STOCK PURCHASE AGREEMENT
Exhibit
10
THIS STOCK PURCHASE
AGREEMENT (“Agreement”) is made 21st, 2008, between Teltronics, Inc., a Delaware
corporation with is principal office at _____________________ ("Seller") and
Xxxx Xxxxxxxx, an individual residing at 00000 Xxxxxx Xxxxxx Xxx Xxx.,
Xxxxxxxxx, Xxxxxxx 00000 and Xxxxx X. Xxxxxx, an individual residing at 0000
00xx Xxxxxx X., Xxxxxxxxx, Xxxxxxx 00000 (each individual referred to as “Buyer”
and collectively as “Buyers”).
RECITALS
WHEREAS as an
inducement for Seller to transfer all of its ownership interest in Teltronics
Direct, Inc. (the “Company”) to Buyers, Buyers agree to purchase all of Seller’s
ownership interest in the Company, continue to operate the Corporate business in
the normal course under a new company name (excluding any reference or use of
“Teltronics” in such new name) and faithfully and completely abide by and
perform each of Buyers’ covenants and obligations set forth in this Agreement;
and
WHEREAS, the Seller
desires to complete the transfer of all of its ownership interest in the Company
to Buyers upon the terms and conditions of this Agreement;
NOW, THEREFORE, in
consideration of the mutual covenants and agreements hereinafter set forth, it
is agreed as follows:
AGREEMENT
1. Sale and Purchase. (a) Seller
hereby sells, conveys, transfers and delivers to the Buyers without recourse and
the Buyers purchase and accept from Seller a total of eighty five (85) shares of
the Company’s Common Stock par value of $1.00 per share (the “Stock”) which
represents all of Seller’s ownership interest in the Company.
2. Purchase Price. Buyers shall
pay Eighty-Seven Thousand Eight Hundred Thirty-Seven and 61/100
($87,837.61) in U.S. Dollars (the “Purchase Price”) to the Seller in accordance
with the terms of a Promissory Note
which shall be executed by each Buyer concurrently with the execution of this
Agreement. Buyers’ payment of the Purchase Price shall be
secured pursuant to (i)the terms of the Stock Pledge Agreement which shall be
executed by the parties concurrently with the execution of this Agreement and
(ii) the terms of Guaranty and Security Agreement which the Buyers shall cause
the Company to execute concurrently with the execution of this
Agreement..
The Purchase Price
is based upon the inventory transfer price set for in Exhibit 1 and the intercompany
debt set forth in Exhibit
2 hereto.
3. Deliveries.
(a) Seller has
delivered to Buyers the following:
(1) Stock Certificates.
Certificates representing all of the Stock, endorsed to the Buyers, which shall
transfer to the Buyers title to such Stock. The Buyers agree
that delivery of the Stock shall be made to and held by the Seller under the
Stock Pledge Agreement (“Stock Pledge Agreement”) until Seller receives payment
in full of the outstanding principal of the Stock Purchase Price and any
interest then accrued pursuant to the Promissory Note.
(2) Resignations.
Written resignations of officers and directors of the Company who are employed
by Seller
(b) Buyers shall deliver to
Seller the Purchase Price pursuant the Promissory Note executed and delivered by
Buyers to Seller on the date first set forth above.
4. Buyers’ Grant of First Right of
Approval to Seller.
(a) For a period of the
five (5) years from the date first set forth above, neither Buyer may sell,
assign, pledge, encumber, give, devise or otherwise dispose of any interest in
any Company stock, whether voluntarily, by operation of law or otherwise to or
for the benefit of any entity or individual including the Company (a Transfer),
unless he or it has first complied with all applicable provisions of this
paragraph 4.
(b) Offer Notice . At
least 45 days prior to making any Transfer, the Buyer(s) proposing to make a
Transfer (the Transferring Buyer) shall deliver a written notice (the Offer
Notice) to Seller. The Offer Notice shall disclose in reasonable detail the
identity of the prospective transferee(s), the number of shares of the stock to
be transferred (the Offered Stock), the consideration offered, and the proposed
terms and conditions of the Transfer; provided, that if the consideration being
offered to the Transferring Buyer consists in whole or in part of something
other than U.S. dollars, then the notice shall also contain a good faith
estimate of the value of the consideration in U.S. dollars and an explanation of
the manner in which the estimate was made.
