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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[XX] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997 or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number: 0-29182
FIDELITY HOLDINGS, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 11-3292094
- - --------------------------------- --------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
80-02 Kew Gardens Road, Suite 5000
Kew Gardens, New York 11415
----------------------------------------
(Address of principal executive offices)
(718) 520-6500
----------------
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes XX No
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: The number of shares of the
registrant's common stock outstanding as of May 12, 1997 was 6,316,700.
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FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
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FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
UNAUDITED AUDITED
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 185,317 $ 574,486
Net Investment in direct financing leases, current 1,402,978 1,390,598
Notes receivable - officer shareholder 143,206 142,659
Accounts receivable 598,703 179,837
Inventories 1,215,370 1,494,020
Other current assets 285,851 45,349
---------------- ----------------
Total current assets 3,831,425 3,826,949
Net investment in direct financing leases,
net of current portion 1,018,916 1,059,287
Property and equipment 1,064,987 1,023,523
Excess of costs over net assets acquired 2,595,269 2,645,269
Other intangible assets 473,974 483,474
Other assets 176,929 278,362
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Total assets $ 9,161,500 $ 9,316,864
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 367,301 $ 419,052
Accrued expenses 160,281 522,026
Current maturities of long-term debt 668,698 643,976
Accrued income taxes 34,000 4,378
Deferred revenue 141,072 67,409
Due to affiliates 1,293,947 1,404,079
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Total current liabilities 2,665,299 3,060,920
Long-term debt, less current maturities 536,021 515,609
Income taxes 488,000 424,000
Other 57,900 72,122
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Total liabilities 3,747,220 4,072,651
Commitments
Stockholders' equity
Preferred stock, .01 par value;
2,000,000 shares authorized,
250,000 shares issued and outstanding
in 1997 and none in 1996 2,500 2,500
Common stock, .01 par value
50,000,000 shares authorized,
6,316,700 shares issued and
outstanding in 1997 and
6,279,200 in 1996 63,167 62,792
Additional paid in capital 4,509,108 4,509,108
Cumulative translation adjustment 287 264
Retained earnings 839,218 669,549
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Total stockholders' equity 5,414,280 5,244,213
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Total liabilities and stockholders' equity $ 9,161,500 $ 9,316,864
================ ================
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FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
March 31, March 31,
1997 1996
UNAUDITED UNAUDITED
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<S> <C> <C>
Revenues:
Computer products and
telecommunications equipment $ 957,864 $ 0
Leasing income 259,158 0
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Total revenues 1,217,022 0
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Operating expenses:
Cost of products sold 205,377 0
Selling, general and
administrative expenses
Products 467,609 146,547
Leasing 195,685 0
Amortization of intangible assets 59,500 0
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928,171 (146,547)
------------------- ---------------------
Operating income (loss) 288,851 (146,547)
Other income (expense)
Interest expense (43,228) (8,750)
Interest income 959 0
Income on joint venture 21,087 0
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Income (loss) before provision for income taxes 267,669 (155,297)
Provision for income taxes 98,000 0
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Net income (loss) $ 169,669 $ (155,297)
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Net income (loss) per common share $ .03 $ (.03)
=================== =====================
</TABLE>
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FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
March 31, March 31,
1997 1996
UNAUDITED UNAUDITED
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 169,669 $ (155,297)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Amortization of intangible assets 59,500 8,929
Depreciation 101,861 0
Deferred income taxes 64,000 0
(Increase) decrease in assets:
Net investment in direct financing leases 27,991 0
Notes receivable (547) 0
Accounts receivable (418,866) 0
Inventories 278,650 0
Other assets (139,069) (26,775)
Increase (decrease) in liabilities:
Accounts payable (51,751) 84,945
Accrued expenses (361,745) 0
Accrued income taxes 29,622 0
Deferred revenue 73,663 629,000
Due to affiliates (110,132) 0
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Net Cash provided (used) by operating activities (277,154) 540,802
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Cash flows from investing activities:
Additions to property and equipment 143,325 6,360
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Net cash used in investing activities 143,325 6,360
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Cash flows from financing activities:
Proceeds from long-term debt-net 30,935 0
Proceeds from issuance of common 375 87,000
stock and exercise of warrants net of expenses
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Net cash provided by financing activities 31,310 87,000
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Net increase (decrease) in cash and cash equivalents (389,169) 621,442
Cash and cash equivalents, beginning of period 574,486 39,062
----------------- ----------------
Cash and cash equivalents, end of period $ 185,317 $ 660,504
================= ================
</TABLE>
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FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THREE MONTHS ENDED MARCH 31, 1997
- - --------------------------------------------------------------------------------
Balance
December 31, 1995 $ (6,417)
Net Income 675,966
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Balance
December 31, 1996 669,549
Net Income 169,669
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Balance
March 31, 1997 $ 839,218
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
BUSINESS OPERATIONS:
During the first quarter, the Company and its subsidiaries continued with their
business plans, as outlined in Form 10-SB.
The Company
The parent company proceeded with the development of the proposed new Division
for Automobile Sales (Dealerships) with the execution of agreements with Harold
Bendell and Bruce Bendell for the acquisition of certain automobile dealerships,
partially in cash (from Harold Bendell) and partially in stock (from Bruce
Bendell). (See Part II, Item 5)
Computer Telephony and Telecommunications Division
Computer Business Sciences, Inc. ("CBS") sold three (3) Talkie Power Web Line
Machines, two (2) of which were intended for the Dominican Republic and one (1)
of which was intended for Jamaica. All three machines have now been installed
and put into service.
Reynard Service Bureau, Inc. is still commencing its operations and all services
were billed by CBS without any inter-company adjustments for the first quarter.
CBS Israel continued its R&D projects, including certain projects proposed to
make that subsidiary a profit center in addition to providing R&D and high level
product support for both CBS and 786710 (Ontario) Limited.
786710 (Ontario) Limited, called Info Systems, continued its sales of software
products. However, during the quarter it also continued marketing planning for
the use of a leasing program to be backed by Major Fleet & Leasing Corp.
Major Fleet and Leasing Corp. was not used for financing of products and
services for 786710 (Ontario) Limited; its business of leasing motor vehicles
expanded by approximately an additional $600,000 of motor vehicles under lease.
Major Acceptance Corp. spent the first quarter in completing its organization
and in developing the required documents for an issuance of debentures to secure
financing to replace certain of the bank lines currently used by Major Fleet &
Leasing Corp.
Plastics and Utility Products Division
During the first quarter this division completed its acquisition of the
hydrotherapy fixtures, to be manufactured and marketed by a subsidiary-to-be
organized. All operations were conducted through Premo-Plast, Inc. During the
first quarter, Premo-Plast initiated engineering (for production configuration)
of the hydrotherapy spa fixtures and the "Armored Conduit". In addition, a
market analysis for the hydrotherapy spa fixtures was initiated.
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LIQUIDITY AND CAPITAL RESOURCES:
During the first quarter, the Company expended cash in the payment of Accounts
Payable and in completion of the production of the Talkie Power Web Line
Machines sold during the fourth quarter of 1996. This resulted in a reduction of
Accounts Payable and a reduction in Accrued Expenses. However, the reduction in
Accrued Expenses was also due to the fact that actual costs incurred were
somewhat less than the estimate accrued at the end 1996. The net effect of these
transactions was a reduction in cash from $574,486 at year end to $185,317 at
the end of the first quarter.
During the second quarter, as forecasted, sales of Talkie Power Web Line
Machines continues and as the result of deposits on additional machines the
Company, as of May 13, 1997, had in excess of $600,000 in available cash.
Management continues to believe that such cash, taken together with collection
of accounts receivable and continuing operations is sufficient for 1997.
However, the Company's purchase from Harold Bendell of his interest in certain
automobile dealerships for cash of $4,000,000 requires additional capital for
completion. The Company is currently seeking a portion of the financing for that
purchase from a private placement and will seek the balance, as well as
additional capital for the development of other operations, including especially
the Plastics and Utility Products Division, by means of a public offering.
RESULTS OF OPERATIONS:
During the first quarter, the Company had revenues from four sources:
1. sales, by CBS, of Talkie Power Web Line Machines;
2. sales, by Info Systems, of software; and
3. participating net revenues from the Nissko Joint Venture;
and
4. leasing revenues from Major Fleet & Leasing Corp.
CBS sold three (3) Talkie Power Web Line Machines (2 for the Dominican Republic
and 1 for Jamaica) for $750,000, of which $650,000 was paid during the quarter
and the balance has been paid in the second quarter. These sales accounted for
approximately 75% to 80% of the Company's income for the first quarter.
786710 (Ontario) Limited, called Info Systems, had revenues (after elimination
of inter-company transactions) translated into U.S. Dollars of $207,864. In
addition, Info Systems received various deposits, reported as Deferred Revenues.
The Nissko Joint Venture contributed $21,087 which does not include expenses
paid to CBS. All expenses accrued by the Nissko Joint Venture were paid during
the first quarter; expenses of approximately $77,000 were accrued during the
first quarter and are expected to be paid during the second quarter. Such
receipts are applied against the expenses incurred in providing those services
to the Joint Venture and accordingly is not recorded as revenue.
<PAGE>
Major Fleet & Leasing Corp. had gross revenues during the first quarter of
$259,158, all of which was from the leasing of motor vehicles, and had a pre-tax
net profit of $20,104.
SUMMARY:
The Company and its subsidiaries continue their business plans and their
development as reported in Form 10-SB. Those subsidiaries currently in operation
and creating revenues are Computer Business Sciences, Inc. ($750,000), 786710
(Ontario) Limited (US$207,864 after elimination of inter-company transactions),
Major Fleet & Leasing Corp. ($259,158) for total revenues of $1,217,022 for the
first quarter. Net income before tax contributed by Major Fleet & Leasing Corp.
was $20,104. Of the total net income after a provision for income taxes of
$169,669 approximately 75% to 80% was due to the sales of Talkie Power Web Line
Machines by CBS. Although cash on hand at the end of 1996 was expended in
payment of Accounts Receivable and completion of the production of the Talkie
Power Web Line Machines sold at the end of 1996, subsequent deposits on
additional machines has increased the Company's cash position to over $600,000.
Management believes that its cash position, taken with the anticipated revenues
from on-going operations and the collection of Accounts Receivable will be
sufficient to maintain the Company's liquidity for 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not engaged in any litigation other than as previously
reported. The suit by the Company and its two subsidiaries against Michael Marom
and M.M. Telecom, Corp. and the counterclaim by the defendants has been inactive
although it is anticipated that discovery will commence shortly. The suit by
Touch Tone Connections against the Canadian subsidiary is in discovery, with
some settlement discussions. The Company has been indemnified in this action by
the Baraks in connection with the Company's purchase of the Canadian subsidiary.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
On March 3, 1997 the Company began the process of acquiring certain automobile
dealerships from Bruce Bendell and Harold Bendell by the execution of a Stock
Purchase Agreement with Harold Bendell, a Plan and Agreement of Merger with
Bruce Bendell, and a Management Agreement to assure the continuity of the
experienced management of the Bendells for the dealerships being acquired.
Copies of the documents are included as Exhibits to this Form 10-SB.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
10.19 Plan and Agreement of Merger
10.20 Stock Purchase Agreement
10.21 Management Agreement
10.22 Employment Agreement with Moise Benedid
Reports
None
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIDELITY HOLDINGS, INC.
Date: May 14, 1977 __________________________________
Doron Cohen, President/CEO
Date: May 14, 1977 __________________________________
Doron Cohen, Treasurer/CFO
<PAGE>
PLAN AND AGREEMENT OF MERGER
This is a Plan and Agreement of Merger ("Agreement") among FIDELITY HOLDINGS,
INC., a Nevada corporation ("Fidelity"), MAJOR AUTOMOTIVE GROUP, INC., a New
York corporation (the "Merging Corporation") MAJOR ACQUISITION CORP., a New York
corporation (the "Surviving Corporation"), and BRUCE BENDELL (the "Shareholder
of the Merging Corporation").
BACKGROUND
A. Fidelity is the parent corporation of the Surviving Corporation.
B. The Shareholder of the Merging Corporation is the sole shareholder of the
Merging Corporation and he desires to merge that entity with the Surviving
Corporation pursuant to the terms and conditions of this Agreement.
C. Fidelity desires to merge the Surviving Corporation with the Merging
Corporation in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, with the foregoing recital paragraphs incorporated herein by
this reference, and for other good and valuable consideration acknowledged to
have been exchanged and received, the parties hereto, intending to be legally
bound, hereby agree as follows:
<PAGE>
ARTICLE 1
PLAN OF MERGER
1.1 Plan Adopted. A plan of merger of the Merging Corporation and the
Surviving Corporation, pursuant to the provisions of Article 9 of the N.Y.C.L.S.
Bus. Corp. SYMBOL 255 F "Symbol" 901 et seq., and Sections 368(a)(1)(A) and/or
368(a)(1)(C) of the Internal Revenue Code, is adopted as follows:
1.1.1 The MergingCorporation shall be merged with and into the Surviving
Corporation, to exist and be governed by the laws of the State of New York.
1.1.2 The name of the Surviving Corporation shall be Major Acquisition
Corp., t/a Major Automotive Group, Inc. Upon completion of the transactions set
forth herein, the Surviving Corporation (with the consent of the Merging
Corporation, if necessary) may, at its option, change its name to Major
Automotive Group, Inc.
1.1.3 When thisAgreement shall become effective, the separate corporate
existence of the Merging Corporation shall cease, and the Surviving Corporation
shall succeed, without other transfer, to all of the rights and property of the
Merging Corporation, and shall be subject to all the debts and liabilities of
the Merging Corporation in the same manner as if the Surviving Corporation had
itself incurred them. All rights of creditors and all liens on the property of
each constituent corporation shall be preserved unimpaired, limited in lien to
the property affected by the liens immediately prior to the merger.
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1.1.4 The Surviving Corporation will carry on business with the assets of
the Merging Corporation, as well as the assets of the Surviving Corporation.
1.1.5 The shareholder of the Merging Corporation will surrender all of
their shares in the manner hereinafter set forth.
1.1.6 In exchange for the shares of the Merging Corporation surrendered
by the shareholders of the Merging Corporation, Fidelity will issue and transfer
to the shareholders of the Merging Corporation on the basis set forth in Article
4 below, shares of its voting convertible preferred stock.
1.1.7 Fidelity, the sole shareholder of the Surviving Corporation, will
retain its shares in the Surviving Corporation.
1.1.8 No change in the Certificate of Incorporation of the Surviving
Corporation is necessary, except insofar as the Surviving Corporation may change
its name to Major Automotive Group, Inc. or it may file a fictitious/alternate
name certificate for the use of such name.
1.2 Closing: Closing Date: Effective Date. The closing of this transaction
(the "Closing") shall occur on a mutually agreed upon date at the offices of
Fidelity, which date shall not be more than one hundred twenty (1 20) days from
the execution hereof, unless mutually extended (the "Closing Date"). In the
event the one hundred twenty days expires and the parties do not agree to
extend, this Agreement shall be deemed null and void, ab initio. The effective
date of the merger ("Effective Date") shall be the date on which the Certificate
of Merger is filed with the Secretary of State of New York pursuant to Article 9
of N.Y.C.L.S. Bus. Corp. SYMBOL 255 \f "Symbol" 906. The foregoing
notwithstanding, the Closing shall not occur
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and the Cetificate of Merger shall not be executed and/or filed until all of
conditions set forth in this Agreement have been satisfied to the satisfaction
of the Board of Directors of the Merging Corporation and Fidelity.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CONSTITUENT CORPORATIONS
2.1 Representations and Warranties. For purposes of this Agreement, "Material
Adverse Effect" means, with respect to Fidelity, the Merging Corporation, the
Surviving Corporation, and any of those corporations set forth on the attached
Exhibit "A", which is made a part hereof by this reference (the "Owned
Corporations"), a material adverse effect on the business, operations, or
financial condition of any such entity. For purposes of this Agreement, 'Taxes"
shall mean all taxes, fees, levies, duties, charges or other assessments imposed
by any federal, state, county, local or foreign government, taxing authority,
subdivision or agency thereof, including interest, penalties, additions to tax
or additional amounts thereto.
2.2 Merging Corporation and Owned Corporations. As a material inducement to
Fidelity and to the Surviving Corporation to execute this Agreement and perform
their obligations under this Agreement, the Merging Corporation and the Owned
Corporations represents and warrants to Fidelity and to the Surviving
Corporation to the best of its
2.2.1 Good Standing. They are corporations duly organized, validly
existing and in good standing under the laws of the State of New York, with
corporate
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power and authority to own property and carry on their respective businesses as
they are now being conducted.
