AGREEMENT BETWEEN COMPUTER BUSINESS SCIENCES
AND
NISSKO TELECOM, LTD.
THIS AGREEMENT, made this 25th day of March, 1996 by and between
COMPUTER BUSINESS SCIENCES, INC., a New York corporation with itS principal
offices located at 000-00 Xxxxx Xxxxxxxx, Xxxxxxxx, Xxx Xxxx 00000 (hereinafter
"CBS")
AND
NISSKO TELECOM, LTD., a Delaware corporation with offices located at 0 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 and formed by: XXXXXXX XXXXXXXXX, an adult
individual residing at 000-00 00xx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000; XXXXX XXXXX,
an adult individual residing at 000 Xxxxxx Xxxxxx, Xxx Xxxxxxx, Xxx Xxxx 00000;
and XXXXXXX XXXXXX, an adult individual residing at 00 Xxxxxx Xxxxx, Xxxxxx
Xxxxx, Xxx Xxxx 00000; (such corporation being hereafter referred to as "NT" and
such individuals being hereafter referred to as "INVESTORS")
WITNESSETH THAT:
WHEREAS, CBS' parent corporation, Fidelity Holdings, Inc. (hereinafter
"FIDELITY") has entered into a Letter of Intent to acquire certain computer
telephony, international telecommunications and business software and related
hardware known under the trade name "Talkie" and has begun exploitation of such
products;
WHEREAS, CBS represents and warrants that the technology of the Talkie Power Web
Line Machine is the state of the art in the field of communications.
WHEREAS, INVESTORS and NT desire to own and commercially use the international
telecommunications and computer telephony modules of Talkie to accomplish the
intentions of this Agreement;
WHEREAS, NT, and CBS and its parent corporation, FIDELITY, and the parties have
reached certain agreements and understandings and desire this Agreement to
formalize and evidence such agreements and understandings;
NOW, THEREFORE, intending to be legally bound, and in consideration of the
mutual promises and covenants contained herein, the parties have agreed as
follows:
1. (a) on the terms and conditions of this Agreement, CBS agrees to sell to
NT, and NT agrees to purchase from CBS, fifteen (15) Talkie Power Web Line
Machines (hereinafter "Machines"), such Machines being more specifically
described on the Invoices attached hereto and made a part hereof, and
marked as Exhibit A. For placement of such Machines, NT has reserved
fifteen (15) cities, listed on the schedule attached hereto, made a part
hereof, and marked as Exhibit B. In the event that CBS shall determine
that a Machine cannot be sited in any city listed on Exhibit B, CBS shall
notify NT which shall then
2
select an alternate city. Accordingly Exhibit B shall be amended from time
to time as necessary.
(b) In consideration of its purchase, NT shall pay for each Machine one
hundred and twenty five thousand dollars eight hundred dollars ($125,800)
for the total sum of One Million Eight Hundred Eighty-seven Thousand
Dollars ($1, 887, 000) of which Six Hundred Twenty-nine Thousand Dollars
($629,000)("'Deposit") shall be paid contemporaneously with the execution
of this Agreement and the balance shall be paid as provided under
paragraph (d) of this section.
(c) Of the 15 machines, CBS shall promptly manuf acture, program and site
three (3) machines. Title to the initial three (3) Machines and all other
machines covered by this Agreement shall pass when NT has tested the lines
and accepted the Machines as properly functioning for the intended
purposes or under such other conditions as the financing source may
dictate.
(d) Subject to sub-paragraph (e) following and 115 of this Agreement, CBS
shall deliver the balance of the Machines and NT shall pay the balance of
the purchase price as provided in Exhibit "C".
(e) Prior to NT being required to pay the balance of the purchase price
for the Machines, CBS shall provide satisfactory evidence that FIDELITY
has closed its acquisition
3
of Talkie. if such acquisition has not been accomplished by
May 15, 1996, NT may either:
(i) elect to treat its Deposit as the purchase of the first 5 Machines and
cancel this Purchase Agreement with respect to the additional Machines; or
(ii) declare this Purchase Agreement in default.
If NT shall elect to cancel this Agreement, the Deposit shall be applied to the
purchase price of the first 5 Machines and the provisions of Paragraphs 4 and 9
shall remain in full force and effect, If NT shall elect to declare a default,
the provisions of Paragraph 9 shall be effective.
2. (a) Subject to completion of the initial 15 Machines, NT shall be
permitted to purchase an additional fifteen (15) Attachment Modules.
