EXHIBIT 10.3
AGREEMENT
This Agreement (the "Agreement") is entered into as of this 10th day of
March 2004, by and among Techsphere Systems International, LLC, a Georgia
Limited Liability Company ("TSI"), and an operating subsidiary of On Alert
Systems, Inc. a Navada Corporation ("Cyber"). They may be referred to as a Party
and collectively as the Parties.
W I T N E S S E T H:
WHEREAS, TSI manufactures, constructs, and assembles Low, Medium and High
altitude airships ("Airships") and CYBER, for the purpose of this Agreement,
primarily is engaged in marketing and sales to federal, state and local
government agencies and the various Military branches (collectively referred to
hereinafter as "Government Units"); and
WHEREAS, TSI has the exclusive world wide right and license to manufacture
the Airships according to the U.S and Canadian patents owned by 21st Century
Airships, Inc., a Canadian corporation; and
WHEREAS, CYBER desires to exclusively market and sell Airships manufactured
by TSI to Government Units and non-exclusively to telecommunications entities
and furthermore, TSI desires to utilize the experience and expertise of CYBER to
sell Airships to Government Units; and
WHEREAS, the Parties desire to set forth their understanding as to the
marketing efforts to be undertaken and the method of purchasing of the Prototype
Airship by Cyber.
CONSIDERATION:
Now therefore, In consideration of the natural convenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree that the foregoing recitals are true
and correct and further agree as follows.
ARTICLE I
PROTOTYPE AIRSHIP ASSIGNMENT AND ASSUMPTION OF TERMS
1.1 Assignment of the Agreement of Purchase and Sale of Airship dated December
4, 2003, assumption of testing and demonstration requirements and coordination
with GTRI.
Subject to payment of the consideration described in Article III hereof and
the terms and conditions of this Agreement the Parties agree that:
A. TSI shall transfer, assign and deliver to Cyber of all of TSI's right,
title and interest in and to the Agreement of Purchase and Sale of Airship dated
December 4, 2003 between TSI and 21st Century Airships, Inc. ("C21") attached as
Exhibit 1.1.A, in which TSI agreed to purchase the existing airship ("Prototype
Airship") described in Exhibit "A" thereof, subject to the terms and conditions
in said airship purchase agreement; and
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B. Cyber shall have the right to place a lien on the Prototype Airship as
soon as C21 is paid in full for the purchase of the Prototype Airship or such
sooner time that C21 allows a lien to be placed against the Prototype Airship.
1.2 Assumption of testing and demonstrations and coordination with GTRL.
A. TSI will immeadiately ship the Prototype Airship to Ft. Xxxxxxx,
Georgia, to arrive no later than March 19, 2004 and conduct the testing required
by the Army and other governmental agencies, including but not limited to
shipping the airship, balloon and platform to Ft. Xxxxxxx, furnishing required
proof of insurance with Cyber and C21 listed as loss payees as their interest
may appear, inflation of the airship's balloon, paing pilot fees for the flight
and will conduct any further demonstration/test flights required by potential
government purchasers secured by SRC or Cyber; and
`B. After shipment to Ft. Xxxxxxx TSI will coordinate with Georgia Tech
Research Institute ("GRTI") to make the Prototype Airship platform available to
GTRI for GTRI to reverse engineer, create an autonomous control system (UAV) and
develop the power systems, shielding, operating manuals ("Droning") and the
engineering drawings necessary to sell and duplicate the low altitude system
("Phase I"), as further described in TSI/GTRI Research Project Agreement No.
A-7291 modified December 5, 2003 attached as Exhibit 1.2B.
C. Cyber, through its parent holding company, Proxity Digital Networks,
Inc., will be allowed to participate in news conferences or press releases
scheduled by TSI concerning the location of the manufacturing facility in
Columbus, Georgia and for such other reasons as the Parties may agree, Proxity
will be allowed to release information about the testing and demonstrations from
time to time, provided it has obtained the prior written approval of the content
of the information from TSI, which will not be unreasonably with held.
ARTICLE II
RIGHT TO MARKET AND SELL TSI MANUFACTURED AIRSHIPS.
2.1 Marketing Rights for Airships.
A. Subject to the SRC agreement, the exclusive world-wide right to market
airships for governmental applications and the non-exclusive world-wide right to
market airships for telecommunication applications (subject to the rights, if
any possessed by Sanswire) will be awarded to Cyber through a sales/marketing
agreement substantially as set forth in Exhibit 2.1.A.
B. The marketing agreement with Cyber will be subject to Cyber's ability to
produce sales which will meet the financial requirements imposed on TSI as
contained in the License Agreement with 21st Century Airships, Inc., whose
application sections are attached hereto in Exhibit 2.2.B.
ARTICLE III
CONSIDERATION AND REMUNERATION.
