MUTUAL RELEASE, CONSENT AND SETTLEMENT AGREEMMNT
This Mutual Consent and Settlement Agreement (the "Agreement") is
entered into this 16th day of April, 1999 by and between Palomar Medical
Technologies, Inc, ("Palomar"), Electronic Packaging Interconnect Corporation, a
Delaware corporation, formerly known as "Biometric Technologies, Inc." ("EPIC")
and Comtel Electronics, Inc., a California corporation, a subsidiary of EPIC
("Comtel') (EPIC and Comtel individually and collectively, the "Company"),
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. ("▇▇▇▇▇▇▇") and ▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇").
Recitals:
A. EPIC, Palomar, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ are parties to that certain Stock
Purchase Agreement dated December 9, 1997, which was amended by that certain
First Amendment to Stock Purchase Agreement dated as of May 14,1998, and which
was amended by that certain Second Amendment to Stock Purchase Agreement dated
October 7, 1998 (the Stock Purchase Agreement, First Amendment and the Second
Amendment are collectively referred to as the "Stock Purchase Agreement."
B. In connection with the Second Amendment to Stock Purchase Agreement,
the Company executed a Promissory Note dated October 7, 1999, in the original
principal sum of $500,000.00 (the "Note") in favor of Palomar. As used herein,
the term "Loan Documents" shall refer to the Note and the Stock Purchase
Agreement and the First Amendment and Second Amendment to Stock Purchase
Agreement.
C. The Company, as the sole shareholder of Comtel has caused Comtel to
enter into an agreement to sell substantially all of the assets of Comtel to
Myford Acquisition Corp., a Delaware corporation ("MAC") controlled by MapleWood
Management LP ("Maplewood"), an unrelated third party (the "Comtel Asset Sale").
D. The Company has disclosed to Palomar the consideration it is
receiving from MAC and the consideration ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ are receiving in
connection with the Comtel Asset Sale. A copy of-thee Company's disclosure
letter is attached hereto as Exhibit B. The Parties acknowledge that the
execution and delivery of this Agreement is a condition precedent to the Comtel
Asset Sale and that, if the Comtel Asset Sale does not close, the Company is
unlikely to be able to continue in business.
▇. ▇▇▇▇▇▇▇ and the Company, in full and complete satisfaction of the,
Company's obligations under Loan Documents, desire to enter into this Agreement,
to settle and finally resolve all matters relating to the Loan Documents and to
set forth the amounts to be paid by the Company and ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ to
Palomar in full satisfaction of the obligations of the Company under the Loan
Documents.
Agreements:
NOW, THEREFORE, in consideration of the terms and conditions hereof,
the parties agree as follows:
1. CONSENT TO SALE OF ASSETS OF COMTEL. Subject to and upon
receipt of the Settlement Consideration, as hereinafter defined, Palomar hereby
(a) consents to the sale by Comtel of all of its assets pursuant to the Comtel
Asset Sale; and (b) releases any and all liens that Palomar, either individually
or Palomar may hold in any of the assets of Comtel or any proceeds of the Comtel
Asset Sale.
2. SETTLEMENT CONSIDERATION. In consideration of the
agreements and releases set forth herein, (a) the Company agrees to pay and
deliver to Palomar, at the Closing Date (as defined below), the following
consideration; (i) cash in the amount of $100,000, and (ii) a release of Palomar
from its guaranty obligations pertaining to a loan to Comtel by Coast Business
Credit, a division of Southern Pacific Bank (the "Coast Business Credit
Release'); and (b) ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ agree to deliver to Palomar a Promissory
Note in the form attached hereto as Exhibit A in the principal amount of
$400,000.00 executed by ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ and their spouses in favor of
Palomar. (The consideration described in clauses (a) and (b) above is
hereinafter called the "Settlement Consideration").
