EXHIBIT 10.1
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
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This Agreement is made as of June 6, 2003, by and between Telenetics
Corporation ("Telenetics") on the one hand, and Comtel Electronics, Inc. dba
Corlund Electronics - Tustin ("Corlund - Tustin") and Corlund Electronics
Corporation dba Corlund Electronics - Camarillo ("Corlund - Camarillo"), on the
other hand, as follows:
RECITALS
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A. On or about February 21, 2003, Telenetics commenced against Corlund
- Tustin and Corlund - Camarillo the litigation styled TELENETICS CORPORATION V.
COMTEL ELECTRONICS, INC., ET AL., Orange County Superior Court Case No.
00XX00000.. (Hereinafter, the above-referenced litigation , including
Telenetics' Complaint and Corlund - Tustin's Cross-Complaint, shall be referred
to as the "Litigation.") On or about April 7, 2003, Corlund - Tustin filed a
cross-complaint against Telenetics. The Litigation is presently pending.
B. The parties hereto desire to settle and resolve the Litigation as
well as all disputes and other matters between Telenetics on the one hand, and
Corlund - Tustin and Corlund - Camarillo, on the other hand.
NOW THEREFORE, in consideration of the foregoing, and for other
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties agree as follows:
AGREEMENT
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1. PAYMENT BY TELENETICS. Telenetics shall pay to Corlund - Tustin the
sum of $1,000,000. Payments shall be made as follows:
(i) Telenetics shall pay the sum of $500,000 on or before June 20,
2003;
(ii) Telenetics shall pay the sum of $250,000 on or before July 21,
2003 (provided, however that such payment shall be deemed timely made if
actually received on or before July 28, 2003); and
(iii) Telenetics shall pay the sum of $250,000 on or before August 20,
2003 (provided, however that such payment shall be deemed timely made if
actually received on or before August 27, 2003).
2. ADDITIONAL PAYMENT BY TELENETICS. On or before November 13, 2003,
Telenetics shall pay to Corlund - Tustin an additional sum (presently estimated
to be approximately $500,000) equal to the amount by which accounts of
Telenetics that were specifically assigned pursuant to that certain agreement
entitled "Assignment of Accounts Receivable" and dated September 7, 2001 (as
supplemented from time-to-time with additional assigned accounts) and that have
been or will be collected by Telenetics exceeds the sum of $1,000,000. (Such
payment shall be deemed timely made if actually received on or before November
20, 2003). The amount to be paid by Telenetics pursuant to this section 2 shall
be reduced by an amount equal to any collections by Corlund - Tustin on accounts
not specifically assigned to Corlund - Tustin. The parties will cooperate and
share all appropriate information to enable them to conduct an accounting to
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determine the sum payable pursuant to this section. If the parties are unable to
agree by August 15, 2003 upon the amount to be paid by Telenetics pursuant to
this section, the parties will retain a certified public accountant to conduct
an appropriate audit/accounting and to determine the amount payable by
Telenetics pursuant to this section. If the parties are unable to agree upon an
accountant to conduct the audit/accounting, Telenetics and Corlund - Tustin each
will choose an accountant, and such accountants will choose a third accountant
who will be the sole accountant to conduct the audit/accounting. The fees and
costs of the accountant who conducts the audit/accounting shall be split equally
between Telenetics and Corlund - Tustin. The results of the accountant's
audit/accounting shall be binding on the parties and no party shall have any
right to contest the same in any manner in any litigation, arbitration, or other
proceeding. Notwithstanding the foregoing, Telenetics shall not be required to
pay Corlund -Tustin in excess of $912,335 pursuant to this section 2.
