EXHIBIT 10.7
Amendment to
"COMPROMISE AGREEMENT AND MUTUAL RELEASE"
This Amendment ("the Amendment") is hereby made to Compromise Agreement and
Mutual Release dated September 1, 1996 ("the Agreement"), attached herein as
Exhibit "A", signed by and between Telenetics Corporation ("Telenetics") on one
side, and SMC Communications Group, Inc. ("SMC Corp.") and Xxxxx Xxxxxxxx doing
business as SMC Group ("Shashani"), jointly on the other side.
Recitals
Whereas, the Agreement was signed on September 1, 1996 but never fulfilled
and Telenetics is in default on the Agreement;
Whereas, Telenetics is indebted to SMC Corp. and Shashani as indicated in
the paragraphs 2.a., 2.b. and 2.c. of the Agreement has increased in principal
and accrued interest since September 1, 1996;
Now therefore, the parties agree to amend the Agreement as follows:
1. Paragraphs 2.b.and 3.c. are hereby amended to reflect that as of the
date of this amendment, the total unpaid sum for Telenetics rental obligation is
$141,500 plus accrued interest and late charges as indicated in the accompanying
letter by Telenetics Controller (Exhibit "B").
2. Paragraph 3.c. is hereby amended to allow for issuance of a note for
the sum of $141,500 payable to Shashani to cover the indebtedness under
paragraph 2.b. of the Agreement and paragraph 1 of the Amendment. This note
shall mature by December 31, 1999 bearing 10% interest per annum commencing on
March 31, 1998. Telenetics may pay this note and accrued interest earlier than
said maturity date without any penalties. (Exhibit "C").
3. Paragraph 3.c is further amended to allow for issuance of a note for
the sum of $115,535 payable to SMC Corp. to cover the indebtedness under
paragraph 2.c. of the Agreement. This note shall mature by December 31, 1999
bearing 10% interest per annum commencing on March 31, 1998. Telenetics may pay
this note and accrued interest earlier than said maturity date without any
penalties. (Exhibit "D").
4. Paragraph 3.a. is amended as follows:
a. The sum of $200,000 payable to Shashani is increased to $250,000 to
include unpaid interest and to compensate for Telenetics inability to pay this
sum in cash as provided under terms of the Agreement. A note shall be issued to
cover this obligation. This note shall mature by April 30, 1999 bearing 7%
interest. (Exhibit "E")
b. Number of shares of common stock to be issued shall remain the same as
Five Million (5,000,000). Certificate shall be issued by March 31, 1998.
All other terms and conditions and covenants of the Agreement shall remain
enforced.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on this
30th day of December 1997.
TELENETICS CORPORATION
By: /s/ XXXXXXX ARMANI
-----------------------------
Xxxxxxx Armani
President & Chief Executive Officer
SMC GROUP
By: /s/ XXXXX XXXXXXXX
________________________________
Xxxxx Xxxxxxxx
SMC COMMUNICATIONS GROUP, Inc.
By: /s/ XXXXX XXXXXXXX
________________________________
Xxxxx Xxxxxxxx
President
Exhibit "A"
COMPROMISE AGREEMENT AND MUTUAL RELEASE
Telenetics Corporation, a California corporation, hereinafter referred to
as "Telenetics", on the one side, and SMC Communications Group, Inc., a
California corporation, and Xxxxx Xxxxxxxx, doing business as SMC Group,
hereinafter respectively referred to as "SMC Corp." and "Shashani," jointly on
the other side, in consideration of the promises made herein, agree as follows:
NATURE AND EFFECT OF AGREEMENT
1. This Agreement consists of a compromise and settlement by each party of
that party's claims against the other party, and a release given by each party
to the other relinquishing all claims against the other. By executing this
Agreement, each of the parties intends to and does hereby extinguish the
obligations heretofore existing between them. This Agreement is not, and shall
not be treated as, an admission of liability by either party for any purpose.
