AMENDMENT NO. 1
TO
AGREEMENT OF PURCHASE AND SALE Of VORTEX TECHNOLOGY
THIS AMENDMENT NO. 1 TO AGREEMENT OF PURCHASE AND SALE OF
VORTEX ASSETS (the "Amendment"), made as of this 30th day of May 2003, is by and
between:
TRI-LINK TECHNOLOGIES INC., a corporation incorporated under
the Canada Business Corporations Act with its principal offices located in
Burnaby, British Columbia, Canada (Tri-Link"); and
TELTRONICS, INC., a corporation incorporated under the laws of
the State of Delaware with its principal offices located in Sarasota, Florida
("Teltronics").
Capitalized terms used herein without definition shall have
the meanings ascribed to them in that certain Agreement of Purchase and Sale of
Vortex Assets dated as of October 31, 2002 (the "Agreement")
R E C I T A L S
WHEREAS, Tri-Link and Teltronics have entered into the
Agreement; and
WHEREAS, Tri-Link and Teltronics desire to amend certain of
the terms of the Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Teltronics and Tri-Link hereby agree as follows:
ARTICLE I
AMENDMENTS
Tri-Link and Teltronics agree that the following terms of the
Agreement shall be amended as follows:
1.01. Definition of "Closing Time." The definition of the term
"Closing Time" as defined in the Agreement shall be amended to read in its
entirety as follows: "Closing Time" means 10:00 a.m. Eastern Time on June 4,
2003 or such other time and date as the parties may agree upon in writing.
1.02. Section 4.02 - Purchase Price and Payment. Section 4.02
shall be amended to read in its entirety as follows: "Purchase Price and
Payment. The Purchase Price for the Purchased Assets (the "Purchase Price")
shall be Two Million Five Hundred Thousand Dollars ($2,500,00.00), which has
been and shall be paid:
(a) $50,000 on May 2, 2003;
(b) $200,000 in immediately available funds at the
Closing; and
(c) $2,250,000 in twelve equal quarterly principal
installments of $187,500, plus accrued interest, with the first payment being
due on the first Business Day of August, 2003 and with subsequent installments
of principal and interest being payable on the first Business Day of each third
month thereafter, until the entirety of the Purchase Price has been paid."
1.03. Section 4.03 - Security. Section 4.03 shall be amended
to read in its entirety as follows: "Security. As security for payment of the
Purchase Price from time to time remaining unpaid and such interest as shall
from time to time have accrued thereon and remain unpaid, Teltronics shall at
the Closing grant to Tri-Link a priority security interest in the Vortex
Technology (as it may be constituted from time) and the Vortex Technology
Assets. Following the Closing, Teltronics shall use commercially reasonable
efforts to obtain the consent of Xxxxxx Corporation, Finova Mezzanine Capital,
Inc. and the CIT Group/Business Credit, Inc. to the creation, as further
security security for payment of the Purchase Price from time to time remaining
unpaid and such interest as shall from time to time have accrued thereon and
remain unpaid, of a junior security interest in favor of Tri-Link in all the
other property and assets of Teltronics, subordinate in all respects to all
present and future bank and other institutional indebtedness of Teltronics,
including all obligations of Teltronics to Xxxxxx Corporation, Finova Mezzanine
Capital, Inc. and the CIT Group/Business Credit, Inc. (as they may be
constituted from time to time). All security interests created pursuant hereto
shall be created (a) by way of a security agreement which is or security
agreements each of which are substantially in the form of Exhibit J attached
hereto and sufficient to perfect a security interest in the applicable
collateral in each of the states of the United States and each of the provinces
of Canada in which such collateral might be located and (b) in accordance with
such other agreements as may be required to effect the specified priorities
among the security interests then existing in the applicable collateral, in each
case reasonably acceptable to the parties hereto."
