UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1997
[_] 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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(Name of Small Business Issuer in Its Charter)
Nevada 11-3292094
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
80-02 Kew Gardens Road, Suite 5000
Kew Gardens, New York 11415
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code (718) 520-6500
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
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(Title of Class)
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 [X] No [_]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this Form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
Issuer's revenues for its most recent fiscal year: $3,862,284.
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The approximate aggregate market value of the registrant's common stock
held by non-affiliates, computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of April 7 ,
1998 was $6,016,606. The number of shares outstanding of the registrant's common
stock on April 7, 1998, was 6,895,700 shares.
<PAGE>
PART I
Item 1. Description of Business.
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The statements which are not historical facts contained in this Annual
Report are forward looking statements that involve risks and
uncertainties, including, but not limited to, possible delays in the
Company's expansion efforts, changes in telephony and communication
markets and technologies, government regulation, the nature of possible
supplier or customer arrangements which may become available to the
Company in the future, possible technological obsolescence, uncollectible
accounts receivable, slow moving inventory, lack of adequate financing,
increased competition and unfavorable general economic conditions. The
Company's actual results may differ materially from the results discussed
in any forward looking statement.
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General
Fidelity Holdings, Inc. ("the Company") was incorporated in Nevada on
November 7, 1995. The Company is a holding company and, accordingly, derives its
revenues solely from its operating subsidiaries. The Company's first full year
of operations was 1996. The operating subsidiaries of the Company are grouped
into three divisions: (i) Computer Telephony and Telecommunications: (ii)
Leasing; and (iii) Plastics and Utility Products. The proposed Major Auto
Acquisition (see "Planned Acquisition", below), will add a fourth, Automotive
Sales. Unless otherwise indicated, all references to the Company include
reference to the subsidiaries of the Company.
One of the primary purposes of the holding company is the consolidation of
the retail automotive industry and the acquisition and development of
synergistic technological businesses to enhance its ability to sell automotive
products and exploit its technological capabilities through sales of
telecommunications products and services. Through its planned acquisition of
Major Auto, the Company will become one of the largest-volume retailers in New
York City of new and used vehicles.
Through its Computer Telephony and Telecommunications division, the
Company provides a broad range of telecommunications services. Included in its
telecommunications product lines are its (i) proprietary software which enables
consumers to place long-distance telephone calls at discounted rates and (ii) a
variety of sophisticated interactive voice response applications. This division
also developed, and presently markets and sells, a proprietary computer software
system that provides multi-lingual accounting and business management
applications.
The Company is planning to exploit its technological capabilities in
telephony by emphasizing high speed, broadband, multimedia transmission over
telephone, including voice, data, videoconferencing and other applications.
Additionally, the Company is in the preliminary process of developing a
commercial mobile satellite technology in connection with the Israel Aircraft
Industry's ELTA division.
The Company's Plastics and Utility Products division currently consists of
a development-stage company which was acquired in 1996. Its proprietary
prototypes include a line of spa and bath fixtures for use in whirlpool baths,
spas, tubs and swimming pools and a light-weight, structurally strong,
prefabricated conduit for underground electrical cables. As this division's
products are still under development, no commercial sales have as yet been made.
The operations of the Company's Leasing division consist of providing
leases and other financing. Such activities are directed primarily toward the
automotive vehicle market and are to be expanded to the purchasers of the
Company's telecommunications hardware products.
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Recent Developments
On October 23, 1997, the Company filed a registration statement on Form
SB-2 (the "Registration Statement") with respect to the proposed offering, by
Hobbs Melville Securities Corp., as underwriter, of 1,150,000 shares of the
Company's common stock ("Common Stock") at an offering price of $6.00 per share.
After the underwriter informed the Company that it could not complete the
offering, the Registration Statement was subsequently withdrawn by the Company
on March 18, 1998, without its having been declared effective by the Securities
and Exchange Commission (the "SEC").
Planned Acquisition
The Company and its wholly-owned subsidiary, Major Acquisition Corp., have
entered into a merger agreement with Major Automotive Group, Inc. ("Major Auto")
and its sole stockholder, Bruce Bendell, who is the Company's chairman and the
beneficial owner of approximately 39.6% of the Company's outstanding common
stock. Bruce Bendell owns all of the issued and outstanding shares of common
stock of Major Chevrolet, Inc. ("Major Chevrolet") and Major Subaru, Inc.
("Major Subaru") and 50% of the issued and outstanding shares of common stock of
Major Dodge, Inc. ("Major Dodge") and Major Chrysler, Plymouth, Jeep Eagle, Inc.
("Major Chrysler, Plymouth, Jeep Eagle"), which, collectively, operate five
franchised automobile dealerships (collectively, the "Major Auto Group").
Pursuant to the merger agreement, Bruce Bendell will contribute to Major
Auto all of his shares of common stock of Major Chevrolet, Major Subaru, Major
Dodge and Major Chrysler, Plymouth, Jeep Eagle. Major Acquisition Corp. will
then acquire from Bruce Bendell all of the issued and outstanding shares of
common stock of Major Auto in exchange for shares of a new class of the
Company's preferred stock. Harold Bendell, Bruce Bendell's brother, owns the
remaining 50% of the issued and outstanding shares of common stock of Major
Dodge and Major Chrysler, Plymouth, Jeep Eagle. Major Acquisition Corp. will
purchase Harold Bendell's shares for $4 million in cash under a stock purchase
agreement. In addition, Major Acquisition Corp. will acquire two related real
estate components (the "Major Real Estate", defined hereinafter) from Bruce
Bendell and Harold Bendell (collectively "the Bendells") for their aggregate
appraised value of $3 million.
The preferred stock to be issued to Bruce Bendell will be called the
"1997-MAJOR Series of Convertible Preferred Stock." It will have voting rights
and will be convertible into the Company's Common Stock. The number of shares of
Common Stock into which the new class will be convertible is the greater of (i)
1.8 million shares and (ii) that number of shares that have a market value of
$6,000,000. The market value per share for this purpose will be the mean between
the closing bid and ask prices for the Common Stock over the 20 trading days
immediately prior to the date of issuance of the preferred stock. See
"Description of Securities-Preferred Stock." The foregoing acquisitions from
Major Auto and Harold Bendell are collectively referred to herein as the "Major
Auto Acquisition."
The merger agreement allocates the value of the consideration payable to
Bruce Bendell as follows: (i) 61% to Major Chevrolet; (ii) 5.8% to Major Subaru;
(iii) 16.6% to Major Dodge; and (iv) 16.6% to Major Chrysler, Plymouth, Jeep
Eagle. The stock purchase agreement allocates the value of the consideration
payable to Harold Bendell 50% to each of Major Dodge and Major Chrysler,
Plymouth, Jeep Eagle. The Major Auto dealerships were valued for purposes of the
proposed merger at eight times adjusted earnings before interest and taxes for
their respective 1996 fiscal years. Adjusted earnings includes officers'
salaries, expenses not directly related to operations, non-recurring legal
expenses and LIFO adjustments. The Company believes that the eight times
earnings multiple is a relatively common pricing/valuation convention in the
automobile industry.
The closing of the Major Auto Acquisition is presently scheduled to
coincide with the closing of a loan with Falcon Financial, LLC ("Falcon") (see
below) which is anticipated to occur no later than April 30, 1998. The parties
have the right to agree to an earlier date. A condition to the closing is that
all manufacturers' approvals have been obtained. If this condition remains
unsatisfied on the scheduled closing date, the merger agreement and the stock
purchase agreement
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provide three alternatives: (i) the Company can elect not to close; (ii) the
parties may agree to extend the closing date to provide additional time to
obtain such approvals; or (iii) the Company may elect to consummate the Major
Auto Acquisition with Major Auto owning, and Harold Bendell selling, only those
dealerships with respect to which the manufacturers' approvals have been
obtained. In the latter case, the number of shares issuable to Bruce Bendell and
the monetary amount payable to Harold Bendell will be reduced in accordance with
the value allocations described above, but the parties are obligated to use
their best efforts during the 90-day period following the closing to obtain the
missing approvals so that the non-included dealership subsidiaries can be
transferred to the Company at a later time. To date, Subaru Distributors Corp.
has consented to the change in ownership of the Subaru dealership and General
Motors Corporation ("General Motors") has consented to the change in ownership
of the Chevrolet dealership. The Company and Major Auto are still awaiting the
consent of Chrysler Corporation to the change in ownership of the Dodge and/or
its Chrysler, Plymouth, Jeep and Eagle franchises. In addition, as part of the
Major Auto Acquisition, it is planned that the Bendells will sell their
interests in the showroom and service facility ("Major Real Estate"), which
Major Dodge, Major Chrysler, Plymouth, Jeep Eagle and Major Subaru lease from
them, to Major Acquisition Corp. for its appraised value of $3 million.
To finance the cash portion of the Major Auto Acquisition, aggregating $7
million ($4 million for Harold Bendell and $3 million to purchase the Major Real
Estate), Major Acquisition Corp. will borrow $7.5 million from Falcon. Major
Auto Acquisition Corp. has received from Falcon a letter of commitment dated
March 16, 1998 which provides, inter alia, for a 15 year term loan with interest
equal to the yield on the ten-year U.S. Treasury bond rate at the time of
closing plus 450 basis points. Prepayment will not be permitted for the first
five years, after which prepayment may be made, in full only, along with the
payment of a "Yield Maintenance Amount."
The collateral securing this transaction includes the Major Real Estate
and, subject to the interests of any current or prospective "floor plan or cap
loan lender," the assets of Major Acquisition Corp. Major Acquisition Corp. will
be required to comply with certain financial covenants related to net worth and
cash flow. The loan is conditional, inter alia, upon the constituent companies
of the Major Auto Group being franchises of the respective manufacturers and
upon the consent of Chrysler Corporation to the acquisition by Major Acquisition
Corp. of the Major Dodge and Major Chrysler, Plymouth, Jeep, Eagle dealerships,
which transaction is required to be completed prior to closing. Furthermore, the
Company will provide an unconditional guarantee of this loan.
Potential Acquisition
In 1997, the Company signed a Letter of Intent (the "Original Lichtenberg
Letter of Intent") with the shareholders of Lichtenberg Robbins Buick, Inc.,
d/b/a Lichtenberg Buick, and Lichtenberg Motors, Inc. d/b/a Lichtenberg Mazda
(collectively, the "Lichtenberg Group"), in contemplation of the acquisition by
the Company or one of its wholly-owned subsidiaries of all of the issued and
outstanding common stock of Lichtenberg Group. The Original Lichtenberg Letter
of Intent contemplated that the parties would negotiate definitive documentation
that will provide for such acquisition for an aggregate purchase price equal
based on the pro forma after-tax earnings of Lichtenberg Group for the twelve
months ending December 31, 1996. A portion of the purchase price would be
payable in cash and the balance would be payable in Common Stock of the Company.
Either party will have the right to terminate the transactions contemplated by
the Original Lichtenberg Letter of Intent if, among other things,
lower-than-expected earnings result in a purchase price of less than $1.8
million. The definitive documentation is also expected to provide that Peter
Lichtenberg, who presently manages Lichtenberg Group, would continue to manage
such dealerships after such acquisition. The Company and the shareholders of
Lichtenberg Group, including Peter Lichtenberg, have been negotiating the terms
of a purchase contract relating to such acquisition. Since signing the Original
Lichtenberg Letter of Intent, the Lichtenberg Group has acquired two additional
franchised dealerships, Chrysler and Subaru. Accordingly, negotiations are
proceeding to revise and update the Original Lichtenberg Letter of Intent to
incorporate the acquisition by the Company of the additional dealerships and to
revise other provisions. Based upon preliminary financial and other information
in the Company's possession relating to the business and operations of
Lichtenberg Group, the Company does not believe that such acquisition, if
consummated, would have a material impact on the financial position of the
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Company. In connection with the proposed Major Auto Acquisition, the Company has
been advised by General Motors that Major Auto does not currently meet General
Motors' criteria to allow acquisition of additional General Motors' dealerships
without seeking approval for each acquisition. The effect of this is that should
the Company determine to acquire Lichtenberg Group or other additional General
Motors' dealerships in the future, it will be required to obtain General Motors'
approval on a case-by-case basis.
The foregoing transaction is in the preliminary stages and is subject to
significant further negotiation and due diligence as part of the preparation and
execution of definitive agreements. There can be no assurance that this
transaction will occur.
Automotive Sales Division
General
Major Auto, which the Company proposes to acquire (see "Planned
Acquisition"), is one of the largest volume automobile retailers in New York
City. Major Auto owns and operates the following five franchised automobile
dealerships in the New York metropolitan area: (i) Chevrolet; (ii) Chrysler and
Plymouth; (iii) Dodge; (iv) Jeep and Eagle; and (v) Subaru. Major Auto also
distributes General Motors vehicles in Russia. Through its dealerships, Major
Auto sells new and used automobiles, provides related financing, sells
replacement parts and provides vehicle repair service and maintenance.
Major Auto's President, Bruce Bendell, has approximately 26 years
experience in the automobile industry. He began selling and leasing used
vehicles in 1972 and has owned and managed franchised automobile dealerships
since he acquired Major Auto's Chevrolet dealership in 1985. Under Mr. Bendell's
leadership, Major Auto has expanded from a single-franchise dealership having
approximately $10 million in revenues and 25 employees in 1985 to a
five-franchise dealership group having approximately $144 million in revenues
and 175 employees in 1997. (Note that the dollar amounts and statistics cited
for Major Auto for 1997 in this Annual Report, and all other dollar amounts and
statistics cited for Major Auto elsewhere herein are based on Major Auto's
preliminary financial statements and related data. Such information is subject
to independent audit which has not yet been completed. Audited Combined
Financial Statements and related notes thereto for Major Auto and pro forma
combining financial statements for Major Auto and the Company will be filed by
amendment to this Annual Report, as soon as practicable after they become
available to the Company.
Industry Background
Automobile manufacturers distribute their new vehicles through franchised
dealerships. According to industry data from the National Automobile Dealers
Association ("NADA data"), in 1997, total dollar sales, consisting of the sale
of all new and used vehicles and service and parts, of all franchised new-car
dealerships increased 4% to a record high of $509 billion. Franchised
dealerships located in the New York State had an estimated total dollar sales of
$17.9 million.
According to NADA data, on average, new vehicle sales constitute 58% of a
franchised dealership's total sales. Unit sales of new vehicles rose 0.7% in
1997 to a total of 15.1 million units sold. At an average retail selling price
of $22,400 per vehicle, new vehicle sales totaled approximately $338 billion in
1997. From 1992 to 1997 sales revenue from the sale of new vehicles increased
approximately 53%. The annual net profit of the typical United States franchised
dealer's new vehicle department is estimated to be $46,760 retailed.
According to NADA data, on average, used vehicle sales constitute 30% of a
franchised dealerships' total sales. In 1997, franchised new vehicle dealers
sold 12.0 million retail used vehicles. At an average selling price of $12,100
per vehicle, used vehicle sales totaled in approximately $145 billion in 1997.
From 1992 to 1997 sales revenue from the
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retail sale of used vehicles increased approximately 88% and the combined sales
revenue from the retail and wholesale sale of used vehicles increased
approximately 81%. The annual net profit of the typical United States franchised
dealer's used vehicle department is estimated to be $147,525 including wholesale
and retail. The NADA data cites that for all United States dealerships, the net
profit from sales of used vehicles is approximately 2 1/2 times the net profit
from the sales of new vehicles. No assurance can be given that results of Major
Auto's operations will conform to NADA's industry data.
The following table sets forth information regarding vehicle sales by
franchised new vehicle dealerships for the periods indicated:
UNITED STATES FRANCHISED DEALER'S VEHICLES SALES
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
(Units in millions; dollars in billions)
<S> <C> <C> <C> <C> <C> <C>
New vehicle unit sales 12.9 13.9 15.1 14.8 15.1 15.1
New vehicle sales revenue(1) $ 221.0 $ 253.0 $ 290.0 $ 303 $ 328.0 $ 338.2
Used vehicle unit sales - retail 9.3 9.9 10.9 11.4 11.9 12.0
Used vehicle retail sales revenue $ 77.3 $ 90.4 $ 111.0 $ 126.0 $ 137.0 $ 145.2
Used vehicle unit sales - wholesale 5.8 6.4 6.8 7.0 7.2 7.1
Used vehicle wholesale sales revenue $ 22.0 $ 24.0 $ 27.7 $ 30.3 $ 33.4 $ 34.6
</TABLE>
(1) Sales revenue figures were generated by multiplying the total unit
sales by the average retail selling price of the vehicle for the given year.
Source: National Automobile Dealers Association (NADA) Data 1998 (1997 data
preliminary and estimated)
In addition to revenues from the sale of new and used vehicles, automotive
dealerships derive revenues from repair and warranty work, sale of replacement
parts, financing and credit insurance and the sale of extended warranty
coverage. According to NADA data, revenues resulting from service and parts
sales increased approximately 4% in 1997 for franchised dealerships, a portion
of which is accounted for by the increase in the amount of used vehicle
reconditioning. Revenue from parts and services constitutes, on average,
approximately 12% of a franchised dealership's total sales and generates an
annual net profit of $149,000.
Automotive dealerships' profits vary widely and depend in part upon the
effective management of inventory, marketing, quality control and responsiveness
to customers. According to NADA data, in 1997, total franchised dealership gross
profits were, on average, $2.8 million with an average net profit of $308,000.
To reduce the costs of owning a new vehicle, automobile manufacturers in
recent years have offered favorable short-term lease terms. This has attracted
consumers to short-term leases and has resulted in consumers returning to the
new vehicle market sooner than if they had purchased a new vehicle with
longer-term financing. In addition, this has provided new car dealerships with a
continuing source of off-lease vehicles and has also enabled dealerships' parts
and service departments to provide repair service under factory warranty for the
lease term.
The automotive dealership industry has been consolidating in recent years.
Until the 1960s, automotive dealerships were typically owned and operated by a
single individual who controlled a single franchise. However, because of
competitive and economic pressures in the 1970s and 1980s, particularly the oil
embargo of 1973 and the subsequent loss of market share experienced by United
States automobile manufacturers to imported vehicles, many automotive
dealerships were forced to close or to sell to better-capitalized dealer groups.
Continued competitive and economic
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pressure faced by automotive dealers and an easing of restrictions imposed by
automobile manufacturers on multiple-dealer ownership have led to further
consolidation. According to NADA data, the number of franchised dealerships has
declined from 36,336 in 1960 to 22,700 at the beginning of 1997.
Major Auto believes that franchised automobile dealerships will continue
to consolidate because the capital required to operate dealerships continues to
increase, many dealership owners are approaching retirement age and certain
automobile manufacturers want to consolidate their franchised dealerships to
strengthen their brand identity. For example, management believes that General
Motors Corporation is implementing a strategy to reduce its franchised
dealerships by 1,500 from 8,400 by the year 2000. Major Auto believes that
dealership groups that have significant equity capital and experience in
acquiring and running dealerships will have an opportunity to acquire additional
franchised dealerships.
Operating Strategy
Major Auto's operating strategy is to increase customer satisfaction and
loyalty and to increase operating efficiencies. The Company intends to pursue
the same operating strategy as Major Auto after completion of the Major Auto
Acquisition. Key elements of this operating strategy are as follows:
Use of Technology. Major Auto believes that it has achieved a competitive
advantage through the use of technology. Major Auto was one of the first
dealership groups to provide its customers with a 1-800 telephone number and
price quotations via facsimile. During the past several years, Major Auto has
sold approximately 25-50 vehicles per month from leads provided by electronic
media, such as Bloomberg (since 1994) and the Internet (since 1995). Major Auto
presently enables its customers to obtain credit approvals over the telephone
via its proprietary Talkie-AutoCom, a customized application of the Company's
"Talkie" telephone interactive voice response system (see "Computer Telephony
and Telecommunications Division -- Talkie"), that operates 24 hours per day,
seven days per week and in nine different languages. Major Auto is presently
expanding its use of Talkie-AutoCom to permit customers to obtain answers to the
most frequently asked questions, obtain price quotes, place orders, schedule and
confirm service appointments, obtain directions to the dealership and request
faxes of product and price information. Major Auto is also intending to expand
its use of Talkie-AutoCom to call its customers automatically to notify them of
required maintenance, sales and promotions and to solicit customer satisfaction
information. In addition, Major Auto intends to explore new ways to use
technology to provide better customer service. Major Auto has developed and is
in the process of beta-testing an Internet-based marketing system called
MajorAuction.Com to provide electronically, visual and textual information
regarding vehicles sold by Major Auto and enable customers to: (i) purchase a
new or used vehicle on-line; (ii) participate in a real-time auction for a
specific vehicle; and (iii) arrange for the related financing. See "Computer
Telephony and Telecommunications Division-Talkie."
Leverage the Sale of International Calling Time. Major Auto will offer
customers pre-paid international telephone calling time in connection with the
purchase or lease of its automobiles. To accomplish this, Major Auto will
utilize the Company's proprietary Talkie technology, which is able to provide
users with international calling time at sharply discounted rates. Because Major
Auto will purchase telephone time from the Company or one its master agents at
below-market rates, the cost to Major Auto of implementing this program will be
minimal compared with the savings to be realized by its customers. Major Auto's
primary market, the New York metropolitan area, is home to many diverse ethnic
groups who have family and friends whom they call frequently in their native
countries. By offering pre-paid international telephone calling time with the
purchase or lease of a vehicle, Major Auto believes that it can add value to its
customers and thereby increase customer satisfaction and loyalty. See "Computer
Telephony and Telecommunications Division-Talkie."
Focus on Used Vehicle Sales. A key element of Major Auto's operating
strategy is to focus on the sale of used vehicles. In 1997, approximately 12.0
million used cars were sold retail by dealers, fifty percent more than the
number of such sales in 1980. Sales of used vehicles are generally more
profitable than sales of new vehicles. Management believes that the New York
metropolitan area is one of the largest markets for used car sales in the United
States and
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that Major Auto sells more used cars in the New York metropolitan area than any
other automobile dealership or dealership group. Major Auto strives to attract
customers and enhance buyer satisfaction by offering multiple financing and
leasing options and competitive warranty products on every used vehicle it
sells. Major Auto believes that a well-managed used vehicle operation affords it
an opportunity to: (i) generate additional customer traffic from a wide variety
of prospective buyers; (ii) increase new and used vehicle sales by aggressively
pursuing customer trade-ins; (iii) generate incremental revenues from customers
financially unable or unwilling to purchase a new vehicle; and (iv) increase
ancillary product sales to improve overall profitability. To maintain a broad
selection of high-quality used vehicles and to meet local demand preferences,
Major Auto acquires used vehicles from trade-ins and a variety of sources
nationwide, including direct purchases from individuals and fleets, and
manufacturers' and independent auctions. Major Auto believes that the price at
which it acquires used vehicles is the most significant factor contributing to
the profitability of its used vehicle operations. Major Auto believes that,
because of the large volume of used vehicles that it sells each month and the
over 25 years of experience in the used vehicle business of its President, Bruce
Bendell, it is able to identify quality used vehicles, assess their value and
purchase them for a favorable price.
Emphasize Sales of Higher Margin Products and Services. Major Auto
generates substantial incremental revenue and achieves increased profitability
through the sale of certain ancillary products and services such as financing,
extended service contracts and vehicle maintenance. Major Auto provides its
employees with special training and compensates them, in part, with commissions
based on their sales of such products and services. Major Auto believes that
these ancillary products and services enhance the value of purchased or leased
vehicles and increase customer satisfaction.
Provide a Broad Range of Products and Services. Major Auto offers a broad
range of products and services, including a wide range of new and used cars and
light trucks, vehicle financing, replacement parts and service. At its four
locations, Major Auto offers, collectively, seven makes of new vehicles,
including Chevrolet, Chrysler, Plymouth, Dodge, Jeep, Eagle and Subaru. In
addition, Major Auto sells a wide variety of used vehicles at a wide range of
prices. Major Auto believes that offering numerous makes and models of vehicles,
both new and used, appeals to a wide variety of customers, minimizes dependence
on any one automobile manufacture and reduces its exposure to supply problems
and product cycles.
Operate Multiple Dealerships in Target Market. Major Auto intends to
become the leading automotive dealer in its target market by operating multiple
dealerships in that market. To accomplish this, Major Auto intends to acquire
new franchises in its existing market and to expand its existing franchises to
new markets. This should enable Major Auto to achieve economies of scale in
advertising, inventory management, management information systems and corporate
overhead.
Target Sales to Ethnic Groups. Because the New York metropolitan area,
Major Auto's primary market, is ethnically diverse, Major Auto targets its
selling efforts to a broad range of ethnic groups. In addition to offering
pre-paid international telephone calling time, Major Auto employs a
multi-lingual sales force and intends to expand its electronic media to
accommodate multiple languages.
Employ Professional Management Techniques. Major Auto employs professional
management techniques in all aspects of its operations, including information
technology, employee training, profit-based compensation and cash management.
Each of Major Auto's four dealership locations, its centralized used vehicle
operation, and its two service and parts operations is managed by a trained and
experienced general manager who is primarily responsible for decisions relating
to inventory, advertising, pricing and personnel. Major Auto compensates its
general managers based, in part, on the profitability of the operations they
control rather than on sales volume. Major Auto's senior management meets weekly
with its general managers and utilizes computer-based management information
systems to monitor each dealership's sales, profitability and inventory on a
daily basis and to identify areas requiring improvement. Major Auto believes
that the application of its professional management techniques provides it with
a competitive advantage over other dealerships and dealership groups and enables
it to increase its profitability.
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Growth Strategy
The Company intends to expand its business by acquiring additional
dealerships and improving their performance and profitability by implementing
its operating strategy. As part of its growth strategy, the Company intends to
focus its efforts on dealerships or dealer groups that, among other criteria,
possess either the sole franchise of a major automobile manufacturer or a
significant share of new vehicle sales in each targeted market and that it
believes are underperforming. In evaluating potential acquisition candidates,
the Company will also consider the dealership's or dealer group's profitability,
customer base, reputation with customers, strength of management and location
(e.g., along a major thoroughfare or interstate highway), and the possibility
that the Company will be able to acquire additional franchises in that market to
achieve larger market share. Major Auto believes that the most attractive
acquisition candidates can be found in the New York metropolitan area, but the
Company may consider acquisitions in other markets. The Company's financing of
such acquisitions may involve spending cash, incurring debt or issuing equity
securities, which could have a dilutive effect on the then outstanding capital
stock of the Company. The Company has been advised by General Motors that Major
Auto does not currently meet General Motors' criteria to allow acquisition of
additional General Motors' dealerships without seeking approval for each
acquisition. The effect of this is that should the Company determine to acquire
additional General Motors' dealerships in the future, including its potential
acquisition of Lichtenberg Group, it will be required to obtain General Motors'
approval on a case-by-case basis. See "Potential Acquisitions."
Upon completing an acquisition, the Company intends to implement its
operating strategy, which includes selling more new and used vehicles,
increasing finance revenues, enhancing employee training, lowering purchasing
costs for used car inventories, supplies and outside vendor expenses. The
Company also intends to install its management information system in acquired
dealerships as soon as possible after the acquisition, which will allow its
senior management to carefully monitor each aspect of the dealership's
operations and performance. Whenever possible, the Company intends to implement
its strategies and operation procedures prior to the closing of an acquisition
to enable it to accelerate the implementation of its operating strategy after
closing. See "Operating Strategy."
The Company believes that Major Auto's management team has considerable
experience in evaluating potential acquisition candidates, determining whether a
particular dealership can be successfully integrated into Major Auto's existing
operations and implementing its operating strategy to improve their performance
and profitability following the acquisition. For example, Bruce Bendell, Major
Auto's President, acquired a Nissan dealership in Oyster Bay, New York in
January 1997. The Nissan dealership is not owned or operated by Major Auto, but
is majority-owned by Mr. Bendell and minority-owned by another individual
otherwise unaffiliated with the Company or Mr. Bendell. Upon Mr. Bendell's
acquisition of the Nissan dealership, it was selling 90 new and 20 used vehicles
per month and was not generating any profits from such sales. Under Mr.
Bendell's leadership, the dealership has expanded its sales to over 200 new and
used vehicles per month. The Company also believes that an increasing number of
acquisition opportunities will become available to it. See "Industry
Background." The Company and Mr. Bendell are currently negotiating a letter of
intent concerning the Company's acquisition of Oyster Bay Nissan. The
acquisition would be subject to the completion of the Major Auto Acquisition.
There can be no assurance that the Company and Mr. Bendell will agree on
acceptable terms. Based upon preliminary financial and other information in the
Company's possession relating to the business and operations of Oyster Bay
Nissan, the Company does not believe that such acquisition, if consummated,
would have a material impact on the financial position of the Company. However,
if the purchase price for such acquisition were to have a significant cash
component, the Company would likely be required to raise additional capital,
either by incurring debt or issuing equity, to finance the consummation of such
acquisition.
With the exception of the Major Auto Acquisition, the negotiations with
respect to Oyster Bay Nissan described above and the transaction described under
"Potential Acquisition" above, the Company does not presently have any other
material plans, proposals, arrangements or understandings with respect to
potential acquisitions.
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Dealership Operations
Major Auto owns and operates five automobile dealerships at four locations
in Long Island City, New York. Major Auto conducts its parts and service
business and its used vehicle business from three additional locations in Long
Island City. Major Auto offers the following seven makes of new vehicles:
Chevrolet, Chrysler, Plymouth, Dodge, Jeep, Eagle and Subaru. Each location is
run by a separate general manager who is responsible for overseeing all aspects
of the business conducted at that location. Each of the parts and service
locations has two general managers, one for parts and one for service. Each
general manager meets with Major Auto's senior management, including Bruce and
Harold Bendell, on a weekly basis.
