Exhibit 1
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MASTER RESTRUCTURING AGREEMENT
BY AND BETWEEN
▇▇▇▇▇▇ CORPORATION
AND
TELTRONICS, INC.
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DATED AS OF MARCH 27, 2002
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MASTER RESTRUCTURING AGREEMENT
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and is not intended
to define, limit, or describe the scope or intent of any provision of this
Agreement.)
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ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1 Definitions......................................................................2
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Section 1.2 Location of Additional Defined Terms.............................................3
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Section 1.3 Rules of Construction............................................................4
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ARTICLE II
TERMS OF THE RESTRUCTURING TRANSACTION AND CLOSING
Section 2.1 Transaction......................................................................5
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Section 2.2 The Closing......................................................................6
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Section 2.3 Further Assurances...............................................................6
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TELTRONICS
Section 3.1 Organization; Authority..........................................................6
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Section 3.2 Authorization of Transaction; No-contravention...................................6
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Section 3.3 Consents and Approvals...........................................................7
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Section 3.4 Legal Proceedings................................................................7
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Section 3.5 Limited Offering.................................................................7
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Section 3.6 Capitalization...................................................................8
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Section 3.7 Sec Reports......................................................................9
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Section 3.8 Accounting Matters...............................................................9
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Section 3.9 Registration Rights..............................................................9
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Section 3.10 No Default.......................................................................9
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Section 3.11 Solvency.........................................................................10
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Section 3.12 Financial Projections............................................................10
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Section 3.13 Amounts Due ▇▇▇▇▇▇...............................................................10
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Section 3.14 Disclosure.......................................................................10
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
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Section 4.1 Organization; Authority..........................................................10
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Section 4.2 Authorization of Transaction; Non-contravention..................................11
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Section 4.3 Consents and Approvals...........................................................11
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Section 4.4 Legal Proceedings................................................................11
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Section 4.5 Regulation D.....................................................................11
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Section 4.6 Claims...........................................................................12
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ARTICLE V
COVENANTS PENDING THE CLOSING
Section 5.1 Approvals; Consents..............................................................12
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Section 5.2 Access to Premises and Information...............................................13
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ARTICLE VI
RECONCILIATION OF AMOUNTS, EXPRESS DISCLAIMER AND CASH PAYMENTS
Section 6.1 Reconciliation of Invoice Amounts................................................13
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Section 6.2 Express Disclaimer On Sale of Additional Inventory...............................13
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ARTICLE VII
RELEASE OF CERTAIN CLAIMS, TERMINATIONS, ETC.
Section 7.1 Termination of October 30, 2000 Agreement........................................13
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Section 7.2 Termination and Release of Certain Claims........................................13
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ARTICLE VIII
CONDITIONS PRECEDENT TO ▇▇▇▇▇▇' OBLIGATIONS
Section 8.1 Representations and Warranties...................................................14
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Section 8.2 Compliance With This Agreement; Payments.........................................14
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Section 8.3 Closing Documents................................................................15
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Section 8.4 Other Documents..................................................................15
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Section 8.5 Certificate of Designations......................................................15
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Section 8.6 CIT Letter Agreement.............................................................15
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Section 8.7 Certificate of No Default or Misrepresentation...................................15
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Section 8.8 Payment of Expenses..............................................................15
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Section 8.9 Absence of Litigation............................................................15
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Section 8.10 Opinion of Counsel...............................................................15
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Section 8.11 No Materially Adverse Change.....................................................16
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ARTICLE IX
CONDITIONS PRECEDENT TO TELTRONICS' OBLIGATIONS
Section 9.1 Representations and Warranties...................................................16
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Section 9.2 Compliance With This Agreement...................................................16
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Section 9.3 Other Transaction Documents......................................................16
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ARTICLE X
ADDITIONAL COVENANTS OF THE PARTIES; INDEMNIFICATION
Section 10.1 Publicity........................................................................16
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Section 10.2 Dividends........................................................................16
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Section 10.3 Indemnification by Teltronics....................................................17
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ARTICLE XI
TERMINATION OF AGREEMENT
Section 11.1 Termination......................................................................17
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ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 Costs and Expenses...............................................................18
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Section 12.2 Survival of Representations and Warranties.......................................18
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Section 12.3 Governing Law....................................................................18
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Section 12.4 Notices..........................................................................18
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Section 12.5 Severability.....................................................................19
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Section 12.6 Submission to Jurisdiction; Waiver of Jury Trial.................................19
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Section 12.7 No Third Party Beneficiary.......................................................19
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Section 12.8 Waiver...........................................................................19
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Section 12.9 Assignment; Amendment............................................................20
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Section 12.10 Entire Agreement.................................................................20
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Section 12.11 Counterparts.....................................................................20
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Section 12.12 No Set-off.......................................................................20
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Signatures.......................................................................21
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EXHIBITS/SCHEDULES
EXHIBITS
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Exhibit A Form of Amended, Restated and Consolidated Secured Promissory Note
Exhibit B Form of Loan Agreement
Exhibit C Form of Amended and Restated General Security Agreement
Exhibit D Form of CIT Letter Agreement
Exhibit E Form of Certificate of Designations
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Second Amendment to Asset Sale Agreement
Exhibit H Form of ▇▇▇▇ of Sale
Exhibit I Form of General Release
Exhibit J Form of Additional Inventory Note
SCHEDULES
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Schedule 2.1(a) Calculation of Amounts Owed by Teltronics to ▇▇▇▇▇▇
Schedule 3.6(a) Pre-Emptive Rights; Anti-Dilution Rights
Schedule 3.6(b) Conversion Rights
Schedule 3.7 SEC Reports Not Timely Filed
Schedule 3.9 Registration Rights
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MASTER RESTRUCTURING AGREEMENT
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THIS MASTER RESTRUCTURING AGREEMENT is made and entered into as of
March 27, 2002 (this "AGREEMENT"), by and between ▇▇▇▇▇▇ CORPORATION, a Delaware
corporation ("▇▇▇▇▇▇") with its principal offices at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, on the one hand, and TELTRONICS, INC., a Delaware
corporation ("TELTRONICS") having an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, on the other hand.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to an Asset Sale Agreement made as of the 30th day of
June 2000, Teltronics purchased certain assets of the ▇▇▇▇▇▇ Enhanced Services
Business Unit and entered into a series of related transactions (the Asset Sale
Agreement as amended to the date hereof is sometimes referred to herein as the
"ASSET SALE AGREEMENT"); and
WHEREAS, pursuant to the Asset Sale Agreement, Teltronics issued and
delivered to ▇▇▇▇▇▇ on June 30, 2000, a Secured Promissory Note, originally
issued in the principal amount of $6,884,355.29, which Note was amended and
restated as of October 4, 2000, pursuant to the Amended and Restated Secured
Promissory Note (the "EXISTING PROMISSORY NOTE") pursuant to which an additional
$212,267.62 of accrued and unpaid interest was added to the unpaid principal,
resulting in a note in the principal amount of $7,096,622.91; and
WHEREAS, by letter agreement dated April 13, 2001, the parties
acknowledged and agreed that the net invoice amount owed by Teltronics to ▇▇▇▇▇▇
of $2,642,941.62 (the "APRIL 13, 2001 INVOICE AMOUNT") in respect of items
received or invoiced prior to January 1, 2001, shall be included as additional
principal under the Existing Promissory Note; and
WHEREAS, pursuant to invoices delivered by ▇▇▇▇▇▇ to Teltronics in
respect of items received or invoiced after January 1, 2001, including Invoice
Number 229023 sent by ▇▇▇▇▇▇ to Teltronics, Teltronics also owes to ▇▇▇▇▇▇ the
amount of $1,029,955.38 representing invoices of items received or invoiced from
January 1, 2001, through March 26, 2001, and $3,171,635.02 representing invoices
of items received or invoiced from March 26, 2001, to the date hereof (the
amount of $4,201,590.40 representing the sum of $1,029,955.38, $2,950,965.02 and
$220,670, reduced by payments of $1,000,017.28 made by Teltronics in respect of
such invoiced amounts is hereinafter referred to as the "ADDITIONAL INVOICES
AMOUNT"); and
WHEREAS, on the date hereof Teltronics owes to ▇▇▇▇▇▇ the amounts of
(i) $7,096,622.91 representing the principal of the Existing Promissory Note;
(ii) $2,642,941.62 representing the April 13, 2001 Invoice Amount; and (iii)
$3,201,573.12 representing the Additional Invoices Amount, plus accrued and
unpaid interest thereon in the amount of $255,663.58, for a total owed to ▇▇▇▇▇▇
on the date hereof of $13,196,801.23; and
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WHEREAS, pursuant and subject to the terms and conditions set forth
herein, ▇▇▇▇▇▇ and Teltronics have agreed to restructure and refinance the
amounts owning from Teltronics to ▇▇▇▇▇▇ under the Existing Promissory Note, the
April 13, 2000 Invoice Amount and the Additional Invoices Amount, and to amend
and modify certain other agreements entered into between Teltronics and ▇▇▇▇▇▇.
