AMENDMENT #1 TO STANDBY EQUITY DISTRIBUTION AGREEMENT
THIS AMENDMENT AGREEMENT is entered into as of December 23, 2004
between CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the
"Investor"), and TELCO-TECHNOLOGY, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Company").
WHEREAS, the Company and the Investor are parties to a certain Standby
Equity Distribution Agreement dated as of October 21, 2004 (the "SEDA"); and
WHEREAS, the parties wish to amend the SEDA as set forth below.
NOW, THEREFORE, it is agreed:
1. Amendment. Section 12.4(c)(ii) of the SEDA is hereby eliminated.
In lieu thereof, the following text is substituted:
(ii) Upon the execution of this Agreement the Company shall issue
to the Investor a Promissory Note in the principal amount of Two
Hundred Fifty Thousand Dollars ($250,000) in the form annexed hereto.
2. Full Force and Effect. All other terms and conditions of the SEDA
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Standby Equity
Distribution Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
COMPANY:
TELCO-TECHNOLOGY, INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: President & CFO
INVESTOR:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
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Name: Xxxx Xxxxxx
Title: Portfolio Manager
PROMISSORY NOTE
$250,000.00 U.S. December 23, 2004
Jersey City, New Jersey
FOR VALUE RECEIVED, TELCO-TECHNOLOGY, INC., a Delaware corporation
(hereafter "Borrower"), promises to pay to the order of CORNELL CAPITAL
PARTNERS, LP, a Delaware limited partnership (hereafter "Lender"), at its
office located at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx
00000, or at such other location or address as Lender may direct from time to
time, the principal sum of Two Hundred Fifty Thousand Dollars ($250,000) (the
"Principal Amount"), said principal being payable as follows:
The first payment shall be due and payable on the first (1st) Trading
Day of the second (2nd) month after the Registration Statement, filed pursuant
to the Investor Registration Rights Agreement dated October 21, 2004 between
the Borrower and the Lender is declared effective by the Securities and
Exchange Commission, and with payments being due and payable on the first
trading day of each succeeding month thereafter until all principal has been
paid. The amount of each payment shall be Twenty Five Thousand Dollars
($25,000) and, at the Borrower's option, shall be paid in cash or in common
stock, par value $0.001 per share of Telco-Technology, Inc. ("Common Stock"),
which shall be registered for resale and valued at the lowest the volume
weighted average price of the Common Stock, as quoted by Bloomberg, LP (the
"VWAP") for the five (5) trading days immediately preceding the date the
payment is due and payable, provided however, that in no event shall the
Borrower be entitled to choose to pay in Common Stock a number of shares
which, upon giving effect to such payment, would cause the aggregate number
of shares of Common Stock beneficially owned by the Lender and its affiliates
to exceed 4.99% of the outstanding shares of the Common Stock following such
payment. This Promissory Note shall not bear interest unless and until there
is an event of default.
At the option of Lender, all sums advanced hereunder shall become
immediately due and payable, without notice or demand, upon the occurrence of
any one or more of the following events of default: (a) the undersigned's
failure to promptly pay in full any payment of principal under this
Promissory Note on the date when such payment of principal becomes due; or
(b) the commencement of any proceedings under any bankruptcy or insolvency
laws, by or against the Borrower.
No delay or omission on the part of Lender in the exercise of any right
hereunder shall operate as a waiver of such right or of any other right under
this Promissory Note. A waiver by Lender of any right or remedy conferred to
it hereunder on any one occasion shall not be construed as a bar to, or
waiver of, any such right and/or remedy as to any future occasion.
Borrower agrees that in the event of a default in the payment of any
installment of principal upon the date when the same severally become due
hereunder, or, if each and every one of the terms and conditions of this
Promissory Note are not duly performed, complied with, or abided by, the
whole of said indebtedness then outstanding shall thereupon, at the option of
Lender, become immediately due and payable. If this Promissory Note becomes
in default and is placed in the hands of an attorney, the undersigned agrees
to pay any and costs, charges and expenses incurred by Lender in the
enforcement of its rights hereunder, including, but not limited to,
reasonable trial and appellate attorney's fees, as well as all fees and
expenses incurred in enforcing and collecting any judgment.
The undersigned and all persons now or hereafter becoming obligated or
liable for the payment hereof do jointly and severally waive demand, notice
of non-payment, protest, notice of dishonor and presentment.
The undersigned does not intend or expect to pay, nor does Lender
intend or expect to charge, collect or accept, any interest greater than the
highest legal rate of interest which may be charged under any applicable law.
Should the acceleration hereof or any charges made hereunder result in the
computation or earning of interest in excess of such legal rate, any and all
such excess shall be and the same is hereby waived by Lender, and any such
excess shall be credited by Lender to the balance hereof.
Each maker, endorser, or any other person, firm or corporation now or
hereafter becoming liable for the payment of the loan evidenced by this
Promissory Note, hereby consents to any renewals, extensions, modifications,
release of security, or any indulgence shown to or any dealings between
Lender and any party now or hereafter obligated hereunder, without notice,
and jointly and severally agree, that they shall remain liable hereunder
notwithstanding any such renewals, extensions, modifications or indulgences,
until the debt evidenced hereby is fully paid.
The undersigned agrees to pay a late charge equal to 5% of each payment
of principal which is not paid within 10 days of the date on which it is due.
Principal may be prepaid in whole or in part at any time prior to the
maturity of this Promissory Note. There is no prepayment fee or penalty.
Each prepayment of principal shall be applied against the payments last due
under this Promissory Note. No partial prepayment of principal shall act to
suspend, postpone or waive any regularly scheduled payment of principal under
this Promissory Note.
Any payment of principal under this Promissory Note which is not
promptly paid on the date such payment becomes due, shall bear interest at
the rate of eighteen (18) percent per annum commencing on the date
immediately following the day upon which the payment was due. Upon the
occurrence of any event of default as defined herein, all sums outstanding
under this Promissory Note shall thereupon immediately bear interest at the
rate of eighteen (18) percent per annum, without notice to the undersigned or
any guarantor or endorser of this Promissory Note, and without any
affirmative action or declaration on the part of Lender.
This Promissory Note shall be construed and enforced according to the
laws of the State of New Jersey, excluding all principles of choice of laws,
conflict of laws or comity. Each person now or hereafter becoming obligated
for the payment of the indebtedness evidenced hereby expressly consents to
personal jurisdiction and venue of the Superior Court of New Jersey, sitting
in Xxxxxx County, New Jersey and the United States District Court of New
Jersey, sitting in Newark, New Jersey, in the event of any litigation in any
way arising out of the loan evidenced hereby, or any property given as
collateral for the loan.
The terms of this promissory note may not be changed orally.
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT WHICH IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS PROMISSORY
NOTE, OR ANY LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH, OR THE FINANCING
CONTEMPLATED HEREBY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING THE LOAN EVIDENCED BY THIS
PROMISSORY NOTE.
TELCO-TECHNOLOGY, INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: President & CEO
