ASSETPURCHASE AGREEMENT

WHEREAS, Access and Collier are solely and exclusively engaged in the sale and installation of telephone systems and the provision of related training and support services (the “Business”); and

WHEREAS, Sellers desire to sell, and Purchaser desires to purchase, certain personal property and assets of Sellers relating to the Business, upon the terms and subject to the conditions hereinafter set forth;

1.1  Purchase and Sale of Assets.  On the terms and subject to the conditions set forth herein, Sellers shall, on the “Closing Date,” as hereinafter defined, convey, transfer, assign and deliver to Purchaser, free and clear of all mortgages, liens, pledges, security interests, charges, claims, demands, restrictions or encumbrances of any kind, and Purchaser shall purchase and acquire, as hereinafter provided, all of the following rights and assets of Sellers (collectively, the “Assets”):

(a)    All items of office furniture, fixtures, equipment and supplies used or useful in the Business, a description of which is set forth on Exhibit A attached to this Agreement;

(b)    All of Sellers’ correspondence, lists and records concerning the customers, prospective customers, suppliers and prospective suppliers of the Business and all of Sellers’ books, records and documents relating to the Business or its operations, including specifically but not exclusively all advertising and marketing materials and service literature;

(c)    Any and all intangible assets, including without limitation all customer lists, trademarks, business entity names, trade names, software programs, other intellectual property and proprietary rights, telephone numbers, facsimile numbers, email addresses and domain names related to or used in connection with the Business;

(d)    Any and all rights that Sellers have in any agreement or contract, including without limitation all amounts due and owing to, and/or received by, Sellers from and after the Closing Date and relating to the Business;

          (a)           Cash at Closing in an amount equal to two hundred thousand dollars ($200,000) (“Cash”). Sellers shall simultaneously deposit the Cash  into the Sellers’ attorney’s trust account, to be held, administered and disbursed by Sellers’ attorney as Escrow Agent under the terms of an Escrow Agreement attached as Exhibit C to this Agreement (“Escrow Agreement”). The Escrow Agreement shall require the Escrow Agent to utilize the Cash for payment and/or settlement in full of the Liens, Assessments, Judgments, Defaults and Pending Lawsuits listed in Exhibit B to this Agreement prior to disbursing the Cash for any other purpose.

1.3  Earn Out Payments to the Sellers.  Purchaser shall pay each Earn Out Payment within five (5) business days following the date as of which each Earn Out Payment is deemed to be finally determined.  Purchaser shall make Earn Out Payments by wire transfer of immediately available funds to the account(s) designated by the Sellers to receive each Earn Out Payment.

(a)    Procedure.  As promptly as practicable, and in any event not later than thirty (30) days after the twelve (12) month anniversary of the Closing Date, Purchaser shall prepare and deliver to Sellers a written statement (each an “Earn Out Payment Statement”) setting forth in reasonable detail Purchaser’s good faith calculation of each Earn Out Payment, as derived from Purchaser’s review of its financial and other books and records related to its business operations.  Purchaser agrees to give to the Sellers or their designated representatives reasonable access to Purchaser’s books and records related to its business operations solely for purposes of their review of each Earn Out Payment Statement.

(b)    Sellers may, in good faith, dispute the calculations contained in a Earn Out Payment Statement by delivery of written notice thereof (a “Dispute Notice”) to Purchaser within five (5) days following their receipt of the Earn Out Payment Statement.  The Dispute Notice shall set forth in reasonable detail all items disputed, together with proposed changes thereto, including without limitation, an explanation in reasonable detail of the basis on which the changes are proposed.

(c)    If (A) by written notice to Purchaser within five (5) days following its receipt of the Earn Out Payment Statement, Sellers accept the Earn Out Payment Statement, or (B) Sellers fail to deliver a Dispute Notice within that five (5) day period, the Earn Out Payment Statement delivered by Purchaser (and the Earn Out Payment set forth therein) shall become final and binding on Purchaser and Sellers as of the date of that acceptance or deemed acceptance.