NOW, THEREFORE, in reliance upon the representations, warranties and
agreements made herein and in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS. Except as otherwise specified or as the
context may otherwise require, in addition to the capitalized terms defined
elsewhere herein, the following terms shall have the respective meanings set
forth below whenever used in this Agreement:
"ADDITIONAL INVENTORY NOTE" means the promissory note substantially in
the form of EXHIBIT J hereto in the principal amount of $94,185.90.
"AFFILIATE" means, with respect to any designated Person, any other
Person directly or indirectly, through one or more intermediaries, controlling,
or controlled by, or under direct or indirect common control with, such
designated Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of stock, other
equity interest or by contract or otherwise.
"ANCILLARY AGREEMENTS" the Amended and Restated Promissory Note,
Additional Inventory Note, Loan Agreement, Amended and Restated General Security
Agreement, CIT Letter Agreement, Registration Rights Agreement, Second Amendment
to Asset Purchase Agreement, ▇▇▇▇ of Sale and General Release.
"BUSINESS DAY" means any day which is not a Saturday, Sunday, or a day
on which banking institutions in the State of Florida are authorized by law to
close.
"CONTEMPLATED TRANSACTION" means the transactions contemplated by this
Agreement and the other Ancillary Agreements, including (a) the delivery on the
Closing Date by Teltronics of the Amended, Restated and Consolidated Secured
Promissory Note to ▇▇▇▇▇▇, (b) the entering into and performance of the Loan
Agreement, (c) the conversion of the Additional Invoices Amount of $3,201,573.12
and $798,426.88 of the April 13, 2001 Invoice Amount into, and the issuance and
delivery by Teltronics to ▇▇▇▇▇▇ of, shares of the Series C Preferred Stock, (d)
the issuance of any shares of Common Stock upon the conversion of the Series C
Preferred Stock, (e) the entering into and performance of the Registration
Rights Agreement and the Second
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Amendment to Asset Sale Agreement, (f) the sale of the Additional Inventory by
▇▇▇▇▇▇ to Teltronics pursuant to the ▇▇▇▇ of Sale and this Agreement and the
delivery of the Additional Inventory Note, and (g) the entering into, delivery,
and performance of this Agreement and all other Ancillary Agreements.
"DAMAGES" means any and all damages, losses, liabilities, obligations,
penalties, fines, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses (including, without limitation,
reasonable attorneys' and experts' fees and disbursements) of any kind or of any
nature whatsoever (whether based in common law, statute or contract; fixed or
contingent; known or unknown) suffered or incurred by a party hereto, its
employees, Affiliates, successors and assigns.
"GOVERNMENTAL BODY" means any Federal, state, municipal, local or other
governmental body, department, commission, board, bureau, agency or
instrumentality, political subdivision or taxing authority, domestic or foreign.
"KNOWLEDGE" an individual will have "Knowledge" of a particular fact or
other matter if such individual is actually aware of such fact or other matter
without independent investigation and a Person (other than an individual) will
have "Knowledge" of a particular fact or other matter if an individual who is
serving as a director, officer, or manager of such person has actual awareness
of such fact or other matter without independent investigation.
"ORDER" means any order, writ, injunction, decree, judgment, award,
determination, directive or demand of a court, arbitrator, tribunal or other
Governmental Body.
"PERMITS" means all permits, licenses, orders, approvals, franchises,
registrations and any other authorizations of any Governmental Body.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, entity or any Governmental Body or political subdivision thereof
or any other entity or organization.
"REQUIREMENT OF LAW" means any statute, law, ordinance, rule,
regulation, order, decree, judicial or administrative decision or directive.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TAXES" means all taxes of any kind, including, without limitation,
those on, or measured by or referred to as income, gross receipts, payroll,
employment, profits, withholding, social security, unemployment, real property,
personal property, sales, use, transfer, of any Federal, state, local or foreign
Governmental Body or other taxing authority.
