SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) October 4, 1996
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(September 20, 1996)
Teltronics, Inc.
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(Exact Name of Registrant as specified in its charter)
Delaware 0-17893 59-2937938
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(State or other jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification
Number)
2150 Whitfield Industrial Way, Sarasota, Florida 34243-9706
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(Address of principal executive offices) (Zip code)
(941-753-5000)
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Registrant's telephone number, including area code
The Exhibit Index appears on page 4.
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Item 2. ACQUISITIONS OR DISPOSITION OF ASSETS.
On September 20, 1996, SRX of Florida, Inc. ("Buyer"), a
Delaware corporation wholly owned by Teltronics, Inc. ("Registrant"),
acquired substantially all of the assets of Shared Resource Exchange,
Inc., a Delaware corporation ("Seller") located in Dallas, Texas,
under an Agreement of Sale among Seller, Buyer and Registrant
dated September 19, 1996 ("Agreement").
After entry of an order by the United States Bankruptcy
Court, Eastern District of Texas, Sherman Division (In re: Shared
Resource Exchange, Inc., Case No. 96-42190S) approving the
Agreement and authorizing Seller to enter into the Agreement and
consummate the transactions contemplated thereby, Buyer delivered
an aggregate of 650,000 shares of Registrant's $.001 par value
common stock ("Registrant's Stock") for substantially all of the
assets of Seller ("Purchased Assets") and an aggregate of 100,000
shares of the Registrant's Stock to discharge an aggregate of
$600,000 of debt owed by Seller to certain of its lenders
("Noteholders"). In addition, Buyer and Registrant agreed to
assume: (i) approximately $374,000 of Seller's accounts payable;
(ii) open purchase orders of approximately $207,000; (iii) funding
of severance obligations of Seller to its employees of
approximately $205,000; (iv) fees owed by Seller to professionals
in the aggregate of approximately $204,000; and (v) certain other
obligations described in the Agreement.
The shares of Registrant's Stock transferred to the
Seller and the Noteholders (the "Shares") are not registered under
the Securities Act of 1933 ("Act") and are therefore subject to the
resale restrictions set forth in Rule 144 promulgated under the
Act. The holders of the Shares have been granted certain
registration rights under a Registration Rights Agreement which
allows them to elect to have their Shares registered under the Act
if Registrant proposes to register any of its securities under the
Act in an offering for cash.
Seller and Registrant entered into an Escrow Agreement
under which 120,000 of the Shares issued to the Seller have been
placed in escrow to cover certain reimbursement and/or indemnity
claims of Buyer and Registrant.
<PAGE>
The Purchased Assets included purchase orders in an
aggregate amount of approximately $6,000,000 placed by various
vendors including purchase orders placed by Motorola, Inc.
("Motorola Orders") with Seller covering both E-911 products and
WiLL products in an aggregate amount of approximately $4,500,000.
Under the Agreement, Buyer and Registrant assumed and agreed to
perform Seller's obligations under the Motorola Orders.
On September 20, 1996, Buyer and Registrant also acquired
certain inventory for use in completion of the Motorola Orders from
one of Seller's contract manufacturers at a price of approximately
$1,443,000 paid in cash and the Registrant's promissory note in the
principal amount of approximately $500,000, payable over six (6)
months without interest, covering the balance of the purchase price
to the manufacturer for the inventory.
There are numerous other provisions in the Agreement and
other documents filed as Exhibits to this Report on Form 8-K which
are important in order derive the full understanding of the
transactions. The above summary is qualified in its entirety by
reference to the text and the terms and conditions of the Exhibits
to this Report on Form 8-K.
Item 5. OTHER EVENTS.
On August 12, 1996 the Registrant filed an Amended and
Restated Certificate of Incorporation with the Delaware Secretary
of State, which among other things authorized the Registrant to
issue up to 5,000,000 shares of preferred stock, par value of $.001
per share. On August 19, 1996 the Registrant filed with the
Delaware Secretary of State a Certificate of Designations which
designated 250,000 of the authorized shares of preferred stock as
Series A preferred shares ("Series A Shares")and set forth the
rights, preferences and privileges of and the restrictions granted
to or imposed on the Series A Shares.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
(1) At the date of this Report on Form 8-K, it is
impracticable for Registrant to provide financial statements of
Shared Resource Exchange, Inc. Such financial statements will be
filed as soon as reasonably practicable, but not later than sixty
days after the date on which this Report on Form 8-K must be filed.
<PAGE>
(b) Pro Forma Financial Information
(1) At the date of this Report on Form 8-K, it is
impracticable for Registrant to provide pro forma financial
information pertaining to Shared Resource Exchange, Inc. Such pro
forma financial information will be filed as soon as reasonably
practicable, but not later than sixty days after the date on which
this Report on Form 8-K must be filed.
(c) Exhibits
(1) Agreement of Sale dated the 19th day of
September, 1996 by and among Shared Resource Exchange, Inc., SRX of
Florida, Inc. and Registrant.
(2) Escrow Agreement made and entered into
September 19, 1996 by and between Shared Resource Exchange, Inc.,
SRX of Florida, Inc., Registrant, and Sevin Rosen Bayless
Management Company.
(3) Registration Rights Agreement among Seller,
Registrant and the Noteholders dated as of September 19, 1996.
(4) Restated Certificate of Incorporation of
Registrant filed with the Delaware Secretary of State on August 12,
1996.
(5) Certificate of Designations of preferences of
Series A Preferred Stock of Registrant filed with the Delaware
Secretary of State on August 19, 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned hereunto duly authorized.
Teltronics, Inc.
(Registrant)
Dated: October 4, 1996 By: Ewen R. Cameron,
President
EXHIBIT 1
AGREEMENT OF SALE
THIS AGREEMENT OF SALE ("Agreement") dated this 19 day
of September, 1996 by and among Shared Resource Exchange, Inc., a
Delaware Corporation (the "Seller") with an office located at
3480 Lotus Drive, Plano, Texas, SRX of Florida, Inc., a Delaware
corporation (the "Buyer") with an office located at 2150
Whitfield Industrial Way, Sarasota, Florida, and Buyer's parent,
Teltronics, Inc., a Delaware corporation ("Teltronics") with an
office located at 2150 Whitfield Industrial Way, Sarasota,
Florida 34243.
W I T N E S S E T H:
WHEREAS, the Seller desires to sell to the Buyer and
the Buyer desires to purchase from the Seller substantially all
of its tangible and intangible assets, subject only to expressly
assumed liabilities, of the Seller.
NOW, THEREFORE, in consideration of the mutual promises
herein set forth and subject to the terms and conditions of this
Agreement, the parties agree as follows:
1. Definitions. As used in this Agreement, terms
defined in the preamble and recitals of this Agreement shall have
the meanings set forth therein and the following terms shall have
the meanings set forth below:
"Access Agreement" shall mean the agreement between
Seller and Buyer of even date herewith providing Buyer certain
access to the land and premises located at 3480 Lotus Drive,
Plano, Texas.
"Act" shall mean the Securities Act of 1933, as
amended.
"Affiliate" shall mean, with respect to any person or
entity, the shareholders, subsidiaries, officers, directors
and/or partners of such person or entity and any other person
which directly or indirectly controls, is controlled by or is
under common control with such person or entity.
"Agreement" shall mean this Agreement of Sale and all
Schedules and Exhibits to this Agreement.
"Assignment Agreements" shall mean the Assignment
Agreements delivered by Seller pursuant to paragraph 4(a)
assigning all of Seller's right, title and interest, in to and
under all of its agreements, licenses, intellectual property, and
contracts, including but not limited to all patents, trademarks,
copyrights, licenses, purchase orders, Motorola orders, DSC
contracts, Protel contracts, to Buyer.
"Assumed Liabilities" shall mean the Liabilities of the
Seller which are Allowed Claims in U.S. Bankruptcy Case No. 96-
42190S, Eastern District of Texas and are described in Exhibit A
to this Agreement.
"Bills of Sale" shall mean the Bills of Sale to be
delivered by Seller to Buyer pursuant to paragraph 4(a).
"Cash Consideration" shall mean the amount of cash set
forth in Section 3(a) of this Agreement.
"Closing" of the transactions described in this
Agreement shall occur simultaneously with the execution and
delivery of this Agreement.
"Closing Date" shall mean the date, no more than two
(2) days after the entry of an Order by the U.S. Bankruptcy Court
(E.D. Texas) approving the Agreement, on which the Agreement is
executed and delivered.
"Code" shall mean the Internal Revenue Code of 1986 and
all regulations promulgated thereunder, as the same have from
time to time been amended.
"Disclosure Statement" shall mean the disclosure
statement and attachments thereto previously delivered by Seller
to Buyer.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974 (and any sections of the Code amended by it)
and all regulations promulgated thereunder, as the same have from
time to time been amended.
"Exchange Agreement" shall mean the agreement by and
among Buyer, Teltronics and the Note Holders executed and
delivered as of the Closing Date.
"Financial Statements" shall mean the financial
statements of Seller described in paragraph 6(c) of this
Agreement, true and correct copies of which were previously
delivered to Buyer as part of the Disclosure Statement.
"GAAP" shall mean generally accepted accounting
principles.
"Liabilities" shall mean all debts, liabilities, Taxes
(including any sales or transfer taxes on the sale of the
Purchased Assets), obligations under contracts, leases,
agreements and commitments, and other obligations of every kind
and character of the Seller as the same may exist at the Closing
(whether accrued, absolute, contingent or otherwise, and whether
due or to become due) or which may arise in the future based upon
events or a state of facts existing at the Closing.
"Material" and "Materially" shall mean, as to Seller,
except for Section 7(i), any item, claim, or event which
individually or in the aggregate exceeds $25,000.00.
"Notes" shall mean certain promissory notes payable by
Seller to the Note Holders, with an aggregate amount of principal
and interest thereunder not in excess of $600,000, which Notes
are being assumed by Buyer.
"Note Holders" shall mean the holders of the Notes.
"Purchased Assets" shall mean all of the Seller's
properties and assets, personal, tangible and intangible, of
every kind and wherever situated, which are owned by the Seller
or in which the Seller has any right, title or interest,
including, without limiting the generality of the foregoing, its
goodwill, franchises and telephone numbers; its trademarks,
trademark registrations, trademark applications, trade names
(including but not limited to "SRX"), copyrights, copyright
applications, copyright registrations, patents, patent
applications, patent registrations, permits, licenses, processes,
formulae, trade secrets, inventions and royalties (including all
rights to sue for past infringement); its inventory, equipment
and supplies; its cash (in an amount not less than $950,000),
money on deposit with banks, factors and others, certificates of
deposit, commercial paper, stocks, bonds and other investments;
its accounts receivable; its insurance policies, excluding
director and officer insurance; its causes of action, judgments,
claims and demands of whatever nature; its tangible and
intangible personal property of all kinds; its deferred charges,
advance payments, pre-paid items, claims for refunds, rights of
offset and credits of all kinds; all credit balances of or
inuring to it under any state unemployment compensation plan or
fund; restrictive covenants and obligations of present and former
officers and employees and of individuals and corporations; its
accounts, contract rights, general intangibles, returned and
repossessed goods, and rights as an unpaid vendor, secured party
or lienor; its credit balances, documents, instruments and other
choses in action; its rights (but not liabilities other than
Assumed Liabilities) under contracts, purchase orders (including
but not limited to Purchase Orders with Motorola, Inc.), personal
property, leases, joint venture agreements or arrangements and
other agreements; its files, papers and records relating to the
aforesaid business, properties and assets; all assets reflected
on the Financial Statements or acquired by the Seller since the
date of such Financial Statements, except for those assets which
have been transferred or disposed of in the ordinary course of
business and consistent with past practice after the date of such
Financial Statements or as otherwise permitted by this Agreement;
provided, however, that the Purchased Assets shall not include
the Retained Assets.
"Registration Rights Agreement" shall mean the
registration rights agreement by and among Buyer, Teltronics and
Seller executed and delivered on the date hereof.
"Retained Assets" shall mean the assets described in
Exhibit B to this Agreement.
"Retained Liabilities" shall mean all Liabilities of
the Seller which are not Assumed Liabilities.
"Shares" shall mean shares of voting common stock of
Teltronics, par value $.001 per share, issued in accordance with
this Agreement all of which shall be, when issued, restricted
securities subject to Rule 145 of the Act.
"Stock Consideration" shall mean the issuance and
delivery of the number of Shares set forth in Section 3(b) of
this Agreement.
"Subsidiaries" shall mean any entity in which a person
holds, directly or indirectly, a majority of the outstanding
voting rights or equity interest in such entity.
"Taxes" shall mean all federal, state, local and
foreign taxes, including, without limitation, income taxes,
excise taxes, sales taxes, use taxes, gross receipts taxes,
franchise taxes, employment and payroll taxes, property taxes,
import duties and interest and penalties in connection with any
of the foregoing.
"Tax Returns" for any specified year shall mean the
federal and state tax returns of the Seller as of and for the
period ending December 31 of such year prepared by the Seller and
filed with the appropriate taxing authority true and correct
copies of which were previously supplied by Seller to Buyer.
"Transactional Documents" shall mean the Bills of Sale,
Assignment Agreements, Exchange Agreement, and Registration
Rights Agreement, executed and delivered on the date hereof.
2. Sale of Properties and Assets. Subject to and
upon the terms and conditions of this Agreement, the Seller
hereby sells, transfers, assigns, conveys and delivers to the
Buyer, and the Buyer hereby purchases, accepts and acquires from
the Seller all of the Purchased Assets.
3. Purchase Price. The aggregate consideration paid
by the Buyer for the Purchased Assets ("Consideration"), the
receipt of which is hereby acknowledged by Seller, is (i) the
Cash Consideration described in Section 3(a) of this Agreement,
(ii) the Stock Consideration described in Section 3(b) of this
Agreement, and (iii) the assumption by the Buyer of the Assumed
Liabilities as set forth in Section 3(c) of this Agreement. The
Buyer and Seller shall agree upon the allocation of the
Consideration among the Purchased Assets in the manner required
by Code section 1060 and any comparable provision of state, local
or foreign law, as applicable. The Buyer and the Seller shall
report, act and file in all tax respects and for all tax purposes
consistent with such allocations.
(a) Cash Consideration. The Cash Consideration
payable to the Seller shall be an aggregate amount equal to One
Thousand Dollars ($1,000.00).
(b) Stock Consideration. Subject to the terms of
this Agreement, the Stock Consideration payable to the Seller at
the Closing shall be Six Hundred Fifty Thousand (650,000) Shares.
(c) Assumed Liabilities. The Buyer hereby
assumes and Teltronics hereby unconditionally guarantees payment
by Buyer of the Assumed Liabilities.
4. Instruments of Transfer; Payment of Purchase Price
and Assumption of Liabilities; Further Assurances.
(a) Sellers' Deliveries. Simultaneously with the
execution and delivery of this Agreement, the Seller shall
execute and deliver to Buyer:
(i) Bills of Sale for the Purchased Assets;
(ii) Access Agreement;
(iii) Assignments for all funds on
deposit with banks or other persons which are included in the
Purchased Assets;
(iv) the Registration Rights Agreement;
(v) the opinion of Kelley Drye & Warren LLP,
Counsel for the Seller, satisfactory to Buyer; and
(vi) Assignment Agreements.