3. REPAYMENT AND SATISFACTION OF NOTE. Except with respect to
obligations created by or arising-out of this Agreement for the payment of the
Settlement Consideration to Palomar on or before the Closing Date, Palomar, for
itself and its successors and assigns, together with all affiliates, agents,
attorneys, representatives, partners, officers, directors, shareholders,
employees and other persons claiming. through Palomar, hereby remises,
releases,. acquits and forever discharges hereby releases and discharges the
Company, ▇▇▇▇▇▇▇, Jcnsen, MAC, MapleWood and their respective successors,
assigns, affiliates, agents, attorneys, representatives, partners, officers,
directors, shareholders and employees (the "Releasees") from (a) any and all
liens. claims, cause of actions, demands, liabilities, obligations, damages,
losses, costs, and expenses whatsoever, whether known or unknown, mature or
contingent arising out of or in connection with the Note and any of the Loan
Documents, but only as it pertains to the Company; (b) any and all liens,
claims, cause of actions, demands, liabilities, obligations, damages, losses,
costs and expenses whatsoever. known or unknown, contingent or mature, arising
out of or in connection with any of the assets of Comtel or the right of Comtel
to receive proceeds from the Comtel Asset Sale, whether such assets or rights
are held by Comtel or its assignees; (c) any and all liens, claims, cause of
actions, demands, liabilities, obligations, damages, losses, costs and expenses
whatsoever, known or unknown, contingent or mature, arising out of or in
connection with the distribution of proceeds or other assets or rights received
from MAC in connection with the Comtel Asset Sale to the Company or any other
third parties; and (d) all suits, claims or causes of action, whether known or
unknown, mature or contingent whether arising under any federal or state statute
(including, without limitation, state and federal securities laws) or in tort,
contract, equity, indemnity, contribution, accounting, or other legal theory,
relative to the Loan Documents but only as it pertains to the Company-
4. COMPANY, ▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ RELEASE. Except with respect to
obligations created by or arising out of this Agreement, the Company, ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇, and each of them for their respective successors and assigns,
together with all affiliates, agents, attorneys, representatives, partners,
officers, directors, shareholders and employees claiming through them, hereby
promise, release, acquit and forever discharge Palomar and its successors,
assigns, affiliates, agents, attorneys, representatives, partners, officers,
directors, shareholders and employees claiming through them and for any others
who may claim through them, from any and all suits, claims or causes of action
demand, liabilities, obligations, damages, losses, costs and expenses
whatsoever, whether known or unknown, mature or contingent, arising,, under any
federal or state statute (including, without limitation, state and federal
securities laws) or in tort, contract, equity, indemnity, contribution,
accounting, or other legal theory, which the Company, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ have or
ever had arising prior to and including the Closing Date against Palomar, its
subsidiaries, affiliates, officers, directors and employees
5. VOLUNTARY SETTLEMENT. Each party granting a release
hereunder (a) represents, warrants and acknowledges it has been fully advised by
its attorney of its rights and has entered into this Agreement voluntarily,
without duress or coercion. Representations and Warranties.
-------------------------------
a. Palomar Representations and Warranties. Palomar hereby
represents and warrants to the Company, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ as follows:
(i) Palomar has the full power and authority to
execute and deliver this Agreement, and this Agreement is
valid, binding and enforceable against Palomar in accordance
with its terms;
(ii) Palomar owns the Note free and clear of any and
all security interests or other encumbrances and Palomar has
not transferred, assigned, sold, negotiated or pledged,
encumbered the Loan Documents or any of these or any of its
rights thereunder;
(iii) Palomar has all necessary corporate, power and
authority to execute and deliver this Agreement and has taken
all corporate action necessary to execute, deliver and perform
this Agreement;
(iv) Palomar has had the right to inquire and make
inquires of the Company regarding the Comtel Asset Sale and to
receive answers concerning the Comtel Asset Sale, the
distribution of proceeds, assets or the right to receive
assets from the Comtel Asset Sale; and
(v) No consent, authorization, approval or other
action by, and no notice to or filing with, any governmental
authority, regulatory body, lessor, franchisor or other person
or entity is required for Palomar to enter into this Agreement
or for the execution, delivery or performance of this
Agreement by Palomar.
b. Company Representations and Warranties. Company hereby
represents and warrants to Palomar as follows:
(i) Company has the full power and authority to
execute and deliver this Agreement and this Agreement is
valid, binding and enforceable against Company accordance with
its terms;
(ii) Company has all necessary corporate power and
authority to execute and deliver this Agreement and has taken
all corporate action necessary to execute, deliver and perform
this Agreement; and
(iv) No consent, authorization, approval or other
action by, and no notice to or filing with, any governmental
authority, regulatory body, lessor, franchisor or other person
or entity is required for Company to enter into this Agreement
or for the execution, delivery or performance of this
Agreement by Company.
6. Payment of Settlement Amount. The Closing Date for the
transaction described in this Agreement shall be March 31, 1999, or such other
date as the Company and Palomar agree in writing (the "Closing Date"). The
closing of the transaction contemplated by this Agreement shall take place at
the offices of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, on or before the Closing Date.
a. On or before the Closing Date, Palomar shall have executed
and delivered the following documents to the Company's legal counsel or
its nominee: (i) an executed original of this Agreement- (ii) a
certified Corporate Resolution authorizing the execution and delivery
of this Agreement, (iii) the original ,Note, and (iv) irrevocable
written instructions to cause the documents described in (i), (ii), and
(iii) to be released to the Company upon the payment of, or the
delivery of the documents constituting, the Settlement Consideration,
as defined in Section 2 hereof, to Palomar.
b. On the Closing Date, the Company shall have executed and
delivered to ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP for delivery to Palomar (i) an
executed original of the Agreement, and (ii) to wired the sum of
$100,000 to Palomar.
c. On the Closing Date, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall have executed
and delivered the Promissory Note and delivered it to ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, LLP for delivery, to Palomar.