Nature and Status of Dispute
2. a. Between January 1, 1992 and the present Shashani lent to Telenetics
the sum of $389,642. The parties hereto agree that the outstanding balance of
principal and interest owed on this obligation as of July 31, 1996, was
$498,167, all of which is past due and immediately callable.
b. Between September 1, 1994 and August 31, 1996 Telenetics has incurred
a rental obligation to Shashani for the occupancy of 00000 Xxxxx Xxxxxxx Xxxxx,
Xxxx Xxxxxx, Xxxxxxxxxx in the amount of $87,500 plus accrued late charges and
interest which sums are unpaid. In that same time period Telenetics has made
improvements to the subject premises in the approximate amount of $30,000
which have not been reimbursed.
c. Between January 1, 1992 and the present SMC Corp. and/or Shashani
provided products and services to or on behalf of Telenetics in the invoice
amount of $115,535, none of which has been paid.
MUTUAL COMPROMISE AGREEMENT
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3. Each party, in consideration of the promises and concessions made by
the other, hereby compromises and settles any and all past, present, or future
claims, demands, obligations, or causes of action, whether based on tort,
contract, or other theories of recovery, which that party has or which may later
accrue to or be acquired by that party against the other party and the other
party's predecessors and successors in interest, heirs and assigns, as well as
past, present and future officers, directors, shareholders, agents, employees,
parent and subsidiary organizations, affiliates and partners, arising from the
subject matter of the action described in Paragraph 2 of this Agreement, on the
following terms and conditions:
a. Telenetics shall pay to Shashani the sum of $200,000 and
shall issue to her Five Million (5,000,000) shares of the common stock of
Telenetics in the manner hereinafter set forth in full satisfaction of the
dispute, and any and all claims arising therefrom, described in Paragraph 2a of
this Agreement. In this regard, the parties agree that the sum of $200,000,
bearing no interest, shall be paid in full within thirty days of the execution
hereof. The parties hereto acknowledge that Telenetics is presently without
corporate authority to issue an additional 5,000,000 shares of its Common Stock
and that its Board of Directors will call a Shareholders' Meting to convene
before September 30, 1996 to increase the authority to issue Telenetics' Common
Stock to a number more than adequate to meet its obligations hereunder.
Telenetics shall issue and deliver its stock certificate for 5,000,000 shares in
the name of Shashani, or her nominees, to Shashani on or before October 1, 1996.
b. Telenetics shall pay to Shashani the sum of $203,035 in the
manner hereinafter set forth in full satisfaction of the dispute, and any and
all claims arising therefrom, described in Paragraphs 2b and 2c of this
Agreement. In this regard, the parties agree that the sum of $203,035, bearing
no interest, shall be paid in six equal installments commencing thirty days
following the execution hereof and continuing each thirty days thereafter until
paid in full. Default shall be deemed to have occurred if any one payment is
not received within ten days of its due date and upon any one default the
remaining balance shall become immediately due and payable.
c. Telenetics, SMC Corp. and Shashani agree that this compromise
and settlement shall constitute a bar to all past, present, and future claims
arising out of the subject matter of the dispute described in Paragraph 2.
MUTUAL GENERAL RELEASE
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4. Each of the parties on behalf of itself, its descendants, ancestors,
dependents, heirs, executors, administrators, and assigns, parent and subsidiary
organizations, affiliates, partners, agents, servants, shareholders, employees,
representatives, assigns and successors, hereby fully releases and discharges
the other party and that party's descendants, ancestors, dependents, heirs,
executors, administrators, and assigns, parent and subsidiary organizations,
affiliates, partners, agents, servants, shareholders, employees,
representatives, assigns and successors from all rights, claims, and actions
which each party and the above-mentioned successors now have against the other
party and the above-mentioned successors, stemming from their differences
arising from the subjects of the dispute described in Paragraph 2.
