DATED 2004
TELTRONICS INC
and
TELTRONICS LIMITED
and
XXXX & XXXX MANAGEMENT SERVICES
RESTRICTIVE COVENANT AND CONSULTANCY AGREEMENT
----------------------------------------------
relating to
the Teltronics telephone systems maintenance business
THIS AGREEMENT is made the day of 2004
BETWEEN
(1) TELTRONICS INC whose principal place of business is at 0000 Xxxxxxxxx
Xxxxxxxxxx Xxx Xxxxxxxx Xxxxxxx 00000 ("the Company"); and
(2) TELTRONICS LIMITED (registered in England and Wales under number
04248637 whose registered office is at 00 Xxxxxx Xxxx Xxxxx
Xxxxxxxxxxxxxxx XX00 0XX ("the Subsidiary"); and
(3) XXXXXX XXXX and XXXX XXXXXXXX the partners for the time being of XXXX &
XXXX MANAGEMENT SERVICES of Rossbonny Xxxxx Xxxx Xxxxxx Xxxxxxxxxxxxxxx
XX0 0XX ("BCMS").
1. Definitions
In this Agreement, the following expressions shall (unless the context
requires otherwise) have the following meanings:
"Business" means the Teltronics 20-20 telephone
systems maintenance business carried
on by the Company or any Group
Company;
"Confidential Business
Information" means all and any information
(whether or not recorded in
documentary form or on computer
disk or tape) relating to the names,
addresses, telephone numbers,
contact names and identities of the
Customers, the nature of their
business operations, their
requirements for Restricted Products
or Restricted Services and all
confidential aspects of their
business relationship with the
Company or any Group Company and all
and any trade secrets relating to
the creation production or supply of
the Restricted Products or the
Restricted Services and any other
information to which the Company or
any Group Company attaches an
equivalent level of confidentiality
or in respect of which it owes an
obligation of confidentiality to any
third party:
(a) which BCMS shall acquire at
any time during the
provision by it of Services
to the Company but which
does not form part of the
Expert's own knowledge; and
(b) which is not readily
ascertainable to persons
not connected with the
Company or any Group
Company
either at all or
without a significant
expenditure of labour skill
or money.
"Connected Persons" means any person, firm or company
who as at the date of this Agreement
is connected with BCMS or the Expert
within the meaning of Section 839
Income and Corporation Taxes Act
1988 or any company of which the
Expert is a director and/or
shareholder or who becomes so
connected other than as a result of
a passive investment in not more
than 5% of any class of securities
quoted on a recognised investment
exchange (as defined in the
Financial Services and Markets Act
2000) and other than the Company;
"Consideration Shares" means 100,000 shares in the
capital of the Company ranking pari
passu with the shares in issue;
"Consultancy Commission
Payment" means the sum referred to in clause
5.2 and any additional sum payable
pursuant to the provisions of clause
5.3 hereof (plus in each case VAT if
applicable);
"Consultancy Payment" means the daily sum of FIVE
HUNDRED POUNDS ((pound)500) gross
for each seven hour day that BCMS
provides the Services and an hourly
sum of ONE HUNDRED POUNDS
((pound)100) for each hour in any
day that BCMS provides the Services
in excess of seven hours (plus in
each case VAT if applicable);
"Customer Contracts" means the telephone
maintenance contracts entered into
with Customers brief particulars of
which are set out in the Schedule;
"Customers" means those persons firms or
companies listed in the Schedule and
any person who in the period of 2
years after the date of this
Agreement becomes a customer of the
Business;
"Expert" means Xxxxxx Xxxx;
"Group Company" means any company which for
the time being is a holding company
of the Company or a subsidiary of
the Company or of such holding
company as those terms are defined
in section 736 Companies Act 1985 as
amended;
"Income" means in relation to any Customer
Contract the amount invoiced to each
such Customer together with any
value added tax thereon;
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"Relevant Period" means 1st February l 2004 to 31st
March 2005;
"Restricted Area" means the United Kingdom;
"Restricted Products" means PBX and ACD
telephone systems produced, marketed
or sold by the Company or any Group
Company in the ordinary course of
the Business;
"Restricted Services" means maintenance services
in respect of the Restricted
Products as provided by the Company
or any Group Company in the ordinary
course of the Business;
"Restrictive Covenant
Payment" means the sum referred to in clause
4.5 and any additional sum payable
pursuant to the provisions of
clauses 4.6 or 4.7 hereof (plus in
each case VAT if applicable);
"Retained Business" means the telecoms and
software products and services
produced, marketed, sold or supplied
as the case may be by BCMS or the
Expert or their Connected Persons
but excluding the supply of the
Restricted Products and/or the
Restricted Services to the
Customers;
"Services" means those services outlined in
Clause 5.1 and any other services
that the Company and BCMS may from
time to time agree;
"Termination Date" means the first anniversary of the
date of this Agreement.