SECTION 1.2 LOCATION OF ADDITIONAL DEFINED TERMS. In addition to the
terms defined in SECTION 1.1, set forth below is a list of terms defined
elsewhere in this Agreement:
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TERM SECTION
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"Additional Inventory"............................................Section 2.1(h)
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"Additional Invoices Amount"......................................Preamble
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"Agreement".......................................................Preamble
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"Amended and Restated Promissory Note"............................Section 2.1(a)
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"Amended and Restated General Security Agreement".................Section 2.1(c)
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"Asset Sale Agreement"............................................Preamble
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"▇▇▇▇ of Sale" ...................................................Section 2.1(h)
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"Certificate of Designations".....................................Section 2.1(e)
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"CIT".............................................................Section 2.1(d)
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"CIT Letter Agreement"............................................Section 2.1(d)
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"Closing".........................................................Section 2.2
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"Closing Date"....................................................Section 2.2
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"Common Stock"....................................................Section 3.6(a)
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"Exchange Act"....................................................Section 3.7
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"Existing Promissory Note"........................................Preamble
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"General Release".................................................Section 2.2(i)
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"▇▇▇▇▇▇"..........................................................Preamble
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"▇▇▇▇▇▇ Damages"..................................................Section 10.3
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"Indemnity Claims Letter".........................................Section 7.2(a)
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"Indemnity Demand"................................................Section 7.2(a)
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"Loan Agreement"..................................................Section 2.1(b)
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"Non-Voting Common Stock".........................................Section 3.6(a)
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"October Agreement"...............................................Section 7.1
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"Registration Rights Agreement"...................................Section 2.1(f)
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"Related Entities"................................................Section 7.2(a)
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"Restated Certificate"............................................Section 3.6(a)
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"Second Amendment to Asset Sale Agreement"........................Section 2.1(g)
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"Sec Reports".....................................................Section 3.7
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"Securities Act"..................................................Section 3.3
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"Series C Preferred Stock"........................................Section 2.1(e)
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"Teltronics"......................................................Preamble
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SECTION 1.3 RULES OF CONSTRUCTION. The following provisions shall be
applied wherever appropriate herein: (a) wherever used herein, any pronoun or
pronouns shall be deemed to include both the singular and plural and to cover
all genders; (b) this Agreement and the other Ancillary Agreements shall be
deemed to have been drafted by both ▇▇▇▇▇▇ and Teltronics and neither this
Agreement nor any other Ancillary Agreement shall be construed against any party
as the principal draftsperson hereof or thereof; (c) any references herein to a
particular Section, Article, Exhibit, or Schedule means a Section or Article of,
or an Exhibit or Schedule to, this Agreement unless another agreement is
specified; (d) the Exhibits and Schedules attached hereto are incorporated
herein by reference and shall be considered part of this Agreement; and (e) the
subject headings of the paragraphs and sections of this Agreement
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are included for the purpose of convenience only and shall not affect the
construction or interpretation of any of its provisions.
ARTICLE II
TERMS OF THE RESTRUCTURING TRANSACTION AND CLOSING
SECTION 2.1 TRANSACTION. On and subject to the terms and conditions of
this Agreement, at the Closing:
(a) Teltronics shall duly execute and deliver to ▇▇▇▇▇▇ an Amended,
Restated and Consolidated Secured Promissory Note substantially in the form of
EXHIBIT A hereto (the "AMENDED AND RESTATED PROMISSORY NOTE"). The principal
amount of such Amended and Restated Promissory Note shall be the sum of
$9,196,801.23 (calculated as set forth in SCHEDULE 2.1(A)) and interest shall
accrue on such Amended and Restated Promissory Note from April 1, 2002. The
Amended and Restated Promissory Note shall be completed by inserting the
appropriate interest and principal payment dates and final maturity date (the
date which is 48 months following the Closing Date) as set forth therein;
(b) ▇▇▇▇▇▇ and Teltronics shall each duly execute and deliver the Loan
Agreement substantially in the form of EXHIBIT B hereto (the "LOAN AGREEMENT");
(c) ▇▇▇▇▇▇ and Teltronics shall each duly execute and deliver the
Amended and Restated General Security Agreement substantially in the form of
EXHIBIT C hereto (the "AMENDED AND RESTATED GENERAL SECURITY AGREEMENT");
(d) ▇▇▇▇▇▇ shall duly execute and deliver to CIT Group/Business Credit,
Inc. ("CIT") the letter substantially in the form of EXHIBIT D hereto (the "CIT
LETTER AGREEMENT");
(e) The Additional Invoices Amount of $3,201,573.12 and $798,426.88 of
the April 13, 2001 Invoice Amount (for a total of $4,000,000.00) shall be
converted into, and Teltronics shall issue and deliver to ▇▇▇▇▇▇, 40,000 shares
of Teltronics' Series C Preferred Stock (the "SERIES C PREFERRED STOCK") having
the rights and preferences set forth in Teltronics' Certificate of Designations
Establishing Series of Shares in the form attached hereto as EXHIBIT E (the
"CERTIFICATE OF DESIGNATIONS"), which shall be filed with the Secretary of State
of Delaware on or before the Closing Date. Teltronics shall deliver a stock
certificate representing the shares of Series C Preferred Stock, registered in
▇▇▇▇▇▇' name or in the name of such nominee as ▇▇▇▇▇▇ may specify at least 24
hours prior to the Closing;
(f) ▇▇▇▇▇▇ and Teltronics shall each duly execute and deliver the
Registration Rights Agreement substantially in the form of EXHIBIT F attached
hereto (the "REGISTRATION RIGHTS AGREEMENT");
(g) ▇▇▇▇▇▇ and Teltronics shall each duly execute and deliver the
Second Amendment to Asset Purchase Agreement substantially in the form of
EXHIBIT G hereto (the "SECOND AMENDMENT TO ASSET SALE AGREEMENT"); and
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(h) ▇▇▇▇▇▇ shall sell to Teltronics, and Teltronics shall purchase from
▇▇▇▇▇▇, the items of inventory (the "ADDITIONAL INVENTORY") identified in the
▇▇▇▇ of Sale substantially in the form of EXHIBIT H hereto (the "▇▇▇▇ OF SALE"),
for which Teltronics shall pay to ▇▇▇▇▇▇ ONE HUNDRED AND FIFTY THOUSAND DOLLARS
($150,000), of which $55,814.10 shall be paid by application of funds received
by ▇▇▇▇▇▇ from Teltronics, and the remainder shall be evidenced by the
Additional Inventory Note; and
(i) Teltronics shall execute and deliver to ▇▇▇▇▇▇ the General Release
substantially in the form of EXHIBIT I hereto (the "GENERAL RELEASE").
SECTION 2.2 THE CLOSING. Subject to the terms and conditions set forth
herein, the closing of the transactions set forth in this ARTICLE II and the
other Contemplated Transactions (the "CLOSING") shall be held at the offices of
▇▇▇▇▇▇ in Melbourne, Florida, or at such other place or places as the parties
may agree at 11:00 A.M., Florida time, on March 27, 2002, or such other time and
date as may be mutually approved by the parties. The time and date of Closing is
herein called the "CLOSING DATE."
SECTION 2.3 FURTHER ASSURANCES. From time to time, pursuant to the
request of a party delivered to the other party after the Closing Date, such
party shall execute, deliver and acknowledge such other instruments and
documents and shall take such other actions and shall execute and deliver such
other documents, certifications and further assurances as the other party
reasonably may request in order to enable the parties to carry out the purposes
and intent of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TELTRONICS
Teltronics represents and warrants to ▇▇▇▇▇▇ that:
SECTION 3.1 ORGANIZATION; AUTHORITY. Teltronics is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Teltronics has all necessary power and authority, and possesses all
Permits necessary to own or to lease, and to operate all its properties and to
carry on its business as it is now being conducted. Teltronics has all necessary
power and authority to execute, deliver and perform its obligations hereunder
and under the other Ancillary Agreements to which it is to be a party.
Teltronics is qualified to do business and is in good standing in each state or
other jurisdiction in which such qualification is necessary under applicable
provisions of law.
