EXHIBIT 10.58
DEBT MODIFICATION AGREEMENT
THIS DEBT MODIFICATION AGREEMENT (this "AGREEMENT") is entered into as
of the date set forth on the signature page to this Agreement, by and between
TELENETICS CORPORATION, a California corporation (the "ISSUER"), and XXXXX
XXXXXXXX XXXX D.B.A. SMC GROUP (the "HOLDER").
R E C I T A L S
WHEREAS, the Issuer is indebted to the Holder under that certain
Secured Promissory Note dated December 30, 1997 in the principal amount of Two
Hundred Fifty Thousand Dollars ($250,000), as amended pursuant to that certain
Amendment to Secured Promissory Note dated effective as of June 27, 2001 between
the Issuer and the Holder (the "12% NOTE"); and whereas Holder is currently in
first position as secured creditor.
WHEREAS, the Issuer is indebted to the Holder under an obligation in
the principal amount of Seventy-Five Thousand Dollars ($75,000) (the "8%
OBLIGATION"). WHEREAS, the Issuer and the Holder desire to amend the terms of
the 12% Note and the 8% Obligation (collectively, the "DEBTS") as provided
herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. WAIVER OF DEFAULTS. The Holder hereby waives any and all defaults
under the Debts that have occurred through the date hereof (collectively,
"DEFAULTS"), and waives any and all consequences that arise from any such
Defaults subject to issuers' good faith performance of the terms of this
agreement.
2. ACKNOWLEDGMENT OF INTEREST ACCRUAL START DATE. The Issuer and the
Holder acknowledge and agree that the Issuer has paid to the Holder all interest
accrued under the Debts through September 30, 2002. Accordingly, the parties
agree that unpaid interest on the Debts began to accrue on October 1, 2002.
3. DEFAULT CURE PERIOD. Notwithstanding anything to the contrary
contained in the existing terms of the Debts, the parties agree that the Issuer
shall have thirty (30) calendar days to cure a default that would otherwise
result from the failure of the Issuer to make payments when due under the Debts.
4. CHANGE IN PAYMENT TERMS OF 8% OBLIGATION. The principal balance of
the 8% Obligation shall be payable in three (3) equal installments due on
November 22, 2002, December 15, 2002, with the entire obligation to be paid by
December 31, 2002. An interest payment in the amount of One Thousand One Hundred
Ninety-Five and Thirty-Eight ($1,195.38, shall be payable on January 2, 2003.
Upon payment of the three (3) monthly installments by December 31, 2002 and the
one (1) interest payment described in this paragraph, the 8% Obligation shall be
deemed satisfied in full.
5. CHANGES IN MATURITY DATE AND PAYMENT DUE DATES OF 12% NOTE. Sections
1(c) and 1(d) of the 12% Note are deleted and replaced with the following
Section 1(c):
"c) Principal and accrued interest on this Note shall be
payable in twelve (12) monthly installments commencing on January 15, 2003 and
continuing on the Fifteenth (15th) day of each month thereafter, with the last
payment coming due on December 15, 2003. The first (1st) monthly payment shall
be in the amount of Twenty-Five Thousand, Five Hundred Dollars ($25,500.00),
which shall represent Eighteen Thousand Dollars ($18,000) in principal amount
plus the interest that has accrued on the 12% Note between October 1, 2002 and
December 31, 2002. Each of the second (2nd) through eleventh (11th) monthly
payments shall be in an amount that represents Twenty Thousand Dollars ($20,000)
in principal amount plus accrued and unpaid interest for the previous month. The
final payment shall be in the amount of the then remaining principal balance
plus accrued and unpaid interest for the previous month. Upon payment of the
twelve (12) monthly installments, the 12% Note shall be deemed satisfied in
full."
6. AGREEMENT TO SUBORDINATE. Notwithstanding anything to the contrary
contained in the terms of the 8% Obligation, the 12% Note or the Security
Agreement dated as of March 31, 1998 (collectively, the "NOTE DOCUMENTATION"),
the parties agree that at all times from and after the Subordination Date (as
defined below), the Issuer's remaining indebtedness to the Holder under the
Debts shall be subordinated to Senior Indebtedness (as defined below). For
purposes of this provision, the "SUBORDINATION DATE" shall mean the date upon
which the Issuer has repaid an aggregate of One Hundred Fifty Thousand Dollars
($150,000) in principal amount of the Debts, provided that the Issuer shall have
cured any payment defaults occurring prior to that date. For purposes of this
provision, "SENIOR INDEBTEDNESS" shall mean the principal of and unpaid interest
on all indebtedness of the Issuer incurred after the date of this Agreement for
money borrowed from any bank, savings and loan or other financial institution
that is in the business of making accounts receivable, inventory and other
asset-based loans and The Holder shall promptly execute any and all
documentation requested by the holder of the Senior Indebtedness to evidence and
perfect the subordination provided for in this paragraph. Nevertheless, this
subordination shall be effective only in the event that Issuer is in full
compliance with this Agreement and the Note Documentation and that the issuer is
generally paying its indebtedness to third parties as it becomes due and is not
otherwise insolvent from a balance sheet perspective. Notwithstanding anything
to the contrary, the Note Documentation evidencing the Debts have not been
amended at any time and constitute duly authorized, valid binding and continuing
agreements and obligations of Issuer, enforceable in accordance with its terms.
Issuer has no claims, cross-claims, counter-claims, setoffs or defenses of any
kind or nature which would in any way reduce or offset the debts under the Note
Documentation. Issuer further acknowledges and agrees that the Debts are secured
by a properly perfected security interest of a first priority senior to all
other consensual liens.