(d)    If Sellers shall have timely delivered a Dispute Notice, then Purchaser and Sellers shall attempt to reach agreement on the matters identified in the Dispute Notice.  If, within thirty (30) days following Purchaser’s receipt of the Dispute Notice, Purchaser and Sellers shall not have reached a resolution in writing of the matters identified in the Dispute Notice, then those matters shall be submitted to the independent public accounting firm of Purchaser for resolution.  Purchaser and Sellers shall instruct the independent public accounting firm to prepare and deliver, within thirty (30) days of such submission, a revised Earn Out Payment Statement (including without limitation, the calculation of the Earn Out Payment) taking into account all items not in dispute between Purchaser and Sellers and those items requested by Purchaser and Sellers to be resolved by the independent public accounting firm.  Purchaser and Sellers shall furnish or cause to be furnished to the independent public accounting firm access to such employees, officers, accountants, facilities, books, records, work papers, historical financial information and other materials of Purchaser as the independent public accounting firm may request.  The fees and expenses of the independent public accounting firm shall be borne by Purchaser if the independent public accounting firm determines that any payment set forth in the Earn Out Payment Statement

 

2.1  Closing. The closing of the sale and purchase of the Assets (the “Closing”) shall take place on December ___, 2007, at the offices of Teltronics located at 2150 Whitfield Industrial Way, Sarasota, Florida 34243, or on such other date and at such other place as may be mutually agreed upon in writing by Purchaser and Sellers.  The date of the Closing is referred to herein as the “Closing Date.”

(b)    Purchaser shall deliver to Sellers the Cash due and owing Sellers at the Closing in accordance with Section 1.2 of this Agreement for deposit by Sellers with the Escrow Agent under the Escrow Agreement.

          (a)    At the Closing, Purchaser, Teltronics, JM and CF will enter into a shareholder agreement (“Shareholder Agreement”) in the form attached as Exhibit D to this Agreement.

3.1  Corporate Existence.  Sellers are limited liability companies duly organized, validly existing and in good standing under the laws of the State of Florida. Buck Young is a limited liability company duly organized validly existing and in good standing under the laws of the States of Delaware and Florida.

3.2  Corporate Power and Authorization.  Sellers and Buck Young have the power, authority and legal right to execute, deliver and perform this Agreement.  The execution, delivery and performance of this Agreement by Sellers and Buck Young have been duly authorized by all necessary corporate action.  This Agreement has been, and the other agreements, documents and instruments required to be delivered by Sellers in accordance with the provisions hereof (the “Sellers’ Documents”) will be, duly executed and delivered on behalf of Sellers by duly authorized representatives of Sellers.  This Agreement constitutes, and the Sellers’ Documents when executed and delivered will constitute, a legal, valid and binding obligation of Sellers, enforceable against Sellers in accordance with their respective terms, subject to (i) bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or other similar laws relating to or affecting creditors’ rights generally, and (ii) as to enforcement, to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law.

3.3  Validity of Contemplated Transactions.  The execution, delivery and performance of this Agreement and the transactions contemplated herein do not and will not violate, conflict with or result in the breach of (i) any term, condition or provision of, or require the consent of any other person under, any existing law, ordinance or governmental rule or regulation to which Sellers or Buck Young is subject, (ii) any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which is applicable to Sellers or Buck Young, (iii) the Articles of Organization, Operating Agreement or other organizational or governing documents of Sellers or Buck Young, or (iv) any mortgage, indenture, agreement, contract, commitment, lease, plan, authorization or other instrument, document or understanding, oral or written, to which Sellers or Buck Young is a party, by which Sellers or Buck Young may have rights, or by which any of the Assets may be bound or affected, or give any party with rights thereunder the right to terminate, modify, accelerate or otherwise change the existing rights or obligations of Sellers or Buck Young thereunder.

