EXHIBIT 1
AGREEMENT OF SALE
THIS AGREEMENT OF SALE ("Agreement") dated this 19 day
of September, 1996 by and among Shared Resource Exchange, Inc., a
Delaware Corporation (the "Seller") with an office located at
0000 Xxxxx Xxxxx, Xxxxx, Xxxxx, SRX of Florida, Inc., a Delaware
corporation (the "Buyer") with an office located at 0000
Xxxxxxxxx Xxxxxxxxxx Xxx, Xxxxxxxx, Xxxxxxx, and Buyer's parent,
Teltronics, Inc., a Delaware corporation ("Teltronics") with an
office located at 0000 Xxxxxxxxx Xxxxxxxxxx Xxx, Xxxxxxxx,
Xxxxxxx 00000.
W I T N E S S E T H:
WHEREAS, the Seller desires to sell to the Buyer and
the Buyer desires to purchase from the Seller substantially all
of its tangible and intangible assets, subject only to expressly
assumed liabilities, of the Seller.
NOW, THEREFORE, in consideration of the mutual promises
herein set forth and subject to the terms and conditions of this
Agreement, the parties agree as follows:
1. Definitions. As used in this Agreement, terms
defined in the preamble and recitals of this Agreement shall have
the meanings set forth therein and the following terms shall have
the meanings set forth below:
"Access Agreement" shall mean the agreement between
Seller and Buyer of even date herewith providing Buyer certain
access to the land and premises located at 0000 Xxxxx Xxxxx,
Xxxxx, Xxxxx.
"Act" shall mean the Securities Act of 1933, as
amended.
"Affiliate" shall mean, with respect to any person or
entity, the shareholders, subsidiaries, officers, directors
and/or partners of such person or entity and any other person
which directly or indirectly controls, is controlled by or is
under common control with such person or entity.
"Agreement" shall mean this Agreement of Sale and all
Schedules and Exhibits to this Agreement.
"Assignment Agreements" shall mean the Assignment
Agreements delivered by Seller pursuant to paragraph 4(a)
assigning all of Seller's right, title and interest, in to and
under all of its agreements, licenses, intellectual property, and
contracts, including but not limited to all patents, trademarks,
copyrights, licenses, purchase orders, Motorola orders, DSC
contracts, Protel contracts, to Buyer.
"Assumed Liabilities" shall mean the Liabilities of the
Seller which are Allowed Claims in U.S. Bankruptcy Xxxx Xx. 00-
00000X, Xxxxxxx Xxxxxxxx of Texas and are described in Exhibit A
to this Agreement.
"Bills of Sale" shall mean the Bills of Sale to be
delivered by Seller to Buyer pursuant to paragraph 4(a).
"Cash Consideration" shall mean the amount of cash set
forth in Section 3(a) of this Agreement.
"Closing" of the transactions described in this
Agreement shall occur simultaneously with the execution and
delivery of this Agreement.
"Closing Date" shall mean the date, no more than two
(2) days after the entry of an Order by the U.S. Bankruptcy Court
(E.D. Texas) approving the Agreement, on which the Agreement is
executed and delivered.
"Code" shall mean the Internal Revenue Code of 1986 and
all regulations promulgated thereunder, as the same have from
time to time been amended.
"Disclosure Statement" shall mean the disclosure
statement and attachments thereto previously delivered by Seller
to Buyer.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974 (and any sections of the Code amended by it)
and all regulations promulgated thereunder, as the same have from
time to time been amended.
"Exchange Agreement" shall mean the agreement by and
among Buyer, Teltronics and the Note Holders executed and
delivered as of the Closing Date.
"Financial Statements" shall mean the financial
statements of Seller described in paragraph 6(c) of this
Agreement, true and correct copies of which were previously
delivered to Buyer as part of the Disclosure Statement.
"GAAP" shall mean generally accepted accounting
principles.
"Liabilities" shall mean all debts, liabilities, Taxes
(including any sales or transfer taxes on the sale of the
Purchased Assets), obligations under contracts, leases,
agreements and commitments, and other obligations of every kind
and character of the Seller as the same may exist at the Closing
(whether accrued, absolute, contingent or otherwise, and whether
due or to become due) or which may arise in the future based upon
events or a state of facts existing at the Closing.
"Material" and "Materially" shall mean, as to Seller,
except for Section 7(i), any item, claim, or event which
individually or in the aggregate exceeds $25,000.00.
"Notes" shall mean certain promissory notes payable by
Seller to the Note Holders, with an aggregate amount of principal
and interest thereunder not in excess of $600,000, which Notes
are being assumed by Buyer.
"Note Holders" shall mean the holders of the Notes.
"Purchased Assets" shall mean all of the Seller's
properties and assets, personal, tangible and intangible, of
every kind and wherever situated, which are owned by the Seller
or in which the Seller has any right, title or interest,
including, without limiting the generality of the foregoing, its
goodwill, franchises and telephone numbers; its trademarks,
trademark registrations, trademark applications, trade names
(including but not limited to "SRX"), copyrights, copyright
applications, copyright registrations, patents, patent
applications, patent registrations, permits, licenses, processes,
formulae, trade secrets, inventions and royalties (including all
rights to xxx for past infringement); its inventory, equipment
and supplies; its cash (in an amount not less than $950,000),
money on deposit with banks, factors and others, certificates of
deposit, commercial paper, stocks, bonds and other investments;
its accounts receivable; its insurance policies, excluding
director and officer insurance; its causes of action, judgments,
claims and demands of whatever nature; its tangible and
intangible personal property of all kinds; its deferred charges,
advance payments, pre-paid items, claims for refunds, rights of
offset and credits of all kinds; all credit balances of or
inuring to it under any state unemployment compensation plan or
fund; restrictive covenants and obligations of present and former
officers and employees and of individuals and corporations; its
accounts, contract rights, general intangibles, returned and
repossessed goods, and rights as an unpaid vendor, secured party
or lienor; its credit balances, documents, instruments and other
choses in action; its rights (but not liabilities other than
Assumed Liabilities) under contracts, purchase orders (including
but not limited to Purchase Orders with Motorola, Inc.), personal
property, leases, joint venture agreements or arrangements and
other agreements; its files, papers and records relating to the
aforesaid business, properties and assets; all assets reflected
on the Financial Statements or acquired by the Seller since the
date of such Financial Statements, except for those assets which
have been transferred or disposed of in the ordinary course of
business and consistent with past practice after the date of such
Financial Statements or as otherwise permitted by this Agreement;
provided, however, that the Purchased Assets shall not include
the Retained Assets.
"Registration Rights Agreement" shall mean the
registration rights agreement by and among Buyer, Teltronics and
Seller executed and delivered on the date hereof.
"Retained Assets" shall mean the assets described in
Exhibit B to this Agreement.
"Retained Liabilities" shall mean all Liabilities of
the Seller which are not Assumed Liabilities.
"Shares" shall mean shares of voting common stock of
Teltronics, par value $.001 per share, issued in accordance with
this Agreement all of which shall be, when issued, restricted
securities subject to Rule 145 of the Act.
"Stock Consideration" shall mean the issuance and
delivery of the number of Shares set forth in Section 3(b) of
this Agreement.
"Subsidiaries" shall mean any entity in which a person
holds, directly or indirectly, a majority of the outstanding
voting rights or equity interest in such entity.
"Taxes" shall mean all federal, state, local and
foreign taxes, including, without limitation, income taxes,
excise taxes, sales taxes, use taxes, gross receipts taxes,
franchise taxes, employment and payroll taxes, property taxes,
import duties and interest and penalties in connection with any
of the foregoing.
"Tax Returns" for any specified year shall mean the
federal and state tax returns of the Seller as of and for the
period ending December 31 of such year prepared by the Seller and
filed with the appropriate taxing authority true and correct
copies of which were previously supplied by Seller to Buyer.
"Transactional Documents" shall mean the Bills of Sale,
Assignment Agreements, Exchange Agreement, and Registration
Rights Agreement, executed and delivered on the date hereof.
2. Sale of Properties and Assets. Subject to and
upon the terms and conditions of this Agreement, the Seller
hereby sells, transfers, assigns, conveys and delivers to the
Buyer, and the Buyer hereby purchases, accepts and acquires from
the Seller all of the Purchased Assets.
