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SECURITIES EXCHANGE ACT OF 1934
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
FIDELITY HOLDINGS, INC.
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(Exact name of the registrant as specified in its charter)
NEVADA 11-3292094
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80-02 KEW GARDENS ROAD, STE 5000 KEW GARDENS, NEW YORK 11415
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, 718-520-6500
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK
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(Title of class)
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(Title of class)
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TABLE OF CONTENTS
PART I
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Item 1. Description of Business..................................................................................1
Item 2. Management's Discussion and Analysis or Plan of Operation...............................................11
Item 3. Description of Property................................................................................13
Item 4. Security Ownership of Certain Beneficial Owners and Management..........................................14
Item 5. Directors, Executive Officers, Promoters and Control Persons............................................16
Item 6. Executive Compensation..................................................................................22
Item 7. Certain Relationships and Related Transactions..........................................................23
Item 8. Description of Securities...............................................................................25
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and Other
Shareholder Matters.................................................................................27
Item 2. Legal Proceedings.......................................................................................27
Item 3. Changes in and Disagreements with Accountants...........................................................28
Item 4. Recent Sales of Unregistered Securities.................................................................28
Item 5. Indemnification of Directors and Officers...............................................................31
Financial Statements............................................................................................F-1
Index to Exhibits.......................................................................................see exhibits
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development
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Fidelity Holdings, Inc. (the "Company") was incorporated under the laws of the
State of Nevada on November 7, 1995. The Company was initially structured as a
holding company, with initial emphasis on two intended divisions: (1) the
Telecommunications Division and (2) the Plastics and Utility Products Division.
The Company's management moved expeditiously to establish the divisions,
especially building on pre-incorporation telecommunications experience. On
November 14, 1996, the Company acquired the "Armored Conduit" patents for the
Plastics and Utility Products Division. On December 15, 1995, the Company
entered into a Letter of Intent for the acquisition of the award-winning
"Talkie" telecommunications and interactive voice response software. The Armored
Conduit product required additional R&D and design engineering, whereas the
Talkie product was market-ready. This, together with the proposed deregulation
of the telecommunications industry, lead the Company's Management to emphasize
the telecommunications division, called the "Computer Telephony and
Telecommunications Division" and to defer development of the Plastics and
Utility Products Division.
During the first quarter of 1996, the Company secured initial investor financing
by means of an offering under Rule 504 of Regulation D promulgated by the
Securities and Exchange Commission as an exemption under the Securities Act of
1933. Substantially all of the proceeds of that offering were directed to the
Computer Telephony and Telecommunications Division. That Division established
several Master Agents to market the Talkie Power Web Line Machines, one of
which, Nissko Telecom, Inc., made a substantial commitment supported by
immediate funding. Due to that impetus to the early growth of that Division,
that Division continued to be the primary focus of the Company's business plan
during most of 1996. As the year closed, however, the Company began the process
of establishing a third division, an Automotive Sales Division, as it entered
into a Letter of Intent to acquire the Major Automotive Group of dealerships.
Holding Company Structure
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Fidelity Holdings, Inc. is structured as a holding company, meaning
that it provides staff functions to operating subsidiaries. As a
holding company, Fidelity Holdings, Inc. has no operations and no
source of revenue and income; all business operations are conducted
by subsidiaries, presently grouped into two divisions:
I. a Computer Telephony and Telecommunications Division; and
II. a Plastics and Utility Products Division.
A third division is in process:
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III. Automobile Sales (dealerships)
Computer Telephony and Telecommunications Division
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This Division is headed by a wholly-owned subsidiary, Computer Business
Sciences, Inc. ("CBS"), which in turn presently has four wholly-owned (second
tier) subsidiaries:
1. 786710 (Ontario) Limited;
2. CBS (Israel);
3. Reynard Service Bureau, Inc.; and
4. Major Fleet & Leasing Corp.
Major Fleet & Leasing Corp. has a subsidiary, Major Acceptance Corp., for
financing purposes. See Item 2. Because this Division is based upon technology
acquired from 786710 (Ontario) Limited, the discussion of this Division will
begin with that subsidiary, rather than the Division head, CBS, the discussion
for which follows the discussion of 786710 (Ontario) Limited.
786710 (Ontario) Limited
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The central business of the Telecommunications Division derives from 786710
(Ontario) Limited ("786710"), doing business as "Info Systems". 786710 is a
corporation organized under the laws of the Province of Ontario, Canada. It was
owned by Dr. Zvi Barak and his wife, Sarah Barak, until April 18, 1996 when it
was acquired by the Company. Under Dr. Barak's direction, 786710 had developed
both the complex of telecommunications and interactive voice response modules
known as "TALKIE", including "TALKIE-GLOBE" for international calling and the
Talkie Power Web Line Machine system, and "BCS" - "Business Control Software",
an integrated group of modules for accounting functions capable of real time use
in various languages and currencies.
TALKIE is a trademarked name for an interrelated group of modules and
applications of telephonic and interactive voice processing software which
786710 had marketed for several years. The group includes:
TALKIE-ATTENDANT automatic receptionist features, including
inband signaling, dial "0" for operator,
name directories, call hunting, call
blocking, call screening, music or company
messages while on hold, paging, personalized
menus, call queuing and conversation
recording
TALKIE-MAIL allows users to record, send, receive and
retrieve voice messages from personal
mailboxes
TALKIE-AUDIO delivers pre-recorded information in
response to telephone inquiries and can
serve as a talking bulletin board
TALKIE-DIAL places a telephone call, using a
User-supplied list of telephone numbers and
delivers voice
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information with the capability of asking
questions, accepting answers, and updating
the system to reflect those answers
TALKIE-QUERY responds to callers' inquiries using
information stored in the system database
TALKIE-TRANS responds to caller's inquiry, accepts his
order, issues the order (which can include
delivery instructions) and faxes the caller
a confirmation
TALKIE-AD permits callers to browse through
pre-recorded messages ("talking
classifieds") based on their search criteria
TALKIE-FORM permits the User to set up a questionnaire
and then collects answers to pre-recorded
questions
TALKIE-CONFERENCE permits the User to schedule a conference
call and then, when the conference call is
to occur, either calls the participants or
permits the participants to dial in, and
provides the Chairperson with various
options during the conference call
TALKIE has received industry recognition and it won Computer Telephony
magazines' 1994 Product of the Year Award, as well as an Editor's Choice Award.
In 1996, TALKIE won Teleconnect Magazines 1996 Product of the Year Award, as
well as an Editor's Choice Award. TALKIE-GLOBE, which was included in the
magazine Awards, is a PC-based integrated international Call Back, Debit Card,
Single Hop and Long Distance Reseller system. TALKIE-GLOBE eliminates the common
callback method, where the foreign caller first calls equipment in the United
States which calls him back in order to permit the call to be placed.
TALKIE-GLOBE permits the foreign caller to use an in-country free line to access
the multiplexing equipment, which gives him an immediate dial tone and permits
him to place the call directly.
The Business Control Software ("BCS") developed by Dr. Barak is as advanced as
TALKIE and TALKIE-GLOBE, having received 11 awards for software excellence from
the Canadian Directory of Software. BCS is a diverse but interconnected series
of powerful software modules. This full featured system includes: General
Ledger, Accounts Receivable, Accounts Payable, Sales Order, Purchase Order,
Inventory Control, Bills of Materials, Job Costing, and Production Control.
While excellent for general accounting applications, BCS is rich in features
with particular strengths for the manufacturing, distribution, import/export,
pharmaceutical and food industries. For example, its sales analysis reports
assist management in its decision-making process in a wide variety of
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areas, including: defining market trends; analyzing sales force effectiveness;
determining profitability of a job, department or entire company; or
geographical sales spread. One of the most advanced features of BCS is its
ability to handle multiple currencies across the entire system; for example,
sales purchases, and costs are maintained in the client's or vendor's currency
but with reporting capability in the company's home currency or in multiple
currencies with automatic posting of exchange rates. The most amazing feature of
BCS, however, is its multi-lingual capability.. BCS allows simultaneous users,
in real time, to run in a multi-lingual environment where each user can select a
different language while accessing the common database.
Prior to the Company's acquisition of 786710, that corporation customized,
installed and serviced the software packages and sold systems integrating the
software into specific hardware. Upon the Company's acquisition of 786710, the
Talkie Power Web Line Machine system was separated from the TALKIE system and
made exclusively available to CBS. Otherwise the functions of 786710 remained
the same and it has continued to sell and install the Talkie modules. Dr. Barak
was employed by the Company to head an Israeli-based Research & Development
"laboratory", for the improvement of TALKIE and the development of new products.
In August, 1996 Dr. Barak moved to Israel and commenced the operations of a new
Israeli-incorporated subsidiary, "CBS (Israel)". Moise Benedid, Dr. Barak's
brother-in-law, who had previously been associated with 786710 and who had been
with a company selling and installing the 786710 products, became the President
of 786710.
Computer Business Sciences, Inc. ("CBS")
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The Company assigned 786710 to CBS, in the Telecommunications Division, and gave
exclusive control of the Talkie Power Web Line Machine system to CBS, which
began establishment of an international (domestic to foreign) calling business.
Following execution of the Letter of Intent with Dr. Barak and Sarah Barak in
December, 1995 CBS established a "Master Agent" program. Under the program, an
appointed Master Agent was given the right to sell the Talkie Power Web Line
Machine system, which otherwise was not available in the market. CBS initially
appointed five Master Agents. In March, 1996 CBS entered into both a Master
Agent Agreement with Nissko Telecom, Inc. and an agreement for the formation of
a Joint Venture to offer international calling services using the Talkie Power
Web Line Machine System. Under the Agreement, Nissko Telecom, Inc. purchased an
initial fifteen "Talkie Power Web Line Machines" ("Machines") for $1,887,000
($2,787,000 if upgraded Machines) with an option to purchase up to forty-five
more such Machines. "Talkie Power Web Line Machines" are hardware-software
integrated PC-based units capable of offering multiple-line international call
handling up to 96 channels. Nissko Telecom, Inc. formed a limited partnership,
Nissko Telecom Associates, which in turn entered into the Joint Venture with
CBS, called the "Nissko-CBS Joint Venture". Under the Joint Venture,
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CBS arranges for the manufacture of the Machines and agrees to maintain them and
sells the Machines to Nissko Telecom, Inc./Nissko Telecom Associates which in
turn enters into operating agreements or partnerships with entities desiring to
offer international telecommunications services to specific countries. Nissko
Telecom Associates is a licensed 214 carrier.
The Joint Venture obtains, for the operating entity, the necessary link (e.g.,
satellite channels) between the Machine in Kew Gardens and the receiver in the
destination country. Marketing and sales of the telecommunications service
created is handled by the operating entity, CBS and Nissko Telecom Associates,
primarily by selling large blocks of time to commercial users which need voice
and data communications to the foreign country, so that utilization of the
Machine is primarily in fulfillment of such block contracts. In addition, usage
is increased through so-called VIP accounts for heavier usage by individuals and
corporations, and also to some extent through credit cards.
Under the terms of its arrangements with most operating entities, the Joint
Venture shares in the revenues derived from the usage of the Machines. In turn,
the Company receives 45% of the income of the Joint Venture, giving the Company
an on-going interest in the usage of the Machines, in addition to the profit
derived from the initial sales of the Machines and the revenues derived by
Reynard Service Bureau, Inc. from its maintenance, servicing and monitoring
operations.
Currently, the basic configuration for a Machine is forty (40) channels,
twenty-four (24) digital and sixteen (16) analog. Machines are built with 40
channel capability with the intent to increase the capacity as usage demands
dictate. Based on the 24 digital channels, for a 30-day month each Machine
creates a theoretical total of 1,036,800 minutes of which 345,600 are considered
"peak time" and the balance are "off-peak". Essentially, the rendering of the
telecommunications services by the operating entity requires a selling of this
time availability. At the present time, under the Joint Venture Machines are in
operation for the following countries:
Korea
Philippines (2 Machines)
Thailand
Venezuela
Israel (4 Machines)
England
Jamaica
Dominican Republic
Sales
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1996 sales for the Telecommunications Division were $3,175,528, which included
$2,637,873 from the sale of Talkie Power Web Line
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Machines, $537,655 from the sale of software, etc. by 786710 (Ontario) Limited
(after elimination of $96,217 in intercompany sales, and $258,947 from leasing
activities of Major Fleet & Leasing Corp., primarily motor vehicle leasing.
Employees
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As of March 3, 1997, the Telecommunications Division had 25 employees, divided
as follows:
CBS 2
786710 (Ontario) Limited 7
CBS Israel 3
Reynard Service Bureau 10
Major Fleet & Leasing Corp. 3
Competition
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The telecommunications business is highly competitive. In addition to major
service providers, such as AT&T, MCI and Sprint, there are numerous smaller
providers which are developing their own networks. There are also many
resellers, which although not having any equipment, provide service through
agreements with providers. While the Company's Telecommunications Division is
focused in the international calling market, that is also a highly competitive
market. As a result of the recent international agreement opening many markets
which are currently state monopolies the competition will intensify. The
Company's Talkie Power Web Line Machine system permits the Company to offer a
system which operates at relatively low costs since the cost of the more common
switches is avoided by the Talkie technology. The Company believes that for the
foreseeable future it will continue to sell Talkie Power Web Line Machines as
the cost for the Machines and their operating costs are still sufficiently low
to permit service providers to offer international telecommunications services
at competitive prices. Furthermore, the Joint Venture is not in the standard
telecommunications market, as it focuses its marketing primarily on large users,
especially those who will purchase large blocks of time so that utilization is
primarily fulfillment of such contracts.
Reynard Service Bureau, Inc.
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CBS formed "Reynard Service Bureau, Inc." to handle its responsibilities under
the Master Agent agreements to install, debug, maintain and service the Machines
for the operating entities. All Machines are installed at the Company's location
in Kew Gardens, New York where they are monitored 24 hours a day. It is the
responsibility of the operating entity to make all arrangements in the
destination country. Reynard Service Bureau, Inc. receives a fee, consisting of
a flat fee charge and a volume usage charge, as compensation for its services.
In addition, Reynard Service Bureau performs other functions for the various
subsidiaries. For example, it provides services for 786710's installations where
the customer requests on-going
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service. In addition, it implements the changes, whether final or Beta testing,
developed by the R&D operations of CBS Israel.
CBS has assigned all telecommunications Customer Service responsibilities to
Reynard Service Bureau, Inc.
Major Fleet & Leasing Corp.
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In order to provide 786710 with a source of internal financing to offer to
potential customers, the Company acquired Major Fleet & Leasing Corp. ("Major
Fleet") as of September 30, 1996. Major Fleet & Leasing Corp. was owned by Bruce
Bendell, the Company's Chairman of the Board, and his brother, Harold Bendell,
and was affiliated with the Major Automotive Group, based on Northern Boulevard
in Long Island City, New York. (See "Major Automotive Group" in Item 2 below)
The acquisition was a stock-for-stock exchange or a so-called "B
Reorganization". In exchange for 100% of the outstanding shares of Major Fleet &
Leasing Corp. the Bendells received 250,000 shares of the Company's Preferred
Stock, designated as the 1996-Major Series. See Item 8.
Established in 1985, Major Fleet has been engaged in the leasing of automotive
vehicles. Accordingly, Major Fleet has well established credit lines and a
business "track record" for its leasing operations. The Company is developing
separate financing lines under Major Fleet to provide the required financing to
the Joint Venture in connection with the sale of Machines. At the same time,
Major Fleet will continue with its established business of leasing motor
vehicles under the experienced management of the Bendells. To expand the
available credit lines so as to service the leasing and/or financing of Talkie
Power Web Line Machines, Major Fleet & Leasing Corp. has established a
subsidiary called "Major Acceptance Corp., a Florida corporation, which is
engaged in a private offering of debentures to raise up to $4,500,000 for
leasing and financing purposes. See Item 2.
CBS Israel
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CBS (Israel) has established an R&D facility at Rannanna, Israel. Headed by Dr.
Barak, the facility employs a receptionist/secretary and a programmer. This
subsidiary provides R&D functions to (1) improve the existing software,
including especially Talkie and to adapt such software to changing PC
environments, (2) to expand the current software, and (3) to develop new
products and applications.
Plastics and Utility Products Division
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The Company's original business plan emphasized the Computer Telephony and
Telecommunications Division; as noted above, the proceeds from the Company's
initial financing were intended primarily to support that Division. Furthermore,
as discussed below, during 1996 the Division's basic product line, "Armored
Conduit", was the subject of substantial disputes and, ultimately, litigation.
Accordingly the Plastics and Utility Products Division
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was not developed in 1996. The Company anticipates seeking financing in the near
term to support development of this Division.
Immediately following its organization, the Company entered into an Agreement
with Progressive Polymerics, Inc. and its subsidiary, Progressive Polymerics
International, Inc. (collectively "PPYM") to acquire two patents covering
"Armored Conduit":
Date of Issue Patent Number
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June 8, 1993 5,217,667
May 17, 1994 5,312,658
"Armored Conduit" is the name that was given by PPYM to its conduit system.
Electric distribution lines are often run through conduits buried in the ground,
usually in the street. This has increasingly become the common way of delivering
electric service in new subdivisions, but many major cities, such as New York
City, have utilized this method for many years. Originally, conduit was made
from creosoted wood or so-called "Transite" asbestos-concrete pipe. Today, the
standard conduit is made from PVC duct, which is installed and then encased in
concrete poured in place, or cement or concrete tubing, or metal tubing. Each of
these types has its own problems. For example, PVC becomes brittle and
inflexible in cold weather, binds the electric wire if there is a short (fire,
heat), and is required to be encased in concrete which must be properly placed
around it. Once in place, the entire "system" must be removed if there is a
problem. The "Armored Conduit" system is assembled in the field from
pre-fabricated pieces, each consisting of a pre-formed plastic shell which is
filled with a pourable cement, with male-to-male extensions, joined in an
end-to-end fashion with couplings or connectors. The pieces have a rectangular
exterior, with linear ribs, a square exterior cross section, and a tubular
interior. The linear ribs permit the conduit to be interlocked when stacked for
storage or shipment, while increasing its structural strength. The "Armored
Conduit" is approximately 30% lighter than standard concrete conduit, yet it has
a high strength to weight ratio that exceeds the physical property requirements
of standard conduit.
Under the original acquisition agreement, the Company agreed to pay a cash
purchase price of $500,000 payable in fifty-six quarterly installments, an
initial minimum royalty, and an on-going royalty equal to the greater of 5% of
the manufactured cost of the product or 2% of gross sales net of returns and
allowances. Subsequent to the acquisition, as the Company began R&D, a dispute
developed with PPYM, and, when negotiations proved unfruitful, the Company filed
a suit to rescind the acquisition. The dispute was resolved in October, 1996
when the Company and PPYM executed an amended agreement which settlement was
filed in the court to terminate the Company's suit. Under the amended agreement,
the minimum royalty was eliminated, the on-going royalty was retained, and the
cash purchase price was amended to a cash purchase price of $100,000 and the
issuance of eighty thousand Units of the Company's securities.
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Each Unit consists of two (2) shares of the Company's Common Stock and two (2)
Warrants exercisable for one year, each Warrant being for the purchase of one
(1) share of the Company's Common Stock at an exercise price of $3.125 per
share. The Company has an option, exercisable for one year, to redeem 80,000 of
the 160,000 shares issued at a redemption price of $2.50.
During 1996, despite the on-going renegotiation involving the Armored Conduit
transaction, the Company retained Mr. Ronald K. Premo, a plastics industry
consultant, to determine the necessary R&D required to complete the product to
the production stage, to determine the product mix which would be required for a
test installation, to determine alternative plastics usable for the shell, to
provide liaison with the mold builder, the injection molder and the blow molder,
and to establish an initial budget for the initiation of the Plastics Division.
Since its organization the Company has sought other plastics products which
would enhance the Division. As noted above, the Company retained an experienced
consultant in the plastics industry, Mr. Ronald K. Premo, to search out and
analyze potential opportunities. At the same time, various products to which the
Company had originally obtained certain rights were terminated as not offering
sufficient market volume to justify the development risks. The Company, with Mr.
Premo, formed a wholly-owned subsidiary, called "Premo-Plast, Inc." to operate
the Plastics and Utility Products Division. The Division was activated on
January 1, 1997 with the employment of Mr. Premo. In January, the Division
acquired a Patent Pending relating to a method for assembling and installing
hydrotherapy fixtures for hot tubs, spas and pools, developed by Mr. John
Pinciaro. The fixture line constitutes an integrated system which can consist of
some 20 to 30 parts, including air and water nozzles and light fixtures, in
various sizes and configurations, together with related controls. For example,
nozzles which are fixed, adjustable, or spin are available in various sizes. The
Patent Pending relates to the method of assembling the components and then
installing them in the hot tub, spa or pool wall. As part of the acquisition,
Premo-Plast, Inc. employed Mr. Pinciaro to oversee a new subsidiary to-be-formed
("NEWCO") which will complete the development of the product line, produce it,
and market it.
Sales
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Since the Plastics Division was not operational in 1996, it had no sales.
Employees
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During 1996 the Plastics Division had no employees. As of March 3,
1997 the Division has two employees, Mr. Premo and Mr. Pinciaro.
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Competition
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The "Armored Conduit" will face competition from the established methods: PVC
duct encased in concrete poured at the site and concrete conduit. While the
Armored Conduit product offers advantages over both current methods, it must
pass rigorous testing by utilities which are unlikely to shift from current
methods without confidence in the Armored Conduit product. Accordingly it should
be anticipated that a substantial effort will have to be made in order to secure
a market share. However, once accepted by major utilities, the market should
become easier and once established as an accepted method the product will have
the advantage of being an established method.
The hydrotherapy spa products are not new or unique, as such, as water and air
nozzles and lighting fixtures are currently available. What is new is the method
of assembly and attachment to the spa, hot tub or pool. The Company believes
that the ease of assembly and the time saved in installation will provide the
Company's products with a profitable market share.
Premo-Plast, Inc.
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Premo-Plast, Inc. is both the head of the Plastics and Utility Products Division
and an operating company. As an operating company, Premo-Plast, Inc. is
responsible for the development of the Armored Conduit. As the head of the
Division, Premo-Plast, Inc. will supervise the development, production and
marketing of the hydrotherapy spa products by NEWCO.
Premo-Plast, Inc. must complete the development of the Armored Conduit, begun by
the prior owner. The process of determining the current status of the product
and understanding the development of the product to date has begun. Upon
completion of that, it is anticipated that the product will go through a
mechanical design phase which will lead to a modification of existing tooling,
as required, to enable the company to produce sufficient actual product to
solicit sales and permit the completion of testing by the various potential
customers. A major emphasis will be on the determination of the plastic used for
the shell, in order to meet test specifications, and a determination of the best
cement mixture for both production and field use.
NEWCO
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The subsidiary to complete the development of, produce and market the
hydrotherapy fixtures has not yet been formed. It is expected that upon
formation the initial operation will be research on the possible modification of
the existing components to permit the most effective production of the
components. In addition, there will be a determination of the initial components
to make up the starting product line. Limited production will follow, with field
testing and any required modifications prior to commencement of full production.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
1996 was a formative year in which the Company experienced rapid growth, based
upon the foundation laid in late 1995 following the Company's incorporation. On
November 14, 1995 the Company purchased two patents for the "Armored Conduit".
On December 15, the Company entered into a Letter of Intent to acquire 786710
(Ontario) Limited, which owned various software, including especially "Talkie".
These transactions placed the Company in the position of needing the cash to
exploit the acquisitions. However, because the Armored Conduit required
additional R&D and design engineering, because the transaction in which the
Armored Conduit patents were acquired was under re-negotiation, because the
786710 software was market-ready, and because of the then proposed deregulation
of the telecommunications industry, the Company decided to focus on its
Telecommunications Division.
On or about February 6, 1996 the Company commenced an offering pursuant to Rule
504 of Regulation D. The offering was of 20,000 Units at $5.00 per Unit, each
Unit consisting of 2 shares of Common Stock and 23 Common Stock Purchase
Warrants exercisable at $1.95 each. Oversubscribed, the offering closed on March
6, 1996, providing the Company with $100,000 for the sale of the Units, intended
primarily for the Telecommunications Division.
Concurrently, the Company began negotiations with a group of investors for their
financial support of the Telecommunications Division and the acquisition of
786710 (Ontario) Limited. Agreement was reached on March 25, 1996 and on March
27, 1996 the investors (Nissko Telecom, Inc., see Item 1, "Description of
Business") made an initial deposit of $629,000.
The combination of the closing of the Rule 504 offering and the deposit by
Nissko Telecom, Inc. provided the Company with the financing needed to close the
acquisition of 786710 (Ontario) Limited. Agreement was reached on April 18, 1996
subject to certain conditions subsequently met in May.
Some of the Common Stock Purchase Warrants issued in the Rule 504 offering were
exercised during the second quarter, providing the Company with an additional
$179,400. The remaining Warrants, scheduled to expire on July 31, 1996, were
extended and all the Warrants were exercised by September 30, 1996. Overall, the
exercise of the 460,000 Warrants provided the Company with an additional
$897,000 which gave it the liquidity required for the balance of 1996. At the
end of 1996, the Company had cash of $574,486 which taken together with
collection of accounts receivable and continuing operations is sufficient for
1997.
The Company believes that the Telecommunications Division and the
(Nissko) Joint Venture will continue to grow, despite the potential
for increased international calling competition. The Joint Venture
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will continue to grow by concentrating on its niche market of fulfillment of
pre-sold time blocks for voice and data transmission. The Company recognizes
that as the costs for such calling drop, the margins of resellers will continue
to shrink, and the Company anticipates that many of those will be forced out of
the market. In addition, newer providers relying upon the more expensive
switches who have not yet recovered the costs for such equipment may experience
problems, while lowered margins may become a barrier to market entry for new
providers. The Company believes that its lower cost PC-based system will permit
it to attract providers who, by concentrating on the niche market, will still be
able to profit despite the decreasing margins.
In October, 1996 the Company closed the acquisition of Major Fleet & Leasing
Corp. Major Fleet & Leasing Corp., owned by Bruce and Harold Bendell, was
incorporated in 1985 and was engaged in leasing and financing motor vehicles,
primarily in conjunction with the Major automobile dealerships, using
established lines of credit. The Company acquired Major Fleet & Leasing Corp. in
a stock-for-stock exchange, effective as of September 30, 1996, to provide a
means to finance Talkie Power Web Line Machines.
In December, 1996 the Company entered into a Letter of Intent with Bruce Bendell
and Harold Bendell for the acquisition of their automobile dealerships. The
interests of Harold Bendell in Major Dodge, Inc. and Major Chrysler, Plymouth,
Jeep, Eagle, Inc. are being purchased for $4,000,000 in cash while the interests
of Bruce Bendell in those dealerships and Major Chevrolet, Inc. and Major
Subaru, Inc. are being acquired for the Company's 1997-Major Automotive Group
Series of Preferred Stock. In order to secure the funds for the purchase of
Harold Bendell's interest the Company is going to make a private offering of
Subordinated Capital Notes in the gross amount of $4,900,000. It is the
Company's intent to establish a third division, the Automobile Sales Division,
centered around the Major Automotive Group dealerships being acquired.
The Company desires to expand the operations of Major Fleet & Leasing Corp.
while reducing the reliance on the existing bank financing and lines of credit.
A subsidiary of Major Fleet & Leasing Corp., Major Acceptance Corp., is making a
private offering of debentures to raise $4,500,000. Such funds will all be used
by Major Fleet & Leasing Corp. for its leasing and financing operations.
During 1997 the Company intends to file a Registration Statement
for a public offering. The proceeds from such offering will cover
repayment of debt, development of the Plastics Division, expansion
of the Telecommunications Division including development of
Internet automotive marketing sites and methods to be used in
conjunction with the Major Automotive Group, and expansion of the
Automotive Sales Division which will be centered around the Major
Automotive Group upon completion of that acquisition. Acquisition
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of additional automobile dealerships will be pursued.
ITEM 3. DESCRIPTION OF PROPERTY.
Real Estate
- -----------
The Company does not own any real estate or plants. All operations are conducted
from locations leased from non-related third parties. The primary location is at
80-02 Kew Gardens Road where the Company leases space on two separate floors.
One area, consisting of 2,800 square feet, houses the corporate offices as well
as the Machines operated by the (Nissko) Joint Venture. Therefore, both CBS and
Reynard Service Bureau, Inc. also utilize the premises. The rent for these
premises is $5,833 per month, subject to annual increases not to exceed 5%, for
an initial term of five years and the right to extend for a further five years.
The other area, consisting of 4,000 square feet, houses offices for other
personnel. The rent for these premises is $5,500 per month for a term of three
years. Whether these premises will prove adequate for the Company's needs will
depend upon its growth; the Company anticipates requiring additional space.
CBS Israel operates in 1,100 square feet, leased for a term of three years at
the rate of $24,000 per year.
786710 (Ontario) Limited operates in 1,200 square feet, leased for a term of one
year at the rate of $18,000 per year.
Major Fleet & Leasing Corp. operates in 2,100 square feet located at 55-11
Northern Blvd., Woodside, New York 11377, leased for a term of 3 years at the
rate of $2,800 per month.
The Plastics Division does not yet have any office space; Mr. Premo operates
from his home and Mr. Pinciaro operates from office space of a separate
business. As the Division begins to function, it is the intent to obtain
specific space for it.
Patents
- -------
The Company owns the two patents covering the Armored Conduit:
Date of Issue Patent Number
------------- -------------
June 8, 1993 5,217,667
May 17, 1994 5,312,658
In addition, the Company owns the Patent Pending for the
hydrotherapy spa products invented by Mr. Pinciaro.
In order to keep its proprietary technology secret, 786710 elected not to apply
for any patents covering its software, and there are no patents; the systems
remain proprietary with no public access to the technology.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a) The following table sets forth certain information with respect to the
beneficial ownership of the Company's voting securities by each person who, to
the knowledge of the Company, on February 24, 1997 was the owner of 5% or more
of the outstanding shares on that date:
(3) Amount
(2) Name and address and nature (4) Per-
(1) Title of of beneficial of beneficial Cent of
Class owner ownership Class
----- ----- --------- -----
Common Doron Cohen L&B(1) 39.8%(2)
Common Bruce Bendell L&B(1) 40.6%(2),(3)
Pfd(4) Bruce Bendell L&B(1) 50.0%(5)
Pfd(4) Harold Bendell L&B(1) 50.0%(5)
(1) "L" means legal ownership; "B" means beneficial ownership.
(2) Based upon 6,286,700 shares issued and outstanding as of February 24, 1997.
(3) Does not include warrants to purchase 50,000 shares, provided in Management
Agreement for Major Fleet & Leasing Corp.
(4) Refers to the 1996-Major Series issued for the acquisition of Major Fleet &
Leasing Corp. of which 250,000 shares are issued and outstanding which are
convertible into a total of 500,000 shares of the Company's Common Stock. If Mr.
Bendell converted his 125,000 shares of the 1996-Major Series, his holding of
the Company's Common Stock would be increased to 2,800,000 shares and he would
own 42.8% of 6,536,700 shares then issued and outstanding.
(5) Based on 250,000 shares of the 1996-Major Series issued and outstanding as
of February 24, 1997.
(b) The following table sets forth certain information with respect to the
beneficial ownership of the Company's voting securities by each director, each
executive officer, and all directors and executive officers as a group as of
February 24, 1997:
(3) Amount
(2) Name and address and nature (4) Per-
(1) Title of of beneficial of beneficial Cent of
Class owner ownership Class
----- ----- --------- -----
Common Bruce Bendell L&B(1) 40.6%(2)
Common Doron Cohen L&B(1) 39.8%(2),(3)
Common Zvi Barak L&B(1) 2.0%(2),(4)
Common Richard C. Fox -0- 0%(2)
Common Yossi Koren L&B(1) 0%(2),(5)
Common All officers and
directors as a
group (5) L&B(1) 82.4%(2)
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Pfd(6) Bruce Bendell L&B(1) 50.0%(7)
Pfd(6) Harold Bendell L&B(1) 50.0%(7)
(1) "L" means legal ownership; "B" means beneficial ownership.
(2) Based upon 6,286,700 shares issued and outstanding as of February 24, 1997.
(3) Does not include warrants to purchase 50,000 shares, provided in Management
Agreement for Major Fleet & Leasing Corp.
(4) Dr. Barak denies any beneficial interest in the 125,000 shares issued to his
wife, Sarah Barak, in the acquisition of 786710 (Ontario) Limited.
(5) Yossi Koren denies beneficial ownership in the shares owned by various
relatives. This calculation does not include any interest in the 1,500,000
Warrants issued to Nissko Telecom, Inc. and its investors under the March, 1996
agreement between Nissko Telecom, Inc. and the Company's wholly-owned
subsidiary, Computer Business Sciences, Inc.
(6) Refers to the 1996-Major Series issued for the acquisition of Major Fleet &
Leasing Corp. See footnote 3 under (a) above.
(7) Based upon 250,000 shares of the 1996-Major Series issued and outstanding as
of February 24, 1997.
(c) Changes in Control. There are no arrangements, known to the Company which
may at a subsequent date result in a change in control of the Company. However,
in December, 1996 the Company entered into a Letter of Intent with Bruce Bendell
and Harold Bendell for the acquisition for stock (Bruce Bendell) and cash
(Harold Bendell) of certain automobile dealerships. The Company is currently
completing such transaction, subject to certain conditions, including the
approval of the applicable manufacturers for such dealerships. If and when such
transaction closes, Mr. Bendell will receive the 1997-Major Automotive Group
Series of the Company's Preferred Stock which, when converted, will convert into
at least 1,800,000 shares of Common Stock. Taken together with the shares of the
Company already owned by Mr. Bendell, Mr. Bendell will then be in sole control
of the Company, subject to the continuing management by Doron Cohen of the other
areas of the Company's business. As of the date of this filing, the number of
shares of the 1997-Major Automotive Group Series to be issued is not known, but
approximately 600,000 shares, convertible into 1,800,000 shares of Common Stock
is probable.
Also, in connection with the closing of the acquisition of the automobile
dealerships, as part of the Management Agreement and for the purpose of securing
the approval of the applicable manufacturers, the Company will issue its
1997A-Major Automotive Group Series of Preferred Stock to Bruce and Harold
Bendell. Consisting of 100 shares, with no dividend rights and limited voting
rights, such Series will give the Bendells the power to continue their control
of the automobile dealerships following the acquisition by the Company. As
noted, the Company is doing this in
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order to secure the required manufacturer approvals, since none of the
executives of the Company, other than Bruce Bendell, have any automobile
dealership experience.
In connection with the Company's acquisition of Major Fleet & Leasing Corp., the
Company entered into a Management Agreement with Bruce Bendell and Harold
Bendell in order to secure their continued management of the acquired motor
vehicle leasing and financing operations. Under the Management Agreement, the
Bendells have exclusive authority and responsibility for the management of the
motor vehicle operations.
While the Bendells control the on-going operations of Major Fleet & Leasing
Corp. and will continue their control of the automobile dealerships, the
operations of the other areas of the Company's business will remain under the
control of Doron Cohen, the Company's President.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.
(a) The Company was founded by Mr. Bruce Bendell and Mr. Doron
Cohen, who may be considered the promoters of the Company.
(b) The directors and executive officers of the Company are:
Name Age Office
---- --- ------
Bruce Bendell 40 Chairman of the Board (director)
Doron Cohen 39 President/CEO/Treasurer, Director
Zvi Barak, Ph.D. 44 Director
Yossi Koren 47 Director
Richard C. Fox 62 Secretary
Mr. Bendell and Mr. Cohen have been directors since the incorporation of the
Company. Mr. Bendell, Mr. Cohen and Mr. Fox have held the indicated offices
since incorporation. Dr. Barak became a director following the Letter of Intent
for the acquisition of 786710 (Ontario) Limited. Yossi Koren became a director
following the March, 1996 agreement between the Company and Nissko Telecom, Inc.
The directors hold office until the next annual meeting of shareholders of the
Company or until successors are elected and qualified. Company officers hold
office until the first meeting of directors following the annual meeting of
shareholders and until their successors are elected and qualified, subject to
earlier removal by the Board of Directors.
In addition to their positions with the Company, Mr. Bendell, Mr.
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Cohen and Dr. Barak have positions within the Company's Divisions and
subsidiaries described elsewhere in this Registration Statement.
BRUCE BENDELL, age 41, is the Chairman of the Board of the Company. Mr. Bendell
attended City College of New York from 1971 to 1973 and then transferred to
Queens College from which he was graduated in 1975 with a B.A. in Accounting and
Economics. He then attended Baruch College for post-graduate courses. Mr.
Bendell is President of the Major Automotive/Group which includes Major
Chevrolet, Inc., Major Dodge, Inc., Major Chrysler Plymouth, Jeep, Eagle, Inc.,
Major Subaru, Inc., and Major Fleet & Leasing Corp. and has been so employed for
many years. In addition to other personal companies and investments, Mr. Bendell
is active in community and charitable affairs. He is a Director of the Queens
Chamber of Commerce, a Director and Capital Campaign Chairman of the Long Island
City YMCAs, a Director of the Long Island City Business Development Corp., a
Member of the NYNEX Business Advisory Council, a Member of the Queens District
Attorney's Business Advisory Council, and several industry/trade groups such as
the Tristate Chrysler Plymouth Advertising Association.
DORON COHEN, age 39, is the President/CEO. Mr. Cohen was born in Israel, holds
Israeli citizenship, and served as an officer in the Israel Defense Force (IDF)
for seven years. He attended the Professional Officer's School in Tel Aviv from
1973 to 1977, with special training in Human Resources, and received advanced
technical training. Mr. Cohen completed his service in the IDF in 1981. Mr.
Cohen entered the United States in January, 1982 and has had a broad range of
managerial, financial and business/ entrepreneurial experience and has been a
business and financial consultant. In 1985, Mr. Cohen developed ERA Ben Franklin
(real estate) into a chain of five offices equipped with the latest in computer
technology. In that connection, Mr. Cohen created and implemented the
integration of all available "multiple listing" services into a computer
database, combined with an imaging system, data processing, and instant mortgage
approvals. In 1989, Mr. Cohen purchased the Holtzman operations, founded in
1945, which he expanded to include: carpeting, tile and floor coverings, and
cabinetry; a decorator showroom for the construction industry and retail trade;
and a construction management company for which he
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implemented a computer expediting management system which allowed direct, daily
on-line reporting from field operations to management. In early 1996, Mr. Cohen
closed the Holtzman operations to concentrate his efforts on the Company.
DR. ZVI BARAK, age 44, is a Director and is in charge of the Company's
Israel-based Research & Development facilities of the Computer Telephony and
Telecommunications Division. Born in Israel, Zvi Barak is bilingual, speaking
both English and Hebrew. He served in the Israel Defense Force from 1970 to
1976, completing a course in Personnel and Human Resources in 1974. In 1974 he
completed a course in FORTRAN at the Weitzman Institute and then received a
B.Sc. in Physics from the University of Beer Sheva in 1978 and a M.Sc. in
Physics from the University of Toronto in 1979. In 1981 he received a Ph.D. in
Theoretical Solid State Physics from the University of Toronto. During
1981-1982, Dr. Barak developed the first Canadian Payroll software for the PC
platform, the rights to which were sold to Tandy Corporation, to which he then
provided technical support, further enhancements and upgrades. In 1982, Dr.
Barak joined Informatic Systems in Toronto for which he had successively more
responsible positions; in 1989-1991 he served as Vice-President of Technical
Operations. During that time he developed software, including the Business
Control Software, as well as handling independent projects for major clients,
including customizing of other software and installing Local and Wide Area
Networks, including the use of Novell Netware. From 1991 to August, 1996, Dr.
Barak was the President of Info Systems, and has developed the Talkie system.
Dr. Barak has extensive knowledge of PC software, PC hardware, various operating
systems (including, to name a few, Novell, Lantastic, UNIX, OASIS and
Multi-Link) and PC integration with various telephone systems (including, to
name a few, Norstar, Panasonic, Toshiba, Vodavi, Isotec, and Centrex).
YOSSI KOREN, age 47, is a Director of the Company. (He is also
affiliated with Nissko Telecom, Inc. and that company's joint
venture with the Company's subsidiary, CBS.) Mr. Koren founded,
and has been CEO of, Nissko Jewelry Trading, a manufacturer of
jewelry based in New York City, since 1983. Mr. Koren was born in
Israel, attended the Military Academy of Haifa from 1966 to 1968,
joined the Israeli Army as a paratrooper in February, 1968 and
completed his military service in 1971. Following that, he was a
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sales executive for Gesttener, a large printing company, in Jerusalem. In 1977
he joined his family's diamond business and gained experience in that industry
before moving to the United States in February, 1980. Initially, he joined Neli
Gems, a large importer of emeralds into the United States and was with that firm
until 1983 when he left to found Nissko Jewelry Trading.
RICHARD C. FOX, age 62, is the Secretary of the Company. He has been an attorney
since 1961, following his graduation from the University of Chicago Law School
where he was an editor of the Law Review and admitted to the Order of the Coif.
He is admitted to practice in Pennsylvania and in Florida, practicing primarily
in the corporate, securities, tax, and business law areas. He taught various
corporate law and paralegal topics at the Harrisburg Area Community College from
January, 1972 to June 1980. He also taught entrepreneurial business seminars for
the College's Foundation (e.g., "How to Start Your Own Business"). He also
taught corporate and securities law topics for the Pennsylvania Bar Institute at
various times from the mid-1960s to 1990. His practice was based in Harrisburg,
Pennsylvania until 1987, when he moved the base to Boca Raton, Florida. Mr. Fox
has served as an officer and director to various companies, providing legal and
financial services. In 1991 Mr. Fox co-founded Microterra, Inc. (now called
"Atlantis Group, Inc.") and initially served as its Secretary/Treasurer, CFO and
General Counsel. In October, 1991 he became President/CEO of Microterra, Inc.
and served in that capacity until November 28, 1994, when he resigned and
returned to private practice. From approximately March, 1995 to November, 1995
he served as an attorney and consultant to Microterra, Inc. ("Atlantis Group,
Inc."), while providing legal and business consulting services to other clients,
including the Company. Since November, 1995 he has been in private practice.
(c) Significant Employees
Moise Benedid, age 47, has been the President of 786710 (Ontario) Limited since
August 1, 1996 when he replaced Dr. Barak upon his departure for Israel. (Mr.
Benedid has been loaned to that subsidiary under a special contract between the
Company and the Canadian corporation by which Mr. Benedid is employed. From
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November, 1994 to August 1, 1996 Mr. Benedid was employed by TelePower
International, Inc. as Vice President in charge of marketing and technical
support. A major part of his responsibilities was the sale, in Canada, of
franchises based on the Talkie system, which gave him a thorough understanding
of that system and familiarity with its marketing. From 1992 to November, 1994
he was President of Powerpoint Microsystems, Inc. where he marketed computer
network systems. Prior to that, from 1987 to 1992 he was President of Computer
Junction, computer retail stores based in Toronto. Mr. Benedid was graduated
from the Technical School ORT in Strasbourg, France in 1969 from which he
received a technical electronics certificate. He then was graduated from the
High Technical Engineering School in Geneva, Switzerland in 1993 as a Nuclear
Engineer. Mr. Benedid is the brother of Sarah Barak, Dr.
Barak's wife.
Lewis Glogower, age 45, is the President of Reynard Service Bureau, Inc. where
he has responsibility for not only the service bureau functions of that
subsidiary but also has responsibility for customer service. Mr. Glogower was
with MCI Telecommunications, Inc. from January, 1995 to January, 1997, when he
joined the Company. Mr. Glogower was a Technical Service Consultant with MCI,
providing project management and implementation. Prior to that, from February,
1992 to January, 1995, he was self-employed as a consultant in the
telecommunications industry, specializing in LAN-WAN networks. For the five
years prior to that he was a Field Technical Manager with Prodigy Services
Company, where he engineered, implemented and maintained all remote sites in the
Bell Atlantic region.
Michael S. Lukin, age 49, is the President of CBS (Israel) and also is the
recruiter and manager of the agents for the International Calling Services of
the Company. Prior to joining the Company in October, 1996 Mr. Lukin was a
Registered Representative in the securities brokerage industry. From 1990 to
January, 1996 he was with Kern Suslow Securities where he handled the sale of
fixed income securities. From January, 1996 until he joined the Company, he was
associated with Weiner, Abrams where he handled the sale of fixed income
securities and tax-free bonds. Mr. Lukin was graduated from Brooklyn College in
1970 with a B.A. (Psychology). He became a Registered Representative in 1979
when he joined Ampal
20
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Securities Corp. and was associated with that firm for ten years. He then joined
A.T. Brod and was associated there until he joined Kern Suslow.
Shlomo Nessim, age 37, is the Technical Manager of Reynard Service Bureau, Inc.,
having joined the Company in August, 1996. He is responsible for installation
and maintenance of all systems, liaison with the accounting and service staffs,
and interfacing with the R&D [CBS (Israel)] staff and implementing their
improvements and changes. Mr. Nessim was graduated from Tel Aviv University in
June, 1985 with a degree in Electrical Engineering. From November, 1993 to
August, 1996 Mr. Nessim was a Senior Technical Support Engineer with Dialogic
Corp., where he provided technical support to customers, primarily engineers.
From February, 1993 to October, 1993 he was a Technical Support Engineer for
Racal Redac, a subsidiary of Racal. Prior to that, from 1991 when he came to the
United States, Mr. Nessim was a free-lance consultant.
JOHN A. PINCIARO, age 47, is the President of the hydrotherapy spa fixture
subsidiary presently in the process of organization and referred to in this
Registration Statement as "NEWCO". From 1983 to the present, Mr. Pinciaro has
been CEO of Thermo Spas, Inc. a manufacturer of spas, which both distributes the
spas at wholesale and has a retail operation.
RONALD K. PREMO, age 58, is the President of Premo-Plast, Inc. which heads the
Plastics and Utilities Division. His entire career has been in the plastics
industry, beginning in 1955. From 1993 to the present, he has founded and
managed a Manufacturer's Representative Agency for the plastics industry, R.K.
Premo & Associates. Prior to that, from 1987 to 1993, he was a Manufacturer's
Representative for R.W. Mitscher, Inc. for whom he successfully opened and
developed a new territory including Connecticut and Rhode Island. His
substantial and well-rounded experience in the industry includes extensive
product development, as well as establishment of technical training programs,
establishment and improvement of purchasing and distribution systems, product
design and quality control, engineering, marketing, sales, purchasing and
inventory control, offshore sourcing, and has covered a wide variety of plastic
types,
21
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production methods, and product types. Mr. Premo was the co-founder of the
Mystic, Connecticut Chapter of the American Production and Inventory Control
Society and he is a 23 year veteran of the U.S. Air Force (including duty as the
Purchasing Agent for Westover Air Force Base) and the U.S. Navy.
PAUL VESEL, age 36, was graduated from the University of Colorado in 1983 with a
B.A. in Economics with a Major in International Affairs and from the University
of South Carolina in 1986 with a Master's Degree in International Business. He
has been employed by Computer Business Sciences, Inc. since November, 1996 as
the Executive Vice President for Sales & Marketing and manages the distribution
and marketing of telecommunication services for the operating entities under the
(Nissko) Joint Venture. Prior to his employment by the Company, Mr. Vesel was
employed by MTC Netsource, a telecommunications company, where he was
responsible for product development, from May, 1995. From 1993 to May, 1995 he
was Director of Sales & Marketing for ATC Distributing. From November, 1989 to
1993 Mr. Vesel was Managing Partner of Focus International, an international
trade and marketing consultant in Barcelona, Spain. From 1990 to September,
1992, while based in Barcelona, he was also Managing Director of Alobarna, S.A.
which planned and provided housing and hospitality services in connection with
the 1992 Olympic Games.
ITEM 6. EXECUTIVE COMPENSATION.
Mr. Bruce Bendell, Chairman of the Board of the Company, entered into a
Consulting Agreement effective January 1, 1996. The Consulting Agreement
provides for base annual compensation of $150,000 and provides for increases in
such base compensation and for both performance-based and discretionary bonuses.
Mr. Doron Cohen, President and Treasurer of the Board of the Company, entered
into an Employment Agreement effective January 1, 1996. The Consulting Agreement
provides for base annual compensation of $150,000 and provides for increases in
such base compensation and for both performance-based and discretionary bonuses.
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Both Mr. Bendell and Mr. Cohen waived their compensation for 1996; there is no
accrual. Neither Mr. Bendell nor Mr. Cohen has any stock options, stock
appreciation rights ("SAR") or deferred compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND TRANSACTIONS.
The Company was founded by Bruce Bendell and Doron Cohen who were the initial
directors and who continue as directors and officers of the Company and its
subsidiaries. Upon incorporation, Mr. Bendell and Mr. Cohen each received
2,500,000 shares of Common Stock for investments of $25,000 each. These
investments provided the initial capitalization of the Company. Mr. Bendell is
Chairman of the Board and Mr. Cohen is President and Treasurer of the Company.
Mr. Cohen entered into an Employment Agreement with the Company, which commenced
on January 1, 1996. Mr. Bendell entered into a Consulting Agreement with the
Company, which also commenced January 1, 1996. Both agreements provide for
annual base compensation of $150,000 per year, together with possible increases
and bonuses. Both Mr. Bendell and Mr. Cohen waived their compensation for 1996.
In March, 1996 the Company's telecommunications subsidiary, Computer Business
Sciences, Inc., entered into an agreement with Nissko Telecom, Inc. for the sale
of at least 5, and up to 60, "Talkie" Power Web Line machines, and calling for a
downpayment of $629,000 for the first 15 machines. In addition, the two
companies agreed to form a joint venture for the sale/leasing/operation of the
machines. Nissko Telecom, Inc. and its investors receive 55% and Computer
Business Sciences, Inc receives 45% of the net revenues of such joint venture.
To involve Nissko Telecom, Inc. as a strategic partner at such an early stage of
the Company's development, prior to the closing of the acquisition of 786710
(Ontario) Limited, the owner of "Talkie", the Company issued to Nissko Telecom,
Inc. and its investors warrants to purchase 1,500,000 shares of the Company's
Common Stock at a price of $1.25 per share. Of these warrants, however, 750,000
are contingent upon completion of the purchase of the initial fifteen Machines.
Following closing of the agreement, one of the Nissko investors, Yossi Koren,
became a director of the Company.
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On April 18, 1996 the Company closed an Agreement for the acquisition of 786710
(Ontario) Limited, a corporation organized in the Province of Ontario, which
owned certain telecommunications software ("Talkie") and certain accounting
software ("BCS"). To acquire 786710, the Company agreed to pay the owners, Dr.
Zvi Barak and Sarah Barak, his wife, $750,000 and issued 125,000 shares of its
Common Stock to Sarah Barak. In connection with the acquisition, the Company
employed Dr. Barak to head its R&D facility to be established in Israel. The
Company entered into an Employment Agreement with Dr. Barak, calling for a base
annual salary of $150,000, and providing Dr. Barak with 125,000 shares of its
Common Stock vesting over the 5 year term of the Agreement. Prior to the
acquisition itself, the Company had entered into a Letter of Intent with Dr.
Barak and his wife, for the acquisition, on December 15, 1995. In conjunction
with that Letter of Intent, Dr. Barak became a director of the Company.
Subsequent to the acquisition, Dr. Barak moved to Israel and has established the
R&D facility, "CBS Israel".
The Company has loaned Mr. Cohen $140,000, which is formalized by a promissory
note due on December 31, 1998. Interest is calculated at the rate of 5.77% per
year.
In October, 1996, but effective as of October 1, 1996, the Company acquired
Major Fleet & Leasing Corp. from Bruce Bendell and his brother, Harold Bendell,
who had owned the company equally. Major Fleet & Leasing Corp., organized in
1985, is engaged in the leasing and financing of motor vehicles. The Bendells
were issued 250,000 shares of Convertible Preferred Stock (the 1996-MAJOR
Series), convertible into 500,000 shares of the Company's Common Stock. In
addition, as a bonus for the attainment of certain goals prior to closing, the
Bendells were issued 100,000 shares of Common Stock. The Company acquired Major
Fleet & Leasing Corp. in order to provide leasing capability to its
Telecommunications Division, but with the intent of continuing the existing
motor vehicle operations. In order to assure continuity for such operations, the
Company entered into a Management Agreement with the Bendells, who have
exclusive authority and responsibility for the motor vehicle operations. In
addition to a performance based management fee, the Bendells were issued
warrants for the purchase of 100,000 shares of the Company's Common Stock at a
price of $1.25 per share.
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In December, 1996 the Company entered into a Letter of Intent with Bruce Bendell
and his brother, Harold Bendell, for the acquisition of certain automobile
dealerships (the "Major Automotive Group"). In summary, the Company agreed to
purchase Harold Bendell's 50% interest in two dealerships (Major Chrysler,
Plymouth, Jeep, Eagle, Inc., and Major Dodge, Inc.) for $4,000,000 and the
Company agreed to acquire Bruce Bendell's 100% interest in two dealerships
(Major Chevrolet, Inc. and Major Subaru, Inc.) and his 50% interest in the other
two dealerships for shares of its Preferred Stock (the 1997 Major Automotive
Group Series) which are convertible into at least 1,800,000 shares of the
Company's Common Stock. To assure securing of the approvals of the manufacturers
for the transfer of ownership, the Company has agreed to enter into a Management
Agreement with Bruce Bendell and Harold Bendell continuing their management of
the dealerships. To assure the manufacturers of such continuity, the Company has
also agreed to issue shares of its Preferred Stock (1997A-Major Automotive Group
Series) which provide the holders (the Bendells) with control of the automobile
dealership operations.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company's Articles of Incorporation, as amended, provide for the issuance of
50,000,000 shares of Common Stock having a par value of $.01 per share and
2,000,000 shares of undesignated Preferred Stock having a par value of $.01 per
share.
Common Stock
- ------------
As of February 24, 1997 there were 6,286,700 shares of the Company's issued and
outstanding. Common Stock shareholders are entitled to cast one vote for each
share at all shareholders' meetings for all purposes, including the election of
directors. Holders share equally on a per share basis in dividends that may be
declared by the Board of Directors out of funds legally available after dividend
distributions to holders of Preferred Stock. Upon liquidation or dissolution,
any assets remaining after payment of creditors and after distribution of
accrued and unpaid dividend to holders of Preferred Stock will be available for
distribution to holders of the Company's Common Stock. Shares of Common Stock
are
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not redeemable, and have no conversion rights. The Common Stock does not have
cumulative voting rights, which means that the holders of more than fifty
percent of the Common Stock voting for election of directors can elect one
hundred percent of the directors of the Company if they choose to do so. The
Company has not paid any dividends on its Common Stock and it is not anticipated
that any dividends will be paid in the foreseeable future. Dividends upon
Preferred Shares must have been paid in full for all past dividend periods
before distribution can be made to the holders of Common Stock; no dividends on
the Preferred Shares have been declared, however. In the event of a voluntary or
involuntary liquidation, all assets and funds of the Company remaining after
payments to the holders of Preferred Stock will be divided and distributed among
the holders of Common Stock according to their respective shares. No holder of
Common Stock has any preemptive or other right to subscribe for or purchase any
part of any new or additional issue of Common Stock or securities convertible
thereunto.
Preferred Stock
- ---------------
Of the 2,000,000 shares of undesignated Preferred Stock authorized, to date the
Company has designated 250,000 shares as the 1996-Major Series. The shares of
the 1996-Major Series are voting, vote with the Common Stock and not as a
separate class, and each share has two votes per share reflecting the underlying
conversion rate. The shares of the Series are convertible, with each share
converting into two shares of Common Stock. In the event that a dividend is
declared on the Common Stock, a dividend of twice the per share dividend on the
Common Stock must be declared on the 1996-Major Series, again reflecting the
underlying conversion rate. The shares are redeemable after December 31, 2001 at
a price of $15.87 per share. The holders of the 1996-Major Series have a right
of rescission (put) in the event of the happening of certain events. There is a
sinking fund to support both the possible rescission and the possible redemption
of the 1996-Major Series. The sinking fund is based upon the earnings of Major
Fleet & Leasing Corp. from the business and assets purchased by the Company.
Dividend Policy
- ---------------
The Company has not operated, has had no earnings or net profits,
and has not paid any cash dividends on its Common Stock or its
26
<PAGE>
Preferred Stock and the Board of Directors has no present intention of declaring
any cash dividends. The declaration and payment of dividends in the future will
be determined by the Board of Directors in light of conditions then existing,
including the Company's earnings, financial condition, capital requirements, and
other factors.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS.
(a) The Company's Common Stock is traded on the NASDAQ Bulletin
Board.
(b) The Company's Common Stock was listed on approximately April 2, 1996, first
traded on May 2, 1996, and the opening regular quotations were on May 9, 1996
when the Common Stock was priced at $4.25 bid, $5.00 asked.
(c) During 1996 its high and low bid and asked prices were as
follows:
High Bid Low Bid High Ask Low Ask
Second Quarter $5.00 $4.00 $5.50 $4.75
Third Quarter $4.75 $3.50 $5.50 $4.50
Fourth Quarter $4.875 $3.75 $5.50 $4.50
On March 6, 1997 the closing prices of the Company's Common Stock were $5.50 bid
and $6.125 asked, as quoted on the NASDAQ Bulletin Board.
To date no dividends have been declared or paid on the Common Stock. (See Part
I, Item 8, "Dividend Policy")
ITEM 2. LEGAL PROCEEDINGS.
On November 22, 1996, the Company and two subsidiaries filed an
27
<PAGE>
action in the New York Supreme Court in Queens County indexed at 25678-96 and
captioned "Fidelity Holdings, Inc., Computer Business Sciences, Inc. and 786710
(Ontario) Limited, Plaintiffs, versus Michael Marom and M.M. Telecom, Corp.",
claiming damages of $5,000,000 for breach of contract, libel, slander,
disparagement, violation of copyright laws, fraud and misrepresentation. On
February 4, 1997 the Defendants filed an amended Answer, and a Counterclaim
seeking damages of $50,000,000 for breach of contract and violation of the
Lanham Act. The Plaintiffs have filed an Answer to the Counterclaim. Discovery
has not yet commenced.
On September 18, 1996, the Company's subsidiary, 786710 (Ontario) Limited, the
Company as owner of 786710, and the Baraks as the original principals of 786710,
were sued in the Ontario Court (General Division) by Touch Tone Connections,
indexed at 96-CU-111059. Touch Tone Connections seeks damages of CN$200,000 in
connection with the installation, in 1995, of certain hardware and software
claimed to have been faulty and not meeting the sales representation. All of the
events occurred prior to the Company's acquisition of 786710 and the Baraks
indemnified the Company against any such action
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Company's auditor for the fiscal year ended December 31, 1995 was Nemiroff,
Cosmas & Co., CPA's. The Company's auditor for the fiscal year ended December
31, 1996 is Peter C. Cosmas Co., CPA's. The change was due solely to the opening
of a separate practice by Mr. Cosmas and there have been no disagreements with
respect to accounting and financial disclosure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On November 7, 1995, in connection with its formation, the Company issued
2,500,000 shares to each of its two founders, Doron Cohen and Bruce Bendell at
the par value of $.01, for total consideration of $50,000. The issuance was
exempt by reason of Section 4(2) of the Securities Act of 1933, as amended.
28
<PAGE>
In February, 1996 the Company engaged in a Rule 504 offering of 20,000 Units to
residents of New York, where the offering was registered. Each Unit consisted of
2 shares of Common Stock and 23 Common Stock Purchase Warrants exercisable at a
purchase price of $1.95 per share. All Units were sold by the directors of the
Company, and all Common Stock Purchase Warrants subsequently exercised,
resulting in the total issuance of 500,000 shares of Common Stock. The issuance
was exempt by reason of Rule 504 of Regulation D promulgated pursuant to Section
3(b) of the Securities Act of 1933, as amended.
On or about March 23, 1996, the Company entered into a certain Agreement with
Nissko Telecom, Inc. for the sale of certain equipment. As an inducement to
Nissko Telecom, Inc. to enter into the Agreement, the Company issued Common
Stock Purchase Warrants, denominated as Class A and Class B Warrants, all
exercisable at a purchase price of $1.25. None of such Warrants has yet been
exercised. The issuance was exempt by reason of Section 4(2) of the Securities
Act of 1933, as amended.
On or about April 18, 1996, the Company entered into a certain Agreement to
acquire 786710 (Ontario) Limited, a Canadian corporation, and to employ Dr. Zvi
Barak, the then President of 786710 and the inventor of the Talkie software. In
connection with the acquisition, as partial payment for the acquisition
including certain accounting software, the Company issued 125,000 shares of its
Common Stock to Sarah Barak, an owner of 786710. In connection with the
employment of Dr. Barak, the Company issued 125,000 shares of its Common Stock
to Dr. Barak. In both cases the shares are subject to certain vesting
conditions. The issuances were exempt by reason of Regulation S and by reason of
Section 4(2) of the Securities Act of 1933, as amended.
On or about August 12, 1996, as an inducement to Moise Benedid's corporation to
permit Mr. Benedid to become President of 786710 (Ontario) Limited upon Dr.
Barak's departure for Israel to head the R&D Division, the Company agreed to
issue 20,000 shares of its Common Stock, subject to certain vesting conditions,
to said corporation. The shares were issued in November, 1996. The issuance was
exempt by reason of Regulation S and by reason of Section 4(2) of the Securities
Act of 1933, as amended.
29
<PAGE>
On or about August 19, 1996, as an inducement to Shlomo Nessim to become an
employee of Computer Business Sciences, Inc., a wholly-owned subsidiary of the
Company, the Company agreed to issue 15,000 shares of its Common Stock, subject
to certain vesting conditions, to Mr. Nessim. The shares were issued in
November, 1996. The issuance was exempt by reason of Section 4(2) of the
Securities Act of 1933, as amended.
On October 10, 1996, in connection with its acquisition of Major Fleet & Leasing
Corp. as of September 30, 1996, the Company issued (a) 250,000 shares of its
Convertible Preferred Stock and (b) agreed to issue 100,000 shares of its Common
Stock subject to Major Fleet & Leasing Corp. having met certain requirements as
of September 30, 1996. The requirements were met and the Common Stock was issued
in November, 1996. Contemporaneously, the Company entered into a Management
Agreement with the former managers of Major Fleet & Leasing Corp. in which the
Company issued Common Stock Purchase Warrants, exercisable at a purchase price
of $1.25 per share, for the purchase of 100,000 shares of Common Stock; however,
such Warrants were not exercisable until after January 1, 1997. The issuances
were exempt by reason of Section 4(2) of the Securities Act of 1933, as amended.
On or about October 15, 1996, the Company resolved its dispute with Progressive
Polymerics, Inc. regarding the Armored Conduit (see "Business of the Company").
Under the Settlement Agreement, the Company converted $400,000 of its purchase
price (total price: $500,000) into equity, consisting of eighty thousand Units,
each Unit consisting of two (2) shares of the Company's Common Stock and two (2)
Warrants, each for the purchase of an additional share at an exercise price of
$3.125. The issuance was exempt by reason of Section 4(2) of the Securities Act
of 1933, as amended.
On October 31, 1996 (upon completion of performance of services) the Company
issued 200,000 shares of its Common Stock as compensation under certain
consulting agreements entered into in early 1996. The issuance was exempt by
reason of Section 4(2) of the Securities Act of 1933, as amended.
On November 25, 1996, as an inducement to Paul Vesel to become an employee of
Computer Business Sciences, Inc., a wholly-owned
30
<PAGE>
subsidiary of the Company, the Company issued 30,000 shares of its Common Stock,
subject to certain vesting conditions, to Mr. Vesel. In addition, Mr. Vesel's
Employment Agreement contains certain stock options none of which have vested or
are exercisable. The issuance was exempt by reason of Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Nevada law and the Company's Articles of Incorporation and By-laws,
officers and directors of the Company (and former officers and directors) are
entitled to indemnification from the Company to the full extent permitted by
law. The Company's Articles of Incorporation and By-laws generally provide for
such indemnification for claims arising out of the acts or omissions of the
Company's officers and directors in their capacity as such, undertaken in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the Company and, with respect to any criminal action or proceeding,
had no reasonable cause to believe that his conduct was unlawful. The conditions
and extent of indemnification are set forth in the Articles of Incorporation and
By-laws of the Company and in the Indemnity Agreements between the Company and
each officer and director. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to officers, directors or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
Limitation On Liability
- -----------------------
As permitted by Nevada law, the Company's Articles of Incorporation provide that
a director of the Company shall not be personally liable for monetary damages
for a breach of fiduciary duty as such, except for liability (i) for any breach
of the director's duty of loyalty, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, or (iii)
for any transaction from which the director derived an improper personal
benefit. This provision is intended to afford
31
<PAGE>
the Company's directors additional protection from, and limit their potential
liability from, suits alleging a breach of their duty of care. As a result of
the inclusion of such a provision, shareholders may be unable to recover
monetary damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their fiduciary
duties although it may be possible to obtain injunctive or other equitable
relief with respect to such actions. If equitable remedies are found not to be
available to shareholders for any particular case, shareholders may not have any
effective remedy against the challenged conduct.
Indemnity Agreement
- -------------------
In order to induce and encourage highly experienced and capable persons to serve
as directors and officers, the Company has entered into an Indemnity Agreement
with each director and officer presently serving the Company and will provide
the same agreement to future directors and officers as well as certain agents
and employees. The Agreement provides that the Company shall indemnify the
director and/or officer, or other person, when he or she is a party to, or
threatened to be made a party to, a proceeding by, or in the name of, the
Company. Expenses incurred by the indemnified person in any proceeding are to be
paid to the fullest extent permitted by applicable law. The Agreement may at
some time require the Company to pay out funds which might otherwise be utilized
to further the Company's business objectives, thereby reducing the ability of
the Company to carry out its projected business plans.
Director's and Officer's Liability Insurance
- --------------------------------------------
At present, the Company does not have any liability insurance for the benefit of
its officers and directors. It is probable that the Company does not currently
meet the underwriting requirements to obtain such insurance. In any event,
because of the expected cost of such insurance the Company has no present plans
to obtain such insurance.
32
<PAGE>
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
FIDELITY HOLDINGS, INC.
-----------------------
Date: March 7, 1997
By: /s/ Doron Cohen
------------------------------------
Doron Cohen, President
(Signature)
33
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Fidelity Holdings, Inc.
We have audited the consolidated balance sheet of Fidelity Holdings, Inc. as
of December 31, 1996 and 1995 and the related consolidated statements of income
(loss), retained earnings (deficit), and cash flows for the periods then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We did not examine the financial statements of Major Fleet &
Leasing Corp. and 786710 Ontario Limited, both wholly-owned subsidiaries, which
statements reflect total assets of $4,299,354 as of December 31, 1996 and total
revenue of $796,602. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Major Fleet & Leasing Corp. and 786710 Ontario Limited is
based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Fidelity Holdings, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the periods then ended in conformity with generally accepted accounting
principles.
PETER C. COSMAS CO., CPA'S
/s/ PETER C. COSMAS
-----------------------
New York, New York
February 27, 1997
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31,
1996 1995
---- ----
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 574,486 $ 39,063
Net Investment in direct financing leases, current 1,390,598 -
Notes receivable - officer shareholder 142,659 -
Accounts receivable 179,837 -
Inventories 1,494,020 -
Other current assets 45,349 10,000
--------------- ----------------
Total current assets 3,826,949 49,063
Net investment in direct financing leases,
net of current portion 1,059,287 -
Property and equipment 1,023,523 -
Excess of costs over net assets acquired 2,645,269 -
Other intangible assets 483,474 500,000
Other assets 278,362 -
--------------- ----------------
Total assets $ 9,316,864 $ 549,063
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 419,052 $ -
Accrued expenses 522,026 5,480
Current maturities of long-term debt 643,976 35,714
Accrued income taxes 4,378 -
Deferred revenue 67,409 -
Due to affiliates 1,404,079 -
--------------- ----------------
Total current liabilities 3,060,920 41,194
Long-term debt, less current maturities 515,609 464,286
Income taxes 424,000 -
Other 72,122 -
--------------- ----------------
Total liabilities 4,072,651 505,480
Commitments
Stockholders' equity
Preferred stock, .01 par value;
2,000,000 shares authorized,
250,000 shares issued and outstanding
in 1996 and none in 1995 2,500 -
Common stock, .01 par value
50,000,000 shares authorized,
6,279,200 shares issued and
outstanding in 1996 and
5,000,000 in 1995 62,792 50,000
Additional paid in capital 4,509,108 -
Cumulative translation adjustment 264 -
Retained earnings (deficit) 669,549 (6,417)
--------------- ----------------
Total stockholders' equity 5,244,213 43,583
--------------- ----------------
Total liabilities and stockholders' equity $ 9,316,864 $ 549,063
=============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended November 7, 1995
December 31, (Inception date) to
1996 December 31, 1995
------------ -------------------
<S> <C> <C>
Revenues:
Computer products and
telecommunications equipment $ 3,175,528 $ -
Leasing income 258,947 -
------------------ ------------------
Total revenues 3,434,475 -
------------------ ------------------
Operating expenses:
Cost of products sold 965,792 -
Selling, general and
administrative expenses
Products 935,529 2,042
Leasing 191,372 -
Amortization of intangible assets 178,104 -
------------------ -------------------
2,270,797 2,042
------------------ -------------------
Operating income (loss) 1,163,678 (2,042)
Other income (expense)
Interest expense (24,132) (4,375)
Interest income 9,830 -
Loss on joint venture (32,410) -
------------------ -------------------
Income (loss) before provision for income taxes 1,116,966 (6,417)
Provision for income taxes 441,000 -
------------------ -------------------
Net income (loss) $ 675,966 $ (6,417)
Earnings (loss) per share
Primary $ 0.12 $ (0.02)
Fully diluted 0.12 -
Weighted average common and common equivalent shares
outstanding:
Primary 5,522,862 5,000,000
Fully diluted 5,522,862 5,000,000
</TABLE>
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
November 7, 1995
Year Ended (inception date) to
December 31, 1996 December 31, 1995
Beginning Balance $ (6,417) $ -
Net income (loss) 675,966 (6,417)
--------- ---------
Ending balance $ 669,549 $ (6,417)
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended November 7, 1995
December 31, (inception date) to
1996 December 31, 1995
------------ -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 675,967 $ (6,417)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:
Amortization of intangible assets 178,104 -
Depreciation 123,329 -
Deferred income taxes 424,000 -
(Increase) decrease in assets:
Net investment in direct financing leases (1,612,675) -
Notes receivable (142,659) -
Accounts receivable (20,229) -
Inventories (1,173,082) -
Other assets (31,304) (10,000)
Increase (decrease) in liabilities:
Accounts payable 108,079 -
Accrued expenses 416,282 5,480
Accrued income taxes 4,378 -
Deferred revenue 3,075 -
Due to affiliates 1,184,177 -
---------------- ---------------
Net Cash provided by operating activities 137,442 (10,937)
---------------- ---------------
Cash flows from investing activities:
Additions to property and equipment 77,326 -
Acquisition of 786710 Ontario Limited,
net of cash acquired 738,636 -
---------------- ---------------
Net cash used in investing activities (815,962) -
---------------- ---------------
Cash flows from financing activities:
Proceeds from long-term debt 400,000 -
Payments of long-term debt (170,321) -
Proceeds from issuance of common
stock and exercise of warrants net of expenses 984,000 50,000
---------------- ---------------
Net cash provided by financing activities 1,213,679 50,000
---------------- ---------------
Effect of exchange rates on cash 264 -
---------------- ---------------
Net increase in cash and cash equivalents 535,423 39,063
Cash and cash equivalents, beginning of period 39,063 -
---------------- ---------------
Cash and cash equivalents, end of period $ 574,486 $ 39,063
================ ===============
Supplemental Disclosures Of Cash Flow Information:
Cash paid during the period for:
Interest $ 24,132 -
Income taxes $ - -
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) Summary of Significant Accounting Policies:
a) Nature of the Business:
Fidelity Holdings, Inc. ( The Company) was incorporated under the laws of the
State of Nevada on November 7, 1995. The Company is structured as a holding
Company that has two divisions, a Computer Telephone and Telecommunication
Division and a Plastic and Utilities Division. The plastic and utilities
division is considered to be in its development stage. In addition through its
October 2, 1996 acquisition of Major Fleet & Leasing Corp. The Company is in the
business of leasing automobiles, trucks and telephone equipment under direct
financing and operating leases.
b) Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of
Fidelity Holdings, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts, transactions and profits have been eliminated.
c) Earnings per Share:
Earnings (loss) per share are based on the weighted average common and common
equivalent shares, outstanding each year. Common equivalent shares consist of
shares issuable upon the exercise of stock options and warrants, except where
anti-dilutive.
d) Cash Equivalents:
Cash equivalents consist of highly liquid investments, principally money market
accounts, with a maturity of three months or less at the time of purchase. Cash
equivalents are stated at cost which approximate market value.
e) Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market.
Automobiles and trucks held for sale or lease are valued at the lower of cost
(specific identification) or market.
f) Property and Equipment:
Property and equipment are recorded at cost. Depreciation and amortization of
property and equipment are computed using the straight-line method over the
estimated useful lives of the assets, ranging from three to ten years.
Depreciation of leased equipment is calculated on the cost of the equipment,
less an estimated residual value, on the straight-line method over the term of
the lease. Maintenance and repairs are charged to operations as incurred. When
property and equipment are sold or otherwise disposed of, the asset cost and
accumulated depreciation are removed from the accounts, and the resulting gain
or loss, if any is included in the results of operations.
g) Revenue Recognition:
The Company recognizes revenue from the sale of telecommunications and computer
products at the date of product shipment. Any additional costs related to the
product sold are provided for at the time of the sale. The Company records
income from direct financing leases based on a constant periodic rate of return
on the net investment in the lease. Income earned from operating lease
agreements is recorded evenly over the term of the lease.
h) Foreign Currency Translation:
The Company translates the assets and liabilities of its foreign subsidiaries at
the exchange rates in effect at year end. Revenues and expenses are translated
using exchange rates in effect during the year. Gains and losses from
<PAGE>
foreign currency translation are credited or charged to cumulative translation
adjustment included in stockholders' equity in the accompanying consolidated
balance sheets. Gains and losses from foreign currency transactions are included
in other income (expense) and amounted to an income of $264 for the year ended
December 31, 1996.
i) Use of Estimates In Preparation of Financial Statements:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amount of assets and liabilities and disclosures of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the reporting periods.
Operating results in the future could vary from the amounts derived from
management's estimates and assumptions.
j) Excess of Costs over Net Assets Acquired:
The excess of cost over fair value of net assets of businesses acquired is
amortized on a straight-line basis over 15 years. Amortization recorded in 1996
was $137,593.
k) Business Combinations:
Business combinations which have been accounted for under the purchase method of
accounting include the results of operations of the acquired business from the
date of acquisition. Net assets of the companies acquired are recorded at their
fair value to the Company at the date of acquisition.
2) Accounts Receivable:
The Company evaluates its accounts receivable on a customer by customer basis
and has determined that no allowance for doubtful accounts is necessary at
December 31, 1996.
3) Notes receivable - officer shareholder:
Note in the principal amount of $140,000 plus accrued interest of $2,659.
Interest rate is 5 7/8 % per annum.