UNKNOWN CLAIMS
5 a. Each party acknowledges and agrees that the release it gives to the
other party upon executing this Agreement applies to all claims for injuries,
damages, or losses to its own person and property, real or personal (whether
those injuries, damages, or losses are known or unknown, foreseen or unforeseen,
patent or latent) which she or it may have against the other party. Each party
certifies that she or it has read the following provisions of California Civil
Code Section 1542:
"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."
and indicates that fact by signing its initials here:
/s/ M.A. Telenetics
---------
/s/ S.S. SMC Corp. and Shashani
---------
c. Each party understands and acknowledges that the significance and
consequence of this waiver of California Civil Code Section 1542 is that even if
she or it should eventually suffer additional damages arising out of the facts
referred to in Paragraph 2, she or it will not be able to make any claims for
those damages. Furthermore, each party acknowledges that she or it consciously
intends even as to claims for damages that may exist as of the date of this
release but which she or it does not know exists, and which, if known, would
materially affect her or its decision to execute this release, regardless of
whether her or its lack of knowledge is the result of ignorance, oversight,
error, negligence, or any other cause.
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ADVICE OF ATTORNEY
6. Each party warrants and represents that in executing this Agreement she
or it has relied upon legal advice from the attorney of her or its choice; that
the terms of this Agreement have been read (including risks, complications and
costs) have been completely explained to her or it by that attorney; and that
she or it fully understands the terms of this Agreement. Each party further
acknowledges and represents that in executing this release, she or it has not
relied on any inducements, promises, or representations made by Releasee or any
party representing or serving Releasee.
CONDITIONS OF EXECUTION
7. Each party acknowledges and warrants that her or its execution of this
release is free and voluntary.
EXECUTION OF OTHER DOCUMENTS
8. Each party to this Agreement shall cooperate fully in the execution of
any and all other documents and in the completion of any additional actions that
may be necessary or appropriate to give full force and effect to the terms and
intent of this Agreement.
ATTORNEYS' FEES
9. Each party to this Agreement shall bear all attorney's fees and costs
arising from that party's own counsel in connection with this Agreement and the
matters referred to herein, and all related matters. This paragraph shall be
applicable to this entire Agreement.
ENTIRE AGREEMENT
10. This Agreement contains the entire agreement between the parties.
EFFECTIVE DATE
11. This Agreement shall become effective immediately upon execution by
Telenetics, SMC Corp. and Shashani.
GOVERNING LAW
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12. This Agreement is entered into, and shall be construed and interpreted
in accordance with, the laws of the State of California.
Executed at Lake Forest, California, on September 1, 1996.
TELENETICS CORPORATION
BY: /s/ XXXXXXX X. ARMANI
--------------------------------------
Xxxxxxx X. Armani, President
SMC COMMUNICATIONS GROUP, INC.
BY: /s/ XXXXX XXXXXXXX
--------------------------------------
Xxxxx Xxxxxxxx, President
SMC GROUP
BY: /s/ XXXXX XXXXXXXX
--------------------------------------
Xxxxx Xxxxxxxx, Proprietor
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EXHIBIT "B"
INTEROFFICE MEMO
From: Xxxxxxx Xxxxxxx, Controller
To: Xxxxxxx Armani
Re: Unpaid Accrued Rent
This memo is to confirm that as of March 31, 1998 the total amount of unpaid
accrued rent to SMC/Shashani is $141,500. We have been paying rent since
January 1, 1998 at the rate of $4,500 per month. The accrual is for the period
ending December 31, 1997.
/s/ XXXXXXX XXXXXXX
EXHIBIT "C"
SECURED
PROMISSORY NOTE
---------------
$141,500.00 Lake Forest, California
December 30, 1997
FOR VALUE RECEIVED, Telenetics Corporation, a California corporation
("Borrower"), hereby promises to pay to the order of Xxxxx Xxxxxxxx, d.b.a. SMC
Group ("Lender"), the principal sum of One Hundred Forty One Thousand Five
Hundred and No/100 Dollars ($141,500.00) with interest thereon at the rate of
ten percent (10%) per annum.
1. Payments.
--------
a) This Note may be prepaid, in part or in full, at any time and from
time to time without premium or penalty. Borrower waives demand,
presentment, notice of nonpayment or dishonor, diligence in
collecting, grace, notice and protest, and consent to all
extensions without notice for any period or periods of time and
partial payment, before or after maturity, without prejudice to the
holder.
b) Accrual of interest commences on April 1998. No interest is accrued
or due between the date of this note and April 1, 1998.
c) Interest is due and payable every quarter.
d) Principal and any unpaid accrued interest shall be paid in full by
December 31, 1999.