3. Purchase Price. The aggregate consideration paid
by the Buyer for the Purchased Assets ("Consideration"), the
receipt of which is hereby acknowledged by Seller, is (i) the
Cash Consideration described in Section 3(a) of this Agreement,
(ii) the Stock Consideration described in Section 3(b) of this
Agreement, and (iii) the assumption by the Buyer of the Assumed
Liabilities as set forth in Section 3(c) of this Agreement. The
Buyer and Seller shall agree upon the allocation of the
Consideration among the Purchased Assets in the manner required
by Code section 1060 and any comparable provision of state, local
or foreign law, as applicable. The Buyer and the Seller shall
report, act and file in all tax respects and for all tax purposes
consistent with such allocations.
(a) Cash Consideration. The Cash Consideration
payable to the Seller shall be an aggregate amount equal to One
Thousand Dollars ($1,000.00).
(b) Stock Consideration. Subject to the terms of
this Agreement, the Stock Consideration payable to the Seller at
the Closing shall be Six Hundred Fifty Thousand (650,000) Shares.
(c) Assumed Liabilities. The Buyer hereby
assumes and Teltronics hereby unconditionally guarantees payment
by Buyer of the Assumed Liabilities.
4. Instruments of Transfer; Payment of Purchase Price
and Assumption of Liabilities; Further Assurances.
(a) Sellers' Deliveries. Simultaneously with the
execution and delivery of this Agreement, the Seller shall
execute and deliver to Buyer:
(i) Bills of Sale for the Purchased Assets;
(ii) Access Agreement;
(iii) Assignments for all funds on
deposit with banks or other persons which are included in the
Purchased Assets;
(iv) the Registration Rights Agreement;
(v) the opinion of Xxxxxx Xxxx & Xxxxxx LLP,
Counsel for the Seller, satisfactory to Buyer; and
(vi) Assignment Agreements.
(b) Buyer's Deliveries. Simultaneous with the
execution and delivery of this Agreement, the Buyer shall execute
and/or deliver to the Seller:
(i) the Cash Consideration;
(ii) the Stock Consideration;
(iii) the Registration Rights Agreement;
and
(iv) the Access Agreement.
(c) Note Holders Deliveries. Simultaneously with
the execution and delivery of this Agreement, the Note Holders
and Teltronics shall execute and perform under the Exchange
Agreement.
(d) Other Transfer Instruments; Inspection
Rights. Following the Closing, at the request of the Buyer, the
Seller shall (i) deliver any further instruments of transfer and
take all reasonable action as may be necessary or appropriate (A)
to vest in the Buyer all of the Seller's rights and title in and
to the Purchased Assets, and (B) to transfer to the Buyer all of
the Seller's rights to licenses and permits necessary for the
operation of the Purchased Assets, to the extent transferable,
and (ii) permit the Buyer or representatives of the Buyer during
normal business hours upon reasonable notice to inspect and make
copies of the Seller's books of account and other records which
are Retained Assets.
5. Transfer of Name. From and after the date hereof,
Buyer shall own the rights of Seller in and to the name "SRX".
For the purpose of completing its obligations under U.S.
Bankruptcy Case No. 96-42190S and winding up its operations
Seller shall retain the right to use the name "Shared Resource
Exchange".
6. Representations and Warranties of the Seller. The
Seller represents and warrants to the Buyer as follows:
(a) Organization; Good Standing. The Seller is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation. The Seller has all
requisite corporate power and authority and legal right to own,
operate and lease its properties, to carry on its business as now
being conducted, and to enter into this Agreement and perform its
obligations under this Agreement. The Seller is qualified to do
business in each jurisdiction where the conduct of its business
or the ownership of its property requires such qualification and
where the failure to so qualify would have a Material adverse
effect on the business of Seller which jurisdictions are the
States of California and Texas. The chief executive office and
principal place of business and the places where the Seller
maintains all records relating to its business is 0000 Xxxxx
Xxxxx, Xxxxx, Xxxxx.
(b) Subsidiaries. The Seller does not own,
directly or indirectly, any capital stock or equity securities of
any other corporation or have any direct or indirect equity or
ownership interest in any business other than the business
conducted by the Seller.
(c) Financial Statements. Seller has previously
furnished to Buyer true, correct, and complete copies of the
following financial statements (collectively referred to as the
"Financial Statements"):
(i) The balance sheet of Seller as of
December 31, 1994 and the related statements of income (loss),
statement of retained earnings and statement of cash flows for
each of the years in the three-year period ended December 31,
1994, as audited by Seller's independent certified public
accountants (collectively, the "Audited Financial Statements")
which have been prepared from the books and records of Seller in
accordance with GAAP applied on a basis consistent with prior
periods except as provided therein and fairly present the
financial position of Seller as of the respective dates thereof
and the results of operations and cash flows of Seller for the
periods then ended;
(ii) The unaudited balance sheet of Seller as
of December 31, 1995 and the related statements of income (loss),
statement of retained earnings and statement of cash flows for
the one year period ended December 31, 1995 (the "Unaudited
Financial Statements") which, except as provided therein or in
the Disclosure Statement have been prepared from the books and
records of Seller in accordance with GAAP applied on a basis
consistent with prior periods and fairly present the financial
position of Seller as of the respective dates thereof and the
results of operations and cash flows of Seller for the periods
then ended;
(iii) The unaudited balance sheet of
Seller as of March 31, 1996, and the related statement of income
(loss), statement of retained earnings and statement of cash
flows of Seller for the three (3) month period ended March 31,
1996 which, except as provided therein or in the Disclosure
Statement, have been prepared from the books and records of
Seller, fairly present the financial position of Seller as of the
respective dates thereof, and fairly present the results of
operations and cash flows of Seller for the accounting period
then ended but do not contain any footnotes required by GAAP and
are subject to year end adjustments in accordance with GAAP.
(d) Absence of Undisclosed Liabilities. Except
to the extent reflected or reserved against in the Financial
Statements for the period ending March 31, 1996 or otherwise
disclosed to Buyer in the Disclosure Statement, the Seller as of
the date of such Financial Statements, has no liabilities or
obligations of any nature, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, of a type which
under GAAP would be required to be reflected or reserved against
in such Financial Statements. Except as set forth in the
Disclosure Statement, the Seller does not know of any claim
against the Seller or liability of any nature, whether due or to
become due, in any amount not adequately reflected or reserved
against in such Financial Statements, or know of any other claim
or liability of any nature arising since March 31, 1996 of a type
which under GAAP would be required to be reflected or reserved
against in such Financial Statements.
(e) No Adverse Change.
(i) Except as previously disclosed to Buyer
in the Disclosure Statement, since March 31, 1996, there has not
been any damage, destruction or loss to any of the Purchased
Assets, whether or not covered by insurance, which materially
adversely affects the ability of the Seller, taken as a whole, to
conduct its business as presently conducted or so far as the
Seller can reasonably now foresee is likely in the future to
affect or impair the ability of the Seller, taken as a whole, to
conduct its business.
(ii) Except as previously disclosed to Buyer
in the Disclosure Statement, since March 31, 1996, Seller has
not:
(A) entered into any contract to merge
or consolidate with any other corporation; or
(B) sold, transferred or otherwise
disposed of (other than in the ordinary course of business) or
encumbered all or any Material part of the Purchased Assets.
(f) Tax Returns and Payments. Seller has duly
filed all state, federal, local and foreign tax returns and
reports (or extension with respect thereto) required to be filed
by the date hereof and has paid all amounts owed for any and all
federal, state and local taxes. All monies required to be
withheld by the Seller from employees for income taxes, Social
Security and unemployment insurance taxes have been collected or
withheld, and either paid to the respective governmental agencies
or set aside in accounts for such purpose, or accrued, reserved
against, and entered upon the books of the Seller. The Seller
has furnished to the Buyer true and complete copies of the
federal income tax returns of the Seller and any amendments
thereto for each of the fiscal years ending December 31, 1993 and
1994.
(g) Title to Purchased Assets. Except as
previously disclosed to Buyer in the Disclosure Statement, the
Seller has good and valid title to all of the Purchased Assets,
subject in each case, to no mortgage, pledge, option, escrow,
hypothecation, lien, security interest, financing statement,
lease, charge, encumbrance, easement or conditional sale or other
title retention agreement.