3.4  No Third Party Options.  There are no existing agreements, options, commitments or rights with, of or to any person to acquire any of Sellers’ or Buck Young’s assets, properties or rights included in the Assets or the Business or any interest therein.

3.5  Financials.  Sellers have delivered the financial statements described in Exhibit F to this Agreement which financial statements are true, complete and accurate in all respects.

3.6  Tax and Other Returns and Reports.  All federal, state, local and foreign tax returns, reports, statements and other similar filings required to be filed by Sellers (the “Tax Returns”) with respect to any federal, state or local taxes, assessments, interest, penalties, deficiencies, fees and other governmental charges or impositions (including without limitation all income tax, unemployment compensation, social security, payroll, sales and use, excise, privilege, property, ad valorem, franchise, license, school and any other tax or similar governmental charge or imposition under laws of the United States or any state or municipal or political subdivision thereof) (the “Taxes”) have been filed with the appropriate governmental agencies in all jurisdictions in which such Tax Returns are required to be filed, and all such Tax Returns properly reflect the liabilities of Sellers for Taxes for the periods, property or events covered thereby. All Taxes, including without limitation those called for by the Tax Returns, claimed to be due by any taxing authority from Sellers, have been properly accrued or paid.  Except as listed in Exhibit B attached to this Agreement, Sellers have not received any notice of assessment or proposed assessment in connection with any Tax Returns and there are not pending tax examinations of or tax claims asserted against Sellers or any of their assets or properties.  Sellers have not extended, or waived the application of, any statute of limitations of any jurisdiction regarding the assessment or collection of any Taxes.  Except as listed in Exhibit B attached to this Agreement, there are no tax liens (other than any lien for current taxes not yet due and payable) on any of the assets or properties of Sellers.  Sellers have no knowledge of any basis for any additional assessment of any Taxes.  Sellers have made all deposits required by law to be made with respect to employees’ withholding and other employment taxes, including without limitation the portion of such deposits relating to Taxes imposed upon Sellers.

3.7  Title to Properties.  Sellers have good, valid and marketable title in and to all of the Assets, free and clear of all mortgages, liens, pledges, security interests, charges, demands, claims, restrictions and other encumbrances and defects of title of any nature whatsoever, other than those set forth in Exhibit B attached to this Agreement.

3.8  Compliance with Law; Authorizations.  Sellers have complied with, and are not in violation of, each law, ordinance or governmental or regulatory rule or regulation, whether federal, state, local or foreign, to which the Business and/or the Assets are subject, except where the failure to so comply would not reasonably be expected to have a material adverse effect on Sellers and/or the Business.

3.9  Litigation.  Except as fully disclosed in Exhibit B attached to this Agreement, no litigation, including any arbitration, investigation or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority is pending or, to the knowledge of Sellers, threatened against Sellers that relates to the Assets, the Business or the transactions contemplated by this Agreement, nor do Sellers know of any reasonably likely basis

3.10  Customer and Contract Lists.  Exhibit G sets forth a true and complete list of all customers of Sellers, together with contact information for each customer.  Exhibit G also lists all contracts and agreements related to the Business, oral or written, for which Sellers receive, or have the right to receive, any revenue or consideration of any kind (“Contracts”).  All of the Contracts are assignable and all rights under each and every Contract may be assigned and transferred to Purchaser without the consent of another person.  The relationships of Sellers with their customers are good commercial working relationships, and none of the customers of Sellers has cancelled, terminated or otherwise materially altered or notified Sellers of any intention to cancel, terminate or materially alter its relationship with Sellers.  Sellers have not been notified, either orally or in writing, by any of Sellers’ customers that there will be any change in relations with the customers of Sellers as a result of the transactions contemplated by this Agreement.

