Exhibit 10.9
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT (this "Agreement") is dated this 26th day of
October, 2000 and is executed among Teltronics, Inc., a Delaware corporation
("Teltronics") and Interactive Solutions, Inc., ("Plaintiffs") and Xxxxx X.
Xxxxxx, Xxxxxxx X. Xxxxx, Intelliworxx, Inc., a Florida corporation
("Intelliworxx") and Wavelogic, Inc. ("Defendants"), collectively referred to
herein as the "Parties."
1. Plaintiffs have sued Defendants for damages as alleged in their
complaint in a lawsuit filed in the United States District Court,
Middle District of Florida, Tampa Division, Case No. 98-CIV-1392-T-23B
(the "Lawsuit").
2. Defendants have been awarded a verdict against Plaintiffs in the
Lawsuit, including a damage award which the Court has ruled excessive.
The Court has encouraged the Parties to negotiate a settlement with
regard to the amount of damages.
3. The Court has ordered a new trial on the issue of damages only.
4. After lengthy negotiations, the Parties have agreed to settle and
release all claims by each and all of them against the others arising
out of the actions of the Parties alleged in the Lawsuit to avoid the
risk, expense and inconvenience of further litigation in accordance
with the terms and conditions set forth below.
NOW, THEREFORE, for good and valuable consideration, the Parties, intending
to be legally bound, agree as follows:
1. Settlement of Action. The Lawsuit shall be and the same hereby is
settled under and subject to the terms and conditions set forth
herein. The Defendants hereby agree not to appeal or move to set aside
the verdict in the Lawsuit on the issue of liability, only.
2. Settlement Amount.
2.1 Settlement Amount. Subject to the terms and conditions herein
stated, the Lawsuit shall be settled on the Closing Date, as described in
Section 2.5 of this Agreement, by Intelliworxx delivering to Teltronics
settlement consideration of $5,250,0000 (the "Settlement Amount") in the
form of cash and shares of Intelliworxx voting common stock registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended ("Intelliworxx Stock") subject to the restrictions and adjustments
set forth herein.
2.2 Payment of the Settlement Amount.
(a) In full consideration of Plaintiff's settlement and release
of the Defendants, as described in Section 6 below, Defendants shall
deliver to Teltronics on the Closing Date $700,000 in immediately
available funds and Intelliworxx shall issue 570,000 shares of
Intelliworxx Stock to Teltronics, which shall be subject to adjustment
as described below (as adjusted, the "Intelliworxx Shares").
(b) Certificates representing the Intelliworxx Shares, together
with stock powers duly endorsed in blank by Teltronics shall be held
in escrow by Xxxxxx & Xxxxxxxxx LLP, pursuant to an escrow agreement
in the form annexed hereto as Exhibit A (the "Escrow Agreement"). The
Escrow Agreement shall provide that:
(i) on the first anniversary of the execution of this
Agreement, Intelliworxx Shares having a "Market Value"
(as determined below) of $2,275,000 will be released
from escrow for sale by Teltronics;
(ii) on the second anniversary of the execution of this
Agreement, additional Intelliworxx Shares having a
Market Value equal to $2,275,000 will be released from
escrow for sale by Teltronics.
(iii) In the event and at such time as Teltronics realizes
gross proceeds of $4,550,000 from the sale of the
Intelliworxx Shares, or Intelliworxx exercises the
repurchase option set forth in Section 2.6 of this
Agreement, unsold Intelliworxx Shares will be returned
to Intelliworxx for cancellation.
2.3 Issuance of Additional Intelliworxx Shares. If, on either the
first anniversary or the second anniversary of the execution of this
Agreement, the Market Value of the Intelliworxx Shares is less than
$2,275,000, Intelliworxx shall issue to Teltronics additional shares of
Intelliworxx Stock so that Teltronics shall realize $2,275,000 upon the
resale of the Escrow Shares, provided that Intelliworxx shall not be
required to issue more than 330,000 additional shares on the first
anniversary of the execution of this Agreement or more than 600,000
additional shares on the second anniversary of the execution of this
Agreement (plus any of the 330,000 shares not issued on the first
anniversary).