4) Net investment in Direct Financing Leases:
Components of the net investment in direct financing leases are as follows:
December 31,
------------
1996 1995
---- ----
Total minimum lease payments to be received $2,705,711 $ -0-
Estimated residual value of leased property 200,315 -0-
Unearned income (456,141) -0-
---------- -------
Net investment $2,449,885 $ -0-
---------- -------
Future minimum lease payments receivable at December 31, 1996 is as follows:
Year Ending
December 31, Amount
------------ ------
1997 $1,512,465
1998 1,108,499
1999 77,493
2000 7,254
----------
Total $2,705,711
----------
<PAGE>
5)Inventories:
Inventories consisted of the following:
December 31,
------------
1996 1995
---- ----
Telecommunication Parts $ 36,395 $ -0-
Automobiles and trucks
held for sale or lease 1,457,625 -0-
----------- -----
$ 1,494,020 $ -0-
----------- -----
6) Property and Equipment:
Property and equipment consisted of the following:
December 31,
------------
1996 1995
---- ----
Leasehold Improvements $ 22,096 $ -0-
Furniture and fixtures 10,314 -0-
Computer equipment and software 804,639 -0-
Leased Equipment 309,803 -0-
----------- -----
1,146,852 -0-
Less accumulated depreciation
and amortization 123,329 -0-
----------- -----
$1,023,523 $ -0-
----------- -----
7) Income Taxes:
The Company accounts for income taxes using the asset and liability method
whereby deferred assets and liabilities are recorded for differences between the
book and tax carrying amounts of balance sheet items. Deferred liabilities or
assets at the end of each period are determined using the tax rate expected to
be in effect when the taxes are actually paid or recovered. The measurement of
deferred tax assets is reduced, if necessary, by a valuation allowance for any
tax benefits that are not expected to be realized. The effects of changes in tax
rates and laws on deferred tax assets and liabilities are reflected in net
income in the period in which such changes are enacted.
The provision for taxes on income is as follows:
Year Ended December 31,
-----------------------
1996 1995
---- ----
Federal:
Current $ 13,000 $ -0-
Deferred 319,000 -0-
State:
Current 4,000 -0-
Deferred 105,000 -0-
---------- -----
Total $441,000 $-0-
---------- -----
<PAGE>
The reconciliation between the amount computed by applying the federal statutory
rate to income (loss) before income taxes and the actual income tax expense were
as follows:
Year Ended December 31,
-----------------------
1996 1995
---- ----
Amount using the statutory Federal
tax rate $ 380,000 $ -0-
State income tax, net of federal
tax benefit 69,000 -0-
Other, Net (8,000) -0-
--------- -----
Provision for taxes on income $ 441,000 $ -0-
--------- -----
8) Long-Term Debt:
Various lenders advance funds to the Company's leasing subsidiary in the form of
notes payable to finance leased vehicles. Interest on each note is charged
depending on the prime rate in effect at the time the vehicle is leased and
remains constant over the term of the lease. Applicable rates at December 31,
1996 ranged between 7% and 9.5%. Equal monthly installments are paid over the
term of the lease (which can range from 12 To 60 months), together with a final
balloon payment, if applicable. These loans are collateralized by the vehicles.
Maturities are as follows:
Year Ending December 31,
------------------------
1996 1995
---- ----
1997 $463,976 $ -0-
1998 230,851 -0-
1999 70,437 -0-
2000 6,594 -0-
-------- -----
Total $771,858 $ -0-
-------- -----
In addition long-term debt includes $387,727 still due from the acquisition of
786710 Ontario Limited.
Maturities are as follows:
Year Ended December 31,
1996 1995
---- ----
1997 $180,000 $ -0-
1998 207,727 -0-
-------- --------
Total $387,727 $ -0-
-------- --------
9) Business Combinations:
Purchase transactions - During 1996 The Company acquired Major Fleet & Leasing
Corp. and 786710 Ontario Limited, in transactions accounted for under the
purchase method of accounting. The Company paid a total of $3,916,227 of which
$3,127,250 was in stock and $788,977 was in cash and notes for the acquisitions.
Of the aggregate purchase price $2,782,862 was allocated to excess of cost over
net assets acquired.
10) Other intangible Assets consist of :
Patents
The Company has purchased two patents to be used in the manufacture of armored
conduit. The patents will be amortized over the remaining useful life of 14
years on the straight line basis.
<PAGE>
The Company has an agreement with the seller of the patents to pay royalty
payments. The payments will be calculated at the greater of 5% of the
manufactured cost of the armored conduit or 2% of the net sales.
11) Commitments:
Compensation Agreements:
Mr. Bruce Bendell, Chairman of the Board of the Company, entered into a
Consulting Agreement effective January 1, 1996. The Consulting Agreement
provides for base annual compensation of $150,000 and provides for increases in
such base compensation and for performance-based and discretionary bonuses.
Mr. Doron Cohen, President and Treasurer of the Company, entered into an
Employment Agreement effective January 1, 1996. The Agreement provides for base
annual compensation of $150,000 and provides for increases in such base
compensation and for both performance-based and discretionary bonuses.
Both Mr. Bendell and Mr. Cohen waived their compensation for 1996: there is no
accrual. Neither Mr. Bendell nor Mr. Cohen has any stock options, stock
appreciation rights ("SAR") or deferred compensation.
Sales of Customer Installment Contracts:
The Company's leasing subsidiary has sold customer installment contracts to some
financing institutions with no recourse and to others with full recourse. In the
event of default on recourse loans, the Company would pay the financing
institution a predetermined amount and would repossess and sell the vehicle. No
accrual has been made for possible losses since, in management's opinion on an
aggregate basis, the Company could sell the repossessed automobiles for amounts
in excess of outstanding liabilities.
Guarantor of Third Party Obligations:
Under the terms of a cross-guarantee, cross-default, cross-collateralization
agreement, the Company's leasing subsidiary is the guarantor of debt incurred by
affiliated companies. In addition, the subsidiary is a guarantor on a mortgage
of an entity which is wholly owned by officer-shareholders of the Company. The
outstanding balance of the mortgage on December 31, 1996 is $877,212.
12) Related Party Transactions:
Approximately 55% of the Company's revenues derived from the sale of computer
products and telecommunications equipment was to Nissko Telecom, a partner with
the Company on a joint venture in which the Company owns 45%. The Company will
receive 45% of the net revenues generated by the joint venture.
Amounts due affiliates are amounts owed by the Company's leasing subsidiary for
advances made in the ordinary course of business from various entities which are
wholly owned by the subsidiaries former Stockholders. The advances are in the
form of non-interest-bearing obligations with no specified maturity dates. The
subsidiary also, purchased a substantial portion of its leased vehicles from
affiliates.
13) Warrants:
In October 1996 the Company revised the Patent Purchase Agreement. Under the
amendment the purchase price was changed form $500,000 in cash to a combination
of $100,000 in cash and the balance in 80,000 unregistered units of the
Company's securities. Each unit consisted of 2 shares of Common Stock and 2
warrants, each warrant being for the purchase of 1 share of the Company's common
stock at an exercise price of $3.125 per share exercisable for one year.
In March 1996, the Company issued to Nissko Telecom, Inc. and its investors,
warrants to purchase 1,500,000 shares of the Company's Common Stock at a price
of $1.25 per share.
<PAGE>
In addition the Company issued warrants for the purchase of 100,000 shares, in
connection with the Management agreement entered into when the Company acquired
Major Fleet & Leasing Corp. The total number of warrants outstanding are
1,760,000 at exercise prices of $1.25 to $3.125.
14) Preferred Stock:
Of the 2,000,000 shares of undesignated Preferred Stock authorized, to date the
Company has designated 250,000 shares as the 1996-Major Series. The shares of
the 1996-Major Series are voting, vote with the Common Stock and not as a
separate class, and each share has two votes per share reflecting the underlying
conversion rate. The shares of the Series are convertible, with each share
converting into two shares of Common Stock. In the event that a dividend is
declared on the Common Stock, a dividend of twice the per share dividend on the
Common Stock must be declared on the 1996-Major Series, again reflecting the
underlying conversion rate. The shares are redeemable after December 31, 2001 at
a price of $15.87 per share. The holders of the 1996-Major Series have a right
of rescission (put) in the event of the happening of certain events. There is a
sinking fund to support both the possible rescission and the possible redemption
of the 1996-Major Series. The sinking fund is based upon the earnings of Major
Fleet & Leasing Corp. from the business and assets purchased by the Company.
15) Subsequent Event:
The Company has entered into a letter of intent with Mr. Bruce Bendell, Chairman
of the Board to acquire for stock and cash certain automobile dealerships
subject to certain conditions.
<PAGE>
STATE OF NEVADA
ARTICLES OF INCORPORATION
OF
FIDELITY HOLDINGS
The undersigned, desiring to form, organize and incorporate a
corporation under the laws of the State of Nevada, hereby adopts the following
Articles of Incorporation and certifies:
ARTICLE I
The name of this corporation shall be:
FIDELITY HOLDINGS, INC.
ARTICLE II
This corporation may engage in any activity or business permitted under
the laws of the State of Nevada, and shall enjoy all the rights and privileges
of a corporation granted by the laws of the State of Nevada.
ARTICLE III
The aggregate number of shares which the corporation shall have
authority to issue is Fifty-two Million (52,000,000) shares, divided into:
2,000,000 Preferred Shares, having a par value of One Cent
($.01) per share
and
50,000,000 Common Shares, having a par value of one Cent
($.01) per share.
A statement of the preferences, privileges, and restrictions
granted to or imposed upon the respective classes of shares or the holders
thereof is as follows:
A. Common Shares. The terms of the 50,000,000 Common Shares
of the corporation shall be as follows:
(1) Dividends. Whenever cash dividends upon the Preferred
Shares of all series thereof at the time outstanding, to the extent of the
preference to which such shares are entitled, shall have been paid in full for
all past dividend periods, or declared and set apart for payment, such
dividends, payable in cash, stock, or otherwise, as may be determined by the
Board of Directors, may be declared by the Board of Directors and paid from time
to time to the holders of the Common Shares out of the remaining net profits or
surplus of the corporation.
1
<PAGE>
(2) Liquidation. In the event of any liquidation,
dissolution, or winding up of the affairs of the corporation, whether voluntary
or involuntary, all assets and funds of the corporation remaining after the
payment to the holders of the Preferred Shares of all series thereof of the full
amounts to which they shall be entitled as hereinafter provided, shall be
divided and distributed among the holders of the Common Shares according to
their respective shares.
(3) Voting rights. Each holder of a Common Share shall
have one vote in respect of each share of such stock held by him. There shall
not be cumulative voting.
B. Preferred Shares. Prior to the issuance of any of the
Preferred Shares, the Board of Directors shall determine the number of Preferred
Shares to then be issued from the Two Million (2,000,000) shares authorized, and
such shares shall constitute a series of the Preferred Shares. Such series shall
have such preferences, limitations, and relative rights as the Board of
Directors shall determine and such series shall be given a distinguishing
designation. Each share of a series shall have preferences, limitations, and
relative rights identical with those of all other shares of the same series.
Except to the extent otherwise provided in the Board of Directors' determination
of a series, the shares of such series shall have preferences, limitations, and
relative rights identical with all other series of the Preferred Shares.
Preferred Shares may have dividend or liquidation rights which are prior
(superior or senior) to the dividend and liquidation rights and preferences of
the Class B Preferred shares. Also, any series of the Preferred Shares may have
voting rights.
ARTICLE IV
The corporation is to have perpetual existence.
2
<PAGE>
ARTICLE V
So long as all the shares of this corporation are owned beneficially
and of record by only one or two shareholders, the business and property of the
corporation shall be managed by a Board of not fewer than the number of
shareholders. At such time as the shares are owned beneficially and of record by
more than three or more shareholders, shares are owned beneficially and of
record by more than three or more shareholders, the business and property of the
corporation shall be managed by a Board of not fewer than three (3) nor more
than twenty-one (21) directors, who shall be natural persons of full age, and
who shall be elected annually by the shareholders having voting rights, for the
term of one year, and shall serve until the election and acceptance of their
duly qualified successors. In the event of any delay in holding, or adjournment
of, or failure to hold an annual meeting, the terms of the sitting directors
shall be automatically continued indefinitely until their successors are elected
and qualified. Directors need not be residents of the State of Nevada nor
shareholders. Any vacancies, including vacancies resulting from an increase in
the number of directors, may be filled by the Board of Directors, though less
than a quorum, for the unexpired term. The Board of Directors shall have full
power, and it is hereby expressly authorized, to increase or decrease the number
of directors from time to time without requiring a vote of the shareholders.
The name(s) and address(addresses) of the member(s) of the first Board
of Directors, who subject to the provisions of the Articles of Incorporation,
the By-Laws, and the corporation laws of the State of Nevada, shall hold office
for the first year of the corporation's business and existence, or until their
successors are elected and have qualified are:
NAME ADDRESS
Doron Cohen 144-15 Union Turnpike
Flushing, NY 11367
Bruce Bendell 144-15 Union Turnpike
Flushing, New York 11367
Hilton Head, South Carolina 29928
3
<PAGE>
ARTICLE VI
The private property of the shareholders of the corporation shall not
be subject to the payment of the corporation's debts to any extent whatsoever.
ARTICLE VII
The corporation hereby designates, as its Registered Agent, to accept
service of process within the State:
THE CORPORATION TRUST COMPANY OF NEVADA
One E. First Street
Reno, Nevada 89501
ARTICLE VIII
The following indemnification provisions shall be deemed to be
contractual in nature and not subject to retroactive removal or reduction by
amendment.
(a) This corporation shall indemnify any director who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil or criminal, judicial,
administrative or investigative, by reason of the fact that he/she is or was
serving at the request of this corporation as a director or officer or member of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement, actually and reasonably incurred by him/her in connection with
such action, suit or proceeding, including any appeal thereof, if he/she acted
in good faith or in a manner he/she reasonably believed to be in, or not opposed
to, the best interests of this corporation, and with respect to any criminal
action or proceeding, if he/she had no reasonable cause to believe his/her
conduct was unlawful. However, with respect to any action by or in the right of
this corporation to procure a judgment in its favor, no indemnification shall be
made in respect of any claim, issue or matter as to which such person is
adjudged liable for negligence or misconduct in the performance of his/her duty
to the corporation unless, and only to the extent that, the court in which such
action or suit was brought determines, on application, that despite the
adjudication of liability, such person is fairly and reasonably entitled to
indemnity in view of all the circumstances of the case. Termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or in a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the party did not meet the applicable standard of conduct.
Indemnification hereunder may be paid by the corporation in advance of the final
disposition of any action, suit or proceeding, on a preliminary determination
that the director, officer, employee or agent met the applicable standard of
conduct.
4
<PAGE>
(b) The corporation shall also indemnify any director or officer
who has been successful on the merits or otherwise, in defense of any action,
suit, or proceeding, or in defense of a claim, issue, or matter therein, against
all expenses, including attorney's fees, actually and reasonably incurred by
him/her in connection therewith without the necessity of an independent
determination that such director or officer met any appropriate standard of
conduct.
(c) The indemnification provided for herein shall continue as to
any person who has ceased to be a director or officer, and shall inure to the
benefit of the heirs, executors, and administrators of such persons.
(d) In addition to the indemnification provided for herein, the
corporation shall have power to make any other or further indemnification,
except an indemnification against gross negligence or willful misconduct, under
any resolution or agreement duly adopted by the Board of Directors, or duly
authorized by a majority of the shareholders.
ARTICLE IX
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director; provided, that the foregoing clause shall not apply to any
liability of a director for any action for which the Nevada Business Corporation
Act proscribes this limitation and then only to the extent that this limitation
is specifically proscribed.
5
<PAGE>
ARTICLE X
In case the corporation enters into contracts or transacts business
with one or more of its directors, or with any firm of which one or more of its
directors are members, or with any other corporation or association of which one
or more of its directors are shareholders, directors, or officers, such
contracts or transactions shall not be invalidated or in any way affected by the
fact that such director or directors have or may have an interest therein which
is or might be adverse to the interest of this corporation, provided that such
contracts or transactions are in the usual course of business.
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any individual or firm, shall in any
way be affected or invalidated by the fact that any of the directors of this
corporation is interested in such contract or transaction, provided that such
interest shall be fully disclosed or otherwise known to the Board of Directors
in the meeting of such Board at which time such contract or transactions was
authorized or confirmed, and provided, however, that any such directors of this
corporation who are so interested may be counted in determining the existence of
a quorum at any meeting of the Board of Directors of this corporation which all
authorized or confirm such contract or transaction, and any such director may
vote thereon to authorize any such contract or transaction with the like force
and effect as if he were not such director or officer of such other corporation
or not so interested.
IN WITNESS WHEREOF, I, the undersigned, for the purpose of forming a
corporation pursuant to the laws of the State of Nevada, have hereunto duly
executed the foregoing Articles of Incorporation to be filed in the Office of
the Secretary of the State of Nevada for the purposes therein set forth this 7th
day of November, 1995.
/s/ Marie Isaac
---------------
Marie Isaac
1200 S. Pine Island Rd.
Plantation, Florida 33324
6
<PAGE>
STATE OF FLORIDA :
:SS
COUNTY OF BROWARD :
BEFORE ME, a notary public authorized to take acknowledgments in the
state and county set forth above, personally appeared Marie Isaac, known to me
to be the person who executed the foregoing Articles of Incorporation, and
acknowledged before me that she executed those Article of Incorporation.
Sworn and subscribed to before me, this 7th day of November 1995.
Tanya M. Millar
---------------
Notary Public
My Commission Expires:
OFFICIAL NOTARY SEAL
TANYA M. MILLER
NOTARY PUBLIC STATE OF FLORDIA
MY COMMISSION EXP. JUNE 12, 1996
CORPORATION TRUST COMPANY OF NEVADA hereby accepts appointment as
Registered Agent this 7th Day of November, 1995.
THE CORPORATION TRUST CO. OF NEVADA
By:________________________________
Assistant Secretary
7
<PAGE>
CERTIFICATE OF INCORPORATION
OF
COMPUTER BUSINESS SCIENCES, INC.
Under Section 402 of the Business Corporation Law
FILER:
Glenn H. Bank, Esq.
299 Broadway
New York, NY 10007
<PAGE>
Articles of Incorporation
of
Computer Business
Sciences, Inc.
3.2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
COMPUTER BUSINESS SCIENCES, INC.
Under Section 402 of the Business Corporation Law
The undersigned, for the purpose of forming a corporation
pursuant to the Business Corporation Law of the State of New York, does hereby
certify and set forth:
FIRST: The name of the corporation is:
COMPUTER BUSINESS SCIENCES, INC.
SECOND: The purposes for which the
corporation is formed are as follows:
To engage in any lawful act or activity for which corporations
may be formed under the Business Corporation Law, provided that the corporation
is not formed to engage in any act or activity which requires the consent or
approval of any State official, department, board, agency or other body, without
such consent or approval first being obtained.
For the accomplishment of the aforesaid purposes, and in
furtherance thereof, the corporation shall have and may exercise all of the
powers conferred by the Business Corporation Law of the State of New York upon
corporations formed thereunder, subject to any limitations contained in Article
2 of said law, or in accordance with the provisions of any other statute of the
State of New York.
<PAGE>
THIRD: The office of the corporation
within the State of New York shall be located in the County
of Queens.
FOURTH: The aggregate number of shares which the corporation
shall have the authority to issue is Two Hundred (200), all of which shall be
without par value.
FIFTH: The Secretary of State is designated as agent of the
corporation upon whom process against it may be served. The post office address
to which the Secretary of State shall mail a copy of any process against the
corporation served upon him is:
80-02 Kew Gardens Rd.
Kew Gardens, NY 11415
IN WITNESS WHEREOF, this Certificate of Incorporation has been
signed this 22nd day of December, 1995, by the undersigned, who affirms that the
statements made herein are true under the penalties of perjury.
_____________________
Fred Larison
307 Hamilton St.
Albany, NY 12210
<PAGE>
WAIVER OF NOTICE OF ORGANIZATION MEETING
OF
COMPUTER BUSINESS SCIENCES
I, the undersigned, being the Sole Incorporator named in the
Certificate of Incorporation of the above named corporation, do hereby agree and
consent that the organization meeting thereof be held on the date and at the
time and place stated below and hereby waive all notice of such meeting and of
any adjournment thereof.
Place of Meeting:
Date of Meeting:
Time of Meeting:
____________________
Sole Incorporator
<PAGE>
MINUTES OF ORGANIZATION MEETING OF
COMPUTER BUSINESS SCIENCES, INC.
The undersigned, being the Sole Incorporator of this
corporation, held an organization meeting at the date and place set forth below,
at which meeting the following action was taken:
It was resolved that a copy of the Certificate of
Incorporation, together with the receipt issued by the Department of State
showing payment of the statutory organization tax and the date and payment of
the fee for filing the original Certificate of Incorporation be appended to
these minutes.
Bylaws regulating the conduct of the business and affairs of
the corporation, as prepared by , counsel for the corporation,
were adopted and ordered appended hereto.
The persons whose names appear below were named as directors.
The Board of Directors was authorized to issue all of the
unsubscribed shares of the corporation at such time and in such amounts as
determined by the Board and to accept in payment, money or other property,
tangible or intangible, actually received or labor or services actually
performed for the corporation or for its benefit or in its formation.
The principal office of the corporation was fixed at
Dated at
the day of , 19
-----------------------------------
Sole Incorporator
The undersigned hereby accept their nomination as directors.
- --------------------- --------------------------
Director's Name Director's Signature
- --------------------- --------------------------
- --------------------- --------------------------
The following are appended to the minutes of this meeting:
Copy of the Certificate
of Incorporation, filed on
Receipt of Department of State
Bylaws
<PAGE>
[NEW YORK STATE SEAL]
STATE OF NEW YORK
GEORGE E. PATAKI
GOVERNOR
Y.S. DEPARTMENT OF STATE 162 WASHINGTON AVENUE
VISION OF CORPORATIONS AND STATE RECORDS ALBANY, NY 12231
FILING RECEIPT
================================================================================
ENTITY NAME : COMPUTER BUSINESS SCIENCES, INC.
DOCUMENT TYPE : INCORPORATION (DOM. BUSINESS) COUNTY: QUEE
SERVICE COMPANY : VANGUARD CORPORATE SERVICES SERVICE CODE: 52*
================================================================================
FILED 12/22/1995 DURATION:PERPETUAL CASH #: 951222000536 FILM #: 95122200049X
ADDRESS FOR PROCESS EXIST DATE
- ------------------- ----------
THE CORPORATION 12/22/199X
144-15 UNION TURNPIKE
FLUSHING, NY 11367
REGISTERED AGENT
- ----------------
[NEW YORK STATE DEPARTMENT SEAL]
STOCK: 200 PNV
================================================================================
FILER FEES 160.00 PAYMENTS 160.00
----- ---- --------
GLENN H. BANK, ESQ. FILING : 125.00 CASH : 0.00
299 BROADWAY TAX : 10.00 CHECK : 0.00
CERT : 0.00 BILLED: 160.00
NEW YORK, NY 10007 COPIES : 0.00
HANDLING : 25.00 REFUND: 0.00
------
================================================================================
OS-1025 (11/89)
<PAGE>
Articles of Incorporation
of
786710 Ontario Ltd.
(Info Systems)
3.3
<PAGE>
Taken from Ministry of Consumer and Commercial Relations
FORM 1 - Corporations Information Act
- --------------------------------------------------------------------------------
Corporation Name Ontario Corporation Number
786710 ONTARIO LIMITED 786710
- --------------------------------------------------------------------------------
Date of incorporation, amalgamation or continuation
July 19, 1988
- --------------------------------------------------------------------------------
Manner of incorporation, amalgamation or continuation
Certificate
- --------------------------------------------------------------------------------
Full address of Registered or Head Office
1000 Finch Ave. W., Suite 600 Downsview, Ontario [M|3|J|2|V|5]
- --------------------------------------------------------------------------------
Principal Place of Bus.
N/A
- --------------------------------------------------------------------------------
Present Director's Full Names Full Residence Address Date Elected Director
Cdn Res.
- --------------------------------------------------------------------------------
Zvi Barak Yes 81 Charlton Blvd., Willowdale July 19, 1988
- --------------------------------------------------------------------------------
Sarah Barak Yes Ontario, M2M 1CL July 19, 1988
same as above
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------=
Principal Officer's Full Names Full Res. Address Date Appointed Officer
- --------------------------------------------------------------------------------
Zvi Barak, Pres. Same as above July 19, 1988
- --------------------------------------------------------------------------------
Sarah Barak, Secretary same as above July 19, 1988
- --------------------------------------------------------------------------------
Sarah Barak, Treas. same as above July 19, 1988
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Full names of persons who since Full Residence Address Date Ceased to be
last notice have been but are no Officer
longer directors
- --------------------------------------------------------------------------------
Maurice Vaturi 1183 Finch Ave., W. Suite 302 July 19, 1988
- --------------------------------------------------------------------------------
Downs, Ont., M3J 2G2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Full names of persons who since last notice have been but are no longer officers
N/A
- --------------------------------------------------------------------------------
<PAGE>
CERTIFICATE -Form 1 Business Corporations Act, 1982
Ontario Corporation No. 786710
July 19, 1988
- --------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
1. The name of the corporation is
786710 Ontario Limited
2. The address of the registered office is
1183 Finch Ave. W, Suite 302,
- --------------------------------------------------------------------------------
Downsview, ONT
- --------------------------------------------------------------------------------
Municipality of Metropolitan, Toronto
- -------------------------------- ---------------------------
3.Number of directors is Minimum 1 - Maximum 10
4. First Name, Initials and surname
Res. Address
Res. Canadian?
MAURICE VATURI 1183 Finch Ave. W, Suite 302 YES
Suite 302,
Downsview, ONT
M3J 2G2
<PAGE>
5. Restrictions, if any, on business the corporation may carry on or on powers
the corporation may exercise.
NONE
6. The classes and any maximum number of shares that the corporation is
authorized to issue.
The capital of the Corporation shall consist of an unlimited number of
non-voting, redeemable, non-cumulative, participating Class "A" Preference
shares (the "Class "A" Preference shares"); an unlimited number of non-voting
redeemable non-participating, Class "B" Preference shares (the "Class "B"
Preference Shares") and an unlimited number of Common Shares (the "Common
Shares").
<PAGE>
Rights, privileges, restrictions and conditions (if any) attaching to each class
of shares and directors authority with respect to any class of shares which may
be issued in series:
CLASS "A" PREFERENCE SHARES
(a) References herein to the Redemption Price Per Share in respect of
each Class "A" Preference Share shall mean a fixed amount determined by dividing
the stated capital account of the Class "A" Preference Shares by the number of
such shares in the capital stock of the Corporation then issued and outstanding.
(b) The holders of the Class "A" Preference Shares, in priority to the
Class "B" Preference shares, and Common shares and any other shares ranking
junior to the Class "A" Preference shares, shall be entitled to receive and the
corporation shall pay thereon, as and when declared by the board of directors of
the Corporation in their discretion out of the moneys of the Corporation
properly applicable to the payment of dividends, to Corporation properly
applicable to the payment of dividends, to such preferential, non-cumulative
dividends at a rate of 70% of the lending rate charged by the branch in the
Province of Ontario of the Corporation's bankers for the time being to its most
favored commercial customers on Canadian dollar loans (the "Prime Rate")
determined as at the date of the dividend declaration and calculated on the
Redemption Price Per share. If within four (4) months after the expiration of
any fiscal year the board of directors in its discretion shall not declare the
said fixed, preferential, non-cumulative dividend or any part thereof on the
Class "A" Preference Shares for such fiscal year, then the rights of the holders
of the Class "A " Preference Shares to such dividend, or to any undeclared part
thereof for such fiscal year, shall be forever extinguished. The holders of the
Class "A" Preference Shares shall not be entitled to any dividend other than or
in excess of the fixed, preferential, non-cumulative dividend at the said rate
herein before provided for, but shall be entitled to participate in any other or
additional earnings or profits of the Corporation.
<PAGE>
(c) Except with the consent in writing of the holders of all the Class
"A" Preference Shares outstanding, no dividends shall at any time be declared or
paid upon or set aside for payment on any Class "B" Preference Shares, or Common
Shares or on any shares of any other class ranking junior to the Class "A"
Preference Shares, for any fiscal year unless and until the fixed, preferential
non-cumulative dividend for such fiscal year on all the Class "A" Preference
Shares outstanding has been declared and paid or a sum set aside for payment
therefore.
(d) The Corporation may subject to the Business Corporations Act, 1982,
upon giving notice as hereinafter provided, redeem at any time the whole or from
time to time any part of the then outstanding Class "A" Preference Shares
without the consent of the holders thereof on payment for each share to be
redeemed of the Redemption Price Per share, together with an amount equal to all
dividends declared thereon and remains unpaid (the "Redemption Price"). In any
case of redemption of Class "A" Preference Shares, the Corporation shall, at
lease twenty (2) days before the date specified for redemption, mail to each
person who, at the date of mailing, is a registered holder of Class "A"
Preference Shares to be redeemed a notice in writing of Preference Shares; such
notice shall be mailed in a prepaid letter addressed to each such shareholder at
his address as it appears on the books of the Corporation or, in the event of
the any such shareholder not so appearing, then to the last known address of
such shareholder; provided however that accidental failure to give any such
notice to one or more of such holders shall not affect the validity of such
redemption. Such notice shall set out the Redemption Price and the date on which
redemption is to take place and, if part only of the shares held by the person
to whom such notice is addressed is to be redeemed, the number thereof so to be
redeemed. On or after the date so specified for redemption, the Corporation
shall pay or cause to be
<PAGE>
or to the order of the registered holders of the Class "A" Preference Shares to
be redeemed the Redemption Price thereof on presentation and surrender at the
head office of the Corporation, or any other place designated in such notice, of
the certificates representing the Class "A" Preference Shares called for
redemption; such Class "A" Preference Shares shall thereupon be redeemed. If a
part only of the Class "A" Preference Shares represented by any certificate be
redeemed, a new certificate for the balance shall be issued at the expense of
the Corporation. From and after the date specified in any such notice, the Class
"A: Preference Shares called for redemption shall cease to be entitled to
dividends and the holders thereof shall not be entitled to exercise any of the
rights of shareholders in respect thereof unless payment of the Redemption Price
shall not be made upon presentation of certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall remain
unaffected. The Corporation shall have the right, at any time after the mailing
of notice of its intention to redeem any Class "A" Preference Shares as
aforesaid, to deposit the Redemption Price of the Class "A" Preference Shares so
called for redemption, or for such of the said shares as are represented by
certificate's which have not at the date of such deposit been surrendered by the
holders thereof in connection with such redemption, to a special account in any
chartered bank or any trust company in Canada named in such notice to be paid
without interest to or to the order of the respective holders of such Class "A"
Preference Shares called for redemption upon presentation and surrender to such
bank or trust company of the certificates representing the same, and upon such
deposit being made or upon the date specified for redemption in such notice,
whichever is the later, the Class "A" Preference Shares in respect whereof such
deposit shall have been made shall be redeemed and the rights of the holders
thereof after such deposit or such redemption date, as the case may be, shall be
limited to receiving without interest their proportionate part of
<PAGE>
the total Redemption Price so deposited against presentation and surrender of
the said certificates held by them respectively.
(e) The Corporation may, subject to The Business Corporations Act,
1982, at any time and from time to time purchase (if obtainable) for
cancellation the whole or any portion of the class "A" Preference Shares
outstanding from time to time by invitation for tenders addressed to all the
holders of record of the Class "A" Preference Shares outstanding, or (with the
consent of all the holders of Class "A" Preference Shares) by private contract
at the lowest price or prices at which, in the opinion of the directors, such
shares are obtainable but not exceeding for each share to be purchased for
cancellation the Redemption Price for Share plus costs of purchase and an amount
equal to all dividends declared thereon and remaining unpaid. Where, in response
to any invitation for tenders, two or more shareholders submit tenders at the
same price and such tenders are accepted by the Corporation as to part only of
the shares offered, the Corporation shall accept part of the shares offered in
each such tender in proportion as nearly as may be to the total number of shares
offered in each such tender (disregarding fractions).
(f) The holders of the Class "A" Preference Shares shall not be
entitled to receive notice of and to attend and vote at all meetings of
Shareholders of the Corporation.
(g) In the event of the liquidation, dissolution or winding up of the
Corporation or other distribution of assets of the Corporation among
shareholders for the purpose of winding up its affairs, the holders of the Class
"A" Preference Shares shall be entitled to receive out of the assets and
property of the Corporation, before any amount is paid or any property or assets
of the Corporation distributed to the holders of any Class "B" Preference
Shares, or Common Shares, or shares of any other class ranking junior to the
class "A" Preference shares, for each share an amount equal to the Redemption
Price Per Share thereon together with all declared and unpaid preferential,
non-cumulative
<PAGE>
dividends thereon; after payment to the holders of the Class "A"
Preference Shares of the amounts so payable to them as above provided, they
shall also be entitled to share in any further distribution of the property or
assets of the Corporation.
CLASS "B" PREFERENCE SHARES
- ---------------------------
(h) References herein to the Redemption Price Per Share in respect of
each Class "B" Preference share shall mean a fixed amount determined by dividing
the stated capital account of the Class "B" Preference Shares by the number of
such shares in the capital stock of the Corporation then issued and outstanding.
(i) The holders of the Class "B" preference Shares, in priority to the
Common shares and any other shares ranking junior to the Class "B" Preference
shares, shall be entitled to receive and the Corporation shall pay thereon, as
and when declared by the board of directors of the Corporation in their
discretion out of the moneys of the Corporation properly applicable to the
payment of dividends, to such preferential, non-cumulative dividends at a rate
of 70% of the Prime Rate determined as at the date of the dividend calculated on
the Redemption Price Per share. If within four (4) months after the expiration
of any fiscal year the board of directors in its discretion shall not declare
the said fixed, preferential, non-cumulative dividend or any part thereof on the
Class "B" Preference Shares for such fiscal year, then the rights of the holders
of the Class "B" Preference Shares to such dividend, or to any undeclared part
thereof for such fiscal year, shall be forever extinguished. The holders of the
Class "B" Preference Shares shall not be entitled to any dividend other than or
in excess of the fixed, preferential, non-cumulative dividend at the said rate
herein before provided for, or to participate in any other or additional
earnings or profits of the Corporation.
Except with the consent in writing of the holders of all the Class "B"
Preference Shares outstanding, no dividends shall at any time be declared or
paid upon or set aside for payment on any Common Shares or on any shares of any
other class ranking junior to the class "B" Preference shares, for any fiscal
<PAGE>
year unless and until the f fixed, preferential non-cumulative dividend for such
fiscal year on all the Class "B" Preference Shares outstanding has been declared
and paid or a sum set aside for payment therefor.
(d) The Corporation may subject to the Business Corporations Act, 1982,
upon giving notice as hereinafter provided, redeem at any time the whole or from
time to time any part of t he then outstanding Class "B" Preference Shares
without the consent of the holders thereof on payment for each share to be
redeemed of the Redemption Price Per Share, together with an amount equal to all
dividends declared thereon and remaining unpaid (the 'Redemption Price"). In any
case of redemption of Class "B" Preference Shares, the Corporation shall, at
least twenty (20) days before the date specified for redemption, mail to each
person who, at the date of mailing, is a registered holder of Class "B"
Preference Shares to be redeemed a notice in writing of the intention of the
Corporation to redeem such Class "B" Preference Shares; such notice shall be
mailed in a prepaid letter addressed to each such shareholder at his address as
it appears on the books of the Corporation or , in the event of the address of
any such shareholder not so appearing, then to the last known address of such
shareholder; provided however that accidental failure to give any such notice to
one or more of such holders shall not affect the validity of such redemption.
Such notice shall set out the Redemption Price and the date on which redemption
is to take place and, if part only of the shares held by the person to whom such
notice is addressed is to be redeemed, the number thereof so to be redeemed. On
or after the date so specified for redemption, the Corporation shall pay or
cause to be paid to or to the order of the registered holders of the Class "B"
Preference Shares to be redeemed the Redemption Price thereof on presentation
and surrender at the head office of the Corporation, or any other place
designated in such notice, of the certificates representing the Class "B"
Preference Shares called for redemption; such Class "B" Preference Shares shall
thereupon be redeemed. If a part only of the Class "B" Preference Shares
represented by any certificate be redeemed, a new certificate for the balance
shall be issued at the expense of the Corporation. From and after the date
specified
<PAGE>
in any such notice, the Class "B" Preference Shares called for
redemption shall cease to be entitled to dividends and the holders thereof shall
not be entitled to exercise any of the rights of shareholders in respect thereof
unless payment of the Redemption Price shall not be made upon presentation of
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected. The Corporation shall have the
right, at any time after the mailing of notice of its intention to redeem any
Class "B" Preference Shares as aforesaid, to deposit the Redemption Price of the
Class "B" Preference Shares so called for redemption, or for such of the said
shares as are represented by certificates which have not at the date of such
deposit been surrendered by the holders thereof in connection with such
redemption, to a special account in any chartered bank or any trust company in
Canada named in such notice to be paid without interest to or to the order of
the respective holders of such Class "B" Preference Shares called for redemption
upon presentation and surrender to such bank or trust company of the
certificates representing the same, and upon such deposit being made or upon the
date specified for redemption in such notice, whichever is the later, the Class
"B" Preference Shares in respect whereof such -deposit shall have been made
shall be redeemed and the rights of the holders thereof after such deposit or
such redemption date, as the case may be , shall be limited to receiving without
interest their proportionate part of the total Redemption Price so deposited
against presentation and surrender of the said certificates held by them
respectively.
(a) The Corporation may, subject to The Business Corporations Act, 1982,
at any time and from time to time purchase (if obtainable) for cancellation the
whole or any portion of the Class "B" Preference Shares outstanding from time to
time by invitation for tenders addressed to all the holders of record of the
Class "B" Preference Shares outstanding, or (with the consent of all the holders
of Class "B" Preference Shares) by private contract at the lowest price or
prices at which, in the opinion of the directors, such shares are obtainable but
not exceeding for each share to be purchased for cancellation the Redemption
Price for Share plus costs of purchase and an amount equal to all dividends
declared thereon and remaining unpaid. Where, in response to any invitation for
tenders, two or more shareholders submit tenders at
<PAGE>
the same price and such tenders are accepted by the Corporation as to part only
of the shares offered, the Corporation shall accept part of the shares offered
in each such tender in proportion as nearly as may be to the total number of
shares offered in each such tender (disregarding fractions).
(f) The holders of the Class "B" Preference Shares shall not be
entitled (except as otherwise specifically provided in the Business Corporations
Act, 1982) to receive notice or to attend any meeting of the shareholders of the
Corporation and shall not be entitled to vote at any such meeting.
(a) In the event of the liquidation, dissolution or winding up of the
Corporation or other distribution of assets of the Corporation among
shareholders for the purpose of winding up its affairs, the holders of the Class
"B" Preference Shares shall be entitled to receive out of the assets and
property of the Corporation, before any amount is paid or any property or assets
of the Corporation distributed to the holders of any Common Shares, or shares of
any other class ranking junior to the Class "B" Preference Shares, for each
share an amount equal to the Redemption Price Per Share thereon together with
all declared and unpaid preferential, non-cumulative dividends 'thereon; after
payment to the holders of the Class "B" Preference Shares of the amounts so
payable to them as above provided, they shall not be entitled to share in any
further distribution of the property or assets of the Corporation. If the assets
and property of the Corporation, including surplus are not sufficient to pay the
Redemption Price Per Share together with all declared and unpaid preferential
non-cumulative dividends, then all of the said assets or the proceeds thereof
shall be distributed pro rata among the holders of the Class "B" P Preference
Shares.
<PAGE>
Subject to any unanimous shareholders agreement existing from time to
time, and any amendments thereto, the right to transfer any share or shares of
the Corporation shall be restricted in that no shareholder shall be entitled to
transfer any share or shares of the Corporation without either:
1. The issue, transfer or ownership of shares is/is not restricted and
the restrictions (if any) are as follows:
(a) the previous express sanction of the holders of more than 50% of
the Common shares of the Corporation for the time being outstanding expressed by
a resolution passed at a meeting of shareholders or by an instrument or
instruments in writing signed by the holders of more than 50% of such shares; or
(b) the previous express sanction of the directors of the Corporation
expressed by a resolution passed by the votes of a majority of the directors of
the Corporation at a meeting of the board of directors or by an instrument or
instruments in writing signed by a majority of the directors.
1. The names and address of the incorporators are:
- --------------------------------------------------------------------------------
MAURICE VATURI 1183 Finch Ave. W,
Suite 302
Downsview, Ontario
M3J 2G2
<PAGE>
Articles of Incorporation
of
Premo-Plast, Inc.
3.4
<PAGE>
[SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
March 4, 1996
CAPITAL CONNECTION, INC.
PO BOX 10349
TALLAHASSEE, FL 32302
The Articles of Incorporation for PREMO-PLAST, INC. were filed on March 4, 1996
and assigned document number P96000019524. Please refer to this number whenever
corresponding with this office regarding the above corporation.
PLEASE NOTE: COMPLIANCE WITH THE FOLLOWING PROCEDURES IS ESSENTIAL TO
MAINTAINING YOUR CORPORATION STATUS. FAILURE TO DO SO MAY RESULT IN DISSOLUTION
OF YOUR CORPORATION.
A CORPORATION ANNUAL REPORT MUST BE FILED WITH THIS OFFICE BETWEEN JANUARY 1 AND
MAY 1 OF EACH YEAR BEGINNING WITH THE CALENDAR YEAR FOLLOWING THE YEAR OF THE
FILING DATE NOTED ABOVE AND EACH YEAR THEREAFTER. FAILURE TO FILE THE ANNUAL
REPORT ON TIME MAY RESULT IN ADMINISTRATIVE DISSOLUTION OF YOUR CORPORATION.
A FEDERAL EMPLOYER IDENTIFICATION (FEI) NUMBER MUST BE SHOWN ON THE ANNUAL
REPORT FORM PRIOR TO ITS FILING WITH THIS OFFICE. CONTACT THE INTERNAL REVENUE
SERVICE TO INSURE THAT YOU RECEIVE THE FEI NUMBER IN TIME TO FILE THE ANNUAL
REPORT. TO OBTAIN A FEI NUMBER, CONTACT THE IRS AT 1-800-829-3676 AND REQUEST
FORM SS-4.
SHOULD YOUR CORPORATE MAILING ADDRESS CHANGE, YOU MUST NOTIFY THIS OFFICE IN
WRITING, TO INSURE IMPORTANT MAILINGS SUCH AS THE ANNUAL REPORT NOTICES REACH
YOU.
Should you have any questions regarding corporations, please contact this office
at the address given below.
Pamela Hall, Document Specialist
New Filings Section Letter Number: 396A0000933
Division of Corporations - P.O. BOX 6327 - Tallahasee, Florida 32314
<PAGE>
STATE OF FLORIDA
ARTICLES OF INCORPORATION
OF
PREMO-PLAST, INC.
FILED
96 MAR -4 AM 11:37
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
The undersigned, desiring to form, organize and incorporate a corporation
under the laws of the State of Florida, hereby adopts the following Articles of
Incorporation and certifies:
ARTICLE I
The name of this corporation shall be:
Premo-Plast, Inc., 512 Bridlepath St., Casselberry, FL 32707
ARTICLE II
This corporation may engage in any activity or business permitted under the
laws of the State of Florida, and shall enjoy all the rights and privileges of a
corporation granted by the laws of the State of Florida.
ARTICLE III
The aggregate number of shares of stock which the corporation shall have
authority to issue is One thousand (1,000) shares of Common Stock, with a par
value of One Dollar ($1.00) per share.
ARTICLE IV
The corporation is to have perpetual existence.
ARTICLE V
So long as all the shares of this corporation are owned beneficially and of
record by only one or two shareholders, the business and property of the
corporation shall be managed by a Board of not fewer than the number of
shareholders. At such time as the shares are owned beneficially and of record by
more than three or more shareholders, the business and property of the
corporation shall be managed by a Board of not fewer than three corporation
shall be managed by a board of not fewer than three (3) nor more than twenty-one
(21) directors, who shall be natural persons of full age, and who shall be
elected annually by the
1
<PAGE>
shareholders having voting rights, for the term of one year, and shall serve
until the election and acceptance of their duly qualified successors. In the
event of any delay in holding, or adjournment of, or failure to hold an annual
meeting, the terms of the sitting directors shall be automatically continued
indefinitely until their successors are elected and qualified. Directors need
not be residents of the State of Florida nor shareholders. Any vacancies,
including vacancies resulting from an increase in the number of directors, may
be filled by the Board of Directors, though less than a quorum, for the
unexpired term. The Board of Directors shall have full power, and it is hereby
expressly authorized, to increase or decrease the number of directors from time
to time without requiring a vote of the shareholders.
The name(s) and addresses of the member(s) of the first Board of Directors,
who, subject to the provisions of the Articles of Incorporation, the By-Laws,
and the corporation laws of the State of Florida, shall hold office for the
first year of the corporation's business and existence, or until their
successors are elected and have qualified are:
NAME ADDRESS
Richard C. Fox 3401 Lakeview Drive
Delray Beach, FL
ARTICLE VI
This corporation, and any or all of the shareholders of this corporation,
may from time to time enter into such agreements as they deem expedient relating
to the shares of stock held by them and limiting the transferability thereof;
and thereafter any transfer of such shares shall be made in accordance with the
provisions of such agreement, provided that before the actual transfer of such
shares on the books of the corporation, written notice of such agreement shall
be given to this corporation by filing a copy thereof with the secretary of the
corporation and a reference to such agreement shall be stamped, written or
printed upon the certificate representing such shares, and the By-Laws of this
corporation may likewise include provisions for the making of such agreement, as
aforesaid.
ARTICLE VII
The private property of the shareholders of the corporation shall not be
subject to the payment of the corporation's debts
<PAGE>
to any extent whatever.
ARTICLE VIII
The corporation hereby designates, as its Registered Agent, and as its
Resident Agent to accept service of process within the State:
Richard C. Fox
3401 Lakeview Drive
Delray Beach, FL
ARTICLE IX
The following indemnification provisions shall be deemed to be
contractual in nature and not subject to retroactive removal or reduction by
amendment.
(a) This corporation shall indemnify any director who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil or criminal, judicial, administrative or
investigative, by reason of the fact that he/she is or was serving at the
request of this corporation as a director -or officer or member of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement, actually and reasonably incurred by him/her in connection with such
action, suit or proceeding, including any appeal thereof, if he/she acted in
good faith or in a manner he/she reasonably believed to be in, or not opposed
to, the best interests of this corporation, and with respect to any criminal
action or proceeding, if he/she had no reasonable . cause to believe his/her
conduct was unlawful. However, with respect to any action by or in the right of
this corporation to procure a judgment in its favor, no indemnification shall be
made in respect of any claim, issue, or matter as to which such person is
adjudged liable for negligence or misconduct in the performance of his/her duty
to the corporation unless, and only to the extent that, the court in which such
action or suit was brought determines, on application, that despite the
adjudication of liability, such person is fairly and reasonably entitled to
indemnity in view of all the circumstances of the case. Termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or in a
plea of nolo contenders or its
3
<PAGE>
equivalent, shall not, of itself, create a presumption that the party did not
meet the applicable standard of conduct. Indemnification hereunder may be paid
by the corporation in advance of the final disposition of any action, suit or
proceeding, on a preliminary determination that the director, officer, employee
or agent met the applicable standard of conduct.
(b) The corporation shall also indemnify any director or officer who has
been successful on the merits or otherwise, in defense of any action, suit, or
proceeding, or in defense of any claim, issue, or matter therein, against all
expenses, including attorneys' fees, actually and reasonably incurred by him/her
in connection therewith, without the necessity of an independent determination
that such director or officer met any appropriate standard of conduct.
(c) The indemnification provided for herein shall continue as to any person
who has ceased to be a director or officer, and shall inure to the benefit of
the heirs, executors, and administrators of such persons.
(d) In addition to the indemnification provided for herein, the corporation
shall have power to make any other or further indemnification, except an
indemnification against gross negligence or willful misconduct, under any
resolution or agreement duly adopted by the Board of Directors, or duly
authorized by a majority of the shareholders.
ARTICLE X
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director; provided, that the foregoing clause shall not apply to any
liability of a director for any action for which the Florida General Corporation
Act proscribes this limitation and then only to the extent that this limitation
is specifically proscribed.
ARTICLE XI
In furtherance, and not in limitation, of the powers conf erred by the laws
of the State of Florida, the Board of Directors is expressly authorized:
(a) To make, alter, amend, and repeal the By-Laws of the corporation,
subject to the power of the holders of stock
4
<PAGE>
having voting power to alter, amend, or repeal the By-Laws made by the Board
of Directors.
(b) To determine and fix the value of any property to be acquired by the
corporation and to issue and pay in exchange therefore, stock of the
corporation; and the judgment of the directors in determining such value shall
be conclusive.
(c) To set apart out of any funds of the corporation available for
dividends, a reserve or reserves for working capital or for any other lawful
purposes, and also to abolish any such reserve in the same manner in which it
was created.
(d) To determine from time to time whether and to what extent, and at what
time and places, and under what conditions and regulations the accounts and
books of the corporation, or Any of the books, shall be open for inspection by
the shareholders and no shareholder shall have any right to inspect any account
or book or document of the corporation except as conferred by the laws of the
State of Florida, unless and until authorized to do so by resolution of the
Board of Directors or of the shareholders.
(e) The Board of Directors may, by resolution, provide for the issuance of
stock certificates to replace lost or destroyed certificates.
ARTICLE XII
If the By-Laws so provide, the shareholders and the Board of Directors of
the corporation shall have the power to hold their meetings, to have an office
or offices, and to keep the books of the corporation, subject to the provisions
of the laws of the State of Florida, outside of said state at such place or
places as may be designated from time to time by the Board of Directors.
The corporation may, in its By-Laws, confer powers upon the Board of
Directors in addition to those granted by these Articles of Incorporation, and
in addition to the powers and authority expressly conferred upon them by the
laws of the State of Florida.
Election of directors need not be by ballot unless the bylaws so provide.
Directors shall be entitled to reasonable fees for their attendance at
meetings of the Board of Directors.
5
<PAGE>
ARTICLE XIII
In case the corporation enters into contracts or transacts business with
one or more of its directors, or with any firm of which one or more of its
directors are members, or with any other corporation or association of which one
or more of its directors are shareholders, directors, or officers, such
contracts or transactions shall not be invalidated or in any way affected by the
fact that such director or directors have or may have an interest therein which
is or might be adverse to the interest of this corporation, provided that such
contracts or transactions are in the usual course of business.
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any individual or firm, shall in any
way be affected or invalidated by the fact that any of the directors of this
corporation is interested in such contract or transactions, provided that such
interest shall be fully disclosed or otherwise known to the Board of Directors
in the meeting of such Board at which time such contract or transaction was
authorized or confirmed, and provided, however, that any such directors of this
corporation who are so interested may be counted in determining the existence of
a quorum at any meeting of the board of Directors of this corporation which
shall authorize or confirm such contract or transaction, and any such director
may vote thereon to authorize any such contract or transaction with the like
force and effect as if he were not such director or officer of such other
corporation or not so interested.
ARTICLE XIV
The corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein upon
shareholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, I, the undersigned, for the purpose of forming a
corporation pursuant to the laws of the State of Florida, have hereunto duly
executed the foregoing Articles of Incorporation to be filed in the Office of
the Secretary of
6
<PAGE>
the State of Florida for the purposes therein set forth this 29th day of
February, 1996.
(signature of Richard Cox)
ACCEPTANCE OF DESIGNATION
Having been named to accept service of process for the above stated
corporation, at the placed designated, I hereby accept to act in this capacity,
and agree to comply with the provisions of Section 48.091, Florida Statutes,
relative to keeping open said office.
(signature of Richard Cox)
<PAGE>
Articles of Incorporation
of
CBS (Israel)
3.5
<PAGE>
UNOFFICIAL TRANSLATION OF INFORMATION REPORT REGARDING
CERTIFICATE OF INCORPORATION FOR CBS (ISRAEL)
- --------------------------------------------------------------------------------
THE MINISTRY FOR LEGAL AFFAIRS COMPANY REGISTRAR
Registration No.: 51-236643-6
STATUS: Active
NAME: C.B.S. COMPUTER BUSINESS SCIENCES, LTD.
FOUNDED: 8/27/96 PUBLISHED 9/8/96
PURPOSES: TO PROVIDE CONSULTING SERVICES TO FOREIGN FIRMS
ADDRESS: HASHACHAFIM 46, RA'ANAANA ZIP CODE 43724
AUTHORIZED CAPITAL STOCK
30 DIRECTOR'S SHARES @ 1.00 PAR VALUE
2,610 REGULAR SHARES @ 1.00 PAR VALUE
SHAREHOLDERS:
1. COMPUTER BUSINESS SCIENCES, INC. I.D. 11-330437-0
ADDRESS: NEW YORK
SHAREHOLDING: 19 REGULAR SHARES @1.00
1. INFOSYSTEMS
ADDRESS: CANADA
SHAREHOLDING: 1 REGULAR SHARE @ 1.00
MANAGEMENT:
3. BARAK, ZVI
APPOINTED ON: 8/28/96 PROFESSION: MANAGER
ADDRESS HASHACHAFIM 46 RA'ANANA
**THE REGISTRAR HAS NO LIENS ATTACHED TO THE COMPANY'S ASSETS**
<PAGE>
Articles of Incorporation
of
Major Fleet & Leasing Corp.
3.6
<PAGE>
CERTIFICATE OF INCORPORATION
OF
MAJOR FLEET & LEASING CORP.
Filed by:
Weinstein & DeZorett, Esqs.
585 Stewart Ave.
Garden City, NY 11530
<PAGE>
CERTIFICATE OF INCORPORATION
MAJOR FLEET & LEASING CORP.
Under Section 402 of the Business Corporation Law.
The Undersigned, for the purpose of forming a corporation pursuant to
Section 402 of the Business Corporation Law of the State of New York, does
hereby certify and set forth:
FIRST: The name of the corporation is MAJOR FLEET & LEASING CORP.
SECOND: The purposes for which the corporation is formed are:
To engage in any lawful act or activity for which corporations may be
organized under the business corporation law, provided that the corporation is
not formed to engage in any act or activity which requires the act or approval
of any state official, department, board, agency or other body without such
approval or consent first being obtained.
To engage in the business of buying and selling, either at retail or at
wholesale, importing and exporting, and of renting and leasing automobiles,
motor trucks, motor cycles, campers, travel trailers, and all kinds of vehicles,
machines and contrivances for the transfer, carriage or transportation of goods,
passengers or mails, whether propelled by gas, electricity or other power.
To engage in the business of leasing or renting Buicks, Cadillacs,
Chevrolets, Chryslers, Lincoln's, Dodges, Fords, Imperials, Jeeps, Mercury's,
Oldsmobiles, Plymouths, Pontiacs, Ramblers, Volkswagens, Jaguars, Mercedes-Benz,
Alfa Romeos, Fiats, Saabs, Porsches, Volvos and every other kind and make of
motor vehicle, whether domestic or foreign, and for such period or periods of
time as the corporation may deem advantageous.
To engage in the business of buying and selling gasoline, lubricating
oils and greases, anti-freeze, tires, and other supplies for automobiles and
motor trucks; to establish, maintain and operate garages for the storage of its
motor vehicles; to act as intermediary in the making of policies of insurance,
and generally to do everything done by those engaged in the business of leasing
automobiles.
<PAGE>
To acquire by purchase, subscription, underwriting or otherwise, and to
own, hold for investment, or otherwise, and to use, sell assign, transfer,
mortgage, pledge, exchange or otherwise dispose of real and personal property of
every sort and description and wheresoever situated, including shares of stock,
bonds, debentures, notes, scrip, securities, evidences of indebtedness,
contracts or obligations of any corporation or association, whether domestic or
foreign, or of any firm or individual or of the United States or any state,
territory or dependency of the United States or any foreign country, or any
municipality or local authority within or without the United States, and also to
issue in exchange therefor, stocks, bonds, or other securities or evidences of
indebtedness of this corporation and, while the owner or holder of any such
property, to receive, collect and dispose of the interest, dividends and income
on or from such property and to possess and exercise in respect thereto all of
the rights, powers and privileges of ownership, including all voting powers
thereon.
To construct, build, purchase, lease or otherwise acquire, equip, hold,
own, improve, develop, manage, maintain, control, operate, lease, mortgage,
create liens upon, sell convey or otherwise dispose of and turn to account, any
and all plants, machinery, works, implements and things or property, real and
personal, of every kind and description, incidental to, connected with, or
suitable, necessary or convenient for any of the purposes enumerated herein,
including all or any part or parts of the properties, assets, business and good
will of any persons, firms, associations or corporations.
The powers, rights and privileges provided in this certificate are not
to be deemed to be in limitation of similar, other or additional powers, rights
and privileges granted or permitted to a corporation by the Business Corporation
Law, it being intended that this corporation shall have all the rights, powers
and privileges granted or permitted to a corporation by such statute.
THIRD: The office of the corporation is to be located in the City of
new York, County of Queens, State of New York.
FOURTH: The aggregate number of shares which the corporation shall have
the authority to issue is Two Hundred (200), all of which shall be without par
value.
FIFTH: The Secretary of State is designated as the agent of the
corporation upon whom process against it may be served. The post office
<PAGE>
address to which the Secretary of State shall mail a copy of any process against
the corporation served upon him is:
34-44 Steinway St.
Astoria, NY
IN WITNESS WHEREOF, this certificate has been subscribed to this 15th
day of July, 1985, by the undersigned, who affirms that the statements made
herein are true under the penalties of perjury.
---------------
Gerald Weinberg
90 State St.
Albany, NY
<PAGE>
ARTICLES OF INCORPORATION
OF
REYNARD SERVICE BUREAU,
INC.
3.7
<PAGE>
[SEAL OF THE STATE OF FLORIDA]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
I.of Corporations
PO Box 6327
Tallahassee, FL 32314
August 27, 1996
CAPITAL CONNECTION, INC.
PO BOX 10349
TALLAHASSEE, FL 32302
The Articles of Incorporation for REYNARD SERVICE BUREAU were filed on August
27, 1996 and assigned document number P96000071303. Please refer to this number
whenever corresponding with this office regarding the above corporation.
PLEASE NOTE: COMPLIANCE WITH THE FOLLOWING PROCEDURES IS ESSENTIAL TO
MAINTAINING YOUR CORPORATION STATUS. FAILURE TO DO SO MAY RESULT IN DISSOLUTION
OF YOUR CORPORATION.
A CORPORATION ANNUAL REPORT MUST BE FILED WITH THIS OFFICE BETWEEN JANUARY 1 AND
MAY 1 OF EACH YEAR BEGINNING WITH THE CALENDAR YEAR FOLLOWING THE YEAR OF THE
FILING DATE NOTED ABOVE AND EACH YEAR THEREAFTER. FAILURE TO FILE THE ANNUAL
REPORT ON TIME MAY RESULT IN ADMINISTRATIVE DISSOLUTION OF YOUR CORPORATION.
A FEDERAL EMPLOYER IDENTIFICATION (FEI) NUMBER MUST BE SHOWN ON THE ANNUAL
REPORT FORM PRIOR TO ITS FILING WITH THIS OFFICE. CONTACT THE INTERNAL REVENUE
SERVICE TO INSURE THAT YOU RECEIVE THE FEI NUMBER IN TIME TO FILE THE ANNUAL
REPORT. TO OBTAIN A FEI NUMBER, CONTACT THE IRS AT 1-800-829-3676 AND REQUEST
FORM SS-4.
SHOULD YOUR CORPORATE MAILING ADDRESS CHANGE, YOU MUST NOTIFY THIS OFFICE IN
WRITING, TO INSURE IMPORTANT MAILINGS SUCH AS THE ANNUAL REPORT NOTICES REACH
YOU.
Should you have any questions regarding corporations, please contact this office
at the address given below.
Freida Chesser, Corporate Specialist
New Filings Section Letter Number: 796A00040608
Division of Corporations - P.O. BOX 6327 - Tallahasse, Florida 32314
<PAGE>
STATE OF FLORIDA
ARTICLES OF INCORPORATION
OF
REYNARD SERVICE BUREAU, INC.
The undersigned, desiring to form, organize and incorporate a
corporation under the laws of the State of Florida, hereby adopts the following
Articles of Incorporation and certifies:
ARTICLE I
The name of this corporation shall be:
Reynard Service Bureau, Inc.
The principal office of the corporation is located at:
3401 Lakeview Dr., Delray Beach, FL 33445
ARTICLE II
This corporation may engage in any activity or business permitted under
the laws of the State of Florida, and shall enjoy all the rights and privileges
of a corporation granted by the laws of the State of Florida.
ARTICLE III
The aggregate number of shares of stock which the corporation shall
have authority to issue is One million (1,000,000) shares of Common Stock, with
a par value of One Dollar ($1.00) per share.
ARTICLE IV
The corporation is to have perpetual existence.
ARTICLE V
So long as all the shares of this corporation are owned beneficially
and of record by only one or two shareholders, the business and property of the
corporation shall be managed by a Board of not fewer than the number of
shareholders. At such time as the shares are owned beneficially and of record by
more than three or more shareholders, the business and property of the
corporation shall be managed by a Board of not fewer than three corporation
shall be managed by a board of not fewer than three (3) nor more than twenty-one
(21) directors, who shall be natural persons of full age, and who shall be
elected annually by the shareholders having voting rights, for the term of one
year, and shall serve until the election and acceptance of their duly qualified
successors. In the event of any delay in holding, or adjournment of, or failure
to hold an annual meeting, the terms of the sitting directors shall be
automatically continued indefinitely until their successors are elected and
qualified. Directors need not be residents of the State of Florida nor
shareholders. Any
1
<PAGE>
vacancies, including vacancies resulting from an increase in the number of
directors, may be filled by the Board of Directors, though less than a quorum,
for the unexpired term. The Board of Directors shall have full power, and it is
hereby expressly authorized, to increase or decrease the number of directors
from time to time without requiring a vote of the shareholders. The name(s) and
addresses of the member(s) of the first Board of Directors, who, subject to the
provisions of the Articles of Incorporation, the By-Laws, and the corporation
laws of the State of Florida, shall hold office for the first year of the
corporation's business and existence, or until their successors are elected and
have qualified are:
NAME ADDRESS
---- -------
Richard C. Fox 3401 Lakeview Drive
Delray Beach, FL
ARTICLE VI
This corporation, and any or all of the shareholders of this
corporation, may from time to time enter into such agreements as they deem
expedient relating to the shares of stock held by them and limiting the
transferability thereof; and thereafter any transfer of such shares shall be
made in accordance with the provisions of such agreement, provided that before
the actual transfer of such shares on the books of the corporation, written
notice of such agreement shall be given to this corporation by filing a copy
thereof with the secretary of the corporation and a reference to such agreement
shall be stamped, written or printed upon the certificate representing such
shares, and the By-Laws of this corporation may likewise include provisions for
the making of such agreement, as aforesaid.
ARTICLE VII
The private property of the shareholders of the corporation shall not
be subject to the payment of the corporation's debts to any extent whatever.
ARTICLE VIII
The corporation hereby designates, as its Registered Agent, and as its
Resident Agent to accept service of process within the State:
Richard C. Fox
3401 Lakeview Drive
Delray Beach, FL
2
<PAGE>
ARTICLE IX
The following indemnification provisions shall be deemed to be
contractual in nature and not subject to retroactive removal or reduction by
amendment.
(a) This corporation shall indemnify any director who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil or criminal, judicial,
administrative or investigative, by reason of the fact that he/she is or was
serving at the request of this corporation as a director -or officer or member
of another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement, actually and reasonably incurred by him/her in connection with
such action, suit or proceeding, including any appeal thereof, if he/she acted
in good faith or in a manner he/she reasonably believed to be in, or not opposed
to, the best interests of this corporation, and with respect to any criminal
action or proceeding, if he/she had no reasonable . cause to believe his/her
conduct was unlawful. However, with respect to any action by or in the right of
this corporation to procure a judgment in its favor, no indemnification shall be
made in respect of any claim, issue, or matter as to which such person is
adjudged liable for negligence or misconduct in the performance of his/her duty
to the corporation unless, and only to the extent that, the court in which such
action or suit was brought determines, on application, that despite the
adjudication of liability, such person is fairly and reasonably entitled to
indemnity in view of all the circumstances of the case. Termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or in a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the party did not meet the applicable standard of conduct.
Indemnification hereunder may be paid by the corporation in advance of the final
disposition of any action, suit or proceeding, on a preliminary determination
that the director, officer, employee or agent met the applicable standard of
conduct.
(b) The corporation shall also indemnify any director or
officer who has been successful on the merits or otherwise, in defense of any
action, suit, or proceeding, or in defense of any claim, issue, or matter
therein, against all expenses, including attorneys' fees, actually and
reasonably incurred by him/her in
3
<PAGE>
connection therewith, without the necessity of an independent determination that
such director or officer met any appropriate standard of conduct.
(c) The indemnification provided for herein shall continue as
to any person who has ceased to be a director or officer, and shall inure to the
benefit of the heirs, executors, and administrators of such persons.
(d) In addition to the indemnification provided for herein,
the corporation shall have power to make any other or further indemnification,
except an indemnification against gross negligence or willful misconduct, under
any resolution or agreement duly adopted by the Board of Directors, or duly
authorized by a majority of the shareholders.
ARTICLE X
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director; provided, that the foregoing clause shall not apply to any
liability of a director for any action for which the Florida General Corporation
Act proscribes this limitation and then only to the extent that this limitation
is specifically proscribed.
ARTICLE XI
In furtherance, and not in limitation, of the powers conf erred by the
laws of the State of Florida, the Board of Directors is expressly authorized:
(a) To make, alter, amend, and repeal the By-Laws of the corporation, subject to
the power of the holders of stock having voting power to alter, amend, or repeal
the By-Laws made by the Board of Directors.
(b) To determine and fix the value of any property to be
acquired by the corporation and to issue and pay in exchange therefore, stock of
the corporation; and the judgment of the directors in determining such value
shall be conclusive.
(c) To set apart out of any funds of the corporation available
for dividends, a reserve or reserves for working capital or for any other lawful
purposes, and also to abolish any such reserve in the same manner in which it
was created.
(d) To determine from time to time whether and to what extent,
and at what time and places, and under what conditions and regulations
4
<PAGE>
the accounts and books of the corporation, or Any of the books, shall be open
for inspection by the shareholders and no shareholder shall have any right to
inspect any account or book or document of the corporation except as conferred
by the laws of the State of Florida, unless and until authorized to do so by
resolution of the Board of Directors or of the shareholders.
(e) The Board of Directors may, by resolution, provide for the
issuance of stock certificates to replace lost or destroyed certificates.
ARTICLE XII
If the By-Laws so provide, the shareholders and the Board of Directors
of the corporation shall have the power to hold their meetings, to have an
office or offices, and to keep the books of the corporation, subject to the
provisions of the laws of the State of Florida, outside of said state at such
place or places as may be designated from time to time by the Board of
Directors.
The corporation may, in its By-Laws, confer powers upon the Board of
Directors in addition to those granted by these Articles of Incorporation, and
in addition to the powers and authority expressly conferred upon them by the
laws of the State of Florida.
Election of directors need not be by ballot unless the bylaws so
provide.
Directors shall be entitled to reasonable fees for their attendance at
meetings of the Board of Directors.
ARTICLE XIII
In case the corporation enters into contracts or transacts business
with one or more of its directors, or with any firm of which one or more of its
directors are members, or with any other corporation or association of which one
or more of its directors are shareholders, directors, or officers, such
contracts or transactions shall not be invalidated or in any way affected by the
fact that such director or directors have or may have an interest therein which
is or might be adverse to the interest of this corporation, provided that such
contracts or transactions are in the usual course of business.
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any individual or firm, shall in any
way be affected or invalidated by the fact that any of the directors of this
corporation is
5
<PAGE>
interested in such contract or transactions, provided that such interest shall
be fully disclosed or otherwise known to the Board of Directors in the meeting
of such Board at which time such contract or transaction was authorized or
confirmed, and provided, however, that any such directors of this corporation
who are so interested may be counted in determining the existence of a quorum at
any meeting of the board of Directors of this corporation which shall authorize
or confirm such contract or transaction, and any such director may vote thereon
to authorize any such contract or transaction with the like force and effect as
if he were not such director or officer of such other corporation or not so
interested.
ARTICLE XIV
The corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein upon
shareholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, I, the undersigned, for the purpose of forming a
corporation pursuant to the laws of the State of Florida, have hereunto duly
executed the foregoing Articles of Incorporation to be filed in the Office of
the Secretary of the State of Florida for the purposes therein set forth this
26th day of August, 1996
--------------------------
(signature of Richard Cox)
ACCEPTANCE OF DESIGNATION
Having been named to accept service of process for the above stated
corporation, at the placed designated, I hereby accept to act in this capacity,
and agree to comply with the provisions of Section 48.091, Florida Statutes,
relative to keeping open said office.
--------------------------
(signature of Richard Cox)
6
<PAGE>
Articles of Incorporation
of
Major Acceptance Corp.
3.8
<PAGE>
[FLORIDA STATE SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
II.of Corporations
PO Box 6327
Tallahassee, FL 32314
January 8, 1996
CAPITAL CONNECTION, INC.
PO BOX 10349
TALLAHASSEE, FL 32302
The Articles of Incorporation for MAJOR ACCEPTANCE CORP. were filed on January
8, 1996 and assigned document number P97000001707. Please refer to this number
whenever corresponding with this office regarding the above corporation.
PLEASE NOTE: COMPLIANCE WITH THE FOLLOWING PROCEDURES IS ESSENTIAL TO
MAINTAINING YOUR CORPORATION STATUS. FAILURE TO DO SO MAY RESULT IN DISSOLUTION
OF YOUR CORPORATION.
A CORPORATION ANNUAL REPORT MUST BE FILED WITH THIS OFFICE BETWEEN JANUARY 1 AND
MAY 1 OF EACH YEAR BEGINNING WITH THE CALENDAR YEAR FOLLOWING THE YEAR OF THE
FILING DATE NOTED ABOVE AND EACH YEAR THEREAFTER. FAILURE TO FILE THE ANNUAL
REPORT ON TIME MAY RESULT IN ADMINISTRATIVE DISSOLUTION OF YOUR CORPORATION.
A FEDERAL EMPLOYER IDENTIFICATION (FEI) NUMBER MUST BE SHOWN ON THE ANNUAL
REPORT FORM PRIOR TO ITS FILING WITH THIS OFFICE. CONTACT THE INTERNAL REVENUE
SERVICE TO INSURE THAT YOU RECEIVE THE FEI NUMBER IN TIME TO FILE THE ANNUAL
REPORT. TO OBTAIN A FEI NUMBER, CONTACT THE IRS AT 1-800-829-3676 AND REQUEST
FORM SS-4.
SHOULD YOUR CORPORATE MAILING ADDRESS CHANGE, YOU MUST NOTIFY THIS OFFICE IN
WRITING, TO INSURE IMPORTANT MAILINGS SUCH AS THE ANNUAL REPORT NOTICES REACH
YOU.
Should you have any questions regarding corporations, please contact this office
at the address given below.
Teresa Brown, Corporate Specialist
New Filings Section
<PAGE>
ARTICLES OF INCORPORATION
OF
MAJOR ACCEPTANCE CORP.
The undersigned incorporation, for the purpose of forming a corporation under
the Florida Business Corporation Act, hereby adopts the following Articles of
Incorporation.
ARTICLE I: NAME
The name of the corporation is MAJOR ACCEPTANCE CORP.
ARTICLE II: PRINCIPAL OFFICE
The principal place of business and mailing address of the corporation is 20869
Pinar Trail, Boca Raton, FL 33433.
ARTICLE III: CAPITAL STOCK
The number of shares of stock that this corporation is authorized to have
outstanding at any one time is ten million (10,000,000) shares having no par
value.
<PAGE>
ARTICLE IV: INITIAL REGISTERED AGENT AND ADDRESS
The name and address of the initial registered agent is Capital Connection,
Inc., 417 E. Virginia St., Suite 1, Tallahassee, FL 32301
ARTICLE V: INCORPORATOR
The name and address of the incorporation of these Articles of Incorporation is
Capital Connection, Inc., 417 E. Virginia St., Suite 1, Tallahassee, FL 32301
ARTICLE VI: INITIAL BOARD OF DIRECTORS
The name and address of the initial Board of Directors of the corporation is
Bruce Bendell, Pres., Chairman of the Board, 80-02 Kew Bardens Rd., Suite 5000,
Kew Gardens, NY 11415.
ARTICLE VII: INDEMNIFICATION
The following indemnification provisions shall be deemed to be
contractual in nature and not subject to retroactive removal or reduction by
amendment.
(a) This corporation shall indemnify any director who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil or criminal, judicial, administrative
or investigative, by reason of the fact that he/she is or was serving at the
request of this corporation as a director -or officer or member of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement, actually and
<PAGE>
reasonably incurred by him/her in connection with such action, suit or
proceeding, including any appeal thereof, if he/she acted in good faith or in a
manner he/she reasonably believed to be in, or not opposed to, the best
interests of this corporation, and with respect to any criminal action or
proceeding, if he/she had no reasonable cause to believe his/her conduct was
unlawful. However, with respect to any action by or in the right of this
corporation to procure a judgment in its favor, no indemnification shall be made
in respect of any claim, issue, or matter as to which such person is adjudged
liable for negligence or misconduct in the performance of his/her duty to the
corporation unless, and only to the extent that, the court in which such action
or suit was brought determines, on application, that despite the adjudication of
liability, such person is fairly and reasonably entitled to indemnity in view of
all the circumstances of the case. Termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or in a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the party did
not meet the applicable standard of conduct. Indemnification hereunder may be
paid by the corporation in advance of the final disposition of any action, suit
or proceeding, on a preliminary determination that the director, officer,
employee or agent met the applicable standard of conduct.
(b) The corporation shall also indemnify any director or officer who
has been successful on the merits or otherwise, in defense of any action, suit,
or proceeding, or in defense of any claim, issue, or matter therein, against all
expenses, including attorneys' fees, actually and reasonably incurred by him/her
in connection therewith, without the necessity of an independent determination
that such director or officer met any appropriate standard of conduct.
(c) The indemnification provided for herein shall continue as to any
person who has ceased to be a director or officer, and shall inure to the
benefit of the heirs, executors, and administrators of such persons.
<PAGE>
(d) In addition to the indemnification provided for herein, the
corporation shall have power to make any other or further indemnification,
except an indemnification against gross negligence or willful misconduct, under
any resolution or agreement duly adopted by the Board of Directors, or duly
authorized by a majority of the shareholders.
ARTICLE VIII
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director; provided, that the foregoing clause shall not apply to any
liability of a director for any action for which the Florida General Corporation
Act proscribes this limitation and then only to the extent that this limitation
is specifically proscribed.
The undersigned has executed these Articles of Incorporation this 8th day of
January 1997.
"Capital Connection, Inc. by Kim Crosson, Office Manager"
Kim Crosson
- -----------
<PAGE>
CERTIFICATE OF DESIGNATION
REGISTERED AGENT/REGISTERED OFFICE
Pursuant to the provisions of section 607.0501, Florida Statutes, the mentioned
corporation, organized under the laws of the State of Florida, submits the
following statement in designating the registered agent/registered office, in
the state of Florida.
1. The name of the corporation is MAJOR ACCEPTANCE CORP.
1. The name and address of the registered agent and office is Capital
Connection, Inc., 417 E. Virginia St., Suite 1, Tallahassee, FL 32301
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY.
"Capital Connection, Inc. signed by Kim Crosson, Office Manager"
<PAGE>
By-Laws of Fidelity
Holdings, Inc.
3.9
<PAGE>
FIDELITY HOLDINGS. INC.
ARTICLE I
SHARES
1. Every stockholder of record shall be entitled to a stock
certificate representing the shares owned by him, but a stock certificate shall
not be issued to any stockholder until the shares represented thereby have been
fully paid. No note or obligation given by a stockholder, whether secured by
pledge or otherwise, shall be considered as payment in whole or in part, of any
shares.
2. Share certificates of the corporation shall be in such form as the
Board of Directors may from time to time determine. Stock certificates shall be
issued to each holder of fury-paid shares, in numerical order, from the stock
certificate books, signed by the President or Vice-President, countersigned by
the Secretary or Treasurer, and sealed with the corporate seal. Facsimile
signatures may be used as permitted by law. Share certificates restricted as to
transfer or resale shall bear an appropriate restriction legend. A record of
each certificate issued shall be kept on the stub thereol
3. Transfers of shares shall be made only upon the books of the
corporation and, before a new certificate is issued, the old certificate must be
surrendered for cancellation. The corporation shall not be bound by any
restrictions on the transferability of shares imposed by any agreement to which
it is not a party unless both written notice of such agreement or restriction is
given to the Secretary and notice of such agreement or restriction has been put
1
<PAGE>
upon the stock certificate(s) so restricted. No transfer shall be made where
such transfer is restricted'by law or governmental regulation. The corporation
shall be entitled to delay or refuse only transfer pending adequate.proof of
entitlement to transfer.