(b) Subject to completion of the purchase of the initial fifteen (15)
Machines at $125,800 each and the fifteen (15) Attachment Modules at
$60,000 each , NT shall have the option to purchase an additional fifteen
(15) Machines at $125,800 each and the fifteen (15) Attachment Modules at
$60,0OO each, provided only that any attachment modules may be purchased
only for attachment to a previously purchased Machine.
(c) In the event that during the term of this Purchase Agreement, CBS
shall develop a new system or new technology
4
which performs the same function and/or provides the same service as the
Talkie Power Web Line Machines, but which is superior to or renders the
current Machines obsolete, NT shall have the options to:
(i) continue with this Purchase Agreement or substitute the new
system or the new technology for the balance of the Machines to be
purchased hereunder; and/or
(ii) purchase the new system or the new technology to replace the
Machines already purchased.
In either event, NT shall pay the standard market price established by CBS
for such new system or new technology.
(d) Upgrades of and /or improvements in technology on the current
technology in Machines ordered shall be provided at no extra cost to NT so
long as the Machines are in operation.
3. (a) CBS hereby grants NT a right of first refusal to place Machines in all
cities of the world in addition to those listed on Exhibit B.
(b) In the event that CBS shall receive a request from any third party to
acquire a Machine for placement in any city, in addition to those listed
on Exhibit B, CBS shall notify NT of such request in writing. NT shall
have a period of ten (10) business days to determine whether to exercise
the right of first refusal, If NT shall not elect to exercise its right,
5
CBS shall be free to proceed with the third party. If NT shall elect to
exercise its right, subject to sub-paragraph (c) following, within Five
(5) business days it shall enter into a f urther Purchase Agreement to
acquire a Machine f or placement in such city. If at the time such option
is exercised, NT has not completed the purchase of the initial fifteen
(15) Machines as provided for under this Agreements NT shall be permitted
to substitute a city elected under the option for one contained in Exhibit
"D". For purposes of this provision, the term business days shall exclude
Saturdays, Sundays, U.S. holidays, and Jewish religious holidays (a list
of all recognized holidays are contained in Exhibit "E").
(c) In the event that CBS shall determine that a Machine cannot be sited
in any city listed an Exhibit "B", and NT shall exercise its right of
first refusal with respect to some other city, the city designated in the
exercise of the right of first refusal may be substituted for the
unavailable city on Exhibit B, at NT's option, in which event no
additional Purchase Agreement shall be required and the Machine shall
constitute one of the 15 Machines hereunder. When NT shall have placed 15
Machines, all subsequent exercises of its right of first refusal shall
require the execution of an additional Purchase Agreement.
4. In consideration of the Deposit which constitutes one-third of
6
the purchase price for the 15 Machines, CBS guarantees that NT shall
recover the Deposit by March 31, 1998. If, by Xxxxx 00, 0000, XX shall not
have earned cumulative (total) income before depreciation interest expense
and taxes of the first 5 Machines placed in service equal or greater to
$629,000, with CBS' capital contribution of $150,000 included as part of
that recovery, NT may:
(a) waive the failure and continue as theretofore; or
(b) terminate this Purchase Agreement; or
(c) declare this Purchase Agreement in default.
NT shall not have an independent cause of action to recover the $629,000
and the remedies of NT are limited to those listed. If NT terminates this
Purchase Agreement, the obligation of NT to purchase any further Machines,
if less than 15 have been purchased, shall be terminated and NT shall
retain and operate the Machines purchased as the sole remedy of NT and
INVESTORS. If NT elects to declare this Purchase Agreement in default, the
provisions of Paragraph 9 shall be effective as the sole remedy of NT and
INVESTORS In the event that NT elects to terminate this Purchase Agreement
or to declare this Purchase Agreement in default, NT shall notify CBS of
such election in writing, certified mail, return receipt requested.
5. (a) CBS acknowledges that CBS will arrange for and guarantee
7
a line of credit or other credit facility to finance the payment of the
balance of the purchase price of the 15 Machines. CBS shall go to at least
three (3) financing institutions to seek out and find, if possible, one
that shall not require personal guarantees from INVESTORS. NT shall assist
CBS in good faith in obtaining a line of credit or other credit facility
to finance the payment of the balance of the purchase price of the 15
Machines and if required by financing institution shall provide written
guarantees. As the Machines are delivered and sited, NT shall draw against
such line of credit or credit facility and pay the balance of the purchase
price. Title to the Machines shall pass when NT has tested the lines and
accepted the Machines as properly functioning for the intented purposes
(b) In the event that CBS cannot arrange f or a line of credit or other
credit facility to finance the balance of the purchase price of the
fifteen (15) Machines then the deposit shall be applied to the purchase
price of the first five (5) Machines.
