EXHIBIT 10.8
FRANKLIN TELECOMMUNICATIONS CORP.
000 XXXXXXXXX XXXX
XXXXXXXX XXXXXXX, XXXXXXXXXX 00000
February 26, 1997
CPR Computer Repair, Inc.
00000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Dear Sir:
In connection with our recent discussions, this is to confirm our mutual
agreements as to the terms and conditions upon which Franklin Telecommunications
Corp., a California corporation ("Franklin"), will acquire all of the issued and
outstanding capital stock of CPR Computer Repair, Inc. ("CPR") a California
corporation in exchange for 25,000 newly issued shares of the Common Stock of
Franklin (the "Franklin Common Stock").
1. As of the date hereof, ALL of the shares of CPR, which constitute all
of the issued and outstanding shares of capital stock of CPR are owned,
beneficially and of record, by Xxxx Xxxx Xxxxx are free of any liens,
encumbrances or claims by any third party. As of the date hereof, there are no
outstanding warrants, options and other rights to purchase from CPR, nor any
securities convertible into or exchangeable for, shares of capital stock of CPR.
Prior to the Closing, and as a condition thereto, each warrant, option, right,
convertible security and exchangeable security currently outstanding shall have
been exercised, converted or exchanged, as the case may be, for shares of Common
Stock of CPR, such that these additional shares of Common Stock of CPR shall be
included among the Shares to be purchased by Franklin at the Closing for the
aggregate consideration of 25,000 newly issued shares of Franklin Common Stock.
2. As a condition to this agreement, the existing Shareholder of CPR
agrees to personally satisfy all outstanding debt of CPR, as additional
consideration, and agrees to issue a note to Franklin for the purpose of
mitigating all of the CPR outstanding debt (Appendix A). The CPR outstanding
debt will be paid directly by the Shareholder of CPR from time to time, whereby
Franklin will reduce the amount of the aforementioned note by amounts paid to
CPR creditors by the Shareholder of CPR.
3. Merger. At the Closing, CPR will be merged with and into a
------
newly-to-be-formed and wholly-owned subsidiary of Franklin, which will be the
surviving corporation in the merger (the "Merger"). As a consequence of the
Merger, (a) all shares of CPR's issued and outstanding Common Stock will be
converted into 25,000 shares of Franklin's newly issued Common Stock, such that
the
1
holders of CPR's currently outstanding Common Stock will be entitled to receive,
as a group, an aggregate of 25,000 shares of the Common Stock of Franklin.
4. Registration Rights and Lock-Up. At the Closing Franklin will use its
-------------------------------
best efforts to gain registration rights by including the shares in a planned
S-1 Registration filing with the Securities and Exchange Commission, and to file
a related Application for Qualification under the California Corporate
Securities Law of 1968, allowing the CPR shareholders to offer their Franklin
shares to the public through registered broker-dealers or through privately
negotiated transactions. Frankin will also undertake to keep the Registration
Statement current for a period of at least 45 days from its effective date, and
to pay all costs (other than brokerage discounts and commissions) associated
with the Registration Statement. LOCKUP: CPR shareholders agree not to sell more
than 1000 shares per day or five (5) percent of the daily volume.
5. Conduct Pending Closing. Consummation of the transactions
-----------------------
contemplated hereby shall occur at a closing to be held on or after February 26,
1997 (the "Closing"). During the period between the date hereof and the
Closing, each party shall give to the other and its authorized representatives
full access, during reasonable business hours, in such a manner as not unduly to
disrupt normal business activities, to any and all of the disclosing party's
premises, properties, contracts, books, records and affairs, and shall cause its
officers to furnish any and all data and information pertaining to its business
that the other party or its representatives may from time to time reasonably
require. During the period between the date hereof and the Closing, each party
shall continue to conduct its operations on a basis consistent with past
practices. The Closing will be conditioned upon verification by each party that
the business, operations, prospects and condition, financial and otherwise, of
the other party are reasonably satisfactory to such party, and that there has
been no material adverse change in the business, operations, prospects, or
financial condition of the other party.
6. Confidentiality. Each party will hold in confidence all information
---------------
obtained from the other. This obligation of confidentiality shall not extend to
any information which is shown to have previously been (i) known to the party
receiving it, (ii) generally known to others engaged in the trade or business
of the party receiving it, (iii) part of public knowledge or literature, or (iv)
lawfully received from a third party. Without limiting the generality of the
foregoing, it is understood and agreed that certain information disclosed by
Franklin to CPR or its representatives may constitute "material inside
information" that has not previously been disclosed to the public generally. CPR
acknowledges that CPR and its representatives are aware of the restrictions on
the use of such information imposed by federal and state securities laws, agrees
to comply and cause its representatives to comply with such restrictions, and
agrees to indemnify and hold Franklin and each of its directors, officers and
employees free and harmless from any and all liability, cost or expense that any
of them may incur or suffer by reason of any breach by CPR or any of its
authorized representatives of any of such restrictions.
