Exhibit 10.1
Amendment dated as of June 1, 2002, to Agreement dated November 28, 2001,
by and between Tel-Instrument Electronics Corp. ("Tel" or the "Company") and
Semaphore Capital Advisors, LLC ("Semaphore").
WHEREAS Tel and Semaphore (previously known as Xxxxx Partners LLC) entered
into a letter agreement, dated November 28, 2001 (the "November Agreement"),
which provided, inter alia, for Semaphore to render specified financial services
to Tel, in consideration for the compensation set forth therein, and
WHEREAS Tel and Semaphore desire to amend the November Agreement, as
hereinafter set forth;
NOW, THEREFORE, it is hereby agreed by and between Tel and Semaphore, for
valuable consideration the receipt of which is hereby acknowledged by both
parties, as follows:
1. Section II of the November Agreement is hereby amended by deleting
subsection (i) thereof and substituting the following paragraphs:
(i) (a) Monthly Payments. Tel shall pay Semaphore a retainer of
$10,000 per month, for each of six (6) months commencing with the month of
June 2002, and ending with the month of November, 2002, in consideration
of Semaphore providing the services set forth in the November Agreement,
as supplemented by the services set forth in this Amendment. In December,
2002, the parties shall review the services provided to that date by
Semaphore, and their result, and consider the question of additional
monthly payments for subsequent months.
The retainer is intended to compensate Semaphore for investment
banking services, particularly those described in subparagraphs (i), (ii)
and (iii) in Section 1 of the November Agreement, as amended. The Company
considers time of the essence in connection with these services and if, in
the Company's reasonable judgment, Semaphore has not provided the services
contemplated hereunder in a diligent manner, the Company may exercise its
termination rights any time after sixty days from the date hereof, and
after such termination, no further amounts specified in this subsection
(i) shall be due and payable. In the event that Semaphore exercises its
termination rights, no further amounts under this subsection (i) shall
become due and payable.
(b) Credits. The entire amount of retainer payments made by Tel,
pursuant to subparagraph (a) above, shall be credited against, and shall
reduce amounts otherwise payable by Tel to Semaphore as a Success Fee,
pursuant to Section II (ii) of the November Agreement, as amended by this
Amendment Agreement; Provided that there shall be no credit or reduction
of the Success Fee pursuant to this subparagraph (b) until the value of
all Transactions and Aggregate Consideration of all investments exceeds $2
million, and Provided further, that no such credits shall be applied if
they reduce cash Success Fees
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payable hereunder to Semaphore below the Minimum Amount specified in
paragraph 5 of this Amendment Agreement. If a Transaction or investment is
completed, and a Success Fee paid to Semaphore without reduction for the
monthly retainer amounts, pursuant to this subparagraph (b), then, in the
event of another Transaction or investment being concluded, all
Transactions and investments pursuant to this Agreement shall be
aggregated and the Success Fee required by this subparagraph (b) shall be
recalculated.
2. Section II of the November Agreement shall be further amended by adding
a new subsection, following subsection (ii), and designated subsection "(iii)",
as follows:
(iii) BCG. In recognition of the fact that Tel identified BCG, and
already has done a substantial amount of due diligence in connection with
BCG, Tel shall pay Semaphore a different Success Fee in respect of BCG,
than the Success Fee payable under subsection (ii) on all other
Transactions or investments. Tel shall pay a Success Fee upon the closing
of a Transaction in respect of BCG, in an amount equal to 4% of the
Aggregate Consideration paid by Tel, rather than the Success Fee set forth
in subsection (ii) above, plus warrants, as defined and calculated in
Paragraph 3 of this Amendment. In no event will the cash Success Fee
payable in respect of BCG be less than $50,000.
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3. Section II (iii) of the November Agreement is hereby deleted and a new
subsection (iii), now designated "subsection iv", shall be added as follows:
(iv) Warrants. In connection with a Success Fee payable as set forth
in subsections (ii) or (iii) above, Tel shall also issue to Semaphore, as
a Success Fee, warrants to purchase its common stock, with usual and
customary rights, terms and conditions (to be covered in a separate
warrant purchase agreement).
The warrants issuable shall have an exercise price of $2.30 per
share, if issued prior to June 1, 2003, and thereafter the exercise price,
shall be at the average of the bid and asked prices on the date of
issuance, as quoted in the over the counter market.
Semaphore shall be issued warrants under this subsection equal to
(a) 5% of the value up to and including $4 million, of Transactions and
the Aggregate Considerations of investments, other than a Transaction
involving BCG; (b) 3% of Transactions and the Aggregate Consideration of
investments, on the excess over $4 million (excluding BCG) and (c) 2-1/2%
of the value of a Transaction involving BCG.
