Exhibit 3
LOAN AGREEMENT
between
XXXXXX CORPORATION
and
TELTRONICS, INC.
Dated as of March 27, 2002
LOAN AGREEMENT dated as of March 27, 2002, between
XXXXXX CORPORATION, a Delaware corporation ("Xxxxxx"), and
TELTRONICS, INC., a Delaware corporation ("Borrower").
W I T N E S S E T H
WHEREAS, Borrower has previously delivered to Xxxxxx an Amended and
Restated Secured Promissory Note in the principal amount of Seven Million
Ninety-Six Thousand Six Hundred Twenty-Two Dollars and Ninety-One Cents
($7,096,622.91) (the "EXISTING PROMISSORY NOTE");
WHEREAS, the amounts owing under the Existing Promissory Note are
secured by a lien on certain personal property of the Borrower pursuant to a
Security Agreement between Borrower and Xxxxxx dated as of June 30, 2000; and
WHEREAS, the Borrower has previously acknowledged that it owed Xxxxxx
an additional $2,642,941.61 in respect of items received or invoiced prior to
January 1, 2001, and $4,201,590.40 in respect of items received or invoiced
after January 1, 2001 as set forth in the Master Restructuring Agreement between
Borrower and Xxxxxx, and has requested that Harris amend and restate the
Existing Promissory Note to consolidate and reflect the addition of such amounts
and certain other amounts owing by the Borrower to Xxxxxx and to extend the
maturity of the Existing Promissory Note and to otherwise modify the terms and
conditions of the Existing Promissory Note.
NOW THEREFORE, FOR AND in consideration and 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, Xxxxxx and the Borrower agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01 CERTAIN 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 INVOICES AMOUNT" shall have the meaning assigned to such
term in the Master Restructuring Agreement.
"AFFILIATE" shall mean, when used with respect to a specified 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 specified 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.
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"BUSINESS DAY" shall mean 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.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean all obligations of
such Person under any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which obligations are
required to be capitalized on a balance sheet of such Person in accordance with
generally accepted accounting principles.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLLATERAL" shall have the meaning assigned to that term in the
Security Agreement.
"DEFAULT" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"DOLLARS" or "$" shall mean lawful money of the United States of
America.
"EFFECTIVE DATE" shall mean the date of this Agreement.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 7.01.
"GOVERNMENTAL AUTHORITY" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"GUARANTEE" of or by any Person shall mean any obligation, contingent
or otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase property, securities or services for the purpose
of assuring the owner of such Indebtedness of the payment of such Indebtedness
or (c) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness; PROVIDED, HOWEVER, that the term Guarantee
shall not include endorsements for collection or deposit, in either case in the
ordinary course of business.
"INDEBTEDNESS" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services, (f)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations of such
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Person in respect of interest rate protection agreements, foreign currency
exchange agreements or other interest or exchange rate hedging arrangements and
(j) all obligations of such Person as an account party in respect of letters of
credit and bankers' acceptances. The Indebtedness of any Person shall include
the Indebtedness of any partnership in which such Person is a general partner.
"LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any pledge or hypothecation of such securities to
a third party or call or similar right of a third party with respect to such
securities.
"LOAN" shall have the meaning assigned to such term in Section 2.01.
"LOAN DOCUMENTS" shall mean this Loan Agreement, the Note and the
Security Agreement.
Any reference to any event, change or effect being "MATERIAL" with
respect to the Borrower means an event, change or effect which is or, insofar as
reasonably can be foreseen in the future will be, material to the condition
(financial or otherwise), properties, assets, liabilities, businesses,
operations or prospects of the Borrower.
"MASTER RESTRUCTURING AGREEMENT" shall mean the Master Restructuring
Agreement, dated as of March 27, 2002, and entered into by and between the
Borrower and Xxxxxx.
"NOTE" shall have the meaning assigned to such term in Section 2.02.
"PERMITTED LIENS" shall have the meaning assigned to such term in the
Security Agreement:
"PERSON" shall mean any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, Governmental Authority or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated the date hereof and entered into by and between Xxxxxx and the Borrower.
"SECURITY AGREEMENT" means the Amended and Restated General Security
Agreement between Borrower and Xxxxxx dated as of the date hereof, as may be
amended from time to time.