2. Acknowledgements by BCMS
BCMS acknowledges:
2.1 that the Company possesses a valuable body of Confidential Business
Information which requires protection much of which is in the knowledge
of the Expert;
2.2 the Company will give it access to Confidential Business Information
in order that it may provide the Services to the Company;
2.3 that it and the Expert have a duty of trust and confidence to the
Company in relation to the Confidential Business Information;
2.4 that the Expert's knowledge of Confidential Business Information
directly benefits BCMS by enabling it to perform the Services and to
earn fees in respect thereof;
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2.5 that the disclosure of any Confidential Business Information to any
customer or competitor of the Company would place the Company at a
serious competitive disadvantage and would cause immeasurable
(financial and other) damage to the Business;
2.6 that if BCMS or the Expert or any of their respective Connected Persons
were to deal with the Customers in competing products to the Restricted
Products or supply services to the Customers competing with the
Restricted Services it would place the Company at a serious competitive
disadvantage and would cause immeasurable (financial and other) damage
to the Business;
2.7 that the success of the Business depends, in part, on the Company's or
the relevant Group Company's employees establishing business
relationships with the Customers which are similar to those previously
established and maintained by the Expert.
3. Confidentiality Obligations
3.1 BCMS agrees that during the period of this Agreement and for a period
of 2 years from the date of termination of this Agreement, it shall and
shall procure that the Expert and any Connected Persons shall:
(i) not directly or indirectly disclose to any person, firm or
company or use other than for any legitimate purposes of the
Company or any Group Company any Confidential Business
Information;
(ii) not without the prior authority of the Company remove from the
Company or any Group Company premises or copy or allow others
to copy the contents of any document, computer disk, tape or
other tangible item which contains any Confidential Business
Information or which belongs to the Company;
(iii) return to the Company upon request and, in any event, upon
termination of its Services all documents, computer disks and
tapes and other tangible items in its possession or under its
control which belong to the Company or which contain or refer
to any Confidential Business Information;
(iv) if so requested by the Company delete all Confidential
Business Information from any computer disks, tapes or other
re-usable material in its possession or under its control and
destroy all other documents and tangible items in its
possession or under its control which contain or refer to any
Confidential Business Information.
3.2 The provisions of this clause shall not apply to information which:
(i) is, or subsequently becomes, part of the public domain,
otherwise than by any breach of this Agreement; or
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(ii) is hereafter disclosed to BCMS or the Expert by a third party
with the lawful right to make such disclosure.
3.3 Nothing in this Clause 3 shall prevent or restrain BCMS or the Expert
from dealing with clients or customers of the Business who are also
clients or customers of the Retained Business in relation to the
Retained Business and retaining and using solely for that purpose
Confidential Business Information relating to such clients or
customers.