7. Expenses. Each party shall bear all of its own expenses incurred in
--------
connection with the transactions contemplated hereby, whether or not a
definitive agreement is executed or the transactions contemplated hereby are
consummated.
8. Announcements. No announcement shall be made by either party with
-------------
respect to the transaction without the prior written consent of the other
party, which consent shall not unreasonably
2
be withheld.
If the foregoing accurately sets forth your understanding of our
agreements, please so indicate by signing the enclosed copy hereof and returning
it to the undersigned by no later than February 26, 1997.
Very truly yours,
Franklin Telecommunications Corp.
By: /s/ Xxxxx X. Xxxxxx 2/26/97
------------------------------- -------
Xxxxx X. Xxxxxx, President & CEO Date
AGREED TO AND ACCEPTED,
this 26 day of February 1997
CPR COMPUTER REPAIR, INC.
By: /s/ Xxxx Xxxx Xxxxx 2-26-97
------------------------------- -------
Xxxx Xxxx Xxxxx, President & CEO Date
3
Appendix A
PROMISSORY NOTE
$117,062 FEB.26, 1997
Xxxx Xxxx Xxxxx, an individual ("Maker"), for value received, hereby promises to
pay to FRANKLIN TELECOMMUNICATIONS CORP ("Holder") or order, the principal
amount of one hundred seventeen thousand sixty two Dollars ($117,062), with no
interest, payable by satisfaction of the outstanding debts ("Debts") of CPR
Computer Repair, Inc. as of February 26, 1996. If all of the Debts are not
satisfied by June 30, 1997, the remaining amounts shall become due and payable
to the Holder on July 1, 1997 ("Due Date").
1.1 Payments: Prepayment. - Payments hereunder shall be made in lawful money
--------------------
of the United States of America at such place as Holder shall have designated to
the Company in writing. This Promissory Note ("Note") may be prepaid, in whole
or in part, before the Due Date without penalty. Each payment received under
this Note shall be applied first to fees, costs or expenses due Holder as a
result of a default, if any, then to principal.
1.2 Security Agreement. - This Note is secured by a security interest granted
------------------
by Maker to Holder in all of Maker's assets, as set forth in that certain
"Security Agreement" between the parties both of even date herewith. Any breach
or default in the terms of the Security Agreement or the Stock Pledge Agreement
shall constitute a default hereunder. In such event, all of the obligations
evidenced by this Note, irrespective of the maturity dates expressed herein, at
the option of the Holder hereof and without demand or notice, shall immediately
become due and payable. The waiver of any default, or the remedying of any
default in a reasonable manner, shall not operate as a waiver of the default
remedies for any other prior or subsequent default. Holder remedies for any
other prior or subsequent default.
1.3 Default. - In the event Maker fails to pay any sum provided herein, after
-------
five (5) days written notice from Holder to Maker, Maker agrees to pay Holder,
in addition to the payments required hereunder, all reasonable charges Holder
may incur as a result of such default. If default occurs in the payment of any
installment under this Note when due, or in the performance of any of the
promises or covenants contain in the Note or the Stock Pledge Agreement or the
Security Agreement, the entire principal and all other amounts due hereunder
shall become at once due and payable without presentment, notice, protest or
demand of any kind, at the sole option of the Holder of this Note. Failure to
exercise this option to accelerate upon default shall not constitute a waiver of
the right to exercise such right in the event of any subsequent default or
continuing default.
1.4 Miscellaneous.
-------------
(a) NOTICES. - Any notice required or permitted under this Note shall be
given in writing and shall be deemed effectively given upon personal delivery to
the party to be notified, upon transmission of fax to the fax numbers set forth
in the Security Agreement, or upon deposit with the United States Post Office,
by registered or certified mail, postage prepaid and addressed to the party at
the address set forth below for such party, or at such other address as either
party may designate by ten (10) day advance written notice to the other party.
(b) BINDING EFFECT. - This Note shall bind and inure to the benefit of the
parties, their successors and assigns.
(c) AMENDMENTS AND WAIVERS. - Any term of this Note may be amended and the
observance of any term of this Note may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of both the Company and Holder hereof Any amendment or waiver
effected in accordance with this paragraph shall be binding upon Holder and the
Company and their successors and assigns.
(d) DUE AUTHORIZATION. - The execution and delivery of this Note has been
duly authorized by all necessary corporate action on behalf of the Company.