1.04. Section 4.05 - Conversion Option. Section 4.05 shall be
amended to read in its entirety as follows: "Conversion Option. Tri-Link shall
be entitled, at its sole option, to convert, at any time and from time to time,
in accordance with and subject to the Conversion Provisions specified in Exhibit
L attached hereto, the balance of the Purchase Price then remaining unpaid into
shares of Teltronics' voting common stock, during the periods and at the rates
set forth in this Section 4.05 (as the same may be adjusted from time to time as
herein provided, the "Conversion Prices"), so long as the total of all amounts
theretofore converted at the applicable rates during the applicable periods and
the amount to be converted at the applicable rate does not exceed the maximum
amount specified in this Section 4.05 as being convertible at that rate during
that period:
(a) Period One (from and after the Closing Time to and
including February 1, 2004):
(i) $82,500 at $0.22 per share;
(ii) $125,000 at $0.50 per share;
(iii) $187,500 at $0.75 per share; and
(iv) $250,000 at $1.00 per share;
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(b) Period Two (from and after February 2, 2004 to and
including June 1, 2004):
(i) $125,000 (less such amount, if any, as may in the
preceding period have been converted at $0.50 per
share) at $0.50 per share;
(ii) $187,500 (less such amount, if any, as may in the
preceding period have been converted at $0.75 per
share) at $0.75 per share; and
(iii) $250,000 (less such amount, if any, as may in the
preceding period have been converted at $1.00 per
share) at $1.00 per share.
(c) Period Three (from and after June 2, 2004 to and
including June 1, 2005):
(i) $187,500 (less such amount, if any, as may in the
preceding periods have been converted at $0.75 per
share) at $0.75 per share; and
(ii) $500,000 (less such amount, if any, as may in the
preceding periods have been converted at $1.00 per
share and less twice such amount, if any, as may
in the preceding periods have been converted at
$0.50 per share) at $1.00 per share; and
(d) Period Four (from and after June 2, 2005 to and
including May 1, 2006):
(i) $750,000 (less such amount, if any, as may in the
preceding periods have been converted at $1.00 per
share and less twice such amount, if any, as may
in the preceding periods have been converted at
$0.50 per share and less one and one-third times
the amount, if any, as may in the preceding
periods have been converted at $0.75 per share) at
$1.00 per share.
(e) Conforming Changes. The term "Conversion Price" shall be
deleted wherever it appears in Exhibit A and under the heading "Anti-
Dilution" in Exhibit L and the term "Conversion Prices" shall be
substituted therefor. The term "the Conversion Price" shall be deleted
where it appears in under the heading "No Fractional Securities" in
Exhibit L and the term "at the applicable Conversion Prices" shall be
substituted therefor.
(f) Recalculated Installments. Upon any such conversion
being effected, each installment amount thereafter payable in respect of
the Purchase Price shall be reduced, to be equal to: (a) such
installment amount as would otherwise have been payable in respect
thereof, less (b) the amount in respect of which such conversion was
effected divided by the number of installment payments remaining to be
made at the time such conversion was effected.
(g) Teltronics' Common Stock. Teltronics covenants that all
of the securities that are issued to Tri-Link upon conversion being
effected hereunder will be duly and validly issued and will be fully
paid and non-assessable.
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1.05. Section 4.06 - Royalty Commitment. Section 4.06 shall be
amended to read in its entirety as follows: "Royalty Commitment. For the period
commencing on the closing and ending on the fifth anniversary thereof,
Teltronics shall pay to Tri-Link royalties as follows:
(a) Four percent (4%) of "Net Revenue" derived from
the following components of the Vortex Technology: Vortex S.E. Controller
Software, Vortex S.E. QSAP, SLIC and POTS, PC-Phone and Analog PSTN Gateway,
each as defined in Exhibit C attached hereto;
(b) Two percent (2%) of "Net Revenue" derived from
the following components of the Vortex Technology: Digital PSTN Gateway, H.323
WAN Gateway and BRI Gateway, each as defined in Exhibit C attached hereto; and
(c) Two percent (2%) of "Net Revenue" derived from
third party hardware products that incorporate and/or use any of Vortex
Technology.
For purposes of this Agreement "Net Revenue" means
monies actually received by Teltronics in connection with the sale, licensing,
distribution or other exploitation of those components of the Vortex Technology
specified in Sections 4.06 (a) and (b) above and those third-party hardware
products specified in Section 4.06(c) above, including, without limitation, the
derivation of revenue by way of user fees, access fees, license fees and any
other fees of a like nature and/or transaction-based charges, but which shall
exclude sales and use taxes, returns, refunds, rebates, and separately stated
shipping and handling costs or separately-stated maintenance, support, and
engineering fees. The term "Net Revenue" shall not include any monies received
by Teltronics in connection with the sale, licensing, distribution or other
exploitation of its own products and services (including those products and
services that interface with, integrate with or are compliant with the Vortex
Technology), whether in existence as of the date hereof or developed in the
future, provided that such products or services do not incorporate, use or
comprise (otherwise than by way of interfacing with, integrating with or being
compliant with) the Vortex Technology (or any portion or portions thereof).