4. Restrictive Covenant Obligations
4.1 In consideration of the payment to BCMS in accordance with the terms of
this Agreement of the Restrictive Covenant Payment and the issue to
BCMS as soon as reasonably practicable but in any event within six
weeks hereof of the Consideration Shares BCMS shall not and shall
procure that the Expert and any Connected Persons shall not within the
Restricted Area whether on its or his own account or as partner
employee or on behalf of another person firm or company without the
prior written consent of the Company during the period of this
Agreement and for the period of 2 years after the date of termination
of this Agreement:-
4.1.1 seek in any capacity whatsoever any business, orders or custom
for any Restricted Products from any Customer;
4.1.2 seek in any capacity whatsoever any business, orders or custom
for any Restricted Services from any Customer;
4.1.3 accept in any capacity whatsoever orders for any Restricted
Products from any Customer;
4.1.4 accept in any capacity whatsoever orders for any Restricted
Services from any Customer;
4.1.5 solicit or entice away or seek to entice away from the Company
or any Group Company any Employee or induce or authorise any
third party to do so whether or not such person would commit
any breach of contract by reason of leaving.
4.2 Each of the foregoing obligations shall be construed as separate and
severable obligations.
4.3 Nothing in this Clause 4 shall prevent or restrain BCMS or the Expert
from dealing with clients or customers of the Business who are also
clients or customers of the Retained Business solely in relation to the
Retained Business.
4.4 BCMS and the Expert shall be relieved of their obligations under clause
4.1 if the Company defaults in any month in the payment of the
Restrictive Covenant Payment and fails to remedy such breach within 5
Business Days of a request by BCMS to remedy the same.
4.5 In consideration of the covenants set out in clause 4.1 above the
Company shall pay to BCMS a sum equal to THIRTY FIVE PER CENT (35%) of
the Income received by the
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Company or any Group Company in respect of amounts invoiced or which
should properly be invoiced in respect of the Customer Contracts during
the Relevant Period "Restrictive Covenant Payment"), to be paid monthly
on or about the last day in the month in which such Income is received
by the Company or the relevant Group Company. BCMS shall submit a VAT
invoice for the amount received by it from the Company within 14 days
of receipt of each payment.
4.6 The Company undertakes to BCMS that it will not and it will procure
that no Group Company will cancel or terminate any of the Customer
Contracts until the expiry of the Relevant Period other than:-
(i) for material breach on the part of the Customer, evidenced to
the reasonable satisfaction of BCMS and on the basis that BCMS
shall be entitled to receive THIRTY FIVE PER CENT (35%) of any
damages awarded to the Company or any Group Company arising
out of or in connection with non-payment of sums due under the
relevant Customer Contract in lieu of the Restrictive Covenant
Payment which would otherwise be payable to BCMS in respect of
such Customer Contract for the remainder of the Relevant
Period; or
(ii) where the Customer enters into a new maintenance contract with
the Company or any Group Company on terms no less favourable
to BCMS in relation to the contract period and the payments
due from the Customer thereunder during the Relevant Period
and on the basis that BCMS shall be entitled to THIRTY FIVE
PER CENT (35%) of the Income received by the Company or any
Group Company in respect of amounts invoiced or which should
properly be invoiced in respect of such replacement contract
during the Relevant Period as if such replacement contract
were listed in the Schedule, being in any event no less than
the Restrictive Covenant Payment which BCMS would have been
entitled to receive had such Customer Contract not been
replaced.
4.7 If any of the Customers purchase new or additional products from the
Company or any Group Company during the Relevant Period BCMS shall be
entitled to receive THIRTY FIVE PER CENT (35%) of the Income received
by the Company or any Group Company in respect of amounts invoiced or
which should properly be invoiced during the Relevant Period in respect
of such new or additional telephone maintenance contracts entered into
by such Customer during the Relevant Period, to be paid at such times
and in such manner as the Restrictive Covenant Payment due under clause
4.5.