2.4 Market Value. As of any date set forth in this Section 2, "Market
Value" shall equal the "Market Price" times the number of shares of
Intelliworxx Stock. Market Price as of any such date shall equal the
greater of: (X) the closing price of a share of Intelliworxx Stock one day
prior to such date or (Y) the average closing price of shares of
Intelliworxx Stock for the thirty (30) trading days prior to such date
("Valuation Formula").
2.5 Closing. The Closing shall take place at 10:00 a.m. at the offices
of Teltronics, (and may be by delivery of documents by overnight courier)
not later than December 15, 2000, or at such other time and date as
Intelliworxx and Teltronics shall agree in writing. Such time and date are
herein referred to as the "Closing Date."
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2.6 Option to Repurchase Shares. Teltronics hereby grants Intelliworxx
the option, exercisable upon not less than ten days written notice, to
purchase all Intelliworxx Shares for a price equal to $4,550,000, less the
gross proceeds realized by Teltronics from the sale of Intelliworxx Shares.
If Intelliworxx gives Teltronics notice of it's intention to exercise this
option, Teltronics shall provide to Intelliworxx copies of all original
documents relating to the number of Intelliworxx Shares sold by Teltronics
and the prices at which such Intelliworxx Shares were sold within 5
business days of such notice.
3. Registration Rights. On the Closing Date, Intelliworxx and Teltronics
shall enter into a Registration Rights Agreement, in the form annexed
hereto as Exhibit B.
4. Security. In order to secure the obligations of Intelliworxx and Messrs.
Xxxxxx and Jonas under this Agreement, the Escrow Agreement and the
Registration Rights Agreement, on the Closing Date, Xxxxxx and Jonas will
execute non-recourse guarantees in the form annexed hereto as Exhibit C and
will pledge to Teltronics or its nominee 425,000 and 100,000 shares of
Intelliworxx Stock owned by them, respectively, free and clear of any and
all liens, encumbrances, options, or rights of others ("Pledged Shares")
under a Pledge Agreement substantially in the form annexed hereto as
Exhibit D.
5. Stipulation Discontinuing Action. On the Closing Date, and upon the
payment of $700,000 to Teltronics by Defendants and the delivery of
executed Escrow Agreement, Registration Rights Agreement, Non-Recourse
Guaranties and Pledges, the Parties will execute and promptly file with the
Court, a Stipulation dismissing the Action, with prejudice, providing that
each Party shall bear its own attorney's fees and court costs and under
which the Court shall, to the extent it may determine to do so, retain
jurisdiction to enforce the terms of this Agreement.
6. Mutual Releases. On the Closing Date, subject to the performance of
Defendants of their obligation set forth in Section 2.2 of this Agreement,
each Party hereto, such Party's heirs, assigns and agents, do hereby fully
and forever, release, waive and discharge each of the Parties hereto, and
their respective officers, directors, shareholders, agents, employees,
successors and assigns, (hereinafter collectively referred to as the
"Releasees") from and against each and every claim, demand, cause of
action, obligation, damage, complaint, expense or action of any kind,
description or nature whatsoever, known or unknown, suspected or
unsuspected, that each Party has or may hereafter have, against the
Releasees. This mutual release specifically excludes the rights and
obligations of the parties under this Agreement, the escrow agreement, the
registration rights agreement, the non-recourse guarantees and the pledges.
