EXHIBIT 10.4
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (the "Agreement"), dated as
of the 25th day of February, 1998, is made and entered into on
the terms and conditions hereinafter set forth, by and among
TELTRONICS, INC., a Delaware corporation ("Teltronics"), TTG
ACQUISITION CORP., a Delaware corporation, Teltronics/SRX, Inc.,
a Delaware corporation, AT SUPPLY, INC., a Texas corporation, and
INTERACTIVE SOLUTIONS, INC., a Delaware corporation (each of the
foregoing entities, including Teltronics, is sometimes referred
to herein as a "Borrower", and the foregoing entities, including
Teltronics, are sometimes collectively referred to herein as the
"Borrowers"), and SIRROM CAPITAL CORPORATION d/b/a TANDEM
CAPITAL, a Tennessee corporation ("Lender").
RECITALS:
Borrowers have requested that Lender make available to
Borrowers loans in the aggregate principal amount of $1,280,000,
upon the terms and conditions hereinafter set forth, and for the
purposes hereinafter set forth (each, a "Loan" and collectively
the "Loans").
NOW, THEREFORE, in consideration of the agreement of Lender
to make the Loans, the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
Borrowers and Lender hereby agree as follows:
ARTICLE I
THE LOAN
Section 1.1 Evidence of Loan Indebtedness and Repayment.
The Loans shall be evidenced by (i) a Secured Senior
Subordinated Promissory Note in the principal amount of
$1,000,000 substantially in the form attached hereto as Exhibit
A-1 (the "A Loan Note") and (ii) a Secured Senior Subordinated
Promissory Note in the principal amount of $280,000 substantially
in the form attached hereto as Exhibit A-2 (the "B Loan Note"),
executed by each Borrower in favor of Lender (the A Loan Note and
the B Loan Note, collectively, the "Notes"). Each Loan shall be
in the original principal amount indicated in the Notes, shall be
payable in accordance with the terms of each such Note, and shall
be prepayable at any time, in whole or in part, without penalty
or premium.
Section 1.2 Advances.
Subject to the terms and conditions of this Agreement,
Lender shall fund the Loans to Borrowers in a single advance on
the date of this Agreement, net of any portion of the Processing
Fee (as defined in Section 1.3) which is not paid in advance and
net of fees and expenses of Lender, including, without
limitation, the fees and expenses of counsel to Lender.
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Section 1.3 Processing Fee.
In connection with the making of the Loan, Borrowers shall
pay to Lender a processing fee in the amount of $32,000 (the
"Processing Fee"), which amount, together with the expenses of
Lender, shall be deducted from the loan proceeds.
Section 1.4 Stock Purchase Warrant.
(a) Issuance of Warrant; Registration Rights. In
consideration for Lender's entering into this Agreement and for
making the Loans contemplated herein, Teltronics shall deliver to
Lender a Stock Purchase Warrant to purchase 365,000 shares of
common stock, par value $.001 per share, of Teltronics
("Teltronics Common Stock") at an exercise price of $2.75 per
share (which number of shares and price shall be adjusted upon
the occurrence of certain events as described therein),
substantially in the form attached hereto as Exhibit B (the
"Warrant"), executed by Teltronics in favor of Lender. The
holder(s) of shares of Teltronics Common Stock issued or issuable
upon exercise of the Warrant shall be entitled to registration
rights as described in a Registration Rights Agreement, dated the
date of this Agreement and substantially in the form attached
hereto as Exhibit C, delivered by Teltronics to Lender (the
"Registration Rights Agreement").
(b) Investment Representations. Lender represents and
warrants to Teltronics that (i) Lender is a registered investment
company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and as such is, an "accredited
investor" under Rule 501(a) under the Securities Act of 1933, as
amended (the "Securities Act"); (ii) Lender is acquiring the
Warrant for its own account, for investment, and not with a view
to the distribution or resale thereof, in whole or in part, in
violation of the Securities Act or any applicable state
securities law, and Lender has no present intention of selling,
negotiating or otherwise disposing of the Warrant, it being
understood that Lender intends to transfer and assign, without
consideration, the Warrant and all of Lender's rights and
obligations under the Warrant and the Registration Rights
Agreement to one or more wholly-owned subsidiaries of Lender,
which subsidiaries are and will also be "accredited investors"
under Rule 501(a); and (iii) Lender is an "institutional
investor" as defined under Section 48-2-102 of the Tennessee
Securities Act of 1980 for purposes of the exemption set forth
under Section 48-2-103(b)(3) of such act.
Section 1.5 Intercreditor Agreement.
The relative rights in the Collateral (as defined in Section
2.1) of the Lender, on the one hand, and the CIT Group/Credit
Finance, Inc. ("CIT"), pursuant to the provisions of that certain
Loan and Security Agreement dated October 28, 1994 among the
Company, Teltronics and certain of the Borrowers, as amended from
time to time (the "CIT Credit Agreement"), on the other hand,
shall be governed by the terms of an Intercreditor Agreement
among Lender, CIT and Borrowers in the form attached hereto as
Exhibit D (the "Intercreditor Agreement").
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ARTICLE II
SECURITY
Section 2.1 Security.
As security for the Secured Obligations (as defined in
Section 2.2), each Borrower hereby grants to Lender a security
interest in the following described property, and any and all
proceeds and products thereof (collectively, the "Collateral"):
(a) Equipment. All machinery and equipment, all data
processing and office equipment, all computer equipment,
hardware, firmware and software, all furniture, fixtures,
appliances and all other goods of every type and description,
whether now owned or hereafter acquired and wherever located,
together with all parts, accessories and attachments and all
replacements thereof and additions thereto;
(b) Inventory. All inventory and goods, whether held for
lease, sale or furnishing under contracts of service, all
agreements for lease of same and rentals therefrom, whether now
in existence or owned or hereafter acquired and wherever located;
(c) General Intangibles. All rights, interests, choses in
action, causes of action, claims and all other intangible
property of every kind and nature, in each instance whether now
owned or hereafter acquired, including, but not limited to, all
corporate and business records; all loans, royalties, and other
obligations receivable; all trade secrets, inventions, designs,
patents, patent applications, registered or unregistered service
marks, trade names, trademarks, copyrights and the goodwill
associated therewith and incorporated therein, and all
registrations and applications for registration related thereto;
all goodwill, licenses, permits, franchises, customer lists and
credit files; all customer and supplier contracts, firm sale
orders, rights under license and franchise agreements, and other
contracts and contract rights; all right, title and interest
under leases, subleases, licenses and concessions and other
agreements relating to real or personal property and any security
agreements relating thereto; all rights to indemnification; all
proceeds of insurance of which any Borrower is beneficiary; all
letters of credit, guarantees, liens, security interests and
other security held by or granted to any Borrower; and all other
intangible property, whether or not similar to the foregoing;
(d) Accounts, Chattel Paper, Instruments and Documents.
All accounts, accounts receivable, chattel paper, instruments and
documents, whether now in existence or owned or hereafter
acquired, entered into, created or arising, and wherever located
(provided that the parties agree that except and until an Event
and Default hereunder, Borrowers shall be entitled to collect all
accounts receivable and use the proceeds collected for their own
purposes and in their sole discretion, except as otherwise
restricted by the provisions of this Agreement); and
(e) Other Property. All other personal property or
interests in property now owned or hereafter acquired.
Section 2.2 Secured Obligations.
Without limiting any of the provisions thereof, the Security
Instruments (as defined in Section 2.3) shall secure the
following indebtedness and obligations (the "Secured
Obligations"):
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(a) the full and timely payment of the indebtedness
evidenced by the Notes, together with interest thereon, and any
extensions, modifications, consolidations or renewals thereof,
and any notes given in payment thereof;
(b) the full and prompt performance of all of the
obligations of any Borrower to Lender under the Loan Documents
(as defined in Section 2.3) to which any Borrower is a party;
(c) the full and prompt payment of all court costs and
other costs and expenses of whatever kind reasonably incurred in
the collection of the indebtedness evidenced by the Notes, the
enforcement or protection of the security interests of the
Security Instruments (as defined in Section 2.3) or the exercise
of any rights or remedies of Lender with respect to the
indebtedness evidenced by the Notes, including without limitation
the reasonable attorney and paralegal fees and costs incurred by
Lender, all of which Borrowers agrees to pay to Lender upon
demand; and
(d) the full and prompt payment and performance of any and
all other indebtedness and other obligations of any Borrower to
Lender, direct or contingent, however evidenced or denominated,
and however and whenever incurred, including but not limited to
indebtedness incurred pursuant to any present or future
commitment to lend money of Lender to any Borrower, together with
interest thereon, and any extensions, modifications,
consolidations and/or renewals thereof and any notes given in
payment thereof.
Section 2.3 Security Instruments.
The Secured Obligations shall also be secured by the assets
of each Borrower in which a security interest is granted pursuant
to that certain Trademark and Patent Security Agreement in
substantially the form attached hereto as Exhibit E (the
"Trademark and Patent Security Agreement"). This Agreement, the
Trademark and Patent Security Agreement and any other
instruments, documents or agreements now or hereafter securing
the Secured Obligations are herein collectively referred to as
the "Security Instruments". The Security Instruments, together
with the Notes and any other instruments and documents now or
hereafter evidencing, securing or in any way related to the
indebtedness evidenced by the Notes are herein individually
referred to as a "Loan Document" and collectively referred to as
the "Loan Documents".