"SUBSIDIARY" of any Person shall mean a corporation, company or other
entity (i) more than fifty percent (50%) of whose outstanding shares or
securities (representing the right to vote for the election of directors or
other managing authority) are, or (ii) which does not have outstanding shares or
securities (as may be the case in a partnership, joint venture or unincorporated
association), but more than fifty percent (50%) of whose ownership interest
representing the right to make decisions for such other entity is, now or
hereafter owned or controlled, directly or indirectly, by such Person, but such
corporation, company or other entity shall be deemed to be a Subsidiary only so
long as such ownership or control exists. Unless otherwise specified, reference
to a Subsidiary shall be deemed to be a reference to a Subsidiary of the
Borrower.
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"TAX" or "TAXES" shall mean all Federal, state, local and foreign
taxes, assessments and other governmental charges, including, without
limitation, taxes based upon or measured by gross receipts, income, profits,
sales, use, occupation, value added, ad valorem, transfer, franchise,
withholding, payroll, employment, excise, or property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other Person with
respect to such amounts.
"TRANSACTION DOCUMENTS" shall mean the Loan Documents, the Registration
Rights Agreement, the Master Restructuring Agreement, and all other Ancillary
Agreements referred to therein.
SECTION 1.02 TERMS GENERALLY. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined. The
words "include," "includes" and "including" shall be deemed to be followed by
the phrase "without limitation." All references herein to Articles, Sections,
Exhibits and Schedules shall be deemed references to Articles and Sections of,
and Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with generally
accepted accounting principles, as in effect from time to time. This Agreement
shall be deemed to have been drafted by both the Borrower and Xxxxxx and neither
this Agreement nor any Loan Document shall be construed against either party as
the principal draftsperson hereof or thereof.
SECTION 1.03 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" mean
"to but excluding."
ARTICLE II. THE LOAN
SECTION 2.01 THE LOAN. Upon the terms and subject to the conditions of
this Agreement, and relying upon the representations, covenants, and warranties
set forth in this Agreement, the Security Agreement, the Note and the other
Transaction Documents, Xxxxxx agrees to amend and restate the terms and
conditions of the Existing Promissory Note and certain other amounts that are
owing from the Borrower to Xxxxxx as set forth herein and in the Master
Restructuring Agreement resulting in a loan in the principal amount of
$9,196,801.23.
SECTION 2.02 AMENDED PROMISSORY NOTE. After the date hereof, the Loan
shall be evidenced by an Amended, Restated and Consolidated Secured Promissory
Note (the "NOTE") duly executed on behalf of the Borrower in the form attached
hereto as EXHIBIT A, payable to the order of Xxxxxx. The parties acknowledge and
agree that the principal amount of the Note was determined by consolidating the
following amounts:
(i) the principal amount of $7,096,622.91 under the Existing
Promissory Note;
(ii) the amount of $2,642,941.62 representing the amount owing to
Xxxxxx by the Borrower on the date hereof in respect of the
net amount of payables for transactions, releases and other
items between the Borrower and Xxxxxx as specifically
identified in the Master Restructuring Agreement for the
period prior to January 1, 2001; and
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(iii) the Additional Invoices Amount of $3,201,573.12 (representing
invoices for items received or invoiced from January 1, 2001
to the date hereof reduced by payment of $1,000,017.28 made by
Borrower in respect of such invoiced amounts) plus accrued and
unpaid interest thereon in the amount of $255,663.58;
Reduced by the conversion of the Additional Invoices Amount of
$3,201,573.12, and $798,426.88 of the April 13, 2001 Invoice
Amount, into Series C Preferred Stock at the Closing.
SECTION 2.03 PREPAYMENT. Borrower shall have the right at any time
without penalty or premium to prepay the principal of the Note in whole or in
part together with accrued interest on the amount prepaid from the date hereof
to the date of the prepayment and the payment of all other fees, expenses and
sums due and owing hereunder, in each case with the amount of such prepayment
being applied first to any such fees or expenses, then to interest until all
accrued and unpaid interest through the date of prepayment has been paid and
thereafter to principal as set forth in the Note. The Note may be required to be
prepaid prior to its maturity as set forth herein and therein.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower represents and warrants to Xxxxxx that:
SECTION 3.01 ORGANIZATION AND GOOD STANDING OF THE BORROWER. The
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Borrower has all requisite power
and authority and possesses all material franchises, licenses, permits,
authorizations and approvals from Governmental Authorities necessary to enable
it to use its corporate name and to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted. The Borrower is
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the nature of its business or the ownership, leasing
or holding of its properties or assets requires such qualification, except where
the failure to be so qualified would not have a materially adverse effect on the
Borrower.