(h) Completeness and Condition of Property.
Except as disclosed to Buyer in the Disclosure Statement, the
Purchased Assets include all of the properties which are
necessary to conduct the Seller's PBX, Omniworks, E911, ACD,
digital switch technology and WiLL business substantially as
conducted during the Quarter ended March 31, 1996 and to perform
all of the contracts, leases, agreements, commitments, purchase
orders, customer orders and other arrangements of Seller included
in the Assumed Liabilities under this Agreement. All items of
tools, furniture, machinery, vehicles, equipment and all other
items of tangible personal property included in the Purchased
Assets have been maintained in good repair, working order and
condition, reasonable wear and tear excepted.
(i) Trademarks, Licenses, etc. A list and brief
description of all of the Seller's trademarks, service marks,
trade names, brands, patents, all applications for registration
and registrations for trademarks, copyrights and patents, and all
franchises, permits and licenses and rights with respect to the
foregoing, are set forth in the Disclosure Statement. Seller
owns or possesses the right to use all the trademarks, service
marks, trade names, brands, copyrights, patents, franchises,
permits and licenses, and rights with respect to the foregoing,
necessary for the conduct of its business as conducted on March
31, 1996. Except as set forth in the Disclosure Statement,
Seller has not received notice of any conflict with the rights of
others, or any use by others which conflicts in any material
respect with the rights of the Seller and all such marks,
franchises, permits and licenses and rights with respect to the
foregoing and all contracts, and arrangements referred to in the
Disclosure Statement are fully assignable without the consent of
any third party. Except as set forth in the Disclosure
Statement, Seller has not received or given notice of any default
or claimed or purported or alleged default on the part of any
party in the performance or payment of any material obligation to
be performed or paid by any party under any franchises, permits,
licenses, contracts, agreements or arrangements referred to in or
submitted as a part of the Disclosure Statement. During the past
five years the only names by which the Seller has been known or
which Seller has used are "SRX" and/or "Shared Resource Exchange,
Inc." Seller has previously delivered to Buyer true and correct
copies of each item described in the Disclosure Statement.
(j) Litigation; Compliance with Laws; etc.
Except as set forth in the
Disclosure Statement there is (i) no suit or action pending or to
Seller's knowledge threatened, against Seller or the property of
Seller, (ii) no governmental investigation or inquiry pending or
to Seller's knowledge threatened against the Seller, or (iii) no
pending change in the environment, zoning or building laws,
regulations or ordinances affecting the leasehold property of
Seller or its business operations, of which Seller has received
notice, which matter referred to in clauses (i), (ii) and (iii)
above would, severally or in the aggregate, Materially adversely
affect the condition (financial or otherwise) of the business,
property, or Purchased Assets, taken as a whole. Seller has
complied with and to its knowledge is not in default in any
respect under any laws, ordinances or governmental requirements,
regulations or orders applicable to its business and properties
where such failure or default would Materially adversely affect
the condition (financial or otherwise), business or assets of the
Seller, taken as a whole. Except as set forth on the Disclosure
Statement Seller has not received any notice of any claimed
violation or threatened proceeding or investigation with respect
to any matter referred to in the foregoing sentences. To
Seller's knowledge, no investigation is pending by any federal,
state or local government, or by any agency or instrumentality
thereof, the effect of which could Materially adversely affect
the business in which the Seller is engaged.
(k) Authority. The Seller has all corporate
authority to authorize, execute, deliver and perform this
Agreement subject to the approval of United States Bankruptcy
Court for the Eastern District of Texas. This Agreement has been
duly authorized, executed and delivered by the Seller and is the
legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms.
(l) Compliance with Other Instruments, etc.
Neither the execution and delivery of the Agreement nor the
consummation of the transaction contemplated hereby will conflict
with or result in any violation of or constitute a default under
any term of the certificate of incorporation or by-laws of Seller
or any agreement, mortgage, indenture, franchise, license,
permit, authorization, lease or other instrument, judgment,
decree, order, law or regulation by which the Seller or its
assets are bound.
(m) Governmental and Other Consents, etc. No
consent, approval or authorization of or designation, declaration
or filing with, any governmental authority, bureau or agency or
other persons or entities on the part of Seller is required in
connection with the execution or delivery of this Agreement or
the consummation of the transactions contemplated hereby.
(n) Agreements, etc. The Disclosure Statement
contains a true, correct and complete list and brief description
(a true and correct and complete copy of each of which has been
delivered to Buyer by Seller) of all personal property leases,
distributor agreements, sale agency or marketing agreements,
licensing agreements and franchise agreements to which Seller is
a party or was a party at March 31, 1996 or in which the Seller
has an interest;
Except as set forth in the Disclosure Statement, all instruments
described in this Section 6(n) are fully assignable without the
consent of any third party, and the continuation, validity and
effectiveness of all such instruments will in no way be
Materially adversely affected by the transactions contemplated by
this Agreement. There exists no default or claimed or purported
or alleged default on the part of any party in the performance of
any obligation to be performed or paid by any party under any
contracts, plans or other instruments or arrangements referred to
in or submitted as a part of the Disclosure Statement. Seller
has not received or given notice of any default or claimed or
purported or alleged default on the part of any party in the
performance or payment of any obligation to be performed or paid
by any party under any contracts, plans or other instruments or
arrangements referred to in or submitted as a part of the
Disclosure Statement.
(o) ERISA. The Seller is and has at all times
been in compliance in all Material respects with all applicable
provisions of ERISA and other federal and state statutes and
regulations relating to "employee benefit plans," as such term is
defined in 3(3) of ERISA, and the Seller is current with respect
to all contributions required to be made to any such plan. No
event has occurred which would constitute a reportable event
within the meaning of 4043(b) of ERISA, or which would
constitute grounds for the appointment by the appropriate United
States district court of a trustee to administer any employee
benefit plan maintained by the Seller, and no notice of
termination has been filed by the plan administrator pursuant to
4041 of ERISA or issued by the Pension Benefit Guaranty
Corporation pursuant to 4042 of ERISA with respect to any
pension benefit plan subject to ERISA. The Seller does not
maintain or contribute, has not maintained or contributed, nor is
it now nor has it ever been required to, maintain or contribute
to a defined benefit pension plan or multi-employer pension plan,
and the Seller is not and has not been under common control
(within the meaning of Sections 414(b) or (c) of the Code) with
an entity.
(p) Bank Accounts; Securities. A list and brief
description of all bank accounts, safe deposit boxes, lock boxes,
money market funds, certificates of deposit, stocks, bonds and
other securities in the names of or owned or controlled by the
Seller and details about persons having access thereto has been
delivered to Buyer as part of the Disclosure Statement.
(q) Environmental Compliance. The Seller has
delivered to the Buyer a copy of each of the following items:
(i) every written communication during the past three years
between the Seller and any environmental agency which alleges
Material noncompliance with applicable environmental laws and
regulations or demands payment of penalties and fines for alleged
violations of such laws and regulations; (ii) a description of
the nature and quantities of any hazardous materials (as defined
below) generated, transported or disposed of in material
quantities by the Seller during the past three years, together
with a description of the location at which such materials were
generated, transported or disposed; and (iii) a summary of the
nature and quantities of any hazardous materials (as defined
below) that have been disposed of in material quantities by
Seller or found by Seller in material quantities at the subject
site. Seller has no direct knowledge that it is not in
compliance with all applicable federal, state and local laws and
regulations relating to pollution control and environmental
contamination including, without limitation, all laws and
regulations governing the generation, use, collecting, treatment,
storage, transportation, recovery, removal, discharge or disposal
of hazardous materials (as defined below) and all laws and
regulations with regard to record keeping, notification and
reporting requirements respecting hazardous materials (defined
below) where the failure to be in such compliance would have a
Material adverse effect on the business, properties or condition
(financial or otherwise) of the Seller, taken as a whole. The
Seller has not received any written notice of, and has not been
subject to any administrative or judicial proceeding pursuant to
laws or regulations relating to pollution control and
environmental contamination at any time during the past three
years. There are no facts or circumstances which now exist of
which Seller has direct knowledge that could form the basis for
the assertion of a claim against the Seller relating to past or
present environmental practices of Seller asserted under the
Comprehensive Environmental Response Compensation and Liability
Act of 1980 ("CERCLA"), the Resource Conservation and Recovery
Act ("RCRA") or any other federal, state or local environmental
statute, which claim, if adversely determined would have a
material adverse effect on the business, properties or condition
(financial or otherwise) of the Seller, taken as a whole. For
purposes of this Section 6(s), the term "hazardous materials"
means materials defined as "hazardous substance" or "hazardous
waste" in CERCLA, RCRA and in any similar federal, state or local
environmental statute.