(e) GOVERNING LAW. - this Note shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to conflicts of law principles.
(f) ATTORNEY FEES. - Maker agrees to pay all costs, expenses, and
attorney's fees paid or incurred by Holder of this Note, or adjudged by a court
including without limitation; (1) reasonable costs of collection and attorney's
fees paid or incurred in connection with the collection and attorney's fees paid
or incurred in connection with the collection or enforcement of this Note,
whether or not suit is filed or foreclosure instituted; and (2) costs of suit
and such sums as the court may adjudge as attorney's fees in any action to
enforce payment of this Note or any part of it.
Maker:
By: /s/ Xxxx Xxxx Xxxxx
---------------------------
Xxxx Xxxx Xxxxx
PROMISSORY NOTE
$40,000 FEB.26, 1997
Xxxx Xxxx Xxxxx, an individual ("Maker"), for value received, hereby promises to
pay to FRANKLIN TELECOMMUNICATIONS CORP ("Holder") or order, the principal
amount of forty thousand Dollars ($40,000), with simple interest on the unpaid
balance thereof from the date hereof at the annual rate of six percent (6%),
payable in variable installments from time to time. The entire principal amount,
and any accrued interest and any other amounts due under this Note, if any,
shall be due and payable in any event on July 1, 1997 ("Due Date").
1.1 Payments: Prepayment. - Payments hereunder shall be made in lawful money
--------------------
of the United States of America at such place as Holder shall have designated to
the Company in writing. This Promissory Note ("Note") may be prepaid, in whole
or in part, before the Due Date without penalty. Each payment received under
this Note shall be applied first to fees, costs or expenses due Holder as a
result of a default, if any, then to interest, then to principal.
1.2 Security Agreement. - This Note is secured by a security interest granted
-------- ---------
by Maker to Holder in all of Maker's assets, as set forth in that certain
"Security Agreement" between the parties both of even date herewith. Any breach
or default in the terms of the Security Agreement or the Stock Pledge Agreement
shall constitute a default hereunder. In such event, all of the obligations
evidenced by this Note, irrespective of the maturity dates expressed herein, at
the option of the Holder hereof and without demand or notice, shall immediately
become due and payable. The waiver of any default, or the remedying of any
default in a reasonable manner, shall not operate as a waiver of the default
remedies for any other prior or subsequent default. Holder remedies for any
other prior or subsequent default.
1.3 Default. - In the event Maker fails to pay any sum provided herein, after
-------
five (5) days written notice from Holder to Maker, Maker agrees to pay Holder,
in addition to the payments required hereunder, all reasonable charges Holder
may incur as a result of such default. If default occurs in the payment of any
installment under this Note when due, or in the performance of any of the
promises or covenants contain in the Note or the Stock Pledge Agreement or the
Security Agreement, the entire principal and all other amounts due hereunder
shall become at once due and payable without presentment, notice, protest or
demand of any kind, at the sole option of the Holder of this Note. Failure to
exercise this option to accelerate upon default shall not constitute a waiver of
the right to exercise such right in the event of any subsequent default or
continuing default.
1.4 Miscellaneous.
-------------
(a) NOTICES. - Any notice required or permitted under this Note shall be
given in writing and shall be deemed effectively given upon personal delivery to
the party to be notified, upon transmission of fax to the fax numbers set forth
in the Security Agreement, or upon deposit
with the United States Post Office, by registered or certified mail, postage
prepaid and addressed to the party at the address set forth below for such
party, or at such other address as either party may designate by ten (10) day
advance written notice to the other party.
(b) BINDING EFFECT. - This Note shall bind and inure to the benefit of the
parties, their successors and assigns.
(c) AMENDMENTS AND WAIVERS. - Any term of this Note may be amended and the
observance of any term of this Note may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of both the Company and Holder hereof. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon Holder and the
Company and their successors and assigns.
(d) DUE AUTHORIZATION. - The execution and delivery of this Note has been
duly authorized by all necessary corporate action on behalf of the Company.
(e) GOVERNING LAW. - this Note shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to conflicts of law principles.
(f) ATTORNEY FEES. - Maker agrees to pay all costs, expenses, and
attorney's fees paid or incurred by Holder of this Note, or adjudged by a court
including without limitation; (1) reasonable costs of collection and attorney's
fees paid or incurred in connection with the collection and attorney's fees paid
or incurred in connection with the collection or enforcement of this Note,
whether of not suit is filed or foreclosure instituted; and (2) costs of suit
and such sums as the court may adjudge as attorney's fees in any action to
enforce payment of this Note or any part of it.
Maker:
By: /s/ Xxxx Xxxx Xxxxx
---------------------------
Xxxx Xxxx Xxxxx