3. COLLECTION OF ASSIGNED ACCOUNTS. To the extent that accounts of
Telenetics that were specifically assigned pursuant to that certain agreement
entitled "Assignment of Accounts Receivable" and dated September 7, 2001 (as
supplemented from time-to-time with additional assigned accounts) have not been
and will not be collected by Telenetics, Telenetics will take all reasonable
steps requested by Corlund - Tustin to assist Corlund - Tustin to collect such
accounts. Such reasonable steps may include, but shall not necessarily be
limited to: (i) providing Corlund - Tustin with contact information for the
account debtors, and (ii) executing joint correspondence (prepared by Corlund -
Tustin) to the account debtors instructing them to pay Corlund - Tustin
directly. To the extent any of the account debtors with respect to any assigned
accounts pay Telenetics directly, Telenetics shall segregate the funds received
and within one business day turn over such funds to Corlund -Tustin. Telenetics
shall cause Xxxxx & Xxxxxx and Xxxxx Xxxxxxxx/SMC Group to execute a Release of
Interest In Accounts Receivable in substantially the form attached hereto as
Exhibit "A." To the extent the accounts to be collected pursuant to this section
3 are not collected in full by November 1, 2003, Telenetics shall pay to Corlund
-Tustin on or before November 13, 2003, all amounts not collected with respect
to such accounts.
4. PURCHASE OF INVENTORY. Telenetics shall purchase from Corlund -
Tustin, at the total cost to Corlund - Tustin (which will be deemed to be actual
cost plus a 7.5% handling charge), inventory that Corlund - Tustin had purchased
as of January 31, 2003 for the purpose of manufacturing products for Telenetics.
Telenetics shall make sufficient purchases of inventory each calendar quarter so
that the total amount paid to Corlund - Tustin in each of the four calendar
quarters commencing with the calendar quarter ending September 30, 2003 and
continuing through the calendar quarter ending June 30, 2004 for inventory
purchases is not less than $100,000.00, for a total minimum inventory purchase
obligation of $400,000. Telenetics is not obligated to make any purchases of
inventory beyond the specified minimum $100,000 per quarter. Notwithstanding the
foregoing, Telenetics shall be entitled to purchase inventory at a discount from
the total cost to Corlund - Tustin in accordance with the following schedule:
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DATE OF PURCHASE AND PAYMENT DISCOUNT FROM TOTAL COST
Through 7/9/03 40%
From 7/10/03 through 8/9/03 30%
From 8/10/03 through 9/9/03 20%
From 9/10/03 and after 0%
Provided, however, that any inventory purchases in excess of $100,000 in any one
calendar quarter shall not reduce the minimum $100,000 purchase requirement for
any succeeding calendar quarter, unless such inventory purchases were made at
total cost (i.e., without application of any discount pursuant to the above
schedule). The terms for purchases pursuant to this section shall be COD and in
the form of wire transfer or cashier's check. Title to purchased inventory shall
not pass to Telenetics until payment in full has been received and all funds
have cleared. Notwithstanding the foregoing, Corlund - Tustin may exercise its
discretion to not sell any inventory to Telenetics, and Corlund - Tustin
reserves the right to sell any and all inventory to anyone on any terms it
chooses.
5. PAYMENT INSTRUCTIONS. All payments to Corlund-Tustin pursuant to
this Settlement Agreement shall be directed pursuant to the instructions set
forth in Exhibit "B" hereto.
6. RELEASE OF CORLUND - TUSTIN AND CORLUND - CAMARILLO. Upon payment to
Corlund - Tustin of all sums required to be paid pursuant to section 1 above
Telenetics, for itself and its predecessors, successors, representatives,
agents, transferees, attorneys, insurance companies, employees, officers,
directors, affiliates, owners, shareholders, and assigns, fully and forever
releases and discharges Corlund - Tustin and Corlund - Camarillo, as well as
Comtel Holdings, Inc. and Xxxxx Diversified Holdings, Inc., and each of them,
and their respective predecessors, successors, representatives, agents,
transferees, attorneys, insurance companies, employees, officers, directors,
affiliates, owners, shareholders, lenders (including but not limited to UPS
Capital Corporation), and assigns from any and all claims, debts, liabilities,
demands, obligations, guarantees, costs, expenses, attorneys' fees, damages,
actions, and causes of action of whatever kind or nature, whether known or
unknown, with the exception of the obligations arising out of this Agreement.