SECTION 3.02 AUTHORITY. The Borrower has all requisite power and
authority to enter into the Loan Documents and the other Transaction Documents,
to issue and deliver the Note, and to consummate the other transactions
contemplated by the parties. The execution and delivery by the Borrower of the
Loan Documents and the other Transaction Documents, the issuance and delivery by
the Borrower of the Note, the borrowing by the Borrower hereunder and the
consummation by the Borrower of the other transactions contemplated by the
parties have been duly authorized by all necessary corporate action on the part
of the Borrower. No approval of or other action by the stockholders of the
Borrower is necessary for the Borrower to perform the matters described in the
preceding sentence. This Agreement has been duly executed and delivered by the
Borrower and constitutes, and the other Loan Documents and Transaction
Documents, and the Note constitute the legal, valid and binding obligations of
the Borrower, enforceable against the Borrower in accordance with their terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization or
similar laws affecting the rights of creditors generally or as may be limited by
the availability of equitable remedies, including specific performance, subject
to the discretion of the court before which
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any proceeding therefor may be brought. The execution and delivery of the Loan
Documents and Transaction Documents, the issuance and delivery of the Note do
not, and the borrowing by the Borrower hereunder and the consummation of the
transactions contemplated hereby and thereby and compliance with the terms
hereof and thereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time or both) under, or give rise to
a right of termination, cancellation or acceleration of any obligation or to
loss of any benefit under (a) any loan or credit agreement, note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement, understanding or arrangement to which the Borrower is a party or by
which the Borrower or any of its properties or assets is bound, (b) any
provision of the Certificate of Incorporation or By-laws of the Borrower, as
amended or (c) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Borrower or any of its properties or assets. No
consent, approval, order, license, permit or authorization of, or registration,
declaration or filing with, any Governmental Authority or any other Person is
required to be obtained or made by or with respect to the Borrower or any of its
Affiliates in connection with the execution and delivery of the Loan Documents,
the other Transaction Documents, the issuance and delivery of the Note, or the
consummation of the transactions contemplated hereby or thereby except for any
filings that may be required under Regulation D of the Securities Act of 1933,
as amended.
SECTION 3.03 FINANCIAL STATEMENTS. All financial statements of the
Borrower delivered by the Borrower to Xxxxxx, pursuant to this Agreement or
otherwise, are (or will be when delivered) correct and complete, are (or will be
when delivered) in accordance with the books and records of the Borrower, have
been (or will have been when delivered) prepared in conformity with generally
accepted accounting principles consistently applied (except as described in the
notes included therein) and fairly present (or will fairly present when
delivered) the financial condition of the Borrower as of the dates thereof and
the results of its operations for the periods then ended.
SECTION 3.04 DISCLOSURE; NO UNTRUE STATEMENTS. No representation or
warranty made by the Borrower in the Loan Documents or which will be made by any
Borrower from time to time in connection with the Loan Documents (a) contains or
will contain any misrepresentation or untrue statement of fact, or (b) omits or
will omit to state any material fact necessary to make the statements therein
not misleading. There is no fact known to the Borrower which materially
adversely affects, or which might in the future materially adversely affect, the
business, assets, properties or condition, financial or otherwise, of the
Borrower, except as set forth or referred to in the Loan Documents or otherwise
disclosed in writing to Xxxxxx.
SECTION 3.05 SUBSIDIARIES. The Borrower has no "Significant
Subsidiaries" as defined pursuant to the Securities Exchange Act of 1934, as
amended ("SIGNIFICANT SUBSIDIARY").
SECTION 3.06 TITLE TO PROPERTIES AND ASSETS; LIENS. The Borrower has
good and marketable title in fee to its properties and assets, tangible or
intangible (including, without limitation, patents, patent applications, trade
secrets and proprietary information) and has good title to all its leasehold
interests, and all such properties and assets are free and clear of any Liens,
other than Permitted Liens. The Borrower enjoys peaceful and undisturbed
possession under all leases under which it is now operating, none of which
contain any burdensome or unusual provisions which may affect its operations,
and all said leases are valid, subsisting, and in full force and effect and
Borrower is not in violation of any material term of any such lease.
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SECTION 3.07 LITIGATION. The Borrower has not been served and does not
have notice of any actions, suits, proceedings or investigations pending against
the Borrower or its properties, existence or revenues before any court or
governmental agency (nor, to the best of the Borrower's knowledge, is there any
basis therefor or threat thereof), which, either in any case or in the
aggregate, might result in any material adverse change in the business or
condition, financial or otherwise, of the Borrower or any of its properties or
assets, or in any material impairment of the right or ability of the Borrower to
carry on its business as now conducted or as proposed to be conducted, or in any
material liability on the part of the Borrower, or, regardless of outcome, which
would be required to be disclosed in notes to any balance sheet as of the date
hereof of the Borrower prepared in reasonable detail in accordance with
generally accepted accounting principles and none which questions the validity
of this Agreement, the Loan Documents, the other Transaction Documents, or any
action taken or to be taken in connection herewith or therewith.