(r) Customers and Suppliers. Seller has
delivered to Buyer as part of the Disclosure Statement a complete
list of names and addresses of the entities that account for 5%
or more of the sales or 10% or more of the purchases,
respectively, made by the Seller during the fiscal year 1995 and
the six month period ended June 30, 1996 showing with respect to
each, the nature of the relationship (including the principal
categories of products bought or sold). Except as set forth in
the Disclosure Statement, the Seller has no knowledge of any
intention of any customer or supplier to terminate, cancel,
modify, or change its business relationship with the Seller
which individually or in the aggregate would be Materially
adverse to the business of the Seller as conducted on March 31,
1996, taken as a whole. The Seller has no knowledge of any
existing events or conditions or state of facts or circumstances
relating to the Seller's relationships with customers and
suppliers that will prevent the Buyer from conducting the
business of the Seller after the consummation of the
transactions contemplated by this Agreement in essentially the
same manner in which it had been conducted by the Seller on March
31, 1996.
(s) Permits and Licenses. Set forth in the
Disclosure Statement is a list and brief description of all
permits, licenses, notices and similar filings that are required
in the Seller's operation of its business in each jurisdiction in
which it conducts business, the failure of which to possess would
have a material adverse effect on the business, properties or
condition (financial or otherwise) of the Seller, taken as a
whole. Except as set forth in the Disclosure Statement, all such
permits, licenses, notices and similar filings may be freely
transferred to the Buyer. Except as set forth in the Disclosure
Statement, the Seller is not required to be licensed or regulated
by any governmental or regulatory body by reason of the
particular business conducted by it.
(t) Schedules and Other Information. The
Financial Statements, the representations and warranties of
Seller contained in this Agreement, the Schedules and Exhibits
thereto, and the Disclosure Statement do not contain any untrue
statements of material fact or omit any material fact necessary
to make the statements contained therein or herein not misleading
in view of the circumstances under which they were made. Buyer
and/or Teltronics shall be entitled to rely upon the
representations and warranties of Seller notwithstanding any due
diligence and/or investigation conducted by Buyer and/or Seller
on or before the date of this Agreement.
(u) Accuracy of Documents. All agreements,
contracts, leases, titles and other documents delivered by the
Seller to the Buyer for the Buyer's review in connection with
this Agreement and the transactions contemplated hereby,
including without limitation, the certificate of incorporation,
by-laws, corporate minutes and tax returns are true, correct and
complete copies of all such agreements, contracts, titles and
other documents.
(v) Conduct of Business.
Except as set forth in the Disclosure
Statement, since March 31, 1996, the Seller has not:
(i) entered into any joint venture,
partnership or other similar arrangement for the conduct of its
business;
(ii) directly or indirectly disposed or
accelerated realization of any of its assets, including inventory
and receivables, except in the ordinary course of business and
consistent with past practice;
(iii) entered into any other transaction
not in the ordinary course of business, except for the filing for
protection under Chapter 11 of the United States Bankruptcy Code.
(w) Inventory. All inventory included in the
Purchased Assets is recorded on the books of the Seller at 115%
of cost of materials.
(x) Accounts Receivable. Seller has previously
delivered to Buyer a detailed schedule of its accounts
receivable, as part of the Disclosure Statement. All of the
accounts receivable of the Seller represent bona fide amounts
due for sales of goods or provision of services; arose in the
ordinary course of business; and except as set forth in the
Disclosure Statement, all of the accounts receivable are fully
collectible. Except as set forth in the Disclosure Statement,
the Seller has no knowledge of any accounts receivable that are
being contested or disputed by the obligor thereon, or which the
Seller has reason to believe will be contested or disputed.
(y) Transactions with Affiliates. Except as set
forth in the Disclosure Statement, all transactions in excess of
$5,000 between the Seller and any Affiliate, relating to
Purchased Assets or Assumed Liabilities, have not been fraudulent
with respect to any creditor of the Seller or any of its
Affiliates.
(z) Product Warranties. Except as set forth in
the Disclosure Statement, the Seller has (i) no unexpired,
express product warranty with respect to any product that it
manufactures or sells or that it has heretofore manufactured or
sold; (ii) not received written notice of any material claim
based on any product warranty, and (iii) no knowledge or any
reasonable ground to know of any material claim (actual or
threatened) based on any product warranty of which it has
received no written notice. No products sold by the Seller
failed to meet any specification relating thereto or were
otherwise defective, which failure individually or in the
aggregate would have a material adverse effect on the financial
condition of the Seller, taken as a whole.
(aa) Brokers' or Finder's Fee. Except as set
forth in the Disclosure Statement, no agent, broker, investment
banker, or other firm acting on behalf of Seller, or any
shareholder of Seller, or under the authority of any of them, is
or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly from any of the
parties in connection with any of the transactions contemplated
by this Agreement.
(bb) Distribution of Consideration. None of the
Consideration, including the Stock Consideration received by
Seller hereunder, shall be delivered, transferred and/or
distributed to any one or more of the holders of the common stock
of the Seller except as described in the Disclosure Statement.
(cc) During the last five (5) years, Seller has
not conducted business under any name other than "SRX" and/or
"Shared Resource Exchange".
7. Representations and Warranties of Teltronics.
Teltronics represents and warrants to the Seller as follows:
(a) Organization; Good Standing. Teltronics is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation. Teltronics has all
requisite corporate power and authority and legal right to own,
operate and lease its properties, to carry on its business as now
being conducted, and to enter into this Agreement and perform its
obligations under this Agreement. Teltronics is qualified to do
business in each jurisdiction where the conduct of its business
or the ownership of its property requires such qualification and
where the failure to so qualify would have a material adverse
effect on the business of Teltronics. The chief executive office
and principal place of business and the places where Teltronics
maintains all records relating to its business is 0000 Xxxxxxxxx
Xxxxxxxxxx Xxx, Xxxxxxxx, Xxxxxxx 00000.
(b) Litigation; Compliance with Laws; etc.
Except as set forth in filings by Teltronics with the Securities
and Exchange Commission there is (i) no suit or action pending or
to Teltronics' knowledge threatened, against Teltronics or the
property of Teltronics, (ii) no governmental investigation or
inquiry pending or to Teltronics' knowledge threatened against
Teltronics, or (iii) no pending change in the environment, zoning
or building laws, regulations or ordinances affecting the
leasehold property of Teltronics or its business operations, of
which Teltronics has received notice, which matter referred to in
clauses (i), (ii) and (iii) above would, severally or in the
aggregate, materially adversely affect the condition (financial
or otherwise) of the business, property, or assets of Teltronics,
taken as a whole. Teltronics has complied with and to its
knowledge is not in default in any respect under any laws,
ordinances or governmental requirements, regulations or orders
applicable to its business and properties where such failure or
default would materially adversely affect the condition
(financial or otherwise), business or assets of Teltronics, taken
as a whole. Teltronics has not received any notice of any
claimed violation or threatened proceeding or investigation with
respect to any matter referred to in the foregoing sentences. To
Teltronics' knowledge, no investigation is pending by any
federal, state or local government, or by any agency or
instrumentality thereof, the effect of which could materially
adversely affect the business in which Teltronics is engaged.
(c) Authority. All necessary proceedings of
Teltronics have been duly taken to authorize the execution,
delivery and performance of this Agreement, and the Transactional
Documents. This Agreement and the Transactional Documents have
been duly authorized, executed and delivered by Teltronics and
are the legal, valid and binding obligations of Teltronics,
enforceable against Teltronics in accordance with their terms.