Subject to terms and conditions of this Agreement the Parties agree that:
3.1 Payment and Purchase Price. Cyber shall pay a total of $2,700,000 for the
following:
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A. Cyber will pay to or on behalf of TSI the sum of two million two hundred
thousand dollars ($2,200,000) as follows:
(1) For the Prototype Airship:
a. Cyber will pay by wired funds to the IOLTA escrow account of
Xxxxxxx Xxxxx Xxxxxxx, LLC account number 2080000646178 at Wachovia Bank,
Atlanta, Georgia whose Routing Number is 06100227 with funds availability
to be confirmed no later than 4:30 P.M. Wednesday March 10, 2004 in the sum
of $500,000.00 Wire to be completed upon completion and signature of all
documents required by Cyber, Investors and TSI to affect wire. Xxxxxxx
Xxxxx Xxxxxxx, L.L.C. will issue a check to the order of TSI and C21 in the
sum of $300,000.00 for the Prototype Airship and TSI will endorse the check
so that the sum of $300,000.00 is payable to C21. The remaining $200,000.00
will be issued by check to TSI pursuant to section 3.(1)B.
b. The sum of $900,000.00 will be paid to C21 by the way of a
convertible debenture whose terms and conditions will be such that it can
used as collateral by C21 or TSI to pay C21 the remaining $900,000.00
immeadiately.
(2) For the Droning:
a. On March 12, 2004, Cyber will issue a convertible debenture to GTRI
in the sum of $1,000,000.00 with said debenture's terms and conditions
being such that it can be used as collateral by GTRI (or if requested by
GTRI, TSI will seek funding with the debenture as collateral) to pay GTRI
progress payments pursuant to the terms of the TSI/GTRI Research Project
Agreement No. A-7291 modified December 5, 2003.
B. For exclusive world-wide marketing rights to Governmental Units and
non-exclusive world-wide marketing rights to telecommunications entities for a
term to be determined as described in Exhibit 2.1.A. Cyber will pay to TSI the
sum of $500,000.00 of which $200,000.00 is to be paid to TSI as described in
3.1.A(1) no later than 4:30 P.M. Wednesday March 10, 2004 as per paragraph
3.1.A(1) and the remaining $300,000.00 is to be paid b way of convertible
debenture whose terms and conditions will be such that it can be used as
collateral for a loan.
C. Cyber will send a copy of the proposed convertible debentures to TSI's
counsel no later than noon Friday March 12 for review and determination of TSI's
ability to secure loans as described above for payments to C21 and GTRI. If
through review by counsel a determination is made that a loan cannot be secured
from the debentures until the funds are released in accordance with the terms of
the debentures, TSI can declare a breach of this Agreement by giving written
notice and Cyber will have 90 days from March 12 to cure the breach.
ARTCLE IV
ADDITIONAL FUNDING.
4.1 At the request of TSI, Cyber will use its best efforts to: (a) provide the
additional development funds for th mid and high altitude models, which funds
shall be subject to reimbursement; (b) as a result of timely funding the mid and
high altitude airship research and development, Cyber shall, to the extent
permitted by TSI's technology agreements, receive ownership and royalty rights
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consistent with the agreements previously entered by TSI on any technology
developed, the amount of which shall be determined by mutual agreement, within
the normal and ordinary range that similar technology development contracts
would yield in the current market; (c) consistant with the agreements previously
entered by TSI, share with TSI and GTRI the ownership and royalty rights. For
those technologies develped soley by TSI with funding obtained from Cyber, TSI
will enter into an agreement with Cyber to share the ownership and royalties. As
Cyber is aware, TSI has no rights to technology developed with by third parties
such as GTRI and C21, other than as given to it through negotiation in its
agreements with the parties developing the technology.
V.
JOINT and COLLECTIVE REPRESENTATIONS OF THE PARTIES
In order to induce the other Party to enter into this Agreement, each Party
makes the following representations and warranties to the other Pary, which
representations and warranties shall be true and correct as at the Closing date
as well as at the date hereof:
5.1 Authority
Each Party
(i) has full power and authority to enter into, deliver and perform
this Agreement as set forth herein; and
(ii) othr than as described herein, neither the execution, delivery,
consummation or perfomance of this Agreement
(A) requires the approval or consent of, or notice to, any third
party;
(B) violates any law, regulation, contract, or agreement to
which it is subject; or
(C) violates, conflicts with or would result in the breach or
termination of, or otherwise give any other contracting
party the right to terminate, or constitute a default (by
way of substitution, novation, or otherwise) under the terms
of, any mortgage, bond, indenture, agreement, franchise or
other instrument or obligation to which it is party or by
which either of it or its assets may be bound.