SECTION 3.08 TAXES. The Borrower has filed all Tax returns required to
be filed by it and has paid in a timely manner all Taxes owed by it (whether or
not shown on any Tax return). All Taxes and assessments that the Borrower is
required to withhold or to collect with respect to amounts owing to employees or
contractors or otherwise have been duly withheld or collected and all
withholdings and collections have been duly and timely paid over to the
appropriate Governmental Authority.
SECTION 3.09 GOVERNMENT CONTRACT. Borrower is not subject to the
renegotiation of any government contract in any material amount.
SECTION 3.10 COMPLIANCE WITH LAWS. The Borrower is not in material
violation of any term or provision under any law, rule, regulation or order of
any Governmental Authority applicable to it or its properties. The Borrower is
duly licensed under all laws, rules or regulations and possesses all licenses
and permits necessary or required to conduct its business as now conducted.
ARTICLE IV. OMITTED
ARTICLE V. BORROWER'S AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with Xxxxxx that, so long as the
principal of or interest on the Note shall be unpaid, unless Xxxxxx shall
otherwise consent in writing:
SECTION 5.01 ACCOUNTING SYSTEM. The Borrower shall and shall cause each
of its Subsidiaries to maintain all its financial records in accordance with
generally accepted accounting principles consistently applied.
SECTION 5.02 PERIODIC REPORTS.
(a) The Borrower shall furnish to Xxxxxx, as soon as
practicable, and in any event within ninety (90) days after the end of each
fiscal year of the Borrower, an annual report of the Borrower, including a
balance sheet as of the end of such fiscal year and the related statements of
operations, stockholders' equity and cash flows for such fiscal year (or similar
statements if the foregoing statements change as the result of changes in
generally accepted accounting principles),
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setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, all of which shall fairly present the financial condition
of the Borrower as of the dates shown and the results of its operations for the
periods then ended.
(b) The Borrower shall furnish to Xxxxxx, as soon as
practicable and in any event within forty-five (45) days after the end of each
of its first, second and third fiscal quarters, a quarterly report of the
Borrower consisting of an unaudited balance sheet as of the end of such quarter
and the related unaudited statements of operations, stockholders' equity and
cash flows for such quarter and for the fiscal year to date, setting forth in
each case in comparative form the corresponding figures for the preceding fiscal
year.
(c) All such reports and financials delivered pursuant to
Sections 5.02(a) and (b) shall fairly present the financial condition of the
Borrower as of the dates shown and the results of its operations for the periods
then ended and shall have been prepared in conformity with generally accepted
accounting principles consistently applied except, in the case of quarterly
reports, for normal, recurring, year-end audit adjustments and the absence of
notes and schedules.
SECTION 5.03 OTHER REPORTS AND INSPECTION. The Borrower shall furnish
promptly to Xxxxxx such other financial documents, reports, data and other
financial information as Xxxxxx may reasonably request. The Borrower shall, upon
reasonable prior notice, make available to Xxxxxx or its representatives or
designees all properties, assets, books of account and corporate records
requested by Xxxxxx, for inspection and shall use its best efforts to make
available to Xxxxxx the directors, officers, employees and independent
accountants of the Borrower for interviews to verify all information furnished
and otherwise to become familiar with the Borrower and its business, operations,
properties and assets.
SECTION 5.04 INSURANCE. The Borrower shall and shall cause each of its
Subsidiaries to maintain valid policies, workers' compensation, fire and
casualty, liability and other forms of insurance with financially sound and
reputable insurers reasonably acceptable to Xxxxxx in such amounts, with such
deductibles and against such risks and losses as are reasonable for the business
and assets of the Borrower and the Borrower shall maintain such other insurance
as may be required by law. The activities and operations of the Borrower shall
be conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies.
SECTION 5.05 LICENSES; OTHER PROPERTY. The Borrower shall and shall
cause each of its Subsidiaries to obtain, preserve, renew and keep in full force
and effect all rights, licenses, permits, patents, copyrights, trademarks, trade
names and other authorizations, from Governmental Authorities or any other
Person, utilized by the Borrower which shall be necessary in any material
respect to the conduct of its business, unless such licenses, permits and
authorizations are not in full force and effect and such is being contested
diligently and in good faith by the Borrower. The Borrower shall maintain and
preserve all property material to the conduct of its business and keep such
property in good repair, working order and condition and from time to time make,
and cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times.