3.11  Employee Benefit Plans and Arrangements.  Sellers have no “employee benefit plans,” as hereinafter defined, except as already disclosed in writing to Purchaser, whether formal or informal, whether or not set forth in writing, and whether covering one person or more than one person.  For the purposes hereof, the term “employee benefit plan” includes all plans, funds, programs, policies, arrangements, practices, customs and understandings providing benefits of economic value to any employee, or any former employee, or present or former beneficiary, dependent or assignee of any such employee or former employee, other than regular salary, wages or commissions paid substantially concurrently with the performance of the services for which paid.  Purchaser will not assume any employee benefit plans of Sellers for employees hired by Purchaser after the Closing.

3.12  Accounts Receivable. All accounts receivable represent valid accounts related to sales by Sellers and are fully collectible within sixty (60) days free and clear of any offset or other claim.

3.13  Judgments and Liens.  Exhibit B sets forth all outstanding judgments, liens, assessments, defaults and pending lawsuits against the Sellers and/or the Assets (“Liens”) and is complete and accurate in all respects, and there are no Liens  other than as listed in Exhibit B.

3.14  Other Judgments.  Exhibit H lists judgments that are not filed against or relate in any manner to the Sellers or the Assets and cannot form a basis for any claim or demand against the Sellers, the Assets, Purchaser or Teltronics.  Exhibit K contains a complete list of judgments and liens against the Assets which have been fully paid by Sellers.  The documents provided to Purchaser to prove payments and releases of the judgments and liens listed in Exhibit K are true, correct and complete and were obtained without agreement, commitment, condition or contingency of any kind.

3.15  Completeness of Disclosure.  No representation or warranty by Sellers in this Agreement or in any certificate, schedule, written statement, document or instrument furnished or to be furnished to Purchaser pursuant hereto contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact required to be stated herein or therein or necessary to make any statement herein or therein not misleading.

4.2  Corporate Power and Authorization.  As of the Closing Date, the Purchaser will have the power, authority and legal right to execute, deliver and perform this Agreement. The execution, delivery and performance of this Agreement by Purchaser will be duly authorized by all necessary corporate action.  This Agreement has been, and the other agreements, documents and instruments required to be delivered by Purchaser in accordance with the provisions hereof (the “Purchaser’s Documents”) will be, duly executed and delivered on behalf of Purchaser by duly authorized officers of Purchaser.  This Agreement constitutes, and the Purchaser’s Documents when executed and delivered will constitute, a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with their respective terms, subject to (i) bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or other similar laws relating to or affecting creditors’ rights generally, and (ii) as to enforcement, to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law.

4.3  Validity of Contemplated Transactions.  The execution, delivery and performance of this Agreement and the transactions contemplated herein by Purchaser does not and will not violate, conflict with or result in the breach of any term, condition or provision of, or require the consent of any other person under, (i) any existing law, ordinance or governmental rule or regulation to which Purchaser is subject, (ii) any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which is applicable to Purchaser, (iii) the Certificate of Incorporation or Bylaws of Purchaser, or (iv) except for those consents that will be obtained prior to the Closing Date, any mortgage, indenture, agreement, contract, commitment, lease, plan or other instrument, document or understanding, oral or written, to which Purchaser is a party or by which Purchaser or its assets are otherwise bound.  Except as aforesaid, no authorization, approval or consent of, and no registration or filing with, any governmental or regulatory official, body or authority is required in connection with the execution, delivery and performance of this Agreement by Purchaser.

5.1  Negative Covenants of Sellers Prior to Closing.  During the period from the date hereof to the Closing Date, Buck Young and Sellers shall not, unless Purchaser shall have given its consent thereto in writing:

(a)    create, assume or permit to exist any encumbrance on any of the Assets;

(b)    sell, lease or otherwise transfer any of the Assets other than in the ordinary course of business for fair and adequate consideration;

(c)    sell, assign or transfer any patent, trademark, trade name, copyright or other intellectual property right or intangible asset;

(d)    incur any other liability or obligation, whether absolute or contingent, other than current liabilities incurred in the ordinary course of business;

(e)    lose, surrender or have revoked or limited any material license, permit or other right granted by any governmental authority to operate any asset in the manner in which they were intended to be operated;

(f)    allow to occur or exist any event of default under any contract or agreement to which either Seller is a party;

(g)    make any material change in the rate of compensation payable or to become payable by Sellers to any of their employees or agents, or enter into or amend in any material respect any contract providing for compensation or benefits; or

(h)    agree to do any of the things described in this Section 5.1.