SECTION 3.2 AUTHORIZATION OF TRANSACTION; NO-CONTRAVENTION. (a)
Teltronics has duly authorized and approved the Contemplated Transactions, and
Teltronics has taken all action required by law (including under its NASDAQ
listing application and requirements), its Restated Certificate, its bylaws or
otherwise to authorize and to approve the execution, delivery and performance of
this Agreement, the other Ancillary Agreements to which it is to be a party and
the documents, agreements and certificates to be executed and delivered by it in
connection
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herewith and therewith. This Agreement is, and each other Ancillary
Agreement to which Teltronics is to be a party, when executed and delivered by
Teltronics at the Closing, will be duly executed and delivered by Teltronics,
and shall constitute a valid and legally binding obligation of Teltronics,
enforceable against Teltronics in accordance with its terms. All persons who
have executed this Agreement on behalf of Teltronics or who will execute on
behalf of Teltronics any other Ancillary Agreements or other documents,
agreements and certificates in connection herewith or therewith, have been duly
authorized to do so by all necessary corporate action. Teltronics' board of
directors has approved this Agreement, the Ancillary Agreements and the
Contemplated Transactions, and no approval of any of Teltronics' stockholders
(including holders of its Series B Preferred Stock) is required, whether by law,
the rules of the NASDAQ SmallCap Market, Teltronics' Restated Certificate or
bylaws, contract or otherwise, for the Contemplated Transactions (including the
issuance of the Series C Preferred Stock or the shares of Common Stock issuable
upon conversion thereof) or for the payment of dividends to holders of the
Series C Preferred Stock pursuant to the terms of the Certificate of
Designations.
(b) Neither the execution and delivery of this Agreement or the other
Ancillary Agreements, nor the consummation of the Contemplated Transactions on
the terms and subject to the conditions hereof and thereof, will (i) conflict
with or result in any violation of or constitute a breach of or give rise to a
right of termination or cancellation of any of the terms or provisions of, or
result in the acceleration of any obligation under, or constitute a default
under any provision of the Restated Certificate or bylaws of Teltronics or under
any lease, contract, loan agreement, promissory note or other agreement to which
Teltronics is a party; or (ii) violate any Order against or binding upon
Teltronics; or (iii) constitute a violation by Teltronics of any Requirement of
Law of any jurisdiction as such Requirement of Law relates to Teltronics, its
business or the Contemplated Transactions.
SECTION 3.3 CONSENTS AND APPROVALS. No approval, consent, waiver or
authorization to any Governmental Body or other Person (including, but not
limited to, any existing Lender of Teltronics or its shareholders) is required
(a) for or in connection with the valid execution and delivery by Teltronics of
this Agreement or the other Ancillary Agreements to which it is to be a party or
the consummation by Teltronics of the Contemplated Transactions (including the
issuance of the Series C Preferred Stock and the shares Common Stock issuable
upon conversion thereof); or (b) as a condition to the legality, validity or
enforceability as against Teltronics of this Agreement or the other Ancillary
Agreements to which it will be a party other than Regulation D filings under the
Securities Act of 1933, as amended (the "SECURITIES ACT") or pursuant to
applicable state securities laws.
SECTION 3.4 LEGAL PROCEEDINGS. There is no action, suit, claim,
proceeding or investigation pending or, to the Knowledge of Teltronics,
threatened against or directly affecting it, which either individually or in the
aggregate, is likely to have an adverse effect on Teltronics' ability to
consummate any of the Contemplated Transactions.
SECTION 3.5 LIMITED OFFERING. Subject in part to the truth and accuracy
of ▇▇▇▇▇▇' representations set forth in Section 4.5 of this Agreement, the
offer, sale and issuance of the Series C Preferred Stock and the underlying
shares of Common Stock upon their conversion are exempt from the registration
requirements of the Securities Act, and neither Teltronics nor any
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authorized agent acting on its behalf has taken or will take any action
hereafter that would cause the loss of such exemption.
SECTION 3.6 CAPITALIZATION. (a) The authorized capital stock of
Teltronics consists of (i) 40,000,000 shares of common stock, par value $.001
per share (the "COMMON STOCK"), of which 5,275,755 shares are issued and
outstanding, (ii) 5,000,000 shares of non-voting common stock, par value $.001
per share (the "NON-VOTING COMMON STOCK"), none of which are issued and
outstanding, (iii) 4,875,000 shares of undesignated preferred stock, with rights
and preferences to be fixed by the Board of Directors in accordance with the
corporate laws of the State of Delaware and the Teltronics Restated Certificate
of Incorporation, as amended to the date hereof (the "RESTATED CERTIFICATE"),
(iv) 100,000 shares designated as Series A Preferred stock bearing the rights
and preferences set forth in the Restated Certificate of which 100,000 shares
are issued and outstanding, and (v) 25,000 shares designated as Series B
Preferred Stock, of which 12,625 shares are issued and outstanding, in each case
bearing the rights and preferences set forth in the Restated Certificate. As of
the Closing Date, 50,000 shares of the undesignated preferred stock shall have
been designated as "Series C Preferred Stock" with the rights, preferences and
limitations set forth in the Certificate of Designations. All shares of Common
Stock and Preferred Stock outstanding have been validly issued and are fully
paid and nonassessable. Except as listed on SCHEDULE 3.6(A), there are no
statutory or contractual pre-emptive rights, rights of first refusal,
anti-dilution rights or any similar rights held by any party with respect to the
issuance of the Series C Preferred Stock or the issuance of Common Stock upon
the conversion thereof.
(b) Teltronics has not granted, or agreed to grant or issue, any
options, warrants or rights to purchase or acquire from Teltronics any shares of
capital stock of Teltronics, there are no securities outstanding or committed to
be issued by Teltronics or any Subsidiary which are convertible into or
exchangeable for any shares of capital stock or other securities of Teltronics
and there are no contracts, commitments, agreements, understandings,
arrangements or restrictions as to which Teltronics is a party, or by which it
is bound, relating top any shares of capital stock or other securities of
Teltronics, whether or not outstanding except for (i) the shares of Series C
Preferred Stock to be issued pursuant to this Agreement; (ii) the conversion
privileges of the holders of the Series C Preferred Stock to be issued pursuant
to this Agreement, and (iii) such options, warrants and other rights to acquire
capital stock of Teltronics, together with relevant exercise prices and dates,
set forth on SCHEDULE 3.6(B). Except as set forth on SCHEDULE 3.6(B), all such
shares have been duly reserved for issuance, have been duly and validly
authorized and upon issuance in accordance with the terms of the respective
instruments, will be validly issued, fully paid and nonassessable.
(c) The Series C Preferred Stock, when issued, sold, and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and will
be free of restrictions on transfer other than restrictions on transfer under
applicable state and federal securities laws. The Common Stock issuable upon
conversion of the Series C Preferred Stock has been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Certificate
of Designations, will be duly and validly issued, fully paid, and non assessable
and will be free of restrictions on transfer other than restrictions on transfer
under applicable state and federal securities laws.