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SECTION 5.06 MATERIAL CHANGES AND OTHER NOTICES. The Borrower shall and
shall cause each of its Subsidiaries to promptly notify Xxxxxx by providing a
written statement of the chief executive officer of the Borrower of (i) any
default (with or without notice or lapse of time or both) under, or breach of,
any Loan Document any other Transaction Documents, the Note or any other
material agreement or obligation, and (ii) the occurrence of any default or
event of default under any other agreement or instrument providing for
Indebtedness of the Borrower or any Subsidiary (together with a copy of any
notices received by the Borrower or such Subsidiary with respect thereto),
specifying for each matter referred to in clause (i) or (ii) the nature, extent
and period of existence thereof and the corrective action taken and proposed to
be taken with respect thereto.
SECTION 5.07 COMPLIANCE WITH APPLICABLE LAWS. The Borrower shall and
shall cause each of its Subsidiaries to maintain its corporate existence in good
standing and comply in all material respects with all applicable statutes, laws,
ordinances, rules and regulations of any Governmental Authority (whether now in
effect or hereinafter enacted) and any filing requirements relating thereto,
such compliance to include, without limitation, filing in a timely manner
(within any applicable extension periods) all Tax returns, reports and forms
required to be filed under the Code or under applicable state, local or foreign
tax laws and timely paying in full all Taxes required to be paid in respect of
the periods covered by such returns, reports and forms, except to the extent
such statutes, laws, ordinances, rules, regulations, filing requirements or
Taxes are being contested diligently and in good faith by the Borrower (and, in
the case of Taxes, adequate reserves for payment thereof have been set up), and
shall do all things necessary to preserve, renew and keep in full force and
effect and in good standing its corporate existence and authority necessary to
continue its business.
SECTION 5.08 OBLIGATIONS. The Borrower shall and shall cause each of
its Subsidiaries to fully perform all obligations under any agreement between
the Borrower and the Board of Education of the City of New York ("NYCBOE")
promptly and in accordance with their terms before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, might give rise to default or breach
under any such agreement.
SECTION 5.09 SUBSIDIARY GUARANTY. If after the date hereof the Borrower
acquires a Significant Subsidiary or if any of its Subsidiaries is or becomes a
Significant Subsidiary, then the Borrower shall cause such Subsidiary to
absolutely and unconditionally guarantee to Xxxxxx the prompt payment of all
amounts owing under the Note. The form of such guarantee shall be reasonably
satisfactory to Xxxxxx.
SECTION 5.10 BOARD OF EDUCATION PERFORMANCE BOND AND CONTRACT
PERFORMANCE REVIEWS. (a) Teltronics shall indemnify, defend and hold Xxxxxx
harmless from and against every loss, cost, damage, expense, claim, or demand
(including attorneys' fees and court costs in connection therewith) with respect
to any and all damages alleged, assessed, or incurred by Xxxxxx (whether in
contract, tort, or strict liability) resulting from any or otherwise arising out
of or in any way connected to either with the failure of completion of the
contract originally between Xxxxxx and NYCBOE which has been subcontracted to
Teltronics (the "NYCBOE CONTRACT") or any default thereunder.
(b) Until the completion and performance of the NYCBOE Contract (or the
release by the NYCBOE of all claims it may have against Xxxxxx) Teltronics
agrees that it will provide Xxxxxx, upon request, with all information relating
to the status and performance of the NYCBOE Contract and that it
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shall make available on-site performance reviews. Teltronics also agrees that,
at the written request of Xxxxxx, it shall make its employees who are
responsible for the oversight of the NYCBOE Contract available for a program
review, provided such reviews are requested not more frequently than one day
during any calendar month.
SECTION 5.11 PAYMENT OF INDEBTEDNESS TO XXXXXX; PERFORMANCE OF OTHER
COVENANTS; PAYMENT OF OTHER OBLIGATIONS. (a) Borrower will make full and timely
payment of the principal of and interest on the Indebtedness owed under any of
the Loan Documents.
(b) Borrower will duly comply with all the terms, covenants and
undertakings contained in the Loan Documents and the other Transaction
Documents.
(c) Borrower will make full and timely payment of all other
Indebtedness of Borrower to Xxxxxx, whether now existing or hereafter arising.