Teltronics presently has no intention of offering the Vortex Technology as part
of an integrated system in which any of the Vortex Technology would be
integrated with any of its own products or services, however, in the event that
Teltronics proposes to offer the Vortex Technology as part of such an integrated
system, it will do so pursuant to a published price list that sets out the
Vortex Technology component of the system as a separate line item. In the event
Tri-Link disagrees with the pricing allocations reflected in any such price
list, the dispute resolution provisions of Article VIII shall apply. Teltronics
shall maintain adequate records to verify all reports and payments to be made to
Tri-Link pursuant to this Section 4.06 for a period of two (2) years following
the end of the period in respect of which royalties are required to be paid
hereunder. Tri-Link shall have the right to select an independent certified
public accountant mutually agreeable to the parties to inspect no more
frequently than annually the records of Teltronics on reasonable notice and
during regular business hours to verify the reports and payments required
hereunder. If such inspection should disclose any underreporting, Teltronics
shall pay Tri-Link such amount within thirty (30) days of the conclusion of such
inspection. The entire cost of such inspection shall be borne by Tri-Link;
provided however, that if Teltronics is determined by such inspection to have
underpaid royalties by five percent (5%) or more, then the cost of such audit
shall be borne by Teltronics. Each royalty payment shall be accompanied by a
statement setting forth in sufficient detail the basis upon which royalties were
calculated."
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1.06. Section 4.07 - Tri-Link Employees. Section 4.07 of the
Agreement shall be amended to read in its entirety as follows: "Tri-Link
Employees. Teltronics, or its wholly-owned Canadian subsidiary, shall assume and
be liable for the accrued vacation pay and other statutory obligations owed by
Tri-Link from August 1, 2002 through the Closing Time. In the event Teltronics
fails to purchase the Vortex Technology in accordance with Section 4.01 hereof,
Teltronics, or its wholly owned Canadian subsidiary, shall be deemed to have
hired the Tri-Link employees as of May 1, 2003."
1.07. Section 5.02(c) - Closing Documentation. Section
5.02(c)(iii) of the Agreement shall be amended to read in its entirety as
follows: "the consent of Xxxxxxx Tsiroulnikov (d/b/a MIKET DSP Solutions) to the
assignment of the MIKET License, as amended pursuant to Section 3.03 hereof, to
Teltronics hereunder;" and Section 5.02(c)(iv) of the Agreement shall be amended
to read in its entirety as follows: "the amendment of the MIKET License made
pursuant to Section 3.03 hereof; ".
1.08. Section 5.03(b) - Closing Documentation. Section
5.03(b)(ii) of the Agreement shall be amended to read in its entirety as
follows: "a bank draft or cashier's check payable to Tri-Link in the amount of
Two Hundred Thousand Dollars ($200,000.00)" and Section 5.03(b)(iv) of the
Agreement shall be amended to read in its entirety as follows: "the Teltronics
Senior Security Agreement; and".
1.09. Section 9.02(b) - Termination. Section 9.02(b) of the
Agreement shall be amended to read in its entirety as follows:
"(b) By Teltronics, if Tri-Link shall have failed to perform any of
its obligations hereunder, and by Tri-Link:
(i) at any time, if Teltronics shall have failed to
perform any of its obligations hereunder other than
an obligation to make an installment payment of
principal and interest required to be made pursuant
to Section 4.02 hereof (as such obligation may, at
the applicable time, have been revised pursuant to
Section 4.05 hereof), unless and until such default
has been cured by Teltronics; and
(ii) at any time after the thirtieth day following
such default, if Teltronics shall have failed to make
an installment payment of principal and interest
required to be made pursuant to Section 4.02 hereof
(as such obligation may, at the applicable time, have
been revised pursuant to Section 4.05 hereof), unless
and until such default has been cured by Teltronics."