Following the acquisition of Major Auto by the Company, Bruce and Harold
Bendell will continue to be responsible for senior-level management of the
dealerships. The Bendell brothers and the Company expect that this prospective
continuity of senior management will facilitate obtaining the manufacturers'
consents to the transfer of the dealerships to the Company. The Bendell
brothers' management control will be accomplished through (i) their ownership of
100 shares of the Company's 1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred
Stock (of which shares Bruce Bendell has a proxy to vote the 50 shares of the
1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred Stock owned by Harold Bendell
for a seven-year period commencing on January 7, 1998) which carries voting
rights allowing them to elect a majority of the Board of Directors of Major
Auto, and through (ii) a related management agreement. See "Description of
Securities-Preferred Stock-1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred
Stock" and "Certain Relationships and Related Transactions" below. Should either
of the Bendell brothers cease managing the dealerships, the management agreement
provides that ownership of his 1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred
Stock shares and his management rights under the management agreement will be
automatically transferred to the other, and should both brothers cease managing
the dealerships for any reason, the shares and management rights will be
automatically transferred to a successor manager designated in a successor
addendum to each dealership agreement or, failing such designation, to a
successor manager designated by the Company (subject to approval by the
applicable manufacturers).
New Vehicle Sales. Major Auto sells the complete product line of cars,
sport utility vehicles, minivans and light trucks manufactured by Chevrolet,
Chrysler, Plymouth, Dodge, Jeep, Eagle and Subaru. In 1997, Major Auto's
dealerships sold 4,834 new vehicles generating total sales of approximately
$91,000,000, which constituted approximately 63% of Major Auto's total revenues.
Major Auto's gross profit margin on new vehicle sales in 1997 was approximately
8% which is higher than the industry average for 1997 of 7%. The relative
percentages of Major Auto's new vehicle sales among makes of vehicles in 1997
was as follows:
1997 Percentage of
Manufacturer New Vehicle Sales
------------ -----------------
Chevrolet 56%
Chrysler, Plymouth,
Jeep and Eagle 22%
Dodge 16%
Subaru 6%
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The following table sets forth, for the periods shown, information with
respect to Major Auto's new vehicle sales:
NEW VEHICLE SALES
(dollars in thousands)
1995 1996 1997
Unit sales 4,375 5,062 4,834
Sales revenue $ 90,000 $109,000 $ 91,000
Gross Profit $ 7,200 $ 8,000 $ 7,300
Gross Profit Margin 8.0% 7.3% 8.0%
Major Auto purchases substantially all of its new vehicle inventory
directly from the respective manufacturers who allocate new vehicles to
dealerships based upon the amount of vehicles sold by the dealership and the
dealership's market area. As required by law, Major Auto posts the
manufacturer's suggested retail price on all new vehicles, but the final sales
price of a new vehicle is typically determined by negotiation between the
dealership and the purchaser.
In addition to its dealership operations, Major Auto has a distributorship
agreement with General Motors pursuant to which Major Auto distributes in Russia
new vehicles manufactured by General Motors. Major Auto has realized revenues of
approximately $2,890,000, $9,400,000 and $8,005,000 during its 1995, 1996 and
1997 fiscal years, respectively, from its distribution of General Motors
vehicles in Russia. Major Auto's gross profits from such sales were
approximately $178,000, $572,000, and $552,700 for its 1995, 1996 and 1997
fiscal years, respectively. Under its distributorship arrangement, Major Auto
accepts orders from General Motors' automobile dealers in Russia for both
standard and custom General Motors vehicles. Major Auto generally receives a
deposit on the purchase price of the vehicle from the Russian dealer and
releases the vehicle to the dealer upon full payment of the balance of the
wholesale purchase price plus a percentage of the dealer's profit on the sale.
Major Auto intends to expand its distributorship operation in the future to
include the sale of used vehicles.
Approximately 29% of Major Auto's unit sales of new vehicles are fleet
sales, which are generally sales to commercial customers that register ten or
more vehicles in a given year, and include taxi cab companies, police
departments and small businesses. Major Auto has advised the Company that it
believes that its fleet sales, and its service of fleet vehicles, protect it
from some of the fluctuations in the retail automobile buying market, provide a
source of off-fleet vehicles for its used vehicle operations and enhance its
reputation and customer satisfaction. Fleet sales are generally awarded to a
dealership on the basis of a blind competitive bidding process.
Used Vehicle Sales. Major Auto offers a wide variety of makes and models
of used vehicles for sale. In 1997, Major Auto sold 3,127 used vehicles
generating total sales of approximately $40,800,000, which constituted
approximately 28% of Major Auto's total revenues. Major Auto's gross profit
margin on used vehicle sales in 1997 was approximately 14% as compared with the
industry average for 1997 of 11.4%. Major Auto is the largest seller of used
vehicles (based on unit sales and sales revenue) in the New York metropolitan
area.
Major Auto has consolidated its used vehicle operations for its various
dealerships at a single site. Major Auto acquires the used vehicles it sells
through customer trade-ins, at "closed" auctions which may be attended by only
new vehicle dealers and which offer off-lease, rental and fleet vehicles, and at
"open" auctions which offer repossessed vehicles and vehicles being sold by
other dealers.
Major Auto has advised the Company that it believes that the market for
used vehicles is driven by the escalating purchase price of new vehicles and the
increase in the quality and selection of used vehicles primarily due to an
increase in the number of popular cars coming off short-term leases.
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The following table sets forth, for the periods shown, information with
respect to Major Auto's used vehicle sales:
USED VEHICLE SALES
(dollars in thousands)
1995 1996 1997
------- ------- -------
Unit sales 2,145 2,231 3,127
Sales revenue $17,520 $22,840 $40,800
Gross Profit $ 2,730 $ 3,300 $ 5,700
Gross Profit Margin 15.6% 14.4% 14%
Parts and Service. Major Auto provides parts and service primarily for the
makes of new vehicles that it sells, but also services other makes of vehicles.
In 1997, Major Auto's parts and service operations generated total revenues of
approximately $11,400,000, which constituted approximately 8% of Major Auto's
total revenues at a gross profit margin of approximately 33%.
The increased use of electronics and computers in vehicles has made it
difficult for independent repair shops to retain the expertise to perform major
or technical repairs. In addition, because motor vehicles are increasingly more
complex and there are longer warranty periods, Major Auto has advised the
Company that it believes that repair work will increasingly be performed at
dealerships, which have the sophisticated equipment and skilled personnel
necessary to perform the repairs.
Major Auto has advised the Company that it considers its parts and service
department to be an integral part of its customer service efforts and a valuable
opportunity to strengthen customer relations and deepen customer loyalty. Major
Auto attempts to notify owners of vehicles purchased at its dealerships when
their vehicles are due for periodic service, thereby encouraging preventative
maintenance rather than post-breakdown repairs.
Major Auto's parts and service business provides a stable, recurring
revenue stream to its dealerships. In addition, Major Auto has advised the
Company that it believes that, to a limited extent, these revenues are
countercyclical to new vehicle sales, since vehicle owners may repair their
existing vehicles rather than purchasing new vehicles. Major Auto has advised
the Company that it believes that this helps mitigate the effects of a downturn
in the new-vehicle sales cycle.
Major Auto does not operate a body shop, but instead contracts with
third parties for body repair work.
The following table sets forth, for the periods shown, information with
respect to Major Auto's sales of parts and services:
SALES OF PARTS AND SERVICES
(dollars in thousands)
1995 1996 1997
------- ------- -------
Sales revenue .......................... $11,070 $12,150 $11,400
Gross Profit ........................... $ 3,450 $ 3,270 $ 3,750
Gross Profit Margin .................... 31.2% 26.9% 33%
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Vehicle Financing. Major Auto provides a wide variety of financing and
leasing alternatives for its customers. Major Auto has advised the Company that
it believes that its customers' ability to obtain financing at its dealerships
significantly enhances Major Auto's ability to sell new and used vehicles. Major
Auto has advised the Company that it believes that its ability to provide its
customers with a variety of financing options provides Major Auto with a
competitive advantage over many of its competitors, particularly smaller
competitors that do not have sufficient sales volumes to attract the diversity
of financing sources available to Major Auto.
In most instances, Major Auto assigns its vehicle finance contracts and
leases to third parties, instead of directly financing vehicle sales or leases,
which minimizes the credit risk to which Major Auto is exposed. Major Auto
typically receives a finance fee or commission from the third party who provides
the financing. In certain limited instances in which Major Auto determines that
its credit risk is manageable, estimated by Major Auto to be approximately 5% of
its vehicles sales and leases, Major Auto directly finances the purchase or
lease of a vehicle. In such instances, Major Auto will bear the credit risk that
the customer will default, but will have the right to repossess the vehicle upon
default. Major Auto maintains relationships with a wide variety of financing
sources, including commercial banks, automobile finance companies, other
financial institutions and the Company's subsidiary Major Fleet. Major Fleet
purchases less than 10% of Major Auto's leases, and none of Major Auto's finance
contracts.
Sales and Marketing
Major Auto has advised the Company that it believes marketing and
advertising are significant to its operations. As is typical in its industry,
Major Auto receives a subsidy for a portion of its expenses from the automobile
manufacturers with whom Major Auto has franchise agreements. The automobile
manufacturers also assist Major Auto to develop its own advertising by providing
it with market research.
Major Auto's marketing effort is conducted over most forms of media
including television, newspaper, direct mail, billboards and the Internet. Major
Auto's advertising seeks to promote its image as a reputable dealer offering
quality products at affordable prices and with attractive financing options.
Each of Major Auto's dealerships periodically offer price discounts or other
promotions to attract additional customers. The individual dealerships'
promotions are coordinated by Major Auto and, because Major Auto owns and
operates several dealerships in the New York City market, it realizes cost
savings through volume discounts and other media concessions.
Major Auto's operations have been enhanced by its ability to achieve
economies of scale with respect to its marketing and advertising. Nationwide,
the average cost of marketing and advertising per new vehicle sold in 1997 was
approximately $347. Notwithstanding that advertising costs in the New York
metropolitan area are generally higher than the national average, Major Auto's
cost of marketing and advertising per vehicle sold have consistently been less
than the national average. These lower costs result from the fact that Major
Auto: (i) has favorable contracts with four major area daily newspapers; (ii)
advertises in lower-cost niche markets (such as local ethnic markets, employee
purchase programs, and discount buying services); and (iii) utilizes telephonic
marketing and electronic marketing via services such as the Internet and
Bloomberg.
Relationships with Manufacturers
Each of Major Auto's dealerships operates under a separate franchise or
dealer agreement which governs the relationship between the dealership and the
relevant manufacturer. In general, each dealer agreement specifies the location
of the dealership for the sale of vehicles and for the performance of certain
approved services in the specified market area. The designation of such areas,
the allocation of such areas and the allocation of new vehicles among
dealerships is discretionary with the relevant manufacturer. Dealer agreements
do not generally provide a dealer with an exclusive franchise in the designated
market area. A dealer agreement generally requires that a dealer meet specified
standards regarding showrooms, the facilities and equipment for servicing
vehicles, the maintenance of inventories, the maintenance of minimum net working
capital, personnel training and other aspects of the dealer's business. The
dealer agreement also gives the relevant manufacturer the right to approve the
dealer's general manager and any material
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change in management or ownership of the dealership. The dealer agreement
provides the relevant manufacturer with the right to terminate the dealer
agreement under certain circumstances, such as : (i) a change in control of the
dealership without the consent of the relevant manufacturer; (ii) the impairment
of the financial condition or reputation of the dealership; (iii) the death,
removal or withdrawal of the dealership's general manager; (iii) the conviction
of the dealership or the dealership's general manager of certain crimes; (iv)
the dealer's failure to adequately operate the dealership or to maintain
wholesale financing arrangements; (v) the bankruptcy or insolvency of the
dealership; or (vi) the dealer's or dealership's material breach of other
provisions of the dealer agreement. Many of the dealership agreements require
the consent of the relevant manufacturer to the dealer's acquisition of
additional dealerships. In addition Major Auto's dealership agreement with
General Motors, with respect to its Chevrolet dealership, gives General Motors a
right of first refusal to purchase such dealership, which means that whenever
Major Auto proposes to sell its Chevrolet dealership, it must first offer
General Motors the opportunity to purchase that dealership.
The dealership agreement that the Company will enter into with General
Motors upon completion of the Major Auto Acquisition will impose several
additional restrictions on the Company. Following the completion of the Major
Auto Acquisition, the Company's Chevrolet franchise, and any other General
Motors' franchises that the Company may subsequently acquire, could be at risk
if: (i) any person or entity acquires more than 20% of the Company's voting
stock with the intention of acquiring additional shares or effecting a material
change in the Company's business or corporate structure; or (ii) if the Company
takes any corporate action that would result: (a) in any person or entity owning
more than 20% of the Company's voting stock for a purpose other than passive
investment; (b) an extraordinary corporate transaction such as a merger,
reorganization, liquidation or transfer of assets; (c) a change in the control
of the Company's Board of Directors within a rolling one-year period; or (d) the
acquisition of more than 20% of the Company's voting stock by another automobile
dealer or such dealer's affiliates. If General Motors determines that any of the
actions described in the preceding sentence could have a material or adverse
effect on its image or reputation in the General Motors' dealerships or be
materially incompatible with General Motors' interests, the Company must either
(x) transfer the assets of the General Motors' dealerships to General Motors or
a third party acceptable to General Motors for fair market value or (y)
demonstrate that the person or entity will not own 20% of the Company's voting
stock or that the actions in question will not occur.
In addition, the General Motors dealer agreement will require that the
Company comply with General Motors' Network 2000 Channel Strategy ("Project
2000"). Project 2000 includes a plan to eliminate 1,500 General Motors
dealerships by the year 2000, primarily through dealership buybacks and approval
by General Motors of inter-dealership acquisitions, and encourages dealers to
align General Motors divisions' brands as may be requested by General Motors,
The dealer agreement will require that the Company bring any General Motors
dealership into compliance with the Project 2000 plan within one year of the
acquisition. Failure to achieve such compliance may result in termination of the
dealer agreement and a buyback of the related dealership assets at book value by
General Motors. The Company believes that Major Auto's Chevrolet dealership
currently complies with the Project 2000 guidelines.
The Company has also agreed that its dealerships offering new vehicles
manufactured by General Motors will not attempt to sell new vehicles of other
manufacturers.
New York law, and many other states' laws, limit manufacturers' control
over dealerships. In addition to various other restrictions imposed upon
manufacturers, New York law provides that notwithstanding the terms of the
dealer agreement with the relevant manufacturer, the manufacturer may not: (i)
except in certain limited instances, terminate or refuse to renew a dealership
agreement except for due cause and with prior written notice; (ii) attempt to
prevent a change in the dealer's capital structure or the means by which the
dealer finances dealership operations; or (iii) unreasonably withhold its
consent to a dealer's transfer of its interest in the dealership or fail to give
notice to the dealer detailing its reasons for not consenting.
Major Auto has solicited the consents of the relevant manufacturers to the
Major Auto Acquisition and the change of control of the respective dealerships
to result therefrom. To date, Major Auto has received the consent of Subaru
Distributors Corp., with respect to the Subaru dealership, and General Motors,
with respect to the Chevrolet dealership,
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and is awaiting the consent of Chrysler Corporation, with respect to the
Chrysler, Plymouth, Dodge, Jeep and Eagle dealerships.
Competition
The market for new and used vehicle sales in the New York metropolitan
area is one of the most competitive in the nation. In the sale of new vehicles,
Major Auto competes with other new automobile dealers that operate in the New
York metropolitan area. Some competing dealerships offer some of the same makes
as Major Auto's dealerships and other competing dealerships offer other
manufacturer's vehicles. Some competing new vehicle dealers are local,
single-franchise dealerships, while others are multi-franchise dealership
groups. In the sale of used vehicles, Major Auto competes with other used
vehicle dealerships and with new vehicle dealerships which also sell used cars
that operate in the New York metropolitan area. In addition, Major Auto competes
with used car "superstores" that have inventories that are larger and more
varied than Major Auto's.
Major Auto has advised the Company that it believes that the principal
competitive factors in vehicle sales are the marketing campaigns conducted by
automobile manufacturers, the ability of dealerships to offer a wide selection
of popular vehicles, pricing (including manufacturers' rebates and other special
offers), the location of dealerships, the quality of customer service,
warranties and customer preference for particular makes of vehicles. Major Auto
believes that its dealerships are competitive in all of these areas.
In addition, Major Auto, due to the size and number of automobile
dealerships it owns and operates, is larger than the independent operators with
which it competes. Major Auto's size has historically permitted it to attract
experienced and professional sales and service personnel and has provided it the
resources to compete effectively. However, as the Company enters other markets,
it may face competitors that are larger and that have access to greater
resources.
Major Auto has advised the Company that it believes that its principal
competitors within the New York metropolitan area are United Auto Group, a
publicly traded company, and Potamkin Auto Group, Burn's Auto Group and
Auto-Land, each of which is privately held.
Governmental Regulation
Automobile dealers and manufacturers are subject to various Federal and
state laws established to protect consumers, including the so-called "Lemon
Laws" which require a dealer or manufacturer to replace a new vehicle or accept
it for a full refund within a specified period of time, generally one year,
after the initial purchase if the vehicle does not conform to the manufacturer's
express warranties and the dealer or manufacturer, after a reasonable number of
attempts, is unable to correct or repair the defect. Federal laws require that
certain written disclosures be provided on new vehicles, including mileage and
pricing information. In addition, Major Auto's financing activities are subject
to certain statutes governing credit reporting and debt collection.
The imported automobiles purchased by Major Auto are subject to United
States custom duties and, in the ordinary course of its business, Major Auto may
from time to time be subject to claims for duties, penalties, liquidated damages
or other charges. Currently, United States customs duties are generally assessed
at 2.5% of the customs value of the automobiles imported, as classified pursuant
to the Harmonized Tariff Schedule of the United States.
As with automobile dealerships generally, and parts and service operations
in particular, Major Auto's business involves the use, handling and contracting
for recycling or disposal of hazardous or toxic substances or wastes, including
environmentally sensitive materials such as motor oil, waste motor oil and
filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner,
batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels.
Accordingly, Major Auto is subject to Federal, state and local environmental
laws governing health, environmental quality, and remediation of contamination
at facilities it operates or to which it sends hazardous or toxic substances or
wastes for treatment, recycling or disposal. Major Auto has advised the Company
that it believes that it is in material compliance
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with all environmental laws and that such compliance will not have a material
adverse effect on its business, financial condition or results of operations.
Computer Telephony and Telecommunications Division
The Company, through Computer Business Sciences, Inc., a New York
corporation ("Computer Business Sciences"), 786710 Ontario Limited, an Ontario
corporation doing business as Info Systems, Inc. ("Info Systems"), C.B.S.
Computer Business Sciences Ltd., an Israeli corporation ("Computer Business
Sciences (Israel)"), and Reynard Service Bureau, Inc., a Florida corporation
("Reynard"), the four wholly-owned subsidiaries comprising its Computer
Telephony and Telecommunications division, currently develops, manufactures,
markets, sells and services two product lines. The first product line utilizes
"Talkie" technology, which consists of proprietary computer software and
hardware that (i) permits end users of the technology to place long-distance
international telephone calls at discounted rates and (ii) offers end users a
broad range of interactive voice response applications such as voice-mail,
automatic receptionist, automated order entry, conference calling and faxing.
The second product line, "Business Control Software," is a proprietary computer
software system that provides multi-lingual general accounting and business
management applications.
The Company is planning to exploit its technological capabilities in
telephony by emphasizing high speed, broadband, multimedia transmission over
telephone, including voice, data, video conferencing and other areas.
Additionally, the Company is in the preliminary process of developing a
commercial mobile satellite technology in connection with the Israel Aircraft
Industry's ELTA division which is expected to allow passengers on automobiles,
trains and buses to receive high quality broadcast television and interactive
broadband multimedia internet service (see "Computer Telephony and
Telecommunications Division -- Planned Activities").
The Company originally acquired the technology for its telecommunications
products (see Talkie" below) in April 1996 through its acquisition from Dr. Zvi
Barak and Sarah Barak of all of the issued and outstanding stock of Info
Systems. A portion of the purchase price for such stock consists of twenty
monthly installment payments of $15,000 from the Company to the Baraks. In order
to secure such installment payments, the Company has granted a security interest
to the Baraks in the stock of Info Systems and the other assets purchased by the
Company from the Baraks. The monthly installment payments commenced in September
1996 and are scheduled to continue through June 1998. To date, the Company has
withheld $85,000 of such installment payments as collateral for the Baraks'
obligation to make certain indemnification payments to the Company. The Company
has agreed to pay the Baraks the $85,000 by July 1998.
Talkie
"Talkie" is the trademark for, and the name used by the Company to
describe, the technology relating to the Company's telephonic and interactive
voice response software applications. The Company has three products that use
Talkie technology. The first product, the "Talkie Power Web Line Machine," is a
computer based telephone "switch" that enables small or start-up telephone
companies to purchase blocks of international telephone calling time from
suppliers such as AT&T and MCI and resell the time in smaller units to callers
at discounted rates. The second product is a group of related telephonic and
interactive voice response software programs, such as voice-mail, automatic
receptionist, automated order entry, conference calling and faxing. The third
product, called "Talkie-Globe," is an international call-back, debit card and
long-distance reselling system.
The Talkie Power Web Line Machine is a programmable electronic telephone
switch based on personal computer technology. It consists of a proprietary
software program, and hardware components most of which are available from a
number of different sources. The machine currently contains 96 channels, but may
be expanded to carry up to 120 channels. Each channel provides 43,200 available
minutes of telephone time per 30-day month that may be sold. As is typical of
industry utilization of available telephone time, approximately 30%-40% of these
available minutes are actually sold. Of the 43,200 available minutes,
approximately 10,560 are considered peak time (defined to be the 480 minutes
comprising the typical eight-hour work day in the destination country and
assuming 22 work days in the typical
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30-day month) and the balance are considered off-peak time, however the
determination of actual peak minutes in a destination country is based upon
demand for calling time, which in turn is based upon such factors as calling
patterns and the differences in time zones between the country from which a call
is placed and the destination county. Peak minutes are generally able to be sold
at higher rates than off-peak minutes.
The Talkie Power Web Line Machine includes an integrated programmable
telephone call switching system known as the Talkie Web Smart Switch. The
programmability of this switching system allows the machine to handle a variety
of international telephone-based services including resale of long-distance
telephone time the Company purchases in bulk, international call-back services
(described below), telemarketing, Internet access and facsimile transmission.
Historically, the Company, through its subsidiary Computer Business
Sciences, sold the Talkie Power Web Line Machines to various service providers
(known as "master agents"). A master agent then established a telephone
connection between a foreign country and the Talkie Power Web Line Machine,
which is located at the Company's offices in Kew Gardens, New York. This
connection is typically a dedicated telephone line that runs from the Talkie
Power Web Line Machine to certain equipment located in the foreign country that
is used to connect the dedicated line to the local telephone lines. The master
agent typically leased the dedicated telephone line, which has a specific
capacity for simultaneous calls, from MCI Communications Corp. or Sprint
Corporation for a fixed monthly fee. Callers in the foreign country place a
local call to connect to the dedicated telephone line and are provided a United
States dial tone by the Talkie Power Web Line Machine. The caller then dials the
number for the desired destination and the call is carried over the dedicated
telephone line to the Talkie Power Web Line Machine and then redirected to the
desired destination. Because the Talkie Power Web Line Machine's software
program is able to process both voice and data, callers may place international
telephone calls and send facsimiles to the desired destination and may also
connect to the Internet.
The master agent generated revenues by selling the available telephone
time generated by the Talkie Power Web Line Machine to callers in the foreign
country. There were two elements to the master agent's cost of carrying a call
from the foreign country to the desired destination: the cost of the dedicated
telephone line from the Talkie Power Web Line Machine to the foreign country
(which is typically a fixed monthly cost) and the cost of the call directed from
the Talkie Power Web Line Machine to the desired destination (which is based
upon United States calling rates). The master agent charged the caller in the
foreign country a markup over the cost of the call to the desired destination.
The cost to the caller is considerably lower than the alternative of placing the
same call through the caller's own local telephone system which, in many cases,
is a state-owned monopoly. The experience of the Company's master agents,
generally, was a very substantial reduction in per minute call costs. The
Company's billing records indicate that the reduction in most cases is a factor
of 15, that is, the country-to-country portion of an international call normally
costing $0.75 per minute, costs $0.05 per minute when placed through the Talkie
Power Web Line Machine. Once the master agent arranged for a certain monthly
volume of calls from a given foreign country, the master agent recouped the cost
of the dedicated telephone line to that foreign country and thereafter generated
profits.
In the third quarter of 1997, the Company decided to acquire from all of
its master agents their rights to their respective territories and the Talkie
Power Line Web Machines previously sold to them. The Company believes that it
can maximize its profitability by selling for itself the telephone minutes to
the existing and additional territories. Negotiations are currently underway
with each of the Company's master agents to finalize the memoranda of
understanding with respect to these acquisitions. See also "Arrangements with
Nissko" below.
The Company and Summa Four, Inc., a publicly owned communications
equipment manufacturer located in New Hampshire, have entered into a value-added
reseller agreement. Under the agreement, the parties will jointly develop an
improved version of the Talkie Power Web Line Machine and associated software,
which the Company will then purchase from Summa Four, Inc.
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Arrangements with Nissko
In March 1996, the Company's subsidiary Computer Business Sciences formed
a joint venture with Nissko Telecom, L.P. ("Nissko"). The joint venture is a
general partnership named Nissko Telecom Associates ("Associates"). Computer
Business Sciences owns 45% of the joint venture and Nissko owns 55%. Nissko is a
limited partnership the general partner of which is one of the Company's master
agents, Nissko Telecom, Ltd. (the "Agent"), and the limited partners of which
are four individuals, three of whom, including Yossi Koren, one of the Company's
directors, are shareholders of the Agent (such three individuals being
collectively referred to herein as the "Nissko Principals"). Pursuant to an
informal agreement, the Agent has granted to Associates the right to market and
sell the available telephone time generated by the Talkie Power Web Line
Machines that the Agent purchases as a master agent, in exchange for a 55%
Agent's interest in the joint venture through its general partnership interest
in Nissko. Through its interest in Associates, Computer Business Sciences
realizes 45% of the revenues generated from Associates' sale of such telephone
minutes. Since the inception of Associates, the Company has had $169,888 in net
losses from Computer Business Science's participation in Associates.
Under its master agent agreement, dated March 1996, with Computer Business
Sciences, the Agent is obligated to purchase 15 Talkie Power Web Line Machines
from Computer Business Sciences and has the right to acquire 15 additional
machines, each for $125,800, and 30 machine upgrades, each for $60,000. Each
upgrade consists of an attachment module which increases the channel capacity of
the machines and the related software. The Agent has a right of first refusal to
sell the telephone time generated by the machines that it has purchased in all
geographical locations in the world. Accordingly, whenever a master agent other
than the Agent proposes to resell telephone time in a country the other master
agent has not previously served, Computer Business Sciences must first offer the
Agent the opportunity to service that country.
Under the terms of its master agent agreement, the Agent (i) paid Computer
Business Sciences a deposit of $629,000 at the time the agreement was executed
toward the purchase of the 15 machines that the Agent is obligated to purchase
and (ii) issued to Computer Business Sciences 45% of its then issued and
outstanding common stock. In return, (i) the Company issued to the Nissko
Principals, including Yossi Koren, who subsequently became a director of the
Company, (a) warrants, exercisable through the date that is 60 days after the
effectiveness of any public offering of the Company's securities, to acquire an
aggregate of 750,000 shares of the Company's Common Stock at an exercise price
of $1.25 per share (the "Class A Warrants") and (b) warrants, exercisable
through March 19, 1998 (which have since expired by their terms), to acquire an
aggregate of 750,000 shares of the Company's Common Stock at an exercise price
of $1.25 per share (the "Class B Warrants") and (ii) Computer Business Sciences
agreed to make a $10,000 contribution to the capital of the Agent upon its
purchase of each of the first 15 machines. Certificates evidencing the Class A
Warrants and the Class B Warrants have not yet been issued. (See "Restructuring
of Nissko Arrangements" below.)
To secure certain payments under the master agent agreement with the
Agent, Bruce Bendell, the Company's Chairman, and Doron Cohen, the Company's
Chief Executive Officer, President and Treasurer, have each pledged to the Agent
500,000 shares of the Company's Common Stock. In the event that certain
financial covenants are not met or superseded by definitive documentation
resulting from the MOU (as hereinafter defined), the Nissko Principals will have
the right to foreclose on the pledged Common Stock.
If the proceeds of liquidating the pledged shares are sufficient to cover
the deficit, the Nissko Principals will be required to transfer to Mr. Bendell
and Mr. Cohen in equal shares the remaining 55% of the Agent's issued and
outstanding common stock. Messrs. Bendell and Cohen have agreed that upon
receipt of that stock, they will transfer it to the Company in exchange for
reimbursement by the Company for the market value of their shares of the
Company's Common Stock foreclosed upon by the Nissko Principals.
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Restructuring of Nissko Arrangements
The Company has entered into a Memorandum of Understanding (the "MOU")
with the Agent, the Nissko Principals, and with the remaining limited partner of
Nissko, Robert L. Rimberg. The transactions contemplated by the MOU are
conditioned on the consummation of the Major Auto Acquisition. The MOU provides
that: (i) Nissko will transfer to the Agent, and the Agent will assume, all of
the assets and liabilities of Nissko; and (ii) Computer Business Sciences will
acquire all of the issued and outstanding shares of common stock of the Agent in
a tax-free reorganization. Upon execution of the MOU, an aggregate $653,750
deposit that the Nissko Principals and Mr. Rimberg had previously paid towards
the full exercise price of the Class A Warrants was converted to a partial
exercise of the Class A Warrants. Upon such conversion, the Company issued an
aggregate of 523,000 shares of its Common Stock to the Nissko Principals and Mr.