(b) Buyer's Deliveries. Simultaneous with the
execution and delivery of this Agreement, the Buyer shall execute
and/or deliver to the Seller:
(i) the Cash Consideration;
(ii) the Stock Consideration;
(iii) the Registration Rights Agreement;
and
(iv) the Access Agreement.
(c) Note Holders Deliveries. Simultaneously with
the execution and delivery of this Agreement, the Note Holders
and Teltronics shall execute and perform under the Exchange
Agreement.
(d) Other Transfer Instruments; Inspection
Rights. Following the Closing, at the request of the Buyer, the
Seller shall (i) deliver any further instruments of transfer and
take all reasonable action as may be necessary or appropriate (A)
to vest in the Buyer all of the Seller's rights and title in and
to the Purchased Assets, and (B) to transfer to the Buyer all of
the Seller's rights to licenses and permits necessary for the
operation of the Purchased Assets, to the extent transferable,
and (ii) permit the Buyer or representatives of the Buyer during
normal business hours upon reasonable notice to inspect and make
copies of the Seller's books of account and other records which
are Retained Assets.
5. Transfer of Name. From and after the date hereof,
Buyer shall own the rights of Seller in and to the name "SRX".
For the purpose of completing its obligations under U.S.
Bankruptcy Case No. 96-42190S and winding up its operations
Seller shall retain the right to use the name "Shared Resource
Exchange".
6. Representations and Warranties of the Seller. The
Seller represents and warrants to the Buyer as follows:
(a) Organization; Good Standing. The Seller is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation. The Seller has all
requisite corporate power and authority and legal right to own,
operate and lease its properties, to carry on its business as now
being conducted, and to enter into this Agreement and perform its
obligations under this Agreement. The Seller is qualified to do
business in each jurisdiction where the conduct of its business
or the ownership of its property requires such qualification and
where the failure to so qualify would have a Material adverse
effect on the business of Seller which jurisdictions are the
States of California and Texas. The chief executive office and
principal place of business and the places where the Seller
maintains all records relating to its business is 3480 Lotus
Drive, Plano, Texas.
(b) Subsidiaries. The Seller does not own,
directly or indirectly, any capital stock or equity securities of
any other corporation or have any direct or indirect equity or
ownership interest in any business other than the business
conducted by the Seller.
(c) Financial Statements. Seller has previously
furnished to Buyer true, correct, and complete copies of the
following financial statements (collectively referred to as the
"Financial Statements"):
(i) The balance sheet of Seller as of
December 31, 1994 and the related statements of income (loss),
statement of retained earnings and statement of cash flows for
each of the years in the three-year period ended December 31,
1994, as audited by Seller's independent certified public
accountants (collectively, the "Audited Financial Statements")
which have been prepared from the books and records of Seller in
accordance with GAAP applied on a basis consistent with prior
periods except as provided therein and fairly present the
financial position of Seller as of the respective dates thereof
and the results of operations and cash flows of Seller for the
periods then ended;
(ii) The unaudited balance sheet of Seller as
of December 31, 1995 and the related statements of income (loss),
statement of retained earnings and statement of cash flows for
the one year period ended December 31, 1995 (the "Unaudited
Financial Statements") which, except as provided therein or in
the Disclosure Statement have been prepared from the books and
records of Seller in accordance with GAAP applied on a basis
consistent with prior periods and fairly present the financial
position of Seller as of the respective dates thereof and the
results of operations and cash flows of Seller for the periods
then ended;
(iii) The unaudited balance sheet of
Seller as of March 31, 1996, and the related statement of income
(loss), statement of retained earnings and statement of cash
flows of Seller for the three (3) month period ended March 31,
1996 which, except as provided therein or in the Disclosure
Statement, have been prepared from the books and records of
Seller, fairly present the financial position of Seller as of the
respective dates thereof, and fairly present the results of
operations and cash flows of Seller for the accounting period
then ended but do not contain any footnotes required by GAAP and
are subject to year end adjustments in accordance with GAAP.
(d) Absence of Undisclosed Liabilities. Except
to the extent reflected or reserved against in the Financial
Statements for the period ending March 31, 1996 or otherwise
disclosed to Buyer in the Disclosure Statement, the Seller as of
the date of such Financial Statements, has no liabilities or
obligations of any nature, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, of a type which
under GAAP would be required to be reflected or reserved against
in such Financial Statements. Except as set forth in the
Disclosure Statement, the Seller does not know of any claim
against the Seller or liability of any nature, whether due or to
become due, in any amount not adequately reflected or reserved
against in such Financial Statements, or know of any other claim
or liability of any nature arising since March 31, 1996 of a type
which under GAAP would be required to be reflected or reserved
against in such Financial Statements.
(e) No Adverse Change.
(i) Except as previously disclosed to Buyer
in the Disclosure Statement, since March 31, 1996, there has not
been any damage, destruction or loss to any of the Purchased
Assets, whether or not covered by insurance, which materially
adversely affects the ability of the Seller, taken as a whole, to
conduct its business as presently conducted or so far as the
Seller can reasonably now foresee is likely in the future to
affect or impair the ability of the Seller, taken as a whole, to
conduct its business.
(ii) Except as previously disclosed to Buyer
in the Disclosure Statement, since March 31, 1996, Seller has
not:
(A) entered into any contract to merge
or consolidate with any other corporation; or
(B) sold, transferred or otherwise
disposed of (other than in the ordinary course of business) or
encumbered all or any Material part of the Purchased Assets.
(f) Tax Returns and Payments. Seller has duly
filed all state, federal, local and foreign tax returns and
reports (or extension with respect thereto) required to be filed
by the date hereof and has paid all amounts owed for any and all
federal, state and local taxes. All monies required to be
withheld by the Seller from employees for income taxes, Social
Security and unemployment insurance taxes have been collected or
withheld, and either paid to the respective governmental agencies
or set aside in accounts for such purpose, or accrued, reserved
against, and entered upon the books of the Seller. The Seller
has furnished to the Buyer true and complete copies of the
federal income tax returns of the Seller and any amendments
thereto for each of the fiscal years ending December 31, 1993 and
1994.
(g) Title to Purchased Assets. Except as
previously disclosed to Buyer in the Disclosure Statement, the
Seller has good and valid title to all of the Purchased Assets,
subject in each case, to no mortgage, pledge, option, escrow,
hypothecation, lien, security interest, financing statement,
lease, charge, encumbrance, easement or conditional sale or other
title retention agreement.
(h) Completeness and Condition of Property.
Except as disclosed to Buyer in the Disclosure Statement, the
Purchased Assets include all of the properties which are
necessary to conduct the Seller's PBX, Omniworks, E911, ACD,
digital switch technology and WiLL business substantially as
conducted during the Quarter ended March 31, 1996 and to perform
all of the contracts, leases, agreements, commitments, purchase
orders, customer orders and other arrangements of Seller included
in the Assumed Liabilities under this Agreement. All items of
tools, furniture, machinery, vehicles, equipment and all other
items of tangible personal property included in the Purchased
Assets have been maintained in good repair, working order and
condition, reasonable wear and tear excepted.
(i) Trademarks, Licenses, etc. A list and brief
description of all of the Seller's trademarks, service marks,
trade names, brands, patents, all applications for registration
and registrations for trademarks, copyrights and patents, and all
franchises, permits and licenses and rights with respect to the
foregoing, are set forth in the Disclosure Statement. Seller
owns or possesses the right to use all the trademarks, service
marks, trade names, brands, copyrights, patents, franchises,
permits and licenses, and rights with respect to the foregoing,
necessary for the conduct of its business as conducted on March
31, 1996. Except as set forth in the Disclosure Statement,
Seller has not received notice of any conflict with the rights of
others, or any use by others which conflicts in any material
respect with the rights of the Seller and all such marks,
franchises, permits and licenses and rights with respect to the
foregoing and all contracts, and arrangements referred to in the
Disclosure Statement are fully assignable without the consent of
any third party. Except as set forth in the Disclosure
Statement, Seller has not received or given notice of any default
or claimed or purported or alleged default on the part of any
party in the performance or payment of any material obligation to
be performed or paid by any party under any franchises, permits,
licenses, contracts, agreements or arrangements referred to in or
submitted as a part of the Disclosure Statement. During the past
five years the only names by which the Seller has been known or
which Seller has used are "SRX" and/or "Shared Resource Exchange,
Inc." Seller has previously delivered to Buyer true and correct
copies of each item described in the Disclosure Statement.
(j) Litigation; Compliance with Laws; etc.
Except as set forth in the
Disclosure Statement there is (i) no suit or action pending or to
Seller's knowledge threatened, against Seller or the property of
Seller, (ii) no governmental investigation or inquiry pending or
to Seller's knowledge threatened against the Seller, or (iii) no
pending change in the environment, zoning or building laws,
regulations or ordinances affecting the leasehold property of
Seller or its business operations, of which Seller has received
notice, which matter referred to in clauses (i), (ii) and (iii)
above would, severally or in the aggregate, Materially adversely
affect the condition (financial or otherwise) of the business,
property, or Purchased Assets, taken as a whole. Seller has
complied with and to its knowledge is not in default in any
respect under any laws, ordinances or governmental requirements,
regulations or orders applicable to its business and properties
where such failure or default would Materially adversely affect
the condition (financial or otherwise), business or assets of the
Seller, taken as a whole. Except as set forth on the Disclosure
Statement Seller has not received any notice of any claimed
violation or threatened proceeding or investigation with respect
to any matter referred to in the foregoing sentences. To
Seller's knowledge, no investigation is pending by any federal,
state or local government, or by any agency or instrumentality
thereof, the effect of which could Materially adversely affect
the business in which the Seller is engaged.
(k) Authority. The Seller has all corporate
authority to authorize, execute, deliver and perform this
Agreement subject to the approval of United States Bankruptcy
Court for the Eastern District of Texas. This Agreement has been
duly authorized, executed and delivered by the Seller and is the
legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms.
(l) Compliance with Other Instruments, etc.
Neither the execution and delivery of the Agreement nor the
consummation of the transaction contemplated hereby will conflict
with or result in any violation of or constitute a default under
any term of the certificate of incorporation or by-laws of Seller
or any agreement, mortgage, indenture, franchise, license,
permit, authorization, lease or other instrument, judgment,
decree, order, law or regulation by which the Seller or its
assets are bound.
(m) Governmental and Other Consents, etc. No
consent, approval or authorization of or designation, declaration
or filing with, any governmental authority, bureau or agency or
other persons or entities on the part of Seller is required in
connection with the execution or delivery of this Agreement or
the consummation of the transactions contemplated hereby.
(n) Agreements, etc. The Disclosure Statement
contains a true, correct and complete list and brief description
(a true and correct and complete copy of each of which has been
delivered to Buyer by Seller) of all personal property leases,
distributor agreements, sale agency or marketing agreements,
licensing agreements and franchise agreements to which Seller is
a party or was a party at March 31, 1996 or in which the Seller
has an interest;
Except as set forth in the Disclosure Statement, all instruments
described in this Section 6(n) are fully assignable without the
consent of any third party, and the continuation, validity and
effectiveness of all such instruments will in no way be
Materially adversely affected by the transactions contemplated by
this Agreement. There exists no default or claimed or purported
or alleged default on the part of any party in the performance of
any obligation to be performed or paid by any party under any
contracts, plans or other instruments or arrangements referred to
in or submitted as a part of the Disclosure Statement. Seller
has not received or given notice of any default or claimed or
purported or alleged default on the part of any party in the
performance or payment of any obligation to be performed or paid
by any party under any contracts, plans or other instruments or
arrangements referred to in or submitted as a part of the
Disclosure Statement.
(o) ERISA. The Seller is and has at all times
been in compliance in all Material respects with all applicable
provisions of ERISA and other federal and state statutes and
regulations relating to "employee benefit plans," as such term is
defined in 3(3) of ERISA, and the Seller is current with respect
to all contributions required to be made to any such plan. No
event has occurred which would constitute a reportable event
within the meaning of 4043(b) of ERISA, or which would
constitute grounds for the appointment by the appropriate United
States district court of a trustee to administer any employee
benefit plan maintained by the Seller, and no notice of
termination has been filed by the plan administrator pursuant to
4041 of ERISA or issued by the Pension Benefit Guaranty
Corporation pursuant to 4042 of ERISA with respect to any
pension benefit plan subject to ERISA. The Seller does not
maintain or contribute, has not maintained or contributed, nor is
it now nor has it ever been required to, maintain or contribute
to a defined benefit pension plan or multi-employer pension plan,
and the Seller is not and has not been under common control
(within the meaning of Sections 414(b) or (c) of the Code) with
an entity.
(p) Bank Accounts; Securities. A list and brief
description of all bank accounts, safe deposit boxes, lock boxes,
money market funds, certificates of deposit, stocks, bonds and
other securities in the names of or owned or controlled by the
Seller and details about persons having access thereto has been
delivered to Buyer as part of the Disclosure Statement.
(q) Environmental Compliance. The Seller has
delivered to the Buyer a copy of each of the following items:
(i) every written communication during the past three years
between the Seller and any environmental agency which alleges
Material noncompliance with applicable environmental laws and
regulations or demands payment of penalties and fines for alleged
violations of such laws and regulations; (ii) a description of
the nature and quantities of any hazardous materials (as defined
below) generated, transported or disposed of in material
quantities by the Seller during the past three years, together
with a description of the location at which such materials were
generated, transported or disposed; and (iii) a summary of the
nature and quantities of any hazardous materials (as defined
below) that have been disposed of in material quantities by
Seller or found by Seller in material quantities at the subject
site. Seller has no direct knowledge that it is not in
compliance with all applicable federal, state and local laws and
regulations relating to pollution control and environmental
contamination including, without limitation, all laws and
regulations governing the generation, use, collecting, treatment,
storage, transportation, recovery, removal, discharge or disposal
of hazardous materials (as defined below) and all laws and
regulations with regard to record keeping, notification and
reporting requirements respecting hazardous materials (defined
below) where the failure to be in such compliance would have a
Material adverse effect on the business, properties or condition
(financial or otherwise) of the Seller, taken as a whole. The
Seller has not received any written notice of, and has not been
subject to any administrative or judicial proceeding pursuant to
laws or regulations relating to pollution control and
environmental contamination at any time during the past three
years. There are no facts or circumstances which now exist of
which Seller has direct knowledge that could form the basis for
the assertion of a claim against the Seller relating to past or
present environmental practices of Seller asserted under the
Comprehensive Environmental Response Compensation and Liability
Act of 1980 ("CERCLA"), the Resource Conservation and Recovery
Act ("RCRA") or any other federal, state or local environmental
statute, which claim, if adversely determined would have a
material adverse effect on the business, properties or condition
(financial or otherwise) of the Seller, taken as a whole. For
purposes of this Section 6(s), the term "hazardous materials"
means materials defined as "hazardous substance" or "hazardous
waste" in CERCLA, RCRA and in any similar federal, state or local
environmental statute.