2.2.2 Assets Owned. The Merging Corporation shall own on or before the
Closing Date those number of shares, as set forth on the aforementioned Exhibit
"A," which represent the percentage ownership set opposite each number of
shares, of the Owned Corporations for which Factory Approvals, as hereinafter
defined, shall have been obtained. The Owned Corporations own those assets set
forth on Exhibit "B" attached hereto and made a part hereof by this reference,
subject to the liabilities disclosed on the Financial Statements, including but
not limited to any and all "LIFO" debt which shall be adjusted as of the Closing
Date and assumed by the Surviving Corporation, which assets are used in an
automobile dealership business. The parties expressly acknowledge and agree that
the Owned Corporations are all Subchapter S corporations for federal and state
purposes and as such, have built up cash reserves ("Cash Reserves") which have
been previously taxed to the Shareholder of the Merging Corporation. The
Shareholder of the Merging Corporation reserves the right, in his sole
discretion, to withdraw the Cash Reserves, any paid in Capital and any
Shareholder loans prior to the Closing Date.
2.2.3 Consents and Approvals-, No Violations: Change in Control.
(i) Except for applicable requirements of New York securities law,
no filing with, and no permit, authorization, consent or approval of any public
body or authority is necessary for the consummation by the Merging Corporation
or any of the Owned Corporations of the transactions contemplated by this
Agreement.
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(ii) Neither the execution and delivery of this Agreement by the
Merging Corporation, the consummation by the Merging Corporation of the
transactions contemplated hereby, nor compliance by the Merging Corporation with
any of the provisions hereof will (i) conflict with or result in any breach of
any provision of the Articles of Incorporation or Bylaws of the Merging
Corporation or those of any of the Owned Corporations; (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or result in the creation of any lien) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which the Merging
Corporation or any of the Owned Corporations is a party or by which any of them
or any of their properties or assets may be bound; or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Merging
Corporation or to any of the Owned Corporations or any of their properties or
assets.
(iii) Neither the Merging Corporation nor any of the Owned
Corporations is a party to any contract, agreement or understanding which
contains a "change in control," "potential change in control" or similar
provision. The Merger will not (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of severance pay or
otherwise) becoming due from the Merging Corporation or from any of the Owned
Corporations to any person.
(iv) The foregoing provisions of this Article 2.2.3
notwithstanding, the Owned Corporations and the Merging Corporation shall have
thirty (30) days from the
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execution hereof to conduct a review of all information and/or documentation for
the purpose of determining (i) if a default or violation as set forth in this
subparagraph exists or (ii) if any consents and/or approvals are necessary to
consummate this transaction. In the event that it is determined that a default
or violation exists or may exist, or a consent or approval is necessary, the
Owned Corporations and the Merging Corporation shall notify Fidelity of such and
provide Fidelity with the information, documentation and records discovered, and
make a good faith effort using due diligence to obtain any such consents and
approvals or to remedy any such defaults or violations. In the event the
Shareholder of the Merging Corporation, the Merging Corporation and the Owned
Corporations are unable to obtain such consents or approvals or to remedy such
defaults or violations, they and Fidelity shall work towards obtaining
replacements for the defaulted/violated Agreements or Fidelity may waive same.
If Fidelity does not so waive, the parties may decide to terminate this
Agreement, in which event this Agreement shall be deemed null and void ab
initio. In addition, the Shareholder of the Merging Corporation agrees to
consent to extend under reas onable terms, any and all real property leases
between ____________________ and the Owned Companies for no less than 5 years
from the Closing Date. Theforegoing notwithstanding, this Agreement shall not be
so terminated if the default/violation does not have a Material Adverse Effect.
2.2.4 Reports. The balance sheets of the Owned Corporations for the year
ended December 31, 1995, attached hereto and made a part hereof as Exhibit "C",
including any notes or schedules thereto (the "Merging Companies' Balance
Sheets") and the related statements of profits and losses for the year then
ended do not contain any
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untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading and fairly present the financial positions of the Owned Corporations
as of the respective dates thereof. Except as and to the extent provided in the
Merging Companies' Balance Sheets, the Owned Corporations did not have at
December 31, 1995, any liabilities required by generally accepted accounting
principals to be reflected on a balance sheet. The Owned Corporations shall
provide balance sheets for the year ended December 31, 1996 as soon as
available, but in no event later than the Closing Date. The representations and
warranties contained herein shall apply to any subsequently provided financial
documents.
2.2.5 Absence of Certain Changes. Since December 31, 1996, the Merging
Corporation or any of the Owned Corporations (i) have not suffered a Material
Adverse Effect, (ii) have not entered into any transaction, or conducted their
businesses or operations, other than in the ordinary course of business and
consistent with past practice, and (iii) have not taken or agreed to take any of
the following actions ("Material Action"):
(i) (a) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, (b) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (c) amend the terms of, repurchase, redeem or otherwise
acquire any of its securities or any securities of its subsidiaries, or propose
to do any of the foregoing;
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<PAGE>
(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities (including indebtedness having
the right to vote) or equity equivalents (including, without limitation, stock
appreciation rights), except as required pursuant to the agreements and
instruments outstanding on the date hereof, or amend in any material respect any
of the terms of any such securities or agreements outstanding on the day hereof;
(iii) amend or propose to amend the Articles or Certificate of
Incorporation or Bylaws of the Merging Corporation or those of any of the Owned
Corporations;
(iv) acquire, sell, lease, encumber, transfer or dispose of any
assets outside the ordinary course of business, consistent with past practice,
or any assets which are material to Fidelity, the Merging Corporation, any of
the Owned Corporations, or the Surviving Corporation, as applicable, taken as a
whole or make any capital expenditures aggregating over Twenty Thousand
($20,000.00) Dollars, except in each case pursuant to obligations in effect on
the date hereof, or enter into any contract, commitment or transaction outside
the ordinary course of business, consistent with past practice;
(v) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Merging Corporation or of any of the Owned
Corporations or guarantee (or become liable for) any debt of others or make any
loans, advances or capital
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<PAGE>
contributions or mortgage, pledge or otherwise encumber any material assets or
create or suffer any material lien thereupon other than in each case in the
ordinary course of business consistent with past practice or for fair
consideration;
(vi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
financial statements (or the notes thereto) of the Merging Corporation or of any
of the Owned Corporations, as applicable, incurred in the course of business
consistent with past practice or settle any lawsuits relating to intellectual
property;
(vii) change any of the accounting principals or practices used by
it (except as required by generally accepted accounting principals);
(viii) except as required by law, (a) enter into, amend or
terminate any Benefit Plan (as hereinafter defined) or any agreement,
arrangement, plan, or policy between the Merging Corporation or any of the Owned
Corporations and one or more of their respective directors or executive
officers, or (b) increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any plan
and arrangement as in effect as of the date hereof, except in the case of
non-officer employees for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing;
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(ix) take any action that would tend not to preserve intact any of
the present business organization of the Merging Corporation or of any of the
Owned Corporations, keep available the services of their respective present
officers and employees and preserve their respective relationships with
customers, suppliers, licensors, licensees, contractors, distributors and others
having business dealings with them; or (x) (a) agree to take any of the
foregoing actions, or (b) take any action that would or is reasonably likely to
result in any of the representations and warranties of the Merging Corporation
or of any of the Owned Corporations set forth in this Agreement being untrue.
2.2.6 No Undisclosed Liabilities. Since December 31, 1996, neither the
Merging Corporation nor any of the Owned Corporations have incurred any
liabilities (absolute, accrued, contingent or otherwise) that are material, in
the aggregate, to the business, operations or financial condition of any such
entity, except for liabilities incurred in the ordinary course of business, and
consistent with past practices and liabilities incurred in connection with this
Agreement.
2.2.7 No Default. Neither the Merging Corporation nor any of the Owned
Corporations is in default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation) of
any term, condition or provision of (i) the Articles of Incorporation or the
By-laws of any such entity, (ii) any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which any such entity
is a party or by which any such entity or any of its properties or assets may be
bound, or (iii) any order, writ, injunction, decree, statute, rule or regulation
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applicable to any such entity, except in the case of (ii) or (iii) for defaults
or violations which would not, in the aggregate, have a Material Adverse Effect
and which would not prevent or materially delay the consummation of the
transactions contemplated hereby.
2.2.8 Litigation. There are no actions, suits, proceedings or, to the
best knowledge of the Merging Corporation or of any of the Owned Corporations,
investigations pending or, to the best knowledge of the Merging Corporation or
of any of the Owned Corporations, threatened involving the Merging Corporation
or any of the Owned Corporations, at law or in equity, or before any
governmental entity which, in the aggregate, are reasonably likely to have a
Material Adverse Effect.
2.2.9 Compliance with Applicable Law. The businesses of the Merging
Corporation and the Owned Corporations are not being conducted in violation of
any applicable law, ordinance, rule, regulation, decree or order of any
governmental entity, except for violations which, in the aggregate, do not and
would not have a Material Adverse Effect. The Merging Corporation and the Owned
Corporations hold all permits, licenses, variances, exemptions, orders and
approvals of all governmental entities necessary for the lawful conduct of their
businesses (the "Corporations' Permits"), except for failures to hold such
Corporations' Permits which would not, in the aggregate, have a Material Adverse
Effect. The Merging Corporation and the Owned Corporations are in compliance
with the terms of the Corporations' Permits, except where the failure to do so
would not, in the aggregate, have a Material Adverse Effect.
2.2.10 Taxes. The Merging Corporation and the Owned Corporations have
duly filed all material federal, state, local and foreign tax returns required
to be filed
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by them, and the Merging Corporation and the Owned Corporations have each duly
paid, caused to be paid or made adequate provision for the payment of all Taxes
required to be paid in respect of the periods covered by such returns and have
made adequate provision for payment of all Taxes anticipated to be payable in
respect of all calendar periods since the periods covered by such returns. All
deficiencies and assessments asserted as a result of any examinations or other
audits by federal, state, local or foreign taxing authorities have been paid,
fully settled or adequately provided for in the financial statements of the
Merging Corporation and the Owned Corporations and no issue or claim has been
asserted for Taxes by any taxing authority for any prior period, the adverse
determination of which would result in a deficiency which would have a Material
Adverse Effect, other than those heretofore paid or provided for. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal, state or local income tax return of either the
Merging Corporation or of any of the Owned Corporations. The foregoing
notwithstanding, Fidelity and the Merging Corporation acknowledge that some
and/or all of the Owned Corporations are currently under Internal Revenue
Service Audit for their 1992 and 1993 tax years.
2.2.11 ERISA.
(i) With respect to each employee benefit plan (including, without
limitation, any "employee benefit plan,' as defined in SYMBOL 255 \f "Symbol"
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and any material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
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benefit, hospitalization, insurance or other plan, arrangement or understanding
(whether or not legally binding) (all the foregoing being herein called "Benefit
Plans"), maintained or contributed to by the Merging Corporation or by any of
the Owned Corporations, the Merging Corporation and the Owned Corporations have
made available to Fidelity and the Surviving Corporation a true and correct copy
of, where applicable, (i) the most recent annual report (Form 5500) filed with
the Internal Revenue Service (the "IRS"), (ii) such Benefit Plan, (iii) each
trust agreement, insurance contract, and third-party administration agreement,
if any, relating to such Benefit Plan, (iv) the most recent actuarial report or
valuation relating to any Benefit Plan subject to Title IV of ERISA, (v) the
most recent IRS determination letter, and (vi) the summary plan description. No
amendments or promises have been made with respect to any Benefit Plan which
would increase after the date of this Agreement the expense of maintaining such
Benefit Plan.
(ii) No Benefit Plans of the Merging Corporation or of any of the
Owned Corporations nor benefit plans of any entity which would be treated as a
"single employer" with the Merging Corporation or any of the Owned Corporations
under SYMBOL 255 \f "Symbol" 4001 (b) of ERISA are subject to Title IV of ERISA.
(iii) With respect to Benefit Plans of the Merging Corporation or
of any of the Owned Corporations, in the aggregate, no event has occurred, and
to the knowledge of the Merging Corporation or of any of the Owned Corporations,
there exists no condition or set of circumstances which are reasonably likely to
occur in connection with which the Merging Corporation or any of the Owned
Corporations would be subject to any liability that would have a Material
Adverse Effect (except liability for benefit claims
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and funding obligations payable in the ordinary course), under ERISA, the
Internal Revenue Code of 1986, as amended (the "Code") or any other applicable
law.
(iv) With respect to Benefit Plans of the Merginc Corporation or
any of the Owned Corporations, in the aggregate, there are no funded benefit
obligations for which contributions have not been made or properly accrued and
there are no unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with generally accepted
accounting principals, on the consolidated financial statements of the Merging
Corporation or of any of the Owned Corporations, except for obligations which
would not, in the aggregate, have a Material Adverse Effect.
(v) Each of the Benefit Plans has been administered in compliance
with its terms in all material respects and is in compliance with applicable
laws and regulations, except for failures to comply which, in the aggregate,
would not have a Material Adverse Effect.
(vi) Each of the Benefit Plans which is intended to be a qualified
plan within the meaning of SYMBOL 255 F "Symbol" 401 (a) of the Code has been
determined by the IRS to be so qualified and nothing has occurred to cause the
loss of such qualified status.
(vii) The Merging Corporation and the Owned Corporations have no
obligations for retiree health, medical or life insurance benefits under any
plan referred to in this Paragraph 2.2.11 other than (i) coverage mandated by
applicable law, (ii) deferred compensation benefits accrued as liabilities on
the financial statements of the Merging Corporation or of any of the Owned
Corporations, (iii) benefits the full cost of
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which are bome by the current or former employee (or his or her beneficiary), or
Coverage provided under any applicable employee union agreement.
2.2.12 Intellectual Prooerty. No claim is pending, or, to the knowledge
of the Merging Corporation or of any of the Owned Corporations, threatened to
the effect that the present or past operations of the Merging Corporation or of
any of the Owned Corporations infringe upon or conflict with the rights of
others with respect to any intellectual property (including, without limitation,
licenses, copyrights, drawings, trade secrets, know-how and computer software)
necessary to permit the Merging Corporation and the Owned Corporations to
conduct their business as now operated (the "Corporations' Intellectual
Property") and no claim is pending or, to the best knowledge of the Merging
Corporation and of the Owned Corporations, threatened to the effect that the
Corporations' Intellectual Property is invalid or unenforceable. The Merging
Corporation and the Owned Corporations have provided Fidelity and the Surviving
Corporation with a list of all licenses, patents, patent rights, patent
applications, trademarks, trademark applications, trade names, copyrights and
service marks. No contract, agreement or understanding between the Merging
Corporation or any of the Owned Corporations and any other party exists which
would impede or prevent the continued use by the Merging Corporation or by any
of the Owned Corporations of the entire right, title and interest of the said
corporation to the said Corporations' Intellectual Property.
2.2.13 Employee Relations. The Merging Corporation and the Owned
Corporations have provided Fidelity and the Surviving Corporation with a
complete and correct list of all employment, compensation, severance, consulting
or indemnification
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contracts between them and their respective present or former employees,
officers, directors, and consultants to the extent that each of them have any
continuing obligations thereunder.
2.2.14 Material Contracts. The Merging Corporation and the Owned
Corporations have made available to Fidelity and the Surviving Corporation a
complete and accurate list of all contracts, agreements and instruments to which
any of them are a party or by which any of them or any of their properties or
assets may be bound that (i) relate to the leasing of real property or (ii)
provide for payments in any one year in excess of Twenty Thousand ($20,000.00)
Dollars. Each of such contracts, agreements and instruments is valid and binding
and in full force and effect and, to the best knowledge of the Merging
Corporation and the Owned Corporations, there has not occurred any default by
any party thereto which remains unremedied as of the date hereof.
2.3 Surviving Corocration. As a material inducement to the Merging
Corporation to execute this Agreement and perform its obligations under this
Agreement, the Surviving Corporation to the best of its knowledge and belief,
represents and warrants to the Merging Corporation as follows:
2.3.1 Good Standinq. The Surviving Corporation is a, corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with corporate power and authority to own,property and carry on its
business as it is now being conducted.
2.3.2 Subsidiary. The Surviving Corporation is a wholly owned subsidiary
of Fidelity.
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2.3.3 Consents and Aoprovals: No Violations. Except for applicable
requirements of New York securities law, no filing with, and no permit,
authorization, consent or approval of any public body or authority is necessary
for the consummation by the Surviving Corporation of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement by the Surviving Corporation, the consummation by the Surviving
Corporation of the transactions contemplated hereby, nor compliance by the
Surviving Corporation with any of the provisions hereof will (i) conflict with
or result in any breach of any provision of the Surviving Corporation's Articles
of Incorpor2tion or Bylaws; (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or result in
the creation of any lien) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation to which the Surviving Corporation is a party or by
which it or any of its properties or assets may be bound; or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Surviving Corporation or any of its properties or assets.
2.3.4 Reports. The balance sheets of the Surviving Corporation for the
year ended December 31, 1996, including any notes or schedules thereto (the
"Survivor's Balance Sheets") and the related statement of profits and losses for
the year then ended do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and fairly present the
financial positions of the Surviving Corporation as of the
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respective dates thereof. Excect as and to the extent provided in the Survivor's
Balance Sheets, the Surviving Corporation did not have at December 31, 19c-.6,
any liabilities required by generally accepted accounting principals to be
reflected on a balance sheet.