5.2  Affirmative Covenants of Sellers Prior to Closing.  Sellers covenant and agree to negotiate agreements with each of the parties to Liens listed in Exhibit B to fully compromise, settle and pay each of such Liens  in an aggregate amount not to exceed the Cash.

5.3  Acquisition Proposals. Sellers and Buck Young shall not, and shall not permit or authorize any of their shareholders, officers, directors, employees or agents to, directly or indirectly, solicit or entertain any inquiries or proposals or participate in any discussions, negotiations or agreements relating to the direct or indirect acquisition or disposition of any portion of the Assets, or all or substantially all of the equity interests of Sellers, to or from any person or entity other than the Purchaser (each an “Acquisition Proposal”), or provide any assistance or any information to or otherwise cooperate with any person or entity in connection with an Acquisition Proposal.  Sellers and/or Buck Young shall promptly disclose to Teltronics and Purchaser any Acquisition Proposal which Sellers and/or Buck Young receives.

5.4  Third Party Consents.   Sellers shall use their best efforts to obtain the consents, waivers and approvals as may be required under any of the contracts or agreements being transferred hereunder so as to preserve all rights of and benefits to the Purchaser thereunder, including specifically but not exclusively all of the contracts or agreements included among the

 

5.5  Employee Matters.  Sellers will remain solely responsible for all demands, claims, liabilities, damages and losses arising from or with respect to the employment of their employees prior to the Closing Date, including without limitation with respect to all salaries and all severance, vacation, medical, sick, holiday, continuation coverage and other compensation or benefits to which employees of Sellers may be entitled as a result of their employment by Sellers prior to the Closing.  All claims and obligations under, pursuant to or in connection with any employee benefit plans of Sellers incurred prior to the Closing Date will remain the responsibility of Sellers.  Subject to the foregoing, from and after the Closing Date, Sellers shall have no further liability with respect to any employees subsequently employed by Purchaser, and Purchaser shall be solely responsible from and after the Closing Date for all salaries, benefits and other compensation of any and all of its employees incurred from and after the Closing Date, including those employees formerly employed by Sellers.

(b)    Remedies.  Sellers and Buck Young, acknowledge and agree that monetary damages would be an inadequate remedy for any breach or threatened breach of the terms and conditions contained in this Section 5.6 and that, in the event of any such breach or threatened

 

5.7  Confidentiality.  It is understood that the respective businesses of Teltronics, Purchaser and Sellers, and all matters related thereto, are of a confidential nature.  Prior to the date hereof there may have been revealed, and on or after the date hereof there may be revealed, to Purchaser and Teltronics and their affiliates and representatives, on the one hand, and to Sellers and their affiliates and representatives, on the other, “Confidential Information,” as hereinafter defined, concerning the business of Teltronics, Purchaser or Sellers.  In consideration for and as an additional inducement to the parties to execute, deliver and perform this Agreement, Sellers, Buck Young, JM, CF and Purchaser hereby agree that, following the termination of this Agreement or any other failure of the transactions contemplated herein to be consummated, neither party shall divulge or appropriate for their own use, or for the use of any third party, any Confidential Information of another.  As used herein, the term “Confidential Information” means the following oral or written information relating to the business of Teltronics, Purchaser or Sellers; client or customer lists, agency or brokerage contracts, know-how, technology, inventions, methodologies, trade secrets, patents, information relating to the development, research, testing, manufacturing, marketing, sales, distribution and uses of products and services, sources of supplies, budgets and strategic plans, the identity and special needs of clients and customers, and any other information which may give the party who received such Confidential Information an opportunity to obtain an advantage over its competitors who do not know or use such information; provided, however, that the term “Confidential Information” shall not include (i) any such information that, prior to its use or disclosure by any party hereto, can be shown to have been in the public domain or generally known or available to clients, customers, suppliers or competitors of the business of Teltronics, Purchaser or Sellers, as the case may be, through no breach of the provisions of this Section 5.7 or other non-disclosure covenants that were executed for the benefit of Teltronics, Purchaser or Sellers, as the case may be, (ii) any such information that, prior to its use or disclosure by any party hereto was rightfully in the receiving party’s possession, without violation of the provisions of this Section 5.7 or other non-disclosure covenants that were executed for the benefit of,