8
SECTION 3.7 SEC REPORTS. Teltronics' Common Stock is listed on the
NASDAQ SmallCap Market and has been duly registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). The symbol for
Teltronics' Common Stock is "TELT". Except as set forth on SCHEDULE 3.7, since
January 1, 2001, Teltronics has timely filed all reports, registrations, proxy
or information statements and all other documents, together with any amendments
required to be made thereto, required to be filed with the SEC under the
Securities Act and the Exchange Act (collectively, the "SEC REPORTS"). The
financial statements contained in the SEC Reports fairly presented (or will
fairly present, as the case may be) the financial position of Teltronics as of
the dates mentioned and the results of operations, changes in stockholders'
equity and changes in financial position or cash flows for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved. As of their respective dates,
the SEC Reports complied (or will comply, as the case may be) in all material
respects with all rules and regulations promulgated by the SEC and did not (or
will not, as the case may be) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 3.8 ACCOUNTING MATTERS. The books of account, minute books,
stock record books and other records of Teltronics are complete and correct,
have been maintained in accordance with sound business practices and accurately
and fairly reflect the transactions and dispositions of the assets of
Teltronics. Teltronics maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (a) transactions are executed in
accordance with management's general or specific authorization; (b) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for the assets of Teltronics; (c) access to the assets of
Teltronics is permitted only in accordance with management's general or specific
authorization; and (d) the recorded account value for assets of Teltronics are
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
SECTION 3.9 REGISTRATION RIGHTS. Except as described in SCHEDULE 3.9,
Teltronics is not under any obligation to register under the Securities Act any
of its presently outstanding securities or any of its securities that may
subsequently be issued.
SECTION 3.10 NO DEFAULT. With respect to each agreement or contract to
which Teltronics is a party: (a) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (b) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (c)
Teltronics not in breach or default and to Teltronics' Knowledge, no other party
is in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (d) Teltronics has not repudiated any
provision of the agreement, and to Teltronics' knowledge no other party has
repudiated any provision of the agreement.
9
SECTION 3.11 SOLVENCY. Teltronics has not admitted in writing its
inability, and is not generally unable, to pay its debts as they become due and
has not made an assignment for the benefit of creditors, filed a petition in
bankruptcy, petitioned or applied to any tribunal for the appointment of a
custodian, receiver or trustee for itself or a substantial part of its assets,
and has not commenced any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, and there has not been filed any such petition or application,
and no such proceeding has been commenced against Teltronics, and Teltronics has
not by any act or omission indicated its consent to, approval of or acquiescence
in any such petition, application, or proceeding or order for relief or the
appointment of a custodian, receiver or any trustee for itself or any
substantial part of any of its properties.
SECTION 3.12 FINANCIAL PROJECTIONS. The financial projections delivered
by Teltronics to ▇▇▇▇▇▇ were prepared by Teltronics on a reasonable basis and in
good faith. The assumptions used in the preparation of such projections (a) are
those Teltronics believes are significant in forecasting the financial results
of Teltronics and (b) reflect, as of the date made and for the relevant periods
presented, a reasonable estimate of the events, contingencies and circumstances
described therein.
SECTION 3.13 AMOUNTS DUE ▇▇▇▇▇▇. The net amount owed by Teltronics to
▇▇▇▇▇▇ immediately prior to Closing (without including any accrued and unpaid
interest) is equal to the sum of (a) $7,096,622.91 representing the principal of
the Existing Promissory Note; (b) $2,642,941.62 representing the April 13, 2001
Invoice Amount; and (c) $3,201,573.12 representing the Additional Invoices
Amount, plus accrued and unpaid interest thereon in the amount of $255,663.58,
for a total owed to ▇▇▇▇▇▇ on the date hereof of $13,196,801.23.
SECTION 3.14 DISCLOSURE. No representation or warranty given as of the
date hereof by Teltronics contained in this Agreement or any Schedule attached
hereto or any statement in any document, certificate or other instrument
furnished or to be furnished to ▇▇▇▇▇▇ pursuant hereto, taken as a whole,
contains or will (as of the time so furnished) contain any untrue statement of a
material fact, or omits or will (as of the time so furnished) omit to state any
material fact which is necessary in order to make the statements contained
herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
▇▇▇▇▇▇ represents and warrants to Teltronics that:
SECTION 4.1 ORGANIZATION; AUTHORITY. ▇▇▇▇▇▇ is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of Delaware. ▇▇▇▇▇▇ has all necessary corporate power and authority, and
possesses all Permits necessary to own or to lease, and to operate all of its
assets and properties and to carry on its business as it is now being conducted.
▇▇▇▇▇▇ has all necessary corporate power and authority to execute, deliver and
perform its obligations hereunder and under the other Ancillary Agreements to
which it is to be a party.
10
SECTION 4.2 AUTHORIZATION OF TRANSACTION; NON-CONTRAVENTION. (a) ▇▇▇▇▇▇
has duly authorized and approved the Contemplated Transactions, and ▇▇▇▇▇▇ has
taken all action required by law, its articles of incorporation, its bylaws or
otherwise to authorize and to approve the execution, delivery and performance of
this Agreement, the other Ancillary Agreements to which it is to be a party and
the documents, agreements and certificates executed and delivered by it or to be
executed and delivered by it in connection herewith and therewith. This
Agreement is, and each other Ancillary Agreement to which ▇▇▇▇▇▇ is to be a
party, when executed and delivered by ▇▇▇▇▇▇ at the Closing will be duly
executed and delivered by ▇▇▇▇▇▇, and shall constitute a valid and legally
binding obligation of ▇▇▇▇▇▇, enforceable against ▇▇▇▇▇▇, in accordance with its
terms. All persons who have executed this Agreement on behalf of ▇▇▇▇▇▇ or who
will execute on behalf of ▇▇▇▇▇▇ any other Ancillary Agreement or other
documents, agreements and certificates in connection herewith or therewith, have
been duly authorized to do so by all necessary corporate action.
(b) Neither the execution and delivery of this Agreement or the other
Ancillary Agreements, nor the consummation of the Contemplated Transactions on
the terms and subject to the conditions hereof and thereof, will (i) conflict
with or result in any violation of or constitute a breach of or give rise to a
right of termination or cancellation of any of the terms or provisions of, or
result in the acceleration of any obligation under, or constitute a default
under any provision of the articles of incorporation or bylaws of ▇▇▇▇▇▇ or any
material contract to which ▇▇▇▇▇▇ is a party; or (ii) violate any Order against
or binding upon ▇▇▇▇▇▇.
SECTION 4.3 CONSENTS AND APPROVALS. No approval, consent, waiver or
authorization to any Governmental Body or other Person is required (a) for or in
connection with the valid execution and delivery by ▇▇▇▇▇▇ of this Agreement or
the other Ancillary Agreements to which it is to be a party or the consummation
by ▇▇▇▇▇▇ of the Contemplated Transactions; or (b) as a condition to the
legality, validity or enforceability as against ▇▇▇▇▇▇ of this Agreement or the
other Ancillary Agreements to which it will be a party.
SECTION 4.4 LEGAL PROCEEDINGS. There is no action, suit, claim,
proceeding or investigation pending or, to the knowledge of ▇▇▇▇▇▇ threatened
against or directly affecting it, which either individually or in the aggregate,
is likely to have an adverse effect on ▇▇▇▇▇▇' ability to consummate the
Contemplated Transactions.
SECTION 4.5 REGULATION D.
(a) INVESTMENT INTENT. Any securities of Teltronics are being acquired
by ▇▇▇▇▇▇ solely for its own account, for investment purposes only, and with no
present intention of distribution, except as contemplated in the Registration
Rights Agreement.
(b) SOPHISTICATION. ▇▇▇▇▇▇ is able to bear the economic risk of an
investment in the securities and can afford to sustain a total loss of such
investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment and therefore has the capacity to protect its own interests in
connection with the purchase of the securities.