Rimberg, 173,583 of which were issued to Yossi Koren, a director of the Company.
Permitted resales will be expressly subject to the voting rights of Bruce
Bendell who holds a proxy to vote 500,000 of these shares during the two-year
restriction period. Subsequently, the parties agreed to remove the contractual
two-year restriction on sales of these shares to make such restriction
consistent with current restrictions under the Securities Act of 1933.
The MOU provides that upon execution of definitive documentation
containing the terms and conditions outlined in the MOU, (i) each of the Nissko
Principals will receive 257,500 shares of the Company's Common Stock and Mr.
Rimberg will receive 27,500 shares of the Company's Common Stock, resales of all
of which shares will be subject to restrictions on transfer and voting that are
identical to those described immediately above, and (ii) each of the Nissko
Principals will receive warrants to acquire up to 68,917 shares of the Company's
Common Stock and Mr. Rimberg will receive warrants to acquire up to 20,250
shares of the Company's Common Stock, in each case for $1.25 per share. Such
warrants represent the unexercised balance of the Class A Warrants remaining
after the conversion of the $653,750 partial payment into a partial exercise as
described above.
Nissko Jewelry Trading, Inc. ("NJT"), a company 33-1/3% owned by Mr.
Koren, has entered into agreements for the Agent's benefit with MCI, Sprint and
Bell Atlantic (formerly NYNEX). These agreements provide for the purchase by NJT
on behalf of the Agent of telephone time or transmission lines. The MOU provides
that the Company will indemnify NJT against any liability it may incur under
these agreements and will place 200,000 shares of its Common Stock into an
escrow account to secure this indemnification obligation.
Upon the effectiveness of the definitive documentation relating to the
transactions contemplated by the MOU the Agent's master agent agreement will
terminate and the pledge by each of Mr. Bendell and Mr. Cohen of 500,000 shares
of the Company's Common Stock, referred to above, will be released.
It is the Company's intention to reacquire the territorial rights and
Talkie Power Line Web Machines from its other master agents in exchange for
shares of Common Stock at fair value. The Company has reached tentative
agreement with each such agent and is presently negotiating definitive memoranda
of understanding.
Interactive Voice Response Software Programs
The second product group, interactive voice response software programs,
consists of the following applications:
Talkie-Ad: permits callers to browse through pre-recorded messages based
on their search criteria, similar to a talking classified ad.
Talkie-Attendant: automated receptionist features, including dial "0" for
operator, name directories, call blocking, call screening, music or company
messages while on hold, paging, personalized menus, call queuing and
conversation recording.
Talkie-Audio: delivers pre-recorded information in response to telephone
inquiries and can serve as a talking bulletin board.
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Talkie-Conference: permits the user to schedule a conference call and
then, when the conference call is to occur, either calls the participants or
permits them to dial in, and provides the chairperson with various options
during the call.
Talkie-Dial: places a telephone call, using a user-supplied list of
telephone numbers and delivers voice information with the capability of asking
questions, accepting answers and updating the system to reflect the answers.
Talkie-Fax: permits the user to program a facsimile into the system and
transmit it to a user-supplied list of numbers and permits users to transmit to
callers upon their request written information programmed into the system such
as directions, product information, price lists or news releases.
Talkie-Form: permits the user to set up a questionnaire and collect
answers to pre-recorded questions.
Talkie-Mail: permits the user to record, send, receive and retrieve voice
messages from personal mailboxes.
Talkie-Query: responds to callers' inquiries using information stored in
the system database.
Talkie-Trans: accepts orders, issues orders (including delivery
instructions) and faxes order confirmations.
Users of the Talkie interactive voice response system can also customize
the foregoing applications to create new applications using Talkie-Gen, which is
an application generator that uses a simple programming language.
In addition to the applications listed above, users may also purchase any
of the following off-the-shelf applications:
Talkie-Dating: permits the user to supply a dating service that will
permit the user's customers to place and browse through personal ads, register
for service and record and listen to messages.
Talkie-Follow-Me: permits the user to supply a telephone tracking service
that enables the user's customers to obtain a single telephone number that will
continually forward incoming calls to a user-defined series of telephone numbers
(such as work, cellular, home, pager and voice-mail).
Talkie-Wake-Up/Reminder: permits the user to supply a wake-up or reminder
service that will call a user supplied number with a user-supplied message at a
specified time.
All of the Talkie interactive voice response applications operate in up to
nine languages.
Info Systems also provides customers with industry-specific and customized
applications of its interactive voice response technology. For example, Info
Systems has developed a product called Talkie AutoCom for use by automobile
dealers. See "Automotive Sales Division-Operating Strategy."
The Talkie interactive voice response software package is sold by the
Company through Info Systems, its wholly-owned Canadian subsidiary.
Talkie-Globe, the trademark for, and the name used by the Company to
describe, its third telecommunications product, is a software-based integrated
call-back, debit-card and long-distance reselling system and includes all of the
Talkie interactive voice response software programs. Typically, international
callers based in countries where the telephone system is a state-owned monopoly
must pay high per-minute rates fixed by the state-owned company. One method of
securing a lower rate is the "call-back" system offered by Info Systems'
Talkie-Globe. Using Talkie-Globe, the foreign caller first places a telephone
call from the foreign country to the United States or Canadian telephone number
where the Talkie-Globe system is located and hangs up without the call being
connected so that no charge is assessed for the call. Talkie-Globe recognizes
the telephone number from which the foreign call was placed and then places a
call to that
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telephone number from the location in the United States or Canada where the
Talkie-Globe system is located to the foreign caller and provides the foreign
caller with a dial tone. The foreign caller then places a telephone call through
the United States or Canada to the desired destination. The foreign caller thus
pays for two calls: (i) the call back from the Talkie-Globe system located in
the United States or Canada to the caller in the foreign market and (ii) the
call that the caller places through the United States or Canada to the desired
destination. The sum of the costs of the two calls placed from the Talkie-Globe
system located in the United States or Canada will be lower than the cost of a
single call placed directly from the applicable foreign market to the desired
destination. The Talkie-Globe system also has a debit card feature, which
permits a caller to purchase a stated value of calling time, and debits that
value as the caller uses the prepaid calling time.
Talkie-Globe is sold by the Company through Info Systems, its wholly-owned
Canadian subsidiary.
Business Control Software
The Company's business control software is an interconnected series of
accounting and business management software applications that includes the
following systems: general ledger, accounts receivable, accounts payable, sales
order, purchase order, inventory control, bills of materials, job costing and
production control. The business control software can assist users, among other
things, to define market trends, analyze sales force effectiveness, determine
the profitability of a job, department or company, or determine a geographical
sales spread. One of the software's principal features is its ability to process
information in multiple currencies. For example, a Japanese distributor
transacting business in France and Italy can use the software to maintain data
relating to sales, purchases and costs in French francs and Italian lira and to
generate reports in Japanese yen (or in several multiple currencies
simultaneously) while automatically posting currency exchange rates. In
addition, the business control software is a multi-lingual system of software
applications that permits multiple users, each selecting a different language,
to access simultaneously a common database.
The business control software sold by the Company is sold through Info
Systems, its wholly-owned Canadian subsidiary.
Marketing and Sales
From inception through December 31, 1997, the Company sold 21 Talkie Power
Web Line Machines to six master agents. The aggregate amount of gross revenues
resulting from these sales is $4,865,493, which accounts for approximately 66.7%
of the Company's total revenues since its inception. The Company's gross profit
margin on sales of the Talkie Power Web Line Machines since its inception is
75.5%. Each master agent had been required to purchase a minimum annual volume
of machines. The minimum purchase requirement had been ten machines or machines
having an aggregate sales price of $1.8 million, whichever is less. "Master
agents" were smaller companies wishing to enter the international telephone time
resale market without incurring the high cost of purchasing, installing and
maintaining traditional telephone switching equipment. Although the master
agents purchased the machines, the purchase terms required that the machines be
located at the Company's premises and that all maintenance be performed by the
Company (as described below). An added benefit to master agents of housing the
machines at the Company's premises is that a Bell Atlantic Switch is located
there and the physical connection between the machines and such switch is short.
Because of this, the Company pays a relatively inexpensive charge (a component
of which is based upon the length of the connection from such switch) to connect
to such switch and experiences no connection delays resulting from the length of
the connection.
Historically, the Company's strategy with respect to the Talkie Power Web
Line Machine has been threefold. First, it sold additional machines through its
existing master agents as they expanded their businesses by providing telephone
service to additional foreign markets. Second, as demand for the machines
increased, it intended to add additional master agents and/or replace any
existing master agents who were not complying with their master agent agreements
and to enter into strategic partnerships with such new and replacement master
agents that would permit the Company
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to share in the revenue generated by the master agents' sale of telephone time.
Third, it intended continually to adapt advancing computer and
telecommunications technology to improve and customize the performance of the
machines. Currently, the Company is in the process of buying out its master
agents and intends to operate its Talkie Power Web Line Machines on its own
behalf.
The Company installs, maintains and services all Talkie Power Web Line
Machines at the Company's offices in Kew Gardens, New York, where the machines
are housed. Historically, for these services, the Company received both a fixed
fee and a volume-based fee. To date, billing arrangements have been informal,
and the cost to each master agent has been calculated by determining the
aggregate maintenance and service costs for all the machines, adding a
percentage markup and charging each master agent its ratable portion based upon
the number of machines it has purchased. The Company also customized the
performance of the machines for the respective master agents and for use in
particular countries, for which it has received a fee that is negotiated by the
Company and the applicable master agent based upon the complexity of the
customization. As noted above, all master agents have been required by contract
with the Company to locate their purchased Talkie Power Web Line Machines at the
Company's principal office and to have all required installation, service and
maintenance performed by the Company. In addition to the services it provides
with respect to the Talkie Power Web Line Machines, the Company also has
provided services for the various other Talkie products and for the Business
Control Software, if requested by the users.
The Company typically sells its interactive voice response software
programs to entrepreneurs who wish to operate a telephone-based service business
with low overhead and fixed costs. The typical interactive voice response
software package requires only a personal computer and voice card for use and
costs $715. Each of the off-the-shelf applications costs an additional $795. The
Company intends to focus its efforts with respect to its Talkie interactive
voice response software programs on the market for industry-specific and
customized applications in which it generally realizes higher profit margins. As
the Company targets a given industry, it expects to hire sales personnel
familiar with that industry and to attend trade shows to market its product. In
addition, the Company intends to expand sales of its interactive voice response
system into Europe and South America.
The Company typically sells four to five of its Talkie-Globe systems per
month to entrepreneurs who wish to provide a telephone business with low
overhead and fixed costs and to small foreign telephone companies. Users of
Talkie-Globe purchase international calling time from long-distance telephone
companies such as MCI Communications Corp. and resell such time at a mark-up.
The typical Talkie-Globe system consists of three personal computers,
proprietary software and a voice card and costs approximately $25,000.
The Company realized gross revenues of $537,655 during 1996, and $679,890
during 1997, from the sale of its Talkie interactive voice response software
programs and of Talkie-Globe (excluding intercompany sales), which constituted
approximately 15.7% and 17.6% of the Company's gross revenues for such years,
respectively. The Company's gross profit margin on sales of its Talkie
interactive voice response software programs was approximately 54.3% for 1996
and approximately 66.7% for 1997.
The Company advertises its Talkie interactive voice response software
programs and Talkie-Globe in telephone and telecommunications industry trade
publications. In addition, Info Systems attends telephone and telecommunications
industry trade shows, which has resulted in reviews of these products in trade
publications.
The Company is not currently allocating resources to market its Business
Control Software, but performs software service contracts and provides annual
program updates to the program's users.
Planned Activities
The Company is seeking to expand its operations in the area of telephony
by building a multimedia, carrier class, broadband network that will be carried
over currently deployed, twist pair copper facilities which support most
existing home and business telephone functions. The initial trial rollout, Phase
I, presently projected for the third quarter of
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1998, targets twenty-two cities and expands to sixty-three cities by the end of
that year.
Phase I, using an asynchronous transport mode ("ATM") technology, is
expected to offer guaranteed quality of service, carrier class-level voice over
internet ("Voice/IP") long distance service at aggressively competitive rates.
Phases II and III of this enterprise, utilizing state-of-the-art digital
subscriber line ("DSL") equipment, are expected to provide a wide array of
Voice/IP services including local dial tone, call-back, dial-around, traditional
long distance and high speed internet access. Additionally, because this
technology permits broadband service over existing copper wires, the Company is
planning to offer, at very competitive prices, additional services such as
virtual private networks ("VPN"), movies on demand and pay TV, home shopping,
banking, telemarketing, tele-medicine, video conferencing and distance learning.
Additionally, in April 1998, the Company signed a memorandum of
understanding with ELTA Electronics Industries Ltd. ("ELTA"), a division of
Israel Aircraft Industries, to form a joint venture to develop a commercial
Mobile Interactive Satellite Receiving Terminal (MIST) system for use onboard
public, private and commercial transportation, including automobiles, trains and
buses, among others. As part of the agreement, the Company will retain a 50
percent stake in the joint venture.
Once complete, the MIST system is expected to allow passengers to receive
high quality broadcast television and interactive broadband multimedia internet
service through the use of Direct Broadcast Satellites. The information will
then be routed through a video Integrated Receiver and Decoder which will
decompress video signals once received and transmit them to a TV monitor or PC.
Passengers would then use a control panel to select from a variety of viewing
options.
Each system is expected to also include a cellular and/or commercial
satellite telephone system utilizing the Company's proprietary routing and
switching technology. Passengers would then use multi-purpose communications
terminals located on the vehicle to receive over 150 television channels,
internet and cellular service at affordable prices.
No assurance can be given that the Company will be successful in
developing the foregoing products or services, or that if successfully
developed, such products or services will result in revenues to the Company.
Research and Development
The Company's wholly-owned subsidiary Computer Business Sciences (Israel)
engages in research and development (i) to improve its existing
telecommunications software, and to adapt the software to changing personal
computer environments, (ii) to expand the software to new uses and (iii) to
develop new software, products and applications. Computer Business Sciences
(Israel) is headed by Dr. Zvi Barak, who was responsible for the development of
the Talkie technology and related Talkie products and of the business control
software.
The Company spent no money on research and development in 1995 with
respect to its Computer Telephony and Telecommunications division and spent
approximately $332,000 and $207,000 on research and development in 1996 and
1997, respectively, with respect to such division.
Intellectual Property
The Company has registered the name "Talkie" as a trade-mark in Canada.
The Company has filed applications with the United States Patent and Trademark
Office to register the names "Talkie" and "Talkie-Globe" and "BCS Software" as
trademarks in the United States. As an additional method of protecting its
proprietary technology, the Company requires that all of the Talkie Power Web
Line Machines that it sells remain at the Company's offices in Kew Gardens, New
York and that all installation, service and maintenance of the machines be
performed solely by the Company. The Company also relies on trade secret
protection, confidentiality agreements and other laws to protect its technology,
but believes that these rights may not necessarily prevent third parties from
developing or using similar or related
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technology to compete against the Computer Telephony and Telecommunications
division's products.
Competition
The Company knows of no person or company that offers a product that is a
feature-for-feature competitor to the Talkie Power Web Line Machine. While other
companies manufacture and sell traditional telephone switching equipment, such
equipment is expensive to purchase and maintain as compared to the Talkie Power
Web Line Machine. Moreover, the proprietary nature of the Talkie Power Web Line
Machine's software program provides the Company a significant head start over a
potential competitor who wishes to develop a competing product.
Associates competes, and the Company will compete, with other providers of
international telephone service. The market for international telephone service
is highly competitive. In additional to the major service providers such as
AT&T, MCI and Sprint, there are numerous smaller service providers as well as
resellers, who do not own and operate equipment but purchase telephone time from
service providers at a discount and resell that time to the public. The Company
believes that a primary competitive factor in the industry is pricing. Because
Associates uses the Talkie Power Web Line Machine, which is less costly to
purchase and maintain than traditional switching equipment, Associates is able
to offer telephone calling time at lower rates than competitors whose rate
structure must account for the higher cost of such traditional switching
equipment. In addition, because the Talkie Power Web Line Machine is able to
process both data as well as voice, Associates is able to offer Internet access,
which relatively few of its competitors offer. However, Associates and the other
master agents presently face, and the Company may face, increasing competition
as a result of deregulation in foreign countries, which could result in
competition from other service providers with large, established customer bases
and close ties to governmental authorities in their home countries and decreased
prices for direct-dialed international calls. Master agents' customers may no
longer be willing to use the master agents' or the Company's services, which
would adversely affect the Company's ability to sell the Talkie Power Web Line
Machine and/or limit the Company's gross margins on phone services sold for its
own account and, thereby, reduce the Company's income.
The Company's Talkie interactive voice response software programs compete
with products sold by approximately two dozen entities in North America,
including AT&T, Northern Telecom and others. However, in the more limited market
for industry-specific and custom interactive voice response applications, the
Company knows of only one direct competitor. The Company's Talkie-Globe system
competes with telephone callback products sold by approximately 6 other
entities.
As a result of its reliance on the Company's proprietary software rather
than hardware components to operate, the purchase price and maintenance costs of
the Company's Talkie interactive voice response software programs and
Talkie-Globe are believed to be generally lower than those of competing
products. In addition, because software is easier to alter than hardware
components, the Company is able to customize its products or modify its products
to incorporate changing technology more quickly and at a lower cost than its
competitors.
Notwithstanding the Company's competitive advantages however, many of the
producers of products competitive with the Company's, and companies wishing to
enter the market in which the Company's products compete, have well established
reputations, customer relationships and marketing and distribution networks.
Many also have greater financial, technical, manufacturing, management and
research and development resources than those of the Company, may be more
successful than the Company in manufacturing and marketing their products and
may be able to use their greater resources and to leverage existing
relationships to obtain a competitive advantage over the Company.
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Leasing Division
In October 1996, the Company acquired all of the issued and outstanding
shares of stock of Major Fleet & Leasing Corp. ("Major Fleet"). Major Fleet has
historically provided lease financing solely for motor vehicles. The Company
intends to expand the operations of Major Fleet to provide lease financing to
purchasers of the Talkie Power Web Line Machine.
Major Fleet typically arranges for sale or lease to its customers of new
or used vehicles of all makes and models. Major Fleet will purchase the desired
vehicle from an automobile dealer and either resell it to its customer for a
markup over its cost, or lease the vehicle to the customer and provide the
related lease financing. If a customer of Major Fleet wants to purchase or lease
a new vehicle that is available from one of Major Auto's dealerships, in almost
all cases, Major Fleet will acquire the vehicle from Major Auto and then resell
or lease it to its customer. Major Fleet estimates that it acquires
approximately 50% of the vehicles it sells and leases from Major Auto.
In most instances, Major Fleet will broker vehicle finance contracts for,
or assign its leases to, third parties instead of directly financing vehicle
sales or leases. This minimizes the credit risk to which Major Auto is exposed.
In these instances, Major Fleet typically receives a finance fee or commission
from the third party who provides the financing. In certain instances, Major
Fleet directly finances the lease of a vehicle. When Major Fleet provides lease
financing, it bears the credit risk that its customers will default in the
payment of the lease installments. In order to minimize its risk of loss, Major
Fleet carefully evaluates the credit of its lease customers. It also requires
that its lease customers have adequate collision and liability insurance on the
leased vehicle and that Major Fleet be named as loss payee and additional
insured on the customer's collision and liability insurance policies. Major
Fleet does not finance the purchase of the vehicles, so if a customer desires
purchase financing, the customer will need to obtain financing from a third
party; however, as discussed above, Major Fleet will broker financing contracts.
Plastics and Utility Products Division
The Company, through its subsidiary Premo-Plast, Inc. ("Premo-Plast"),
presently the only company in its Plastics and Utility Products division, is
currently conducting research and development with respect to two products
lines: (i) a line of spa and bath fixtures for use in whirlpool baths, spas,
tubs and swimming pools and (ii) an armored conduit system for use by utility
companies.
Spa Fixtures
Premo-Plast has been engaged in research and development related to a line
of fixtures to be placed through the walls of water containers such as spa tubs.
To date, the Company has focused its research on fixtures such as the jets used
to introduce water mixed with air bubbles into a whirlpool bath, spa or tub and
has designed and developed prototypes of such fixtures.
The construction of a whirlpool bath, spa or tub is typically a large
thin-walled shell (most often fiberglass coated plastic), through which protrude
a number of fixtures such as air and water jets. Inserting these fixtures
requires two workers. First, the "inside" worker drills a pilot hole where the
fixture is to be inserted. Then, the "outside" worker drills a much larger hole
to clear the mounting thread on the fixture, and at the same time smooths an
area on the rough outside wall of the spa around the hole in order to allow a
tight seal to the washer that will surround the hole when the fixture is
installed. Next, the inside worker places a sealing washer on the shaft of the
fixture and inserts the shaft through the drilled hole. The outside worker
places a second washer on the outside end of the fixture and applies silicone
sealant (or, in some cases, applies silicone sealant without a second washer),
and adds a retaining nut to secure the assembly. The inside worker must steady
the fixture from the inside of the spa, while the outside worker tightens the
nut from the outside. The degree of tightness is critical, as too much
tightening will squeeze out the silicone sealant, and too little will result in
a weak seal. Either condition will cause a leak. Once the nut is tightened, the
fixture must set in place, undisturbed, for several hours to permit the silicone
to harden and form a water-tight seal.
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The Company has acquired the rights to a proprietary plumbing fixture
installation method and has designed and developed a line of fixtures that
enable installation in a whirlpool bath, spa or tub in significantly less time
than is normally required to install such fixtures. One person, working from
inside the whirlpool bath, spa or tub, drills the pilot hole and final-size
hole. Next, a rubber grommet is placed in the hole. A grommet resembles a small
donut with flanges around the inside and outside; the flanges on the grommet are
placed into contact with the drilled hole. Next, the worker presses the fixture
into the grommeted hole, which can be done from either the inside or the outside
of the whirlpool bath, spa or tub. The barrel of the fixture expands the sides
of the grommet against the sides of the hole, sealing the hole (by contrast to
the traditional fixture, the seal takes place at the sides, not the front and
back, so no sealant is required). The barrel is ribbed to prevent the fixture
from being pushed back inside the whirlpool bath, spa or tub. Because there are
relatively few steps involved in the Company's installation method, there is
less risk of error. In addition, because no silicone sealant is used, the
fixture does not need to set in place, which permits immediate use and minimizes
the risk of leaks.
The Company acquired the technology for the proprietary fixture
installation method through its acquisition from John Pinciaro of all of his
right, title and interest therein and two United States patent applications
related thereto. The Company and Mr. Pinciaro will participate jointly in
exploitation of the fixture installation method. In October 1997, the Company
formed a new subsidiary, whose shares are owned 80% by the Company's existing
subsidiary Premo-Plast and 20% by Mr. Pinciaro.
Status of Development of Spa Fixtures
Since its acquisition of the technology relating to the fixture
installation method, the Company has further developed that technology and has
designed and produced working prototypes of the various fixtures for use in
connection with such method. The Company is currently testing the prototype
fixtures and installation method. In addition, the Company has finalized a
limited number of components and beta testing has been completed. The Company's
management expects that, given availability of the funding, the Company will
begin production tooling in the second quarter of 1998 and will commence
commercial sales of its spa and bath fixtures by the third quarter of 1998.
Company's Strategy with respect to Spa and Bath Fixture Technology
According to industry data, approximately 250,000 whirlpool baths and spas
and approximately 600,000 tubs are sold annually. Management of Premo-Plast
estimates that each whirlpool bath requires approximately 35-45 fixtures and
that each tub requires approximately 4-6 fixtures.
The Company's strategy with respect to the fixture technology is to
establish its proprietary installation method and its fixtures as the industry
standard for whirlpool baths, spas and tubs. The company has a threefold plan to
implement this strategy upon its commencement of commercial production of the
fixtures. First, the Company intends to expand its workforce by hiring
employees, most of whom have already been identified and approached by the
Company, experienced in the areas of design, production and marketing.
Second, the Company intends initially to sell its fixtures and license the
right to use its installation method to several designated regional
manufacturers and producers of whirlpool baths, spas and tubs. All of these
manufacturers and producers were consulted by John Pinciaro, from whom the
Company acquired the rights to the proprietary fixture installation method and
presently an employee of Premo-Plast, prior to and during the period of
development of such method. All of these manufacturers and producers expressed
in writing their interest in the installation method and a desire to utilize
that method and the Company's fixtures once commercially available, although
none are required to do so. Among these producers is ThermoSpas, Inc., a company
wholly-owned and operated by Mr. Pinciaro.
Third, the Company intends to publicize its installation method and
fixtures generally to the whirlpool bath, spa and tub industry and to attend
major trade shows.
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Armored Conduit
In November 1995, shortly after its formation, the Company acquired from
Progressive Polymerics, Inc. two United States patents and a Canadian patent
application covering an armored conduit product. The Company is presently
involved in litigation relating to the purchase price for such patents and
patent application. See "Legal Proceedings." The primary application for the
armored conduit is protection for underground electrical distribution lines. In
many major cities electric utility companies deliver service via lines that are
run through underground conduits. The underground conduit method of distribution
is becoming increasingly common in other cities as the preferred method for
delivering electric service to newly constructed subdivisions, replacing
above-ground lines mounted on wood or metal poles.
Originally, underground conduit was made from hollow creosoted wood or
transite pipe made from a mixture of asbestos and concrete. Currently, conduit
is typically made from either (i) PVC duct encased in concrete, (ii) cement or
concrete tubing or (iii) fiberglass tubing. Each of these types of conduit has
distinct disadvantages. PVC duct becomes brittle and inflexible in cold weather,
and melts and bonds to the electric wire if there is excess heat from an
overload condition. Cement or concrete cracks easily during transportation and
installation as a result of above-ground vibrations and stresses, and, unless
installed at the proper depth, if there is a problem with a portion of a conduit
system (whether PVC duct, cement, concrete or fiberglass) once installed, the
entire system must be removed and replaced.
The product covered by the Company's armored conduit patents is assembled
underground from prefabricated pieces that are typically two to four feet in
length. Each piece consists of a pre-formed plastic shell that is filled with
pourable cement, Each pre-formed shell has a rectangular cross-section, with a
linear ribbed exterior and tubular interior. Each end of the pre-formed shell
has an extension that can be coupled to the next section in end-to-end fashion.
Potentially, the design of the armored conduit offers several advantages
over other types of conduit. First, because the armored conduit system is
assembled from pre-fabricated pieces, if there is a problem with a single piece,
only that piece, rather than the entire conduit system, needs to be replaced.
The problem piece will be replaced with a replacement piece that has a top and
bottom half. The bottom half of the replacement piece will first be put in place
and coupled to the pieces on either side. The wires will then be placed in the
bottom half of the interior tube. The top half of the replacement piece will
then cover the wires and be coupled to the pieces on either side. Second, the
linear ribs on the exterior of the pre-formed shells increase the structural
strength of the shells and permit them to be interlocked when stacked for
storage or shipment, thereby reducing the risk of damage. Third, the outer
plastic shell of the armored conduit system protects it from water, chemicals
and other elements to which underground conduit systems are exposed. As a result
of all of these advantages, the armored conduit system can be expected to be
more durable than existing types of conduit.
The Company has been engaged in limited research and development
activities relating to the armored conduit, and expects, given the availability
of funding, to pursue further research and development.
Research and Development
Research and development with respect to the armored conduit technology
and the spa and bath fixture technology is conducted by the Company through its
wholly-owned subsidiary Premo-Plast.
The Company spent no money on research and development in 1995 with
respect to its Plastics and Utility Products division and estimates that it
spent approximately $3,650 and $33,750, respectively, in 1996 and 1997 on
research and development with respect to such division. Such division currently
has no customers.
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Intellectual Property
The Company owns two United States patents, issued in June 1993 and May
1994, respectively, relating to the armored conduit technology and also owns a
Canadian patent application relating to such technology. In addition, the
Company has filed two applications for a United States patent relating to the
spa and bath fixtures and related installation method. The Company is presently
pursuing such applications with the United States Patent and Trademark Office.
The Company has also filed two applications relating to the spa and bath
fixtures and related installation method under the Patent Cooperation Treaty
designating Australia, Canada, China, Japan and the European Patent Office (up
to 18 countries) as recipient countries. Under such treaty, the Company will
have the option to individually file separate applications in the designated
countries at an appropriate future date. In addition, the Company relies on
confidentiality agreements and other laws to protect its technology. The Company
believes that it may be possible for third parties to develop technology that
provides the same features as the Company's plastic products without infringing
the Company's rights or making use of its proprietary technology.
Competition
If the Company's armored conduit is developed into a commercially viable
product, it will compete with PVC duct encased in concrete, cement or concrete
tubing and metal tubing, all of which are established methods. The Company's spa
and bath fixtures will compete with existing types of such fixture. Because the
Company's fixtures and installation method permit single-person assembly rather
than the two-person assembly required by existing products and installation
methods, the Company believes that use of its fixtures will result in
significantly reduced assembly time and costs.
Many of the producers and distributors of products competitive with the
Company's spa and bath fixtures and armored conduit may have well established
reputations, customer relationships and marketing and distribution networks.
They may also have greater financial, technical, manufacturing, management and
research and development resources than those of the Company. While the Company
believes that its spa and bath fixtures and installation method and its armored
conduit will have significant advantages over existing products, the Company's
competitors may be more successful than the Company in manufacturing and
marketing their products and may be able to leverage existing relationships to
obtain a competitive advantage over the Company.
Item 2. Description of Property.
Neither the Company nor any of its subsidiaries owns any real estate or
plants. All of the operations of the Company and its subsidiaries are conducted
from locations leased from unaffiliated third parties. Following the Major Auto
Acquisition, the Company will own the Major Real Estate.