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7. Representations of Plaintiffs. The Plaintiffs, individually, represent,
warrant and agree as follows:
7.1 Authority to Execute and Perform Agreement; No Breach. Each
Plaintiff has the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement and to perform
fully their respective obligations hereunder. This Agreement has been duly
executed and delivered by such Plaintiff and, assuming due execution and
delivery by, and enforceability against, Defendants, constitutes the valid
and binding obligation of such Plaintiff enforceable in accordance with its
terms, subject to the qualifications that enforcement of the rights and
remedies created hereby is subject to (i) bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
the rights and remedies of creditors, and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in
equity or at law). No approval or consent of, or filing with, any
governmental or regulatory body, and no approval or consent of, or filing
with, any other person is required to be obtained by such Plaintiffs or in
connection with the execution and delivery by such Plaintiffs of this
Agreement and consummation and performance by them of the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by such Plaintiffs and the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof by
such Plaintiffs will not:
(a) knowingly violate, conflict with or result in the breach of
any of the material terms of, or constitute (or with notice or lapse
of time or both would constitute) a material default under, any
contract, lease, agreement or other instrument or obligation to which
such Plaintiffs is a party or by or to which any of the properties and
assets of such Plaintiffs may be bound or subject;
(b) violate any order, judgment, injunction, award or decree of
any court, arbitrator, governmental or regulatory body, by which
either such Plaintiffs or the securities, assets, properties or
business of such Plaintiffs is bound; or
(c) knowingly violate any statute, law or regulation.
7.2 Securities Acknowledgements. Teltronics hereby acknowledges that:
(a) The Intelliworxx Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any
state securities act in reliance on exemptions therefrom.
(b) In connection with the purchase of the Intelliworxx Shares,
that no representation has been made by representatives of
Intelliworxx regarding its business, assets or prospects other than
that set forth herein and as set forth in the filings made by
Intelliworxx pursuant to Section 13 of the Securities Exchange Act of
1934, as amended and such other representations and warranties as set
forth in this Agreement.
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(c) The certificate or certificates representing the Intelliworxx
Shares will be inscribed with the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933. The securities have
been acquired for investment and may not be sold, transferred
assigned in the absence of an effective registration statement
for these securities under the Securities Act of 1933 or an
opinion of Teltronic's counsel, in form and substance reasonably
acceptable to Intelliworxx' counsel, that registration is not
required under said Act."
7.3 Securities Representations. Teltronics hereby represents, warrants
and agrees as follows:
(a) The Intelliworxx Shares are being acquired solely for such
Teltronics' own account, for investment and are not being acquired
with a view to or for the resale or distribution thereof, except as
contemplated by the Registration Rights Agreement, Teltronics has no
present plans to enter into any such contract, undertaking, agreement
or arrangement and Teltronics further understands that the
Intelliworxx Shares, may only be resold pursuant to a registration
statement under the Securities Act, or pursuant to some other
available exemption;
(b) Teltronics is an "accredited investor" as that term is
defined in Regulation D of the Securities Act and through its officers
and directors has sufficient knowledge and experience in financial and
business matters to be capable of evaluating the merits and the risks
of its investment in the Intelliworxx Shares and is able to bear the
economic risk of its investment in the Intelliworxx Shares;
8. Representations of Defendants. Each Defendant represents, warrants and
agrees as follows:
8.1 Authorization. Each Defendant has full power, legal capacity and
authority to enter into this Agreement, to execute all attendant documents
and instruments necessary to consummate the transaction herein
contemplated, and, as to Intelliworxx, to issue and sell the Intelliworxx
Shares to Teltronics, and to perform all of its obligations hereunder. This
Agreement and all other agreements, documents and instruments to be
executed in connection herewith have been effectively authorized by all
necessary action, corporate or otherwise, on the part of the Defendants,
which authorizations remain in full force and effect, have been duly
executed and delivered by the Defendants, and no other corporate
proceedings on the part of the Defendants are required to authorize this
Agreement and the transactions contemplated hereby, except as specifically
set forth herein. This Agreement constitutes the legal, valid and binding
obligation of the Defendants and is enforceable with respect to the
Defendants in accordance with its terms, except as enforcement hereof may
be limited by bankruptcy, insolvency, reorganization, priority or other
laws of court decisions relating to or affecting generally the enforcements
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of creditors' rights or affecting generally the availability of equitable
remedies. Neither the execution and delivery of this Agreement, nor the
consummation by the Defendants of any of the transactions contemplated
hereby, or compliance with any of the provisions hereof, will (i) conflict
with or result in a breach or, violation of, or default under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, credit agreement or other agreement, document, instrument
or obligation (including, without limitation, any of its charter documents)
to which the Defendants is a party or by which the Defendants or any of its
assets or properties may be bound, or (ii) violate any judgment, order,
injunction, decree, statute, rule or properties of the Defendants. No
authorization, consent or approval of any public body of authority or any
third party is necessary for the consummation by the Defendants of the
transactions contemplated by this Agreement.
