee director is eligible to
receive stock options under the SRS Labs, Inc. Amended and Restated 1996
Non-employee Directors’ Stock Option Plan (the “Non-employee Directors’ Plan”),
a non-discretionary, formula stock option plan. 
Under the Non-employee Directors’ Plan, (a) each non-employee director
who first becomes a member of the Board is granted an option to purchase 10,000
shares of Common Stock automatically upon election to the Board of Directors
which vests upon the date of grant, and (b) each non-employee director is
granted an option to purchase 15,000 shares of Common Stock automatically
effective at the close of business on the date of each of the Company’s annual
meeting of stockholders at which such non-employee director is elected which
vests in three equal annual installments commencing on the first anniversary of
the applicable date of grant.

 

Incentive Plan.    Each non-employee director also is eligible
to receive awards under the Company’s Amended and Restated 1996 Long-Term
Incentive Plan (the “Incentive Plan”), a discretionary plan currently
administered by the Compensation Committee. 
Under the Board’s policy, each non-employee member of the Board of
Directors will be granted an option to purchase 30,000 shares of the Company’s
Common Stock pursuant to the Incentive Plan, effective as of the close of
business on the date of each annual meeting of stockholders at which such
non-employee director is re-elected as a non-employee director or continues in
office as an incumbent director, with the following terms and conditions: (a)
the options shall be subject to all terms and conditions of the Incentive Plan;
(b) the options shall vest as follows: 1/4th to vest one year after the date of
grant; and 1/16th every three months during the next three successive years
thereafter; (c) the options shall have a term of 10 years from the date of
grant; and (d) the exercise price shall be the fair market value of the Company’s
Common Stock on the date of grant.

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