2.3.5 Absence of Certain Changes. Since December 31, 1996, the Surviving
Corporation (i) has not suffered a Material Adverse Effect, (ii) has not entered
into any transaction, or conducted its businesses or operations, other than in
the ordinary course of business and consistent with past practice, or (iii) has
not taken or agreed to take any Material Action (as previously defined).
2.3.6 No Undisclosed Liabilities. Since December 31, 1996, the Surviving
Corporation has not incurred any liabilities (absolute, accrued, contingent or
otherwise) that are material, in the aggregate, to the business, operations or
financial condition of the Surviving Corporation, except for liabilities
incurred in the ordinary course of business, and consistent with past practices
and liabilities incurred in connection with this Agreement.
2.3.7 No Default. The Surviving Corporation is not in default or
violation (and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Articles of Incorporation or Bylaws, (ii) any note, bond,
mortgage, indenture, license, contract, agreement or other instrument or
obligation to which the Surviving Corporation is a party or by which the
Surviving Corporation or any of its properties or assets may be bound, or (iii)
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Surviving Corporation, except in the case of (ii) or (iii) for defaults or
violations which would not, in the aggregate,
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have a Material Adverse Effect and which would not prevent or materially delay
the consummation of the transactions contemplated hereby.
2.3.8 Litigation. There are no actions, suits, proceedings or, to the
best knowledge of the Surviving Corporation, investigations pending or, to the
best knowledge of the Surviving Corporation, threatened involving the Surviving
Corporation, at law or in equity, or before any governmental entity which, in
the aggregate, are reasonably likely to have a Material Adverse Effect.
2.3.9 Compliance with Applicable Law. The business of the Surviving
Corporation is not being conducted in violation of any applicable law,
ordinance, rule, regulation, decree or order of any governmental entity, except
for violations which, in the aggregate, do not and would not have a Material
Adverse Effect. The Surviving Corporation hold all permits, licenses, variances,
exemptions, orders and approvals of all governmental entities necessary for the
lawful conduct of its business (the "Survivoes Permits"), except for failures to
hold such Survivors Permits which would not, in the aggregate, have a Material
Adverse Effect. The Surviving Corporation is in compliance with the terms of the
Survivoes Permits, except where the failure to do so would not, in the
aggregate, have a Material Adverse Effect.
2.3.10 Taxes. The Surviving Corporation has duly filed all material
federal, state, local and foreign tax returns required to be filed by them, and
the Surviving Corporation has duly paid, caused to be paid or made adequate
provision for the payment of all Taxes required to be paid in respect of the
periods covered by such returns and have made adequate provision for payment of
all Taxes anticipated to be payable in respect of
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all calendar periods since the periods covered by such returns. All deficiencies
and assessments asserted as a result of any examinations or other audits by
federal, state, local or foreign taxing authorities have been paid, fully
settled or adequately provided for in the financial statements of the Surviving
Corporation and no issue or claim has been asserted for Taxes by any taxing
authority for any prior period, the adverse determination of which would result
in a deficiency which would have a Material Adverse Effect, other than those
heretofore paid or provided for. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any federal, state or
local income tax return of the Surviving Corporation.
2.3.11 ERISA.
(i) With respect to each Benefit Plan maintained or contributed to
by the Surviving Corporation, the Surviving Corporation has made available to
the Merging Corporation a true and correct copy of, where applicable, (i) the
most recent annual report (Form 5500) filed with the IRS, (ii) such Benefit
Plan, (iii) each trust agreement, insurance contract, and third-party
administration agreement, if any, relating to such Benefit Plan, (iv) the most
recent actuarial report or valuation relating to any Benefit Plan subject to
Title IV of ERISA, (v) the most recent IRS determination letter, and (vi) the
summary plan description. No amendments or promises have been made with respect
to any Benefit Plan which would increase after the date of this Agreement the
expense of maintaining such Benefit Plan.
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(ii) No Benefit Plans of the Surviving Corporation nor benefit
plans of any entity which would be treated as a "single employe@' with the
Surviving Corporation under SYMBOL 255 \f "Symbol" 4001 (b) of ERISA are subject
to Title IV of ERISA.
(iii) With respect to Benefit Plans of the Surviving Corporation,
in the aggregate, no event has occurred, and to the knowledge of the Surviving
Corporation, there exists no condition or set of circumstances which are
reasonably likely to occur in connection with which the Surviving Corporation
would be subject to any liability that would have a Material Adverse Effect
(except liability for benefit claims and funding obligations payable in the
ordinary course), under ERISA, the Internal Revenue Code of 1986, as amended
(the "Code") or any other applicable law.
(iv) With respect to Benefit Plans of the Surviving Corporation, in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principals, on the
consolidated financial statements of the Surviving Corporation, except for
obligations which would not, in the aggregate, have a Material Adverse Effect.
(v) Each of the Benefit Plans has been administered in compliance
with its terms in all material respects and is in compliance with applicable
laws and regulations, except for failures to comply which, in the aggregate,
would not have a Material Adverse Effect.
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(vi) Each of the Benefit Plans which is intended to be a qualified
plan within the meaning of SYMBOL 255 \f "Symbol" 401 (a) of the Code has been
determined by the IRS to be so qualified and nothing has occurred to cause the
loss of such qualified status.
(vii) The Surviving Corporation is not a party to any collective
bargaining agreement and the Surviving Corporation has no employees who are
subject to a collective bargaining agreement.
(viii) The Surviving Corporation has no obligations for retiree
health, medical or life insurance benefits under any plan referred to in this
Paragraph 2.3.1 1 other than (i) coverage mandated by applicable law, (ii)
deferred compensation benefits accrued as liabilities on the financial
statements of the Surviving Corporation, or (iii) benefits the full cost of
which are borne by the current or former employee (or his or her beneficiary).
2.3.12 Intellectual Property. No claim is pending, or, to the knowledge
of the Surviving Corporation, threatened to the effect that the present or past
operations of the Surviving Corporation infringe upon or conflict with the
rights of others with respect to any intellectual property (including, without
limitation, licenses, copyrights, drawings, trade secrets, know-how and computer
software) necessary to permit the Surviving Corporation to conduct its business
as now operated (the Survivor's Intellectual Property") and no claim is pending
or, to the best knowledge of the Surviving Corporation, threatened to the effect
that any of the Survivoes Intellectual Property is invalid or unenforceable. The
Surviving Corporation has provided the Merging Corporation with a list of all
licenses, patents, patent rights, patent applications, trademarks, trademark
applications, trade names, copyrights and service marks. No contract, agreement
or understanding between
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the Surviving Corporation and any other party exists which would impede or
prevent the continued use by the Surviving Corporation of the entire right,
title and interest of the Surviving Corporation to the Survivor's Intellectual
Property.
2.3.13 Change in Control. The Surviving Corporation is not a party to any
contract, agreement or understanding which contains a "change in control,"
Upotential change in control" or similar provision. The Merger will not (either
alone or upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from the Surviving
Corporation to any person.
2.3.14 Employee Relations. The Surviving Corporation has provided the
Merging Corporation with a complete and correct list of all employment,
compensation, severance, consulting or indemnification contracts between the
Surviving Corporation and its present or former employees, officers, directors,
and consultants to the extent that the Surviving Corporation has any continuing
obligations thereunder.
2.3.15 Material Contracts. The Surviving Corporation has provided the
Merging Corporation with a complete and accurate list of all contracts,
agreements and instruments to which the Surviving Corporation is a party or by
which the Surviving Corporation or any of its properties or assets may be bound
that (i) relate to the leasing of real property or (ii) provide for payments in
any one year in excess of Twenty Thousand ($20,000.00) Dollars. Each of such
contracts, agreements and instruments is valid and binding and in full force and
effect and, to the best knowledge of the Surviving Corporation, there has not
occurred any default by any party thereto which remains unremedied as of the
date hereof.
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2.4 Fidelity. As a material inducement to the Merging Corporation to execute
this Agreement and perform its obligations under this Agreement, Fidelity
represents and warrants to the Merging Corporation as follows:
2.4.1 Good Standing. Fidelity is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, with
corporate power and authority to own property and carry on its business as it is
now being conducted. Fidelity is qualified to transact business as a foreign
corporation and is in good standing in all jurisdictions in which its principal
properties are located and business is transacted.
2.4.2 Shares Authorized and Issued. Fidelity, by its Nevada Certificate
of Incorporation, which was issued on November 7, 1995, is authorized to issue
Fifty Million (50,000,000) shares of common stock, each of $0.01 par value, of
which Five Million Seven Hundred Fifty Thousand (5,750,000) shares are validly
issued and outstanding, fully paid, and non-assessable on the date of this
Agreement, and Two Million (2,000,000) shares of undesignated preferred stock,
each of $0.01 par value, of which Two Hundred Fifty Thousand (250,000) shares,
designated as uthe 1996-MAJOR Series of Convertible Preferred Stock, are validly
issued and outstanding, fully paid.
2.4.3 Financial Statements. Fidelity has furnished the Merging
Corporation with the consolidated audited balance sheet of Fidelity as of
December 31, 1995, and the related audited statement of income for the twelve
months then ended, and an interim unaudited balance sheet (the "Balance Sheet")
as of September 30, 1996 (the "Balance Sheet Date") and the related consolidated
statement of income for the nine (9)
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Months then ended. These financial statements (i) are in accordance with the
books and records of Fidelity; (ii) fairly present the financial condition of
Fidelity as of those dates and the results of its operations as of and for the
periods specified, all prepared in accordance with generally accepted accounting
principles applied on the basis consistent with prior accounting periods; and
(iii) contain and reflect, in accordance with generally accepted accounting
principles consistently applied, reserves for all liabilities, losses and costs
in excess of expected receipts and all discounts and refunds for services and
products already rendered or sold that are reasonably anticipated and based on
events or circumstances in existence or likely to occur in the future with
respect to any of the contracts or commitments of Fidelity. Specifically, but
not by way of limitation, the Balance Sheet (i) discloses, in accordance with
generally accepted accounting principles, all of the debts, liabilities and
obligations of any nature (whether absolute, accrued, contingent, or otherwise,
and whether due or to become due) of Fidelity at the Balance Sheet Date, and
includes appropriate reserves for all taxes and other liabilities accrued or due
at that date but not yet payable, and (ii) does not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading and
fairly present the financial positions of Fidelity as of the respective dates
thereof.
2.4.4 Consents and Approvals: No Violations. Except for applicable
requirements of New York securities law, no filing with, and no permit,
authorization, consent or approval of any public body or authority is necessary
for the consummation by Fidelity of the transactions contemplated by this
Agreement. Neither the execution and
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2.4.5 Absence of Certain Changes. Since December 31, 1996, Fidelity (i)
has not suffered a Material Adverse Effect, (ii) has not entered into any
transaction, or conducted its business or operations, other than in the ordinary
course of business and consistent with past practice, and (iii) has not taken or
agreed to take any of the following actions :
(i) (a) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, (b) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (c) amend the terms of, repurchase, redeem or otherwise
acquire any of its securities or any securities of its subsidiaries, or propose
to do any of the foregoing;
(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities (including indebtedness having
the right to vote) or equity equivalents (including, without limitation, stock
appreciation rights), except as required pursuant to the agreements and
instruments outstanding on the date hereof, or amend in any material respect any
of the terms of any such securities or agreements outstanding on the day hereof;
(iii) Incorporation or Bylaws; amend or propose to amend its
Articles or Certificate of
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(iv) acquire, sell, lease, encumber, transfer or dispose of any
assets outside the ordinary course of business, consistent with past practice,
or any assets which are material to Fidelity, the Merging Corporation, any of
the Owned Corporations, or the Surviving Corporation, as applicable, taken as a
whole or make any capital expenditures aggregating over Twenty Thousand
($20,000.00) Dollars, except in each case pursuant to obligations in effect on
the date hereof, or enter into any contract, commitment or transaction outside
the ordinary course of business, consistent with past practice;
(v) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of Fidelity or guarantee (or become liable for) any
debt of others or make any loans, advances or capital contributions or mortgage,
pledge or otherwise encumber any material assets or create or suffer any
material lien thereupon other than in each case in the ordinary course of
business consistent with past practice;
(vi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
financial statements (or the notes thereto) of Fidelity, as applicable, incurred
in the course of business consistent with past practice or settle any lawsuits
relating to intellectual property;
(vii) change any of the accounting principals or practices used by
it (except as required by generally accepted accounting principals);
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delivery of this Agreement by Fidelity, the consummation by Fidelity of the
transactions contemplated hereby, nor compliance by Fidelity with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws of Fidelity; (ii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or result in the creation of any lien) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which Fidelity is a
party or by which any of them or any of its properties or assets may be bound;
or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Fidelity or any of its properties or assets. The
foregoing notwithstanding, Fidelity shall have thirty (30) days from the
execution hereof to conduct a review of all information and/or documentation for
the purpose of determining (i) if a default or violation as set forth in this
subparagraph exists or (ii) if any consents and/or approvals are necessary to
consummate this transaction. In the event that it is determined that a default
or violation exists or may exist, or a consent or approval is necessary,
Fidelity shall notify the Merging Corporation of such and provide the Merging
Corporation with the information, documentation and records discovered, at which
time the Merging Corporation may decide, in its sole and absolute discretion,
whether to waive such default or violation and/or require Fidelity to remedy the
same and obtain any and all necessary consents and/or approvals. In the
alternative, the Merging Corporation may decide in its sole and absolute
discretion, to terminate this Agreement, in which event this Agreement shall be
deemed null and void ab,initio.
(viii) except as required by law, (a) enter into, amend or
terminate any Benefit Plan (as hereinafter defined) or any agreement,
arrangement, plan, or policy between Fidelity and one or more of its directors
or executive officers, or (b) increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof, except in the case
of ncn-officer employees for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing;
(ix) take any action that would tend not to preserve intact any of
the present business organization of Fidelity, keep available the services of
its present officers and employees and preserve its relationships with
customers, suppliers, licensors, licensees, contractors, distributors and others
having business dealings with it; or
(x) (a) agree to take any of the foregoing actions, or (b) take any
action that would or is reasonably likely to result in any of the
representations and warranties of Fidelity set forth in this Agreement being
untrue.
2.4.6 No Undisclosed Liabilities. Since December 31, 1996, Fidelity has
not incurred any liabilities (absolute, accrued, contingent or otherwise) that
are material, in the aggregate, to the business, operations or financial
condition of any such entity, except for liabilities incurred in the ordinary
course of business, and consistent with past practices and liabilities incurred
in connection with this Agreement.
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2.4.7 No Default. Fidelity is not in default or violation (and no event
has occurred which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) the Articles of
Incorporation or the Bylaws of any such entity, (ii) any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which any such entity is a party or by which any such entity or any of its
properties or assets may be bound, or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to any such entity, except in the case of
(ii) or (iii) for defaults or violations which would not, in the aggregate, have
2 Material Adverse Effect and which would not prevent or materially delay the
consummation of the transactions contemplated hereby.
2.4.8 Litigation. With the exception of the previously disclosed M & M
Telecon litigation, there are no actions, suits, proceedings or, to the best
knowledge of Fidelity, investigations pending or, to the best knowledge of
Fidelity, threatened involving Fidelity, at law or in equity, or before any
governmental entity which, in the aggregate, are reasonably likely to have a
Material Adverse Effect.
2.4.9 Compliance with Applicable Law. The businesses of Fidelity is not
being conducted in violation of any applicable law, ordinance, rule, regulation,
decree or order of any governmental entity, except for violations which, in the
aggregate, do not and would not have a Material Adverse Effect.. Fidelity holds
all permits, licenses, variances, exemptions, orders and approvals of all
governmental entities necessary for the lawful conduct of their businesses (the
Corporations' Permits"), except for failures to hold such Corporations' Permits
which would not, in the aggregate, have a Material Adverse Effect.
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Fidelity is in compliance with the terms of the Corporations' Permits, except
where the failure to do so would not, in the aggregate, have a Material Adverse
Effect.
2.4.10 Taxes. Fidelity has duly filed all material federal, state, local
and foreign tax returns required to be filed by it, and has duly paid, caused to
be paid or made adequate provision for the payment of all Taxes required to be
paid in respect of the periods covered by such returns and have made adequate
provision for payment of all Taxes anticipated to be payable in respect of all
calendar periods since the periods covered by such returns. All deficiencies and
assessments asserted as a result of any examinations or other audits by federal,
state, local or foreign taxing authorities have been paid, fully settled or
adequately provided for in the financial statements of Fidelity and no issue or
claim has been asserted for Taxes by any taxing authority for any prior period,
the adverse determination of which would result in a deficiency which would have
a Material Adverse Effect, other than those heretofore paid or provided for.
There are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any federal, state or local income tax return of
Fidelity.
