Exhibit 10.4
INDEMNIFICATION AGREEMENT AND RELEASE
THIS INDEMNIFICATION AGREEMENT AND RELEASE (this "Agreement") is made
and entered into as of the 12th day of September 2002, by and between TEL
electronics, inc., a Utah corporation ("Electronic"), and TELS Corporation, a
Utah corporation ("TELS").
Premises
WHEREAS, TELS and Xxxx X. Xxxxxx entered into that certain Split-Off
Agreement dated as of July 27, 2001, pursuant to which TELS transferred to
Xxxxxx all shares of capital stock of Electronic and Xxxxxx assumed certain
obligations of TELS; and
WHEREAS, TELS has or will this day consummate and complete the
transactions contemplated by that certain Agreement and Plan of Reorganization
among TELS, TELS Merger Co., and Strategic Futures and Options, Inc.
("Strategic"), dated as of August 16, 2002 (the "Reorganization Agreement"); and
WHEREAS, the Reorganization Agreement generally provides that prior to
or concurrently with closing of the transactions contemplated thereby, the
liabilities of TELS, contingent or otherwise, shall be eliminated; and
WHEREAS, Strategic has requested that Electronic indemnify, release,
and hold TELS harmless from certain liabilities, including all current
liabilities of TELS and liabilities pertaining to the prior operations of
Electronic during the time it was a wholly owned subsidiary of TELS; and
WHEREAS, Xxxxxx, the sole shareholder of Electronic, is an executive
officer, director, and principal shareholder of TELS and will benefit personally
from the transactions contemplated by the Reorganization Agreement; and
WHEREAS, the parties desire to enter into this Agreement to provide for
the indemnification and release of TELS by Electronic in the manner requested by
Strategic;
Agreement
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, Electronic
and TELS agree as follows:
1. Indemnification. Electronic agrees to indemnify, release, and hold
TELS harmless from and against any and all claims, demands, costs, expenses
(including reasonable attorney's fees), liabilities, obligations, and causes of
action of any kind or character whatsoever, whether known or unknown, suspected
or unsuspected, now existing or hereafter arising, from or in connection with
the following: (i) the age discrimination claim and related proceedings
initiated by Xxxxxx Xxxxxx against TELS (the "Xxxxxx Claim"), including the
$10,000 deductible payable under TELS insurance policy; (ii) the Section 401(k)
employee benefit plan that was transferred to Electronic by TELS; (iii) the
sublease agreement between TELS and LSI Corporation pertaining to certain office
and warehouse space in California; (iv) the environmental clean-up plan effected
under the direction of the City of Santa Clara, California with respect to the
premises located at 0000 Xxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000; (v) any
and all amounts owing from TELS to Electronic, whether billed or unbilled,
accrued or unaccrued, which amounted to $144,436 as of June 30, 2002, as
reported in TELS quarterly report on Form 10-QSB for the quarter ended on such
date; (vi) any and all expenses of TELS incurred through and including the date
hereof (including expenses billed subsequent to the date hereof that relate to
goods or services provided on or prior to the date hereof), including but not
limited to all amounts payable to Ray, Xxxxxxx & Xxxxxxx, Xxxxxx & Company, and
American Stock Transfer; and (vii) claims arising from or pertaining to the
day-to-day business operations of Electronic, including the design, development,
marketing and sale of its products and the employment of its workforce. In
connection with the foregoing indemnification, TELS agrees to transfer, assign
and pay to Electronic any and all amounts it may receive from its employee
practices insurance policy and the amount of any security deposit it receives
from the landlord under the master lease pertaining to the premises that were
subsequently subleased to LSI Corporation.
2. ATTORNEYS' FEES. In the event either party initiates or defends any
legal action or proceeding in any way connected with this Agreement, the
prevailing party in any such action or proceeding (in addition to any other
relief which may be granted, whether legal or equitable), shall be entitled to
recover from the losing party in any such action or proceeding its reasonable
costs and attorney's fees (including, without limitation, its reasonable costs
and attorney's fees on any appeal). All such costs and attorney's fees shall be
deemed to have accrued on commencement of any legal action or proceeding and
shall be enforceable whether or not such legal action or proceeding is
prosecuted to judgment.
3. Miscellaneous. The terms, covenants and conditions herein contained
shall be binding upon and inure to the benefit of the Parties and their
respective heirs, successors, transferees and assigns. This Agreement
constitutes the entire agreement between the Parties with respect to the subject
matter hereof and may only be modified by a subsequent writing executed by both
Parties. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement, and the balance the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. This Agreement shall be construed and enforced in accordance with, and
governed by, the laws of the state of Utah. The individuals executing this
Agreement represent and warrant that they have the power and authority to do so,
and to bind the entities for whom they are executing this Agreement.
DATED as of the date first above written.
Electronic: TEL electronic inc.
a Utah corporation
By /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, President
President
TELS: TELS Corporation
a Utah corporation
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, President