SECTION 5.12 FURTHER ASSURANCES. At their cost and expense, upon
request of Xxxxxx, Borrower shall duly execute and deliver or cause to be duly
executed and delivered to Xxxxxx such further instruments or documents and do
and cause to be done such further acts as may be reasonably necessary or proper
in the opinion of Xxxxxx to carry out more effectively the provisions and
purposes of any of the Loan Documents.
ARTICLE VI. NEGATIVE COVENANTS
The Borrower covenants and agrees with Xxxxxx that, so long as the
principal of or interest on the Note shall be unpaid, unless Xxxxxx shall
otherwise consent in writing:
SECTION 6.01 LIENS. The Borrower shall not and shall not permit any of
its Subsidiaries to create, incur, assume or permit or exist any Lien except
under the Security Agreement on any property or assets now owned or hereafter
acquired by it or on any income or rights in respect of any thereof, except
Permitted Liens and except for liens listed on Schedule A hereto and for
purchase money liens on property acquired by the Borrower after the date hereof
and secured only by such property so acquired and no other property or asset of
the Borrower.
SECTION 6.02 TRANSACTIONS WITH AFFILIATES. The Borrower shall not enter
into any transaction for the sale, transfer, lease or other disposition of real
or personal property, tangible or intangible, or incur or create any
Indebtedness with, or extend any Guarantee to, any of its stockholders or
Affiliates except in the ordinary course of and pursuant to the reasonable
requirements of the Borrowers or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person other than an
Affiliate, in each case as determined in good faith by a majority of the
disinterested directors of the Borrower (as the term "disinterested" is used in
Section 144 of the Delaware General Corporation Law).
SECTION 6.03 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Borrower
shall not and shall not permit any of its Subsidiaries, except for Interactive
Solutions, Inc., to merge or consolidate with or sell, assign, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
to any Person except that any
10
Subsidiary may merge with or sell or otherwise transfer its assets to the
Borrower or a wholly-owned Subsidiary of the Borrower and the Borrower may merge
with another corporation provided it is the surviving corporation of such
merger.
SECTION 6.04 DIVIDENDS. The Borrower shall not declare or pay any cash
dividends on, or make any other distribution in respect of, the capital stock of
the Borrower except for dividends in respect of its Series B Preferred Stock or
Series C Preferred Stock or any other class of Preferred Stock that may be
issued by the Borrower; provided that the Borrower complies with Section 2 of
the Certificate of Designations for the Series C Preferred Stock.
ARTICLE VII. EVENTS OF DEFAULT
SECTION 7.01 EVENTS OF DEFAULT. In case of the happening of any of the
following events ("Events of Default"):
(a) any representation or warranty made in any Loan Document,
any other Transaction Documents, or any representation, warranty, statement or
information contained in any report, certificate, financial statement or other
instrument furnished or pursuant to any Loan Document, any other Transaction
Documents, or the Note, shall prove to have been false or misleading in any
material respect when so made or furnished or deemed to have been made or
furnished;
(b) a failure by Borrower to pay any installment of principal
of, interest on or any other sum due under, the Note, within three (3) days
after it shall become due;
(c) default shall be made in the payment of any other amount
(other than an amount referred to in (b) above) due under this Agreement, any
other Loan Document or the Note and such default is not cured within ten (10)
calendar days;
(d) default shall be made in the due observance or performance
by the Borrower of any covenant, obligation, condition or agreement contained in
this Agreement, any other Loan Document, any other Transaction Documents, or the
Note (other than those specified in (a), (b) or (c) above); and such default
shall continue unremedied for a period of ten (10) calendar days after notice
thereof from Xxxxxx to the Borrower;
(e) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of the Borrower, or of a substantial part of the property
assets of the Borrower, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower, or for a substantial part of the property or assets of the Borrower,
or (iii) the winding-up or liquidation of the Borrower; and such proceeding or
petition shall continue undismissed for sixty (60) days or an order or decree
approving or ordering any of the foregoing shall be entered;
(f) the Borrower shall (i) voluntarily commence any proceeding
or file any petition seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (ii) consent to the institution
11
of, or fail to contest in a timely and appropriate manner, any proceeding or the
filing of any petition described in (e) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or for a substantial part of the property or
assets of the Borrower (iv) file an answer admitting the material allegations of
a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in writing
its inability or fail generally to pay its debts as they become due or (vii)
take any action for the purpose of effecting any of the foregoing;
(g) the Borrower shall (i) fail to pay any principal, or
interest or other amount due under any other Indebtedness, including any
Indebtedness owed to Xxxxxx, when and as the same shall become due and payable
or (ii) fail to observe or perform any other covenant, condition or agreement
contained in any agreement or instrument relating to any other Indebtedness if