2. Security. This Note is secured by a Security Agreement between Lender
--------
and Borrower dated February 7, 1992 and any amendments thereafter.
3. Events of Default and Remedies. Upon the happening of an event of
------------------------------
default with respect to this Note, the whole sum of principal and interest still
outstanding pursuant to the terms of this Note shall become due and payable
immediately, at the option of the Lender, unless said default is cured within
thirty (30) business days. The following shall constitute events of default
hereunder: (1) the failure of the Borrower to pay principal when due and
payable; (2) a decree or order by a court having jurisdiction in the premises
being entered adjudging the Borrower a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, readjustment, arrangement,
composition or similar relief for the Borrower under the Federal bankruptcy
laws, or any other similar applicable Federal or state law, and such decree or
order shall have continued undischarged or unstayed for a period of sixty (60)
days; or (3) a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, trustee or assignee in bankruptcy
or insolvency of the Borrower, or a substantial part of its property or for the
winding-up or liquidation of its affairs, shall have been entered, and such
decree or order shall have remained in force discharged or unstayed for a
period of sixty (60) days; or (4) any substantial part of the property of the
Borrower, on a consolidated basis, shall be sequestered or attached and shall
not be returned to the possession of the Borrower or released from such
attachment within sixty (60) days thereafter; or (5) the Borrower shall
institute proceedings to be adjudicated a voluntary bankrupt or shall consent to
the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization, readjustment, arrangement, composition
or similar applicable Federal or state law, or shall consent to the filing of
any such petition, or shall consent to the appointment of a receiver,
liquidator, trustee or assignee in bankruptcy or insolvency of it or a
substantial part of its property, or shall make an assignment for the benefit of
creditors.
4. Miscellaneous. This Note shall be binding upon and inure to the
-------------
benefit of the heirs, executors, administrators, and successors of the parties
hereto. It is the intention of the parties that the provisions of this Note
shall be governed by and construed in accordance with the laws of the State of
California.
"BORROWER"
TELENETICS CORPORATION
a California corporation
By:______________________________________
Xxxxxxx X. Armani, President
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EXHIBIT "D"
SECURED
PROMISSORY NOTE
---------------
$115,535.00 Lake Forest, California
December 31, 1997
FOR VALUE RECEIVED, Telenetics Corporation, a California corporation
("Borrower"), hereby promises to pay to the order of SMC Communications Group,
Inc. ("Lender"), the principal sum of One Hundred Fifteen Thousand Five Hundred
Thirty Five and No/100 Dollars ($115,535.00) with interest thereon at the rate
of ten percent (10%) per annum.
1. Payments.
--------
a) This Note may be prepaid, in part or in full, at any time and from
time to time without premium or penalty. Borrower waives demand,
presentment, notice of nonpayment or dishonor, diligence in
collecting, grace, notice and protest, and consent to all
extensions without notice for any period or periods of time and
partial payment, before or after maturity, without prejudice to the
holder.
b) Accrual of interest commences on April 1998. No interest is accrued
or due between the date of this note and April 1, 1998
c) Interest is due and payable every quarter.
d) Principal and any unpaid accrued interest shall be paid in full by
December 31, 1999.
2. Security. This Note is secured by a Security Agreement between Lender
--------
and Borrower dated December 31, 1997 and hereto attached.
3. Events of Default and Remedies. Upon the happening of an event of
------------------------------
default with respect to this Note, the whole sum of principal and interest still
outstanding pursuant to the terms of this Note shall become due and payable
immediately, at the option of the Lender, unless said default is cured within
thirty (30) business days. The following shall constitute events of default
hereunder: (1) the failure of the Borrower to pay principal when due and
payable; (2) a decree or order by a court having jurisdiction in the premises
being entered adjudging the Borrower a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, readjustment, arrangement,
composition or similar relief for the Borrower under the Federal bankruptcy
laws, or any other similar applicable Federal or state law, and such decree or
order shall have continued undischarged or unstayed for a period of sixty (60)
days; or (3) a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, trustee or assignee in bankruptcy
or insolvency of the Borrower, or a substantial part of its property or for the
winding-up or liquidation of its affairs, shall have been entered, and such
decree or order shall have remained in force discharged or unstayed for a
period of sixty (60) days; or (4) any substantial part of the property of the
Borrower, on a consolidated basis, shall be sequestered or attached and shall
not be returned to the possession of the Borrower or released from such
attachment within sixty (60) days thereafter; or (5) the Borrower shall
institute proceedings to be adjudicated a voluntary bankrupt or shall consent to
the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization, readjustment, arrangement, composition
or similar applicable Federal or state law, or shall consent to the filing of
any such petition, or shall consent to the appointment of a receiver,
liquidator, trustee or assignee in bankruptcy or insolvency of it or a
substantial part of its property, or shall make an assignment for the benefit of
creditors.