4.8 The Company shall collect or procure the collection of all income due
from the Customers in respect of the Customer Contracts (and any
replacement or additional contracts referred to in clause 4.7) in a
separate bank account and shall produce to BCMS on a monthly basis
copies of the bank statements in relation to such account. The Company
shall in addition keep separate, detailed, true and accurate books and
records of all income received or receivable in respect of the Customer
Contracts (and any replacement or additional contracts referred to in
clause 4.7) to enable BCMS to check the accuracy of the information
contained in the bank statements rendered under this
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clause and the Restrictive Covenant Payment made to BCMS from time to
time hereunder and BCMS shall be entitled at its expense to inspect the
same by its authorised representative or representatives during
business hours on giving reasonable notice and to take copies of or
extracts from such books and records. In the event that any Restrictive
Covenant Payment rendered under this clause 4 is inaccurate, the costs
of such inspection shall be paid by the Company and the Company shall
pay to BCMS the amount of the shortfall forthwith together with
interest thereon at the rate of 4% per annum above the base rate from
time to time in force of National Westminster Bank plc (whether before
or after judgement) from the date such payment should properly have
been made under this Agreement to the date of actual payment.
4.9 Notwithstanding the provisions of clause 4.8 above, in the event of a
dispute between the parties in respect of the provisions of this clause
4 the Company shall instruct its auditors (who shall act as expert and
not as arbitrator) to supply to BCMS within 60 days of 31 March 2005,
or if later within 60 days of receipt of the last payment due from any
Customer under the Customer Contracts (and any replacement or
additional contracts referred to in clause 4.7) during the Relevant
Period, a certificate in writing certifying the aggregated sums
received from Customers on which the Restrictive Covenant Payment is
payable hereunder and the amount of the payment due. If such amount
falls short of the Restrictive Covenant Payment actually paid, the
Company shall remit the balance to BCMS with the certificate together
with interest calculated in accordance with clause 4.8 above. The
rendering of such certificate shall not preclude the right of
inspection given to BCMS in clause 4.8.
4.10 The obligation of the Company to pay the Restrictive Covenant Payment
and the rights of inspection granted by this clause 4 shall continue in
full force and effect until the Company has received all income due
from Customers under the Customer Contracts (and any replacement or
additional contracts referred to in clause 4.7) during the Relevant
Period and has accounted to BCMS for the Restrictive Covenant Payment
in respect thereof.
5. Consultancy Obligations
5.1 In consideration of the Consultancy Payment and the Consultancy
Commission Payment referred to below BCMS hereby agrees until the
Termination Date to provide such advice consultancy and assistance to
the Company or any Group Company from time to time agreed by BCMS and
the Company to assist in the Company's or any Group Company's employees
establishing business relationships with the Customers and the
collection of income due under the Customer Contracts ("the Services").
The Company and BCMS agree that the Services shall be performed in the
United Kingdom and Ireland or such other locations as the Company and
BCMS may from time to time agree. The Consultancy Payment shall be paid
to BCMS on or about the last day in the month next following the month
in which such Services are performed whereupon BCMS shall submit a VAT
invoice to the Company in respect thereof.
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5.2 In further consideration of BCMS entering into this Agreement the
Company shall pay to BCMS a sum equal to THIRTEEN PER CENT (13%) of the
Income received by the Company or any Group Company in respect of
amounts invoiced or which should properly be invoiced in respect of the
Customer Contracts during the Relevant Period ("Consultancy Commission
Payment"), to be paid monthly on or about the last day in the month in
which such Income is received by the Company or the relevant Group
Company up to a maximum of FORTY-SIX THOUSAND POUNDS ((pound)46,000)
plus VAT. BCMS shall submit a VAT invoice for the amount received by it
from the Company within 14 days of receipt of each payment.
5.3 The provisions of clauses 4.6 and 4.7 shall apply mutatis mutandis to
the Consultancy Commission Payment as if repeated herein.
5.4 BCMS shall procure that the Services are provided by the Expert, such
Services to be provided with reasonable care and skill.
5.5 All reasonable travelling and subsistence expenses incurred by BCMS in
the performance of the Services shall be paid by the Company in
addition to the Consultancy Payment.
5.6 BCMS shall submit details of such expenses (including in the case of
car journeys the mileage covered) to the Company together with VAT
invoices where applicable. The Company shall re-imburse such expenses
on or about the last day in the month next following the month in which
such expenses are incurred.