2.4.11 ERISA.
(i) With respect to each employee benefit plan (including, without
limitation, any 'employee benefit plan," as defined in SYMBOL 255 F "Symbol"
3(3) of the Employee Retirement Income Security Act of 1974, as amended
('ERISA')), and any material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan, arrangement or understanding
(whether
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or not legally binding) (all the foregoing being herein called "Benefit Plans"),
maintained or contributed to by Fidelity, Fidelity has made available to the
Merging Corporation a true and correct copy of, where applicable, (i) the most
recent annual report (Form 5500) filed with the Internal Revenue Service (the
"IRS"), (ii) such Benefit Plan, (iii) each trust agreement, insurance contract,
and third-party administration agreement, if any, relating to such Benefit Plan,
(iv) the most recent actuarial report or valuation relating to any Benefit Plan
subject to Title IV of ERISA, (v) the most recent IRS determination letter, and
(vi) the summary plan description. No amendments or promises have been made with
respect to any Benefit Plan which would increase after the date of this
Agreement the expense of maintaining such Benefit Plan.
(ii) No Benefit Plans of Fidelity nor benefit plans of any entity
which would be treated as a "single employee" with Fidelity under SYMBOL 255 \f
"Symbol" 4001 (b) of ERISA are subject to Title IV of ERISA.
(iii) With respect to Benefit Plans of Fidelity, no event has
occurred, and to the knowledge of Fidelity, there exists no condition or set of
circumstances which are reasonably likely to occur in connection with which
Fidelity would be subject to any liability that would have a Material Adverse
Effect (except liability for benefit claims and funding obligations payable in
the ordinary course), under ERISA, the Internal Revenue Code of 1986, as amended
(the code) or any other applicable law.
(iv) With respect to Benefit Plans of Fidelity in the aggregate,
there are no funded benefit obligations for which contributions have not been
made or properly accrued and there are no unfunded benefit obligations which
have not been accounted for
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reserves, or otherwise prooeriv footnoted in accordance with generally acceoted
accounting principals, an the consolidated financial statements of Fidelity,
except for obligations which would not, in the aggregate, have a Material
Adverse Effect.
(v) Each of the Benefit Plans has been administered in compliance
with its terms in all material respects and is in compliance with applicable
laws and regulations, except for failures to comply which, in the aggregate,
would not have a Material Adverse Effect.
(vi) Each of the Benefit Plans which is intended to be a qualified
plan within the meaning of SYMBOL 255 \f "Symbol" 401 (a) of the Code has been
determined by the IRS to be so qualified and nothing has occurred to cause the
loss of such qualified status.
(vii) Fidelity is not a party to any collective bargaining
agreement and Fidelity has no employees who are subject to a collective
bargaining agreement.
(viii) Fidelity has no obligations for retiree health, medical or
life insurance benefits under any plan referred to in this Paragraph 2.2.1 1
other than (i) coverage mandated by applicable law, (ii) deferred compensation
benefits accrued as liabilities on the financial statements of Fidelity, or
(iii) benefits the full cost of which are borne by the current or former
employee (or his or her beneficiary).
2.4.12 Intellectual Propertv. No claim is pending, or, to the knowledge
of Fidelity, threatened to the effect that the present or past operations of
Fidelity infringe upon or conflict with the rights of others with respect to any
intellectual property (including, without limitation, licenses, copyrights,
drawings, trade secrets, know-how and computer software) necessary to permit
Fidelity to conduct its business as now operated (the
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"Corporation's Intellectual Property") and no claim is pending or, to the best
knowledge of Fidelity, threatened to the effect that Corporation's Intellectual
Property is invalid or unenforceable. Fidelity has provided the Merging
Corporation with a list of all licenses, patents, patent rights, patent
applications, trademarks, trademark applications, trade names, copyrights and
service marks. No contract, agreement or understanding between Fidelity and any
other party exists which would impede or prevent the continued use by Fidelity
of the entire right, title and interest of the said corporation to the said
corporation's Intellectual Property.
2.4.13 Change in Control. Fidelity is not a party to any contract,
agreement or understanding which contains a "change in control," "potential
change in control" or similar provision. The Merger will not (either alone or
upon the occurrence of any additional acts or events) result in any payment
(whether of severance pay or otherwise) becoming due from Fidelity to any
person.
2.4.14 Employee Relations. Fidelity has provided the Merging Corporation
with a complete and correct list of all employment, compensation, severance,
consulting or indemnification contracts between them and their respective
present or former employees, officers, directors, and consultants to the extent
that each of them have any continuing obligations thereunder.
2.4.15 Material Contracts. Fidelity has provided the Merging Corporation
with a complete and accurate list of all contracts, agreements and instruments
to which it is a party or by which it to any of its properties or assets may be
bound that (i) relate to the leasing of real property or (ii) provide for
payments in any one year in excess
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of TWENTY THOUSAND ($20,000.00) DOLLARS. Each of such contracts, agreements and
instruments is valid and binding and in full force and effect and, 'Lo the best
knowledge of the Fidelity, there has not occurred any default by any party
thereto which remains unremedied as of the date herecf.
2.5 Securities Law. The parties will mutually arrange for and manage all
necessary procedures under the requirements of federal and New York securities
laws, and the related supervisory commissions, to insure that this plan is
properly processed to comply with registration formalities, or to take full
advantage of any appropriate exemptions from registration, and to otherwise be
in accord with all anti-fraud restrictions in this area.
ARTICLE 3
COVENANTS, ACTIONS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
3.1 Interim Conduct of Business-, Limitations. Except as limited by this
Paragraph 3.1, pending consummation of the merger, each of the constituent
corporations will carry on its business in substantially the same manner as
before, and will use its best efforts to maintain its business organization
intact, to retain its present employees, and to maintain its relationship with
suppliers and other business contacts. Except with the prior consent in writing
of the Surviving Corporation or the Merging Corporation, pending consummation of
the merger, the Merging Corporation, the Surviving Corporation and Fidelity
shall not:
3.1.1 Create or issue any in debtedness for borrowed money other than the
ordinary course of its business.
3.1.2 Enter into any transaction other than those involved in carrying on
its ordinary course of business.
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3.2 Submission to Shareholders and Filing. This Agreement shall be submitted
separately to the shareholders of each party to this Agreement in the manner
provided by the laws of the jurisdiction under which each party is incorporated
for approval.
3.3 Conditions Precedent to Obligations of the Merging Corporation. Except as
may be expressly waived in writing by the Merging Corporation, all of the
obligations of the Merging Corporation under this Agreement are subject to the
satisfaction, prior to or on the Closing Date of each of the following
conditions by the Surviving Corporation and/or Fidelity:
3.3.1 Representations and warranties made by the Surviving Corporation
and Fidelity to the Merging Corporation in Article 2 of this Agreement and in
any documents delivered pursuant to this Agreement shall be deemed to have been
made again on the Closing Date, and shall then be true and correct in all
material respects. If the Surviving Corporation shall have discovered any
material error, misstatement, or omission in those representations and
warranties on or before the Closing Date, it shall report that discovery
immediately to the Merging Corporation and shall either correct the error,
misstatement or omission or obtain a written waiver from the Merging
Corporation.
3.3.2 The Surviving Corporation and Fidelity shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed and complied with by it prior to or on the Closing Date.
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3.3.3 Fidelity shall not have issued any new shares from the date of
execution hereof through and including the Closing Date.
3.3.4 The Surviving Corporation and Fidelity shall have delivered to the
Merging Corporation a certificate dated the Closing Date executed in its
corporate name by the appropriate corporate officer, certifying to the
satisfaction of the conditions specified in Subparagraphs 3.3.1 and 3.3.2.
3.3.5 No action or proceeding by any governmental body or agency shall
have been threatened, asserted or instituted to restrain or prohibit the
carrying out of the transactions contemplated by this Agreement.
3.3.6 All corporate and other proceedings and actions taken in connection
with the transactions contemplated by this Agreement and all certificates,
opinions, instruments and documents shall be satisfactory in form and substance
to counsel for the Merging Corporation
3.3.7 That certain Stock Purchase Agreement between the Surviving
Corporation and Harold Bendell shall have been completed and all contingencies
therein contained shall have been satisfied to the satisfaction of the
Shareholder of the Merging Corporation.
3.4 Conditions Precedent to Obligations of Surviving Corporation. Except as
may be expressly waived in writing by the Surviving Corporation, all of the
obligations of the Surviving Corporation under this Agreement are subject to the
satisfaction, prior to or on the Closing Date, of each of the following
conditions by the Merging Corporation:
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3.4.1 Representations and warranties made by the Merging Corporation to
the Surviving Corporation in Article 2 of this Agreement and in any documents
delivered pursuant to this Agreement shall be deemed to have been made again on
the Closing Date, and shall then be true and correct in all material respects.
If the Merging Corporation shall have discovered any material error,
misstatement, or omission in those representations and warranties on or before
the Closing Date, it shall report that discovery immediately to the Surviving
Corporation and shall either correct the error, misstatement or omission or
obtain a written waiver from the Surviving Corporation.
3.4.2 The Merging Corporation shall have performed and complied with all
agreements and conditions required by the Agreement to be performed and complied
with by it prior to or on the Closing Date.
3.4.3 The Merging Corporation shall have delivered to the Surviving
Corporation a certificate dated the Closing Date executed in its corporate name
by the appropriate corporate officer, certifying to the satisfaction of the
conditions specified in Subparagraphs 3.4.1 and 3.4.2.
3.4.4 No action or proceeding by any governmental body or agency shall
have been threatened, asserted or instituted to restrain or prohibit the
carrying out of the transactions contemplated by this Agreement.
3.4.5 All corporate and other proceedings and actions taken in connection
with the transactions contemplated by this Agreement and all certificates,
opinions, instruments and documents shall be satisfactory in form and substance
to counsel for the Surviving Corporation.
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3.4.6 The Merging Corporation shall have obtained the approval of all
franchising manufacturers (the "Factory Approvals") which have franchise
agreements with the Owned Companies. The parties acknowledge and agree that in
the event some or all of the Factory Approvals are not obtained on or before the
Closing Date, the parties may either (i) extend the Closing Date in order to
provide the Merging Corporation with additional time to obtain the Factory
Approvals or (ii) the Surviving Corporation and Fidelity may close this
transaction with the Merging Corporation only owning those Owned Companies for
which Factory Approvals have been obtained in which event the Consideration, as
hereinafter defined, shall be adjusted in accordance with the allocations
referenced in Article 4.2. The Shareholder of the Merging Corporation, the
Merging Corporation and the Owned Corporations agree to make a good faith effort
using all due diligence to obtain the Factory Approvals prior to the Closing and
for any of the Owned Corporations for which the Factory Approvals could not be
obtained prior to the Closing, to continue in their efforts to obtain same until
the parties mutually agree to cease such effort, but in no event for a period in
excess of 90 days after the Closing Date.
ARTICLE 4
MANNER OF CONVERTING SHARES
4.1 Manner. The Shareholders of the Merging Corporation shall surrender their
shares to the secretary of the Surviving Corporation promptly after the Closing
Date in exchange for shares of Fidelity to which they are entitled under this
Article 4.
4.2 Shares. The shareholders of the Merging Corporation shall be entitled to
receive 1.8 million shares of The 1997-MAJOR Series of Convertible Preferred
Stock (the
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"Shares") of Fidelity. In the event the Shares do not have a value on the
Closing Date equal to SIX MILLION ($6,000,000.00) DOLLARS, the shareholders of
the Merging Corporation shall be entitled to that number of shares which have a
value on the Closing Date Of SIX MILLION ($6,000,000.00) DOLLARS (the
"Consideration"). The Consideration shall be allocated among the Owned
Corporation as set forth on the attached Exhibit "D" which is incorporated
herein by this reference.
ARTICLE 5
REMEDIES
5.1 Remedies of Merging Corporation.
5.1.1 Remedies of Merging Corporation against Fidelity. In the event
Fidelity is unable for any reason whatsoever to transfer the Shares, which
failure or refusal shall not relieve Fidelity of any obligation hereunder,
Merging Corporation may, at its option, and without prejudice to its rights
against Fidelity, pursue all rights and remedies that it may have as against
Fidelity including, without limitation, the right of specific performance.
5.1.2 Remedies of Merging Corporation against Surviving Corooration. In
the event Surviving Corporation is unable for any reason whatsoever to carry out
its obligations under this Agreement, which failure or refusal shall not relieve
Surviving Corporation of any obligation hereunder, Merging Corporation may, at
its option, and without prejudice to its rights against Surviving Corporation,
pursue all rights and remedies that it may have as against Surviving Corporation
including, without limitation, the right of specific performance.
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5.2 Remedies of Surviving Corocration. In the event Merging Corporation is
unable for any reason whatsoever to carry out its obligations under this
Agreement, which failure or refusal shall not relieve Merging Corporation of any
obligation hereunder, Surviving Corporation may, at its option, and without
prejudice to its rights against Merging Corporation, pursue all rights and
remedies that it may have as against Merging Corporation including, without
limitation, the right of specific performance.
5.3 Remedies of Fidelity In the event Merging Corporation is unable for any
reason whatsoever to carry out its obligations under this Agreement, which
failure or refusal shall not relieve Merging Corporation of any obligation
hereunder, Fidelity may, at its option, and without prejudice to its rights
against Merging Corporation, pursue all rights and remedies that it may have as
against Merging Corporation including, without limitation, the right of specific
performance.
ARTICLE 6
DIRECTORS AND OFFICERS
6.1 Directors and Officers of the Surviving Corporation. The Board of
Directors and the Officers of the Surviving Corporation who are currently
serving in such positions and who will be serving in such positions after the
Closing Date are set forth on Exhibit 'E' which is attached hereto and made a
part hereof by this reference thereto.
ARTICLE 7
BY-LAWS
7.1 By-Laws of Surviving Corporation. The by-laws of the Surviving
Corporation as existing on the date of execution of this Agreement, shall
continue in full force and
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effect as the by-laws of the Surviving Corporation until altered, amended, or
repealed as provided in the by-laws or as provided by law.
7.2 By-Laws of the Merging Corporation. The by-laws of the Merging
Corporation as existing on the date of execution of this Agreement, shall
continue in full force and effect as the by-laws of the Merging Corporation
until altered, amended, or repealed as provided in the by-laws or as provided by
law.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification. The Merging Corporation and the Surviving Corporation
agree that each shall obtain from their respective shareholders, agreements
wherein the respective shareholder shall indemnify the other for any loss,
damage or cost arising out of any material misrepresentations made by such
shareholders.
ARTICLE 9
TERMINATION
9.1 Circumstances. This Agreement may be terminated and the merger may be
abandoned at any time prior to the Closing Date notwithstanding the approval of
the shareholders of either of the constituent corporations:
9.1.1 By mutual consent of the Board of Directors of the constituent
corporations.
9.1.2 At the election of the Board of Directors of either constituent
corporation if:
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(i) The number of shareholders of either constituent corporation,
or of both, dissenting from the merger shall be so large as to make the merger
in the opinion of either Board of Directors, inadvisable or undesirable.
(ii) Any material litigation or proceeding shall be instituted or
threatened against either constituent corporation, or any of its assets, that,
in the opinion of either Board of Directors, renders the merger inadvisable or
undesirable.
(iii) Any legislation shall be enacted that, in the opinion of
either Board of Directors, renders the merger inadvisable or undesirable.
(iv) Between the date of this Agreement and the Closing Date, there
shall have been, in the opinion of either Board of Directors, any materially
adverse change in the business or condition, financial or otherwise of either
constituent corporation or Fidelity.
9.1.3 At the election of the Board of Directors of the Merging
Corporation, if the Commissioner of Internal Revenue shall not have ruled, in
substance, that for federal income tax purposes the merger will qualify as a
reorganization under Sections 368(a)(1)(A) and/or 368 (a)(1)(C) of the Internal
Revenue Code of 1986, as amended, and that no gain or loss will be recognized by
the shareholders of the Merging Corporation on the exchange of their stock for
stock of the Surviving Corporation.
9.2 Notice of and Liability for Termination. If an election is made to
terminate this Agreement and abandon the merger for any reason:
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9.2.1 The president or any vice president of the constituent corporation
whose Board of Directors has made the election shall give immediate written
notice of the election to the other constituent corporation.
9.2.2 On the giving of notice as provided in Subparagraph (a), this
Agreement shall terminate and the proposed merger shall be abandoned.
ARTICLE 10
FINANCIAL STATEMENTS
The parties hereto acknowledge that they have each received financial
statements from the other.
ARTICLE 1 1
MISCELLANEOUS
11.1 Entire Agreement. This Agreement represents the entire agreement between
the parties with respect to the subject matter hereof and may only be modified
by a written instrument executed by all parties.
11.2 Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance shall, to any extent, be
deemed invalid or unenforceable, then, and in such event, the remainder of this
Agreement, or the application of such term or provision to persons or
circumstances other than those as to whom or to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforceable thereto to the fullest extent permitted
by law.