(c) Option. Seller may
elect to purchase all or any portion of the Offered Stock at the price per share
and on the terms specified in the Offer Notice by delivering written notice of
Seller’s election to the Transferring Buyer within thirty (30) days after the
delivery of the Offer Notice.
(d) If Seller has
elected to purchase all or any portion of the Offered Stock from the
Transferring Buyer, the transfer will be consummated as soon as practicable
after the delivery of the election notices, but in any event within thirty (30)
days after the identity of the transferees has been determined (the Election
Period).
(e) If Seller has not
elected to purchase all of the Offered Stock on or before the end of the
Election Period, the Transferring Buyer may, within ninety (90) days after the
expiration of the Election Period, transfer the remaining Offered Stock to the
transferee(s) specified in the Offer Notice at a price not less than the price
per share specified in the Offer Notice and on terms no less favorable to the
Transferring Buyer in any material respect than the terms specified in the Offer
Notice. If the Transferring Buyer does not transfer all of such Offered Stock to
the transferee(s) specified in the Offer Notice within such ninety (90) day
period, the Transferring Buyer may not transfer any such Offered Stock without
first having complied with all applicable provisions of this
Agreement.
(f) At Seller’s sole
discretion, the certificates of Stock to be delivered hereunder shall include
the legend set forth below. Further, Buyers shall promptly at the
request of Seller, which request may be made at any time, submit the
certificates for all of other shares of Company stock owned by them to the
Seller for endorsement on the face of each certificate of such
legend:
Any sale,
assignment, transfer, pledge or other disposition of the shares of the stock
represented by this certificate is restricted by, and subject to, the terms and
provisions of a Stock Purchase Agreement, dated _____________, 2008 a copy of
which is on file with the Secretary of the Company.
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5. Other Documents. (a)
Simultaneously with execution of this Agreement, Seller and/or Buyers
have executed and delivered the following documents;
(1) Promissory
Note. The Promissory Note pursuant to section 2 herein.
(2) Termination of
Shareholder Agreement. A termination of the Shareholder Agreement among Company,
Seller and Buyer dated January, 2008.
(3) Stock Pledge
Agreement. The Stock Pledge Agreement.
(4) Amendment to
Articles of Incorporation. Documents to change the Company’s name to be filed by
Seller with the State of Florida, Division of Corporations.
(5) Termination of
Administrative Services Agreement. A termination of the
Administrative Services Agreement between Seller and Company dated January,
2008.
(6) Distribution
Agreement. Distribution agreement for Company’s purchase and resale
of Seller’s product and services.
(7) Support Agreement.
Support Agreement for Company’s purchase of Seller’s second-level support to
facilitate Company’s fulfillment of Company’s Warranty and Support
Obligations.
(8) Restrictive
Covenants and Confidentiality. Buyers have executed and delivered
with this Agreement Non-Solicitation and Confidentiality
Agreements.
(9) General
Release. Buyers have executed and delivered to Seller General
Releases.
(b) Simultaneously with execution of this
Agreement, Buyers have caused the Company to execute and deliver the following
documents to Seller:
(1) Guaranty and Security
Agreement by Company for Xxxx Xxxxxxxx
(2) Guaranty and
Security Agreement by Company for Xxxxx X. Xxxxxx
6. Representation by
Buyers. Buyers represent and warrant to the Seller as
follows:
(a) They are acquiring
the Stock for their own account as principal, for investment and not with a view
to resale or distribution of all or any part of such Stock.
(b) They have sufficient
knowledge and expertise in financial and business matters to evaluate the merits
and risks of this investment, that they have had an opportunity to
review the books and records of account of the Company, and to ask questions of,
and receive answers from, appropriate representatives of the Company and the
Company's operations, capitalization and bank financing, and to obtain such
additional information as they deem necessary to make a fully informed decision
as to purchase of the Stock.
