Amendment to Settlement Agreement and Mutual Release between Telenetics Corporation and CMA Business Credit Services (as Assignee for Corlund Entities)
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This amendment updates a previous settlement agreement between Telenetics Corporation and Credit Managers Association of California (CMA), acting as assignee for the benefit of creditors of Corlund Electronics, Inc. and Corlund Electronics Corporation. The amendment revises payment terms, inventory purchase obligations, and the process for stipulated judgment. It also clarifies the parties’ obligations and conditions for effectiveness, including a required payment by Telenetics. CMA affirms its authority as assignee, and both parties reaffirm certain warranties and prior modifications. The agreement becomes effective upon a specified payment by Telenetics.
EX-10.1 3 amendment.txt Exhibit 10.1 AMENDMENT TO SETTLEMENT AGREEMENT AND MUTUAL RELEASE THIS AMENDMENT TO SETTLEMENT AGREEMENT AND MUTUAL RELEASE (the "Amendment") is made as of September 30, 2003 by and between Telenetics Corporation ("Telenetics") and Credit Managers Association of California dba CMA Business Credit Services ("CMA"), solely in its capacity as assignee for the benefit of creditors of Comtel Electronics, Inc. dba Corlund Electronics - Tustin ("Corlund - Tustin") and Corlund Electronics Corporation dba Corlund Electronics - Camarillo ("Corlund - Camarillo"), as follows: RECITALS A. On or about June 6, 2003, Telenetics, Corlund - Tustin, and Corlund- Camarillo entered into that certain Settlement Agreement and Mutual Release dated June 6, 2003 (the "Settlement Agreement"), and the parties have been performing pursuant to the Settlement Agreement since on or about such date. B. On or about August 6, 2003, the parties agreed to modify the Settlement Agreement to permit Telenetics to pay early the payment otherwise required to be made on August 20, 2003 in exchange for a discount of 10%. The parties complied with such modification to the Settlement Agreement. C. On or about August 28, 2003, Corlund - Tustin and Corlund - Camarillo made general assignments (the "Assignments") for the benefit of their respective creditors. CMA is the assignee of such Assignments. Pursuant to the Assignments, Corlund - Tustin and Corlund - Camarillo assigned to CMA substantially all of their respective property of every kind and nature, including but not limited to choses in action and all other assignable property. D. A disagreement has arisen with respect to determination of the amount to be paid to Corlund - Tustin on or before November 13, 2003 pursuant to Sections 2 and 3 of the Settlement Agreement. The parties desire to amend various provisions of the Settlement Agreement to resolve such disagreement. NOW, THEREFORE, in consideration of the foregoing, and for other valuable consideration, the amount and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. AMENDMENT OF SECTION 2 OF THE SETTLEMENT AGREEMENT. Section 2 of the Settlement Agreement is stricken in its entirety and replaced with the following: "2. ADDITIONAL PAYMENT BY TELENETICS. ON OR BEFORE SEPTEMBER 30, 2003, TELENETICS SHALL PAY TO THE SENIOR SECURED LENDER UPS CAPITAL CORPORATION (IN ACCORDANCE WITH SECTION 5 AND EXHIBIT "B" HERETO) THE SUM OF $212,386.12." 2. AMENDMENT OF SECTION 3 OF THE SETTLEMENT AGREEMENT. The last sentence of Section 3 of the Settlement Agreement is stricken in its entirety and replaced with the following: "TO THE EXTENT THE ACCOUNTS TO BE COLLECTED PURSUANT TO THIS SECTION 3 ARE NOT COLLECTED IN FULL BY OCTOBER 10, 2003, TELENETICS SHALL HAVE NO FURTHER OBLIGATION TO CORLUND - TUSTIN WITH RESPECT TO SUCH ACCOUNTS." 3. AMENDMENT OF SECTION 4 OF THE SETTLEMENT AGREEMENT. Section 4 of the Settlement Agreement is stricken in its entirety and replaced with the following: "4. PURCHASE OF INVENTORY. (a) TELENETICS SHALL PURCHASE FROM CORLUND - TUSTIN, AT PRICES EQUAL TO THE VALUES REFLECTED ON CORLUND - TUSTIN'S BOOKS AND RECORDS (I.E., AT CORLUND - TUSTIN'S ACTUAL COST), ALL ITEMS OF INVENTORY SET FORTH ON EXHIBIT "E" ATTACHED HERETO (COLLECTIVELY, THE "INVENTORY"). INVENTORY PURCHASES BY TELENETICS PURSUANT TO THIS SECTION 4 SHALL BE MADE ON OR BEFORE THE FOLLOWING DATES AND IN NOT LESS THAN THE FOLLOWING AMOUNTS: DATE AMOUNT ---- ------ OCTOBER 10, 2003 $ 160,000 NOVEMBER 5, 2003 $ 80,000 DECEMBER 5, 2003 $ 80,000 JANUARY 5, 2004 $ 80,000 FEBRUARY 5, 2004 $ 80,000 