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
Each of the Borrowers, jointly and severally, hereby
represents and warrants to Lender as follows:
Section 3.1 Corporate Status.
(a) Each Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation, and has the corporate power to own and operate its
properties, to carry on its business as now conducted and to
enter into and to perform its obligations under this Agreement
and the other Loan Documents to which it is a party. Each
Borrower is duly qualified to do business and is in good standing
in each state or other jurisdiction in which a failure to be so
qualified could give rise to a Material Adverse Event, as
hereinafter defined. The states or other jurisdictions in which
any Borrower is so qualified are set forth on Schedule 3.1(a).
For purposes of this Agreement, "Material Adverse Event" means
any event or circumstance, or set of
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events or circumstances, individually or collectively, that
reasonably could be expected to result in any (i) adverse effect
upon the validity or enforceability of any Loan Document, or
(ii) material and adverse effect on the condition (financial or
otherwise), business, operations, properties or prospects of a
Borrower, or (iii) default hereunder or thereunder.
(b) None of Borrowers owns, directly or indirectly, any
capital stock or other equity interest of any corporation,
partnership, joint venture, limited liability company or other
business organization (a "Subsidiary"), except that Teltronics
owns: (i) all of the outstanding capital stock of TTG
Acquisition Corp., (ii) all of the outstanding capital stock of
Teltronics/SRX, Inc., (iii) eighty-five percent (85%) of the
voting stock of Interactive Solutions, Inc. on a fully-diluted,
as-converted basis, and (iv) eighty percent (80%) of the voting
stock of AT Supply, Inc. on a fully-diluted, as-converted basis.
(c) The authorized capital stock of each of the Borrowers,
the number of shares of each of Borrowers issued and outstanding
and, in the case of each of the Borrowers other than Teltronics,
the holder(s) of all such issued and outstanding shares, is set
forth on Schedule 3.1(c).
(d) Except as specified in Schedule 3.1(d), there are no
outstanding options, warrants or rights to purchase or acquire
from any Borrower any securities of any Borrower, there are no
securities outstanding or committed to be issued by any Borrower
which are convertible into or exchangeable for any shares of
capital stock or other securities of any Borrower, and there are
no contracts, commitments, agreements, understandings,
arrangements or restrictions relating to any shares of capital
stock or other securities of any Borrower, whether or not
outstanding, to which any Borrower is a party or by which it is
bound or, to the best knowledge of each Borrower, to which any of
its shareholders is a party or by which any such shareholder is
bound. All of the shares of capital stock of each of the
Borrowers are validly issued, fully paid and non-assessable and
were not issued in violation of any preemptive rights, rights of
first refusal, anti-dilution rights or any similar rights held by
any party. None of the Borrowers has violated any federal or
state securities laws in connection with the issuance of any
securities.
(e) Except as set forth on Schedule 3.1(e), none of the
Borrowers is under any registration obligation under the
Securities Act, any state securities law or the Trust Indenture
Act of 1939, as amended, with respect to any equity securities or
debt securities of any Borrower, whether presently outstanding,
issuable upon exercise or conversion of any instrument or
subsequently issuable.
Section 3.2 Authorization.
Each Borrower has full legal right, power and authority to
enter into and perform its obligations under the Loan Documents,
without the consent or approval of any other person, firm,
governmental agency or other legal entity, other than consents
listed on Schedule 3.2, which consents have previously been
obtained. Each Borrower has all necessary right, power and
authority to grant to Lender a valid and enforceable security
interest in the Collateral. The execution and delivery of this
Agreement, the borrowing hereunder, the execution and delivery of
each Loan Document to which any Borrower is a party, and the
performance by each Borrower of its obligations hereunder and
thereunder are within the corporate powers of such Borrower and
have been duly authorized by all necessary corporate action
properly taken, have received all necessary governmental
approvals, if any were required, and do not and will not
contravene or conflict with the articles of incorporation or
bylaws of such Borrower or any material agreement to which any
Borrower is a party or which is binding upon such Borrower or its
properties or any provision of law,
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any applicable judgment, ordinance, regulation or order of any
court or governmental agency. The officers executing this Agreement,
the Notes and all of the other Loan Documents to which any Borrower
is a party, are duly authorized to act on behalf of each such Borrower.
Section 3.3 Validity and Binding Effect.
This Agreement and the other Loan Documents are the legal,
valid and binding obligations of each Borrower, enforceable in
accordance with their respective terms.
Section 3.4 Priority of Liens; Title to Property.
Except as disclosed on Schedule 3.4, there are no
outstanding loans, liens, pledges, security interests, agreements
or other financings which provide any third person with a lien
against any of the collateral securing the Secured Obligations,
whether such collateral is pledged pursuant to this Agreement or
any other Security Instruments. Except as disclosed on Schedule
3.4, each Borrower has good and marketable title to all of its
property, free and clear of any and all claims, liens,
encumbrances, equities and restrictions, except such claims,
liens, encumbrances, equities and restrictions which would not,
in the aggregate, cause a Material Adverse Event.
Section 3.5 Location of Collateral.
The location of the chief executive office and principal
place of business of each Borrower is set forth on Schedule
3.5(a), and all records or documents with respect to intangible
personal property comprising the Collateral are maintained at one
of such addresses. All of the Collateral comprised of tangible
personal property is located at one of the addresses set forth on
Schedule 3.5(a) or one of the addresses set forth on Schedule
3.5(b).
Section 3.6 Litigation.
Except as set forth on Schedule 3.6, there are no actions,
suits or proceedings pending, or, to the knowledge of any
Borrower, threatened, against or affecting any Borrower or
involving the validity or enforceability of any of the Loan
Documents or the priority of the liens thereof, at law or in
equity, or before any governmental or administrative agency,
except actions, suits and proceedings that are fully covered by
insurance and that, if adversely determined, would not impair
materially the ability of any Borrower to perform each and every
one of its obligations under and by virtue of the Loan Documents;
and to each Borrower's knowledge, no Borrower is in default with
respect to any order, writ, injunction, decree or demand of any
court or any governmental authority.
Section 3.7 Financial Statements.
The consolidated financial statements of Teltronics and its
Subsidiaries, including each Borrower, for the fiscal years ended
December 31, 1994, December 31, 1995, and December 31, 1996, and
the unaudited consolidated financial statements as of and for the
nine (9) months ended September 30, 1997, and the related notes,
copies of which Teltronics previously has delivered to Lender,
fairly present the financial position, results of operations,
cash flows and changes in stockholders' equity of Teltronics and
its consolidated Subsidiaries, at the respective dates of and for
the periods to which they apply in such financial statements and
have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout
the periods indicated, subject, in the case of interim financial
statements, to normal recurring year-end adjustments (the effect
of which will not, individually or in the aggregate, cause a
Material Adverse Event). No material adverse change has
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occurred in the condition (financial or otherwise), business, operations,
properties or prospects of any Borrower since September 30, 1997,
and no additional indebtedness or obligations have been incurred
by any Borrower since the date(s) thereof, other than trade
payables incurred in the ordinary course of business.
Section 3.8 No Defaults.
Consummation of the transactions hereby contemplated and the
performance of the obligations of each Borrower under and by
virtue of the Loan Documents will not result in any breach of,
contravene, conflict with, or constitute a default under, (i) the
charter documents or bylaws of any Borrower, (ii) any provision
of law, any applicable judgment, ordinance, regulation, or under
order of any court or governmental agency which breach,
contravention, conflict or default could give rise to a Material
Adverse Event, or (iii) any mortgage, security deed or agreement,
deed of trust, lease, loan or credit agreement, partnership
agreement, license, franchise or any other material instrument or
agreement to which any Borrower is a party or by which any
Borrower or its properties may be bound or, to the knowledge of
any Borrower, affected.
Section 3.9 Compliance With Law.
To its knowledge, each Borrower is in compliance with all
federal, state and local laws, regulations, decrees and orders
applicable to it (including but not limited to occupational and
health standards and controls, antitrust, monopoly, restraint of
trade or unfair competition), except to the extent that
noncompliance, in the aggregate, would not give rise to a
Material Adverse Event.
Section 3.10 Environmental Matters.
No Borrower has knowledge of (i) the presence, except in
compliance with Applicable Environmental Laws, of any Hazardous
Substances (as defined below) on any property owned, leased or
otherwise controlled by any Borrower (collectively, the
"Property"); (ii) any spills, releases, discharges, or disposal
of Hazardous Substances that have occurred or are presently
occurring on or onto any of the Property; (iii) the presence on
any of the Property of underground or above-ground storage tanks
or pipelines which are required to be licensed by any local,
state or federal agency; (iv) any spills or disposal of Hazardous
Substances that have occurred or are occurring off the Property
as a result of any construction on or operation and use of the
Property; (v) any failure by any Borrower to comply with any
Applicable Environmental Laws (as defined below); (vi) any
notices related to any Borrower or any of the Property claiming a
violation of any Applicable Environmental Laws, or the
commencement of any action or proceeding against any Borrower or
related to any of the Property alleging a violation of Applicable
Environmental Laws; (vii) any notices related to any Borrower or
any of the Property requiring compliance with Applicable
Environmental Laws, or demanding payment or contribution for
injury to the environment or human health; or (viii) any
outstanding notices or citations relating to violations by any
former owner or operator of any of the Property. For the
purposes of this Agreement, (A) "Hazardous Substances" means any
substance or material defined or designated as a hazardous or
toxic waste, material or substance, or other similar term, by any
federal, state, or local environmental statute, regulation, or
ordinance presently in effect, including, without limitation,
asbestos in any form, urea formaldehyde foam insulation,
petroleum products, and polychlorinated biphenyls; and (B)
"Applicable Environmental Laws" means any and all applicable
local, state, and federal environmental laws, regulations,
ordinances, and administrative and judicial orders relating to
the generation, recycling, reuse, sale, storage, handling,
transport, or disposal of any Hazardous Substances.