5.2 No Impediments to Close.
There exists
(a) no action or investigation pending or, to the best of the Parties'
knowledge, threatened against any of the Parties' or their assets, or
against the transactions contemplated by this Agreement; and
(b) to the Parties' knowledge, no event, fact or circumstance which
could reasonably be expected to give rise to any such action or
investigation.
5.3 Truth of Statements; Completeness of Documents, No Material Adverse Effect.
(a) Except as otherwise set forth herein, all documents, schedules,
Exhibits and other materials delivered or to be delivered by or on behalf
of each Party to the other in connection with this Agreement and the
transactions contemplated hereby are to the best of its knowledge true and
complete;
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(b) The information furnished by or on behalf of each Party to the
other in connection with this Agreement and the transactions contemplated
hereby does not, to the best of its knowledge, contain any untrue
statements of a material fact and does not omit to any material fact
required to be stated therein or necessary to make the statements therein
not false or misleading.
(c) There is no fact known to any of the Parties which has not been
disclosed to the other Parties in writing which has, or which will have, a
material adverse effect on any of the other Parties or the transactions
contemplated by this Agreement.
VI.
DISPUTE RESOLUTION
6.1 If a dispute arises out of or relates to this Agreement, or the breach
thereof, and if the dispute cannot be settled through negotiation, the parties
agree first to try in good faith to settle the dispute by mediation on the
Commercial Mediation Rules of the American Arbitration Association ("AAA"),
through a mediator selected by them, before resorting to arbitration.
6.2 If any controversy or claim arising out of or related to this Agreement, or
the breach thereof, cannot be resolved through good faith mediation or either
party will not participate in good faith in mediation, the parties agree to
submit the dispute to final and binding arbitration before a single arbitrator
under the AAA Commercial Arbitration Rules, unless the use of othr rules is
agreed upon by the parties. Any dispute as to the arbitrability of an issue
shall be determined by the arbitrator. The arbitrator shall have no authority to
award punitive damages, but the arbitrator shall have authority to award
interest and costs of arbitration. The arbitrator may not, in any event, make
any ruling, finding or award that does not conform to the terms and conditions
of this Agreement. The judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. Such arbitrations shall occur
in Atlanta, Georgia, unless the parties mutually agree upon another location.
VII
NOTICE
7. All notices and other communications contemplated, required or permitted by
this Agreement shall be in writing and shall be deemed to have been properly
given or served when deposited with the United States Postal Service, designated
as registered or certified mail, return receipt requested, postage prepaid, and
addressed as hereinafter provided, or if delivered in person or by overnight
delivery service addressed as follows:
To: TSI To: CYBER
000 Xxxxxxx Xxxxx 771 Military Trail North
Building 10, Suite 100 Palm Beach Gardens, Florida 33410
Xxxxxxx, Xxxxxxx 00000
ATTN.: Xxxx ATTN.: Xxxxx Xxxxxxxx
Facsimile No. (000) 000-0000 Facsimile No. (000) 000-0000
VIII
GENERAL
8.1 Any amendment, supplement, modification or waiver or any provision of this
Agreement must be in writing and signed by authorized representatives of both
Parties.
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8.2 If any portion of this Agreement is found to be invalid or unenforceable,
the Parties agree that the remaining portions shall remain in effect.
8.3 Any discretion vested in a Party to this Agreement shall not be
unreasonably, arbitarily or capriciously exercised.
8.4 This Agreement integrates and supercedes all previous agreements, oral or
written, between the parties and constitutes the entire agreement of the Parties
as to subject matter described herein.
8.5 Neither Party shall assign this Agreement without the prior written consent
of the other Party. Either Party may assign this Agreement or any part thereof
to its Affiliate without the prior written consent of the other Party.
"Affiliate" means any corporation, partnership, limited liability company,
controlled by or under common control with a Party and for Cyber the word
"Party"shall also mean OASI as it solely relates to this subsection. It is
anticipated that Cyber will merge into a public entity which will be majority
owned by OASI and this Agreement can be assigned to the new public entity.
8.6 The headings in this Agreement are inserted for convenience only and not
intended to affect the meaning or interpretation of this Agreement.
8.7 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall comprise
but a single instrument.
8.8 Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof, shall not be deemed a waiver of such terms, covenants or
conditions, nor shall any waiver or relinquishment of any right or power
hereunder, at any one time or more times, be deemed a waiver or relinquishment
of such right or power at any time or times.
8.9 The invalidity of any one or more of the words, phrases, sentences, clauses,
sections, subdivisions, paragraphs or subparagraphs contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part thereof. In the event one or more of the words, phrases, sentences,
clauses, sections, subdivisions, paragraphs, or subparagraphs contained herein
shall be invalid, this instrument shall be construed as if such invalid portion
had not been inserted, and if such invalidity shall be caused by the length of
any period of time or the size of any area set forth in any part hereof, such
period of time or such area, or shall considered to he a period or area which
would invalidity.
