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:........................September 5, 1997
(Date of Earliest Event Reported):.....(August 7, 1997)
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 (Commission File Number) (IRS Employer
jurisdiction Identification
of Incorporation) Number)
2150 Whitfield Industrial Way, Sarasota, Florida 34243-9706
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (941) 753-5000
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ITEM 5. OTHER EVENTS.
Registrant has engaged Dougherty Funding LLC to assist
the Registrant in the structure and funding of future acquisitions
of communication, computer and technology related companies that
the Registrant may seek to acquire. Dougherty Funding LLC is an
affiliate of Dougherty Financial Group LLC, a Minneapolis,
Minnesota based financial services company which, through its
affiliates, provides underwriting and financial advisory services
to government and corporate clients in 38 states, as well as
securities brokerage services to investors nationwide. Under the
engagement, Dougherty Funding LLC expects to privately place on a
best efforts basis up to $100,000,000 of debt financing over a two
year period for a fee calculated based upon percentages of the
aggregate debt placed during the term of the engagement.
Currently, there are no definitive understandings or
written agreements in force with any prospective debt investor or
acquisition candidate. There can be no assurance that Dougherty
Funding LLC or the Registrant will be successful in identifying and
consummating a transaction or transactions with any prospective
acquisition candidate(s). Further, there can be no assurance that
Dougherty Funding LLC will be successful in identifying any
qualified, prospective debt investor(s) or that, if identified,
Dougherty Funding LLC will be successful in consummating the
placement of the Registrants' debt with any such qualified
prospective investor(s) on terms and conditions satisfactory to the
Registrant.
There are numerous other provisions in the engagement
letter filed as an Exhibit to this Report on Form 8-K which are
important in order to derive the full understanding of the
engagement of Dougherty Funding LLC by the Registrant. The above
summary is qualified in its entirety by reference to the text and
the terms and conditions of the engagement letter filed as an
Exhibit to this Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Listed below the financial statements, pro forma
financial information and exhibit, if any, filed as a part of this
Report.
EXHIBITS:
99.1 Engagement Letter among Teltronics, Inc., Frederick
L. Morris and Dougherty Funding LLC, dated August 7, 1997
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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: September 5, 1997 By: Ewen R. Cameron
President and Chief Executive Officer
EXHIBIT 99.1
ENGAGEMENT LETTER
This letter agreement (the Engagement Letter") is made and entered
into by and between Teltronics, Inc. (the "Acquiring Company") and Frederick
L. Morris (the "Financial Advisor") and Dougherty Funding, LLC., investment
bankers (the "Placement Agent"), Financial Advisor and Placement Agent are
collectively referred to as the "Agents."
Whereas the Acquiring Company intends to seek and purchase other
communications, computer and technology related companies;
Whereas the Acquiring Company seeks an investment advisor to assist in
structuring the purchase of such acquisitions of communications, computer and
technology related companies; and
Whereas Agents agree to assist in the structuring, design, placement and
execution of such acquisitions;
The parties agree as follows:
SERVICES PROVIDED: Agents will assist in the design, structuring and funding
of acquisitions to be made by the Acquiring Company. They will publicly or
privately place, on a best efforts basis, up to one hundred million dollars
($100,000,000) of debt financing for such acquisitions in the first twenty-four
(24) months of this engagement. Additional debt placements may be available
for approved transactions. Agents will assist in the preparation of placement
materials; work with the Acquiring Company's lawyers and other professionals;
identify and qualify potential investors; and assist in closing the proposed
acquisitions of communications, computer and technology related companies.
They will work with the Acquiring Company to help determine the best
transaction structure given the requirements of the Acquiring Company.
TRANSACTION STRUCTURES: Each transaction structure will be tailored to the
specific circumstances encountered in the proposed acquisition. The proposed
structures will require the corporate guarantees of Teltronics, Inc. and its
joint venture partners, if any. Each proposed acquisition will be subject to
completion of satisfactory due diligence review by the Placement Agent of the
Acquiring Company, the acquisition candidate and the proposed acquisition.