7. Miscellaneous.
a. Each party acknowledges that this Agreement is entered into
after voluntary and without coercion arms length negotiations in which
all parties have been represented
by counsel of their choice, and that all parties to this Agreement are
in equal bargaining positions and without any disadvantage.
b. If any part of this Agreement is breached in any manner and
legal, equitable or other proceedings are required to enforce the same,
the unsuccessful party in the litigation, as determined by the court,
agrees to pay the successful party, as determined by the court, all
costs, legal fees and expenses, including attorneys fees and expert
witness fees in the amount incurred by the successful party.
c. This Agreement will inure to the benefit of and will be
binding upon all heirs, assignees, personal representatives, or
successors in interest by merger or otherwise to any or all of the
parties to this Agreement.
d. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of Delaware without
regard to its principals of conflicts of law.
e. This Agreement may be executed in any number of
counterparts, and when so executed, such counterparts shall constitute
a single, binding Agreement between all signatories thereto.
f. This Agreement shall not constitute a negotiable instrument
or note.
g. The terms of this Agreement supersede all prior or
contemporaneous oral or written agreements and understanding of the
parties, all of which will be deemed to be merged into this Agreement.
IN WITNESS NVEEREOF, the parties have executed this Agreement on
the date and year set forth above.
Palomar Medical Technologies, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Its: Chairman and CEO
Electronic Packaging Interconnect Corporation,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
Comtel Electronics, Inc.
A California corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Exhibit A
PROMISSORY NOTE
Principal Amount Phoenix, Arizona
$400,000.00 April 16, 1999
FOR VALUE RECEIVED, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
husband and wife and ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, husband and wife
(collectively the "Maker"), promises to pay to Palomar Medical Technologies,
Inc. or order ("Holder"), the principal balance of Four Hundred Thousand and
No/100ths Dollars (S400,000.00) in lawful money of the United States of America,
together with interest on the unpaid principal amount hereof from time to time
outstanding, from the date hereof until payment in full, at ten percent (10%)
per annum. All amounts due hereunder, including any accrued and unpaid interest,
shall be due and payable on March 31, 2001 (the "Maturity Date").
The Maker promises to pay to the Holder quarterly interest payments of
Two Thousand Five Hundred and No/100ths Dollars ($2,500.00) commencing on the
first (1st) day of July, 1999 and continuing on the first (1st) day of October,
January, and April from the date hereof until the Maturity- Date. Payment of
interest that accrues hereunder that is in excess of the amount of the quarterly
interest payment shall be deferred until the Maturity Date.
The Maker shall be permitted to prepay all or any portion of the amount
due hereunder at any time without penalty.
Holder's acceptance of payments after the due date shall not waive or
postpone any right of the Holder hereof, and time is and shall remain of the
essence hereof.
If, as a result of any default under this Note, the Holder incurs any
attorneys' fees or other legal costs or expenses with respect to enforcement of
any rights provided for hereunder, whether or not any legal proceeding is
instituted, Maker promises to pay such attorneys' fees and expenses, including,
without limitation, any costs of court, witness fees or experts fees, and
reasonable travel costs, regardless of whether such amounts are reasonable under
applicable law.
Maker and all persons now or hereafter liable on this Note severally
waive notice, presentment for payment and protest.
The loan evidenced by this Note is made for commercial purposes and
that no portion of the amounts describe herein are or will be used for any
purpose other than a commercial purpose. If all interest, fees, penalties or
other charges payable under this Note should exceed the maximum interest rate
permitted by law, then (i) interest or charges that exceed the maximum interest
rate permitted by law shall be reduced to the maximum rate permitted by law and
(ii) any amounts paid in excess of the maximum legal interest rate shall be
credited against the outstanding principal amount of the indebtedness evidenced
by this Note.
This Note shall be governed by the substantive laws of the Commonwealth
of Massachusetts, without regard to conflicts of law principles.
"MAKER"
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇., a married man
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a married woman
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, a married man
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a married woman
EXHIBIT B
ELECTRONIC PACKAGING
INTERCONNECT CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
March 16, 1999
Via Federal Express
Palomar Medical Technologies
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Director of Finance
Dear ▇▇. ▇▇▇▇▇▇:
Please find enclosed three documents for your review and approval:
1. Mutual Release, Consent and Settlement Agreement
2. Non-Negotiable Promissory Note
3. Class A Stock Warrant
As we have discussed, Electronic Packaging Interconnect Corporation,
formerly known as Biometric Technologies Corp. ("EPIC") has not been able to
attract sufficient outside capital necessary to meet the strategic and
operational objectives of the company. Not all the parties who entered the EPIC
Participant Term Sheet dated October 16,1 998 were able to meet their investment
objective. This required EPIC and its sole operating subsidiary, Comtel
Electronics, Inc. ("Comtel"), to seek other sources of financing.