(d) Compliance with Instruments, Consents, Adverse
Agreements. Neither the execution and the delivery of this
Agreement and the Transactional Documents, nor the consummation
of the transaction contemplated hereby and thereby will conflict
with or result in any violation of or constitute a default under
Teltronics' Restated Certificate of Incorporation and bylaws or
any agreement, mortgage, indenture, license, permit, lease or
other instrument, judgment, decree, order, law or regulation by
which Teltronics is bound. No consent, approval or authorization
of or designation, declaration or filing with any governmental
authority or other persons or entities on the part of Teltronics
is required in connection with the execution or delivery of this
Agreement and the Transactional Documents or the consummation of
the transaction contemplated hereby and thereby. Teltronics is
not a party to or subject to or in violation of any agreement or
instrument, or subject to or in violation of any charter or other
restriction or any judgment, order, writ, injunction, decree,
law, rule or regulation which materially adversely affects the
business operations, prospects, properties, assets or condition,
financial or otherwise, of Teltronics.
(e) Broker's or Finder's Fee. Except as set
forth on Schedule 7(e) hereto, no agent, broker, investment
banker, or other person or firm acting on behalf of Teltronics or
under Teltronics' authority is or will be entitled to any
broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties to this Agreement
in connection with any of the transactions contemplated by this
Agreement.
(f) Capitalization. The authorized capital stock
of Teltronics consists of:
(i) 40,000,000 shares of Common Stock, par
value $.001 per share, of which 2,612,013 shares are issued and
outstanding and 1,250,000 shares are reserved for issuance
pursuant to employee stock options and 5,000,000 shares Non-
Voting Common Stock, $.001 par value, of which no shares are
issued and outstanding and 1,000,000 shares are reserved for
possible issuance in connection with the acquisition by a
Subsidiary of Teltronics of certain technology.
(ii) 5,000,000 shares of Preferred Stock
("Preferred Stock") of which (A) 250,000 shares are designated
Class A Preferred Stock, par value $.001 per share, of which no
shares are issued and outstanding and (B) 17,200 shares are
reserved for issuance to Teltronics' majority shareholder.
The list set forth in Teltronics' 1996 Proxy Statement ("Proxy
Statement") is a complete and correct list of all holders of
securities of Teltronics who own 5% or more of the issued and
outstanding shares of Common Stock, Preferred Stock or other
Teltronics securities (including options and warrants) as of the
date of this Agreement. The outstanding shares of Common Stock
are duly authorized and validly issued in accordance with
applicable law, fully paid and non-assessable. Holders of shares
of Teltronics' capital stock have no pre-emptive rights. Except
for the transactions contemplated by and/or disclosed in this
Agreement or as disclosed in Teltronics' 10-KSB for the year
ended December 31, 1995 ("1995 10-KSB"), 10-QSB for the quarter
ended March 31, 1996 ("March 1996 10-QSB"), 10-QSB for the
quarter ended June 30, 1996 ("Current 10-QSB"), and/or the Proxy
Statement, there are (A) no outstanding warrants, options,
convertible securities or rights to subscribe for or purchase any
capital stock or other securities of Teltronics from Teltronics;
(B) no existing rights of stockholders to require Teltronics to
register any securities of Teltronics or to participate with
Teltronics in any registration by Teltronics of its securities;
and (C) no obligation (contingent or otherwise) of Teltronics to
purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any
other distribution in respect thereof.
(g) Validity of Stock. The Stock Consideration,
when issued and delivered in accordance with the terms of this
Agreement will be duly and validly issued, fully paid and non-
assessable.
(h) Subsidiaries. Set forth on Schedule 7(h)
annexed hereto is a true and complete list of each of the
subsidiaries of Teltronics (each, a "Subsidiary" and
collectively, the "Subsidiaries"). Each Subsidiary is a
corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its organization and is duly qualified and has all requisite
power and authority in each applicable jurisdiction to own its
properties and conduct its business as currently conducted.
(i) Financial Statements. Teltronics has
furnished the Seller with its (i) unaudited consolidated balance
sheet as of June 30, 1996 (the "Unaudited Balance Sheet"), (ii)
unaudited consolidated statements of operations, shareholders'
equity and cash flows for the period then ended, and (iii)
audited consolidated financial statements as of and for the year
ended December 31, 1995 and 1994 ("Audited Financial Statements")
(all of which in (i), (ii) and (iii) are collectively referred to
as the "Teltronics Financial Statements"). The Teltronics
Financial Statements are true and correct in all material
respects, are in accordance with the books and records of
Teltronics and its Subsidiaries and have been prepared in
accordance with GAAP consistently applied (except that the
Unaudited Balance Sheet does not contain any footnotes required
by GAAP and is subject to normal year-end audit adjustments) and
fairly and accurately present in all material respects the
consolidated financial position of Teltronics and the
Subsidiaries as of such date and the results of its operations
for the period then ended. Teltronics and its Subsidiaries taken
as a whole have no liabilities, debts or obligations, whether
accrued, absolute or contingent, other than (i) liabilities
reflected or reserved against in the Unaudited Balance Sheet, and
(ii) liabilities incurred since June 30, 1996 in the ordinary and
usual course of business. Since June 30, 1996, except as to the
transactions contemplated by this Agreement or referenced in the
Proxy Statement, the Current 10-QSB, the March 1996 10-QSB or the
1995 10-KSB, Teltronics and the Subsidiaries taken as a whole
have been operated in the ordinary and usual course of business,
and there has not been:
(i) any change in the assets, liabilities,
condition (financial or otherwise) business or operating results
of Teltronics and its Subsidiaries, taken as a whole, from that
reflected in the Unaudited Balance Sheet, except changes in the
ordinary course of business that have not been, in the aggregate,
materially adverse;
(ii) any damage, destruction or loss, whether
or not covered by insurance, materially and adversely affecting
the assets, properties, condition (financial or otherwise),
operating results, prospects or business of Teltronics and its
Subsidiaries, taken as a whole (the "Business");
(iii) any waiver by Teltronics or any
Subsidiary of a valuable right or of a material debt owed to it
except in the ordinary course of business and which is not
material to the Business;
(iv) any satisfaction or discharge of any
lien, claim or encumbrance or payment of any obligation by
Teltronics or any Subsidiary, except in the ordinary course of
business and which is not material to the Business;
(v) any material change or amendment to a
material contract or arrangement by which Teltronics or any
Subsidiary or any of their respective assets or properties are
bound or subject except in the ordinary course of business and
which is not material to the Business;
(vi) any sale by Teltronics or any Subsidiary
of a material non-inventory asset other than in the ordinary
course of business.
(j) Insurance. Teltronics and each of its
Subsidiaries has in full force and effect fire and casualty
insurance policies, with extended coverage, sufficient in an
amount (subject to reasonable deductibles) to allow it to replace
any of its material properties that might be damaged or
destroyed.
(k) Absence of Undisclosed Liabilities; Changes.
(i) Except as referred to in the Proxy
Statement or reflected in the Current 10-QSB, the March 1996 10-
QSB, 1995 10-KSB or in the Teltronics Financial Statements,
Teltronics and its Subsidiaries on a consolidated basis have no
material liability or obligation, absolute or contingent,
including without limitation, any tax liabilities due or to
become due, except (A) obligations and liabilities incurred after
the date of the Unaudited Balance Sheet in the ordinary course of
business that are not individually or in the aggregate material
and (B) obligations under contracts made in the ordinary course
of business that would not be required to be reflected in
financial statements prepared in accordance with GAAP and (C)
obligations arising under this Agreement. Without limiting the
generality of the foregoing, Teltronics does not know of any
basis for the assertion against Teltronics or any Subsidiary
taken as a whole as of the date hereof any material liabilities
of Teltronics or its Subsidiaries taken as a whole that are not
reflected in the Proxy Statement, March 1995 10-QSB, Current 10-
QSB, 1995 10-KSB or in the Teltronics Financial Statements.
(ii) Since the date of the Unaudited Balance
Sheet, there has been no occurrence, condition or development
that has materially and adversely affected Teltronics' Business,
and there has been no material change in Teltronics' Business,
except pursuant to transactions contemplated by this Agreement
and as disclosed in the Proxy Statement, 1995 10-KSB, March 1996
10-QSB and/or Current 10-QSB.