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11.3 Jurisdiction. In any action or proceeding brought hereunder or in
respect hereof, the parties consent to the personal judicial jurisdiction of the
courts of the State of New York.
11.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of New York, excluding choice
of law rules thereof.
11.5 Notices. All notices, requests, demands, or other communications to be
given hereunder shall be in writing and shall be deemed to have been duly given
if personally delivered or mailed by certified mail, return receipt requested:
If to the Merging Corporation and/or the Shareholder of the Merging
Corporation addressed to it at:
Major Automotive Group, Inc.
Bruce Bendell, President
43-40 Northern Boulevard
Long Island City, NY 1 1 1 01
With a copy to:
Michael Dezorett, Esquire
150 Broadway, Suite 707
7th Floor
New York, NY 10038
If to the Surviving Corporation, addressed to it at:
Major Acquisition Corp.
c/o Fidelity Holdings, Inc.
80-02 Kew Gardens Road,
Suite 5000
Kew Gardens, NY 11 415
With a copy to:
Robert Rimberg, Esquire
866 Third Avenue, 30th Floor
New York, NY 10022
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If to Fidelity to
Fidelity Holdings, Inc.
80-02 Kew Gardens Rd.
Kew Gardens, NY 11415
With a copy to.,
Robert Rimberg
866 Third Avenue, 3M Floor
New York, NY 10022
or to such other piece or place* as designated in writing.
11.6 Gender- All pronouns and any Nations thereof shall be deemed to refer to
the masculine, feminine, regular or plural, and the Identify of the person or
enmity may require.
11.7 This Agreement may be executed in several corporation, one of which
shall be deemed an original for all purposes hereof. All corporate reports,
however, shall constitute one
11.8 Faxsimile- A faxed signed copy of this Agreement shall constitute me
original for all purposex.
IN WITNESS WHEREOF, these have year first above written.
Attest:
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PLAN AND AGREEMENT OF MERGER
EXHIBIT "A"
NUMBER OF SHARES OWNED AND
PERCENTAGE OF THOSE SHARES
COMPANIES OWNED BY MERGING CORPORATION OUTSTANDING
- - --------------------------------------- ---------------------------
Major Chevrolet, Inc. 890 100%
Major Dodge, Inc. 10 50%
Major Subaru, Inc. 10 100%
Major Chrysler, Plymouth, Jeep, Eagle, Inc. 50 50%
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PLAN AND AGREEMENT OF MERGER
Exhibit "B"
Owned Corporations' Assets
<PAGE>
PLAN AND AGREEMENT OF MERGER
Exhibit "C"
Owned Corporations' Balance Sheets
<PAGE>
EXHIBIT
Major Chevrolet, Inc. 1,100,000 shares
Major Dodge, Inc. 300,000 shares*
Major Chrysler Plymouth Jeep Eagle, XAC 300,000 shares*
Major Subaru, Inc. 100,000 shares*
----------
TOTAL 1,800,000 shares
* as described in Paragraph 4.2 of the Plan and Agreement of Officers of Major
Acquisition Corp. prior to the Closing Date:
<PAGE>
Directors of Major Acquisition Corp. after the Closing Date:
BRUCE BENDELL
HAROLD BENDELL
Officers of Major Acquisition Corp. after the Closing Date:
BRUCE BENDELL
HAROLD BENDELL
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT, made this 3rd day May, 1997, by and between:.HAROLD BENDELL, an
adult individual residing at 200 Fendling Rd, Englewood
Cliffs,NewJerseyO7632(hereinafter referred to as SELLER)
AND
MAJOR ACQUISITIONCORP. a corporation organized under the laws of the State of
New York, having its principal office located at 80-02 Kew Gardens Boulevard,
Suite 5000, Kew Gardens, New York II 41 5 (hereinafter referred to as 'BUYER')
AND
Robert Rimberg, Esquire, whose address is 566 Third Avenue., New York, New York
10022 (hereinafter referred to as escrow agent);
WITNESSETH:
WHERE AS, SELLER has entered Into a certain Letterof Intent. dated December 11,
1996 with BUYER for the sale to BUYER of all of his stockholdings in Major
Dodge. Inc, and Major Chrysler, Plymouth, Jeep Eagle, Inc. (collectively, the
Corporation and the parties desire that this Agreemerrt will formalize and
evidence their final understandings concerning such sale.and purchase
transaction; and
WHEREAS, in conjunction wfth such sale and purrhase transaction the parties
desire to provide for an as of the Shares as hereinafter defined, the Deposit as
hereinafter defined and the payment of the Purchase Price Balance as hereinafter
defined. pending closing of the transaction. and therefore, simultaneously
herewith, the parties
<PAGE>
have entered into that certain escrow agreement ("Escrow Agreement") attached
hereto as Exhibit "A" and made a part hereof by this reference; and
WHEREAS, under the Escrow Agreement, Escrow Agent has agreed to act as
EscrowAgent to hold and deliver both the Shares and the Purchase Price as
hereinafter defined according to the provisions thereof and hereof.
NOW, THEREFORE, with the foregoing recitals incorporated herein and in
consideration of the mutual covenants herein contained, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
STOCK PURCHASE
1.1. Sale of Shares. SELLER shall sell to BUYER, on the terms and conditions
of this Agreement, and BUYER shall purchase from SELLER, on the terms and
conditions of this Agreement, the following shares of the indicated companies
(the "Shares"): Ten (10) shares of Major Dodge, Inc., a New York corporation.
Fifty (50) shares of Major Chrysler, Plymouth, Jeep Eagle, Inc., a New York
corporation.
1.2. Delivery of Shares. Seller shall deliver and the Escrow Agent shall
receive and acknowledge receipt of, stock certificates representing the Shares,
together with executed blank stock powers with signature guarantees for each
certificate (the defined term 'Shares' is deemed to include the executed blank
stock powers and signature guarantees) for purposes of the Agreement,
simultaneously with the delivery by Buyer to the Escrow Agent of the Deposit.
Escrow Agent agrees to hold, safeguard, account for
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and return and/or deliver the Shares in accordance with the terms and conditions
of the Escrow Agreement.
1.3. Purchase Price. BUYER shall pay the sum of FOUR MILLION ($4,000,000.00)
DOLLARS (the "Purchase Price") for the Shares in the following manner:
1.3.1. Upon execution hereof, BUYER shall deliver a deposit in the
amount of Four Hundred Thousand ($400.000.00) Dollars (the "Deposit") to the
Escrow Agent, who shall hold the Deposit as provided in the Escrow Agreement -,
1.3.2. Upon satisfaction of all of the contingencies set forth in
paragraph 1.4 below, BUYER shall deliver the balance of the Purchase Price in
the amount of Three Million Six Hundred Thousand ($3,600,000.00) Dollars
("Purchase Price Balance") to the Escrow Agent who shall hold the Purchase Price
Balance as provided in the Escrow Agreement .
1.4. Contingencies.
1.4.1. The parties hereto expressly agree and acknowledge that the
payment of the Purchase Price Balance and the Close of Escrow, as hereinafter
defined, are expressly contingent upon the following:
1.4.1.1. The Seller shall have obtained the approval of all automotive
franchising manufacturers (the "Factory Approval") which have franchise
agreements with the Corporations to sell new vehicles and parts. The parties
acknowledge and agree that in the event some or all of the Factory Approvals are
not obtained on or before the Closing Date, as that term is defined in that
certain Plan and Agreement of Merger by and between Fidelity Holdings, Inc.
("Fidelity"), Major Automotive
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Group, Inc. ("MAG"), Major Acquisition Corp. ("MAC") and Bruce Bendell
("Bendell"), (the "Merger Agreement") the parties may either (i) extend the
Closing Date in order to provide the Seller with additional time to obtain the
Factory Approval or (II') the Buyer may proceed with the Close of Escrow in
which event the Purchase Price shall be adjusted 'in accordance with the
allocations set forth on the attached Schedule 6 ("Partial Closing"). In the
event of the occurrence of Partial Closing (i) the Escrow Agent shall deliver
those shares for the Corporations for which Factory Approvals have been obtained
and shall deliver the applicable portion of the Deposit to Seller, and (ii) the
Seller shall be under a continuing obligation to obtain the remaining Factory
Approvals upon the obtaining of which, the Seller shall be paid the balance of
the Purchase Price. Seller may waive receiving any further monies post Close of
Escrow upon delivery of written notice of his inability to obtain the remaining
Factory Approvals to Buyer in which event Escrow Agent shall deliver to Seller
those shares in those Corporations for which Factory Approval was not obtained.
1.4.1.2. Buyer's obtaining and delivering to Escrow Agent unconditional
releases from all of the creditors set forth on Exhibit "C", attached hereto,
and by this reference made a part hereof, releasing Seller from any and all
liability as a primary obligor or as a guarantor for any and all debts owed each
such creditor ("Releases"). This contingency may be waived by Seller in the
event Buyer is unable to obtain all of the Releases in which event, Buyer shall
be required to post sufficient collateral to protect Seller to Seller's
satisfaction until the Releases are obtained or the underlying debts satisfied.
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1.4.1.3. The consummation of that certain Plan and Agreement of Merger
dated March, 1997 by and among Fidelity, MAG and Buyer- and
1.4.1.4. Seller and Buyer shall, on or before the Closing of Escrow
Date, as hereinafter defined, have reached an agreement as to any adjustment in
the Purchase Price as a result of Seller's loans receivable, paid in capital,
cash reserves and loans payable to the Corporations.
1.4.2. In the event that the Merger Agreement is not consummated for any
reason, or the Closing and/or Partial Closing have not been extended, completed
or partially completed in accordance with Article 1.4.1.1 above, this Agreement
shall be null and void ab initio in which event the Deposit shall be returned to
Buyer, together with interest thereon, the Shares shall be returned to Seller,
together with all dividends and distributions paid, and the parties shall have
no further rights or obligations with respect to each other.
1.5. Closing. Closing of this sale and purchase transaction shall be held at
10:00 a.m., at the offices of Buyer, on the Close of Escrow Date as hereinafter
defined.
1.6. Default by SELLER. This transaction is for the sale and purchase of the
Shares. In the event of the failure or refusal of SELLER to deliver any of the
Shares, which failure or refusal shall not relieve SELLER of his obligations
hereunder, BUYER may, at its option and without prejudice to its rights against
SELLER, pursue all rights and remedies that it may have as against SELLER,
including, without limitation, the right of specific performance.
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1.7. Default by BUYER. In the event of the failure or refusal of BUYER to
perform any of its obligations under this Agreement, which failure or refusal
shall not relieve BUYER of its obligations hereunder, SELLER may, at his option
and without pre'udice to his rights against BUYER, pursue all rights and
remedies that he may have as against BUYER, including, without limitation, the
right of specific performance or, in the alternative, Seller may retain the
Deposit as liquidated damages, it being agreed that the Deposit represents a
reasonable calculation of the damages which the Seller would sustain as a result
of the breach of this Agreement by Buyer.
1.8. SELLER's Representations and Warranties with respect to the Shares. In
addition to the business representations and warranties of SELLER contained 'in
Paragraph 1.9 following, SELLER represents and warrants to the best of his
knowledge and belief that: (a) the Corporations are legally organized and in
good standing in their respective states of incorporation; (b) the Shares are
duly authorized, validly issued and outstanding, and are fully-paid and
non-assessable; and (c) the Shares are free and clear of all liens,
encumbrances, security interests, charges, pledges and hypothecations, there is
no prior agreement respecting the sale of such shares to any person or entity,
and SELLER is the sole legal and beneficial owner of such Shares with full right
and authority to sell and transfer such shares to BUYER.
1.9. SELLER's Representations and Warranties. For purposes of this Agreement,
"Material Adverse Effect" means, with respect to the Corporations, a material
adverse effect on the business, operations, or financial condition of either of
the Corporations. For purposes of this Agreement, "Taxes" shall mean all taxes,
fees, levies,
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duties. charges or other assessments imposed by any federal, state, county,
local or foreign government, taxing authority, subdivision or agency thereof.
including interest. penalties. additions to tax or additional amounts thereto.
In addition to the foregoing representations and warranties of SELLER relating
to the Shares, SELLER represents and warrants to the best of his knowledge and
belief as follows-.
1.9. 1. Consents and Approvals- No Violations.
(i) Except for applicable requirements of New York securities
law. no filing with, and no permit, authorization, consent or approval of any
public body or authority is necessary for the consummation by the Corporations
of the transactions contemplated by this Agreement.
(ii) Neither the execution and delivery of Lhis Agreement by
SELLER, the consummation by SELLER of the transactions contemplated hereby, nor
compliance by SELLER with any of the provisions hereof will (i) conflict with or
result in any breach of any provision of the Corporations' Articles of
Incorporation or Bylaws; (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration or result in the creation
of any lien) under any of the terms, conditions or provisions of any note, bond.
mortgage, indenture, license, contract, agreement or other instrument or
obligation to which either of the Corporations is a party or by which they or
any of their properties or assets may be bound; or (iii) violate any order,
writ, injunction. decree. statute, rule or regulation applicable to the
Corporations or any of their properties or assets.
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(iii) The foregoing provisions of this Article 1.9.1
notwithstanding, the Seller shall have thirty (30) days from the execution
hereof to conduct a review of all information and/or documentation for the
purpose of determining (i) if a default or violation as set forth in this
subparagraph exists or (ii) if any consents and/or approvals are necessary to
consummate this transaction. In the event that it is determined that a default
or violation exists or may exist, or a consent or approval is necessary, the
Seller shall notify the Buyer of such and provide the Buyer with the
information. documentation and records discovered, and make a good faith effort
using due diligence to obtain any such con sents and approvals or to remedy any
such defaults or violations. In the event the Seller is unable to obtain such
consents or approvals or to remedv such defaults or violations. he shall work
towards obtaining replacements for the defaulted/violated Agreements or Buyer
may waive same. If Buyer does not so waive, the parties may decide to terminate
this Agreement, in which event this Agreement shall be deemed null and void ab
initio.
1.9.2. Reports. The balance sheets of the Corporations for the year
ended December 31, 1996, including any notes or schedules thereto (the
"Corporations' Balance Sheets") and the related statements of profits and losses
for the year then ended do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and fairly present the
financial positions of the Corporations as of the respective dates thereof.
Except as and to the extent provided in the Corporations' Balance Sheets, the
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Corporations did not have at December 31, 1996, any liabilities required by
generally accepted accounting principals to be reflected on a balance sheet.
1.9.3. Absence of Certain Changes. Since December 31, 1996, the
Corporations (i) have not suffered a Material Adverse Effect, (ii) have not
entered into any transaction, or conducted their businesses or operations, other
than in the ordinary course of business and consistent with past practice, or
(iii) have not taken or agreed to take any of the following actions ("Material
Action")-.
1.9.3.1. (i) declare. set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, (ii) split. combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of. in lieu of or in substitution for shares of its
capital stock; or (iii) amend the terms of, repurchase, redeem or otherwise
acquire any of its securities or any securities of its subsidiaries, or propose
to do any of the foregoing;
1.9.3.2. authorize for issuance, issue, sell. deliver or agree or commit
to issue. sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities (including indebtedness having the right to
vote) or equity equivalents (including, without limitation, stock appreciation
rights), except as required pursuant to the agreements and instruments
outstanding on the date hereof, or amend in any material respect any of the
terms of any such securities or agreements outstanding on the day hereof; to do
any of the foregoing, consistent with past practice.
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1.9.3.3. amend or propose to amend either Corporations'Articies or
Certificate of Incorporation or Bylaws;
1.9.3.4. acquire, sell, lease, encumber, transfer or dispose of any
assets outside the ordinary course of business, consistent with past practice,
or any assets which are material to SELLER, BUYER, or the Corporations, as
applicable, taken as a whole or make any capital expenditures aggregating over
Twenty Thousand ($20,000.00) Dollars, except in each case pursuant to
obligations in effect on the date hereof. or enter into any contract, commitment
or transaction outside the ordinary course of business.
1.9.3.5. incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Corporations or guarantee (or become liable
for) any debt of others or make any loans, advances or capital contributions or
mortgage, pledge or otherwise encumber any material assets or create or suffer
any material lien thereupon other than in each case in the ordinary course of
business consistent with past practice;
1.9.3.6. pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unassented, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
financial statements (or the notes thereto) of either of the Corporations, as
applicable, incurred in the course of business consistent with past practice or
settle any lawsuits relating to intellectual property:
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1.9.3.7. change any of the accounting principals or practices used by it
(except as required by generally accepted accounting principals)-,
1.9.3.8. except as required by law, (i) enter into, amend or terminate
any Benefit Plan (as hereinafter defined) or any agreement, arrangement, plan,
or policy between either of the Corporations and one or more of its directors or
executive officers, or (ii) increase in any manner the compensation or fringe
benefits of any director. officer or employee or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof, except in the case
of non-officer employees for normal increases in the ordinary course of business
consistent with past practice that. in the aggregate, do not result in a
material increase in benefits or compensation expense. or enter into any
contract. agreement, commitment or arrangement to do any of the foregoing;
1.9.3.9. take any action that would tend not to preserve intact either
Corporation's present business organization, keep available the services of its
present officers and employees and preserve its relationship with customers,
suppliers, licensors, licensees, contractors, distributors and others having
business dealings with them; or
1.9.3.10. (i) agree to take any of the foregoing actions, or (ii) take
any action that would or is reasonably likely to result in any of the
representations and warranties of either of the Corporations set forth in this
Agreement being untrue.