(c) They recognize that
this investment involves a high degree of risk. They have taken
full cognizance of, and understand such risk fully.
(d) They fully
understand and agree that they must bear the economic risk of their purchase for
an indefinite period of time because, among other reasons, the Stock has not
been registered under the Securities Act of 1933 (the "Act"), and, therefore,
cannot be sold, pledged,
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assigned or
otherwise disposed of unless they are subsequently registered under the Act or
an exemption from such registration is available.
(e) They understand that
no Federal or State agency has passed upon the Stock or made any
finding or determination as to the fairness of their investment.
(f) They are aware that
they may not be able to sell or dispose of the Stock and that they must not
purchase the Stock, unless they are able to bear the economic risks of their
investment for an indefinite period of time. They understand that
their right to transfer the Stock will be restricted as set forth by Federal and
State Securities Laws; that such laws impose strict limitations upon such
transfer; and that the Seller is under no obligation to register the Stock in
connection with the subsequent transfer thereof by them or to aid them in
obtaining any exemption from such registration.
(g) They acknowledge
that the certificates representing the Stock shall contain a legend on the face
thereof restricting transfer of the Stock as described above.
7. Reserved
8. Organization, Management and Control
of the Company
(a) Buyers acknowledge
that due to the low volume of sales revenue throughout 2008, the management of
the Company elected to terminate the Company work force and in connection with
such employee terminations, entered into separation and release agreements
(“Separation Agreements”) with all such employees which obligate the Company to
make lump sum separation payments to such employee in exchange for their
releases of Company from any and all claims of liability arising from such
employment terminations. Buyers shall cause the Company to fulfill
all separation payments due and owing to each former employee pursuant to the
terms and conditions of his or her Separation Agreement notwithstanding the fact
the Company may elect to re-hire such former employee and Buyers agree to cause
the Company to not condition the re-hire of any such former employee on his or
her repayment, forfeiture or waiver of any such separation
payments.
(b) Seller agrees to
license to Buyers and Buyers agree to license from Seller certain office space
(Licensed Space), the size and location of which shall be determined and subject
to change by Seller at its sole discretion within Seller’s facility in Sarasota
Florida through August 31, 2008 rent free. Buyers agree to occupy and
use the Licensed Space solely for the purpose of conducting the general
operation of the Company’s business and to vacate the Licensed Space prior to
September 1, 2008. Buyers agree to be responsible for all costs and
expenses associated with their occupancy and use of such Licensed Space and
expressly agree that occupancy or use of the Licensed Space by Buyers
shall not constitute any leasehold interest.
(c) Buyers shall cause
the Company to manage and operate its business in the ordinary and usual course
including the distribution of Seller’s Cerato SE, ME, and Vision IP products and
services in the State of Florida, pursuant to the terms of Seller’s non
exclusive distribution agreement for a period of 1 year and at Seller’s then
current commercial prices and credit terms.
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(d) Buyers shall cause
the Company to fulfill (i) any proposals listed in Exhibit 3 for the distribution
and support of Seller products issued by the Company, which proposals continue
to be in effect on or after the date first set forth above; and (ii) any Company
Warranty and Support for all Seller Products sold by Company. Company Warranty
and Support Obligations existing as of the the date first set forth above are
listed in Exhibit 4.
(e) A list of Company
customers is set forth in Exhibit 5 to this Agreement.