4. In case a stock certificate is lost or destroyed, the claimant
thereof shall make an affirmation or affidavit of the fact and advertise the
same in such manner as the Board of Directors may require, and shall give the
corporation a bond of indemnity in form and amount acceptable to the Board, and
with one or more sureties satisfactory to the Board and upon satisfactory proof
being produced to the Board of Directors of such loss or destruction,, a anew
certificate may be issued of the same tenor and for the same number of shares as
the one alleged to be lost or destroyed, but always subject to the approval of
the Board of Directors.
5. The holder of record of any share or shares shall be entitled to
be treated by the corporation as the holder in fact thereof, and the corporation
accordingly shall not be bound to recognize any equitable claim to, or interest
in, such share on the part of any other person, whether or not the corporation
shall have express or other notice thereof, save as expressly provided by
applicable laws.
6. A stockholder shall not be personally liable for any debt or
liability of the corporation, except as may be imposed by law.
7. The treasury stock of the corporation shall consist of such issued
and outstanding shares of the corporation as may be donated to the corporation
or otherwise acquired, and shall be held subject to disposal by the Board of
Directors. Such shares shall neither vote nor participate in dividends while
held by the corporation.
2
<PAGE>
ARTICLE II
MEETINGS OF STOCKHOLDERS
1. The annual meeting of the stockholders of this corporation shall be
held at such place either within or without the State of Nevada, on such date,
and at such time, as may be designated by the Board of Directors. Failure to
hold an annual meeting at the designated time shall not work any forfeiture or
dissolution of the corporation.
2. Special Meeting of the stockholders may be called to be held at the
registered office of the corporation, or at such other place designated in the
call, at any time, (a) by the President or (b) by resolution of the Board of
Directors, or (c) upon written request of the stockholders holding a majority of
the outstanding shares having voting rights. Upon written request of the
stockholder or stockholders entitled to call a special meeting, the Secretary
shall give notice of such special meeting, to be held at such time as the
Secretary my fix, not less than ten (10) nor more than sixty (60) days after the
receipt of such request. Upon neglect or refusal of the Secretary to issue such
call the person or persons making the request may do so.
3. In order that the corporation determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of share or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty (60)
3
<PAGE>
nor less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
If no record date is fixed:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, on which the meeting is held.
(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
(d) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
4. At least ten days before each meeting! of stockholders, the officer
having charge of the transfer books for shares shall make a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
with the address of and the number of shares held by each, which list shall be
kept on file at the principal office of the corporation and shall be subject to
inspection by any stockholder at any time during usual business hours. Such list
shall be produced and kept open at the time and place of meeting, subject to the
inspection of
4
<PAGE>
any stockholders during the whole time of the meeting. The preparation of such
list may be dispensed with by oral or written agreement of all stockholders.
5. Except as herein otherwise mentioned, notice of meeting, written or
printed for every regular or special meeting of the stockholders, shall be
prepared and mailed to the last known post office address of each stockholder
having voting rights, not less than five days before any such meeting, and if
for a special meeting, such notice shall also state the object or objects
thereof No failure of or,-irregularity in notice of any regular meeting shall
invalidate such meeting or any proceeding thereat. Notice of a meeting may be
waived by written waiver signed by persons entitled to vote. Attendance at a
meeting shall constitute waiver of notice of place, date, time and purpose.
6. A quorum at any meeting of the stockholders shall consist of a
majority of the voting shares of the corporation, represented in person or by
proxy. A majority of such quorum shall decide any question that may come before
the meeting unless such question is by statute required to be decided by a
majority of the outstanding shares or otherwise.
7. At any meeting duly called and held for the election of directors at
which a quorum is present, directors shall be elected by a plurality of the
votes cast by the holders (acting as such) of shares of stock of the corporation
entitled to elect such directors.
8. Removal of directors. Notwithstanding any other provisions of the
Certificate of Incorporation or the by-laws of the corporation (and
notwithstanding the fact that some lesser percentage may be specified by law,
the Certificate of Incorporation or the By-laws of
5
<PAGE>
the corporation), any director or the entire board of Directors of the
corporation may be removed at any time, but only for cause and only by the
affective vote of the holders of a majority of the outstanding shares of capital
stock of the corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the stockholders
called for that purpose.
9. The order of business at the annual meeting and, as far as possible,
at all other meetings of the stockholders, shall be:
(a) Call to order
(b) Proof of due notice of meeting
(c) Call for filing of proxies, and determination of a quorum
(d) Reading and disposal of any unapproved minutes
(e) Unfinished business
(f) Amendments of Articles of Incorporation or By-laws
(g) Fixing the number of directors and election of directors
(h) Reports of officers and committees
(i) New business
(j) Adjournment
Any agenda item may be waived. Robert's Rules of Order shall determine any
question or dispute regarding procedure
Business transacted at all special meetings shall be confined to the
objects stated in the
6
<PAGE>
call and matters germane thereto, unless all stockholders entitled to vote are
present and consent.
10. Stockholders shall have the right to be represented and vote by
proxy at any meeting of stockholders. Proxies shall be filed with the Secretary
prior to the meeting and failure to do so file shall preclude exercise thereof
by the proxy holder at such meeting.
11. Any action which may be taken at a meeting of stockholders may be
taken without a meeting, if a consent in writing, setting forth the action so
taken, shall be signed by all of the stockholders who would be entitled to vote
at a meeting for such lesser percentage of shares as shall be set by the
Articles, and the consent shall be field with the Secretary of the corporation.
ARTICLE ]III
DIRECTORS
1. So long as all the shares of this corporation are owned beneficially
and of record by only one or two stockholders, the business and property of the
corporation shall be managed by a Board of not fewer than the number of
stockholders. At such time as the stocks are owned beneficially and of record by
three (3) or more stockholders, the business and property of the corporation
shall be managed by a Board of not fewer than three (3) nor more than twenty-one
(21) directors, who shall be natural persons of full age, and who shall be
elected annually be the stockholders having voting rights, for the term of one
year, and shall serve until the election and acceptance of their duly qualified
successors. In the event of any
8
<PAGE>
delay in holding, or adjournment of, or failure to hold an annual meeting, the
terms of the sitting directors shall be automatically continued indefinitely
until their successors shall be duly elected and qualified. Directors need not
be stockholders. Any vacancies, including vacancies resulting from an increase
in the number of directors, may be filled by the Board of Directors, though less
than a quorum for the unexpired term. The Board of Directors shall have fun
power, and it is hereby expressly authorized, to increase or decrease the number
of directors from time to time without requiring a vote of the stockholders.
2. The annual m of the Board of Directors shall be held at the offices
of the corporation within thirty (30) days following the annual meeting of
stockholders. At such meeting, the Board may elect a Chairman of the Board (who
shall thereafter chair meetings of the Board), a Secretary (who shall thereafter
keep the minutes of the meetings of the Board), and such other officials as the
Board may deem desirable.
3. Special meeting of the Board of Directors, may be called at any time
by the President, or by a majority of the members of the Board, and may be held
at any time and place, either within or without the State of Nevada, either with
notice as provided in Section 4 or without if by written consent of all the
absent members any by the presence of all other members at such meeting.
4. Notice of special meetings shall be given by any means of
communication by the Secretary to each member of the Board not less than
twenty-four (24) hours before any such meeting, and notice of such special
meetings shall include a general statement of the purposes thereof Notice of
such meetings may be waived by written waiver.
8
<PAGE>
5. A quorum at any meeting shall consist of a majority of the entire
membership of the Board. A majority of such quorum shall decide any question
that may come before the meeting, unless otherwise provided by statute.
6. Executive Committee. The Board of Directors may, by resolution
adopted by a majority of the whole Board, delegate not less than two of its
number to constitute an Executive Committee which, to the extent provided in
such resolution, shall have and exercise the authority of the Board of Directors
in the management of the business of the corporation. Written minutes shall be
kept of all actions taken by the Executive Committee between intervals of the
regular meetings of the Board of Directors, and these minutes must be reported
at the next regular meeting of the Board.
7. Special Committees. The Board of Directors may, by specific
resolution adopted by a majority of the whole Board, delegate not less than two
of its number to constitute a special committee which, to the extent and scope
provided in such resolution, shall have and exercise authority in such matters
as the Board shall declare. Written minutes shall be kept of all actions taken
by any such special committee between the intervals of the regular meetings of
the Board of Directors, and those minutes must be reported at the next regular
meeting of the Board.
8. One or more directors may participate in a meeting of the Board or
of an Executive or other committee of the Board by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other.
9
<PAGE>
9. Any action which may be taken at a meeting of the Board or of any
committee -thereof may be taken without a meeting, if a consent in writing,
setting forth the action so taken, shall be signed by all of the Directors who
would be entitled to vote at a meeting for such purposes and shall be filed with
the Secretary of the Corporation.
10. Officers of the corporation, including the President, shall be
elected by ballot, by the Board of Directors, at its first meeting after the
election of directors each year. If any office becomes vacant, including the
office of the President, during the year, the Board of Directors shall fill it
for the unexpired term. The President need not be chosen from the Board of
Directors.
11. The order of business at any regular or special meeting of the
Board of Directors shall be:
(a) Call to order an call of roll
(b) Reading and disposal of any unapproved minutes
(c) Unfinished business
(d) Reports of officers and committees
(e) New business
(f) Adjournment
Any agenda item may be waived. Robert's Rules of Order shall determine
any question or dispute regarding procedure.
12. Compensation. Directors as such, shall not receive any stated
salary for their
10
<PAGE>
services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board provided, that nothing herein contained shall be construed
to preclude any director from servicing the corporation in any other capacity
and receiving compensation therefor.
ARTICLE IV
OFFICERS
1. The officer of the corporation shall be a President, a Secretary and
a Treasurer. In addition, there may be one or more Vice Presidents and such
other officers, assistant officers, and agents as the Board of Directors may
determine. All officers and agents shall be elected for the term of one year and
shall hold office until their successors are elected and qualified. Any two or
more offices may be held by the same person including the offices of President
and Secretary.
2. The President shall be the chief executive officer of the
corporation; shall preside at all meetings of the stockholders and directors;
shall have general supervision of the affairs of the corporation; shall sign or
countersign certificates, contracts, and other instruments of the corporation,
as authorized by the Board of Directors; shall make reports to the directors and
stockholders; and shall perform all such other duties as are incident to his
office or are properly required of him by the Board of Directors.
3. The Secretary shall issue notices for all meetings; shall keep
minutes, shall have charge of the seal and the books of the corporation; shall
sign with the President of affix the
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<PAGE>
seal to such instruments as require such signature or seal and attest to the
signature of the President by affixation of the seal thereto; and shall make
such reports and perform such other duties as are incident to his office, or are
properly required of him by the Board of Directors.
4. The Treasurer shall have the custody of all moneys and securities of
the corporation and shall keep regular books of account. He shall sign or
countersign such documents and instruments as required his signature, shall
perform all duties incident to his office or that are properly required of him
by the Board of Directors, and if required by the Board of Directors, shall give
bond for the faithful performance of his duties in such sum and with such
sureties as may be required by the Board of Directors. He shall have the sole
and exclusive power, responsibility, and authority to determine the priority and
order of payment of liabilities of this corporation, to calculate and pay all
payrolls, to withhold all required taxes including federal, state, and local
income taxes and F.I.C.A.. to regularly and timely deposit such withheld sums in
the manner required by law or regulation, and to prepare, execute, and file, on
a timely basis, all federal, state, and local tax reports and/or returns and to
transmit therewith all sums due and owing.
6. All other officers, assistant officers, and shall perform such
duties as may be required of them by the Board of Directors. AR officers,
assistant officers, and agents of the corporation shall be subject to removal by
the Board of Directors whenever in its judgment the best interests of the
corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person removed. Any vacancy occurring in
any office of the corporation by death, resignation, removal or otherwise shall
be filled by the
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<PAGE>
Board of Directors.
7. All officers, assistant officers, and agents of the Corporation
shall be subject to removal by the Board of Directors whenever in its judgment
the best interests of the Corporation will be serviced thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person
removed.
8. Compensation. The Board of Directors shall have power to fix the
compensation of all officers and assistant officers of the corporation. It may
authorize any officer, upon whom the power of appointing subordinate officers
may have been conferred, to fix the compensation of such subordinate officers.
9. Disallowed Compensation. Any payments made to an officer or employee
of the corporation such as a salary, commission, bonus, interest, rent, travel
or entertainment expense incurred by him, which shall be disallowed in whole or
in part as a deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer or employee to the corporation to the full extent of
such disallowance. It shall be the duty of the directors, as a Board, to enforce
payment of each such amount disallowed, In lieu of payment by the officer or
employee, subject to the determination of the directors, proportionate amounts
may be withheld from his future compensation payments until the amount owed to
the corporation has been recovered.
10. Resignation, Any director or other officer may resign at anytime,
such resignation to be in writing, and to take effect from the time of its
receipt by the corporation, unless some
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<PAGE>
time be fixed in the resignation and then from that date. The acceptance of a
resignation shall not be required to make it effective.
ARTICLE V
DIVIDENDS AND FINANCE
1. Dividends shall be declared as provided by law at such times as the
Board of Directors shall direct, and no dividend shall be declared that will
impair the capital of the corporation.
2. The monies of the corporation shall be deposited in the name of the
corporation, in such banks, savings and loan associations or trust companies as
the Board of Directors shall designate, and shall be drawn out only by check or
other negotiable instrument signed as directed by the Board of Directors. Funds
in excess of current world capital needs may be invested in such certificates of
deposit, mutual funds government securities, money market funds, and similar
liquid investments.
3. Financial Reports. The officers of the corporation shall tender to
the Board of Directors such financial reports of the condition of the
corporation as may be required by the Board of Directors. The directors and
officers shall be required to forward to the stockholders an annual financial
report with one hundred eighty (180) days after the close of each fiscal year.
No report of the financial condition of the corporation need be prepared or
verified by a certified public accountant, unless directed to be so prepared by
an order of the Board of Directors.
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<PAGE>
4. A fiscal year basis may be established for the operations of the
corporation by the Board of Directors and may be changed, from time to time, as
desirable to the extent permitted by applicable tax laws or regulations.
5. The Treasurer, with the approval of the President, may make
charitable contributions out of the funds of the corporation for purposes
permitted by law, without the consent of the stockholders or directors, to the
extent that such contributions shall be deductible by the corporation for income
tax purposes; provided, however, that fun report of such contributions shall be
made to the Board of Directors at its next meeting.
ARTICLE VI
SEAL
1. The corporate seal of the corporation shall consist of two
concentric circles, between which is the name of the corporation, and the word,
"Nevada", and in the circle shall be inscribed the words "Corporate Seal"
together with the year of incorporation, and such seal is impressed on the
margin hereof and is hereby adopted as the corporate seal of the corporation.
ARTICLE VII
CONFLICT OF INTEREST
1. No contract or transaction between the corporation and one or more
of its, directors or officers, or between the corporation and any other
corporation, partnership, association, or
15
<PAGE>
other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest,, shall be void or voidable
solely for such reason, or solely because the director or officer is present at
or participates in the meeting of the Board which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(a) The material facts as to his (their) interest and as to the
contract or transaction are disclosed to or are known by the Board of Directors,
and the Board, in good faith, authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors; or
(b) The material facts as to his (their) relationship or interest and
as to the contract or transaction are disclosed to or are known by the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors or the
stockholders.
2. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors which authorizes a
contract or transaction specified in Section 1 of the Article.
3. This provision shall be in addition to, and not in limitation of,
any applicable provisions of law validating contracts in situations involving
interested directors, officers and stockholders.
16
<PAGE>
ARTICLE VII
LIMITATION OF LIABILITY
1. No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, that the foregoing clause shall not apply to any
liability of a director for any action for which the corporation laws of the
State of Nevada proscribes this limitation and then only to the extent that this
limitation is specifically proscribed.
2. It is the intent that this Article be interpreted to provide the
maximum protection against liability afforded to directors under the Nevada
corporation laws as it may be amended from time to time.
ARTICLE IX
INDEMNIFICATION
1. The corporation shall, to the fullest extent permitted by applicable
law as then in effect, indemnify each director, each officer and each other
person who may have acted as a representative of the corporation at its request,
and his heirs, executors, and administrators. Any such person shall be
indemnified by the corporation against:
(a) any costs and expenses, including counsel fees, reasonably incurred
in connection with any civil, criminal, administrative or other claim, action,
suit or proceeding, in which he may become involved or with which he may be
threatened, by reason of his being or having
17
<PAGE>
been a director or officer of the corporation or by reason of his serving or
having served any corporation, trust, committee, or other organization as
director, officer, employee, trustee, member or otherwise at the request of this
corporation, and
(b) any payments in settlement of any such claim, suit, action, or
proceeding or in satisfaction of any related judgment, fine, or penalty, except
costs, expenses or payments in relation to any matter as to which he shall be
finally adjudged derelict in the performance of his duties to the corporation,
unless the corporation shall receive an opinion from independent counsel that
such director, officer, or representative has not so been derelict. In the case
of a criminal action, suit, or proceeding, a conviction or judgment (whether
after trial or based on a plea of guilty or nolo contenders or its equivalent)
shall not be deemed an adjudication that the director, officer or representative
was derelict in the performance of his duties to the corporation of he acted in
good faith in what he considered to be the best interests of the corporation and
with no reasonable cause to believe the action was illegal.
The foregoing right of indemnification shall not be exclusive of
other rights to which directors, officers and others may be entitled under the
Certificate of Incorporation as a matter of law or otherwise.
2. It is the intent that this Article be interpreted to provide the
maximum indemnification permitted under the Nevada corporation laws as they may
be amended from time to time.
3. This corporation shall have the power to purchase and maintain
insurance on behalf of any person who (1) is or was a director, officer,
employee or agent of the corporation, or
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<PAGE>
(2) is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability.
ARTICLE X
EMERGENCY BY-LAWS
1. Emergency Powers. During any emergency resulting from warlike
damage, including civil disorder, or an attack on the United States or any
nuclear or atomic disaster, the regular by-laws shall be suspended to the extent
necessary under the circumstances and the Board of Directors may make any
emergency by-law that may be practical or necessary for the circumstances of the
emergency, even though inconsistent with the regular by-laws. No director,
officer, or employee acting in accordance with any such emergency by-laws shall
be liable, except for willful misconduct.
2. Meeting. A meeting of the Board of Directors may be called by any
officer or director with no prescribed period of notice, so long as an attempt
is made to notify each director as soon as conditions may permit. Such notice
may be given by any feasible means at the time, including publication or radio.
3. Quorum. The director or directors in attendance at the meeting of
the Board shall constitute a quorum.
<PAGE>
Certificate of Designation
for 1996-Major
Preferred Stock
4.1
<PAGE>
FIDELITY HOLDINGS, INC.
Certificate of Designation, Powers, Preferences and Rights
of the
1996-MAJOR Series of Convertible Preferred Stock
($.0l Par Value)
Liquidation Value $10.00 Per Share
Pursuant to Section 78.195(6) of the
Corporation Law of the State of Nevada
The undersigned, President of FIDELITY HOLDINGS, INC., a Nevada
Corporation (hereinafter called the "Company") does hereby certify as required
by NRS 78.195(6) that the following resolution has been duly adopted by the
Board of Directors of the Company:
RESOLVED, that pursuant to authority expressly granted to and vested in
the Board of Directors of the Company (the "Board of Directors") by the
provisions of the Certificate of Incorporation, as amended (hereinafter the
"Certificate of Incorporation") of the Company, there hereby is created, out of
the 2,000,000 shares of preferred stock of the Company authorized in Article III
of its Certificate of Incorporation (the "Preferred Stock"), a series of 250,000
shares, which series shall have the following designations, powers, preferences,
rights, qualifications, limitations and restrictions (in addition to the
designations, powers, preferences, rights, qualifications, limitations and
restrictions set forth in the Certificate of Incorporation of the Company which
are applicable to the Preferred Stock):
1. Designation.
The designation of the said series of the Preferred Stock shall be the
"The 1996-MAJOR Series of Convertible Preferred Stock" (the 111996-MAJOR
Series").
2. Number of Shares; Par Value.
The number of shares of the 1996-MAJOR Series shall be limited
<PAGE>
to 250,000. The shares of the 1996-MAJOR Series shall be issued as full shares
and shall have a par value of $.0l per share.
3. Dividends.
The holders of the 1996-Major Series of Convertible Preferred Stock
shall be entitled to receive, out of \ any funds of the Company at the time
legally available for the declaration of dividends, a participating dividend
equivalent to that declared and/or paid with respect to the shares of Common
Stock, except that each share of the 1996-MAJOR Series of Convertible Preferred
Stock shall receive twice the dividend payable with respect to each share of
Common Stock, equivalent to the dividend applicable if such preferred shares
were converted to Common Shares on the terms and conditions of conversion
provided herein.\
4. Liquidation.
In the event of a liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, the holders of shares of 1996-MAJOR
Series of Convertible Preferred Stock shall be entitled to receive out of the
assets of the Company, whether such assets are capital or surplus of any nature,
the sum of Ten Dollars ($10.00) per share, and, in addition to such amount, a
further amount equal to the dividends declared but unpaid and accumulated
thereon, to the date of such distribution, and no more, before any payment shall
be made or any assets distributed to the holders of shares of Common Stock.
Under all circumstances, the holders of shares of the 1996-MAJOR Series of
Convertible Preferred Stock shall receive the full amount of the available
sinking fund, as provided in Section 9 below. If upon such liquidation,
dissolution, or winding up, whether voluntary or involuntary, the assets
distributed among the holders of all classes of the 1996MAJOR Series of
Convertible Preferred Shares shall be insufficient to permit the payment to such
shareholders of the full preferential amounts, then the entire assets of the
Company to be distributed shall be distributed ratably among the holders of the
1996-MAJOR Series.
2
<PAGE>
5. Required Repurchase (Put).
Commencing July 1, 1997, the holders of the 1996-MAJOR Series of
Convertible Preferred Stock shall have the right to require that the Company
repurchase the shares of such 1996-MAJOR Series, as provided herein. Such right
shall be exercisable at any time after July 1, 1997 and from time to time,
subject to the following restrictions and limitations:
(a) The repurchase price (Put price) shall be Ten Dollars ($10.00) per
share.
(b) Shares put for repurchase shall be repurchased, subject to "c"
following, within ten (10) business days following receipt of the put. Puts
shall be made by transmittal to the Company of certificates for sufficient
shares to cover the put being made, together with a written demand specifying
the number of shares being put. The Company shall transmit the certificate(s) to
the Company's transfer agent with appropriate instructions to return to the
holder the shares in excess of those being put.
(c) The Company shall not be required to repurchase shares in an amount
in excess of the sinking fund established as provided in Section 9 below;
however, the Company may, in its sole discretion, elect to purchase any portion
of any shares put to it from general corporate funds. If demands for repurchase
(puts) exceed the fund available, the Company shall purchase shares to the full
extent of the available sinking fund and shall return the unpurchased shares to
the putting holder, to the extent unpurchased by the Company under its
discretionary purchase option.
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<PAGE>
(d) The Company shall repurchase shares strictly in the order in which
repurchase demands (puts) are made, using the date and time of receipt by the
Company to determine priority. If more shares are simultaneously put than can be
repurchased from the available sinking fund, the Company shall select by lot
those shares to be redeemed to the full extent of the available sinking fund.
6. Redemption.
(a) At any time after December 31, 2001, the Company, at the option of
the Board of Directors, may redeem the whole of, or from time to time may redeem
any part of, the 1996-MAJOR Series of Convertible Preferred Stock on any
dividend date by either (i) paying in cash therefor $15.87 per share and, in
addition to such amount, an amount in cash equal to all dividends on the
1996-MAJOR Series of Convertible Preferred Stock declared but unpaid and
accumulated up to and including the date fixed for redemption or (ii) to the
extent of the available sinking fund, paying in cash therefor $15.87 per share
and, in addition to such amount, an amount in cash equal to all dividends on the
1996-MAJOR Series of Convertible Preferred Stock declared but unpaid and
accumulated up to and including the date fixed for redemption, and issuing, to
the extent of any amount not paid from the available sinking fund, the Company's
Bonds, which shall be secured by the continuation of the sinking fund, as
provided in section 9 below.
(b) In case of the redemption of a part only of the outstanding shares
of the 1996-MAJOR Series of Convertible Preferred Stock, the Company shall
designate by lot, in such manner as the Board of Directors may determine, the
shares to be redeemed, or shall effect such redemption pro rata. Less than all
of the shares of the 1996-MAJOR Series of Convertible Preferred Stock at any
time outstanding may not be redeemed until all dividends declared, accrued and
in arrears upon all of the shares of the 1996-MAJOR Series of Convertible
Preferred Stock outstanding shall
4
<PAGE>
have been paid for all past dividend periods, and until full dividends, if any,
for the then current dividend period on all shares of the 1996-MAJOR Series of
Convertible Preferred Stock then outstanding, other than the shares to be
redeemed, shall have been paid or declared and the full amount thereof set apart
for payment. At least 30 days' previous notice by mail, postage prepaid, shall
be given to the holders of record of the shares to be redeemed.
(c) In the event that the Company exercises its right to purchase the
1996-MAJOR Series of Convertible Preferred Stock with Bonds, such Bonds shall
bear interest at the current prime rate of interest as set by CitiBank, shall
mature on December 31, 2006, shall require quarterly payments of interest, in
arrears, on the second Thursday of April, July, October and January, shall
require quarterly repayments of principal to the extent of the remaining sinking
fund after payment of the interest, and shall be secured by the Sinking Fund as
provided in Paragraph 9 below. The Company, at the option of the Board of
Directors, may redeem any of such Bonds at any time upon payment of the
principal value together with all unpaid interest.
7. Voting.
The 1996-MAJOR Series of Convertible Preferred Stock shall have voting
rights. For voting purposes, such series shall be considered part of the Common
Shares and shall vote with the common stock, rather than as a separate series of
preferred stock. Each share of the 1996-MAJOR Series of Convertible Preferred
Stock shall have two votes per share, equivalent to the votes applicable if such
shares were converted to Common Shares on the terms and conditions of conversion
provided herein.
8. Conversion.
The shares of 1996-MAJOR Series of Convertible Preferred Stock shall,
after the earlier of (1) December 31, 1996 or (2) the effectiveness of a
Registration Statement of the Company
5
<PAGE>
registering the underlying Common Shares into which the 1996-MAJOR Series of
Convertible Preferred Stock shall be convertible, at the option of the
respective holders thereof, be convertible into fully paid and nonassessable
Common Shares of the Company, upon certain terms and conditions, at any time and
f from time to time, except that any of such 1996-MAJOR shares which have been
called for redemption shall be convertible up to and including, but not after,
the close of business on the tenth (10) day prior to the redemption date.
(i) In order to exercise the conversion privilege, the holder of any of
the shares of the 1996-MAJOR Series to be converted shall surrender the
certificate or certificates therefor to any transfer agent of the Company for
such shares, duly endorsed in blank for transfer with the signature Medallion
guaranteed, accompanied by written notice of election to convert such shares or
a portion thereof executed on the form set forth on such certificates or on such
other form as may be provided form time to time by the Company.
As soon as practicable after the surrender of such certificates as
provided above, the Company shall cause to be issued and delivered, at the
office of such transfer agent, to or on the order of the holder of the
certificates thus surrendered, a certificate or certificates for the number of
full shares of Common Stock issuable hereunder upon the conversion of such
shares of the 1996-MAJOR Series and cash or scrip, as provided in subparagraph
(v) below, in respect of any fraction of a common share issuable upon such
conversion. Such conversion shall be deemed to have been effected on the date on
which the certificates for such shares of the 1996-MAJOR Series have been
surrendered as provided above, and the person in whose name any certificate or
6
<PAGE>
certificates for Common Stock are issuable upon conversion shall be deemed to
have become on such date the holder of record of the shares represented thereby.
(ii) The shares of 1996-MAJOR Series of Convertible Preferred Stock
shall be convertible into Common Shares of the Company at a conversion price of
the lower of (a) Five Dollars ($5.00) for each Common Share or (b) the average
of the bid and asked closing prices for the twenty (20) consecutive trading days
ending on the day prior to conversion, taking each share of the 1996-MAJOR
Series of Convertible Preferred Stock at Ten Dollars ($10.00) per share, so that
each such share shall be convertible into at least two (2) Common Shares. No
fractional Common Shares shall be issued.
(iii) Earned and declared but unpaid and accrued or accumulated
dividends on the 1996-MAJOR Series of Convertible Preferred Stock shall be
convertible in the same manner and on the same terms as the principal $10.00.
(iv) In case of the voluntary dissolution, liquidation, or winding up
of the Company, all conversion rights of the holders of shares of 1996-MAJOR
Series of Convertible Preferred Stock shall terminate on a date fixed by the
Board of Directors, but not more than thirty (30) days prior to the record date
for determining the holders of the Common Shares entitled to receive any
distribution upon such dissolution, liquidation or winding up. The Company shall
cause notice of the proposed action, and of the date of termination of
conversion rights, to be mailed to the holders of record of shares of the
1996MAJOR Series not later than thirty (30) days prior to the date of such
7
<PAGE>
termination, and shall promptly give similar notice to each transfer agent for
such Preferred Stock and for the Common Stock.
(v) No fractional share of Common Stock shall be issued upon conversion
of any share of the 1996-MAJOR Series, but in lieu of fractional shares the
Company shall, at its option, either pay an amount in cash equal to the current
market value of such fractional interest, computed on the basis of the last
reported sale price of the Common Stock prior to the date of conversion, or
issue scrip of the Company in respect thereof. Such scrip shall be
noninterest-bearing and non-voting, shall be exchangeable in combination with
other similar scrip for the number of full shares of Common Stock represented
thereby, shall be issued in such denominations and in such form, shall expire
after such reasonable time, which shall not be less than one year from the date
of issue, may contain such provisions for the sale for the account of the holder
of such scrip of the shares of Common Stock for which such scrip is
exchangeable, and shall be subject to such other terms and provisions, if any,
as the Board of Directors may from time to time determine prior to the issuance
thereof.
(vi) As long as any of the shares of the 1996-MAJOR Series remain
outstanding, the Company shall take all steps necessary to reserve and keep
available a number of its authorized but unissued shares of Common Stock
sufficient for issuance upon conversion of all such outstanding shares of the
1996-MAJOR Series, and for issuance in exchange for all outstanding scrip
certificates.
(vii) All certificates for the shares of the 1996-MAJOR Series
surrendered for conversion as provided herein shall be canceled and retired, and
no further shares of the 1996-MAJOR Series shall be issued in lieu thereof the
Common Stock.
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(ix) The exercise of the conversion privilege shall be subject to such
regulations, not inconsistent with the foregoing provisions of this paragraph,
as may from time to be adopted by the Board of Directors of the Company.
(x) All shares of Common Stock issued upon the conversion of the shares
of the 1996-MAJOR Series shall be validly issued and outstanding, and fully paid
and nonassessable.
9. Sinking Fund for Puts, Redemption, and Bond Collateral.
Upon issuance of any shares of the 1996-MAJOR Series, the Company shall
establish a Sinking Fund for (i) meeting any demands for required repurchases of
such shares (Puts), (ii) provide funds for the redemption of such shares, and
(iii) provide funds to collateralize and repay any Bonds which may be issued.
The Sinking Fund shall be established, funded and utilized as follows:
(a) on the second Thursday of the first month succeeding the first
calendar quarter after the first issuance of any shares of the 1996-MAJOR
series, and continuing on the second Thursday of each month (April, July,
October and January) succeeding each calendar quarter, the Company shall
determine the amount of the Sinking Fund deposit to be made and shall make such
deposit, in the name of Major Fleet & Leasing Corp., in such financial
institution as the holders of the 1996-Major Series of Convertible Preferred
Stockholders or of the Bonds issued for redemption of the 1996-Major Series. The
deposit shall be made in such a manner as to safeguard it for the intended
purposes. The Sinking Fund shall only be retained as cash or invested in
short-term government bills and notes, in interest-bearing savings accounts, or
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other highly liquid and secure investments.
(b) The amount of the deposit required shall be equal to the net income
determined on a cash basis, after calculated federal, state and local tax
liabilities, of Major Fleet & Leasing Corp. derived from revenues from the motor
vehicle operations, including transactions with, or through, Major Automotive
Group, including but not limited to Major Chevrolet, Geo, Dodge,
ChryslerPlymouth, Jeep-Eagle, and Subaru.
(c) In calculating the net income from motor vehicle operations, the
management fee paid under the Management Agreement for such operations shall be
deducted but none of the costs, expenses or liabilities incurred by or arising,
directly or indirectly, from the other business operations of the Company (i.e.,
non-motor vehicle operations), shall be deducted, it being the intent to utilize
the net I income equivalent to continuing historical operations of Major Fleet &
Leasing Corp., determined on a cash basis, as a Sinking Fund. However, a charge
of fifteen percent (15%) of the net income, prior to the deduction of the
management fee, shall be deducted to compensate for overall corporate expenses
not specifically charged to such operations (e.g., accounting and auditing
costs, legal/SEC fees and costs, etc.).
(d) Such Sinking Fund shall be established and funded without reference
to the book or taxable income or loss of Major Fleet & Leasing Corp., but solely
as provided above.
(e) No funds deposited , or required to be deposited, in the Sinking
fund shall be expended or transferred from the segregated account in the name of
Major Fleet & Leasing Corp. except by transfer to the Company as specifically
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required to meet any requirements, repurchases (Puts), redemptions or Bond
repayments.
(f) Shares of the 1996-MAJOR Series redeemed from general corporate
funds of the Company, i.e., out of funds other than the Sinking Fund, may be
credited, at the option of the Company, in its sole discretion, against the
sinking fund requirements, such credit to be equal to the general corporate
funds expended.
(g) The Sinking Fund requirements shall continue so long as (i) any
shares of the 1996-MAJOR Series and/or (ii) and Bonds issued in redemption of
shares of the 1996MAJOR Series, shall be outstanding. When all shares of the
1996-MAJOR Series have been repurchased, converted, or redeemed, and when all
principal and interest of Bonds issued in redemption of the 1996-MAJOR Series
have been repaid in full, the Sinking Fund requirements shall cease and any
balance therein not set aside for redemptions and/or Bond repayments shall
revert to the general funds of Major Fleet & Leasing Corp. and/or the Company.
10. Rescission Right.
(a) If, during the period that the shares of the 1996-MAJOR Series are
issued and outstanding, there shall occur an "Event of Rescission", the holders
of the shares then issued and outstanding may, upon a vote of a majority of such
shares, elect to rescind the exchange transaction in which the shares of the
1996-MAJOR Series are to be issued; i.e., to exchange all of the then issued and
outstanding shares of the 1996-MAJOR Series for all of the issued and
outstanding shares of Major Fleet & Leasing Corp.
(b) The Rescission Right shall terminate at midnight, December 31,
2001.
(c) To exercise the Rescission Right, the holders shall give written
demand to the Company accompanied by the certificates for all of the then issued
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and outstanding shares of the 1996-MAJOR Series endorsed for transfer.
Immediately, time being of the essence, the Company shall deliver to such
rescinding holders, pro rata to their holdings of the then issued and
outstanding shares of the 1996- MAJOR Series, all of the then issued and
outstanding shares of capital stock, of all classes and series, of Major Fleet &
Leasing Corp.
(d) The term "Event of Rescission" shall mean:
(i) Any determination by the Internal Revenue Service that the
stock-for-stock exchange does not qualify as a tax-free reorganization.
(ii) Any breach by the Company of the Reorganization Agreement; or
Reorganization Agreement; or
(iii) Any failure by the Company to establish, fully fund, properly
maintain and apply, and/or safeguard the Sinking Fund; or
(iv) Any breach by the Company of the terms of the 1996-MAJOR Series of
Convertible Preferred Stock; or
(v) Admission by the Company of insolvency, adjudication of the Company
as insolvent, and/or an inability or failure of the Company to pay its debts and
liabilities in the normal course of business; or
(vi) Any proceeding shall be commenced by or against the Company
relating to the Company under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, receivership, dissolution, or liquidation law
or statute of any jurisdiction, whether nor or hereafter in effect, and any such
proceeding shall remain undismissed for a period of ninety (90) days or the
Company by any act indicates its consent to, approval of, or acquiescence in,
any such proceeding; or
(vii) A receiver or trustee is appointed for the Company or for all or
a substantial part of the property of the Company and any such receivership or
trusteeship shall remain undischarged f or a period of sixty (60) days; or
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(viii) Any change in any of the top three executives of the Company
(Chairman of the Board, President, CEO), provided that this basis for rescission
must be utilized within ninety (90) days of the change or it shall be deemed
waived.
II. No Preemptive Rights.
No holder of any shares of the 1996-MAJOR Series of Convertible
Preferred Stock, as such, shall be entitled as a matter of right to subscribe f
or purchase any part of any new or additional issue of shares of any class or
series, junior or senior thereto, or securities convertible into, exchangeable
for, or exercisable f or the purchase of, shares of any class or series, junior
or senior, whether now or hereafter authorized, and whether issued for cash,
property, services, by way of dividends, or otherwise.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed on its behalf by its undersigned President and attested to by its
Secretary this 25th day of September, 1996.
FIDELITY HOLDINGS, INC.
ATTEST:
(Corporate Seal] By: /s/ Doron Cohen
-------------------
Doron Cohen, President
_______________________________
Richard C. Fox, Secretary
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WHEREAS, BUYER desires promptly to provide the financing and
exploitation which SELLER requires and the parties have negotiated with respect
to a sale of the PATENTS by SELLER to BUYER on terms and condition which will
protect Internationals and Seller's current investment in the PATENTS while
securing the needed financing, manufacturing capability, and sales/distribution;
and
WHEREAS, the parties have negotiated with respect to the terms and
conditions of the sale and purchase of the PATENTS and desire to formalize and
evidence their understandings and agreements in this document;
NOW, THEREFORE, in consideration of the premises, intending to be
legally bound and in consideration of the mutual promises and covenants
contained herein, the parties hereto hereby agree as follows:
1. Sale of PATENTS and Related Assets
(a) The SELLER hereby sells, transfers, assigns, conveys and delivers,
and the BUYER hereby purchases and accepts delivery of, all of the SELLER's
rights, title and interest in and to all of the PATENTS owned by the SELLER,
including the two United States Patents referred to in the premises, the
Canadian filings referred to in the premises, and all other patent applications,
patent filings, and patent protections, wherever filed, whether in the United
States or in any foreign country.
(b) In addition, SELLER hereby sells, transfers, assigns, conveys and
delivers, and the BUYER hereby purchases and accepts delivery of, all of the
seller's rights, title and interest in and to all of the property and assets
related, directly and/or indirectly to such PATENTS and patent filings,
including, but not limited to (i) all prototypes, models and samples; (ii) all
tooling, including jigs, fixtures, etc,.; (ill) all production and manufacturing
equipment and machinery and the parts, accessories, supplies, and specifications
2
<PAGE>
therefore; (iv) all drawings, sketches blue prints, mylar prints, and product
specifications; (v) all booklets, manuals, axles brochures and materials; (vi)
all distributorship and dealer contacts, lists, correspondence, proposals, etc.;
(vii) all marketing, feasibility, and product testing studies and surveys and
(viii) all correspondence, papers, contracts, agreements, documents, files,
computer data bases, computer software, etc. pertaining or referring to the
armored conduit, the PATENTS, ix)o production and manufacture of the armored
conduit, and/or the sales and distribution of the armored conduit; all of such
property and assets being referred to herein as the "Related Assets".
All of the foregoing PATENTS and Related Assets being sold and
transferred hereunder shall be free and clear of all lions, encumbrances and
security agreements and shall be subject only to the liabilities being
specifically assumed by the BUYER pursuant to this Agreement.
(c) It is specifically understood and agreed by the parties hereto that
the SELLER is not selling, and the BUYER is not purchasing, the SELLER'S
franchise as a corporation, its minute book or its stock issuance and transfer
records, or its goodwill, or any assets, business or property not included
within sub-paragraphs (a) and/or (b) above. SELLER and International shall
maintain their own separate and individual corporate existences and except as
specifically provided herein no party shall have any interest in the business,
assets, liabilities, revenues, income, cents, expenses and losses of any other
party.
(d) International represents and warrants that, prior to this
transaction and this Agreement, it has obtained the approval hereof from a
majority of Its stockholders.
2. Non-Assumption of Liabilities.
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Except as otherwise specifically provided herein, the BUYER is not, and
shall not be deemed to have agreed to, assume and pay, perform or otherwise
discharge any existing liabilities of the SELLER, including any of the
liabilities of the regular business operations of the SELLER or International
that may already exist or which may arise or accrue with respect to the
operation of International's and/or the SELLER's business hereafter. In no event
shall the BUYER be responsible for, or have any liability with respect to sales,
use or other similar taxes arising out of this transaction, it being the express
intention of the parties that all taxes arising out of this transaction shall be
the sole responsibility of the SELLER. Except as specifically set forth in this
Section 2, the BUYER is assuming no liabilities, debts, obligations, income or
other taxes, or expenses of the SELLER.
3. Purchase Price
(a) The aggregate purchase price to be paid by the BUYER to the SELLER
for and in consideration of the sale, transfer and conveyance to the BUYER of
the PATENTS and the Related Assets shall consist of:
(I) a cash purchase price, to be paid in installments;
(II) a "minimum royalty", by the payment of specific costs; and
(III) an ongoing, or continuous, royalty based on production or sales.
(b) The cash purchase price if Five Hundred Thousand Dollars
($500,000), which amount has been set by reference to the investment of SELLER
and International in the PATENTS, the development of the armored conduit, and
certain efforts to exploit the armored conduit. SELLER and International hereby
represent and warrant the such Five Hundred Thousand Dollars ($500,000) is their
good faith determination of their combined investment for said purposes and that
BUYER has relied upon such determination in establishing the cash purchase
price, it being the intent of the parties. that SELLER and International fully
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<PAGE>
recover their investments in equal quarterly installments, in arrears, over the
remaining life of the older patent. The parties have agreed on a fourteen (14)
year remaining life, calculated as commencing January 1, 1996, which Is
fifty-six (56) quarterly installments. The unpaid principal sum shall bear
interest at the rate of seven per cent (7%) per annum, simple interest. On or
before the second Thursday of January, 1996, BUYER shall pay to SELLER the sum
of $4,375 representing interest on the unpaid sum from the date hereof to
December 31, 1995. Thereafter, commencing with a payment of $14,078.97 on or
before April 11, 1996, BUYER shall pay SELLER, on the second Thursday of the
month following the end of each calendar quarter, for 56 consecutive quarters,
the sum of $14,078.97 so as to fully amortize the principal sum and the interest
on the unpaid balance thereof.
(c) In addition to the cash purchase price of $500,000, BUYER shall pay
the following sums, as indicated, as a "minimum royalty" during the two year
period to November 13, 1997;
(1) During the period from the date hereof to November 13, 1997, BUYER
shall select an attorney or attorneys to defend international with respect to
the Daniel Topper litigation and shall pay up to the sum of Thirty Thousand
Dollars ($30,000) for legal fees and costs, court costs, expert witness fees,
depositions and discovery costs, and all other costs and expenses of such
litigation; and
(ii) During the period from the date hereof to November 12, 1997, BUYER
shall pay to SELLER and/or International, as directed, the SUM Of $32,000 per
year which the recipient shall use for the employment of Peter Curli for the
purposes of this Agreement. Mr. Curti shall be assigned to BUYER for the
purposes of completing the R&D on the armored conduit, completing the
specifications of and purchasing the required machinery initial equipment for
production and manufacture of the armored conduit, and supervising the initial
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<PAGE>
manufacturing operations. BUYER has the right, after such two year period,
without further compensation to SELLER or International, to hire Mr. Curti
directly.
(d) in addition to the cash purchase price of $500,000 and the minimum
royalty" during the first two years of this Agreement, BUYER shall pay an
on-going or continuous royalty to SELLER calculated as the greater of (I) five
per cent (5%) of the manufactured cost of the armored conduit and (ii) two per
cent (2%) of the gross sales, net of discounts, allowances and returns. when
actual production commeliukti; (following all pilot plant, developmental,
prototype, and de-bugging production), SELLER shall, within forty-five (45) days
after the end of each calendar quarter, provide SELLER with a report showing the
(i) aggregate costs of production of all armored conduit during the referenced
quarter and (ii) the gross sales (on a cash basis) of all armored conduit, net
of discounts, allowances and returns, during the referenced quarter, with the
potential royalty on each such basis calculated. Each such report shall be
accompanied by SELLER's payment of the larger royalty calculated on either
method. (e) SELLER and International jointly and severally represent and warrant
that the consideration set forth herein has been based upon both (i) the
investments of them into the PATENTS and the exploitation costs of them to date
and (ii) a negotiated royalty considered to be in the current market range and
that after a review by the stockholders of international the consideration is
fair and reasonable based upon the condition of SELLER and International at the
present time, the lack of marketing and production, and the commitments of BUYER
with respect to marketing and production.
4. Marketing Obligations
BUYER shall:
(i) Act vigorously to develop commercially marketable products;
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<PAGE>
(ii) Act vigorously to obtain any necessary state, federal or other
governmental or regulatory clearance; and
(iii) Review BUYER's progress of the above performance obligations with
appropriate SELLER and International personnel at intervals of six months to
assure a reasonable level of contact, communication, and compliance.
5. Production/Manufacturing Obligations
BUYER shall:
(i) Act vigorously either to acquire or to construct a manufacturing
facility for the purpose of producing armored conduit;
(ii) Act vigorously to obtain any necessary state, federal or other
governmental or regulatory clearance; and
(iii) Review BUYER's progress of the above performance obligations with
appropriate SELLER and International personnel at intervals of six months to
assure a reasonable level of contact, communication, and compliance.
6. No Defense by SELLER of Patent Position
SELLER and International make no representation as to the value or
validity of the PATENTS nor the status of infringement thereby or thereon.
SELLER and International do not represent that the manufacture, production,
distribution and/or sale of armored conduit will not infringe on the rights of
any other party. Likewise, SELLER and International do not represent that the
products of any other party do or do not infringe upon the rights/claims granted
in the PATENTS. BUYER shall be responsible, at its own expense, for the bringing
of and the defense of all patent infringement suits. However, in any such a
suit, the SELLER and/or International at its (their) option may participate and
contribute to the costs of litigation in any proportion it (they) wishes, up to
49%. Their (its) aggregate contribution may not exceed 49% without the express
written consent of BUYER. Notice of the
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<PAGE>
election of the SELLER and/or International thus to participate, and the
election of the proportion in which SELLER and/or International will
participate, Must be given to BUYER in writing within 90 days of Buyer's notice
to SELLER and International that BUYER will sue under the provisions of this
paragraph. The SELLER and/or International will then share in any damages,
profits, and awards in the same proportions to which each contributes to the
costs of litigation. The pendency of a lawsuit for infringement of any claim of
any PATENTS or otherwise concerning the validity or enforceability of any
PATENTS shall not effect in any way any obligations to pay the purchase pride,
fees, .royalties or other amounts under this Agreement.
7. Auditing
(a) BUYER agrees to make and keep full and accurate books and records
showing the sublicensing, manufacturing, use, distribution, and sale of any
products pursuant to the PATENTS. BUYER further agrees that SELLER and
International, SELLER and International designee, agent or representative may
inspect and audit BUYER's books and records pertaining to such products and the
manufacture and sale thereof during regular business hours on ten days' written
notice, and may make copies of those books and records at BUYER's place of
business to the extent necessary to verify the payments due under this
Agreement. Any such audit shall be at the expense of SELLER and International.
(b) SELLER and International agree that, except to the extent SELLER
and International may be required by applicable law to so disclose, it will not
disclose and will keep confidential for the term of this Agreement and for a
further period of three years thereafter any information about BUYER's
customers, prices and other confidential information about the business affairs
of BUYER which SELLER and International may discover in the course of any
examination of books and records permitted under this Section.
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(c) In the event that BUYER assigns, sells or transfers the PATENTS or
it the BUYER sublicences any right granted under the PATENTS, any agreement
sublicensing, assigning, or otherwise transferring that right shall grant SELLER
and International the same rights to audit the books and records au provided
with respect to BUYER hereunder.
(d) The right of SELLER and International to inspect the books and
records of BUYER or of any sublicensee, assignee, or transferee shall continue
past the term of or termination of this agreement, until all payments due under
this Agreement have been made, or until two years after the term or termination
of, this Agreement, whichever occurs later.
7. No Warranties of_SELLER or International regarding PATENTS and
technology
SELLER and International make no warranty or representation whatsoever as to the
usefulness of the Patents or the technology embodied therein or represented
thereby or their fitness for the purpose for which intended or for any other
purpose. SELLER and International make no warranty or representation that the
manufacture, use or sale of the armored conduit will be free from patent
infringement.
8. Warranties of SELLER and International
(a) SELLER and International represent and warrant that there are no
agreements, contracts, or understandings with respect to licenses or sublicenses
or manufacturing, distribution or sales rights under the PATENTS.
(b) SELLER and International represent and warrant that there are no
pending orders or agreements or contracts for the sale of any armorcd conduit
and there are no understandings with respect to the anticipated production
costs, wholesale or distributor prices, or OEM or retail prices for armored
conduit.
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(c) SELLER and International represent and warrant that there are no
distributorships, franchises, dealerships, or relationships established or
existing.
(d) SELLER and International represent and warrant that they are not
aware of and have no notice of and have no notice of (I) any litigation or
threatened litigation against either Company other than the Topper litigation,
(II) any litigation or threatened litigation relating to the ownership or
validity or the PATENTS or claiming that the armored conduit infringes any other
patent, and (III) any litigation or threatened litigation claiming any
infringement on the claims in the PATENTS.
9. Indemnification
(a) BUYER shall defend, indemnify, and hold harmless SELLER and
International, and SELLER and International agents, officers, board members and
employees from and against any and all claims, damages, losses, and expenses,
including reasonable attorney & fees to or for an attorney of SELLER and
International's choosing, for claims for damages to property, ii)injury to
persons, or death of persons, or for any other damage arising out of or in any
way related to the sublicensing, manufacture, use, distribution, marketing, or
sale of armored conduit by BUYER or by anyone for whom BUYER may be responsible,
including but not limited to BUYER'S associates, affiliates, DIRECTORS,
officers, employees, SUBLICENSORS, assigned, and BUYER transferees.
(b) BUYER agrees to defend SELLER and International and any of SELLER
and International's agents, employees, officers, board member, or anyone for
whom SELLER and International may be liable ("Indemnitees") , against any such
lawsuit referred to in subparagraph (a) of this Section at BUYER'S expense, and
to pay any judgment rendered against any Indemnitee in any such lawsuit,
together with all costs and reasonable attorney's fees to or for and attorney of
SELLER and International's choosing incurred inpreparing for defending any such
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lawsuit. Any sublicense, transfer, or assignment of any BUYER's rights under
this Agreement shall approximately impose the obligations of this Section on any
SUBLICENSEE, transferee, or assignee.
(c) SELLER and International shall defend, indemnify, and hold harmless
BUYER and BUYER's agents, officers, board members and employees from and against
any and all claims, damages, losses, and expenses, including reasonable
attorney's fees to or for an attorney of BUYERS choosing, for any claims for:
property rights in or to; rights in or to; liens on or to; security interests in
or to; the PATENTS, and also any claims for rights, privileges or licenses
contrary to the Premises of this Agreement or the representations and warranties
of SELLER and International in Section 8 and sub-paragraphs 1(d) and 3(e). In
addition, SELLER and International shall reimburse BUYER for, indemnify BUYER
against, and hold BUYER harmless from, any costs, losses,, expenses, damages,
awards, and/or judgments arising directly or indirectly out of, or in any way
related directly or indirectly to, any such litigation.
(d) The indemnification of SELLER and International in subparagraph (c)
above shall extend to any of BUYER's agents, employees, officers, board members,
or anyone for whom BUYER may be liable (Indemnitees"), against any such lawsuit
referred to in subparagraph (c) of this Section. Any sublicense, transfer, or
assignment of any BUYER'S rights under this Agreement may expressly provide the
benefits of this sub-paragraph to any sublicensee, transferee, or assignee, but
that shall not be required in order for such a person to receive the benefits
hereof.
10. Insurance
(a) Prior to the first use of any armored conduit, BUYER shall obtain
liability insurance coverage for any and all liability arising out of
subleasing, manufacturing, use, distribution, marketing, or sale of any armored
conduit.
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SELLER and International shall be named insiders in any such liability
insurance. The amount of liability insurance coverage shall be for at least
$1,000,000.
(b) BUYER shall forward written evidence of the above amounts of
liability insurance coverage to SELLER and International, prior to the first use
of any armored conduit. The obligation to provide SELLER written evidence of the
liability insurance required by this section shall continue so long as BUYER
makes, uses, or sells armored conduit.
(c) Any sublicense, assignee, or transferee of any rights under the
PATENTS or this Agreement shall each obtain the type and amount of liability
insurance required by subparagraph (a) of this Section.
ii. Breach or Default
(a) If BUYER Shall not, within twenty-four (24) months of the date
hereof, acquire or construct a facility for the production and manufacture of
armored conduit, then regardless of the status of the cash purchase price
Installment payments hereunder or the payments of the "minimum royalty" items
hereunder there shall be a breach of this Agreement.
(b) If BUYER shall be delinquent in the payment of any installment of
the cash purchase price hereunder, which delinquency is not cured within thirty
(30) days after the giving of written notice of such delinquency by SELLER,
there shall be a breach of this Agreement.
(C) If any representation or warranty of SELLER and/or International
herein shall be found to be incorrect, not consistent with the facts, or
otherwise inaccurate, there shall be a breach of this Agreement.
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(d) In the event of a
breach of this Agreement by BUYER, SELLER may require that SELLER reconvey the
PATENTS to SELLER and SELLER shall have the option to purchase the business and
assets pertaining to the exploitation of such PATENTS from BUYER at the then
current book value thereof, as shown on Buyer's books.
(e) In the event of a breach of this Agreement by Seller and/or
International, BUYER may, as relevant and applicable, (i) extend the time for
performance of all provisions hereof for an equal period of time plus thirty
(30) days, (ii) withhold all sums owing to BUYER together with interest at seven
per cent (7t) from any sums owing to SELLER or International hereunder (whether
cash purchase price installments, royalties, or otherwise) or (iii) take such
action, at the expense of SELLER and/or International, to cure such breach, or
(iv) terminate this Agreement, tender the PATENTS together with the offer to
sell to SELLER and International the business and assets pertaining to the
exploitation of such PATENTS from BUYER at the original cost value thereof,
together with seven per cent (7%) interest thereon since the date the costs were
incurred, in which event SELLER and INTERNATIONAL, jointly and severally shall
purchase such PATENTS and business and assets.
12. NOTICES
All notices to a party shall be deemed given when mailed by registered
or certified mail to the address set forth below or such other address as may be
substituted therefor by notice:
TO SELLER:
With a copy to:
_________________________________, Esq.
TO International:
with a copy to:
_________________________________, Esq.
TO BUYER.,
With a copy to:
_________________________________, Esq.
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13. Integration
This Agreement is the entire Agreement among the parties and supersedes
the Letter of Intent of November 9, 1995 and any other prior agreements among
the parties with respect thereto except as herein specified. There are no
representation, warranties or other agreements except as expressed in this
Agreement. No alteration, modification, or waiver of term or condition hereof
shall be binding unless in writing and signed by all parties.
14. Amendments
This Agreement may be amended only with the written approval of the
party to be charged therewith provided, however, that no such amendment may be
made that would cause a breach of any warranty or representation herein.
15. No Assignment
This agreement may not be assigned by any party or by operation of law
or otherwise, except that BUYER may assign its rights hereunder to a
wholly-owned subsidiary for the purpose of implementing the terms hereof.
16. Construction
Whenever required by the context hereof: the masculine gender shall be
deemed to include the feminine and neuter; and the singular member shall be
deemed to include the plural. Time is expressly declared to be of the essence of
this Agreement. This Agreement shall be deemed to have been mutually prepared by
all parties and shall not be construed against any particular party as the
draftsman.
17. Interpretation
It is the intent of the parties that this Agreement shall be construed
and interpreted, and that all questions arising hereunder shall be determined in
accordance with the provisions of the laws of the State of New York.
14
<PAGE>
18. Binding Effect
This Agreement shall be binding upon and shall inure to the benefit of
the parties and their successor's and assigns.
19. Arbitration
Any controversy, claim or dispute arising out of or resulting from this
Agreement, or the breach thereof, that cannot be resolved by negotiations shall
be resolved by arbitration, to be held in Flushing, New York, In accordance with
the rules and regulations of the American Arbitration Association, except that
the provisions for discovery shall be as set forth in the Rules or Civil
procedural then in effect in New York. Failure of a party to participate or
cooperate shall constitute grounds for default judgment. The arbitrator shall
award legal fees and costs to the prevailing party. The decision of the
arbitrator shall in each case, including awards and the allocation of costs, be
final and binding upon the parties. Judgment upon the award rendered by the
arbitrator may be entered in any Court having jurisdiction thereof.
20. Counterparts
This Agreement may be executed in two or more counterparts, any one of
which shall be deemed to be an original.
21. No Broker's or Finder's Fees
No agent, broker, person, or firm acting on behalf of either party or
any of their subsidiaries or under the authority of any of them is or will be
entitled to any commission or broker's or finders fee or financial advisory fee
in connection with any of the transactions contemplated herein.
15
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement on the date first above written.
PROGRESSIVE POLYMERICS, INC.
ATTEST:
BY:__________________________
PROGRESSIVE POLYMERICS
INTERNATIONAL, INC.
ATTEST:
BY:__________________________
FIDELITY HOLDINGS, INC.
ATTEST:
BY:__________________________
<PAGE>
Warrant Agreement for
Nissko Warrants
4.2
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, made this 26th day of March, 1996, by and
between:
FIDELITY HOLDINGS, INC., a Nevada corporation. with its principal office
located at 80-02 Kew Gardens Rd., Queens, NY 11413, (hereinafter referred to as
the "COMPANY").
AND
EACH OF THE REGISTERED HOLDERS of the Company's warrants covered hereby
(and their registered assigns), from time to time, from the date of original
issue of such warrants to the expiration date thereof (hereinafter referred to
as the "INVESTORS", "HOLDER" and/or 'HOLDERS" as the context may require).
WITNESSETH THAT:
WHEREAS, the COMPANY has entered into a certain Agreement of even date
with the INVESTORS, in which such Agreement the COMPANY has agreed, in
consideration of the execution of such Agreement by the INVESTORS, to issue and
deliver Stock Purchase Warrants (hereinafter called the "WARRANTS") to the
INVESTORS entitling the HOLDERS thereof to purchase up to an aggregate of One
Million Five Hundred Thousand (1,500,000) shares of the Common Stock of the
COMPANY (hereinafter called the "Shares"); and
WHEREAS, the COMPANY desires to provide for the form and provisions of
the WARRANTS, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the COMPANY and the
HOLDERS; and
WHEREAS, all acts and things necessary to make the WARRANTS, when
executed on behalf of the COMPANY, the valid, binding, and legal obligations of
the COMPANY, have been done and performed; and
WHEREAS, all acts and things necessary to authorize the execution and
delivery of this Warrant Agreement, and to execute and deliver the WARRANTS to
the INVESTORS as the original registered HOLDERS, have been done and performed;
<PAGE>
NOW, THEREFORE, intending to be legally bound hereby, and intending the
original registered HOLDERS and their successors and assigns to rely hereon, the
COMPANY hereby represents and agrees, and the HOLDERS by acceptance of the
WARRANTS implicitly agree, as follows:
1. WARRANTS AUTHORIZED. COMPANY hereby authorizes the issuance to the
INVESTORS of One Million Five Hundred Thousand (1,500,000) WARRANTS upon the
terms and conditions of this Warrant Agreement. Such WARRANTS are divided into
two (2) types of WARRANTS: Seven Hundred Fifty Thousand (750,000) of the
WARRANTS shall be called the 1996-A Warrants and, subject to sub-paragraph 5(b)
below, shall be exercisable until 5:00 P.M. E.D.T. on the last day of the sixth
month after the date of issuance at an exercise price of $1.25 per share of
Common Stock; and Seven Hundred Fifty Thousand (750,000) of the WARRANTS shall
be called the 1996-B warrants and, subject to sub-paragraph 5(b) below, shall be
exercisable until 5:00 P.M. E.D.T. on the last day of the twenty-fourth month
after the date of issuance at an exercise price of $1.25 per share of Common
Stock.
2. FORM AND EXECUTION. Each WARRANT, whenever issued: (a) depending
upon the type of WARRANT, 750,000 WARRANTS (the 1996-A Warrants) shall be in
substantially the form attached hereto as Exhibit A and 750,000 WARRANTS (the
1996-B Warrants) shall be in substantially the form attached hereto as Exhibit
B; (b) shall be dated as of the date of issuance, which shall be the same date
as ,this Warrant Agreement; (c) shall entitle the HOLDER-to purchase the number
of Shares stated thereon; (d) shall be signed by the !President or Vice
President and the Secretary or Treasurer of the COMPANY; (e) and shall have the
company's seal impressed thereon. The COMPANY may adopt and use the facsimile
signature of any person who is a requisite officer of the COMPANY at the time
such WARRANTS are executed, or of any person now or hereafter holding such
office, notwithstanding the fact that at the time a WARRANT is issued he had
ceased to be such officer of the COMPANY. Prior to delivery of any WARRANT, it
shall be manually countersigned by the Warrant Agent. No WARRANT shall be valid
unless so countersigned.
3. WARRANT ISSUANCE AND ISSUANCE CONSIDERATION. These WARRANTS are
being hereby issued to the INVESTORS as the original
2
<PAGE>
registered HOLDERS, such INVESTORS having entered into a certain Agreement with
the COMPANY for the purchase of fifteen (15) "Talkie Power Web Line Machines".
The consideration for the issuance of the WARRANTS is the execution of such a
large Agreement at this stage of the company's development. The INVESTORS are
acquiring these WARRANTS in a private transaction for their own investment
purposes and not with a view to transfer, resale or distribution of such
WARRANTS or the underlying Common Stock.
4. WARRANT EXERCISE PRICE. Each WARRANT (both 1996-A Warrants and
1996-B Warrants) shall entitle the registered HOLDER thereof, subject to the
provisions thereof and of this Warrant Agreement, to purchase from the COMPANY
the number of Shares of the company's Common Stock as stated thereon, at the
price of One Dollar and Twenty-five Cents ($1.25) per Share, both the number of
Shares and the price being subject to the anti-dilution adjustments provided in
Paragraph 8 hereof. The term Warrant Exercise Price" as used in this Warrant
Agreement refers to the price per Share at which Common Stock may be purchased
at the time a WARRANT is exercised.
5. DURATION (Term). (a) Subject to sub-paragraph (b) following, the
1996-A Warrants may be exercised at any time between the date of issuance and
the close of business (5:00 P.M. Eastern Daylight Time) on the last day of the
sixth month after the date of issuance, such date being hereinafter called the
"Expiration Date". Subject to sub-paragraph (b) following, the 1996-B Warrants
may be exercised at any time between the date of issuance and the close of
business (5:00 P.M. Eastern Standard Time) on the last day of the twenty-fourth
month after the date of issuance, such date being hereinafter called the
"Expiration Date". Each. WARRANT not exercised on or before its Expiration Date
shall become void, and all rights thereunder and all rights in respect thereof
under this Warrant Agreement shall cease at the close of business on the
respective Expiration Date. The COMPANY reserves the right to extend the
Expiration Date of either type of WARRANTS,'from time to time, any number of
times, but shall be under no obligation to do SO.
(b) Both the 1996-A Warrants and the 1996-B Warrants shall terminate prior to
the Expiration Date in the event that the contemporaneous Purchase Agreement
between the COMPANY's wholly-
3
<PAGE>
owned subsidiary and Nissko Telecom, Inc. is terminated or Nissko Telecom, Inc.
fails to perform as required under such Purchase Agreement.
6. TRANSFER AND/OR EXCHANGE OF WARRANTS. On or after the date of
issuance and prior to the Expiration Date, any HOLDER of any WARRANT, subject to
the transfer restrictions of federal and state securities laws, at any time
prior to the exercise thereof, -may transfer all or any portion of the stock
purchase rights provided in the WARRANT. Upon presentation and surrender to the
Warrant Agent of the WARRANT, properly assigned, accompanied by appropriate
transfer instructions from the HOLDER, the Warrant Agent shall issue a WARRANT
for the assigned number of shares to the assignee as the new registered HOLDER
and shall issue a WARRANT for the unassigned balance of the shares to the
assigning (old) registered HOLDER. Any HOLDER of any WARRANT or WARRANTS, at any
time prior to the exercise thereof, may exchange such WARRANT or WARRANTS for a
WARRANT or WARRANTS of like tenor exercisable for the same aggregate number of
Common Shares as the WARRANT surrendered; i.e., consolidate or divide his
holdings. The Warrant Agent is the COMPANY's Transfer Agent, Olde Monmouth Stock
Transfer Co., 22 Claridge Drive, Middletown, New Jersey 07748. The COMPANY shall
give notice to the registered HOLDERS of WARRANTS of any change in the address
of, or in the designation of, its warrant Agent.
7. EXERCISE. (a) Except as otherwise provided in subparagraph (f)
below, a WARRANT shall be exercisable only by the registered HOLDER surrendering
it, together with the subscription form set forth in the WARRANT duly executed,
accompanied by payment, in full, in lawful money of the United States, of the
Warrant Exercise Price for each full Share as to which the WARRANT is exercised,
to the Warrant Agent. The Warrant Agent is the COMPANY's Transfer Agent, olde
Monmouth Stock Transfer Co., 22 Claridge Drive, Middletown, New Jersey 07748.
The COMPANY shall give notice to the registered HOLDERS of WARRANTS of any
change in the address of, or in the designation of, its Warrant Agent.
(b) A WARRANT may be exercised wholly or in part. If a WARRANT is only
exercised in part, a new WARRANT for the number of shares as to which the
WARRANT shall not have been exercised shall
4
<PAGE>
be issued to the registered HOLDER.
(c) As soon as practicable after the exercise of any WARRANT, the
COMPANY shall issue to or upon the order of the registered HOLDER a certificate
or certificates for the number of full Shares which he is entitled, registered
in such name or names as may be directed by him.
(d) All Shares issued upon exercise of a WARRANT shall be validly
issued, fully paid, and non-assessable. The COMPANY shall pay all taxes in
respect of the issue thereof. However, the registered HOLDER shall pay all taxes
imposed in connection with any transfer, even if involved in an issue of a
certificate, and the COMPANY shall not be required to issue or deliver any stock
certificate in such case until the tax shall have been paid.
(e) Each person in whose name any such certificate for Shares is issued
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the WARRANT was surrendered and payment of the
Warrant Exercise Price and applicable taxes was made, irrespective of the date
of delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the COMPANY are closed, the
person or persons entitled to receive Shares upon such exercise shall be
considered the record holder or holders of such shares at the close of business
on the next succeeding date on which the stock transfer books are open and shall
be entitled to receive only dividends or distributions which are payable to
holders of record after that date.
(f) Notwithstanding sub-paragraph (a) above, with respect to full
payment upon exercise of a WARRANT, the 1996-A Warrants shall be exercisable by
the registered HOLDER surrendering-it, together with the subscription form set
forth in the WARRANT duly executed, accompanied by payment of at least ten
percent (10%) of the full Exercise Price for each full Share as to which the
WARRANT is exercised, in lawful money of the United states, to the Warrant
Agent. The shares shall be issued in escrow -and, held by the COMPANY for
release to the subscribing HOLDER only when the balance is paid in full. The
balance shall be paid in full on or before December 31, 1996; subject, however,
to an extension (grace period)
5
<PAGE>
of no more than two (2) weeks in the discretion of the subscribing HOLDER. If
the balance is paid in full by the due date, as extended, the shares shall be
released to the subscribing HOLDER; if the balance is not paid in full by the
due date, as extended, the shares shall be returned to the Warrant Agent for
cancellation and the ten percent (10%) deposit shall be returned without
interest.
8. SHARE DIVIDENDS, RECLASSIFICATION, REORGANIZATION ANTI-DILUTION
PROVISIONS. Each WARRANT is subject to the following further provisions:
(a) In case, prior to the expiration of a WARRANT by exercise or by its
terms, the COMPANY shall issue any of its Common Stock as a share dividend or
subdivide the number of outstanding shares of Common Stock into a greater number
of shares, then, in either of such cases" the Purchase Price per share of the
Shares purchasable pursuant to a WARRANT in effect at the time of such action
shall be proportionately reduced and the number of Shares at the time
purchasable pursuant to a WARRANT shall be proportionately increased; and
conversely, in the event the COMPANY shall contract the number of outstanding
shares of Common Stock by combining such shares into a smaller number of shares,
then, in such case, the Purchase Price per share of the Shares purchasable
pursuant to a WARRANT in effect at the time of such action shall be
proportionately increased and the number of Shares at the time purchasable
pursuant to a WARRANT shall be proportionately decreased. If the COMPANY shall,
at any time during the life of a WARRANT, declare a dividend payable in cash on
its Common Stock and shall at substantially the same time offer to its
stockholders a right to purchase new Common Stock from the proceeds of such
dividend or for an amount substantially equal to the dividend, all shares of
Common Stock so issued shall, for the purpose of a WARRANT, be deemed to have
been issued as a share dividend. Any dividend paid or distributed upon the
Common Stock in 91 hares of any other class or securities convertible into
Common Stock shall be treated as a dividend paid in shares of Common Stock to
the extent that shares of Common Stock are issuable upon the conversion thereof.
(b) In case, prior to the expiration of a WARRANT by exercise
6
<PAGE>
or by its terms, the COMPANY shall be recapitalized, or the COMPANY or a
successor corporation shall consolidate or merge with or convey all or
substantially all of its or of any successor corporation's property and assets
to any other corporation or corporations (any such corporation being included
within the meaning of the term "successor corporation" hereinbefore used in the
event of any consolidation or merger of any such corporation with, or the sale
of all or substantially all of the property of any such corporation to, another
corporation or corporations) , the holder of a WARRANT shall thereafter have the
right to purchase, upon the basis and on the terms and conditions and during the
time specif ied in a WARRANT in lieu of the Shares of the COMPANY theretof ore
purchasable, upon the exercise of a WARRANT, such shares, securities or assets
as may be issued or payable with respect to, or in exchange f or, the number of
Shares of the COMPANY theretof ore purchasable upon the exercise of a WARRANT
had such recapitalization, consolidation, merger, or conveyance not taken place;
and in any such event, the rights of the holder of a WARRANT to an adjustment in
the number of Shares purchasable upon the exercise of a WARRANT as herein
provided shall continue and be preserved in respect of any shares, securities,
or assets which the holder of a WARRANT becomes entitled to purchase.
(c) In case:
(i) the COMPANY shall take a record of the holders of its
common Shares f or the purpose of entitling them to
receive a dividend payable otherwise than in cash, or
any other distribution in respect of the common
Shares (including cash), pursuant to, without
limitation, any spin-off, split-off, or distribution
of the COMPANY's assets; or
(ii) the COMPANY shall take a record of the holders of its
Common Shares f or the purpose of entitling them to
subscribe for or purchase any shares of any class or
to receive any other rights; or
(iii) of any classification, reclassification, or
7
<PAGE>
other reorganization of the shares which the COMPANY
is authorized to issue, consolidation or merger of
the COMPANY with or into another corporation, or
conveyance of all or substantially all of the assets
of the COMPANY; or
(iv) of the voluntary or involuntary dissolution,
liquidation, or winding up of the COMPANY;
then, and in any such case, the COMPANY shall mail to the holder of a WARRANT,
at least 21 days prior thereto, a notice stating the date or expected date on
which a record is to be taken f or the purpose of such dividend, distribution,
or rights, or the date on which such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up is to take place, as the case may be. Such notice shall also specify
the date or expected date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to participate in such dividend, distribution,
or rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up, as the case may be.
(d) In case the COMPANY at any time while a WARRANT shall remains
unexpired and unexercised shall sell all or substantially all of its property or
dissolve, liquidate, or wind up its affairs, the holder of a WARRANT may
thereafter receive upon exercise hereof in lieu of each Share which it would
have been entitled to receive the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon such sale,
dissolution, liquidation, or winding up with respect to each Share.
(e) The COMPANY plans to make an offering of convertible debentures or
convertible preferred stock or such other security which may be convertible into
Common Stock or carry warrants for the purchase of shares of Common stock. The
parties agree that this warrant issuance is related to such proposed.offering(s)
and no adjustments (as described in this Section 8) shall be made to any of the
WARRANTS on account of any such offering(s), for a
8
<PAGE>
period of twenty-four (24) months from the date of the issuance of the first
warrant subject to this warrant agreement or until and unless the number of
shares of COMPANY's Common Stock outstanding exceeds twelve million (12,000,000)
shares. After such 24 month period, or at any time that the outstanding Common
Stock of the COMPANY exceeds 12,000,000 shares if earlier than 24 months, then
the provisions of Section 8 hereinabove shall have full force and effect on the
WARRANTS.
9. RESERVATION OF SHARES ISSUABLE ON EXERCISE OF WARRANTS. The COMPANY
shall at all times reserve and keep available out of its authorized shares,
solely for issuance upon the exercise of all WARRANTS issued hereunder, such
number of Common Shares and other shares as from time to time shall be issuable
upon the exercise of a WARRANT and all other similar WARRANTS at the time
outstanding.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION. Upon receipt by the COMPANY
of evidence satisfactory to it, (in the exercise of its reasonable discretion),
of the ownership of and the loss, theft, destruction, or mutilation of a
WARRANT, and (in the case of loss, theft, or destruction) of indemnity
satisfactory to i@ (in the case of mutilation) upon surrender and cancellation
thereof e the COMPANY will execute and deliver, in lieu thereof, a new WARRANT
for like tenor.
WARRANT HOLDER NOT A SHAREHOLDER. The HOLDER of a WARRANT, as
such, shall not be entitled by reason of a WARRANT to any rights whatsoever of a
stockholder of the COMPANY. No HOLDER of any WARRANT shall be entitled to
receive any dividend or to vote with respect to any dividend declared or the
taking of a register of stockholders entitled to vote with a Record Date prior
to the date of exercise of the WARRANTS.
12. NOTICES. All notices and other communications from the COMPANY to
the HOLDER of a WARRANT shall be mailed by first-class registered mail, postage
prepaid, to the address furnished to the COMPANY in writing by the HOLDER)ER of
a WARRANT.
IN WITNESS WHEREOF, intending to be legally bound, the COMPANY
9
<PAGE>
has executed this Warrant Agreement:
Dated: March 26, 1996
FIDELITY HOLDINGS, INC.
ATTEST:
By:________________________________
President
By:________________________________
Secretary
10
<PAGE>
NO. 1996 - A 1996A WARRANT
RIGHT TO PURCHASE
__________ SHARES
FIDELITY HOLDINGS, INC.
(a Nevada Corporation)
1996A WARRANT
VOID AFTER 5:00 P.M. EDT, SEPTEMBER 19, 1996
THIS IS TO CERTIFY THAT:
- --------------------------------------------------------------------------------
or registered assigns, is entitled to purchase, on or before 5:00 p.m. Eastern
Daylight Time on September 19, 1996, that number of shares (subject to
anti-dilution protection provisions contained in the Warrant Agreement) of the
Common Stock of Fidelity Holdings, Inc. (the "Company") at a price of One Dollar
and Twenty-five Cents ($1.25) per share, upon presentation of this Warrant and
payment of the purchase price at the office of the Warrant Agent; subject,
however, to the terms of the Warrant Agreement under which this Warrant has been
issued, which is incorporated by reference, and to which the holder hereof
assents by acceptance of this Warrant. This Warrant, the purchase rights
represented hereby, and all of the rights of each holder with respect thereto,
are subject to all of the terms, conditions, rights, limitations and other
provisions of the Warrant Agreement and in the event of any conflict between the
terms of this Warrant and the terms of the Warrant Agreement, the Warrant
Agreement shall control.