1.10. Section 9.03 - Remedy Upon Payment Default. Section 9.03
shall be added to the Agreement to read in its entirety as follows: "Remedy Upon
Payment Default. Each time Teltronics fails to make an installment payment of
principal and interest required to be made pursuant to Section 4.02 hereof (as
such obligation may, at the applicable time, have been revised pursuant to
Section 4.05 hereof) and fails to remedy such default by the end of the tenth
day after the day on which the applicable payment was due, Teltronics shall
issue to Tri-Link, on
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the fortieth day after the day on which the applicable payment was due, that
number of shares of Teltronics' common voting stock which is equal to 22,500
times the number of days by which the number of days the applicable default
remained unremedied (the day on which such default is remedied being deemed to
be a day on which it remained unremedied) exceeds ten (10) days. Teltronics
covenants that all of the shares which may be so issued to Tri-Link will be duly
and validly issued and will be fully paid and non-assessable. "
1.11. Exhibit A - Definitions. The definition of "Operative
Documents" in Exhibit A to the Agreement shall be amended to read in its
entirety as follows " "Operative Documents" means this Agreement, the Teltronics
Note, the Joint Escrow Instructions, the Teltronics Senior Security Agreement
and, if made, the Teltronics Junior Security Agreement. " and the definition of
"Teltronics Security Agreement" in Exhibit A to the Agreement shall be deleted
therefrom and the following substituted therefor:
" "Teltronics Senior Security Agreement" means the agreement made in
accordance with Section 4.03 pursuant to which the priority security
interest therein specified is granted.
"Teltronics Junior Security Agreement" means the agreement made in
accordance with Section 4.03 pursuant to which the junior security interest
therein specified is granted. "
1.12. Other Terms. All other terms of the Agreement not
expressly amended hereby shall remain in full force and effect.
ARTICLE II
CONSIDERATION
In consideration of Tri-Link's execution and delivery of this
Amendment, Teltronics has paid Tri-Link by wire transfer of immediately
available funds on May 2, 2003 the sum of $50,000.00, which amount shall be
deemed to satisfy the corresponding obligation set forth in Section 4.02(a) as
amended hereby.
ARTICLE III
MISCELLANEOUS
3.01. Amendments and Waivers. Except as otherwise expressly
provided herein, this Amendment shall not be amended or modified in any manner
except by an instrument in writing signed by all of the parties hereto. The
waiver by a party of any condition, or any breach of this Amendment by any other
party, shall not be effective unless in a writing signed by the waiving party,
and no such waiver shall operate or be construed as the waiver of any conditions
other than those expressly identified in the written waiver or of the same or
another breach on a subsequent occasion.
3.02. Non-assignability. All terms and provisions of this
Amendment shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Amendment may
not be assigned by either party without the prior written consent of the other;
provided, however, that such consent shall not be required for the assignment by
either party of its rights and privileges hereunder to an Affiliate of that
party (it being understood that no such assignment shall relieve the assigning
party of its duties or obligations hereunder).
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3.03. No Third Party Beneficiaries. This Amendment is not for
the benefit of any Person other than the parties and their Affiliates, and no
Person other than Teltronics and Tri-Link and their respective Affiliates shall
have any rights against the parties hereunder.
3.04. Rules of Construction. The headings in this Amendment
are inserted only as a matter of convenience and in no way affect the terms or
intent of any provision of this Amendment. All defined phrases, pronouns, and
other variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular, or plural, as the actual identity of the organization, person,
or persona may require. No provision of this Agreement shall be construed
against any parties hereto by reason of the extent to which such parties or its
counsel participated in the drafting hereof.
3.05. Choice of Law. This Amendment is made and entered into
under the laws of Province of British Columbia (without giving effect to the
principles of conflicts of laws thereof), which law shall govern the validity,
enforceability and interpretation hereof and the performance by parties hereto
of their respective duties and obligations hereunder.
3.06. Severability of Provisions. If any provision of this
Amendment shall be contrary to the internal laws of the Province of British
Columbia or any other applicable law, at the present time or in the future, such
provision shall be deemed null and void, but shall not affect the legality of
the remaining provisions of this Amendment. This Amendment shall be deemed to be
modified and amended so as to be in compliance with applicable law and this
Amendment shall then be construed in such a way as will best serve the intention
of the parties at the time of the execution of this Amendment
3.07. Counterparts; Delivery. This Amendment may be executed
in one or more counterparts. Each such counterpart shall be considered an
original and all of such counterparts shall constitute a single agreement
binding all the parties as if all had signed a single document. The parties
acknowledge that delivery of executed counterparts of this Amendment may be
effected by a facsimile transmission or other comparable means, with an original
document to be delivered promptly thereafter via overnight courier.