9. Indemnification.
(a) (1) Buyers, jointly and
severally, hereby covenant and agree to defend, indemnify and hold harmless
Seller, its shareholders, officers, directors, agents and employees, from and
against any and all losses, costs, expenses, liabilities, claims, demands,
judgments and settlements of every nature that are incurred by any and all of
them, including without limitation the cost of defense thereof and reasonable
attorney fees, accountant fees and witness fees incurred which arise out of (a)
the breach, or if the subject of a third-party claim, alleged breach, by Buyers
of any agreement pursuant to this Agreement, (b) the non-performance,
or if the subject of a third-party claim, alleged non-performance, partial or
total, of any covenant made by Buyers pursuant to this Agreement, (c) all
liabilities, or if the subject of a third-party claim, alleged liabilities, of
Buyers arising by reason of actions taken (or not taken) by Buyers (d) the
operation of the Company prior to, on and after the date of this
Agreement; and or (e) any claim by any former employee or employee of
Company, resulting from any act, obligation, or omission occurring prior to, on
or after the date of this Agreement in connection with any such former
employee’s or employee’s employment, termination or separation therefrom, or
terms of such employment, including any employment agreement, or employee
benefit or any state, federal or local statute, regulation, public policy,
contract or tort principle in any way governing or regulating any such former
employee's or employee’s employment, terms of employment, including any
employment agreement, or termination by Company. The above stated
indemnification obligations shall not include any costs or damages caused by the
negligence of Seller.
(2) Method of Asserting
Claims. (a) If any person or entity who or which is entitled to seek
indemnification under subparagraph (a)(1)(an Indemnified Party ) receives notice
of the assertion or commencement of any third-party claim against such
Indemnified Party with respect to which the person or entity against whom or
which such indemnification is being sought (an Indemnifying Party ) is obligated
to provide indemnification under this Agreement, the Indemnified Party will give
the Indemnifying Party reasonably prompt written notice thereof, but in any
event not later than twenty (20) days after receipt of written notice of a
third-party claim. The notice by the Indemnified Party will describe the
third-party claim in reasonable detail and will include copies of all available
material written evidence thereof. The Indemnifying Party will have the right to
participate in or, by giving written notice to the Indemnified Party, to assume,
the defense of any third-party claim at the Indemnifying Party’s own expense and
by the Indemnifying Party’s own counsel (reasonably satisfactory to the
Indemnified Party) and the Indemnified Party will cooperate in good faith in
that defense.
If, within ten (10) days after giving notice of
a third-party claim to an Indemnifying Party pursuant to subparagraph (a)(1), an
Indemnified Party receives written notice from the Indemnifying Party that the
Indemnifying Party has elected to assume the defense of the third-party claim as
provided in the last sentence of subparagraph (a)(2), the Indemnifying Party
will not be liable for any legal expenses subsequently incurred by the
Indemnified Party in connection with the
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defense thereof;
provided, however, that if the Indemnifying Party fails to take reasonable steps
necessary to defend diligently the third-party claim within ten (10) days after
receiving written notice from the Indemnified Party that the Indemnified Party
reasonably believes the Indemnifying Party has failed to take those steps, the
Indemnified Party may assume its own defense, and the Indemnifying Party will be
liable for all reasonable costs and expenses paid or incurred in connection
therewith. Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any third-party claim
which would lead to liability or create any financial or other obligation on the
part of the Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder, or which provides for injunctive or other
non-monetary relief applicable to the Indemnified Party, or which does not
include an unconditional release of all Indemnified Parties. If a firm offer is
made to settle a third-party claim without leading to liability or the creation
of a financial or other obligation on the part of the Indemnified Party for
which the Indemnified Party is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to that firm offer, the
Indemnifying Party will give written notice to the Indemnified Party to that
effect. If the Indemnified Party fails to consent to that firm offer within ten
(10) days after its receipt of the notice, the Indemnified Party may continue to
contest or defend the third-party claim and, in such event, the maximum
liability of the Indemnifying Party as to the third-party claim will not exceed
the amount of that firm offer. The Indemnified Party will provide the
Indemnifying Party with reasonable access during normal business hours to books,
records and employees of the Indemnified Party necessary in connection with the
Indemnifying Party’s defense of any third-party claim which is the subject of a
claim for indemnification by an Indemnified Party hereunder.
(3) Any claim by an
Indemnified Party on account of damages which does not result from a third-party
claim (a Direct Claim) will be asserted by giving the Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than twenty
(20) days after the Indemnified Party becomes aware of the Direct Claim. That
notice by the Indemnified Party will describe the Direct Claim in reasonable
detail, will include copies of all available material written evidence thereof
and will indicate the estimated amount, if reasonably practicable, of damages
that have been or may be sustained by the Indemnified Party. The Indemnifying
Party will have a period of ten (10) days within which to respond in writing to
the Direct Claim. If the Indemnifying Party does not so respond within such ten
(10) day period, the Indemnifying Party will be deemed to have accepted the
accuracy of the information set forth in that claim, in which event the
Indemnified Party will be free to pursue such remedies as may be available to
the Indemnified Party on the terms and subject to the provisions of this
Agreement.