The Company leases approximately 6,800 square feet on two floors in Kew
Gardens, New York. The lease for the floor that the Company currently uses for
executive offices and to house the Talkie Power Web Line Machines consists of
approximately 2,800 square feet and expires on March 31, 2001, but the Company
has the option to extend the lease for one additional five-year term. The
current annual rent under such lease is $69,448.50, but will be increased by
3.5% on a compounded and cumulative basis each lease year. If the Company elects
to extend such lease, the base rent for the extension period will be the greater
of the base rent on March 31, 2001 at the termination of the original lease
period or the then fair market rental of the premises.
The lease for the other floor in Kew Gardens, New York consists of
approximately 4,000 square feet and is occupied pursuant to the terms of a
sublease between Major Fleet, as lessee, and an unrelated third party, as
lessor. The lease expires on January 14, 2000 and contains no renewal
provisions. The current annual rent under such lease is $73,992. Pursuant to an
informal arrangement, (i) Computer Business Sciences pays such rent on behalf of
Major Fleet, (ii) a portion of the leased space is used by Computer Business
Sciences for additional office space and (iii) a portion of the leased space is
used by Associates to operate the customer service division of its reselling
operations.
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The Company believes that its current facilities are suitable and adequate
for its current needs, but expects to require additional facilities to
accommodate its anticipated expansion.
Computer Business Sciences (Israel) leases from an unrelated third party
approximately 1,517 square feet of office space in Raanana, Israel. The lease
expires on September 1, 1999, but Computer Business Sciences (Israel) has an
option to renew the lease for an additional two-year period. The current annual
rent under such lease is $22,620 and will increase by 6% on July 1, 1999.
Info Systems leases from an unrelated third party approximately 1,415
square feet of office space in Downsview, North York, Canada. The lease expires
on October 31, 1998, but Info Systems has an option to renew the lease for an
additional two-year period. The current annual rent under such lease is $19,810
and is not subject to escalation.
Major Subaru subleases from an unrelated third party approximately 2,500
square feet of office and automobile showroom space in Woodside, New York. This
lease expires on January 31, 1999 and contains no renewal provisions. The
current annual rent under such lease is $69,457.56. Pursuant to an informal
arrangement between Major Subaru and Major Fleet, Major Fleet occupies the space
and pays the rental payments.
In addition, upon the consummation of the Major Auto Acquisition, the
Company will have an interest in the following leases, under which Major Auto
presently pays aggregate annual rental payments of $638,000:
Major Chrysler, Plymouth, Jeep Eagle leases from an unrelated third party
approximately 17,400 square feet of office and automobile showroom and storage
space in Long Island City, New York. This lease expires on October 31, 2001, but
Major Chrysler, Plymouth, Jeep Eagle has the option to extend the lease for one
additional ten-year term.
Major Dodge leases from Bruce Bendell and Harold Bendell approximately
12,000 square feet of office and automobile showroom space in Long Island City,
New York. The lease expires on December 31, 1998 and contains no renewal
provisions.
Major Chrysler, Plymouth, Jeep Eagle, Major Dodge and Major Subaru lease
from Bendell Realty L.L.C., a company wholly owned by Bruce Bendell and Harold
Bendell, approximately 40,000 square feet in Long Island City, New York which is
used as a service facility. The lease expires on December 31, 1998 and contains
no renewal provisions.
The above properties that are leased from the Bendells will be acquired by
Major Acquisition Corp. in connection with the Major Auto Acquisition; see
"Planned Acquisition" above.
Major Auto leases from an unrelated third party approximately 2,000 square
feet of lot space in Astoria, New York adjacent to the main Major Dodge
showroom. This lease expired on June 30, 1997 at which time the annual rent was
$30,300. Major Auto is currently renegotiating such lease and remains in
possession of the premises under an oral month-to-month lease. Major Auto does
not believe that this property is material to the operation of Major Auto.
Major Chevrolet leases from an unrelated third party two adjacent
automobile dealership facilities in Long Island City, New York, comprising
approximately 250,000 square feet. This lease expires on February 1, 2004, but
Major Chevrolet has the option to extend the lease for up to three additional
five-year terms.
Item 3. Legal Proceedings.
On November 22, 1996, the Company and its wholly-owned subsidiaries
Computer Business Sciences and Info Systems filed an action in the New York
Supreme Court, Queens County against Michael Marom ("Marom") and M.M. Telecom,
Corp. ("MMT"). The Company and its subsidiaries are seeking damages of
$5,000,000 for breach of contract, libel, slander, disparagement, violation of
copyright laws, fraud and misrepresentation. The Company and its
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subsidiaries allege in their complaint that Marom and MMT have violated the
terms of a License and Exclusivity Agreement pursuant to which MMT guaranteed
the purchase of a certain amount of Talkie-Globe Software products and was
granted an exclusive license to advertise the Talkie-Globe product, to train
customers and to provide technical support. On February 4, 1997, the defendants
filed a counterclaim against the Company and its subsidiaries seeking damages of
$50,000,000 for breach of contract and violation of the Lanham Act. The
defendants allege in their counterclaim that Computer Business Sciences
misappropriated and altered software developed by Marom in order to prevent
competition with the Company's Talkie-Globe. Both parties to the litigation have
filed responses to the counterclaims. The litigation is proceeding and the
parties are currently in the process of discovery.
On May 7, 1997, the Company and its wholly-owned subsidiary Computer
Business Sciences filed an action in the New York Supreme Court, New York
County, against Network America, Inc. ("Network"). The Company and its
subsidiary are seeking damages of $1,000,000 for breach of contract,
misrepresentation, fraud and tortious interference with the Company's business
and operations. The Company and its subsidiary allege in their complaint that
the information and representations provided to the Company by Network, on the
basis of which the Company entered into a Letter of Intent to acquire Network,
were intentionally fraudulent and misleading. On August 18, 1997, Network filed
an answer which denied the allegations and a counterclaim seeking damages of
$2,000,000 for the Company's alleged misappropriation of proprietary information
and violation of a NonCompetition Agreement entered into by the parties to the
litigation. The litigation is proceeding and the parties are currently in the
process of discovery.
The Company believes that its asserted claims have merit and that there is
no basis to the asserted counterclaims, and that a judgment against the Company
and its subsidiaries with respect to either action would not have a material
adverse effect on the Company's financial condition.
The Company has received notice of a claim by Mr. Daniel Tepper, of Los
Angeles, California. Mr. Tepper had contacted the Company claiming to have
acquired, through foreclosure of a security interest, 12,000 shares of its
Common Stock originally issued to Progressive Polymerics International, Inc.
("PPYM") in a private placement. He requested that the Company issue
certificates representing the shares in question that did not bear a legend
restricting their transfer, on the basis that the shares had been held by his
predecessor in interest for a length of time sufficient to allow their
unrestricted resale in accordance with Rule 144 promulgated under the Securities
Act. The Company was advised by counsel that it should not issue the unlegended
share certificates requested by Mr. Tepper unless he showed that he acquired the
relevant shares in a transaction allowing him to take advantage of his
predecessor's holding period for the shares in question.
The Company's legal counsel contacted Mr. Tepper in November 1997, seeking
to verify details of the claimed foreclosure in order to verify Mr. Tepper's
eligibility to take advantage of his predecessor's holding period for the shares
in question. Mr. Tepper never responded to that inquiry. Instead, on December
23, 1997, Mr. Tepper, acting through counsel, asserted a number of claims
against the Company, including claims arising out of transactions dating back to
the 1995 acquisition by the Company of the armored conduit patents. See
"Description of Business-Plastics and Utility Products Division-Armored
Conduit."
The Company has been advised by counsel that Mr. Tepper's claims are
without merit. However, one of the allegations made by Mr. Tepper prompted an
inquiry by the Company into one of the circumstances of that transaction.
On October 15, 1996 the Company, Progressive Polymerics, Inc.
("Progressive") and PPYM signed a First Amendment to the Patent Sale and
Purchase Agreement (the "First Amendment") between them dated November 14, 1995.
The First Amendment, which was dated September 30, 1996, settled a claim by the
Company against Progressive and PPYM related to undisclosed additional
development costs related to the armored conduit patents. The Company commenced
litigation against Progressive and PPYM in which it sought a reduction in the
purchase price for the armored conduit patents. The First Amendment changed the
purchase price from $500,000 in cash to the sum of (i) $100,000 in cash, (ii)
160,000 shares of the Company's Common Stock and (iii) warrants to purchase a
further 160,000 shares of the Company's Common Stock.
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The Company was advised by the President of PPYM, Terrence Davis, prior to
signing the First Amendment, that the First Amendment had been approved by a
majority of the shareholders of PPYM. However, Mr. Tepper's claim included an
assertion that the version of the First Amendment that PPYM's shareholders
approved failed to include a provision, added just prior to signing, giving the
Company the right to repurchase 80,000 of the 160,000 shares issued to PPYM.
Upon receipt of Mr. Tepper's claim, the Company contacted Mr. Davis, who
confirmed on January 5, 1998 that the version of the First Amendment approved by
PPYM's shareholders did not include the repurchase provision. The reason given
by Mr. Davis was that, as President of PPYM, he believed he had the authority to
agree to the repurchase provision on PPYM's behalf without shareholder approval.
The Company has accordingly revived its legal action that was pending
against PPYM and Progressive at the time of the First Amendment, in which it
sought modification of the purchase price due pursuant to the Patent Sale and
Purchase Agreement with PPYM. The Company has obtained an order to show cause
seeking return of the $100,000 paid at the time the First Amendment was signed
and return of the 160,000 shares, which will effectively terminate the First
Amendment.
The Company, assuming it is successful in the prosecution of the
litigation as just described, will then seek to recover damages from and
Progressive related to the misrepresentations concerning additional development
expenditures required in connection with the patents covered by the Patent Sale
and Purchase Agreement. These misrepresentations were the subject of the legal
action referred to in the preceding paragraph.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
PART II
Item 5. Market For Common Equity and Related Stockholder Matters.
Market Information
On April 2, 1996, the Company's Common Stock was approved for trading on
the NASDAQ OTC Bulletin Board. From the time of the listing through March 31,
1998, the high bid price was $6.375 and the low bid price was $3.50; quarter-end
high and low bids were (as reported by Nasdaq Trading & Market Services) which
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not reflect actual transactions:
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Quarter Ended High Bid Low Bid
------------- -------- -------
March 31, 1998 $4.625 $4.00
December 31, 1997 $5.375 $4.00
September 30, 1997 $4.375 $3.50
June 30, 1997 $5.50 $4.00
March 31, 1997 $6.375 $3.625
December 31, 1996 $4.875 $3.75
September 30, 1996 $4.75 $3.50
June 30, 1996 $5.00 $4.00
Shareholders
As of April 7, 1998 there were 261 holders of record of the Company's
Common Stock.
Dividends
The Company has never declared dividends on any class of `its securities
and has no present intention to declare any dividends on any class of its
securities in the future.
Recent Sales of Unregistered Securities
The securities described below of the Company were sold by the Company
during 1997 without being registered under the Securities Act. All such sales
made in reliance on Section 4(2) of the Securities Act were, to the best of the
Company's knowledge, made to investors that, either alone or together with a
representative that assisted such investor in connection with the applicable
investment, had such sufficient knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks connected with
the applicable investment.
1. In January 1997, in connection with an informal consulting agreement
between the Company and Ronald Premo, the Company issued to Mr. Premo 7,500
shares of Common Stock. The consulting services included analyzing the Company
armored conduit plastics products, identifying business opportunities for the
Company's Plastics and Utilities Products division and introducing the Company
to manufacturers, distributors and others in the plastics industry. Such Common
Stock was issued in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act. In March 1997, in connection with an
Employment Agreement between the Company and Ronald Premo, the Company issued to
Mr. Premo, 30,000 shares of Common Stock, 10,000 of which shares will vest upon
the completion of each of his first three years of employment with the Company.
Such Common Stock was issued in reliance upon the exemption from registration
contained in Section 4(2) of the Securities Act.
2. In February 1997, in connection with the agreement of Ronald Shapss to
perform certain consulting services for the Company, the Company issued to Mr.
Shapss 50,000 shares of Common Stock for an aggregate purchase price of $500.
Such services included assisting the Company in obtaining financing and in
identifying and consummating potential acquisitions. Such Common Stock was
issued in reliance upon the exemption from registration contained in Section
4(2) of the Securities Act.
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Effective May 1997, pursuant to such agreement, the Company granted to Mr.
Shapss, at no cost, options to acquire up to 50,000 shares of Common Stock at an
exercise price of $4.50 per share, the fair market value of the Common Stock on
February 18, 1997, the date of such agreement. Such options are exercisable for
five years from the date of grant. Such options were issued in reliance upon the
exemption from registration contained in Section 4(2) of the Securities Act.
3. In July 1997, the Company issued to Lewis Glogower, as part of the
termination of Mr. Glogower's employment with the Company, 3,000 shares of
Common Stock. Such Common Stock was issued in reliance upon the exemption from
registration contained in Section 4(2) of the Securities Act.
4. In September 1997, in connection with the execution of the MOU relating
to Computer Business Sciences' acquisition of the Agent and an aggregate
$653,750 deposit that the Nissko Principals and Robert L. Rimberg had previously
paid towards the full exercise price of the Class A Warrants was converted to a
partial exercise of the Class A Warrants. Upon such conversion, the Company
issued an aggregate of 523,000 shares of its Common Stock to the Nissko
Principals and Mr. Rimberg. All of such Common Stock was issued in reliance upon
the exemption from registration contained in Section 4(2) of the Securities Act.
5. In November 1997, in connection a Consulting Agreement between Computer
Business Sciences and Bruce A. Hall, the Company issued to Mr. Hall 10,000
shares of Common Stock, 3,334 of which shares will vest after the completion of
Mr. Hall's first year of consulting and 3,333 of which shares will vest after
completion of each of Mr. Hall's second and third years of consulting. Such
Common Stock was issued in reliance upon the exemption from registration
contained in Section 4(2) of the Securities Act and Regulation S under the
Securities Act.
6. In April 1998, the Company issued $600,000 principal amount of its 10%
Convertible Subordinated Debentures due 1999 (the "Debentures") to one
institutional investor and two accredited investors, for aggregate proceeds to
the Company of $600,000. Such Debentures were issued in reliance upon the
exemption from registration contained in Section 4(2) of the Securities Act.
Item 6. Management's Discussion and Analysis of Financial Condition.
The following discussion of the operations, financial condition, liquidity
and capital resources of the Company and its subsidiaries should be read in
conjunction with the Company's audited Consolidated Financial Statements and
related notes thereto included elsewhere herein. The discussion of the
operations, financial condition, liquidity and capital resources of Major Auto
as well as audited Combined Financial Statements and related notes thereto for
Major Auto and pro forma combining financial statements for Major Auto and the
Company will be filed by amendment to this Annual Report, as soon as practicable
after they become available to the Company.
This Annual Report also contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements.
Results of Operations - Year Ended December 31, 1997 and
Year Ended December 31, 1996
Revenues. Revenue for the year 1997 resulted in a net increase of
$427,809 or 12.5% to $3,862,284. Revenue for the year 1996 was $3,434,475.
The sources for such increase (decrease) were:
Computer Telephony and Telecommunications ............. $(266,277)
Leasing ............................................... $ 694,086
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The 1997 amounts reflect a full year of operations for both divisions,
whereas in 1996 the Computer Telephony and Telecommunications division
only began operations during the second quarter and the Leasing division
was not acquired until the beginning of the fourth quarter. Also, it
should be noted that, during the third quarter, as a result of a decision
to operate Talkie Power Web Line machines for itself, the Company stopped
the sale of such machines to master agents.
Cost of sales. Cost of sales for 1997, all of which relates to the
Computer Telephony and Telecommunications division, was $823,397 compared
with $965,792 in the 1996 period. This is a decrease of $(142,395) or
14.7% and is consistent with the change in operational direction of this
division.
Gross profit. Gross profit for the Computer Telephony and
Telecommunications division in 1997 was $2,085,854 which represented a
decrease of $123,882, or 6% from the prior year's gross profit of
$2,209,736. Additionally, gross profit as a percentage of the related
revenue increased to 71.7% in 1997 over the 69.6% gross profit percentage
in 1996. Both the dollar decrease and the gross profit percentage of
revenues increases are consistent with the decreased sales and increased
operating efficiencies.
Selling, general and administrative expense. Selling, general and
administrative expenses ("SG&A") increased a total of $790,023 to
$1,916,924 in 1997 from $1,126,901 in 1996. Of this increase $165,035
relates to the Computer Telephony and Telecommunications division and
$624,988 is from the Leasing division. SG&A for the Computer Telephony and
Telecommunications division increased from $935,529 for 1996 (this
division commenced operations in the second quarter of 1996) to $1,100,564
for 1997, a 17.6% increase. This increase is reflective of an almost full
level of normal activity in 1997 compared with the start-up activities in
1996. The increase in selling, general and administrative expense for the
Leasing division in 1997 is the result of a full year of activity in this
division which was not acquired until the fourth quarter of 1996.
Interest expense. Interest expense was $121,092 for the year ended
December 31, 1997 compared with $24,132 for 1996. The increase of $96,960
relates primarily to the debt incurred to finance the vehicles and
equipment leased by the Company's Leasing division during the current
year. There was no comparable amount in the prior year.
Loss from joint venture. The loss from the Nissko Joint Venture was
$137,475 in 1997. In the comparable prior period, operations of this joint
venture had just commenced and resulted in a loss of $32,410.
Results of Operations - Fiscal Year Ended December 31, 1996 and
Fiscal Year Ended December 31, 1995
Revenues. Inasmuch as 1996 was the first full year of operations for
the Company, all revenue increases resulted from the commencement of
previously planned activities and from companies acquired during that
year. Revenues from operating divisions were as follows:
Computer Telephony and Telecommunications .............. $3,175,528
Leasing ................................................ $ 258,947
Included in the Computer Telephony and Telecommunications division's sales
were $2,637,873 from the sale of hardware and $537,635 from the sale of
software.
Cost of sales. Cost of sales, aggregating $965,792 for the year
ended December 31, 1996 includes the direct costs of materials, labor and
overhead included in the Company's products sold through its Computer
Telephony
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and Telecommunications division.
Gross profit. The year 1996 was the first full year of operations
for the Company's Computer Telephony and Telecommunications division.
Gross profit for that division for the year ended December 31, 1996
aggregated $2,209,736 or 70.0% of sales. The Company anticipates that,
over time, annual sales will increase and greater operating efficiencies
will be achieved through experience, training and economies of scale.
Management believes that as a result, gross profit for the Company's
Computer Telephone and Telecommunications division will increase in terms
of both dollars and percentage of sales.
Selling, general and administrative expense. Selling, general and
administrative expenses, which amounted to $1,126,901 in 1996 ($2,042 in
1995), include payroll and related expense attributable to senior
management (although Mr. Bendell, Chairman, and Mr. Cohen, Chief Executive
Officer, President and Treasurer of Company waived compensation from the
Company in 1996), finance, systems, sales, marketing and office
administration, personnel, facilities costs and general office expenses
pertaining to these functions, as well as outside professional fees. The
increase in such expenses between 1996 and 1995, which were $933,487 for
the Computer Telephony and Telecommunications division and $191,372 for
the Leasing division are attributable to the commencement of planned
activities for the former and the acquisition in October 1996 of the
latter.
Interest expense. The increase in interest expense of $19,757 to
$24,132 in 1996 from $4,375 in 1995 relates primarily to the debt used to
finance the vehicles and equipment leased by the Company's Leasing
division which was acquired in October 1996 and, to a lesser extent, to
interest on debt due from the acquisition of the Company's Computer
Telephony and Telecommunications division in April 1996.
Loss on joint venture. In March 1996, the Company's Computer
Telephony and Telecommunications division formed a joint venture (the
"Nissko Joint Venture") named Nissko Telecom, L.P., a limited partnership.
The general partner of Nissko Telecom, L.P. is one of the Company's master
agents. The Company has a 45% interest in the Nissko Joint Venture, whose
purpose is to market and sell the available telephone time generated by
the Company's Talkie Power Web Line Machines purchased by this master
agent. Because 1996 was the start-up year, the Nissko Joint Venture
incurred expenses disproportionate to its revenue generation and suffered
from start-up inefficiencies. This resulted in a loss to the Company of
$32,410.
Liquidity and Capital Resources - December 31, 1997
The Company's primary source of liquidity for the year ended December 31,
1997 was $1,624,601 from its net income of $369,139, as adjusted by net non-cash
charges, which aggregated $1,255,462. This net increase in cash was more than
offset by (a) the net increase in assets of $1,730,584 (resulting primarily from
an increase in accounts receivable of $1,471,082, primarily attributable to the
Computer Telephony and Telecommunications division as a result of the strategic
decision to acquire the master agents' territories and equipment. The
receivables are expected to be collected as part of the acquisition.) and (b) a
net decrease in liabilities amounting to $189,974 (primarily attributable to
decreases in due to affiliates of $102,097 and accrued expenses of $121,349,
partially offset by an increase in accounts payable of $32,689). The net result
was a use of cash in operating activities of $295,957
The Company's investing activities, i.e., additions to property and
equipment, primarily cars and trucks purchased for the Leasing division, used
cash of $708,108 which was significantly offset by $646,737 provided by the
Company's financing activities, of which $653,750 resulted from the proceeds
from the exercise of warrants to purchase common stock. Cash from lines of
credit and long-term debt were substantially offset by payments of long-term
debt.
The foregoing activities, i.e., operating, investing and financing,
resulted in a net cash decrease of $357,295 for the year ended December 31,
1997.
The Company believes that the funds generated through existing and planned
operations, together with existing cash,
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<PAGE>
available credit from banks and other lenders, future equity offerings and the
consummation of the Major Auto Acquisition will be sufficient to finance its
current operations, planned expansion and internal growth for at least the next
24 months.
Liquidity and Capital Resources - December 31, 1996
After its initial investor financing during the first quarter of 1996, the
Company's primary source of liquidity was its cash flow from operations. Net
cash provided by operating activities in 1996 was $147,942 on net income of
$675,966 (net of non-cash charges of $735,934), offset by changes in working
capital of $1,263,958. Such changes in working capital are principally
attributable to (i) increases, by the Leasing division, in net financing leases
of $1,612,675 and (ii) increases, by the Computer Telephony and
Telecommunications division, in inventories, amounting to $15,026. These
increases were offset, in part, by the increase in amounts due to affiliates of
$26,121.
Net cash used in investing activities in 1996 was $815,962 and related,
primarily, to the acquisition of the Company's computer Telephony and
Telecommunications division.
Cash flow generated from financing activities in 1996 aggregated
$1,203,179. The net proceeds from the issuance of common stock and the exercise
of warrants accounted for $973,500 of this amount.
The Company, through its Leasing division, has arrangements with various
banks and automotive lenders to finance leased vehicles and equipment.
Item 7. Financial Statements
The Financial Statements are filed as a part of this Annual Report as
pages F-1 through F-17 following Part IV.
The Combined Financial Statements and related notes thereto for Major Auto
and pro forma combining financial statements for Major Auto and the Company will
be filed by amendment to this Annual Report, as soon as practicable after they
become available to the Company.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.
The names, ages and principal occupations of the Directors and
Executive Officers of the Company are as follows:
Name Age Position, Term In Office
- ---- --- ------------------------
Bruce Bendell 43 Chairman of the Board
President, Chief Executive Officer,
Doron Cohen 41 Treasurer and a Director
Richard L. Feinstein 54 Chief Financial Officer
Glenn H. Bank 46 Secretary
Yossi Koren 48 Director
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<PAGE>
The following is a brief description of the professional experience and
background of the directors and executive officers of the Company:
Bruce Bendell. Mr. Bendell has served as the Company's Chairman of the
Board since its incorporation in November 1995. Mr. Bendell has served as the
President and a director of Major Chevrolet and its affiliates since December
1985.
Doron Cohen. Mr. Cohen has served as the President, Chief Executive
Officer, Treasurer and a director of the Company since its incorporation in
November 1995. From 1991 to 1995, Mr. Cohen served as President and Chief
Executive Officer of Holtman Enterprises, a construction and interior design
company.
Richard L. Feinstein. Mr. Feinstein has served as the Company's Chief
Financial Officer since December 1997. From 1994 to December 1997, Mr. Feinstein
maintained his own financial and management consulting practice. From 1989 to
1994, Mr. Feinstein served as Managing Director and Chief Financial Officer of
Employee Benefit Services, Inc. From 1978 to 1989, Mr. Feinstein was a partner
in KPMG Peat Marwick and a predecessor firm.
Glenn H. Bank. Mr. Bank has served as the Secretary of the Company since
June 1997. Mr. Bank has been a practicing attorney since 1979. Mr. Bank is a
sole practitioner with an office in New York City.
Yossi Koren. Mr. Koren has served as a director of the Company since April
1996. Mr. Koren founded Nissko Jewelry Trading, Inc., a jewelry manufacturer
based in New York City, in 1983 and has served as its Chief Executive Officer
since that time.
The following persons, although not executive officers of the Company, are
regarded by management as key personnel:
Zvi Barak. Mr. Barak, age 45, has served as the Director of Research and
Development of the Company's Computer Telephony and Telecommunications division
since April, 1996. From 1992 to August 1996, Mr. Barak served as President of
Info Systems.
Moise Benedid. Mr. Benedid, age 48, has served as the President of the
Company's Canadian subsidiary Info Systems since August 1996. From November 1994
through July 1996, Mr. Benedid served as Vice President in charge of marketing
and technical support for TelePower International, Inc., where he was
responsible for the sale in Canada of franchises based on the "Talkie"
technology. From December 1992 to November 1994, Mr. Benedid served as President
of Powerpoint Microsystems, Inc., and from August 1989 to December 1992, he
served as President of Computer Junction, a Toronto-based computer retail store.
Bruce Hall. Mr. Hall, age 52, has served as Vice President of Operations
of the Company since March 1998. From November 1997 to March 1998, Mr. Hall was
a consultant to the Company. For the thirty years prior to that time, he was
with Bell Atlantic (NYNEX), most recently as their Director of Operations for
the Borough of Queens, New York.
Michael S. Lukin. Mr. Lukin, age 50, has served as the President of the
Company's subsidiary Computer Business Sciences (Israel) since October 1996.
From January 1996 to October 1996, Mr. Lukin served as a securities broker for
Weiner, Abrahms, and from 1990 to January 1996 he served as a securities broker
for Kern Suslow Securities.
John Pinciaro. Mr. Pinciaro, age 48, serves as Vice-President of the
Company's subsidiary Premo-Plast since January 1, 1997 and will serve as the
President of the subsidiary of the Company formed in October 1997 to exploit the
Company's spa fixture technology. Mr. Pinciaro has served as the Chief Executive
Officer of ThermoSpas, Inc., a manufacturer and distributor of spas, since it
inception in 1983.
Ronald K. Premo. Mr. Premo, age 59, has served as the President of the
Company's subsidiary Premo-Plast since January 1997. In 1993, Mr. Premo founded
and has since operated R.K. Premo & Associates, a manufacturer's
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<PAGE>
representative agency for the plastics industry. From 1987 to 1993, Mr. Premo
was a Manufacturer's Representative for R.W. Mitscher, Inc.
Paul Vesel. Mr. Vesel, age 38, has served as the Executive Vice President
for Sales & Marketing of the Company's subsidiary Computer Business Sciences
since November 1996. From May 1995 to November 1996, Mr. Vesel was employed by
MTC Netsource, a telecommunications company, where he was responsible for
product development and from 1993 to 1995, he served as Director of European
Sales and Marketing for ATC Distributing. From November 1989 to 1993, Mr. Vesel
was a Managing Partner of Focus International, an international trade and
marketing consulting company.
The term of office of each person elected as a Director will continue
until the Company's next Annual Meeting of Shareholders or until his successor
has been elected.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten percent stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during Fiscal 1997, its officers, directors, and greater than ten-percent
beneficial owners have not complied with all applicable Section 16(a) filing
requirements. The process of bringing such persons in compliance with all
applicable Section 16(a) filing requirements is currently being undertaken.
Item 10. Executive Compensation.
Summary Compensation Table
The following table sets forth information for each of the Company's
fiscal years ended December 31, 1997 and 1996 concerning compensation of (i) all
individuals serving as the Company's Chief Executive Officer during the fiscal
year ended December 31, 1997 and (ii) each other executive officer of the
Company whose total annual salary and bonus equaled or exceeded $100,000 in the
fiscal year ended December 31, 1997:
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<PAGE>
<TABLE>
<CAPTION>
Annual Compensation
-------------------
All
Other Other
Name and Principal Position Year Salary($) Bonus($) ($)Annual Compensation($)
<S> <C> <C> <C> <C> <C>
Doron Cohen 1997 206,500(l) 0 0 0
President, Chief Executive Officer and 1996 200,000 0 0 0
Treasurer (since November 7, 1995)
Bruce Bendell 1997 178,080(2) 0 0 0
Chairman (since November 7, 1995) 1996 158,640(2) 0 0 162,500(3)
Zvi Barak 1997 150,000 0 23,000(4) 0
Director of Research and Development 1996 105,000 0 23,000(4) 0
(Since April 18, 1996)
</TABLE>
(1) Mr. Cohen waived his salary from the Company for the years ended December
31, 1997 and 1996. This salary will not accrue. Mr. Cohen was paid a salary in
1997 and 1996 of $56,500 and $50,000, respectively, from Computer Business
Sciences.
(2) Mr. Bendell waived his consultant's fee from the Company for the years ended
December 31, 1997 and 1996. This fee will not accrue. Mr. Bendell received
$28,080 and $8,640 as management fees from Major Fleet for management services
performed in 1997 and during the fourth quarter of 1996, respectively.