7. RELEASE OF TELENETICS. Upon payment to Corlund - Tustin of all sums
required to be paid pursuant to section 1 above Corlund - Tustin and Corlund -
Camarillo, and each of them, for themselves and their respective predecessors,
successors, representatives, agents, transferees, attorneys, insurance
companies, employees, officers, directors, affiliates, owners, shareholders, and
assigns, fully and forever release and discharge Telenetics and its
predecessors, successors, representatives, agents, transferees, attorneys,
insurance companies, employees, officers, directors, affiliates, owners,
shareholders, lenders, and assigns from any and all claims, debts, liabilities,
demands, obligations, guarantees, costs, expenses, attorneys' fees, damages,
actions, and causes of action of whatever kind or nature, whether known or
unknown, with the exception of the obligations arising out of this Agreement.
8. WAIVER OF SECTION 1542 RIGHTS. It is the intention of the parties
hereto that upon their taking effect, the releases set forth in sections 6 and 7
be effective as a bar to all claims, demands, controversies, actions, causes of
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action, and obligations, of whatsoever character, nature, and kind, known or
unknown, suspected or unsuspected, specified in sections 6 and 7 to be so
barred; in furtherance of this intention, the parties expressly waive any and
all rights and benefits conferred by the provisions of section 1542 of the
California Civil Code, which provides as follows:
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.
Each party hereto understands and acknowledges the significance and consequences
of such specific waiver of Section 1542 and hereby assumes full responsibility
for any injuries, damages, losses or liabilities of or to such party that may
hereafter occur or become known to such party, notwithstanding that such
injuries, damages, losses or liabilities may presently be unknown to such party.
9. RESOLUTION OF LITIGATION. The Litigation shall be resolved by filing
of the stipulated judgment pursuant to section 11 below.
10. SECURITY / NOTIFICATION OF ACCOUNT DEBTORS. Telenetics' obligations
pursuant to this Settlement Agreement arise out of that certain Manufacturing
Agreement dated December 29, 2000, as amended by that certain Amendment to
Manufacturing Agreement dated August 31, 2002, and such obligations shall be
secured by one or more Security Agreements in effect between the parties.
Corlund-Tustin is authorized to file any appropriate UCC-1 financing statements
to perfect any security interests not previously perfected. All Security
Agreements and financing statements shall remain in effect until Telenetics has
fully performed pursuant to this Settlement Agreement. Without limiting the
foregoing, and without waiving any security interest(s), upon payment by
Telenetics pursuant to section 1(i) above, Corlund - Tustin shall execute and
send to Telenetics' account debtors whose obligations to Telenetics were not
assigned to Corlund - Tustin a letter in substantially the form attached hereto
as Exhibit "C".
11. STIPULATED JUDGMENT. Telenetics shall stipulate to a judgment in
the amount of $5,200,000 in substantially the form attached hereto as Exhibit
"D". Such judgment shall be deemed satisfied as follows: (i) the judgment shall
be deemed satisfied by 1/3 upon payment of the amount required by section 1(i)
above, (ii) the judgment shall be deemed satisfied by 1/6 upon payment of the
amount required by section 1(ii) above, (iii) the judgment shall be deemed
satisfied by 1/6 upon payment of the amount required by section 1(iii) above,
and the judgment shall be deemed satisfied by 1/3 upon payment of the amount
required by section 2 above. Such judgment may be enforced only in accordance
with section 12 below.