(4) A failure to give
timely notice or to include any specified information in any notice as provided
in subparagraphs (a)(1), (2) or (3), will not affect the rights or obligations
of any party hereunder, except and only to the extent that, as a result of that
failure, any party which was entitled to receive that notice was deprived of its
right to recover any payment under its applicable insurance coverage or was
otherwise materially prejudiced as a result of that failure.
(b) Buyers hereby
acknowledge and agree that the indemnification provisions under this paragraph 9
are in addition to and do not waive, amend or modify the indemnification
obligations of Buyer under Article VIII of the Asset Purchase Agreement dated
December 19, 2007
10. Notices. All notices,
requests, demands, and other communications which are required or may be given
under this Agreement shall be in writing, unless otherwise specified in this
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Agreement, and
shall be deemed to have been duly given if delivered personally or sent by
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to Seller, to:
Teltronics, Inc.
0000 Xxxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxx,
President
With a copy to:
Xxxxx & Xxxxx, LLP
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx,
Esq.
If to Buyer (Xxxx Xxxxxxxx), to:
Xxxx Xxxxxxxx
00000 Xxxxxx Xxxxxx Xxx Xxx.
Xxxxxxxxx, Xxxxxxx 00000
Esq.
If to Buyer (Xxxxx X. Xxxxxx), to:
Xxxxx X. Xxxxxx
0000 00xx Xxxxxx X.
Xxxxxxxxx, Xxxxxxx 00000
or
to such other addresses any party shall have specified by notice in writing to
the other.
11. Effectively Date for Accounting and
Tax purposes. Buyers and Seller agree that for purposed of
accounting and tax purposes, this Agreement is effective July 31,
2008
12. Expenses. Seller and Buyers
shall pay their, its or his own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
13. Contents of Agreement; Parties in
Interest. This Agreement, together with all Exhibits atttached
hereto and the documents referenced herein, sets forth the entire understanding
of the parties with respect to the transactions contemplated hereby. This
Agreement may not be amended or modified except by written instrument duly
executed by all of the parties.
14. Assignment and Binding Effect
.. This Agreement may not be assigned by any party without the prior written
consent of the other parties. Subject to the foregoing, all of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of each
party.
15. Waiver . Each party at any
time may only waive any term or provision of this
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Agreement to the
benefit of which it is entitled, by a duly executed written
instrument.
16. Applicable Law. This Agreement
and the legal relations between the parties hereto shall be governed by and in
accordance with the law of the State of Florida.
17. Taxes. As of July
31, 2008 the Company is not in default in the filing of any Tax Return relating
or pertaining to income, gross receipts, stamp, occupation, sales or use taxes
incurred in connection with the operation of the Company’s
business.
Any taxes in the
nature of sales or transfer tax and any stock transfer tax, payable on the sale
or transfer of all or any portion of the Stock or the consummation of any other
transaction contemplated hereby shall be paid by Buyers. Buyers will fully
indemnify and hold harmless the Teltronics for any such taxes, interest and
penalties.
18. Headings. The paragraph and
other headings contained in this Agreement are for reference purposes only and
shall not affect the meaning and interpretation of this Agreement.
19. Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original and all of which together shall be deemed to be one and the same
instrument.
20. Company Furniture. Company
furniture is listed in Exhibit
6 to this Agreement
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first set forth above.
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Teltronics,
Inc.
By: /s/
Ewen R. Xxxxxxx
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Xxxx X.
Xxxxxxx
President and
CEO
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/s/ Xxxx
Xxxxxxxx
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Xxxx
Xxxxxxxx
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/s/ Xxxxx X.
Xxxxxx
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Xxxxx X.
Xxxxxx
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