11
(c) ACCREDITED INVESTOR. ▇▇▇▇▇▇ is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act.
(d) RESTRICTED SECURITIES. ▇▇▇▇▇▇ acknowledges that the securities will
be deemed "restricted securities" as defined in Rule 144 under the Securities
Act and that the transfer thereof is restricted by any applicable provisions of
Rule 144, unless registered under the Securities Act, or pursuant to the
Registration Rights Agreement or otherwise, or unless there exists an exemption
from registration under the Securities Act. ▇▇▇▇▇▇ acknowledges that the
certificates representing the Series C Preferred Stock (or the Common Stock
issued upon conversion of the Series C Preferred Stock) shall bear the following
or similar legend and that appropriate stock transfer instructions will be
entered in the stock records of Teltronics:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY APPLICABLE STATE SECURITIES LAW. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO OR FOR RESALE IN CONNECTION WITH THE
DISTRIBUTION THEREOF. NO DISPOSITION OF THE SHARES MAY BE MADE IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR (2) AN APPLICABLE EXEMPTION SO THAT SUCH DISPOSITION WITHOUT
REGISTRATION IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAW.
SECTION 4.6 CLAIMS. To the Knowledge of ▇▇▇▇▇▇, on the date hereof,
other than claims relating to (a) the transactions contemplated by the Asset
Purchase Agreement, (b) amounts owing to ▇▇▇▇▇▇ under the Existing Promissory
Note or the April 13, 2001 Invoice Amount, (c) amounts owing to ▇▇▇▇▇▇ as the
Additional Invoices Amount, (d) amounts or claims with respect to the
performance of Teltronics under the contract originally entered into between
▇▇▇▇▇▇ and the Board of Education of the City of New York, as assigned to
Teltronics (including potential claims in respect of any performance bond), or
(e) claims or potential claims under any written agreement between ▇▇▇▇▇▇ and
Teltronics, ▇▇▇▇▇▇ is unaware of other claims it has against Teltronics. This
representation is informational only and shall not constitute a release of any
claims, whether known or unknown, contingent, manifest or unmanifested.
ARTICLE V
COVENANTS PENDING THE CLOSING
▇▇▇▇▇▇ and Teltronics hereby covenant and agree that after the date
hereof until the Closing and except as otherwise agreed to in writing by the
other party:
SECTION 5.1 APPROVALS; CONSENTS. ▇▇▇▇▇▇ and Teltronics shall use
commercially reasonable efforts to obtain or cause to be obtained all consents,
approvals, authorizations and waivers required by any applicable Requirement of
Law or by any contracts, to be obtained by it in connection with the
consummation of the Contemplated Transactions.
12
SECTION 5.2 ACCESS TO PREMISES AND INFORMATION. From the date hereof to
the Closing Date, Teltronics shall give to, or cause to be made available for,
▇▇▇▇▇▇ and its other representatives access and the right, upon reasonable
notice, to inspect during normal business hours all the documents, contracts,
employees, books and records of Teltronics and shall permit them to consult with
the employees, officers, accountants and agents of Teltronics for the purpose of
making such investigation.
ARTICLE VI
RECONCILIATION OF AMOUNTS, EXPRESS DISCLAIMER AND CASH PAYMENTS
SECTION 6.1 RECONCILIATION OF INVOICE AMOUNTS. ▇▇▇▇▇▇ and Teltronics
acknowledge and agree that immediately prior to Closing, the net amount owed by
Teltronics to ▇▇▇▇▇▇ (without including any accrued and unpaid interest) is
equal to the sum of (a) $7,096,622.91 representing the principal of the Existing
Promissory Note; (b) $2,642,941.62 representing the April 13, 2001 Invoice
Amount; and (c) $3,201,573,12 representing the Additional Invoices Amount, plus
accrued and unpaid interest thereon in the amount of $255,663.58, for a total
owed to ▇▇▇▇▇▇ on the date hereof of $13,196,801.23.
SECTION 6.2 EXPRESS DISCLAIMER ON SALE OF ADDITIONAL INVENTORY. AT THE
CLOSING ▇▇▇▇▇▇ SHALL SELL THE ADDITIONAL INVENTORY, AND TELTRONICS SHALL
PURCHASE THE ADDITIONAL INVENTORY, ON AN "AS IS" AND "WHERE IS" BASIS. ▇▇▇▇▇▇
DISCLAIMS ALL WARRANTIES WITH RESPECT TO THE ADDITIONAL INVENTORY, WHETHER
EXPRESS OR IMPLIED, WRITTEN OR ORAL (INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE).
ARTICLE VII
RELEASE OF CERTAIN CLAIMS, TERMINATIONS, ETC.
SECTION 7.1 TERMINATION OF OCTOBER 30, 2000 AGREEMENT. On October 30,
2000, Teltronics and ▇▇▇▇▇▇ entered into an Agreement (the "OCTOBER AGREEMENT").
Effective on the Closing Date, Teltronics and ▇▇▇▇▇▇ acknowledge and agree that
the October Agreement will have no further force and effect. The parties
acknowledge and agree that the Allocation of Payment Received as set forth in
the October Agreement will at the Closing be superseded in all respects by the
allocation and reconciliation reflected in the April 13, 2001 Invoice Amount.
SECTION 7.2 TERMINATION AND RELEASE OF CERTAIN CLAIMS. (a) Effective on
the Closing Date, in consideration of the Contemplated Transactions and for
other good and valuable consideration, Teltronics for itself and for its
successors, assigns, shareholders, agents, representatives and Affiliates
("RELATED ENTITIES") does hereby remise, release, acquit and forever discharge
▇▇▇▇▇▇ and ▇▇▇▇▇▇ Related Entities of and from any claims, liabilities, demands,
damages, and obligations, and causes of action of every nature, character, and
description, past, present and future, known or unknown, vested or contingent,
ascertained or unascertained,
13
suspected or unsuspected, existing or claimed to exist, in law or in equity,
which Teltronics or any Related Entity now owns or holds or has at any time
heretofore owned or held, by reason of any matter, cause, or thing occurred,
done, omitted or suffered to be done prior to the date of this Agreement,
including, without limitation whatsoever, those with respect to, concerning, or
arising out of any assets sold pursuant to the Asset Sale Agreement or any other
transactions prior to the date hereof, including any claims asserted pursuant to
the Letter from Teltronics to ▇▇▇▇▇▇ on December 1, 2000 ("INDEMNITY CLAIMS
LETTER") as supplemented by the Letter dated January 31, 2001, reference
"INDEMNITY DEMAND", provided that nothing herein shall release ▇▇▇▇▇▇ from any
obligations arising under this Agreement or the Ancillary Agreements or any
obligations or undertakings under any other agreement entered into between
▇▇▇▇▇▇ and Teltronics which by its terms requires performance by ▇▇▇▇▇▇ after
the date hereof.