8.10 This shall be in with and governed by the laws of State of Georgia without
regard to its conflicts of laws.
8.11 This Agreement shall terminate upon written notice by the Party declaring a
breach and/or termination as follows:
A. Cyber's failure to fund the payments as per paragraph 3.1.A(1) on
Wednesday March 10, 2004 by 4:30 P.M.
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B. Cyber's failure to timely provide the convertible debentures for
review by counsel by Friday March 12, 2004 at 4:30 P.M. and or provide the
convertible debentures by Friday March 12, 2004 at 5 P.M.
C. TSI's failure to timely ship the Prototype Airship to Ft. Xxxxxxx
and allow GTRI to perform as described in section 1.2 above.
D. TSI's failure to timely forward its $300,000 certified check to
C21, if Cyber timely wires the money as described herein.
E. For any other material breach of the Agreement.
WHEREOF, the parties hereto have caused this Agreement to be executed on
the date set forth above by their duly authorized representatives identified
below.
ON-ALERT SYSTEMS, INC. TECHSPHERE SYSTEMS INTERNATIONAL, LLC:
/s/ Xxxxxxx Xxxxxxxx /s/ Xxxx Xxxxxx
------------------------- -------------------------
Chief Executive Officer President
Attest: Attest
/s/ illegible /s/ illegible
------------------------- -------------------------
Secretary [Seal] Secretary [Seal]
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Exhibit 1.1 A
Agreement of Purchase and Sale of Airship from C21
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Exhibit 2.1 A
Proposed Sales/Marketing Agreement
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Exhibit 2.1.C
Marketing Contacts
Name of Project or Service Size of Airship
--------------------------------- --------------------
US Coast Guard Mid-Alt
Homeland Defense Mid and High
Border Protection/Customs High
Secretary of Defense Iraq Command Low-Mid-High
South COM- Army Mid-High
US Air Force Low-Mid-High
L-3 Low-Mid-High
Raytheon Low-Mid-High
Lockheed Low-Mid-High
DRTA Low-Mid-High
NSP Low-Mid-High
FAA High
AFSOC Low-Mid-High
Army Security and Intel Low-Mid-High
Department of Energy Low-Mid-High
National Security Agency Low-Mid-High
NSA/ELINT Low-Mid-High
U.S. Navy Command Intelligenc Low-Mid-High
Army G-2 Low-Mid-High
Under Secretary's DOD-Battle Awareness Low-Mid-High
CIA Low-Mid-High
Army INCOM Low-Mid-High
Air Force Intelligence Low-Mid-High
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Exhibit 2.2B
C21 Financial Requirements
3. Compensation. As full consideration for the rights and exclusive license to
use the Patents and Know-How granted to TSI hereunder, TSI agrees to:
B. Royalty Payment.
(1) TSI shall pay 21st Century a Royalty Payment of Four Hundred Fifty
Thousand Dollars ($450,000) for each Low Altitude Airship, Six Hundred Thousand
Dollars ($600,000) for each Medium Altitude Airship and an amount equal to ten
(10%) percent of the gross sales price, but said amount shall not be less than
Three Million Dollars ($3,000,000.00), for each High Altitude Airship
manufactured or sold by or on behalf of TSI. Subject to section 3.B (2) below,
the Royalty Payment for each Low Altitude Airship, Medium Altitude Airship or
High Altitude Airship manufactured by or on behalf of TSI shall be payable to
21st Century in increments proportional to the percentage of the purchase price
for the Airship received by TSI from time to time, and TSI shall make the
incremental payments to 21st Century within thirty (30) days of TSI receiving
payment for ten (10%) percent of the purchase price of a Airship TSI shall pay
ten (10%) of the Royalty Payment for that Airship to 21st Century, and so on
until the full amount of the Royalty Payment for that Airship has been paid to
21st Century.
(2) Notwithstanding section 3.B(1) above, within one hundred twenty (120)
days of the completion of the manufacture by or on behalf of TSI of a Low
Altitude Airship, Medium Altitude Airship or High Altitude Airship, TSI shall
pay the full Royal Payment for the Airship to 21st Century.
4. Term The Term of this License Agreement shall continue until the expiration
of the last expiring Patent; but subject to sections 4A and 4B below, the term
shall not be for less than fifteen years from the Effective Date.
B. Abandonment. If within the preceding twelve (12) months, excluding the
initial first twelve (12) months of this Agreement TSI shall without the written
consent of 21st Century fail to make Royalty Payments of at least One Million
Dollars ($1,000,000.00), 21st Century may give thirty (30) days' written notice
to TSI that it intends to terminate this License Agreement and the License
granted hereunder if the failure is not cured. If such failure is not cured
within such thirty (30) days, this License Agreement shall thereafter terminate
upon the date set forth in such notice.
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