(r) Customers and Suppliers. Seller has
delivered to Buyer as part of the Disclosure Statement a complete
list of names and addresses of the entities that account for 5%
or more of the sales or 10% or more of the purchases,
respectively, made by the Seller during the fiscal year 1995 and
the six month period ended June 30, 1996 showing with respect to
each, the nature of the relationship (including the principal
categories of products bought or sold). Except as set forth in
the Disclosure Statement, the Seller has no knowledge of any
intention of any customer or supplier to terminate, cancel,
modify, or change its business relationship with the Seller
which individually or in the aggregate would be Materially
adverse to the business of the Seller as conducted on March 31,
1996, taken as a whole. The Seller has no knowledge of any
existing events or conditions or state of facts or circumstances
relating to the Seller's relationships with customers and
suppliers that will prevent the Buyer from conducting the
business of the Seller after the consummation of the
transactions contemplated by this Agreement in essentially the
same manner in which it had been conducted by the Seller on March
31, 1996.
(s) Permits and Licenses. Set forth in the
Disclosure Statement is a list and brief description of all
permits, licenses, notices and similar filings that are required
in the Seller's operation of its business in each jurisdiction in
which it conducts business, the failure of which to possess would
have a material adverse effect on the business, properties or
condition (financial or otherwise) of the Seller, taken as a
whole. Except as set forth in the Disclosure Statement, all such
permits, licenses, notices and similar filings may be freely
transferred to the Buyer. Except as set forth in the Disclosure
Statement, the Seller is not required to be licensed or regulated
by any governmental or regulatory body by reason of the
particular business conducted by it.
(t) Schedules and Other Information. The
Financial Statements, the representations and warranties of
Seller contained in this Agreement, the Schedules and Exhibits
thereto, and the Disclosure Statement do not contain any untrue
statements of material fact or omit any material fact necessary
to make the statements contained therein or herein not misleading
in view of the circumstances under which they were made. Buyer
and/or Teltronics shall be entitled to rely upon the
representations and warranties of Seller notwithstanding any due
diligence and/or investigation conducted by Buyer and/or Seller
on or before the date of this Agreement.
(u) Accuracy of Documents. All agreements,
contracts, leases, titles and other documents delivered by the
Seller to the Buyer for the Buyer's review in connection with
this Agreement and the transactions contemplated hereby,
including without limitation, the certificate of incorporation,
by-laws, corporate minutes and tax returns are true, correct and
complete copies of all such agreements, contracts, titles and
other documents.
(v) Conduct of Business.
Except as set forth in the Disclosure
Statement, since March 31, 1996, the Seller has not:
(i) entered into any joint venture,
partnership or other similar arrangement for the conduct of its
business;
(ii) directly or indirectly disposed or
accelerated realization of any of its assets, including inventory
and receivables, except in the ordinary course of business and
consistent with past practice;
(iii) entered into any other transaction
not in the ordinary course of business, except for the filing for
protection under Chapter 11 of the United States Bankruptcy Code.
(w) Inventory. All inventory included in the
Purchased Assets is recorded on the books of the Seller at 115%
of cost of materials.
(x) Accounts Receivable. Seller has previously
delivered to Buyer a detailed schedule of its accounts
receivable, as part of the Disclosure Statement. All of the
accounts receivable of the Seller represent bona fide amounts
due for sales of goods or provision of services; arose in the
ordinary course of business; and except as set forth in the
Disclosure Statement, all of the accounts receivable are fully
collectible. Except as set forth in the Disclosure Statement,
the Seller has no knowledge of any accounts receivable that are
being contested or disputed by the obligor thereon, or which the
Seller has reason to believe will be contested or disputed.
(y) Transactions with Affiliates. Except as set
forth in the Disclosure Statement, all transactions in excess of
$5,000 between the Seller and any Affiliate, relating to
Purchased Assets or Assumed Liabilities, have not been fraudulent
with respect to any creditor of the Seller or any of its
Affiliates.
(z) Product Warranties. Except as set forth in
the Disclosure Statement, the Seller has (i) no unexpired,
express product warranty with respect to any product that it
manufactures or sells or that it has heretofore manufactured or
sold; (ii) not received written notice of any material claim
based on any product warranty, and (iii) no knowledge or any
reasonable ground to know of any material claim (actual or
threatened) based on any product warranty of which it has
received no written notice. No products sold by the Seller
failed to meet any specification relating thereto or were
otherwise defective, which failure individually or in the
aggregate would have a material adverse effect on the financial
condition of the Seller, taken as a whole.
(aa) Brokers' or Finder's Fee. Except as set
forth in the Disclosure Statement, no agent, broker, investment
banker, or other firm acting on behalf of Seller, or any
shareholder of Seller, or under the authority of any of them, is
or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly from any of the
parties in connection with any of the transactions contemplated
by this Agreement.
(bb) Distribution of Consideration. None of the
Consideration, including the Stock Consideration received by
Seller hereunder, shall be delivered, transferred and/or
distributed to any one or more of the holders of the common stock
of the Seller except as described in the Disclosure Statement.
(cc) During the last five (5) years, Seller has
not conducted business under any name other than "SRX" and/or
"Shared Resource Exchange".
7. Representations and Warranties of Teltronics.
Teltronics represents and warrants to the Seller as follows:
(a) Organization; Good Standing. Teltronics is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation. Teltronics has all
requisite corporate power and authority and legal right to own,
operate and lease its properties, to carry on its business as now
being conducted, and to enter into this Agreement and perform its
obligations under this Agreement. Teltronics is qualified to do
business in each jurisdiction where the conduct of its business
or the ownership of its property requires such qualification and
where the failure to so qualify would have a material adverse
effect on the business of Teltronics. The chief executive office
and principal place of business and the places where Teltronics
maintains all records relating to its business is 2150 Whitfield
Industrial Way, Sarasota, Florida 34243.
(b) Litigation; Compliance with Laws; etc.
Except as set forth in filings by Teltronics with the Securities
and Exchange Commission there is (i) no suit or action pending or
to Teltronics' knowledge threatened, against Teltronics or the
property of Teltronics, (ii) no governmental investigation or
inquiry pending or to Teltronics' knowledge threatened against
Teltronics, or (iii) no pending change in the environment, zoning
or building laws, regulations or ordinances affecting the
leasehold property of Teltronics or its business operations, of
which Teltronics has received notice, which matter referred to in
clauses (i), (ii) and (iii) above would, severally or in the
aggregate, materially adversely affect the condition (financial
or otherwise) of the business, property, or assets of Teltronics,
taken as a whole. Teltronics has complied with and to its
knowledge is not in default in any respect under any laws,
ordinances or governmental requirements, regulations or orders
applicable to its business and properties where such failure or
default would materially adversely affect the condition
(financial or otherwise), business or assets of Teltronics, taken
as a whole. Teltronics has not received any notice of any
claimed violation or threatened proceeding or investigation with
respect to any matter referred to in the foregoing sentences. To
Teltronics' knowledge, no investigation is pending by any
federal, state or local government, or by any agency or
instrumentality thereof, the effect of which could materially
adversely affect the business in which Teltronics is engaged.
(c) Authority. All necessary proceedings of
Teltronics have been duly taken to authorize the execution,
delivery and performance of this Agreement, and the Transactional
Documents. This Agreement and the Transactional Documents have
been duly authorized, executed and delivered by Teltronics and
are the legal, valid and binding obligations of Teltronics,
enforceable against Teltronics in accordance with their terms.
(d) Compliance with Instruments, Consents, Adverse
Agreements. Neither the execution and the delivery of this
Agreement and the Transactional Documents, nor the consummation
of the transaction contemplated hereby and thereby will conflict
with or result in any violation of or constitute a default under
Teltronics' Restated Certificate of Incorporation and bylaws or
any agreement, mortgage, indenture, license, permit, lease or
other instrument, judgment, decree, order, law or regulation by
which Teltronics is bound. No consent, approval or authorization
of or designation, declaration or filing with any governmental
authority or other persons or entities on the part of Teltronics
is required in connection with the execution or delivery of this
Agreement and the Transactional Documents or the consummation of
the transaction contemplated hereby and thereby. Teltronics is
not a party to or subject to or in violation of any agreement or
instrument, or subject to or in violation of any charter or other
restriction or any judgment, order, writ, injunction, decree,
law, rule or regulation which materially adversely affects the
business operations, prospects, properties, assets or condition,
financial or otherwise, of Teltronics.
(e) Broker's or Finder's Fee. Except as set
forth on Schedule 7(e) hereto, no agent, broker, investment
banker, or other person or firm acting on behalf of Teltronics or
under Teltronics' authority is or will be entitled to any
broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties to this Agreement
in connection with any of the transactions contemplated by this
Agreement.
(f) Capitalization. The authorized capital stock
of Teltronics consists of:
(i) 40,000,000 shares of Common Stock, par
value $.001 per share, of which 2,612,013 shares are issued and
outstanding and 1,250,000 shares are reserved for issuance
pursuant to employee stock options and 5,000,000 shares Non-
Voting Common Stock, $.001 par value, of which no shares are
issued and outstanding and 1,000,000 shares are reserved for
possible issuance in connection with the acquisition by a
Subsidiary of Teltronics of certain technology.
(ii) 5,000,000 shares of Preferred Stock
("Preferred Stock") of which (A) 250,000 shares are designated
Class A Preferred Stock, par value $.001 per share, of which no
shares are issued and outstanding and (B) 17,200 shares are
reserved for issuance to Teltronics' majority shareholder.
The list set forth in Teltronics' 1996 Proxy Statement ("Proxy
Statement") is a complete and correct list of all holders of
securities of Teltronics who own 5% or more of the issued and
outstanding shares of Common Stock, Preferred Stock or other
Teltronics securities (including options and warrants) as of the
date of this Agreement. The outstanding shares of Common Stock
are duly authorized and validly issued in accordance with
applicable law, fully paid and non-assessable. Holders of shares
of Teltronics' capital stock have no pre-emptive rights. Except
for the transactions contemplated by and/or disclosed in this
Agreement or as disclosed in Teltronics' 10-KSB for the year
ended December 31, 1995 ("1995 10-KSB"), 10-QSB for the quarter
ended March 31, 1996 ("March 1996 10-QSB"), 10-QSB for the
quarter ended June 30, 1996 ("Current 10-QSB"), and/or the Proxy
Statement, there are (A) no outstanding warrants, options,
convertible securities or rights to subscribe for or purchase any
capital stock or other securities of Teltronics from Teltronics;
(B) no existing rights of stockholders to require Teltronics to
register any securities of Teltronics or to participate with
Teltronics in any registration by Teltronics of its securities;
and (C) no obligation (contingent or otherwise) of Teltronics to
purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any
other distribution in respect thereof.
(g) Validity of Stock. The Stock Consideration,
when issued and delivered in accordance with the terms of this
Agreement will be duly and validly issued, fully paid and non-
assessable.
(h) Subsidiaries. Set forth on Schedule 7(h)
annexed hereto is a true and complete list of each of the
subsidiaries of Teltronics (each, a "Subsidiary" and
collectively, the "Subsidiaries"). Each Subsidiary is a
corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its organization and is duly qualified and has all requisite
power and authority in each applicable jurisdiction to own its
properties and conduct its business as currently conducted.
(i) Financial Statements. Teltronics has
furnished the Seller with its (i) unaudited consolidated balance
sheet as of June 30, 1996 (the "Unaudited Balance Sheet"), (ii)
unaudited consolidated statements of operations, shareholders'
equity and cash flows for the period then ended, and (iii)
audited consolidated financial statements as of and for the year
ended December 31, 1995 and 1994 ("Audited Financial Statements")
(all of which in (i), (ii) and (iii) are collectively referred to
as the "Teltronics Financial Statements"). The Teltronics
Financial Statements are true and correct in all material
respects, are in accordance with the books and records of
Teltronics and its Subsidiaries and have been prepared in
accordance with GAAP consistently applied (except that the
Unaudited Balance Sheet does not contain any footnotes required
by GAAP and is subject to normal year-end audit adjustments) and
fairly and accurately present in all material respects the
consolidated financial position of Teltronics and the
Subsidiaries as of such date and the results of its operations
for the period then ended. Teltronics and its Subsidiaries taken
as a whole have no liabilities, debts or obligations, whether
accrued, absolute or contingent, other than (i) liabilities
reflected or reserved against in the Unaudited Balance Sheet, and
(ii) liabilities incurred since June 30, 1996 in the ordinary and
usual course of business. Since June 30, 1996, except as to the
transactions contemplated by this Agreement or referenced in the
Proxy Statement, the Current 10-QSB, the March 1996 10-QSB or the
1995 10-KSB, Teltronics and the Subsidiaries taken as a whole
have been operated in the ordinary and usual course of business,
and there has not been:
(i) any change in the assets, liabilities,
condition (financial or otherwise) business or operating results
of Teltronics and its Subsidiaries, taken as a whole, from that
reflected in the Unaudited Balance Sheet, except changes in the
ordinary course of business that have not been, in the aggregate,
materially adverse;
(ii) any damage, destruction or loss, whether
or not covered by insurance, materially and adversely affecting
the assets, properties, condition (financial or otherwise),
operating results, prospects or business of Teltronics and its
Subsidiaries, taken as a whole (the "Business");
(iii) any waiver by Teltronics or any
Subsidiary of a valuable right or of a material debt owed to it
except in the ordinary course of business and which is not
material to the Business;
(iv) any satisfaction or discharge of any
lien, claim or encumbrance or payment of any obligation by
Teltronics or any Subsidiary, except in the ordinary course of
business and which is not material to the Business;
(v) any material change or amendment to a
material contract or arrangement by which Teltronics or any
Subsidiary or any of their respective assets or properties are
bound or subject except in the ordinary course of business and
which is not material to the Business;
(vi) any sale by Teltronics or any Subsidiary
of a material non-inventory asset other than in the ordinary
course of business.
(j) Insurance. Teltronics and each of its
Subsidiaries has in full force and effect fire and casualty
insurance policies, with extended coverage, sufficient in an
amount (subject to reasonable deductibles) to allow it to replace
any of its material properties that might be damaged or
destroyed.
(k) Absence of Undisclosed Liabilities; Changes.
(i) Except as referred to in the Proxy
Statement or reflected in the Current 10-QSB, the March 1996 10-
QSB, 1995 10-KSB or in the Teltronics Financial Statements,
Teltronics and its Subsidiaries on a consolidated basis have no
material liability or obligation, absolute or contingent,
including without limitation, any tax liabilities due or to
become due, except (A) obligations and liabilities incurred after
the date of the Unaudited Balance Sheet in the ordinary course of
business that are not individually or in the aggregate material
and (B) obligations under contracts made in the ordinary course
of business that would not be required to be reflected in
financial statements prepared in accordance with GAAP and (C)
obligations arising under this Agreement. Without limiting the
generality of the foregoing, Teltronics does not know of any
basis for the assertion against Teltronics or any Subsidiary
taken as a whole as of the date hereof any material liabilities
of Teltronics or its Subsidiaries taken as a whole that are not
reflected in the Proxy Statement, March 1995 10-QSB, Current 10-
QSB, 1995 10-KSB or in the Teltronics Financial Statements.
