Contract between Nissko
Telecom, Inc. and
Computer Business
Sciences, Inc.
10.5
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 Xxxxxxx 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 . telacommunications and business software and related
hardware known under the trade name "Talkie" and has begun exploitation of such
products;
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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.
MMRZASP TNVESTORS 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 hereinp 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
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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 $60,000 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
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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 grant5 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 shall not elect to exercise
it's right CBS shall be free to proceed with the third party. If NT
shall elect to exercise its right,
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subject to sub-paragraph (c) following, within Five (5) business days
it shall enter into a further Purchase Agreement to acquire a Machine
for 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 Agreement 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 on 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
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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 C13S of such election in writing,
certified mail, return receipt requested.
5. (a) CBS acknowledges that CBS will arrange for and guarantee
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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 intended 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".
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(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 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 before depreciation, interest expense and
taxes". GAAF accounting shall be adjusted to the methods used
in preparing the performance projections.
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(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
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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
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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 "G", "H', and "I."
8. (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 non-refundable
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 Paragraph 2 of this Agreement.
(c)During the first year of NT's operations, subject to the
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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 flow 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.
9. CBS shall repay to Investors within six (6) months of NT's election
under Paragraphs I(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
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cause to transfer to CBS at no further cost 55% of the shares in NT. If
CBS shall fail to repay to INVESTORS the unrecovered balance of such
$629,000 within ninety (90) days of the declaration of default, NT and
or INVESTORS may proceed to recover such balance by selling,
proportionately as between Xx. Xxxxxxx and Xx. Xxxxx, that number of
shares as may be required in order to secure the unrecovered balance.
Contemporaneously with the execution of this Purchase Agreement, Xx.
Xxxxxxx and Xx. Xxxxx are executing the Stock Pledge and Security
Agreement, a copy of which is attached hereto, and made a part hereof,
and marked as Exhibit III. if the unrecovered balance is obtained by NT
and/or INVESTORS from the sale of the pledged shares, upon such payment
INVESTORS shall cause to transfer equally to Xx. Xxxxxxx and Xx. Xxxxx
at no further cost 55% of the shares in NT.
10. To assure NT and INVESTORS that CBS will fulfill its guarantee provided
in Paragraph 5 and 6 above, FIDELITY hereby guarantees the performance
of CBS. If NT and/or INVESTORS shall declare a default with respect to
this Purchase Agreement as a result of the failure to meet the
performance projections, CBS and FIDELITY shall be jointly and
severally primarily responsible for the repayment of the unrepaid
balance of any line of credit or credit facility established
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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 default 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.
11. 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 in 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.
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NTI 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'6 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 for 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.
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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.
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
17
of 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
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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 judgment, 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
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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 OF, each of the parties hereto has duly executed and
delivered this Agreement on the date first above written.
ATTESTATIONS FROM:
COMPUTER BUSINESS SCIENCES, INC.
FIDELITY HOLDINGS, INC.
NISSKO TELECOM, INC.
INVESTORS
SECRETARY
WITNESSES
AVRAHAM OISSANIAN
XXXXX XXXXX
XXXXXXX XXXXXX/
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