SETTLEMENT AGREEMENT
THIS
AGREEMENT is made as of March 17, 2009, by and among IEC Electronics
Corp., having an address at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(“Parent”)
Val-U-Tech Corp., having an address at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(Subsidiary” and,
together with Parent, “IEC”) and ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, having an address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ (“▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇”),
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, having an address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (“▇▇▇▇▇▇▇ ▇▇▇▇▇▇”) and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, having an address at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ ("Vaseliv" and,
together with ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the “Shareholders”).
WHEREAS,
the parties and VUT Merger Corp., a wholly-owned subsidiary of
Parent, entered into an Agreement and Plan of Merger dated as of May
23, 2008 (the ”Merger
Agreement”), pursuant to which Subsidiary became a wholly-owned
subsidiary of Parent (the “Merger”);
and
WHEREAS,
prior to the Merger, the Shareholders were the sole shareholders of Subsidiary;
and
WHEREAS,
in connection with the Merger and pursuant to the Merger Agreement , the Parent
issued certain promissory notes (the “Purchase Notes”) and
500,000 shares (the “Shares”) of
its $.01 par value common stock to the Shareholders; and
WHEREAS,
pursuant to the Merger Agreement, the Purchase Price (as
defined in the Merger Agreement) and the Purchase Notes are subject to
adjustment in certain circumstances, some of which have already been made, some
of which Parent claims that it is now entitled to make pursuant to Section
2.01(a)(iv) of the Merger Agreement and some of which may be made in the future
based upon the provisions of the Merger Agreement; and
WHEREAS,
Parent believes that it is entitled to indemnification from the Shareholders for
breaches of certain representations and warranties made by the Shareholders in
the Merger Agreement and the Shareholders dispute such claim; and
WEHEREAS, Parent
is obligated to make certain payments to the Shareholders pursuant to Section
6.07 of the Merger Agreement and, in connection with such payments, the Purchase
Notes are to be further adjusted; and
WHEREAS,
in order to fully and finally resolve the claims of IEC for adjustment of the
Purchase Notes and for indemnification pursuant to the Merger Agreement and in
order to fully satisfy the obligations of IEC to make payment to the
Shareholders, the parties wish to agree to resolve the differences among them on
the terms and conditions contained in this Agreement;
NOW,
THEREFORE, the parties agree as follows:
1. Adjustment of Purchase Price
and Purchase Notes. The Purchase Price and
the Purchase Notes shall be adjusted as follows and restated
promissory notes shall be issued by IEC in the form and substance attached as
Exhibits ▇-▇, ▇-▇ ▇▇▇ ▇-▇ in replacement of and in substitution for the Purchase
Notes ("Restated Purchase Notes"):
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a.
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The
Purchase Price and the Purchase Notes shall be increased in the aggregate
amount of $442,278, to reflect the preliminary estimated working capital
adjustment provided for in Section 2.01(a)(ii) of the Merger Agreement
(“Preliminary Working Capital
Adjustment”).
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b.
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The
Purchase Price and the Purchase Notes shall be decreased in the aggregate
amount of $88,266.09, to reflect the actual working capital adjustment
provided for in Section 2.01(a) (ii) of the Merger Agreement (“Actual
Working Capital Adjustment”).
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c.
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The
Purchase Price and the Purchase Notes shall be decreased in the aggregate
amount of $755,864, to reflect the adjustment provided for in Section
2.01(a)(iv) of the Merger Agreement (“2008
Clawback”).
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2. Tax
Advance. Concurrently with the execution of this Agreement,
Parent shall pay the Shareholders the aggregate amount of $240,488.22 in full
satisfaction of its obligations under Section 6.07 of the Merger Agreement,
receipt of which is hereby acknowledged by the Shareholders (the "Tax
Advance"). The Tax Advance is an advance payment on the Restated
Purchase Notes. An aggregate of $240,488.22 of such payment shall be
deemed to be payment in full of the payments due on the Restated Purchase Notes
on March 1, 2009. After application of such amount, the aggregate
outstanding balance of the Restated Purchase Notes shall be
$2,488,270.14.