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Section 3.11 Taxes.
Each Borrower has filed or caused to be filed all federal,
state and local income, excise and franchise tax returns required
to be filed (except for returns that have been appropriately
extended), and has paid, or provided for the payment of, all
taxes shown to be due and payable on said returns and all other
taxes, impositions, assessments, fees or other charges imposed on
it by any governmental authority, agency or instrumentality,
prior to any delinquency with respect thereto (other than taxes,
impositions, assessments, fees and charges currently being
contested in good faith by appropriate proceedings, for which
appropriate amounts have been reserved), and no Borrower knows of
any proposed assessment for additional taxes or any basis
therefor. No tax liens have been filed against any Borrower or
any of their properties.
Section 3.12 Certain Transactions.
Except as set forth on Schedule 3.12(i) and except as to
indebtedness incurred in the ordinary course of business and
approved by the Board of Directors of Teltronics, no Borrower is
indebted, directly or indirectly, to any of its officers or
directors, or to their respective spouses or children, in excess
of an aggregate amount of $60,000, and none of the officers or
directors or any members of their immediate families are indebted
to Borrowers in excess of an aggregate amount of $60,000 or have
any direct or indirect ownership interest in any firm or
corporation with which any Borrower is affiliated or with which
any Borrower has a business relationship, or any firm or
corporation which competes with any Borrower, except that an
officer and/or director of any Borrower may own no more than 1.0%
of the outstanding stock of any publicly traded company which
competes directly with such Borrower. Except as set forth on
Schedule 3.12(ii), no officer or director of any Borrower or any
member of their immediate families is, directly or indirectly,
interested in any material contract with any Borrower. Except as
set forth on Schedule 3.12(iii), no Borrower is a guarantor or
indemnitor of any indebtedness of any other person, firm or
corporation.
Section 3.13 Corporate or Trade Names.
Except as set forth on Schedule 3.13, in the preceding five
(5) years, no Borrower has been known as or conducted business
under any name other than the name used by such Borrower in
executing this Agreement.
Section 3.14 Intellectual Property.
Each Borrower is the lawful owner or licensee of all
proprietary information used by it in the operation of its
business except to the extent that the failure to own or license
such proprietary information could not give rise to a Material
Adverse Event, and all proprietary information owned by each
Borrower is owned free and clear of any claim, right, trademark,
patent or copyright protection of any third party. As used
herein, "proprietary information" includes without limitation
(i) any computer software and related documentation, inventions,
technical data and nontechnical data related thereto, and (ii)
other documentation, inventions and data related to patterns,
plans, methods, techniques, drawings, finances, customer lists,
suppliers, products, special pricing and cost information,
designs, processes, procedures, formulas, research data owned or
used by any Borrower or marketing studies conducted by any
Borrower, all of which is commercially important and
competitively sensitive and which generally has not been
disclosed to third parties other than customers in the ordinary
course of business. Each Borrower has good title or has a valid
and enforceable license to all patents, trademarks, trade names,
service marks, copyrights or other
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intangible property rights, and registrations or applications for
registration thereof, owned by such Borrower or used or required by
such Borrower in the operation of its business as presently being conducted.
No Borrower has any knowledge of any infringement or conflict with
asserted rights of others with respect to copyrights, patents,
trademarks, service marks, trade names, trade secrets or other
intangible property rights or know-how utilized by any Borrower.
To the knowledge of each Borrower, no products or processes of
any Borrower infringe or conflict with any rights of patent or
copyright, or any discovery, invention, product or process, that
is the subject of a patent or copyright application or
registration known to any Borrower. Each Borrower follows such
procedures as are necessary to provide reasonable protection of
such Borrower's trade secrets and proprietary rights in
intellectual property of all kinds. To the knowledge of each
Borrower, no person employed by or affiliated with any Borrower
has employed or proposes to employ any trade secret or any
information or documentation proprietary to any former employer
and, to the knowledge of each Borrower, no person employed by or
affiliated with any Borrower has violated any confidential
relationship that such person may have had with any third person,
in connection with the development, manufacture, sale or lease of
any product or proposed product or the development or sale of any
service or proposed service of any Borrower.
Section 3.15 Regulatory Compliance.
No business of any Borrower is subject to the special
regulation of any federal, state or local governmental regulatory
body by reason of the nature of the business being conducted.
Except where failure to do so does not and would not constitute a
Material Adverse Event, each Borrower has obtained all licenses,
permits and governmental approvals and authorizations necessary
or proper in order to conduct its business and affairs as
heretofore conducted and as hereafter intended to be conducted
and as necessary for the conduct of its business and for the
ownership, maintenance and operation of its properties and
assets. All such licenses, permits and authorizations are in
full force and effect.
Section 3.16 ERISA.
Each Borrower is in compliance in all material respects with
all applicable provisions of Title IV of the Employee Retirement
Income Security Act of 1974, Pub. L. No. 93-406, September 2,
1974, 88 Stat. 829, 29 U.S.C.A. Section 1001 et seq. (1975), as amended
from time to time ("ERISA"). Except as disclosed in Schedule
3.16, neither a reportable event nor a prohibited transaction (as
defined in ERISA) has occurred and is continuing with respect to
any "pension plan" (as such term is defined in ERISA, a "Plan");
no notice of intent to terminate a Plan has been filed nor has
any Plan been terminated; no circumstances exist which constitute
grounds entitling the Pension Benefit Guaranty Corporation
(together with any entity succeeding to or all of its functions,
the "PBGC") to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any
such proceedings; neither any Borrower nor any commonly
controlled entity (as defined in ERISA) has completely or
partially withdrawn from a multiemployer plan (as defined in
ERISA); each Borrower and each commonly controlled entity has met
its minimum funding requirements under ERISA with respect to all
of its Plans and the present fair market value of all Plan
property exceeds the present value of all vested benefits under
each Plan, as determined on the most recent valuation date of the
Plan and in accordance with the provisions of ERISA and the
regulations thereunder for calculating the potential liability of
the Company or any commonly controlled entity to the PBGC or the
Plan under Title IV or ERISA; and neither the Company nor any
commonly controlled entity has incurred any liability to the PBGC
under ERISA.
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Section 3.17 Regulations G, T, U and X.
No Borrower is engaged in the business of extending credit
for the purposes of purchasing or carrying margin stock, and no
proceeds of the Loans will be used for a purpose which violates,
or would be inconsistent with, Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System.
Section 3.18 Government Regulation.
No Borrower is an "investment company" within the meaning of
the Investment Company Act, or a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or subject to regulation
under the Federal Power Act, the Interstate Commerce Act or any
other federal law or state laws limiting its ability to incur
indebtedness or to execute, deliver or perform the Loan
Documents.
Section 3.19 SEC Reports.
Teltronics' Common Stock has been duly registered with the
Securities and Exchange Commission ("SEC") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Since
January 1, 1995, Teltronics has timely filed all reports,
registrations, proxy or information statements and all other
documents, together with any amendments required to be made
thereto, required to be filed with the SEC under the Securities
Act and the Exchange Act (collectively, the "SEC Reports").
Teltronics previously has furnished to Lender true copies of all
the SEC Reports, together with all exhibits thereto that Lender
has requested, and Teltronics' annual report to stockholders for
the year ended December 31, 1996, which annual report meets the
requirements of Rule 14a-3 or 14e-3 under the Exchange Act (the
"Annual Report"). The financial statements contained in the SEC
Reports fairly presented (or will fairly present, as the case may
be) the financial position of Teltronics and its consolidated
Subsidiaries as of the dates mentioned and the results of
operations, changes in stockholders' equity and changes in
financial position or cash flows for the periods then ended in
conformity with GAAP applied on a consistent basis throughout the
periods involved. As of their respective dates, the SEC Reports
complied (or will comply, as the case may be) in all material
respects with all rules and regulations promulgated by the SEC
and did not (or will not, as the case may be) contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
Section 3.20 Accounting Matters.
The books of account, minute books, stock record books and
other records of each Borrower are complete and correct, have
been maintained in accordance with sound business practices and
accurately and fairly reflect the transactions and dispositions
of the assets of such Borrower. Each Borrower maintains a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability
for the assets of each Borrower; (iii) access to the assets of
each Borrower is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded
accountability for assets of each Borrower are compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
11
Section 3.21 Insurance.
Each Borrower has maintained insurance coverage by
financially sound and reputable insurers with respect to their
respective properties and business in such forms and amounts and
against such risks, casualties and contingencies as are customary
for corporations of comparable size and condition (financial and
otherwise) engaged in the same or a similar business and owning
and operating similar properties.
Section 3.22 Employees.