(l) Labor Agreements and Actions. Neither
Teltronics nor any Subsidiary is bound by or subject to (and none
of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has
requested or, to the best knowledge of Teltronics, has sought to
represent any of the employees, representatives or agents of
Teltronics or any Subsidiary. There is not strike or other labor
dispute involving Teltronics or any Subsidiary pending, or to the
best knowledge of Teltronics threatened, that would have a
material adverse effect on the Business, nor is Teltronics aware
of any labor organization activity involving its employees.
(m) Taxes, etc. Teltronics and each of its
Subsidiaries have in all material respects accurately prepared
and timely and properly filed all foreign and U.S. federal, state
and municipal tax returns that are required to be filed by them
and each has paid or made provision for the payment of all
amounts due pursuant to such returns. The income tax returns of
Teltronics as to which the applicable statutes of limitations
have not expired have not been audited and are not currently
under audit by the tax authorities with which such returns were
filed, and there are no waivers in effect of the applicable
statute of limitations for any period. No material deficiency
assessment or proposed adjustment of any foreign or U.S. federal,
state or municipal taxes of Teltronics or any Subsidiary is
pending and Teltronics has no knowledge of any material proposed
liability for any tax to be imposed.
(n) Full Disclosure. The Teltronics Financial
Statements and the representations and warranties of Teltronics
contained in this Agreement do not contain any untrue statement
of a material fact or omit any material fact necessary to make
the statements contained therein or herein not misleading in view
of the circumstances under which they are made.
For the purposes of this Section 7, "material" is any
event or condition giving rise to a cost or liability to
Teltronics and any Subsidiary taken as a whole equal to or
greater than $100,000.
7A. Representations and Warranties of Buyer. Buyer
represents and warrants to the Seller as follows:
(a) Organization; Good Standing. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation. Buyer has all
requisite corporate power and authority and legal right to own,
operate and lease its properties, to carry on its business as now
being conducted, and to enter into this Agreement and perform its
obligations under this Agreement. Buyer is qualified to do
business in each jurisdiction where the conduct of its business
or the ownership of its property requires such qualification and
where the failure to so qualify would have an adverse effect on
the business of Buyer. The chief executive office and principal
place of business and the places where Buyer maintains all
records relating to its business is 0000 Xxxxxxxxx Xxxxxxxxxx
Xxx, Xxxxxxxx, Xxxxxxx 00000.
(b) Authority. All necessary proceedings of
Buyer have been duly taken to authorize the execution, delivery
and performance of this Agreement and the Transactional
Documents. This Agreement and the Transactional Documents have
been duly authorized, executed and delivered by Buyer and are the
legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their terms.
(c) Compliance with Instruments, Consents, Adverse
Agreements. Neither the execution and the delivery of this
Agreement, nor the Transactional Documents, nor the consummation
of the transaction contemplated hereby and thereby will conflict
with or result in any violation of or constitute a default under
Buyer's certificate of incorporation and bylaws or any agreement,
mortgage, indenture, license, permit, lease or other instrument,
judgment, decree, order, law or regulation by which Buyer is
bound. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority or other
persons or entities on the part of Buyer is required in
connection with the execution or delivery of this Agreement and
the Transactional Documents or the consummation of the
transaction contemplated hereby and thereby. Buyer is not a
party to or subject to or in violation of any agreement or
instrument, or subject to or in violation of any charter or other
restriction or any judgment, order, writ, injunction, decree,
law, rule or regulation which adversely affects the business
operations, prospects, properties, assets or condition, financial
or otherwise, of Buyer.
(d) Broker's or Finder's Fee. No agent, broker,
investment banker, or other person or firm acting on behalf of
Buyer or under Buyer's authority is or will be entitled to any
broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties to this Agreement
in connection with any of the transactions contemplated by this
Agreement.
8. Survival of Representations and Warranties. The
parties hereto agree that all representations and warranties made
in this Agreement or in any Exhibit, Schedule, certificate or
document delivered herewith or at the Closing shall survive the
execution and delivery thereof and the Closing hereunder through
December 15, 1997.
9. Indemnification.
(a) Indemnification by Seller. Subject to the
limitations set forth in Section 9(c), Seller shall indemnify,
defend, and hold Buyer, Teltronics and their respective officers,
directors, employees, and shareholders and their respective
successors and assigns (collectively, "Buyer's Indemnified
Persons") harmless from and against all demands, suits, claims,
actions or causes of action, assessments, losses, damages,
liabilities, settlements, penalties, and forfeitures, and
reasonable costs and expenses (including court costs, and any
other litigation related expenses incident thereto)
(collectively, the "Indemnity Losses" and individually,
"Indemnity Loss") asserted against, suffered, or incurred by any
of Buyer's Indemnified Persons arising out of or in any way
related to:
(i) Any misrepresentation in or breach of
the representations and warranties of Seller or the failure of
Seller to perform any of its covenants or obligations contained
in this Agreement, the Transactional Documents, or in any
exhibit, schedule, certificate or other instrument or document
furnished to or to be furnished by Seller pursuant to this
Agreement or in connection with the transactions contemplated by
this Agreement;
(ii) Except with respect to the Assumed
Liabilities assumed by Buyer under this Agreement, the operation
of Seller's business or the use of the Purchased Assets prior to
the date hereof;
(iii) Any actions, claims, suits, or
proceedings asserted by third parties alleging personal injury or
property damage due to, arising out of, or by reason of the
design, manufacture or use of any products of the Seller's
business manufactured on or prior to the date hereof;
(iv) Any worker's compensation claims of any
employee or former employee of Seller relating to events
occurring on or prior to the date hereof;
(v) Any and all claims for compensation and
other employee benefits (including, but not limited to, severance
pay, outplacement benefits, disability benefits, health, retiree
medical, worker's compensation, tuition assistance, death
benefits, and pension and profit sharing plans and claims
relating to employment or termination of employment) accruing on
or prior to the date hereof, or on or after the date hereof with
respect to the payment of severance benefits and other welfare
benefit payments, if any, with respect to (i) employees in the
Seller's business who are laid off on or prior to the date hereof
and (ii) employees in the Seller's business who, on the date
hereof, are on medical leave or disability, and related costs and
liabilities, regardless of whether such claims and related cots
and liabilities are made or incurred before, on or after the date
hereof;
(vi) All claims, investigations, actions,
suits, proceedings, demands, assessments, judgments, costs and
expenses, including reasonable attorneys' fees and expenses,
incident to the foregoing; or
(vii) Any liabilities, obligations or
expenses of Seller not included in the Assumed Liabilities
assumed by Buyer pursuant to the provisions of the Agreement.
(b) Indemnification by Buyer and Teltronics.
Subject to the limitations set forth in Section 9(c), Buyer and
Teltronics shall indemnify, defend, and hold Seller, and its
officers, directors, employees, and shareholders and their
respective successors and assigns (collectively "Seller's
Indemnified Persons"), harmless from and against any Indemnity
Loss asserted against, suffered or incurred by any of Seller's
Indemnified Persons arising out of or in any way related to:
(i) Any misrepresentation in or breach of
the representations and warranties of Buyer or Teltronics or the
failure of Buyer or Teltronics to perform any of their covenants
or obligations contained in this Agreement, the Transaction
Documents or in any exhibit, schedule, certificate or other
instrument or document furnished or to be furnished by Buyer
pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement;
(ii) The use by Buyer of the Purchased Assets
after the date hereof;
(iii) The Assumed Liabilities;
(iv) All claims, investigations, actions,
suits, proceedings, demands, assessments, judgments, costs, and
expenses, including reasonable attorneys' fees and expenses,
incident to the foregoing;
(v) Any actions, investigations, actions,
suits, proceedings, demands, assessments, judgments, costs, and
expenses, including reasonable attorneys' fees and expenses
(incurred thereon at trial and upon appeal), incident to the
foregoing;
(c) Limitations on Indemnity. The
indemnification obligations of the parties under Sections 9(a)
and (b) of this Agreement shall be subject to the following
limitations:
(i) Deductible. Buyer, Teltronics and
Seller shall be obligated to pay Indemnity Losses described in
Sections 9(a) or (b) hereof as the case may be only to the extent
that such Indemnity Losses exceed $25,000 in the aggregate.