The purchase rights represented by this Warrant are exercisable at the
option of the registered owner hereof in whole at any time prior to expiration.
Subject to the right of the Company to extend the expiration date as set forth
in the Warrant Agreement, this Warrant and the purchase rights it represents
expire at 5:00 p.m. on September 19, 1996 and thereafter shall be void and of no
effect. Notwithstanding the foregoing specific Expiration Date, this Warrant
shall terminate prior to the Expiration Date in the event that the
contemporaneous Purchase Agreement between Computer Business Sciences, Inc., the
COMPANY'S wholly-owned subsidiary, and Nissko-Delaware is terminated or
Nissko-Delaware fails to perform as required under such Purchase Agreement.
The number of shares purchasable upon the exercise of this Warrant and
<PAGE>
the purchase price per share shall be subject to adjustment from time to time,
to provide anti-dilution protection, as set forth in the Warrant Agreement.
This Warrant shall not entitle the registered owner or any holder to
voting rights or other rights as a stockholder of the Company or to any other
rights whatsoever except the rights herein expressed or expressed in the Warrant
Agreement, and no dividends shall be payable or accrue in respect of this
Warrant or the interest represented hereby or the shares purchasable hereunder
until, or unless, and to the extent that, this Warrant shall be exercised.
This Warrant is exchangeable upon its surrender to the Company by the
registered owner, for new Warrants of like tenor and date, representing in the
aggregate the right to purchase the number of shares purchasable hereunder.
Except as otherwise above provided, this Warrant and all rights
hereunder are transferable by the registered owner hereof in person or by duly
authorized attorney on the books of the Company upon surrender to the Company of
this Warrant, properly endorsed.
The Company may deem and treat the registered owner of this Warrant at
all times as the absolute owner hereof for all purposes and such shall not be
affected by any notice to the contrary.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by the signatures of its duly authorized officers and the corporate seal
hereunto affixed.
Dated: March 26, 1996
At: Flushing, New York
FIDELITY HOLDINGS, INC.
ATTEST:
BY:___________________________
President
BY:___________________________
Secretary
<PAGE>
SUBSCRIPTION FORM
(To be executed by the Registered Holder
upon exercise of Warrant)
NOTE: If less than all of the shares for which this Warrant is exercisable are
subscribed for, the Warrant Agent will return a new Warrant for the unexercised
balance.
The undersigned, Registered Holder or assignee of such Registered
Holder of the within Warrant, hereby (1) subscribes for ____ Shares of the
Common Stock which the undersigned is entitled to purchase under the terms of
the within Warrant, (2) makes cash payment of ten percent (10%) of the Exercise
Price called for by the within Warrant for the number of shares as to which this
Warrant is exercised, with the understanding that the shares will be held in
escrow by the Company until receipt of the balance of the Exercise Price as
provided in the Warrant Agreement, and (3) directs that the Shares of Common
Stock issuable upon exercise of the within Warrant be issued as follows:
Name:___________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
Dated:_____________________, 1996
Signature(s):-------------------------------
-------------------------------
- --------------------------------------------------------------------------------
NOTICE: The signature(s) on this Subscription Form must correspond with the
name(s) as written upon the face of the within Warrant, or upon the assignment
form on the reverse thereof, in every particular, without alteration or
enlargement, or any change whatsoever, and must be guaranteed by a bank or by a
firm having registered membership on a registered securities exchange.
<PAGE>
ASSIGNMENT
(To be executed by the Registered Holder
to effect a transfer of the within Warrant)
NOTE: If less tan all of the shares for which this Warrant is exercisable are
assigned, the Warrant Agent will return a new Warrant for the unassigned
balance.
FOR VALUE RECEIVED the undersigned Registered Holder(s) of the within
Warrant hereby sell(s), assign(s), and transfer(s) the right to purchase ___
Shares of Common Stock evidenced by the within Warrant and do irrevocably
constitute and appoint
- --------------------------------------------------------------------------------
to transfer such right on the books of the Company with full power of
substitution.
Dated: ___________________________, 1996
Signatures(s):------------------------------
------------------------------
- --------------------------------------------------------------------------------
NOTICE: The signature(s) on this Subscription Form must correspond with the
name(s) as written upon the face of the within Warrant, or upon the assignment
form on the reverse thereof, in every particular, without alteration or
enlargement, or any change whatsoever, and must be guaranteed by a bank or by a
firm having registered membership on a registered securities exchange.
<PAGE>
NO. 1996 - B _____ 1996B WARRANT
RIGHT TO PURCHASE
__________ SHARES
FIDELITY HOLDINGS, INC.
(a Nevada Corporation)
1996A WARRANT
VOID AFTER 5:00 P.M. EDT, MARCH 19, 1998
THIS IS TO CERTIFY THAT:
- --------------------------------------------------------------------------------
or registered assigns, is entitled to purchase, on or before 5:00 p.m. Eastern
Daylight Time March 19, 1998, that number of shares (subject to anti-dilution
protection provisions contained in the Warrant Agreement) of the Common Stock of
Fidelity Holdings, Inc. (the "Company") at a price of One Dollar and Twenty-five
Cents ($1.25) per share, upon presentation of this Warrant and payment of the
purchase price at the office of the Warrant Agent; subject, however, to the
terms of the Warrant Agreement under which this Warrant has been issued, which
is incorporated by reference, and to which the holder hereof assents by
acceptance of this Warrant. This Warrant, the purchase rights represented
hereby, and all of the rights of each holder with respect thereto, are subject
to all of the terms, conditions, rights, limitations and other provisions of the
Warrant Agreement and in the event of any conflict between the terms of this
Warrant and the terms of the Warrant Agreement, the Warrant Agreement shall
control.
The purchase rights represented by this Warrant are exercisable at the
option of the registered owner hereof in whole at any time prior to expiration.
Subject to the right of the Company to extend the expiration date as set forth
in the Warrant Agreement, this Warrant and the purchase rights it represents
expire at 5:00 p.m. on September 19, 1996 and thereafter shall be void and of no
effect. Notwithstanding the foregoing specific Expiration Date, this Warrant
shall terminate prior to the Expiration Date in the event that the
contemporaneous Purchase Agreement between Computer Business Sciences, Inc., the
COMPANY'S wholly-owned subsidiary, and Nissko-Delaware is terminated or
Nissko-Delaware fails to perform as required under such Purchase Agreement.
The number of shares purchasable upon the exercise of this Warrant and
<PAGE>
the purchase price per share shall be subject to adjustment from time to time,
to provide anti-dilution protection, as set forth in the Warrant Agreement.
This Warrant shall not entitle the registered owner or any holder to
voting rights or other rights as a stockholder of the Company or to any other
rights whatsoever except the rights herein expressed or expressed in the Warrant
Agreement, and no dividends shall be payable or accrue in respect of this
Warrant or the interest represented hereby or the shares purchasable hereunder
until, or unless, and to the extent that, this Warrant shall be exercised.
This Warrant is exchangeable upon its surrender to the Company by the
registered owner, for new Warrants of like tenor and date, representing in the
aggregate the right to purchase the number of shares purchasable hereunder.
Except as otherwise above provided, this Warrant and all rights
hereunder are transferable by the registered owner hereof in person or by duly
authorized attorney on the books of the Company upon surrender to the Company of
this Warrant, properly endorsed.
The Company may deem and treat the registered owner of this Warrant at
all times as the absolute owner hereof for all purposes and such shall not be
affected by any notice to the contrary.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by the signatures of its duly authorized officers and the corporate seal
hereunto affixed.
Dated: March 26, 1996
At: Flushing, New York
FIDELITY HOLDINGS, INC.
ATTEST:
BY:___________________________
President
BY:___________________________
Secretary
<PAGE>
SUBSCRIPTION FORM
(To be executed by the Registered Holder
upon exercise of Warrant)
NOTE: If less than all of the shares for which this Warrant is exercisable are
subscribed for, the Warrant Agent will return a new Warrant for the unexercised
balance.
The undersigned, Registered Holder or assignee of such Registered
Holder of the within Warrant, hereby (1) subscribes for ____ Shares of the
Common Stock which the undersigned is entitled to purchase under the terms of
the within Warrant, (2) makes cash payment of ten percent (10%) of the Exercise
Price called for by the within Warrant for the number of shares as to which this
Warrant is exercised, with the understanding that the shares will be held in
escrow by the Company until receipt of the balance of the Exercise Price as
provided in the Warrant Agreement, and (3) directs that the Shares of Common
Stock issuable upon exercise of the within Warrant be issued as follows:
Name:__________________________________________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________
Dated:_____________________, 199_
Signature(s):-------------------------------
-------------------------------
- -------------------------------------------------------------------------------
NOTICE: The signature(s) on this Subscription Form must correspond with the
name(s) as written upon the face of the within Warrant, or upon the assignment
form on the reverse thereof, in every particular, without alteration or
enlargement, or any change whatsoever, and must be guaranteed by a bank or by a
firm having registered membership on a registered securities exchange.
<PAGE>
ASSIGNMENT
(To be executed by the Registered Holder
to effect a transfer of the within Warrant)
NOTE: If less than all of the shares for which this Warrant is exercisable are
assigned, the Warrant Agent will return a new Warrant for the unassigned
balance.
FOR VALUE RECEIVED the undersigned Registered Holder(s) of the within
Warrant hereby sell(s), assign(s), and transfer(s) the right to purchase ___
Shares of Common Stock evidenced by the within Warrant and do irrevocably
constitute and appoint
- --------------------------------------------------------------------------------
to transfer such right on the books of the Company with full power of
substitution.
Dated: ___________________________, 199_
Signatures(s):------------------------------
------------------------------
- --------------------------------------------------------------------------------
NOTICE: The signature(s) on this Subscription Form must correspond with the
name(s) as written upon the face of the within Warrant, or upon the assignment
form on the reverse thereof, in every particular, without alteration or
enlargement, or any change whatsoever, and must be guaranteed by a bank or by a
firm having registered membership on a registered securities exchange.
<PAGE>
Warrant Agreement for
Major Fleet Warrants
4.3
<PAGE>
THIS WARRANT AGREEMENT, made this 2nd day of October, 1996, by and
between:
FIDELITY HOL.DINGS, INC., a Nevada corporation with its principal
office located at 80-02 Kew Gardens Rd., Kew Gardens, Queens, NY 11413
(hereinafter referred to as the "COMPANY"). York 11367, (hereinafter referred to
as the "COMPANY")
AND
BRUCE BENDELL and HAROLD BENDELL, THE REGISTERED HOLDERS of the
Company's 1996-MAJOR warrants covered hereby (and their registered assigns),
from time to time, from the date of origin issue of such warrants to the
expiration date thereof (hereinafter referred to as the "INVESTORS", "HOLDER"
and/or "HOLDERS" as the context may require).
WITNESSETH THAT:
WHEREAS, the COMPANY has entered into a certain Management Agreement of
even date with the INVESTORS, in which such Management Agreement the COMPANY has
agreed, in consideration of the execution of such Agreement by the INVESTORS, to
issue and deliver Stock Purchase Warrants (hereinafter called the "WARRANTS") to
the INVESTORS entitling the HOLDERS thereof to purchase up to a aggregate of Two
Hundred Fifty Thousand (250,000) shares of the Common Stock of the COMPANY
(hereinafter called the "Shares") ; and
WHEREAS, the COMPANY desires to provide for the form an provisions of
the WARRANTS, the terms upon which they shall be issued and exercised, and the
respective rights, limitation o rights, and immunities of the COMPANY and the
HOLDERS; and
<PAGE>
NOW, THEREFORE, intending to be legally bound hereby, and intending the
original registered HOLDERS and their successors and assigns to rely hereon, the
COMPANY hereby represents and agrees, and the HOLDERS by acceptance of the
WARRANTS implicitly agree, as follows:
1. WARRANTS AUTHORIZED. COMPANY hereby authorizes the issuance to the
INVESTORS of Two Hundred Fifty Thousand (250,000) WARRANTS upon the terms and
conditions of this Warrant Agreement. The WARRANTS shall be called the
1996-MAJOR Warrants and, subject to sub-paragraph 5(b) below, shall be
exercisable after January 1, 1997 and until 5:00 P.M. E.D.T. on the day which is
six (6) months after the declaration of effectiveness of the Company's
Registration Statement registering the shares to be acquired upon exercise of
this warrant, at an exercise price of $1.25 per share of Common Stock.
2. FORM AND EXECUTION. Each WARRANT, whenever issued: (a) shall be in
substantially the form attached hereto as Exhibit A; (b) shall be dated as of
the date of issuance, which shall be the same date as this Warrant Agreement;
(c) shall entitle the HOLDER to purchase the number of Shares stated thereon;
(d) shall be signed by the President or Vice President and the Secretary or
Treasurer of the COMPANY; (e) and shall have the COMPANY'S seal impressed
thereon. The COMPANY may adopt and use the facsimile signature of any person who
is a requisite officer of the COMPANY at the time such WARRANTS are executed, or
of any person now or hereafter holding such office, notwithstanding the fact
that at the time a WARRANT is issued he had ceased to be such officer of the
COMPANY.
3. WARRANT ISSUANCE AND ISSUANCE CONSIDERATION. These WARRANTS are
being hereby issued to the INVESTORS as the original registered HOLDERS, such
INVESTORS having entered into a certain Management Agreement with the COMPANY.
The consideration for the issuance of the WARRANTS is the execution of such
Agreement. The INVESTORS are acquiring these WARRANTS in a private transaction
for their own investment purposes and not with a view to transfer, resale or
distribution of such WARRANTS or the underlying Common Stock.
2
<PAGE>
4. WARRANT EXERCISE PRICE. Each WARRANT shall entitle the registered
HOLDER thereof, subject to the provisions thereof and of this Warrant Agreement,
to purchase from the COMPANY the number of Shares of the company's Common Stock
as stated thereon, at the price of One Dollar and Twenty-five Cents ($1.25) per
Share, both the number of Shares and the price being subject to the antidilution
adjustments provided in Paragraph 8 hereof. The term "Warrant Exercise Price" as
used in this Warrant Agreement refers to the price per Share at which Common
Stock may be purchased at the time a WARRANT is exercised.
5. DURATION (Term). (a) Subject to sub-paragraph (b) following, the
1996-MAJOR Warrants may be exercised at any time between January 1, 1997 and the
close of business (5:00 P.M. Eastern Daylight Time) on the day which is six (6)
months after the declaration of effectiveness of the Company's Registration
Statement registering the shares to be acquired upon exercise of this Warrant,
such date being hereinafter called the "Expiration Date". Each WARRANT not
exercised on or before its Expiration Date shall become void, and all rights
thereunder and all rights in respect thereof under this Warrant Agreement shall
cease at the close of business on the respective Expiration Date. The COMPANY
reserves the right to extend the Expiration Date of the WARRANTS, from time to
time, any number of times,, but shall be under no obligation to do so.
(b)The 1996-MAJOR Warrants shall terminate prior to the Expiration Date in the
event that there is an uncured material breach of the Management Agreement, as
provided therein.
TRANSFER AND/OR EXCHANGE OF WARRANTS. On or after the date of issuance
and prior to the Expiration Date, any HOLDER of any WARRANT, subject to the
transfer restrictions of federal and state securities laws, at any time prior to
the exercise thereof, may transfer all or any portion of the stock purchase
rights provided in the WARRANT. Upon presentation and surrender to the Warrant
Agent of the WARRANT, properly assigned, accompanied by appropriate transfer
instructions from the HOLDER, the Warrant Agent shall issue a WARRANT for the
assigned number of shares to the assignee as the new registered HOLDER and shall
issue a WARRANT for the unassigned balance of the shares to the assigning (old)
registered HOLDER. Any HOLDER of any WARRANT or WARRANTS, at any
3
<PAGE>
time prior to the exercise thereof, may exchange such WARRANT or WARRANTS for a
WARRANT or WARRANTS of like tenor exercisable for the same aggregate number of
Common Shares as the WARRANT surrendered; i.e., consolidate or divide his
holdings. The Warrant Agent is the Company's Transfer Agent, Old Monmouth Stock
Transfer Co., 77 Memorial Parkway, Suite 101, Atlantic Highlands, New Jersey
07716. The COMPANY shall give notice to the registered HOLDERS of WARRANTS of
any change in the address of, or in the designation of, its Warrant Agent.
EXERCISE. (a) Except as otherwise provided in subparagraph (f) below, a
WARRANT shall be exercisable only by the registered HOLDER surrendering it,
together with the subscription form set forth in the WARRANT duly executed,
accompanied by payment, in full, in lawful money of the United States, of the
Warrant Exercise Price for each full Share as to which the WARRANT is exercised,
to the Warrant Agent. The Warrant Agent is the Company's Transfer Agent, Olde
Monmouth Stock Transfer Co., 77 Memorial Parkway, Suite 101, Atlantic Highlands,
New Jersey 07716. The COMPANY shall give notice to the registered HOLDERS of
WARRANTS of any change in the address of, or in the designation of, its Warrant
Agent.
(b) A WARRANT may be exercised wholly or in part. If a WARRANT is only
exercised in part, a new WARRANT for the number of Shares as to which the
WARRANT shall not have been exercised shall be issued to the registered HOLDER.
(c) As soon as practicable after the exercise of any WARRANT, the
COMPANY shall issue to or upon the order of the registered HOLDER a certificate
or certificates for the number of full Shares which he is entitled, registered
in such name or names as may be directed by him.
(d) All Shares issued upon exercise of a WARRANT shall be validly
issued, fully paid, and non-assessable. The COMPANY shall pay all taxes in
respect of the issue thereof. However, the registered HOLDER shall pay all taxes
imposed in connection with any transfer, even if involved in an issue of a
certificate, and the COMPANY shall not be required to issue or deliver any stock
certificate in such case until the tax shall have been paid.
4
<PAGE>
(e) Each person in whose name any such certificate for Shares is issued
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the warrant was surrendered and payment of the
Warrant Exercise Price and applicable taxes was made, irrespective of the date
of delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the company are closed, the
person or persons entitled to receive Shares upon such exercise shall be
considered the record holder or holders of such shares at the close of business
on the next succeeding date on which the stock transfer books are open and shall
be entitled to receive only dividends or distributions which are payable to
holders of record after that date.
8. SHARE DIVIDENDS, RECLASSIFICATION, REORGANIZATION, ANTI-DILUTION
PROVISIONS. Each WARRANT is subject to the following further provisions:
(a) In case, prior to the expiration of a warrant by exercise or by its
terms, the company shall issue any of its Common Stock as a share dividend or
subdivide the number of outstanding shares of Common Stock into a greater number
of shares, then, in either of such cases, the Purchase Price per share of the
Shares purchasable pursuant to a WARRANT in effect at the time of such action
shall be proportionately reduced and the number of Shares at the time
purchasable pursuant to a warrant shall be proportionately increased; and
conversely, in the event the company shall contract the number of outstanding
shares of Common Stock by combining such shares into a smaller number of shares,
then, in such case, the Purchase price per share of the Shares purchasable
pursuant to a warrant in effect at the time of such action shall be
proportionately increased and the number of Shares at the time purchasable
pursuant to a warrant shall beporportionately decreased. If the company shall,
at any time during the life of a warrant, declare a dividend payable in cash on
its Common Stock and shall at substantially the same time offer to its
stockholders a right to purchase new Common Stock from the proceeds of such
dividend or for an amount substantially equal to the dividend, all shares of
Common Stock so issued shall, for the purpose of a warrant, be deemed to have
been issued as a share dividend. Any dividend paid or distributed upon the
Common Stock in shares of any
5
<PAGE>
other class or securities convertible into Common Stock shall be treated as a
dividend paid in shares of Common Stock to the extent that shares of Common
Stock are issuable upon the conversion thereof.
(b) In case, prior to the expiration of a warrant by exercise or by its
terms, the company shall be recapitalized, or the company or a successor
corporation shall consolidate or merge with or convey all or substantially all
of its or of any successor corporation's property and assets to any other
corporation or corporations (any such corporation being included within the
meaning of the term "successor corporation" herinbefore used in the event of any
consolidation or merger of any such corporation with, or the sale of all or
substantially all of the property of any such corporation to, another
corporation or corporations), the holder of a warrant shall thereafter have the
right to purchase, upon the basis and on the terms and conditions and during the
time specified in a warrant in lieu of the Shares of the company thertofore
purchasable, upon the exercise of a warrant, such shares, securities or assets
as may be issued or payable with respect to, or in exchange for, the number of
Shares of the company theretofore purchasable upon the exercise of a warrant had
such recapitalization, consolidation, merger, or conveyance not taken place; and
in any such event, the rights of the holder of a warrant to an adjustment in the
number of shares purchasable upon the exercise of a warrant as herein provided
shall continue and be preserved in respect of any shares, securities, or assets
which the holder of a warrant become entitled to purchase.
(c) In case:
(i) the company shall take a record of the holders of its
Common Shares for the purpose entitling them to
receive a dividend payable otherwise than in cash, or
any other distribution in respect of the Common
Shares (including cash), pursuant to, without
limitation, any spin-off, split-off, or distribution
of the company's assets;
(ii) the Company shall take a record of the holders
6
<PAGE>
of its Common Shares for the purpose of entitling
them to subscribe for purchase any shares of any
class or to receive any other rights; or
(iii) of any classification, reclassification, or other
reorganization of the shares which the COMPANY is
authorized to issue, consolidation or merger of the
COMPANY with or into another corporation, or
conveyance of all or substantially all of the assets
of the COMPANY; or
(iv) of the voluntary or involuntary dissolution,
liquidation, or winding up of the COMPANY;
then, and in any such case, the COMPANY shall mail to the holder of a WARRANT,
at least 21 days prior thereto, a notice stating the date or expected date on
which a record is to be taken f or the purpose of such dividend, distribution,
or rights, or the date on which such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up is to take place, as the case may be. Such notice shall also specify
the date or expected date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to participate in such dividend, distribution,
or rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up, as the case may be.
(d) In case the COMPANY at any time while a WARRANT shall remains
unexpired and unexercised shall sell all or substantially all of its property or
dissolve, liquidate, or wind up its affairs, the holder of a WARRANT may
thereafter receive upon exercise hereof in lieu of each Share which it would
have been entitled to receive the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon such sale,
dissolution, liquidation, or winding up with respect to each Share.
(e) The COMPANY plans to make an offering of convertible
7
<PAGE>
debentures or convertible preferred stock or such other security which may be
convertible into Common Stock or carry warrants for the purchase of shares of
Common Stock. The parties agree that this warrant issuance is related to such
proposed offerings) and no adjustments (as described in this Section 8) shall be
made to any of the WARRANTS on account of any such offerings), for a period of
twenty-four (24) months from the date of the issuance of the first warrant
subject to this warrant agreement or until and unless the number of shares of
Company's Common Stock outstanding exceeds twelve million (12,000,000) shares.
After such 24 month period, or at any time that the outstanding Common Stock of
the COMPANY exceeds 12,000,000 shares if earlier than 24 months, then the
provisions of Section 8 herein above shall have full force and effect on the
WARRANTS.
9. RESERVATION OF SHARES ISSUABLE ON EXERCISE OF WARRANTS. The COMPANY
shall at all times reserve and keep available out of its authorized shares,
solely for issuance upon the exercise of all WARRANTS issued hereunder, such
number of Common Shares and other shares as from time to time shall be issuable
upon the exercise of a WARRANT and all other similar WARRANTS at the time
outstanding.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION. Upon receipt by the COMPANY
of evidence satisfactory to it, (in the exercise of its reasonable discretion),
of the ownership of and the loss, theft, destruction, or mutilation of a
WARRANT, and (in the case of loss, theft, or destruction) of indemnity
satisfactory to it (in the case of mutilation) upon surrender and cancellation
thereof, the COMPANY will execute and deliver, in lieu thereof, a new WARRANT
for liketenor.
11. WARRANT HOLDER NOT A SHAREHOLDER. The HOLDER of a WARRANT, as such,
shall not be entitled by reason of a WARRANT to any rights whatsoever of a
stockholder of the COMPANY. No HOLDER of any WARRANT shall be entitled to
receive any dividend or to vote with respect to any dividend declared or the
taking of a register of stockholders entitled to vote with a Record Date prior
to the date of exercise of the WARRANTS.
12. NOTICES. All notices and other communications from the COMPANY to
the HOLDER of a WARRANT shall be mailed by first-class
8
<PAGE>
registered mail, postage
prepaid, to the address furnished to the COMPANY in writing by the HOLDER of a
WARRANT.
IN WITNESS WHEREOF, intending to be legally bound, the COMPANY has
executed this Warrant Agreement:
Dated: October 2, 1996
FIDELITY HOLDINGS, INC.
ATTEST:
By:____________________________
President
9
<PAGE>
- --------------------------------------------------------------------------------
Progressive Polymerics
- --------------------------------------------------------------------------------
International, Inc. PPYM
Warrants
4.4
<PAGE>
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
- --------------------------------------------------------------------------------
THIS WARRANT AGREEMENT, made this 15th day of October, 1996, by and
between:
FIDELITY HOLDINGS, INC., a Nevada corporation with its principal office
located at 80-02 Kew Gardens Road, Suite 5000, Kew Gardens, New York 21415,
(hereinafter referred to as the Company).
AND
EACH OF THE REGISTERED HOLDERS of the COMPANY s warrants covered hereby
(and their registered assigns), from time to time, from the date of original
issue of such warrants to the expiration date thereof (hereinafter referred to
as the "HOLDER" and/or "HOLDERS" as the context may require).
WITNESSETH THAT:
WHEREAS, the COMPANY has entered into a certain First Amendment of
Patent Sale and Purchase Agreement with Progressive Polymerics International,
Inc. ("PPYMII), in which such First Amendment the COMPANY has agreed, in
consideration of the conversion of a portion of the cash purchase price, to
issue and deliver to PPYM Stock Purchase Warrants (hereinafter called the
"WARRANTS") entitling the HOLDERS thereof to purchase up to an aggregate of One
Hundred Sixty Thousand (160,000) shares of the Common Stock of the COMPANY
(hereinafter called the "Shares") , and
WHEREAS, the COMPANY desires to provide for the form and provisions of
the WARRANTS, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the COMPANY and the
HOLDERS; and
WHEREAS, all acts and things necessary to make the WARRANTS, when
executed on behalf of the COMPANY, the valid, binding, and legal obligations of
the COMPANY, have been done and performed; and WHEREAS all acts and things
necessary to authorize the execution and delivery of this Warrant Agreement, and
to execute and deliver the WARRANTS to PPYM as the original registered
<PAGE>
HOLDERS, have been done and performed;
NOW, THEREFORE, intending to be legally bound hereby, and intending the
original registered HOLDERS and their successors and assigns to rely hereon, the
COMPANY hereby represents and agrees, and the HOLDERS by acceptance of the
WARRANTS implicitly agree, as follows:
1. WARRANTS AUTHORIZED. COMPANY hereby authorizes the issuance to PPYM
of One Hundred Sixty Thousand (160,000) WARRANTS upon the terms and conditions
of this Warrant Agreement.
2. FORM AND EXECUTION. Each WARRANT, whenever issued, (a) shall be in
substantially the form attached hereto as Exhibit A; (b) shall be dated as of
the date of issuance, which shall be the same date as this Warrant Agreement;
(c) shall entitle the HOLDER to purchase the number of Shares stated thereon;
(d) shall be signed by the President or Vice President and the Secretary or
Treasurer of the COMPANY; (e) and shall have the COMPANY'S seal impressed
thereon. The COMPANY may adopt and use the facsimile signature of any person who
is a requisite officer of the COMPANY at the time such WARRANTS are executed, or
of any person now or hereafter holding such office, notwithstanding the fact
that at the time a WARRANT is issued he had ceased to be such officer of the
COMPANY. Prior to delivery of any WARRANT, it shall be manually countersigned by
the Warrant Agent. No WARRANT shall be valid unless so countersigned.
3. WARRANT ISSUANCE AND ISSUANCE CONSIDERATION. These WARRANTS are
being hereby issued to PPYK as the original registered HOLDER, PPYM having
entered into a certain First Amendment to Patent Sale and Purchase Agreement
relating to the two Armored Conduit patents. PPYM is acquiring these WARRANTS in
a private transaction for its own investment purposes and not with a view to
transfer, resale or distribution of such WARRANTS or the underlying Common
Stock.
4. WARRANT EXERCISE PRICE. Each WARRANT shall entitle the registered
HOLDER thereof, subject to the provisions thereof and of this Warrant Agreement,
to purchase from the COMPANY the number of Shares of the company's common stock
as stated thereon, at the
2
<PAGE>
price of Three Dollars and Twelve and one-half Cents ($3.125) per Share, both
the number of Shares and the price being subject to the anti-dilution
adjustments provided in Paragraph 8 hereof. The term "Warrant Exercise Price" as
used in this Warrant Agreement refers to the price per Share at which Common
Stock may be purchased at the time a WARRANT is exercised.
5. DURATION (Term). (a) The WARRANTS may be exercised at any time
between the date of issuance and the close of business (5:00 P.M. Eastern
Daylight Time) on the last day of the twelfth month after the date of issuance,
such date being hereinafter called the "Expiration Date". The COMPANY reserves
the right to extend the Expiration Date of the WARRANTS, from time to time, any
number of times, but shall be under no obligation to do so. (b) in the event
that the Company elects to extend f or one (1) year its certain option to
repurchase 80,000 shares of its Common Stock at a price of $2.50 per share as
provided in the First Amendment to Patent Sale and Purchase Agreement, then the
Expiration Date shall. be extended automatically for a like term.
6. TRANSFER AND OR EXCHANGE OF WARRANTS. On or after the date of
issuance and prior to the Expiration Date, any HOLDER of any WARRANT, subject to
the transfer restrictions of federal and state securities laws, at any time
prior to the exercise thereof, may transfer all or any portion of the stock
purchase rights provided in the WARRANT. Upon presentation and surrender to the
Warrant Agent of the WARRANT, properly assigned, accompanied by appropriate
transfer instructions from the HOLDER, the Warrant Agent shall issue a WARRANT
for the assigned number of shares to the assignee as the new registered HOLDER
and shall issue a WARRANT for the unassigned balance of the shares to the
assigning (old) registered HOLDER. Any HOLDER of any WARRANT or WARRANTS, at any
time prior to the exercise thereof, may exchange such WARRANT or WARRANTS for a
WARRANT or WARRANTS of like tenor exercisable for the same aggregate number of
Common Shares as the WARRANT surrendered; i.e., consolidate or divide his
holdings. The Warrant Agent is the Company's Transfer Agent, Olde Monmouth Stock
Transfer Co., 22 Claridge Drive, Middletown, New Jersey 07747. The COMPANY shall
give notice to the registered HOLDERS of WARRANTS of any change in the address
of, or in the designation of, its Warrant Agent.
3
<PAGE>
7 . EXERCISE. A WARRANT shall be exercisable only by the registered
HOLDER surrendering it, together with the subscription form set forth in the
WARRANT duly executed, accompanied by payment, in full, in lawful money of the
United states, of the Warrant Exercise Price for each full Share as to which the
WARRANT is exercised, to the Warrant Agent. The Warrant Agent is the Company's
Transfer Agent, Olde Monmouth Stock Transfer Co., 77 Memorial Parkway, Suite
101, Atlantic Highlands, New Jersey 07716. The COMPANY shall give notice to the
registered HOLDERS of WARRANTS of any change in the address of, or in the
designation of, its Warrant Agent.
(b) A WARRANT may be exercised wholly or in part. If a WARRANT is
only exercised in part, a new WARRANT for the number of Shares as to which the
WARRANT shall not have been exercised shall be issued to the registered HOLDER.
(c) As soon as practicable after the exercise of any WARRANT, the
COMPANY shall issue to or upon the order of the registered HOLDER a certificate
or certificates for the number of full Shares which he is entitled, registered
in such name or names as may be directed by him.
(d) All Shares issued upon exercise of a WARRANT shall be validly
issued, fully paid, and non-assessable. The COMPANY shall pay all taxes in
respect of the issue thereof. However, the registered HOLDER shall pay all taxes
imposed in connection with any transfer, even if involved in an issue of a
certificate, and the COMPANY shall not be required to issue or deliver any stock
certificate in such case until the tax shall have been paid.
(e) Each person in whose name any such certificate for Shares is
issued shall for all purposes be deemed to have become the holder of record of
such shares on the date on which the WARRANT was surrendered and payment of the
Warrant Exercise Price and applicable taxes was made, irrespective of the date
of delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the COMPANY are closed, the
person or persons entitled to receive Shares upon such exercise shall be
considered the record holder or holders of such shares at the close of business
on the next succeeding date on
4
<PAGE>
which the stock transfer books are open and shall be entitled to receive only
dividends or distributions which are payable to holders of record after that
date.
8. SHARE DIVIDENDS, RECLASSIFICATION, REORGANIZATION, ANTI-DILUTION
PROVISIONS. Each WARRANT is subject to the following further provisions:
(a) In case, prior to the expiration of a WARRANT by exercise or by
its terms, the COMPANY shall issue any of its Common Stock as a share dividend
or subdivide the number of outstanding shares of Common stock into a greater
number of shares, then, in either of such cases, the Purchase Price per share of
the Shares purchasable pursuant to a WARRANT in effect at the time of such
action shall be proportionately reduced and the number of Shares at the time
purchasable pursuant to a WARRANT shall be proportionately increased; and
conversely, in the event the COMPANY shall contract the number of outstanding
shares of Common Stock by combining such shares into a smaller number of shares,
then, in such case, the Purchase Price per share of the Shares purchasable
pursuant to a WARRANT in effect at the time of such action shall be
proportionately increased and the number of Shares at the time purchasable
pursuant to a WARRANT shall be proportionately decreased. If the COMPANY shall,
at any time during the life of a WARRANT, declare a dividend payable in cash on
its Common Stock and shall at substantially the same time offer to its
stockholders a right to purchase new Common Stock from the proceeds of such
dividend or for an amount substantially equal to the dividend, all shares of
Common Stock so issued shall, for the purpose of a WARRANT, be deemed to have
been issued as a share dividend. Any dividend paid or distributed upon the
Common Stock in shares of any other class or securities convertible into Common
Stock shall be treated as a dividend paid in shares of Common Stock to the
extent that shares of Common Stock are issuable upon the conversion thereof.
(b) In case, prior to the expiration of a WARRANT- by exercise or
by its terms, the COMPANY shall be recapitalized, or the COMPANY or a successor
corporation shall consolidate or merge with or convey all or substantially all
of its or of any successor corporation's property and assets to any other
corporation or
5
<PAGE>
corporations (any such corporation being included within the meaning of the term
"successor corporation" herein before used in the event of any consolidation or
merger of any such corporation with, or the sale of all or substantially all of
the property of any such corporation to, another corporation or corporations),
the holder of a WARRANT shall thereafter have the right to purchase, upon the
basis and on the terms and conditions and during the time specified in a WARRANT
in lieu of the Shares of the COMPANY therefore purchasable, upon the exercise of
a WARRANT, such shares, securities or assets as may be issued or payable with
respect to, or in exchange for, the number of Shares of the COMPANY therefore
purchasable upon the exercise of a WARRANT had such recapitalization,
consolidation, merger, or conveyance not taken place; and in any such event, the
rights of the holder of a WARRANT to an adjustment in the number of Shares
purchasable upon the exercise of a WARRANT as herein provided shall continue and
be preserved in respect of any shares, securities, or assets which the holder of
a WARRANT becomes entitled to purchase.
(c) In case:
(I) the COMPANY shall take a record of the holders of its
Common Shares f or the purpose of entitling them to receive
a dividend payable otherwise than in cash, or any other
distribution in respect of the Common Shares (including
cash), pursuant to, without limitation, any spin-off,
split-off, or distribution of the Company's assets; or
(II) the COMPANY shall take a record of the holders of its
Common Shares for the purpose of entitling them to
subscribe for purchase any shares of any class or to
receive any other rights; or
(III) of any classification, reclassification, or other
reorganization of the shares which the COMPANY is
authorized to issue, consolidation or merger of the COMPANY
with or into another corporation, or conveyance of all or
6
<PAGE>
substantially all of the assets of the COMPANY; or
(IV) of the voluntary or involuntary dissolution, liquidation,
or winding up of the COMPANY;
then, and in any such case, the COMPANY shall mail to the holder of a WARRANT,
at least 21 days prior thereto, a notice stating the date or expected date on
which a record is to be taken f or the purpose of such dividend, distribution,
or rights, or the date on which such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up is to take place, as the case may be. Such notice shall also specify
the date or expected date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to participate in such dividend, distribution,
or rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up, as the case may be.
(d) In case the COMPANY at any time while a WARRANT shall remains
unexpired and unexercised shall sell all or substantially all of its property or
dissolve, liquidate, or wind up its affairs, the holder of a WARRANT may
thereafter receive upon exercise hereof in lieu of each Share which it would
have been entitled to receive the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon such sale,
dissolution, liquidation, or winding up with respect to each Share.
9. RESERVATION OF SHARES ISSUABLE ON EXERCISE OF WARRANTS. The COMPANY
shall at all times reserve and keep available out of its authorized shares,
solely for issuance upon the exercise of all WARRANTS issued hereunder, such
number of Common Shares and other shares as from time to time shall be issuable
upon the exercise of a WARRANT and all other similar WARRANTS at the time
outstanding.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION. Upon receipt by the COMPANY
of evidence satisfactory to it, (in the exercise of its reasonable discretion),
of the ownership of and the loss, theft, destruction, or mutilation of a
WARRANT, and (in the case of loss,
7
<PAGE>
theft, or destruction) of indemnity satisfactory to it (in the case of
mutilation) upon surrender and cancellation thereof, the COMPANY will execute
and deliver, in lieu thereof, a new WARRANT for like tenor.
11. WARRANT HOLDER NOT A SHAREHOLDER. The HOLDER of a WARRANT, as such,
shall not be entitled by reason of a WARRANT to any rights whatsoever of a
stockholder of the COMPANY. No HOLDER of any WARRANT shall be entitled to
receive any dividend or to vote with respect to any dividend declared or the
taking of a register of stockholders entitled to vote with a Record Date prior
to the date of exercise of the WARRANTS.
12. NOTICES. All notices and other communications from the COMPANY to
the HOLDER of a WARRANT shall be mailed by first-class registered mail, postage
prepaid, to the address furnished to the COMPANY in writing by the HOLDER of a
WARRANT.
IN WITNESS WHEREOF, intending to be legally bound, the COMPANY has
executed this Warrant Agreement:
Dated: October 15, 1996 FIDELITY HOLDINGS, INC.
ATTEST:
__________________________
By: President
___________________________
Secretary
8
<PAGE>
- --------------------------------------------------------------------------------
160,000 SHARES
- --------------------------------------------------------------------------------
FIDELITY HOLDINGS, INC.
(a Nevada Corporation)
COMMON STOCK PURCHASE WARRANT
VOID, UNLESS EXTENDED, AFTER 5:00 P.M. EST, OCTOBER 15, 1997
THIS IS TO CERTIFY THAT:
PROGRESSIVE POLYMERICS INTERNATIONAL, INC., a Nevada corporation with its
principal office located at 5715 Lemona Avenue, Van Nuys, California 91411, or
registered assigns, is entitled to purchase, an or before 5:00 P.M. Eastern
Standard Time on October 15, 1997F that number of shares (subject to
anti-dilution protection provisions contained in the Warrant Agreement) of the
Common Stock of Fidelity Holdings, Inc. (the "Company") at a price of Three
Dollars and Twelve and one-half Cents ($3.125), upon presentation of this
Warrant and payment of the purchase price at the office of the Warrant Agent;
subject, however, to the terms of the Warrant Agreement under which this Warrant
has been issued, which is incorporated by reference, and to which the holder
hereof assents by acceptance of this Warrant. This Warrant, the purchase rights
represented hereby, and all of the rights of each holder with respect thereto,
are subject to all of the terms, conditions, rights, limitations and other
provisions of the Warrant Agreement and in the event of any conflict between the
terms of this Warrant and the terms of the Warrant Agreement, the Warrant
Agreement shall control.
The purchase rights represented by this Warrant are exercisable at the
option of the registered owner hereof in whole at any time prior to expiration.
Subject to (a) the right of the Company to extend the expiration date as set
forth in the Warrant Agreement and (b) the automatic extension of the expiration
date in the event of the extension by the company of its' certain stock
repurchase option as set forth in the Warrant Agreement, this Warrant and the
purchase rights it represents expire at 5:00 p.m. on October 15, 1997 and
thereafter shall be void and of no effect.
The number of shares purchasable upon the exercise of this
<PAGE>
as set forth in the Warrant Agreement.
This Warrant shall not entitle the registered owner or any holder to
voting rights or other rights as a stockholder of the Company or to any other
rights whatsoever except the rights herein expressed or expressed in the Warrant
Agreement, and no dividends shall be payable or accrue in respect of this
Warrant or the interest represented hereby or the shares purchasable hereunder
until, or unless, and to the extent that, this Warrant shall be exercised.
This Warrant is exchangeable upon its surrender to the Company by the
registered owner, for new Warrants of like tenor and date, representing in the
aggregate the right to purchase the number of shares purchasable hereunder.
Except as otherwise above provided, this Warrant and all rights
hereunder are transferable by the registered owner hereof in person or by duly
authorized attorney on the books of the Company upon surrender to the Company of
this Warrant, properly endorsed.
The Company may deem and treat the registered owner of this Warrant at
all times as the absolute owner hereof for all purposes and such shall not be
affected by any notice to the contrary.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by the signatures of its duly authorized officers and the corporate seal
hereunto affixed.
Dated: October 15, 1996
At: Kew Gardens, New York
FIDELITY HOLDINGS, INC.
ATTEST:
__________________________
By: President
___________________________
Secretary
<PAGE>
SUBSCRIPTION FORM
(To be executed by the Registered Holder
upon exercise of Warrant)
NOTE: if less than all of the shares for which this Warrant is exercisable are
subscribed for, the Warrant Agent will return a new Warrant for the unassigned
balance.
The undersigned, Registered Holder or assignee of such Registered
Holder of the within Warrant, hereby (1) subscribes for ____________ Shares of
the Common Stock which the undersigned is entitled to purchase under the terms
of the within Warrant, (2) makes full cash payment therefor called for by the
within warrant for the number of shares as to which this warrant is exercised,
and (3) directs that the Shares of Common Stock issuable upon exercise of the
within Warrant be issued as follows:
Name:___________________________________________________________________________
_______________________________
Address:________________________________________________________________________
_______________________________
Dated:_________________________, 199___
Signature(s):________________________________________
_______________________________ ________________________________________
_______________________________ ________________________________________
________________________________________________________________________________
NOTICE: The signature(s) on this Subscription Form must correspond with the
name(s) as written upon the face of the within Warrant, or upon the assignment
form on the reverse thereof, in every particular, without alteration or
enlargement, or any change whatsoever and must be guaranteed by a bank or by a
firm having registered membership on a registered securities exchange.
<PAGE>
ASSIGNMENT
(To be executed by the Registered Holder
upon exercise of Warrant)
NOTE: if less than all of the shares for which this Warrant is exercisable are
subscribed for, the Warrant Agent will return a now Warrant for the unassigned
balance.
FOR VALUE RECEIVED the undersigned Registered Holder(s) of the within
Warrant hereby sell(s), assign(s), and transfer(s) the right to purchase ______
Shares of Common Stock evidenced by the within Warrant and do irrevocably
constitute and appoint
________________________________________________________________________________
______________________________________________________________.
to transfer such right on the books of the Company with full power of
substitution.
Dated:_________________________, 199___
Signature(s):________________________________________
_______________________________ ________________________________________
_______________________________ ________________________________________
________________________________________________________________________________
NOTICE: The signature(s) on this Subscription Form must correspond with the
name(s) as written upon the face of the within Warrant, or upon the assignment
form on the reverse thereof, in every particular, without alteration or
enlargement, or any change whatsoever and must be guaranteed by a bank or by a
firm having registered membership on a registered securities exchange.
<PAGE>
Employment Agreement
with
Doron Cohen
10.1
<PAGE>
EMPLOYMENT AGREEMENT
(and Agreement to serve as a Director)
THIS EMPLOYMENT AGREEMENT, made as of this 7th day of November, 1995,
by and between:
FIDELITY HOLDINGS, INC., a newly organized Nevada corporation having
its executive office at 80-02 Kew Gardens Rd, Kew Gardens, Queens, NY 11415
(hereinafter referred to as "EMPLOYER") AND
DORON COHEN, an adult individual residing at 47 Parker Blvd, Monsey,
N.Y. 10952 (hereinafter referred to as "EMPLOYEE")
WITNESSETH THAT:
WHEREAS, EMPLOYEE has certain education, experience, background and
contacts which would be useful and helpful to EMPLOYER in its business and
EMPLOYER is desirous of retaining EMPLOYEE in order to obtain the benefits of
such education, experience, background and contacts.
WHEREAS, EMPLOYEE is agreeable to being retained by EMPLOYER as a
consultant and providing the benefits of his education, experience, background
and contacts to EMPLOYER;
WHEREAS, the parties have agreed upon the terms of such retention and
desire a written, formal contract to evidence their agreements;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
forbearance's contained herein, and intending to be legally bound, the parties
have agreed as follows:
1. RETENTION. For the term-n provided in Paragraph 2, EMPLOYER hereby
retains EMPLOYEE, and EMPLOYEE hereby accepts that retention, upon the terms and
conditions hereinafter set forth.
2. TERM
(a) This Agreement shall become effective as of November 7, 1995.
(b) This Agreement, subject to the provisions of Paragraphs 14 and 15
below, shall continue and exist for an initial period from November 7, 1995 to
December 31, 1998.
(c) If, at September 30, 1998, neither party is then in default under
this Agreement, EMPLOYER shall have the option to extend the term of this
Agreement for an additional one (1) year period, i.e., to December 31, 1999.
Such option shall be exercised by EMPLOYER mailing-nailing notice to EMPLOYEE on
or before October 31, 1998, of its intention to so extend the Agreement. If
EMPLOYER shall not exercise its extension option by October 31, 1998, this
Agreement shall terminate on December 31, 1998.
(d) This Agreement shall be subject to successive additional one (1)
year extensions under the procedure provided in subparagraph (c), provided that
at September 30 of the then existing extension year neither party is then in
default under this Agreement and notice of exercise of the extension option is
given on or before October 31 of such extension year.
<PAGE>
(e) Notwithstanding the foregoing, the term of this Agreement is
otherwise subject to the termination provisions contained hereafter.
3. COMPENSATION-BASE.
(a) For all services rendered under this Agreement, EMPLOYEE shall be
paid, as base compensation, such annual fee as shall be determined by the Board
of Directors of EMPLOYER, from time to time, but in no event shall such
compensation be at a rate of less than $150,000 per year. In the event of any
extension of this Agreement, such compensation shall be at a rate of no less
than $150,000 per year during each extension year. All such compensation shall
be subject to a Cost-of-Living Adjustment (COLA) annually based upon the
percentage increase in the Cost-of-Living Index, All Commodities, for the New
York City area. Subject to subparagraph (b) below, such compensation is to be
payable in equal installments at intervals no longer than semi-monthly. Such
base compensation shall be in addition to such fringe benefits and bonuses as
provided elsewhere herein.
(b) The base compensation for each year of this Agreement, including
the first and second year, and any extensions to this Agreement, shall be
subject to a retroactive increase, based upon an earnings per share formula
(actual common shares issued and outstanding at December 31 of each year, and
not fully diluted) as follows:
Profits Per Increase as a
Common Share Percent of Base Compensation
$.00 - $.01 5%
$.11 - $.20 10%
$.21 - $.30 20%
$.31 - $.40 30%
$.41 - $.50 40%
$.51 - $.60 50%
$.61 - $.70 70%
$.71 - $.80 90%
$.81 - $.90 110%
$.91 - $1.00 130%
over $1.00 150%
This retroactive increase, if any should occur, is not a bonus but a merit
adjustment to the base salary.
(c) EMPLOYER may assign EMPLOYEE to one or more of its subsidiaries
and/or affiliates, to perform services consistent with EMPLOYEE'S duties
hereunder. In such event, EMPLOYEE may be separately compensated by each such
subsidiary and/or affiliate. All such compensation shall be deducted from the
compensation payable under subparagraph (a) above and EMPLOYER shall pay
EMPLOYEE only the difference between (i) the total of all such compensations
from subsidiaries and/or affiliates and (ii) the base compensation.
(d) At the end of each calendar year, the Board of Directors of
EMPLOYER shall review the performance of EMPLOYEE for such year and, based upon
such evaluation, establish any increase in the base compensation payable to
EMPLOYEE for the succeeding calendar year, as adjusted by subparagraph (c)
above. EMPLOYER shall not be obligated to provide any increase, in excess of the
increase in the Cost-of-Living Index, All
<PAGE>
Commodities, for the New York City area during the prior calendar year.
4. COMPENSATION-FRINGE BENEFITS. EMPLOYEE shall receive at least the
following additional benefits, which may be extended or increased, but not
reduced, by
EMPLOYER:
(a) Vacation - During each year of this Agreement, EMPLOYEE shall be
entitled to paid vacation of three (3) weeks.
(b) Personal Leave - During each year of this Agreement, EMPLOYEE shall
receive five days paid personal leave, which shall not be accumulated from year
to year if unused. EMPLOYEE shall not be compensated for any unused personal
leave. "Personal leave" shall include sick leave, bereavement leave, and all
other personal time off.
(c) Other EMPLOYEE shall receive such other medical, surgical,
hospital, dental or legal insurance and fringe benefits as are available to any
other officers/employees/consultants, consistent with EMPLOYER'S past practices
and such life/disability insurance, incentive or deferred compensation or
bonuses, pension/profit sharing plan and qualified and non-qualified stock
option plans as the Board of Directors of EMPLOYER shall establish. Nothing
contained in this Agreement shall be in lieu of any rights, benefits and
privileges to which EMPLOYEE may be entitled under any retirement, pension,
profit-sharing, insurance, hospital or other plans which may now be in effect or
which may hereafter be adopted. EMPLOYEE shall have the same rights and
privileges to participate in such plans and benefits as any other employee
during his period of retention.
5. COMPENSATION-BONUS. After the end of each calendar year, the Board
of Directors of EMPLOYER shall determine the net profits before taxes of
EMPLOYER for such prior year and shall determine any bonus for such year payable
to EMPLOYEE. EMPLOYER shall not be obligated to provide any bonus. Any bonus
awarded shall be paid at such time or times, in such amounts or installments, as
the Board of Directors may determine.
6. DUTIES. (a) EMPLOYEE is engaged as a business, management and
financial consultant to EMPLOYER and shall provide advice to the officers,
directors and key management of the EMPLOYER. EMPLOYEE'S performance shall be
subject to the supervision of EMPLOYER'S Board of Directors. In addition, at the
option of EMPLOYER management, and subject to the approval of the Employer's
shareholders, during the term of this Agreement EMPLOYEE shall serve as a
director of the EMPLOYER if so elected. The precise consulting scope and the
specific services to be rendered by EMPLOYEE may be defined, interpreted,
curtailed, or extended, from time to time, by determination of the Board of
Directors of EMPLOYER, provided, however, that any definition, interpretation,
curtailment, or extension is consistent with the status of, and/or educational
experience required for, the responsibilities for which EMPLOYEE has been
initially engaged hereunder. It is the intent of this provision to provide
EMPLOYER with flexibility in assigning responsibilities to EMPLOYEE and this
provision shall not be used to discipline, embarrass, humiliate or harass
EMPLOYEE.
7. EXTENT AND PLACE OF SERVICES. EMPLOYEE is a general businessman
engaged in various business activities, including consulting for other
companies. Nothing contained herein is intended to limit Employee's continuation
of existing business activities nor the commencement of new activities, provided
only that such activities are not directly competitive with the conduit pipe
business of EMPLOYER, for which reasons Paragraphs 11, 12 and 13 relate to
conduit pipe business only. EMPLOYER
<PAGE>
acknowledges that the majority of employee's services will be rendered during
the initial months of this Agreement and the diminution of such services over
time shall not be a breach hereof nor a reason for reduction of compensation.
Furthermore, nothing contained herein shall be construed as preventing
EMPLOYEE from investing his assets in such form or manner as EMPLOYEE may
select, whether or not such investment will require any services on EMPLOYEE'S
part in the operation of the affairs of the companies in which such investments
are made.
8. WORKING FACILITIES. EMPLOYEE shall be furnished with all necessary
working facilities, including but not limited to an equipped office, clerical
help, and telephone/facsimile/copying services, suitable to his position and
adequate for the performance of his duties. EMPLOYEE may utilize his existing
office space, in which event EMPLOYER shall reimburse EMPLOYEE for its pro rata
share thereof.
9. EXPENSES. EMPLOYEE is not authorized to incur expenses on behalf of,
or chargeable to, EMPLOYER, with respect to his business travel, including
transportation, lodging, food, entertainment, etc. except within such guidelines
as may be established from time to time by the Board of Directors of EMPLOYER.
EMPLOYER shall reimburse EMPLOYEE for authorized expenses within such guidelines
upon presentation by EMPLOYEE, from time to time, of an itemized account of such
expenditures in such form as EMPLOYER may require, together with receipts or
other proofs of the expenditures as may be required.
10. DISCLOSURE OF INFORMATION REGARDING CONDUIT PIPE. EMPLOYEE
recognizes and acknowledges that: (a) during the course of his retention, he
will have access to valuable proprietary information regarding the conduit pipe,
and that (b) such information about the conduit pipe constitutes unique assets
of the business of EMPLOYER. EMPLOYEE will not, during or after his retention,
personally use or disclose all, or any part of, such proprietary information
regarding the conduit pipe to any person, firm, corporation, association,
agency, or other entity except as properly required in the conduct of the
business of EMPLOYER or one of its subsidiaries, or except as pre-authorized in
writing by EMPLOYER or one of its subsidiaries, publish, disclose or authorize
anyone else to publish or disclose, any secret or confidential matter relating
to any aspect of the business of EMPLOYER and its subsidiaries with which
EMPLOYEE'S service may in any way acquaint EMPLOYEE. In the event of a breach,
or threatened breach, by EMPLOYEE, of the provisions of this Paragraph, EMPLOYER
shall be entitled to a preliminary, temporary and permanent injunction
restraining EMPLOYEE from disclosing in whole or in part, any such proprietary
information and/or form rendering any services to any person, firm, corporation,
association, agency, or other entity to whom such information, in whole or in
part, has been disclosed or is threatened to be disclosed. Furthermore, nothing
herein shall be construed as prohibiting EMPLOYER from pursuing any other
equitable or legal remedies available to it for such breach or threatened
breach, including the recovery or damages from EMPLOYEE, and neither remedy
(injunction or damages) shall be exclusive of the other or constitute an
election of remedies.
11. RESTRICTIVE COVENANT.
(a) During the term of this Agreement and for a period of one (1) year
after the termination of this Agreement and any extension thereof, EMPLOYEE
shall not, within the eastern United States, as well as within such other areas
as EMPLOYER shall then be operating conduit pipe plants, be engaged in the
manufacture and/or sale of conduit pipe
<PAGE>
or, directly or indirectly, own, manage, operate, control, be employed by,
consult for, participate in, or be connected in any manner with the ownership,
management, operation or control of any business relating to conduit pipe.
(b) EMPLOYEE agrees that the "time," "geographic area," and "scope of
business" provisions of this restrictive covenant are reasonable and proper and
have been negotiated connection with his participation in the proposed business
combination as well as in connection with his retention hereunder and
specifically the continued compensation provisionunder Paragraphs 14 and 15.
(c) EMPLOYER and EMPLOYEE agree, that if any court of competent
jurisdiction shall, for any reason, conclude that any portion of this covenant
shall be too restrictive, the court shall determine and apply lesser
restrictions, it being the intent of the parties that some such restrictions
shall be applicable for the protection of EMPLOYER and its shareholders.
12. NON SOLICITATION COVENANT.
(a) During the term of this Agreement and for a period of two (2) years
after the termination of this Agreement (including any extension thereof)
EMPLOYEE shall not solicit, directly or indirectly, by any means, any of the
customers, accounts, employees or "leads" of EMPLOYER relating to the conduit
pipe business.
(b) EMPLOYER and EMPLOYEE agree that, if any court of competent
jurisdiction shall, for any reason conclude that any portion of this covenant
shall be too restrictive, the court shall determine and apply lesser
restrictions, it being the intent of the parties that some such restrictions
shall be applicable for the protection of EMPLOYER and its shareholders.
(c) This covenant has been given to induce EMPLOYER to enter into this
Agreement and provide EMPLOYEE'S job responsibilities and compensation, and
specifically the continued compensation provisions under Paragraph 14.
13. DISABILITY.
(a) EMPLOYEE'S inability to perform his duties because of temporary
illness, disability, or incapacity, or for any other reasonable cause, shall not
constitute a failure to perform his obligations hereunder and shall not be
deemed a breach or default by him.
(b) If, at any time during the term of this Agreement and/or any
extension thereof, the EMPLOYEE is unable to perform his services b reason of
illness or incapacity, EMPLOYER shall continue EMPLOYEE'S compensation during
the period of such illness or incapacity, up to the balance of the initial term
of this Agreement or then current extension thereof.
(c) At any time, and from-n time to time, EMPLOYER may purchase
disability insurance to compensate EMPLOYEE during periods of disability. In the
event that such insurance is purchased, during any period for which benefits are
being paid by such insurance subparagraph (a) above shall be inapplicable. In
lieu thereof, EMPLOYER shall compensate EMPLOYEE at the agreed base compensation
rate less the benefits paid by such insurance.
14. TERMINATION.
(a) EMPLOYER can terminate employee's retention at any time for good
cause. Without intending to limit the definition of good cause hereby, good
cause will include:
(1) the EMPLOYEE'S death;
<PAGE>
(2) the occurrence of one of the following events:
(i) EMPLOYEE commits, is arrested, or is officially charged with a felony or any
crime involving moral turpitude or unethical conduct which in the good faith
opinion of the EMPLOYER could impair his ability to perform his duties; (ii)
EMPLOYEE commits an act, or fails to take action in bad faith and to the
detriment of the EMPLOYER, and
(iii) in the good faith opinion of the Board of Directors, the EMPLOYEE fails to
fully and faithfully perform his obligations under this Consulting Agreement.
(b) The termination of EMPLOYEE'S services shall not constitute a
termination of the restrictive obligations and duties under Paragraphs 10, 11
and 12.
(c) In the event of the bankruptcy (Chapter 7), reorganization (Chapter
11) or other termination of the business of the EMPLOYER or of any subsidiary on
which EMPLOYEE'S continued retention and compensation is dependent, the
provisions of Paragraph 11 shall continue in full force and effect only so long
as full base compensation by EMPLOYER shall continue.
(d) In the event of the termination- or non-renewal of this Agreement
as a result of, or in connection with, or as the outcome of, a change of control
of EMPLOYER, the provisions of Paragraph 11 and the provisions of Paragraph 12
shall not remain in effect following termination.
15. ARBITRATION. Any controversy or claim arising out of, or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in New
York City, New York in accordance with the rules then pertaining of the American
Arbitration Association, but with all rights of discovery provided by the New
York Rules of Civil Procedure, and judgment upon the award rendered may be
entered in any court having jurisdiction thereof.
16. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by such other party. The failure of a party
to exercise any rights or privileges under this Agreement shall not be deemed to
be a waiver or extinguishment of such rights or privileges, all of which shall
continue to be exercisable.
17. BENEFIT. The rights and obligations of EMPLOYER under this
Agreement shall inure to the benefit of, and shall be binding upon, its
successors and assigns. The protection of Paragraphs 10, 11 and 12 shall inure
to the benefit of EMPLOYER and any successors and assigns. The rights and
obligations of EMPLOYEE under this Agreement shall inure to the benefit of, and
shall be binding upon, his heirs, administrators, executors, successors and
assigns.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by certified mail to
his residence in the case of EMPLOYEE, or to its principal office in the case of
EMPLOYER.
19. LIFE INSURANCE.
(a) EMPLOYER and/or one or more of its subsidiaries may, in its
discretion at any time after the execution of this Agreement, apply for and
procure, as owner and for its own benefit, insurance on the life of EMPLOYEE, in
such amounts and in such forms as EMPLOYER may choose. EMPLOYER shall not be
required to give EMPLOYEE any interest whatsoever in any such policy or
policies, (although nothing contained herein shall be deemed to prohibit any
such arrangement) but EMPLOYEE shall, at the request of EMPLOYER, subject
himself to such medical examination, supply such information, and
<PAGE>
execute such information releases and documents as may be required by the
insurance company or companies to whom EMPLOYER has applied for such insurance.
(b) The provisions of subparagraph (a) above shall be in addition to
any insurance purchased to fund any shareholder buy-sell agreement.
20. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties and may be modified only by agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
21. APPLICABLE LAW. This Agreement shall be governed for all purposes
by the laws of the State of New York. If any provision of this Agreement is
declared void, such provision shall be deemed severed from-n this Agreement,
which shall otherwise remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto set their hands and seals as of the day and year herein above
written.
FIDELITY HOLDINGS, INC.
ATTEST:
______________________________
Secretary
WITNESS:
_______________________________ _____________________________ (L. S.)
<PAGE>
Consulting Agreement
with
Bruce Bendell
10.02
<PAGE>
CONSULTING AGREEMENT
(and Agreement to serve as a Director)
THIS CONSULTING AGREEMENT, made as of this 7th day of November, 1995,
by and between:
FIDELITY HOLDINGS, INC., a newly organized Nevada corporation having
its executive office at 144-15 Union Turnpike Kew Gardens Hills, NY 11367
(hereinafter referred to as "COMPANY") AND
BRUCE BENDELL, an adult individual with offices at 43-40 Northern
Blvd, Long Island City, N.Y. I 1 101 (hereinafter referred to as
"CONSULTANT")WITNESSETH THAT:
WHEREAS, CONSULTANT has certain education, experience, background and
contacts which would be useful and helpful to COMPANY in its business and
COMPANY is desirous of retaining CONSULTANT in order to obtain the benefits of
such education, experience, background and contacts.
WHEREAS, CONSULTANT is agreeable to being retained by COMPANY as a
consultant and providing the benefits of his education, experience, background
and contacts to COMPANY;
WHEREAS, the parties have agreed upon the terms of such retention and
desire a written, formal contract to evidence their agreements;
NOW, THEREFORE, in consideration of the mutual promises, covenants
and forbearances contained herein, and intending to be legally bound, the
parties have agreed as follows:
1. RETENTION. For the term provided in Paragraph 2, COMPANY hereby
retains CONSULTANT, and CONSULTANT hereby accepts that retention, upon the terms
and conditions hereinafter set forth.
2. TERM.
(a) This Agreement shall become effective as of November 7, 1995.
(b) This Agreement, subject to the provisions of Paragraphs 14 and 15
below, shall continue and exist for an initial period from-n November 7, 1995 to
December 31, 1998.
(c) If, at September 30, 1998, neither party is then in default under
this Agreement, COMPANY shall have the option to extend the term of this
Agreement for an additional one (1) year period, i.e., to December 31, 1999.
Such option shall be exercised by COMPANY mailing notice to CONSULTANT on or
before October 31, 1998, of its intention to so extend the Agreement. If COMPANY
shall not exercise its extension option by October 31, 1998, this Agreement
shall terminate on December 31, 1998.
(d) This Agreement shall be subject to successive additional one (1)
year extensions under the procedure provided in subparagraph (c), provided that
at September 30 of the then existing extension year neither party is then in
default under this Agreement and notice of exercise of the extension option is
given on or before October 31 of such extension year.
<PAGE>
(e) Notwithstanding the foregoing, the term of this Agreement is
otherwise subject to the termination provisions contained hereafter.
3. COMPENSATION-BASE.
(a) For all services rendered under this Agreement, CONSULTANT shall
be paid, as base compensation, such annual fee as shall be determined by the
Board of Directors of COMPANY, from time to time, but in no event shall such
compensation be at a rate of less than $150,000per year. In the event of any
extension of this Agreement, such compensation shall be at a rate of no less
than $150,000 per year during each extension year. All such compensation shall
be subject to a Cost-of-Living Adjustment (COLA) annually based upon the
percentage increase in the Cost-of-Living Index, All Commodities, for the New
York City area. Subject to subparagraph (b) below, such compensation is to be
payable in equal installments at intervals no longer than semi-monthly. Such
base compensation shall be in addition to such fringe benefits and bonuses as
provided elsewhere herein.
(b) The base compensation for each year of this Agreement, including
the first and second year, and any extensions to this Agreement, shall be
subject to a retroactive increase, based upon an earnings per share formula
(actual common shares issued and outstanding at December 31 of each year, and
not fully diluted) as follows:
Profits Per Increase as a
Common Share Percent of Base Compensation
$.00 - $.01 5%
$.11 - $.20 10%
$.21 - $.30 20%
$.31 - $.40 30%
$.41 - $.50 40%
$.51 - $.60 50%
$.61 - $.70 70%
$.71 - $.80 90%
$.81 - $.90 110%
$.91 - $1.00 130%
over $1.00 150%
This retroactive increase, if any should occur, is not a bonus but a merit
adjustment to the base salary.
(c) COMPANY may assign CONSULTANT to one or more of its subsidiaries
and/or affiliates, to perform services consistent with CONSULTANT'S duties
hereunder. In such event, CONSULTANT may be separately compensated by each such
subsidiary and/or affiliate. All such compensation shall be deducted from the
compensation payable under subparagraph (a) above and COMPANY shall pay
CONSULTANT only the difference between (i) the total of all such compensations
from subsidiaries and/or affiliates and (ii) the base compensation.
(d) At the end of each calendar year, the Board of Directors of COMPANY
shall review the performance of CONSULTANT for such year and, based upon such
evaluation, establish any increase in the base compensation payable to
CONSULTANT for the succeeding calendar year, as adjusted by subparagraph (c)
above. COMPANY shall not be obligated to provide any increase, in excess of the
increase in the Cost-of-Living Index, All Commodities, for the New York City
area during the prior calendar year.
<PAGE>
4. COMPENSATION-FRINGE BENEFITS. CONSULTANT shall receive at least
the following additional benefits, which may be extended or increased, but not
reduced, by COMPANY:
(a) Vacation - During each year of this Agreement, CONSULTANT shall be entitled
to paid vacation of three (3) weeks.
(b) Personal Leave - During each year of this Agreement, CONSULTANT shall
receive five days paid personal leave, which shall not be accumulated from year
to year if unused. CONSULTANT shall not be compensated for any unused personal
leave. "Personal leave" shall include sick leave, bereavement leave, and all
other personal time off.
(c) Other CONSULTANT shall receive such other medical, surgical, hospital,
dental or legal insurance and fringe benefits as are available to any other
officers/employees/consultants, consistent with COMPANY'S past practices and
such life/disability insurance, incentive or deferred compensation or bonuses,
pension/profit sharing plan and qualified and non-qualified stock option plans
as the Board of Directors of COMPANY shall establish. Nothing contained in this
Agreement shall be in lieu of any rights, benefits and privileges to which
CONSULTANT may be entitled under any retirement, pension, profit-sharing,
insurance, hospital or other plans which may now be in effect or which may
hereafter be adopted. CONSULTANT shall have the same right ' s and privileges to
participate in such plans and benefits as any other employee during his period
of retention.
5. COMPENSATION-BONUS. After the end of each calendar year, the Board
of Directors of COMPANY shall determine the net profits before taxes of COMPANY
for such prior year and shall determine any bonus for such year payable to
CONSULTANT. COMPANY shall not be obligated to provide any bonus. Any bonus
awarded shall be paid at such time or times, in such amounts or installments, as
the Board of Directors may determine.
6. DUTIES. (a) CONSULTANT is engaged as a business, management and
financial consultant to COMPANY and shall provide advice to the officers,
directors and key management of the COMPANY. CONSULTANT'S performance shall be
subject to the supervision of COMPANY'S Board of Directors. In addition, at the
option of COMPANY management, and subject to the approval of the company's
shareholders, during the term of this Agreement CONSULTANT shall serve as a
director of the COMPANY if so elected. The precise consulting scope and the
specific services to be rendered by CONSULTANT may be defined, interpreted,
curtailed, or extended, from time to time, by determination of the Board of
Directors of COMPANY, provided, however, that any definition, interpretation,
curtainment, or extension is consistent with the status of, and/or educational
experience required for, the responsibilities for which CONSULTANT has been
initially engaged hereunder. It is the intent of this provision to provide
COMPANY with flexibility in assigning responsibilities to CONSULTANT and this
provision shall not be used to discipline, embarrass, humiliate or harass
CONSULTANT.
7. EXTENT AND PLACE OF SERVICES. CONSULTANT is a general businessman
engaged in various business activities, including consulting for other
companies. Nothing contained herein is intended to limit Consultant's
continuation of existing business activities nor the commencement of new
activities, provided only that such activities are not directly competitive with
the conduit pipe business of COMPANY, for which reasons Paragraphs 11, 12 and 13
relate to conduit pipe business only. COMPANY acknowledges
<PAGE>
that the majority of Consultant's services will be rendered during the initial
months of this Agreement and the diminution of such services over time shall not
be a breach hereof nor a reason for reduction of compensation.
Furthermore, nothing contained herein shall be construed as
preventing CONSULTANT from investing his assets in such form or manner as
CONSULTANT may select, whether or not such investment will require any services
on CONSULTANT'S part in the operation of the affairs of the companies in which
such investments are made.
8. WORKING FACILITIES. CONSULTANT shall be furnished with all
necessary working facilities, including but not limited to an equipped office,
clerical help, and telephone/facsimile/copying services, suitable to his
position and adequate for the performance of his duties. CONSULTANT may utilize
his existing office space, in which event COMPANY shall reimburse CONSULTANT for
its pro rata share thereof
9. EXPENSES. CONSULTANT is not authorized to incur expenses on behalf
of, or chargeable to, COMPANY, with respect to his business travel, including
transportation, lodging, food, entertainment, etc. except within such guidelines
as may be established from time to time by the Board of Directors of COMPANY.
COMPANY shall reimburse CONSULTANT for authorized expenses within such
guidelines upon presentation by CONSULTANT, from time to time, of an itemized
account of such expenditures in such form as COMPANY may require, together with
receipts or other proofs of the expenditures as may be required.
10. DISCLOSURE OF INFORMATION REGARDING CONDUIT PIPE. CONSULTANT
recognizes and acknowledges that: (a) during the course of his retention, he
will have access to valuable proprietary information regarding the conduit pipe,
and that (b) such information about the conduit pipe constitutes unique assets
of the business of COMPANY. CONSULTANT will not, during or after his retention,
personally use or disclose all, or any part of, such proprietary information
regarding the conduit pipe to any person, firm, corporation, association,
agency, or other entity except as properly required in the conduct of the
business of COMPANY or one of its subsidiaries, or except as pre-authorized in
writing by COMPANY or one of its subsidiaries, publish, disclose or authorize
anyone else to publish or disclose, any secret or confidential matter relating
to any aspect of the business of COMPANY and its subsidiaries with which
CONSULTANT'S service may in any way acquaint CONSULTANT. In the event of a
breach, or threatened breach, by CONSULTANT, of the provisions of this
Paragraph, COMPANY shall be entitled to a preliminary, temporary and permanent
injunction restraining CONSULTANT from disclosing in whole or in part, any such
proprietary information and/or form rendering any services to any person, firm,
corporation, association, agency, or other entity to whom such information, in
whole or in part, has been disclosed or is threatened to be disclosed.
Furthermore, nothing herein shall be construed as prohibiting COMPANY from
pursuing any other equitable or legal remedies available to it for such breach
or threatened breach, including the recovery or damages from CONSULTANT, and
neither remedy (injunction or damages) shall be exclusive of the other or
constitute an election of remedies.
11. RESTRICTIVE COVENANT.
(a) During the term of this Agreement and for a period of one (1)
year after the termination of this Agreement and any extension thereof,
CONSULTANT shall not, within the eastern United States, as well as within such
other areas as COMPANY shall then be operating conduit pipe plants, be engaged
in the manufacture and/or sale of conduit pipe
<PAGE>
or, directly or indirectly, own, anage, operate, control, be employed by,
consult for, participate in, or be connected in any manner with the ownership,
management, operation or control of any business relating to conduit pipe.
(b) CONSULTANT agrees that the "time,""geographic area," and "scope
of business" provisions of this restrictive covenant are reasonable and proper
and have been negotiated in connection with his participation in the proposed
business combination as well as in connection with his retention hereunder and
specifically the continued compensation provisions under Paragraphs 14 and 15.
(c) COMPANY and CONSULTANT agree, that if any court of competent
jurisdiction shall, for any reason, conclude that any portion of this covenant
shall be too restrictive, the court shall determine and apply lesser
restrictions, it being the intent of the parties that some such restrictions
shall be applicable for the protection of COMPANY and its shareholders.
12. NON SOLICITATION COVENANT.
(a) During the term of this Agreement and for a period of two (2)
years after the termination of this Agreement (including any extension thereof)
CONSULTANT shall not solicit, directly or indirectly, by any means, any of the
customers, accounts, employees or "leads" of COMPANY relating to the conduit
pipe business.
(b) COMPANY and CONSULTANT agree that, if any court of competent
jurisdiction shall, for any reason conclude that any portion of this covenant
shall be too restrictive, the court shall determine and apply lesser
restrictions, it being the intent of the parties that some such restrictions
shall be applicable for the protection of COMPANY and its shareholders.
(c) This covenant has been given to induce COMPANY to enter into this
Agreement and provide CONSULTANT'S job responsibilities and compensation, and
specifically the continued compensation provisions under Paragraph 14.
13. DISABILITY.
(a) CONSULTANT'S inability to perform his duties because of temporary
illness, disability, or incapacity, or for any other reasonable cause, shall not
constitute a failure to perform his obligations hereunder and shall not be
deemed a breach or default by him.
(b) If, at any time during the term of this Agreement and/or any
extension thereof, the CONSULTANT is unable to perform his services by reason of
illness or incapacity, COMPANY shall continue CONSULTANT'S compensation during
the period of such illness or incapacity, up to the balance of the initial term
of this Agreement or then current extension thereof.
(c) At any time, and from time to time, COMPANY may purchase
disability insurance to compensate CONSULTANT during periods of disability. In
the event that such insurance is purchased, during any period for which benefits
are being paid by such insurance subparagraph (a) above shall be inapplicable.
In lieu thereof, COMPANY shall compensate CONSULTANT at the agreed base
compensation rate less the benefits paid by such insurance.
14. TERMINATION.
(a) COMPANY can terminate consultant's retention at any time for good
cause. Without intending to limit the definition of good cause hereby, good
cause will include:
(1) the CONSULTANT'S death;
<PAGE>
(2) the occurrence of one of the following events:
(i) CONSULTANT commits, is arrested, or is officially charged with a felony or
any crime involving moral turpitude or unethical conduct which in the good faith
opinion of the COMPANY could impair his ability to perform his duties;
(ii) CONSULTANT commits an act, or fails to take action in bad faith and to the
detriment of the COMPANY, and
(iii) in the good faith opinion of the Board of Directors, the CONSULTANT fails
to fully and faithfully perform his obligations under this Consulting Agreement.
(b) The termination of CONSULTANT'S services shall not constitute a
termination of the restrictive obligations and duties under Paragraphs 10, 11
and 12.
(c) In the event of the bankruptcy (Chapter 7), reorganization
(Chapter 11) or other termination of the business of the COMPANY or of any
subsidiary on which CONSULTANT'S continued retention and compensation is
dependent, the provisions of Paragraph 11 shall continue in full force and
effect only so long as full base compensation by COMPANY shall continue.
(d) In the event of the termination or non-renewal of this Agreement
as a result of, or in connection with, or as the outcome of, a change of control
of COMPANY, the provisions of Paragraph 11 and the provisions of Paragraph 12
shall not remain in effect following termination.