 

5.9  Accounts Receivable.  Sellers acknowledge and agree that any and all monies received by Purchaser or Sellers from and after the Closing Date and relating to the Business purchased from Sellers by Purchaser (“Post-Closing Receivables”) shall belong to Purchaser.  In furtherance thereof, any Post-Closing Receivables received by Sellers shall be held in trust for, and promptly delivered to Purchaser.

6.1  Conditions Precedent to Purchaser’s Obligations.  All obligations of Purchaser under this Agreement are subject to the fulfillment or satisfaction, prior to or at the Closing, of each of the following conditions precedent:

(b)    Compliance with this Agreement.  Sellers, Buck Young, JM and CF shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by Sellers, Buck Young, JM and CF prior to or at the Closing.

(c)    Closing Certificate.  Purchaser shall have received a certificate from Sellers, Buck Young, JM and CF dated the Closing Date, certifying that the conditions specified in Sections 6.1(a) and 6.1(b) hereof have been fulfilled.

(d)    No Threatened or Pending Litigation.  On the Closing Date, no suit, action or other proceeding, or injunction or final judgment relating thereto, shall be threatened or be pending before any court or governmental or regulatory official, body or authority in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, and no investigation that might result in any such suit, action or proceeding shall be pending or threatened.

(f)     UCC Search.  Not more than ten (10) days prior to the Closing, Sellers shall have furnished to Purchaser Uniform Commercial Code, franchise and tax lien search results for Sellers from the State of Florida, and a certificate as to the good standing of Sellers in the State of Florida, and a certificate of good standing of Buck Young in the States of Delaware and Florida all of which shall be obtained and delivered at Sellers’ expense.

(h)    Other Matters.  Sellers, Buck Young, JM and CF shall have delivered to Purchaser such other documents, instruments, certifications and further assurances as counsel for Purchaser may reasonably require, and Purchaser shall have been satisfied with the results of the business, accounting, legal and other due diligence into the financial condition and operations of Sellers for all periods prior to the date of Closing, to be performed by Purchaser’s accountants, attorneys and other representatives.

(j)     Satisfactions of Judgments and Liens Paid by Sellers.  Sellers shall have delivered to Purchaser recorded satisfactions or other written proof of full settlement and payment of all the judgments and liens listed in Exhibit K attached to this Agreement.

(o)    Proof of Settlement Agreements.  Sellers shall have delivered to Purchaser written proof signed by each of the creditors, plaintiffs and/or claimants listed in Exhibit B that each of them will fully settle and release their respective claims listed in Exhibit B for the amount listed in Exhibit B utilizing the Cash and no other source for payment.

(p)    Lender Consent.  Written consent to the transactions contemplated by this Agreement from the lenders of Teltronics in form and substance satisfactory to Teltronics.

6.2  Conditions Precedent to the Obligations of Sellers.  All obligations of Sellers under this Agreement are subject to the fulfillment or satisfaction, prior to or at the Closing, of each of the following conditions precedent:

(a)    Representations and Warranties True as of the Closing Date.  The representations and warranties of the Purchaser contained in this Agreement or in any list, certificate or document delivered by Purchaser to Sellers pursuant to the provisions hereof shall be true on the date of delivery thereof and shall be true on the Closing Date in all material respects with the same effect as though such representations and warranties were made as of such date.