(ii) Since the date of the Unaudited Balance
Sheet, there has been no occurrence, condition or development
that has materially and adversely affected Teltronics' Business,
and there has been no material change in Teltronics' Business,
except pursuant to transactions contemplated by this Agreement
and as disclosed in the Proxy Statement, 1995 10-KSB, March 1996
10-QSB and/or Current 10-QSB.
(l) Labor Agreements and Actions. Neither
Teltronics nor any Subsidiary is bound by or subject to (and none
of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has
requested or, to the best knowledge of Teltronics, has sought to
represent any of the employees, representatives or agents of
Teltronics or any Subsidiary. There is not strike or other labor
dispute involving Teltronics or any Subsidiary pending, or to the
best knowledge of Teltronics threatened, that would have a
material adverse effect on the Business, nor is Teltronics aware
of any labor organization activity involving its employees.
(m) Taxes, etc. Teltronics and each of its
Subsidiaries have in all material respects accurately prepared
and timely and properly filed all foreign and U.S. federal, state
and municipal tax returns that are required to be filed by them
and each has paid or made provision for the payment of all
amounts due pursuant to such returns. The income tax returns of
Teltronics as to which the applicable statutes of limitations
have not expired have not been audited and are not currently
under audit by the tax authorities with which such returns were
filed, and there are no waivers in effect of the applicable
statute of limitations for any period. No material deficiency
assessment or proposed adjustment of any foreign or U.S. federal,
state or municipal taxes of Teltronics or any Subsidiary is
pending and Teltronics has no knowledge of any material proposed
liability for any tax to be imposed.
(n) Full Disclosure. The Teltronics Financial
Statements and the representations and warranties of Teltronics
contained in this Agreement do not contain any untrue statement
of a material fact or omit any material fact necessary to make
the statements contained therein or herein not misleading in view
of the circumstances under which they are made.
For the purposes of this Section 7, "material" is any
event or condition giving rise to a cost or liability to
Teltronics and any Subsidiary taken as a whole equal to or
greater than $100,000.
7A. Representations and Warranties of Buyer. Buyer
represents and warrants to the Seller as follows:
(a) Organization; Good Standing. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation. Buyer has all
requisite corporate power and authority and legal right to own,
operate and lease its properties, to carry on its business as now
being conducted, and to enter into this Agreement and perform its
obligations under this Agreement. Buyer is qualified to do
business in each jurisdiction where the conduct of its business
or the ownership of its property requires such qualification and
where the failure to so qualify would have an adverse effect on
the business of Buyer. The chief executive office and principal
place of business and the places where Buyer maintains all
records relating to its business is 2150 Whitfield Industrial
Way, Sarasota, Florida 34243.
(b) Authority. All necessary proceedings of
Buyer have been duly taken to authorize the execution, delivery
and performance of this Agreement and the Transactional
Documents. This Agreement and the Transactional Documents have
been duly authorized, executed and delivered by Buyer and are the
legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their terms.
(c) Compliance with Instruments, Consents, Adverse
Agreements. Neither the execution and the delivery of this
Agreement, nor the Transactional Documents, nor the consummation
of the transaction contemplated hereby and thereby will conflict
with or result in any violation of or constitute a default under
Buyer's certificate of incorporation and bylaws or any agreement,
mortgage, indenture, license, permit, lease or other instrument,
judgment, decree, order, law or regulation by which Buyer is
bound. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority or other
persons or entities on the part of Buyer is required in
connection with the execution or delivery of this Agreement and
the Transactional Documents or the consummation of the
transaction contemplated hereby and thereby. Buyer is not a
party to or subject to or in violation of any agreement or
instrument, or subject to or in violation of any charter or other
restriction or any judgment, order, writ, injunction, decree,
law, rule or regulation which adversely affects the business
operations, prospects, properties, assets or condition, financial
or otherwise, of Buyer.
(d) Broker's or Finder's Fee. No agent, broker,
investment banker, or other person or firm acting on behalf of
Buyer or under Buyer's authority is or will be entitled to any
broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties to this Agreement
in connection with any of the transactions contemplated by this
Agreement.
8. Survival of Representations and Warranties. The
parties hereto agree that all representations and warranties made
in this Agreement or in any Exhibit, Schedule, certificate or
document delivered herewith or at the Closing shall survive the
execution and delivery thereof and the Closing hereunder through
December 15, 1997.
9. Indemnification.
(a) Indemnification by Seller. Subject to the
limitations set forth in Section 9(c), Seller shall indemnify,
defend, and hold Buyer, Teltronics and their respective officers,
directors, employees, and shareholders and their respective
successors and assigns (collectively, "Buyer's Indemnified
Persons") harmless from and against all demands, suits, claims,
actions or causes of action, assessments, losses, damages,
liabilities, settlements, penalties, and forfeitures, and
reasonable costs and expenses (including court costs, and any
other litigation related expenses incident thereto)
(collectively, the "Indemnity Losses" and individually,
"Indemnity Loss") asserted against, suffered, or incurred by any
of Buyer's Indemnified Persons arising out of or in any way
related to:
(i) Any misrepresentation in or breach of
the representations and warranties of Seller or the failure of
Seller to perform any of its covenants or obligations contained
in this Agreement, the Transactional Documents, or in any
exhibit, schedule, certificate or other instrument or document
furnished to or to be furnished by Seller pursuant to this
Agreement or in connection with the transactions contemplated by
this Agreement;
(ii) Except with respect to the Assumed
Liabilities assumed by Buyer under this Agreement, the operation
of Seller's business or the use of the Purchased Assets prior to
the date hereof;
(iii) Any actions, claims, suits, or
proceedings asserted by third parties alleging personal injury or
property damage due to, arising out of, or by reason of the
design, manufacture or use of any products of the Seller's
business manufactured on or prior to the date hereof;
(iv) Any worker's compensation claims of any
employee or former employee of Seller relating to events
occurring on or prior to the date hereof;
(v) Any and all claims for compensation and
other employee benefits (including, but not limited to, severance
pay, outplacement benefits, disability benefits, health, retiree
medical, worker's compensation, tuition assistance, death
benefits, and pension and profit sharing plans and claims
relating to employment or termination of employment) accruing on
or prior to the date hereof, or on or after the date hereof with
respect to the payment of severance benefits and other welfare
benefit payments, if any, with respect to (i) employees in the
Seller's business who are laid off on or prior to the date hereof
and (ii) employees in the Seller's business who, on the date
hereof, are on medical leave or disability, and related costs and
liabilities, regardless of whether such claims and related cots
and liabilities are made or incurred before, on or after the date
hereof;
(vi) All claims, investigations, actions,
suits, proceedings, demands, assessments, judgments, costs and
expenses, including reasonable attorneys' fees and expenses,
incident to the foregoing; or
(vii) Any liabilities, obligations or
expenses of Seller not included in the Assumed Liabilities
assumed by Buyer pursuant to the provisions of the Agreement.
(b) Indemnification by Buyer and Teltronics.
Subject to the limitations set forth in Section 9(c), Buyer and
Teltronics shall indemnify, defend, and hold Seller, and its
officers, directors, employees, and shareholders and their
respective successors and assigns (collectively "Seller's
Indemnified Persons"), harmless from and against any Indemnity
Loss asserted against, suffered or incurred by any of Seller's
Indemnified Persons arising out of or in any way related to:
(i) Any misrepresentation in or breach of
the representations and warranties of Buyer or Teltronics or the
failure of Buyer or Teltronics to perform any of their covenants
or obligations contained in this Agreement, the Transaction
Documents or in any exhibit, schedule, certificate or other
instrument or document furnished or to be furnished by Buyer
pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement;
(ii) The use by Buyer of the Purchased Assets
after the date hereof;
(iii) The Assumed Liabilities;
(iv) All claims, investigations, actions,
suits, proceedings, demands, assessments, judgments, costs, and
expenses, including reasonable attorneys' fees and expenses,
incident to the foregoing;
(v) Any actions, investigations, actions,
suits, proceedings, demands, assessments, judgments, costs, and
expenses, including reasonable attorneys' fees and expenses
(incurred thereon at trial and upon appeal), incident to the
foregoing;
(c) Limitations on Indemnity. The
indemnification obligations of the parties under Sections 9(a)
and (b) of this Agreement shall be subject to the following
limitations:
(i) Deductible. Buyer, Teltronics and
Seller shall be obligated to pay Indemnity Losses described in
Sections 9(a) or (b) hereof as the case may be only to the extent
that such Indemnity Losses exceed $25,000 in the aggregate.
(ii) Ceiling. Subject to Section 9(c)(iii),
the maximum aggregate amount payable for any and all of the
Indemnity Loss hereunder shall be $720,000 payable in
restricted shares of the Common Stock of Teltronics valued at
$6.00 per share or cash at the option of the indemnifying party.
Seller and Buyer agree that not more than $120,000 of the maximum
aggregate amount payable by Seller under this Section 9 shall be
allocable to certain claims for medical, commission and other
claims specifically identified in the Disclosure Statement.
(iii) Rescission. In the event that some
or all of the transactions described in this Agreement and the
Transaction Documents are rescinded, reversed or otherwise
revoked and/or set aside by a duly constituted court of law,
located within the United States including but not limited to the
United States Bankruptcy Court for the Eastern District of Texas,
the ceiling described in Section 9(c)(ii) above shall not apply
and shall not in any manner limit the right of either Teltronics,
Buyer or Seller to enforce the indemnity provisions of this
Section 9.
(d) Notice. If any party believes that it has
suffered or incurred any Indemnity Loss, that party shall so
notify the indemnifying party promptly in writing describing such
loss or expense, the amount thereof, if known, and the method of
computation of such Indemnity Loss, all with reasonable
particularity. If any action at law, suit in equity or
administrative action is instituted by or against a third party
with respect to which any party intends to claim any liability or
expense as an Indemnity Loss under this Section 9, such party
shall promptly notify the indemnifying party of such action.
(e) Defense of Claims. The indemnifying party
shall have ten (10) business days after receipt of either notice
referred to in Section 9(d) of this Agreement to notify the
indemnified party that it elects to conduct and control any legal
or administrative action or suit with respect to an indemnifiable
claim. If the indemnifying party does not give such notice, the
indemnified party shall have the right to defend, contest, settle
or compromise such action or suit in the exercise of its
exclusive discretion, and the indemnifying party shall, upon
request from the Indemnified Person promptly pay the indemnified
person in accordance with the other terms and conditions of this
Section 9, the amount of any Indemnity Loss resulting from its
liability to the third party claimant. If the indemnifying party
gives such notice, it shall have the right to undertake, conduct
and control, through counsel of its own choosing (which counsel
shall be satisfactory to the indemnified party in the reasonable
judgment of the indemnified party) and at its sole expense, the
conduct and settlement of such action or suit, and the
indemnified party shall cooperate with the indemnifying party in
connection therewith; provided, however, that (i) the
indemnifying party shall not thereby permit to exist any lien,
encumbrance or other adverse change securing the claims
indemnified hereunder upon any asset of the indemnified party,
(ii) the indemnifying party shall not thereby consent to the
imposition of any injunction against the indemnified party
without the prior written consent of the indemnified party, (iii)
the indemnifying party shall permit the indemnified party to
participate in such conduct or settlement through counsel chosen
by the indemnified party, but the fees and expenses of such
counsel shall be borne by the indemnified party except as
provided in clause (iv) below, and (iv) upon a final
determination of such action or suit, the indemnifying party
shall agree promptly to reimburse to the extent required under
this Section 9 the indemnified party for the full amount of any
Indemnity Loss resulting from such action or suit and all
reasonable and related expenses incurred by the indemnified
party, except fees and expenses of counsel for the indemnified
party incurred after the assumption of the conduct and control of
such action or suit by the indemnifying party. So long as the
indemnifying party is contesting any such action in good faith,
the indemnified party shall not pay or settle any such action or
suit. Notwithstanding the foregoing, the indemnified party shall
have the right to pay or settle any such action or suit, provided
that in such even the indemnified party shall waive any right to
indemnity therefor from the indemnifying party and no amount in
respect therefor shall be claimed as a Indemnity Loss under this
Agreement.
(f) Cooperation. If requested by the
indemnifying party, the indemnified person shall cooperate with
the indemnifying party and its counsel in contesting any claim
which the indemnifying party elects to contest or, if
appropriate, in making any counterclaim against the person
asserting the claim, or any cross-complaint against any person,
and further agrees to take such other action as reasonably may be
requested by an indemnifying party to reduce or eliminate any
loss or expense for which the indemnifying party would have
responsibility, but the indemnifying party will reimburse the
indemnified person for any expenses incurred by it in so
cooperating or acting at the request of the indemnifying party.
(g) Right to Participate. The indemnified party
shall afford the indemnifying party and its counsel (at the
indemnifying party's own expense) the opportunity to be present
at, and to participate in, conferences with all persons,
including governmental authorities, asserting any claim against
the indemnified party or conferences with representatives of or
counsel for such persons.
(h) Payment of Losses. The indemnifying party
shall promptly pay to the indemnified person in cash the amount
of any Indemnity Loss to which the indemnified person is entitled
by reason of the provision of this Agreement. Any claim for
which indemnification occurs under this Agreement shall be
assigned (without recourse) to the indemnifying party.
(i) Subrogation. In the event of any payment by
an indemnifying party to an indemnified party in connection with
any Indemnity Loss, the indemnifying party shall be subrogated to
and shall stand in the place of the indemnified party as to any
events or circumstances in respect of which the indemnified party
may have any right to claim against any third party relating to
such event of indemnification. The indemnified party shall
cooperate with the indemnifying party in any reasonable manner in
prosecuting any subrogated claim.
10. Post-Closing Covenants. Seller and Buyer covenant
with each other that promptly after the execution and delivery of
this Agreement, Seller shall engage Ernst & Young to conduct an
audit of the balance sheet of Seller as of December 31, 1995 in
accordance with generally accepted auditing standards ("Ernst &
Young Audited Statements"). The fees charged by Ernst & Young in
the conduct of the audit, up to an aggregate of $55,000 shall be
paid by the Buyer. All charges, fees and bills of Ernst & Young
in connection with the audit in excess of $55,000 shall be the
sole obligation and responsibility of Seller. Seller shall
cooperate with and use its best efforts to cause Ernst & Young to
deliver to Seller and Buyer within forty-five (45) calendar days
from the date hereof, the Ernst & Young Audited Statements,
together with Ernst & Young's opinion thereon in form reasonably
acceptable to Buyer. Unless Buyer shall deliver to Seller a
written statement of Buyer's objections to the Ernst & Young
Audited Statements within fifteen (15) days after receipt by it
of the Ernst & Young Audited Statements, the Ernst & Young
Audited Statements shall be deemed to have satisfied Seller's
obligations under this paragraph 10, but such deemed satisfaction
shall not in any manner limit, impair or waive any of the rights
of Buyer and/or Teltronics under this Agreement.
11. Non-Compete. To induce Buyer to enter into this
Agreement, Seller covenants and agrees that commencing the date
of this Agreement and for a period of two years thereafter,
Seller shall not, directly or indirectly, as an owner,
shareholder, partner, agent, representative or in any other
manner enter into, or in any manner take an active part in, any
business similar to or related to the PBX, E911, digital switch
technology, ACD, WiLL and/or Omniworks business which is or may
be in competition with the business of Buyer and/or Teltronics
within the United States. Seller expressly acknowledges that in
addition to all rights and remedies at law available to Buyer
and/or Teltronics to enforce the terms of this Section, Buyer
and/or Teltronics shall have the right to seek and obtain
equitable relief, including injunctive relief, against Seller for
violating the terms of this Section.