(3) Represents warrants to acquire 50,000 shares of Common Stock issued to Mr.
Bendell on October 2, 1996 as a signing bonus under a management agreement with
the Company to manage the operations of Major Fleet. These warrants are valued
based upon the difference between the exercise price of $1.25 per share and the
closing bid price on the OTC Bulletin Board of $4.50 per share on the date of
issuance.
(4) Includes $5,000 for life and disability insurance premiums and $18,000
annual automobile allowance.
Option Grants Table
No individual grants of stock options were made during the fiscal year ended
December 31, 1997 to any of the executive officers of the Company named in the
Summary Compensation Table.
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<PAGE>
Aggregated Option Exercises and Fiscal Year-End Option Value Table
No stock options were exercised during the fiscal year ended December 31, 1997
by any of the executive officers named in the Summary Compensation Table. The
value of unexercised options held by any such persons as of December 31, 1997
was as follows for Bruce Bendell (the only such option holder):
Total number of shares underlying unexercised options 50,000
Exercisable options 50,000
Unexercisable options -0-
Value of in-the-money options $162,500(1)
- ----------
(1) Represents warrants to acquire 50,000 shares of Common Stock issued to Mr.
Bendell on October 2, 1996 as a signing bonus under a management agreement with
the Company to manage the operations of Major Fleet.
Compensation of Directors
Directors of the Company are not compensated for their services. The
Company reimburses directors for their expenses of attending meetings of the
Board of Directors.
As of November 7, 1995, the Company's date of incorporation, the Company
entered into a Consulting Agreement with Bruce Bendell, its Chairman, pursuant
to which he serves as a business, management and financial consultant to the
Company for a period ending on December 31, 1998, subject to successive one-year
extensions at the option of the Company. Mr. Bendell receives an annual
consulting fee as determined by the Company's Board of Directors from time to
time, but not less than $150,000. The consulting fee is subject to a yearly
cost-of-living adjustment and may also be retroactively increased based upon the
Company's profits per outstanding share of Common Stock for the applicable year.
The available percentage increase in consulting fee as a result of profits
ranges from 5% for break-even results to 150% for earnings per share exceeding
$1.00 per share. Mr. Bendell is also entitled to a bonus in such amounts and at
such times as determined by the Company's Board of Directors. In addition, the
agreement provides that Mr. Bendell is entitled to various fringe benefits and
is entitled to participate in any incentive, stock option, deferred compensation
or pension plans established by the Company's Board of Directors. Mr. Bendell
has agreed not to disclose confidential information relating to the Company and
has agreed not to compete with, or solicit employees or customers of, the
Company during specified periods following the breach or termination of his
agreement to serve as a consultant to the Company.
Employment Contracts and Termination of Employment, and Change in Control
Arrangements
Doron Cohen. As of November 7, 1995, the Company's date of incorporation,
the Company entered into an Employment Agreement with Doron Cohen, pursuant to
which he serves as the Company's President, Chief Executive Officer and
Treasurer for a period ending on December 31, 1998, subject to successive
one-year extensions at the option of the Company. Mr. Cohen receives an annual
base salary as determined by the Company's Board of Directors from time to time,
but not less than $150,000. The annual salary is subject to a yearly
cost-of-living adjustment and may also be retroactively increased based upon the
Company's profits per outstanding share of Common Stock for the applicable year.
The available percentage increase in salary as a result of profits ranges from
5% for break-even results to 150% for earnings per share in excess of $1.00 per
share. Mr. Cohen is also entitled to a bonus in such amounts and at such times
as determined by the Company's Board of Directors. In addition, the agreement
provides that Mr. Cohen is entitled to various fringe benefits under the
agreement and is entitled to participate in any incentive, stock option,
deferred compensation or pension plans established by the Company's Board of
Directors. Mr. Cohen has agreed not to disclose confidential information
relating to the Company and has agreed not to compete with, or solicit employees
or customers of, the Company during specified periods following discontinuance
of his employment for any reason other than a
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<PAGE>
termination for cause.
Zvi Barak. As of April 18, 1996, the Company entered into an Employment
Agreement with Zvi Barak, pursuant to which he serves as the Company's Director
of Research & Development for a period ending on April 30, 2001, subject to a
one-year extension at the option of the Company. Mr. Barak receives an annual
base salary as determined by the Company's Board of Directors from time to time,
but not less than $150,000. The annual salary is subject to a yearly
cost-of-living adjustment and may also be retroactively increased based upon the
Company's profits per outstanding share of Common Stock for the applicable year.
The available percentage increase in salary as a result of profits ranges from
5% for break-even results to 150% for earnings per share in excess of $1.00 per
share. Mr. Barak is also entitled to a bonus in such amounts and at such times
as determined by the Company's Board of Directors and to an annual royalty
incentive in an amount equal to 2% of gross revenues received from sales of new
products developed under his direction. In addition, the agreement provides that
Mr. Barak is entitled to various fringe benefits under the agreement, including
an annual allowance of $5,000 for disability insurance and $18,000 for the
purchase or lease of an automobile, and is entitled to participate in any
incentive, stock option, deferred compensation or pension plans established by
the Company's Board of Directors. Pursuant to the agreement, the Company
established a research and development facility in Israel and, in the event that
Mr. Barak elects to establish residence outside of Israel, the Company has
agreed to establish another research and development facility in the location
where Mr. Barak establishes his residence. The Company spent approximately
$25,000 to open the research and development facility in Israel and spends
approximately $27,600 per month to operate such facility. Mr. Barak is obligated
to pay the expenses of relocating himself to Israel and to any subsequent
residence. Mr. Barak has agreed not to disclose confidential information
relating to the Company's business and has agreed not to compete with, or
solicit employees or customers of, the Company during specified periods if he
resigns, is terminated for cause or if his employment agreement expires without
being renewed.
Indemnification of Directors and Officers
Under the Nevada General Corporation Law, as amended, a director, officer,
employee or agent of a Nevada corporation may be entitled to indemnification by
the corporation under certain circumstances against expenses, judgments, fines
and amounts paid in settlement of claims brought against them by a third person
or by or in right of the corporation.
The Company is obligated under its Articles of Incorporation to indemnify
any of its present or former directors who served at the Company's request as a
director, officer or member of another organization against expenses, judgments,
fines and amounts paid in settlement of claims brought against them by a third
person or by or in right of the corporation if such director acted in good faith
or in a manner such director reasonably believed to be in, or not opposed to,
the best interests of the Company and, with respect to any criminal action or
proceeding, if such director had no reason to believe his or her conduct was
unlawful. However with respect to any action by or in the right of the Company,
the Articles of Incorporation prohibit indemnification in respect of any claim,
issue or matter as to which such director is adjudged liable for negligence or
misconduct in the performance is his or her duties to the Company, unless
otherwise ordered by the relevant court. The Company's Articles of Incorporation
also permit it to indemnify other persons except against gross negligence or
willful misconduct.
The Company is obligated under its bylaws to indemnify its directors,
officers and other persons who have acted as representatives of the Company at
its request to the fullest extent permitted by applicable law as in effect from
time to time, except for costs, expenses or payments in relation to any matter
as to which such officer, director or representative is finally adjudged
derelict in the performance of his or her duties, unless the Company has
received an opinion from independent counsel that such person was not so
derelict.
In addition, pursuant to indemnification agreements that the Company has
entered into with each of its directors, the Company is obligated to indemnify
its directors to the fullest extent permitted by applicable corporate law and
its Articles of Incorporation. The indemnification agreements also provide that,
upon the request of a director and provided that director undertakes to repay
amounts that turn out not to be reimbursable, that director is entitled to
reimbursement
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<PAGE>
of litigation expenses in advance of the final disposition of the legal
proceeding.
The Company's indemnification obligations are broad enough to permit
indemnification with respect to liabilities arising under the Securities Act.
Insofar as the Company may otherwise be permitted to indemnify its directors,
officers and controlling persons against liabilities arising under the
Securities Act or otherwise, the Company has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
The Nevada General Corporation Law, as amended, also permits a corporation
to limit the personal liability of its officers and directors for monetary
damages resulting from a breach of their fiduciary duty to the corporation and
its stockholders. The Company's Articles of Incorporation limit director
liability to the maximum extent permitted by The Nevada General Corporation Law,
which presently permits limitation of director liability except (i) for a
director's acts or omissions that involve intentional misconduct, fraud or a
knowing violation of law and (ii) for a director's willful or grossly negligent
violation of a Nevada statutory provision that imposes personal liability on
directors for improper distributions to stockholders. As a result of the
inclusion in the Company's Articles of Incorporation of this provision, the
Company's stockholders may be unable to recover monetary damages against
directors as a result of their breach of their fiduciary duty to the Company and
its stockholders. This provision does not, however, affect the availability of
equitable remedies, such as injunctions or rescission based upon a breach of
fiduciary duty by a director.
The Company does not maintain any liability insurance for the benefit of
its officers or directors and has no present plans to obtain such insurance.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following tables sets forth information with respect to the beneficial
ownership of each class of the Company's securities as of December 31, 1997,
respectively, by (i) each director of the Company, (ii) each executive officer
of the Company, (iii) all directors and executive officers of the Company as a
group and (iv) each person known to the Company to own more than 5% of any class
of it securities:
1996 Major Series of
Convertible Preferred
Common Stock Stock(2)
Name and Address(3) Number Percent Number Percent
Bruce Bendell 2,850,010(4) 39.6% 125,000(5) 50%
Doron Cohen 2,500,000(6) 36.3%
Glenn H. Bank 1,400 *
Yossi Koren 504,108(7) 7.0%
Zvi Barak 250,000(8) 3.6%
Richard L. Feinstein *
All directors and execu-
tive officers as a group 6,105,518(9) 79.8%
Avraham Nissanian 504,319(10) 7.0%
Chmuel Livian 502,759(11) 7.0%
Harold Bendell 350,000(12) 4.9% 125,000(13) 50%
*Represents less than 1% of the outstanding shares of Common Stock.
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<PAGE>
(1) Based on 6,895,700 shares of Common Stock outstanding on December 31,
1997.
(2) Based on 250,000 shares of the 1996-MAJOR Series of Convertible Preferred
Stock outstanding on December 31, 1997.
(3) The address for each beneficial owner is c/o Fidelity Holdings, Inc.,
80-02 Kew Gardens Rd., Suite 5000, Kew Gardens, NY 11415.
(4) Includes (i) 10 shares of Common Stock owned by Bruce Bendell's wife and
the following shares of Common Stock which Bruce Bendell has the right to
acquire within 60 days: (a) 250,000 shares of Common Stock, the minimum
number of shares of Common Stock into which the 125,000 shares of the
1996-MAJOR Series of Convertible Preferred Stock beneficially owned by
Bruce Bendell are convertible and (b) 50,000 shares of Common Stock which
Bruce Bendell has the right to acquire upon the exercise of warrants. Does
not reflect a proxy giving Mr. Bendell the sole right to vote an
additional 500,000 shares of Common Stock issued pursuant to the MOU for a
period of two years. See "Description of BusinessComputer Telephony and
Telecommunications Division-Talkie-Restructuring of Nissko Arrangements."
Does not reflect Mr. Cohen's agreement to give Bruce Bendell a proxy to
vote 750,000 of Mr. Cohen's shares during the two-year period commencing
on October 14, 1997.
(5) All of such shares of the 1996-MAJOR Series of Convertible Preferred Stock
are held in a trust created under the law of Gibraltar. Bruce Bendell is
the principal beneficiary of such trust.
(6) Does not reflect Mr. Cohen's agreement to give Bruce Bendell a proxy to
vote 750,000 of Mr. Cohen's shares during the two-year period commencing
on October 14, 1997.
(7) Includes (i) 1,350 shares of Common Stock owned by members of Mr. Koren's
immediate family, (ii) 3,508 shares of Common Stock representing one-third
of the 10,526 shares of Common Stock owned by Nissko Jewelry Trading,
Inc., a company 33-1/3% owned by Mr. Koren, and (iii) 325,667 shares of
Common Stock representing approximately one-third of the 977,000 shares of
Common Stock that the Nissko Principals have the right to acquire within
60 days upon the exercise of the Class A and Class B Warrants. The MOU
provides that upon execution of the definitive documentation, Mr. Koren
will receive (i) 257,500 shares of the Company's Common Stock, transfer of
which will be restricted for two years as described under "Description of
Business--Computer Telephony and Telecommunications
Division-Talkie-Restructuring of Nissko Arrangements," and (ii) warrants
to acquire up to 68,917 shares of Common Stock which will be exercisable
within 60 days. Such warrants represent a portion of the unexercised
balance of the Class A Warrants. The Class B Warrants (exercisable for
750,000 shares of Common Stock in the aggregate) have expired by their
terms. See "Description of Business--Computer Telephony and
Telecommunications Division-Talkie-Restructuring of Nissko Arrangements."
(8) Includes 125,000 shares of Common Stock owned by Mr. Barak's wife.
(9) Includes (i) 126,360 shares of Common Stock owned by immediate family
members of directors and executive officers as a group, (ii) 3,508 shares
of Common Stock representing one-third of the 10,526 shares of Common
Stock owned by Nissko Jewelry Trading, Inc., a company 33-1/3% owned by
Mr. Koren, and (iii) 625,667 shares of Common Stock that the directors and
executive officers as a group have the right to acquire within 60 days.
(10) Includes (i) 3,360 shares of Common Stock owned by members of Mr.
Nissanian's immediate family, (ii) 3,508 shares of Common Stock
representing one-third of the 10,526 shares of Common Stock owned by
Nissko Jewelry Trading, Inc., a company 33-1/3% owned by Mr. Nissanian,
and (iii) 325,667 shares of Common Stock representing approximately
one-third of the 977,000 shares of Common Stock that the Nissko Principals
have the right to acquire within 60 days upon the exercise of the Class A
and Class B Warrants. The Class B Warrants have expired by their terms.
The MOU provides that upon execution of the definitive documentation, Mr.
Nissanian will receive (i)
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<PAGE>
257,500 shares of the Company's Common Stock, transfer of which will be
restricted for two years as described under "Description of
Business-Computer Telephony and Telecommunications
DivisionTalkie-Restructuring of Nissko Arrangements," and (ii) warrants to
acquire up to 68,917 shares of Common Stock which will be exercisable
within 60 days. Such warrants represent a portion of the unexercised
balance of the Class A Warrants. The Class B Warrants (exercisable for
750,000 shares of Common Stock in the aggregate) have expired by their
terms. See "Description of Business-Computer Telephony and
Telecommunications Division-Talkie-Restructuring of Nissko Arrangements."
(11) Includes (i) 3,508 shares of Common Stock representing one-third of the
10,526 shares of Common Stock owned by Nissko Jewelry Trading, Inc., a
company 33-1/3% owned by Mr. Livian, and (ii) 325,667 shares of Common
Stock representing approximately one-third of the 977,000 shares of Common
Stock that the Nissko Principals have the right to acquire within 60 days
upon the exercise of the Class A and Class B Warrants. The MOU provides
that upon execution of the definitive documentation, Mr. Livian will
receive (i) 257,500 shares of the Company's Common Stock, transfer of
which will be restricted for two years as described under "Description of
Business-Computer Telephony and Telecommunications
DivisionTalkie-Restructuring of Nissko Arrangements," and (ii) warrants to
acquire up to 68,917 shares of Common Stock which will be exercisable
within 60 days. Such warrants represent a portion of the unexercised
balance of the Class A Warrants. The Class B Warrants (exercisable for
750,000 shares of Common Stock in the aggregate) have expired by their
terms. See "Description of Business-Computer Telephony and
Telecommunications Division-Talkie-Restructuring of Nissko Arrangements."
(12) Includes the following shares of Common Stock which Harold Bendell has the
right to acquire within 60 days: (i) 250,000 shares of Common Stock, the
minimum number of shares of Common Stock into which the 125,000 shares of
the 1996-MAJOR Series of Convertible Preferred Stock beneficially owned by
Harold Bendell are convertible and (ii) 50,000 shares of Common Stock
which Harold Bendell has the right to acquire upon the exercise of
warrants,
(13) All of such shares of the 1996-MAJOR Series of Convertible Preferred Stock
are held in a trust created under the law of Gibraltar. Harold Bendell is
the principal beneficiary of such trust.
Item 12. Certain Relationships and Related Transactions.
See "Executive Compensation-Employment Contracts and Termination of
Employment, and Change in Control Arrangements" for a description of (i) the
Employment Agreement between the Company and Doron Cohen, its President, Chief
Executive Officer and Treasurer and one of its directors, and (ii) the
Employment Agreement between the Company and Zvi Barak, its Director of Research
and Development.
See "Executive Compensation-Compensation of Directors" for a description
of the Consulting Agreement between the Company and Bruce Bendell, its Chairman.
See "Executive Compensation-Indemnification of Directors and Officers" for
a description of indemnification agreements between the Company and each of its
directors.
In October 1996, the Company acquired from Bruce Bendell, the Company's
Chairman, and his brother Harold Bendell all of the issued and outstanding stock
of Major Fleet. In exchange for their shares of the common stock of Major Fleet,
each of the Bendells received (i) 125,000 shares of the Company's 1996-MAJOR
Series of Convertible Preferred Stock and (ii) as a result of Major Fleet's
financial performance prior to the closing of the exchange, 50,000 shares of the
Company's Common Stock. See "Description of Securities-Preferred Stock."
In connection with the Company's acquisition of Major Fleet, the Bendells
and the Company entered into a management agreement pursuant to which the
Bendells have the exclusive right and obligation to manage the motor
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<PAGE>
vehicle leasing activities of Major Fleet. The management agreement is for a
term ending on December 31, 2001. In connection with the management agreement,
the Company issued to each of the Bendells warrants to purchase 50,000 shares of
the Company's Common Stock for $1.25 per share. The management agreement also
provides that the Bendells will receive a management fee annually in an amount
equal to the balance remaining after deducting from the annual gross revenues of
the motor vehicle leasing activities of Major Fleet the following: (i) Major
Fleet's costs of financing and operating its vehicle leasing activities, (ii) a
corporate management fee in an amount equal to 15% of Major Fleet's net income
to cover overhead costs of the Company allocable to Major Fleet and (iii) income
derived from the leases to which Major Fleet was a party on the date of closing
of the Company's acquisition of Major Fleet.
Following the planned acquisition of Major Auto by the Company, Bruce and
Harold Bendell will continue to be responsible for senior-level management of
the dealerships. The Bendell brothers and the Company expect that this
continuity of senior management will facilitate obtaining the manufacturers'
consents to the transfer of the dealerships to the Company. The Bendell
brothers' management control will be accomplished through (i) their ownership of
100 shares of the Company's 1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred
Stock (of which shares Bruce Bendell has a proxy to vote the 50 shares of the
1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred Stock owned by Harold Bendell
for a seven-year period commencing on January 7, 1998) which carries voting
rights allowing them to elect a majority of the Board of Directors of Major
Auto, and through (ii) a related management agreement, discussed immediately
below, See "Description of Securities-Preferred Stock- I 997A-MAJOR AUTOMOTIVE
GROUP Series of Preferred Stock" below.
To further facilitate obtaining the required manufacturers' consents, the
Bendells and the Company have entered into a management agreement pursuant to
which the Bendells will have the exclusive right and obligation to manage the
automobile dealerships acquired by the Company in connection with the Major Auto
Acquisition and any additional automobile dealerships that the Company may
acquire in the future. The management agreement is for a term ending on December
31, 2002 and may not be earlier terminated unilaterally by the Company. If the
Company continues to own automobile dealerships at the end of the term, the
management agreement may be unilaterally extended by the Bendell brothers in
order to maintain the level of management control that will avoid the need to
seek further manufacturer consents. Should either of the Bendell brothers cease
managing the dealerships, the management agreement provides that ownership of
his 1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred Stock shares and his
management rights under the management agreement will be automatically
transferred to the other, and should both brothers cease managing the
dealerships for any reason, the shares and management rights will be
automatically transferred to a successor manager designated in a successor
addendum to each dealership agreement or, failing such designation, to a
successor manager designated by the Company (subject to approval by the
applicable manufacturers). As noted in the prior paragraph, Bruce and Harold
Bendell will retain the right to elect a majority of the directors of Major Auto
(and possibly other affiliates in the future) in order to facilitate obtaining
the required manufacturers' consents. Should the Boards of Directors of Major
Auto and the Company disagree as to a particular course of action, Major Auto
would nonetheless be able to take the action in question, except that the
management agreement prohibits certain actions without the prior approval by the
Company's Board of Directors. Those actions are (i) disposing of any of the
Major Auto dealerships, (ii) acquiring new dealerships, and (iii) the Company
incurring liability for Major Auto indebtedness.
As compensation for their performance under the management agreement, the
management agreement provides that the Bendells are entitled to receive
initially the same compensation that they theretofore received from the
dealerships to be acquired as part of the Major Auto Acquisition. As
compensation from such dealerships in 1996, Bruce Bendell received a salary of
$104,000 and a bonus of $300,000, and Harold Bendell received a salary of
$104,000 and a bonus of $180,000. Such compensation will be increased in a
manner to be negotiated upon expansion of the operations of those dealerships or
the Company's acquisition of new dealerships. The compensation that Bruce
Bendell is entitled to receive under the management agreement is in addition to
any other compensation that he is entitled to receive as Chairman of the
Company. In connection with the execution of the Management Agreement in March
1997, the
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<PAGE>
Company is required to issue to the Bendells 100 shares of the 1997A-MAJOR
AUTOMOTIVE GROUP Series of Preferred Stock (of which shares Bruce Bendell has a
proxy to vote the 50 shares of the 1997A-MAJOR AUTOMOTIVE GROUP Series of
Preferred Stock owned by Harold Bendell for a seven-year period commencing on
January 7, 1998).
See "Planned Acquisition" for a description of the proposed Major
Auto Acquisition.
In April 1996, the Company acquired from Zvi Barak, then a director of the
Company, and Sarah Barak, his wife, all of the issued and outstanding stock of
Info Systems. Mr. Barak resigned his directorship on July 7, 1997. Pursuant to
the agreement between the Company and the Baraks, the Company acquired all of
the issued and outstanding shares of common stock of Info Systems. In exchange,
the agreement provides that the Baraks will receive $750,000, $300,000 of which
consists of twenty monthly installment payments of $15,000 from the Company to
the Baraks. The monthly installment payments commenced in September 1996 and are
scheduled to continue through June 1998. In order to secure such installment
payments, the Company has granted a security interest to the Baraks in the stock
of Info Systems and the other assets owned by Info Systems. To date, the Company
has withheld $85,000 of such installment payments as collateral for the Baraks'
obligation to make certain indemnification payments to the Company. The Company
has agreed to pay the Baraks the $85,000 by July 1998. In addition to monetary
compensation, each of the Baraks were issued 125,000 shares of the Company's
Common Stock, which vest (i) in the case of Sarah Barak, 25,000 shares vested on
December 31, 1997, 50,000 shares vest on each of December 31, 1998 and 1999 and
(ii) in the case of Zvi Barak, 25,000 shares per year on the last day of
February which commenced on February 28, 1997 and continues through February 28,
2002.
In March 1996, the Company's subsidiary Computer Business Sciences formed
a joint venture with Nissko Telecom, L.P., of which Yossi Koren, a director of
the Company is a limited partner. Mr. Koren is also a shareholder in Nissko
Telecom, Ltd. Nissko Telecom, Ltd. is the general partner of Nissko Telecom,
L.P. and also one of the Company's master agents. The joint venture arrangement
and the master agent arrangement are described above under "Description of
Business-Computer Telephony and Telecommunications Division-TalkieArrangements
with Nissko."
The Company has entered into a MOU with the Agent, the Nissko Principals,
and with the remaining limited partner of Nissko, Robert L. Rimberg. The MOU
looks toward restructuring the Nissko arrangements as described above under
"Description of Business--Computer Telephony and Telecommunications
Division-Talkie-Restructuring of Nissko Arrangements."
The Company has made a loan to its President and Chief Executive Officer,
Doron Cohen, in the principal amount of $140,000, bearing interest at 5.77% per
annum, uncompounded. The loan is evidenced by a promissory note dated December
31, 1996. The promissory note provides that the full principal amount of, and
all accrued interest on, the loan is due and payable in a single installment on
December 31, 1998.
Nissko Telecom Associates, the joint venture between Computer Business
Sciences and Nissko Telecom, L.P., of which Yossi Koren, one of the Company's
directors is a limited partner, occupies space free of charge at the Company's
principal office in Kew Gardens, New York, pursuant to an informal arrangement.
Bruce Bendell, and Major Chevrolet, Major Dodge and Major Chrysler
Plymouth Jeep Eagle, all of which are wholly-owned by Bruce Bendell and/or his
brother Harold Bendell, have guaranteed the obligations of Major Fleet under a
$5,000,000 line of credit with Marine Midland Bank. In addition, Bruce Bendell
and Major Fleet have guaranteed the obligations of Major Auto's subsidiaries
under certain of their agreements with various financial institutions pursuant
to which such subsidiaries sell their vehicle finance contracts and leases.
Major Fleet has pledged its assets to such financial institutions to secure its
guarantee. In addition, such subsidiaries have cross-guaranteed and
cross-collateralized their respective agreements with such financial
institutions. See "Description of Business-Automotive Sales Division-Dealership
Operations-Vehicle Financing" and "-Leasing Division" for a description of
certain transactions between Major Auto and Major Fleet.
-45-
<PAGE>
Major Subaru subleases from an unrelated third party approximately 2,500
square feet of office and automobile showroom space in Woodside, New York. This
lease expired on January 31, 1998 and contains no renewal provisions. The
property is currently being leased on a month-to-month basis. The annual rent
under such lease was $69,457.56. Pursuant to an informal arrangement between
Major Subaru and Major Fleet, Major Fleet occupies the space and pays the rental
payments.
Major Dodge leases from Bruce Bendell and Harold Bendell approximately
12,000 square feet of office and automobile showroom space in Long Island City,
New York. The lease expires on December 31, 1998 and contains no renewal
provisions. The current annual rent under such lease is $114,000.
Major Chrysler, Plymouth, Jeep Eagle, Major Dodge and Major Subaru lease
from Bendell Realty L.L.C., a company wholly owned by Bruce Bendell and Harold
Bendell, approximately 40,000 square feet in Long Island City, New York which is
used as a service facility. The lease expired on December 31, 1997 and contains
no renewal provisions. The property is currently being leased on a
month-to-month basis. The annual rent under such lease was $132,000.
The above properties which are leased from the Bendells will be acquired
by the Company in connection with the Major Auto Acquisition.
Major Fleet is a guarantor of a mortgage held by Chrysler Realty on the
property owned by Bendell Realty L.L.C., located in Long Island City which Major
Auto operates as a service center for Major Dodge, Major Subaru, and Major
Chrysler, Plymouth, Jeep Eagle. As of December 31, 1997 the outstanding mortgage
balance was approximately $800,000.
The promoters of the Company are Bruce Bendell and Doron Cohen. In
addition to the other transactions with Mr. Bendell and Mr. Cohen described or
referred to above under the heading "Certain Relationships and Related
Transactions," each of Mr. Bendell and Mr. Cohen received 2,500,000 shares of
the Company's Common Stock upon its incorporation in exchange for $25,000 or
$.01 per share.