15. ARBITRATION. Any controversy or claim arising out of, or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in New
York City, New York in accordance with the rules then pertaining of the American
Arbitration Association, but with all rights of discovery provided by the New
York Rules of Civil Procedure, and judgment upon the award rendered may be
entered in any court having jurisdiction thereof
16. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by such other party. The failure of a party
to exercise any rights or privileges under this Agreement shall not be deemed to
be a waiver or extinguishment of such rights or privileges, all of which shall
continue to be exercisable.
17. BENEFIT. The rights and obligations of COMPANY under this
Agreement shall inure to the benefit of, and shall be binding upon, its
successors and assigns. The protection of Paragraphs 10, I 1 and 12 shall inure
to the benefit of COMPANY and any successors and assigns. The rights and
obligations of CONSULTANT under this Agreement shall inure to the benefit of,
and shall be binding upon, his heirs, administrators, executors, successors and
assigns.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by certified mail to
his residence in the case of CONSULTANT, or to its principal office in the case
of COMPANY.
19. LIFE INSURANCE.
(a) COMPANY and/or one or more of its subsidiaries may, in its
discretion at any time after the execution of this Agreement, apply for and
procure, as owner and for its own benefit, insurance on the life of CONSULTANT,
in such amounts and in such forms as COMPANY may choose. COMPANY shall not be
required to give CONSULTANT any interest whatsoever in any such policy or
policies, (although nothing contained herein shall be deemed to prohibit any
such arrangement) but CONSULTANT shall, at the request of COMPANY, subject
himself to such medical examination, supply such information, and
<PAGE>
execute such information releases and documents as may be required by the
insurance company or companies to whom COMPANY has applied for such insurance.
(b) The provisions of subparagraph (a) above shall be in addition to
any insurance purchased to fund any shareholder buy-sell agreement.
20. ENTIRE AGREEMENT. This instrument contains the entire agreement
of the parties and may be modified only by agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
21. APPLICABLE LAW. This Agreement shall be governed for all purposes
by the laws of the State of New York. If any provision of this Agreement is
declared void, such provision shall be deemed severed from this Agreement, which
shall otherwise remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto set their hands and seals as of the day and year herein
above written.
FIDELITY HOLDINGS, INC.
ATTEST: By: /s/
------------------------------------
President
- ------------------------------
Secretary
WITNESS:
- ------------------------------
<PAGE>
Agreement with PPYM
for
Purchase of Patents
10.3
<PAGE>
PATENT SALE AND PURCHASE AGREEMENT
THIS PATENT SALE AND PURCHASE AGREEMENT is made and entered into this
14th day of November 1995 by and between
(1) PROGRESSIVE POLYMERICS, INC., a New York corporation, referred to herein as
the "SELLER".
(2) PROGRESSIVE POLYMERICS INTERNATIONAL, INC., a Nevada corporation, referred
to herein as "International".
AND
(3) FIDELITY HOLDINGS, IIIC., a Nevada corporation, referred to herein as to
"BUYER"
WTTNESSETH THAT:
WHEREAS, the SELLER is a wholly-owned subsidiary of Progressive
Polymerics International, Inc., a Nevada corporation, hereinafter referred to as
"'international", and is the owner of two United States patents, #5,217,667
issued June 8, 1993 and #5,312,658 issued May 17, 1994, and certain filings with
respect thereto in Canada, all such patents and filings hereinafter being
referred to as the "PATENTS";
WHEREAS, International acquired SELLER with the intention and purpose
of providing financing to complete development of the products under the PATENTS
and to exploit such patents through the manufacture and sale/distribution of the
so-called "armored conduit" product;
WHEREAS, international has not been able to complete its intended
financing and exploitation, and certain litigation has interfered with its
ability to secure the necessary financing, and International cannot, at this
time, complete its financing and exploitation, and international is desirous of
assisting SELLER in accomplishing its goals, even through a sale by SELLER of
the PATENTS, and international has secured the approval of a majority of its
stockholders for this transaction and Agreement;
<PAGE>
4. Emergency Directors. Prior to such an emergency, the Board of
Directors may designate officers or other persons who shall serve as directors
in emergency meetings in the event that the elected directors shall for any
reason be rendered incapable of discharging their duties.
5. Lines of Succession. The Board of Directors, either before or during
any such emergency, may provide, and from time to time modify, lines of
succession in the event that during such an emergency any or all officers or
agents of the corporation shall for any reason be rendered incapable of
discharging their duties.
6. Termination. Upon termination of the emergency, as declared by the
Board of Directors or other person discharging their duties, the emergency
by-laws shall cease to be operative. Termination shall not affect the legality
of actions taken hereunder.
ARTICLE XI
AMENDMENTS
1. These by-laws may be amended, repealed or altered in whole or in
part, by a majority vote of the outstanding stocks of the corporation, at any
regular or special meeting of the stockholders. Written notice shall, not less
than five (5) days before a stockholders' meeting called by the Board of
Directors for the purpose of considering proposed amendments, be given to each
stockholder of record entitled to vote. Such notice shall set forth the proposed
amendment or a summary of the changes to be effected thereby.
20
<PAGE>
2. These By-laws may also be amended, repealed, or altered, in whole or
in part, by a majority vote of the Board of Directors, at any meeting, without
prior notice. However, such by-laws, or any provision thereof, made, altered,
amended, or repealed by the Board of Directors, shall from time to time be
submitted to the stockholders for approval, and may be further altered, amended
or repealed by the stockholders at any annual meeting or, upon notice, at any
special meeting, and when so altered, amended or repealed, the Board of
Directors' changes disapproved by the stockholders shall not be re-established
by the Board of Directors without the prior approval of the stockholders.
21
<PAGE>
First Amendment
with PPYM
10.4
<PAGE>
PROGRESSIVE POLYMERICS INTERNATIONAL, INC.
(A Nevada Corporation)
UNANIMOUS CONSENT IN LIEU OF
SPECIAL MEETING OF DIRECTORS
The undersigned, being all of the Directors of Progressive Polymerics
International, Inc., a Nevada corporation, hereby execute this written consent
to action, as provided by Section 78.315(2) of the Nevada Corporation Law and in
lieu of a formal meeting. The undersigned hereby waive, pursuant to Section
78.375 of the Nevada Corporation Law and ARTICLE X of the By-laws, all
requirements of notice, including notice of purpose, whether contained in the
Nevada Constitution, the Nevada Corporation Law, or the By-laws of this
Corporation, and do hereby adopt the following resolutions:
WHEREAS, the Board of Directors of this corporation has received a
majority in interest of the PPYM stockholders approving the arrangements of the
First Amendment to the Sale and Purchase Agreement of the Armored Conduit
patents to Fidelity Holdings, Inc.; and
WHEREAS, this agreement will be entered in Court as a settlement of
Fidelity's action for rescission of the original agreement which will make the
matter res judicata for both PPYM and its stockholders;
NOW THEREFORE, BE IT RESOLVED, that the officers of this corporation be
and hereby are, authorized, directed, and empowered to do any act necessary or
desirable to effectuate the foregoing resolutions and to negotiate, execute,
seal, acknowledge, deliver and/or file any documents, instruments, or other
resolutions, all such acts and writings being hereby ratified, confirmed, and
adopted.
Dated: September 30, 1996
- -----------------------------
Terrence A. Davis
- -----------------------------
John P. O'Meara
Being all the Directors of the Corporation.
The following is appended hereto:
List of Shareholders Ratifying Agreement
First Amendment To Patent Sale And Purchase Agreement
<PAGE>
FIRST AMENDMENT
TO
PATENT SALE AND PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO PATENT SALE AND PURCHASE AGREEMENT is made and
entered into this 30th day of September, 1996 by and among
(1) PROGRESSIVE POLYMERICS, INC., a New York corporation, referred to herein as
the "SELLER";
(2) PROGRESSIVE POLYMERICS, INTERNATIONAL, INC., a Nevada Corporation, referred
to herein as "International";
AND
(3) FIDELITY HOLDINGS, INC., a Nevada corporation, referred to herein as the
"BUYER".
WITNESSETH THAT:
WHEREAS, the parties entered into a Patent Purchase and Sale Agreement
on November 14, 1995 which they now desire to amend in order to convert a
substantial portion of the purchase price to securities of the BUYER for the
benefit of the stockholders of International; and
WHEREAS, although allegedly approved by amajority in interest of the
stockholders of International, subsequent to the execution of the Patent
Purchase and Sale Agreement certain stockholders and members of management
complained that the Patent Purchase and Sale Agreement was not fair to
International, and demanded that such agreement be amended;
WHEREAS, in response to the claim of unfairness, BUYER offered to
rescind the Patent Purchase and Sale Agreement, but the complaining stockholders
and members of management rejected the rescission and demanded that the Patent
Purchase and Sale Agreement be amended, and the parties negotiated with respect
to an amendment to the terms and conditions of the original sale and purchase of
the two Armored Conduit patents but were unable to agree upon a mutually
acceptable amendment, due to BUYER's ascertainment of previously undisclosed
data;
WHEREAS, after the impasse developed, on June 20, 1996 BUYER filed a suit
in the Supreme Court of the State of New York, County of Queens, Indexed at No.
13505/96, seeking rescission of the Patent Purchase and Sale Agreement, but
subsequently the parties have agreed upon a mutually acceptable amendment, and
the parties desire to formalize and evidence their understandings and agreements
in this document;
NOW, THEREFORE, in consideration of the premises, intending to be legally bound
and in consideration of the mutual promises and
<PAGE>
covenants contained herein, the parties hereto hereby agree as follows:
1. Confirmation of prior Agreement The parties hereby confirm that the
prior Agreement of November 14, 1995 ("Original Agreement") is in full force and
effect and in good standing without default by either party. The parties intend
that such Agreement shall remain in full force and effect, except as
specifically amended hereby-.
2. Amendment; Conversion of Debt to Equity
(a) Paragraph 3 of the original Agreement of November 14, 1995 provided
for an aggregate purchase price to be paid by the BUYER to the SELLER for and in
consideration of the sale, transfer and conveyance to the BUYER of the two
Armored Conduit patents and certain related assets, consisteing of:
(i) a cash purchase price, to be paid in installments;
(ii) a "minimum royalty", by the payment of specific costs; and
(iii) an ongoing, or continuous, royalty based on production sales.
(b) The parties desire to amend the cash purchase price and "minimum
royalty" as provided in subparagraphs 3(b) and 3(c) of the original Agreement,
and by this First Amendment hereby amend such provisions. Nothing contained in
this amended Agreement shall affect the payment by BUYER of an on-going or
continuous royalty to SELLER calculated as provided in the original Agreement.
(c) The original Agreement provided for a cash purchase price f Five
Hundred Thousand Dollars ($500,000) to be paid in fifty-six (56) equal quarterly
installments, in arrears, over the remaining fourteen year life of the older
patent, commencing January 1, 1996. a unpaid principal sum was to bear interest
at the rate of seven cent (7%) per annum, simple interest. As required by such
Original Agreement, in January, 1996, BUYER paid to SELLER the sum of $4,375
representing interest on the unpaid sum from November 14, 995 to December 31,
1995. SELLER and International acknowledge that all interest on the original
cash purchase price has been paid through December 31, 1995.
(d) The Five Hundred Thousand Dollars ($500,000) cash purchase price is
hereby amended to a combination of:
(i) One Hundred Thousand Dollars ($100,000) in cash; and;
2
<PAGE>
(ii) Eighty Thousand (80, 000) Units of BUYER's securities,
as hereinafter provided in subparagraph (f) below, with such amendment to be
deemed to have occurred on January 1, 1996 for purposes of calculating interest
on the cash component, the differential being covered in subparagraph (f) below;
(e) The amended cash purchase price of $100,000 shall be paid an
follows:
(i) SELLER and International shall credit the sun of Fifteen
Thousand Dollars, which was wired on May 2, 1996, to the
principal sum, leaving a balance due of Eightyfive Thousand
Dollars ($85,000);
(ii) Upon execution of this First Amendment Agreement, BUYER
shall pay SELLER the sum of Fourteen Thousand Sixty Dollars
and Ninety-eight Cents ($14,060.98), of which Ten Thousand
Dollars shall be applied to the principal balance, leaving a
balance due of seventy-five Thousand Dollars ($75,000), and
Two Thousand Three Hundred Ninetyone Dollars and Sixty-seven
Cents ($2,391.67) shall be applied to interest on the amended
cash purchase price of $100,000 from January 1, 1996 to May 2,
1996, and One Thousand Six Hundred Sixty-nine Dollars and
Thirty-one Cents shall be applied to interest on the $85,000
principal balance from May 2, 1996 to September 11, 1996; on
or before October 31, 1996 and Nove-mber 30, 1996, BUYER shall
pay the following sums, allocated as indicated;
Month Payment Principal Interest
----- ------- --------- --------
October $10,452.08 $10,000 $ 452.08
November $14,379.17 $14,000 $ 379.17
(iv) on or before January 31, 1997, April 30, 1997, July 31,
1997 and October 31, 1997, BUYER shall pay the following sums,
allocated as indicated:
Month Payment Principal Interest
----- ------- --------- --------
January $14,912.33 $14,000 $ 912.33
April $14,638.63 $14,000 $ 638.63
July $12,406.97 $12,000 $ 406.97
October $11,196.77 $11,000 $ 196.77
(f) In addition to the cash purchase price of $500,000, BUYER had
agreed to pay certain additional sums as a "minimum royalty" during the two year
period to November 13, 1997, which included (i)
3
<PAGE>
up to the Sum Of Thirty Thousand Dollars ($30,000) for legal fees and costs in
connection with the Daniel Tepper litigation and (ii) the sum of $32,000 per
year for the employment of Peter Curti for the purposes of the original
Agreement. With respect to (i), BUYER and International have advised BUYER that
the Daniel Tepper litigation has been settled and the balance of the funds are
not required for that purpose. With respect to (ii), the parties have agreed
that BUYER will simply hire any person that it chooses for the intended purposes
and further employment of Mr. Curti is not required. Accordingly, in conversion
of the $400,000 balance of the cash purchase price and in lieu of the foregoing
minimum royalty payments, and in lieu of the interest on $500,000 from ,January
1, 1996 to March 31, 1996 per subparagraph (d) above, the parties have 'agreed
that, as provided in subparagraph (g) following, BUYER shall issue to
International Eighty Thousand (80,000) Units of its securities, each Unit to
consist of Two (2) shares of the Common Stock of BMBR and Two (2) Warrants, each
Warrant being for the purchase of one (1) further share of BUYER's Common Stock
at an exercise (purchase) price of $3.125 per share.
(g) BUYER shall issue the 80,000 Units upon the completed execution of
this frst Amendment. No Unit certificates shall be issued; BUYER shall issue, in
the name of International, two (2) certificates each for Eighty Thousand
(80,000) shares of its Common Stock and a single Warrant, exercisable for one
(1) year, for the purchase of one Hundred Sixty Thousand (160,000) additional
shares of its common Stock. Such certificate and Warrant shall bear a
restrictive legend on the face thereof disclosing that such securities have been
issued without registration under the Securities Act of 1933, as amended, and
are restricted as to further transfer. BUYER hereby agrees with International
that it will register Twelve Thousand (12,000) of such shares (from the stock
certificate not subject to the call provision as provided below) in its intended
SB-2 Registration Statement, anticipated to be filed in the first quarter of
1996; in consideration for such registration, which shall be at the expense of
BUYER, international covenants and agrees that it will not sell more than 1,000
shares of such 'registered 12,000 shares in each month for one year, commencing
the month following the month in which the Registration Statement is declared
effective. BUYER is hereby authorized by SELLER and International to provide
instructions to its Transfer Agent to implement this agreed sales limitation.
4
<PAGE>
(h) Of the 160, 000 shares of Common Stock being Issued, SELLER and
International hereby grant; to BUYER an irrevocable option to repurchase/redeem
80,000 of such shares at a price of Two Dollars and Fifty Cents ($2.50) per
share. The option shall be in effect only for so long as the exercise period for
the Warrant i.e., initially for a period of one year. BUYER may extend the call
option for a further year, but must also extend the exercise of the Warrant for
the same extension period. In the event that BUYER exercises this call option,
SELLER and International shall have the option to apply the payment to the
exercise of the Warrant.
(i) SELLER and International agree to be bound by the sales
restrictions applicable to affiliates. First, no unregistered shares being
issued (excluding the 12,000 shares to be registered from the certificate not
subject to the call provision) shall be sold for a period of two (2) years from
the date of issuance. No shares obtained upon exercise of the Warrant shall be
sold for a period of two (2) years from the date of purchase. The amount of
securities sold for the account of SMLER within the preceding three (3) months
shall not exceed the greater of (i) one percent (1%) of the shares or other
units of the class outstanding as shown by the most recent report or statement
published by BUYER as the issuer, or (ii) the average weekly reported volume of
trading in such securities during the preceding four (4) weeks on all national
securities exchanges and/or reported through the automated quotation system, and
a further sales limitation shall be that no sales in one day shall exceed the
bid volume displayed by the primary bidder. BUYER is hereby authorized by SELLER
and International toprovide instructions to its Transfer Agent to place a legend
on one of the share certificates indicating that it is subject to this
provision.
3. Amendment; Deletion of Prgvisionss. Paragraphs 4, 5 and 11 of the
prior Agreement of November 14, 1995 are hereby deleted. BUYER shall not be in
default due to any delay, non-action, failure to exploit, or other time
limitation or duty to market, produce, manufacture, or otherwise.
4. Collateral Matter; Release and Covenant not to Sue
(a) During the period prior to November 14, 1995, SELLER and International had
dealt with Holtzman Enterprises, Inc. and its
5
<PAGE>
affiliates (Holtzman). Officers, directors and employees and agents of Holtzman
performed various services for SELLER and/or International and both SELLER and
International received various accommodations and services (e.g., office space,
office expense, telephone, secretarial/receptionist assistance, legal
assistance). In reimbursement of Holtzman's expenses, BUYER and International
transferred and paid to Holtzman approximately Eighty-five-Thousand Dollars
($85,000). In the dispute following the November 14, 1995 Agreement, outlined in
the Preamble to this First Amendment, shareholders and/or agent of SELLER and
International demanded repayment of all or some of such reimbursement.
(b) SELLER and International jointly and severally represent and warrant that
such reimbursement is deemed to have been correct, fair and reasonable, that
they jointly and severally release (i) Holtzman, its officers, directors,
shareholders, employees and agents, and (ii) BUYER, its officers, directors,
shareholders, employees and agents, and that they and neither of them shall make
any further claim with respect thereto or file or prosecute any claim, suit,
proceeding or arbitration, directly or indirectly, with respect to such payment,
the amount thereof, the components thereof, or otherwise-
(c) SELLER and International jointly and severally represent and warrant that
the amended consideration set forth in this First Amendment is also
consideration for this collateral release and covenant not to sue.
(d) For and in consideration of this First Amendment, SELLER and International
jointly and severally release Holtzman,. its officers, directors, shareholders,
employees, agents, successors and assigns from all actions, causes of action,
suits debts, Purchase orders, dues, sums of 'money.. accounts, reckonings,
bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions, claims
and demands whatsoever, in law, admiralty or equity, which against such released
parties - SELLER and/or international and S Is and International directors,
officers, shareholders, employees, agents, successors and assigns ever had, now
have or hereafter can, shall, or may have, for, upon or by reason of any matter,
cause or thing whatsoever from the beginning of the world to the date hereof.
6
<PAGE>
5. Confirmation, Representation and Warranty
(a) SELLER and International jointly and severally . represent and warrant that
(a) the original consideration for the Bale of the patents was and is fair and
reasonable and (b) the amended consideration for the sale of the patents set
forth herein has been negotiated at arms length in negotiations initiated by S
and International due to their change in circumstances, is fair and reasonable,
and has been approved by a 'majority in interest of the shareholders of
international. BUYER is authorized to enter this First Amendment, or such other
documents as may be appropriate under the circumstances incorporating this First
Amendment, as a Final Order in the pending rescission litigation so that this
First Amendment or the team and conditions hereof shall be res judirata with
respect to the prior disputes.
(b) For and in consideration of this First Amendment, s and International
jointly and severally release BUYER, its officers, directors, Shareholders,
employees, agents, successors and assigns from all actions, causes of action,
suits debts, Purchase Orders, dues, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims and
demands whatsoever, in law, admiralty or equity, which against such released
parties SELLER and/or International and SELLER and International directors,
officers, shareholders, employees, agents, successors and assigns ever had, now
have or hereaft er can, shall, or may have, for, upon or by reason of any
matter, cause or thing whatsoever from the beginning of the world to the date
hereof.
6. MASTER DISTRIBUTORSHIP
BUYER hereby covenants and agrees that, upon commencement of sales of the
Armored Conduit by BUYER's "Plastics- and Utilities Division", it shall cause
its appropriate subsidiary, subsubsidiary and/or affiliate or licensee, then
producing and/or distributing the Armored Conduit to appoint SELLER and
International, jointly, as a non-exclusive Master Distributor for the Armored
Conduit products. Such Master Distributorship shall be an a "favored nation"
basis, i.e.,, on terms and conditions equal to the most favorable terms and
conditions given to any other Master Distributors (distributors) of the
products. Such 'Master Distributorship shall be transferable and assignable by
SELLER and
7
<PAGE>
International, subject to BUYER'S approval of the qualifications of any such
transferee or assignee.
7. Construction
Whenever required by the context hereof the masculine gender shall be deemed to
include the feminine and neuter; and the singular member shall be deemed to
include the plural. Time Is expressly declared to be of the essence of this
Agreement. This Agreement shall be deemed to have been mutually prepared by all
parties and shall not be construed against any particular party as the draft
8. Interpretation
It is the intent of the parties that this First Amendment shall be construed and
interpreted, and that all questions arising hereunder shall be determined in
accordance with the provisions of the laws of the State of New York.
9. Binding Effect
This First Amendment shall be binding upon and shall inure to the benefit of the
parties and their successors and assigns.
10. Counterparts
This First Amendment may be executed in two or more counterparts, any one of
which shall be deemed to be an original and all of which taken together shall
constitute one agreement.
11. No Brokers' or Finders' fees
No agent, broker, person, or firm acting on behalf of either party or any of
their subsidiaries or under the authority of any of them is or will be entitled
to any commission or brokers or finder's fee or financial advisory fee in
connection with any of the transactions contemplated herein.
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this First Amendment to Patent Sale and
8
<PAGE>
Purchase Agreement on the date first above written.
PROGRESSIVE POLYMERICS, INC.
ATTEST:
By:________________________________
PROGRESSIVE POLYMERICS,
INTERNATIONAL INC.
ATTEST:
By:________________________________
FIDELITY HOLDINGS, INC.
ATTEST:
By:________________________________
9
<PAGE>
Contract between Nissko
Telecom, Inc. and
Computer Business
Sciences, Inc.
10.5
<PAGE>
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 144-15 Union Turnpike, Flushing, New York 11367
(hereinafter "CBS")
AND
NISSKO TELECOM, LTD., a Delaware corporation with offices located at 7
West 45th Street, New York, New York 10036 and formed by: AVRAHAM NISSANIAN, an
adult individual residing at 139-34 78th Drive, Flushing, New York 11367; YOSSI
KOREN, an adult individual residing at 124 Atidley Street, Kew Gardens, New York
11418; and CHAMUEL LIVIAN, an adult individual residing at 65 Tennis Place,
Forest Hills, New York 11375; (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;
1
<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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,
4
<PAGE>
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
5
<PAGE>
the purchase price for the 15 Machines, CBS guarantees that NT shall
recover the Deposit by March 31, 1998. If, by March 31, 1998, NT 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
6
<PAGE>
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".
7
<PAGE>
(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 Geoffrey Alexander, a CBS employee.
NT and Mr. Alexander shall enter into such employment or
consulting agreement as they may negotiate. The term of Mr.
Alexander's 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 Mr. Alexander,
NT shall notify CBS of the failure to achieve the performance
projections and shall terminate Mr. Alexander. 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.
8
<PAGE>
(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
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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, Bruce Bendell,
Chairman of the Board of FIDELITY, and Doron Cohen, 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
12
<PAGE>
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 Mr. Bendell and Mr. Cohen, that number of
shares as may be required in order to secure the unrecovered balance.
Contemporaneously with the execution of this Purchase Agreement, Mr.
Bendell and Mr. Cohen 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 Mr. Bendell and Mr. Cohen
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
13
<PAGE>
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.
14
<PAGE>
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.
15
<PAGE>
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
144-15 Union Turnpike
Flushing, New York 11367
with a copy to: Richard C. Fox, Esq.
3401 Lakeview Drive
Delray Beach, Florida 33445
If to Nissko Telecom, Ltd.:
Nissko Telecom, Ltd.
7 West 45th Street
New York, New York 10036
with a copy to; Robert L. Rimberg, Esq.
866 Third Avenue, 30th Floor
New York, New York 10022
or to such other addresses as the parties hereto may from time
16
<PAGE>
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
<PAGE>
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
18
<PAGE>
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
19
<PAGE>
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
YOSSI KOREN
CRAMUEL LIVIAN/
20
<PAGE>
Contract between Zvi and
Sarah Barak. and
Fidelity Holdings, Inc.
10.6
<PAGE>
THIS INDENTURE made in duplicate this 18th day of April, 1996 BETWEEN
FIDELITY HOLDINGS, INC. and
786710 ONTARIO LIMITED
collectively
hereinafter called the Seller OF THE
FIRST PART, and
ZVI BARAK and SARAH BARAK,
collectively
hereinafter called the Buyer OF THE
SECOND PART.
WHEREAS the Seller is possessed of the goods hereinafter set forth, and has
contracted and greed with the Buyer for the absolute Sale to him thereof, for
the consideration hereinafter mentioned:
NOW THEREFORE THIS INDENTURE WITNESSETH, that in pursuance of the said
Agreement, and in consideration of the sum of ---------------------- TEN
($10.00) --------------------- Dollars of lawful money of Canada, paid by the
Buyer to the Seller at or before the sealing and delivery of this Indenture (the
receipt whereof is hereby acknowledged), the Seller does bargain, sell, assign,
transfer and set over unto the said Puyer
ALL THOSE goods, namely;
All interest, right and title in and to the trademark BCS Software, presently
registered in Canada and all software, modules, applications and modifications
and all hardware signatures with respect thereto and all interest, right and
title in and to the trademark Infosystems and all software, modules,
applications and modifications and all hardware signatures with respect thereto.
It is acknowledged that this Bill of Sale is provided as a security document
pursuant to a Pledge and Security Agreement made as of the 18th day of April,
1996 between Fidelity Holdings, Inc. and 786710 Ontario Umi ted and Zvi Barak
and Sarah Barak and is intended to be enforced in the event of a Default
occurring under such Pledge and Security Agreement. 'nis Bill of Sale shall
include all trademark rights and patent rights registered, filed or claimed in
respect of the trademark refereed to above anywhere in the world at the time of
the enforcement of the Bill of Sale by the Buyer in accordance with the
provisions of the Pledge and Security Agreement referred to above.
<PAGE>
Attached hereto and made a part of this Bill and Sale is an Assigament executed
by the Seller in respect of the Canadian trademark rights to the trademark
referred to above.
<PAGE>
all of which goods, being in the possession of the Seller and located at
1110 Finch Avenue West, Suite 906
Toronto, Ontario; and
144-15 Union Turnpike
Flushing, New York
U.S.A.
AND all the right, title, interest, property, claim and demand whatsoever of the
Seller of, in, to, and out of the same, and every part thereof.
TO HOLD the said goods and every part thereof, and all the right, title and
interest of the Seller therein and thereto, unto and to the use of the Buyer.
AND the Seller does hereby, covenant, promise and agree with the Buyer: THAT the
Seller is now rightfully and absolutely possessed of and entitled to the said
goods and every part thereof; AND that the Seller now has good right to assign
the same unto the Buyer, and according to the true intent and meaning of this
Indenture; AND that the Buyer, shall and may from time to time, and at all times
hereafter, peaceably and quietly have, hold, possess, and enjoy the said goods
and every part thereof, to and for his own use and benefit, without any manner
of hindrance, interruption, molestation, claim or demand whatsoever of, from or
by the Seller or any person or persons whomsoever; AND that the said goods are
free and clear from all encumbrances; AND that the Buyer shall be absolutely
released and discharged, or otherwise, at the cost of the Seller, from all
former and other bargains, sales, gifts, grants, charges and encumbrances
affecting the said goods, and the Seller hereby indemnifies the Buyer with
respect thereto;
AND, that the Seller and all persons rightfully claiming, or to claim any
estate, right, title or interest of, in, or to the said goods and every part
thereof, shall and will from time to time, and at all times hereafter upon every
reasonable request of the Buyer, but at the cost and charges of the Buyer make,
do and execute, or cause or procure to be made, done and executed, all such
further acts, deeds and assurances for the more effectually assigning and
assuring the said goods unto the Buyer, in manner aforesaid, and according to
the true intent and meaning of this Indenture, as by the Buyer, or his Counsel
in the law shall be reasonably advised or required.
IT IS AGREED that this Indenture and everything herein contained shall enure to
the benefit of and be binding upon the executors, administrators and assigns or
successors and assigns of the parties hereto respectively.
IT IS FURTHER AGREED that wherever the singular and masculine are used
throughout this Indenture, they shall be construed as if the plural or the
feminine or the neuter had been used, where the context or the party or parties
hereto so require, and the rest of the sentence shall be construed as if the
grammatical and terminological changes thereby rendered necessary had been made.
IN WITNESS WHEREOF, the Seller has executed this Indenture
this 18th 1996 day of April
SIGNED, SEALED AND DELIVERED
In the presence of
FIDELITY HOLDINGS, INC.
Per: /s/ Doron Cohen C/S
- ------------------------
Doron Cohen
786710 ONTARIO LIMITED
Per: /s/ Doron Cohen C/S
- ------------------------
Doron Cohen
<PAGE>
A S S I G N M E N T
KNOW ALL MEN BY THESE PRESENTS that 786710 ONTARIO LIMITED, a
corporation incorporated pursuant to the laws of the Province of Ontario, having
a principal office and place of business in the Municipality of Metropolitan
Toronto, Province of Ontario (hereinafter called the "Assignor") in
consideration paid to it by Zvi Barak and Sarah Barak, c/o Messrs. Grubner,
Krauss, Barristers & Solicitors, 5140 Yonge Street, Suite 1540, North York,
Ontario M2N 6L7 (hereinafter called the Assignee"), the receipt whereof is
hereby acknowledged, has agreed to sell, assign and transfer and does hereby
sell, assign and transfer unto the said Assignee all of its right, title and
interest in and to the trade mark "BCS Software" duly registered in the Canadian
Trade Marks Office under Number 309,483 -525,690 on ___________
The Assignee hereby appoints Geoffrey Douglas Brown whose full post
office address in Canada is 5140 Yonge Street, Suite 1540, North York, Ontario,
M2N 6L7, as the person or firm to whom any notice of its registration may be
sent, and upon him service of any proceedings in respect of the said
registration may be given or served with the same effect as if they had been
given to or served upon it.
IN WITNESS WHEREOF the parties have hereunto affixed their
corporate seals under the names of the proper officers to be authorized in that
behalf as of this 18th day of April, 1996.
786710 ONTARIO LIMITED
Per: /s/ Doron Cohen C/S
------------------------
Doron Cohen
________________________
ZVI BARAK
________________________
SARAH BARAK
<PAGE>
Employment Agreement
with Dr. Barak
10.7
<PAGE>
EMPLOYMENT AGREEMENT
(and Agreement to serve as a Director)
THIS EMPLOYMENT AGREEMENT, made as of ' this 18th day of April, 1996,
by and between:
FIDELITY HOLDINGS, INC., a newly organized Nevada corporation having
its executive office at 144-15 Union Turnpike, Kew Gardens Hills, NY 11367
(hereinafter referred to as "EMPLOYER")
AND
ZVI BARAK, Ph.D, an adult individual residing at 204 Franklin Avenue,
Thornhill, Ontario L4J 7L3 (hereinafter referred to as "EMPLOYEE")
WITNESSETH THAT:
WHEREAS, EMPLOYEE has certain education, experience, background and
contacts which would be useful and helpful to EMPLOYER in its business and
EMPLOYER is desirous of employing EMPLOYEE in order to obtain the benefits of
such education, experience, background and contacts;
WHEREAS, EMPLOYEE is the inventor and developer of TALKIE, TALKIE-GLOBE
and BCS, certain software and systems which EMPLOYER has acquired and desires
that EMPLOYEE establish and manage a research and development facility for
EMPLOYER, dedicated to improving the products purchased and developing new
products, either associated with the acquired products or newly developed
products;
WHEREAS, EMPLOYER desires that EMPLOYEE provide product support for the
products acquired;
WHEREAS, EMPLOYEE is agreeable to being hired by EMPLOYER as an
employee and providing the benefits of his education, experience, background and
contacts to EMPLOYER;
WHEREAS, the parties have agreed upon the terms of such employment and
desire a written, formal contract to evidence their agreements;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
forbearances contained herein, and intending to be legally bound, the parties
have agreed as follows:
1. EMPLOYMENT. For the term provided in Paragraph 2, EMPLOYER hereby
employs EMPLOYEE, and EMPLOYEE hereby accepts that employment, upon the terms
and conditions hereinafter set forth.
2. TERM.
(a) This Agreement shall become effective as of April 18, 1996.
(b) This Agreement, subject to the provisions of Paragraphs 14 and
15 below, shall continue and exist for an initial period from April 18, 1996 to
April 30, 2001.
(c) EMPLOYER shall have the option to extend the term of
1
this Agreement for an additional one (1) year period, i.e., to April 30, 2002.
Such option shall be exercised by EMPLOYER mailing notice to EMPLOYEE on or
before February 28, 2001, of its intention to so extend the Agreement. If
EMPLOYER shall not exercise its extension option by March 1, 2001, this
Agreement shall terminate on April 30, 2001.
(d) Notwithstanding the foregoing, the term of this Agreement is
otherwise subject to the termination provisions contained hereafter.
3. COMPENSATION-BASE
(a) For all services rendered under this Agreement, EMPLOYEE shall
be paid, as base compensation, such annual fee as shall be determined by the
President/CEO and Management of EMPLOYER, from time to time, but in no event
shall such compensation be at rate of less than $150,000 per year. In the event
of any extension of this Agreement, such compensation shaall be at a rate of no
less than $150,000 per year during each extension year. All such compensation
shall be subject to a Cost-of-Living Adjustment (COLA) annually based upon the
percentage increase in the Cost-of-Living Index, All Commodities, for the New
York City area. Subject to sub-paragraph (b) below, such compensation is to be
payable in equal installments at intervals no longer than semi-monthly, and
shall be paid as and where directed by EMPLOYEE, EMPLOYER acting reasonably to
accommodate EMPLOYEE's claim of permitted tax exemptions. Such base compensation
shall be in addition to such fringe benefits and bonuses as provided elsewhere
herein. (b) In addition to the COLA adjustment, the adjusted base compensation
for each year of this Agreement, including any extensions to this Agreement,
shall be subject to a retroactive increase, based upon an earnings per share
formula (actual common shares issued and outstanding at December 31 of each
year, and not fully diluted) as follows:
Profits per Increase as a
Common Share Percent of Base Compensation
$.00 - $.10 5%
$.11 - $.20 10%
$.21 - $.30 20%
$.31 - $.40 30%
$.41 - $.50 40%
$.51 - $.60 50%
$.61 - $.70 70%
$.71 - $.80 90%
$.81 - $.90 110%
$.91 - $1.00 130%
over $1.00 150%
This retroactive increase, if any should occur, is not a bonus but a
merit adjustment to the base compensation, and shall be based on the
COLA-adjusted base compensation in effect for the prior year. The calculation
shall be made based upon the annual audit of EMPLOYER's financial statements and
shall be paid in equal amounts for the balance of the then current year on the
2
<PAGE>
regular paydays, commencing with the first payday following release of the
audit. Any retroactive increase shall not affect the baseline for subsequent
calculations. It is a separate adjustment from any other adjustment under any
other plan.
(c) For compensation purposes, EMPLOYER may assign EMPLOYEE to one or
more of its subsidiaries and/or affiliates, to perform services consistent with
EMPLOYEEIS duties hereunder. In such event, EMPLOYEE may be separately
compensated by each such subsidiary and/or affiliate. All such compensation
shall be deducted from the compensation payable under sub-paragraph (a) above
and EMPLOYER shall pay EMPLOYEE only the difference between (i) the total of all
such compensations from subsidiaries and/or affiliates and (ii) the base
compensation. No assignment hereunder for compensation purposes shall require
that EMPLOYEE physically relocate.
(d) At the end of each calendar year, the President/CEO and Management
of EMPLOYER shall review the performance of EMPLOYEE for such year and, based
upon such evaluation, establish any increase in the base compensation payable to
EMPLOYEE for the succeeding calendar year, as COLA adjusted by sub-paragraph (a)
above. EMPLOYER shall not be obligated to provide any increase, in excess of the
increase in the Cost-of-Living Index, All Commodities, for the New York City
area during the prior calendar year.
4. COMPENSATION-FRINGE BENEFITS. EMPLOYEE shall receive at least the
following additional benefits, which may be extended or increased, but not
reduced, by EMPLOYER:
(a) Vacation - During each year of this Agreement, EMPLOYEE shall be entitled to
paid vacation during the first year of this Agreement of three (3) weeks and
thereafter of four (4) weeks, which shall not be accumulated from year to year
if unused. EMPLOYEE shall not be compensated for any unused vacation time.
(b) Personal Leave - During each year of this Agreement, EMPLOYEE shall receive
five days paid personal leave, which shall not be accumulated from year to year
if unused. EMPLOYEE shall not be compensated for any unused personal leave.
"Personal leave" shall include sick leave and all other personal time off not
otherwise provided for.
(c) Statutory/Religious Holidays - During each year of this Agreement, EMPLOYEE
shall be entitled to paid days off for all statutory and religious holidays as
specified in the Jewish calendar.
(d) Bereavement - In the event of a death of person f or which EMPLOYEE observes
shiva, EMPLOYEE shall be entitled to paid days off for all such observance.
(e) Military Service - If, during the term of this Agreement, EMPLOYEE shall be
called into military service, EMPLOYER shall continue EMPLOYEE's compensation
for a period of up to fourteen (14)working days. The calculation of working days
shall exclude the Sabbath and non-working religious holidays. Any military
service period over 14 working days shall either not be compensated by EMPLOYER
or EMPLOYEE may utilize vacation or
3
<PAGE>
personal leave for such purpose.
(f) Disability/Life Insurance - EMPLOYEE shall receive an allowance of Five
Thousand Dollars ($5, 000) f or the payment of premiums for disability insurance
and/or life insurance. EMPLOYEE may select such coverage, from such companies,
for either or both disability and life insurance, and EMPLOYER shall pay $5,000
toward the premiums, with EMPLOYEE responsible for the overage. The $5,000
allowance shall be subject to the COLA adjustment provided above with respect to
the base compensation.
(g) Automobile - During the term of this Agreement, (i) if the Israeli R&D
facility is turned into a profit center, or (ii) if EMPLOYEE leaves Israel, or
(iii) if EMPLOYEE becomes subject to Israeliincome taxes exceeding $18,000, then
in any such event EMPLOYER shall provide EMPLOYEE with a car allowance of the
lesser of (i) $18,000 per year of employment or (ii) the total costs for vehicle
purchase or lease, garaging, repairs, maintenance, insurance, fuel, oil and
supplies. EMPLOYEE shall be responsible for all purchase or lease costs in
excess of $18,000 per year and all costs for garaging, repairs, maintenance,
insurance, fuel, oil, and supplies.
(h) Other - EMPLOYEE shall receive such other medical, surgical, hospital,
dental or legal insurance and fringe benefits as are available to any other
officers/employees/consultants, consistent with EMPLOYERIS past practices and
such life/disability insurance, incentive or deferred compensation or bonuses,
pension/profit sharing plan and qualified and non-qualified stock option plans
as the Board of Directors of EMPLOYER shall establish. Nothing contained in this
Agreement shall be in lieu of any rights, benefits and privileges to which
EMPLOYEE may be entitled under any retirement, pension, profit-sharing,
insurance, hospital or other plans which may now be in effect or which may
hereafter be adopted. EMPLOYEE shall have the same rights and privileges to
participate in such plans and benefits as any other employee during his period
of employment.
5. COMPENSATION-BONUS. (a) After the end of each calendar year, the
President/CEO and Management of EMPLOYER shall determine the net profits before
taxes of EMPLOYER for such prior year and shall determine any bonus for such
year payable to EMPLOYEE. EMPLOYER shall not be obligated to provide any bonus.
Any bonus awarded shall be paid at such time or times, in such amounts or
installments, as the President/CEO and Management may determine.
(b) As incentive compensation for EMPLOYEE, EMPLOYER shall pay EMPLOYEE a
royalty of two percent (2%) on gross revenues received by EMPLOYER from sales of
all "new products" developed by the R&D facility under EMPLOYEE's direction, as
determined under subparagraph 7(c) below. The royalty shall be paid annually, in
arrears, on or before April 30th, for all sales of all new products during the
preceding calendar year. The royalty shall be calculated on a sales base
consisting of the new product and the hardware sold with it. This royalty
incentive compensation shall continue during the term of this contract and for
the balance of the year in which termination occurs and for the two
4
<PAGE>
full succeeding calendar years. In the event that EMPLOYEE moves, as permitted
under subparagraph 7 (c) below, the royalty incentive compensation for new
products developed at the facility in Israel'shall continue to the extent of new
products developed during EMPLOYEE's management tenure. As used herein:
(i) the term "new product" shall mean any software, program or
application which requires more than one (1) standard man-month (172 working
hours) to develop and which either: (A) is new software or a program which
performs one or more applications different from the applications of the current
software or programs, including the current Talkie and BCS modules; or (B) is
sufficiently distinguishable that it provides a new source of revenue (income)
for EMPLOYER. Adaptation of the current software, programs and applications to
Windows/Windows 95 shall not be deemed a new product; and
(ii) the term "sales of all new products" shall mean the revenues (net
of returns and allowances) from all transactions including a "new product",
whether denominated as a " sale" , "lease",, "service contract",, "license
agreement", anycombination thereof, or otherwise. (c) In the event that an
incentive program is developed by EMPLOYER as an alternative to the 2% royalty
provided in (b) above, which could provide EMPLOYEE with greater income,
EMPLOYER shall offer such program to EMPLOYEE.
6. DUTIES. (a) EMPLOYEE is engaged as the EMPLOYER's "Director of
Research & Development" and, subject to the direction and approval of EMPLOYER's
President/CEO and Management,, shall establish, supervise and manage a research
& Development facility to (i) provide product support to existing products,
including TALKIE, TALKIE-GLOBE and BCS, which after the first six months shall
mean high-level support advising assigned service and support engineers of
786710, FIDELITY, and/or FIDELITY's subsidiary, Computer Business Sciences,
Inc., (ii) improve and enhance such existing products so as to keep them at the
most current state-of-the-art level, and (iii) develop new products to increase
the EMPLOYER's product line. EMPLOYEE shall provide product advice and
assistance to EMPLOYER's officers,, directors and key management. In cooperation
with, and subject to, EMPLOYER's President/CEO and Management, EMPLOYEE shall
develop a schedule of work, including the scope and content of the R&D work
being performed, and shall develop, for approval'by EMPLOYER's President/CEO and
Management, an annual budget for the R&D within that scope of work. EMPLOYEEIS
performance shall be subject to the supervision of EMPLOYERIS President/CEO and
Management. The precise consulting scope and the specific services to be
rendered by EMPLOYEE may be defined, interpreted, curtailed, or extended, from
time to time, by determination of the Presideht/CEO of EMPLOYER, provided,
however, that any definition, interpretation, curtailment, or extension is
consistent with the status of, and/or educational experience required for, the
responsibilities for which EMPLOYEE has been initially engaged hereunder. It is
the intent of this provision
5
<PAGE>
to provide EMPLOYER with flexibility in assigning responsibilities to EMPLOYEE
and this provision shall not be used to discipline, embarrass, humiliate or
harass EMPLOYEE.
(b) In addition, at the option of EMPLOYER I s management, and subject to the
approval of the EMPLOYER's shareholders, during the term of this Agreement
EMPLOYEE shall, from time to time, serve as a director of the EMPLOYER if so
elected. The parties acknowledge that EMPLOYEE is presently a director elected
to serve until his successor is elected and qualified. If elected to serve as a
director, EMPLOYEE shall be indemnified by EMPLOYER and shall receive the
benefits of any O&D insurance. Removal and/or failure to elect or reelect
EMPLOYEE as a director shall not be a breach of this Employment Agreement or the
contemporaneously executed Master Agreement.
(c) The parties intend that EMPLOYEE's duties shall not require regular travel
or prolonged trips. Accordingly, other than required appearances for legal
proceedings, attendance at meetings of the Board of Directors, high level
conferences with potential and existing customers, attendance at job-related
technology conferences, and similar types of travel necessitated by EMPLOYEE's
position, duties and know-how, EMPLOYER shall not require that EMPLOYEE travel.
All business travel shall be at the expense of EMPLOYER which shall, in
addition, provide excess medical/health insurance coverage applicable to
EMPLOYEE at all locations outside Israel.
7. EXTENT AND PLACE OF SERVICES. (a)
EMPLOYER is establishing an R&Dfacility in Israel to accommodate EMPLOYEE, who
desires to emigrate to Israel. EMPLOYEE's move to Israel shall be at EMPLOYEE's
sole expense. EMPLOYER and EMPLOYEE shall mutually develop a plan for the
location, outfitting and staffing of such R&D facility and a budget for the
operation of such facility. In general, the facility shall include EMPLOYEE, a
secretary, and a programmer assistant. Final decisions with respect to the
outfitting and staffing of the R&D facility in excess of the minimum level and
the establishment of the budget for such facility, shall rest with EMPLOYERIS
President/CEO and management.
(b) EMPLOYEE agrees that this employment constitutes his exclusive employment
and understands that his primary loyalty and responsibility is to EMPLOYER.
Accordingly, EMPLOYEE shall devote such adequate, reasonable, and proper time,
attention, and energies to the business of EMPLOYER as shall be necessary or
consistent with such understanding and EMPLOYEE shall not, during the term of
this Agreement be engaged in any other business activity (whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage),
which conflicts with EMPLOYEEIS employment responsibilities hereunder, without
prior, written authorization of EMPLOYERIS President/CEO and Management. Nothing
contained herein shall be construed as preventing EMPLOYEE from investing his
assets in such form or manner as will not require any services on EMPLOYEEIS
part in the operation of the affairs of the companies in which such investments
are made.
(c) EMPLOYER and EMPLOYEE have discussed the possibility that
6
<PAGE>
EMPLOYEE subsequently decides to leave Israel. In such event, EMPLOYEE in his
discretion may move, at his expense, to a new location, and such a further move
shall not be a breach of this Agreement. At such new place of residence,
EMPLOYER shall establish an R&D facility for the purpose of permitting EMPLOYEE
to continue his required services hereunder. EMPLOYER in its sole discretion may
retain the R&D facility in Israel and either continue EMPLOYEE's supervision of
such facility or employ a substitute.
8. WORKING FACILITIES. (a) EMPLOYEE shall be furnished with all
necessary working facilities, including but not limited to
telephone/facsimile/copying services, suitable to his position and adequate for
the performance of his duties. (b) In the event that EMPLOYEE elects to leave
Israel, as provided in Paragraph 7(c) above, EMPLOYER shall furnish EMPLOYEE
with all necessary working facilities at the new location.
9. EXPENSES. EMPLOYEE is not authorized to incur expenses on behalf of,
or chargeable to, EMPLOYER, with respect to his business travel, including
transportation, lodging, food, entertainment, etc. except within such guidelines
as may be established from time to time by the President/CEO and Management of
EMPLOYER. EMPLOYER shall reimburse EMPLOYEE for authorized expenses within such
guidelines upon presentation by EMPLOYEE, from time to time, of an itemized
account of such expenditures-in such form as EMPLOYER may require, together with
receipts or other proofs of the expenditures as may be required.
10. OWNERSHIP OF INVENTIONS AND DEVELOPMENTS. (a) For purposes of this
Agreement, the following definitions shall apply:
(i) "Inventions" shall mean:
(A) All inventions, improvements, modifications, and enhancements,
whether or not patentable, made by EMPLOYEE during EMPLOYEE's employment by
EMPLOYER; and
(B) All inventions, improvements, modifications and enhancements
made by EMPLOYEE, during a period of one (1) year after any suspension or
termination of EMPLOYEE's employment by EMPLOYER, which relate, directly or
indirectly, to the past, present or then current business of the EMPLOYER.
(ii) "Work Product" shall mean all documentation, software, creative
works, programs,, systems, source codes, Hardware Signatures, know-how and
information created, in whole or in part, by EMPLOYEE during EMPLOYEE's
employment by EMPLOYER, whether or not copyrightable or otherwise protectable,
excluding Inventions.
(iii) "Trade Secrets" shall mean all documentation, software, know-how
and information relating to the past, present and then current business of the
EMPLOYER, any intended business of EMPLOYER of which EMPLOYEE has knowledge, or
any plans therefor, or relating to the past, present or then current business of
a third party or plans therefor that are disclosed to
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an equipped office, clerical help, and the EMPLOYER, which the EMPLOYER does not
disclose to third parties without restrictions on use or further disclosure.
(b) To provide a benchmark, EMPLOYEE represents and warrants that as of the
execution of 'this Agreement there are no Inventions or Work Products developed
by EMPLOYEE which the EMPLOYEE asserts are to be excluded from the provisions of
this Paragraph 10.
(c) EMPLOYEE shall promptly disclose to EMPLOYER all Inventions and keep
accurate records relating to the conception and reduction to practice of all
Inventions. Such records shall be the sole and exclusive property of EMPLOYER,
and the EMPLOYEE shall surrender possession of such records to the EMPLOYER upon
any suspension or termination of EMPLOYEE's employment with the EMPLOYER.
(d) EMPLOYEE hereby assigns to the EMPLOYER, without further consideration to
the EMPLOYEE, the entire right title and interest in and to the Inventions and
Work Product and in and to all proprietary rights therein or based thereon.
EMPLOYEE agrees that the Work Product shall be deemed to be a "work made f or
hire". EMPLOYEE shall execute all such assignments, oaths, declarations and
other documents as may be prepared by EMPLOYER to effect the foregoing.
(e) EMPLOYEE shall provide EMPLOYER with all reasonable inf ormation,
documentation, and assistance EMPLOYER may request to perfect, enforce, or
defend the proprietary rights in or based on the Inventions, Work Product or
Trade Secrets. EMPLOYER, in its sole discretion, shall determine the exact
extent of the proprietary rights, if any, to be protected in or based on the
Inventions and Work Product. All such information, documentation and assistance
shall be provided at no additional expense or cost to the EMPLOYER, except for
out-of-pocket expenses which the EMPLOYEE incurs at the EMPLOYER's request. (f)
In the event of termination of this Employment Agreement, EMPLOYER shall be
entitled to advise any new employer of EMPLOYEE of his rights and obligations
hereunder for a period of one year following termination of this Employment
Agreement.
11. NON-DISCLOSURE OF INFORMATION. (a) EMPLOYEE recognizes and
acknowledges that, during the course of his proprietary information, including,
but not limited to Inventions, Work Product and/or Trade Secrets, contractual
arrangements and compensation arrangements with sub-contractors and customers of
EMPLOYER; compensation arrangements with sub contractors, vendors, and outside
personnel; costing, pricing and bidding methods, procedures, and amounts;
management and operating procedures and sof tware; management inf ormation
systems, etc. ; marketing plans and strategy; personnel policies and contractual
arrangements, including job assignments and compensation; customer leads;
customer lists; and that such information constitutes unique assets of the
business of EMPLOYER and of which EMPLOYER is the sole and exclusive owner.
EMPLOYEE will treat such proprietary information on a confidential basis and
will not, during or after his employment, personally use, or employment, he will
have access to valuable
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disclose all, or any part of, such proprietary information to any person, firm,
corporation, association, agency, or other entity except as properly required in
the conduct of the business of EMPLOYER, or except as authorized in writing by
EMPLOYER,, publish, disclose or authorize anyone else to publish or disclose,
any secret or confidential matter relating to any aspect of the business of
EMPLOYER with which EMPLOYEEIS service may in any way acquaint EMPLOYEE.
EMPLOYEE shall surrender possession of all proprietary information, including
especially all Trade Secrets, to EMPLOYER upon any suspension or termination of
EMPLOYEE's employment with the EMPLOYER. In the event of a breach, or threatened
breach, by EMPLOYEE, of the provisions of this Paragraph, EMPLOYER shall be
entitled to a preliminary, temporary and permanent injunction restraining
EMPLOYEE from disclosing in whole or in part, any such proprietary information
and/or form rendering any services to any person, firm, corporation,
association, agency, or other entity to whom such information, in whole or in
part, has been disclosed or is threatened to be disclosed. Furthermore, nothing
herein shall'be construed as prohibiting EMPLOYER from pursuing any other
equitable or legal remedies available to it for such breach or threatened
breach, including the recovery or damages from EMPLOYEE.
(b) EMPLOYER recognizes that the EMPLOYEE may possess proprietary information of
third parties and that EMPLOYEE may have ongoing obligations to third parties
with respect thereto. EMPLOYER expressly requires that EMPLOYEE shall honor such
ongoing obligations to such third parties and that the EMPLOYEE shall not use,
for the benefit of EMPLOYER, or disclose to EMPLOYER, any such proprietary
information.
12. RESTRICTIVE COVENANT. (a) During the term of this Agreement and for
a period of twelve (12) months after the termination of this Agreement and any
extension thereof, EMPLOYEE will not, within the United States or any other area
of the world in which EMPLOYER is then operating, directly or indirectly,
compete with, own, manage,, operate, control, be employed by, consult for,
participate in, perform services for, or be connected in any manner with the
ownership, management, operation or control of any business similar to the type
of business conducted by EMPLOYER at the time of the termination of this
Agreement. EMPLOYEE shall not, directly or indirectly, compete with any products
or services marketed or offered by EMPLOYER at the time of termination, or
engage in any activities which could be deemed a conflict of interest.
(b) EMPLOYEE agrees that the "time", "geographic area", and "Scope of Business"
provisions of this restrictive covenant are reasonable and proper and have been
negotiated in connection with the sale of his stock in 786710 as well as in
connection with his employment hereunder.
(c) EMPLOYER and EMPLOYEE agree, that if any court of competent jurisdiction
shall, for anyreason, conclude that any portion of this covenant shall be too
restrictive, the court shall determine and apply lesser restrictions, it being
the intent of the parties
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that some such restrictions shall be applicable for the protection of EMPLOYER
and its shareholders.
(d) Notwithstanding the restriction provided in sub-paragraphs (a) above, in the
event of a foreclosure by EMPLOYEE pursuant to the Pledge & Security Agreement
provided in Paragraph 4 of the separate Agreement being contemporaneously
executed, the restriction shall not apply to the extent necessary to permit
EMPLOYEE to realize the value of the collateral, including the right to operate
the businesses and utilize the assets obtained as a result of such foreclosure.
13. NONSOLICITATION COVENANT. (a) For a period of twelve (12) months
after the termination of this Agreement (including any extension thereof) (the
"Post Termination Period") EMPLOYEE shall not, solicit, directly or indirectly,
by any means, any of the clients, accounts, employees or "leads" of EMPLOYER
during the Post Termination Period.
(b) EMPLOYER and EMPLOYEE agree, that if any court of competent jurisdiction
shall, for any reason conclude that any portion of this covenant shall be too
restrictive, the court shall determine and apply lesser restrictions, it being
the intent of the parties that some such restrictions shall be applicable for
the protection of EMPLOYER and its shareholders.
(c) This covenant has been given to induce EMPLOYER to enter into this Agreement
and provide EMPLOYEE'S job responsibilities and compensation.
14. DISABILITY. (a) If the EMPLOYEE is unable to perform his services
by reason of illness or incapacity for a period of more than twenty-one (21)
consecutive work days, or more than four (4) weeks in any two-month period, the
compensation otherwise payable to him thereafter during the continued period of
such illness or incapacity may, at the option of EMPLOYER be reduced by 40%. If
such illness or incapacity shall continue for a period of more than six (6)
consecutive weeks, or more than 50% of the time in any one year, such
compensation may, at the option of EMPLOYER, be stopped altogether. The
EMPLOYEEIS full compensation shall be reinstated upon his return to employment
and the discharge of his full duties hereunder. Notwithstanding anything herein
to the contrary, EMPLOYER may, at its option, terminate this Agreement at any
time after the EMPLOYEE shall be absent from his employment, for whatever cause,
for a continuous period of more than six (6) months, and all obligations of
EMPLOYER hereunder shall cease upon any such termination.
(b) At any time, and from time to time, EMPLOYER may purchase disability
insurance to compensate EMPLOYEE during periods of disability, either pursuant
to sub-paragraph 4(d) or otherwise. In the event that such insurance is
purchased, during any period for which benefits are being paid by such insurance
sub-paragraph (a) above shall be inapplicable. In lieu thereof, EMPLOYER shall
compensate EMPLOYEE at the agreed base compensation rate less the benefits paid
by such insurance.
15. SUSPENSION. As used in this Agreement, the term
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"suspension" shall mean:
(a) uncompensated military leave;
(b) uncompensated extended personal leave, authorized by EMPLOYER;
(c) temporary discontinuance of compensation due to disability, whether
or not compensated; and
(d) temporary discontinuance of employment, without termination, for
the convenience of either of the parties.
16. TERMINATION. (a) EMPLOYER can terminate EMPLOYEE's employment at
any time for good cause. Without intending to limit the definition of good cause
hereby, good cause will include:
(1) the EMPLOYEE'S death;
(2) the occurrence of one of the following events:
(i) EMPLOYEE commits, is arrested, or is officially charged with a felony or any
crime involving moral turpitude or unethical conduct which in the good faith
opinion of the EMPLOYER could impair his ability to perform his duties; and
(ii) in the good faith opinion of the President/CEO and Management, the EMPLOYEE
fails to fully and faithfully perform his obligations under this Employment
Agreement, and does not cure such failure within ten (10) working days after
receipt of notice of any failure.
(b) The termination of EMPLOYEEIS services shall not constitute a termination of
the restrictive obligations and duties under Paragraphs 10, 11, 12 and 13,
except as otherwise provided in this Employment Agreement.
(c) In the event of the bankruptcy (Chapter 7), reorganization (Chapter 11) or
other termination of the business of the EMPLOYER or of any subsidiary on which
EMPLOYEEIS continued employment and compensation is dependent, the provisions of
subparagraph 10(i) (B) and Paragraphs 12 and 13 shall continue in full force and
effect only so long as full base compensation by EMPLOYER shall continue.
(d) In the event of EMPLOYER's termination of EMPLOYEE's employment for any
reason other than for good cause as a result of , or in connection with, or as
the outcome of , a change of control of EMPLOYER, the provisions of subparagraph
10(i)(B) and Paragraphs 12 and 13 shall not remain in effect following
termination.
(e) In the event of a seizure of collateral security under the Pledge & Security
Agreement by EMPLOYEE as the result of a default by EMPLOYER under the Master
Agreement or otherwise, EMPLOYEE may terminate this Employment Agreement. In
such event, the provisions of subparagraph 10(i)(B) and Paragraphs 12 and 13
shall not remain in effect, while the provisions of Paragraph 11 shall remain in
effect, except that EMPLOYEE shall be entitled to use the proprietary
information to the extent required to utilize and market the seized collateral
security.
17. RELATIONSHIP OF EMPLOYMENT AGREEMENT TO MASTER AGREEMENT. (a) A
breach by EMPLOYER of this Employment
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Agreement shall not constitute a breach of the contemporaneously-executed Master
Agreement, and a breach by EMPLOYER of the Master Agreement shall not constitute
a breach of this Employment Agreement.
(b) To EMPLOYER, the employment of EMPLOYEE is integral to the purchase of the
assets under the Purchase Agreement. Accordingly, (i) until April 18, 1998, a
voluntary termination (thereby excluding death and disability sufficient to
permit termination) by EMPLOYEE of this Employment Agreement or (ii) until April
18, 1997, a termination of EMPLOYEE's employment for a reasonrelated directly to
EMPLOYEE's ability to perform his required duties (thereby excluding conviction
of a felony or commission of an act of moral turpitude or unethical conduct)
shall be a breach of the Master Agreement. EMPLOYER's termination of EMPLOYEE's
employment for any reason other than those set forth above shall not be a breach
of the Master Agreement. Furthermore, a breach by EMPLOYEE of the terms of the
Master Agreement, other than those relating to this employment, shall not be a
breach of this Employment Agreement.
18. ARBITRATION. Any controversy or claim arising out of, or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in New
York City, New York in accordance with the rules then pertaining of the American
Arbitration Association, but with all rights of discovery provided by the New
York Rules of Civil Procedure, and judgment upon the award rendered may be
entered in any court having jurisdiction thereof. The losing party shall pay all
costs and fees, including reimbursement of the attorney's fees of the winning
party.
19. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by such other party. The failure of a party
to exercise any rights or privileges under this Agreement shall not be deemed to
be a waiver or extinguishment of such rights or privileges, all of which shall
continue to be exercisable.
20. BENEFIT. The rights and obligations of EMPLOYER under this
Agreement shall inure to the benefit of, and shall be binding upon it, its
successors and assigns. The protection of Paragraphs 10, 11 and 12 shall inure
to the benefit of EMPLOYER and any successors and assigns. The rights and
obligations of EMPLOYEE under this Agreement shall inure to the benefit of, and
shall be binding upon, his heirs, administrators, executors, successors and
assigns.
21. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by certified mail to
his residence in the case of EMPLOYEE, or to its principal office in the case of
EMPLOYER.
22. LIFE INSURANCE. EMPLOYER and/or one or more of its subsidiaries
may, in its discretion at any time after the
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execution of this Agreement, apply for and procure, as owner and f or its own
benef it, insurance on the life of EMPLOYEE, in such amounts and in such forms
as EMPLOYER may choose. EMPLOYER shall not be required to give EMPLOYEE any
interest whatsoever in any such policy or policies, (although nothing contained
herein shall be deemed to prohibit any such arrangement) but EMPLOYEE shall, at
the request of EMPLOYER, subject himself to such medical examination, supply
such information, and execute such inf ormation releases and documents as may be
required by the insurance company or companies to whom EMPLOYER has applied for
such insurance.
23. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties and may be modified only by agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
24. APPLICABLE LAW. This Agreement shall be governed for all purposes
by the laws of the State of New York. If any provision of this Agreement is
declared void, such provision shall be deemed severed from this Agreement, which
shall otherwise remain in full force and effect.
25. U.S. CURRENCY. All currency amounts stated in this Agreement are in
United States Dollars.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto set their hands and seals as of the day and year herein above
written.
FIDELITY HOLDINGS, INC.
ATTEST:
By:________________________________
Doron Cohen, President
By:________________________________
Richard Fox, Secretary
WITNESS:
___________________________________
___________________________________ (L.S.)
Zvi Barak, L.S.
<PAGE>
Employment Agreement
with Paul Vesel
10.88
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of this 18th day of October, 1996,
by and between:
COMPUTER BUSINESS SCIENCES, INC., a New York corporation having its
executive office at 80-02 Kew Gardens Road, Suite 5000, Kew Gardens, New York
11415 (hereinafter referred to as "EMPLOYER")
AND
PAUL VESEL, an adult individual residing at 529 Acadia Drive, Petaluma,
California 94954 (hereinafter referred to as "EMPLOYEE")
WITNESSETH THAT:
WHEREAS, EMPLOYEE has certain education, experience, background and
contacts, as well as substantial foreing and domestic expertise in the sales and
marketing of international telecommunications services, which would be useful
and helpful to EMPLOYER in its business and EMPLOYER is desirous of employing
EMPLOYEE in order to obtain the benefits of such education, experience,
background, contacts and expertise;
WHEREAS, EMPLOYEE is agreeable to being hired by EMPLOYER as an
employee and providing the benefits of his education, experience, background,
contacts and expertise to EMPLOYER;
WHEREAS, the parties have agreed upon the terms of such employment and
desire a written, formal contract to evidence their agreements;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
forbearances contained herein, and intending to be legally bound, the parties
have agreed as follows:
1. EMPLOYMENT. For the term provided in Paragraph 2, EMPLOYER hereby
employs EMPLOYEE, and EMPLOYEE hereby accepts that employment, upon the terms
and conditions hereinafter set forth.
2. TERM.
(a) This Agreement shall become effective as of November 25, 1996.
(b) This Agreement, subject to the provisions of Paragraphs 14 and 15
below, shall continue and exist for an initial period from the date hereof to
November 24, 1999.
3. COMPENSATION-BASE.
(a) For all services rendered under this Agreement, EMPLOYEE shall be
paid, as base compensation, such annual salary as shall be determined by the
Board of Directors of EMPLOYER, from time to time, but in no event shall such
compensation be at a rate of less than $110,000 per year. Such compensation is
to be payable in equal installments at intervals no longer than semi-monthly.
Such base compensation shall be in addition to such fringe benefits and bonuses
as provided elsewhere herein.
(b) For compensation purposes, EMPLOYER may assign EMPLOYEE
<PAGE>
to one or more of its subsidiaries and/or affiliates, to perform services
consistent with EMPLOYEEIS duties hereunder. In such event, EMPLOYEE may be
separately compensated by each such subsidiary and/or affiliate. All such
compensation shall be deducted from the compensation payable under sub-paragraph
(a) above and EMPLOYER shall pay EMPLOYEE only the difference between (i) the
total of all such compensations from subsidiaries and/or affiliates and (ii) the
base compensation. No assignment hereunder for compensation purposes shall
require that EMPLOYEE physically relocate.
(c) At the end of each calendar year, the Board of Directors of
EMPLOYER shall review the performance of EMPLOYEE for such year and, based upon
such evaluation, establish any increase in the base compensation payable to
EMPLOYEE for the succeeding calendar year, as adjusted by subparagraph (c)
above. EMPLOYER shall not be obligated to provide any increase.
(d) The base compensation for the first year of employment hereunder is
deemed vested and guaranteed, meaning that if EMPLOYER terminates this
Employment Agreement without cause as defined in Paragraph 18 or breaches this
Employment Agreement, such compensation shall be due and payable. If, however,
EMPLOYEE breaches this Employment Agreement for any reason other than a breach
by EMPLOYER or its parent, Fidelity Holdings, Inc., the vesting and guarantee
provision shall be null and void.
(e) Immediately upon execution of this Agreement, EMPLOYEE and EMPLOYER
shall mutually select an escrow. EMPLOYER's parent, Fidelity Holdings, Inc.
shall issue twenty thousand shares of its Common Stock to such escrow for the
purposes hereof. In the event of a default by EMPLOYER with respect to the
vesting and guarantee provision of subparagraph (d) above, the escrow shall
proportionately release to EMPLOYEE sufficient shares to meet the balance of the
unpaid compensation.
4. COMPENSATION-FRINGE BENEFITS. EMPLOYEE shall receive at least the
following additional benefits, which may be extended or increased, but not
reduced, by EMPLOYER:
(a) Vacation - EMPLOYEE shall be entitled to paid vacation during the
first year of this Agreement of two (2) weeks and thereafter of three (3) weeks,
which shall not be accumulated from year to year if unused. EMPLOYEE shall not
be compensated for any unused vacation time.
(b) Personal Leave - During each year of this Agreement, EMPLOYEE shall
receive five days paid personal leave, which shall not be accumulated from year
to year if unused. EMPLOYEE shall not be compensated for any unused personal
leave. "Personal leave" shall include sick leave, bereavement leave, and all
other personal time off.
(d) Disability Insurance - At such time as EMPLOYER, or its parent,
Fidelity Holdings, Inc., shall establish a program including disability
insurance, EMPLOYEE shall either be included in such program or shall receive an
allowance sufficient for him to purchase such insurance to the same level as
would have been afforded under the program.
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(e) Parking Space - EMPLOYEE shall receive a paid parking space in the
building garage.
(f) Moving Allowance - EMPLOYEE shall,receive an allowance of up to Ten
Thousand Dollars ($10,000) to cover costs of moving, including car
transportation and family travel costs.
(g) Other - EMPLOYEE shall receive such other medical, surgical,
hospital, dental or legal insurance and fringe benefits as are available to any
other officers/employees/consultants, consistent with EMPLOYERIS past practices
and such life/disability insurance, incentive or deferred compensation or
bonuses, pension/profit sharing plan and qualified and non-qualified stock
option plans as the Board of Directors of EMPLOYER and/or EMPLOYER's parent,
Fidelity Holdings, Inc., shall establish. The current medical/ hospitalization
plan is the oxford Freedom Plan. Nothing contained in this Agreement shall be in
lieu of any rights, benefits and privileges to which EMPLOYEE may be entitled
under any retirement, pension, profit-sharing, insurance, hospital or other
plans which may now be in effect or which may hereafter be adopted. EMPLOYEE
shall have the same rights and privileges to participate in such plans and
benefits as any other employee during his period of employment.
(h) Executive Bonus Package - EMPLOYER's parent, Fidelity Holdings,
Inc. is establishing an Executive Bonus Package in which EMPLOYEE shall be
entitled to participate on as parity with executives of equal rank.
5. SIGNING BONUS. (a) As a "signing bonus", EMPLOYER's parent, Fidelity
Holding's Inc., shall promptly issue to EMPLOYEE Thirty Thousand (30,000) shares
of its Common Stock, ownership to which shall vest as provided below. The
purpose of immediate issuance is to establish EMPLOYEE as a stockholder as of
the starting date of employment, subject to such subsequent vesting, for
purposes of dividends, stock splits, and other capital transactions. EMPLOYEE
represents and warrants that he is acquiring such shares for personal investment
purposes and not with a view to resale or distribution; the certificates for
such shares shall bear a legend on the face thereof indicating that such shares
have not been registered under the Securities Act of 1933 and are restricted as
to further transfer.
(b) ownership to the 30,000 shares shall vest as follows:
(I) upon completion of the first year of employment, twenty thousand
(20,000) shares shall vest; and
(ii) upon completion of the second year of employment, ten thousand
(10,000) shares shall vest.
The certificates for such shares shall bear a legend on the face
thereof indicating that such shares have not vested and cannot be sold,
transferred, assigned or otherwise disposed of until and unless they have
vested.
(c) As shares shall vest, EMPLOYEE may, subject to restrictions imposed
by applicable securities laws and regulations, sell, transfer, assign or
otherwise dispose of the vested shares.
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EMPLOYEE may not sell, transfer, assign or otherwise dispose or any shares not
vested.
(d) During the two year vesting period, all dividends shall be paid to EMPLOYEE
to the extent that shares are vested. Dividends payable with respect to shares
not yet vested, shall be held by Fidelity Holdings, Inc. and shall be paid over
to EMPLOYEE proportionately as the shares shall vest. As shares shall vest, all
accrued dividends with respect thereto shall vest also. Stock splits and other
capital transactions shall also follow the status of the original shares; i.e.,
vested or unvested.
6. COMPENSATION-INCENTIVE. (a) After the end of each calendar year, the
Board of Directors of EMPLOYER shall determine the net income before federal and
state income taxes of EMPLOYEE's SBU for such prior year. The calculation of
such net income shall consolidate all revenue components of the SBU. The
calculation of the costs and expenses of the SBU shall be (i) those costs and
expenses over which EMPLOYEE has control, (ii) budgeted costs directly
attributable to the SBU, and (iii) costs and expenses not under the control of
EMPLOYER but which are components of gross margin. The SBU will not be charged
overhead factors not directly related executive salaries and benefits, SEC/NASD
than allocated accounting and professional SBU related items.
(b) Examples of costs and expenses underwith general corporate to such SBU, such
as compliance costs (other fees), and similar non-your control are:
(i) contractor services (independent representatives) for outside sales
(ii) salaries, wages, commissions, and benefits for all sales managers
and staff members
(iii) travel and entertainment expenses incurred by sales managers and
staff members
(iv) salaries, wages, and benefits for all non-sales SBU staff and
employees (e.g., SBU secretary)
(c) Examples of budgeted costs directly attributable to your SBU are:
(i) allocated rent, telephone, fax, express delivery, and other office
and communication expenses (with the allocation to be based upon
actual utilization by the SBU)
(ii) allocated or incurred professional expenses, including quarterly
accounting and annual audit, (with the allocation to be based upon
actual utilization by the SBU)
(iii) allocated salaries, wages, and benefits for all shared employees
(e.g., a receptionist) (with the allocation to be based upon actual
utilization by the SBU) (iv) EMPLOYEE's salary and benefits
(d) Examples of costs not under the control of EMPLOYER but which are components
for determination of gross margin are:.
(i) cost of carrier services
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(ii) carrier usage charges
(iii) monthly access service charges
(iv) carrier penalties
(v) miscellaneous carrier charges
(vi) network management
(e) EMPLOYEE shall receive a bonus equal to twelve and one-half percent (12.5%)
of the amount by which such net income exceeds Four Hundred Thousand Dollars
($400,000).
(f) Any bonus awarded hereunder shall be paid at such time or times, in such
amounts or installments, as the Board of Directors may determine, provided,
however, that such bonus shall be paid within three (3) months after completion
of the annual audit of EMPLOYER for the year in question.
7. STOCK OPTIONS. (a) At the beginning of each employment year under
this Agreement, EMPLOYEE shall receive from EMPLOYER's parent, Fidelity
Holdings, Inc., an option to purchase 25,000 shares of the Common Stock of
Fidelity Holdings, Inc., exercisable upon the terms of this paragraph 7. Within
the first forty-five (45) days of each such employment year, EMPLOYER and
EMPLOYEE shall mutually set certain specific, objectively-defined targets
(goals) to be achieved by EMPLOYEE and his SBU. Within thirty (30) days
following release of the annual audit(s) covering the employment year under
consideration, EMPLOYER shall determine whether EMPLOYEE and his SBU have
achieved the targets (goals) and shall advise EMPLOYEE accordingly. If the
targets (goals) have been met, the options for that year shall become
exercisable as of the date of such notification. If the targets (goals) have not
been met, the options shall terminate.
(b) The option price (exercise price) for the options for the first 'employment
year shall be Four Dollars ($4.00) per share. Thereafter, the option price
(exercise price) shall be fixed at eighty percent (80%) of the closing price for
the Common Stock of Fidelity Holdings, Inc. on the first trading day of such
employment year.
(c) All options granted hereunder shall have an exercise period (term) of two
(2) years commencing with the date on which EMPLOYEE is first notified that the
targets (goals) have been met. Such options shall be exercisable in whole or in
part at any time and from time to time during the exercise period. To the extent
not exercised during the exercise period, the options shall terminate and become
null and void at the end of the two years. All options shall include
anti-dilution protection in the event of stock splits, stock dividends,
recapitalizations, mergers and consolidations.
(d) All shares issued upon exercise of the options shall be unregistered and
restricted as to transfer. EMPLOYEE represents and warrants that he is acquiring
such shares for personal investment purposes and not with a view to resale or
distribution; the certificates for such shares shall bear a legend on the face
thereof indicating that such shares have not been registered under the
Securities Act of 1933 and are restricted as to further transfer.
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<PAGE>
8. DUTIES. EMPLOYEE is engaged as the EMPLOYER's "Vice President- Sales and
Marketing" and shall establish, supervise and manage a Sales and Marketing
Section (hereinafter referred to as "SBU" to (i) manage and direct the domestic
and international sales and marketing operations for CBS (covering VIP Accounts,
Credit Cards, Debit Cards, etc.); (ii) develop a forecast of probable sales (at
predicted pricing for predicted costs over predicted time periods); (iii) assist
management in developing a budget based upon such forecast; (iv) advise
management on competitive market conditions and recommend appropriate responses
while making required changes in the forecast and the budget; (v) recommend
marketing programs; (vi) directly contact and sell major accounts; hire, train,
direct and supervise any required sales personnel; (vii) develop and establish a
sales network/distribution system for debit cards and any newly-developed
similar programs; and, (viii) generally, such other sales and marketing duties
as the Board of Directors of EMPLOYER and the management of EMPLOYERI's parent,
Fidelity Holdings, Inc., may assign from time to time. EMPLOYEE shall provide
"product" advice, competitive market reports, and general sales and marketing
assistance and advice to EMPLOYER's officers, directors and key management. The
precise scope of, and the specification of, the services to be rendered by
EMPLOYEE may be defined, interpreted, curtailed, or extended, from time to time,
by determination of the Board of Directors of EMPLOYER, provided, however, that
any definition, interpretation, curtailment, or extension is consistent with the
status of, and/or educational experience required for, the responsibilities for
which EMPLOYEE has been initially engaged hereunder. It is the intent of this
provision to provide EMPLOYER with flexibility in assigning responsibilities to
EMPLOYEE and this provision shall not be used to discipline, embarrass,
humiliate or harass EMPLOYEE.