Schedule 3.22 sets forth the number of full-time employees
and full-time equivalent employees of and each Borrower as of the
most recent payroll date, which date is set forth therein. To
the best of each Borrower's knowledge, there is no strike, labor
dispute or union organization activities pending or threatened
between it and its employees. None of the employees of any
Borrower belongs to any union or collective bargaining unit. To
the best of its knowledge, each Borrower has complied in all
material respects with all applicable state and federal equal
opportunity and other laws related to employment. To the best of
each Borrower's knowledge, no employee of each Borrower is or
will be in violation of any judgment, decree, or order, or any
term of any employment contract, patent disclosure agreement, or
other contract or agreement relating to the relationship of any
such employee with the Borrower, or any other party, because of
the nature of the business conducted or presently proposed to be
conducted by the Borrower or to the use by the employee of his or
her best efforts with respect to such business. Except as
disclosed in Schedule 3.22, no Borrower is a party to or bound by
any employment contract, deferred compensation agreement, bonus
plan, incentive plan, profit sharing plan, retirement agreement,
or other employee compensation agreement. No Borrower is aware
that any officer or key employee, or that any group of key
employees, intends to terminate their employment with such
Borrower, nor does such Borrower have a present intention to
terminate the employment of any of the foregoing. Subject to
general principles related to wrongful termination of employees,
the employment of each officer and employee of a Borrower is
terminable at the will of the Borrower.
Section 3.23 Financing Statements.
Neither (i) that certain Financing Statement filed in
the Office of the Secretary of State of the State of Florida on
August 18, 1997 (File No. 970000184501) nor (ii) that certain
Financing Statement filed in the Office of the Secretary of State
of the State of Florida on July 2, 1997 (File No. 970000146543)
perfect a security interest in any of the assets of Interactive
Solutions, Inc., a Delaware corporation and a subsidiary of
Teltronics.
Section 3.24 Statements Not False or Misleading.
No representation or warranty given as of the date hereof by
any Borrower contained in this Agreement or any schedule attached
hereto or any statement in any document, certificate or other
instrument furnished or to be furnished to Lender pursuant
hereto, taken as a whole, contains or will (as of the time so
furnished) contain any untrue statement of a material fact, or
omits or will (as of the time so furnished) omit to state any
material fact which is necessary in order to make the statements
contained therein not misleading.
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Section 3.25 Survival.
The representations and warranties of each Borrower
contained in this Agreement or any schedule attached hereto or
any statement in any document, certificate or other instrument
furnished or to be furnished to Lender pursuant hereto, shall
survive until this Agreement terminates in accordance with
Article 7 hereof.
ARTICLE IV
COVENANTS AND AGREEMENTS OF BORROWER
Each of the Borrowers hereby covenants and agrees as follows:
Section 4.1 Use of Proceeds.
Borrowers shall use the proceeds of the Loans solely for the
purposes set forth on Schedule 4.1 hereto, including payment to
CIT of amounts described in the Pay-Off Letter, in the form of
Exhibit J attached hereto.
Section 4.2 Corporate Existence, No Dissolution, Etc.
Each Borrower will preserve and keep in force and effect its
corporate existence and good standing in the state of
incorporation thereof, its qualification and good standing as a
foreign corporation in each jurisdiction where such qualification
is required by applicable law, and all licenses and permits
necessary to the proper conduct of its business. No Borrower
will permit dissolution or liquidation of such Borrower or any
other Borrower.
Section 4.3 Maintenance of Assets, Etc.
Each Borrower will maintain, preserve and keep its
properties and assets which are used or useful in the conduct of
its business (whether owned in fee or pursuant to a leasehold
interest) in good repair and working order and from time to time
will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be
maintained.
Section 4.4 Nature of Business.
No Borrower will engage in any business if, as a result, the
general nature of the business, taken on a consolidated basis,
which would then be engaged in by the Borrowers would be
substantially changed from the general nature of the business
engaged in by Teltronics and the other Borrowers on the date of
this Agreement.
Section 4.5 Insurance.
Without limiting any of the requirements of any of the other
Loan Documents, each Borrower shall maintain, in amounts
customary for entities engaged in comparable business activities,
fire, liability and other forms of insurance on its properties
(including but not limited to the collateral now or hereafter
securing payment and performance of the Secured Obligations),
against such hazards and in at least such amounts as is customary
in such Borrower's business. Lender shall be named as an
additional insured with respect to liability insurance and loss
payee with respect to hazard insurance. Each such insurance
policy shall require the insurer to notify Lender in writing at
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least thirty (30) days prior to any cancellation or material
alteration of such policy. At the request of Lender, each
Borrower will deliver forthwith a certificate specifying the
details of such insurance in effect.
Section 4.6 Taxes, Claims for Labor and Materials.
Each Borrower shall (i) file all tax returns and appropriate
schedules thereto that are required to be filed under applicable
law, prior to the date of delinquency, (ii) pay and discharge all
taxes, assessments and governmental charges or levies imposed
upon such Borrower, upon its income and profits or upon any
properties belonging to it, prior to the date on which penalties
attach thereto, and (iii) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a
lien or charge upon any of its properties; provided that each
Borrower shall have the right to contest in good faith and by
appropriate proceedings the applicability or validity of any such
tax, assessment, charge or levy without paying such tax,
assessment, charge or levy so long as adequate reserves with
respect thereto are maintained in accordance with GAAP.
Section 4.7 Compliance with Law and Agreements.
Except where failure to do so does not and would not
constitute a Material Adverse Event, each Borrower shall (a)
maintain its business operations and property owned or used in
connection therewith in compliance with (i) all applicable
federal, state and local laws, regulations and ordinances, and
such laws, regulations and ordinances of foreign jurisdictions,
governing such business operations and the use and ownership of
such property, and (ii) all agreements, licenses, franchises,
indentures and mortgages to which such Borrower is a party or by
which such Borrower or any of its properties is bound and (b) pay
all of its indebtedness promptly and substantially in accordance
with the terms thereof.
Section 4.8 ERISA Matters.
If any Borrower has in effect, or hereafter institutes, a
Plan, then the following covenants shall be applicable during
such period as any such Plan shall be in effect: (i) throughout
the existence of the Plan, such Borrower's contributions under
the Plan will meet the minimum funding standards required by
ERISA and the Borrower will not institute a distress termination
of the Plan; and (ii) such Borrower will send to Lender a copy of
any notice of a reportable event (as defined in ERISA) required
by ERISA to be filed with the Labor Department or the Pension
Benefit Guaranty Corporation, at the time that such notice is so
filed.
Section 4.9 Books and Records; Rights of Inspection.
Each Borrower shall keep proper books of record and account
in which full and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of the
Borrower, in accordance with GAAP consistently maintained. Each
Borrower shall permit a representative of Lender to visit any of
its properties and inspect its properties (including, but not
limited to, the Collateral and the other items of collateral
described in the Security Instruments), corporate books and
financial records, and will discuss its accounts, affairs and
finances with such Borrower or the principal offices of such
Borrower,, during reasonable business hours, at all such times as
Lender may reasonably request.
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Section 4.10 Reports.
Teltronics, and where indicated, the other Borrowers, shall
furnish to Lender the following:
(a) Monthly Statements. Within twenty (20) days of the end
of each month, beginning the month of March 1998, monthly
internal financial reports which at a minimum shall consist of a
consolidated balance sheet of Teltronics as of the close of such
month and related consolidated statements of income and cash
flows for the one-month period then ended and for the prior
months of the current fiscal year (on a year to date basis), each
compared to the same period in the previous fiscal year, all in
reasonable detail, and unaudited but prepared on the basis of
GAAP consistently applied (except for the absence of footnotes
and subject to year-end adjustments, as well as any additional
financial reports for such period routinely prepared with respect
to the Borrowers;
(b) Quarterly Statements. As soon as available and in any
event within thirty (30) days after the end of each quarterly
fiscal period (except the last) of each fiscal year, copies of:
(i) consolidated and consolidating balance sheets of
Teltronics and each Borrower as of the close of the
three-month period then ended, setting forth in
comparative form the consolidated figures at the end of
the preceding fiscal year,
(ii) consolidated and consolidating statements of
income and retained earnings of Teltronics and each
Borrower for the three-month period then ended, setting
forth in comparative form the consolidated figures for
the corresponding period of the preceding fiscal year,
and
(iii) consolidated and consolidating statements of
cash flows of Teltronics and each Borrower for the
portion of the fiscal year ending with such three-month
period, setting forth in comparative form the
consolidated figures for the corresponding period of
the preceding fiscal year,
all in reasonable detail and certified as complete and correct by
an authorized financial officer of Teltronics;
(c) Annual Statements. As soon as available and in any
event within ninety (90) days after the close of each fiscal year
of Teltronics, copies of:
(i) consolidated and consolidating balance sheets of
Teltronics and each Borrower as of the close of such
fiscal year, and
(ii) consolidated and consolidating statements of
income and retained earnings and cash flows of
Teltronics and each Borrower for such fiscal year,
in each case setting forth in comparative form the consolidated
figures for the preceding fiscal year, all in reasonable detail
and accompanied by an unqualified report thereon of a firm of
independent public accountants of recognized national standing;
(d) Audit Reports. Promptly upon receipt thereof, one copy
of each interim or special audit made by independent accountants
of the books of any Borrower;
15
(e) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice
or proxy statement sent by Teltronics to stockholders generally
and of each periodic or current report, and any registration
statement or prospectus filed by Teltronics or any Borrower with
any securities exchange or the SEC or any successor agency, and
copies of any orders in any proceedings to which Teltronics or
any Borrower is a party, issued by any governmental agency,
federal or state, having jurisdiction over the Borrowers. All
such filings or reports shall be true and correct in all material
respects and shall not omit to state a fact or facts, the absence
of which would make any such filing or report false or
misleading. Teltronics specifically covenants to timely file
each such item required to be filed with the SEC and each state
requiring securities laws filings;
(f) Press Releases. Promptly upon its release, a copy of
each press release issued by any Borrower;
(g) Officers' Compliance Certificate. Within ninety (90)
days after the end of each fiscal year of Teltronics, a
certificate executed by the chief executive or chief financial
officer of each Borrower stating that, (A) each Borrower has
kept, observed, performed and fulfilled each covenant, term and
condition of this Agreement and the other Loan Documents during
the preceding fiscal year, and (B) no Event of Default hereunder
has occurred and is continuing (or if such officer has knowledge
that an Event of Default has occurred and is continuing,
specifying the nature of same, the period of existence of same
and the action such Borrowers propose to take in connection
therewith); and
(h) Requested Information. With reasonable promptness,
such financial data and other information relating to the
business of the Borrowers as Lender may from time to time
reasonably request.