-46-
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description Page
- ------ ----------- ----
3.1* Articles of Incorporation of Fidelity Holdings, Inc.,
("Company") incorporated by reference to Exhibit 3.1
of Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
3.2* Articles of Incorporation of Computer Business
Sciences, Inc., incorporated by reference to Exhibit
3.2 of Company's Registration Statement on Form
10-SB, as amended, filed with the Securities and
Exchange Commission on March 7, 1997. N/A
3.3* Articles of Incorporation of 786710 (Ontario)
Limited, incorporated by reference to Exhibit 3.3 of
Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
3.4* Articles of Incorporation of Premo-Plast, Inc.,
incorporated by reference to Exhibit 3.4 of Company's
Registration Statement on Form 10-SB, as amended,
filed with the Securities and Exchange Commission on
March 7, 1997. N/A
3.5* Articles of Incorporation of C.B.S. Computer Business
Sciences Ltd., incorporated by reference to Exhibit
3.5 of Company's Registration Statement on Form
10-SB, as amended, filed with the Securities and
Exchange Commission on March 7, 1997. N/A
3.6* Articles of Incorporation of Major Fleet & Leasing
Corp., incorporated by reference to Exhibit 3.6 of
Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
3.7* Articles of Incorporation of Reynard Service Bureau,
Inc., incorporated by reference to Exhibit 3.7 of
Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
3.8* Articles of Incorporation of Major Acceptance Corp.,
incorporated by reference to Exhibit 3.8 of Company's
Registration Statement on Form 10-SB, as amended,
filed with the Securities and Exchange Commission on
March 7, 1997. N/A
3.9* By-Laws of the Company incorporated by reference to
Exhibit 3.9 of Company's Registration Statement on
Form 10-SB, as amended, filed with the Securities and
Exchange Commission on March 7, 1997. N/A
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<PAGE>
Exhibit Description Page
- ------- ----------- ----
4.1* Certificate of Designation for the Company's
1996-MAJOR Series of Convertible Preferred Stock,
incorporated by reference to Exhibit 4.1 of Company's
Registration Statement on Form 10-SB, as amended,
filed with the Securities and Exchange Commission on
March 7, 1997. N/A
4.1(i) Form of Amended and Restated Certificate of
Designation for the Company's 1996-MAJOR Series of
Convertible Preferred Stock. --
4.2* Warrant Agreement for Nissko Warrants, incorporated
by reference to Exhibit 4.2 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. N/A
4.3* Warrant Agreement for Major Fleet Warrants,
incorporated by reference to Exhibit 4.3 of Company's
Registration Statement on Form 10-SB, as amended,
filed with the Securities and Exchange Commission on
March 7, 1997. N/A
4.3(i) Amended and Restated Warrant Agreement, dated October
11, 1997 between the Company, Bruce Bendell and
Harold Bendell. --
4.4* Warrant Agreement for Progressive Polymerics
International, Inc. Warrants, incorporated by
reference to Exhibit 4.4 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. --
4.5 Form of Certificate of Designation for the Company's
1997A-Major Automotive Group Series of Preferred
Stock. --
4.6 Form of Certificate of Designation for the Company's
1997-Major Series of Convertible Preferred Stock. --
4.7 Form of Registration Rights Agreement between the
Company and Bruce Bendell. --
4.8 Stock Pledge and Security Agreement, dated March 26,
1996, between Doron Cohen, Bruce Bendell, Avraham
Nissanian, Yossi Koren, Sam Livian and Robert
Rimberg. --
4.9 Form of Registration Rights Agreement between the
Company, Castle Trust and Management Services Limited
and Bruce Bendell. --
4.10 Form of the Company's 10% Convertible Subordinated
Debenture due 1999. --
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<PAGE>
Exhibit Description Page
- ------- ----------- ----
10.1* Employment Agreement, dated November 7, 1995, between
the Company and Doron Cohen, incorporated by
reference to Exhibit 10.1 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. N/A
10.1(i) Amendment No. 1 to Employment Agreement, dated as of
November 7, 1995 between the Company and Doron Cohen. --
10.2* Consulting Agreement, dated November 7, 1995, between
the Company and Bruce Bendell, incorporated by
reference to Exhibit 10.2 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. N/A
10.2(i) Amendment No. 1 to Consulting Agreement, dated as of
November 7, 1995 between Fidelity Holdings, Inc. and
Bruce Bendell. --
10.3* Agreement for Purchase of Patents, dated November 14,
1995, between the Company and Progressive Polymerics,
Inc., incorporated by reference to Exhibit 10.3 of
the Company's Registration Statement on Form 10-SB,
as amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
10.3(i)* First Amendment, dated September 30, 1996, to
Agreement for Purchase of Patents, dated November 14,
1995, incorporated by reference to Exhibit 10.4 of
Company's Registration Statement on Form 10-SB as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
10.5* Agreement, dated March 25, 1996, between Nissko
Telecom, Ltd. and Computer Business Sciences, Inc.,
incorporated by reference to Exhibit 10.5 of
Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
10.6* Asset Purchase Agreement, dated April 18, 1996,
between the Company and Zvi and Sarah Barak,
incorporated by reference to Exhibit 10.6 of
Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
10.6(i) Amendment to Asset Purchase Agreement dated August 7,
1997. --
10.7* Employment Agreement dated April 18, 1996 between the
Company and Dr. Zvi Barak, incorporated by reference
to Exhibit 10.7 of Company's Registration Statement
on Form 10-SB, as amended, filed with the Securities
and Exchange Commission on March 7, 1997. N/A
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<PAGE>
Exhibit Description Page
- ------- ----------- ----
10.8* Employment Agreement dated October 18, 1996 between
Computer Business Sciences, Inc. and Paul Vesel,
incorporated by reference to Exhibit 10.8 of
Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
10.9* Indemnification Agreement dated November 7, 1995
between the Company and Doron Cohen, incorporated by
reference to Exhibit 10.9 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. N/A
10.10* Indemnification Agreement dated November 7, 1995
between the Company and Bruce Bendell, incorporated
by reference to Exhibit 10.10 of Company's
Registration Statement on Form 10-SB, as amended,
filed with the Securities and Exchange Commission on
March 7, 1997. N/A
10.11* Indemnification Agreement dated December 6, 1995
between the Company and Richard C. Fox, incorporated
by reference to Exhibit 10.11 of Company's
Registration Statement on Form 10-SB, as amended,
filed with the Securities and Exchange Commission on
March 7, 1997. N/A
10.12* Indemnification Agreement dated March 28, 1996
between the Company and Dr. Barak, incorporated by
reference to Exhibit 10.12 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. N/A
10.13* Indemnification Agreement dated March 28, 1996
between the Company and Yossi Koren, incorporated by
reference to Exhibit 10.13 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. N/A
10.14* Plan of Reorganization for acquisition of Major Fleet
& Leasing Corp. dated August 23, 1996 between the
Company, Bruce Bendell and Harold Bendell,
incorporated by reference to Exhibit 10.17 of
Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
10.15* Patent Purchase Agreement dated December 30, 1996
between Premo-Plast, Inc. and John Pinciaro,
incorporated by reference to Exhibit 10.16 of
Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
10.16* Employment Agreement dated December 30, 1996 between
Premo-Plast, Inc. and John Pinciaro, incorporated by
reference to Exhibit 10.17 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. N/A
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<PAGE>
Exhibit Description Page
- ------- ----------- ----
10.17* Employment Agreement dated January 27, 1997 between
the Company and Ronald K. Premo, incorporated by
reference to Exhibit 10.18 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. N/A
10.18* Plan and Agreement of Merger, dated April 21, 1997,
the Company, Major Automotive Group, Inc., Major
Acquisition Corp. and Bruce Bendell, incorporated by
reference to Exhibit 10.19 of Company's Registration
Statement on Form 10-SB, as amended, filed with the
Securities and Exchange Commission on March 7, 1997. N/A
10.18(i) Amendment to Plan and Agreement of Merger, dated
August 1, 1997, between Fidelity Holdings, Inc.,
Major Automotive Group, Inc., Major Acquisition Corp.
and Bruce Bendell. --
10.18(ii) Amendment to Plan and Agreement of Merger, dated
August 26, 1997, between Fidelity Holdings, Inc.,
Major Automotive Group, Inc., Major Acquisition Corp.
and Bruce Bendell. --
10.18(iii) Amendment to Plan and Agreement of Merger, dated
November 20, 1997, between Fidelity Holdings, Inc.,
Major Automotive Group, Inc., Major Acquisition Corp.
and Bruce Bendell. --
10.19* Stock Purchase Agreement with Escrow Agreement
attached, incorporated by reference to Exhibit 10.20
of Company's Registration Statement on Form 10-SB, as
amended, filed with the Securities and Exchange
Commission on March 7, 1997. N/A
10.20* Management Agreement, incorporated by reference to
Exhibit 10.21 of Company's Registration Statement on
Form 10-SB, as amended, filed with the Securities and
Exchange Commission on March 7, 1997. N/A
10.21* Employment Agreement with Moise Benedid, incorporated
by reference to Exhibit 10.22 of Company's
Registration Statement on Form 10-SB, as amended,
filed with the Securities and Exchange Commission on
March 7, 1997. N/A
10.22 Partnership Agreement between Nissko Telecom
Associates and the Company. --
10.23 Memorandum of Understanding, dated September 9, 1997,
by and among Computer Business Sciences, Inc., Nissko
Telecom Ltd., the Company and Robert L. Rimberg. --
10.24 Letter of Intent, dated June 6, 1997, between the
Company and SouthWall Capital Corp. (formerly known
as Sun Coast Capital Corp.) --
10.25 Letter of Intent, dated September 1997, between the
Company, Lichtenberg Robbins Buick, Inc. and
Lichtenberg Motors Inc. --
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<PAGE>
Exhibit Description Page
- ------- ----------- ----
10.26 Consulting Agreement, dated February 18, 1997, with
Ronald Shapss Corporate Services, Inc. --
10.27 Value Added Reseller Agreement between Summa Four,
Inc. and Computer Business Sciences, Inc., as
Reseller. --
10.28 Lease Agreement, dated March 1996, between 80-02
Leasehold Company, as Owners and the Company, as
Tenant. --
10.29 Master Lease Agreement, dated December 26, 1996,
between Major Fleet & Leasing Corp., as Lessor, and
Nissko Telecom, Ltd., as Lessee. --
10.30 Sublease Agreement, dated March 1995, between Speedy
R.A.C., Inc., as Sublessor, and Major Subaru Inc., as
Sublessee. --
10.31 Lease Agreement, dated November 1, 1991, between
Gloria Hinsch, as Landlord, and Major
Chrysler-Plymouth, Inc., as Tenant. --
10.32 Store Lease Agreement, dated June 10, 1992, between
Bill K. Kartsonis, as Owner, and Major Automotive
Group, as Tenant. --
10.33 Lease Agreement, dated June 3, 1994, between General
Motors Corporation, as Lessor, and Major Chevrolet,
Inc., as Lessee. --
10.34 Lease Agreement, dated August 1990, between Bruce
Bendell and Harold Bendell, as Landlord and Major
Chrysler-Plymouth, Inc., as Tenant. --
10.34(i) Extension of Lease Agreement, dated August 14, 1997,
between Bruce Bendell and Harold Bendell, as Landlord
and Major Dodge, Inc. (formerly known as Major
Chrysler-Plymouth, Inc.), as Tenant. --
10.34(ii) Extension of Lease Agreement, dated December 16,
1997, between Bruce Bendell and Harold Bendell, as
Landlord and Major Dodge (formerly known as Major
Chrysler-Plymouth, Inc.), as Tenant.
10.35 Lease Agreement, dated February 1995, between Bendell
Realty, L.L.C., as Landlord, and Major
Chrysler-Plymouth Jeep Eagle, Inc., as Tenant. --
10.35(i) Extension of Lease Agreement, dated August 14, 1997,
between Bendell Realty, L.L.C., as Landlord and Major
Chrysler-Plymouth Jeep Eagle, Inc., as Tenant. --
10.35(ii) Extension of Lease Agreement, dated December 16,
1997, between Bendell Realty, L.L.C., as Landlord and
Major Chrysler-Plymouth Jeep Eagle, Inc., as Tenant. --
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<PAGE>
Exhibit Description Page
- ------- ----------- ----
10.36 Lease Agreement, dated February 1996, between Prajs
Drimmer Associates, as Landlord, and Barak Technology
Inc., as Tenant. --
10.37 Sublease Agreement, dated January 8, 1997, between
Newsday, Inc., as Sublessor, and Major Fleet &
Leasing Corp., as Sublessee. --
10.37(i) Consent to Sublease Agreement, dated January 16,
1997, between 80-02 Leasehold Company, Newsday Inc.
and Major Fleet and Leasing Corp. --
10.38 General Security Agreement between Major Fleet &
Leasing Corp., as Debtor, and Marine Midland Bank, as
Secured Party. --
10.39 Retail and Wholesale Dealer's Agreement, dated March
30, 1995, between Marine Midland Bank, as Bank, and
Major Fleet & Leasing Corp., as Dealer. --
10.40 Wholesale Lease Financing Line of Credit between
General Electric Capital Corporation, as Lender, and
Major Fleet & Leasing Corp., as Borrower. --
10.41 Chrysler Leasing System License Agreement between
Chrysler Motors Corporation, as Licensor, and Major
Fleet & Leasing Corp., as Licensee. --
10.42 GMAC Retail Plan Agreement between General Motors
Acceptance Corp. and Major Fleet & Leasing Corp., as
Dealer. --
10.43 Fidelity Holdings, Inc. 1996 Employees' Performance
Recognition Plan. --
10.44 Secured Promissory Note, dated December 31, 1996,
between Doron Cohen, as Maker, and Fidelity Holdings,
Inc., as Holder. --
10.45 Dealer Master Agent Agreement and License, dated
February 1996, between Computer Business Sciences,
Inc. and Progressive Polymerics International, Inc.,
as Master Agent. --
10.46 Dealer Master Agent Agreement and License, dated
February 1996, between Computer Business Sciences,
Inc. and Cellular Credit Corp. of America, Inc., as
Master Agent. --
10.47 Dealer Master Agent Agreement and License, dated
February 1996, between Computer Business Sciences,
Inc. and America's New Beginning, Inc., as Master
Agent. --
10.48 Dealer Master Agent Agreement and License, dated
February 1996, between Computer Business Sciences,
Inc. and Korean Telecom, as Master Agent. --
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<PAGE>
Exhibit Description Page
- ------- ----------- ----
10.49 Dealer Master Agent Agreement and License, dated
February 1996, between Computer Business Sciences,
Inc. and Philcom Telecommunications, as Master Agent. --
10.50 Management Agreement, dated August 23, 1996, between
Major Fleet, Bruce Bendell and Harold Bendell. --
10.51 Wholesale Security Agreement, dated April 26, 1990,
between General Motors Acceptance Corporation
("GMAC") and Major Fleet. --
10.51(i) Amendment, dated February 14, 1991, to Wholesale
Security Agreement between GMAC and Major Fleet. --
10.52 Direct Leasing Plan Dealer Agreement, dated July 24,
1986, between GMAC and Major Fleet. --
10.53 Retail Lease Service Plan Agreement, dated April 3,
1987, between GMAC and Major Fleet. --
10.54 Contribution Agreement dated as of October 6, 1997
between the Company, Bruce Bendell and Doron Cohen.
10.55 Letter of Commitment dated March 16, 1998 from Falcon
Financial, LLC to Major Auto Acquisition, Inc. --
21.1* List of Subsidiaries of the Company, incorporated
by reference to Exhibit 22.1 of Company's
Registration Statement on Form 10-SB, as amended,
filed with the Securities and Exchange Commission on
March 7, 1997. --
27.1 Financial Data Schedule.
- ------------
* Previously filed with the Commission as Exhibits to, and incorporated herein
by reference from, the registrant's registration statement on Form 10-SB
(File No. 0-29182).
(b) Reports on Form 8-K
During the last quarter of Fiscal 1997, the Company did not file any
Reports on Form 8-K.
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<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 217,191 $ 574,486
Net Investment in direct financing leases, current 1,644,575 1,390,598
Notes receivable - officer shareholder 148,400 142,659
Accounts receivable 1,650,919 179,837
Inventories 164,661 1,212,062
Other current assets 375,172 45,349
------------ -----------
Total current assets 4,200,918 3,544,991
Net investment in direct financing leases,
net of current portion 687,106 1,059,287
Property and equipment, net 1,236,513 1,023,523
Excess of costs over net assets acquired 2,738,911 3,042,144
Other intangible assets 428,571 483,474
Other assets 109,324 163,445
------------ -----------
Total assets $ 9,401,343 $ 9,316,864
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable bank $ 150,000 $ -
Accounts payable 438,630 419,052
Accrued expenses 400,677 522,026
Current maturities of long-term debt 575,185 643,976
Accrued income taxes - 4,378
Deferred revenue 72,570 67,409
Due to affiliates 143,926 1,404,079
------------ -----------
Total current liabilities 1,780,988 3,060,920
Long-term debt, less current maturities 427,387 515,609
Income taxes, deferred 583,000 424,000
Other 85,233 72,122
------------ -----------
Total liabilities 2,876,608 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 1996 2,500 2,500
Common stock, .01 par value
50,000,000 shares authorized,
6,895,700 shares issued and
outstanding in 1997 and
6,279,200 shares issued and
outstanding in 1996 68,957 62,792
Additional paid in capital 5,414,293 4,509,108
Cumulative translation adjustment 297 264
Retained earnings 1,038,688 669,549
------------ -----------
Total stockholders' equity 6,524,735 5,244,213
------------ -----------
Total liabilities and stockholders' equity $ 9,401,343 $ 9,316,864
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Revenues:
Computer products and
telecommunications equipment $ 2,909,251 $ 3,175,528
Leasing income 953,033 258,947
-------------- ----------------
Total revenues 3,862,284 3,434,475
-------------- ----------------
Operating expenses:
Cost of products sold 823,397 965,792
Selling, general and
administrative expenses
Products 1,100,564 935,529
Leasing 816,360 191,372
Amortization of intangible assets 343,744 178,104
-------------- ----------------
3,084,065 2,270,797
-------------- ----------------
Operating income 778,219 1,163,678
Other income (expense)
Interest expense (121,092) (24,132)
Interest income 8,487 9,830
Loss on joint venture (137,475) (32,410)
-------------- ----------------
Income before provision for income taxes 528,139 1,116,966
Provision for income taxes 159,000 441,000
-------------- ----------------
Net income $ 369,139 $ 675,966
============== ================
Earnings per share
Basic $ .06 $ 0.12
Diluted $ .05 $ 0.11
Shares used in computing earnings per share
Basic 6,454,350 5,623,739
Diluted 7,550,546 6,315,489
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Retained Currency Total
----------------- --------------------- Paid-In Earnings Translation Stockholders'
Shares Amount Shares Amount Capital (Deficit) Adjustment Equity
------ ------ ------- ------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
Common Stock -- $ -- 5,000,000 $50,000 $ -- $ -- $ -- $50,000
Net Loss -- -- -- -- -- (6,417) -- (6,417)
Balance --------------------------------------------------------------------------------------------------
December 31, 1995 -- -- 5,000,000 50,000 -- (6,417) -- 43,583
Issuance of Common
Stock and exercise of
warrants net of
expenses -- -- 990,000 9,900 979,000 988,900
Issuance of Common
Stock as payment for
long-term debt -- -- 160,000 1,600 398,400 -- -- 400,000
Issuance of common
Stock for the acquisition of
786710 Ontario Ltd. -- -- 125,000 1,250 623,750 -- -- 625,000
Issuance of Preferred
stock for the acquisition
of Major Fleet &
Leasing Corp. 250,000 2,500 -- -- 2,497,500 -- -- 2,500,000
Net income -- -- -- -- -- 675,966 -- 675,966
Effect of stock compensation
charge -- -- 4,200 42 10,458 -- -- 10,500
Translation
adjustment -- -- -- -- -- -- 264 264
Balance
December -------------------------------------------------------------------------------------------------
31, 1996 250,000 2,500 6,279,200 62,792 4,509,108 669,549 264 5,244,213
Issuance of Common
Stock pursuant to exercise
of warrants -- -- 523,000 5,230 648,520 -- -- 653,750
Effect of stock compensation
charge -- -- 93,500 935 256,665 -- -- 257,600
Net income -- -- -- -- -- 369,139 -- 369,139
Translation adjustment -- -- -- -- -- -- 33 33
Balance -------------------------------------------------------------------------------------------------
December 31, 1997 250,000 $2,500 6,895,700 $68,957 $5,414,293 $1,038,688 $297 $6,524,735
=================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 369,139 $ 675,966
Adjustments to reconcile net income
to net cash (used in) provided by operating activities:
Amortization of intangible assets 343,744 178,104
Depreciation 495,118 123,330
Deferred income taxes 159,000 424,000
Non cash items - stock based compensation 257,600 10,500
(Increase) decrease in assets:
Net investment in direct financing leases 118,204 (1,612,675)
Notes receivable (5,741) (142,659)
Accounts receivable (1,471,082) (20,229)
Inventories (110,655) (15,026)
Other assets (261,310) (31,304)
Increase (decrease) in liabilities:
Accounts payable 32,689 108,079
Accrued expenses (121,349) 416,282
Accrued income taxes (4,378) 4,378
Deferred revenue 5,161 3,075
Due to affiliates (102,097) 26,121
-------------- -------------
Net Cash (used in)provided by
operating activities (295,957) 147,942
-------------- -------------
Cash flows from investing activities:
Additions to property and equipment (708,108) (77,326)
Acquisition of 786710 Ontario Limited,
net of cash acquired -- (738,636)
-------------- -------------
Net cash used in investing activities (708,108) (815,962)
-------------- -------------
Cash flows from financing activities:
Line of credit 150,000 --
Proceeds from long-term debt 416,431 400,000
Payments of long-term debt (573,444) (170,321)
Proceeds from issuance of common
stock and exercise of warrants net of expenses 653,750 973,500
-------------- -------------
Net cash provided by financing activities 646,737 1,203,179
-------------- -------------
Effect of exchange rates on cash 33 264
-------------- -------------
Net increase (decrease) in cash and cash equivalents (357,295) 535,423
Cash and cash equivalents, beginning of year 574,486 39,063
-------------- -------------
Cash and cash equivalents, end of year $ 217,191 $ 574,486
============== =============
Supplemental Disclosures Of Cash Flow Information:
Cash paid during the year for:
Interest $ 121,092 24,132
Income taxes $ 16,809 --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) Summary of Significant Accounting Policies:
a) Nature of the Business:
Fidelity Holdings, Inc. (The Company) was incorporated under the laws of the
State of Nevada on November 7, 1995. The Company is structured as a holding
Company that has two divisions, a Computer Telephony and Telecommunication
Division and a Plastics and Utility Division. The plastics and utility division
is considered to be in its development stage. In addition, through its October
1, 1996 acquisition of Major Fleet & Leasing Corp., the Company is in the
business of leasing automobiles, trucks and telephone equipment under direct
financing and operating leases.
b) Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of
Fidelity Holdings, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts, transactions and profits have been eliminated.
c) Earnings per Share:
In February 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share",
applicable for financial statements issued for periods ending after December 15,
1997. As required, the Company adopted "SFAS" No. 128 for the year ended
December 31, 1997 and restated all prior period earnings per share figures. The
Company has presented basic and diluted earnings per share. Basic earnings per
share excludes potential dilution and is calculated by dividing income available
to common stockholders by the weighted average number of outstanding common
shares. Diluted earnings per share incorporates the potential dilutions from all
potential dilutive securities that would have reduced earnings per share.
d) Cash Equivalents:
Cash equivalents consist of highly liquid investments, principally money market
accounts, with a maturity of three months or less at the time of purchase. Cash
equivalents are stated at cost which approximates market value.
e) Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market.
Automobiles and trucks held for sale or lease are valued at the lower of cost
(specific identification) or market.
f) Property and Equipment:
Property and equipment are recorded at cost. Depreciation and amortization of
property and equipment are computed using the straight-line method over the
estimated useful lives of the assets, ranging from three to ten years.
Depreciation of leased equipment is calculated on the cost of the equipment,
less an estimated residual value, on the straight-line method over the term of
the lease. Maintenance and repairs are charged to operations as incurred. When
property and equipment are sold or otherwise disposed of, the asset cost and
accumulated depreciation are removed from the accounts, and the resulting gain
or loss, if any, is included in the results of operations.
g) Revenue Recognition:
The Company recognizes revenue from the sale of telecommunications and computer
products at the date of product shipment. Any additional costs related to the
product sold are provided for at the time of the sale. The Company records
income from direct financing leases based on a constant periodic rate of return
on the net investment in the lease. Income earned from operating lease
agreements is recorded evenly over the term of the lease.
-6-
<PAGE>
h) Foreign Currency Translation:
The Company translates the assets and liabilities of its foreign subsidiaries at
the exchange rates in effect at year end. Revenues and expenses are translated
using exchange rates in effect during the year. Gains and losses from foreign
currency translation are credited or charged to cumulative translation
adjustment included in stockholders' equity in the accompanying consolidated
balance sheets.
i) Use of Estimates In Preparation of Financial Statements:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amount of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of income and expenses during the reporting
periods. Operating results in the future could vary from the amounts derived
from management's estimates and assumptions.
j) Excess of Costs over Net Assets Acquired:
The excess of cost over fair value of net assets of businesses acquired is
amortized on a straight-line basis from five to fifteen years. Amortization
recorded in 1997 was $303,233 and in 1996 was $137,593.
k) Impairment of Long-Lived Assets
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be disposed of. SFAS No. 121 requires the Company to
review the recoverability of the carrying amount of its long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset might not be recoverable.
In the event that facts and circumstances indicate that the carrying amount of
long-lived assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the assets' carrying amount
to determine if a write-down to fair value is required. Fair value may be
determined by reference to discounted future cash flows over the remaining
useful life of the related asset. Such adoption did not have a material effect
on the Company's consolidated financial position or results of operations.
l) Fair Value Disclosures
The carrying amounts reported in the Consolidated Balance Sheets for cash and
cash equivalents, notes and accounts receivable, accounts payable, accrued
expenses, and due to affiliates approximate fair value because of the immediate
or short-term maturity of these financial instruments.
The fair value of long-term debt, including the current portion, is estimated
based on current rates offered to the Company for debt of the same remaining
maturities.
m) Stock Options
The Company accounts for its stock options in accordance with the provisions of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the underlying
stock exceeded the exercise price. On January 1, 1996, the Company adopted the
disclosure requirements of Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation. Had the Company determined
Compensation Cost based on fair value at the grant date for stock options under
SFAS No. 123 the effect would have been immaterial.
n) New Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information". "SFAS" No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company will be required to comply with the
requirements of SFAS
-7-
<PAGE>
No. 130 for the year ending December 31, 1998. SFAS No. 131 establishes revised
guidelines for determining an entity's operating segments and the type and level
of financial information to be disclosed. The Company will be required to comply
with the requirements of SFAS No. 131 in the year ending December 31, 1998. The
Company believes that the implementation of these statements will not have a
significant impact on the nature of information disclosed in the Company's
consolidated financial statements.
2) Accounts Receivable:
The Company evaluates its accounts receivable on a customer by customer basis
and has determined that no allowance for doubtful accounts was necessary at
December 31, 1997 and 1996.
3) Notes Receivable - Officer Shareholder:
The Company holds a note in the principal amount of $140,000 plus accrued
interest of $8,400 in 1997 and $2,659 in 1996. Interest rate is 5 7/8 % per
annum.
4) Net Investment in Direct Financing Leases:
Components of the net investment in direct financing leases are as follows:
December 31,
------------
1997 1996
---- ----
Total minimum lease payments to be received $2,448,089 $2,705,711
Estimated residual value of leased property 260,129 200,315
Unearned income (315,641) (456,141)
---------- ----------
2,392,577 2,449,885
Less lease income receivable (60,896) -0-
---------- ----------
Net investment $2,331,681 $2,449,885
---------- ----------
Future minimum lease payments receivable at December 31, 1997 is as follows:
Year Ending
December 31, Amount
------------ ------
1998 $1,776,015
1999 601,621
2000 39,896
2001 21,017
2002 9,540
----------
Total $2,448,089
----------
5) Inventories:
Inventories consisted of the following:
December 31,
-----------
1997 1996
---- ----
Telecommunication parts $ 40,306 $ 36,395
Automobiles and trucks
held for sale or lease 124,355 1,175,667
----------- -----------
$ 164,661 $ 1,212,062
----------- -----------
6) Property and Equipment:
Property and equipment consisted of the following:
December 31,
-----------
1997 1996
---- ----
Leasehold improvements $ 12,159 $ 22,096
-8-
<PAGE>
Furniture and fixtures 84,033 10,314
Computer equipment and software 983,285 804,639
Leased equipment 624,254 309,803
----------- -----------
1,703,731 1,146,852
Less accumulated depreciation
and amortization 467,218 123,329
----------- -----------
$ 1,236,513 $ 1,023,523
----------- -----------
7) Income Taxes:
The Company accounts for income taxes using the asset and liability method
whereby deferred assets and liabilities are recorded for differences between the
book and tax carrying amounts of balance sheet items. Deferred liabilities or
assets at the end of each period are determined using the tax rate expected to
be in effect when the taxes are actually paid or recovered. The measurement of
deferred tax assets is reduced, if necessary, by a valuation allowance for any
tax benefits that are not expected to be realized. The effects of changes in tax
rates and laws on deferred tax assets and liabilities are reflected in net
income in the period in which such changes are enacted.
The provision for taxes on income is as follows:
Year Ended December 31,
-----------------------
1997 1996
---- ----
Federal:
Current $ -0- $ 13,000
Deferred 127,000 319,000
State:
Current -0- 4,000
Deferred 32,000 105,000
----------- -----------
Total $159,000 $441,000
----------- -----------
The reconciliation between the amount computed by applying the federal statutory
rate to income before income taxes and the actual income tax expense were as
follows:
Year Ended December 31,
-----------------------
1997 1996
---- ----
Amount using the statutory Federal
tax rate $ 180,000 $ 380,000
State income tax, net of federal
tax benefit 21,000 69,000
Other, Net (42,000) (8,000)
----------- -----------
Provision for taxes on income $ 159,000 $ 441,000
----------- -----------
The tax effect of temporary differences resulted in deferred tax liabilities as
follows:
December 31,
-----------
1997 1996
---- ----
Temporary Differences
Revenue and expenses of consolidated subsidiary
recognized on the cash basis for tax purposes,
resulting in a timing difference $ 112,974 $ 399,427
Depreciation 42,015 17,310
-9-
<PAGE>
Other 4,011 7,263
--------- ---------
Total $ 159,000 $ 424,000
--------- ---------
8) Secured Line of Credit:
In November 1997, the Company entered into a "Line of Credit Agreement: with
Marine Midland Bank for $250,000. The interest rate is a variable rate based on
the bank's prime rate of interest. Interest will be payable monthly.
The "Line" is collateralized by a first security interest in and UCC filing on
all assets of Fidelity Holdings, Inc., and the personal guarantees of the
majority shareholders, Bruce Bendell and Doran Cohen, each of whom will be
limited to 50% of the total obligation to the Bank.
As of December 31, 1997, the Company owes $150,000 against the line.
9) Long-Term Debt:
Various lenders advance funds to the Company's leasing subsidiary in the form of
notes payable to finance leased vehicles. Interest on each note is charged
depending on the prime rate in effect at the time the vehicle is leased and
remains constant over the term of the lease. Applicable rates at December 31,
1997 ranged between 8% and 8.5%. Equal monthly installments are paid over the
term of the lease (which can range from 12 to 60 months), together with a final
balloon payment, if applicable. These loans are collateralized by the vehicles.
Maturities are as follows:
Year Ending December 31,
------------------------
1997 1996
---- ----
1997 $ -0- $463,976
1998 483,852 230,851
1999 293,150 70,437
2000 76,015 6,594
2001 40,045 -0-
2002 18,177 -0-
-------- --------
Total $911,239 $771,858
-------- --------
In addition long-term debt includes amounts due from the acquisition of 786710
Ontario Limited.