MARCH 5, 2004 $ 80,000 APRIL 5, 2004 $ 80,000 --------- $ 640,000 (b) TELENETICS MAY, BEFORE ANY PURCHASE DATE SET FORTH IN SECTION 4(a) ABOVE, MAKE PARTIAL PAYMENTS AND PARTIAL PURCHASES OF INVENTORY ON THE TERMS SET FORTH IN SECTION 4(A) ABOVE; PROVIDED, HOWEVER, THAT ANY SUCH PARTIAL PURCHASE SHALL NOT RELIEVE TELENETICS FROM COMPLETING THE REMAINDER OF SUCH INVENTORY PURCHASE ON THE REGULARLY SCHEDULED DUE DATE AS SET FORTH IN SECTION 4(a) ABOVE. PARTIAL PAYMENTS AND PURCHASES SO MADE SHALL BE APPLIED TOWARD THE IMMEDIATELY NEXT SCHEDULED INVENTORY PAYMENT / PURCHASE. -2- (c) NOTWITHSTANDING THE FOREGOING, UPON PAYMENT IN FULL BY TELENETICS OF THE TOTAL AMOUNT OF $640,000 PURSUANT TO THIS SECTION 4, TELENETICS SHALL BE ENTITLED TO POSSESSION OF ALL REMAINING INVENTORY SET FORTH IN EXHIBIT "E" HERETO WITHOUT FURTHER PAYMENT THEREFOR. ALL PAYMENTS SHALL BE MADE TO UPS CAPITAL CORPORATION IN ACCORDANCE WITH SECTION 5 AND EXHIBIT "B" HERETO. (d) THE PARTIES AGREE THAT THE INVENTORY IS BEING SOLD AND PURCHASED "AS-IS, WHERE-IS."" 4. AMENDMENT OF SECTION 11 OF THE SETTLEMENT AGREEMENT. Section 11 of the Settlement Agreement is stricken in its entirety and replaced with the following: "11. STIPULATED JUDGMENT. TELENETICS SHALL STIPULATE TO A JUDGMENT IN THE AMOUNT OF $480,000 IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT "D." SUCH JUDGMENT SHALL BE DEEMED SATISFIED BY 1/6 UPON PAYMENT OF EACH $80,000 PAYMENT AMOUNT REQUIRED BY SECTION 4 OF THIS SETTLEMENT AGREEMENT. SUCH JUDGMENT SHALL NOT BE FILED WITH THE COURT ABSENT A DECLARATION OF DEFAULT IN ACCORDANCE WITH SECTION 12 BELOW, AND SUCH JUDGMENT OTHERWISE MAY BE ENFORCED ONLY IN ACCORDANCE WITH SECTION 12 BELOW." 5. AMENDMENT OF SECTION 27 OF THE SETTLEMENT AGREEMENT. Section 27 of the Settlement Agreement is amended to include the following: "TO CMA: ROBERT J. HODER CMA BUSINESS CREDIT SERVICES 40 EAST VERDUGO AVE. BURBANK, CA 91502 WITH A COPY TO: DEMETRA V. GEORGELOS, ESQ. WINSTON & STRAWN LLP 333 SOUTH GRAND AVENUE, 38TH FLOOR LOS ANGELES, CA 90071 TELEPHONE: (213) 615-1700 FACSIMILE: (213) 615-1750" 6. EFFECTIVENESS OF AMENDMENT. Notwithstanding any other provision of this Amendment, this Amendment shall become effective and binding on the parties immediately upon, and not before, payment in full by Telenetics of the sum of $160,000 on account of the inventory purchase scheduled for October 10, 2003 as provided for in Section 3 of this Amendment. -3- 7. AGREEMENT TO BE BOUND. CMA, as assignee of Corlund - Tustin and Corlund - Camarillo, agrees to be bound by all terms of the Settlement Agreement as modified by this Amendment, including, without limitation, Section 7 (release of Telenetics) and Section 8 (waiver of Section 1542 rights) therein. 8. REPRESENTATIONS AND WARRANTIES OF CMA. CMA represents and warrants to Telenetics that (i) CMA is a corporation duly organized, validly existing and in good standing under the laws of the State of California, (ii) CMA is the assignee for the benefit of creditors of Corlund - Camarillo and Corlund - Tustin pursuant to valid general assignments for the benefit of creditors (the "Assignments"), and (iii) CMA, as said assignee under such Assignments, has the authority to enter into this Amendment and to perform the obligations set forth herein and in the Settlement Agreement, as amended hereby. 9. REAFFIRMATION OF WARRANTY RE SECURITY INTERESTS IN ACCOUNTS. Reaffirming the representations and warranties contained in Section 13 of the Settlement Agreement, Telenetics hereby warrants and represents that the only persons or entities with security interests in Telenetics' accounts receivable are the parties who were to execute (and who did execute) Exhibit "A" to the Settlement Agreement (i.e., Rutan & Tucker, SMC Group, and Shala Shashani), and no one else. 10. PRIOR MODIFICATION TO SETTLEMENT AGREEMENT. The prior modification to the Settlement Agreement dated on or about August 6, 2003, as described in Recital B of this Amendment, is hereby ratified in all respects. 