7. CONFESSION OF JUDGMENT. Concurrently with the execution of this
Agreement, the Issuer shall execute and deliver to the Holder's counsel a
Judgment by Confession, Stipulation for Entry of Judgment by Confession,
Confession and Confession of Judgment and Attorney Certification in the forms
agreed upon by the Issuer and the Holder (collectively, the "CONFESSION OF
JUDGMENT DOCUMENTS"), all of which documents shall be approved in writing by the
Officers and Board of Directors of Issuer. The Confession of Judgment Documents
shall be held by counsel for the Holder and shall only be used consistent with
the terms of this Agreement. If an event of default under the Debts shall have
occurred and be continuing uncured after the expiration of applicable cure
period of thirty days then the Holder shall have the right to file and have a
court of competent jurisdiction enter the Confession of Judgment Documents. In
the event that the pre-conditions for the filing and entering of the Confession
of Judgment Documents are met, the Issuer's maximum liability shall be equal to
the principal amount of the Debts plus interest accrued under the Debts on such
principal amount through the entry of the Confession of Judgment Documents. The
Issuer's liability shall be reduced by sums paid to the Holder pursuant to this
Agreement. If the Issuer has repaid all principal and interest due under the
Debts prior to the filing of the Confession of Judgment Documents, then the
Holder and the Holder's counsel shall not file or enforce the Confession of
Judgment Documents but instead shall immediately return them to the Issuer's
counsel. Issuer acknowledges and agrees that it shall reimburse Holder for all
fees and costs, including attorney fees, incurred in the collection, any
litigation regarding and/or enforcement of the security interest and obligations
set forth herein or contained in the Note Documentation.
8. OTHER TERMS OF DEBTS. Except as modified or amended by the terms
hereof, all other terms and conditions of the Debts and the Note Documentation
shall remain in full force and effect. To the extent that any term of this
Agreement conflicts with any term of the Note Documentation, the terms of this
Agreement shall control.
9. FURTHER REPRESENTATIONS AND AGREEMENTS.
(a) Each party represents that this Agreement and the
Confession of Judgment Documents are the result of arms' length
negotiations between the parties and have been freely and voluntarily
entered into by such party.
(b) Each party represents and warrants to each other party and
acknowledges that, in the negotiating and preparing this Agreement and
the Confession of Judgment Documents, and with respect to the
advisability of entering into this Agreement and the Confession of
Judgment Documents, such party has been represented by counsel and
relied upon counsel of such party's own choosing.
(c) The parties represent that they have each read this
Agreement and the Confession of Judgment Documents, and each is fully
aware of and understands all of the terms and the legal consequences
thereof.
(d) The parties represent that the execution, delivery and
performance of this Agreement and the Confession of Judgment Documents
by such party does not and will not violate any provision of any law,
rule, regulation, order, writ, injunction, decree, determination or
award presently in effect having applicability to such party.
(e) 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.
(f) Each party executing this Agreement represents and
warrants that such party has the legal capacity and/or has been duly
authorized to execute this Agreement.
(g) 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, without regard to choice of
law principles. Any disputes arising under this Agreement shall be
resolved in the federal or state courts located in the County of
Orange, State of California.
(h) If any term, condition or provision of this Agreement is
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.
(i) 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 heirs, successors
and assigns.
(j) This Agreement, together with the Note Documentation and
Confession of Judgment Documents, contains the entire agreement and
understanding concerning the Debts and replaces any prior or
contemporaneous negotiations or agreements between the parties, whether
written and/or oral, concerning the Debts.
(k) Each of the parties agrees that no particular party 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 in this Agreement shall
be resolved, and the terms, provisions and conditions of this Agreement
shall be construed and interpreted, without regard to which party 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.
(l) 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.
(m) 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 counterparts.
(n) Any notice, demand, request, waiver or other communication
required or permitted to be given under this Agreement shall be in
writing and shall be effective (a) upon hand delivery or by telecopy or
facsimile at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such
communications shall be:
If to Issuer: Telenetics Corporation
00000 Xxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: President
Attention: Chief Financial Officer
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with a copy (which copy
shall not constitute notice
to Telenetics) to: Xxxxx X. Xxxxxxx, Esq.
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
If to Holder: Xxxxx Xxxxxxxx Xxxx D.B.A. SMC Group
00000 Xxxxxxxx Xxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with a copy (which copy
shall not constitute notice
to Holder) to: Xxxxxxx X. Xxxxx, Esq.
Marshack Xxxxxxx Xxxxxx & Xxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Telecopier: (000)000-0000
Telephone: (000)000-0000
Any party hereto may from time to time change its address for
notices by giving at least ten (10) days' written notice of such changed address
to the other party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
or about November 21, 2002, to memorialize an agreement intended by the parties
to be effective as of that date.
"ISSUER" TELENETICS CORPORATION,
a California corporation
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Xxxxx X. Xxxxx, President
"HOLDER" /s/ Xxxxx Xxxxxxxx Xxxx
------------------------------------
XXXXX XXXXXXXX XXXX d.b.a. SMC GROUP
I am the Secretary of Telenetics
Corporation, and I hereby certify that
Telenetics Corporation has been duly
authorized by resolution of the Board of
Directors to enter into this Debt
Modification Agreement with Xxxxx Xxxxxxxx
Xxxx and that Xxxxx L, Stone its President
is authorized to this Debt Modification
Agreement on behalf of Telenetics
Corporation.
Xxxxxx X. Xxxxxxx, Secretary