8.2 Compliance with Law and Government Regulations. The Defendants are
in compliance with all applicable statutes, regulations, decrees, orders,
restrictions, guidelines and standards, whether mandatory or voluntary,
imposed by the United States of America, any state, county, municipality or
agency of any thereof, and any foreign country or government to which the
Defendants are subject. Without limiting the generality of the foregoing,
the Defendants have filed all reports and statements required to be filed
pursuant to the Securities Act of 1933 (the "1933 Act") and Securities
Exchange Act of 1934 (the "1934 Act") including all periodic reports
required under the Section 13 or 15 of the Exchange Act. Each of such
reports was complete, did not contain any material misstatement of or omit
to state any material fact.
8.3 Reduction in Ownership. At or prior to the Closing Date, the Xxxxx
X. Xxxxxx and Xxxxxxx X. Xxxxx collective ownership of Intelliworxx shall
have been decreased by not less than 15%.
8.4 Shares. The Intelliworxx Shares to be issued and delivered to
Teltronics shall be fully paid, non-assessable and free and clear of any
lien, claim, charge of encumbrance.
9. No Admission. The Parties agree that the execution of this Agreement is
not an admission by any of them of liability with respect to damages,
except as set forth in this Agreement.
10. Miscellaneous Provisions.
10.1 Severability. In the event that any provision of this Agreement
is found to be illegal or unenforceable by any court or tribunal of
competent jurisdiction, then to the extent that such provision may be made
enforceable by amendment to or modification thereof, the Parties agree to
make such amendment or modification so that the same shall be made valid
and enforceable to the fullest extent permissible under existing law and
public policies in the jurisdiction where enforcement is sought, and in the
event that the Parties cannot so agree, such provision shall be modified by
such court or tribunal to conform, to the fullest extent permissible under
applicable law, to the intent of the Parties in a valid and enforceable
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manner, if possible and if not possible, then be stricken entirely from the
Agreement by such court or tribunal and the remainder of this Agreement
shall remain binding on the parties hereto.
10.2 Amendment. No amendment or modification of the terms or
conditions of this Agreement shall be valid unless in writing and signed by
the party or parties to be bound thereby.
10.3 Governing Law. This Agreement shall be interpreted, construed,
governed and enforced according to the internal laws of the State of
Florida without regard to conflict or choice of law principles of Florida
or any other jurisdiction. This Agreement shall be executed in Florida and
is intended to be performed in Florida. In the event of litigation arising
out of this Agreement, the parties hereto consent to the personal
jurisdiction of the State of Florida, and agree to exclusively litigate
said actions, in the court having jurisdiction over the Lawsuit.
10.4 No Waiver. If any party to this Agreement fails to, or elects not
to enforce any right or remedy to which it may be entitled hereunder or by
law, such right or remedy shall not be waived, nor shall such nonaction be
construed to confer a waiver as to any continued or future acts, nor shall
any other right or remedy be waived as a result thereof. No right under
this Agreement shall be waived except as evidenced by a written document
signed by the party waiving such right, and any such waiver shall apply
only to the act or acts expressly waived in said document.
10.5 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart will, for all purposes, be deemed
an original instrument, but all such counterparts together will constitute
but one and the same Agreement.
10.6 Binding Agreement. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, and upon their respective
heirs, successors, assigns and legal representatives.