1.9.4. No Undisclosed Liabilities. Since December 31, 1996, neither of the
Corporations has incurred any liabilities (absolute, accrued, contingent or
otherwise) that are material, in the aggregate. to the business, operations or
financial condition of either
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of the Corporations, except for liabilities incurred in the ordinary course of
business, and consistent with past practices and liabilities incurred in
connection with this Agreement.
1.9.5. No Default. Neither of the Corporations is in default or violation
(and no event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (i)
the Articles of Incorporation or the Bylaws of either of the Corporations, (ii)
any note. bond, mortgage, indenture. license, contract. agreement or other
instrument or obligation to which either of the Corporations is a party or by
which the Corporations or any of their properties or assets may be bound, or
(iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to the Corporations, except in the case of (ii) or (iii) for defaults
or violations which would not. in the aggregate, have a Material Adverse Effect
and which would not prevent or materially delay the consummation of the
transactions contemplated hereby.
1.9.6. Litication. There are no actions, suits, proceedings or, to the best
knowledge of the Corporations, investigations pending or, to the best knowledge
of the Corporations, threatened involving the Corporations, at law or in equity,
or before any governmental entity which, in the aggregate, are reasonably likely
to have a Material Adverse Effect.
1.9.7. Comoliance with Applicable Law. The business of the Corporations is
not being conducted in violation of any applicable law, ordinance, rule,
regulation. decree or order of any governmental entity, except for violations
which, in the aggregate, do not and would not have a Material Adverse Effect.
The Corporations hold all permits. licenses, variances, exemptions, orders and
approvals of all governmental entities
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necessary for the lawful conduct of their businesses (the "Corporations'
Permits"), except for failures to hold such Corporations' Permits which would
not. in the aggregate, have a Material Adverse Effect. The Corporations are in
compliance with the terms of the Corporations' Permits, except where the failure
to do so would not, in the aggregate. have a Material Adverse Effect.
1.9.8. Taxes. The Corporations have duly filed all material federal, state.
local and foreign tax returns required to be filed by them, and the Corporations
have duly paid, caused to be paid or made adequate provision for the payment of
all Taxes required to be paid in respect of the periods covered by such returns
and have made adequate provision for payment of all Taxes anticipated to be
payable in respect of all calendar periods since the periods covered by such
returns. All deficiencies and assessments asserted as a result of any
examinations or other audits by federal, state, local or foreign taxing
authorities have been paid, fully settled or adequately provided for in the
financial statements of the Corporations and no issue or claim has been asserted
for Taxes by any taxing authority for any prior period, the adverse
determination of which would result in a deficiency which would have a Material
Adverse Effect, other than those heretofore paid or provided for. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal, state or local income tax return of the Corporations.
1.9.9. ERISA.
1.9.9.1. With respect to each employee benefit plan (including, without
limitation, any "employee benefit plan," as defined in Section'3(3) of the
Employee Retirement Income Security Act of 'i 974, as amended ("ERISA")), and
any material bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other plan, arrangement or understanding (whether or not legally
binding) (all the foregoing being herein called "Benefit Plans"), maintained or
contributed to by the Corporations, the Corporations have made available to
BUYER a true and correct copy of, where applicable, (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (II')
such Benefit Plan, (iii) each trust agreement, insurance contract. and
third-party administration agreement, if any, relating to such Benefit P!an,
(iv) the most recent actuarial report or valuation relating to any Benefit Plan
sub'ect to Title IV of ERISA, (v) the most recent IRS determination letter, and
(vi) the summary plan description. No amendments or promises have been made with
respect to any Benefit Plan which would increase after the date of this
Agreement the expense of maintaining such Benefit Plan.
1.9.9.2. No Benefit Plans of the Corporations nor benefit plans of any
entity which would be treated as a "single employer" with either of the
Corporations under Section 4001 (b) of ERISA are subject to Title IV of ERISA.
1.9.9.3. With respect to Benefit Plans of the Corporations, in the
aggregate, no event has occurred, and to the knowledge of the Corporations,
there exists no condition or set of circumstances which are reasonably likely to
occur in connection with which either of the Corporations would be subject to
any liability that would have a Material Adverse Effect (except liability for
benefit claims and funding obligations payable
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in the ordinary course), under ERISA, the Internal Revenue Code of 1986, as
amended (the "Code") or any other applicable law.
1.9.9.4. With respect to Benefit Plans of either of the Corporations, in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
fcotnoted in accordance with generally accepted accounting principals, on the
consolidated financial statements of the Corporations. except for obligations
which would not, in the aggregate, have a Material Adverse Effect.
1.9.9.5. Each of the Benefit Plans has been administered in compliance
with its terms in all material respects and is in compliance with applicable
laws and regulations, except for failures to comply which, in the aggregate,
would not have a Material Adverse Effect.
1.9.9.6. Each of the Benefit Plans which is intended to be a qualified
plan within the meaning of Section 401 (a) of the Code has been determined by
the IRS to be so qualified and nothing has occurred to cause the loss of such
qualified status.
1.9.9.7. The Corporations have no obligations for retiree health,
medical or life insurance benefits under any plan referred to in this Section
1.9 other than (i) coverage mandated by applicable law, (ii) deferred
compensation benefits accrued as liabilities on the financial statements of the
Corporations, or (iii) benefits the full cost of which are borne by the current
or former employee (or his or her beneficiary).
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1.9.10. Intellectual Property. No claim is pending, or, to the knowledge of
the Corporations, threatened to the effect that the present or past operations
of either of the Corporations infringe upon or conflict with the rights of
others with respect to any intellectual property (including, without limitation,
licenses, copyrights, drawings, trade secrets, know-how and computer software)
necessary to permit the Corporations to conduct their business as now operated
(the Corporations Intellectual Property") and no claim is pending or, to the
best knowledge of the Corporations, threatened to the effect that any of the
Corporations Intellectual Property is invalid or unenforceable. The Corporations
have provided BUYER with a list of all licenses. patents, patent rights. patent
applications, trademarks. trademark applications, trade names. copyrights and
service marks. No contract, agreement or understanding between either of Lhe
Corporations and any other party exists which would impede or prevent the
continued use by the Corporations of the entire right, title and interest of the
Corporations to the Corporations Intellectual Property.
1.9.11. Emoloyee Relations. The Corporations have provided the BUYER with a
complete and correct list of all employment, compensation, severance. consulting
or indemnification contracts between the Corporations and its present or former
employees, officers, directors, and consultants to the extent that the
Corporations have any continuing obligations thereunder.
1.9.12. Material Contracts. The Corporations have made available to the BUYER
a complete and accurate list of all contracts, agreements and instru ments to
which the Corporations are a party or by which either of them or any of their
properties or assets may be bound that (i) relate to the leasing of real
property or (ii) provide for
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payments in any one year in excess of Twenty Thousand ($20,000.00) Dollars. Each
of such contracts, agreements and instruments is valid and binding and in full
force and effect and, to the best knowledge of the Corporations, there has not
occurred any default by any party thereto which remains unremedied as of the
date hereof.
1.10. BUYER's Representations and Warranties. To the best of its knowledge
and belief, BUYER represents and warrants as follows:
1.10.1. Organization. BUYER is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
the corporate power to own, lease and operate all of its properties and assets
and to carry on its business as now being conducted. Neither the ownership of
its properties nor the conduct of its business requires BUYER to be qualified to
do business in any other jurisdiction. BUYER has heretofore delivered or will
promptly deliver to SELLER accurate and complete copies of BUYER's Certificate
of Incorporation and Bylaws, as currently in effect.
1.10.2. Authority Relative to this Agreement. BUYER has the corporate
power to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of BUYER and the holders of a majority of
the outstanding shares of BUYER. No other actions are required by law or the
Articles of Incorporation or Bylaws of BUYER to authorize the execution and
delivery of this Agreement or the consummation of the actions contemplated
hereby. This Agreement has
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been duly and validly executed and delivered by BUYER and constitutes a valid
and binding agreement of BUYER, enforceable against BUYER in accordance with its
terms.
1.10.3. Consents and Approvals: No Violations. Except for applicable
requirements of New York securities law, no filing with, and no permit,
authorization, consent or approval of any public body or authority is necessary
for the consummation by BUYER of the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement by BUYER, the
consummation by BUYER of the transactions contemplated hereby, nor compliance by
BUYER with any of the provisions hereof will (1) conflict with or result in any
breach of any provision of BUYER's Articles of Incorporation or Bylaws; (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or result in the creation of any lien) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation to which BUYER is
a party or by which it or any of its properties or assets may be bound; or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to BUYER or any of its properties or assets.
1.10.4. No Default. BUYER is not in default or violation (and no event has
occurred which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) its Articles of
Incorporation or Bylaws, (ii) any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which BUYER is a party
or by which BUYER or any of its properties or assets may be bound, or (iii) any
order, writ, injunction, decree, statute. rule or regulation
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applicable to BUYER, except in the case of (ii) or (iii) for defaults or
violations which would not, in the aggregate, have a Material Adverse Effect and
which would not prevent or materially delay the consummation of the transactions
contemplated hereby.
1.10.5. Litigation. There are no actions, suits, proceedings or, to the best
knowledge of BUYER, investigations pending or, to the best knowledge of BUYER,
threatened involving BUYER. at law or in equity, or before any governmental
entity which, in the aggregate, are reasonably likely to have a Material Adverse
Effect.
1.10.6. Compliance with Applicable Law. The business of BUYER is not being
conducted in violation of any applicable law, ordinance. rule. regulation,
decree or order of any governmental entity, except for violations which, in the
aggregate, do not and would not have a Material Adverse Effect. The BUYER hold
all permits, licenses. variances, exemptions, orders and approvals of all
governmental entities necessary for the lawful conduct of its business (the
"BUYER's Permits"), except for failures to hold such BUYER's Permits which would
not. in the aggregate, have a Material Adverse Effect. BUYER is in compliance
with the terms of the BUYER's Permits, except where the failure to do so would
not, in the aggregate, have a Material Adverse Effect.
1.10.7. Taxes. BUYER has duly filed all material federal, state, local and
foreign tax returns required to be filed by them, and BUYER has duly paid,
caused to be paid or made adequate provision for the payment of all Taxes
required to be paid in respect of the periods covered by such returns and have
made adequate provision for payment of all Taxes anticipated to be payable in
respect of all calendar periods since the periods covered by such returns. All
deficiencies and assessments asserted as a result
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of any examinations or other audits by federal, state, local or foreign taxing
authorities have been paid, fully settled or adequately provided for in the
financial statements of BUYER and no issue or claim has been asserted for Taxes
by any taxing authority for any prior period, the adverse determination of which
would result in a deficiency which would have a Material Adverse Effect, other
than those heretofore paid or provided for. There are no outstanding agreements
or waivers extending the statutory period of limitation applicable to any
federal, state or local income tax return of BUYER.
ARTICLE II
ESCROW
2.1 Appointment of Escrow Agent. SELLER and BUYER hereby appoint and
designate Robert Rimberg, Esquire as the Escrow Agent for the purposes set forth
in this Agreement. Upon the terms and conditions of this Agreement, the Escrow
Agent hereby accepts such appointment and agrees to act as provided herein.
2.2 Deposit of Purchase Price and Shares.
2.2.1. At or before the time specified in Paragraph 1.3. BUYER shall
deliver to Escrow Agent the Deposit in the form of a Cashier's, Treasurer's or
Bank Check. The interest on such funds shall be paid to the party ultimately
receiving such funds under the terms and conditions of this Agreement.
2.2.2. At or before the time specified in paragraph 1.3, Buyer shall
deliver to Escrow Agent the Purchase Price Balance in the form of a Cashier's,
Treasurer's or Bank Check. The interest on such funds shall be paid to the party
ultimately receiving such funds under the terms and conditions of this
Agreement.
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2.2.3. At or before the time specified in paragraph 1.2. Seller shall
deliver to Escrow Agent the Shares.
2.3. Voting of Escrowed Shares. Until Closing, SELLER shall have the right to
vote the escrowed Shares on all corporate issues and questions requiring a vote
of the stockholders of either Corporation or upon which a vote of the
stockholders of either Corporation is taken; provided, however, that SELLER
shall not vote the escrowed Shares in any manner that shall be inconsistent with
the terms of this Agreement.
2.4. Dividends and Distributions on the Escrowed Shares. Prior to Closing,
any dividends or distributions declared or made with respect to the escrowed
Shares shall be delivered to the Escrow Agent who shall hold such funds or
property for delivery to the party ultimately receiving the Shares.
2.5. Closing of Escrow. The Escrow Agent shall terminate the escrow and
deliver the Shares to Buyer together with all dividends and distributions paid.
and deliver all of the Purchase Price by Bank or Certified Check to the order of
the Seller together with all interest thereon ("Close of Escrow") on the third
day following the earliest to occur of the following (should the third day fall
on a weekend or holiday, the third day shall be deemed to be the next business
day thereafter) ("Close of Escrow Date"):
2.5.1. Completion by Fidelity of the Offering, as set forth and more
fully defined on the attached Exhibit "D", attached hereto and made a part
hereof by this reference;
2.5.2. Such time as Buyer and Fidelity, shall elect: or
21
<PAGE>
2.5.3. Thirty (30) days after satisfaction of all contingencies set
forth in Article 1.4.
2.6. Compensation to Escrow Agent. SELLER and BUYER shall each pay one half
of the charges of the Escrow Agent, and any aftorney's fees, expenses and other
costs incurred by the Escrow Agent in connection with the administration of the
provisions of this Escrow Agreement.
2.7. Limited Duties of Escrow Agent. The Escrow Agent undertakes to perform
only such duties as are required pursuant to the Escrow Agreement and no implied
duties or obligations shall be read into the Escrow Agreement against the Escrow
Agent.
2.8. Writings and signatures. The Escrow Agent may act in reliance upon any
writing or instrument or signature which it, in good faith, believes to be
genuine. may assume the validity and accuracy of any statement or assertion
contained in such a writing or instrument and may assume that any person
purporting to give any writing, notice, advice, or instructions in connection
with the provisions hereof has been duly authorized to do so. The Escrow Agent
shall not be liable in any manner for the sufficiency or correctness as to form,
manner and execution, or validity of any instrument deposited in this escrow,
nor as to the identity, authority, or right of any person executing the same.
2.9. Indemnification of Escrow. BUYER and SELLER hereby agree jointly and
severally, to indemnify the Escrow Agent and hold it harmless from any and all
claims, liabilities, losses, actions, suits or proceedings at law or in equity,
or any other expenses. fees, or charges of any character or nature, which it may
incur or with which it may be threatened by reason of its acting as Escrow Agent
under this Agreement; and in
22
<PAGE>
connection therewith, to indemnify the Escrow Agent against any and all
expenses. including attorneys' fees and the cost of defending any action, suit
or proceeding or resisting any claim.
2.10. Dispute Resolution. If the parties shall be in disagreement about the
interpretation of this Agreement, or about the rights and obligations, or the
propriety, of any action contemplated by the Escrow Agency hereunder, the Escrow
Agent may, at its sole discretion, file an action in interpleader to resolve
such disagreement. The Escrow Agent shall be indemnified for all costs,
including reasonable attorneys' fees, in connection with the aforesaid
interpleader action, and shall be fully protected in suspending all or a part of
its activities under the Escrow Agreement until a final judgment in the
interpleader action is received. As an alternative to the filing of an action in
interpleader in the event of a dispute, the Escrow Agent, at its option, may
suspend all or a part of its activities under the Escrow Agreement until the
Escrow Agent receives an agreement between the parties settling the dispute or a
court order directing the Escrow Agent to take a specified course of action. In
the event that the Escrow Agent chooses the latter course of action, the Escrow
Agent shall be fully protected in suspending all or a part of its activities
under this Escrow Agreement until the Escrow Agent receives an agreement between
the parties settling the dispute or a court order directing the Escrow Agent to
take a specified course of action.
2.11. Independent Counsel. The Escrow Agent may consult with counsel of its
own choice and shall have full and complete authorization and protection for any
action taken or suffered by it hereunder in good faith and in accordance with
the opinion of such
23
<PAGE>
counsel. The Escrow Agent shall otherwise not be liable for any mistakes of fact
or error of judgment, or for any acts or omissions of any kind unless caused by
its wilful misconduct or gross negligence.
2.12. Resignation. The Escrow Agent may resign upon thirty days written
notice to both parties. SELLER shall thereupon appoint a successor Escrow Agent.