(A) the effect of any failure referenced in clause (i) is to cause the Person to
whom such Indebtedness is owed (with or without the giving of notice or lapse of
time or both) to cause such Indebtedness to become due prior to its stated
maturity after giving effect to any applicable period of grace or (B) the effect
of any failure referenced in clause (ii) is that the Person to whom such
Indebtedness is owed has (after the giving of any notice or lapse of time or
both provided for in the applicable agreements or other instruments) declared
such Indebtedness due prior to its stated maturity or otherwise exercised any of
the other rights and remedies available to it on account of such failure;
(h) the Security Agreement shall for any reason (other than
pursuant to the terms thereof or by any act or omission of Xxxxxx) cease to
create a valid and perfected security interest in any of the collateral
purported to be covered thereby and such default is not cured within ten (10)
calendar days; or
(i) the Borrower shall sell or convey all or substantially all
of its assets to, or merge or consolidate with or into, any other entity and,
after giving effect to such sale, conveyance, merger or consolidation, Persons
who were stockholders of the Borrower immediately prior thereto, and Affiliates
of such Persons, shall cease to hold securities in the transferee, surviving or
resulting entity representing a majority of the outstanding shares of the voting
securities of the transferee, surviving or resulting entity;
then, and in every such event (other than an event described in paragraph (e) or
(f) above involving the Borrower) and at any time thereafter during the
continuance of such event, Xxxxxx may, in addition to any other remedy available
at law or in equity, by notice to the Borrower, take any or all of the following
actions, at the same or different times: declare the Note to be forthwith due
and payable in whole or in part, whereupon the principal of the Note so declared
to be due and payable, together with accrued interest thereon and all other
liabilities of the Borrower accrued hereunder and under such Note, shall become
forthwith due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Borrower,
anything contained herein or in the Note to the contrary notwithstanding or
exercise any rights under the Security Agreement or any other agreement that may
be available to Xxxxxx.
SECTION 7.02 AUTOMATIC ACCELERATION. In case of the happening of any of
the events set forth in Section 7.01(e) or Section 7.01(f) above, the Note shall
automatically, without out any further action or declaration on the part of, or
notice to, Xxxxxx or the Borrower, accelerate and become forthwith due
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and payable in whole, whereupon the principal of the Note so due and payable,
together with accrued interest thereon and all other liabilities of the Borrower
accrued hereunder and under such Note, shall automatically become forthwith due
and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by the Borrower, anything
contained herein or in the Note to the contrary notwithstanding or exercise any
rights under the Security Agreement or any other agreement that may be available
to Xxxxxx.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.01 NOTICES. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand, by telecopy, by
Federal Express or similar overnight courier service, or mailed by registered or
certified mail, as follows:
(a) if to Xxxxxx:
Xxxxxx Corporation
0000 X. XXXX Xxxxxxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
(b) if to the Borrower:
Teltronics, Inc.
0000 Xxxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention : Xxxx X. Xxxxxxx
President and CEO
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand, telecopy or overnight courier
service, or on the date five (5) Business Days after being mailed by certified
or registered mail, in each case delivered, sent or mailed (properly addressed)
to such party as provided in this Section 8.01 or in accordance with the latest
unrevised direction from such party given in accordance with this Section 8.01.
SECTION 8.02 SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to any Loan Document, any other Transaction Documents, or the Note
shall be considered to have been relied upon by Xxxxxx and shall survive the
making of any loan, and the execution and delivery to Xxxxxx of the Note,
regardless of any investigation made by Xxxxxx or on its behalf.
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SECTION 8.03 ASSIGNMENT. The Loan Documents and the Note and the rights
thereunder shall not be assignable or transferable by the Borrower without the
prior written consent of Xxxxxx. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns.
SECTION 8.04 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any Person,
other than the parties hereto and such assigns, any legal or equitable rights
hereunder.
SECTION 8.05 EXPENSES. the Borrower agrees to pay all out-of-pocket
expenses incurred by Xxxxxx in connection with the enforcement of Xxxxxx' rights
in connection with any Loan Document or the Note, including the reasonable fees
and disbursements of counsel for Xxxxxx and including any intangible or
documentary stamp tax or similar taxes which may be required to be paid under
applicable law. The provisions of this Section 8.05 shall remain operative and
in full force and effect regardless of the expiration of the term of any Loan
Document, the Note, the consummation of the transactions contemplated thereby,
the repayment of the Loan, the invalidity or unenforceability of any term or
provision of any Loan Document, or the Note, or any investigation made by or on
behalf of Xxxxxx. All amounts due under this Section 8.05 shall be payable on
written demand therefor.