12. Severability. If any provision of this Agreement
or the application of any such provision to any party or
circumstances shall be determined by any court of competent
jurisdiction to be invalid and unenforceable to any extent, the
remainder of this Agreement or the application of such provision
to such person or circumstances other than those to which it is
so determined to be invalid and unenforceable, shall not be
affected thereby, and each provision hereof shall be enforceable
to the fullest extent permitted by law.
13. Applicable Law. This Agreement shall be governed
and construed and interpreted in accordance with the internal
laws of the State of Texas without regard to principles of
conflicts of laws.
14. Waivers and Notices. Any failure by any party to
this Agreement to comply with any of its obligations, agreement
or covenants hereunder may be waived by the Seller in the case of
a default by the Buyer and by the Buyer in the case of a default
by the Seller. All waivers under this Agreement and all notices,
consents, demands, requests, approvals and other communications
which are required or may be given hereunder shall be in writing
and shall be deemed to have been duly given if delivered or
mailed certified first class mail, postage prepaid, return
receipt requested:
(a) If to the Seller:
Shared Resource Exchange, Inc.
3480 Lotus Drive
Plano, Texas
with copies to:
Frederic A. Rubinstein, Esq. Maryann S. Brousseau, Esq.
Kelley Drye & Warren LLP Ungerman Sweet & Brousseau
101 Park Avenue 800 Chateau Plaza
New York, New York 10178 2515 McKinney Avenue
Dallas, Texas 75201-1993
(b) If to the Buyer:
SRX of Florida, Inc.
2150 Whitfield Industrial Way
Sarasota, Florida 34243-4046
(c) If to Teltronics:
Teltronics, Inc.
2150 Whitfield Industrial Way
Sarasota, Florida 34243
or to such other person or persons at such address or addresses
as may be designated by written notice to the other parties
hereunder.
15. Access to Books and Records Post-Closing. After
the Closing, (i) the Seller shall provide the Buyer full access
during normal business hours (upon reasonable prior notice) to
all books and records which are part of the Retained Assets
insofar as they relate to any Purchased Assets or Assumed
Liabilities or the conduct of the business after the Closing and
(ii) the Buyer shall provide the Seller full access during normal
business hours (upon reasonable prior notice) to all books and
records which are part of the Purchased Assets which relate to
the Purchased Assets or Assumed Liabilities or the conduct of the
business prior to the Closing.
16. Entire Agreement. This Agreement, together with
the other writings delivered in connection herewith, embodies the
entire Agreement and understanding of the parties hereto and
supersedes all prior agreements or understandings between the
parties, oral or written, express or implied. This Agreement
cannot be amended orally, but only by a writing duly executed by
the parties.
17. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same document.
18. Headings. Headings of the Sections in this
Agreement are for reference purposes only and shall not be deemed
to have any substantive effect.
19. Binding Effect, Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns; provided, however,
that nothing in this Agreement shall be construed to confer any
rights, remedies, obligations or liabilities on any person other
than the parties hereto or their respective successors and
assigns.
20. Expenses. All costs and expenses (excluding fees
of Ernst & Young relative to the preparation of the Ernst & Young
Audited Statements which shall be paid by Buyer in accordance
with the terms of Section 10 and Kelley Drye & Warren's fees as
and to the extent described in Exhibit A) and accountant's fees
incurred by Seller in connection with this Agreement and the
transactions contemplated hereby, shall be paid by the Seller at
Closing. Buyer shall pay its costs and expenses.
21. Brokers. Seller agrees to indemnify and hold
harmless Buyer and Teltronics from and against any and all claims
for broker's or finder's fees or commissions in connection with
the transactions contemplated hereby arising out of or based upon
any act of the Seller. The Buyer agrees to indemnify and hold
harmless the Seller from and against any and all claims for
broker's or finder's fees or commissions in connection with the
transactions contemplated hereby arising out of or based upon any
act of the Buyer.
IN WITNESS WHEREOF, the parties heave executed this
Agreement as of the date first written above.
SELLER BUYER
Shared Resources Exchange, Inc. SRX of Florida, Inc.
By: Gerald A. Shanholt By: Ewen Cameron
President & Chief President
Executive Officer
Teltronics, Inc.
By: Ewen Cameron
President
EXHIBIT A
CLAIMS TO BE ASSUMED SUBJECT TO BEING ALLOWED
IN U.S. BANKRUPTCY CASE NO. 96-42190S
1. Accounts payable as of September 19, 1996 in the aggregate
amount of approximately $374,000.00 as more fully described in
the Accounts Payable/Unvouchered Receipts Report contained in
the Disclosure Statement.
2. Open purchase orders for custom parts in the aggregate amount
of approximately $207,000 as of September 19, 1996 as more
fully described in the Open purchase orders Report contained
in the Disclosure Statement.
3. DIVA Communications credit of $263,900.00 to be applied
against and as performance is rendered by Buyer under order
#73801 placed by DIVA with Seller in the amount of $791,690.
4. Payment in the amount of $24,324.00 ($12,162.00 per quarter)
due to Business Telephone Services Inc. per agreement dated
September 5, 1995 and more fully described in the Disclosure
Statement. Payment contingent upon receivable of $93,072.66
being paid by Business Telephone Services.
5. 100% of audit fees of Ernst & Young LLP up to a maximum of
$55,000.00 to be paid upon receipt of the completed 1995 year
audit.
6. Lease payable to Aloha Leasing for trade show booth with
monthly payments of $1,436.00 and expiring on May 4, 1997.
Lease more fully described in the Disclosure Statement.
7. Lease payable to the Manifest Group for UPS with monthly
payments of $460.11 and expiring on April 4, 1998. Lease more
fully described in the Disclosure Statement.
8. Lease payable to Republic leasing for VAX computer and related
equipment with monthly payments of $861.09 expiring on
September 20, 1998. Lease more fully described in the
Disclosure Statement.
9. Lease payable to T & W Leasing Corp. for various computer
equipment with monthly payments of $1,353.62 and expiring on
October 20, 1997. Lease more fully described in the
Disclosure Statement.
10. Legal fees of Kelley Drye for pre-petition fees related to
this Agreement and post-petition fees to the extent allowed by
the Bankruptcy Court not to exceed $125,000 in the aggregate.
11. Motorola, Inc. Purchase Orders to Shared Resource Exchange,
Inc. d/b/a SRX as follows:
ORDER NUMBER DATE REV PAGE(S) SIGNED BY
CG475710PP00 6-03-96 3&4 5 P. Mulhall
CG570284PP00 7-26-96 --- 2 P. Mulhall
CG475711PP00 6-03-96 4&5 8 P. Mulhall
CG475712PP00 6-04-96 5&6 5 P. Mulhall
12. An aggregate payment of $204,257.97 to fund severance
obligations owed by Seller to Gerald A. Shanholt ($175,000 to
be paid in equal payments over 12 months commencing with
Closing and consistent with Buyer's employee pay schedule),
Jeffrey Box ($21,154.77 to be paid in accordance with an
Employment Agreement between Mr. Box and Buyer) and Terry
Gonzalez ($8,103.20 to be paid in equal installments over a
six week period commencing with Closing and consistent with
the Buyer's employee pay schedule).
13. An aggregate payment of $120,000 to fund disputed medical
claim of approximately $20,000 and disputed commission claims
and a PBX end user claim in the aggregate of approximately
$100,000.
14. An aggregate payment of up to $20,000 to fund certain
operating expenses of Seller through September 20, 1996.
15. Aggregate payments of: (i) $42,400 to fund close out of two
(2) copier leases, and (ii) $37,900 to fund Allowed claims, if
any, relating to the rejection of six office leases.
16. Aggregate payments to Ernst & Young LLP of up to: (i) $12,000
for the 1995 tax return preparation fees and (ii) $12,000 for
the 1996 tax return preparation fees.
17. A payment of $1,100 to fund accrued vacation obligation in
favor of Penny Ross to be paid upon Closing.
Each and every claim described above (except as provided in
paragraph 12 and 17 above) shall be discharged by Buyer upon the
earlier to occur of: (i) the expiration of nine (9) months after
the Closing or (ii) completion of performance by Buyer and payment
by Motorola, Inc. of the purchase orders described in paragraph 11
above. Provided, however, should Seller, as Debtor-in-Possession
of the Estate determine, in its sole discretion, that an Objection
to any claim or claims above should be filed, Buyer shall refrain
from paying the respective contested claim or claims until an Order
allowing said claim or claims is entered by the U. S. Bankruptcy
Court for the Eastern District, Sherman Division. Seller shall
deliver all Objections to Claims and subsequent Orders approving
the contested claims to SRX Florida.
The claims referred to in paragraphs 12 and 17 shall be paid as
stated therein respectively.
EXHIBIT B
RETAINED ASSETS
1. Cash in the amount of $242.000. Said cash amount includes a
$61,000 anticipated federal income tax refund payable to SRX
or its bankruptcy estate. SRX shall endorse and deposit any
checks for said refund into its DIP account..
2. The Cash Consideration and the Stock Consideration described
in Section 3 of this Agreement.
EXHIBIT 2
ESCROW AGREEMENT
ESCROW AGREEMENT made as of this 19 day of September,
1996, by and between SHARED RESOURCE EXCHANGE, INC., a Delaware
corporation ("SRX"), SRX OF FLORIDA, INC., a Delaware corporation
("SRX FLORIDA"), TELTRONICS, INC., a Delaware corporation
("Teltronics")(SRX Florida and Teltronics are sometimes
collectively referred to as "Buyer"), and SEVIN ROSEN BAYLESS
MANAGEMENT COMPANY ("Sevin Rosen"), as Escrow Agent.
WITNESSETH
WHEREAS, SRX, Teltronics and SRX Florida have entered
into an Agreement of Sale of even date herewith ("Agreement of
Sale"), pursuant to which SRX sold to SRX Florida substantially
all the assets of SRX, and SRX Florida assumed certain Assumed
Liabilities (as defined in the Agreement of Sale) of SRX; and
WHEREAS, SRX, Teltronics and SRX Florida have entered
into a Payment of Allowed Claims Agreement, of even date herewith
("Allowed Claims Agreement"), pursuant to which SRX Florida and
Teltronics have agreed to provide to SRX up to $120,000 to fund
the payment of certain Allowed Claims (as defined in the Allowed
Claims Agreement); and
WHEREAS, Section 9 of the Agreement of Sale provides
for the indemnification by SRX of SRX Florida, as provided in
Sections 9(a)(i) through and including 9(a)(vii) thereof; and
WHEREAS, the Allowed Claims Agreement provides for the
reimbursement by SRX of any amounts funded by SRX Florida or
Teltronics under the Allowed Claims Agreement; and
WHEREAS, to facilitate (i) the indemnification by SRX
of SRX Florida under Section 9 of the Agreement of Sale and (ii)
the reimbursement by SRX of SRX Florida or Teltronics for any
amounts funded under the Allowed Claims Agreement which have not
been reimbursed by SRX in cash, SRX has agreed to deliver to the
Escrow Agent 120,000 shares of the Teltronics common stock issued
to SRX in connection with the Agreement of Sale ("Teltronics
Stock"), to be held by the Escrow Agent in escrow, subject to the
terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, the parties hereto hereby
agree as follows:
1. APPOINTMENT OF ESCROW AGENT. SRX, Teltronics and
SRX Florida hereby appoint Sevin Rosen as escrow agent (the
"Escrow Agent") and Sevin Rosen accepts such appointment.
2. DELIVERY OF SHARES. Upon closing of the
transactions contemplated by the Agreement of Sale, SRX shall
deliver to the Escrow Agent 120,000 shares of the shares of
Teltronics voting common stock received by SRX at such closing
from Teltronics, 100,000 of which shall be held by the Escrow
Agent to provide funds for the payment of any indemnification
liability of SRX under the Agreement of Sale (the
"Indemnification Shares") and 20,000 of which shall be held by
the Escrow Agent to provide funds for the reimbursement of any
Allowed Claims paid by Buyer under the Allowed Claims Agreement
(the "Allowed Claims Shares"). The Escrow Agent shall retain
custody of the Indemnification Shares and Allowed Claims Shares
for purposes of implementing the provisions of this Agreement.
3. SUBMISSION OF INDEMNIFICATION CLAIMS. On or
before December 15, 1997, Buyer shall submit to SRX a notice
("Final Notice of Claim") setting forth the details of all claims
of Buyer or Buyer's Indemnified Persons (as defined in the
Agreement of Sale) for indemnification by SRX under Section 9(a)
of the Agreement of Sale ("Final Notice of Claim") which may not
thereafter be modified or amended by Buyer of Buyer's Indemnified
Persons (as defined in the Agreement of Sale) without the consent
of SRX, except as set forth below. SRX shall have 30 days after
receipt of such Final Notice of Claim to review the details
thereof and dispute any or all of the claims or claim amounts set
forth therein. If SRX disputes the claims or claim amounts for
indemnification set forth by the Buyer and Buyer's Indemnified
Persons in the Final Notice of Claim, and the Buyer and SRX
cannot within ten days after SRX notifies the Buyer of its
disagreement with such amount claimed, reach agreement with
respect to the amount claimed, then the Buyer and SRX agree that
the Final Notice of Claim shall be submitted to an arbitrator in
Dallas, Texas in accordance with the rules of the American
Arbitration Association, as then in effect. The decision of the
arbitrator as to the validity of the claims and the amount for
which SRX is liable under the terms of the Agreement of Sale
shall be final and binding on all parties. If SRX agrees with
the claims or claim amounts made by the Buyer and Buyer's
Indemnified Persons set forth in the Final Notice of Claim, or
upon the decision of the arbitrator, as the case may be, SRX
shall thereupon, at its option, (i) pay such amount due Buyer and
Buyer's Indemnified Persons in cash in accordance with the terms
of the Agreement of Sale; or (ii) such amount shall be paid by
Escrow Agent from the Indemnification Shares held by the Escrow
Agent with the Indemnification Shares being valued at $6 per
share for the purposes hereof. After the payment of the amount
of all undisputed claims and claims allowed by the arbitrator,
either in cash or from the Indemnification Shares, the Escrow
Agent shall release to SRX any remaining Indemnification Shares
then held by the Escrow Agent.
4. ALLOWED CLAIMS REIMBURSEMENT. Until the earlier
of (i) such time as Buyer has no further obligation to pay Claims
(as defined in the Allowed Claims Agreement) and SRX has
reimbursed Buyer for all such Claims paid by Buyer under the
Allowed Claims Agreement, either in cash of in Allowed Claims
Shares, or (ii) such time as the Maximum Payment Amount (as
defined in the Allowed Claims Agreement) has been reimbursed to
Buyer in cash and/or Allowed Claims Shares, pursuant to Section 4
of the Allowed Claims Agreement, the Escrow Agent shall retain
the Allowed Claims Shares and disburse such shares only to Buyer
upon the written instruction of SRX to do so in accordance with
the terms of, and in satisfaction of any reimbursement amount due
Buyer from SRX under, the Allowed Claims Agreement, which written
instruction shall indicate the number of such Allowed Claims
Shares to be so disbursed. Upon the earlier of (i) such time as
Buyer has no further obligation to pay Claims (as defined in the
Allowed Claims Agreement) and SRX has reimbursed Buyer for all
such Claims paid by Buyer under the Allowed Claims Agreement,
either in cash of in Allowed Claims Shares, or (ii) such time as
the Maximum Payment Amount (as defined in the Allowed Claims
Agreement) has been reimbursed to Buyer, the Escrow Agent shall
release to SRX any remaining Allowed Claims Shares then held by
the Escrow Agent.