(b) Teltronics waives and relinquishes all rights and benefits
under Section 1542 of the Civil Code of the State of California (and any like
statutory provision or principle of common law in any foreign jurisdiction) and
acknowledges that Teltronics may hereafter discover facts different from or in
addition to those Teltronics knows or believes to be true with respect to the
claims, debts, dues, accounts, liabilities, demands, damages, covenants,
agreements, contracts, obligations, costs, expenses, fees, actions, and causes
of action herein released, and agrees that this Agreement shall be and remain
effective in all respects notwithstanding the discovery or existence of such
different or additional facts.
Section 1542 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."
--------------------------------------------------------------------------------
ARTICLE VIII
CONDITIONS PRECEDENT TO ▇▇▇▇▇▇' OBLIGATIONS
The obligations of ▇▇▇▇▇▇ to consummate the Contemplated Transactions
is subject to the satisfaction or fulfillment, at or before the Closing Date, of
each of the following conditions precedent (any of which may be waived, in whole
or in part, by ▇▇▇▇▇▇ in its sole discretion):
SECTION 8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Teltronics contained in this Agreement shall have been true and
correct in all material respects at the Closing Date.
SECTION 8.2 COMPLIANCE WITH THIS AGREEMENT; PAYMENTS. Teltronics shall
have duly performed and complied in all material respects with all agreements
and conditions required by this Agreement to be performed or complied with by it
at or before the Closing Date.
14
SECTION 8.3 CLOSING DOCUMENTS. Teltronics shall have furnished ▇▇▇▇▇▇
with such documents, certified resolutions, instruments, good standing
certificates or incumbency certificates as ▇▇▇▇▇▇ reasonably may have requested
in respect of the Contemplated Transactions. Teltronics shall also deliver a
UCC-1 Financing Statement covering the collateral covered by the Amended and
Restated General Security Agreement, which UCC-1 shall be filed in the State of
Delaware.
SECTION 8.4 OTHER DOCUMENTS. Teltronics shall have duly executed and
delivered to ▇▇▇▇▇▇:
(a) the Amended and Restated Promissory Note;
(b) the Loan Agreement;
(c) the Amended and Restated General Security Agreement;
(d) the Registration Rights Agreement;
(e) the Second Amendment to Asset Sale Agreement;
(f) the General Release;
(g) a Stock Certificate representing 40,000 shares of Series C
Preferred Stock registered in ▇▇▇▇▇▇' name or in the name of
such nominee as ▇▇▇▇▇▇ may have specified; and
(h) the Additional Inventory Note.
SECTION 8.5 CERTIFICATE OF DESIGNATIONS. The Certificate of
Designations shall have been accepted by the Office of the Secretary of State of
Delaware as filed.
SECTION 8.6 CIT LETTER AGREEMENT. ▇▇▇▇▇▇ shall have received a copy of
the CIT Letter Agreement duly executed by CIT.
SECTION 8.7 CERTIFICATE OF NO DEFAULT OR MISREPRESENTATION. Teltronics
shall have delivered to ▇▇▇▇▇▇ a certificate to the effect that each of the
conditions specified above in Section 8.1 and Section 8.2 have been satisfied in
all respects.
SECTION 8.8 PAYMENT OF EXPENSES. Teltronics shall have reimbursed
▇▇▇▇▇▇ for all fees and expenses for which Teltronics is responsible as provided
in Section 12.1 below.
SECTION 8.9 ABSENCE OF LITIGATION. No litigation shall have been
commenced or threatened, and no investigation by any Government body shall have
been commenced, against ▇▇▇▇▇▇, Teltronics or any of the Affiliates, officers or
directors of any of them, with respect to the Contemplated Transactions.
SECTION 8.10 OPINION OF COUNSEL. ▇▇▇▇▇▇ shall have received an opinion
of counsel to Teltronics, dated as of the Closing Date, covering (a) the
authorization, execution and delivery of this Agreement and the other Ancillary
Agreements, (b) the enforceability of this Agreement and the other Ancillary
Agreements, (c) shareholder approval not being required to consummate any of the
Contemplated Transactions, including the issuance of the Series C Preferred
Stock or the issuance of shares of Common Stock upon the conversion thereof, and
(d) such other items, as may be reasonably requested by ▇▇▇▇▇▇ and its counsel.
15
SECTION 8.11 NO MATERIALLY ADVERSE CHANGE. No event or circumstance
shall have arisen or occurred which has had or could reasonably be expected to
have a material adverse change on the business, financial condition, operations,
results of operations or future prospects of Teltronics.
ARTICLE IX
CONDITIONS PRECEDENT TO TELTRONICS' OBLIGATIONS
The obligations of Teltronics under this Agreement are subject to the
satisfaction or fulfillment, at or before the Closing Date, of each of the
following conditions precedent (any of which may be waived, in whole or in part,
by Teltronics in its sole discretion):
SECTION 9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of ▇▇▇▇▇▇ contained in this Agreement, or in any certificate or
document delivered to Teltronics in connection herewith, shall be true and
correct in all material respects at the Closing Date.
SECTION 9.2 COMPLIANCE WITH THIS AGREEMENT. ▇▇▇▇▇▇ shall have duly
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by ▇▇▇▇▇▇ at or before the Closing
Date.
SECTION 9.3 OTHER TRANSACTION DOCUMENTS. ▇▇▇▇▇▇ shall have duly
executed and delivered to Teltronics:
(a) the Loan Agreement;
(b) the Amended and Restated General Security Agreement;
(c) the Registration Rights Agreement;
(d) the Second Amendment to the Asset Sale Agreement; and
(e) the ▇▇▇▇ of Sale.
ARTICLE X
ADDITIONAL COVENANTS OF THE PARTIES; INDEMNIFICATION
SECTION 10.1 PUBLICITY. No party shall issue any press release or
announcement or make any reference to the Contemplated Transactions to any third
party (except in connection with obtaining requisite consents) without the prior
written consent of the other party, which consent shall not be unreasonably
withheld; PROVIDED, HOWEVER, that the parties may make such disclosure as may be
required by law, rule or regulation in which case the party making the release
or announcement shall, before making such release or announcement, afford the
other party a reasonable opportunity to review and comment upon such release or
announcement.
SECTION 10.2 DIVIDENDS. Teltronics shall declare and pay the Preferred
Dividends (as that term is defined in the Certificate of Designations) no later
than the respective dates set forth
16
in the Certificate of Designations, provided Teltronics may lawfully declare and
pay a dividend on such dates.
SECTION 10.3 INDEMNIFICATION BY TELTRONICS. In addition to any and all
indemnification obligations Teltronics may have pursuant to the Asset Sale
Agreement, following the Closing, Teltronics shall be liable for, shall
indemnify ▇▇▇▇▇▇, its officers, directors, Affiliates and employees for, shall
hold harmless, protect and defend ▇▇▇▇▇▇, its officers, directors, Affiliates or
employees from and against, and shall reimburse ▇▇▇▇▇▇, its officers, directors,
Affiliates and employees for, any and all ▇▇▇▇▇▇ Damages. The term "▇▇▇▇▇▇
DAMAGES" means all any and all Damages sustained, incurred or suffered by
▇▇▇▇▇▇, its officers, directors, Affiliates or employees after the Closing
resulting from or arising in connection with: (a) any misrepresentation by
Teltronics contained in or made pursuant to this Agreement or any Ancillary
Agreement or in any certificate, instrument or agreement delivered to ▇▇▇▇▇▇ as
part of the Closing under this Agreement; or (b) any breach of warranty or any
default in the performance of any covenant or obligation of Teltronics under
this Agreement or any Ancillary Agreement; or (c) the performance or failure of
completion of any agreement between Teltronics and the Board of Education of the
City of New York, or any default thereunder.