(ii) Ceiling. Subject to Section 9(c)(iii),
the maximum aggregate amount payable for any and all of the
Indemnity Loss hereunder shall be $720,000 payable in
restricted shares of the Common Stock of Teltronics valued at
$6.00 per share or cash at the option of the indemnifying party.
Seller and Buyer agree that not more than $120,000 of the maximum
aggregate amount payable by Seller under this Section 9 shall be
allocable to certain claims for medical, commission and other
claims specifically identified in the Disclosure Statement.
(iii) Rescission. In the event that some
or all of the transactions described in this Agreement and the
Transaction Documents are rescinded, reversed or otherwise
revoked and/or set aside by a duly constituted court of law,
located within the United States including but not limited to the
United States Bankruptcy Court for the Eastern District of Texas,
the ceiling described in Section 9(c)(ii) above shall not apply
and shall not in any manner limit the right of either Teltronics,
Buyer or Seller to enforce the indemnity provisions of this
Section 9.
(d) Notice. If any party believes that it has
suffered or incurred any Indemnity Loss, that party shall so
notify the indemnifying party promptly in writing describing such
loss or expense, the amount thereof, if known, and the method of
computation of such Indemnity Loss, all with reasonable
particularity. If any action at law, suit in equity or
administrative action is instituted by or against a third party
with respect to which any party intends to claim any liability or
expense as an Indemnity Loss under this Section 9, such party
shall promptly notify the indemnifying party of such action.
(e) Defense of Claims. The indemnifying party
shall have ten (10) business days after receipt of either notice
referred to in Section 9(d) of this Agreement to notify the
indemnified party that it elects to conduct and control any legal
or administrative action or suit with respect to an indemnifiable
claim. If the indemnifying party does not give such notice, the
indemnified party shall have the right to defend, contest, settle
or compromise such action or suit in the exercise of its
exclusive discretion, and the indemnifying party shall, upon
request from the Indemnified Person promptly pay the indemnified
person in accordance with the other terms and conditions of this
Section 9, the amount of any Indemnity Loss resulting from its
liability to the third party claimant. If the indemnifying party
gives such notice, it shall have the right to undertake, conduct
and control, through counsel of its own choosing (which counsel
shall be satisfactory to the indemnified party in the reasonable
judgment of the indemnified party) and at its sole expense, the
conduct and settlement of such action or suit, and the
indemnified party shall cooperate with the indemnifying party in
connection therewith; provided, however, that (i) the
indemnifying party shall not thereby permit to exist any lien,
encumbrance or other adverse change securing the claims
indemnified hereunder upon any asset of the indemnified party,
(ii) the indemnifying party shall not thereby consent to the
imposition of any injunction against the indemnified party
without the prior written consent of the indemnified party, (iii)
the indemnifying party shall permit the indemnified party to
participate in such conduct or settlement through counsel chosen
by the indemnified party, but the fees and expenses of such
counsel shall be borne by the indemnified party except as
provided in clause (iv) below, and (iv) upon a final
determination of such action or suit, the indemnifying party
shall agree promptly to reimburse to the extent required under
this Section 9 the indemnified party for the full amount of any
Indemnity Loss resulting from such action or suit and all
reasonable and related expenses incurred by the indemnified
party, except fees and expenses of counsel for the indemnified
party incurred after the assumption of the conduct and control of
such action or suit by the indemnifying party. So long as the
indemnifying party is contesting any such action in good faith,
the indemnified party shall not pay or settle any such action or
suit. Notwithstanding the foregoing, the indemnified party shall
have the right to pay or settle any such action or suit, provided
that in such even the indemnified party shall waive any right to
indemnity therefor from the indemnifying party and no amount in
respect therefor shall be claimed as a Indemnity Loss under this
Agreement.
(f) Cooperation. If requested by the
indemnifying party, the indemnified person shall cooperate with
the indemnifying party and its counsel in contesting any claim
which the indemnifying party elects to contest or, if
appropriate, in making any counterclaim against the person
asserting the claim, or any cross-complaint against any person,
and further agrees to take such other action as reasonably may be
requested by an indemnifying party to reduce or eliminate any
loss or expense for which the indemnifying party would have
responsibility, but the indemnifying party will reimburse the
indemnified person for any expenses incurred by it in so
cooperating or acting at the request of the indemnifying party.
(g) Right to Participate. The indemnified party
shall afford the indemnifying party and its counsel (at the
indemnifying party's own expense) the opportunity to be present
at, and to participate in, conferences with all persons,
including governmental authorities, asserting any claim against
the indemnified party or conferences with representatives of or
counsel for such persons.
(h) Payment of Losses. The indemnifying party
shall promptly pay to the indemnified person in cash the amount
of any Indemnity Loss to which the indemnified person is entitled
by reason of the provision of this Agreement. Any claim for
which indemnification occurs under this Agreement shall be
assigned (without recourse) to the indemnifying party.
(i) Subrogation. In the event of any payment by
an indemnifying party to an indemnified party in connection with
any Indemnity Loss, the indemnifying party shall be subrogated to
and shall stand in the place of the indemnified party as to any
events or circumstances in respect of which the indemnified party
may have any right to claim against any third party relating to
such event of indemnification. The indemnified party shall
cooperate with the indemnifying party in any reasonable manner in
prosecuting any subrogated claim.
10. Post-Closing Covenants. Seller and Buyer covenant
with each other that promptly after the execution and delivery of
this Agreement, Seller shall engage Ernst & Young to conduct an
audit of the balance sheet of Seller as of December 31, 1995 in
accordance with generally accepted auditing standards ("Ernst &
Young Audited Statements"). The fees charged by Ernst & Young in
the conduct of the audit, up to an aggregate of $55,000 shall be
paid by the Buyer. All charges, fees and bills of Ernst & Young
in connection with the audit in excess of $55,000 shall be the
sole obligation and responsibility of Seller. Seller shall
cooperate with and use its best efforts to cause Ernst & Young to
deliver to Seller and Buyer within forty-five (45) calendar days
from the date hereof, the Ernst & Young Audited Statements,
together with Ernst & Young's opinion thereon in form reasonably
acceptable to Buyer. Unless Buyer shall deliver to Seller a
written statement of Buyer's objections to the Ernst & Young
Audited Statements within fifteen (15) days after receipt by it
of the Ernst & Young Audited Statements, the Ernst & Young
Audited Statements shall be deemed to have satisfied Seller's
obligations under this paragraph 10, but such deemed satisfaction
shall not in any manner limit, impair or waive any of the rights
of Buyer and/or Teltronics under this Agreement.
11. Non-Compete. To induce Buyer to enter into this
Agreement, Seller covenants and agrees that commencing the date
of this Agreement and for a period of two years thereafter,
Seller shall not, directly or indirectly, as an owner,
shareholder, partner, agent, representative or in any other
manner enter into, or in any manner take an active part in, any
business similar to or related to the PBX, E911, digital switch
technology, ACD, WiLL and/or Omniworks business which is or may
be in competition with the business of Buyer and/or Teltronics
within the United States. Seller expressly acknowledges that in
addition to all rights and remedies at law available to Buyer
and/or Teltronics to enforce the terms of this Section, Buyer
and/or Teltronics shall have the right to seek and obtain
equitable relief, including injunctive relief, against Seller for
violating the terms of this Section.
12. Severability. If any provision of this Agreement
or the application of any such provision to any party or
circumstances shall be determined by any court of competent
jurisdiction to be invalid and unenforceable to any extent, the
remainder of this Agreement or the application of such provision
to such person or circumstances other than those to which it is
so determined to be invalid and unenforceable, shall not be
affected thereby, and each provision hereof shall be enforceable
to the fullest extent permitted by law.
13. Applicable Law. This Agreement shall be governed
and construed and interpreted in accordance with the internal
laws of the State of Texas without regard to principles of
conflicts of laws.
14. Waivers and Notices. Any failure by any party to
this Agreement to comply with any of its obligations, agreement
or covenants hereunder may be waived by the Seller in the case of
a default by the Buyer and by the Buyer in the case of a default
by the Seller. All waivers under this Agreement and all notices,
consents, demands, requests, approvals and other communications
which are required or may be given hereunder shall be in writing
and shall be deemed to have been duly given if delivered or
mailed certified first class mail, postage prepaid, return
receipt requested:
(a) If to the Seller:
Shared Resource Exchange, Inc.