If a successor Escrow Agent is not appointed by SELLER within the first
twenty-one days of the thirty day period, the Escrow Agent shall notify BUYER
who shall thereupon appoint a successor Escrow Agent. If a successor Escrow
Agent is not appointed within the thirty day period, the Escrow Agent may
petition the court to name a successor.
ARTICLE III
MISCELLANEOUS
3.1. Notices. Anv notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by certified mail to
the addresses as noted in this Agreement or such other address as a party may
designate in writing to all parties to this Agreement.
3.2. Waiver of Breach. The waiver by any party of a breach of any provision
of this Agreement by any other party shall not operate or be construed as a
waiver of any subsequent breach by such other party.
3.3. Benefit. The rights and obligations of all parties under this Agreement
shall inure to the benefit of, and shall be binding upon their heirs,
administrators, representatives, successors, and assigns.
3.4. Entire Agreement. This Agreement contains the entire agreement of the
parties and may be modified only by agreement in writing signed by the party or
parties
24
<PAGE>
against whom enforcement of any waiver, change, modification, extension, or
discharge is sought
3.6. Severability. If provision of this Agreement is round to be invalid or
unenforceable, this Agreement shall be considered divisible as to provision,
what shall be inoperative, though that provision be not inclusive of this
Agreement -shall be valid and binding as herein.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement on the
day and year first written above.
SELLER:
/s/ Harold Bendell
------------------
HAROLD BENDELL
BUYER:
MAJOR ACQUISITION CORP.
BY:____________________
ESCROW AGENT
/s/ Robert Rimberg
-----------------------
ROBERT RIMBERG, ESQUIRE
<PAGE>
STOCK PURCHASE AGREEMENT
Exhibit "A"
ESCROW AGREEMENT
<PAGE>
STOCK PURCHASE AGREEMENT
EXHIBIT "B"
MAJOR DODGE, INC. $2,000,000.00
MAJOR CHRYSLER, PLYMOUTH, JEEP, EAGLE, INC. $2,000,000.00
<PAGE>
STOCK PURCHASE AGREEMENT
Exhibit "C"
<PAGE>
ESCROW AGREEMENT
AGREEMENT made as of the 6th day of March 1997, by and between Major
Acquisition Corp, a New York Corp., with offices at 80-02 Kew Gardens Road, Kew
Gardens, NY 11415 (hereinafter "Major"), Harold Bendell, an individual residing
at 200 Pershing Road, Englewood, NJ 07632 (hereinafter "Bendell") and Robert L.
Rimberg, Esq., 866 Third Ave., New York, NY 10022 (hereafter "Escrowee" or
"Escrow Agent").
ESCROWEE
WHEREAS, Major and Bendell have entered into an agreement dated March 6, 1997
and titled "Stock Purchase" whereby major will purchase and Bendell will sell
stock his interests in the Corporations (the "Agreement");
WHEREAS, Major and Bendell are desirous of having Escrowee act as Escrow
Agent to receive a four hunderd thousand dollars ($400,000.00) and shares as
defined in the Agreement (collectively to be called "Deposit");
WHEREAS, Major and Bendell are desirous are of setting forth the terms and
conditions under which Escrowee shall hold and disburse the Deposit received by
Escrowee pursuant to this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and representations
contained herein and intending to be legally bound the parties agree as follows:
1. The Deposit to be paid in accordance with the Agreement and shall be paid
directly to Escrowee.
2. The parties hereto agree that the total amount received by Escrowee in
connection with the transaction is the Deposit.
3. The Escrowee shall terminate the escrow and deliver the Deposit to Buyer
as provided for
<PAGE>
in the Agreement.
4. Excrowee represents that he will act as fiduciary in accordance with the
judiciary law and other ethical or legal standards for attorneys admitted to
practice in the State of New York.
5. In determining the obligation under this Agreement, Escrowee shall rely
solely upon ;this Escrow Agreement, with the exception of disbursing the Deposit
which shall be in accordance with the Agreement, and the obligations of
attorneys acting as a fiduciary in accordance with New York Law as described
above. In event a dispute arises with respect to the monies held in escrow by
Escrowee, Escrowee may hold the monies in escrow pending an Agreement signed by
the parties or until final determination from a court of competent jurisdiction
and all applicable appeal periods having expired.
6. It is agreed that the duties of the Escrowee are only as specifically
provided, are purely ministerial in nature, and that Escrowee shallincur no
liability whatsoever except for willful misconduct or gross negligence. Bendell
and Major hereby release Escrowee in good faith in performance of its duties
hereunder.
7. The Escrowee undertakes to perform only such duties as are required
pursuant to this Agreement and no implied duties or obligations shall be read
into this Escrow Agreement against the Escroww.
8. The Escrowee may act in reliance upon any writing or instrument or
signature which it, in good faith, believes to be genuine, may assume the
validity and accuracy of any statement or assertion contained in such writing or
instrument and may assume that any person purporting to give any writing,
notice, advise or instructions in connection with the provisions hereof has been
duly athorized to do so. The Escrowee shall not be liable in any manner for the
sufficiency or corectness as to form, manner and execution, or validity of any
instrument deposited in this escrow, nor as to
<PAGE>
the identity, authority or right of any person executing the same.
9. Buyer and Seller hereby agree jointly and severally, to indemnify the
Escrowee and hold it harmless from any and all claims, liabilities, losses,
actions, suits or proceedings at law or in equity, or any other expenses, fees
or charges of any character or nature, which it may incur or with which it may
be threatened by reason of its acting as Escrowee under this Agreement; and in
connection therewith, to indemnify the Escrowee against all expenses, including
attorney's fees and the cost of defending any action, suit or proceeding or
restraining claim.
10. If the partieis shall be in disagreement about the interpretation of this
Agreement, or about the rights and obligations, or the propriety, of any action
contemplated by the Escrow Agency hereunder, the Escrow Agent may, at its sole
discretion, file an action in interpleader to resolve such disagreement. The
Escrow Agent shall be indemnified for all costs, including reasonable attorney's
fees, in connection with the aforesaid interpleader action, and shall be fully
protected in suspending all or a part of its activities under this Escrow
Agreement until a final judgment in the interpleader action is received. As an
alternatve to the filing of an action in interpleader in the event of a dispute,
the Escrow Agent, at its option, amy suspend all or a part of its activities
under this Escrow Agreement until the Escrow receives an agreement between the
parties settling the dispute or a court order directing the Escrow Agent, at its
option, may suspend all or a part of its activities under this Escrow Agreemnt
until the Escrow receives an agreement between the partieis settling the dispute
or a court order directing the Escrow Agent to take sa specified court of
action. In the event that the Escrow Agent chooses the latter course of action,
the Escrow Agent shall be fully protected in suspending all or a part of its
activities under this Escrow Agreement until the Escrow Agent receives an
agreement between the partieis settling the dispute or a court order directing
the Escrow Agent to take a specified course of action.
11. The Escrow Agent may consult with counsel of its own choice and shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith
<PAGE>
and in accordance with the opinion os such counsel. The Escrow Agent shall
otherwise not be liable for any mistakes of fact or error of judgment, or for
any acts or omissions of any kind unless caused by its wilful misconduct or
gross negligence.
12. The Escrow Agent may resign upon thirty days written notice to both
parties. Seller shall thereupon appoint a successor Escrow Agent. If a successor
Escrow Agent is not appointedby Seller within the first twenty0one days of the
thirty day period, the Escrow Agent sall notify Buyer who shall thereuppon
appoint a successor Escrow Agent. If a successor Escrow Agent is not appointed
within the thirty day period, the Excrow Agent may petition the court to name a
successor.
13. This Agreement embodies the complete and final Agreement and
understanding between the partieis hereto and supersedes alal prior agreement
and understanding relating to the subject matter hereof.
14. This Agreement may not be amended, changed, altered, modified or
terminated except by a written instrument signed by all parties hereto.
15. All questions arising hereunder and the rights of the parties shall be
construed in accordance with the laws of the State of New York and any action or
proceeding shall be commenced in the State Courts of State of New York as
provided for under the CPLR.
16. In the event any provision of this Agreement is deemed unenforceable,
such determination shall not effect any of the other provisions herein.
17. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the partieis hereto
that day and year above written.
/s/ Harold Bendell
-----------------------
Harold Bendell
Major Acquistion Corp.
/s/ Doron Cohen
-----------------------
By: Doron Cohen VP
/s/ Robert L. Rimberg
-----------------------
Robert L. Rimberg, Esq.
<PAGE>
MANAGMENT AGREEMENT
THIS MANAGEMENT AGREEMENT, made this 3rd day of March, 1997 by and between:
FIDELITY HOLDINGS, INC., a Nevada corporation having its principal office
located at 80-02 Kew Gardens Road, Suite 5000, Kew Gardens, New York 11415
(hereinafter "FIDELITY")
AND
BRUCE BENDELL and HAROLD BENDELL, adult individuals with primary business
offices located at 43-40 Northern Boulevard, Long Island City, New York 11101
(hereinafter jointly "MANAGERS")
WITNESSETH THAT:
WHEREAS, FIDELITY' s wholly-owned subsidiary, Major Acquisition Corp., has
contracted to acquire ownership of various automobile dealerships, including:
Major Chevrolet, Inc.; Major Dodge, Inc.; Major Subaru, Inc. ; and Major
Chrysler, Plymouth, Jeep, Eagle, Inc., subject to, inter alia, manufacturers'
approvals;
WHEREAS, FIDELITY will place its ownership of such dealerships into a new
division, under a newly-organized, wholly-owned subsidiary named "Major
Automotive Group, Inc.";
WHEREAS, the Management of FIDELITY has no experience in the management of
automobile dealerships or the purchasing, selling, financing, leasing, or
otherwise dealing in or with motor vehicles, but desires to maintain continuity
of the existing management of such dealerships by securing the managerial
services of MANAGERS, who have been the managers of such dealerships prior to
their acquisition by FIDELITY;
NOW, THEREFORE, intending to be legally bound, and in consideration of the
mutual promises and covenants contained herein, the parties agree as follows:
1. ENGAGEMENT. (a) For purposes of this Management Agreement, the acquired
automobile dealerships, including but not limited to, Major Chevrolet, Inc.,
Major Dodge, Inc., Major Subaru, Inc., and Major Chrysler, Plymouth, Jeep,
Eagle, Inc., motor vehicle
<PAGE>
disabled or is otherwise unable to serve, resigns, or retires or otherwise
withdraws from the management hereunder, the other manager shall be the
successor manager. In the event that both MANAGERS die, become permanently
disabled or otherwise unable to serve, resign, or retire or otherwise withdraw
from the management hereunder, the successor manager(s) named or appointed in
any socalled "Successor Addendum" for each dealership shall become the
manager(s) for that dealership. If no successor manager(s) have been named or
appointed, FIDELITY shall name such successor manager(s) subject to obtaining
any required manufacturer approvals.
(c) In managing the operations, MANAGERS shall have the sole right to:
(i) Communicate with and make all decisions in connection with, all
manufacturers, wholesalers, distributors, and suppliers;
(ii) Establish, continue, maintain, replace, refinance, and utilize various
manufacturer, bank and financial institution lines of credit, floor plan
financing, purchase and lease financing, and other sources of credit used in the
division operations;
(iii) Obtain, continue, maintain, amend, and interpret all agreements,
franchises, licenses, and arrangements with manufacturers, franchisors, and
distributors of motor vehicles; and
(iv) Conduct day-to-day operations, including hiring and firing personnel,
setting salary and wage rates, setting commission rates, determining business
hours, setting and enforcing personnel policies, setting sales, leasing and
general business policies, establishing operating methods and systems, selecting
advertising agencies and media, approving customer credit, etc.
(d) MANAGERS shall not have any authority, in the absence of prior approval of
the Board of Directors of FIDELITY, to:
(i) Pledge the credit of FIDELITY;
(ii) Sell, pledge, hypothecate or dispose of any of the shares of any of the
dealerships; or
(iii) Acquire, contract to acquire, dispose of, contract to dispose of,
pledge, hypothecate, or otherwise deal in or
3
<PAGE>
with the dealerships within the Major Automotive Group, Inc. division
or with outside dealerships desiring to become affiliated.
(e) In no event shall the management of the respective dealerships change
without the consent of the applicable manufacturer if such consent is required.
3. TERM. (a) The initial term of this Management Agreement shall commence
contemporaneously with the date of the Closing of the Plan and Agreement of
Reorganization between FIDELITY's wholly-owned subsidiary, Major Acquisition
Corp., and Bruce Bendell for the acquisition of the dealerships by FIDELITY and,
unless extended as provided below in (b) or (c), shall end on December 31, 2002.
(b) In the event that on December 31, 2002 FIDELITY, directly or indirectly,
retains ownership of the dealerships, this Management Agreement shall continue
upon the unilateral decision of the affected MANAGER or MANAGERS.
(c) Upon the mutual agreement of the parties, this Management Agreement may be
extended for such term as the parties may then determine, subject to such
amendments, if any, as the parties may then agree upon.
4. LICENSE(S) . Each of the dealerships has obtained such licenses and
regulatory authorizations as required by governmental agencies to engage in the
motor vehicle operations as presently conducted. MANAGERS shall conduct all
motor vehicle operations in strict accordance with the regulatory requirements
of such licensing agencies and shall maintain such licenses and/or
authorizations in good standing. MANAGERS shall obtain any licenses which may be
required now or hereafter, relating to operations as they may then be conducted,
and shall maintain all such licenses in good
5. FACTORY APPROVALS. MANAGERS shall communicate with the manufacturers of the
motor vehicles and their distributors and shall maintain all existing
relationships in good standing. MANAGERS shall obtain all approvals which may be
required from time to time from any such manufacturers or
4
<PAGE>
EMPLOYMENT AGREEMENT W/
MOISE BENEDID
10.22
<PAGE>
AGREEMENT
THIS AGREEMENT, made as of this 29th day of July, 1996, by and between:
786710 (ONTARIO) LIMITED, a corporation organized under the laws of the
Province of Ontario, Canada and having its executive office at 1110 Finch Avenue
West, Suite 906, Toronto, Ontario, Canada M3J 2T2 (hereinafter referred to as
"EMPLOYER")
AND
1180513 (Ontario) Limited, a corporation organized under the laws of the
province of Ontario, Canada (hereinafter referred to as "1180513")
WITNESSETH THAT:
WHEREAS, 1180513 employs MOISE BENEDID, whom services EMPLOYER desires to
obtain, and 1180513 is prepared to contract with EMPLOYER to provide the
services of MOISE BENEDID as a "contract executive";
WHEREAS, MOISE BENEDID (hereinafter referred to as "CONTRACT EXECUTIVE")
has certain education, experience, background and contacts which would be useful
and helpful to EMPLOYER in its business and EMPLOYER is desirous of contracting
for the services of CONTRACT EXECUTIVE in order to obtain the benefits of such
education, experience, background and contacts;
WHEREAS, CONTRACT EXECUTIVE is familiar with TALKIE, TALKIE-GLOBE and BCS,
certain software and systems which EMPLOYER has developed, and desires that
CONTRACT EXECUTIVE manage the operations of EMPLOYER;
WHEREAS, CONTRACT EXECUTIVE is agreeable to having his services secured
from 1180513 and to providing his services to EMPLOYER as a contract or leased
executive, providing the benefits of his education, experience, background and
contacts to EMPLOYER;
WHEREAS, the parties have agreed upon the terms of such an arrangement 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
contracts with 1180513 for the services of CONTRACT EXECUTIVE, and 1180513
hereby contracts with EMPLOYER to provide the services of CONTRACT EXECUTIVE. By
Joinder herein, CONTRACT EXECUTIVE hereby authorizes 1180513 to so contract for
his services and accepts the terms and conditions of this Agreement and agrees
to be bound hereby.
2. TERM.
(a) This Agreement shall become effective as of August 1, 1996.
(b) This Agreement, subject to the provisions of Paragraphs
<PAGE>
15, 16 and 17 below, shall continue and exist for an initial period from August
1, 1996 to July 31, 1998.
(c) EMPLOYER shall have the option to extend the term of this Agreement for
two additional one (1) year periods. The option for the first extension year
shall be exercised by EMPLOYER mailing notice to 1180513 and CONTRACT EXECUTIVE
on or before April 30, 1998, of its intention to so extend the Agreement. If
EMPLOYER shall not exercise its extension option by April 30, 1998, this
Agreement shall terminate on July 31, 1998. The option for the second extension
year shall be exercised by EMPLOYER mailing notice to 1180513 and CONTRACT
EXECUTIVE on or before April 30, 1999, of its intention to further extend the
Agreement. If EMPLOYER shall not exercise its extension option by April 30,
1999, this Agreement as extended shall terminate on July 31, 1999.
(d) Notwithstanding the foregoing, the term of this Agreement is otherwise
subject to the termination provisions contained hereafter.