(b)    Compliance with this Agreement. Purchaser shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by Purchaser prior to or at the Closing.

(c)    Closing Certificates.  Sellers shall have received a certificate from Purchaser dated the Closing Date certifying that the conditions specified in Sections 6.2(a) and 6.2(b) hereof have been fulfilled.

(d)    Shareholder Agreement. The Shareholder Agreement shall have been executed and delivered.

(e)    Employment Agreements. The Employment Agreements shall have been executed and delivered.

 

8.1  General Indemnification Obligations of Sellers, Buck Young, JM and CF.  Sellers, Buck Young, JM and CF, jointly and severally, hereby covenant and agree to defend, indemnify and hold harmless Teltronics and Purchaser, their 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, to the extent the same are not covered by insurance, which arise out of (i) the breach, or if the subject of a third-party claim, alleged breach, by Sellers, Buck Young, JM, or CF of any representation or warranty made by Sellers,  Buck Young, JM, or CF pursuant to this Agreement, (ii) the non-performance, or if the subject of a third-party claim, alleged non-performance, partial or total, of any covenant made by Sellers, Buck Young, JM or CF pursuant to this Agreement, (iii) all liabilities, or if the subject of a third-party claim, alleged liabilities, of Sellers, Buck Young, JM or CF arising by reason of actions taken (or not taken) by Sellers, Buck Young, JM or CF, (iv) all taxes (including, but not limited to, any net income, gross income, sales, use, ad valorem, value added, transfer, franchise, payroll, employment or excise tax), penalties and interest relating from, arising out of or incurred with respect to any claims that may be asserted by any party based upon, attributable to or resulting from the operations of the Business or for which Sellers, Buck Young, JM and CF may be liable in respect of the Assets, for all periods prior to the Closing Date, and/or (v) the operation of the Business prior to the Closing Date.

8.2  General Indemnification Obligations of Purchaser.  Purchaser hereby agrees to defend, indemnify and hold harmless Sellers, their members, managers, agents and employees, from and against any and all losses, costs, expenses, liabilities, claims, demands, judgments and settlements of every nature that are actually incurred by Sellers, including without limitation the cost of defense thereof and reasonable attorney fees, accountant fees and witness fees incurred, to the extent the same are not covered by insurance, which arise out of (i) the breach, or if the subject of a third-party claim, alleged breach, by Purchaser of any representation or warranty

 

(a)    If any person or entity who or which is entitled to seek indemnification under Section 8.1 or Section 8.2 (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.

(b)    If, within ten (10) days after giving notice of a third-party claim to an Indemnifying Party pursuant to Section 8.3(a), 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 Section 8.3(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnified Party in connection with the 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

 

(c)    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.

8.4  Survival of Representations and Warranties.  All representations and warranties made by Sellers, Buck Young, JM and/or CF  in this Agreement or in any certificate, schedule, statement, document or instrument furnished hereunder or in connection with the negotiation, execution and performance of this Agreement shall survive the Closing for a period of two (2) years; provided, however, that the representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.7 and 3.8 shall survive the Closing until the expiration of the statute of limitations applicable to the matters covered thereby (after giving effect to any waiver, mitigation or extension thereof granted by Sellers).