0000 Xxxxx Xxxxx
Xxxxx, Xxxxx
with copies to:
Xxxxxxxx X. Xxxxxxxxxx, Esq. Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxx Xxxx & Xxxxxx LLP Xxxxxxxx Sweet & Xxxxxxxxx
000 Xxxx Xxxxxx 000 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 0000 XxXxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
(b) If to the Buyer:
SRX of Florida, Inc.
0000 Xxxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxxx, Xxxxxxx 00000-0000
(c) If to Teltronics:
Teltronics, Inc.
0000 Xxxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxxx, Xxxxxxx 00000
or to such other person or persons at such address or addresses
as may be designated by written notice to the other parties
hereunder.
15. Access to Books and Records Post-Closing. After
the Closing, (i) the Seller shall provide the Buyer full access
during normal business hours (upon reasonable prior notice) to
all books and records which are part of the Retained Assets
insofar as they relate to any Purchased Assets or Assumed
Liabilities or the conduct of the business after the Closing and
(ii) the Buyer shall provide the Seller full access during normal
business hours (upon reasonable prior notice) to all books and
records which are part of the Purchased Assets which relate to
the Purchased Assets or Assumed Liabilities or the conduct of the
business prior to the Closing.
16. Entire Agreement. This Agreement, together with
the other writings delivered in connection herewith, embodies the
entire Agreement and understanding of the parties hereto and
supersedes all prior agreements or understandings between the
parties, oral or written, express or implied. This Agreement
cannot be amended orally, but only by a writing duly executed by
the parties.
17. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same document.
18. Headings. Headings of the Sections in this
Agreement are for reference purposes only and shall not be deemed
to have any substantive effect.
19. Binding Effect, Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns; provided, however,
that nothing in this Agreement shall be construed to confer any
rights, remedies, obligations or liabilities on any person other
than the parties hereto or their respective successors and
assigns.
20. Expenses. All costs and expenses (excluding fees
of Ernst & Young relative to the preparation of the Ernst & Young
Audited Statements which shall be paid by Buyer in accordance
with the terms of Section 10 and Xxxxxx Xxxx & Xxxxxx'x fees as
and to the extent described in Exhibit A) and accountant's fees
incurred by Seller in connection with this Agreement and the
transactions contemplated hereby, shall be paid by the Seller at
Closing. Buyer shall pay its costs and expenses.
21. Brokers. Seller agrees to indemnify and hold
harmless Buyer and Teltronics from and against any and all claims
for broker's or finder's fees or commissions in connection with
the transactions contemplated hereby arising out of or based upon
any act of the Seller. The Buyer agrees to indemnify and hold
harmless the Seller from and against any and all claims for
broker's or finder's fees or commissions in connection with the
transactions contemplated hereby arising out of or based upon any
act of the Buyer.
IN WITNESS WHEREOF, the parties heave executed this
Agreement as of the date first written above.
SELLER BUYER
Shared Resources Exchange, Inc. SRX of Florida, Inc.
By: Xxxxxx X. Xxxxxxxx By: Xxxx Xxxxxxx
President & Chief President
Executive Officer
Teltronics, Inc.
By: Xxxx Xxxxxxx
President
EXHIBIT A
CLAIMS TO BE ASSUMED SUBJECT TO BEING ALLOWED
IN U.S. BANKRUPTCY CASE NO. 96-42190S
1. Accounts payable as of September 19, 1996 in the aggregate
amount of approximately $374,000.00 as more fully described in
the Accounts Payable/Unvouchered Receipts Report contained in
the Disclosure Statement.
2. Open purchase orders for custom parts in the aggregate amount
of approximately $207,000 as of September 19, 1996 as more
fully described in the Open purchase orders Report contained
in the Disclosure Statement.
3. DIVA Communications credit of $263,900.00 to be applied
against and as performance is rendered by Buyer under order
#73801 placed by DIVA with Seller in the amount of $791,690.
4. Payment in the amount of $24,324.00 ($12,162.00 per quarter)
due to Business Telephone Services Inc. per agreement dated
September 5, 1995 and more fully described in the Disclosure
Statement. Payment contingent upon receivable of $93,072.66
being paid by Business Telephone Services.
5. 100% of audit fees of Ernst & Young LLP up to a maximum of
$55,000.00 to be paid upon receipt of the completed 1995 year
audit.
6. Lease payable to Aloha Leasing for trade show booth with
monthly payments of $1,436.00 and expiring on May 4, 1997.
Lease more fully described in the Disclosure Statement.
7. Lease payable to the Manifest Group for UPS with monthly
payments of $460.11 and expiring on April 4, 1998. Lease more
fully described in the Disclosure Statement.
8. Lease payable to Republic leasing for VAX computer and related
equipment with monthly payments of $861.09 expiring on
September 20, 1998. Lease more fully described in the
Disclosure Statement.
9. Lease payable to T & W Leasing Corp. for various computer
equipment with monthly payments of $1,353.62 and expiring on
October 20, 1997. Lease more fully described in the
Disclosure Statement.
10. Legal fees of Xxxxxx Xxxx for pre-petition fees related to
this Agreement and post-petition fees to the extent allowed by
the Bankruptcy Court not to exceed $125,000 in the aggregate.
11. Motorola, Inc. Purchase Orders to Shared Resource Exchange,
Inc. d/b/a SRX as follows:
ORDER NUMBER DATE REV PAGE(S) SIGNED BY
CG475710PP00 6-03-96 3&4 5 X. Xxxxxxx
CG570284PP00 7-26-96 --- 2 X. Xxxxxxx
CG475711PP00 6-03-96 4&5 8 X. Xxxxxxx
CG475712PP00 6-04-96 5&6 5 X. Xxxxxxx
12. An aggregate payment of $204,257.97 to fund severance
obligations owed by Seller to Xxxxxx X. Xxxxxxxx ($175,000 to
be paid in equal payments over 12 months commencing with
Closing and consistent with Buyer's employee pay schedule),
Xxxxxxx Box ($21,154.77 to be paid in accordance with an
Employment Agreement between Mr. Box and Buyer) and Xxxxx
Xxxxxxxx ($8,103.20 to be paid in equal installments over a
six week period commencing with Closing and consistent with
the Buyer's employee pay schedule).
13. An aggregate payment of $120,000 to fund disputed medical
claim of approximately $20,000 and disputed commission claims
and a PBX end user claim in the aggregate of approximately
$100,000.
14. An aggregate payment of up to $20,000 to fund certain
operating expenses of Seller through September 20, 1996.
15. Aggregate payments of: (i) $42,400 to fund close out of two
(2) copier leases, and (ii) $37,900 to fund Allowed claims, if
any, relating to the rejection of six office leases.
16. Aggregate payments to Ernst & Young LLP of up to: (i) $12,000
for the 1995 tax return preparation fees and (ii) $12,000 for
the 1996 tax return preparation fees.
17. A payment of $1,100 to fund accrued vacation obligation in
favor of Xxxxx Xxxx to be paid upon Closing.
Each and every claim described above (except as provided in
paragraph 12 and 17 above) shall be discharged by Buyer upon the
earlier to occur of: (i) the expiration of nine (9) months after
the Closing or (ii) completion of performance by Buyer and payment
by Motorola, Inc. of the purchase orders described in paragraph 11
above. Provided, however, should Seller, as Debtor-in-Possession
of the Estate determine, in its sole discretion, that an Objection
to any claim or claims above should be filed, Buyer shall refrain
from paying the respective contested claim or claims until an Order
allowing said claim or claims is entered by the U. S. Bankruptcy
Court for the Eastern District, Xxxxxxx Division. Seller shall
deliver all Objections to Claims and subsequent Orders approving
the contested claims to SRX Florida.
The claims referred to in paragraphs 12 and 17 shall be paid as
stated therein respectively.
EXHIBIT B
RETAINED ASSETS
1. Cash in the amount of $242.000. Said cash amount includes a
$61,000 anticipated federal income tax refund payable to SRX
or its bankruptcy estate. SRX shall endorse and deposit any
checks for said refund into its DIP account..
2. The Cash Consideration and the Stock Consideration described
in Section 3 of this Agreement.