9. EXTENT OF SERVICES. EMPLOYEE agrees that this employment constitutes his
exclusive employment and understands that his primary loyalty and responsibility
is to EMPLOYER. Accordingly, EMPLOYEE shall devote such adequate, reasonable,
and proper time, attention, and energies to the business of EMPLOYER as shall be
necessary or consistent with such understanding and EMPLOYEE shall not, during
the term of this Agreement be engaged in any other business activity (whether or
not such business activity is pursued for gain, profit, or other pecuniary
advantage), which conflicts with EMPLOYEE'S employment responsibilities
hereunder, without prior, written authorization of EMPLOYER'S Board of
Directors. Nothing contained herein shall be construed as preventing EMPLOYEE
from investing his assets in such form or manner as will not require any
services on EMPLOYEE'S part in the operation of the affairs of the companies in
which such investments are made.
10. WORKING FACILITIES. EMPLOYEE shall be furnished, at EMPLOYER's expense, with
all necessary working facilities, including but not limited to an equipped
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office, clerical help, and telephone/facsimile/copying services, suitable to his
position and adequate for the performance of his duties. In addition, EMPLOYEE
shall-be furnished, at EMPLOYER's expense, with a pager, a cellular telephone,
and a car allowance for business use.
11.EXPENSES. EMPLOYEE is not authorized to incur expenses on behalf of , or
chargeable to, EMPLOYER, with respect to his business travel, including
transportation, lodging, food, entertainment, etc. except within such guidelines
as may be established from time to time by the Board of Directors of EMPLOYER.
EMPLOYER shall reimburse EMPLOYEE for authorized expenses within such guidelines
upon presentation by EMPLOYEE, from time to time, of an itemized account of such
expenditures in such f orm as EMPLOYER may require, together with receipts or
other proofs of the expenditures as may be required.
12. OWNERSHIP OF INVENTIONS AND DEVELOPMENTS. (a) For purposes of this
Agreement, the following definitions shall apply:
(i) "Inventions" shall mean:
(a) All inventions, improvements, modif ications, and
enhancements, whether or not patentable, made by EMPLOYEE during EMPLOYEE's
employment by EMPLOYER; and
(b) All inventions, improvements, modif ications and
enhancements made by EMPLOYEE, during a period of one (1) year after any
suspension or termination of EMPLOYEE's employment by EMPLOYER, which relate,
directly or indirectly, to the past, present or future business of the EMPLOYER.
(ii) "Work Product" shall mean all documentation, software, creative
works, programs,, systems, source codes, Hardware Signatures, know-how and
information created, in whole or in part, by EMPLOYEE during EMPLOYEE's
employment by EMPLOYER, whether or not copyrightable or otherwise protectable,
excluding Inventions.
(iii) "Trade Secrets" shall mean all documentation, software, know-how
and information relating to the past, present and future business of the
EMPLOYER or any plans therefor, or relating to the past, present or future
business of a third party or plans therefor that are disclosed to the EMPLOYER,
which the EMPLOYER does not disclose to third parties without restrictions on
use or further disclosure.
(b)EMPLOYEE shall promptly disclose to EMPLOYER all Inventions and keep accurate
records relating to the conception and reduction to practice of all Inventions.
Such records shall be the sole and exclusive property of EMPLOYER, and the
EMPLOYEE shall surrender possession of such records to the EMPLOYER upon any
suspension or termination of EMPLOYEE's employment with the EMPLOYER.
(c) EMPLOYEE hereby assigns to the EMPLOYER, without further consideration to
the EMPLOYEE, the entire right title and interest in and to the Inventions and
Work Product and in and to all proprietary rights therein or based thereon.
EMPLOYEE agrees that the Work Product shall be deemed to be a "work made for
hire". EMPLOYEE shall execute all such assignments, oaths, declarations and
other documents as may be prepared by EMPLOYER to effect the foregoing.
7
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(d) EMPLOYEE shall provide EMPLOYER with all information, documentation, and
assistance EMPLOYER may request to perfect, enforce, or defend the proprietary
rights in or based on the Inventions, Work Product or Trade Secrets. EMPLOYER,
in its sole discretion, shall determine the exact extent of the proprietary
rights, if any, to be protected in or based on the Inventions and Work Product.
All such information, documentation and assistance shall be provided at no
additional expense or cost to the EMPLOYER, except for out-of-pocket expenses
which the EMPLOYEE incurs at the EMPLOYER's request.
(e) In the event of termination of this Employment Agreement, EMPLOYER shall be
entitled to advise any new employer of EMPLOYEE of his rights and obligations
hereunder.
13.NON-DISCLOSURE OF INFORMATION. (a) EMPLOYEE recognizes and acknowledges that,
during the course of his employment, he will have access to valuable proprietary
information, including, but not limited to Inventions, Work Product and/or Trade
Secrets, contractual arrangements and compensation arrangements with employees
and agents of EMPLOYER; compensation arrangements with sub contractors, vendors,
and outside personnel; costing, pricing and bidding methods, procedures, and
amounts; management and operating procedures and software; management
information systems, etc.; marketing plans and strategy; personnel policies and
contractual arrangements, including job assignments and compensation; customer
leads; customer lists; and that such information constitutes unique assets of
the business of EMPLOYER and of which EMPLOYER is the sole and exclusive owner.
EMPLOYEE will treat such proprietary information on a confidential basis and
will not, during or after his employment, personally use or disclose all, or any
part of, such proprietary information to any person, firm, corporation,
association, agency, or other entity except as properly required in the conduct
of the business of EMPLOYER, or except as authorized in writing by EMPLOYER,
publish, disclose or authorize anyone else to publish or disclose, any secret or
confidential matter relating to any aspect of the business of EMPLOYER with
which EMPLOYEEIS service may in any way acquaint EMPLOYEE. EMPLOYEE shall
surrender possession of all proprietary information, including especially all
Trade Secrets, to EMPLOYER upon any suspension or termination of EMPLOYEE's
employment with the EMPLOYER. In the event of a breach, or threatened breach, by
EMPLOYEE, of the provisions of this Paragraph, EMPLOYER shall be entitled to a
preliminary, temporary and permanent injunction restraining EMPLOYEE from
disclosing in whole or in part, any such proprietary information and/or form
rendering any services to any person, firm, corporation, association, agency, or
other entity to whom such information, in whole or in part, has been disclosed
or is threatened to be disclosed. Furthermore, nothing herein shall be construed
as prohibiting EMPLOYER from pursuing any other equitable or legal remedies
8
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available to it f or such breach or threatened breach, including the recovery or
damages from EMPLOYEE.
(b) EMPLOYER recognizes that the EMPLOYEE may possess proprietary inf ormation
of third parties and that EMPLOYEE may have ongoing obligations to third parties
with respect thereto. EMPLOYER expressly requires that EMPLOYEE shall honor such
ongoing obligations to such third parties and that the EMPLOYEE shall not use,
for the benefit of EMPLOYER, or disclose to EMPLOYER, any such proprietary
information.
14.RESTRICTIVE COVENANT. (a) During the term of this Agreement and for
a period of twelve (12) months after the termination of this Agreement and any
extension thereof, EMPLOYEE will not, within the United States or any other area
of the world in which EMPLOYER is then operating, directly or indirectly,
compete with, own, manage,, operate, control, be employed by, consult for,
participate in, perform services for, or be connected in any manner with the
ownership, management, operation or control of any telecommunications business
which provides (delivers) service, directly or indirectly, through a system
which is PC-based and/or IVR-based. EMPLOYEE shall not, directly or indirectly,
compete with any products or services marketed or offered by EMPLOYER at the
time of termination, or engage in any activities which could be deemed a
conflict of interest. This provision shall not restrict EMPLOYEE from being
employed in a telecommunications business which provides (delivers) service
through a system which is not PC-based or IVR-based.
(b)EMPLOYEE agrees that the "time", "geographic area", and "Scope of
Business" provisions of this restrictive covenant are reasonable and proper and
have been negotiated in connection with his employment hereunder.
(c)EMPLOYER and EMPLOYEE agree, that if any court of competent
jurisdiction shall, for any reason, conclude that any portion of this covenant
shall be too restrictive, the court shall determine and apply lesser
restrictions, it being the intent of the parties that some such restrictions
shall be applicable for the protection of EMPLOYER and its shareholders.
15. NONSOLICITATION COVENANT. (a) For a period of two (2) years after
the termination of this Agreement (including any extension thereof) (the "Post
Termination Period") EMPLOYEE shall not, solicit, directly or indirectly, by any
means, any of the clients, accounts, employees or "leads" of EMPLOYER during the
Post Termination Period.
(b) EMPLOYER and EMPLOYEE agree, that if any court of competent
jurisdiction shall, for any reason conclude that any portion of this covenant
shall be too restrictive, the court shall determine and apply lesser
restrictions, it being the intent of the parties that some such restrictions
shall be applicable for the protection of EMPLOYER and its shareholders.
(c) This covenant has been given to induce EMPLOYER to enter into this
Agreement and provide EMPLOYEE'S job responsibilities and compensation.
9
<PAGE>
16. DISABILITY. (a) If the EMPLOYEE is unable to perform his services
by reason of illness or incapacity f or a period of more than thirty (30)
consecutive business days or more than fifty percent (50%) in any calendar
quarter ("extended disability"), at its option EMPLOYER may either suspend this
Employment Agreement until EMPLOYEE is able to fully perform his duties or
terminate this Employment Agreement. In the event of suspension of this
Employment Agreement, EMPLOYER may suspend all payments of compensation and
accrual of fringe benefits. All obligations of EMPLOYER hereunder, except for
any compensation, bonus and/or benefits earned prior to termination or
suspension, shall cease upon any termination.
(b)It is anticipated that EMPLOYER will adopt a program including
disability insurance, in which event EMPLOYEE shall be covered as provided in
subparagraph 4(d) above. In the event that such insurance is purchased, during
any period for which benefits are being paid by such insurance subparagraph (a)
above shall be inapplicable; in lieu thereof, EMPLOYER shall compensate EMPLOYEE
at the agreed base compensation rate less the benefits paid by such insurance.
17. SUSPENSION.. As used in this Agreement, the term "suspension" shall
mean:
(a) uncompensated extended personal leave, authorized by EMPLOYER;
(b) temporary discontinuance of compensation due to disability, whether
or not compensated; and
(c) temporary discontinuance of employment, without termination, for
the convenience of either of the parties.
18. TERMINATION.
(a) EMPLOYER can terminate EMPLOYEE's employment at any time for good
cause, which is defined as follows:
(1) the EMPLOYEEIS death or extended disability as defined in Paragraph
16;
(2) the occurrence of one of the following events:
(i) EMPLOYEE is convicted of a felony or any crime involving moral turpitude or
unethical conduct;
(ii) EMPLOYEE commits an act, or fails to take action in bad faith and to the
material detriment of the EMPLOYER; and
(iii) in the good faith opinion of the Board of Directors, the EMPLOYEE fails to
fully and faithfully perform his obligations under this Employment Agreement,
and corrective action is not taken within a reasonable time after written
notification of such failure. In the absence of written waiver by EMPLOYER,
"full and faithful performance of obligations" shall include a requirement, in
effect only after the first year, for achievement of profit breakeven (net
revenues equal or exceed costs) by EMPLOYEE's SBU.
(b)The termination of EMPLOYEE'S services shall not constitute a termination of
the restrictive obligations and duties under Paragraphs 12, 13, 14 and 15.
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However, termination for cause will terminate EMPLOYEE's benefits under this
Employment Agreement.
(c) In the event of the bankruptcy (Chapter 7), reorganization (Chapter 11) or
other termination of the business-of the EMPLOYER or of any subsidiary on which
EMPLOYEE's continued employment and compensation is dependent, the provisions of
Paragraph 14 shall continue in full force and effect only so long as full base
compensation by EMPLOYER shall continue.
19.ARBITRATION. Any controversy or claim arising out of, or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in New
York City, New York in accordance with the rules then pertaining of the American
Arbitration Association, but with all rights of discovery provided by the New
York Rules of civil Procedure, and judgment upon the award rendered may be
entered in any court having jurisdiction thereof. The losing party shall pay all
costs and fees, including reimbursement of the attorney's fees of the winning
party.
20.WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by such other party. The failure of a party
to exercise any rights or privileges under this Agreement shall not be deemed to
be a waiver or extinguishment of such rights or privileges, all of which shall
continue to be exercisable.
21.BENEFIT. The rights and obligations of EMPLOYER under this Agreement
shall inure to the benefit of, and shall be binding upon it, its successors and
assigns. The protection of Paragraphs 12, 13, 14 and 15 shall inure to the benef
it of EMPLOYER and any successors and assigns. The rights and obligations of
EMPLOYEE under this Agreement shall inure to the benefit of, and shall be
binding upon, his heirs, administrators, executors, successors and assigns.
22. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by certified mail to
his residence in the case of EMPLOYEE, or to its principal office in the case of
EMPLOYER.
23.LIFE INSURANCE. EMPLOYER and/or one or more of its subsidiaries may,
in its discretion at any time after the execution of this Agreement, apply for
and procure,.as owner and for its own benefit, insurance on the life of
EMPLOYEE, in such amounts and in such forms as EMPLOYER may choose. EMPLOYER
shall not be required to give EMPLOYEE any interest whatsoever in any such
policy or policies, (although nothing contained herein shall be deemed to
prohibit any such arrangement) but EMPLOYEE shall, at the request of EMPLOYER,
subject himself to such medical examination, supply such information, and
execute such information releases and documents as may be required by the
insurance company or companies
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<PAGE>
to whom EMPLOYER has applied for such insurance.
24. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties and may be modified only by agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
25. APPLICABLE LAW. This Agreement shall be governed'for all purposes
by the laws of the State of New York. If any provision of this Agreement is
declared void, such provision shall be deemed severed from this Agreement, which
shall otherwise remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto set their hands and seals as of the day and year herein above
written.
COMPUTER BUSINESS SCIENCES, INC.
ATTEST:
________________________________
Doron Cohen
President
___________________________
Secretary
Paul Vesel
WITNESS:
<PAGE>
Indemnification
Agreement with
Doron Cohen
10.9
<PAGE>
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made as of November 7, 1995,
by and between FIDELITY HOLDINGS, INC., a Nevada corporation ("Company"), and
DORON COHEN ("Indemnitee"), a director and/or officer or key executive, employee
or consultant of the Company, or a person serving at the request of the Company
as a director, officer, employee or agent of another enterprise.
RECITALS
A. The Indemnitee is currently serving or has agreed to serve as a
director and/or officer of the Company and in such capacity has rendered and/or
will render valuable services to the Company.
B. The Company has investigated the availability and sufficiency of
liability insurance and applicable statutory indemnification provisions to
provide its directors and officers with adequate protection against various
legal risks and potential liabilities to which such individuals are subject due
to their positions with the Company and has concluded that such insurance may be
unavailable or too costly, and even if purchased it, and the statutory
provisions, may provide inadequate and unacceptable protection to certain
individuals requested to serve as its directors and/or officers.
C. It is essential to the Company that it attract and retain as
officers and directors the most capable persons available and in order to induce
and encourage highly experienced and capable persons such as the Indemnitee to
serve or continue to serve as a director and/or officer of the Company, the
Board of Directors has determined, after due consideration and investigation of
the terms and provisions of the Agreement and the various other options
available to the Company and the Indemnitee in lieu liereof,tliat this Agreement
is not only reasonable and prudent but necessary to promote and ensure the best
interests of the Company and its stockholders.
NOW, THEREFORE, in consideration of the services or continued services
of the Indeninitee and in order to induce the Indemnitee to serve or continue to
serve as
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director and/or officer, the Company and the Indemnitee do hereby agree as
follows:
1. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed inquiry, hearing, investigation, action, suit, arbitration or other
alternative dispute resolution mechanism or proceeding, formal or informal,
whether brought in the name of the Company or otherwise and whether of a
civil, criminal or administrative or investigative nature, by reason of the fact
that the Indemnitee is or was a director and/or officer of the Company, or is or
was serving at the request of the Company as a director, officer, employee or
agent of another enterprise, whether or not he/she is serving in such capacity
at the time any liability or expense is incurred for which indemnification or
reimbursement is to be provided under this Agreement.
(b) The term "Expenses" includes, without limitation: attorneys'
fees, costs, disbursements and retainers; accounting and witness fees; fees of
experts; travel and deposition costs; transcript costs, filing fees, telephone
charges, postage, copying costs, delivery service fees and other expenses and
obligations of any nature whatsoever paid or incurred in connection with any
investigations, judicial or administrative proceedings and appeals, amounts paid
in settlement by or on behalf of Imdemnitee, and any expenses of establishing a
right to indemnification, pursuant to this Agreement or otherwise, including
reasonable compensation for time spent by the Indemnitee in connection with the
investigation, defense or appeal of a Proceeding or action for indemnification
for which he/she is not otherwise compensated by the Company or any third
party. The term "Expenses" does not include the amount of judgments, fines,
penalties or ERISA excise taxes actually levied against the Indemnitee.
2. Agreement to Serve. The Indemnitee agrees to serve or to continue to
serve as a director and/or officer of the Company for so long as he/she is duly
elected or appointed or until such time as lie/she tenders his/her resignation
in writing or is removed as a director and/or officer. However, nothing
contained in this Agreement shall be construed as giving Indeiniiitee any right
to be retained in the employ of the Company, any subsidiary or any other person.
2
<PAGE>
3. Indemnification in Third Party Actions. The Company shall indemnify
the Indemnitee if the Indemnitee is a party to or threatened to be made a party
to or is otherwise involved in any Proceeding (other that a Proceeding by or in
the name of the Company to procure a judgment in its favor), by reason of the
fact that the Indemnitee is or was a director and/or officer of the Company, or
is or was serving at the request of the Company as a director, officer, employee
or agent of another enterprise, against all Expenses, judgments, lines,
penalties and ERISA excise taxes actually and reasonably incurred by the
Indei-nnitee in connection with the defense or settlement of such a Proceeding,
to the fullest extent permitted by applicable corporate law and the Company's
Articles of Incorporation; provided that any settlement of a Proceeding be
approved in writing by the Company.
4. Indemnification in Proceedings by or In the Name of the Company. The
Company shall indemnify the Iiideinnitee if the Indeinnitee is a party to or
threatened to be made a party to or is otherwise involved in any Proceeding by
or in the name of the Company to procure a judgment in its favor by reason of
the fact that the Indemnitee was or is a director and/or officer of the Company,
or is or was serving at the request of the Company as a director, officer,
ei-nployee or agent of another enterprise, against all Expenses, judgments,
fines penalties and ERISA excise taxes actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such a Proceeding, to
the fullest extent permitted by applicable corporate law and the Company's
Articles of Incorporation.
5. Conclusive Presuml2tion Repardiniz Standards of Conduct. The
Indemnitee shall be conclusively presumed to have met the relevant standards of
conduct, if any, as defined by applicable corporate law, for indemnification
pursuant to this Agreement, unless a determination is made that the Indemnitee
has not met such standards (i) by the Board of Directors by a majority vote of a
quorum thereof consisting of directors who were not parties to the Proceeding
due to which a claim is made under this Agreement, (ii) by the shareholders of
the Company by majority vote of a quorum thereof consisting of shareholders who
are not parties to the Proceeding due to which a claim is made
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<PAGE>
under this Agreement, (iii) in a written opinion by independent counsel,
selection of whom has been approved by the Indemnitee in writing, or (iv) by a
court of competent jurisdiction.
6. Indemnification of Expenses of Successful Party. Notwithstanding any
other, provision of the Agreement, to the extent that the Indemnitee has been
successful in defense of any Proceeding or in defense of any claim, issue or
matter therein, on the merits or otherwise, including the dismissal of a
Proceeding without prejudice or the settlei,nent of a Proceeding without an
adi-nission of liability, the Indemnitee shall be indemnified against all
Expenses incurred in connection therewith to the fullest extent peri-nitted by
applicable corporate law.
7. Advances of Exl2enses. The Expenses incurred by the Indemnitee in
any Proceeding shall be paid promptly by the Company in advance of the final
disposition of the Proceeding at the written request of the Indemnitee to the
fullest extent permitted by applicable corporate law; provided that the
Indemnitee shall undertake in writing to repay any advances if it is ultimately
determined that the Indemnitee is not entitled to Indemnification.
8. Partial Indemnification. If the Indemnitee is entitled under any
provision of the Agreement to indemnification by the Company for a portion of
the Expenses, judgments, fines, penalties or ERISA excise taxes actually and
reasonably incurred by him/her in the investigation, defense, appeal or
settlement of any Proceeding but not, however, for the total amount of his/her
Expenses, judgments, fines, penalties or ERISA excise taxes, the Company shall
nevertheless indemnify the Indemnitee for the portion of Expenses, judgments,
fines, penalties or ERISA excise taxes to which the Iiideiiinitee is entitled.
9. Indemnification Procedure: Determination of Riplit to
Indemnification.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of any Proceeding, the Indemnitee shall, if a claim in respect
thereof is
4
<PAGE>
to be made against the Coi-npaiiy under this Agreet-nent, notify the Company of
the comi-nencement thereof in writing. The omission to so notify the Company,
however, shall not relieve it from any liability which it may have to the
Indemnitee otherwise than under this Agreement.
(b) lf a claim for indemnification or advances under this Agreement
is not paid by the Coi-npaiiy within thirty (30) days of receipt of written
notice, the rights provided by this Agreement shall be enforceable by the
Indemnitee in any court of competent jurisdiction. The burden of proving by
clear and convincing evidence that indei-nnificatioti or advances are not
appropriate shall be on the Company. Neither the failure of the directors or
stockholders of the Company or its independent legal counsel to have made a
determination prior to the commencement of such action that indei-nnification or
advances are proper in the circumstances because the Indemnitee has met the
applicable standard of conduct, if any, nor an actual determination by the
directors or shareholders of the Coi-npany or independent legal counsel that the
Indemnitee has not met the applicable standard of conduct, shall be a defense to
the action or create a presumption for the purpose of an action that the
Indemnitee has not been the applicable standard of conduct.
(c) The Indemnitee's Expenses incurred in connection with any
Proceeding concerning his/her right to indemnification or advances in whole or
part pursuant to this Agreement shall also be indemnified by the Company
regardless of the outcome of such Proceeding.
(d) With respect to any Proceeding for which indemnification is
requested, the Company will be entitled to participate therein at its own
expense and, except as otherwise provided below, to the extent that it may wish,
the Company may assume the defense thereof, with counsel satisfactory to the
Indemnitee. After notice from the Company to the Itidemiiitee of its election to
assume the defense of a Proceeding, the Company will not be liable to the
Indei-nnitee for any Expenses subsequently incurred by the Iiidemiiitee in
connection with the defense thereof, other than as provided below. The Company
shall not settle any Proceeding in any manner which would impose any penalty or
limitation oil the Iiideiiiilitee without the Indeiiiiiitee's written consent.
The Indei-nnitee shall have the right to employee his/her counsel in any
Proceeding, but the
5
<PAGE>
fees and expenses of such counsel incurred after notice from the Company of its
assumption of the defense of the Proceeding shall be at the expense of the
Indemnitee, unless (i) the employment of counsel by the Indemnitee has been
authorized by the Company, (ii) the Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and the Indemnitee
in the conduct of the defense of a Proceeding, in each of which cases the fees
and expenses of the Indemnitee's counsel shall be advances by the Company. The
Company shall not be entitled to assume the defense of any Proceeding brought by
or on behalf of the Company or as to which the Indemnitee has concluded that
there may be a conflict of interest between the Company and the Indemnitee.
10. Limitations on Indemnification. No payments pursuant to this Agreement shall
be made by the Company:
(a) To indemnify or advance funds to the Indemnitee expenses
with respect to Proceeding initiated or brought voluntarily by the Indemiiitee
and not by way of defense, except with respect to Proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under applicable corporate law,
but such indemnification or advancement of expenses may be provided by the
Company in specific cases if the Board of Directors finds it to be appropriate;
(b) To iiidei-nnify the Indemnitee for any Expenses, judgment,
fines, penalties or ERISA excise taxes sustained in any Proceeding for which
payment is actually made to the Indeniiiitee under a valid and collectible
insurance policy, except in respect of any excess beyond the amount of payment
under such insurance;
(c) To indemnify the Indemnitee for any Expenses, judgment, fines,
and/or penalties sustained in any Proceeding for an accounting of profits made
from the purchase or sale by the Indemnitee of securities of the Company
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934, the rules and regulations promulgated thereunder and amendments thereto or
similar provisions of any federal, state or local statutory law; and
(d) If a court of competent jurisdiction finally determines that
any
6
<PAGE>
indemnification hereunder is unlawful.
11. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, as long as the
Indei,nnitee continues to serve as a director and/or officer of the Company and
thereafter as long as the Indemnitee may be subject to any possible Proceeding,
the Company, subject to subsection (c), shall promptly obtain and maintain in
full force and effect directors' and officers' liability insurance ("D&O
Insurance") in reasonable amounts from established and reputable insurers.
(b) In all D&O insurance policies, the Indemnitee shall be named as
an insured in such a iiianner as to provide the Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors and/or officers.
(c) Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain D&O Insurance if the Company determines, in its
sole discretion, that such insurance is not reasonably available, the premium
costs for such insurance is so limited by exclusions that it provides an
insufficient benefit, or the Indemnitee is covered by similar insurance
i-naintained by a subsidiary of the Company-
12. Indemnification Hereunder Not Exclusive. The indemnification provided by
this Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may be entitled under the Articles of Incorporation, Bylaws, any
agreement, vote of shareholders or disinterested directors, provision of
applicable corporate law, or otherwise, both as to action in his/her official
capacity and as to action in another capacity on behalf of the Company while
holding such office.
13. Successors and Assip-tis. This Agreement shall be binding upon, and shall
inure to the benefit of the Itidemiiitee and his/her heirs, executors,
administrators and assigns, whether or not Indeilinitee has ceased to be a
director or officer, and the Company and its successors and assigns.
14. Severability. Each and every paragraph, sentence, term and provision hereof
is
7
<PAGE>
separate and distinct so that if any paragraph, sentence, term or provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of any other paragraph, sentence, term or provision hereof. To the extent
required, any paragraph, sentence, term or provision of this Agreement shall be
modified by a court of competent jurisdiction to preserve its validity and to
provide the Indei-nnitee with the broadest possible indemnification permitted
under applicable corporate law.
15. Savings Clause. If this Agreement or any paragraph, sentence, term or
provision hereof is invalidated on any ground by any court of competent
jurisdiction, the Company shall nevertheless indemnify the Indemnitee as to any
Expenses, judgments, fines, penalties for ERISA excise taxes incurred with
respect to any Proceeding to the full extent permitted by any applicable
paragraph, sentence, term or provision of this Agreement that has not been
invalidated or by any other applicable provision of applicable corporate law.
16. Interpretation, Governing Law. This Agreement shall be construed as a whole
and in accordance with its fair meaning. Headings are for convenience only and
shall not be used in construing meaning. This Agreement shall be governed and
interpreted in accordance with the laws of the State of Nevada.
17. Amendments. No amendment, waiver, modification, termination or cancellation
of this Agreement shall be effective unless in writing signed by the party
against whom enforcei-neiit is sought. The indei-niiification rights afforded to
the Indemnitee hereby are contract rights and may not be diminished, eliminated
or otherwise affected by amendments to the Articles of Incorporation, Bylaws, or
by other agreements, including D&O Insurance policies.
18. Counterparts. This Agreei-neiit may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other.
8
<PAGE>
19. Notices. Any notice required to be given under this Agreement shall be
directed:
TO: FIDELITY HOLDINGS, INC.
80-02 Kew Gardens Rd.
Kew Gardens, Queens, NY 11415
With a copy to: Richard C. Fox, Esq.
3401 Lakeview Drive
Delray Beach, Florida 33445
and
TO: DORON COHEN c/o Glen H. Bank, Esq.
299 Broadway, Suite 1605
New York, NY 10007
or to such other address as either shall designate in writing.
IN WITNESS WHEREOF, The parties leave executed this Indemnity Agreement
as of the date first written above.
INDEMNITEE:
/s/ Doron Cohen
-----------------------------------
DORON COHEN
FIDELITY HOLDINGS, INC.
BY: /s/
--------------------------------
President
9
<PAGE>
Indemnification
Agreement with
Bruce Bendell
10.10
<PAGE>
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made as of November 7, 1995,
by and between FIDELITY HOLDINGS, INC., a Nevada corporation ("Company"), and
BRUCE BENDELL ("Indemnitee"), a director and/or officer or key executive,
employee or consultant of the Company, or a person serving at the request of the
Company as a director, officer, employee or agent of another enterprise.
RECITALS
A. The Indemnitee is currently serving or has agreed to serve as a
director and/or officer of the Company and in such capacity has rendered and/or
will render valuable services to the Company.
B. The Company has investigated the availability and sufficiency of
liability insurance and applicable statutory indemnification provisions to
provide its directors and officers with adequate protection against various
legal risks and potential liabilities to which such individuals are subject due
to their positions with the Company and has concluded that such insurance may be
unavailable or too costly, and even if purchased it, and the statutory
provisions, may provide inadequate and unacceptable protection to certain
individuals requested to serve as its directors and/or officers.
C. It is essential to the Company that it attract and retain as
officers and directors the most capable persons available and in order to induce
and encourage highly experienced and capable persons such as the Indemnitee to
serve or continue to serve as a director and/or officer of the Company, the
Board of Directors has determined, after due consideration and investigation of
the terms and provisions of the Agreement and the various other options
available to the Company and the Indemnitee in lieu of that this Agreement is
not only reasonable and prudent but necessary to promote and ensure the best
interests of the Company and its stockholders.
NOW, THEREFORE, in consideration of the services or continued services
of the Indemnitee and in order to induce the Indemnitee to serve or continue to
serve as
1
<PAGE>
director and/or officer, the Company and the Ijideiniiitee do hereby agree as
follows:
1. Definitions. As used in this Agreement:
(i) The term "Proceeding" shall include any threatened, pending or
completed inquiry, hearing, investigation, action, suit, arbitration or other
alternative dispute resolution mechanism or proceeding, formal or informal,
whether brought in the name of the Company or otherwise and whether of a civil,
criminal or administrative or investigative nature, by reason of the fact that
the Indemnitee is or was a director and/or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another enterprise, whether or not he/she is serving in such capacity at the
time any liability or expense is incurred for which indemnification or
reimbursement is to be provided under this Agreement.
(b) The term "Expenses" includes, without limitation: attorneys'
fees, costs, disbursements and retainers; accounting and wetness fees; fees of
experts; travel and deposition costs; transcript costs, filing fees, telephone
charges, postage, copying costs, delivery service fees and other expenses and
obligations of any nature whatsoever paid or incurred in connection with any
investigations, judicial or administrative proceedings and appeals, amounts paid
ill settlement by or oil behalf of Indemnitee, and any expenses of establishing
a right to indemnification, pursuant to this Agreement or otherwise, including
reasonable compensation for time spent by the Indemnitee in connection with the
investigation, defense or appeal of a Proceeding or action for indemnification
for which he/she is not otherwise compensated by the Company or any third party.
The term "Expenses" does not include the amount of judgments, fines, penalties
or ERISA excise taxes actually levied against the Indemnitee.
2. Agreement to Serve. The Indemnitee agrees to serve or to continue to
serve as a director and/or officer of the Company for so long as he/she is duly
elected or appointed or until such time as he/she tenders his/her resignation
ill writing or is removed as a director and/or officer. However, nothing
contained in this Agreement shall be construed as giving Indemnitee any right to
be retained in the employ of the Company, any subsidiary or any other person.
2
<PAGE>
3. Indemnification in Third Party Actions. The Company shall indemnify
the Indemnitee if the Indemnitee is a party to or threatened to be made a party
to or is otherwise involved in any Proceeding (other that a Proceeding by or in
the name of the Company to procure a judgment in its favor), by reason of the
fact that the Indemnitee is or was a director and/or officer of the Company, or
is or was serving at the request of the Company as a director, officer, emplyee
or agent of another enterprise, against all Expenses, judgments, fines,
penalties and ERISA excise taxes actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such a Proceeding, to
the fullest extent permitted by applicable corporate law and the Company's
Articles of Incorporation; provided that any settlement of a Proceeding be
approved in writing by the Company.
4. Indemnification in Proceeding-s by or In the Name of the Company .
The Company shall indemnify the Indemnitee if the Indemnitee is a party to or
threatened to be made a party to or is otherwise involved in any Proceeding by
or in the name of the Company to procure a judgment in its favor by reason of
the fact that the Indemnitee was or is a director and/or officer of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another enterprise, against all Expenses, judgments, fines
penalties and ERISA excise taxes actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such a Proceeding, to
the fullest extent permitted by applicable corporate law and the Company's
Articles of Incorporation.
5. Conclusive Presumption Regarding Standards of Conduct. The
Indemnitee shall be conclusively presumed to have met the relevant standards of
conduct, if any, as defined by applicable corporate law, for indemnification
pursuant to this Agreement, unless a determination is made that the Indemnitee
has not met such standards (i) by the Board of Directors by a majority vote of a
quorum thereof consisting of directors who were not parties to the Proceeding
due to which a claim is made under this Agreement, (ii) by the shareholders of
the Company by majority vote of a quorum thereof consisting of shareholders who
are not parties to the Proceeding due to which a claim is made
3
<PAGE>
under this Agreement, (iii) in a written opinion by independent counsel,
selection of whom has been approved by the indemnitee in writing, or (iv) by a
court of competent jurisdiction.
6. Indemnification of Expenses of Successful Party. Notwithstanding any
other provision of the Agreement, to the extent that the Indemnitee has been
successful in defense of any Proceeding or in defense of any claim, issue or
matter tlierein, on the inerits or otherwise, including the dismissal of a
Proceeding without prejudice or the settlement of a Proceeding Without an
admission of liability, the Indemnitee shall be Indemnified against all Expenses
incurred in connection therewith to the fullest extent permitted by applicable
corporate law.
7. Advances of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be paid promptly by the Company in advance of the final
disposition of the Proceeding at the written request of the Indemnitee to the
fullest extent permitted by applicable corporate law; provided that the
Indemnitee shall undertake in writing to repay any advances if it is ultimately
determined that the Indemnitee is not entitled to indemnification.
8. Partial Indemnification. If the Indemnitee is entitled under any
provision of the Agreement to indemnification by the Company for a portion of
the Expenses, judgments, fines, penalties or ERISA excise taxes actually and
reasonably incurred by him/her in the investigation, defense, appeal or
settlement of any Proceeding but not, however, for the total amount of his/her
Expenses, judgments, fines, penalties or ERISA excise taxes, the Company shall
nevertheless indemnify the Indemnitee for the portion of Expenses, judgments,
fines, penalties or ERISA excise taxes to which the Indemnitee is entitled.
9. Indemnification Procedure, Determination of Right to
Indemnification.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of any Proceeding, the Indemnitee shall, if a claim in respect
thereof is
4
<PAGE>
to be made against the Company under this Agreement, notify the Company of the
commencement thereof in writing. The omission to so notify the Company, however,
shall not relieve it from any liability which it may have to the Indemnitee
otherwise than under this Agreement.
(b) If a claim for indemnification or advances under this Agreement is
not paid by the Company within thirty (30) days of receipt of written notice,
the rights provided by this Agreement shall be enforceable by the Indemnitee in
any court of competent jurisdiction. The burden of proving by clear and
convincing evidence that indemnification or advances are not appropriate shall
be on the Company. Neither the failure of the directors or stockholders of the
Company or its independent legal counsel to have made a determination prior to
the commencement of such action that indemnification or advances are proper in
the circumstances because the Indemnitee has met the applicable standard of
conduct, if any, nor ail actual determination by the directors or shareholders
of the Company or independent legal counsel that the Indemnitee has not met the
applicable standard of conduct, shall be a defense to the action or create a
presumption for the purpose of an action that the Indemnitee has not been the
applicable standard of conduct.
(c) The Indemnitee's Expenses incurred in connection with any
Proceeding concerning his/her right to indemnification or advances in whole or
part pursuant to this Agreement shall also be indemnified by the Company
regardless of the outcome of such Proceeding.
(d) With respect to any Proceeding for which indemnification is
requested, the Company will be entitled to participate therein at its own
expense and, except as otherwise provided below, to the extent that it may wish,
the Company may assume the defense thereof, with counsel satisfactory to the
Indemnitee. After notice from the Company to the Indemnitee of its election to
assume the defense of a Proceeding, the Company will not be liable to the
Ijideiiiilitee for any Expenses subsequently incurred by the Indemnitee in
connection with the defense thereof, other than as provided below. The Company
shall not settle any Proceeding in any manner which would impose any penalty or
limitation oil the Indemnitee without the Indemnitee's written consent. The
Indemnitee shall have the right to employee his/her counsel in any Proceeding,
but the
5
<PAGE>
10. Limitations oil Indemnification. No payments pursuant to this
Agreement shall be made by the Company:
(a) To indemnify or advance funds to the Indemnitee expenses with
respect to Proceeding initiated or brought Voluntarily by the Indemnitee and not
by way of defense, except with respect to Proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other statute or
law or otherwise as required under applicable corporate law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors finds it to be appropriate;
(b) To indemnify the Indemnitee for any Expenses, judgment, fines,
penalties or ERISA excise taxes sustained in any Proceeding for which payment is
actually made to the Indemnitee under a valid and collectible insurance policy,
except in respect of any excess beyond the amount of payment under such
insurance;
(c) To indemnify the Indemnitee for any Expenses, judgment, fines,
and/or penalties sustained in any Proceeding for an accounting of profits made
from the purchase or sale by the Indemnitee of securities of the Company
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934, the rules and regulations promulgated thereunder and amendments thereto or
similar provisions of any federal, state or local statutory law; and
(d) If a Court of competent jurisdiction finally determines that
any
6
<PAGE>
indemnification hereunder is unlawful.
11. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, as long as the
Indemnitee continues to serve as a director and/or officer of the Company and
thereafter as long as the Indemnitee may be subject to any possible Proceeding,
the Company, subject to subsection (c), shall promptly obtain and maintain in
full force and effect directors' and officers' liability insurance ("D&O
Insurance") in reasonable amounts from established and reputable insurers.
(b) In all D&O insurance policies, the Indemnitee shall be named as
an insured in such a Banner as to provide the Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors and/or officers.
(c) Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain D&O Insurance if the Company determines, in its
sole discretion, that such insurance is not reasonably available, the premium
costs for such insurance is so limited by exclusions that it provides ail
insufficient benefit, or the Indemnitee is covered by similar insurance
maintained by a subsidiary of the Company.
12. Indemnification Hereunder Not Exclusive. The indemnification
provided by this Agreement shall not be deemed exclusive of any other rights to
which the Indemnitee may be entitled under the Articles of Incorporation,
Bylaws, any agreement, vote of shareholders or disinterested . directors,
provision of applicable corporate law, or otherwise, both as to action in
his/her official capacity and as to action in another capacity oil behalf of the
Company while holding such office.
13. Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of the Indemnitee and his/her heirs, executors,
administrators and assigns, whether or not Indemnitee has ceased to be a
director or officer, and the Company and its successors and assigns.
14. Severability. Each and every paragraph, sentence, term and
provision hereof is
7
<PAGE>
separate and distinct so that if any paragraph, sentence, term or provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of any other paragraph, sentence, term or provision hereof. To the extent
required, any paragraph, sentence, term or provision of this Agreement shall be
modified by a court of competent jurisdiction to preserve its validity and to
provide the Indemnitee with the broadest possible indemnification permitted
under applicable corporate law.
15.Savings Clause. If this Agreement or any paragraph, sentence, term
or provision hereof is invalidated on any ground by any court of competent
jurisdiction, the Company shall nevertheless indemnify the Indemnitee as to any
Expenses, judgments, fines, penalties for ERISA excise taxes incurred with
respect to any Proceeding to the full extent permitted by any applicable
paragraph, sentence, term or provision of this Agreement that has not been
invalidated or by any other applicable provision of applicable corporate law.
16.Interpretation: Governing Law. This Agreement shall be construed as
a whole and in accordance with its fair meaning. Headings are for convenience
only and shall not be used in construing meaning. This Agreement shall be
governed and interpreted in accordance with the laws of the State of Nevada.
17. Amendments. No amendment, waiver, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
the party against whom enforcement is sought. The indemnification rights
afforded to the Indemnitee hereby are contract rights and may not be diminished,
eliminated or otherwise affected by amendments to the Articles of Incorporation,
Bylaws, or by other agreements, including D&O Insurance policies.
18.Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other.
8
<PAGE>
19. Notices. Any notice required to be given under this Agreement shall
be directed:
TO: FIDELITY HOLDINGS, INC.
80-02 Kew Gardens Rd.
Kew Gardens, Queens, NY 11415
With a copy to: Richard C. Fox, Esq.
3401 Lakeview Drive
Delray Beach, Florida 33445 and;
TO: BRUCE BENDELL
43-40 Northern Blvd.
Long Island City, NY 11101
or to such other address as either shall designate in writing.
IN WITNESS WHEREOF, The parties have executed this Indemnity Agreement
as of the date first written above.
INDEMNITEE:
_____________________________
Bruce Bendell
FIDELITY HOLDINGS, INC.
By:__________________________
President
9
<PAGE>
Indemnification
Agreement with
Richard C. Fox
10.11
<PAGE>
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made as of December 6, 1995,
by and between FIDELITY HOLDINGS, INC., a Nevada corporation ("Company"), and
RICHARD C. FOX ("Indemnitee"), a director and/or officer or key executive,
employee or consultant of the Company, or a person serving at the request of the
Company as a director officer, employee or agent of another enterprise.
RECITALS
A. The Indemnitee is currently serving or has agreed to serve as a
director and/or officer of the Company and in such capacity has rendered and/or
will render valuable services to the Company.
B. The Company has investigated the availability and sufficiency of
liability insurance and applicable statutory indemnification provisions to
provide its directors and officers with adequate protection against various
legal risks and potential liabilities to which such individuals are subject due
to their positions with the Company and has concluded that such insurance may be
unavailable or too costly, and even if purchased it, and the statutory
provisions, may provide inadequate and unacceptable protection to certain
individuals requested to serve as its directors and/or officers.
C. It is essential to the Company that it attract and retain as
officers and directors the most capable persons available and in order to induce
and encourage highly experienced and capable persons such as the Indemnitee to
serve or continue to serve as a director and/or officer of the Company, the
Board of Directors has determined, after due consideration and investigation of
the terms and provisions of the Agreement and the various other options
available to the Company and the Indemnitee in lieu this Agreement is not only
reasonable and prudent but necessary to promote and ensure the best interests of
the Company and its stockholders.
NOW, THEREFORE, in consideration of the services or continued services
of the Indemnitee and in order to induce the Indemnitee to serve or continue to
serve as
1
<PAGE>
director and/or officer, the Company and the Indemnitee do hereby agree as
follows:
1. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed inquiry, hearing, investigation, action, suit, arbitration or other
alternative dispute resolution mechanism or proceeding, formal or informal,
whether brought in the name of the Company or otherwise and whether of a civil,
criminal or administrative or investigative nature, by reason of the fact that
the Indemnitee is or was a director and/or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another enterprise, whether or not he/she is serving in such capacity at the
time any liability or expense is incurred for which indemnification or
reimbursement is to be provided under this Agreement.
(b) The term "Expenses" includes, without limitation: attorneys'
fees, costs, disbursements and retainers; accounting and witness fees; fees of
experts; travel and deposition costs; transcript costs, filing fees, telephone
charges, postage, copying costs, delivery service fees and other expenses and
obligations of any nature whatsoever paid or incurred in connection with any
investigations, judicial or administrative proceedings and appeals, amounts paid
in settlement by or on behalf of Indemnitee, and any expenses of establishing a
right to indemnification, pursuant to this Agreement or otherwise, including
reasonable compensation for time spent by the Indemnitee in connection with the
investigation, defense or appeal of a Proceeding or action for indemnification
for which he/she is not otherwise compensated by the Company or any third party.
The term "Expenses" does not include the amount of judgments, fines, penalties
or ERISA excise taxes actually levied against the Indemnitee.
2. Agreement to Serve. The Indemnitee agrees to serve or to continue
to serve as a director and/or officer of the Company for so long as he/she is
duly elected or appointed or until such time as he/she tenders his/her
resignation in writing or is removed as a director and/or officer. However,
nothing contained in this Agreement shall be construed as giving Indemnitee any
right to be retained in the employ of the Company, any subsidiary or any other
person.
2
<PAGE>
3. Indemnification in Third Party Actions. The Company shall indemnify
the Indemnitee if the Indemnitee is a party to or threatened to be made a party
to or is otherwise involved in any Proceeding (other than a Proceeding by or in
the name of the Company to procure a judgment in its favor), be reason of the
fact that the Indemnitee is or was a director and/or officer of the Company, or
is or was serving at the request of the Company as a director, officer, employee
or agent of another enterprise, against all Expenses, judgments, fines,
penalties and ERISA excise taxes actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such a Proceeding, to
the fullest extent permitted by applicable corporate law and the Company's
Articles of Incorporation; provided that any settlement of a Proceeding be
approved in writing by the Company.
4. Indemnification in Proceedings by or In the Name of the Company.
The Company shall indemnify the Indemnitee if the Indemnitee is a party to or
threatened to be made a party to or is otherwise involved in any Proceeding by
or in the name of the Company to procure a judgment in its favor by reason of
the fact that the Indemnitee was or is a director and/or officer of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another enterprise, against all Expenses, judgments, fines,
penalties and ERISA excise taxes actually and reasonably incurred by the
Indemnitee in connection with defense or settlement of such a Proceeding, to the
fullest extent permitted by applicable corporate law and the Company's Articles
of Incorporation.
5. Conclusive Presumption Regarding Standards of Conduct. The
Indemnitee shall be conclusively presumed to have met the relevant standards of
conduct, if any, as defined by applicable corporate law, for indemnification
pursuant to this Agreement, unless a determination is made that the Indemnitee
has not met such standards (I) by the Board of Directors by a majority vote of a
quorum thereof consisting of directors who were not parties to the Proceeding
due to which a claim is made under this Agreement, (ii) by the shareholders of
the Company by majority vote of a quorum thereof consisting of shareholders who
are not parties to the Proceeding due to which a claim is made
3
<PAGE>
under this Agreement, (iii) in a written opinion by independent counsel,
selection of whom has been approved by the Indemnitee in writing, or (iv) by a
court of competent jurisdiction.
6. Indemnification of Expenses of Successful Party. Notwithstanding any
other provision of the Agreement, to the extent that the Indemnitee has been
successful in defense of any Proceeding or in defense of any claim, issue or
matter therein, on the merits or otherwise, including the dismissal of a
Proceeding without prejudice or the settlement of a Proceeding without an
admission of liability, the Indemnitee shall be indemnified against all Expenses
incurred in connection therewith to the fullest extent permitted by applicable
corporate law.
7. Advances of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be paid promptly by the Company in advance of the final
disposition of the Proceeding at the written request of the Indemnitee to the
fullest extent permitted by applicable corporate law; provided that the
Indemnitee shall undertake in writing to repay any advances if it is ultimately
determined that the Indemnitee is not en titled to indemnification.
8. Partial Indemnification. If the Indemnitee is entitled under any
provision of the Agreement to indemnification by the Company for a portion of
the Expenses, judgments, fines, penalties or ERAS excise taxes actually and
reasonably incurred by him/her in the investigation, defense, appeal or
settlement of any Proceeding but not, however, for the total amount of his/her
Expenses, judgments, fines, penalties or ERISA excise taxes, the Company shall
nevertheless indemnify the Indemnitee for the portion of Expenses, judgments,
fines, penalties or ERISA excise taxes to which the Indemnitee is entitled.
9. Indemnification Procedure, Determination of Right to Indemnification.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of any Proceeding, the Indemnitee shall, if a claim in respect
thereof is
4
<PAGE>
to be made against the Company under this Agreement, notify the Company of the
commencement thereof in writing. The omission to so notify the Company, however,
shall not relieve it from any liability which it may have to the Indemnitee
otherwise than under this Agreement.
(b) If a claim for indemnification or advances under this Agreement
is not paid by the Company within thirty (30) days of receipt of written notice,
the rights provided by this Agreement shall be enforceable by the Indemnitee in
any court of competent jurisdiction. The burden of proving by clear and
convincing evidence that indemnification or advances are not appropriate shall
be on the Company. Neither the failure of the directors or stockholders of the
Company or its independent legal counsel to have made a determination prior to
the commencement of such action that indemnification or advances are proper in
the circumstances because the Indemnitee has met the applicable standard of
conduct, if any, nor an actual determination by the directors or shareholders of
the Company or independent legal counsel that the Indemnitee has not met the
applicable standard of conduct, shall be a defense to the action or create a
presumption for the purpose of an action that the Indemnitee has not been the
applicable standard of conduct.
(c) The Indemnity's Expenses incurred in connection with any
Proceeding concerning his/her right to indemnification or advances in whole or
part pursuant to this Agreement shall also be indemnified by the Company
regardless of the outcome of such Proceeding.
(d) With respect to any Proceeding for which indemnification is
requested, the Company will be entitled to participate therein at its own
expense and, except as otherwise provided below, to the extent that it may wish,
the Company may assume the defense thereof, with counsel satisfactory to the
Indemnitee. After notice from the Company to the Indemnitee of its election to
assume the defense of a Proceeding, the Company will not be liable to the
Indemnitee for any Expenses subsequently incurred by the Iiideiiiiiitee in
connection with the defense thereof, other than as provided below. The Company
shall not settle any Proceeding in any manner which would impose any penalty or
limitation on the Indemnitee without the Indemnitee's written consent. The
Indemnitee shall have the right to employee his/her counsel in any Proceeding,
but the
5
<PAGE>
fees and expenses of such counsel incurred after notice from the Company of its
assumption of the defense of the Proceeding shall be at the expense of the
Indemnitee, unless (i) the employment of counsel by the Indemnitee has been
authorized by the Company, (ii) the Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and the Indemnitee
in the conduct of the defense of a Proceeding, in each of which cases the fees
and expenses of the Indemnitee's counsel shall be advances by the Company. The
Company shall not be entitled to assume the defense of any Proceeding brought by
or on behalf of the Company or as to which the Indemnitee has concluded that
there may be a conflict of interest between the Company and the Indemnitee.
10. Limitations on Indemnification. No payments pursuant to this Agreement shall
be made by the Company:
(a) To indemnify or advance funds to the Indemnitee expenses with
respect to Proceeding initiated or brought voluntarily by the Indemnitee and not
by way of defense, except with respect to Proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other statute or
law or otherwise as required under applicable corporate law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors finds it to be appropriate;
(b) To indemnify the Indemnitee for any Expenses, judgment, fines,
penalties or ERISA excise taxes sustained in any Proceeding for which payment is
actually made to the Indemnitee under a valid and collectible insurance policy,
except in respect of any excess beyond the amount of payment under such
insurance;
(c) To indemnify the Indemnitee for any Expenses, judgment, fines,
and/or penalties sustained in any Proceeding for an accounting of profits made
from the purchase or sale by the Indemnitee of securities of the Company
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934, the rules and regulations promulgated thereunder and amendments thereto or
similar provisions of any federal, state or local statutory law; and
(d) If a court of competent jurisdiction finally determines that any
6
<PAGE>
indemnification hereunder is unlawful.
11. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, as long as the
Indemnitee continues to serve as a director and/or officer of the Company and
thereafter as long as the Indemnitee may be subject to any possible Proceeding,
the Company, subject to subsection (c), shall promptly obtain and maintain in
full force and effect directors' and officers' liability insurance ("D&O
Insurance") in reasonable amounts from established and reputable insurers.
(b) In all D&O insurance policies, the Indemnitee shall be named as
an insured in such a manner as to provide the Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors and/or officers.
(c) Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain D&O Insurance if the Company determines, in its
sole discretion, that such insurance is not reasonably available, the premium
costs for such insurance is so limited by exclusions that it provides an
insufficient benefit, or the Indemnitee is covered by similar insurance
maintained by a subsidiary of the Company.
12. Indemnification Hereunder Not Exclusive. The indemnification provided by
this Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may be entitled under the Articles of Incorporation, Bylaws, any
agreement, vote of shareholders or disinterested directors, provision of
applicable corporate law, or otherwise, both as to action in his/her official
capacity and as to action in another capacity on behalf of the Company while
holding such office.
13. Successors and Assigns. This Agreement shall be binding upon, and shall
inure to the benefit of the Indemnitee and his/her heirs, executors,
administrators and assigns, whether or not Indemnitee has ceased to be a
director or officer, and the Company and its successors and assigns.
14. Severability. Each and every paragraph, sentence, term and. provision hereof
is
7
<PAGE>
separate and distinct so that if any paragraph, sentence, term or provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of any other paragraph, sentence, term or provision hereof. To the extent
required, any paragraph, sentence, term or provision of this Agreement shall be
modified by a court of competent jurisdiction to preserve its validity and to
provide the Indemnitee with the broadest possible indemnification permitted
under applicable corporate law.
15. Savings Clause. If this Agreement or any paragraph, sentence, term or
provision hereof is invalidated on any ground by any court of competent
jurisdiction, the Company shall nevertheless indemnify the Indemnitee as to any
Expenses, judgments, fines, penalties for ERISA excise taxes incurred with
respect to any Proceeding to the full extent permitted by any applicable
paragraph, sentence, term or provision of this Agreement that has not been
invalidated or by any other applicable provision of applicable corporate law.
16. Interpretation: Governing Law. This Agreement shall be construed as a whole
and in accordance with its fair meaning. Headings are for convenience only and
shall not be used in construing meaning. This Agreement shall be governed and
interpreted in accordance with the laws of the State of Nevada.
17. Amendments. No amendment, waiver, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
the party against whom enforcement is sought. The indemnification rights
afforded to the Indemnitee hereby are contract rights and may not be diminished,
eliminated or otherwise affected by amendments to the Articles of Incorporation,
Bylaws, or by other agreements, including D&O Insurance policies.
18. Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other.
8
<PAGE>
in any such notice, the Class "B" Preference Shares called for redemption shall
cease to be entitled to dividends and the holders thereof shall not be entitled
to exercise any of the rights of shareholders in respect thereof unless payment
of the Redemption Price shall not be made upon presentation of certificates in
accordance with the foregoing provisions, in which case the rights of the
holders shall remain unaffected. The Corporation shall have the right, at any
time after the mailing of notice of its intention to redeem any Class "B"
Preference Shares as aforesaid, to deposit the Redemption Price of the Class "B"
Preference Shares so called for redemption, or for such of the said shares as
are represented by certificates which have not at the date of such deposit been
surrendered by the holders thereof in connection with such redemption, to a
special account in any chartered bank or any trust company in Canada named in
such notice to be paid without interest to or to the order of the respective
holders of such Class "B" Preference Shares called for redemption upon
presentation and surrender to such bank or trust company of the certificates
representing the same, and upon such deposit being made or upon the date
specified for redemption in such notice, whichever is the later, the Class "B"
Preference Shares in respect whereof such -deposit shall have been made shall be
redeemed and the rights of the holders thereof after such deposit or such
redemption date, as the case may be , shall be limited to receiving without
interest their proportionate part of the total Redemption Price so deposited
against presentation and surrender of the said certificates held by them
respectively.
(e) The Corporation may, subject to The Business Corporations Act,
1982, at any time and from time to time purchase (if obtainable) for
cancellation the whole or any portion of the Class "B" Preference Shares
outstanding from time to time by invitation for tenders addressed to all the
holders of record of the Class "B" Preference Shares outstanding, or (with the
consent of all the holders of Class "B" Preference Shares) by private contract
at the lowest price or prices at which, in the opinion of the directors, such
shares are obtainable but not exceeding for each share to be purchased for
cancellation the Redemption Price for Share plus costs of purchase and an amount
equal to all dividends declared thereon and remaining unpaid. Where, in response
to any invitation for tenders, two or more shareholders submit tenders at
<PAGE>
19. Notices. Any notice required to be given under this Agreement shall be
directed:
TO: FIDELITY HOLDINGS, INC.
80-02 Kew Gardens Rd.
Kew Gardens, NY 11413
With a copy to: Richard C. Fox, Esq.
3401 Lakeview Drive
Delray Beach, Florida 33445 and;
or to such other address as either shall designate in writing.
IN WITNESS WHEREOF, The parties have executed this Indemnity Agreement
as of the date first written above.
INDEMNITY
------------------------------------------
Richard C. Fox
FIDELITY HOLDINGS, INC.
------------------------------------------
Doron Cohen
<PAGE>
Indemnification
Agreement with
Dr. Barak
10.12
<PAGE>
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made as of December 6, 1995,
by and between FIDELITY HOLDINGS, INC., a Nevada corporation ("Company"), and
DR. ZVI BARAK ("Indemnitee"), a director and/or officer or key executive,
employee or consultant of the Company, or a person serving at the request of the
Company as a director officer, employee or agent of another enterprise.
RECITALS
A. The Indemnitee is currently serving or has agreed to serve as a
director and/or officer of the Company and in such capacity has rendered and/or
will render valuable services to the Company.
B. The Company has investigated the availability and sufficiency of
liability insurance and applicable statutory indemnification provisions to
provide its directors and officers with adequate protection against various
legal risks and potential liabilities to which such individuals are subject due
to their positions with the Company and has concluded that such insurance may be
unavailable or too costly, and even if purchased it, and the statutory
provisions, may provide inadequate and unacceptable protection to certain
individuals requested to serve as its directors and/or officers.
C. It is essential to the Company that it attract and retain as
officers and directors the most capable persons available and in order to induce
and encourage highly experienced and capable persons such as the Indemnitee to
serve or continue to serve as a director and/or officer of the Company, the
Board of Directors has determined, after due consideration and investigation of
the terms and provisions of the Agreement and the various other options
available to the Company and the Indemnitee in lieu this Agreement is not only
reasonable and prudent but necessary to promote and ensure the best interests of
the Company and its stockholders.
1
<PAGE>
NOW, THEREFORE, in consideration of the services or continued services of
the Indemnitee and in order to induce the Indemnitee to serve or continue to
serve as director and/or officer, the Company and the Indemnitee do hereby agree
as follows:
1. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed inquiry, hearing, investigation, action, suit, arbitration or other
alternative dispute resolution mechanism or proceeding, formal or informal,
whether brought in the name of the Company or otherwise and whether of a civil,
criminal or administrative or investigative nature, by reason of the fact that
the Indemnitee is or was a director and/or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another enterprise, whether or not he/she is serving in such capacity at the
time any liability or expense is incurred for which indemnification or
reimbursement is to be provided under this Agreement.
(b) The term "Expenses" includes, without limitation: attorneys' fees,
costs, disbursements and retainers; accounting and witness fees; fees of
experts; travel and deposition costs; transcript costs, filing fees, telephone
charges, postage, copying costs, delivery service fees and other expenses and
obligations of any nature whatsoever paid or incurred in connection with any
investigations, judicial or administrative proceedings and appeals, amounts paid
in settlement by or on behalf of Indemnitee, and any expenses of establishing a
right to indemnification, pursuant to this Agreement or otherwise, including
reasonable compensation for time spent by the Indemnitee in connection with the
investigation, defense or appeal of a Proceeding or action for indemnification
for which he/she is not otherwise compensated by the Company or any third party.
The term "Expenses" does not include the amount of judgments, fines, penalties
or ERISA excise taxes actually levied against the Indemnitee.
2
<PAGE>
2 . Agreement to Serve. The Indemnitee agrees to serve or to continue
to serve as a director and/or officer of the Company for so long as he/she is
duly elected or appointed or until such time as he/she tenders his/her
resignation in writing or is removed as a director and/or officer. However,,
nothing contained in this Agreement shall be construed as giving Indemnitee any
right to be retained in the employ of the Company, any subsidiary or any other
person.
3. Indemnification in Third Party Actions. The Company shall indemnify
the Indemnitee if the Indemnitee is a party to or threatened to be made a party
to or is otherwise involved in any Proceeding (other that a Proceeding by or in
the name of the Company to procure a judgment in its favor) , by reason of the
fact that the Indemnitee is or was a director and/or officer of the Company, or
is or was serving at the request of the Company as a director, officer, employee
or agent of another enterprise, against all Expenses, judgments, fines,
penalties and ERISA excise taxes actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such a Proceeding, to
the fullest extent permitted by applicable corporate law and the Company's
Articles of Incorporation; provided that any settlement of a Proceeding be
approved in writing by the Company.
4. Indemnification in Proceedings by or In the Name of the Company. The
Company shall indemnify the Indemnitee if the Indemnitee is a party to or
threatened to be made a party to or is otherwise involved in any Proceeding by
or in the name of the Company to procure a judgment in its favor by reason of
the fact that the Indemnitee was or is a director and/or officer of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another enterprise, against all Expenses, judgments, fines
penalties and ERISA excise taxes actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such a Proceeding, to
the fullest extent permitted by applicable corporate law and the Company's
Articles of Incorporation.
3
<PAGE>
5. Conclusive Presumption Regarding Standards of Conduct. The
Indemnitee shall be conclusively presumed to have met the relevant standards of
conduct, if any, as defined by applicable corporate law, for indemnification
pursuant to this Agreement, unless a determination is made that the Indemnitee
has not met such standards (I) by the Board of Directors by a majority vote of a
quorum thereof consisting of directors who were not parties to the Proceeding
due to which a claim is made under this Agreement, (ii) by the shareholders of
the Company by majority vote of a quorum thereof consisting of shareholders who
are not parties to the Proceeding due to which a claim is made under this
Agreement, (iii) in a written opinion by independent counsel, selection of whom
has been approved by the Indemnitee in writing, or (iv) by a court of competent
jurisdiction.
6. Indemnification of Expenses of Successful Party. Notwithstanding any
other provision of the Agreement, to the extent that the Indemnitee has been
successful in defense of any Proceeding or in defense of any claim, issue or
matter therein, on the merits or otherwise, including the dismissal of a
Proceeding without prejudice or the settlement of a Proceeding without an
admission of liability, the Indemnitee shall be indemnified against all Expenses
incurred in connection therewith to the fullest extent permitted by applicable
corporate law.
7. Advances of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be paid promptly by the Company in advance of the final
disposition of the Proceeding at the written request of the Indemnitee to the
fullest extent permitted by applicable corporate law; provided that the
Indemnitee shall undertake in writing to repay any advances if it is ultimately
determined that the Indemnitee is not entitled to indemnification.
8. Partial Indemnification. If the Indemnitee is entitled under any
provision of the Agreement to indemnification by the Company for a portion of
the Expenses, judgments, fines, right to indemnification under this Agreement or
4
<PAGE>
any other statute or law or otherwise as required under applicable corporate
law, but such indemnification or advancement of expenses may be provided by the
Company in specific cases if the Board of Directors finds it to be appropriate;
(b) To indemnify the Indemnitee for any Expenses, judgment, fines,
penalties or ERISA excise taxes sustained in any Proceeding f or which payment
is actually made to the Indemnitee under a valid and collectible insurance
policy, except in respect of any excess beyond the amount of payment under such
insurance;
(c) To indemnify the Indemnitee for any Expenses, judgment, fines,
and/or penalties sustained in any Proceeding f or an accounting of profits made
from the purchase or sale by the Indemnitee of securities of the Company
pursuant to the provisions of Section 16 (b) of the Securities Exchange Act of
1934, the rules and regulations promulgated thereunder and amendments thereto or
similar provisions of any federal, state or local statutory law; and
(d) If a court of competent jurisdiction finally determines that any
indemnification hereunder is unlawful.
11. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, as long as the
Indemnitee continues to serve as a director and/or off icer of the Company and
thereafter as long as the Indemnitee may be subject to any possible Proceeding,
the Company, subject to subsection (c) , shall promptly obtain and maintain in
full force and effect directors' and officers' liability insurance (D&O
Insurance") in reasonable amounts from established and reputable insurers.
(b) In all D&O insurance policies, the Indemnitee shall be named as an
insured in such a manner as to provide the Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors and/or officers.
(c) Notwithstanding the foregoing, the Company shall have no obligation
to obtain or maintain D&O Insurance if the
5
<PAGE>
Company determines, in its sole discretion, that such insurance is not
reasonably available, the premium costs for such insurance is so limited by
exclusions that it provides an insufficient benefit, or the Indemnitee is
covered by similar insurance maintained by a subsidiary of the Company.
12. Indemnification Hereunder Not Exclusive. The indemnification
provided by this Agreement shall not be deemed exclusive of any other rights to
which the Indemnitee may be entitled under the Articles of Incorporation,
Bylaws, any agreement, vote of shareholders or disinterested directors,
provision of applicable corporate law, or otherwise, both as to action in
his/her official capacity and as to action in another capacity on behalf of the
Company while holding such office.
13. Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of the Indemnitee and his/her heirs, executors,
administrators and assigns, whether or not Indemnitee has ceased to be a
director or officer, and the Company and its successors and assigns.
14. Severance. Each and every paragraph, sentence, term and provision
hereof is separate and distinct so that if any paragraph, sentence, term or
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of any other paragraph, sentence, term or provision hereof. To
the extent required, any paragraph, sentence, term or provision of this
Agreement shall be modified by a court of competent jurisdiction to preserve its
validity and to provide the Indemnitee with the broadest possible
indemnification permitted under applicable corporate law.
15. Savings Clause. If this Agreement or any paragraph, sentence, term
or provision hereof is invalidated on any ground by any court of competent
jurisdiction, the Company shall nevertheless indemnify the Indemnitee as to any
Expenses, judgments, fines, penalties for ERISA excise taxes incurred with
6
<PAGE>
respect to any Proceeding to the full extent permitted by any applicable
paragraph, sentence, term or provision of this Agreement that has not been
invalidated or by any other applicable provision of applicable corporate law.
16.Interpretation,, Governing Law. This Agreement shall be construed as
a whole and in accordance with its fair meaning. Headings are for convenience
only and shall not be used in construing meaning. This Agreement shall be
governed and interpreted in accordance with the laws of the State of Nevada.
17. Amendments. No amendment, waiver, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
the party against whom enforcement is sought. The indemnification rights
afforded to the Indemnitee hereby are contract rights and may not be diminished,
eliminated or otherwise affected by amendments to the Articles of Incorporation,
Bylaws, or by other agreements, including D&O Insurance policies.
18. Counterpart. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other.
19.Notices. Any notice required to be given under this Agreement shall
be directed:
TO: FIDELITY HOLDINGS, INC.
144-15 Union Tpke.
Flushing, New York 11367
With a copy to:
Richard C. Fox, Esq.
3401 Lakeview Drive
Delray Beach, Florida 33445
and;
TO: DR. ZVI BARAK
1110 Finch Ave W
Downsview ON M3J 2T2
7
<PAGE>
Indemnification
Agreement with
Yossi Koren
lO.l3
<PAGE>
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made this 28th day of March,
1996, by and between FIDELITY HOLDINGS, INC., a Nevada corporation ("Company"),
and YOSSI KOREN ("Indemniteell), a director and/or officer or key executive,
employee or consultant of the Company, or a person serving at the request of the
Company as a director, officer, employee or agent of another enterprise.
RECITALS
A. The Indemnitee is currently serving or has agreed to serve as a
director and/or officer of the Company and in such capacity has rendered and/or
will render valuable services to the Company.
B. The Company has investigated the availability and sufficiency of
liability insurance and applicable statutory indemnification provisions to
provide its directors and officers with adequate protection against various
legal risks and potential liabilities to which such individuals are subject due
to their positions with the Company and has concluded that such insurance may be
unavailable or too costly, and even if purchased it, and the statutory
provisions, may provide inadequate and unacceptable protection to certain
individuals requested to serve as its directors and/or officers
C. It is essential to the Company that it attract and retain as officers
and directors the most capable persons available and in order to induce and
encourage highly experienced and capable persons such as the Indemnitee to serve
or continue to serve as a director and/or officer of the Company, the Board of
Directors has determined, after due consideration and investigation of the terms
and provisions of the Agreement and the various other options available to the
Company and the Indemnitee in lieu hereof that this Agreement is not only
reasonable and prudent but necessary to promote and ensure the best interests of
the Company and its stockholders.
1
<PAGE>
NOW, THEREFORE, in consideration of the services or continued services of
the Indemnitee and in order to induce the Indemnitee to serve or continue to
serve as director and/or officer, the Company and the Indemnitee do hereby agree
as follows:
1. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed inquiry, hearing, investigation, action, suit, arbitration or other
alternative dispute resolution mechanism or proceeding, formal or informal,
whether brought in the name of the Company or otherwise and whether of a civil,
criminal or administrative or investigative nature, by reason of the fact that
the Indemnitee is or was a director and/or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another enterprise, whether or not he/she is serving in such capacity at the
time any liability or expense is incurred for which indemnification or
reimbursement is to be provided under this Agreement.
(b) The term "Expenses" includes, without limitation: attorneys'
fees, costs, disbursements and retainers; accounting and witness fees; fees of
experts; travel and deposition costs; transcript costs, filing fees, telephone
charges, postage,copying costs, delivery service fees and other expenses and
obligations of any nature whatsoever paid or incurred in connection with any
investigations, judicial or administrative proceedings and appeals, amounts paid
in settlement by or on behalf of Indemnitee, and any expenses of establishing a
right to indemnification, pursuant to this Agreement or otherwise, including
reasonable compensation for time spent by the Indemnitee in connection with the
investigation, defense or appeal of a Proceeding or action for indemnification
for which he/she is not otherwise compensated by the Company or any third party.
The term "Expenses" does not include the amount of judgments, fines, penalties
or ERISA excise taxes actually levied against the Indemnitee.
2
<PAGE>
missing type on edgar file ?????
3
<PAGE>
5 . Conclusive Presumption Regarding Standards of Conduct. The
Indemnitee shall be conclusively presumed to have met the relevant standards of
conduct, if any, as defined by applicable corporate law, for indemnification
pursuant to this Agreement, unless a determination is made that the Indemnitee
has not met such standards (i) by the Board of Directors by a majority vote of a
quorum thereof consisting of directors who were not parties to the Proceeding
due to which a claim is made under this Agreement, (ii) by the shareholders of
the Company by majority vote of a quorum thereof consisting of shareholders who
are not parties to the Proceeding due to which a claim is made under this
Agreement, (iii) in a written opinion by independent counsel, selection of whom
has been approved by the Indemnitee in writing, or (iv) by a court of competent
jurisdiction.
6. Indemnification of Expenses of Successful P@. Notwithstanding any
other provision of the Agreement, to the extent that the Indemnitee has been
successful in defense of any Proceeding or in defense of any claim, issue or
matter therein, on the merits or otherwise, including the dismissal of a
Proceeding without prejudice or the settlement of a Proceeding without an
admission of liability, the Indemnitee shall be indemnified against all Expenses
incurred in connection therewith to the fullest extent permitted by applicable
corporate law.
7. Advances of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be paid promptly by the Company in advance of the final
disposition of the Proceeding at the written request of the Indemnitee to the
fullest extent permitted by applicable corporate law; provided that the
Indemnitee shall undertake in writing to repay any advances if it is ultimately
determined that the Indemnitee is not entitled to indemnification.
8. Partial Indemnification. If the Indemnitee is entitled under any
provision of the Agreement to indemnification by the Company for a portion of
the Expenses, judgments, fines,
4
<PAGE>
penalties or ERISA excise taxes actually and reasonably incurred by him/her in
the investigation, defense, appeal or settlement of any Proceeding but not,
however, for the total amount of his/her Expenses, judgments, fines, penalties
or ERISA excise taxes, the Company shall nevertheless indemnify the Indemnitee
for the portion of Expenses, judgments, fines, penalties or ERISA excise taxes
to which the Indemnitee is entitled.
9. Indemnification Procedure,- Determination of Right to
Indemnification.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of any Proceeding, the Indemnitee shall, if a claim in respect
thereof is to be made against the Company under this Agreement, notify the
Company of the commencement thereof in writing. The omission to so notify the
Company, however, shall not relieve it from any liability which it may have to
the Indemnitee otherwise than under this Agreement.
(b) If a claim for indemnification or advances under this Agreement
is not paid by the Company within thirty (30) days of receipt of written notice,
the rights provided by this Agreement shall be enforceable by the Indemnitee in
any court of competent jurisdiction. The burden of proving by clear and
convincing evidence that indemnification or advances are not appropriate shall
be on the Company. Neither the failure of the directors or stockholders of the
Company or its independent legal counsel to have made a determination prior to
the commencement of such action that. indemnification or advances are proper in
the circumstances because the Indemnitee has met the applicable standard of
conduct, if any, nor an actual determination by the directors or shareholders of
the Company or independent legal counsel that the Indemnitee has not met the
applicable standard of conduct, shall be a defense to the action or create a
presumption for the purpose of an action that the Indemnitee has not been the
applicable standard of conduct.
(c) The Indemnitee's Expenses incurred in connection with any
Proceeding concerning his/her right to indemnification
5
<PAGE>
or advances in whole or part pursuant to this Agreement shall also be
indemnified by the Company regardless of the outcome of such Proceeding.
(d) With respect to any Proceeding for which indemnification is
requested, the Company will be entitled to participate therein at its own
expense and, except as otherwise provided below, to the extent that it may wish,
the Company may assume the defense thereof, with counsel satisfactory to the
Indemnitee. After notice from the Company to the Indemnitee of its election to
assume the defense of a Proceeding, the Company will not be liable to the
Indemnitee for any Expenses subsequently incurred by the Indemnitee in
connection with the defense thereof, other than as provided below. The Company
shall not settle any Proceeding in any manner which would impose any penalty or
limitation on the Indemnitee without the Indemnitee's written consent. The
Indemnitee shall have the right to employee his/her counsel in any Proceeding,
but the fees and expenses of such counsel incurred after notice from the Company
of its assumption of the defense of the Proceeding shall be at the expense of
the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been
authorized by the Company, (ii) the Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and the Indemnitee
in the conduct of the defense of a Proceeding, in each of which cases the fees
and expenses of the Indemnitee's counsel shall be advances by the Company. The
Company shall not be entitled to assume the defense of any Proceeding brought by
or on behalf of the Company or as to which the Indemnitee has concluded that
there may be a conflict of interest between the Company and the Indemnitee.
10. Limitations on Indemnification. No payments pursuant to this Agreement
shall be made by the Company:
(a) To indemnify or advance funds to the Indemnitee expenses with
respect to Proceeding initiated or brought voluntarily by the Indemnitee and not
by way of defense, except with respect to Proceedings brought to establish or
enforce a
6
<PAGE>
right to indemnification under this Agreement or any other statute or law or
otherwise as required under applicable corporate law, but such indemnification
or advancement of expenses may be provided by the Company in specific cases if
the Board of Directors finds it to be appropriate;
(b) To indemnify the Indemnitee for any Expenses, judgment, fines,
penalties or ERISA excise taxes sustained in any Proceeding f or which payment
is actually made to the Indemnitee under a valid and collectible insurance
policy, except in respect of any excess beyond the amount of payment under such
insurance;
(c) To indemnify the Indemnitee for any Expenses, judgment, fines,
and/or penalties sustained in any Proceeding f or an accounting of prof its made
from the purchase or sale by the Indemnitee of securities of the Company
pursuant to the provisions of Section 16 (b) of the Securities Exchange Act of
1934, the rules and regulations promulgated thereunder and amendments thereto or
similar provisions of any federal, state or local statutory law; and
(d) If a court of competent jurisdiction finally determines that any
indemnification hereunder is unlawful.
11. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, as long as the
Indemnitee continues to serve as a director and/or of f icer of the Company and
thereaf ter as long as the Indemnitee may be subject to any possible Proceeding,
the Company, subject to subsection (c), shall promptly obtain and maintain in
full force and effect directors' and officers, liability insurance (D&O
Insurance") in reasonable amounts from established and reputable insurers.
(b) In all D&O insurance policies, the Indemnitee shall be named as an
insured in such a manner as to provide the Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors and/or officers.
(c) Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain D&O Insurance if the
7
<PAGE>
Company determines, in its sole discretion, that such insurance is not
reasonably available, the premium costs for such insurance is so limited by
exclusions that it provides an insufficient benefit, or the Indemnitee is
covered by similar insurance maintained by a subsidiary of the Company.
12. Indemnification Hereunder Not Exclusiyg. The indemnification
provided by this Agreement shall not be deemed exclusive of any other rights to
which the Indemnitee may be entitled under the Articles of Incorporation,
Bylaws, any agreement, vote of shareholders or disinterested directors,
provision of applicable corporate law, or otherwise, both as to action in
his/her official capacity and as to action in another capacity on behalf of the
Company while holding such office
13. Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of the Indemnitee and his/her heirs, executors,
administrators and assigns, whether or not Indemnitee has ceased to be a
director or officer, and the Company and its successors and assigns.
14. Severability. Each and every paragraph, sentence, term and
provision hereof is separate and distinct so that if any paragraph, sentence,
term or provision hereof shall be held to be invalid or unenforceable for any
reason, such invalidity or unenforceability shall not affect the validity or
enforceability of any other paragraph, sentence, term or provision hereof. To
the extent required, any paragraph, sentence, term or provision of this
Agreement shall be modified by a court of competent jurisdiction to preserve its
validity and to provide the Indemnitee with the broadest possible
indemnification permitted under applicable corporate law.
15. savings . If this Agreement or any paragraph, sentence, term or
provision hereof is invalidated on any ground by any court of competent
jurisdiction, the Company shall nevertheless indemnify the Indemnitee as to any
Expenses,
8
<PAGE>
judgments, fines, penalties for ERAS excise taxes incurred with respect to any
Proceeding to the full extent permitted by any applicable paragraph, sentence,
term or provision of this Agreement that has not been invalidated or by any
other applicable provision of applicable corporate law.
16. Interpretation,, Governing Law. This Agreement shall be construed
as a whole and in accordance with its fair meaning. Headings are for convenience
only and shall not be used in construing meaning. This Agreement shall be
governed and interpreted in accordance with the laws of the State of Nevada.
17. Amendments. No amendment, waiver, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed b ,y
the party against whom enforcement is sought. The indemnification rights
afforded to the Indemnitee hereby are contract rights and may not be diminished,
eliminated or otherwise affected by amendments to the Articles of Incorporation,
Bylaws, or by other agreements, including D&O Insurance policies.
18. Counterp@. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other.
19. Notices. Any notice required to be given under this Agreement shall
be directed:
TO: FIDELITY HOLDINGS, INC.
80-02 Kew Gardens Rd.
Kew Gardens, Queens, NY 11413
With a copy to:
Richard C. Fox, Esq.
3401 Lakeview Drive
Delray Beach, Florida 33445
and;
TO: YOSSI KOREN
124 Audley Street
Kew Gardens, New York 11418
9
<PAGE>
or to such other address as either shall designate in writing.
INDEMNITEE:
---------------------------------------
YOSSI KOREN
FIDELITY HOLDINGS, INC.
By:_____________________________________
Doron Cohen
10
<PAGE>
Exhibit 10.14
Reorganization Agreement
with Bruce Bendell and
Harold Bendell for
Acquisition of Major Fleet &
Leasing Corp.
lO.l4
<PAGE>
PLAN AND AGREEMENT OF REORGANIZATION
UNDER I.R.C. 9368(a)(1)(B)
FIDELITY HOLDINGS INC.
AND
THE SHAREHOLDERS OF
MAJOR FLEET & LEASING CORP.
THIS PLAN AND AGREEMENT OF REORGANIZATION, dated this 23rd day of
August, 1996, made by and between:
FIDELITY HOLDINGS, INC., a Nevada business corporation having its
principal business office located at 80-02 Kew Gardens Road, Suite 5000, Kew
Gardens, New York 11415 (hereinafter sometimes referred to as "FIDELITY");
AND
BRUCE BENDELL and HAROLD BENDELL (hereinafter jointly and severally
sometimes referred to as "SHAREHOLDERS"), adult individuals who are all of the
shareholders of MAJOR FLEET & LEASING CORP., a New York business corporation
having its principal business office located at 75 Georgian Court, -Roslyn, New
York (hereinafter sometimes referred to as "MAJOR");
WITNESSETH THAT:
WHEREAS, FIDELITY desires to acquire from SHAREHOLDERS all of the
issued and outstanding capital stock of MAJOR, so as to constitute MAJOR as a
wholly-owned subsidiary of FIDELITY, in exchange for shares of the voting
Preferred Stock of FIDELITY in a transaction qualifying as a tax-free
reorganization;
WHEREAS, FIDELITY, by its Nevada Certificate of Incorporation which was
issued on November 7, 1995 is authorized to issue 2,000,000 shares of
undesignated Preferred Stock having a par value of $.Ol per share, none of which
shares are presently issued and outstanding, and 50,000,000 shares of Common
Stock having a par value of $.Ol per share, of which 5,750,000 shares are issued
and outstanding;
WHEREAS, MAJOR, INC., by its Certificate of Incorporation which was
issued on August 12, 1985 is authorized to issue 200 shares of Common Stock
having no par value, 20 of which shares are
<PAGE>
issued and outstanding;
NOW THEREFORE, the constituent corporations, in consideration of the
mutual covenants, agreements and provisions hereinafter contained do I hereby
prescribe the terms and conditions of their reorganization and the mode of
carrying the same into effect, as follows:
ARTICLE I
THE REORGANIZATION/EXCHANGE
1. PLAN OF REORGANIZATION. SHAREHOLDERS are the owners of all of the
issued and outstanding capital stock of MAJOR, which consists of 20 shares of
Common Stock. It is the intention of the parties that all of such issued and
outstanding Common Stock of MAJOR be acquired by FIDELITY in exchange solely for
its voting stock, as defined in Paragraph 2 following, in a reorganization
qualifying under ss.3 68 (a) (1) (B) of the Internal Revenue Code of 1986, as
amended.
2. CONVERTIBLE PREFERRED STOCK. Prior to the Closing of the exchange of
shares as provided in this Agreement, FIDELITY's Board of Directors shall
designate, and FIDELITY shall file with the office of the Secretary of State of
Nevada a Certificate of Designation, establishing the 1996-MAJOR Series of
Convertible Preferred Stock (1996-MAJOR Series). (A copy of the Certificate of
Designation is attached hereto, marked. as Exhibit A, and made a part hereof by
reference.) Such stock shall be voting, such voting to be together with the
common stock, with each share of the 1996MAJOR Series to have 2 votes,
consistent with the votes which the underlying shares of Common Stock would have
upon conversion of the 1996-MAJOR Series. The 1996-MAJOR Series shall be
convertible into FIDELITY's Common Stock, taking the 1996-MAJOR Series at a
value of $10 per share and valuing the Common,Stock at Five Dollars ($5.00) for
each Common Share. The 1996-MAJOR Series shall receive dividends on a
participating basis with the Common Stock, if earned and if declared by the
Board of Directors of FIDELITY. If the
2
<PAGE>
Board of Directors shall declare a dividend to the holders of the FIDELITY
Common Stock, then the holders of the 1996-MAJOR series shall receive, per
share, twice the same dividend equivalent to the dividend payable with respect
to the underlying Common Stock if the 1996-MAJOR Series were converted to Common
Stock. In the event of liquidation, dissolution or winding-up of FIDELITY,
whether voluntary or involuntary, the holders of the 1996-MAJOR Series shall a
distribution preferential to the Common Stock of $10.00 per share plus declared
but unpaid dividends and, in any event, shall at least receive the Sinking Fund,
as described in Paragraph 7 below., At any time after July 1, 1997, the holders
of the 1996MAJOR Series shall have the right to require that FIDELITY repurchase
the shares, using the Sinking Fund to be established as described in Paragraph 7
below; however, FIDELITY shall not be required to repurchase any shares in
excess of the then available Sinking Fund, although FIDELITY may, in its
discretion, purchase any put shares from general corporate funds. Commencing
January 1, 2002, FIDELITY shall have the option to redeem any shares of the
1996-MAJOR Series then outstanding by payment of $15.87 plus declared but unpaid
dividends to the date of redemption:
(i) in cash; or
(ii) in cash, to the extent of the available Sinking Fund, and the
balance by the issuance of Bonds, described in Paragraph 8 below, collateralized
by, and paid from, a'continuation of the Sinking Fund. In the event of the
occurrence of an "Event of Rescission", the holders of the then issued and
outstanding shares of the 1996-MAJOR Series shall have the right to rescind this
exchange transaction and receive back, in exchange for such shares of the
1996-MAJOR Series, all of the capital stock, of all classes and series, of
MAJOR. The term "Event of Rescission" shall mean:
(i) Any determination by the, Internal Revenue Service that the
stock-for-stock exchange does not qualify as a tax- free reorganization.
(ii) Any breach by the FIDELITY of the Reorganization
3
<PAGE>
Agreement; or
(iii) Any failure by FIDELITY to establish, fully fund, properly
maintain and apply, and/or safeguard the Sinking Fund; or I (iv) Any breach
by FIDELITY of the terms of the 1996- MAJOR Series of Convertible Preferred
Stock; or
(v) Admission by FIDELITY of insolvency, adjudication of FIDELITY as
insolvent, and/or an inability or failure of FIDELITY to pay its debts and
liabilities in the normal course of business; or
(vi) Any proceeding shall be commenced by or against FIDELITY relating
to FIDELITY under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, dissolution, or liquidation law or
statute of any jurisdiction, whether nor or hereafter in effect, and any
such proceeding shall remain undismissed for a period of ninety (90) days
or FIDELITY by any act indicates its consent to, approval of, or
acquiescence in, any such proceeding; or
(vii) A receiver or trustee is appointed for FIDELITY or for all or a
substantial part of the property of FIDELITY and any such receivership or
trusteeship shall remain undischarged for a period of sixty (60) days.
(viii) Any change in any of the top three executives of FIDELITY
(Chairman of the Board, President, CEO), provided that this basis for
rescission must be utilized within ninety (90) days of the change or it
shall be deemed waived.
3. EXCHANGE OF SHARES. (a) FIDELITY and the SHAREHOLDERS agree that at
Closing all 20 shares of MAJOR shall be exchanged with FIDELITY for 250,000
shares of the voting Preferred Stock of FIDELITY to be immediately issued'-. The
following numbers of FIDELITY shares will, at Closing, be delivered to the
individual SHAREHOLDERS in exchange for their MAJOR shares, as follows:
4
<PAGE>
No. of Shares No. of Shares
of MAJOR of FIDELITY
SHAREHOLDERS Exchanged to be Issued
------------ -------------- -------------
Bruce Bendell 10 125,000
Harold Bendell 10 125,000
-- -------
TOTAL 20 250,000
The FIDELITY shares shall be issued in certificates of such denominations,
amounts, and names as may be requested by the respective SHAREHOLDERS. The
SHAREHOLDERS represent and warrant that they are taking, and will hold, such
shares for investment. (b) It is the present intention of FIDELITY to file a
Registration Statement with the Securities and Exchange Commission (Form SB-2) f
or the registration of an issuance of Common Stock. FIDELITY shall, an behalf of
the holders of the 1996-MAJOR Series, include in such Registration Statement, at
FIDELITY's expense, when filed, Five Hundred Thousand (500,000) shares of Common
Stock, so as to permit any conversion of the 1996-MAJOR Series after
effectiveness of such Registration Statement to be for registered
("freetrading") shares. (c) If, between the date hereof and Closing, the gross
assets of MAJOR shall equal or exceed $2,500,000 in value, FIDELITY shall issue,
as an incentive bonus" 100,000 shares of its voting Common Stock. Such Common
Stock shall (i) be restricted as to further transfer as required by applicable
rules and regulations of the Securities and Exchange Commission, (ii) shall not
be entitled to any demand or "piggyback" registration rights, and (iii) shall
not participate in the rights and powers accorded to the 250,000 shares of
voting Preferred Stock being issued for the exchange (including the "put" and
the sinking fund).
4. DELIVERY OF SHARES. At the Closing, the SHAREHOLDERS shall deliver
certificates for all of the issued and outstanding shares of common stock of
MAJOR duly endorsed with signatures Medallion guaranteed so as to make FIDELITY
the sole owner thereof, free and clear of all claims and encumbrances.
Simultaneously at the Closing, FIDELITY shall issue and deliver to the
SHAREHOLDERS
5
<PAGE>
certificates representing all of the FIDELITY ..shares of voting Preferred Stock
to be issued in exchange for the MAJOR shares, in such names, denominations and
amounts as SHAREHOLDERS shall have requested. In the alternative, FIDELITY may
deliver to SHAREHOLDERS duly executed instructions to its Transfer Agent for the
immediate issuance of such shares. Time is of the essence.
5. INVESTMENT REPRESENTATIONS. Each SHAREHOLDER acknowledges, agrees and
represents that:
(a) He has been advised that none of the shares of FIDELITY being acquired
hereunder have been registered under the Securities Act of 1933 (the 111933
Act").
(b) All of the shares of FIDELITY being acquired hereunder are being, and
will be, acquired and held for investment, not for resale or distribution to the
public and not f or the purpose of effecting or causing to be effected a public
offering of such securities and, further, that none of such securities will be
sold, transferred, assigned or disposed of except to, or in trust for the
benefit of, members of a shareholder's immediate family or their personal
representatives, devisees, and legatees, or in accordance with the 1933 Act and
the Rules and Regulations of the Securities and Exchange Commission promulgated
thereunder.
(c) He has been advised and is aware of the fact, that by reason of the
foregoing investment representations and restrictions upon transfer: (i) the
shares of the FIDELITY stock must be held indefinitely unless they are
subsequently registered under the 1933 Act or an exemption from such
registration is available; (ii) if Rule 144 of the Rules and Regulations
promulgated by the SEC is applicable to any future routine sales of any such
securities, such sales can be made only in limited amounts in accordance with
the terms and conditions of that Rule; (iii) in the case of securities to which
that Rule is not applicable, compliance with some applicable disclosure
exemption, if any be available, will be required; (iv) all of the certificates
for the shares of FIDELITY's voting Preferred Stock will bear a legend
restricting transfer
6
<PAGE>
thereof, and, if applicable, the certificates for FIDELITY's Common Stock issued
upon conversion of such Preferred Stock will also bear such legend; and (v) the
Transfer Agent of FIDELITY I s Pref erred Stock will be given "stop-transfer"
instructions so as to prevent any illegal transfer of such shares and similar
instructions will be issued with respect to the Common Stock receivable upon
conversion of such Common Stock.
(d) He has relied only and exclusively upon his own investigation into
FIDELITY and its financial condition for purposes of deciding to enter into and
close this Agreement and to accept shares of FIDELITY in exchange for shares of
MAJOR. He has not relied upon any oral or written representation made by
FIDELITY or any of its officers or directors or representatives of FIDELITY and
that no representation, or statements shall survive the Closing with the sole
exception of the representations and warranties contained in this Agreement.
(e) He has received the audited f inancial statements of FIDELITY for the
year ended December 31, 1995, and the reviewed financial statements for the
period ended March 13, 1996 and has had full opportunity to review and inspect
all books and records of FIDELITY and its subsidiaries.
6. CLOSING.
(a) Closing shall take place at 10:60 a.m. on Wednesday, October 23, 1996
at the offices of FIDELITY, 80-02 Kew Gardens Road, Suite 5000, Kew Gardens, New
York 11415 or such other time and place as the parties may mutually select.
(b) In addition to the share certificates to be delivered to FIDELITY
pursuant to Paragraph 3 above, SHAREHOLDERS shall deliver or cause to be
delivered to FIDELITY the following documents at Closing:
(1) Certified copy of the Minutes of the Meeting of the Board of
Directors of MAJOR ratifying and approving this Agreement and
the Closing thereof, and the conveyance of shares by its
SHAREHOLDERS;
7
<PAGE>
(2) Certificate of good standing reflecting that MAJOR is a
corporation in good standing in the state of its incorporation;
(3) Audited financial statements for MAJOR as of December December
31, 1993, 1994 and 1995, and in-house and/or compiled f inancial
statements as of September 30, 1996 together with a certificate
executed by the President and Secretary of MAJOR certifying that
to the best of their knowledge and belief, the financial
statements are accurate and complete;
(4) A certificate from each of the SHAREHOLDERS updating the
representations and warranties included in this agreement, as if
made on the Closing date; and
(5) Any and all other documents which may be reasonably requested by
FIDELITY to effect and close this transaction.
(c) In addition to the share certificates or Transfer Agent
instructions to be delivered to SHAREHOLDERS pursuant to Paragraph 3 above,
FIDELITY shall deliver to SHAREHOLDERS the following documents at Closing:
(1) Certified resolution of the Board of Directors of FIDELITY
ratifying this Agreement and the Closing thereof and expressly
authorizing the issuance of shares as required by this
Agreement;
(2) A certificate of good standing of FIDELITY reflecting that
FIDELITY is in good standing under the laws of the state of its
incorporation;
(3) Financial statements of FIDELITY, reflecting on an unaudited
basis, its financial condition as of September 30, 1996;
(4) A certificate from the President and Secretary of FIDELITY
confirming the representations and warranties made by FIDELITY
as if made on the Closing date; and
(5) Any and all other documents as may be required by the
SHAREHOLDERS to close this Agreement.
8
<PAGE>
7. SINKING FUND.
Following Closing, FIDELITY shall establish a Sinking Fund for (i) meeting
any demands f or required repurchases of such shares (Puts), (ii) provide funds
for the redemption of such shares, and (iii) provide funds to collateralize and
repay any Bonds which may be issued to redeem shares of the 1996-MAJOR Series.
The Sinking Fund shall be established, funded and utilized as follows:
(a) On the second Thursday of the first month succeeding the first
calendar quarter after the first issuance of any shares of the 1996-MAJOR
series, and continuing on the second Thursday of each month (April, July,
October and January) succeeding each calendar quarter, FIDELITY shall
determine the amount of the Sinking Fund deposit to be made and shall make
such deposit, in the name of MAJOR. The Sinking Fund shall only be
retained as cash or invested in short-term government bills and notes, in
interest-bearing savings accounts, or other highly liquid and secure
investments.
(b) The amount of the deposit required shall be equal to the net income
determined on a cash basis, after calculating federal, state and local tax
liabilities, of MAJOR derived from revenues from the motor vehicle
operations, including transactions with, or through, Major Automotive
Group, including but not limited to Major Chevrolet, Geo, Dodge,
Chrysler-Plymouth, JeepEagle, and Subaru.
(c) In calculating the net income from motor vehicle operations, the
management fee paid under the Management Agreement for such operations
shall be deducted but none of the costs, expenses or liabilities incurred
by or arising, directly or indirectly, from the other business operations
of MAJOR shall be deducted, it being the intent to utilize the net income
equivalent to
9
<PAGE>
continuing historical operations of MAJOR ' determined on a cash basis, as
a Sinking Fund. However, a charge of fifteen percent (15%) of the net
income,, prior to deduction of the management fee, shall be deducted to
compensate for overall corporate expenses not specifically charged to such
operations (e.g., accounting and auditing costs, legal/SEC fees and costs,
etc.).
(d) Such Sinking Fund shall be established and funded without reference to
the book or taxable income or loss of MAJOR, but solely as provided above.
(e) No funds deposited, or required to be deposited, in the Sinking Fund
shall be expended or transferred from the segregated account in the name
of MAJOR except by transfer to FIDELITY as specifically required to meet
any required repurchases (Puts), redemptions, or Bond repayments.
(f) Shares of the 1996-MAJOR Series redeemed from general corporate funds
of FIDELITY, i.e., out of funds other than the Sinking Fund, may be
credited, at the option of FIDELITY, in its sole discretion, against the
sinking fund requirements, such credit to be equal to the general
corporate funds expended.
(g) The Sinking Fund requirements shall continue so long as (i) any shares
of the 1996-MAJOR Series and/or (ii) and Bonds issued in redemption of
shares of the 1996-MAJOR Series, shall be outstanding. When all shares of
the 1996-MAJOR Series-have been repurchased, converted, or redeemed, and
when all principal and interest of Bonds issued in redemption of the
1996-MAJOR Series have been repaid in full, the Sinking Fund
10
<PAGE>
requirements shall cease and any balance therein not set aside for
redemptions and/or Bond repayments shall revert to the general funds of
MAJOR.
B. BONDS.
If after January 1, 2002 FIDELITY elects to redeem the then outstanding
shares of the 1996-MAJOR Series as provided in Paragraph 2 above, and FIDELITY
does not pay the entire redemption price in cash, but elects to pay out the then
available Sinking Fund and pay the balance with Bonds, FIDELITY shall authorize
and issue Bonds, in a transaction structured to the greatest extent possible to
meet the requirements of Section 368 (a) (1) (E) of the Internal Revenue Code,
as follows:
(a) The Bonds shall be designated as the Redemption Bonds and shall be
issued as a single series, all such Bonds ranking equally, in registered form.
(b) The Redemption Bonds shall bear interest at the then current prime
rate as established by CitiBank, with such interest being paid quarterly in
arrears on the second Thursday of April, July, October and January for the
immediately prior calendar quarter.
(c) The Redemption Bonds shall be restricted as to further transfer; i.e.,
not registered under the Securities Act of 1933, and shall not be issued under a
Trust Indenture.
(d) The Redemption Bonds shall be general obligations of FIDELITY,
collateralized with a first lien on the Sinking Fund provided in Paragraph 7
above, which shall be continued so long as any Redemption Bonds remain
outstanding. Upon determination of the Sinking Fund deposit each quarter,
FIDELITY shall first use such funds to pay the interest on such Redemption Bonds
and shall use any remaining balance for the redemption of outstanding Redemption
Bonds, selected by lot. Any payment of principal or interest not made when
scheduled shall be delinquent; any delinquency not cured within ten (10)
business days shall be a default. In the event of default, a majority of the
bondholders, in dollar amount then
11
<PAGE>
outstanding, may, by written notice, declare the balance of the Redemption Bonds
then outstanding and the interest accrued thereon immediately due and payable
and, thereupon, such principal and interest shall be immediately due and
payable.
(e) The Redemption Bonds shall be redeemable by FIDELITY at any time and
from time to time, without prepayment penalty, from general corporate funds. If
less than all of the then outstanding Redemption Bonds are redeemed at any time,
the Redemption Bonds to be redeemed shall be selected by lot.
(f) Notwithstanding the Sinking Fund payment and redemption provisions,
the Redemption Bonds shall immediately mature: (i) upon acceleration by the
holders in the event of default; (ii) if FIDELITY makes an assignment for the
benefit of creditors, voluntary or involuntary bankruptcy or reorganization
proceedings are commenced with respect to FIDELITY and not dismissed within
ninety (90) days, or a receiver is appointed for a substantial part of the
FIDELITY assets; (iii) if liquidation or dissolution proceedings are commenced
for FIDELITY; and/or (iv) sixty (60) months after issuance.
(g) If Redemption Bonds are issued at separate dates, all of such
Redemption Bonds outstanding at any time shall rank equally and shall share with
respect to collateral and payment priority.
(h) The Redemption Bonds shall not be'convertible into, or exchangeable
for, any other securities of FIDELITY and no holder of the Redemption Bonds
shall have any preemptive right to purchase any other security of FIDELITY.
(i) The holders of the Redemption Bonds shall not have voting rights, nor
any other rights as shareholders of FIDELITY.
(j) The holders of the Redemption Bonds shall not have recourse for
payment of the principal or interest against any shareholder, officer, director,
employee or agent of FIDELITY, whether past, present, or future, such being
waived.
ARTICLE II
12
<PAGE>
MUTUAL ACCESS TO PREMISES, BOOKS AND RECORDS
1. Between the date hereof and the Closing FIDELITY and its
representatives shall have such reasonable access during normal business hours
to the properties, offices, records and books of account of MAJOR, as will not
unreasonably interfere with the business and operations of MAJOR, for the
purposes of investigating the financial position, assets, liabilities and all
other matters relating to the business of MAJOR and the correctness of Major's
representations and warranties and the fulfillment of the covenants and
conditions of SHAREHOLDERS as required in this Agreement.
2. Between the date hereof and the Closing SHAREHOLDERS and their
representatives shall have such reasonable access during normal business hours
to the properties, offices, records and books of account of FIDELITY, as will
not unreasonably interfere with the business and operations of FIDELITY, for the
purposes of investigating the financial position, assets, liabilities and all
other matters relating to the business of MAJOR and the correctness of
Fidelity's representations and warranties and the fulfillment of the covenants
and conditions of FIDELITY as required in this Agreement.
ARTICLE III
INTERIM OPERATIONS OF MAJOR FLEET & LEASING CORP.
(a) From the execution of this Agreement to Closing, MAJOR shall not take
any action, or enter into any agreement, that would constitute or cause any
inducement, representation or warranty of SHAREHOLDERS contained in this
Agreement to become untrue, nor to take any action or enter into any agreement,
that would constitute, or cause, a breach of this Agreement. Between the date of
this Agreement and Closing, the affairs and business of MAJOR shall be conducted
in the ordinary course of business. The SHAREHOLDERS represent and warrant that
they will take such action, and will cause MAJOR to take such action, or refrain
from such action, as is necessary to insure that prior to Closing, without the
prior written consent of FIDELITY, MAJOR shall not:
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<PAGE>
(i) except as provided in (b) below, enter into any employment/consulting
or consulting agreement or otherwise
salary/wage/compensation/remuneration/ pension/profit sharing liability;
(ii) amend its Articles of Incorporation and/or by-laws;
(iii) issue or agree to issue any stock or other securities, including any
right, warrant or option to purchase or otherwise acquire any of its stock
or securities convertible thereunto;
(iv) except as provided in (b) below, issue any bonds, debentures, notes
or other evidences of indebtedness, or create or incur any new
indebtedness, mortgage, security interest, lien, charge or encumbrance;
(v) except as provided in (c) below, declare or pay any dividend (whether
in cash, property, or securities);
(vi) purchase or redeem any of its stock; except as provided in (b) below,
enter into any contract or agreement, whether written or oral, which shall
survive the Closing except agreements which are executed in the ordinary
course of business; or
(viii) sale, lease, or encumber, or enter into any agreement to do any of
the foregoing, any real or personal property owned by it except in the
ordinary course of business.
(b) It is the specific intent of FIDELITY in acquiring ownership of MAJOR
that its current business operations shall continue and shall be expanded.
Because the source of funding for the Sinking Fund is the net income from the
continuation of such operations, it is the intent of SHAREHOLDERS that such
operations continue and be expanded. Pending Closing, SHAREHOLDERS shall cause
MAJOR to carry on its business in substantially the same manner as heretofore,
maintaining the goodwill of customers and financing institutions and maintaining
the morale of employees and agents. To secure for MAJOR the continuing
relationships now,in effect, MAJOR may, with the consultation of FIDELITY,
formalize
14
<PAGE>
create any employment relationship or existing oral contracts, understandings
and arrangements and enter into such employment, retainer, and management
contracts as shall effectuate such mutual intent.
(c) FIDELITY acknowledges that (i) MAJOR has been a Subchapter S
corporation and (ii) substantial income, previously taxed to SHAREHOLDERS,
remains undistributed. SHAREHOLDERS are authorized to distribute such amounts of
such undistributed, previously taxed income as they elect. Any amount not
distributed shall be added to the initial Sinking Fund.
(d) The representations and warranties of SHAREHOLDERS contained in
subparagraph (a) above shall not survive closing.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
or
FIDELITY
FIDELITY, intending SHAREHOLDERS to rely thereon, represents, warrants and
agrees as follows:
1. FIDELITY is, as of the date of this Agreement, a validly existing
corporation in good standing, duly organized pursuant to the laws of the State
of Nevada, with all legal and corporate authority and power to conduct its
business as now being conducted and to own its properties and to the best of its
knowledge it possesses all necessary permits and licenses required in connection
with the conduct of its business.
2. The conduct of FIDELITY'S present business is to the best of its
knowledge in full compliance with all applicable, federal, state and local
governmental statutes, rules, regulations, ordinances and decrees.
3. Pursuant to its Articles of Incorporation as amended FIDELITY is
authorized to issue 2,000,000 shares of undesignated Preferred Stock having a
par value of $.01 per share, none of which shares are presently issued and
outstanding, and 50,000,000 shares of Common Stock having a par value of $. 01
per share, of which 5,750,000 shares are presently issued and outstanding. There
are
15
<PAGE>
adequately reserved for; to the extent that tax liabilities have accrued, but
have not become payable, they are adequately reflected as liabilities on the
books of the company; and FIDELITY is not a party to any t action or proceeding
by any governmental authority for assessment or collection of taxes,' nor has
any claim for assessments been asserted against FIDELITY.
8. There are presently no contingent liabilities, factual circumstances,
threatened or pending litigation, contractually assumed obligations or
unasserted possible claims which are known to FIDELITY, which might result in a
material adverse change in the future financial condition or operations of
FIDELITY other than as previously disclosed to MAJOR or reflected in FIDELITY'S
financial statements provided to MAJOR.
9. The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not require the consent, authority or
approval of any other person or entity except such as have been obtained.
10. No transactions have been entered into either by or on behalf of
FIDELITY, other than in the ordinary course of business nor have any acts been
performed (including within the definition of the term "performed" the failure
to perform any required acts) which would adversely affect the goodwill of
FIDELITY.
11. The entering into of this Agreement and the performance thereof
has been duly and validly authorized by all required corporate action and does
not require any consents other than such as have been unconditionally
obtained.
12. The audited financial statements for FIDELITY as of December 31,
1995 furnished to SHAREHOLDERS (attached hereto as Exhibit B) are true and
complete, prepared in conformity with generally accepted accounting principles
consistently applied during the periods, and present fairly the financial
positions, results of operations, and change in financial positions, of
FIDELITY. FIDELITY represents that:
(a) Except as set forth in the audited financial statements of FIDELITY,
dated December 31, 1995, FIDELITY is the owner, free
17
<PAGE>
and clear of any liens, pledges, or encumbrances, of all of the property and
assets set forth in the Balance Sheet;
(b) FIDELITY has no liabilities or obligations except those disclosed in
the financial statements at December 31, 1995, except those set forth on other
Exhibits to this Agreement and FIDELITY does not have any knowledge of facts
which would require the setting up of additional reserves with respect thereto;
(c) FIDELITY is not in def ault under or in breach of the provisions of
any credit facility, loan, debt, security, mortgage, indebtedness, material
contract, or agreement to which it is a party or by which it is bound, which
default or breach would materially adversely effect its business or properties
or condition, financial or otherwise, or would result in the creation of a lien
or charge upon any of the properties or assets of MAJOR;
(d) No waiver, indulgence or postponement of any of the obligations of
MAJOR have been granted by any Obligee;
(e) There exists no event, current condition, or act which with the giving
of notice of the lapse of time or the happening of any other event or condition
would become a default under or breach of any such credit facility, loan, debt,
security, mortgage, indebtedness, or material contract, or would result in the
creation of a lien or charge upon the properties or assets of FIDELITY as
reflected in the Balance Sheet dated December 31, 1995. None of the terms of any
credit facility, loan., debt, security, mortgage indebtedness or other material
contract or any other contract or agreement would prevent the consummation of
the Closing of this Agreement.
13. At Closing, FIDELITY shall not have any debt or liability nor any
contract or commitment which will require the payment of any sum which will
survive closing.
The foregoing representations, warranties and agreements shall be true
and correct as of the effective date of the reorganization. Such
representations, warranties and agreements shall survive the reorganization
until March 31, 1997. None of such representations, warranties and agreements
contain, or shall contain as of the
18
<PAGE>
effective date of the reorganization, any false or misleading statement of a
material fact or omit, as of the effective date of the reorganization, to state
any material fact necessary In order to make the representations, warranties and
agreements not misleading.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
or
SHAREHOLDERS
SHAREHOLDERS, intending FIDELITY to rely thereon, jointly and severally
represent, warrant and agree as follows:
1. MAJOR is, as of the date of this Agreement, a validly existing
corporation in good standing,duly organized pursuant to the laws of the State of
New York with all legal and corporate authority and power to conduct its
business as now being conducted and to own its properties, and it possesses all
necessary permits and licenses required in connection with the conduct of its
business.
2. The conduct of MAJOR's business is to the best of SHAREHOLDERS'
knowledge in full compliance with all applicable, federal, state and local
governmental statutes, rules, regulations, ordinances and decrees.
3. Pursuant to its Articles of Incorporation MAJOR is authorized to issue
200 shares of Common Stock having no par value, of which 20 shares issued and
outstanding. There are no other authorized or outstanding securities of any
class or of any kind or character of the corporation and there are no
outstanding subscriptions, options, warrants or other agreements or commitments
obligating the corporation to issue or to sell any additional shares of MAJOR's
stock or any options or rights with respect thereto, or any securities
convertible into any shares of stock of any class.
4. The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance
19
<PAGE>
with the terms of this Agreement will not result in a breach of any of the terms
or provisions of, or constitute a default under, the Articles of Incorporation
or By-Laws of MAJOR; any indenture, credit facility, loan agreement, lease, or
other agreement or instrument to which the corporation is a party or by which it
or its assets are bound; or any applicable regulation, judgment, order or decree
of any governmental instrumentality or court, domestic or foreign, having
jurisdiction over the corporation, its securities or its properties.
5. MAJOR is not a party to any written or oral agreement which grants an
option or right of first refusal or other arrangement to acquire any of the
stock or to any agreement that affects the voting rights of any of the stock,
nor has the corporation made any commitment of any kind relating to the issuance
of shares of any of its stock, whether by subscription, right of conversion,
option or otherwise.
6. MAJOR is not a party to any agreement or understanding for the sale or
exchange of inventory or services for consideration other than cash or at a
discount in excess of normal discount for quantity or cash payment.
7. MAJOR has filed with the appropriate governmental agencies, in correct
form, all tax returns and tax reports required to be filed; all federal, state
and local income, capital stock, franchise, sales, use, occupation, FICA,
unemployment (FICA and state) or other taxes due have been fully paid or
adequately reserved for; to the extent that tax liabilities have accrued, but
have not become payable, they are adequately reflected as liabilities on the
books of the company; and MAJOR is not a party to any action or proceeding by
any governmental authority for assessment or collection of taxes, nor has any
claim for assessments been asserted against MAJOR.
8. There are presently no contingent liabilities, factual circumstances,
threatened or pending litigation, contractually assumed obligations or
unasserted possible claims which are known to MAJOR, which might result in a
material adverse change in the
20
<PAGE>
future financial condition or operations of MAJOR other than as previously
disclosed to FIDELITY in writing or reflected in MAJOR's financial statements
provided to FIDELITY.
9. The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not require the consent, authority or
approval of any other person or entity except such as have been obtained.
10. No transactions have been entered into either by or on behalf of
MAJOR, other than in the ordinary course of business nor have any acts been
performed (including within the definition of the term "performed" the failure
to perform any required acts) which would adversely affect the goodwill of
MAJOR.
11. The entering into of this Agreement and the performance thereof has
been duly and validly authorized by all required corporate action and does not
require any consents other than such as have been unconditionally obtained.
12. The audited financial statements for MAJOR as of December 31, 1993,
December 31, 1994, and December 31, 1995, furnished to FIDELITY (attached hereto
as Exhibit A) are true and complete, prepared in conformity with generally
accepted accounting principles consistently applied during the periods, and
present fairly the financial positions, results of operations, and changes in
financial positions, of MAJOR. The SHAREHOLDERS represent that:
(a) Except as set forth in the audited financial statements of MAJOR,
dated December 31, 1995, MAJOR is the owner, free and clear of any liens,
pledges, or encumbrances, of all of the property and assets set forth in the
Balance Sheet;
(b) MAJOR has no liabilities or obligations except those disclosed in the
financial statements at December 31, 1995, except those set forth on other
Exhibits to this Agreement and SHAREHOLDERS do not have any knowledge of facts
which would require the setting up of additional reserves with respect thereto;
(c) MAJOR is not in def ault under or in breach of the provisions of any
credit facility, loan, debt, security, mortgage, indebtedness, material
contract, or agreement to which it is a
21
<PAGE>
party or by which it is bound, which def ault or breach would materially
adversely effect its business or properties or condition, financial or
otherwise, or would result in the creation of a lien or charge upon any of the
properties or assets of MAJOR;
(d) No waiver, indulgence or postponement of any of the obligations of
MAJOR have been granted by any obligee;
(e) There exists no event, current condition, or act which with the giving
of notice of the lapse of time or the happening of any other event or condition
would become a default under or breach of any such credit facility, loan, debt,
security, mortgage, indebtedness, or material contract, or would result in the
creation of a lien or charge upon the properties or assets of MAJOR as reflected
in the Balance Sheet dated December 31, 1995. None of the terms of any credit
facility, loan, debt, security, mortgage indebtedness or other material contract
or any other contract or agreement would prevent the consummation of the Closing
of this Agreement.
13. No adverse material change in the business or financial position since
December 31, 1995 has occurred and no event, condition or state of facts which
materially and/or adversely affects, or threatens to materially and/or adversely
affect, the business or results of operations or financial condition of MAJOR
and its subsidiaries.
14. There are no loans, accrued obligations, liabilities, claims, or
contractual obligations owed by MAJOR to any of its Officers, Directors, or
Stockholders except those set forth on Exhibit B hereto.
15. There is no suit, action, or legal, administrative, arbitration or
other proceeding or governmental investigation, or any change in the zoning,
building, or licensing ordinances affecting the real property or any significant
leasehold interests of MAJOR, pending or threatened, which might affect the
business, financial condition, or earnings of MAJOR
16. Except as set forth on Exhibit C, attached hereto, MAJOR does not have
any debts and liabilities over $5,000 nor any
22
<PAGE>
contracts or commitments which will require the payment of over $5,000 which
will survive the reorganization.
17. The shares of MAJOR being acquired by FIDELITY from SHAREHOLDERS I
hereby are duly and validly authorized, issued and outstanding and are fully
paid and nonassessable. SHAREHOLDERS are the legal and beneficial owners of such
shares and there are no adverse claims against such shares or liens and
encumbrances thereon. There are no agreements between any of the SHAREHOLDERS
and any other individual or entity which would prevent or affect the
consummation of the transaction provided for in this Agreement.
18. The corporate record book of MAJOR is complete and contains all
amendments to the Articles, Bylaws, and all Minutes of meetings of Directors and
Shareholders.
19. This Agreement and all Exhibits to this Agreement and all documents
delivered to FIDELITY by the SHAREHOLDERS at the Closing in connection with this
transaction are true and correct. The representations and warranties made by
SHAREHOLDERS in this Agreement contain no untrue statements of material facts
and do not omit to state a material fact necessary to make the statements
contained herein not misleading. Notwithstanding any investigation that may be
made by FIDELITY, all representations and warranties of the SHAREHOLDERS made in
this Agreement shall be deemed to have been made both at the time of the
execution of.this Agreement and at the Closing and shall survive the Closing of
this Agreement.
The foregoing representations, warranties and agreements and those
contained in Article I, Paragraph 4 above shall be true and correct as of the
effective date of the reorganization. Such representations, warranties and
agreements shall survive the reorganization until March 31, 1997. None of such
representations, warranties and agreements contain, or shall contain as of the
effective date of the reorganization, any false or misleading statement of a
material fact or omit, as of the effective date of the reorganization, to state
any material fact necessary in order to make the representations,, warranties
and agreements not misleading.
23
<PAGE>
ARTICLE VI
CONDUCT OF MAJOR BEFORE CLOSING
From the execution of this Agreement to Closing, SHAREHOLDERS shall
not permit MAJOR to take any action, or enter into any agreement, that would
constitute or cause any inducement, representation or warranty of
SHAREHOLDERS (as to MAJOR) contained in this Agreement to become untrue, nor
to take any action or enter into any agreement, that would constitute, or
cause, a breach of this Agreement. Specifically, but not in limitation of
the foregoing, MAJOR shall not:
(a) enter into any employment/consulting or consulting agreement or
otherwise create any employment relationship or salary/wage/
compensation/remuneration liability;
(b) amend its Articles of Incorporation and/or By-Laws;
(c) issue or agree to issue any stock or other securities, including any
right, warrant or option to purchase or otherwise acquire any of its
stock or securities convertible thereinto;
(d) issue any bonds, debentures, notes or other evidences of
indebtedness;
(e) declare or pay any dividend (whether in cash, property, or
securities);
(f) purchase or redeem any of its stock;
(g) enter into any Agreement, whether written or oral, which shall
survive the Closing except agreements which are executed in the
ordinary course of business; or
(h) sale, lease, or encumber, or enter into any agreement to do any of
the foregoing, any real or personal property owned by it except in
the ordinary course of business.
MAJOR will use its best efforts to- preserve intact the business organization of
MAJOR, to keep available to it the services of its present officers and
employees, to preserve its present relationships with persons having significant
business relations
24
<PAGE>
with it, to maintain all of its properties in customary repair and condition and
to maintain insurance policies in respect of its business and properties
consistent with current practice.
ARTICLE VII
CONDUCT OF PARTIES PENDING CLOSING
1. FIDELITY and MAJOR (through SHAREHOLDERS) each agree to give to the
other and the authorized representatives of the other full access to all the
premises and books and records of it and to furnish the other with such
financial and operating data and other information with respect to the business
and properties of it as the other shall from time to time request; provided,
however, that any such investigation shall not affect any of the representations
and warranties hereunder; and provided further, that any such investigation
shall be conducted in such manner as not to interfere unreasonably with the
operation of the business of the other. In the event of termination of this
agreement, MAJOR and FIDELITY will each return to the other all documents, work
papers and other material obtained from the other in connection with the
transactions contemplated hereby and will use all reasonable efforts to keep
confidential any information obtained pursuant to this agreement unless such
information is readily ascertainable from public or published information or
trade sources.
2. Each of MAJOR and FIDELITY shall use its best efforts to obtain the
consent or approval of each person whose consent or approval shall be required
in order to permit MAJOR or FIDELITY, as the case may be, to consummate the
reorganization.
ARTICLE IX
MISCELLANEOUS
1. NOTICES. All notices to a party shall be deemed given when mailed by
registered or certified mail to the address set forth below or such other
address as may be substituted therefor by notice:
TO SHAREHOLDERS:
25
<PAGE>
(only to:) Bruce Bendell
75 Georgian Court
Roslyn, New York 11576
With a copy to: Robert E. Salad, Esq.
Cooper, Perskie, April, Niedelman,
Wagenheim, & Levenson
1125 Atlantic Avenue
Atlantic City, New Jersey 08401
TO FIDELITY: Doron Cohen, President/CEO
Fidelity Holdings, Inc.
80-02 Kew Gardens Road, Suite 5000
Kew Gardens, New York 11415
With a copy to: Richard C. Fox, Esq.
3401 Lakeview Drive
Delray Beach, Florida 33445
2. INTEGRATION. This Agreement is the entire Agreement among the parties
and supersedes the prior discussions, negotiations and agreements) among the
parties with respect thereto. There are no representations, warranties or other
assurances except as expressed in this Agreement. No alteration, modification,
or waiver of term or condition hereof shall be binding unless in writing and
signed by all parties.
3. AMENDMENTS. This Agreement may be amended only with the written
approval of the party to be charged therewith; provided, however, that no such
amendment may be made that would cause a breach of any warranty or
representation herein.
4. NO ASSIGNMENT. This agreement may not be assigned by any party or by
operation of law or otherwise.
5. CONSTRUCTION. Whenever required by the context hereof: the masculine
gender shall be deemed to include the feminine and neuter; and the singular
member shall be deemed to include the plural. Time is expressly declared to be
of the essence of this Agreement. This Agreement shall be deemed to have been
mutually prepared by all parties and shall not 'be construed against any
particular party as the draftsman.
6. INTERPRETATION. It is the intent of the parties that this
26
<PAGE>
Agreement shall be construed and interpreted, and that all questions arising
hereunder shall be determined in accordance with the provisions of the laws of
the State of New York.
7. BINDING EFFECT. This Agreement shall be binding upon and shall inure to
the benefit of the parties and their successors and assigns.
8. ARBITRATION. Any controversy, claim or dispute arising out of or
resulting f rom this Agreement, or the breach thereof, that cannot be resolved
by negotiation, shall be resolved by arbitration, to be held in Long Island
City, New York, in accordance with the commercial rules and regulations of the
American Arbitration Association. Failure of a party to participate or cooperate
shall constitute grounds for default judgment. The arbitrator shall award legal
fees and costs to the prevailing party. The decision of the arbitrator shall in
each case, including awards and the allocation of costs, be final and binding
upon the parties. Judgment upon the award rendered by the arbitrator may be
entered in any Court having jurisdiction thereof.
9. FURTHER DOCUMENTS AND ACTIONS. Each party shall deliver such further
documents and take such further action as may be reasonably requested by another
party in order to carry out the provisions and purposes of this Agreement.
10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, including facsimile counterparts, any one of which shall be deemed
to be an original.
11. BROKERS' OR FINDERS' FEES. No agent, broker, person, or firm acting on
behalf of either party or any of their subsidiaries or under the authority of
any of them is or will be entitled to any commission or broker's or finder's fee
or financial advisory fee in connection with any of the transactions
contemplated herein.
12. EXHIBITS. All Exhibits described herein which are not attached to the
Agreement at execution shall be attached within three calendar days thereafter.
Each exhibit shall be mutually agreed to by all parties and shall bear the
signature of the party submitting same.
27
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound, the parties have
hereunto set their hands and seals the day and year first above written.
FIDELITY HOLDINGS, INC.
ATTEST:
By: /s/ Doron Cohen
-------------------------------------
Doron Cohen, President/CEO
- ------------------------------------
Secretary
WITNESS: SHAREHOLDER:
/s/ Bruce Bendell
- ------------------------------------ ----------------------------------------
BRUCE BENDELL
/s/ Harold Bendell
- ------------------------------------ ----------------------------------------
HAROLD BENDELL
28
<PAGE>
CLOSING ADDENDUM
TO
REORGANIZATION AGREEMENT
This Closing Addendum is executed at Closing of the "B" Reorganization
Agreement between Fidelity Holdings, Inc. and Bruce Bendell and Harold Bendell,
the Shareholders of Major Fleet & Leasing Corp.
The parties have mutually elected to close this 2nd day of October, 1996
in lieu of the scheduled closing date of October 23, 1996 and in order to permit
such expedited closing the parties have waived the requirements for the delivery
at Closing of the financial statements as of September 30, 1996. The parties
have agreed that such financial statements shall be delivered on or before
November 15, 1996.
Since the expedited Closing precludes the concurrent delivery of the
financial statements, it is also agreed that the 1000,000 Shares of Common Stock
deliverable under the Reorganization Agreement shall not be issued pending
determination of whether the issuance conditions have been met. Within three (3)
business days after delivery to Fidelity Holdings, Inc. of the September 30,
1996 financial statements of Major Fleet & Leasing Corp., if the issuance
condition has been met, Fidelity Holdings shall immediately advise its Transfer
Agent, Olde Monmouth Stock Transfer Co. to issue the shares as provided in the
Reorganization Agreement.
IN WITNESS WHEREOF, the parties have executed this Closing Addendum this
2nd day of October, 1996:
FIDELITY HOLDINGS, INC.
By:
-------------------------------------
WITNESS:
/s/ Bruce Bendell
- ------------------------------------ ----------------------------------------
Bruce Bendell
/s/ Harold Bendell
- ------------------------------------ ----------------------------------------
Harold Bendell
<PAGE>
Sample of Master Agent
Agreement
lO.l5
<PAGE>
Computer Business Sciences, Inc.
Dealer Master Agent Agreement and License
ARTICLE 1 - PARTIES
This Agreement is made by and between Computer Business Sciences, Inc. , a New
York corporation, having its principal office and place of business at
RECITALS
IT IS MUTUALLY CONTEMPLATED AND AGREED AS FOLLOWS:
WHEREAS, Master Agent desires to purchase and resell software, hardware,
products and services of CBS. To operate as a distributor/agent representing the
business of CBS, and using its MARKS and good will; and
WHEREAS, CBS is further desirous of distributing its products and services and
aiding the Master Agent on a non exclusive basis with the use of CBS names, and
trademarks: 'Talkie, Talkie-Software', 'Pay-As-You Use'. "Call-Back USA",
"Talkie-Globe", 'Talkie-Fax", 'Talkie-Dial", 'Talkie-Query', 'Talkie-Trans',
'Talkie-Ad', "Talkie-Form*, "Talkie-Mail", *Talkie-Audio", "Talkie-Gen". *BCS",
and Info-Systems"; and WHEREAS, CBS and Master Agent are agreeable thereto upon
the terms and conditions more particularly herein set forth; and
WHEREAS, Master Agent acknowledges that CBS owns certain software and hardware
systems for the operation of Long distant RESELLER under the name "TalkieGlobe".
CBS uses and owns the service mark 'Talkie' and related logos, and possesses all
rights under various registered copyrights, trademarks, service marks, trade
names, and other marks which CBS developed or own, and may develop or own in the
future ; and styles including distinctive logos and also certain copyrighted
material embodying the use of such marks including but not limited to enumerate
<PAGE>
marks and has promoted the use of and acceptance of such Marks through its own
operations and operations of licensees, and is developing an international
marketing and sales system identified with its Marks which has public acceptance
and good will and identifying to the public the existence of CBS company
products, services and additionally newly developed marks and registered -are
reserved for CBS (all hereinafter generally referred to as "Marks"); and
WHEREAS, CBS possesses rights under various registered copyrights, trademarks,
service marks, trade names and styles including distinctive logos and also
certain copyrighted material embodying the use of such marks including but not
limited to enumerate marks and (all hereinafter generally referred to and to be
included as "Marks') CBS has promoted the use of and acceptance of such Marks
through its own operations and the operations of licensees and is developing an
international sales system identified with its Marks which has public acceptance
and good will and identifying to the public the existence of Talkie's voice
processing software modules and programs, CBS service bureau, and BCS software
accounting system; and
WHEREAS, CBS expressly disclaims the making of, and Master Agent acknowledges
that it has not received or relied upon, any warranty or guaranty, express or
implied, as to the revenues, profits or success of the this dealership venture
contemplated by this Agreement. Master Agent acknowledges that it has read this
Agreement and conducted its own independent research, agrees that this is not a
"franchised offering', and that it has no knowledge of any representations by
CBS, or its officers, shareholders, employees or agents that are contrary to the
statements made in this Agreement or the terms herein; and
WEARIES, Licenser has developed and perfected a plan and/or system utilizing CBS
software and hardware ("System") for providing licensed FCC telephone companies
, and resellers of long distance services, certain facilities, hardware and
software, and related services; other products and services of distinctive
nature, and of other distinguishing characteristics, placed in operation by CBS
provided under the name "CBS", "Computer Business Sciences, 'Info Systems",
"talkie", 'taw Globe". The distinguishing characteristics of said System, and of
the Business services provided pursuant thereto, include the following:
(1) The words "Talkie","Talkie-Software', "Pay-As-You Use", "Call-Back USA",
"Talkie-Globe", "Talkie-Fax", "Talkie-Dial", 'Talkie-Query", "Talkie-Trans",
"Talkie-Ad", "Talkie Form", 'Talkie-Mail', "Talkie-Audio", "Talkie-Gen", 'BCS",
Info-Systems" or other combinations of words, either alone, or in combination or
association with any color scheme or pattern, office design, insignia, slogans,
signs, emblems trade names, trade marks, service marks, or with the CBS service,
now or hereafter provided or used by CBS as part of the said sales system, or in
2
<PAGE>
association with the idea of an Long Distance Reseller of telephone service, and
cellular service of software, hardware, all, providing standardized, high
quality, and distinctive service;
(2) A distinctive and readily recognizable design and service;
(3) The color scheme, pattern and design, and the color combinations of the
exteriors and interiors of said products and marketing tools;
(4) Appearance of certain of said marketing tools, structures, and the
distinctive trademarks, service marks, design, slogans, name and matter now or
hereafter displayed thereon, or used as part thereof;
(5) The trade marks, trade names, service marks, insignia, emblems, software
documentation, software, hardware, signs, designs, color or patterns, and other
distinctive features, as now or hereafter in use as part of the sales System,
both as identifying the System of CBS, and as identifying the type, character,
and standard of quality of service which the public may expect to receive from
businesses and services of Master Agent.
NOW, THEREFORE, in consideration of the foregoing, CBS and Master Agent, hereby
mutually agree as follows:
ARTICLE 2 - GRANT OF CBS AND RELATED LICENSES
A. Names and Marks to be Licensed
Subject to the provisions of this agreement, CBS hereby grants to Master Agent a
Dealership ( "Dealership") , without any territory or exclusivity, to operate a
Dealership business ("Business') offering CBS software, hardware, products, and
services utilizing at Master Agent's option CBS formats, methods, standards,
operating procedures and the MARKS (identified in Section of Exhibit which
is annexed hereto and made a PART hereof by this reference) for a term of three
(3) years commencing on the date of execution hereof. Termination or expiration
of this Agreement constitutes termination or expiration of the Dealership.
B. Territorial, Location and Customer Restrictions on License.
Master Agent hereby agrees that no territorial exclusivity has been implied or
offered by Licenser to Master Agent. That, CBS reserves the right to approve
locations, and sites to be served.
3
<PAGE>
C. Restrictions on the Goods and Services Sold Under the Marks.
(i) Master Agent agrees to use the MARKS in connection with, and
exclusively for, the promotion and conduct of CBS business, as provided
hereunder;
(ii) Master Agent agrees that for the purpose of protecting and
enhancing the value and good will of the Marks and of insuring that the public
may rely upon said Marks as identifying quality, 4W and standard of business,
that the license granted by this agreement is subject to the continued faithful
adherence by Master Agent to the standards, terms and conditions set forth in,
or established in accordance with this Agreement. D. Master Agent's obligation
to Protect and Defend the Licensed Marks.
(i) Master Agent recognizes and acknowledges that CBS is the sole and
exclusive owner of the Marks and hereby agrees not to register or attempt to
register such Marks, in CBS's name or that of any other firm, persons,
corporation or any entity and that it will not use the Marks or any part thereof
as any part of any corporate name and does promise not to do anything to
derogate that ownership or call it into question. Master Agent does hereby
obligate itself to call to CBS's attention any infringing uses ft learns of.
(ii) Immediately upon the expiration or termination of this Agreement
or any renewal hereof, Master Agent agrees to cease and forever abstain from
using the aforesaid Marks and shall return within thirty (30) days to CBS or
effectively destroy all documents at Master Agent's sole expense, which shall
include but not be limited to instructions, display items, and the like bearing
any of the Marks .
E. License to use Trade Secrets.
Operating manuals, formulas, software, hardware, CBS vendors, customer lists and
computer programs, among other things, may all be deemed trade secrets. CBS has
a protectable interest in those secrets and the Master Agent hereby acknowledges
CBS's interest in preserving the Trade Secrets, and information disclosed in
writing as confidential, and CBS requires that the Master Agent keep them
confidential during the term of the Agreement
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and after its termination or expiration. Failure to do so is a material breach
of this Agreement and the Agent Acknowledges that it will cause irreparable harm
to CBS.
F. Master Agent's Minimum Sales Provision.
In consideration of the opportunity to establish and maintain a CBS Dealership
and license as herein provided Master Agent represents and shall purchase a
minimum of ten (10) Talkie/Globe systems annually and/or a minimum of gross
sales in excess of one ($1,800,000) million eight hundred thousand dollars,
annually.
ARTICLE 3 - DEALER'S FINANCIAL OBLIGATIONS TO CBS
A. Should Master Agent utilize any maintenance and or service agreements of CBS,
or the reselling of services to Master Agent customers, Master Agent or customer
shall pay to CBS monthly service fees. Amount of said fees shall be under the
exclusive direction of CBS.
B. All terms of payment and credit approval shall be upon CBS invoice and
discretion. A service charge not to exceed 1 1/2% monthly or the highest legal
contract rate may be added to all accounts not paid within thirty (30) days of
date of invoice. Master Agent agrees to promptly review and advise CBS
concerning any corrections which may be required in invoices received. Invoices
outstanding for more than sixty (60) days without advice of correction shall be
deemed to represent the true and correct statement of Master Agent's account.
Failure to pay within sixty (60) days of the date of invoice shall be deemed a
material breach of this Agreement and CBS, may at its sole discretion may
terminate this Agreement with notice without any recourse by Master Agent.
ARTICLE 4 - DEALER'S OBLIGATIONS REGARDING OPERATIONS
A. Master Agent shall commence operations within ninety (30) days from the date
of this Agreement from at least one CBS "Talkie/Globe' Long Distance Reseller
System (hereafter "Talkie/Globe System).
B. Master Agent shall purchase for its operations a minimum 10 systems annually
at the rate of one 'Talkie/Globe' system per month the first six months of this
Agreement. Completing minimum sales requirement during second half of each year
of this Agreement. During each year thereafter, the annual sales requirements
must be satisfied by December 1. of the calendar Year. Master Agent recognizes
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that CBS shall has the right to establish and adjust the minimum sales
requirement for Master Agent during the life of this Agreement. In no event
shall Master Agent be restricted from generating additional sales over the
minimum requirement for Master Agent.
C. CBS at its option may require Master Agent to prominently display CBS's then
current signs, insignia, symbols, slogans and other forms and devices as
specified from time to time by CBS for uniform system and Marks recognition by
the public. Master Agent may not use any of CB Ss Marks in any advertising or
promotion without the prior written approval of CBS.
D. AU service and maintenance on CBS's equipment or equipment used in connection
with this Agreement shall by performed by CBS or their authorized
representatives under a CBS service Agreement.
ARTICLE 5 - INDEMNIFICATION REQUIREMENTS:
A. 1. To the fullest extent permitted by law, the Master Agent shall indemnify,
defend, protect and hold harmless CBS, its agents and employees, their
respective partners, officers, directors, shareholders, representatives, agents,
employees , and anyone else acting for or on behalf of any or them (herein
individually called "Indemnitee' and collectively called "Indemnitee") from and
against all liabilities, damages, losses, claims, demands, lawsuits,
proceedings, arbitrations, and actions of any nature whatsoever ("Claims") which
arise out of or are connected with, or are claimed to arise out of or be
connected with:
A.2. The performance of Work or any act or ornission of Master Agent, its
Contractors, Subcontractors, sub-subcontractors, suppliers, materialmen or
anyone directly or indirectly employed by any of them or anyone for whose acts
they may be liable, regardless of whether or not such claims or expense in
caused in part by an Indemnitee;
A.3. The use, misuse, erection, maintenance, operation or failure of any
machinery or equipment whether or not such machinery or equipment was fumished,
rented, bought, leased or loaned by the CBS or their officers, employees,
agents, servants or others, to Master Agent.
B. I. Without limiting the generality of the foregoing, such defense and
indemnity includes all Claims on account of bodily and personal injury, death or
Property damage and loss to any Indemnitee, any of Indemnitee's
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employees, agents, contractors or subcontractors, licensees or invitees, or any
other persons, whether based upon, or claimed to be based upon, statutory
(including, without limiting the generality or the foregoing, worker's
compensation), contractual, tort or other liability of any Indemnitee or any
other persons. In addition, the Claims indemnified against shall include all
claims for trademark, copyright or patent infringement, for unfair competition
or infringement of any other so-called "intangible" property rights, for
defamation, false arrest, malicious prosecution or any other infringement of
personal or property rights of any kind whatever or which arise, or is specified
in the contract Documents, including, without limitation, these General
conditions.
2. CBS expressly understands and agrees that any performance bond or insurance
protection required by the Contract Documents, or otherwise provided to CBS,
shall in no way limit the responsibility to indenuiify, save, and hold harmless
and defend the Indemnitee as herein provided.
3. The indemnification provisions contained herein shall be included in each of
CBS's and Master Agents Subcontracts and shall be in favor of the Indemnitee and
Master Agent.
4. Any Indemnitee, at its election, may defend against or settle any Claim, or
at the request of any Indemnitee, Master Agent shall assume the defense on
behalf of such Indenmitee, of any such Claim, provided however, that any
attorney employed In such defense must be satisfactory to such Indemnitee.
5. Master Agent shall bear any and all expense, whether incurred or paid, of any
Indemnitee because of any Claim or other matter indemnified against hereunder,
including without limitation, attorneys' and consultants' fees and expenses,
court costs, and costs related to the defense of, or preparing for the defense
against, any such Claim even if such Claim is groundless, false or fraudulent.
6. In any and all Claims against the Indemnitee by any employee of Master Agent,
any Subcontractor, supplier, materialmen, anyone directly or indirectly employed
by any of them or anyone for whose acts any of then may be liable, the
indemnification obligation under this section 2 shall not be limited in any way
by any limitation on the amount or @ or damages, compensation or benefits
Payable by or for Master Agent or any Contractor, subcontractor, or
sub-subcontractor under workers' or worker compensation acts, disability benefit
acts or other employee benefit acts.
7. Master Agent shall Master indemnify, defend, protect and hold harmless the
Indemnitee from and against any and all claims and shall bear any and all
expense, whether incurred or paid, of any Indemnitee (including without
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limitation, attorneys and consultants' fees and expenses, costs related to
preparing for and/or defending any action and court costs) suffered, incurred of
any kind.
8. Master Agent shall pay any judgment finally awarded in any Claim which is
brought against any Indemnitee, regardless of whether the Indemnitee or Master
Agent directs the defense thereof, and shall pay any amounts payable in
settlement or compromise of any such claim.
9. In the event that Master Agent is requested but refuses to honor its
indemnity obligations hereunder, then Master Agent shall, in addition to its
other obligations, pay the cost of bringing any action to enforce Master agents
indemnity obligations, Including, without limitation, attorneys' and
consultants' fees, expenses, and court costs, to the party requesting indemnity
ARTICLE 6 - MASTER AGENT INSURANCE REQUIREMENTS:
A. Upon execution of this Agreement Master Agent shall file with the CBS valid
duplicate original certificates of Insurance and/or, at the CBS's option, a
certified copy of the insurance policies and any and all endorsements or riders
thereto, evidencing compliance with all requirements contained in this contract,
all in form and substance satisfactory to CBS. Master Agent shall provide CBS
with proof of payment of premium in full for the current annual period or, if
such premiums are financed, evidence that premiums are current.
B. Acceptance and/or approval of the insurance herein does not and shall not be
construed to relieve Master Agent from any obligations, responsibilities or
liabilities under this Agreement.
C. All insurance required by the contract shall be obtained at the sole cost and
expense of Master Agent, shall be maintained with insurance carriers properly
licensed to do business in all states required by the terms of this Contract and
acceptable in all respects, to CBS; shall be "primary' and non-contributing to
any insurance maintained by Owner; shall contain a Waiver of Subrogation in
favor of CBS; so that in no event, shall the insurance carriers have any right
of recovery against CBS, their agents or employees; shall contain a separation
of insured provision (severability of interest clause); shall provide written
notice be given to CBS, and all additional insured and certificate holders at
least thirty (30) days prior to the cancellation, non-renewal or modification of
any such policies, which notice shall be evidenced by return receipt of United
States certified mail; shall name CBS,
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and any subsidiary, parent or affiliates of the CBS and their partners,
directors, officers, agents, and employees or other persons or entities with an
insurable interest designated by the CBS as additional insured thereunder.
D. Master Agent shall cause all insurance to be in full force and effect as of
the date of this Agreement and to remain in full force and affect throughout the
term of this Agreement and as further required by this Contract Master Agent
shall not take any action, or omit to take any action that would suspend or
invalidate any of the required coverage during the time period such coverage are
required to be in effect.
E. Not less than thirty (30) days prior to the expiration date or renewal date,
Master Agent shall supply Master Agent with updated replacement Certificates of
Insurance, amendatory riders, and endorsements, and/or certified copies of
insurance policies, together with evidence of payment of the premium, that
clearly evidence the continuation of all of the terms and conditions of the
coverage, limits of protection, and scope of coverage as was provided by the
expiring Certificates of Insurance, certified copies of insurance policies and
amendatory riders or endorsements as originally supplied.
F. If Master Agent fails to purchase and maintain or fails to require to be
purchased and maintained, the liability insurance specified in this Contract CBS
may (but shall not be obligated to) purchase such insurance on the Master
Agent's behalf and shall be entitled to be repaid by Master Agent for any
premiums paid therefor.
G. Master Agent shall select reputable and financially sound insurers to
underwrite the required Coverage acceptable to Owner. In all instances, each
insurer selected must be rated at least "A-" (Excellent) Class "VII" in the most
recently published Best's insurance Report. If an insurer's rating falls below
"A-" (Excellent) Class "VII" during the term of the policy, the insurance must
be replaced no later am the renewal date of the policy with an insurer
acceptable to CBS and having an "A-" (Excellent) Class "VII" rating in the most
recently published Best's Report.
H. No act or omission of any insurance agent, broker or insurance company
representative shall relieve Master Agent of any of its obligations under this
Contract.
I. Master Agent throughout the term of this Contract or as otherwise required by
this Contract shall obtain and maintain in full force and effect the following
casualty/liability insurance with limits not less than specified herein and as
required by the terms or this Contract or as required by law, whichever is
greater:
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1. Commercial General Liability Insurance or its coverage equivalent is to be
provided under the Insurance Service Office's (ISO) most current form, with a
combined single limit for bodily injury and property damage of not less than
$______ , which insurance shall include a comparable limit with respect to
Personal Injury and Advertising injury, as well as ______(any other). (This
limit may be provided through a combination of primary and umbrella/excess
liability policies.) Such insurance shall include the following coverage:
A. Premises Operations coverage, including Independent contractors, with limits
of liability applying on a per location basis.
B. Product Liability and Completed operations coverage, with the provision that
coverage shall extend for a period of at least twelve (12) months from the date
of final completion and acceptance by the Owner of all of Contractor's Work.
C. Personal injury and Advertising Liability Coverage to include Injury
sustained by any person as a result of an offense directly or indirectly related
to employment of such person by the insured, or by any other person and
liability assumed under contracts.
D. Extended Bodily injury coverage with respect to bodily injury resulting from
the use of reasonable force to protect persons or property.
E. Premises and Operations Medical Payments coverage.
F. Broad Form Property Damage Liability coverage, including coverage for
completed operations.
G. Explosion, Collapse, and Underground Property Damage Coverage providing
protection for Property damage resulting from these hazards.
H. Worker's Compensation, Occupational Diseases benefits, Voluntary
Compensation, and Disability Benefits, U.S. Longshoremen's and Harbor Worker's
compensation, Admiralty/Jones Act, Defense Base Act, and any other federal
and/or state coverage, as required, for not less than the statutory limits, and
if applicable, an "Other States Endorsements"; Employer's Liability Insurance or
stop-Gap Employers, Liability insurance with limits of not less than by accident
$1M each accident, by disease $1M policy limit, by disease $1M each employee:
(These limits may be provided through a combination of primary and
umbrella/excess liability policies).
I. The following shall be names an additional insured in all insurance policies
required under this Contract:
J. The following shall be identified as certificate holders in all insurance
policies required under this Contract:
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ARTICLE 7 - NON COMPETE
During the term of this Agreement and for a period of two (2) years after the
expiration or termination of this Agreement or any renewal hereof, neither
MasterAgent nor Master agents principals or associates, whether individually or
through a partnership or corporation, will engage, either directly or
indirectly, in the operation of any telecommunications, telephone long distance
businesses or any of the business activates of CBS in the United States and
Canada.
ARTICLE 8 - DEFAULT
No failure to perform in accordance with any of the terms or conditions of this
or any collateral agreement or other fault or defect shall be deemed to exist or
occur unless such failure cannot be cured or if curable shall continue for ten
no more than ten (10) days following mailing or wiring to the party to be put
into default of written notification of such failure, except, however, that if
the failure to perform is the nonpayment, in excess of thirty (30) days, of
moneys due and in such failure shall continue for three (3) days or more
following mailing or wiring to the party to be put into default of written
notification of such failure. In addition, in the event of non-payment under
this Agreement or any collateral agreement as above provided, CBS may require
Master Agent to fumish complete up-to-date financial information.
ARTICLE 9 - Term
This Agreement shall be in effect from the date of acceptance and execution
by CBS and continue for three (3) years unless terminated sooner as provided
herein, and may be renewed at the option of the Master Agent under CBS's then
current standard terms for new dealers, for additional successive periods of
three (3) years, for a minimum of two (2) such periods (total of 6 years)
provided that Master Agent has complied with the provisions contained herein.
Master Agent must notify CBS of its election to exercise such option to renew in
writing ninety (90) days prior to the expiration of his Agreement of any renewal
hereof.
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ARTICLE 10 - TERMINATION
A. TERMINATION BY MASTER AGENT.
Master Agent being in good standing, may terminate this Agreement at any time by
giving ninety (90) days written notice to CBS, except that such termination
shall not relieve MASTER AGENT of any obligation to CBS that shall have matured
under or survived this Agreement or under any collateral written agreement of
the parties.
B. TERM[NATION BY CBS
CBS may terminate this Agreement and revoke all licenses upon the occurrence of
the following:
a) If Master Agent is in default or fails to fulfill any provision of
this Agreement;
b) If Master Agent discontinues the active conduct of its business;
Upon the transfer or assignment of any part of Master Agent business
assets which results in the passage of control of the business, unless
consented to in writing by CBS;
d) Upon the insolvency, the making of an assignment for benefit of
creditors, appointment for a receiver or trustee of any part of the
assets of Master Agent's business, the service of a warrant of
attachment upon any of the assets of the business or upon service of
an execution.
ARTICLE 11 - RIGHTS OF CBS IN EVENT OF TERMINATION
Upon termination of this Agreement, CBS shall be entitled to recover immediately
upon termination from Master Agent all moneys due under this Agreement, together
with interest at the highest level contract rate and all costs and expenses,
including reasonable attorney's fees and disbursements, incurred or accrued by
CBS in enforcing its rights under this Agreement. Master Agent shall deliver and
CBS may assume possession of any service guaranty by CBS. Master Agent also
entitles CBS the option to exercise only upon termination, for the assignment
for collection of Master Agent accounts receivable. Master Agent also assigns at
CBS's option all telephone lines, 800 line services and vanity numbers,
telephone listings, International and Domestic Private Lines, as described
herein shall take effect upon termination. CBS shall also have the exclusive
option and right to assume any and all leases for equipment. Master Agent shall
return to CBS, or effectively destroy, all literature, signs, advertising
material, promotional matter and other materials identifying the form Master
Agent with CBS and shall immediately cease to refer to or identify itself with
CBS or use the Marks or any simulation thereof. Master Agent shall thereafter
take no action detrimental to CBS or the Business of CBS. Master Agent
irrevocably authorizes, appoints and empowers CBS as Master Agent's lawful
attorney in fact to act for Master Agent and in its name, place and stead
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to do all acts and things herein provided for upon termination; to sell or
resell the same; to execute all contracts, instruments and documents of transfer
of ownership, or otherwise; and to pay the costs and expense of doing such acts
and things. It is agreed that after expiration or termination, any use of the
Marks by Master Agent will result in irreparable injury to CBS and Master Agent
hereby consents to the entry of an order enjoining Master Agent from using CBS
Marks in any way.
ARTICLE 12 - COMPLIANCE WITH LAWS
Master Agent shall be solely responsible for compliance with all laws, statutes,
ordinances, orders or codes of any public or governmental authority pertaining
to the use of CBS products, services and particularly the reselling of domestic
and long distance, domestic and international private line telephone voice
services and its business, and for payment of all taxes, permits, license and
registration fees and other charges or assessments arising out of the
establishment and operation of Master Agent's business.
ARTICLE 13 - RELATIONSHIP BETWEEN PARTIES
CBS and Master Agent are not and shall not be considered as joint venturers,
partners, agents, servants, employees or fiduciaries of each other or as,
franchiser or franchisee, and neither shall have the power to bind or obligate
the other except as set forth in this Agreement. There shall be no liability on
the part of CBS to any person for any debts incurred by Master Agent unless CBS
agrees in writing to pay such debts. Master Agent acknowledges and represents
that it is completely independent of CBS.
ARTICLE 14 -
WAIVER The failure of either party to enforce at any time any of the provis ions
of this Agreement or to exercise any option or remedy herein provided shall in
no way be construed to be a waiver of such provisions of in any way to affect
the validity of this Agreement. The exercise by either party of any of their
rights hereunder or of any options or remedies under the terms of covenants
herein shall not prejudice them from thereafter exercising the same or any other
right it may have under this Agreement irrespective of any previous action or
proceeding taken by the parties hereunder. All remedies contained herein are
cumulative and severable.
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ARTICLE 15 - TRANSFER ASSIGNMENT AND SUBLICENSE
CBS's rights under this Agreement shall inure to the benefit of its successors
and assigns. Such rights may be assigned provided that the assignee shall agree
in writing to assume all of CBS's obligations hereunder and notice thereof is
served upon Master Agent. Such assignment shall discharge CBS from any Master
obligation hereunder. The license herein granted is personal to Master Agent and
cannot be transferred, assigned or sublicense without the prior written consent
of CBS, which consent shall not be unreasonably withheld. In the event CBS shall
consent in writing to a transfer, assignment or sublicense, the transferee,
assignee, or sublicenses shall be bound by each and all covenants and conditions
contained herein and shall have no right to the Master Master of this license
except with the prior written consent of CBS.
ARTICLE 16 - SEPARABI]LITY
in the event that @y provision herein is in conflict with the law of any state
of jurisdiction, such provision shall be deemed not to be a part of this
Agreement in that jurisdiction.
ARTICLE 17 - HEADINGS
Headings in this Agreement are inserted solely for the purpose of convenience of
reference and are in no manner to be construed as part of the Agreement. ARTICLE
18 - SIGNATORY-LIABILITY
All signatories to this Agreement whether individually,
a partner on behalf of the partnership, or corporate officer on behalf of the
corporation, are to be deemed parties hereto and hereby agree to be jointly and
severally bound by the terms and conditions contained herein and agree that they
shall act as guarantors for any unpaid balance on Master Agent's account with
CBS. Such signatories hereby expressly waive and dispense with all rights and
defenses as guarantors to include, but not restricted to notice of acceptance of
this Agreement, notices of non-payment or non-performance, notices of amount of
indebtedness outstanding at any time, protests, demands and prosecution of
collection, foreclosure and possessor remedies.
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ARTICLE 19 - DEALER'S WARRANTIES ON EXECUTION OF AGREEMENT
Master Agent hereby acknowledges by execution of this Agreement that Master
Agent has read and understands each and every term and condition of this
Agreement and the documents referred to below and is not relying on any
representations, promises or agreements not expressed herein and that this
Agreement supersedes and cancels any previous understanding or agreement between
the parties relating to the subject covered hereby.
Specifically, Dealer warrants:
a) It understands this Agreement contemplates the operation of a
business by Master Agent and the Master Agent's success will depend upon Master
Agent's active participation in such business;
b) It has investigated the potential of the effect of CBS's
non-exclusive territory. Master Agent agrees that the non-exclusivity of
TERRITORY is a reasonable and shall not effect the business of Master Agent.
C) It has examined and is fully conversant with CBS's PROCEDURES,
PRODUCTS, SERVICES
AND SALES AL.
ARTICLE 20 - NO ORAL REPRESENTATIONS OR SIDE AGREEMENTS
This Agreement, when accepted in.................. by an authorized officer of
CBS, together with any collateral written agreement, signed by an authorized
officer of CBS, constitutes the entire Agreement and understanding between the
parties and NO OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE,
SHALL BE OF ANY FORCE OF EFFECT.
This Agreement when accepted in.................. by an authorized officer of
Muter Agent, together with any collateral written agreement signed by an
authorized officer of CBS, constitutes the entire Agreement and understanding
between the parties and NO OTHER REPRESENTAT10N, PROMISE OR AGREEMENT, ORAL OR
OTHERWISE, SHALL BE OF ANY FORCE OF EFFECT.