3.08. Entire Agreement. This Amendment (including the
Agreement, any schedules, exhibits or other attachments thereto), taken together
with the other Operative Documents, constitute the entire agreement among the
parties. This Amendment, the Agreement and the other Operative Documents
supersede all prior and contemporaneous agreements, statements, understandings,
and representations of the parties, including, without limitation, the e-mail of
Xxx Xxxxxxx on August 1, 2002. There are no representations, warranties,
agreements, arrangements, or understandings, oral or written between the parties
relating to the subject matter of this Amendment which are not fully expressed
herein. The parties agree that the traditional formulation of the parole
evidence rule (whereby extrinsic evidence may not be used to vary or contradict
the unambiguous terms of a document that represents a final and complete
expression of the parties' agreement) shall govern in any action or proceeding
that may arise in connection with this Amendment.
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3.09. Last Day for Performance Other Than a Business Day. In
the event that the last day for performance of an act or the exercise of a right
hereunder falls on a day other than a Business Day, then the last day for such
performance or exercise shall be the first Business Day immediately following
the otherwise last day for such performance or such exercise.
3.10. Notices. All notices, requests, consents, or other
communications required or permitted to be given under this Amendment shall be
in writing, may be delivered in person, by overnight air courier, or by
certified or registered mail (return receipt requested with all fees prepaid),
and shall be deemed to have been duly given and to have become effective upon
the date actually delivered to the parties or their assignees at the following
addresses:
If to Tri-Link: Tri-Link Technologies Inc.
#000 - 0000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxx Xxxxxxx
If to Teltronics: Teltronics, Inc.
0000 Xxxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx Xxxxxxx, President and CEO
The persons or addresses to which mailings or deliveries shall be made may be
changed from time to time by notice given pursuant to the provisions of this
section.
3.11. Waiver of Jury Trial. The parties hereto hereby waive
their respective right to trial by jury of any cause of action, claim,
counterclaim or cross-complaint in any action, proceeding and/or hearing brought
by any party hereto against another party hereto on any matter whatsoever
relating to, resulting from, arising out of, or in any way connected with this
Amendment, or any amendment or breach hereof, including, without limitation, any
claim or injury or damage, or the enforcement of any remedy under any law,
statute, or regulation, emergency or otherwise, now or hereafter in effect.
3.12. Expenses. Except as otherwise specifically provided in
this Amendment, each party shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including filing, registration and applicable fees, printing fees,
and fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel.
3.13. Further Assurances. The parties hereto from time to time
after execution of this Amendment, without further consideration, shall execute
and deliver, as appropriate, such documents and take such actions as may be
reasonably necessary or proper to carry out and consummate the transactions
contemplated by this Amendment.
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3.14. Force Majeure. Neither party shall be liable for
defaults or delays due to acts of God or the public enemy, acts or demands of
government or any government agency, strikes, fires, flood, accident, or other
unforeseeable causes beyond its control (other than general economic conditions)
and not due to its fault or negligence. Any party desiring to excuse its default
or delay for any such reason shall notify the other party of the cause of such
default or delay within five (5) days after the beginning thereof.
3.15. Brokers and Finders. Each of the parties represents and
warrants that neither it nor any of its officers, directors, employees, or
Affiliates has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions, or finders' fees in
connection with this Amendment or the transactions contemplated hereby, except
for the Financial Advisory Agreement between Tri-Link and Xxxxxx-Global Ventures
Inc. dated November 13, 2001 (for which Teltronics has no obligations or
liability whatsoever). In the event of a claim by any broker or finder based
upon his or its representing or being retained by or allegedly representing or
being retained by any party, such party agrees to indemnify and hold each other
party harmless of and from any liability in respect of such claim.
3.16. Relationship of Parties. Nothing contained in this
Amendment shall be construed as constituting a partnership or agency
relationship between the parties hereto.
IN WITNESS WHEREOF, the undersigned parties hereby execute
this Amendment as of the date first above written.
"Teltronics"
Teltronics, Inc.
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Xxxx Xxxxxxx
President and CEO
"Tri-Link"
Tri-Link Technologies Inc.
By: /s/ Hafrry Jaako
-------------------------------------
Xxxxx Xxxxx
Director & Secretary, Authorized
Signatory
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