Maturities are as follows:
Year Ending December 31,
------------------------
1997 1996
---- ----
1997 $ -0- $180,000
1998 91,333 207,727
-------- --------
Total $91,333 $387,727
-------- --------
10) Business Combinations
a) Acquisition of 786710 Ontario Limited
On April 18, 1996, the Company acquired 786710 Ontario Limited, doing business
as "Info Systems". Info Systems developed both the complex of telecommunications
and interactive voice response modules known as "Talkie", including
"Talkie-Globe" for international calling and the talkie power web line machine
system and "BCS" - "Business Control Software", an integrated group of modules
for accounting functions capable of real time use in various languages and
currencies.
-10-
<PAGE>
Talkie is a trademarked name for an interrelated group of module's and
applications of telephonic and interactive voice processing software which Info
Systems had marketed for several years.
The transaction was accounted for under the purchase method of accounting and
the total cost for the acquisition was $1,413,977. The results of operations for
786710 are included in the Company's "Consolidated Statements of Operations"
from April 18, 1996, the date of acquisition.
The Company issued 125,000 of its shares valued at $625,000 for the acquisition.
These shares shall vest at the rate of 25,000 shares per year over a five year
period.
The Company independently reviewed their investment in this technology to ensure
proper valuation on the financial statements.
The cost of $1,413,977 was allocated as follows:
Fair value of net assets acquired at April 18, 1996,
mainly computer software and equipment $ 729,603
Intangible asset-excess of costs over net assets acquired 684,374
----------
Total $1,413,977
----------
The excess of costs over net assets acquired amounting to $684,374 is being
amortized over a five-year period.
b) Acquisition of Major Fleet & Leasing Corp.
On October 1, 1996 the Company acquired from Bruce Bendell (Chairman of the
Board of the Company) and his brother, Harold Bendell (together "the Bendells)
Major Fleet & Leasing Corp., organized in 1985 and engaged in the leasing and
financing of motor vehicles, primarily in the New York City metropolitan area.
Since becoming a wholly-owned subsidiary of the Company, it has expanded its
operations to include the leasing of telephone equipment.
The transaction was accounted for under the purchase method of accounting and
the total cost for the acquisition was $2,500,000. The results of operations for
Major Fleet & Leasing Corp. are included in the Company's "Consolidated
Statements of Operations" from October 1, 1996, the date of acquisition.
The Company issued 250,000 shares of Convertible Preferred Stock (The 1996 -
Major Series), convertible into 500,000 shares of the Company's Common Stock. In
addition, as a bonus for the attainment of certain goals prior to closing, the
Bendells were issued 100,000 shares of Common Stock. In addition the Bendells
were issued warrants for the purchase of 100,000 shares of the Company's Common
Stock at a price of $1.25 per share.
The cost of $2,500,000 was allocated as follows:
Fair value of net assets acquired at October 1, 1996 $ 4,637
Intangible asset-excess of costs over net assets acquired 2,495,363
---------
Total 2,500,000
---------
The excess of costs over net assets acquired amounting to $2,495,363 is
being amortized over a fifteen-year period.
-11-
<PAGE>
Separate results for the periods prior to the acquisition were as follows:
Nine month Year ended
period ended December 31, 1995
9/30/96
------------ -----------------
Revenues $ 692,314 $1,105,434
--------- ----------
Net income $ 158,383 $ 310,051
--------- ----------
The results of operations for the year ended December 31,1996, combining the
acquisition of Major Fleet & Leasing Corp. and 786710Ontario Limited as though
they were both acquired by the Company as of January 1, 1996, are as follows:
Revenues $ 4,385,884
Net income 609,430
11) Other intangible Assets consist of:
Patents
The Company has purchased two patents to be used in the manufacture of armored
conduit. The patents, which were valued at their cost to the seller, will be
amortized over the remaining useful life of 14 years on the straight line basis.
The Company has an agreement with the seller of the patents to pay royalty
payments. The payments will be calculated at the greater of 5% of the
manufactured cost of the armored conduit or 2% of the net sales.
The Company has reclassified "Licenses" appearing on the December 31, 1996
balance sheet to excess of cost over net assets acquired. There was no effect on
1996 income.
12) Commitments:
Compensation Agreements:
Mr. Bruce Bendell, Chairman of the Board of the Company, entered into a
Consulting Agreement effective January 1, 1996. The Consulting Agreement
provides for base annual compensation of $150,000 and provides for increases in
such base compensation and for performance-based and discretionary bonuses.
Mr. Doron Cohen, President and Treasurer of the Company, entered into an
Employment Agreement effective January 1, 1996. The Agreement provides for base
annual compensation of $150,000 and provides for increases in such base
compensation and for both performance-based and discretionary bonuses.
Both Mr. Bendell and Mr. Cohen waived their compensation for 1996: there is no
accrual. However, there was compensation paid to Mr. Cohen by the Company's
Telecommunication subsidiary in the amount of $50,000 in 1996. In 1997
compensation paid and accrued to Mr. Cohen amounted to $150,000. Mr. Bendell
waved his compensation in 1997. Neither Mr. Bendell nor Mr. Cohen has any stock
options, stock appreciation rights ("SAR") or deferred compensation.
Sales of Customer Installment Contracts:
The Company's leasing subsidiary has sold customer installment contracts to some
financing institutions with no recourse and to others with full recourse. In the
event of default on recourse loans, the Company would pay the financing
institution a predetermined amount and would repossess and sell the vehicle. No
accrual has been made for possible losses since, in management's opinion on an
aggregate basis, the
-12-
<PAGE>
Company could sell the repossessed automobiles for amounts in excess of
outstanding liabilities. The "pre-determined" amount that must be paid by the
Company in the event of default is $20,460.
Guarantor of Third Party Obligations:
Under the terms of a cross-guarantee, cross-default, cross-collateralization
agreement, the Company's leasing subsidiary is the guarantor of debt incurred by
affiliated companies. In addition, the subsidiary is a guarantor on a mortgage
of an entity which is wholly owned by officer-shareholders of the Company. The
outstanding balance of the mortgage on December 31, 1997 is $844,737.
In addition, an officer shareholder has personally guaranteed leases purchased
by the subsidiary from European American Bank. The balance due to European
American Bank at December 31, 1997 is approximately $237,000.
Legal Proceedings
On November 22, 1996, the Company and two subsidiaries filed an action in the
New York Supreme Court in Queens County indexed at 25678-96 and captioned
"Fidelity Holdings, Inc., Computer Business Sciences, Inc. and 786710 (Ontario)
Limited, Plaintiffs, versus Michael Marom and M. M. Telecom, Corp. "claiming
damages of $5,000,000 for breach of contract, libel, slander, disparagement,
violation of copyright laws, fraud and misrepresentation. On February 4, 1997
the Defendants filed an amended Answer, and a Counterclaim seeking damages of
$50,000,000 for breach of contract and violation of the Lanham Act. The
Plaintiffs have filed an Answer to the Counterclaim. Discovery has not yet
commenced.
On September 18, 1996, the Company's subsidiary, 786710 (Ontario) Limited, the
Company as owner of 786710, and the Baraks as the original principals of 786710,
were sued in the Ontario Court (General Division) by Touch Tone Connections,
indexed at 96-CU-111059. Touch Tone Connections seeks damages of CN$200,000 in
connection with the installation, in 1995, of certain hardware and software
claimed to have been faulty and not meeting the sales representation. All of the
events occurred prior to the Company's acquisition of 786710 and the Baraks
indemnified the Company against any such action.
The Company filed an action in the Supreme Court of the State of New York
seeking a return of $100,000 paid and 160,000 shares of common stock issued to
the sellers of the two patents referred to in Note 11. Such amounts were paid
pursuant to a First Amendment to the Patent Sale and Purchase Agreement dated
September 30, 1996 ("Patent Agreement Amendment"). The Patent Agreement
Amendment was entered into in settlement of litigation brought by the Company
against the sellers of the patents. Such litigation was for damages related to
misrepresentations concerning additional development expenditures required in
connection with the subject patents. The Company intends to reinstate its
litigation to modify the purchase price of the relevant patents. Management
believes that, whatever the outcome of any or all of the foregoing actions,
there will be no material impact on the Company's assets, earnings or net worth.
In a related matter, the Company received notice from an individual claiming to
have acquired, through foreclosure of a security interest, 12,000 shares of the
Company's common stock originally issued to the sellers of the patents as
discussed in the preceding paragraph. Such individual requested the Company to
exchange his restricted certif icates for ones without restriction. Upon advice
of counsel, the Company will not accede to this request until such time as the
holder demonstrates compliance with the rules of the Securities Act of 1933
relating to the lifting of restrictions after the passage of time for the
appropriate holder. This individual has also asserted a number of claims against
the Company, including some related to the patent acquisition discussed in the
preceding paragraph. The Company has been advised by counsel that such claims
are without merit.
While it is not possible to determine the ultimate disposition of these
proceedings, the Company believes that the outcome of such proceedings will not
have a material adverse effect on the financial position or results of
operations of the Company.
-13-
<PAGE>
13) Related Party Transactions:
Approximately 13% in 1997 and 55% in 1996 of the Company's revenues derived from
the sale of computer products and telecommunications equipment was from Nissko,
a partner with the Company on a joint venture in which the Company owns 45%. The
Company will receive 45% of the net revenues generated by the joint venture. The
investment in the Joint Venture is recorded under the Equity Method of
Accounting.
Amounts due affiliates are amounts owed by the Company's leasing subsidiary for
advances made in the ordinary course of business from various entities which are
wholly owned by the subsidiaries former stockholders. The advances are in the
form of non-interest-bearing obligations with no specified maturity dates. The
subsidiary also, purchased a substantial portion of its leased vehicles from
affiliates.
The Company has a note receivable from an officer shareholder in the amount of
$140,000 plus accrued interest of $8,400.
14) Warrants and Options:
a) Warrants
In October 1996 the Company revised the Patent Purchase Agreement. Under the
amendment the purchase price was changed form $500,000 in cash to a combination
of $100,000 in cash and the balance in 80,000 unregistered units of the
Company's securities. Each unit consisted of 2 shares of Common Stock and 2
warrants, each warrant being for the purchase of 1 share of the Company's common
stock at an exercise price of $3.125 per share exercisable for one year which
expired in October 1997.
In March 1996, the Company issued to Nissko Telecom, Inc. and its investors,
warrants to purchase 1,500,000 shares of the Company's Common Stock at a price
of $1.25 per share. In 1997 warrants to purchase 523,000 shares were exercised,
leaving a balance of 977,000 outstanding. Of this amount, class B Warrants for
750,000 shares, which were exercisable thru March 19, 1998, were unexercised by
that date, and, therefore, lapsed. In addition the Company issued warrants for
the purchase of 100,000 shares, in connection with the Management agreement
entered into when the Company acquired Major Fleet & Leasing Corp. The total
number of warrants outstanding at December 31, 1997 was 1,077,000 exercisable at
$1.25 per share.
b) Options
As required by FASB 123, the Company has determined the pro-forma information as
if the Company had accounted for stock options granted since January 1,1996,
under the fair value method of FASB 123. An option pricing model similar to the
Black-Scholes was used with the following weighted average assumptions used for
grants in the years 1997 and 1996, respectively; expected volatility of 80
percent; risk free interest rate of 6% and 5.5% respectively and expected lives
of 5 years. The pro-forma effect of these options on net earnings was not
material.
In consideration for certain financial services related to the planned
acquisition of the Major Auto Group, the Company has issued options to purchase
50,000 shares of the Company's common stock for $4.50 per share, exercisable
until May, 2002. These are the only options outstanding at December 31, 1997.
15) Preferred Stock:
Of the 2,000,000 shares of undesignated Preferred Stock authorized, to date the
Company has designated 250,000 shares as the 1996-Major Series. The shares of
the 1996-Major Series are voting, vote with the Common Stock and not as a
separate class and each share has two votes per share reflecting the underlying
conversion rate. The shares of the 1996 Major Series are convertible, with each
share converting into two shares of Common Stock. In the event that a dividend
is declared on the Common Stock, a dividend of twice the per share dividend on
the Common Stock must be declared on the 1996-Major Series, again reflecting the
underlying conversion rate. The shares are redeemable after December
-14-
<PAGE>
31, 2001 at a price of $15.87 per share. The liquidation preference is ten
dollars per share or a total of $2,500,000. Pursuant to an agreement between the
Company and the preferred stockholders, the right of rescission (under certain
circumstances), which was a part of the original agreement, has been rescinded.
Common Stock
In 1996 the Company issued at no cost to various employees, in recognition of
their services in 1996, 4,200 shares of common stock. The value assigned to each
of the relevant issues was $2.50 per share based on a discount determined by
management to reflect the lack of marketability due to the fact that the shares
are restricted securities.
The fair values of additional shares issued in connection with employment
agreements will be charged as compensation expense (and capital in excess of par
credited) ratably during each month of employment over which the shares will be
earned, i.e. vest. Vesting periods are from three to five years from date of
employment. Such common stock was issued in reliance upon the exemption from
registration contained in Section 4(2) of the Securities Act.
Pursuant to oral agreements entered into in January 1996, in connection with
investment banking marketing services rendered to the Company, the Company in
October 1996, upon the completion of these services issued 200,000 shares of its
stock at its par value of $.01 per share. The gross proceeds to the Company from
such sales were $2,000.00, which was considered to be the fair value in January
1996. Such common stock was issued and sold in reliance upon the exemption from
registration contained in Section 4(2) of the Securities Act.
The warrants issued in connection with the management agreement referred to in
Note 14 are convertible into restricted shares at $1.25 per share, was separate
and distinct from the Major Fleet acquisition and was performance based with no
registration rights and could have been terminated. Therefore, a lower value was
assigned to reflect a discount for marketability and risk.
In 1997, the Company issued 67,000 shares valued at $2.80 per share which was
considered to be the fair value in connection with legal and financial services
rendered in connection with the proposed acquisition of the Major Auto Group.
The $187,600 value of the shares issued has been deferred and included in other
assets which amount will be charged as part of the cost of acquisition at
closing.
16) Business Segments
The Company currently operates in two industry segments:
Computer and telephony products and leasing;
It also has a plastics division currently in the development stage.
The Company's operation by industry segment for the year ended December
31, 1997 is as follows:
Industry
--------
Computer Leasing Other Consolidated
Products Income
----------- ----------- ----------- -----------
Revenues $2,909,251 $953,033 -- $3,862,284
----------- ----------- ----------- -----------
Operating income 641,546 136,673 -- 778,219
----------- ----------- ----------- -----------
Interest expense -- 121,092 -- 121,092
----------- ----------- ----------- -----------
Interest income 8,400 87 -- 8,487
----------- ----------- ----------- -----------
Loss on joint venture -- -- 137,475 137,475
----------- ----------- ----------- -----------
Income before income taxes $528,139
-----------
-15-
<PAGE>
Capital expenditures 268,761 439,347 -- 708,108
----------- ----------- ----------- -----------
Depreciation and
amortization of property
and equipment 203,193 291,925 -- 495,118
----------- ----------- ----------- -----------
Amortization of
other assets -- -- 343,744 343,744
----------- ----------- ----------- -----------
Identifiable assets 4,039,589 5,361,754 -- 9,401,343
----------- ----------- ----------- -----------
The Company's operation by industry segment for the year ended December 31, 1996
is as follows:
Industry
--------
Computer Leasing Other Consolidated
Products Income
---------- ----------- ----------- -----------
Revenues $3,175,528 $ 258,947 -- $ 3,434,475
---------- ----------- ----------- -----------
Operating income 1,034,143 129,535 -- 1,163,678
---------- ----------- ----------- -----------
Interest expense -- (24,132) -- (24,132)
---------- ----------- ----------- -----------
Interest income 2,920 6,910 -- 9,830
---------- ----------- ----------- -----------
Loss on joint venture (32,410) (32,410)
---------- ----------- ----------- -----------
Income before income taxes $ 1,116,966
-----------
Capital expenditures 837,040 309,812 -- 1,146,852
---------- ----------- ----------- -----------
Depreciation and
amortization of property
and equipment 63,980 59,349 -- 123,329
---------- ----------- ----------- -----------
Amortization of
other assets -- -- 178,104 178,104
---------- ----------- ----------- -----------
Identifiable assets 2,677,219 6,639,645 -- 9,316,864
---------- ----------- ----------- -----------
17) Planned Acquisitions:
The Company has entered into a letter of intent with Mr. Bruce Bendell, Chairman
of the Board to acquire for stock and cash certain automobile dealerships, real
estate and facilities subject to certain conditions.
In the third quarter of 1997, the Company made the decision to acquire from all
of its master agents their rights to their respective territories and the Talkie
Power Line Web Machines previously sold to them. The company believes that it
can maximize its profitability by selling for itself the telephone minutes to
the existing and additional territories. Negotiations are currently underway
with each of the Company's master agents to finalize the memorandum of
understanding with respect to these acquisitions.
-16-
<PAGE>
18) Subsequent Events:
To finance the cash portion of the acquisition of dealerships and related
properties, the Company has secured a loan commitment of 7.5 million from a
third party lender. The loan will be secured by the assets acquired in the
transaction and the borrower will be required to maintain certain financial
covenants related to net worth and cash flow.
Also, to provide additional working capital, the Company is offering privately
to a small number of accredited investors convertible debentures paying 10%
interest and due in fourteen months. The minimum amount to be sold is $.5
million to a maximum of $1.5 million.
-17-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Fidelity Holdings, Inc.
We have audited the consolidated balance sheets of Fidelity Holdings, Inc.
and subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not examine the financial statements of
Major Fleet & Leasing Corp. and 786710 Ontario Limited, both wholly-owned
subsidiaries, which statements, after intercompany eliminations, reflect total
assets of $3,270,885 as of December 31, 1997 and $4,299,354. as of December 31,
1996 and total revenue of $1,797,394 in 1997 and $796,602 in 1996. Those
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the amounts included for Major
Fleet & Leasing Corp. and 786710 Ontario Limited is based solely on the report
of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Fidelity Holdings, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ PETER C. COSMAS CO., CPA'S
PETER C. COSMAS CO., CPA'S
New York, New York
March 31, 1998
F - 1
<PAGE>
Signatures
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Fidelity Holdings, Inc.
Dated: April 8, 1998 By:/s/ Doron Cohen
---------------
Doron Cohen, President
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Doron Cohen Chief Executive Officer, President, April 9, 1998
- ------------------------- Treasure and Director
Doron Cohen
/s/ Bruce Bendell Chairman of the Board April 9, 1998
- ------------------------
Bruce Bendell
/s/ Yossi Koren Director April 9, 1998
- ------------------------
Yossi Koren
/s/ Glenn H. Bank Secretary April 9, 1998
- ------------------------
Glenn H. Bank
/s/ Richard L. Feinstein Chief Financial Officer April 9, 1998
- ------------------------
Richard L. Feinstein
-55-
FIDELITY HOLDINGS, INC.
Amended and Restated Certificate of Designation,
Powers, Preferences and Rights of the
1996-MAJOR Series of Convertible Preferred Stock
($.01 Par Value)
Liquidation Value $10.00 Per Share
Pursuant to Section 78.195(6) of the
Corporation Law of the State of Nevada
The undersigned, President of FIDELITY HOLDINGS, INC., a Nevada
Corporation (hereinafter called the "Company") does hereby certify as required
by NRS 78.195(6) that the following resolution has been duly adopted by the
Board of Directors of the Company:
RESOLVED, that pursuant to authority expressly granted to and vested in
the Board of Directors of the Company (the "Board of Directors") by the
provisions of the Certificate of Incorporation, as amended (hereinafter the
"Certificate of Incorporation") of the Company, there hereby is created, out of
the 2,000,000 shares of preferred stock of the Company authorized in Article III
of its Certificate of Incorporation (the "Preferred Stock"), a series of 250,000
shares, which series shall have the following designations, powers, preferences,
rights, qualifications, limitations and restrictions (in addition to the
designations, powers, preferences, rights, qualifications, limitations and
restrictions set forth in the Certificate of Incorporation of the Company which
are applicable to the Preferred Stock):
1. Designation.
The designation of the said series of the Preferred Stock shall be the
"The 1996-MAJOR Series of Convertible Preferred Stock" (the "1996-MAJOR
Series").
2. Number of Shares; Par Value.
The number of shares of the 1996-MAJOR Series shall be limited to 250,000.
The shares of the 1996-MAJOR Series shall be issued as full shares and shall
have a par value of $.01 per share.
-1-
<PAGE>
3. Dividends.
The holders of the 1996-Major Series shall be entitled to receive, out of
any funds of the Company at the time legally available for the declaration of
dividends, a participating dividend equivalent to that declared and/or paid with
respect to the shares of Common Stock, except that each share of the 1996-MAJOR
Series shall receive twice the dividend payable with respect to each share of
Common Stock.
4. Liquidation.
In the event of a liquidation, dissolution, or winding up of the Company,
whether voluntary or involuntary, the holders of shares of 1996-MAJOR Series
shall be entitled to receive out of the assets of the Company, whether such
assets are capital or surplus of any nature, the sum of Ten Dollars ($10.00) per
share, and, in addition to such amount, a further amount equal to the dividends
declared but unpaid and accumulated thereon, to the date of such distribution,
and no more, before any payment shall be made or any assets distributed to the
holders of shares of Common Stock. If upon such liquidation, dissolution, or
winding up, whether voluntary or involuntary, the assets distributed among the
holders of all classes of the 1996-MAJOR Series shall be insufficient to permit
the payment to such shareholders of the full preferential amounts, then the
entire assets of the Company to be distributed shall be distributed ratably
among the holders of the 1996-MAJOR Series.
5. Redemption.
(a) At any time after December 31, 2001, the Company, at the option of the
Board of Directors, may redeem the whole of, or from time to time may redeem any
part of, the 1996-MAJOR Series on any dividend date by either (i) paying in cash
therefor $15.87 per share and, in addition to such amount, an amount in cash
equal to all dividends on the 1996-MAJOR Series declared but unpaid and
accumulated up to and including the date fixed for redemption or (ii) issuing,
to the extent of any amount not paid in cash, the Company's Bonds.
(b) In case of the redemption of a part only of the outstanding shares of
the 1996-MAJOR Series, the Company shall designate by lot, in such manner as the
Board of Directors may determine, the shares to be redeemed, or shall effect
such redemption pro rata. Less than all of the shares of the 1996-MAJOR Series
at any time outstanding may not be redeemed until all dividends declared,
accrued and in arrears upon all of the shares of the 1996-MAJOR Series
outstanding shall have been paid for all past dividend periods, and until full
dividends, if any, for
-2-
<PAGE>
the then current dividend period on all shares of the 1996-MAJOR Series then
outstanding, other than the shares to be redeemed, shall have been paid or
declared and the full amount thereof set apart for payment. At least 30 days'
previous notice by mail, postage prepaid, shall be given to the holders of
record of the shares to be redeemed.
(c) In the event that the Company exercises its right to purchase the
1996-MAJOR Series with Bonds, such Bonds shall bear interest at the current
prime rate of interest as set by CitiBank, N.A. shall mature on December 31,
2006, shall require quarterly payments of interest, in arrears, on the second
Thursday of April, July, October and January, and shall require quarterly
repayments of principal. The Company, at the option of the Board of Directors,
may redeem any of such Bonds at any time upon payment of the principal value
together with all unpaid interest.
6. Voting.
The 1996-MAJOR Series shall have voting rights. For voting purposes, such
series shall be considered part of the Common Shares and shall vote with the
common stock, rather than as a separate series of preferred stock. Each share of
the 1996-MAJOR Series shall have two votes per share.
7. Conversion.
The shares of 1996-MAJOR Series shall be convertible into fully paid and
nonassessable Common Shares of the Company, upon the terms and conditions set
forth in this Paragraph 8, at any time and from time to time, except that any of
such 1996-MAJOR shares which have been called for redemption shall be
convertible up to and including, but not after, the close of business on the
tenth (10) day prior to the redemption date.
(i) In order to exercise the conversion privilege, the holder of any of
the shares of the 1996-MAJOR Series to be converted shall surrender the
certificate or certificates therefor to any transfer agent of the Company
for such shares, duly endorsed in blank for transfer with the signature
medallion guaranteed, accompanied by written notice of election to convert
such shares or a portion thereof executed on the form set forth on such
certificates or on such other form as may be provided form time to time by
the Company.
As soon as practicable after the surrender of such certificates as
provided above, the Company shall cause to be issued and delivered, at the
office of such transfer agent, to or on the order of the holder of the
certificates thus surrendered, a certificate or
-3-
<PAGE>
certificates for the number of full shares of Common Stock issuable
hereunder upon the conversion of such shares of the 1996-MAJOR Series and
cash or scrip, as provided in subparagraph (v) below, in respect of any
fraction of a common share issuable upon such conversion. Such conversion
shall be deemed to have been effected on the date on which the
certificates for such shares of the 1996-MAJOR Series have been
surrendered as provided above, and the person in whose name any
certificate or certificates for Common Stock are issuable upon conversion
shall be deemed to have become on such date the holder of record of the
shares represented thereby.
(ii) Each share of the 1996-MAJOR Series shall be convertible into that
number of Common Shares of the Company obtained by dividing the
liquidation preference of the -MAJOR Series ($10.00 per share) by the
conversion price of the Common Shares as set forth in the immediately
succeeding sentence. The conversion price per Common Share shall be the
lower of (a) Five Dollars ($5.00) or (b) the average of the bid and asked
closing prices of the Common Shares for the twenty (20) consecutive
trading days ending on the day prior to conversion, so that each share of
the 1996-MAJOR Series shall be convertible into at least two (2) Common
Shares. No fractional Common Shares shall be issued.
(iii) Earned and declared but unpaid and accrued or accumulated dividends
on the 1996-MAJOR Series shall be paid in cash on the date of conversion.
(iv) In case of the voluntary dissolution, liquidation, or winding up of
the Company, all conversion rights of the holders of shares of 1996-MAJOR
Series shall terminate on a date fixed by the Board of Directors, but not
more than thirty (30) days prior to the record date for determining the
holders of the Common Shares entitled to receive any distribution upon
such dissolution, liquidation or winding up. The Company shall cause
notice of the proposed action, and of the date of termination of
conversion rights, to be mailed to the holders of record of shares of the
1996-MAJOR Series not later than thirty (30) days prior to the date of
such termination, and shall promptly give similar notice to each transfer
agent for such Preferred Stock and for the Common Stock.
(v) No fractional share of Common Stock shall be issued upon conversion of
any share of the 1996-MAJOR Series, but in lieu of fractional shares the
Company shall, at its option, either pay an amount in cash equal to the
current market value of such fractional interest, computed on the basis of
the last reported sale price of the Common Stock prior
-4-
<PAGE>
to the date of conversion, or issue scrip of the Company in respect
thereof. Such scrip shall be noninterest-bearing and non-voting, shall be
exchangeable in combination with other similar scrip for the number of
full shares of Common Stock represented thereby, shall be issued in such
denominations and in such form, shall expire after such reasonable time,
which shall not be less than one year from the date of issue, may contain
such provisions for the sale for the account of the holder of such scrip
of the shares of Common Stock for which such scrip is exchangeable, and
shall be subject to such other terms and provisions, if any, as the Board
of Directors may from time to time determine prior to the issuance
thereof.
(vi) As long as any of the shares of the 1996-MAJOR Series remain
outstanding, the Company shall take all steps necessary to reserve and
keep available a number of its authorized but unissued shares of Common
Stock sufficient for issuance upon conversion of all such outstanding
shares of the 1996-MAJOR Series, and for issuance in exchange for all
outstanding scrip certificates.
(vii) All certificates for the shares of the 1996-MAJOR Series surrendered
for conversion as provided herein shall be canceled and retired, and no
further shares of the 1996-MAJOR Series shall be issued in lieu thereof.
(ix) The exercise of the conversion privilege shall be subject to such
regulations, not inconsistent with the foregoing provisions of this
paragraph, as may from time to be adopted by the Board of Directors of the
Company.
(x) All shares of Common Stock issued upon the conversion of the shares of
the 1996-MAJOR Series shall be validly issued and outstanding, and fully
paid and nonassessable.
8. No Preemptive Rights.
No holder of any shares of the 1996-MAJOR Series, as such, shall be
entitled as a matter of right to subscribe for or purchase any part of any new
or additional issue of shares of any class or series, junior or senior thereto,
or securities convertible into, exchangeable for, or exercisable for the
purchase of, shares of any class or series, junior or senior, whether now or
hereafter authorized, and whether issued for cash, property, services, by way of
dividends, or otherwise.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed on its behalf by its undersigned President and attested to by its
Secretary this [__] day of [________], 1997.
FIDELITY HOLDINGS, INC.
ATTEST:
[Corporate Seal]
By: /s/ Doron Cohen
Doron Cohen, President
/s/ Glenn H. Bank
Glenn H. Bank, Secretary
-6-
[LETTERHEAD OF COOPER PERSKIE APRIL NIEDELMAN WAGENHEIM & LEVENSON]
January 16, 1998
VIA Fax 718-793-4830 AND UPS OVERNIGHT
Mr. Geofrey Alexander
Fidelity Holdings, Inc.
80-02 Kew Gardens Road, Suite 5000
Kew Gardens, NY 11415
Re: Fidelity/Major Merger
Dear Geofrey:
In accordance with your request, enclosed herewith please find a copy of
the October 2, 1996 Warrant Agreement by and between Fidelity Holdings, Inc. and
Bruce Bendell and Harold Bendell. It is also my understanding that you are in
search of a copy of an amendment to this Warrant Agreement allegedly dated
October 11, 1997. Please be advised that I do not have nor do I believe I have
ever seen a draft or executed copy of such amendment.
If I may be of any further assistance, please do not hesitate to contact
me. Thank you.
Very truly yours,
/s/ PACIFICO S. AGNELLINI
- -------------------------------
PACIFICO S. AGNELLINI
cc: Robert E. Salad, Esquire
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, made this 2nd day of October, 1996, by and
between:
FIDELITY HOLDINGS, INC., a Nevada corporation with its principal office
located at 144-15 Union Turnpike, Flushing, New York 11367, (hereinafter
referred to as the "COMPANY").