5. RIGHTS, DUTIES AND RESPONSIBILITIES OF ESCROW
AGENT.
(a) The parties hereto understand and agree that
the duties of the Escrow Agent hereunder are purely
ministerial in nature.
(b) The Escrow Agent shall not be responsible for
or required to enforce any of the terms or conditions
of any agreement between any of the parties hereto.
The Escrow Agent shall not be responsible for the
performance by any of the parties hereto of their
respective obligations under the Agreement of Sale or
the Allowed Claims Agreement.
(c) The Escrow Agent shall be entitled to rely
upon the accuracy, act in reliance upon the contents
and assume the genuineness of any notice, instruction,
certificate, signature, instrument or other document
which is given to the Escrow Agent pursuant to this
Agreement without the necessity of the Escrow Agent
verifying the truth or accuracy thereof. The Escrow
Agent shall not be obligated to make any inquiry as to
the authority, capacity, existence or identity of any
person purporting to give any such notice or
instructions or to execute any such certificate,
instrument or other document.
(d) If the Escrow Agent is uncertain as to its
duties or rights hereunder or shall receive
instructions which, in its sole determination, are in
conflict either with other instructions received by it
or with any provision of this Agreement, it shall be
entitled, at its sole election, to: continue to hold
the Indemnification Shares and Allowed Claims Shares
pending the resolution of such uncertainty to its sole
satisfaction, by final judgment of a court or
otherwise; or deposit the Indemnification Shares and
Allowed Claims Shares, or a portion thereof, with a
court of competent jurisdiction and seek resolution of
such uncertainty in a proceeding in which all parties
in interest are joined. Upon the deposit by the Escrow
Agent of the Indemnification Shares and Allowed Claims
Shares with such court of competent jurisdiction, the
Escrow Agent shall be relieved of all further
obligations and released from all liability hereunder
with respect thereto.
(e) The Escrow Agent shall not be liable for any
action taken or omitted, for the misconduct of any of
its employees or agents or any attorney appointed by it
or for any loss, liability, claim, damage, cost or
expense, except in the case of willful misconduct or
gross negligence on the part of the Escrow Agent. The
Escrow Agent shall be entitled to consult with counsel
of its own choosing and shall not be liable for any
action taken, suffered or omitted by it in accordance
with the advice of such counsel.
(f) The Escrow Agent shall have no responsibility
at any time to ascertain whether or not any security
interest exists in the Indemnification Shares or the
Allowed Claims Shares, or any part thereof, or to file
any financing statement under the Uniform Commercial
Code with respect to such shares, or any part thereof.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
By: Jon W. Bayless
President
SHARED RESOURCE EXCHANGE, INC.
By: Gerald A. Shanholt
President
SRX OF FLORIDA, INC.
By: Ewen Cameron
President
TELTRONICS, INC.
By: Ewen Cameron
President
EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of September
19, 1996, among Shared Resource Exchange, Inc., a Delaware
corporation (the "Seller"), Teltronics, Inc., a Delaware
corporation ("Teltronics") and those parties listed as lenders on
Schedule 1 attached hereto (the "Lenders" and together with the
Seller, the "Investors").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement of Sale, dated as of
September 19, 1996 (the "Agreement of Sale"), among the Seller,
SRX of Florida, Inc. (the "Buyer") and Teltronics, the Seller
has, as consideration for the sale of substantially all of its
assets pursuant to the terms of the Agreement of Sale, received
shares of voting common stock of Teltronics, par value $.001 per
share ("Teltronics Stock"), which shares are not registered
under the Securities Act of 1933 (the "Act") and are subject to
the resale restrictions set forth in Rule 144 promulgated under
the Act; and
WHEREAS, pursuant to an Exchange Agreement, dated
September 19, 1996 (the "Exchange Agreement"), among the Buyer,
Teltronics and the Lenders, Teltronics has issued shares of
Teltronics Stock to the Lenders as full payment and satisfaction
of all of the liabilities and obligations of the Buyer arising
under the Bridge Documents (as defined in the Exchange Agreement)
which were assumed by the Buyer from the Seller pursuant to the
Agreement of Sale.
NOW, THEREFORE, in consideration of the premises and
the mutual agreements set forth herein, the parties agree as
follows:
1. REGISTRATION. The following provisions govern the
registration of the Teltronics Stock:
1.1 DEFINITIONS. As used herein, the following terms
have the following meanings:
Holder: A holder of Registrable Stock (or transferee,
subject to compliance with Section 1.10 hereof),
provided that anyone who acquires any Registrable Stock
in a distribution pursuant to a registration statement
filed by Teltronics under the Securities Act of 1933,
as amended (the "Securities Act"), shall not thereby be
deemed to be a "Holder".
"Register", "registered" and "registration" refer to a
registration effected by filing a registration
statement in compliance with the Securities Act and the
declaration or ordering by the Securities and Exchange
Commission (the (Commission") of effectiveness of such
registration statement.
Registrable Stock: All shares of Teltronics Stock
issued and held by the Seller or a Lender (or its
designee(s)) which were issued pursuant to the terms of
the Agreement of Sale or Exchange Agreement or by a
person to whom registration rights have been
transferred in compliance with the provisions of
Section 1.9 hereof; and all shares of Teltronics Stock
issued by Teltronics in respect of such shares.
1.2 INCIDENTAL REGISTRATION. If Teltronics at any
time proposes to register any of its securities under the
Securities Act in an offering for cash (other than a registration
effected solely to implement an employee benefit plan or an
exchange of securities for the assets or securities of or the
merger or consolidation with another person, firm, corporation
or other entity), it will each such time give written notice to
all Holders of its intention so to do. Upon the written request
of a Holder or Holders given within 20 days after receipt of
any such notice (stating the number of shares of Registrable
Stock to be disposed of by such Holder or Holders and the
intended method of disposition), Teltronics shall use its best
efforts to cause all such shares of Registrable Stock intended to
be disposed of, the Holders of which shall have requested
registration thereof, to be registered under the Securities Act
so as to permit the disposition (in accordance with the methods
in said request) by such Holder or Holders of the shares so
registered, subject, however, to the limitations set forth in
Section 1.3.
1.3 LIMITATIONS ON INCIDENTAL REGISTRATION. If the
registration of which Teltronics gives notice pursuant to Section
1.2 is for an underwritten offering, only securities that are to
be included in the underwriting may be included in the
registration. Notwithstanding any provision of Section 1.2, if
the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the
underwriter may eliminate or reduce the number of shares of
Registrable Stock to be included in the registration and
underwriting. Teltronics shall so advise all Holders (except
those Holders who have not indicated to Teltronics their decision
to distribute any of their Registrable Stock through such
underwriting), and the number of shares of Registrable Stock that
may be included in the registration and underwriting shall be
allocated among such Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Stock owned
by such Holders at the time of filing the registration statement.
No Registrable Stock excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such
registration. In addition, selling Holders shall execute a
mutually acceptable lock-up agreement with the underwriter(s) in
any underwritten registration. If any Holder disapproves of any
such underwriting, such person may elect to withdraw therefrom by
written notice to Teltronics and the underwriter. The
Registrable Stock and/or other securities so withdrawn from such
underwriting shall also be withdrawn from such registration.
1.4 REGISTRATION PROCEDURES. Whenever Teltronics
shall file a registration statement registering shares of
Teltronics Stock, as contemplated by Section 1.2 hereof,
Teltronics shall:
(a) furnish to each prospective seller such
number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities
Act, in order to facilitate the public sale or other disposition
of the shares owned by such seller;
(b) use its best efforts to register or qualify
the shares covered by such registration statement under such
other securities or blue sky or other applicable laws of the
states of California, New York and Texas, to enable each
prospective seller to consummate the public sale or other
disposition in such st ates of the shares owned by such seller;
provided, however, that in no event shall Teltronics be obligated
to qualify to do business in any jurisdiction where it is not at
the time so qualified or to take any action which would subject
it to service of process in suits other than those arising out of
the offer or sale of the stock covered by such registration
statement in any jurisdiction where it is not at the time so
subject;
(c) in the event of any underwritten public
offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the
managing underwriter of such offering; each Holder participating
in such underwriting shall also enter into and perform its
obligations under such an agreement;
(d) notify each Holder of Registrable Stock
covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which
the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing; and
(e) apply for listing and use its best efforts to
list the Registrable Stock being registered on any national
securities exchange on which a class of equity securities of
Teltronics are listed or, if Teltronics does not have a class of
equity securities listed on a national securities exchange, apply
for qualification and use its best efforts to qualify the
Registrable Stock being registered for inclusion on the Small Cap
TM automated quotation system of the National Association of
Securities Dealers, Inc. ('NASDAQ") or on a national securities
exchange.
The registration rights granted under Section 1.2 shall
terminate as to any Holder if such person (a) holds one percent
(1%) or less of the outstanding shares of Teltronics Stock and
(b) would be permitted to sell all of the Registrable Stock held
by it pursuant to Rule 144(k).
1.5 DESIGNATION OF UNDERWRITER. In the case of any
registration initiated by Teltronics, Teltronics, in its sole
discretion, shall have the right to designate the managing
underwriter in any underwritten offering.
1.6 COOPERATION BY PROSPECTIVE SELLERS.
(b) Failure of a prospective seller of
Registrable Stock to furnish the information and agreements
described in this Section 1.6 or Section 1.4(c) shall not affect
the obligations of Teltronics under this Section 1 to remaining
sellers who furnish such information and agreements unless, in
the reasonable opinion of counsel to Teltronics or the
underwriters, such failure impairs or may impair the viability of
the offering or the legality of the registration statement or the
underlying offering.
(c) The Holders of Registrable Stock included in
the registration statement will not (until further notice from
Teltronics) effect sales thereof after receipt of telegraphic or
written notice from Teltronics to suspend sales to permit
Teltronics to correct or update a registration statement or
prospectus; but the obligations of Teltronics with respect
to maintaining any registration statement current and effective
shall be extended by a period of days equal to the period such
suspension is in effect unless (i) such extension would result
in the inability of Teltronics to use the financial statements in
the registration statement initially filed and (ii) such
correction or update did not result from the wrongful acts or
failures to act of Teltronics.
1.7 EXPENSES OF REGISTRATION. All expenses incurred
in effecting any registration pursuant to Section 1.2 including,
without limitation, all registration and filing fees, printing
expenses, expenses of compliance with blue sky laws, fees and
disbursements of counsel for Teltronics, and expenses of any
audits incidental to or required by any such registration, shall
be borne by Teltronics, except that all expenses, fees and
disbursements of any counsel or other professional retained by
the Holders, and all underwriting discounts and commissions shall
be borne by the Holders of the securities registered pursuant to
such registration, pro rata according to the quantity of their
securities so registered.
1.8 INDEMNIFICATION. (a) To the extent permitted by
law, Teltronics shall indemnify each Holder joining in a
registration, each agent, officer and director of such Holder,
each person controlling such Holder and each underwriter and
selling broker of the securities so registered (collectively,
"Indemnitees") against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or
other document incident to any registration, qualification or
compliance (or in any related registration statement,
notification or the like) or any omission (or alleged omission)
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any
violation by Teltronics of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or state
securities laws or any rule or regulation promulgated under the
Securities Act, the Exchange Act or a state securities law, in
each case applicable to Teltronics, and will reimburse each such
Indemnitee for any legal and any other fees and expenses
reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, provided,
however, that Teltronics will not be liable to any Indemnitee in
any such case to the extent that any such claim, loss, damage or
liability is caused by any untrue statement or omission so made
in conformity with information furnished to Teltronics by such
Indemnitee for use therein and except that the foregoing
indemnity is subject to the condition that, insofar as it relates
to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus
but eliminated or remedied in the amended prospectus on file with
the Commission at the time the registration statement becomes
effective or in the amended prospectus filed with the Commission
pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity
shall not inure to the benefit of any underwriter, or any
Indemnitee if there is no underwriter, if a copy of the Final
Prospectus was not furnished to the person or entity asserting
the loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act; provided, further,
that this indemnity shall not be deemed to relieve any
underwriter of any of its due diligence obligations; provided,
further, that the indemnity agreement contained in this
subsection 1.8(a) shall not apply to amounts paid in settlement
of any such claim, loss, damage, liability or action if such
settlement is effected without the consent of Teltronics, which
consent shall not be unreasonably withheld.
b) To the extent permitted by law, each Holder
joining in a registration and each underwriter and selling broker
of the securities so registered shall indemnify Teltronics and
its officers and directors and each person, if any, who controls
any thereof within the meaning of Section 15 of the Securities
Act, and their respective successors against all claims, losses,
damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus,
offering circular or other document incident to any registration,
qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading and shall reimburse Teltronics and each other person
indemnified pursuant to this paragraph (b) for any legal and any
other fees and expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action, provided, however, that this paragraph (b)
shall apply only if (and only to the extent that) such statement
or omission was made in reliance upon and in conformity with
information (including, without limitation, written negative
responses to inquiries) furnished to Teltronics by such Holder,
underwriter or selling broker for use in such prospectus,
offering circular or other document (or related registration
statement, notification or the like) or any amendment or
supplement thereto; and except that the foregoing indemnity is
subject to the condition that, insofar as it relates to any such
untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in the preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the
Commission at the time the registration statement becomes
effective or in the Final Prospectus, such indemnity shall not
inure to the benefit of (i) Teltronics and (ii) any underwriter,
or Holder if there is no underwriter, if a copy of the Final
Prospectus was not furnished to the person or entity asserting
the loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act; provided, further,
that this indemnity shall not be deemed to relieve any
underwriter of any of its due diligence obligations; provided,
further, that the indemnity contained in this subsection 1.8(b)
shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if such settlement is effected
without the consent of the Holder or underwriter, as the case may
be, which consent shall not be unreasonably withheld; and
provided, further, that the obligations of such Holders shall be
limited to an amount equal to the net proceeds received by such
Holder from the sale of such stock in such offering as
contemplated herein, unless such claim, loss, damage, liability
or action resulted from such Holder's fraudulent misconduct.
(c) Each party entitled to indemnification
hereunder (the "indemnified party") shall give notice to the
party required to provide indemnification (the "indemnifying
party') promptly after such indemnified party has actual
knowledge of any claim as to which indemnity may be sought, and
shall permit the indemnifying party (at its expense) to assume
the defense of any claim or any litigation resulting therefrom,
provided that counsel for the indemnifying party, who shall
conduct the defense of such claim or litigation, shall be
reasonably satisfactory to the indemnified party, and the
indemnified party may participate in such defense at such party's
expense, and provided further that the omission by any
indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this
Section 1.8 except to the extent that the omission results in a
failure of actual notice to the indemnifying party and such
indemnifying Party is damaged solely as a result of the failure
to give notice. No indemnifying party, in the defense of any
such claim or litigation, shall consent, except with the consent
of each indemnified party, to entry of any judgment or enter into
any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to
such claim or litigation.