Section 4.11 Limitations on Debt and Obligations.
No Borrower shall issue, assume, guarantee or otherwise
become liable or permit to exist any Debt except: (i) Debt owing
from time to time to the CIT Group/Credit Finance, Inc. (and its
successors and assigns) by any Borrower, as the same Debt may be
extended, renewed, refunded, amended or modified (but the
principal amount thereof not increased), provided, however, that
if the "Maximum Credit" (as defined in the CIT Credit Agreement)
is reduced from $7,000,000 to $5,500,000 pursuant to the CIT
Credit Agreement, then the principal amount of such Debt to CIT
shall not be increased thereafter above $5,500,000; (ii) Debt
existing on the date hereof and reflected on Schedule 5.13
hereto; (iii) the Debt incurred pursuant to the Notes; (iv)
accounts payable and other trade payables incurred in the
ordinary course of business; (v) obligations of the Borrowers
pursuant to capitalized leases and/or purchase money financing of
equipment; (vi) Debt that refinances secured Debt under clause
(i) above, provided that the collateral for such new indebtedness
is the collateral from the refinanced secured Debt and the
aggregate principal amount of such Debt does not exceed the
principal amount outstanding under the refinanced Debt; (vii)
Debt incurred in connection with the acquisition of a business
(including the assets of a business) provided such Debt is
secured solely by the assets of the business so acquired; (viii)
additional Debt which is senior to or ranking pari passu with the
Debt evidenced by the Notes in a principal amount not to exceed
$50,000; or (ix) the Debt incurred pursuant to the 12%
Subordinated Debentures (as defined in Section 5.1(m)).
Notwithstanding the foregoing, the aggregate principal amount of
any Debt secured by the accounts receivable and/or inventory of
the Borrowers (whether such Debt is permitted under clause (i) or
in clause (vi)), may be increased based upon the amount of the
accounts receivable and/or inventory eligible as collateral, so
long as the ratio of outstanding principal amount
16
of such Debt to "eligible receivables" (howsoever defined) and/or
"inventory" remains the same; provided, however, that nothing contained
herein shall restrict the right of any holder of Debt referred to
under clause (i) or (vi) above from decreasing the advance rates
applicable to any inventory or accounts or thereafter increasing
such rates to no more than the rates in effect on the date
hereof. For purposes of this Agreement, "Debt" of any person
means, without duplication, (a) all obligations of such person
for borrowed money and all obligations of such person evidenced
by bonds, debentures, notes or other similar instruments on which
interest charges are customarily paid, (b) all obligations,
contingent or otherwise, relative to the face amount of all
letters of credit, whether or not drawn, and banker's acceptances
issued for the account of such person, and (c) all obligations of
such person (contingent or otherwise) to guarantee the
obligations of, purchase or otherwise acquire, or otherwise
assure a creditor against loss in respect of, another person.
Section 4.12 Liability for Other Parties.
Other than guaranties or endorsements by Teltronics or any
100%-owned Subsidiary of Teltronics in favor of Teltronics or any
100%-owned Subsidiary of Teltronics not otherwise prohibited by
the provisions of Section 4.11 hereof, no Borrower will become
liable, directly or indirectly, for any obligation of any other
person, by guaranty, endorsement, or otherwise, except by
endorsement in the ordinary course of business of negotiable
instruments payable at sight for deposit or collection.
Section 4.13 Sales of Collateral; Limitations on Liens.
Without Lender's prior written consent (a) other than in the
ordinary course of its business, no Borrower will sell, exchange,
lease or otherwise dispose of any Collateral, and (b) no Borrower
will create or incur, or suffer to be incurred or to exist, any
mortgage, pledge, security interest, encumbrance, lien or charge
of any kind (collectively, "Liens") on its property or assets,
whether now owned or hereafter acquired, or upon any income or
profits therefrom, or transfer any property for the purpose of
subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or
agree to acquire, any property or assets upon conditional sales
agreement or other title retention devices, except (i) those
Liens which exist as of the date hereof; (ii) Liens hereafter
created on Debt which is permitted under Section 4.11(v) or (vi);
(iii) purchase money security interests on property acquired by
any Borrower in an amount not to exceed in the aggregate 10% more
than the amount approved by the Board of Directors of Teltronics
for such expenditures in the Annual Plan (as defined in Section
4.20); or (iv) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business and
securing obligations (other than indebtedness for borrowed money)
that (A) are not overdue for a period of more than 60 days, or
(B) are being contested in good faith by proper proceedings and
as to which appropriate reserves are being maintained in
accordance with GAAP on the books of such Borrower.
Section 4.14 Restricted Payments.
Without the prior written consent of hereunder and except as
hereinafter provided, no Borrower will:
(a) declare or pay any dividends, either in cash or
property, on any shares of its capital stock of any class except
(i) dividends or other distributions payable solely in shares of
capital stock of Teltronics, (ii) cash dividends payable by
Teltronics on shares of its Series B Convertible
17
Preferred Stock, provided that no Event of Default exists hereunder,
and (iii) cash dividends payable by any wholly-owned Subsidiary
to Teltronics;
(b) directly or indirectly purchase, redeem or retire any
shares of its capital stock of any class or any warrants, rights
or options to purchase or acquire any shares of its capital
stock; or
(c) make any other payment or distribution, either directly
or indirectly, in respect of its capital stock.
Section 4.15 Loans and Investments.
No Borrower will make any Investments (as defined below)
outside the ordinary course of business for such Borrower,
without the prior written consent of Lender, except:
(a) Investments in direct obligations of the United States
of America, or any agency or instrumentality of the United States
of America, the payment or guaranty of which constitutes a full
faith and credit obligation of the United States of America, in
either case maturing in twelve months or less from the date of
acquisition thereof;
(b) Investments in certificates of deposit maturing within
one year from the date of origin, issued by a bank or trust
company organized under the laws of the United States or any
state thereof, having capital, surplus and undivided profits
aggregating at least $100,000,000 and whose long-term
certificates of deposit are, at the time of acquisition thereof
by Company or a Subsidiary, rated AA or better by Standard &
Poor's Corporation or Aa or better by Xxxxx'x Investors Service,
Inc.;
(c) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition
by the Company or any Subsidiary, is accorded the highest rating
by Standard & Poor's Corporation, Xxxxx'x Investors Service, Inc.
or another nationally recognized credit rating agency of similar
standing;
(d) loans or advances in the usual and ordinary course of
business to officers, directors and employees for expenses
(including moving expenses related to a transfer) incidental to
carrying on the business of such Borrower; and
(e) receivables arising from the sale of goods and services
in the ordinary course of business of such Borrower.
For purposes of this Agreement, "Investments" shall mean all
investments, in cash or by delivery of property made, directly or
indirectly in any person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or securities or
by loan, advance, capital contribution or otherwise; provided,
however that "Investments" shall not mean or include routine
investments in property to be used or consumed in the ordinary
course of business.
Section 4.16 Mergers, Consolidations and Sales of Assets.
(a) Without the prior written consent of Lender, no
Borrower will consolidate with or be a party to a merger or share
exchange with any other corporation or (2) sell, lease or
otherwise dispose of all or any substantial part (as defined in
paragraph (c) of this Section 4.16) of the assets of such
Borrower; provided, however, that:
18
(i) any Borrower may merge or consolidate with or into
Teltronics or any wholly-owned Subsidiary so long as in
any merger or consolidation involving Teltronics,
Teltronics shall be the surviving or continuing
corporation; and
(ii) any Borrower may sell, lease or otherwise dispose
of all or any substantial part of its assets to
Teltronics or any other wholly-owned Subsidiary of
Teltronics.
(b) Without the prior written consent of Lender, no
Borrower will sell, transfer or otherwise dispose of any shares
of stock in any Subsidiary (except to qualify directors) or any
indebtedness of any Subsidiary, and will not permit any
Subsidiary to sell, transfer or otherwise dispose of (except to
Teltronics or a wholly-owned Subsidiary of Teltronics) any shares
of stock or any indebtedness of any other Subsidiary, unless all
of the following conditions are met:
(i) simultaneously with such sale, transfer or
disposition, all shares of stock and all indebtedness
of such Subsidiary at the time owned by Teltronics and
by every other Subsidiary shall be sold, transferred or
disposed of as an entirety;
(ii) the Board of Directors of Teltronics shall have
determined, as evidenced by a resolution thereof, that
the retention of such stock and indebtedness is no
longer in the best interests of Teltronics;
(iii) such stock and Indebtedness is sold,
transferred or otherwise disposed of to a person, for a
cash consideration and on terms reasonably deemed by
the Board of Directors of Teltronics to be adequate and
satisfactory;
(iv) the Subsidiary being disposed of shall not have
any continuing investment in Teltronics or any other
Subsidiary not being simultaneously disposed of; and
(v) such sale or other disposition does not involve a
substantial part (as hereinafter defined) of the assets
of Teltronics and its Subsidiaries taken as a whole.