3. Indemnification
Obligations. In full satisfaction and release of their
obligations under Section 9.02 of the Merger Agreement, the Shareholders shall
surrender the Shares to Parent. On or before April 10, 2009, the
Shareholders shall deliver to Parent certificates representing the Shares, duly
endorsed in blank for transfer or with duly executed stock powers
attached. Parent will acknowledge receipt of such
certificates. In the event any stock certificate ("Certificate")
evidencing Shares shall have been lost, stolen or destroyed, the Shareholder
owning the lost Certificate will make an affidavit setting forth that fact and
deliver such other documents and bonds as the Parent's transfer agent
requires. In the event any stock Certificate is lost, stolen or
destroyed, the Shareholders of those Certificates will indemnify IEC against any
claim that may be made against IEC with respect to such Certificate and provide
IEC with the right to offset any claim for such indemnification against that
Shareholder's Restated Purchase Note.
4. Further Purchase Note
Adjustment. In consideration of the agreements of the
Shareholders contained in this Agreement, Parent waives its right to a further
adjustment of the Purchase Price, the Purchase Notes and Restated Purchase Notes
pursuant to Section 2.01(a)(v) and (viii) of the Merger Agreement (“2009
Clawback”).
5. Resignation. Concurrently
with the execution of this Agreement, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall deliver to Parent his
resignation as a director of IEC, in the form attached to this Agreement as
Exhibit B.
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6. Releases.
a. With
the exception of the obligations of Parent expressly set forth in this Agreement
and Restated Purchase Notes attached, each of the Shareholders
releases and discharges Parent, Subsidiary, their respective subsidiaries and
affiliates, their respective officers, employees and agents and their respective
heirs, executors, successors and assigns (the “IEC Released
Parties”) from all claims, actions or causes of action whatsoever, in law
or in equity, which they may have against the IEC Released Parties arising out
of or relating to the Merger Agreement, the transactions contemplated thereby,
the employment by any of the Shareholders by any of the IEC Released Parties or
the performance or non-performance by any of the IEC Released Parties of any
obligations with respect to any of the foregoing.
b. With
the exception of the obligations of the Shareholders expressly set forth in this
Agreement, Parent, on its own behalf and on behalf of its subsidiaries and
affiliates, and Subsidiary each releases and discharges each of the
Shareholders and their respective heirs, executors, successors and assigns from
all claims, actions or causes of action whatsoever, in law or in equity, which
it may have against them arising out of or relating to the Merger Agreement, the
performance or non-performance by any of them of any obligations under or with
respect to the Merger Agreement, the employment of any of the Shareholders by
any of the IEC Released Parties and any other matter related to any of the
foregoing.
7. Conduct. Each
of the Shareholders agrees to refrain from making any statements, whether verbal
or written, which disparage any of the IEC Released Parties or any of their
products or services. Parent, on its own behalf and on behalf of each
of the IEC Released Parties, and Subsidiary, each agrees to refrain from making
any statements, whether verbal or written, which disparage any of the
Shareholders.
8. General
Terms.
a. Binding
Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their personal representatives, successors and
assigns.
b. Entire
Agreement. This Agreement contains the entire understanding
between or among the parties hereto and supersedes any prior understanding,
memoranda or other written or oral agreements between or among any of them
respecting the within subject matter. There are no representations,
agreements, arrangements or understandings, oral or written, between or among
any of the parties relating to the subject matter of this Agreement which are
not fully expressed herein.
c. Modifications;
Waiver. No modification or waiver of this Agreement or any
part hereof shall be effective unless in writing and signed by the party or
parties sought to be charged therewith.
d. Governing
Law. This Agreement and all rights of the parties shall be
governed by, and construed in accordance with, the laws of the State of New York
pertaining to contracts made and to be wholly performed within such state,
without taking into account conflicts of laws principles.
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e. Headings. The
headings contained in this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
f. Counterparts. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, and all of said counterparts together shall constitute but one and
the same instrument.
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IS SIGNATURE PAGE
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IN WITNESS WHEREOF, the undersigned
have hereunto signed their names on the day and date first above
written.
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By: /s/ W ▇▇▇▇▇
▇▇▇▇▇▇▇
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Name: W.
▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: Chief
Executive Officer
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VAL-U-TECH
CORP.
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By: /s/ W ▇▇▇▇▇
▇▇▇▇▇▇▇
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Name: W.
▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: President
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SHAREHOLDERS:
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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