12. DEFAULT. In the event Telenetics fails to comply with any monetary
obligation hereunder, or in the event Telenetics fails to comply with any
non-monetary obligation after 10 days' notice in accordance with the notice
provisions of section 27 below, Corlund - Tustin and/or Corlund - Camarillo may
declare a default hereunder, in which case Comtel- Tustin and/or Comtel -
Camarillo may proceed to take all appropriate steps to enforce Telenetics'
obligation's pursuant to this agreement, including but not limited to enforcing
the stipulated judgment pursuant to section 11 above; provided, however, that
Corlund - Tustin shall be entitled to enforce such judgment only to the extent
that some amount thereunder remains unsatisfied after application of the
adjustments provided in section 11 above.
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13. WARRANTY RE SECURITY INTERESTS IN ACCOUNTS. TELENETICS WARRANTS AND
REPRESENTS THAT THE ONLY PERSONS OR ENTITIES WITH SECURITY INTERESTS IN
TELENETICS' ACCOUNTS RECEIVABLE ARE THE PARTIES WHO ARE TO EXECUTE EXHIBIT "A"
HERETO, AND NO ONE ELSE. ON OR BEFORE JULY 28, 2003, TELENETICS SHALL PROVIDE
COPIES OF CURRENT UCC-1 FILINGS BY SECURED PARTIES OF RECORD TO EVIDENCE THE
WARRANTY CONTAINED IN THIS SECTION 13.
14. INTEGRATION CLAUSE. This Agreement contains the entire agreement
between the parties relating to the settlement and transactions contemplated
hereby, and all prior or contemporaneous needs, agreements, understandings,
representations, and statements, whether oral or written, and whether by a party
hereto or such party's legal counsel, are merged herein.
15. MODIFICATION. This Agreement may not be changed, altered, or
modified except in a writing signed by the parties. This Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the parties.
16. CALIFORNIA LAW. This Agreement shall be deemed to have been
executed and delivered within the State of California, and the rights and
obligations of the parties hereto shall be construed and enforced in accordance
with, and governed by, the laws of the State of California except to the extent
that federal bankruptcy law applies.
17. NO PRIOR ASSIGNMENTS. The parties hereto each represent and warrant
to each other that they have not assigned or transferred to any third party any
of the rights, claims, causes of action, or other matters that they are
obligated to release or transfer pursuant to this Agreement.
18. SIGNATORIES' AUTHORITY. Each entity executing this Agreement
represents that it is authorized to do so. Each person executing this Agreement
on behalf of an entity, other than an individual executing this Agreement on his
or her own behalf, represents that he or she is authorized to execute this
Agreement on behalf of that entity.
19. BINDING ON SUCCESSORS AND ASSIGNS. This Stipulation shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, representatives, successors and assigns.
20. ATTORNEYS' FEES AND COSTS. In the event any party hereto fails to
perform any of its obligations under this Agreement, or in the event a dispute
arises concerning the meaning or interpretation of any provision of this
Agreement, the party not prevailing in such dispute shall pay any and all costs
and expenses incurred by the other parties in enforcing or establishing their
rights hereunder, including without limitation court costs and reasonable
attorneys' fees.
21. NO ADMISSION OF LIABILITY. The parties expressly recognize and
agree that the terms and conditions of this Agreement constitute a compromise of
contested matters, and neither the offer nor the acceptance of the terms and
conditions represent an admission regarding liability or regarding the merits of
any other party's claims or assertions.
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22. EXECUTION OF DOCUMENTS. Each party agrees to execute all such
further documents as shall be necessary or appropriate to carry out all of the
provisions of this Agreement.
23. NON-RELIANCE UPON REPRESENTATIONS. Except as expressly stated in
this Agreement, no party hereto, nor any officer, agent, employee,
representative, or attorney for any party, has made any statement or
representation to any other party hereto regarding any fact relied upon in
entering into this Agreement, and no party hereto relies upon any such statement
or representation in executing this Agreement.
24. REVIEW AND CONSULTATION WITH COUNSEL. The parties have read this
Agreement, have had the opportunity to consult with counsel of their own
choosing in connection with this Agreement, and have made such investigation of
the facts as they deem necessary.