The amount of warrants to which Semaphore is entitled, under this
subsection shall be equal to (x) the Aggregate Consideration of
investments, and the value of Transactions, (y) multiplied by the
applicable warrant percentage as set forth above (5%, 3% or 2-1/2% as the
case may be) and then
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(z) the result divided by the warrant exercise price, which shall be
$2.30 per share until June 1, 2003. For example, in the event of $5
million of Transactions, prior to December 31, 2002, Semaphore would be
entitled to warrants to purchase 100,000 shares of Tel common stock at an
exercise price of $2.30 per share ($4 million of transactions x 5% / 2.30
= 86,957 warrants plus $1 million of transactions x 3% / 2.30 = 13,043
warrants.)
4. Subsection (iii) and (iv) of Section II of the November Agreement shall
be renumbered "(v)".
5. Section II of the November Agreement shall be further amended by adding
a new subsection "(vi)", as follows:
"(vi). Minimum Fee. Semaphore's cash Success Fee to which it is
entitled, pursuant to this Agreement, shall in no event be less than (1)
$50,000, in the event of a BCG Transaction or (b) $100,000 for each other
Transaction, or investment. After Semaphore has received its minimum fee
on a Transaction or investment, the aggregate Success Fee to which it is
entitled hereunder shall be recalculated on an aggregate basis, and
credits shall be applied for retainer amounts paid pursuant to subsection
(i) and for any other prior payments made by Tel pursuant to this
Agreement.
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6. Semaphore shall be the exclusive financial advisor to the company for a
period of six (6) months, and the term of this Agreement shall be extended to
twelve (12) months, commencing on the date as of which this amendment is
executed by both parties, provided however that either party may withdraw from
and terminate the November Agreement as amended, at any time upon thirty (30)
days written notice to the other party. Semaphore shall provide the services set
forth in Section I of the November Agreement and shall be compensated in
accordance with Section II, except the parties agree that in the event Semaphore
is unable to render a fairness opinion on any Transaction or investment because
of exceptional circumstances, such as questions arising outside of Semaphore's
expertise, then the parties will in good faith review the matter and use their
best efforts to reach an accommodation that takes into consideration the
interests of both parties. The parties also acknowledge that the first paragraph
of the November Agreement, which defines a Transaction in terms of "any other
financial transactions", includes joint ventures and strategic partnerships, so
that if such a Transaction is closed with a Candidate, as defined in the
November Agreement, then Semaphore would be entitled to the compensation set
forth in Section II.
7. Semaphore represents and warrants to Tel that (a) Semaphore is the
successor in interest to Xxxxx Partners LLC, the signatory to the November
Agreement, and has all of the rights, title, interest and duties which Xxxxx
Partners LLC had under that agreement, (b) it has the obligation to and will
perform the duties required to be performed
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by Xxxxx Partners LLC under the November Agreement and (c) Tel will incur no
claim from or liability to Xxxxx Partners LLC, its partners, members, assignees
or successors, in connection with or growing out of Tel dealing with Semaphore
as the other party to the November Agreement. Semaphore will indemnify and hold
Tel harmless from and against any and all costs, expenses and damages including
reasonable attorneys fees, arising or resulting from or in connection with a
breach or claimed breach of this Paragraph. Semaphore's indemnity obligation
includes the obligation to defend at its cost, any such claim made against Tel,
its officers, directors and representatives. The rights and obligations under
this Paragraph are in addition to any and all other rights Tel has under the
November Agreement, this Amendment or otherwise.
The Assignment to Semaphore does not waive, qualify or limit the provision
in Section IV of the November Agreement prohibiting assignments, and any
attempted further assignment or transfer will be ineffective to transfer any
right or interest in the November Agreement as amended.
8. Terms and provisions defined in the November Agreement shall have the
same meaning when used in this Amendment Agreement.
9. The November Agreement and all its terms and provisions, are still in
full force and effect and binding on the parties, unless expressly changed,
modified or deleted by this Amendment Agreement, except that all references to
Xxxxx Partners LLC shall be deemed to refer to Semaphore.
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WHEREFORE the undersigned parties have executed and accepted this
Amendment Agreement as of June 1, 2002.
TEL-INSTRUMENT ELECTRONICS CORP.
By: XXXXXX X. XXXXXXXX
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President
Dated: New York, New York
June 10, 2002
SEMAPHORE CAPITAL ADVISORS, LLC
By:
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(Office)
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WHEREFORE the undersigned parties have executed and accepted this
Amendment Agreement as of June 1, 2002.
TEL-INSTRUMENT ELECTRONICS CORP.
By:
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President
Dated: New York, New York
June , 2002
SEMAPHORE CAPITAL ADVISORS, LLC
By: [ILLEGIBLE]
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(Office) Partner
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