11. EFFECT OF AVOIDED TRANSFER. If the payment of money made by any party hereto should for any reason subsequently be declared to be "fraudulent" within the meaning of any state or federal law relating to fraudulent conveyances, preferential or otherwise voidable or recoverable, in whole or in part, for any reason under the Bankruptcy Code or any other federal or state law (collectively, "Voidable Transfers") and CMA or UPS Capital Corporation ("UPSC") is required to pay or restore the amount of any such Voidable Transfers, or any portion thereof, then, as to the amount repaid or restored pursuant to any such Voidable Transfer (including all costs, expenses and attorneys fees of CMA or UPSC related thereto, including without limitation relief from the stay or similar proceedings), the liability of Telenetics shall be automatically revived, re-instated and restored in such amount or amounts, and shall exist as though the Voidable Transfer had never been made to CMA or UPSC, and the release in favor of Telenetics shall be rendered null and void and of no effect whatsoever. Nothing set forth herein is an admission that such Voidable Transfer has occurred. Telenetics expressly acknowledges that CMA or UPSC may rely upon advice of counsel, and if so advised by counsel may settle, without defending, any action to avoid any alleged Voidable Transfer, and that upon such settlement, Telenetics shall again be liable for any and all amounts resulting from such settlement as provided in the Settlement Agreement. 12. MISCELLANEOUS. (a) All other terms and provisions of the Settlement Agreement not expressly modified by this Amendment shall remain in full force and effect. (b) This Amendment 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. -4- (c) The parties agree to execute and deliver all such other instruments and take all such other action as any party may reasonably request from time to time, and without payment of further consideration, in order to effectuate the transactions provided for herein and in the Settlement Agreement as modified hereby. The parties shall cooperate fully with each other and with their respective counsel and accountants in connection with any steps required to be taken as part of their respective obligations under this Amendment and/or under the Settlement Agreement as modified hereby. (d) This Amendment 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 have executed this Amendment to be effective September 30, 2003. Dated: TELENETICS CORPORATION -------------------------- /s/ David Stone ----------------------------------- David Stone, President and Chief Financial Officer Dated: CREDIT MANAGERS ASSOCIATION OF -------------------------- CALIFORNIA DBA CMA BUSINESS CREDIT SERVICES, solely in its capacity as assignee for the benefit of creditors of Corlund - Tustin and Corlund - Camarillo By: ------------------------------- Its: -5- EXHIBIT D SULLIVAN, HILL, LEWIN, REZ & ENGEL A Professional Law Corporation James P. Hill, SBN 90478 K. Todd Curry, SBN 149360 550 West "C" Street, Suite 1500 San Diego, California 92101 Telephone: (619) 233-4100 Fax Number: (619) 231-4372 Attorneys for Defendants Comtel Electronics, Inc. and Corlund Electronics Corporation SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE, CENTRAL JUSTICE CENTER TELENETICS CORPORATION, a ) California corporation, ) Case No. 03 CC 03611 ) Plaintiff, ) v. ) ) COMTEL ELECTRONICS, INC., dba ) STIPULATED JUDGMENT Corlund Electronics - Tustin, a Delaware ) corporation; CORLUND ELECTRONICS ) CORPORATION, a California corporation; ) and DOES 1 through 50, inclusive, ) ) Defendants. ) ) - -----------------------------------------------) ) COMTEL ELECTRONICS, INC., dba ) Corlund Electronics - Tustin, a Delaware ) corporation,, ) ) Cross-Complainant, ) v. ) ) TELENETICS CORPORATION; and ROES ) 1 through 50, inclusive, ) ) Cross-Defendants. ) ) ) ) - ------------------------------------------------ The parties having reached agreement for resolution of the above-entitled litigation, including the claims alleged in the Complaint filed by Telenetics Corporation and the claims alleged in the Cross-Complaint filed by Comtel Electronics, Inc, it is hereby adjudged, ordered, and decreed as follows: -1- 1. Telenetics Corporation shall take nothing by way of its Complaint. 2. Comtel Electronics, Inc. shall have judgment against Telenetics Corporation in the total sum of $480,000. 3. The parties shall bear their own attorneys' fees and costs Dated: ----------------- ----------------------------------------- JUDGE OF THE SUPERIOR COURT Submitted by: SULLIVAN, HILL, LEWIN, REZ & ENGEL A Professional Law Corporation By: ------------------------------------- K. Todd Curry Attorneys for Comtel Electronics, Inc. and Corlund Electronics Corporation Approved: - ----------------------------------------- Robert J. Huston III Attorneys for Telenetics Corporation -2- EXHIBIT E