SECTION 8.06 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Florida
applicable to agreements made and to be performed entirely within such state,
without regard to the conflicts of law principles of such state.
SECTION 8.07 WAIVERS; AMENDMENT.
(a) No failure or delay of either party in exercising any
power or right under any Loan Document or the Note, shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of either party under the Loan Documents
and the Note are cumulative and are not exclusive of any rights or remedies
which such party would otherwise have. No waiver of any provision of the Loan
Documents or the Note, or consent to any departure by the Borrower therefrom
shall in any event be effective unless the same shall be permitted by Section
8.07(b), and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar or other circumstances.
(b) None of the Loan Documents or the Note, nor any provision
hereof or thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Borrower and Xxxxxx.
SECTION 8.08 WAIVER OF JURY TRIAL JURISDICTION. EACH PARTY HERETO
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
14
DOCUMENTS AND THE NOTE. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE
BEEN INDUCED TO ENTER INTO THE LOAN DOCUMENTS AND THE NOTE BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.08. THE BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE COURT LOCATED IN
BREVARD COUNTY, FLORIDA, OR IN A FEDERAL COURT LOCATED IN THE MIDDLE DISTRICT OF
FLORIDA FOR THE PURPOSE OF ANY SUIT, ACTION, PROCEEDINGS, OR JUDGMENT ARISING
UNDER THIS AGREEMENT.
SECTION 8.09 SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement or the Note, is or should become invalid,
illegal, or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 8.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract, and shall become
effective when one or more such counterparts have been signed by each of the
parties and delivered to the other parties.
SECTION 8.11 HEADINGS. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
effect the construction of, or be taken into consideration in interpreting this
Agreement.
SECTION 8.12 ENTIRE AGREEMENT. The Loan Documents, the other
Transaction Documents and the Note constitute the entire contract between the
parties relative to the subject matter hereof. Any previous agreement among the
parties with respect to the subject matter hereof is superseded thereby.
[Intentionally left blank to end of page.]
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IN WITNESS WHEREOF, the Borrower and Xxxxxx have duly executed this
Loan Agreement as of the day and year first above written.
XXXXXX CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Assistant Treasurer
TELTRONICS, INC.
By: /s/ Xxxx Xxxxxxx
---------------------------------
Name: Xxxx Xxxxxxx
Title: President and CEO
STATE OF Georgia
-------------
:ss.:
COUNTY OF Xxxxxx
----------------
On this 28th day of March ______, 2002, before me personally
appeared Xxxx Xxxxxxx, to be personally known, who, being by me duly sworn, says
that he is President & CEO of TELTRONICS, INC., that said instrument was
signed on behalf of said corporation by authority of its Board of Directors,
and he acknowledged that the execution of the foregoing instrument was the
free act and deed of said corporation.
/s/ Xxxxx X. Xxxxxx
---------------------------------
Notary Public
My Commission Expires: 8/3/05
[Notary Seal]
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AFFIDAVIT OF OUT-OF-FLORIDA EXECUTION
-------------------------------------
I, Xxxx Xxxxxxx, being duly sworn upon my oath, depose and say:
1. That I am President and CEO of Teltronics, Inc.
(the "Borrower").
2. That on the 28th day of March, 2002, I executed on
behalf of the Borrower the Loan Agreement dated March 28, 2002 between the
Borrower and Xxxxxx Corporation ("Xxxxxx").
3. The execution of the Loan Agreement took place in the City
of Atlanta in the State of Georgia.
IN WITNESS WHEREOF, I have executed this Affidavit of Out-of-Florida
Execution as of the day and year set forth below.
/s/ Xxxx Xxxxxxx
--------------------------
Name: Xxxx Xxxxxxx
Title: President and CEO
1
STATE OF Georgia
-----------------------
COUNTY OF Xxxxxx
-----------------------
The foregoing Affidavit of Out-of-Florida Execution was acknowledged
before me this 28th day of March, 2002, by the affiant named above, who signed
and acknowledged the same on behalf of the Borrower, Teltronics, Inc. The
affiant is personally known to me or has produced Driver's License as
identification and [X] did [ ]did not take an oath.
(NOTARY SEAL)
/s/ Xxxxx X. Xxxxxx
-------------------------------
Name:
Notary Public-State of Georgia
---------
Commission Number: 01-NT-02474
-------------
2