6. As an inducement to NT to make a purchase of 15 Machines and thereby
require financing:
(a) CBS guarantees that NT shall achieve the financial performance
projections, a copy of which is attached hereto, and made a part hereof
and marked as Exhibit "F"
8
(b) CBS shall be responsible to assist and provide NT in its management
and business development. CBS shall make available the full time services
of Xxxxxxxx Xxxxxxxxx, a CBS employee. NT and Xx. Xxxxxxxxx shall enter
into such employment or consulting agreement as they may negotiate. The
term of Xx. Xxxxxxxxx'x employment shall be in the discretion of NT
(c) In the event that NT does not achieve such performance projections
during the management /consulting of Xx. Xxxxxxxxx, NT shall notify CBS of
the failure to achieve the performance projections and shall terminate Xx.
Xxxxxxxxx. It shall be the responsibility of CBS to provide an alternative
manager/consultant to assist NT in achieving the performance projections.
In determining It cumulative (total) income before depreciation, interest
expense and taxes" from operations of the first 5 Machines", the parties
shall utilize the performance projections which are attached hereto, and
made a part hereof and marked as Exhibit D pursuant to Paragraph 5(a)
below. Discretionary expenses not included in the performance projections
shall be added back in determining cumulative (total) income bef ore
depreciation, interest expense and taxes". GAAP accounting shall be
adjusted to the methods used in preparing the performance projections.
9
(d) If NT does not achieve the performance projections, NT may:
(i) waive the failure and continue as theretofore; or
(ii) terminate this Purchase Agreement; or
(iii) declare this Purchase Agreement in default.
NT shall not have an independent cause of action for failure to achieve
the performance projections and the remedies of NT are limited to those
listed. If NT terminates this Purchase Agreement, the obligation of NT to
purchase any further Machines, if less than 15 have been purchased, shall
be terminated and NT shall retain and operate the Machines purchased as
the sole remedy of NT and INVESTORS. if NT elects to declare this Purchase
Agreement in default, the provisions of Paragraph 10 shall be effective as
the sole remedy of NT and INVESTORS. In the event that NT elects to
terminate this Purchase Agreement or to declare this Purchase Agreement in
default, NT shall notify CBS of such election in writing, certified mail,
return receipt requested.
7. (a) In consideration of the execution of this Agreement by NT, FIDELITY
shall contemporaneously issue to INVESTORS (including to such persons and
entities as INVESTORS may direct) Seven Hundred and Fifty Hundred Thousand
(750,000) warrants for the purchase of 750,000 shares of the Common
10
Stock of FIDELITY at an exercise price of $1.25. FIDELITY represents that
it has the authority to issue such warrants. Such warrants, designated as
the 1996-A Warrants, may be exercised the later of:
(i) prior to 5:00 P.M, on September 19, 1996; or
(ii) within sixty (60) days after the effectiveness of the SB-2 of
FIDELITY excluding those Jewish holidays listed in Exhibit "E"
provided that this Purchase Agreement is in full force and effect as
of the date of exercise. Payment for the options shall be as
follows:
(i) Not less than ten (10%) percent shall be paid at the times
provided under Paragraph 7(a)(ii) ; and
(ii) The remainder of the payment for the options shall be
paid not later than 5:00 P.M. on December 31, 1996.
(b) In consideration of the payment of the full purchase price of
$1,887,000 for all 15 Machines, FIDELITY shall contemporaneously with the
execution of this Purchase Agreement issue to INVESTORS (including to such
persons and entities as INVESTORS may direct) Seven Hundred Fifty Thousand
(750,000) warrants for the purchase of 750,000 shares of the Common Stock
of FIDELITY at an exercise price of $1.25. Such warrants, designated as
the 1996-B Warrants, may be exercised at any time prior to 5:00 P.M. on
March 19, 1998 provided that this Purchase Agreement is in full force and
effect as of the
11
date of exercise. FIDELITY represents that it has the authority to issue
such warrants.
(c) Contemporaneously with the execution of this Purchase Agreement
FIDELITY shall -adopt the Warrant Agreement, form of 1996-A Warrant, and
form of 1996-B Warrant attached hereto, and made a part hereof and marked
respectively as Exhibits "H", and "'I".
(a) Within seven (7) business days following execution of this Purchase
Agreement, INVESTORS shall cause NT to issue to CBS, and NT shall issue to
CBS, that number of shares of the common stock of NT as shall equal
forty-five percent (45%) of the issued and outstanding shares of Common
Stock of NT. CBS shall pay the par value, if any, for such stock. NT shall
be incorporated with a single class of Common Stock and the stockholders
shall have preemptive rights.