3. CONTRACT FEE-BASE.
(a) For all services rendered under this Agreement by CONTRACT EXECUTIVE
1180513 shall be paid, as a base contract fee, such annual fee as shall be
determined by the Management of EMPLOYER's parent, Fidelity Holdings, Inc., from
time to time, but in no event shall such contract fee be at a rate of less than
CN$80,000 per year. In the event of any extension of this Agreement, such
contract fee shall be at a rate of no less than CN$80,000 per year during each
extension year. Subject to sub-paragraph (b) below, such contract fee shall be
paid in equal installments at intervals no longer than semi-monthly. Such base
contract fee shall be in addition to such fringe benefits and bonuses as
provided elsewhere herein.
(b) The base contract fee 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 EMPLOYER for the twelve months
ended December 31 of each calendar year ending during the term of this Agreement
divided by actual common shares of EMPLOYER's public company parent (Fidelity
Holdings, Inc.) issued and outstanding at December 31 of each such 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%
2
<PAGE>
over $1.00 150%
The Profits per Common Share shall be the net income after taxes and all
calculations shall be in Canadian Dollars. This retroactive increase , if any
should occur, is not a bonus but a merit adjustment to the base contract fee 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 contract fee payment dates,
commencing with the first payment date following release of the audit. Any
unpaid balance upon termination of this Agreement remain in effect and shall be
paid over the balance of the then current year on the same payment dates as if
the Agreement had continued. 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 allocation of contract fee purposes, EMPLOYER may assign CONTRACT
EXECUTIVE to perform services for one or more of its affiliates and/or
brother/sister corporations, such services to be consistent with CONTRACT
EXECUTIVE'S duties hereunder. In such event, allocations of the contract fee to
1180513 may be separately paid by each such affiliate and/or brother/sister
corporation. All such allocated portions of the contract fee shall be deducted
from the total contract fee payable under sub-paragraph (a) above and EMPLOYER
shall pay 1180513 only the difference between (i) the total of all such
allocations from affiliates and/or brother/sister corporations and (ii) the base
contract fee. No assignment hereunder for allocation purposes shall require that
CONTRACT EXECUTIVE physically relocate.
(d) At the end of each calendar year, the Board of Directors of EMPLOYER
and the Management of EMPLOYER's parent, Fidelity Holdings, Inc. shall review
the performance of CONTRACT EXECUTIVE for such year and, based upon such
evaluation, establish any increase in the base contract fee payable to 1180513
for the services of CONTRACT EXECUTIVE for the succeeding calendar year.
EMPLOYER shall not be obligated to provide any increase.
4. INCENTIVE INCREASE IN CONTRACT FEE. (a) As an incentive to 1180513 to
supervise CONTRACT EXECUTIVE and cause CONTRACT EXECUTIVE to provide superior
services, EMPLOYER shall pay 1180513 an "Incentive Fee" [in addition to and
separate from the stock option referred to in (b) below and any incentive
compensation components of the Executive Bonus Package discussed in Paragraph
5(g) below] calculated as a percentage of the gross sales (net of returns and
allowances) of EMPLOYER on a bracket basis as follows:
The threshold for this Incentive Increase Plan is CN$1,000,000; that is, if
gross sales, net of returns and allowances, for any year are less that
$1,000,000 no Incentive Increase payment will be made.
If gross sales exceed CN$1,000,000, for that portion of the gross sales
less than CN$1,200,000, EMPLOYER shall pay 1180513 two percent (2%); and
For that portion of the gross sales over CN$1,200,000 and
3
<PAGE>
less than CN$2,500,000, EMPLOYER shall pay 1180513 four percent (4%); and
For all gross sales over CN$2,500,000 EMPLOYER shall pay 1180513 five
percent (5%).
The Incentive Increase in the Contract Fee would be cumulative by bracket.
For example, if the gross sales (net of returns and allowances) were
CN$2,7000,000 EMPLOYER shall pay 1180513 a total of CN$82,000 calculated as
follows:
For the sales to CN$1,200,000: CN$241000; and
For the $1,200,000 of sales between CN$1,200,000 and
CN$2,500,000: CN$48,000; and
For the $200,000 of sales over CN$2,500,000: CN$10,000.
(b) In addition, for each year in which gross sales (less returns and
allowances) exceed CN$2,000,000 EMPLOYER's parent, Fidelity Holdings, Inc.,
shall issue to 1180513 an option to purchase Ten Thousand (10,000) shares of
the Common Stock of Fidelity Holdings, Inc. at a price of US$2.50 per share.
Such option shall be exercisable for period of one (1) year after it is issued
and the stock to be issued will be restricted as to further transfer in
accordance with applicable laws and regulations of the U.S. Securities and
Exchange Commission.
5. FRINGE BENEFITS. EMPLOYER and 1180513 have agreed that the fringe
benefits to be provided to CONTRACT EXECUTIVE by 1180513 shall be equal to those
to be provided hereunder. CONTRACT EXECUTIVE 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, CONTRACT EXECUTIVE shall be
entitled to paid vacation during each year of this Agreement of three (3) weeks,
which shall not be accumulated from year to year if unused. Neither 1180513 nor
CONTRACT EXECUTIVE shall not be compensated for any unused vacation time.
(b) Personal Leave - During each year of this Agreement, CONTRACT EXECUTIVE
shall receive five days paid personal leave, which shall not be accumulated from
year to year if unused. Neither 1180513 nor CONTRACT EXECUTIVE 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, CONTRACT
EXECUTIVE 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 for which CONTRACT
EXECUTIVE observes shiva, CONTRACT EXECUTIVE shall be entitled to paid days off
for all such observance.
(e) Medical/Disability/Life Insurance - 1180513 and CONTRACT EXECUTIVE shall
receive an allowance of Three Thousand Five Hundred Canadian Dollars (CN$3,500)
for the payment of premiums for medical/surgical/hospital insurance,
disability insurance and/or life insurance. CONTRACT EXECUTIVE may select such
coverage, from
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such companies, for either or all the medical/surgical/hospital insurance, the
disability insurance and/or the life insurance, and EMPLOYER shall pay CN$3,500
toward the premiums, with 1180513 and/or CONTRACT EXECUTIVE responsible f6r the
overage.
(f) Automobile - During the term of this Agreement, EMPLOYER shall provide
EMPLOYEE with a car allowance of CN$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.
(g) Other - CONTRACT EXECUTIVE shall receive such other fringe benefits as are
determined by the Board of Directors of EMPLOYER's parent, Fidelity Holdings,
Inc., as the Executive Bonus Package, it being understood that as of the date of
this Agreement, no specific components of such Package have been established.
CONTRACT EXECUTIVE shall have the same rights and privileges to participate in
the plans and benefits of the Executive Bonus Package as any other eligible
executive during the period of his contract services.
6. SIGNING BONUS. (a) As a "signing bonus", EMPLOYER's parent, Fidelity
Holding's Inc., shall promptly issue to 1180513 Twenty Thousand (20,000) shares
of its Common Stock, ownership to which shall vest as provided below. The
purpose of immediate issuance is to establish 1180513 as a stockholder as of the
starting date of the providing of services under this Agreement, subject to such
subsequent vesting, for purposes of dividends, stock splits, and other capital
transactions. 1180513 represents and warrants that it 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 20,000 shares shall vest as follows:
(i) upon completion of the first year of this Agreement ten thousand
(10,000) shares shall vest; and
(ii) upon completion of the second year of this Agreement, 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, 1180513 may, subject to restrictions imposed by
applicable securities laws and regulations, sell, transfer, assign or otherwise
dispose of the vested shares. 1180513 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 1180513
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 1180513 proportionately as the shares shall vest. As shares shall vest, all
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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.
7. DUTIES. (a) CONTRACT EXECUTIVE is to be assigned the responsibilities as
EMPLOYER'S Chief Executive Officer and, subject to the direction and approval of
the Management of EMPLOYER's parent company, Fidelity Holdings, Inc., shall
perform all the duties inherent in such position, (i) including executive
management of the corporation including but not limited to budgeting, cash flow
planning, cost control and containment, supervision of all employees and
functions, and development of a marketing plan including Trade Shows,
Advertising and Public Relations, and (ii) including supervision of day-to-day
activities with responsibility for existing and future operations including but
not limited to management of sales (expanding the Canadian and U.S. markets for
the TALKIE product line) with hands-on management, providing of product support,
monitoring of competitive developments, and liaison with suppliers, customers,
computer and telephony industry members, efforts to identify new products
compatible with and competitive to TALKIE, etc., together with (iii) such other
duties as the Board of Directors of Info Systems and the management of Fidelity
Holdings, Inc. may assign from time to time.
8. EXTENT AND PLACE OF SERVICES. 1180513 agrees that its assignment of
CONTRACT EXECUTIVE to EMPLOYER shall constitute his primary employment and that
his primary loyalty and responsibility is to EMPLOYER. Accordingly, CONTRACT
EXECUTIVE 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 CONTRACT EXECUTIVE 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 his responsibilities hereunder, without prior, written
authorization of EMPLOYER's Board of Directors and the Management of Fidelity
Holdings, Inc. However, nothing contained herein shall be construed as
preventing CONTRACT EXECUTIVE from investing his assets in such form or manner
as he may select, whether or not such investment will require any services on
his part in the operation of the affairs of the companies in which such
investments are made.
9. WORKING FACILITIES. CONTRACT EXECUTIVE 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. In addition, EMPLOYEE
shall be furnished, at EMPLOYER's expense, with a pager and a cellular
telephone.
10. EXPENSES. CONTRACT EXECUTIVE is not authorized to incur
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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 CONTRACT
EXECUTIVE for authorized expenses within such guidelines upon presentation by
CONTRACT EXECUTIVE, 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. OWNERSHTP 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 CONTRACT EXECUTIVE during CONTRACT
EXECUTIVE's employment by EMPLOYER; and
(B) All inventions, improvements, modifications and enhancements made
by CONTRACT EXECUTIVE, during a period of one (1) year after any suspension or
termination of CONTRACT EXECUTIVE'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 CONTRACT EXECUTIVE during CONTRACT EXECUTIVE'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 CONTRACT EXECUTIVE 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, CONTRACT EXECUTIVE represents and warrants that as
of the execution of this Agreement there are no Inventions or Work Products
developed by CONTRACT EXECUTIVE which the CONTRACT EXECUTIVE asserts are to be
excluded from the provisions of this Paragraph 10.
(c) CONTRACT EXECUTIVE 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 CONTRACT EXECUTIVE shall surrender possession of such records
to the EMPLOYER upon any suspension or termination of CONTRACT EXECUTIVE's
employment with the EMPLOYER.
(d) CONTRACT EXECUTIVE hereby assigns to the EMPLOYER, without further
consideration to the CONTRACT EXECUTIVE, 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. CONTRACT
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EXECUTIVE agrees that the Work Product shall be deemed to be a "work made for
hire". CONTRACT EXECUTIVE shall execute all such assignments oaths, declarations
and other documents as may be prepared by EMPLOYER to effect the foregoing.
(e) CONTRACT EXECUTIVE 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 CONTRACT EXECUTIVE incurs at the EMPLOYER's
request.
(f) In the event of termination of this Agreement, EMPLOYER shall be entitled to
advise any new employer of CONTRACT EXECUTIVE of his rights and obligations
hereunder for a period of one year following termination of this Agreement.
12. NON-DISCLOSURE OF INFORMATION. (a) 1180513 and CONTRACT EXECUTIVE
recognize and acknowledge that, during the course of his services hereunder,
CONTRACT EXECUTIVE 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.
1180513 and CONTRACT EXECUTIVE 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 CONTRACT EXECUTIVE'S service may in any way
acquaint CONTRACT EXECUTIVE. 1180513 and CONTRACT EXECUTIVE shall surrender
possession of all proprietary information, including especially all Trade
Secrets, to EMPLOYER upon any suspension or termination of CONTRACT EXECUTIVE's
employment with the EMPLOYER. In the event of a breach, or threatened breach, by
1180513 and/or CONTRACT EXECUTIVE, of the provisions of this Paragraph, EMPLOYER
shall be entitled to a preliminary, temporary and permanent injunction
restraining 1180513 and/or CONTRACT EXECUTIVE from disclosing in whole or in
part, any such proprietary information
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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 1180513 and/or CONTRACT EXECUTIVE
and neither remedy (injunction or damages) shall be exclusive of the other or
constitute an election of remedies. In the event that EMPLOYER is required to
pursue legal or equitable remedies, 1180513 and/or CONTRACT EXECUTIVE shall pay
to EMPLOYER all legal fees and costs incurred by EMPLOYER in protecting its
rights hereunder.
13. 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, neither 1180513 nor CONTRACT EXECUTIVE will, 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. Neither 1180513 nor CONTRACT EXECUTIVE
shall, 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) 1180513 and CONTRACT EXECUTIVE agree 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 negotiation of this
Agreement and the consideration to 1180513 provided herein, including the
Signing Bonus and the Incentive Increase.
(c) EMPLOYER, 1180513 and CONTRACT EXECUTIVE 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.
14. NONSOLICITATION COVENANT. (a) For a period of thirty-six (36) months
after the termination of this Agreement (including any extension thereof) (the
"Post Termination Period") CONTRACT EXECUTIVE shall not, solicit, directly or
indirectly, by any means, any of the clients, customers, accounts, employees or
"leads" of EMPLOYER during the Post Termination Period.
(b) EMPLOYER and CONTRACT EXECUTIVE 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
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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 CONTRACT EXECUTIVE'S job responsibilities and compensation.
15. DISABILITY. (a) If the CONTRACT EXECUTIVE is unable to perform his
services by reason of illness or incapacity for a period of more than ten (10)
consecutive work days, or more than three (3) weeks in any two-month period, the
Contract Fee otherwise payable to 1180513 thereafter during the continued period
of such illness or incapacity may, at the option of EMPLOYER be reduced by fifty
percent (50%). If such illness or incapacity shall continue for a period of
thirty consecutive work days or more than fifty percent of any calendar quarter,
payment of such Contract Fee may, at the option of EMPLOYER, be stopped
altogether. The full Contract Fee shall be reinstated upon CONTRACT EXECUTIVE's
return to service 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 CONTRACT EXECUTIVE 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 CONTRACT EXECUTIVE 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 CONTRACT EXECUTIVE at the agreed base compensation rate less the
benefits paid by such insurance.
16. 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.
17. TERMINATION. (a) EMPLOYER can terminate this Agreement at any time for
good cause. without intending to limit the definition of good cause hereby, good
cause will include;
(1) the CONTRACT EXECUTIVE'S death;
(2) the occurrence of one of the following events:
(i) CONTRACT EXECUTIVE 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,
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the CONTRACT EXECUTIVE fails to fully and faithfully perform his obligations
under this Agreement, and does not cure such failure within ten (10) working
days after receipt of notice of any failure.
(b) The termination of this Agreement and the CONTRACT EXECUTIVE'S services
shall not constitute a termination of the restrictive obligations and duties
under Paragraphs 11, 12, 13, and 14 except as otherwise provided in this
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
CONTRACT EXECUTIVE'S continued rendering of services and 1180513's contract fee
is dependent, the provisions of Paragraph 13 shall continue in full force and
effect only so long as payment of the full base contract fee by EMPLOYER shall
continue.
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
1180513 and CONTRACT EXECUTIVE under this Agreement shall inure to the benefit
of, and shall be binding upon, their 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
CONTRACT EXECUTIVE's residence in the case of CONTRACT EXECUTIVE, or to its
principal office in the case of EMPLOYER.
22. LIFE INSURANCE. EMPLOYER, its parent, and/or one or more of its
affiliates may, in its discretion at any time after the execution of this
Agreement, apply for and procure, as owner and
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for its own benefit, insurance on the life of CONTRACT EXECUTIVE, in such
amounts and in such forms as EMPLOYER may choose. EMPLOYER shall not be required
to give 1180513 or CONTRACT EXECUTIVE any interest whatsoever in any such policy
or policies, (although nothing contained herein shall be deemed to prohibit any
such arrangement) but CONTRACT EXECUTIVE 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.
25. CURRENCY. All currency amounts stated in this Agreement are in Canadian
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.
786710 (ONTARIO) LIMITED
ATTEST:
By:_______________________________
President
________________________________
Secretary
1180513 (ONTARIO) LIMITED
ATTEST:
By:________________________________
President
________________________________
Secretary
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JOINDER
MOISE BENEDID hereby joins in the foregoing Agreement and indicates his
intent to be legally bound thereby, accepting the duties and responsibilities
imposed, upon the terms and conditions stated, and agrees to perform the
required services to the best of his abilities.
WITNESS:
L.S.
_______________________________ _____________________________________
MOISE BENEDID
JOINDER
Fidelity Holdings, Inc., the parent corporation of 786710 (Ontario)
Limited, EXPLOYER in the foregoing Agreement, hereby joins in the foregoing
Agreement to indicate its intent to be bound by the specific provisions of
Paragraphs 4(b), 5(g) and 6.
FIDELITY HOLDINGS, INC.
ATTEST:
By:__________________________________
President
_______________________________
Secretary
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