(d) The reimbursement required by this Section
1.8 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or
expenses incurred.
(e) The obligation of Teltronics and each Holder
under this Section 1.8 shall survive the completion of any
offering of Registrable Stock in a registration statement under
this Section 1, or otherwise, in which Holders were offered an
opportunity to sell all of their shares, for a period of one (1)
year.
1.9 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
INVESTORS. Each Investor severally represents and warrants that:
(a) AUTHORIZATION. It has full power and authority to
enter into and to perform this Agreement in accordance with its
terms. This Agreement has been duly executed and delivered by it
and constitutes its valid and legally binding obligation.
(b) INVESTMENT REPRESENTATIONS. It is acquiring the
shares of Teltronics Stock being acquired for its own account,
for investment purposes and not with a view to, or for sale in
connection with, any distribution of such shares or any part
thereof; provided, however, it is the intention of Seller to
distribute the shares of Teltronics Stock, acquired by it under
the Agreement of Sale to its shareholders in connection with the
liquidation of Seller, subject to Seller receiving appropriate
investment representations from such shareholders.
(c) INVESTMENT EXPERIENCE; Access to Information. It
(a) is an investor experienced in the evaluation of businesses
similar to the Buyer and Teltronics, (b) is able to fend for
itself in the transactions contemplated by this Agreement, (c)
has such knowledge and experience in financial, business and
investment matters as to be capable of evaluating the merits and
risks of this investment, (d) has the ability to bear the
economic risks of this investment, (e) was not organized or
reorganized for the specific purpose of acquiring the shares of
Teltronics Stock held by it, and (f) has been afforded the
opportunity to ask questions of, and to receive answers from, the
Buyer and Teltronics and to obtain any additional information, to
the extent the Buyer or Teltronics, as the case may be, has such
information or could have acquired it without unreasonable effort
or expense, all as necessary for it to make an informed
investment decision with respect to the acquisition of the
Shares.
(d) ABSENCE OF REGISTRATION. It understands that:
(i) The shares of Teltronics Stock are
unregistered and may be required to be held indefinitely unless
they are subsequently registered under the Securities Act, or an
exemption from such registration is available.
(ii) Teltronics is under no obligation to file a
registration statement with the Securities and Exchange
Commission with respect to the Shares.
(iii) Rule 144 promulgated under the Securities
Act ("Rule 144"), which provides for certain limited sales of
unregistered securities, is not presently available with respect
to the Shares, and Teltronics is under no obligation to make Rule
144 available.
(e) RESTRICTIONS ON TRANSFER. It will not offer,
sell, pledge, hypothecate, or otherwise dispose of the shares of
Teltronics Stock unless such offer, sale, pledge, hypothecation
or other disposition (i) is registered under the Securities Act
and any applicable State law, or (ii) does not violate the
Securities Act or any applicable state law, and (iii) the
certificate(s) representing the shares shall bear a legend
stating in substance:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
LAWS OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS THEREOF.
Upon request of a holder of the shares of Teltronics
Stock, Teltronics shall remove the legend set forth above from
the certificates evidencing such shares, or issue to such holder
new certificates therefor free of such legend, (i) if with such
request Teltronics shall have received an opinion of counsel
selected by the holder and reasonably satisfactory to Teltronics,
in form and substance reasonably satisfactory to Teltronics, to
the effect that such shares are not required by the Securities
Act to continue to bear the legend, or (ii) if such shares may be
sold pursuant to the provisions of paragraph (k) of Rule 144 (or
any similar sale) as then in effect.
(f) TRANSFER INSTRUCTIONS. It agrees that Teltronics
may provide for appropriate transfer instructions to implement
the provisions of Section 1.9 (e) hereof.
(g) ECONOMIC RISK. It understands that it must bear
the economic risk of the investment represented by the
acquisition of the shares of Teltronics Stock for an indefinite
period.
1.10 TRANSFER OF REGISTRATION RIGHTS. The registration
rights granted to the Seller under this Section 1 may be
transferred but only to the stockholders of the Seller in
connection with Seller's liquidation and dissolution. The
registration rights granted to the Lenders (or their designee(s))
under this Section 1 may not be transferred.
2. NOTICES. All notices, requests, consents and
other communications herein (except as stated in the last
sentence of this Section 2) shall be in writing and shall
be deemed to be delivered (i) on the date delivered, if
personally delivered or transmitted via facsimile with return
confirmation of such transmission; (ii) on the business day after
the date sent, if sent by recognized overnight courier service
and (iii) on the fifth day after the date sent, if mailed by
first-class certified mail, postage prepaid and return receipt
requested, as follows:
(a) If to the Seller:
3480 Lotus Drive Liquidation Corp.
3480 Lotus Drive
Plano, Texas 75075
Attention: Gerald A. Shanholt, President and
Chief Executive Officer
Facsimile: (214) 985-2772
With a copy to:
Kelley Drye & Warren LLP
101 Park Avenue
New York, New York 10178
Attention: Frederic A. Rubinstein, Esq.
Facsimile: (212) 808-7897
(b) If to Teltronics:
2150 Whitfield Industrial Way
Sarasota, Florida 34243
Attention:
Facsimile:
(c) If to the Lenders:
To those addresses set forth on Schedule 1 hereto.
3. MISCELLANEOUS.
(a) Neither this Registration Rights Agreement
nor any provision hereof may be changed, waived, discharged or
terminated orally, by course of conduct, or in
writing, except that any provision of this Registration Rights
Agreement may be amended and the observance of any such provision
may be waived (either generally or in a particular instance and
either retroactively or prospectively) with (but only with) the
written consent of the Investors and Teltronics.
(b) This Registration Rights Agreement, together
with the schedule attached hereto and the other documents
referred to herein, contains the entire agreement between the
parties with respect to the transactions contemplated hereby, and
supersedes all negotiations, agreements, representations,
warranties, commitments, whether in writing or oral, prior to the
date hereof.
(c) Except as otherwise expressly provided in
this Registration Rights Agreement, all of the terms of this
Registration Rights Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors
and permitted transferees of the parties hereto.
(d) This Registration Rights Agreement may be
executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original, and all such
counterparts together shall constitute one instrument.
(e) This Registration Rights Agreement shall be
governed by the internal laws of the state of Delaware, without
regard to principles of conflicts of law. In the event any
provision of this Registration Rights Agreement or the
application of any such provision to any party shall be held by a
court of competent jurisdiction to be contrary to law, the
remaining provisions of this agreement shall remain in full force
and effect.
(f) If either of Teltronics or any one or more of
the Investors shall default in any of its obligations under this
Registration Rights Agreement, Teltronics or the Investors, as
the case may be, may proceed to protect and enforce their
respective rights by suit in equity or action at law, whether for
specific performance of any term contained herein or for an
injunction against the breach of any term of this Registration
Rights Agreement, or to enforce any other legal or equitable
right of the Investors or to take any one or more of such
actions. In any such action or suit, the prevailing party in
such dispute shall be entitled to recover from the losing party
all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Registration
Rights Agreement, including without limitation such reasonable
fees and expenses of attorneys, which shall include without
limitation all fees, costs and expenses of appeals.
(g) No remedy referred to herein is intended to
be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to
Teltronics or the Investors, as the case may be, at law or in
equity. No express or implied waiver by Teltronics or the
Investors of any default shall be a waiver of any future or
subsequent default. The failure or delay of Teltronics or the
Investors in exercising any rights granted them hereunder shall
not constitute a waiver of any such right and any single or
partial exercise of any particular right by Teltronics or the
Investors shall not exhaust the same or constitute a waiver of
any other right provided herein.
(h) The descriptive headings of the Sections
hereof and the Schedule hereto are inserted for convenience only
and do not constitute a part of this Registration Rights
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Registration Rights Agreement by their duly authorized
officers as of the date first above written.
SHARED RESOURCE EXCHANGE, INC.
By: Gerald A. Shanholt
Title: President & CEO
TELTRONICS, INC.
By: Ewen R. Cameron
Title: President & CEO
SEVIN ROSEN FUND III L.P.
By:
Title:
KLEINER PERKINS CAUFIELD & BYERS III
By:
Title:
GIBRALTAR TRUST
By: William F. Indoe
Title: Trustee
INTERWEST PARTNERS V
By: Philip Gianos
Title:
INTERWEST INVESTORS V
By: Philip Gianos
Title:
<PAGE>
SCHEDULE 1
Lenders
Sevin Rosen Fund III L.P.
(f/k/a SRB Partners Fund, L.P.)
c/o Sevin Rosen Management Co.
Two Galleria Tower, Suite 1670
13455 Noel Road, LB-5
Dallas, TX 75240
Attention: Jon W. Bayless
Facsimile: (214) 702-1103
Kleiner Perkins Caufield & Byers III
2750 Sandhill Road
Menlo Park, CA 94025
Attention: Kevin Compton
Facsimile: (415) 856-2760
Gibraltar Trust
c/o Rho Management Company
767 Fifth Avenue
New York, NY 10153
Attention: Joshua Ruch
Facsimile: (212) 751-3613
InterWest Partners V
3000 Sandhill Road
Building 3, Suite 255
Menlo Park, CA 94025-7112
Attention: Philip Gianos
Facsimile:
InterWest Investors V
3000 Sandhill Road
Building 3, Suite 255
Menlo Park, CA 94025-7112
Attention: Philip Gianos
Facsimile:
EXHIBIT 4
RESTATED CERTIFICATE OF INCORPORATION
OF
TELTRONICS, INC.
PURSUANT TO SECTIONS 242 AND 245
OF THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
Teltronics, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as
follows:
1. The name of this Corporation is Teltronics, Inc.
Teltronics, Inc. was originally incorporated under the same name
and the original Certificate of Incorporation was duly filed with
the Secretary of State of the State of Delaware on February 14,
1989. A Restated Certificate of Incorporation of Teltronics,
Inc. was filed with the Secretary of State of the State of
Delaware on February 27, 1989.
2. Pursuant to, and duly adopted and approved by the
Corporation's Board of Directors and Shareholders in accordance
with, Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation
restates and amends the provisions of the Restated Certificate of
Incorporation of Teltronics, Inc.
3. The text of the Restated Certificate of
Incorporation of Teltronics, Inc. is hereby restated and amended
to read in its entirety as follows:
FIRST: The name of this Corporation is Teltronics,
Inc.
SECOND: Its registered office and place of business
in the State of Delaware is to be located at: 15 North Street in
the City of Dover, County of Kent. The Registered Agent in
charge thereof is NATIONWIDE INFORMATION SERVICES, INC.
THIRD: The nature of the business and, the objects
and purposes to be transacted, promoted and carried on are to do
any and all things herein mentioned, as fully and to the same
extent as natural persons might or could do, and in any part of
the world, VIS.:
The purpose of the Corporation is to engage
in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of
capital stock which the Corporation shall have the authority to
issue is Fifty Million (50,000,000) shares divided into three
classes of which Five Million (5,000,000) shares, par value $.001
per share, shall be designated Preferred Stock, Forty Million
(40,000,000) shares, par value $.001 per share, shall be
designated Common Stock and Five Million (5,000,000) shares, par
value $.001 per share, shall be designated Non-Voting Common
Stock. The Board of Directors is expressly vested with authority
to issue the Common Stock, the Non-Voting Common Stock and the
Preferred Stock from time to time.
A. ALL CLASSES OF CAPITAL STOCK. The following
provisions shall apply to all classes of the Corporation's
capital stock:
Section 1. Acquisition, Redemption and Other
Disposition. The Corporation shall have the power to acquire (by
purchase, redemption, or otherwise), hold, own, pledge, sell,
transfer, assign, reissue, cancel, or otherwise dispose of the
shares of the Corporation in the manner and to the extent now or
hereafter permitted by the laws of the State of Delaware (but
such power shall not imply an obligation on the part of the owner
or holder of any share to sell or otherwise transfer such share
to the Corporation), including the power to purchase, redeem, or
otherwise acquire the Corporation's own shares, directly or
indirectly, and without pro rata treatment of the owners or
holders of any class or series of shares, unless, after giving
effect thereto, the Corporation would not be able to pay its
debts as they become due in the usual course of business or the
Corporation's total assets would be less than its total
liabilities (and without regard to any amounts that would be
needed, if the Corporation were to be dissolved at the time of
the purchase, redemption, or other acquisition, to satisfy the
preferential rights upon dissolution of stockholders whose
preferential rights are superior to those of the holders of the
shares of the Corporation being purchased, redeemed, or otherwise
acquired, unless otherwise expressly provided with respect to a
series of Preferred Stock). Shares of the Corporation purchased,
redeemed, or otherwise acquired by it shall constitute authorized
but unissued shares, unless prior to any such purchase,
redemption, or other acquisition, or within thirty (30) days
thereafter, the Board of Directors adopts a resolution providing
that such shares constitute authorized and issued but not
outstanding shares;
Section 2. Reissuance. Preferred Stock of any
series that has been redeemed (whether through the operation of a
retirement or sinking fund or otherwise) or purchased by the
Corporation, or which, if convertible, have been converted into
shares of the Corporation of any other class or series, may be
reissued as a part of such series or of any other series of
Preferred Stock, subject to such limitations (if any) as may be
fixed by the Board of Directors with respect to such series of
Preferred Stock in accordance with the provisions of Article
FOURTH, Subsection D, of this Restated Certificate of
Incorporation; and
Section 3. Disposition, Issuance and Sale. The
Board of Directors of the Corporation may dispose of, issue, and
sell shares in accordance with, and in such amounts as may be
permitted by, the laws of the State of Delaware and the
provisions of this Restated Certificate of Incorporation and for
such consideration, at such price or prices, at such time or
times and upon such terms and conditions (including the privilege
of selectively repurchasing the same) as the Board of Directors
shall determine, without the authorization or approval by any
stockholders of the Corporation. Shares may be disposed of,
issued, and sold to such persons, firms, or corporations as the
Board of Directors may determine, without any preemptive or other
right on the part of the owners or holders of other shares of the
Corporation of any class or kind to acquire such shares by reason
of their ownership of such other shares.
B. COMMON STOCK. The following provisions shall
apply to the Common Stock:
Section 1. Voting Rights. Except as otherwise
provided by the General Corporation Law of Delaware and subject
to such stockholder disclosure and recognition procedures (which
may include voting prohibition sanctions) as the Corporation may
by action of its Board of Directors establish, shares of Common
Stock shall have unlimited voting rights and each outstanding
share of Common Stock shall, when validly issued by the
Corporation, entitle the record holder thereof to one vote at all
stockholders' meetings on all matters submitted to a vote of the
stockholders of the Corporation;
Section 2. Dividends and Distributions. Shares
of Common Stock shall be equal in every respect insofar as their
relationship to the Corporation is concerned, but such equality
of rights shall not imply equality of treatment as to redemption
or other acquisition of shares by the Corporation. Subject to
the rights of the holders of any outstanding series of Preferred
Stock, the holders of Common Stock shall be entitled to share
ratably in such dividends or other distributions (other than
purchases, redemptions, or other acquisitions of shares by the
Corporation), if any, as are declared and paid from time to time
on the Common Stock at the discretion of the Board of Directors;
and
Section 3. Liquidation, Dissolution or Winding
Up. In the event of any liquidation, dissolution, or winding up
of the Corporation, either voluntary or involuntary, after
payment shall have been made to the holders of any outstanding
series of Preferred Stock of the full amount to which they shall
be entitled, the holders of Common Stock shall be entitled, to
the exclusion of the holders of Preferred Stock of any and all
series, to share, ratably according to the number of shares of
Common Stock held by them, in all remaining assets of the
Corporation available for distribution to its stockholders.