(c) As used in this Section 4.16, a sale, lease or other
disposition of assets shall be deemed to be a "substantial part"
of the assets of a Borrower only if the book value of such
assets, when added to the book value of all other assets sold,
leased or otherwise disposed of by all other Borrowers (other
than in the ordinary course of business) during the same twelve
month period ending on the date of such sale, lease or other
disposition, exceeds 15% of the consolidated net tangible assets
of all Borrowers determined as of the end of the immediately
preceding fiscal year.
Section 4.17 Issuance of Stock.
Upon the issuance of additional shares of capital stock of
Teltronics or securities or other rights convertible into or
exchangeable or exercisable for shares of capital stock of
Teltronics (other than pursuant to employee stock option plans),
Teltronics shall promptly disclose to Lender, in writing, the
number of shares (or the amount of other securities) so issued,
the price therefor, and such other information as Lender may from
time to time request. No Borrower (other than Teltronics) shall
issue any additional shares of its capital stock, other than to
Teltronics or to a wholly-owned Subsidiary of Teltronics.
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Section 4.18 Transactions with Affiliates.
No Borrower will enter into or be a party to any transaction
or arrangement with any officer, director or Affiliate
(including, without limitation, the purchase from, sale to or
exchange of property with, or the rendering of any service by or
for, any Affiliate), except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower's
business and upon fair and reasonable terms no less favorable to
such Borrower than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate, in each case
as determined in good faith by a majority of the disinterested
directors of the Borrower (as the term "disinterested" is used in
Section 144 of the Delaware General Corporation Law). For
purposes of this Agreement, "Affiliate" shall mean any person (a)
which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with a
Borrower, (b) which beneficially owns or holds 5% or more of any
class of the voting stock of a Borrower, or (c) 5% or more of the
voting stock (or in the case of a person which is not a
corporation, 5% or more of the equity interest) of which is
beneficially owned or held by a Borrower.
Section 4.19 Notice of Certain Events.
Each Borrower shall, promptly upon the discovery thereof,
give written notice to Lender of (i) the occurrence of any
default or Event of Default or event which, with the passage of
time, would constitute an Event of Default, under this Agreement
or a default under any other Loan Document, (ii) the occurrence
of any default or event of default under any other agreement
between a Borrower and any other person providing for Debt or
securing any indebtedness, or under a capitalized lease
obligation, (iii) any actions, suits or proceedings instituted by
any person against any Borrower or materially affecting any of
the assets of any Borrower, or (iv) any investigation initiated
by, or any dispute between and any governmental regulatory body,
on the one hand, and any Borrower, on the other hand, which
dispute might interfere with the normal operations of such
Borrower.
Section 4.20 Annual Plan.
The Board of Directors of Teltronics shall adopt and
Teltronics will furnish to Lender, in such manner and form as
approved by the Board of Directors, no later than the first day
of each fiscal year, a financial plan for Teltronics and its
Subsidiaries (including the Borrowers), which shall include at
least a projection of income and expenses (including capital
expenditures) and a projected cash flows statement for each month
in such fiscal year, and a projected balance sheet as of the end
of each month in such fiscal year (the "Annual Plan"). The
Annual Plan may only be amended or revised, in any material
manner, with the approval of the Board of Directors of
Teltronics. Teltronics shall promptly furnish to Lender each
amendment or revision to the Annual Plan.
Section 4.21 Board of Directors; Observer Rights.
Teltronics shall invite one representative of Lender to
attend, at Teltronics' expense, all meetings of the Board of
Directors of Teltronics and all committees of its Board of
Directors in a nonvoting capacity and, in this respect, shall
give such representative copies of all notices and meeting agenda
in advance of such meetings and shall permit such representative
to review all documents and other materials provided to directors
at such meetings. Teltronics shall also provide Lender, in
advance, with copies of all actions proposed to be taken by the
Board of Directors of Teltronics in lieu of meeting.
Notwithstanding anything in this Section 4.21 to the contrary,
this provision shall not apply to a Lender if such Lender
exercises identical observer rights to attend meetings of the
Board of Directors of Teltronics pursuant to that certain
Preferred Stock Purchase
20
Agreement, dated of even date herewith, by and between Teltronics
and Lender or that certain Debenture Purchase Agreement, of even
date herewith, by and between Teltronics and Lender.
Section 4.22 Key Executives.
The officers and key employees of the Borrower whose names
and current positions are set forth on Schedule 4.22 hereto shall
continue to be employed by such Borrower in such position and
with the current duties and responsibilities for at least that
position unless (i) such employment ceases because of death, or
(ii) such Borrower replaces such officer or key employee within
ninety (90) days of the person's notice of resignation with
another executive who shall be reasonably acceptable to Lender.
Section 4.23 Further Assurances.
Borrowers will take all actions reasonably requested by
Lender to create and maintain in Lender's favor valid liens upon
and perfected security interests in any Collateral secured
pursuant to this Agreement or the other Security Instruments and
all other security for the Secured Obligations now or hereafter
held by or for Lender. Without limiting the foregoing, Borrowers
agree to execute such further instruments (including financing
statements and continuation statements) as may be required or
permitted by any law relating to notices of, or affidavits in
connection with, the perfection of Lender's liens and security
interests, and to cooperate with Lender in the filing or
recording and renewal thereof.
Section 4.24 Environmental Requirements.
In addition to, and not in derogation of, the requirements
of Section 4.7, each Borrower will comply with all laws,
governmental standards and regulations applicable to such
Borrower or to properties owned or leased by such Borrower, in
respect of occupational health and safety and Applicable
Environmental Laws (unless such laws, standards or regulations
are being contested in good faith by appropriate proceedings and
adequate reserves therefor have been established), promptly
notify Lender of its receipt of any notice of a violation of any
such law, standard or regulation, and indemnify and hold Lender
harmless from all loss, cost, damage, liability, claim and
expense incurred by or imposed upon Lender on account of such
Borrower's failure to perform its obligations under this Section
4.24.
Section 4.25 Name Change.
No Borrower will change its name without providing Lender
with at least sixty (60) days prior written notice thereof.
Section 4.26 Funding of Interactive Solution, Inc.
Without the prior written consent of Lender, no Borrower,
including Teltronics, shall make any advance or capital
contribution to, provide funding for, or become liable, directly
or indirectly, by guaranty, endorsement or otherwise, for any
obligation of Interactive Solutions, Inc., a Delaware corporation
and a partly-owned subsidiary of Teltronics ("ISI"); provided,
however, that Teltronics may loan up to an aggregate of $300,000
to ISI prior to April 30, 1998; provided further, that Teltronics
may make additional loans to ISI from time to time after April
30, 1998 if (i) Teltronics, on a consolidated basis, had net
profits for the immediately preceding calendar month as reflected
in the financial statements delivered pursuant to Section 5.12(a)
hereof and (ii) the Board of Directors
21
of Teltronics approves each such loan prior to the making thereof;
provided further, that any such loan shall be evidenced by a
promissory note by ISI in favor of Teltronics.
Section 4.27 Location of Business and Collateral.
Each Borrower shall give written notice to Lender (i) thirty
(30) days prior to the opening of any new business office,
setting forth the address (including county) of such new
location, (ii) thirty (30) days prior to changing the location of
records with respect to intangible personal property constituting
collateral security for the Secured Obligations, and
(iii) whenever any Collateral comprised of tangible personal
property will be located in a county or state that is not set
forth on Schedule 3.5(a) or Schedule 3.5(b) hereof for a period
of four (4) months or longer. Prior to establishing any new
business office location or locating any collateral in a county
or state that is not set forth on Schedule 3.5(a) or Schedule
3.5(b) hereof for a period of four (4) months or longer, each
Borrower shall have (i) executed and delivered to Lender all
financing statements and financing statement amendments which
Lender may reasonably request in connection therewith in order to
perfect and protect the security interests and priority of Lender
in such Collateral, (ii) paid in full all filing fees and taxes,
if any, payable in connection with such filings and (iii)
complied with any other requirement in this Agreement or any
other Loan Document relating to the location of any Collateral.
ARTICLE V
CONDITIONS TO CLOSING
Section 5.1 Conditions of Lender's Obligations.
The obligation of Lender to make the Loans is subject to the
receipt by Lender of the following documents, each of which shall
be satisfactory to Lender in form and substance, and to the
fulfillment of each of the other following conditions:
(a) Corporate Documents. A copy of the articles or
certificate of incorporation, as appropriate, of each Borrower,
as certified by the Secretary of State of the jurisdiction of
incorporation thereof, and certificates of legal existence and
good standing from the Secretary of State or other appropriate
official of the jurisdiction of incorporation thereof and each
jurisdiction in which any Borrower is legally required to qualify
to transact business as a foreign corporation, each as of a date
within ten (10) days of the date of closing.
(b) Security Instruments. Each of the Security
Instruments, duly executed by each Borrower, as applicable,
including the Trademark and Patent Security Agreement.