5.7 For the purposes of this Agreement BCMS shall be an independent
contractor and not the servant, employee, partner, representative or
agent of the Company and has no power or authority to enter into any
contract on behalf of the Company or any Group Company.
5.8 BCMS will be fully responsible for and will indemnify the Company and
each and every Group Company for and in respect of any tax (excluding
VAT) and National Insurance and Social Security contributions and any
other liability, deduction, contribution, assessment or claim arising
from or made in connection with the performance by the Company of its
obligations under this Agreement or the performance by the Consultant
of the services under this Agreement. BCMS will further indemnify the
Company and each and every Group Company against all reasonable costs
and expenses and any penalty, fine or interest incurred or payable by
the Company in connection with or in consequence of any such liability,
deduction, contribution, assessment or claim other than where such
liability, deduction or contribution arising out of the assessment or
claim arises out of the Company's negligence or wilful default.
6. Publicity
BCMS shall not and shall procure that the Expert shall not at any time
make any untrue statement in relation to the Company or any Group
Company nor after the Termination Date wrongly represent itself or
himself as being connected with the Company or any Group Company.
8
7. Waiver
A waiver by one party of a breach by the other of any term of this
Agreement shall not prevent the subsequent enforcement of that term and
shall not be deemed a waiver of any subsequent breach.
8. Notices
8.1 Any notice or communication to be given under this Agreement shall be
in writing and shall be delivered personally (including by courier) or
sent by first class pre-paid or registered or recorded delivery post to
an address inland or by airmail post to an address overseas to the
registered office or principal place of business of the party to be
served or to such other address as may have been notified for such
purpose from time to time.
8.2 The notice shall be deemed to be given if delivered personally at the
time of delivery or if sent by post to an address inland 2 working days
after the notice shall have been posted or if sent by airmail post 5
working days after the notice shall have been posted.
8.3 In proving service it shall be sufficient to prove that personal
delivery was made or that the envelope containing the notice was
properly addressed and delivered into the custody of the postal
authorities as a first class pre-paid or registered or recorded
delivery letter or airmail letter as the case may be.
9. Governing law
9.1 This Agreement shall be governed by and construed in accordance with
the law of England.
9.2 The parties to this Agreement irrevocably agree for the exclusive
benefit of BCMS that the courts of England shall have jurisdiction over
any claim or matter arising under or in connection with this Agreement
or the legal relationships established by this Agreement and that
accordingly any proceedings in respect of any such claim or matter may
be brought in such courts. Nothing in this clause shall limit the right
of BCMS to take proceedings against the Company or the Subsidiary in
any other court of competent jurisdiction, nor shall the taking of
proceedings in any one or more jurisdictions preclude the taking of
proceedings in any other jurisdictions, whether concurrently or not, to
the extent permitted by the law of such other jurisdiction.
10. Entire Agreement
10.1 It is acknowledged and agreed that this Agreement (including the
documents and instruments referred to herein) shall supersede all prior
representations arrangements understandings and agreements between the
parties relating to the subject matter hereof and shall constitute the
entire complete and exclusive agreement and understanding between the
parties hereto.
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10.2 The parties irrevocably and unconditionally waive any right they may
have to claim damages for any misrepresentation arrangement
understanding or agreement not contained in this Agreement or for any
breach of any representation not contained in this Agreement (unless
such misrepresentation or representation was made fraudulently).
10.3 It is further acknowledged and agreed that no representations
arrangements understandings or agreements (whether written or oral)
made by or on behalf of any of the other parties have been relied upon
other than those expressly set out or referred to in this Agreement.
11. Severability
Each of the obligations contained in the clauses and sub-clauses of
this Agreement shall be construed as separate and severable obligations
but if at any time any one or more of the obligations is or becomes
invalid illegal or unenforceable in any respect under law but would be
valid if some part thereof were deleted or the period or area of
application reduced such obligation shall apply with such modification
as may be necessary to make it valid and effective and in any event the
validity legality and enforceability of the remaining clauses and
sub-clauses hereof shall not in any way be affected or impaired
thereby.