25. TIME OF ESSENCE. Time is of the essence for the performance of each
and every covenant and the satisfaction of each and every condition contained in
this Agreement.
26. CONSTRUCTION. This Agreement shall not be construed against the
party preparing it, but shall be construed as if both parties prepared it.
27. NOTICES. Unless otherwise specifically provided herein, all
notices, demands, or other communications given hereunder shall be in writing
and shall be deemed to have been duly given as of the second business day after
mailing by United States certified mail, return receipt requested, addressed as
follows:
To Corlund - Tustin:
Xxxx Xxxxxx, CEO
Comtel Electronics, Inc.
00000 Xxxxxx Xxxx
Xxxxxx, XX 00000
To Corlund - Camarillo:
Xxxx Xxxxxx, CEO
Corlund Electronics, Inc.
0000 X. Xxxxxxxx Xxxxxx Xx.
Xxxxxxxxx, XX 00000
with a copy to:
K. Xxxx Xxxxx, Esq. Sullivan, Hill, Xxxxx, Rez & Xxxxx
000 Xxxx X Xxxxxx, Xxx. 0000
Xxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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To Telenetics:
Xxxxx Xxxxx, President
Telenetics Corporation
00000 Xxxxxx Xxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
with a copy to:
Xxxxxx X. Xxxxxx III, Esq.
0000 XxxXxxxxx Xxxx., Xxx. 000
Xxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address or other person as either party hereto shall designate
to the other in writing.
28. COUNTERPARTS. This Agreement may be executed in one or more
counterparts with the same force and effect as if executed in a single, complete
document.
IN WITNESS WHEREOF, the parties and their respective attorneys have
approved and executed this Agreement on the dates set forth opposite their
respective signatures.
Dated:__________________________, 2003 TELENETICS CORPORATION
By:________________________
Its:_______________________
Dated:__________________________, 2003 COMTEL ELECTRONICS, INC. dba
Corlund Electronics -
Tustin
By:________________________
Its:_______________________
Dated:__________________________, 2003 CORLUND ELECTRONICS CORPORATION
dba Corlund Electronics
- Camarillo
By:________________________
Its:_______________________
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Approved as to Form and Content:
Dated:__________________________, 2003 ___________________________
Xxxxxx X. Xxxxxx III
Attorney for Telenetics Corporation
SULLIVAN, HILL, XXXXX, REZ & XXXXX
A Professional Law Corporation
By:______________________________
K. Xxxx Xxxxx
Attorneys for Comtel
Electronics, Inc. dba
Corlund Electronics -
Tustin, and Corlund
Electronics Corporation
dba Corlund Electronics -
Camarillo
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EXHIBIT "A"
RELEASE OF INTEREST IN ACCOUNTS RECEIVABLE
For value received, the undersigned secured creditors of Telenetics
Corporation ("Telenetics") hereby release any and all right, title, and interest
in and to the accounts owed to Telenetics that are listed in the Attachment
hereto consisting of Schedule B-1 through Schedule B-68 to the Assignment of
Accounts Receivable agreement inclusive, totaling 78 pages. The undersigned
hereby authorize Comtel Electronics, Inc dba Corlund Electronics - Tustin
("Corlund - Tustin") and its agents to execute and file and their behalf one or
more appropriate UCC releases with respect to the accounts listed in the
Attachment hereto. To the extent necessary and allowed by law, the undersigned
irrevocably appoint Corlund - Tustin or its agents as attorney-in-fact, which
power is coupled with an interest, with full authority in the place and stead of
the undersigned, to execute any UCC releases relative to all or any portion of
the accounts listed in the Attachment hereto in the name of the undersigned or
without the signature of the undersigned.
Dated: _________________________ XXXXX & XXXXXX
By: ______________________________
________________________name, title
Dated: _________________________ SMC GROUP
By: ______________________________
________________________name, title
Dated: _________________________ ______________________________
Xxxxx Xxxxxxxx
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