8.5  Offset.  For any and all losses and/or damages suffered by Purchaser or Teltronics which arise out of any breach of any representation, warranty, covenant or other obligation of Sellers, Buck Young, JM or CF under the terms of this Agreement, Purchaser is entitled to and may offset against and reduce the amount of any Earn Out Payment otherwise due to Sellers by the amount of those losses and/or damages.  In the alternative, Purchaser may, at its option, offset against and reduce, and thereby redeem without other consideration, the number of shares of Purchaser’s stock issued to JM and CF equal to the amount of those losses and/or damages, at a price per share to be determined by the Chief Financial Officer of Purchaser.  Any Earn Out Payment so reduced and paid pursuant to the terms of this Section 8.5 shall be deemed to satisfy Purchaser’s payment obligation for that Earn Out Payment pursuant to Section 1.2(b) of this Agreement.  The remedy provided to Teltronics and Purchaser under this Section 8.5: (i) shall not be the sole remedy of Teltronics and Purchaser for any breach of any representation, warranty, covenant or other obligation of Sellers, Buck Young, JM or CF under the terms of this Agreement and (ii) shall be in addition to any other remedy available to Purchaser or Teltronics under the terms of this Agreement or under any and all claims and causes of action which

 

 9.1  Sales, Transfer and Documentary Taxes.  Sellers shall pay all federal, state and local sales, documentary and other transfer taxes, if any, due as a result of the purchase, sale or transfer of the Assets in accordance herewith.

9.2  Expenses.  Except as otherwise provided in this Agreement, and whether or not the transactions contemplated herein are consummated, Sellers, Buck Young, JM, CF, and Purchaser 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.

9.3  Contents of Agreement; Parties in Interest.  This Agreement, together with all Exhibits attached 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.

9.4  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.

* A judgment has been entered in Case 07CC08726 in the Superior Court of the State of California for the County of Orange.  The complaint provided for the Plaintiff or its authority to have leave of the court to amend the complaint to show true names and capacities and the defendant company’s legal names.  The guarantee attached to the complaint identified the company as FMG Ventures, LLC and JC Ventures LLC.  On the basis thereof the judgment may be subject to amendment to incorporate a claim against the Sellers, FMG Ventures, LLC and JC Ventures LLC and are accordingly listed herein as a lien against the Sellers.

(a)           The Escrow Agent shall have no duty as to the collection or protection of the Escrow Funds or any income thereon or as to the preservation of any rights pertaining thereto, beyond the safe custody of any thereof actually in his possession and the payment of the Escrow Items pursuant to the terms of this Agreement.  Except with respect to the Escrow Agent's obligations under paragraph 4; Escrow Agent’s duty to maintain the Escrow Funds in safe custody; and Escrow Agent’s duty for timely payment of Escrow Disbursements in the correct amount for each item as set forth in paragraphs 5 and 6 and otherwise in a manner consistent with the terms of this Agreement, the Purchaser and the Sellers release the Escrow Agent from any claims, causes of action and demands at any time arising out of or with respect to this Agreement, the Escrow Funds and/or any actions taken or omitted to be taken by the Escrow Agent with respect thereto, and the Sellers hereby agree to hold the Escrow Agent harmless from and with respect to any and all such claims, causes of action and demands.

(b)           The Escrow Agent may act relative this Agreement in reliance upon advice of counsel in reference to any matter connected herewith.  In any event, it will not be liable for any mistake of fact or law, for any error of judgment, or for any act or omission of any kind, except for its own willful misconduct.

(c)           This Agreement sets forth in its entirety the duties and responsibilities of the Escrow Agent with respect to any and all matters pertinent thereto.  The Escrow Agent need not refer to, and will not be bound by, the provisions of any other agreement except for the Asset Purchase Agreement and its Exhibits.

(i)           All rights of Pledgor to receive Distributions and any and all proceeds from the sale or other disposition of the Pledged Collateral (or any portion thereof) which Pledgor would otherwise be authorized to receive and retain shall cease, and all such rights shall thereupon become vested in Pledgee, who shall thereupon have the sole right to receive and hold as Pledged Collateral such Distributions and proceeds.

(ii)           All Distributions and proceeds which are received by Pledgor contrary to the provisions of paragraph (a) of this Section 9 shall be received in trust for the benefit of Pledgee, shall be segregated from other funds of Pledgor and shall be forthwith paid over to Pledgee as Pledged Collateral in the same form as so received (with any necessary endorsement).