(b) As NT shall pay for each Machine, CBS shall make a nonrefundable
contribution to the capital of NT in the amount of Ten Thousand Dollars
($10,000); i.e., $10,000 per initial Machine Purchased, to a total of
$150,000, No further contribution shall be required on account of
additional Machines purchased by NT in exercising its right of first
refusal or purchased pursuant to 12 of this Agreement.
(c) During the first year of NT's operations, subject to the
12
expenditure of the capital contribution of CBS for operations, as may be
required by NT in good faith, CBS shall make an unsecured bearing loans to
NT at the lowest interest rate permitted by Federal law and in such
amounts, from time to time, as may be required for NT to meet its cash f
low deficits, to a total of $300,000. Such loan(s) shall be repaid first
from available cash flow of NT as its business develops, from time to
time, and the unpaid balance of such loans shall mature on March 19, 1998.
CBS shall repay to Investors within six (6) months of NT's election under
Paragraphs 1(e) or 4 to declare a default the $629,000. As additional
security and to assure NT and INVESTORS that CBS will fulfill its
guarantee provided in Paragraph 4 above, Xxxxx Xxxxxxx, Chairman of the
Board of FIDELITY, and Xxxxx Xxxxx, President/CEO of FIDELITY, both of
whom are major stockholders of FIDELITY, shall each pledge Five Hundred
Thousand (500,000) shares of the Common Stock of FIDELITY as collateral
for the performance by CBS of its guarantee of the recovery of the
$629,000. If NT and/or INVESTORS shall declare a default with respect to
this Purchase Agreement as a result of the failure to recover the
$629,000, CBS shall be primarily responsible for the payment of the
unrecovered balance of the $629,000. If CBS shall pay such unrecovered
balance, upon such payment INVESTORS shall
13
by NT as provided in Paragraph 5 above. Upon notifying CBS of its election
to declare a default of this Purchase Agreement, INVESTORS shall cause to
transfer to FIDELITY at no further cost 55% of the shares in. Furthermore,
in the event that NT and/or INVESTORS shall declare a def xxxx with
respect to this Purchase Agreement as a result of the failure to meet the
performance projections, CBS and FIDELITY jointly and severally agree to
indemnify INVESTORS against, and hold INVESTORS harmless from, any
repayment demands with respect to such line of credit or credit facility
and with respect to any loss, charge, expense, claim, award or damages
arising from or directly related to such line of credit or credit facility
from and after the date of the declaration of default.
If, from and after the date of this Purchase Agreement, while this
Purchase Agreement remains in full force and effect without default by NT,
FIDELITY shall determine:
(a) to sell a total of 50% or more of CBS; or
(b) to have CBS become a public company;
then FIDELITY shall notify NT and INVESTORS, writing, of such
determination upon the earlier of:
(i) the execution of an Agreement contemplating such an event; or'
(ii) at least thirty (30) days prior to the effective date of such
event.
14
NT's stockholders shall have the option to convert their stockholdings in NT
to shares of the Common Stock of CBS, so as to participate in the proposed
event. Such option shall expire if unexercised within ten (10) business days
after NT's receipt of notice from FIDELITY, unless otherwise agreed upon by the
parties. The intent of such conversion is to give the non-CBS stockholders of NT
a value for their 55% interest in NT equal to the value being received by CBS in
recognition of its 45% interest. The basis for such conversion shall be the
application to the 55% of NT owned by its non CBS stockholders of the same
valuation being applied, in the proposed transaction, to the 45% of NT owned by
CBS. If the proposed event is a sale of 50% or more of CBS, the value being
applied by the buyer to the 45% interest of CBS in NT shall be applied to the
55% of the non-CBS stockholders. If the proposed event is CBS becoming a public
company, the value being applied by the underwriter to the 45% interest of CBS
in NT shall be applied to the 55% of the non-CBS stockholders In the event that
the valuation method cannot be determined, the conversion shall be based upon an
independent appraisal of the value of NT. The parties acknowledge that this
provision will increase the price to be paid f or the interest in CBS being
sold, whether privately or publicly, and the parties shall cooperate, in good
faith, to accomplish any potential transaction and the intent of this paragraph.
15
12. This Purchase Agreement shall be deemed to be made in New York and all
disputes arising hereunder shall be governed and controlled by the laws of
New York. In, the event of any litigation arising from this Purchase
Agreement, the parties hereto agree to submit themselves and the subject
matter of said dispute to the jurisdiction of the state and/or federal
courts in New York.