(c) Officer's Certificate. The certificate of the president
and chief executive officer of each Borrower, substantially in
the form of Exhibit F hereto, certifying that, after giving
effect to this Agreement, all representations and warranties
herein are true and correct and there is no default or Event of
Default in existence as of such date, nor any event which, given
the passage of time, would constitute an Event of Default.
(d) Secretary's Certificate. A certificate of the
Secretary of each Borrower to the effect set forth in Exhibit G.
(e) Opinion of Counsel. The written opinion of Xxxxx &
Xxxxx, counsel to the Borrowers, in form satisfactory to Lender,
and substantially in the form of Exhibit H hereto.
22
(f) The Notes. The Notes, in each case duly completed and
executed by each Borrower.
(g) Warrant. Teltronics shall have duly executed and
delivered (i) the Warrant, and (ii) the Warrant Valuation Letter
in the form attached hereto as Exhibit I.
(h) UCC-1 Financing Statements. Financing statements on
Form UCC-1, duly completed and executed by each Borrower,
perfecting the security interest of Lender in the Collateral.
(i) Governmental Consents and Approvals. All consents and
true copies of required governmental approvals, if any, necessary
to the execution, delivery and performance of the Loan Documents
and the transactions contemplated hereby and thereby.
(j) Debit Authorization Agreement. An Authorization
Agreement for Pre-Authorized Payments (Debit), executed by a duly
authorized officer(s) of each Borrower, in the form attached
hereto as Exhibit J.
(k) Pay-Off Letter and Release of Lien. A Pay-Off Letter,
in the form of Exhibit K attached hereto, executed by CIT to the
effect that (i) upon payment of the amount stated therein (which
amount shall include related accrued interest and fees and a per
diem charge for each additional day of outstanding indebtedness)
by Borrowers or any of them to CIT, CIT shall (i) promptly
terminate or cause to be terminated any security interest of CIT
in all Collateral of Borrowers, or any of them, other than
Collateral consisting of accounts receivable or inventory of
Borrowers, and (ii) take such other actions as Lender may request
to release CIT's security interest in and lien on all Collateral
other than accounts receivable or inventory of Borrowers.
(l) Intercreditor Agreement. The Intercreditor Agreement,
executed by duly authorized officers of each Borrower and CIT, in
the form of Exhibit D hereto.
(m) Sale of Preferred Stock and Debentures. Evidence
satisfactory to Lender and counsel to Lender as to (i) the sale
by Teltronics to Sirrom Capital Corporation d/b/a Tandem Capital
("Tandem") of 25,000 shares of Series B Convertible Preferred
Stock of Teltronics for an aggregate purchase price of
$2,500,000, (ii) the sale by Teltronics to Tandem of its 12%
Subordinated Debentures due February 13, 2002, in the principal
amount of $1,750,000 (the "12% Subordinated Debentures"), and the
grant by Teltronics to Tandem of its warrant for the purchase of
525,000 shares of Teltronics Common Stock, upon the same terms
and substantially in the form of the Warrant attached hereto as
Exhibit B, and (iii) the delivery by Tandem to Teltronics of
Teltronics' 11% Subordinated Convertible Debentures due February
13, 2000, in the principal amount of $4,250,000, and payment by
Teltronics of all interest accrued thereon to the date of delivery.
ARTICLE VI
DEFAULT AND REMEDIES
Section 6.1 Events of Default.
The occurrence of any of the following shall constitute an
Event of Default hereunder:
(a) Default in the payment when due of any portion of the
principal amount of the indebtedness evidenced by either of the
Notes, or default in the payment when due of any interest on the
indebtedness evidenced by either of the Notes;
23
(b) Any representation by any Borrower hereunder or under
any of the other Loan Documents, or delivery by any Borrower of
any schedule, statement, resolution, report, certificate, notice
or writing to Lender, is untrue in any material respect on the
date as of which made, stated or certified;
(c) A default or event of default shall occur, or there
shall occur such other failure by any Borrower to perform its
obligations under, any of Sections 4.10, 4.14, 4.15, 4.16, 4.21
or 4.22 hereof;
(d) A default or event of default shall occur in the
observance or performance by any Borrower of any other provision
of this Agreement which is not remedied within thirty (30) days
after the earlier of (i) the date on which any Borrower first
obtains knowledge of such default or event of default and (ii)
the date on which written notice thereof is given to the
Borrowers by the Lender;
(e) Any Borrower (i) shall admit in writing its inability
to pay its debts generally as they become due; or (ii) shall make
an assignment for the benefit of creditors or petition or apply
to any tribunal for the appointment of a custodian, receiver or
trustee for it or a substantial part of its assets; or (iii)
shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or (iv) shall have had any such petition or
application filed or any such proceeding commenced against it in
which an order for relief is entered or an adjudication or
appointment is made; or (v) shall indicate, by any act or
omission, its consent to, approval of, or acquiescence in any
such petition, application, proceeding or order for relief or the
appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (vi) shall suffer any such
custodianship, receivership or trusteeship to continue
undischarged for a period of sixty (60) days or more;
(f) Any Borrower shall be liquidated, dissolved,
partitioned or terminated, or the articles or certificate of
incorporation of Borrower shall expire or be revoked;
(g) Any Borrower shall default in the timely payment or
performance of any obligation now or hereafter owed to Lender in
connection with any indebtedness of any Borrower now or hereafter
owed to Lender, other than the Loans, subject to any applicable
grace period; or
(h) (i) Any Borrower shall fail to pay any principal of or
premium or interest on any indebtedness owed by Borrower (other
than the Loans), which is outstanding in a principal amount of at
least $100,000 in the aggregate, when the same becomes due and
payable (whether by scheduled maturity, acceleration, demand or
otherwise), and such failure shall continue after any cure period
applicable thereto; or (ii) any other event shall occur or
condition shall exist under any agreement or instrument relating
to any such indebtedness and shall continue after any applicable
cure period, if the effect of such event or condition is to
accelerate or permit the acceleration of such indebtedness; or
(iii) any such indebtedness shall be accelerated or otherwise
declared to be due and payable prior to the stated maturity
thereof; or (iv) any such indebtedness shall be required to be
prepaid, redeemed, purchased or defeased, or an offer to repay,
redeem, purchase or defease such indebtedness shall be required
to be made, in each case prior to the stated maturity thereof; or
(i) Any person set forth on Schedule 4.22 attached hereto
shall cease to hold the office of Teltronics and devote
substantially all of his or her professional time and attention
to the business
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and affairs of Teltronics (unless a successor or successors
reasonably acceptable to Lender shall be appointed within ninety
(90) days of any announcement of resignation of any such person).
Section 6.2 Acceleration of Maturity; Remedies.
Upon the occurrence of any Event of Default described in
Section 6.1(e), the indebtedness evidenced by the Notes as well
as any and all other indebtedness of any Borrower to Lender shall
be immediately due and payable in full; and upon the occurrence
of any other Event of Default described in Section 6.1, Lender at
any time thereafter may at its option accelerate the maturity of
the indebtedness evidenced by the Notes as well as any and all
other indebtedness of any Borrower to Lender, whereupon such
indebtedness shall be and become immediately due and payable; all
without notice of any kind. Upon the occurrence of any such
Event of Default and the acceleration of the maturity of the
indebtedness evidenced by the Notes:
(a) Lender shall be immediately entitled to exercise any
and all rights and remedies possessed by Lender pursuant to the
terms of the Security Instruments and all of the other Loan
Documents.
(b) Lender shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code as adopted in the
respective states pursuant to which security interests in the
Collateral are governed.
(c) Lender shall have any and all other rights and remedies
that Lender may now or hereafter possess at law, in equity or by
statute.
Section 6.3 Remedies Cumulative; No Waiver.
No right, power or remedy conferred upon or reserved to
Lender by this Agreement or any of the other Loan Documents is
intended to be exclusive of any other right, power or remedy, but
each and every such right, power and remedy shall be cumulative
and concurrent and shall be in addition to any other right, power
and remedy given hereunder, under any of the other Loan Documents
or now or hereafter existing at law, in equity or by statute. No
delay or omission by Lender to exercise any right, power or
remedy accruing upon the occurrence of any Event of Default shall
exhaust or impair any such right, power or remedy or shall be
construed to be a waiver of any such Event of Default or an
acquiescence therein, and every right, power and remedy given by
this Agreement and the other Loan Documents to Lender may be
exercised from time to time and as often as may be deemed
expedient by Lender.
Section 6.4 Proceeds of Remedies.
Any or all proceeds resulting from the exercise of any or
all of the foregoing remedies shall be applied as set forth in
the Loan Document(s) providing the remedy or remedies exercised;
if none is specified, or if the remedy is provided by this
Agreement, then as follows:
(a) First, to the costs and expenses, including reasonable
attorney and paralegal fees and costs, incurred by Lender in
connection with the exercise of its remedies;
(b) Second, to the expenses of curing the default that has
occurred, in the event that Lender elects, in its sole
discretion, to cure the default that has occurred;
25
(c) Third, to the payment of accrued and unpaid interest on
the indebtedness evidenced by the Notes;
(d) Fourth, to the payment of the unpaid principal of the Notes;
(e) Fifth, to the payment of all other Secured Obligations; and
(f) Sixth, the remainder, if any, to the Borrowers or to
any other person lawfully thereunto entitled.