C. NON-VOTING COMMON STOCK. The following provisions
shall apply to the Non-Voting Common Stock:
1. Issuance. The Board of Directors is hereby
expressly authorized to provide, out of the unissued shares of
Non-Voting Common Stock, for one or more classes of Non-Voting
Common Stock. Before the shares of any such class are issued,
the Board of Directors shall fix, and hereby is expressly
empowered to fix, by adopting and filing in accordance with the
General Corporation Law of Delaware of a Certificate of
Designation after adopting a resolution or resolutions providing
for the issue of such Non-Voting Common Stock, and in such
resolution or resolutions providing for the issue of shares of
each such class, the Board of Directors is also expressly vested
with authority to fix the number of shares constituting any such
class and to fix:
(i) the rate and times at which, and the
conditions under which, dividends shall be payable on shares of
any such class, and the status of such dividends as cumulative or
noncumulative and as participating or non-participating;
(ii) the price or prices, times and terms and
conditions, if any, upon which or at which shares of any such
class shall be subject to redemption;
(iii) the rights, if any, of holders of
shares of any such class to convert such shares into, or exchange
such shares for other classes of stock, or series thereof, of
this Corporation and the terms and conditions of such conversion
or exchange, including the conversion price or prices or the
rates of exchange, and the adjustments thereof, if any;
(iv) the terms of the sinking fund or
redemption or purchase account, if any, to be provided for shares
of any such class, including without limitation the amount of the
fund or account, the manner of its application, and the price or
prices at which shares of any such class may purchased or
redeemed though the application of the fund or account;
(v) the rights of the holders of shares of
any such class upon the liquidation, dissolution or winding up of
the affairs of, or upon any distribution of the assets of, the
Corporation, including the amount or amounts payable to the
holders of shares of such class prior to any payment distribution
of any assets of the Corporation to any class or classes of stock
ranking junior to such class;
(vi) the limitations, if any, applicable
while any such class is outstanding, on the payment of dividends
or making of distributions on, or the acquisition of, or the use
of moneys for the purchase of any series of any class or classes
of stock ranking junior to such class;
(vii) the voting rights, if any, of any such
class; and
(viii) any other designations, preferences,
and powers, and relative participating, optional or other such
special rights and the qualifications, limitations or
restrictions thereof, of any such class, as the Board of
Directors may deem advisable and as are not inconsistent with the
provisions of the laws of the State of Delaware or in each case,
so far as not inconsistent with the provisions of this Restated
Certificate of Incorporation, as amended to the date of any such
resolution or resolutions, and to the full extent now or
hereafter permitted by the laws of the State of Delaware. All
shares of any class shall be identical to and of equal rank with
other shares of such class except in respect to the particulars
that may be fixed by the Board of Directors as provided above;
provided, however, that all shares of each series of any such
class shall be identical and of equal rank, except as to the
times from which dividends thereon, if any, shall be cumulative.
Unless otherwise provided in such resolution or resolutions
fixing the designations, preferences, and powers, and relative
participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, of any such
class, the number of shares of any such class to which such
resolution or resolutions apply, may be increased (but not above
the total number of authorized shares of the class) or decreased
by the Board of Directors (but not below the number of shares
thereof then outstanding) without any requirement that such
increase or decrease be approved by a class vote on the part of
the affected class or any series thereof, or on the part of any
other class or classes of stock of this Corporation.
D. PREFERRED STOCK. The following provisions shall
apply to the Preferred Stock:
1. Issuance. The Board of Directors is hereby
expressly authorized to provide, out of the unissued shares of
Preferred Stock, for one or more series of Preferred Stock.
Before any shares of any such series are issued, the Board of
Directors shall fix, and hereby is expressly empowered to fix, by
adopting and filing in accordance with the General Corporation
Law of Delaware, a Certificate of Designation, after adopting a
resolution or resolutions providing for the issue of such
Preferred Stock, and in such resolution or resolutions providing
for the issue of shares of each such class and of each particular
series of any such class. The Board of Directors is also
expressly vested with authority to fix the number of shares
constituting any such series of any such class and to fix the
terms of such Preferred Stock or series of Preferred Stock,
including the following:
(i) the designation of such series, the
number of shares to constitute such series and the stated value
thereof if different from the par value thereof;
(ii) whether the shares of such series shall
have voting rights, and, if so, the terms of such voting rights,
which may be general or limited, may include multiple votes per
share and may include the right, under specified circumstances,
to elect additional directors;
(iii) the dividends, if any, payable on such
series, whether any such dividends shall be cumulative, and, if
so, from what dates, the conditions and dates upon which such
dividends shall be payable, the preference or relation which such
dividends shall bear to the dividends payable on any shares of
stock of any other class or any other series of Preferred Stock;
(iv) whether the shares of such series shall
be subject to redemption by the Corporation and, if so, the
times, prices and other conditions of such redemption;
(v) the amount or amounts payable upon
shares of such series upon, and the rights of the holders of such
series in, the voluntary or involuntary liquidation, dissolution
or winding up, or upon any distribution of the assets, of the
Corporation;
(vi) whether the shares of such series shall
be subject to the operation of a retirement or sinking fund and,
if so, the extent to and manner in which any such retirement or
sinking fund shall be applied to the purchase or redemption of
the shares of such series for retirement or other corporate
purposes and the terms and provisions relative to the operation
thereof;
(vii) whether the shares of such series shall
be convertible into, or exchangeable for, shares or stock of any
other class or any other series of Preferred Stock or any other
securities (whether or not issued by the Corporation) and, if
so, the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same, and any
other terms and conditions of conversion or exchange;
(viii) the limitations and restrictions, if
any, to be effective while any shares of such series are
outstanding upon the payment of dividends or the making of other
distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of, the Common Stock or shares of
stock of any other class or any other series of Preferred Stock;
(ix) the conditions or restrictions, if any,
upon the creation of indebtedness of the Corporation or upon the
issue of any additional stock, including additional shares of
such series or of any other series of Preferred Stock or of any
other class of stock; and
(x) any other powers, preferences and
relative, participating, optional and other special rights, and
any qualifications, limitations and restrictions thereof.
Except to the extent otherwise expressly provided in this
Restated Certificate of Incorporation or required by law (i) no
share of Preferred Stock shall have any voting rights other than
those which shall be fixed by the Board of Directors pursuant to
this Article FOURTH and (ii) no share of Common Stock shall have
any voting rights with respect to any amendment to the terms of
any series of Preferred Stock, provided however, that in the case
of this clause (ii) the terms of such series of Preferred Stock,
as so amended, could have been established without any vote of
any shares of Common Stock.
FIFTH: The corporation is to have perpetual
existence.
SIXTH: In furtherance and not in limitation of the
powers conferred by statute, the board of directors is expressly
authorized:
To make, alter or repeal the by-laws of the
corporation.
To authorize and cause to be executed
mortgages and liens upon the real and personal property of the
corporation.
To set apart out of any of the funds of the
corporation available for dividends, a reserve or reserves for
any proper purpose and to abolish any such reserve in the manner
in which it was created.
By a majority of the whole board, to
designate one or more committees, each committee to consist of
one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at
any meeting of the committee. The by-laws may provide that in
the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent
or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors, or in the
by-laws of the corporation, shall have and may exercise all the
powers and authority of the board of directors in the management
of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or
authority in reference to amending the certificate of
incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and
assets; recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending the by-
laws of the corporation; and, unless the resolution or by-laws,
expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of
stock.
When and as authorized by the stockholders in
accordance with statute, to sell, lease or exchange all or
substantially all of the property and assets of the corporation,
including its good will and its corporate franchises, upon such
terms and conditions and for such consideration, which may
consist in whole or in part of money or property including shares
of stock in, and/or other securities of, any other corporation or
corporations, as its board of directors shall deem expedient and
for the best interests of the corporation.
SEVENTH: Elections of the directors need not be by
written ballot unless the by-laws of the corporation shall so
provide.
Meetings of stockholders may be held within
or without the State of Delaware, as the by-laws may provide.
The books of the corporation may be kept (subject to any
provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time
to time by the board of directors or in the by-laws of the
corporation.
EIGHTH: The corporation reserves the right to amend,
alter, change or repeal any provision contained in this
certificate of incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
NINTH: No director of the corporation shall be
personally liable to the corporation or any stockholder for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the directors' duty of
loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith, (iii) for acts or omissions which
involve intentional misconduct or a knowing violation of law,
(iv) under Section 174 of the Delaware General Corporation Law,
or any amendment thereto or successor provision thereto, or (v)
for any transaction from which the director derived an improper
personal benefit.
IN WITNESS WHEREOF, the undersigned President of the
Corporation has executed this Restated Certificate of
Incorporation this 8th day of August, 1996 and affirms that this
Restated Certificate of Incorporation is the act and deed of the
Corporation and the statements made herein are true under the
penalties of perjury.
Ewen R. Cameron, President
Attest:
Paul D. Shrader, Secretary
EXHIBIT 5
TELTRONICS, INC.
CERTIFICATE OF DESIGNATIONS
OF PREFERENCES OF
SERIES A PREFERRED STOCK
PURSUANT TO SECTION 151(g) OF THE
GENERAL CORPORATION LAW OF DELAWARE
The undersigned, Ewen R. Cameron, being the President of
Teltronics, Inc., a Delaware corporation (the "Corporation"),
does hereby make and execute this Certificate of Designations and
does hereby certify on behalf of the Corporation that:
1. He is the duly elected and acting President of the
Corporation.
2. The Board of Directors of the Corporation has duly
adopted the following resolutions designating shares of the
Corporation's Preferred Stock as Series A Preferred Stock and
fixing the preferences and powers, and participating, optional
and other special rights and the qualifications, limitations and
restrictions thereof:
RESOLVED, that pursuant to the authority conferred upon
the Board of Directors by Article FOURTH, subparagraph (d) of the
Restated Certificate of Incorporation of the Corporation, there
is hereby established a series of shares of the authorized
preferred stock of the Corporation designated "Series A Preferred
Stock" (the "Series A Preferred Stock"); that the number of
shares constituting such series and to which this resolution
shall apply shall be Two Hundred Fifty Thousand (250,000) shares;
and that the rights, preferences and privileges and restrictions
granted to or imposed on the Series A Preferred Stock shall be as
follows:
Section 1. DESIGNATION AND AMOUNT. The Preferred
Stock created and authorized hereby shall be designated as the
"Series A Preferred Stock" (the "Series A Preferred Stock"). The
number of shares of Series A Preferred Stock shall be Two Hundred
Fifty Thousand (250,000), par value $.001 per share. The
Corporation shall not issue any rights, warrants, options or
other securities exercisable for or convertible or exchangeable
into shares of Series A Preferred Stock. The number of shares of
Series A Preferred Stock may be increased or decreased by
resolution of the Board of Directors; provided that no decrease
shall reduce the number of shares of such Series A Preferred
Stock to a number less than that of the shares of Series A
Preferred Stock then outstanding.
Section 2. DIVIDENDS AND DISTRIBUTIONS. The
shares of Series A Preferred Stock shall not be entitled to
receive dividends.
Section 3. VOTING RIGHTS.
(a) With respect to every matter upon which
the stockholders shall be entitled to vote, including without
limitation actions taken by written consent, and at every annual
or special meeting of the stockholders of the Corporation, every
holder of Series A Preferred Stock shall be entitled to Four
Hundred (400) votes, in person or by proxy, for each share of
Series A Preferred Stock standing in such holder's name on the
books of the Corporation.
(b) STOCK SPLITS; ADJUSTMENTS. If the
Corporation shall in any manner subdivide (by stock split, stock
dividend, or otherwise) or combine (by reverse stock split or
otherwise) the outstanding shares of Series A Preferred Stock,
then the outstanding shares of Series A Preferred Stock shall be
subdivided or combined, as the case may be, to the same extent,
share and share alike, and effective provision shall be made for
the preservation of the voting rights of the Series A Preferred
Stock hereunder.
Section 4. LIQUIDATION, DISSOLUTION OR WINDING
UP. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation,
after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts,
if any, to which the holders of other series of Preferred Stock,
if any, shall be entitled, the holders of all outstanding shares
of Common Stock and Non-Voting Common Stock shall be entitled to
share ratably in the remaining net assets of the Corporation.
The Series A Preferred Stock shall not share ratably in the
remaining net assets of the Corporation.
Section 5. RE-ACQUIRED SHARES. Any shares of the
Series A Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and maybe reissued as part of
a new series of Preferred Stock subject to conditions and
restrictions on issuance set forth in the Corporations' Restated
Certificate of Incorporation, and any certificate of amendment
creating a series of Preferred Stock or as otherwise required by
law.
Section 6. NO CONVERSION. The shares of Series A
Preferred Stock shall not be convertible into any other shares of
any other Preferred Stock and/or Common Stock of the Corporation.
Section 7. RANKING. The Series A Preferred Stock
shall rank junior to all other classes of stock of the
Corporation (including the Common Stock) as to the payment of
dividends and distribution of assets, unless the terms of any
such classes shall provide otherwise.
Section 8. AMENDMENT. The Restated Certificate
of Incorporation shall not be amended in any manner which would
alter or change the powers, preferences, or special rights of any
shares of the Series A Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of the Series A
Preferred Stock.
Section 9. CONSOLIDATION, MERGER, ETC. In case
the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or
securities, cash or any other property, then, in any such case,
the shares of Series A Preferred Stock shall at the same time be
similarly exchanged or changed (subject to adjustments as set
forth herein) in a manner which preserves the voting rights
associated with each share of Series A Preferred Stock in
relation to the Common Stock exchanged or changed.
RESOLVED FURTHER, that before the Corporation shall
issue any of the shares of Series A Preferred Stock, a
Certificate of Designations pursuant to Section 151(g) of the
General Corporation Law of Delaware shall be executed,
acknowledged, filed and recorded in accordance with the
provisions such Sections 103 and 151(g) of such law, and the
officers of the Corporation are hereby authorized and directed to
do all acts and things that they determine to be necessary and
proper to carry into effect the purposes and intent of these
resolutions.
IN WITNESS WHEREOF, this Certificate of Designations has
been executed by the Corporation's President and attested by its
Secretary, and each of them does hereby affirm and acknowledge
that this Certificate of Designations is the act and deed of the
Corporation and that the statements made herein are true under
the penalties of perjury.
Dated: August 15, 1996
Ewen R. Cameron, President
Attest:
Paul D. Shrader, Secretary