10.7 Counsel. Each of the parties hereto represents that it, she or he
has consulted legal counsel in connection with this Agreement, or has been
given full opportunity to review this Agreement with counsel of his, her or
its choice prior to execution thereof and has elected not to seek such
counsel. The parties hereto waive all claims that they were not adequately
represented in connection with the negotiation, drafting and execution of
this Agreement. Each party further agrees to bear its own costs and
expenses, including attorneys' fees, in connection with the Action and this
Agreement. If any Party initiates any legal action arising out of or in
connection with enforcement of this Agreement, the prevailing Party in such
legal action shall be entitled to recover from the other Party all
reasonable attorneys' fees, expert witness fees and expenses incurred by
the prevailing Party in connection therewith.
10.8 Notices. All notices and demands permitted, required or provided
for by this Agreement shall be made in writing, and shall be deemed
adequately delivered if delivered by hand or by mailing the same via the
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United States Mail, prepaid certified or registered mail, return receipt
requested, or by priority overnight courier for next business day delivery
by a nationally recognized overnight courier service that regularly
maintains records of its pick-ups and deliveries and has daily deliveries
to the area to which the notice is sent, addressed to the parties at their
respective addresses as shown below:
Name Address
---- -------
To Company Intelliworxx, Inc.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
With a Copy To: Xxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
To Teltronics: Teltronics Inc.
0000 Xxxxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
With a Copy To: Xxxx X. Xxxxx, Esq.
Xxxxx & Xxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
To Interactive Solutions: Interactive Solutions
c/o Teltronics Inc.
0000 Xxxxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
To Xxxxx X. Xxxxxx: Xxxxx X. Xxxxxx
c/o Intelliworxx, Inc.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
To Xxxxxxx X. Xxxxx: Xxxxxxx X. Xxxxx
c/o Intelliworxx, Inc.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
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To Wavelogic: Wavelogic, Inc.
c/o Intelliworxx, Inc.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Notices delivered personally shall be deemed communicated as of the
date of actual receipt. Notices mailed as set forth above shall be deemed
communicated as of the date three (3) business days after mailing, and
notices sent by overnight courier shall be deemed communicated as of the
date one (1) business day after sending.
10.9 Entire Agreement. This Agreement and the Exhibits hereto set
forth the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and supersedes all prior
agreements, promises, understandings, letters of intent, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any party hereto or by any related or unrelated third party.
All exhibits attached hereto, and all certificates, documents and other
instruments delivered or to be delivered pursuant to the terms hereof are
hereby expressly made a part of this Agreement, and all references herein
to the terms "this Agreement", "hereunder", "herein", "hereby" or "hereto"
shall be deemed to refer to this Agreement and to all such writings.
10.10 Successors and Assigns. As used herein the term "the Parties"
shall include their respective successors in interest, licensees or
assigns, except that Defendants shall not assign any of their rights or
delegate any of their obligations under this Agreement, except Intelliworxx
repurchase option set forth in Section 2.6 of this Agreement, without the
prior written consent of Teltronics.
10.11 Documents. At the conclusion of the Action, each Party shall
return to the other all documents and papers produced by the other in
connection with the Action.
10.12 Execution. Each person who signs this Agreement on behalf of a
corporate entity represents and warrants that he has full and complete
authority to execute this Agreement on behalf of such entity. Each party
shall bear the fees and expenses of its counsel and its own out-of-pocket
costs in connection with the Action and this Agreement.
10.13 Captions. The captions appearing in this Agreement are for
convenience only, and shall have no effect on the construction or
interpretation of this Agreement.
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Executed by the Parties on this 27th day of October, 2000.
Intelliworxx, Inc. Teltronics, Inc.
By: /s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxx
--------------------------------- --------------------------------
Name: Xxxxx X. Xxxxxxxx Name: Xxxx X. Xxxxxxx
------------------------------- ------------------------------
Title: Chairman & CEO Title: President & CEO
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Xxxxx X. Xxxxxx Interactive Solutions, Inc.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxxxx
------------------------------------ --------------------------------
Name: Xxxx X. Xxxxxxx
------------------------------
Xxxxxxx X. Xxxxx Title
------------------------------
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Wavelogic, Inc.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
-------------------------------
Title: President
------------------------------
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