12. Third Parties
The parties hereby declare that no term of this Agreement is intended
by the parties to confer a benefit on any Third Party (as defined by
the Contracts (Rights of Third Parties) Act 1999), nor is it intended
to be enforceable by any Third Party. The provisions of the said Act
are hereby excluded.
13. General
13.1 BCMS has given the undertakings contained in this Agreement to the
Company as trustee for itself and for each Group Company and will at
the request and cost of the Company enter into direct undertakings with
any Group Company which correspond to the undertakings in this
Agreement, or which are less onerous only to the extent necessary (in
the opinion of the Company or its legal advisors) to ensure that such
undertakings are valid and enforceable.
13.2 The provisions of this Agreement may be amended only by a written
instrument executed by both the Company and BCMS.
13.3 Neither party may transfer or assign its rights or obligations under
this Agreement without the prior written consent of the other party.
13.4 The Company warrants that it has all requisite power and authority to
enter into this Agreement and to allot and issue the Consideration
Shares which when issued shall rank as fully paid shares in the capital
of the Company.
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14. Subsidiary's Guarantee
14.1 In consideration of BCMS entering into this Agreement the Subsidiary,
at the request of the Company, hereby unconditionally guarantees to
BCMS the due and punctual performance and observance by the Company of
all the Company's obligations and the punctual discharge by the Company
of all the Company's liabilities to BCMS contained in or arising under
this Agreement.
14.2 If the Company shall make default in the collection of income due from
Customers when due for payment and/or the payment when due of any
amount payable to BCMS under this Agreement the Subsidiary shall
forthwith on demand by BCMS collect any and all income due from
Customers under the Customer Contracts and unconditionally pay to BCMS
in the manner prescribed in this Agreement an amount equal to the
amount payable by the Company.
14.3 As an independent and primary obligation, without prejudice to the
above provisions, the Subsidiary hereby unconditionally and irrevocably
agrees to indemnify and keep indemnified the Company against all and
any losses, costs, claims, liabilities, damages, demands and expenses
suffered or incurred by BCMS arising from failure of the Company to
comply with any of its obligations or discharge any of its liabilities
under this Agreement or by reason of the Company not being at any time,
or ceasing to be, liable in respect of the obligations and liabilities
purported to be assumed by it in accordance with the express terms of
this Agreement.
14.4 The guarantee and indemnity contained in this clause shall be a
continuing guarantee and indemnity and shall continue in full force and
effect until all liabilities or purported liabilities of the Company
arising under, and all monies owing or payable or purported to be owing
or payable by the Company under this Agreement, have been paid,
discharged or satisfied in full and notwithstanding any insolvency of
the Company or any change in the status of the Company.
14.5 The Subsidiary shall not be exonerated or discharged nor shall its
liability be affected by any forbearance, whether as to payment, time,
performance or otherwise howsoever, or by any other indulgence being
given to the Company or by any variation of the terms of this Agreement
or by any act, thing, omission or means whatever which, but for this
provision, might operate to exonerate or discharge the Subsidiary from
its obligations under the guarantee and indemnity contained in this
Clause.
EXECUTED as a deed on the date of this document
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SCHEDULE
List of Customers and Customer Contracts
----------------------------------------
Customer Name Brief Contract Details
------------- ----------------------
12
EXECUTED (but not delivered until the )
date hereof) as a DEED by )
TELTRONICS INC )
acting by )
Authorised Signatory: ...........................
Authorised Signatory: ...........................
EXECUTED (but not delivered until the
date hereof) as a DEED by
TELTRONICS LIMITED
acting by
Director: ...........................
Director/Secretary: ...........................
SIGNED (but not delivered until the date )
hereof) as a DEED by the said ) ...........................
XXXXXX XXXX and XXXX XXXXXXXX )
the partners for the time being of )
XXXX & XXXX MANAGEMENT ) ...........................
SERVICES in the presence of:- )
WITNESS:
Name: ....................................
Address: ....................................
....................................
Occupation: ....................................
13