ARTICLE VII
TERMINATION
This Agreement shall remain in full force and effect until
the payment in full by Borrowers of all amounts owed to Lender
under the Loan Documents, within a reasonable time after which
Lender shall take such actions as necessary to release its
security interests in the Collateral, including the filing of
appropriate UCC-3 termination statements.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Performance By Lender.
If any Borrower shall default in the payment, performance or
observance of any covenant, term or condition of this Agreement,
Lender may, at its option, pay, perform or observe the same, and
all payments made or reasonable costs or expenses incurred by
Lender in connection therewith (including but not limited to
reasonable attorney and paralegal fees and costs), with interest
thereon at the highest default rate provided in each such Note,
shall be immediately repaid to Lender by Borrowers and shall
constitute a part of the Secured Obligations and be secured
hereby until fully repaid. Lender, in its commercially
reasonable discretion and without any liability therefor, shall
determine the necessity for any such actions and of the amounts,
if any, to be paid.
Section 8.2 Successors and Assigns Included in Parties.
Whenever in this Agreement one of the parties hereto is
named or referred to, the heirs, legal representatives,
successors, successors-in-title and assigns of such parties shall
be included, and all covenants and agreements contained in this
Agreement by or on behalf of Borrowers or by or on behalf of
Lender shall bind and inure to the benefit of their respective
heirs, legal representatives, successors-in-title and assigns,
whether so expressed or not.
Section 8.3 Costs and Expenses.
Each Borrower agrees to pay all costs and expenses incurred
by Lender in connection with the making of the Loans, including
but not limited to filing fees, recording taxes and reasonable
attorney and paralegal fees and costs, promptly upon demand of
Lender. Each Borrower further agrees to pay all of the
reasonable out-of-pocket costs and reasonable expenses incurred
by Lender in connection with the maintenance of its security
interest in the Collateral, protection of the Collateral and
collection of the Loans, including but not limited to reasonable
attorney and paralegal fees and
26
costs related thereto (including any such incurred in connection
with any appellate litigation)promptly upon demand of Lender.
Section 8.4 Assignment.
The Notes, this Agreement and the other Loan Documents may
be endorsed, assigned and transferred in whole or in part by
Lender, and any such subsequent holder or assignee of the same
shall succeed to and be possessed of the rights and powers of
Lender under all of the same to the extent transferred and
assigned. Lender may grant participations in the Notes, this
Agreement and the other Loan Documents (or any portion thereof).
Lender shall notify Teltronics in writing of any such
endorsement, assignment or transfer by Lender. No Borrower shall
assign any of its rights nor delegate any of its duties hereunder
or under any of the other Loan Documents without the prior
express written consent of Lender.
Section 8.5 Time of the Essence.
Except as specifically provided herein, time is of the
essence with respect to each and every covenant, agreement and
obligation of any Borrower hereunder and under all of the other
Loan Documents.
Section 8.6 Severability.
If any provisions of this Agreement or the application
thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and
the application of such provisions to other persons or
circumstances shall not be affected thereby nor shall the
validity and enforceability thereof be affected.
Section 8.7 Interest and Loan Charges Not to Exceed Maximum
Allowed by Law.
Anything in this Agreement, the Note, the Security
Instruments or any of the other Loan Documents to the contrary
notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loans, acceleration of the
maturity of the unpaid balance of the Loans or otherwise, shall
the interest and other consideration agreed to be paid to Lender
for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in
effect from time to time. It is understood and agreed by the
parties that, if for any reason whatsoever the interest or other
consideration paid or contracted to be paid by Borrowers in
respect of the indebtedness evidenced by the Notes shall exceed
the maximum amounts collectible under applicable laws in effect
from time to time, then ipso facto, the obligation to pay such
interest and other consideration shall be reduced to the maximum
amounts collectible under applicable laws in effect from time to
time, and any amounts collected by Lender that exceed such
maximum amounts shall be applied to the reduction of the
principal balance of the indebtedness evidenced by the Notes or
refunded to Borrowers, in Lender's sole discretion, so that at no
time shall the interest and other consideration paid or payable
in respect of the indebtedness evidenced by the Notes exceed the
maximum amounts permitted from time to time by applicable law.
Section 8.8 Article and Section Headings; Defined Terms.
Numbered and titled article and section headings and defined
terms are for convenience only and shall not be construed as
amplifying or limiting any of the provisions of this Agreement.
27
Section 8.9 Notices.
Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing,
signed by the party giving such notice, election or demand and
shall be delivered personally, faxed (provided that such notice
is mailed to the other party promptly thereafter), or sent by
certified mail or nationally recognized overnight courier service
(such as Federal Express) to the other party at the address set
forth below, or at such other address as may be supplied in
writing and of which receipt has been acknowledged in writing.
The date of personal delivery, the date of successful fax
transmission, the third day after the date of mailing, or the
business day after the date of delivery to such courier service,
as the case may be, shall be the date of such notice, election or
demand. For the purposes of this Agreement, notices, elections
or demands made pursuant hereto shall be made to the following
addresses:
If to Lender: Tandem Capital, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxx
with a copy to: Xxxxxxxx & Xxx, PLC
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxx I.N. XxXxxxxx
Fax: 000-000-0000
if to any Borrower, Teltronics, Inc.
addressed to 0000 Xxxxxxxxx Xxxxxxxxxx Xxx
such Borrower: Xxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, President
with a copy to: Xxxxx & Xxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
Section 8.10 Entire Agreement.
This Agreement and the other written agreements between
Borrowers and Lender executed contemporaneously herewith
represent the entire agreement between the parties concerning the
subject matter hereof, and all oral discussions and prior
agreements are merged herein.
Section 8.11 Counterparts.
This Agreement may be executed in multiple originals or
counterparts, each of which shall be deemed an original and all
or which when taken together shall constitute but one and the
same instrument.
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Section 8.12 Governing Law.
This Agreement shall be construed and enforced under the
internal laws of the State of Tennessee, without reference to the
conflict of laws principles thereof.
Section 8.13 Amendments; Incorporation.
No amendment or modification hereof shall be effective
except in a writing executed by each of the parties hereto. All
schedules, exhibits, riders, and other documents and instruments
referenced herein shall be deemed to be incorporated herein and
made a part hereof.
Section 8.14 Waiver of Jury Trial.
LENDER AND EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE LAW)
ANY RIGHT TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER,
RELATING TO, OR CONNECTED WITH THIS AGREEMENT, THE COLLATERAL OR
ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY
OR DELIVERED IN CONNECTION HEREWITH AND AGREE THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER
INTO THIS AGREEMENT.
Section 8.15 Disclosure Statement.
The disclosures contained in the Disclosure Statement
attached hereto with respect to any section number hereof shall
be deemed to constitute the contents of the schedule of such
number referenced herein.
[Signatures on following pages]
[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this
Loan and Security Agreement, or have caused this Agreement to be
executed by their duly authorized officers, as of the day and
year first above written.
BORROWERS:
TELTRONICS, INC.
By: Xxxx X. Xxxxxxx, President
Attest: Xxxx X. Xxxxx, Secretary
[CORPORATE SEAL]
TTG ACQUISITION CORP.
By: Xxxx X. Xxxxxxx, President
Attest: Xxxx X. Xxxxx, Secretary
[CORPORATE SEAL]
AT SUPPLY, INC.
By: Xxxx X. Xxxxxxx, Chairman
Attest: Xxxx X. Xxxxx, Secretary
[CORPORATE SEAL]
[Signatures continue on next page]
INTERACTIVE SOLUTIONS, INC.
By: Xxxx X. Xxxxxxx, Chairman
Attest: Xxxx X. Xxxxx, Secretary
[CORPORATE SEAL]
TELTRONICS/SRX, INC.
By: Xxxx X. Xxxxxxx
Attest: Xxxx X. Xxxxx, Secretary
[CORPORATE SEAL]
LENDER:
SIRROM CAPITAL CORPORATION
d/b/a TANDEM CAPITAL
By: Xxxxx Xxxxxx, Vice-President
Index of Attachments
Exhibit A-1 Form of Secured Promissory Note -- $1,000,000
Exhibit A-2 Form of Secured Promissory Note -- $280,000
Exhibit B Warrant -- 365,000 shares
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of CIT Intercreditor Agreement
Exhibit E Form of Trademark and Patent Security Agreement
Exhibit F Form of Officer's Certificate/Borrower
Exhibit G Form of Secretary's Certificate/Borrower
Exhibit H Form of Opinion of Borrower's Counsel
Exhibit I Form of Warrant Valuation Letter
Exhibit J Form of Debit Authorization Agreement/Loans
Exhibit K Form of CIT Pay-Off Letter
Schedule 3.1(a) Jurisdictions in Which Borrower is Qualified
Schedule 3.1(c) Outstanding Stock
Schedule 3.1(d) Options
Schedule 3.1(e) Preemptive Rights with Respect to Warrant
Schedule 3.2 Required Consents
Schedule 3.4 Outstanding Loans, Liens, Security Interests, Etc.
Schedule 3.5(a) Chief Executive Office/Principal Place of Business
Schedule 3.5(b) Location of Collateral
Schedule 3.6 Litigation
Schedule 3.12(i) Related Party Transactions
Schedule 3.12(ii) Related Party Contracts
Schedule 3.12(iii) Related Party Guarantees
Schedule 3.13 Corporate or Trade Names
Schedule 3.16 ERISA
Schedule 3.22 Employees
Schedule 4.1 Use of Proceeds
Schedule 4.22 Key Executives
Schedule 4.25 Key Man Insurance