ARTICLE XI
TERMINATION OF AGREEMENT
SECTION 11.1 TERMINATION. This Agreement and the Contemplated
Transactions may be terminated or abandoned at any time before the Closing Date:
(a) by the mutual written consent of ▇▇▇▇▇▇ and Teltronics; or
(b) by ▇▇▇▇▇▇, by giving written notice to Teltronics (i) if there has
been a material misrepresentation in this Agreement by Teltronics, or a material
breach by Teltronics of any of its warranties or covenants set forth herein,
which breach is not cured within ten (10) days following written notice to
Teltronics, or which breach, by its nature cannot be cured prior to the Closing,
or (ii) if the Closing shall not have occurred on or before April 15, 2002, by
reason of the failure of any condition precedent under ARTICLE VIII hereof
(unless the failure results primarily from ▇▇▇▇▇▇ itself breaching any
representation, warranty or agreement contained in this Agreement); or
(c) by Teltronics, by giving written notice to ▇▇▇▇▇▇ (i) if there has
been a material misrepresentation in this Agreement by ▇▇▇▇▇▇, or a material
breach by ▇▇▇▇▇▇ of any of the warranties or covenants of ▇▇▇▇▇▇ set forth
herein, which breach is not cured within ten (10) days following written notice
to ▇▇▇▇▇▇, or which breach, by its nature, cannot be cured prior to the Closing;
or (ii) if the Closing shall not have occurred on or before April 15, 2002, by
reason of the failure of any condition precedent under ARTICLE IX hereof (unless
the failure results primarily from Teltronics breaching any representation,
warranty or agreement contained in this Agreement).
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ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 COSTS AND EXPENSES. Teltronics agrees to pay the
reasonable out-of-pocket fees and expenses (including but not limited to the
fees and expenses of Holland & Knight LLP or other outside counsel retained by
▇▇▇▇▇▇) incurred by ▇▇▇▇▇▇ in connection with the preparation and negotiation of
this Agreement and the Ancillary Agreements. Such amounts will be paid
irrespective of any other amount owing or claimed to be owing from ▇▇▇▇▇▇ to
Teltronics, shall not be set-off against any other amounts and shall be payable
whether or not the Closing occurs. Except as set forth in the foregoing
sentences and except for any documentary stamp taxes which shall be paid by
Teltronics or as otherwise provided herein, each party shall pay its own
expenses in connection with the preparation and performance of the terms of this
Agreement. The provisions of this Section shall survive the termination of this
Agreement.
SECTION 12.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein or in any certificate,
statement, document or instrument furnished hereunder or under the other
Ancillary Agreements shall survive the Closing. The covenants of ▇▇▇▇▇▇ and
Teltronics shall continue in full force and effect in accordance with their
respective terms.
SECTION 12.3 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of Florida
without giving effect to the conflicts of laws provisions thereof.
SECTION 12.4 NOTICES. All notices, consents, requests, instructions,
approvals and other communications which may be or are required to be given,
served or sent by either party pursuant to this Agreement, shall be in writing
and shall be delivered personally, or sent by nationally recognized overnight
courier service, or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to Teltronics: Teltronics, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and CEO
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) If to ▇▇▇▇▇▇: ▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Secretary
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With a copy to: ▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
Each party may designate by notice in writing as aforesaid a new address to
which any notice, demand, request or communication may thereafter be so given,
served or sent. Each notice, demand, request or communication which shall be
mailed, sent, or delivered in the manner described above, shall be deemed
sufficiently given, served, sent or received for all purposes (i) on the day
personally delivered or faxed, (ii) on the second day after the date delivered
to a nationally recognized overnight courier, or (iii) on the fifth day
following the date sent by certified mail.
SECTION 12.5 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
illegal, invalid, void or unenforceable, then the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect.
SECTION 12.6 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
TELTRONICS HEREBY CONSENTS TO THE JURISDICTION OF ANY FEDERAL COURT LOCATED
WITHIN THE MIDDLE DISTRICT OF FLORIDA AND ANY STATE COURT WITHIN BREVARD COUNTY,
STATE OF FLORIDA, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS AGREEMENT MAY BE LITIGATED IN SUCH COURTS, AND TELTRONICS
WAIVES ANY OBJECTION WHICH IT MIGHT HAVE BASED ON IMPROPER VENUE OR FORUM NON
CONVENIENS.
THE PARTIES ACKNOWLEDGE THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY
EXCEED THE TIME AND EXPENSE FOR A BENCH TRIAL AND HEREBY WAIVE, TO THE EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE CONTEMPLATED TRANSACTIONS.
SECTION 12.7 NO THIRD PARTY BENEFICIARY. This Agreement is entered into
solely for the benefit of the parties hereto, and the provisions of this
Agreement shall be for the sole and exclusive benefit of such parties and their
respective successors and permitted assigns. No Person not a party hereto or
their successors and permitted assigns (including employees or creditors of the
Seller) shall be entitled to enforce any provisions hereof or exercise any right
hereunder.
SECTION 12.8 WAIVER. Neither the waiver by either of the parties hereto
of a breach of or a default under any one or more of the provisions of this
Agreement, nor the failure of either of the parties, on one or more occasions,
to enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of any such provisions,
rights or
19
privileges hereunder. No waiver shall be binding unless executed by the party
making the waiver.
SECTION 12.9 ASSIGNMENT; AMENDMENT. Neither Teltronics or ▇▇▇▇▇▇ shall
assign any of their rights or obligations under this Agreement without the prior
written consent of the other, which shall not be unreasonably withheld. This
Agreement shall be binding upon and shall inure to the benefit of the parties
and their respective successors and permitted assigns. No provisions of this
Agreement may be amended, modified, discharged or terminated except by written
agreement duly executed by each of the parties.
SECTION 12.10 ENTIRE AGREEMENT. This Agreement and the Ancillary
Agreements embody and constitute the entire agreement and understanding between
the parties with respect to the subject matter hereof and supersede and cancel
any prior and contemporaneous oral or written agreement, letter of intent,
proposal executed or delivered by or on behalf of any of the parties or
understanding related to the subject matter hereof.
SECTION 12.11 COUNTERPARTS. This Agreement may be executed in one or
more counterparts (including telecopy facsimile), and it shall not be necessary
that the signature of, or on behalf of, each party, or that the signatures of
all persons required to bind any party, appear on each counterpart, but it shall
be sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more such
counterparts. All counterparts shall constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
SECTION 12.12 NO SET-OFF. Neither party hereto shall have any right to
set-off any amounts due under this Agreement against any claims or amounts due
to the other party under any other arrangement between or among the parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Master Restructuring Agreement has been duly
executed by the parties hereto on the day and year first above written.
▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Assistant Treasurer
Witness:
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
TELTRONICS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & CEO
Witness:
/s/ ▇▇▇▇▇▇▇ ▇. Min
-------------------------------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
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