On December 30, 1998, EPIC and its sole operating subsidiary, Comtel,
entered a Letter of Intent with MapleWood Management LP ("MapleWood") to conduct
due diligence and determine MapleWood's potential interest in making an
investment in the company. In ate February, MapleWood's Investment Committee
approved the creation of two new Delaware corporation, Myford Holdings Corp.
("MHC") and Myford Acquisition Corp. ("MAC"), which were authorized to enter an
agreement to acquire substantially all of the assets of Comtel subject to
specific terms and conditions. A definitive agreement is nearing completion and
is expected to be ready for signature shortly. A Bulk Sale Notice (attached) was
recorded on March 8, 1999. The targeted closing dart is for the end of March.
Palomar Medical Technologies
March 16, 1999
Page 2
The acquisition is being structured as an asset purchase, with MAC
acquiring the assets of Comtel and assuming certain liabilities. Except as
described below, EPIC will realize no value from the transaction, but Comtel's
business will be preserved.
In negotiating with MapleWood, EPIC has attempted to obtain as much
consideration as possible for its debt and equity bridge investors, given EPIC's
and Comtel's financial condition. While MHC is not obligated to do so, MHC is
offering the EPIC outside shareholders the opportunity to convert their EPIC
investment into Class A Warrants in MHC. The EPIC bridge lenders (including, to
the extent of a $200,000 bridge loan, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the undersigned) will
be offered various combinations of cash, seven year notes, and Class A Warrants
in MHC. The EPIC bridge lenders will receive Class A Warrants convertible into
an aggregate of 300,782 common shares of MHC. Since Comtel is the only remaining
operating asset in EPIC, serious consideration should be given to this proposal.
It is unlikely that any EPIC shareholder or EPIC bridge lender would realize any
value for its investment if these offers are not accepted. MAC's offer and the
closing of its proposed purchase of Comtel's assets is conditioned upon
obtaining mutual releases regarding all previous business matters with EPIC,
Comtel Electronics, ▇▇. ▇. ▇▇▇▇▇▇▇ and the undersigned, including the release of
any claims by EPIC, debt or equity investors.
Going forward, MapleWood is prepared to make a significant initial
investment into Comtel to be followed by subsequent planned investments in
acquisitions and strategic expansions. The amount of the initial investment is
subject o MapleWood's discretion, but is contemplated to be $7,000,000. In
exchange therefore, MapleWood will receive preferred stock of MHC which is
convertible into 7.2 million common shares of MHC. The investment objective is
to create a regional market leader in contract electronic manufacturing. The
initial focus of the business will be on Southern and Northern California.
MapleWood's investment in Comtel through MAC should give the company a viable
opportunity to be successful.
To facilitate the transaction, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and the undersigned have
agreed tow rite-off their Convertible Note of $1.6m and forego their 6.7 million
share of EIPC stock as described in the October 16,1 998 EPIC Participant Term
Sheet. The undersigned will enter a multi-year employment contract as the CEO
and will receive 450,000 shares of common stock in MAC as an incentive for
entering into said Agreement. The employment package will include a base salary,
annual cash bonuses based on EBITDA performance, and restricted stock whose
vesting will be tied to EBITDA performance over the next five years. ▇▇. ▇▇▇▇▇▇▇
will enter a Directors Agreement and will be compensated for the time spent on
the strategic expansion of Comtel. ▇▇. ▇▇▇▇▇▇▇ will receive 450,000 shares of
common stock in MAC as an incentive for entering into the Director's Agreement.
▇▇. ▇▇▇▇▇▇▇ will also be offered an additional 450,000 shares of restricted
stock whose vesting will be based on EBITDA performance over the next five
years. Both ▇▇. ▇▇▇▇▇▇▇ and the undersigned will be eligible to participate in
MHC's stock option plan. The maximum amount of option's which may be granted to
all person under MHC's proposed stock option plan, including ▇▇. ▇▇▇▇▇▇▇ and the
undersigned, will total 1 million shares.
Palomar Medical Technologies
March 16,1999
Page 3
On behalf of EPIC and Comtel, we encourage you to accept the attached
offer and provide the necessary releases to ensure the MapleWood offer and
closing occurs in a timely manner. EPIC has no other viable financing options
and strongly believes MapleWood's offer provides the best opportunity to you and
likely the last opportunity to realize any value on your investment.
Please review and sign the attached documents. You will notice that all
aspects of the old agreements are canceled and replaced with a set of new
agreements. Time is of the essence and we look forward to your timely approval
of MAC's offer.
Sincerely,
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
CEO
Comtel Electronics
Enclosures
c(w/out encs.): ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
MapleWood management LP