The final transaction structures will require the approval of the Acquiring
Company.
EXCLUSIVITY PERIOD: The Financial Advisors will serve as Acquiring Company's
exclusive financial advisors and investment bankers for debt financing used to
acquire high technology related companies for a period of twenty-four (24)
months from the date of execution of this Engagement Letter. Such position
shall be automatically renewed unless notice is received sixty days prior to
the end of the exclusivity period. If the Placement Agent has not identified an
investor or closed a transaction within forty-five (45) calendar days of
receipt of the necessary information and materials required for a given proposed
transaction (and both the seller and the Acquiring Company desire to close
within such forty-five day period) the exclusivity for such transaction will
expire and upon notice to the Agents, Acquiring Company may seek other financial
advisory assistance for such proposed transaction.
CONFIDENTIALITY: The Agents will sign confidentiality agreements provided by
Acquiring Company. Acquiring Company also agrees to keep confidential any
proprietary information it receives from Agents, including but not limited to
lists of investors and unique financial structures. Acquiring Company agrees
not to directly contact any potential investor identified by Agents without
the permission of Agents. If within the six (6) month period after the
conclusion of Agents' service to Acquiring Company, Acquiring Company closes
a transaction with an investor identified by Agents, Acquiring Company will pay
Agents an amount equal to 3.0% of the amount of money raised with such investor
or investors.
COMPENSATION: The Agents will be compensated at and as a condition of closing
of transactions in which they participate. Compensation levels for the
placement of debt follow:
CUMULATIVE AMOUNT FEE AS PERCENT
OF DEBT PLACED OF DEBT PLACED
$0 to $ 2,500,000 6.00%
2,500,001 to 5,000,000 5.00%
5,000,001 to 10,000,000 4.00%
10,000,001 to 20,000,000 3.70%
20,000,001 to 25,000,000 3.10%
greater than 25,000,000 3.00%
For the first $100,000,000 of debt placed, Agents will receive stock warrants
at closing of each debt transaction placed. The number of shares subject to
such warrants shall equal the quotient of the principal amount of debt placed
in each respective transaction divided by $100,000,000 then multiplied by
five percent of the authorized and outstanding shares of voting common stock
at the close of business on the day prior to issuance of each respective
warrant(s). [(Series Principal/$100,000,000)*(.05*Authorized and outstanding
shares of voting common stock)] The warrants will allow the Agents to
purchase shares of common voting stock of the Acquiring Company at a ratio
of one share per each warrant. Such purchase can be exercised by the Agents,
in their sole desecration, at any time during the five year period following
issuance of the respective warrants. The exercise price of the warrants shall
equal ten percent (10%) below the average of the bid and ask prices of the
common stock for the Acquiring Company on the date of issuance of said
warrants. All such warrants shall comply with Rule 144(a) restrictions and
criteria all as to be fully set out in the warrants. The stock will
initially be unregistered with full piggy back registration rights granted.
All reasonable out-of-pocket expenses will be reimbursed as incurred,
including but not limited to legal expenses resulting from Placement Agent's
counsel review of closing documents prepared by counsel to the Acquiring
Company.
The intention of this agreement is to engage one part of a team to
assist in facilitating the growth of the Acquiring Company. The terms of
this Engagement Letter may be changed with the written consent of all of
the signatory parties to this agreement. The parties to this Engagement
Letter agree to the terms and conditions herein by signing below.
AGREED AND ACCEPTED;
TELTRONICS, INC.
Signed: Ewen R. Cameron
Title: President and CEO
Date: August 5, 1997
DOUGHERTY FUNDING, LLC.
Signed: Steven D. McWhirter
Title: Sr. Vice President
Date: August 7, 1997
FREDERICK L. MORRIS
Signed: Frederick L. Morris
Title:
Date: August 7, 1997