ARTICLE 21 - ENFORCEMENT
At CBS's option, any dispute or disagreement between the parties hereto arising
out of or relating to this agreement shall be submitted the American Arbitration
Association in New York City under the rules then in effect, and judgment upon
the award may be entered in any court having jurisdiction.
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ARTICLE 22 -NOTICES AND PAYMENTS.
All notices or statements to be given and all payments to be made hereunder
shall be given or made at the respectiveaddresses of the parties as set forth
above unless notification of a change of is given in writing. Any notice shall
be sent by registered or certified mail and shall be deemed to have been given
at the dm IN WITNESS WHEREOF, intending to be legally bound, the parties have
signed this Dealer Master Agent Agreement and License on February 1996.
Witness: Computer Business Sciences, Inc.
_______________________ By:_____________________________
witness
STATE OF NEW YORK
:Ss.:
COUNTY OF NEW YORK
On this _____ day of ___________ 1996, before me personally am
______________________________, known to be to be the person described herein
and who examined the foregoing instrument on behalf of the Contractor, who,
being by me duly sworn. did depose and say: that he resides
at____________________________________ that he is the Of the Corporation that
executed the foregoing contract and that he is duly authorized by said
Corporation to sign his name on behalf of
______________________________
Notary Public
<PAGE>
Agreement with John
Pinciaro
10.16
<PAGE>
AGREEMENT
THIS AGREEMENT, made as of this 30th day of December, 1996 by and
between:
JOHN PINCIARO, an adult individual with offices at 155 East Street, Wallingford,
Connecticut 06492 (hereinafter "SELLER")
AND
PREMO-PLAST, INC., a Florida corporation with its registered office offices
located at 512 Bridlepath, Casselberry,, Florida 32707 (hereinafter "BUYER")
WITNESSETH THAT:
WHEREAS, SELLER is the inventor/developer of a "Hydrotherapy Jet and
Fixtures for Spa Tubs and Pools and a Method of installation (hereinafter
referred to as the "PRODUCT") and desires to secure manufacture and distribution
of such PRODUCT;
WHEREAS, BUYER is a divisional holding company, being the plastics
division of a public company, which desires to secure the rights to the PRODUCT
and to manufacture and distribute the PRODUCT;
WHEREAS, the parties have negotiated with respect to an agreement, have
reached certain understandings, and desire a written contract to evidence and
formalize their agreement;
NOW, THEREFORE, intending to be legally bound, and in consideration of
the mutual covenants contained herein, agree as follows:
1. (a) SELLER, on the terms and conditions of this Agreement, hereby sells,
transfers, conveys and assigns to BUYER all of his right, title and interest in
and to:
(i) the application for a U.S. Patent (serial # 08/682,432, filed
July 7, 1996; and
(ii) the PRODUCT, more specifically described on Exhibit A and the
attachments thereto, attached hereto and made a part hereof by reference; and
(iii) the concepts embodied in the PRODUCT, with all rights to enhancements,
modifications, improvements, and addition, whether now existing or hereafter
developed and whether or not patentable. BUYER, on the terms and conditions of
this Agreement, hereby buys
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all of SELLER's right, title and interest in the PRODUCT. Such purchase and sale
encompasses not only (i) the pending U.S. Patent (Serial # 08/682,432, filed
July 7, 1996 and (ii) the PRODUCT but also (iii) the concepts embodied in it,
with all rights to enhancements, Modifications, improvements, and additions,
whether now existing or hereafter developed.
(b) SELLER represents and warrants that he is the sole legal and beneficial
owner of the patent application and that there was no undisclosed co-inventor.
SELLER also represents and warrants that, to the best of his knowledge and
belief, he is the sole legal and beneficial owner of the PRODUCT and the
concepts embodied in it, that there are no adverse claims of inventorship, no
adverse intellectual property claims, and no liens or encumbrances against the
PRODUCT or the concepts embodied in it.
(c) SELLER shall execute such deeds, assignments, transf ers and other documents
as may be reasonably necessary or desirable to ef fectuate this sale, transf er
and assignment.
2. (a) BUYER shall immediately form a new, initially whollyowned,, subsidiary
(hereinafter "NEWCO'l) for the specific purpose of exploiting the assets and
rights hereby acquired. Such subsidiary shall be authorized to issue only 1,000
shares of Common Stock, all of which shall be. initially issued to BUYER, and
the shareholders shall have pre-emptive rights. BUYER shall immediately assign
to such subsidiary all of the assets and rights acquired hereunder and shall
delegate all of the duties and responsibilities hereunder. It is understood that
NEWCO may be called by another name when incorporated. Neither NEWCO, BUYER, nor
BUYER's parent corporation, Fidelity Holdings, Inc., shall further assign,
license, sub-license any of such assets or rights, nor license or assign any
right or power hereunder, unless such assignment and/or license includes a
provision for the payment of the royalty provided in subparagraph (c) below.
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(b) As partial consideration for the sale of the pending U.S. Patent, the
PRODUCT, and the concepts embodied therein, BUYER shall transfer to SELLER
twenty percent (20%) or two hundred (200) of the shares of NEWCO, so as to
constitute SELLER as a 20% shareholder of NEWCO.
(c) As the balance of the consideration for the sale of the pending U.S. Patent,
the PRODUCT, and the concepts embodied therein, subject to Paragraphs 9(f), 9(g)
and 9(h) below, NEWCO shall pay SELLER a royalty of five percent (5%) of the
Distributor Cost Price for all sales of the PRODUCT (including in the definition
of PRODUCT any enhancements, modifications, improvements, and additions, whether
now existing or hereafter developed, except as provided in Paragraph 9(f)
below). The term "Distributor Cost Price" means the actual wholesale price at
which NEWCO sells the PRODUCT (including all current enhancements,
modifications, improvements, and additions) to its distributors, net of all
reasonable discounts (e.g., cash, volume, promotional, prompt payment), returns
and reasonable allowances. The royalty shall be calculated on. the basis, of
actual receipts by NEWCO of Payments received; NEWCO is not a factor and does
not guarantee collection. Within forty-five (45) days after the end of each
calendar quarter, commencing with the quarter in which distribution begins,
NEWCO shall provide SELLER with a report for such quarter showing (i) all
shipments 'made during such quarter, including the number of PRODUCT units
shipped and the price at which sold; (ii) all shipments made during any prior
quarter for which payment has not yet been received during such quarter, @e.,
carried accounts; and (iii) all payments received during such quarter. Each such
report shall be accompanied by a check in the amount of the royalty calculated
to be due, as 5% of all payments received during such quarter. Following
commencement of the royalty reporting period as specified in subparagraph 2(d)
following and expiration of the eighteen month ramp-up period specified in
Paragraph 5 below, BUYER pay a minimum quarterly royalty of Five Hundred Dollars
3
<PAGE>
(d) NEWCO'S duty to provide royalty payments and royalty reports shall
commence with the quarter in which regular sales (not Beta testing) of the
Product commence.
3. NEWCO agrees that at all times it will keep complete, true and correct books
of account containing a current record of shipments, sales, discounts, returns
and allowances and payments in suff icient detail to enable the royalties
payable under this Agreement to be computed and verified. NEWCO further agrees
to permit an independent certified public accountant retained by SELLER to have
access for inspection of such books of account at reasonable intervals (no more
frequent than once each six months) during normal business hours, in a manner
not disruptive of NEWCO's employees or NEWCO's normal business activities. The
cost of such independent certified public accountant shall be borne by SELLER,
unless either (a) underpayments in any one quarter are in excess of 10% of the
amount actually paid by NEWCO or (b) underpayments in any one calendar year are
in excess of 10% of the amount actually paid by NEWCO. In either of such events,
NEWCO shall bear the cost. In any event, underpayments shall bear interest from
the last day of the accounting period being reviewed to the date of actual
payment, at the higher of seven percent (7%) simple interest per annum or the
prime rate of interest plus one percent (prime plus 1%) as established by First
Union National Bank of Florida.
4. All royalties due hereunder shall be paid in United States Dollars. All
royalties for an accounting period based on sales computed in foreign currencies
shall be converted to United States Dollars on the same basis as set forth in
the agreement with the foreign buyer. In the event of any dispute, the parties
shall use the buying rate for the transfer of such currencies to United States
Dollars as quoted by Fir st Union National Bank of Florida on the last day of
the accounting period, or the-first business day
4
<PAGE>
thereafter if such last day shall be a Saturday, Sunday or holiday.
5. (a) NEWCO shall, in good faith, with all deliberate speed, proceed to exploit
the PRODUCT by securing arrangements for its manufacture, distribution and sale.
NEWCO shall be a second tier subsidiary of Fidelity Holdings, Inc. which
anticipates filing a Registration Statement with the Securities and Exchange
Commission on or about February 28, 1997 to raise the funds to finance the
exploitation of the PRODUCT as required. In the event that Fidelity Holdings,
Inc. has not commenced funding NEWCO by September 30, 1997 (plus -a grace period
equal to the number of days from- June 30, 1997 to the date that the
Registration Statement shall be declared effective by the Securities and
Exchange Commission but not exceeding November 30, 1997), SELLER shall have the
option to terminate this Agreement as provided in Paragraphs 10(a)& 10(b) below.
All costs and expenses of such manufacture, distribution and sale, including but
not limited to: marketing; advertising and public relations; promotion;
additional or modified. molds or other tooling; packaging, transportation;
storage of raw materials and inventories; sales commissions; and NEWCO overhead
shall be borne by NEWCO without adjustment of or offset to the royalty payable
hereund er. The only deductions from Distributor Cost Price allowable are
discounts (e.g., cash, volume, promotional, prompt payment), allowances (which
may include co-op advertising, point-of-sale materials, etc.), and returns. (b)
By the earlier of (a) eighteen (18) months following completion of- all required
R&D and Beta testing, or (b) thirty (30) months following the execution of this
Agreement, NEWCO shall have established the manufacture, distribution and sale
of the PRODUCT. If at any time thereafter, NEWCO shall provide a quarterly
royalty report showing shipments of less than Ten Thousand Dollars ($10,000) and
BUYER declines to pay a minimum quarterly royalty of Five Hundred Dollars ($500)
with such report, SELLER may elect to terminate this Agreement. To exercise such
election, SELLER shall give written notice thereof to NEWCO, by certif ied mail,
return
5
<PAGE>
receipt requested, within twenty-one (21) days after receipt of the quarterly
royalty report and such termination shall be effective upon receipt thereof by
NEWCO. Notwithstanding such notice and termination, however, NEWCO may continue
with manufacture to fill all orders on hand at the date of termination and NEWCO
may continue with distribution and sale until its inventory is depleted. Failure
of SELLER to give such notice within twenty-one (21) days after receipt of the
quarterly royalty report shall constitute waiver of the election for that
quarter and this Agreement shall continue in full force and effect.
6. If, at any time, NEWCO shall determine (in its sole discretion) that sales of
the Product are inadequate to justify continued support of the Product, NEWCO
may elect to -terminate this Agreement. To exercise such election, NEWCO shall
give written notice thereof to SELLER, certified mail, return receipt requested
and such termination shall be effective upon receipt thereof by SELLER.
Notwithstanding such notice and termination, however, NEWCO may continue with
manufacture to fill all orders on hand at the date of termination and NEWCO may
continue with distribution and sale until its inventory is depleted. NEWCO shall
provide royalty reports and royalty payments as long as NEWCO continues to
manufacture, distribute and/or sell the PRODUCT.
7. (a) If any royalty report or royalty payment, as provided for in Paragraph 2
above, shall not be given or made to SELLER within forty-five (i5) days after
the end of a calendar quarter, such report shall-be "delinquent. Any delinquency
not cured within five (5) business days after receipt by NEWCO of written notice
from SELLER of such delinquency shall be a Default. Notice must be written but
may be given by registered mail, certified mail, by facsimile, or in person.
(b) If any three (3) consecutive royalty reports or payments are delinquent,
although such delinquencies are cured prior to default,
6
<PAGE>
it shall be a Default.
(c) If any three consecutive inspections of the books and records, as provided
in Paragraph 3 above, shall show underpayments, and there shall be evidence of
fraud with respect to the reporting and/or payments made, it shall be a Default.
(d) In the event of a Default, SELLER may elect to terminate this Agreement. To
exercise such election, SELLER shall give written notice thereof to NEWCO,
certified mail, return receipt requested within twenty-one (21) days after the
Default and such termination shall be effective upon receipt thereof by NEWCO.
Notwithstanding such notice and termination, however, NEWCO may continue with
manufacture to fill all orders on hand at the data of termination and NEWCO may
continue with distribution and sale until its inventory is depleted and NEWCO
shall provide royalty reports and royalty payments as long as NEWCO continues to
manufacture, distribute and/or sell the PRODUCT. Failure to give such notice
within twenty-one (21) days after the Default shall constitute waiver of NEWCO'S
Default and this Agreement shall continue in full force and effect.
8 (a) In the event of termination of this Agreement pursuant to Paragraph 5 (b)
, Paragraph 6, or Paragraph 7, or by mutual agreement of the parties, BUYER
shall cause NEWCO to redeem the $00 shares of NEWCO Common Stock held by it for
a Promissory Note from NEWCO to BUYER bearing interest at the prime rate plus
one percent (1%-) which Note shall mature in one hundred and twenty (120) months
after the end of the month in which the redemption occurs and which shall be
payable in quarterly installments equal to two and onehalf percent of the gross
revenues of NEWCO for the prior quarter. The f irst -quarterly payment shall be
due and payable on the second Thursday of the month after the end of the first
calendar quarter after redemption. For example, if redemption occurs on April
21, the note will mature 120 months after April. 30 and the first
7
<PAGE>
quarterly payment will be due on the second Thursday of July, Quarterly payments
will be applied first to interest and then to principal. No personal guarantee
of the note shall be required. The principal of the Note shall be equal to
eighty percent (80%) of the net worth of NEWCO as shown on the books of NEWCO as
of the end of the quarter preceding termination.' Such action shall be taken
within fifteen (15) business days after receipt of notice of termination, it
being the intent to implicitly transfer ownership of the Product and related
assets and business (including liabilities) to SELLER by constituting him as the
sole shareholder and independent owner of NEWCO.
(b) In the event that NEWCO has filed any patent application(r,) (patent(s)
'pending) or has been issued any patent(s), the implicit transfer and conveyance
of ownership of NEWCO in subparagraph (a) above shall include such applications)
and patent(s), except as may be required for a third party invention as provided
in Paragraph 9(f).
9. (a) NEWCO understands and acknowledges that the Product is not yet patented,
although a patent application has been filed. SELLER does not represent that-the
Product is patentable.
(b) Following the execution of this Agreement, NEWCO shall pay up to Five
Thousand Dollars in payment of fees and costs associated with the continued
prosecution of the patent application for the PRODUCT in the United States
Patent and Trademark Office, including but not limited to legal fees, filing
fees, extension fees, issue fees, formal drawing costs, postage and appeals.
SELLER shall be responsible for, and shall personally pay, all such fees and
costs above NEWCO's $5,000.
(c) It is the intent of the parties that SELLER shall continue to seek to
improve and enhance the PRODUCT. From time to time, as' SELLER shall develop
improvements and/or accessories to and for the
8
<PAGE>
PRODUCT, he. shall provide a full and complete written disclosure of such
improvement and/or accessory to BUYER. Both parties shall keep such disclosures
in complete confidence and do nothing to compromise the patentability of such
improvement and/or accessory. NEWCO may, in its sole discretion, seek to obtain
a patent on any improvements to and/or accessories invented by the SELLER for
the PRODUCT, and in doing so obligates itself to pay all fees and costs
associated with the filing and prosecution of patent application(s) in the
United States Patent and Trademark office therefor. Any such patent application
shall be filed in the name of SELLER as inventor or as a co-inventor, as
applicable; however, SELLER agrees to execute promptly and without cost to BUYER
such assignments of any such patent applications or patent(s) to NEWCO as may be
reasonably required. NEWCO may not abandon the application for the PRODUCT or
the applications. to and/or accessories for the PRODUCT for which SELLER is an
inventor and NEWCO files an application, without the express written consent of
SELLER which shall not be unreasonably withheld. If NEWCO does not seek to
obtain a patent on an improvement to or accessory for the PRODUCT within six (6)
months after a disclosure by SELLER to NEWCO of the improvement to and/or
accessory for the PRODUCT, SELLER may seek to obtain a patent on the improvement
and/or accessory to the exclusion of NEWCO, and SELLER shall then be responsible
for paying all fees and costs associated therewith. However, in the event that
SELLER's patent application differs from the scope of the disclosure previously
'made to BUYER, SELLER shall make a new disclosure to BUYER under this
subparagraph and SELLER shall have the right to claim such patent application
and proceed as provided herein.
(d) NEWCO has the option, in its sole discretion, to seek foreign patents on the
PRODUCT for which a patent application has been filed in the United States
Patent and Trademark office, and on improvements to and/or accessories for the
PRODUCT for which NEWCO .has filed a patent application in the United States
Patent and
9
<PAGE>
Trademark Of f ice. if NEWCO elects to seek foreign patent (s) , NEWCO shall pay
all fees and costs for the foreign patent applications which it files. Not less
than thirty (30) days prior to the lapse of foreign patent rights with respect
to the PRODUCT or f or an improvement to and/or accessory f or the PRODUCT,
NEWCO shall provide notice to SELLER of whether it intends to seek foreign
patent rights. If NEWCO does not intend to file a foreign patent application on
the PRODUCT or on an improvement and/or accessory to the exclusion of NEWCO, and
SELLER shall then be responsible for paying all fees and costs associated
therewith.
(e) To the extent provided in subparagraphs (c) and (d) above, SELLER is
obligated to execute promptly all required assignments of patents and patent
applications. NEWCO shall not be obligated to provide royalty reports or to make
royalty payments until such assignments are properly executed and delivered.
From and after the date on which SELLER executes an assignment as required under
subparagraph (b) above, the sale. of all improvements and accessories shall be
subject to the royalty and royalty reporting ?requirements of Paragraph 2,
above; subject, nevertheless to subparagraph 2(d).
(f) If NEWCO shall acquire any patent applications and/or any patent(s) from a
third party, NEWCO may agree with such person to pay such person a royalty and
such royalty shall not be payable to SELLER, nor shall SELLER receive a royalty
on that portion of the Distributor-'-Cost Price attributable to third party
patent .applications and/or patents. in the event that the third party product
is marketed and sold in combination with the PRODUCT, allocation of the
Distributor Cost Price for royalty calculation purposes shall be made on the
basis of the respective manufacturing Costs of the components. In the event of
the implicit transfer and conveyance as required in subparagraph 8(a) above,
NEWCO shall remain -bound by, and shall automatically continue to pay TO, such
person according to the terms of any agreement
10
<PAGE>
between NEWCO and such person.
(g) in the event that patent protection 'for the PRODUCT is not ultimately
obtained, for whatever reason, but no third party has commenced the sale of a
copy or of a similar device to the PRODUCT, NEWCO 'may notify SELLER that it
elects under this subparagraph to either (i) terminate this agreement as
provided in Paragraph 8 above or (ii) continue the business but reduce the
royaly payable to SELLER to four percent (4%). Such election shall be effective
upon receipt of such notice by SELLER and shall affect only shipments made
thereafter.
(h) in the event that patent protection for the PRODUCT is not ultimately
obtained, for whatever reason, and a third party commences sale of a copy or of
a similar device to. the PRODUCT, and NEWCO determines that the competition
requires a lowering of the price in order to be competitive, NEWCO may notify
SELLER that it elects under this subparagraph to either (i) terminate this
agreement as provided in.Paragraph 8 above or (ii) continue the business but
reduce the royalty payable to SELLER to three percent (3%) . such election shall
be ef f ective upon receipt of such notice by SELLER and shall affect only
shipments made thereafter.
10 (a) Until and unless terminated as provided in Paragraph 5 (a) Paragraph 5(b)
, Paragraph 0, or Paragraph 7 above, or until and unless terminated by mutual
agreement of the parties, this Agreement shall remain in full force and effect
in perpetuity. Notwithstanding the foregoing, SELLER may terminate this
Agreement upon twenty-one (21) business days written notice in the event of:
(i) liquidation of NEWCO;
(ii) insolvency or bankruptcy of NEWCO;
(iii) inability of NEWCO to meet its obligations hereunder; .
(iv) failure of NEWCO to satisfy any judgment against it;
(v) appointment of a receiver or trustee for NEWCO; assignment by
NEWCO for the benefit of its creditors;
11
<PAGE>
or
(vii) failure by Fidelity Holdings, Inc. to fund NEWCO as provided in
Paragraph 5(a).
(b) Subject to the claims of any creditors or lien holders, upon termination of
this Agreement by the SELLER by reason of any event in subparagraphs (i) through
(vi) inclusive under Paragraph 10 (a), any patents or patent applications
assigned to NEWCO in which SELLER is the inventor or a co-inventor shall be
reassigned to SELLER. Upon termination of this Agreement by the SELLER by reason
of event (vii) under Paragraph 10 (a) , any patents or patent applications
assigned to NEWCO in which SELLER is the inventor or a co-inventor shall be
reassigned to SELLER free and clear of all liens and encumbrances.
11. (a) It is the intent of the parties, as provided in Paragraph 2 above, that
BUYER shall transfer and assign the assets and rights obtained under this
Agreement to NEWCO, a corporation-to-be-formed. For all purposes of this
Agreement, SELLER authorizes such transfer and assignment, but BUYER shall 'be
jointly and severally bound hereby and, subject to subparagraph (b) following,
shall guarantee performance hereunder.
(b) Nothing contained in this Agreement is intended to restrict the rights of
either party to sell, transfer, assign or otherwise dispose of his or its
interest in NEWCO but no such assignment shall terminate, modify or otherwise
affect the rights and duties of the parties under this Agreement, except that
BUYER shall not be deemed a guarantor of the performance by any transferee or
assignee of its interest or by NEWCO. under the ownership of any such transferee
or assignee.
(c) In the event that BUYER determines to sell, transfer, assign or otherwise
dispose of its entire interest in NEWCO and secures an offer from a third party
to acquire such interest, SELLER shall have a right of first refusal to acquire
such interest on the same
12
<PAGE>
terms and conditions as offered by the third party. BUYER shall notify SELLER in
writing of its intent to dispose of its entire interest and of the terms and
conditions offered by the third party. SELLER shall have a period of ten (10)
business days to determine whether or not to a @ ire the interest on such terms
and conditions. If SELLER does not notify BUYER in writing of his intent to
exercise his right of first refusal by 5:00 p.m. Eastern Time on the tenth
business day following BUYER's notification, BUYER may proceed with the third
party. Alternatively to exercising his right of first refusal, SELLER may notify
BUYER that he desires to have his interest in NEWCO included in the proposed
sale, transfer, assignment or disposition. In such event, BUYER shall endeavor
to accommodate SELLER's desire; however, inclusion of SELLER shall not become a
condition of any transaction by BUYER.
12. All notices to a party shall be deemed given when mailed by registered or
certified mail to the address set forth below or such other address as may be
substituted therefor by notice:
TO SELLER; John Pinciaro
155 East Street
Wallingford, Connecticut Ob492
With a copy to: David P. Gordon, Esq.
65 Woods End Road
Stamford, Connecticut 06905
TO NEWCO: Ronald K. Premo, President
Premo-Plast, Inc.
383 Lathrop Road
Plainfield, Connecticut 06374
With a copy to: Doron Cohen, Presidefit
Fidelity Holdings, Inc.
80-02 Kew Gardens Road, Suite 5000
Kew Gardens, New York 11415
13. This Agreement is the entire Agreement among the parties with respect to
the PRODUCT and any modifications and accessories. therefor and supersedes all
discussions, correspondence, memoranda, interim negotiations, and any other
prior agreements among the parties with respect thereto except as herein
specified. There are
13
<PAGE>
no representations, warranties or other agreements except as expressed in this
Agreement. No alteration, modification, or waiver of term or condition hereof
shall be binding unless in writing and signed by all parties.
14. This Agreement may be amended only with the written approval of the party to
be charged therewith; provided, however, that no such amendment may be 'made
that would cause a breach of any warranty or representation herein.
15. Whenever required by the context hereof: the masculine gender shall be
deemed to include the feminine and neuter; and the singular member shall be
deemed to include the plural. Time is expressly declared to be of the essence of
this Agreement. This Agreement shall be deemed to have been mutually prepared by
all parties and shall not be construed against any particular party as the
draftsman.
16. It is the intent of the parties that this Agreement shall be construed and
interpreted, and-id that all questions arising hereunder shall be determined in
accordance with the provisions of the laws of the State of Florida.
17. This Agreement shall be binding upon and shall inure to the benefit of the
parties and their successors and assigns.
18. Any controversy, claim or dispute arising out of or resulting from this
Agreement, or the breach thereof, that cannot be resolved by negotiation, shall
be resolved by arbitration, to be held in the borough of Queens, New York, New
York, in accordance with the rules and regulations of the American Arbitration
Association, except that the provisions for discovery shall be as set forth in
the Rules of Civil Procedure then in effect in New York. Failure 'of a party to
participate or cooperate shall constitute grounds for default judgment. The
arbitrator shall award legal fees and costs
14
<PAGE>
to the prevailing party. The decision of the arbitrator shall in each case,
including awards and the allocation of costs, be final and binding upon the
parties. Judgment upon the award rendered by the arbitrator may be. entered in
any I Court having jurisdiction thereof.
19. This Agreement may be executed in two or more counterparts and by facsimile,
any one of which shall be deemed to be an original.
20. No agent, broker, person, or firm acting on behalf of either party or any of
their subsidiaries or under the authority of any of them is or will be entitled
to any commission or broker's or finder's f ee or financial advisory fee in
connection with any of the transactions contemplated herein.
IN WITNESS WHEREOF, and intending to be legally bound, the parties have
hereunto set their hands and seals the day and year first above written.
PREMO-PLAST, INC. (BUYER)
ATTEST:
By___________________________________
Ronald K. Premo
___________________________________
Secretary
WITNESS:
___________________________________ ___________________________________
John Pinciaro (SELLER)
15
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Exhibit "A" for Purchase contract
A system for assembling water, light and aeration devices and attaching same to
hot tubs, spas and other appliances as more specifically described in attached
patent 08/682,432 filed July 7,1996.
16
<PAGE>
Employment Agreement
with John Pinciaro
10.17
<PAGE>
EMPLOYMENT. AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of this 30th day of December, 1996,
by and between:
AND
PREMO-PLAST, INC., a Florida corporation with its registered office offices
located at 51.2 Bridlepath, Casselberry, Florida 32707 (hereinafter "EMPLOYER")
AND
JOHN PINCIARO, an adult individual with offices at 155 East Street, Wallingford,
Connecticut t) 06492 (hereinafter "EMPLOYEE")
WITNESSETH THAT:
WHEREAS, EMPLOYEE has certain education, experience, background,
know-how and contacts which would be useful and helpful to EMPLOYER in its
business and EMPLOYER is desirous of employing EMPLOYEE in order to obtain the
benefits of such education, experience, background, know-how and contacts;
WHEREAS, EMPLOYEE is agreeable to being employed by EMPLOYER and providing the
benefits of(his education, experience, background and contacts to EMPLOYER;
WHEREAS, the parties have agreed upon the terms of such employment and desire a
written, formal contract to evidence their agreements-,
NOW, THEREFORE, in consideration of the mutual promises, covenants and
forbearances contained herein, and intending to be legally bound, the parties
have agreed as follows- I
. RETENTION. For the term provided in Paragraph 2, EMPLOYER hereby
employs EMPLOYEE, and EMPLOYEE hereby accepts that employment, upon the terms
and conditions hereinafter set forth,
2. TERM.
(a) This Agreement shall become effective as of January 1, 1997,
(b) This Agreement, subject to the provisions of Paragraphs 14 and 16
below, shall continue and exist for an initial period from such effective date
for a period of two (2) years (initial term).
(c) If four (4) months prior to the expiration date of the initial
term, neither party is then in default under this Agreement, EMPLOYER shall have
the option to extend the term of this Agreement for an additional one (1) year
period. Such option shall be exercised by EMPLOYER mailing notice to EMPLOYEE,
on or before three (3) months prior to the expiration date of the initial term
of its intention t o extend the Agreement. If EMPLOYER shall not give its
1
<PAGE>
extension option on or before the three months prior to the expiration date of
the initial term, this Agreement shall terminate as provided.
(d) This Agreement
shall be -subject to successive additional one (1) year extensions under the
procedure provided in subparagraph (c), provided that at August 3 1 of the then
existing extension year neither party is then in default under this Agreement
and notice of exercise of the extension option is given on or before September
30 of such extension year.
(e) Notwithstanding the foregoing, the term of this
Agreement is otherwise subject to the to provisions contained hereafter.
3. COMPENSATION BASE
(a) For 0 services rendered under this Agreement, EMPLOYEE shall be
paid, as base compensation, such annual salary as shall be determined by the
President/CEO and Management of EMPLOYER, from time, to time, but in no event
shall such compensation be at a rate of less than $75,000 per year, In the event
of any extension of this Agreement, such compensation shall be at no lesser rate
during each such extension year. AU such compensation shall be subject to a
Cost-of living Adjustment (COLA) annually based upon the percentage increase in
the Cost-of-Living Index, All Commodities for the New York City area, The COLA
deterrnination shall be made by comparing the Index at the last day of each year
of this Agreement to the Index on the effective date of this Agreement and any
increase shall be effective as of the first day of the succeeding year. Such
base compensation is to be payable in equal installments at intervals no longer
than semi-monthly. Such base compensation shall be in addition to such incentive
compensation, fringe benefits and bonuses as provided elsewhere herein.
(b) EMPLOYER "I assign EMPLOYEE to its new subsidiary to be formed
("NEWCO") which shall exploit certain spa products the patent for which ENTLOYER
has separately purchased from EMPLOYEE and, provided that such assignment does
not require relocation, may assign EMPLOYEE to one or more of its other
subsidiaries and/or affiliates, to perform services consistent with EMPLOYEE'S
duties hereunder. In such event, EMPLOYEE may be separately compensated by each
such 'subsidiary and/or affiliate. All such compensation shall be deducted from
the compensation payable under subparagraph (a) above and EMPLOYER shall pay
EMPLOYEE only the difference between (i) the total of all such compensations
from subsidiaries and/or affiliates and (ii) the base compensation,
(c) At the end of each calendar year, the President/CEO and Management
of EMPLOYER shall review the performance of EMPLOYEE for such year and, based
upon such evaluation, establish any increase in the base compensation payable to
EMPLOYEE for the succeeding calendar year, as adjusted by subparagraph (a)
above. EMPLOYER shall not be obligated to provide any increase, in excess of the
increase in the Cost-of-Living Index, All Commodities, for the New York City
area during the prior calendar year.
4. COMPENSATION-INCENTIVE. The base compensation for each year of this
Agreement, including any extensions to this Agreement, shall be subject to a
retroactive increase, based upon an earnings per share formula (earnings of
NEWCO divided by actual common shares of EMPLOYEEs public company parent issued
and outstanding at December 3 of each year, and not fully diluted) as follows:
2
Profits Per Increase as a
Common Share Percent of Base Compensatin
$.00 - $.10 5%
$.11 - $.20 10%
$.21 - $.30 20%
$.31 - $.40 30%
$.41 - $,50 40%
$.51 - S.60 50%
$.61 - S.70 70%
$.71 - $.80 90%
S.81 - $.90 110%
S.91 - $1.00 130%
over S.1.00 150%
This retroactive increase, if any should occur, is not a bonus but a merit
adjustment to the base compensation. The calculation will be made based upon the
annual audit of EMPLOYERS financial statements and shall be paid in equal
amounts for the balance of the then current- year on the regular paydays,
commencing with the first payday following release of the audit. Any retroactive
increase "I not affect the base compensation for subsequent calculations It is a
separate adjustment from any other adjustment under any other plan.
5. COMPENSATION-FRINGE BENEFITS. EMPLOYEE shall receive at least the
following additional benefits, which may be extended or increased, but not
reduced, by EMPLOYER: (a) Vacation - EMPLOYEE, shall be entitled to paid
vacation of TWO (2) weeks during the first year, three weeks during the second
year, and four (4) weeks each year thereafter. Unused vacation time may be
accumulated FROM YEAR to year if unused. EMPLOYEE -,ball not be compensated for
any unused vacation time.
(b) Personal Leave - During each year of this Agreement, EN.[EMPLOYEE shall
receive ten (10) days paid personal leave, which shall not be accumulated from
year to year if unused. EMPLOYEE shall not be compensated for any unused
personal leave. "Personal leave" shall include sick leave, bereavement leave,
and all other personal time off.
(c) Other - EMPLOYEE-E shall receive such other medical, surgical, hospital,
dental or legal insurance and fringe benefits as are available to any other
officers/employees/consultants, consistent with EMPLOYERS\ past practices and
such disability insurancE as the President/CEO and Management of employer shall
establish. Nothing contained in this Agreement shall be in lieu of any rights,
benefits and privileges to which employee may be entitled under any retirement,
pension, profit-sharing, insurance, hospital or other plans which may now be in
effect or which may hereafter be adopted. employee- shall have the same rights
and privileges to participate in such plans and benefits as any other employee
during Ns period of employment, except that employee's participation may be
based upon the incentive compensation component of F-employee annual
compensation.
6.. COMPENSATION-BONUS. (a) 'Upon the commencement of regular,
production shipments (not alpha or beta testing shipments) of the spa products
3
<PAGE>
the patent for which employer has separately purchased from employee during the
term of this Agreement, EMPLOYEE- shall receive bonus compensation equal to two
percent (2%) of the gross shipments over the first $1,500,000 per year, up to a
total bonus of S75,000 per annum. The bonus shall be calculated on the basis of
(i) actual receipts by EMPLOYER of payments received from purchasers;
ENQLOY.F-K is not a factor and does not guarantee collection. and
(6) all sales of the products made by any company in the Fidelity
Holdings, Inc, group or any company licensed or authorized by any company in the
Fidelity Holdings, Inc. group, and shall not be limited to the sales of such
products by NEWCO and/or EMPLOYER.
The bonus shall be paid on the second Thursday of each month calculated on the
payments received for shipments during the preceding month.
(b) After the end of each calendar year, the President/CEO and Management of
EMPLOYER shall determine the net profits before taxes of EMPLOYER for such prior
year and shall determine any additional bonus for such year payable to EMPLOYEE.
EMPLOYER, shall not be obligated to provide any bonus other than that in (a)
above. Any additional bonus awarded_shall be paid at such time or time, in such
amounts or installments, as the President/CEO and Management of EMPLOYER may
determine.
7. DUTIES. (a) EMPLOYEE is engaged as a Plastics and Utility
Products.Division Vice-President and, in addition, as President of NEWCO.
EMPLOYER- shall perform all usual and customary services as such an executive,
including but not limited to those set forth on Exhibit A, attached hereto and
made a part hereof employee's performance shall be subject to the supervision of
EMPLOYER's President/CEO and Management. The precise job description and the,
services to be rendered by EMPLOYEE may be defined, interpreted, curtailed, or
extended, from time to time, by determination of the President/CEO and
Management of EMPLOYER, provided, however, that any, interpretation,
curtailment, or extension is Consistent with the status of, and/or educational
experience required for, the responsibilities for which EM-PLOYEE has been
initially engaged hereunder. It is the intent of this provision to provide
EMPLOYER with Flexibility in assigning responsibilities to EMPLOYEE and/or
promoting EMPLOYEE, and this provision shall not be used to discipline,
embarrass, humiliate or harass EMPLOYEE.
B. EXTENT AND PLACE OF SERVICES, (a) Except as provided i n
subparagraph (b) below, EMPLOYEE agrees that this employment constitutes his
primary employment and understands that his primary loyalty and responsibility
is to EMPLOYER. Accordingly, except as provided in subparagraph (b) below,
EMPLOYEE, shall devote such adequate, reasonable, and proper =e, attention, and
energies to the business of EMPLOYER as shall be necessary or consistent with
such understanding and EMPLOYEE shall not, during the term of this Agreement be
engaged in any other business activity (whether or not such business activity is
pursued for gain, profit, or other pecuniary advantage), which conflicts with
EMPLOYEE'S employment responsibilities hereunder, without prior, written
authorization of EMPLOYER-R's President/CEO and Management. However, nothing
contained herein shall be construed as preventing EMPLOYEE from investing his
assets, in such form or manner as EMPLOYEE may select, whether or not such
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investment will require any services on EMPLOYEE part in the operation of the
affairs of the companies in which such investments are made.
(b) EMPLOYER acknowledges awareness that EMPLOYEE owns and operates a separate
spa industry enterprise, "ThermoSpa, Inc.". EMPLOYEE may continue to own and
operate such enterprise, provided that EMPLOYER, shall devote at least three (3)
full business days per week to his duties under this Employment Agreement.
9. WORKING FACILITIES. (a) Until such time as NEWCO shall commence
production of spa components, as defined in Paragraph 3(a) above, EMPLOYEE shall
use, his own current office space at his expense.
(b) Upon commencement of production of spa components, EMPLOYER shall furnish
EMPLOYEE with all necessary working facilities, including but not limited to, as
applicable, an equipped office, clerical help, and telephone/ facsimile/copying
services, suitable to his position and adequate for the performance of his
duties.
10. EXPENSES. EMPLOYEE is not authorized to incur expenses on behalf
of, or chargeable to, EMPLOYER, with respect to his business travel, including
transportation, lodging, food, entertainment, etc. except within such guidelines
as may be established from time to time by the President/CEO and Management of
EMPLOYER. EMPLOYER shall reimburse EMPLOYEE for authorized expenses within such
guidelines upon presentation by EMPLOYEE, from time to time, of an itemized
account of such expenditures in such form as EMPLOYER may require, together with
receipts or other proofs of the expenditures as may be required.
11, NON-DISCLOSE OF INFORMATION. (a) EMPLOYER recognizes and
acknowledges that, during the course of his employment, he will have access to
valuable ".Proprietary Information" as defined in subparagraph (b) below,
including, but not limited to Inventions, Work Product and/or Trade Secrets,
contractual arrangements and compensation arrangements with suppliers,
manufacturers, sub-contractors and customers 'of EMPLOYER; compensation
arrangements with sub-contractors, vendors, and outside personnel; costing,
pricing and bidding methods, procedures, and amounts; management and operating
procedures and software-, management information systems, etc.; marketing plans
and strategy, personnel policies and contractual arrangements, including job
assignments and compensation; customer leads; customer lists; and that such
informationon constitutes unique assets of the business of EMPLOYER and of which
EMPLOYER is the sole exclusive owner. EMPLOYEE will treat such Proprietary
Information on a confidential basis and will not, during or after his
employment, personally use or disclose a)), or any part of such Proprietary
Information to any person, firm, corporation, association, agency, or other
entity except as property required in the conduct of the business of EMPLOYER-R,
or except as authorized in writing by EMPLOYER, publish, disclose or authorize
anyone else to publish or disclose, any Proprietary Information of EMPLOYER with
which EMPLOYEE'S service may in any way acquaint EMPLOYEE. EMPLOYEE shall
surrender possession of all Proprietary Information, including especially all
Trade Secrets, to F-EMPLOYER upon any suspension or termination of EMPLOYEES
employment with the EMPLOYER. in the event of a breach., or threatened breach,
by EMPLOYEE, of the provisions of @ Paragraph, EMPLOYER shall be entitled to a
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preliminary, temporary and permanent injunction restraining EMPLOYEE from
disclosing in whole or in part, any such Proprietary Information and/or from
rendering any services to any person, firm, corporation, association, agency, or
other entity to whom such ' information in whole or in part, has been disclosed
or is threatened to be disclosed. Furthermore, nothing herein shall be construed
as prohibiting EMPLOYER from pursuing any other equitable or legal remedies
available to it for such breach or threatened breach including the recovery or
damages from EMPLOYEE.
(b) For purposes herein "Proprietary Information" shall not include information
which (i) is publicly available from a source other than EMPLOYEE or can be
lawfully obtained from a third party or parties in lawful possession thereof, or
(ii) is publicly release in writing by EMPLOYER, or (iii) is required to be
disclosed pursuant to the authority of any court or public agency.
(c) Nothing contained herein shall prohibit EMPLOYEE from continuing to
use information known to EMPLOYEE prior to the execution of @s Agreement;
however, EMPLOYEE shall not publish or disclose any such information which as a
result of EMPLOYEE services hereunder shall have become Proprietary Information
of EMPLOYER.
12. RESTRITIVE COVENANT. (a) During the term of this Agreement and for
a period of twelve (12) months after the termination of this Agreement and any
extension thereof, EMPLOYEE will not, Mazatlan the United States or any other
area of the, world in_which EMPLOYER is then operating, directly or indirectly,
compete with, own, manage, operate, control, be employed by, consult for,
participate in, perform services for., or be connected in any manner with the
ownership, management, operation or control of any business similar to the type
of business conducted by EMPLOYER, at the time of the termination of this
Agreement. EMPLOYER- shall not, directly or indirectly, compete with any
products or services marketed or offered by EMPLOYER at the time of termination,
or engage in any activities which could be deemed a conflict of Interest.
(b) EMPLOY-EE agrees that the "time", "geographic area", and "Scope of Business"
provisions of this restrictive covenant are reasonable and proper and have been
negotiated in connection with the sale of the spa nozzle concept "patent
pending" as well as in connection with his employment hereunder.
(c) EMPLOYER and EMPLOYEE agree, that if any court of competent jurisdiction
shall, for any reason, conclude that any portion of this covenant shall be too
restrictive, the court shall determine and apply lesser restrictions, it being
the intent of the parties that some, such restrictions shall be applicable.for
the protection of EMPLOYER and its shareholders.
(d) Notwithstanding the foregoing, EMPLOYE-E's continuation of the business of
ThermoSpa, Inc., as provided in Paragraph 8(b) shall not constitute a violation
of the provisions of this restrictive covenant, provided that, such business is
not expanded into competition with EMPLOYER!
13. NONSOLICITATION COVENANT. (a) For a period of two (2) years after
the termination of this Agreement (including any extension thereon (the "Post
Termination Period") EMPLOYE-E shall not, solicit, directly or indirectly, by
any means, any of the clients, accounts, employees or "Leads" of EMPLOYER during
the Post Termination Period. (b) EMPLOYER and EMPLOYE-E agree, that if any court
of competent jurisdiction shall, for any reason conclude that any portion of
this covenant shall be too restrictive, the court shall determine and apply
lesser restrictions, it being the intent of the parties that some such
restrictions shall be applicable for the protection of EMPLOYER and its
shareholders.
(c) This covenant has been given to induce EMPLOYER to enter into this Agreement
and provide EMPLOYEE'S job responsibilities and compensation.
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14. DISABILITY. Subject to the provisions of Paragraph 15(a), if the
EMPLOYEE is ,unable to perform his services by reason of illness or incapacity
for a period of more than twenty-one (21) consecutive work days, or more than
four (4) weeks in any two-month period, the compensation otherwise payable to
him thereafter during the continued period of such illness or incapacity may, at
the option of EMPLOYER be reduced by 50%. If such illness or incapacity shall
continue for a period of more than six (6) consecutive weeks, or more than 50%
of the time in any one year, such compensation may, at the option of EMPLOYE-R,
be stopped altogether, The EMPLOYEE'S full compensation shall be reinstated upon
his return to employment and the discharge of his full duties hereunder.
Notwithstanding anything herein to the contrary, except as provided in Paragraph
15(a), EMPLOYER may, at its option, terminate this Agreement at any time after
the employ-EE shall be absent from his employment, for whatever cause, for a
continuous period of more than six (6) months, and all obligations of employer
hereunder shall cease upon any such termination,
15. TERMINATION OF EMPLOYMENT. (a) Notwithstanding EMPLOYER'S right to
terminate EMPLOYEES employment as provided in this Paragraph 15, EMPLOYER'S
obligation to compensate EMPLOYEE at the agreed rate of base compensation
($75,000 per annum) shall continue through and until December 31, 1998
EMPLOYER-.R shall terminate its interest in NEWCO.
(b) EMPLOYER can terminate EMPLOYEE'S employment at any time for good cause.
Without intending to limit the definition of good cause hereby, good cause will
include:
(1) , the EMPLOYEE'S death;
(2) the occurrence of one of the following events:
(i) EMPLOYEE commits, is arrested, or is officially charged with a felony or any
crime involving moral turpitude or unethical conduct which in the good faith
opinion of the.F-NTLOYFR could impair his ability to perform his duties;
(ii) EMPLOYEE commits an act, or fails to take action in bad faith and to the
detriment of the F-EMPLOYER, and
(iii) in the good faith opinion of the President/CEO and Management of EMPLOYER,
the EMPLOYEE fails to fully and faithfully perform his obligations under this
Employment Agreement.
(c) The termination of EMPLOYEES servicez shall not constitute a termination of
the restrictive obligations and duties under Paragraphs I l.. 12 and 13.
(d) In the event of the bankruptcy (Chapter 7), reorganization (Chapter I 1) or
other termination of the business of the EMPLOYE-R or of any subsidiary on which
EMPLOYEE'S continued employment and compensation is dependent ', the provisions
of Paragraphs 12 and 13 shall continue in full force and effect only so long as
full base compensation by EMPLOYER shall construct.
16. ARBITRATION, Any controversy or claim arising out of, or relating to
this Agreement, or the breach thereof shall be settled by arbitration in New
York City, New York in accordance with the rules then pertaining of the American
Arbitration Association, but with all rights of discovery provided by the New
York Rules of Civil Procedure, and judgment upon the award rendered may be
entered in any court having jurisdiction thereof
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17. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by such other party. The failure of a party
to exercise any rights or privileges under this Agreement shall not be deemed to
be a waiver or extinguishment of such rights or privileges, all of which shall
continue to be exercisable.
18. BENEFIT. The rights and obligations of EMPLOYER under this Agreement
shall inure to the benefit of, and shall be binding upon, its successors and
assigns. The protection of Paragraphs 11, 12, and 13 shall inure to the benefit
of employer-R and any successors and assigns. The rights and obligations of
EMPLOYEE under this Agreement shall inure to the benefit of, and shall be
binding upon, his heirs, administrators, executors, successors and assigns.
19. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if either personally delivered
or sent by certified ' mail, to his residence in the case of, or to its
principal office in the case of EMPLOYER.
20. LIFE INSURANCE. EMPLOYER and/or one or more of its subsidiaries
may, in its discretion at any time after the execution of this Agreement, apply
for and procure, as owner and for its own benefit, insurance on the life of
EMPLOYEE, in such amounts and in such forms as EMPLOYER may choose. EMPLOYER
shall not be required to give EMPLOYEE any interest whatsoever in any such
policy or policies, (although nothing contained herein shall be deemed to
prohibit such) but EMPLOY-E shall, at the request of EMPLOYER, subject himself
to such medical examination, supply such information, and execute such
information releases and documents as may be required by the insurance company
or companies to whom EMPLOYER has applied for such insurance.
21. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties and may be modified only by agreement-in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
22. APPLICABLE LAW. This Agreement shall be governed for all purposes
by the laws of the State of New York. If any provision. of this Agreement is
declared void, such provision shall be deemed severed from this Agreement, which
shall otherwise remain in full force and effect.
WHEREOF, the parties hereto, intending to be legally bound, have, hereunto
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set
their hands and seals as of the day and year herein above written.
PREMO-PLAST, INC.
ATTEST:
By: _________________________
V. President
Secretary
WITNESS:
<PAGE>
Employment Agreement
with Ronald K. Premo
10.18
<PAGE>
EMPLOYMENT AGREEMENT
(and Agreement to serve as a Director)
THIS EMPLOYMENT AGREEMENT, made as of this 27th day of January, 1997, by
and between:
FIDELITY HOLDINGS, INC., a Nevada corporation having its executive
office at 80-02 Kew Gardens Road, Suite 5000, Kew Gardens, New York 11415
(hereinafter referred to as "EMPLOYER")
AND
RONALD K. PREMO, an adult individual residing at 383 Lathrop Road,
Plainfield, Connecticut 06374 (hereinafter referred to as "EMPLOYEE")
WITNESSETH THAT:
WHEREAS, EMPLOYEE has certain education, experience, background and
contacts which would be useful and helpful to EMPLOYER in its business and
EMPLOYER is desirous of employing EMPLOYEE in order to obtain the benefits of
such education, experience, background and contacts;
WHEREAS, EMPLOYEE is agreeable to being hired by EMPLOYER as an employee
and providing the benefits of his education, experience, background and contacts
to EMPLOYER;
WHEREAS, the parties have agreed upon the terms of such employment and
desire a written, formal contract to evidence their agreements;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
forbearances contained herein, and intending to be legally bound, the parties
have agreed as follows:
1. EMPLOYMENT. For the term provided in Paragraph 2, EMPLOYER hereby
employs EMPLOYEE, and EMPLOYEE hereby accepts that employment, upon the terms
and conditions hereinafter set forth.
2. TERM.
(a) This Agreement shall become effective as of 12:01 am, January 27,
1997.
(b) This Agreement, subject to the provisions of Paragraphs 14 and 15
below, shall continue and exist for an initial period from January 27, 1997 to
December 31, 1999.
(c) EMPLOYER shall have the option to extend the term of this Agreement
for an additional one (1) year period, i.e., to December 31, 2000. Such option
shall be exercised by EMPLOYER mailing notice to EMPLOYEE on or before September
30, 1999, of its intention to so extend the Agreement. If EMPLOYER shall not
exercise its extension option by September 30, 1999, this Agreement shall
terminate on December 31, 1999.
(d) EMPLOYER shall have an additional option to extend the term
<PAGE>
of this Agreement for a further one (1) year period, i.e., to December 31, 2001.
Such option shall be exercised by EMPLOYER mailing notice to EMPLOYEE on or
before September 30, 2000, of its intention to so extend the Agreement. If
EMPLOYER shall not exercise its extension option by September 30, 2000, this
Agreement shall terminate on December 31, 2000.
(e) Notwithstanding the foregoing, the term of this Agreement is
otherwise subject to the termination provisions contained hereafter.
3. COMPENSATION-BASE.
(a) For all services rendered under this Agreement, EMPLOYEE shall be
paid, as base compensation, such annual fee as shall be determined by the
President/CEO and Management of EMPLOYER, from time to time, but in no event
shall such compensation be at a rate of less than $100,000 per year. In the
event of any extension of this Agreement, such compensation shall be at a rate
of no less than $100,000 per year during each extension year. All such
compensation shall be subject to a Cost-of-Living Adjustment (COLA) annually
based upon the percentage increase in the Cost-of-Living Index, All Commodities,
for the New York City area. Subject to sub-paragraphs (b) and (c) below, such
compensation is to be payable in equal installments at intervals no longer than
semi-monthly. Such base compensation shall be in addition to such fringe
benefits and bonuses as provided elsewhere herein.
(b) EMPLOYEE acknowledges that EMPLOYER is seeking the funding of the
working capital for the operations of EMPLOYER and the entire Plastics and
Utility Products Division of Fidelity Holdings, Inc. Accordingly, regular
semi-monthly compensation shall not commence until thirty (30) days after
effectiveness of the proposed Registration Statement being filed with the
Securities and Exchange Commission. Until such time, all compensation due
hereunder shall be accrued, subject, nevertheless, to periodic "draws" against
such accru ' al to be made by EMPLOYER as its financial circumstances will
permit.
(c) For compensation purposes, EMPLOYER shall assign EMPLOYEE to its
divisional subsidiary, "Premo-Plast, Inc.", which is the head of the "Plastics
and Utility Products Division" and, provided that such assignment does not
require relocation, may assign EMPLOYEE to EMPLOYER may assign EMPLOYEE to one
or more of its subsidiaries and/or affiliates, to perform services consistent
with EMPLOYEE'S duties hereunder. In such event, EMPLOYEE may be separately
compensated by each such subsidiary and/or affiliate. All such compensation
shall be deducted from the compensation payable under sub-paragraph (a) above
and EMPLOYER shall pay EMPLOYEE only the difference between (i) the total of all
such compensations from subsidiaries and/or affiliates and (ii) the base
compensation. No assignment hereunder for compensation purposes shall require
that EMPLOYEE physically relocate.
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(d) The base compensation for each year of this Agreement, including any
extensions to this Agreement, shall be subject to a retroactive increase, based
upon an earnings per share formula (earnings of the "Plastics and Utility
Products bivision" on a consolidated basis divided by actual common shares of
EMPLOYER's public company parent issued and outstanding at December 31 of each
year, and not fully diluted) as follows:
Profits Per Increase as a
Common Share Percent of Base Compensation
$.OO - $.10 5%
$.ll - $.20 10%
$.21 - $.30 20%
$.31 - $.40 30%
$.41 - $.50 40%
$.51 - $.60 50%
$.61 - $.70 70%
$.71 - $.80 90%
$.81 - $.90 110%
$.91 - $1.00 130%
over $1.00 150%
This retroactive increase, if any should occur, is not a bonus but a merit
adjustment to the base compensation, and shall be based on the COLA-adjusted
base compensation in effect for the prior year. The calculation shall be made
based upon the annual audit of EMPLOYER's financial statements and shall be paid
in equal amounts for the balance of the then current year on the regular
paydays, commencing with the first payday following release of the audit. Any
retroactive increase shall not affect the baseline for subsequent calculations.
It is a separate adjustment from any other adjustment under any other plan.
(e) At the end of each calendar year, the President/CEO and Management
of EMPLOYER shall review the performance of EMPLOYEE for such year and, based
upon such evaluation, establish any increase in the base compensation payable to
EMPLOYEE for the succeeding calendar year, as COLA adjusted by sub-paragraph (a)
above. EMPLOYER shall not be obligated to provide any increase, in excess of the
increase in the Cost-of-Living Index, All Commodities, for the New York City
area during the prior calendar year.
4. COMPENSATION-FRINGE BENEFITS. EMPLOYEE shall receive at least the
following additional benefits, which may be extended or increased, but not
reduced, by EMPLOYER:
(a) Vacation - During the first year of this Agreement, EMPLOYEE shall
be entitled to paid vacation of three (3) weeks and during the second and any
extension year of this Agreement shall be entitled to paid vacation of four (4)
weeks, which shall not be accumulated from year to year if unused. EMPLOYEE
shall not be compensated for any unused vacation time.
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(b) Personal Leave - During each year of this Agreement, EMPLOYEE shall
receive ten (10) days paid personal leave, which shall not be accumulated from
year to year if unused. EMPLOYEE shall not be compensated for any unused
personal leave. "Personal leave" shall include sick leave and all other personal
time off not otherwise provided for.
(c) Automobile - During the term of this Agreement, EMPLOYER shall
provide EMPLOYEE with a car allowance of $500.00 per month. EMPLOYEE shall be
responsible for all purchase or lease costs and all costs for garaging, repairs,
maintenance, insurance, fuel, oil, and supplies. This amount shall commence with
the effective date of this Agreement and shall not be accrued.
(d) Health Insurance - During the term of this Agreement, EMPLOYER
shall provide EMPLOYEE with an allowance of $400.00 per month for the payment of
health insurance premiums. EMPLOYEE shall be responsible for all costs in excess
of such allowance. This amount shall commence with the effective date of this
Agreement and shall not be accrued.
(e) Other - EMPLOYEE shall receive such other medical, surgical,
hospital, dental or legal insurance and fringe benefits as are available to any
other officers/employees/consultants, consistent with EMPLOYERIS past practices
and such life/disability insurance, incentive or deferred compensation or
bonuses, pension/profit sharing plan and qualified and non-qualified stock
option plans as the Board of Directors of EMPLOYER shall establish. Nothing
contained in this Agreement shall be in lieu of any rights, benefits and
privileges to which EMPLOYEE may be entitled under any retirement, pension,
profit-sharing, insurance, hospital or other plans which may now be in effect or
which may hereafter be adopted. EMPLOYEE shall have the same rights and
privileges to participate in such plans and benefits as any other employee
during his period of employment.
5. COMPENSATION-BONUS. After the end of each calendar year, the
President/CEO and Management of EMPLOYER shall determine the net profits before
taxes of EMPLOYER for such prior year and shall determine any bonus for such
year payable to EMPLOYEE. EMPLOYER shall not be obligated to provide any bonus.
Any bonus awarded shall be paid at such time or times, in such amounts or
installments, as the President/CEO and Management may determine.
6. DUTIES. (a) EMPLOYEE is engaged as the Chief Executive Officer of
EMPLOYER's "Plastics and Utility Products Division" under the Florida
corporation "Premo-Plast, Inc." and, subj ect to the direction and approval of
EMPLOYER's President/CEO and Management, shall establish, supervise and manage
that division. EMPLOYEE shall provide advice and assistance to EMPLOYER's
officers, directors and key management. In cooperation with, and subject to,
EMPLOYER's President/CEO and Management, EMPLOYEE shall develop a divisional
developmental budget and forecast, including the acquisition,
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<PAGE>
development, testing, production/manufacture and sales/marketing/distribution of
divisional products and shall develop, for approval by EMPLOYER's President/CEO
and Management, an annual budget and forecast for the Plastics and Utility
Products Division. EMPLOYEE'S performance shall be subject to the supervision of
EMPLOYERIS President/CEO and Management. The precise consulting scope and the
specific services to be rendered by EMPLOYEE may be defined, interpreted,
curtailed, or extended, from time to time, by determination of the President/CEO
of EMPLOYER, provided, however, that any definition, interpretation,
curtailment, or extension is consistent with the status of, and/or educational
experience required for, the responsibilities for which EMPLOYEE has been
initially engaged hereunder. It is the intent of this provision to provide
EMPLOYER with flexibility in assigning responsibilities to EMPLOYEE and this
provision shall not be used to discipline, embarrass, humiliate or harass
EMPLOYEE. (b) In addition, at the option of EMPLOYER's management, and subject
to the approval of the EMPLOYER's shareholders, during the term of this
Agreement EMPLOYEE shall, from time to time, serve as a director of the EMPLOYER
if so elected. If elected to serve as a director, EMPLOYEE shall be indemnified
by EMPLOYER and shall receive the benefits of any O&D insurance. Removal and/or
failure to elect or reelect EMPLOYEE as a director shall not be a breach of this
Employment Agreement.
7. EXTENT AND PLACE OF SERVICES. (a) Except as provided in subparagraph
(b) below, EMPLOYEE agrees that this employment constitutes his primary
employment and understands that his primary loyalty and responsibility is to
EMPLOYER. Accordingly, except as provided in subparagraph (b) below, EMPLOYEE
shall devote such adequate, reasonable, and proper time, attention, and energies
to the business of EMPLOYER as shall be necessary or consistent with such
understanding and EMPLOYEE shall not, during the term of this Agreement be
engaged in any other business activity (whether or not such business activity is
pursued for gain, profit, or other pecuniary advantage), which conflicts with
EMPLOYEE's employment responsibilities hereunder, without prior, written
authorization of EMPLOYER's President/CEO and Management. , However, nothing
contained herein shall be construed as preventing EMPLOYEE from investing his
assets in such form or manner as EMPLOYEE may select, whether or not such
investment will require any services on EMPLOYEE'S part in the operation of the
affairs of the companies in which such investments are made.
(b) EMPLOYER acknowledges awareness that EMPLOYEE owns and operates a plastics
industry consulting firm called "R.K. Premo & Associates". EMPLOYEE may continue
to own and operate such enterprise, provided that EMPLOYEE shall devote at least
forty (40) hours per week to his duties under his Employment Agreement.
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8. WORKING FACILITIES. EMPLOYEE shall be furnished, at the expense of
EMPLOYER, with all necessary working facilities, including but not limited to an
equipped office, clerical help, and telephone/facsimile/copying services,
suitable to his position and adequate for the performance of his duties.
9. EXPENSES. EMPLOYEE is not authorized to incur expenses on behalf
of, or chargeable to, EMPLOYER, with respect to his business travel, including
transportation, lodging, food, entertainment, etc. except within such
guidelines as may be established from time to time by the President/CEO and
Management of EMPLOYER. EMPLOYER shall reimburse EMPLOYEE for authorized
expenses within such guidelines upon presentation by EMPLOYEE, from time to
time, of an itemized account of such expenditures in such form as EMPLOYER may
require, together with receipts or other proofs of the expenditures as may be
required.
10. OWNERSHIP OF INVENTIONS AND DEVELOPMENTS. (a) For purposes of this
Agreement, the following definitions shall apply:
(i) "Inventions" shall mean:
(A) All inventions, improvements, modifications, and enhancements,
whether or not patentable, made by EMPLOYEE during EMPLOYEE's employment by
EMPLOYER; and
(B) All inventions, improvements, modifications and enhancements
made by EMPLOYEE, during a period of one (1) year after any suspension or
termination of EMPLOYEE's employment by EMPLOYER, which relate, directly or
indirectly, to the past, present or then current business of the EMPLOYER.
(ii) "Work Product" shall mean all documentation, software, creative
works, programs, systems, source codes, Hardware Signatures, know-how and
information created, in whole or in part, by EMPLOYEE during EMPLOYEE's
employment by EMPLOYER, whether or not copyrightable or otherwise protectable,
excluding Inventions.
(iii) "Trade Secrets" shall mean all documentation, software, know-how
and information relating to the past, present and then current business of the
EMPLOYER, any intended business of EMPLOYER of which EMPLOYEE has knowledge, or
any plans therefor, or relating to the past, present or then current business of
a third party or plans therefor that are disclosed to the EMPLOYER, which the
EMPLOYER does not disclose to third parties without restrictions on use or
further disclosure.
(b) To provide a benchmark, EMPLOYEE represents and warrants that as of
the execution of this Agreement there are no Inventions or Work Products
developed by EMPLOYEE which the EMPLOYEE asserts are to be excluded from the
provisions of this Paragraph 10.
(c) EMPLOYEE shall promptly disclose to EMPLOYER all Inventions and
keep accurate records relating to the conception and reduction to practice of
all Inventions. Such records shall be the sole and exclusive property of
EMPLOYER, and the EMPLOYEE shall surrender
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possession of such records to the EMPLOYER upon any suspension or termination of
EMPLOYEE's employment with the EMPLOYER.
(d) EMPLOYEE hereby assigns to the EMPLOYER, without further
consideration to the EMPLOYEE, the entire right title and interest in and to the
Inventions and Work Product and in and to all proprietary rights therein or
based thereon. EMPLOYEE agrees that the Work Product shall be deemed to be a
"work made for hire". EMPLOYEE shall execute all such assignments, oaths,
declarations and other documents as may be prepared by EMPLOYER to effect the
foregoing.
(e) EMPLOYEE shall provide EMPLOYER with all reasonable information,
documentation, and assistance EMPLOYER may request to perfect, enforce, or
defend the proprietary rights in or based on the Inventions, Work Product or
Trade Secrets. EMPLOYER, in its sole discretion, shall determine the exact
extent of the proprietary rights, if any, to be protected in or based on the
Inventions and Work Product. All such information, documentation and assistance
shall be provided at no additional expense or cost to the EMPLOYER, except for
out-of-pocket expenses which the EMPLOYEE incurs at the EMPLOYER's request.
(f) In the event of termination of this Employment Agreement, EMPLOYER
shall be entitled to advise any new employer of EMPLOYEE of his rights and
obligations hereunder for a period of one year following termination of this
Employment Agreement.
11. NON-DISCLOSURE OF INFORMATION. (a) EMPLOYEE recognizes and
acknowledges that, during the course of his employment, he will have access to
valuable proprietary information, including, but not limited to Inventions, Work
Product and/or Trade Secrets, contractual arrangements and compensation
arrangements with sub-contractors and customers of EMPLOYER; compensation
arrangements with sub contractors, vendors, and outside personnel; costing,
pricing and bidding methods, procedures, and amounts; management and operating
procedures and software; management information systems, etc.; marketing plans
and strategy; personnel policies and contractual arrangements, including job
assignments and compensation; customer leads; customer lists; and that such
information constitutes unique assets of the business of EMPLOYER and of which
EMPLOYER is the sole and exclusive owner. EMPLOYEE will treat such proprietary
information on a confidential basis and will not, during or after his
employment, personally use or disclose all, or any part of, such proprietary
information to any person, firm, corporation, association, agency, or other
entity except as properly required in the conduct of the business of EMPLOYER,
or except as authorized in writing by EMPLOYER, publish, disclose or authorize
anyone else to publish or disclose, any secret or confidential matter relating
to any aspect of the business of EMPLOYER with which EMPLOYEEIS service may in
any way acquaint EMPLOYEE. EMPLOYEE shall surrender possession of all
proprietary information, including especially all Trade Secrets, to EMPLOYER
upon any suspension or termination of
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EMPLOYEE's employment with the EMPLOYER. In the event of a breach, or threatened
breach, by EMPLOYEE, of the provisions of this Paragraph, EMPLOYER shall be
entitled to a preliminary, temporary and permanent injunction restraining
EMPLOYEE from disclosing in whole or in part, any such proprietary information
and/or form rendering any services to any person, firm, corporation,
association, agency, or other entity to whom such information, in whole or in
part, has been disclosed or is threatened to be disclosed. Furthermore, nothing
herein shall be construed as prohibiting EMPLOYER from pursuing any other
equitable or legal remedies available to it for such breach or threatened
breach, including the recovery or damages from EMPLOYEE. (b) EMPLOYER recognizes
that the EMPLOYEE may possess proprietary information of third parties and that
EMPLOYEE may have ongoing obligations to third parties with respect thereto.
EMPLOYER expressly requires that EMPLOYEE shall honor such ongoing obligations
to such third parties and that the EMPLOYEE shall not use, for the benefit of
EMPLOYER, or disclose to EMPLOYER, any such proprietary information.
12. RESTRICTIVE COVENANT. (a) During the term of this Agreement and for
a period of twelve (12) months after the termination of this Agreement and any
extension thereof, EMPLOYEE will not, within the United States or any other area
of the world in which EMPLOYER is then operating, directly or indirectly,
compete with, own,, manage, operate, control, be employed by, consult for,
participate in, perform services for, or be connected in any manner with the
ownership, management, operation or control of any business similar to the type
of business conducted by EMPLOYER at the time of the termination of this
Agreement. EMPLOYEE shall not, directly or indirectly, compete with any products
or services marketed or offered by EMPLOYER at the time of termination, or
engage in any activities which could be deemed a conflict of interest.
(b) EMPLOYEE agrees that the "time", "geographic area", and "Scope of
Business" provisions of this restrictive covenant are reasonable and proper and
have been specifically negotiated in connection with his employment and
compensation hereunder.
(c) EMPLOYER and EMPLOYEE agree, that if any court of competent
jurisdiction shall, for any reason, conclude that any portion of this covenant
shall be too restrictive, the court shall determine and apply lesser
restrictions, it being the intent of the parties that some such restrictions
shall be applicable for the protection of EMPLOYER and its shareholders.
(d) Notwithstanding the foregoing, EMPLOYEE's continuation of the
businesses of R.K. Premo & Associates, as provided in Paragraph 7(b) shall not
constitute a violation of the provisions of this restrictive covenant, provided
that such business is not expanded into competition with EMPLOYER.
13. NONSOLICITATION COVENANT. (a) For a period of twelve (12
8
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months after the termination of this Agreement (including any extension thereof)
(the "Post Termination Period") EMPLOYEE shall not, solicit, directly or
indirectly, by any means, any of the clients, accounts, employees or "leads" of
EMPLOYER during the Post Termination Period.
(b) EMPLOYER and EMPLOYEE agree, that if any court of competent
jurisdiction shall, for any reason conclude that any portion of this covenant
shall be too restrictive, the court shall determine and apply lesser
restrictions, it being the intent of the parties that some such restrictions
shall be applicable for the protection of EMPLOYER and its shareholders.
(c) This covenant has been given to induce EMPLOYER to enter into this
Agreement and provide EMPLOYEEIS job responsibilities and compensation.
14. DISABILITY. (a) If the EMPLOYEE is unable to perform his services
by reason of illness or incapacity for a period of more than twenty-one (21)
consecutive work days, or more than four (4) weeks in any two-month period, the
compensation otherwise payable to him thereafter during the continued period of
such illness or incapacity may, at the option of EMPLOYER be reduced by 40%. If
such illness or incapacity shall continue for a period of more than six (6)
consecutive weeks, or more than 50% of the time in any one year, such
compensation may, at the option of EMPLOYER, be stopped altogether. The
EMPLOYEE'S full compensation shall be reinstated upon his return to employment
and the discharge of his full duties hereunder. Notwithstanding anything herein
to the contrary, EMPLOYER may, at its option, terminate this Agreement at any
time after the EMPLOYEE shall be absent from his employment, for whatever cause,
for a continuous period of more than six (6) months, and all obligations of
EMPLOYER hereunder shall cease upon any such termination.
(b) At any time, and from time to time, EMPLOYER may purchase
disability insurance to compensate EMPLOYEE during periods of disability, either
pursuant to sub-paragraph 4(d) or otherwise. In the event that such insurance is
purchased, during any period for which benefits are being paid by such insurance
sub-paragraph (a) above shall be inapplicable. In lieu thereof, EMPLOYER shall
compensate EMPLOYEE at the agreed base compensation rate less the benefits paid
by such insurance.
15. SUSPENSION. As used in this Agreement, the term "suspension" shall
mean:
(a) uncompensated military leave;
(b) uncompensated extended personal leave, authorized by EMPLOYER;
(c) temporary discontinuance of compensation due to disability, whether
or not compensated; and
(d) temporary discontinuance of employment, without termination, for
the convenience of either of the parties.
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16. TERMINATION. (a) EMPLOYER can terminate EMPLOYEE employment at any
time for good cause. Without intending to limit the definition of good cause
hereby, good cause will include:
(1) the EMPLOYEEIS death;
(2) the occurrence of one of the following events:
(i) EMPLOYEE commits, is arrested, or is officially charged with a f
elony or any crime involving moral turpitude or unethical conduct which in the
good faith opinion of the EMPLOYER could impair his ability to perform his
duties; and
(ii) in the good faith opinion of the President/CEO and Management, the
EMPLOYEE fails to fully and faithfully perform his obligations under this
Employment Agreement, and does not cure such failure within ten (10) working
days after receipt of notice of any failure.
(b) The termination of EMPLOYEEIS services shall not constitute a
termination of the restrictive obligations and duties under Paragraphs 10, 11,
12 and 13, except as otherwise provided in this Employment Agreement.
(c) In the event of the bankruptcy (Chapter 7), reorganization (Chapter
11) or other termination of the business of the EMPLOYER or of any subsidiary on
which EMPLOYEEIS continued employment and compensation is dependent, the
provisions of subparagraph 10(a) (i) (B) and Paragraphs 12 and 13 shall continue
in full force and effect only so long as full base compensation by EMPLOYER
shall continue.
17. SIGNING BONUS. (a) As a "signing bonus", EMPLOYER's parent,
Fidelity Holding's Inc., shall promptly issue to EMPLOYEE Thirty Thousand
(30,000) shares of its Common Stock, ownership to which shall vest as provided
below. The purpose of immediate issuance is to establish EMPLOYEE as a
stockholder as of the starting date of employment, subject to such subsequent
vesting, for purposes of dividends, stock splits, and other capital
transactions. EMPLOYEE represents and warrants that he is acquiring such shares
for personal investment purposes and not with a view to resale or distribution;
the certificates for such shares shall bear a legend on the face thereof
indicating that such shares have not been registered under the Securities Act of
1933 and are restricted as to further transfer.
(b) Ownership to the 30,000 shares shall vest as follows:
(i) upon completion of the first year of employment, ten thousand
(10,000) shares shall vest;
(ii) upon completion of the second year of employment, ten thousand
(10,000) shares shall vest; and
(iii) upon completion of the third year of employment, ten thousand
(10,000) shares shall vest.
The certificates for such shares shall bear a legend on the face
thereof indicating that such shares have not vested and cannot be sold,
transferred, assigned or otherwise disposed of until and unless they have
vested.
(c) As shares shall vest, EMPLOYEE may, subject to restrictions imposed
by applicable securities laws and regulations transfer,
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assign or otherwise dispose of the vested shares. EMPLOYEE may not sell,
transfer, assign or otherwise dispose or any shares not vested.
(d) During the three year vesting period, all dividends shall be paid
to EMPLOYEE to the extent that shares are vested. Dividends payable with respect
to shares not yet vested, shall be held by Fidelity Holdings, Inc. and shall be
paid over to EMPLOYEE proportionately as the shares shall vest. As shares shall
vest, all accrued dividends with respect thereto shall vest also. Stock splits
and other capital transactions shall also follow the status of the original
shares; i.e., vested or unvested.
18. ARBITRATION. Any controversy or claim arising out of, or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in New
York City, New York in accordance with the rules then pertaining of the American
Arbitration Association, but with all rights of discovery provided by the New
York Rules of Civil Procedure, and judgment upon the award rendered may be
entered in any court having jurisdiction thereof. The losing party shall pay all
costs and fees, including reimbursement of the attorney's fees of the winning
party.
19. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by such other party. The failure of a party
to exercise any rights or privileges under this Agreement shall not be deemed to
be a waiver or extinguishment of such rights or privileges, all of which shall
continue to be exercisable.
20. BENEFIT. The rights and obligations of EMPLOYER under this
Agreement shall inure to the benefit of, and shall be binding upon it, its
successors and assigns. The protection of Paragraphs 10, 11 and 12 shall inure
to the benefit of EMPLOYER and any successors and assigns. The rights and
obligations of EMPLOYEE under this Agreement shall inure to the benefit of, and
shall be binding upon, his heirs, administrators, executors, successors and
assigns.
21. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by certified mail to
his residence in the case of EMPLOYEE, or to its principal office in the case of
EMPLOYER.
22. LIFE INSURANCE. EMPLOYER and/or one or more of its subsidiaries
may, in its discretion at any time after the execution of this Agreement, apply
for and procure, as owner and for its own benefit, insurance on the life of
EMPLOYEE, in such amounts and in such forms as EMPLOYER may choose. EMPLOYER
shall not be required to
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give EMPLOYEE any interest whatsoever in any such policy or policies, (although
nothing contained herein shall be deemed to prohibit any such arrangement) but
EMPLOYEE shall, at the request of EMPLOYER, subject himself to such medical
examination, supply such 'information, and execute such information releases and
documents as may be required by the insurance company or companies to whom
EMPLOYER has applied for such insurance.
23. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties and may be modified only by agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
24. APPLICABLE LAW. This Agreement shall be governed for all purposes
by the laws of the State of New York. If any provision of this Agreement is
declared void, such provision shall be deemed severed from this Agreement, which
shall otherwise remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto set their hands and seals as of the day and year herein above
written.
FIDELITY HOLDINGS, INC.
ATTEST:
By:__________________________________
President
________________________
Secretary
WITNESS:
_______________________ __________________________________
RONALD K. PREMO
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FIDELITY HOLDINGS, INC.
Company Subsidiaries as of March 3, 1997
---------------------------
FIDELITY HOLDINGS, INC.
---------------------------
| |
| |
| |
----------------- --------------------------
| |
- -------------------------------- --------------------
COMPUTER BUSINESS SCIENCE, INC.
(CBS) PREMO-PLAST, INC.
- ------------------------------------- --------------------
| | | | |
| | | | |
| | | | |
- ------------- | --------------- ------------------------------ |
| Major Fleet & |
CBS (Israel) | Leasing Corp. Reynard Service Bureau, Inc. |
- ------------- | --------------- ------------------------------ |
| | |
--- | |
| | |
- ---------------------- | -------------------
InfoSystems |
786710 (Ontario) Ltd. | NEWCO (Pinciaro)
- ---------------------- | -------------------
|
|
|
| -------------------------
|---- Major Acceptance Corp.
-------------------------
<PAGE>
24.1
<PAGE>
We consent to the incorporation by reference in the registration statement of
Fidelity Holdings Inc. and subsidiaries of Form 10 of our report dated February
27, 1997 on audit of the consolidated financial statements of Fidelity Holdings
Inc. and subsidiaries as of December 31, 1996 and 1995, and for the year ended
December 31, 1996 and period ended December 31, 1996.
Peter C. Cosmas Co., CPAs
---------------------------------
/s/ Peter C. Cosmas Co., CPAs
400 Madison Ave.
New York, NY 10017
(212) 752-5353
fax (201) 838-0585