13. Any and all notices, requests, demands and other communications required
or permitted to be given pursuant to this Purchase Agreement shall be in
writing and shall be deemed to have been duly given when delivered by hand
or when deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, as follows:
If to CBS: Computer Business Sciences
000-00 Xxxxx Xxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
with a copy to: Xxxxxxx X. Xxx, Esq.
0000 Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxx 00000
If to Nissko Telecom, Ltd.: Nissko, Telecom, Ltd.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
with a copy to: Xxxxxx X. Xxxxxxx, Esq.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
or to such other addresses as the parties hereto may from time
16
to time give written notice of to the others.
14. This Purchase Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes
all prior agreements, understandings, negotiations and discussions, both
written and oral, between the parties hereto with respect to such subject
matter. This Agreement may not be amended or modified in any way except by
a written instrument executed by all of the parties hereto. This provision
shall not affect the validity not interpretation of the related documents
referred to herein and supporting the provisions of this Purchase
Agreement.
17
15. This Purchase Agreement shall be for the benefit of and binding upon the
parties hereto and their respective heirs, personal representatives,
successors and, where applicable, assigns.
16. The waiver by any of the parties hereto of any other party's prompt and
complete performance, or breach or violation, of any provision of this
Purchase Agreement shall not operate nor be construed as a waiver of any
subsequent breach or violation, and the failure by either of the parties
hereunder to exercise any right or remedy which it may possess hereunder
shall not operate nor be construed as a bar to the exercise of
18
such right or remedy by such party upon the occurrence of any subsequent
breach or violation. No right or remedy conferred upon or reserved to
either of the parties hereto by this Purchase Agreement shall exclude any
other right or remedy, except as expressly provided herein, but each such
right or remedy shall be cumulative and shall be in addition to every
other right or remedy hereunder or available at law or in equity.
17. The invalidity of any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Purchase Agreement
shall not affect the enforceability of the remaining portions of this
Purchase Agreement or any part hereof, all of which are inserted
conditionally on their being valid in law, and, in the event that any one
or more of the words, phrases, sentences, clauses, sections or subsections
contained in this Purchase Agreement shall be declared invalid by a court
of competent jurisdiction, this Purchase Agreement shall be construed as
if such invalid word or words, phrase or phrases, sentence or sentences
clause or clauses, section or sections or subsection or subsections had
not been inserted.
18. All of the legal, accounting and other costs and expenses incurred in
connection with this Purchase Agreement and the transactions contemplated
hereby shall be borne and paid by the party incurring such costs and
expenses, and no party shall be obligated for any cost or expense incurred
by any other party.
19. In any legal action or other proceeding involving, arising out of or in
any way relating to this Purchase Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs, and expenses of
litigation.
20. Upon consent of both parties, any controversy, dispute or claim arising
out of, or relating to this Agreement or breach thereof, shall be settled
by arbitration pursuant to the rules then obtaining of the American
Arbitration Association and shall be held at the offices of the American
Arbitration Association offices in New York City. Any award rendered
therein shall be binding on each and all of the parties and their personal
representatives. Expenses shall be borne by the non-prevailing party in
the arbitration proceeding. Judgement may be entered upon an arbitration
award in any court of competent jurisdiction, and any arbitration notice,
process, notice of motion or application to a court, including application
for judgement, may be served within or outside the State of New York by
mail or personal service, provided a reasonable time for appearance is
allowed. Each Stockholder hereby consents to the jurisdiction of any court
to which any
19
motion or application shall be made in accordance with this agreement.
21. This Purchase Agreement may be executed -in any number of counterparts and
by the separate parties hereto in separate counterparts, each of which
shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed and delivered
this Agreement on the date first above written.
ATTEST: COMPUTER BUSINESS SCIENCES, INC.
By: /s/: Xxxxx Xxxxx
---------------------------
Xxxxx Xxxxx
Secretary
ATTEST: FIDELITY HOLDINGS, INC.
By: /s/: Xxxxx Xxxxx
---------------------------
Xxxxx Xxxxx
Secretary
ATTEST: NISSKO TELECOM, INC.
By: /s/ Avi Nissanian
---------------------------
Avi Nissanian
Secretary
WITNESSES: INVESTORS:
By: /s/: Avi Nissanian
---------------------------
Avi Nissanian
By: /s/: Xxxxx Xxxxx
---------------------------
Xxxxx Xxxxx
By: /s/: Xxxxxxx Xxxxxx
---------------------------
Xxxxxxx Xxxxxx