4. Miscellaneous. This Note shall be binding upon and inure to the
-------------
benefit of the heirs, executors, administrators, and successors of the parties
hereto. It is the intention of the parties that the provisions of this Note
shall be governed by and construed in accordance with the laws of the State of
California.
"BORROWER"
TELENETICS CORPORATION
a California corporation
By:
----------------------------
Xxxxxxx X. Armani, President
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EXHIBIT "E"
SECURED
PROMISSORY NOTE
---------------
$250,000.00 Lake Forest, California
December 30, 1997
FOR VALUE RECEIVED, Telenetics Corporation, a California corporation
("Borrower"), hereby promises to pay to the order of Xxxxx Xxxxxxxx, d.b.a. SMC
Group ("Lender"), the principal sum of Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00) with interest thereon at the rate of ten percent (7%) per
annum.
1. Payments.
--------
a) This Note may be prepaid, in part or in full, at any time and from
time to time without premium or penalty. Borrower waives demand,
presentment, notice of nonpayment or dishonor, diligence in
collecting, grace, notice and protest, and consent to all
extensions without notice for any period or periods of time and
partial payment, before or after maturity, without prejudice to the
holder.
b) Accrual of interest commences on April 1998. No interest is accrued
or due between the date of this note and April 1, 1998
c) Interest is due and payable every quarter.
d) Principal and any unpaid accrued interest shall be paid in full by
December 31, 1999.
2. Security. This Note is secured by a Security Agreement between Lender
--------
and Borrower dated February 7, 1992 and any amendments thereafter.
3. Events of Default and Remedies. Upon the happening of an event of
------------------------------
default with respect to this Note, the whole sum of principal and interest still
outstanding pursuant to the terms of this Note shall become due and payable
immediately, at the option of the Lender, unless said default is cured within
thirty (30) business days. The following shall constitute events of default
hereunder: (1) the failure of the Borrower to pay principal when due and
payable; (2) a decree or order by a court having jurisdiction in the premises
being entered adjudging the Borrower a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, readjustment, arrangement,
composition or similar relief for the Borrower under the Federal bankruptcy
laws, or any other similar applicable Federal or state law, and such decree or
order shall have continued undischarged or unstayed for a period of sixty (60)
days; or (3) a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, trustee or assignee in bankruptcy
or insolvency of the Borrower, or a substantial part of its property or for the
winding-up or liquidation of its affairs, shall have been entered, and such
decree or order shall have remained in force discharged or unstayed for a
period of sixty (60) days; or (4) any substantial part of the property of the
Borrower, on a consolidated basis, shall be sequestered or attached and shall
not be returned to the possession of the Borrower or released from such
attachment within sixty (60) days thereafter; or (5) the Borrower shall
institute proceedings to be adjudicated a voluntary bankrupt or shall consent to
the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization, readjustment, arrangement, composition
or similar applicable Federal or state law, or shall consent to the filing of
any such petition, or shall consent to the appointment of a receiver,
liquidator, trustee or assignee in bankruptcy or insolvency of it or a
substantial part of its property, or shall make an assignment for the benefit of
creditors.
4. Miscellaneous. This Note shall be binding upon and inure to the
-------------
benefit of the heirs, executors, administrators, and successors of the parties
hereto. It is the intention of the parties that the provisions of this Note
shall be governed by and construed in accordance with the laws of the State of
California.
"BORROWER"
TELENETICS CORPORATION
a California corporation
By:
----------------------------
Xxxxxxx X. Armani, President
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