AND
BRUCE BENDELL and HAROLD BENDELL, THE REGISTERED HOLDERS of the COMPANY's
1996-MAJOR warrants covered hereby (and their registered assigns), from time to
time, from the date of original issue of such warrants to the expiration date
thereof (hereinafter referred to as the "INVESTORS", "HOLDER" and/or "HOLDERS"
as the context may require).
WITNESSETH THAT:
WHEREAS, the COMPANY has entered into a certain Management Agreement of
even date with the INVESTORS, in which such, Management Agreement the COMPANY
has agreed, in consideration of the execution of such Agreement by the
INVESTORS, to issue and deliver Stock Purchase Warrants (hereinafter called the
"WARRANTS") to the INVESTORS entitling the HOLDERS thereof to purchase up to an
aggregate of Two Hundred Fifty Thousand (250,000) shares of the Common Stock of
the COMPANY (hereinafter called the "Shares"); and
WHEREAS, the COMPANY desires to provide for the form and provisions of the
WARRANTS, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the COMPANY and the
HOLDERS; and
WHEREAS, all acts and things necessary to make the WARRANTS, when executed
on behalf of the COMPANY, the valid, binding, and legal obligations of the
COMPANY, have been done and performed; and
WHEREAS, all acts and things necessary to authorize the execution and
delivery of this Warrant Agreement, and to execute and deliver the WARRANTS to
the INVESTORS as the original registered HOLDERS, have been done and performed;
<PAGE>
NOW, THEREFORE, intending to be legally bound hereby, and intending the
original registered HOLDERS and their successors and assigns to rely hereon, the
COMPANY hereby represents and agrees, and the HOLDERS by acceptance of the
WARRANTS impliedly agree, as follows:
1. WARRANTS AUTHORIZED. COMPANY hereby authorizes the issuance to the
INVESTORS of Two Hundred Fifty Thousand (250,000) WARRANTS upon the terms and
conditions of this Warrant Agreement. The WARRANTS shall be called the
1996-MAJOR Warrants and, subject to sub-paragraph 5(b) below, shall be
exercisable after January 1, 1997 and until 5:00 P.M. E.D.T. on the day which is
six (6) months after the declaration of effectiveness of the Company's
Registration Statement registering the shares to be acquired upon exercise of
this Warrant, at an exercise price of $1.25 per share of Common Stock.
2. FORM AND EXECUTION. Each WARRANT, whenever issued: (a) shall be in
substantially the form attached hereto as Exhibit A; (b) shall be dated as of
the date of issuance, which shall be the same date as this Warrant Agreement;
(c) shall entitle the HOLDER to purchase the number of Shares stated thereon;
(d) shall be signed by the President or Vice President and the Secretary or
Treasurer of the COMPANY; (e) and shall have the COMPANY'S seal impressed
thereon. The COMPANY may adopt and use the facsimile signature of any person who
is a requisite officer of the COMPANY at the time such WARRANTS are executed, or
of any person now or hereafter holding such office, notwithstanding the fact
that at the time a WARRANT is issued he had ceased to be such officer of the
COMPANY.
3. WARRANT ISSUANCE AND ISSUANCE CONSIDERATION. These WARRANTS are being
hereby issued to the INVESTORS as the original registered HOLDERS, such
INVESTORS having entered into a certain Management Agreement with the COMPANY.
The consideration for the issuance of the WARRANTS is the execution of such
Agreement. The INVESTORS are acquiring these WARRANTS in a private transaction
for their own investment, purposes and not with a view to transfer, resale or
distribution of such WARRANTS or the underlying Common Stock.
2
<PAGE>
4. WARRANT EXERCISE PRICE. Each WARRANT shall entitle the registered
HOLDER thereof, subject to the provisions thereof and of this Warrant Agreement,
to purchase from the COMPANY the number of Shares of the COMPANY's Common Stock
as stated thereon, at the price of One Dollar and Twenty-five Cents ($1.25) per
Share, both the number of Shares and the price being subject to the
anti-dilution adjustments provided in Paragraph 8 hereof. The term "Warrant
Exercise Price" as used in this Warrant Agreement refers to the price per Share
at which Common Stock may be purchased at the time a WARRANT is exercised.
5. DURATION (Term). (a) Subject to sub-paragraph (b) following, the
1996-MAJOR Warrants may be exercised at any time between January 1, 1997 and the
close of business (5:00 P.M. Eastern Daylight Time) on the day which is six (6)
months after the declaration of effectiveness of the Company's Registration
Statement registering the shares to be acquired upon exercise of this Warrant,
such date being hereinafter called the "Expiration Date". Each WARRANT not
exercised on or before its Expiration Date shall become void, and all rights
thereunder and all rights in respect thereof under this Warrant Agreement shall
cease at the close of business on the respective Expiration Date. The COMPANY
reserves the right to extend the Expiration Date of the WARRANTS, from time to
time, any number of times, but shall be under no obligation to do so.
(b) The 1996-MAJOR Warrants shall terminate prior to the Expiration Date
in the event that there is an uncured material breach of the Management
Agreement, as provided therein.
6. TRANSFER AND/OR EXCHANGE OF WARRANTS. On or after the date of issuance
and prior to the Expiration Date, any HOLDER of any WARRANT, subject to the
transfer restrictions of federal and state securities laws, at any time prior to
the exercise thereof, may transfer all or any portion of the stock purchase
rights provided in the WARRANT. Upon presentation and surrender to the Warrant
Agent of the WARRANT, properly assigned, accompanied by appropriate transfer
instructions from the HOLDER, the Warrant Agent shall issue a WARRANT for the
assigned number of shares to the assignee as the new registered HOLDER and shall
issue a WARRANT for the unassigned balance of the shares to the assigning (old)
registered HOLDER. Any HOLDER of any WARRANT or WARRANTS, at any
3
<PAGE>
time prior to the exercise thereof, may exchange such WARRANT or WARRANTS for a
WARRANT or WARRANTS of like tenor exercisable for the same aggregate number of
Common Shares as the WARRANT surrendered; i.e., consolidate or divide his
holdings. The Warrant Agent is the COMPANY's Transfer Agent, Olde Monmouth Stock
Transfer Co., 77 Memorial Parkway, Suite 101, Atlantic Highlands, New Jersey
07716. The COMPANY shall give notice to the registered HOLDERS of WARRANTS of
any change in the address of, or in the designation of, its Warrant Agent.
7. EXERCISE. (a) Except as otherwise provided in sub-paragraph (f) below,
a WARRANT shall be exercisable only by the registered HOLDER surrendering it,
together with the subscription form set forth in the WARRANT duly executed,
accompanied by payment, in full, in lawful money of the United States, of the
Warrant Exercise Price for each full Share as to which the WARRANT is exercised,
to the Warrant Agent. The Warrant Agent is the COMPANY's Transfer Agent, Olde
Monmouth Stock Transfer Co., 77 Memorial Parkway, Suite 101, Atlantic Highlands,
New Jersey 07716. The COMPANY shall give notice to the registered HOLDERS of
WARRANTS of any change in the address of, or in the designation of, its Warrant
Agent.
(b) A WARRANT may be exercised wholly or in part. If a WARRANT is only
exercised in part, a new WARRANT for the number of Shares as to which the
WARRANT shall not have been exercised shall be issued to the registered HOLDER.
(c) As soon as practicable after the exercise of any WARRANT, the COMPANY
shall issue to or upon the order of the registered HOLDER a certificate or
certificates for the number of full Shares which he is entitled, registered in
such name or names as may be directed by him.
(d) All Shares issued upon exercise of a WARRANT shall be validly issued,
fully paid, and non-assessable. The COMPANY shall pay all taxes in respect of
the issue thereof. However, the registered HOLDER shall pay all taxes imposed in
connection with any transfer, even if involved in an issue of a certificate, and
the COMPANY shall not be required to issue or deliver any stock certificate in
such case until the tax shall have been paid.
4
<PAGE>
(e) Each person in whose name any such certificate for Shares is issued
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the WARRANT was surrendered and payment of the
Warrant Exercise Price and applicable taxes was made, irrespective of the date
of delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the COMPANY are closed, the
person or persons entitled to receive Shares upon such exercise shall be
considered the record holder or holders of such shares at the close of business
on the next succeeding date on which the stock transfer books are open and shall
be entitled to receive only dividends or distributions which are payable to
holders of record after that date.
8. SHARE DIVIDENDS, RECLASSIFICATION, REORGANIZATION, ANTI-DILUTION
PROVISIONS. Each WARRANT is subject to the following further provisions:
(a) In case, prior to the expiration of a WARRANT by exercise or by its
terms, the COMPANY shall issue any of its Common Stock as a share dividend or
subdivide the number of outstanding shares of Common Stock into a greater number
of shares, then, in either of such cases, the Purchase Price per share of the
Shares purchasable pursuant to a WARRANT in effect at the time of such action
shall be proportionately reduced and the number of Shares at the time
purchasable pursuant to a WARRANT shall be proportionately increased; and
conversely, in the event the COMPANY shall contract the number of outstanding
shares of Common Stock by combining such shares into a smaller number of shares,
then, in such case, the Purchase Price per share of the Shares purchasable
pursuant to a WARRANT in effect at the time of such action shall be
proportionately increased and the number of Shares at the time purchasable
pursuant to a WARRANT shall be proportionately decreased. If the COMPANY shall,
at any time during the life of a WARRANT, declare a dividend payable in cash on
its Common Stock and shall at substantially the same time offer to its
stockholders a right to purchase new Common Stock from the proceeds of such
dividend or for an amount substantially equal to the dividend, all shares of
Common Stock so issued shall, for the purpose of a WARRANT, be deemed to have
been issued as a share dividend. Any dividend paid or distributed upon the
Common Stock in shares of any
5
<PAGE>
other class or securities convertible into Common Stock shall be treated as a
dividend paid in shares of Common Stock to the extent that shares of Common
Stock are issuable upon the conversion thereof.
(b) In case, prior to the expiration of a WARRANT by exercise or by its
terms, the COMPANY shall be recapitalized, or the COMPANY or a successor
corporation shall consolidate or merge with or convey all or substantially all
of its or of any successor corporation's property and assets to any other
corporation or corporations (any such corporation being included within the
meaning of the term "successor corporation, hereinbefore used in the event of
any consolidation or merger of any such corporation with, or the sale of all or
substantially all of the property of any such corporation to, another
corporation or corporations), the holder of a WARRANT shall thereafter have the
right to purchase, upon the basis and on the terms and conditions and during the
time specified in a WARRANT in lieu of the Shares of the COMPANY theretofore
purchasable, upon the exercise of a WARRANT, such shares, securities or assets
as may be issued or payable with respect to, or in exchange for, the number of
Shares of the COMPANY theretofore purchasable upon the exercise of a WARRANT had
such recapitalization, consolidation, merger or conveyance not taken place; and
in any such event, the rights of the holder, of a WARRANT to an adjustment in
the number of Shares purchasable upon the exercise of a WARRANT as herein
provided shall continue and be preserved in respect of any shares, securities,
or assets which the holder of a WARRANT becomes entitled to purchase.
(c) In case:
(i) the COMPANY shall take a record of the holders of its Common
Shares for the purpose of entitling them to receive a dividend
payable otherwise than in cash, or any other distribution in
respect of the Common Shares (including cash), pursuant to,
without limitation, any spin-off, split-off, or distribution
of the COMPANY's assets; or
(ii) the COMPANY shall take a record of the holders
6
<PAGE>
of its Common Shares for the purpose of entitling them to
subscribe for or purchase any shares of any class or to
receive any other rights; or
(iii) of any classification, reclassification, or other
reorganization of the shares which the COMPANY is authorized
to issue, consolidation or merger of the COMPANY with or into
another corporation, or conveyance of all or substantially all
of the assets of the COMPANY; or
(iv) of the voluntary or involuntary dissolution, liquidation, or
winding up of the COMPANY;
then, and in any such case, the COMPANY shall mail to the holder of a WARRANT,
at least 21 days prior thereto, a notice stating the date or expected date on
which a record is to be taken for the purpose of such dividend, distribution, or
rights, or the date on which such classification reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up is to take place, as the case may be. Such notice shall also specify
the date or expected date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to participate in such dividend, distribution,
or rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up, as the case may be.
(d) In case the COMPANY at any time while a WARRANT shall remains
unexpired and unexercised shall sell all or substantially all of its property or
dissolve, liquidate, or wind up its affairs, the holder of a WARRANT may
thereafter receive upon exercise hereof in lieu of each Share which it would
have been entitled to receive the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon such sale,
dissolution, liquidation, or winding up with respect to each Share.
(e) The COMPANY plans to make an offering of convertible debentures or
7
<PAGE>
convertible preferred stock or such other security which may be convertible into
Common Stock or carry warrants for the purchase of shares of common Stock. The
parties agree that this warrant issuance is related to such proposed offering(s)
and no adjustments (as described in this Section 8) shall be made to any of the
the WARRANTS on account of any such offering(s), for a period of twenty-four
(24) months from the date of the issuance of the first warrant subject to this
warrant agreement or until and unless the number of shares of COMPANY's Common
Stock outstanding exceeds twelve million (12,000,000) shares. After such 24
month period, or at any time that the outstanding Common Stock of the COMPANY
exceeds 12,000,000 shares if earlier than 24 months, then the provisions of
Section 8 hereinabove shall have full force and effect on the WARRANTS.
9. RESERVATION OF SHARES ISSUABLE ON EXERCISE OF WARRANTS. The COMPANY
shall at all times reserve and keep available out of its authorized shares
solely for issuance upon the exercise of all WARRANTS issued hereunder, such
number of Common Shares and other shares as from time to time shall be issuable
upon the exercise of a WARRANT and all other similar WARRANTS at the time
outstanding.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION. Upon receipt by the COMPANY of
evidence satisfactory to it, (in the exercise of its reasonable discretion), of
the ownership of and the loss, theft, destruction, or mutilation of a WARRANT,
and (in the case of loss, theft, or destruction) of indemnity satisfactory to it
(in the case of mutilation) upon surrender and cancellation thereof, the COMPANY
will execute and deliver, in lieu thereof, a new WARRANT for like tenor.
11. WARRANT HOLDER NOT A SHAREHOLDER. The HOLDER of a WARRANT, as such,
shall not be entitled by reason of a WARRANT to any rights whatsoever of a
stockholder of the COMPANY. No HOLDER of any WARRANT shall be entitled to
receive any dividend or to vote with respect to any dividend declared or the
taking of a register of stockholders entitled to vote with a Record Date prior
to the date of exercise of the WARRANTS.
12. NOTICES. All notices and other communications from the COMPANY to the
HOLDER of a WARRANT shall be mailed by first-class
8
<PAGE>
registered mail, postage prepaid, to the address furnished to the COMPANY in
writing by the HOLDER of a WARRANT.
IN WITNESS WHEREOF, intending to be legally bound, the COMPANY has
executed this Warrant Agreement:
Dated: October 2, 1996
FIDELITY HOLDINGS, INC.
ATTEST
By: /s/
----------------------------
President
/s/ Richard C. Fox
- ----------------------
Secretary
9
FIDELITY HOLDINGS, INC.
Certificate of Designation, Powers, preferences and Rights
of the
1997A - Major Automotive Group Series of Preferred Stock
($.01 Par Value)
Liquidation Value $10.00 Per Share
Pursuant to Section 78.195(6) of the
Corporation law of the State of Nevada
The undersigned, President of FIDELITY HOLDINGS, INC., a Nevada
Corporation (hereinafter called the "Company") does hereby certify as required
by NRS 78.195(6) that the following resolution has been duly adopted by the
Board of Directors of the Company:
RESOLVED, that pursuant to authority expressly granted to and vested in
the Board of Directors of the Company (the "Board of Directors") by the
provisions of the Certificate of Incorporation, as amended (hereinafter the
"Certificate of Incorporation) of the Company, there hereby is created, out of
the 2,000,000 shares of preferred stock of the Company authorized in Article III
of its Certificate of Incorporation (the "Preferred Stock"), a series of 100
shares, which series shall have the following designations, powers, preferences,
rights, qualifications, limitations and restrictions (in addition to the
designations, powers, preferences, rights, qualifications, limitations and
restrictions set forth in the Certificate of Incorporation of the Company which
are applicable to the Preferred Stock):
1. Designation.
The designation of the said series of the Preferred Stock shall be the
"The 1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred Stock" (hereinafter the
"1997A-MAJOR Series").
2. Number of Shares; Par Value.
The number of shares of the 1997A-MAJOR Sodas shall be limited to 100. The
shares of the 1997A-MAJOR Series shall be issued as full shares and shall have a
par value of $.01 per share.
3. Dividends
The holders of the 1997A-MAJOR Series of Preferred Stock shall not be
entitled to receive any dividends or distributions, whether specially or
generally declared, whether in cash or in property, and whether or not funds of
the Company at the time are legally available for the declaration of dividends.
<PAGE>
4. Liquidation.
In the event of a liquidation, dissolution, or winding up of the Company,
whether voluntary or involuntary, the holders of shares of 1997A- MAJOR Series
of Preferred Stock shall be entitled to receive out of the assets of the
Company, whether such assets are capital or surplus of any nature, the sum of
One Dollar ($1.00) per share.
5. Redemption.
The Company, at the option of the Board of Directors, may redeem the whole
of, or from time to time may redeem any part of, the 1997A-MAJOR Series of
Preferred Stock, if:
(a) the Company shall dispose of the Major Automotive Group division and
shall have no further motor vehicle operations subject to the control of the
holders of the 1997A-MAJOR Series; or (b) the Management Agreement between the
Company and Bruce and Harold Bendell shall be terminated by Bruce and Harold
Bendell or shall be terminated by mutual Agreement; or (c) the Company shall
issue another series or class of security for the control of its motor vehicle
operations and the redemption of the 1997A- MAJOR Series shall be approved by
the then existing manufacturers/franchisers.
6. Voting.
The purpose of the 1997A-MAJOR Series is to provide a structural guarantee
of control of the motor vehicle dealerships being acquired by the Company
through the issuance of a class/series of stock which can control the Company's
subsidiary or subsidiaries which own such dealerships. Accordingly, the
1997A-MAJOR Series of Preferred Stock shall have voting rights, strictly limited
to the election of a majority of the Board of Directors of Major Automotive
Group, Inc. and/or such other subsidiaries and affiliates of the Company as
shall be engaged in the operation of motor vehicle dealerships. For voting
purposes, such series shall be considered as a separate class of Preferred Stock
and shall not vote with any other series. The 1997A-MAJOR Series shall not have
any other voting rights.
7. Conversion.
The shares of 1997A-MAJOR Series of Preferred Stock shall not be
convertible into any other security of the Company.
8. No Preemptive Rights.
No holder of any shares of the 1997A-MAJOR Series of Convertible Preferred
Stock, as such, shall be entitled as a matter of right to subscribe for or
purchase any part of any new or additional issue of shares of any class or
series, junior or senior thereto, or securities convertible into, exchangeable
for,
<PAGE>
or exercisable for the purchase of, shares of any class or series, junior or
senior, whether now or hereafter authorized, and whether issued for cash,
property, services, by way of dividends, or otherwise.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed on its behalf by its undersigned President and attested to by its
Secretary this ____ day of _____________.
FIDELITY HOLDINGS, INC.
ATTEST:
(Corporate Seal]
By:
Secretary
Certificate of Designation
of the Powers, Preferences, Limitations,
Restrictions, and Relative Rights of the
1997-MAJOR Series of Convertible Preferred Stock
$.01 Par Value
(Under Section 78.195 of the General Corporation Law
of the State of Nevada)
It is hereby certified that:
I. The name of the corporation is FIDELITY HOLDINGS, INC. (the
"Corporation").
II. Set forth hereinafter is a statement of the powers, preferences,
limitations, restrictions and relative rights of shares of the 1997-MAJOR Series
of Convertible Preferred Stock hereinafter designated, as contained in a
resolution of the Board of Directors of the Corporation, pursuant to a provision
of the Articles of Incorporation of the Corporation permitting the designation
and issuance of said 1997-MAJOR Series of Convertible Preferred Stock by
resolution of the Corporation's Board of Directors:
1. Designation; Number of Shares.
The designation of said series of Preferred Stock shall be the
1997-MAJOR Series of Convertible Preferred Stock (the "1997-Major Series"). The
number of shares of the 1997-Major Series shall be 900,000.
2. Dividends.
The holders of outstanding shares of the 1997-Major Series shall be
entitled to receive participating dividends equivalent to any dividend declared
for payment on any shares of any Common Stock out of funds of the Corporation
legally available therefor when, as and if declared, except that each share of
the 1997-Major Series shall receive twice the dividend payable with respect to
each share of Common Stock.
3. Liquidation Rights.
(a) Upon the dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, the holders of the 1997-Major
Series shall be entitled to receive, before any payment or distribution shall be
made on the Common Stock or any other series of preferred stock of the
Corporation that has a liquidation preference that is junior to that of the
1997-Major Series (collectively with the Common Stock, the "Junior Stock"), out
of the
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<PAGE>
assets of the Corporation available for distribution to stockholders, an amount
equal to the Liquidation Value per share of the 1997-Major Series (as adjusted
for any stock dividends, combinations or splits with respect to such shares) and
all accrued and unpaid dividends to and including the date of payment thereof.
Upon the payment in full of all amounts due to holders of the 1997-Major Series,
the holders of the Common Stock of the Corporation and any other Junior Stock
shall receive all remaining assets of the Corporation legally available for
distribution. If the assets of the Corporation available for distribution to the
holders of the 1997-Major Series shall be insufficient to permit payment in full
of the amounts payable as aforesaid to the holders of the 1997-Major Series upon
such liquidation, dissolution or winding-up, whether voluntary or involuntary,
then all such assets of the Corporation shall be distributed, to the exclusion
of the holders of shares of Junior Stock, among the holders of the 1997-Major
Series, and any other series of preferred stock of the Corporation that is not
Junior Stock, ratably in accordance with their respective liquidation values.
(b) Neither the purchase nor the redemption by the Corporation of
shares of any class of stock, nor the merger or consolidation of the Corporation
with or into any other corporation or corporations, nor the sale or transfer by
the Corporation of all or any part of its assets, shall be deemed to be a
liquidation, dissolution or winding-up of the Corporation for the purposes of
this paragraph 3. Holders of the 1997-Major Series shall not be entitled, upon
the liquidation, dissolution or winding-up of the Corporation, to receive any
amounts with respect to such stock other than the amounts referred to in this
paragraph 3.
4. Redemption.
The shares of the 1997-Major Series may not be redeemed.
5. Conversion into Common Stock.
Shares of the 1997-Major Series shall have the following conversion
rights and obligations:
(a) Subject to the further provisions of this paragraph 5, each
holder of shares of the 1997-Major Series shall have the right, at any time, to
convert such shares into fully paid and non-assessable shares of Common Stock of
the Corporation (as defined in subparagraph 5(h) below) at the Conversion Rate
(which shall be the Initial Converstion Rate, as adjusted to the date of
Conversion pursuant to paragraph (d) below). As used herein (i) "Initial
Conversion Rate" means the rate of the Applicable Number of Shares of Common
Stock divided by 900,000 and (ii) "Applicable Number of Shares of Common Stock"
means (A) if the Market Value of 1,800,000 shares of Common Stock on the Issue
Date is equal to or greater than $6,000,000, and (B) if the Market Value of
1,800,000 shares of Common Stock on the Issue Date is less than $6,000,000, such
number of shares of Common Stock as shall have a Market Value on the Issue Date
equal to $6,000,000, with any fraction of a share of Common Stock rounded
upwards to the nearest integer..
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<PAGE>
(b) On the fifth anniversary of the date of initial issuance of the
1997-Major Series (the "Issue Date"), all outstanding shares of the 1997-Major
Series shall automatically be converted into shares of Common Stock at the
then-applicable Conversion Rate for such shares.
(c) The holder of any certificate(s) for shares of the 1997-Major
Series desiring to convert any of such shares or whose shares where
automatically converted pursuant to the provisions of this paragraph 5 shall
surrender such certificate(s), at the principal office of any transfer agent for
said stock (the "Transfer Agent"), with a written notice of such election to
convert (if such conversion is voluntary) such shares into Common Stock duly
completed and executed and, if necessary under the circumstances of such
conversion, with such certificate(s) properly endorsed for, or accompanied by
duly executed instruments of, transfer (and such other transfer papers as said
Transfer Agent may reasonably require). The holder of the shares so surrendered
for conversion shall be entitled to receive a certificate or certificates, which
shall be expressed to be fully paid and non-assessable, for the number of shares
of Common Stock to which such stockholder shall be entitled upon such
conversion, registered in the name of such holder or in such other name or names
as such stockholder in writing may specify. In the case of a partial conversion
of the 1997-Major Series, the holder of shares of the 1997-Major Series shall
upon delivery of the certificate or certificates representing Common Stock also
receive a new share certificate representing the unconverted portion of the
shares of the 1997-Major Series. Nothing herein shall be construed to give any
holder of shares of the 1997-Major Series surrendering the same for conversion
the right to receive any additional shares of Common Stock or other property
which results from an adjustment in conversion rights under the provisions of
subparagraphs (d) of this paragraph 5 until holders of Common Stock are entitled
to receive the shares or other property giving rise to the adjustment.
In the case of the exercise of the conversion rights set forth in
paragraph 5(a), the conversion privilege shall be deemed to have been exercised,
and the shares of Common Stock issuable upon such conversion shall be deemed to
have been issued, upon the date of receipt by such Transfer Agent for conversion
of the certificate for such shares of the 1997-Major Series. In the case of the
automatic conversion set forth in paragraph 5(b), conversion shall be deemed to
have occurred, and the shares of Common Stock issuable upon such conversion
shall be deemed to have been issued, on the fifth anniversary of the Issue Date.
The Person entitled to receive Common Stock issuable upon such conversion shall
on the date such conversion privilege is deemed to have been exercised and
thereafter be treated for all purposes as the record holder of such Common Stock
and shall on the same date cease to be treated for any purpose as the record
holder of such shares of the 1997-Major Series so converted.
Notwithstanding the foregoing, if the stock transfer books are
closed on the date such shares are received by the Transfer Agent, the
conversion privilege shall be deemed to have been exercised, and the Person
shall be treated as a record holder of shares of Common Stock, on the next
succeeding date on which the transfer books are open, but the Conversion Rate
shall be that in effect on the date such conversion privilege was exercised. The
Corporation shall not be
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<PAGE>
required to deliver certificates for shares of its Common Stock or new
certificates for unconverted shares of its 1997-Major Series while the stock
transfer books for such respective classes of stock are duly closed for any
purpose; but the right of surrendering shares of the 1997-Major Series for
conversion shall not be suspended during any period that the stock transfer
books of either of such classes of stock are closed.
Upon the conversion of any shares of the 1997-Major Series, no
adjustment or payment shall be made with respect to such converted shares on
account of any dividend on shares of such stock or on account of any dividend on
the Common Stock, except that the holder of such converted shares shall be
entitled to be paid any dividends declared on shares of Common Stock after
conversion thereof.
If the Corporation shall at any time be liquidated, dissolved or
wound-up, the conversion privilege shall terminate at the close of business on
the last business day next preceding the effective date of such liquidation,
dissolution or winding-up.
The Corporation shall not be required, in connection with any
conversion of 1997-Major Series, to issue a fraction of a share of its Common
Stock nor to deliver any stock certificate representing a fraction thereof, but
in lieu thereof the Corporation shall make a cash payment equal to such fraction
multiplied by the Payout Price of the Common Stock determined as hereinafter set
forth. The "Payout Price" of the Common Stock for the purpose of computing
payments to be made for fractional shares shall be the closing sales price (or
if there were no sales, the closing bid price) on the principal stock exchange
on which the Common Stock is listed or, if the Common Stock is not listed, the
closing bid price in the over-the-counter market. Such price shall be determined
as of the close of business on the last business day of each week and such price
as so determined shall continue in effect during the next succeeding week. In
all other cases, the Payout Price of the Common Stock shall mean the amount
determined by the Board of Directors to be the market price based upon a good
faith attempt to value the Common Stock accurately and computed in accordance
with applicable law.
(d) The Conversion Rate shall be subject to adjustment from time to
time as follows:
(i) If the Corporation shall at any time (A) declare any dividend or
distribution on its Common Stock or other securities of the Corporation,
(B) split or subdivide the outstanding Common Stock, (C) combine the
outstanding Common Stock into a smaller number of shares or (D) issue by
reclassification of its Common Stock any shares or other securities of the
Corporation, then, in each such event, the Conversion Rate shall be
adjusted proportionately so that the holders of 1997-Major Series shall be
entitled to receive the kind and number of shares or other securities of
the Corporation which such holders would have owned or have been entitled
to receive after the happening of any of the events described above had
such shares of 1997-Major Series been converted immediately prior to the
happening of such event (or any record date with
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<PAGE>
respect thereto). Such adjustment shall be made whenever any of the events
listed above shall occur. An adjustment made to the Conversion Rate
pursuant to this paragraph 5(d)(i) shall become effective immediately upon
the effective date of the event or, if earlier, shall become effective
retroactive to the record date for the event.
(ii) If the Corporation shall consolidate or merge with or into any
other corporation (other than a merger or consolidation in which the
Corporation is the surviving or continuing corporation and which does not
result in any reclassification, conversion or change of the outstanding
shares of Common Stock), then, unless the right to convert shares of the
1997-Major Series shall have terminated, as part of such consolidation or
merger, lawful provision shall be made so that holders of the 1997-Major
Series shall thereafter have the right to convert each share of the
1997-Major Series into the kind and amount of shares of stock and/or other
securities or property receivable upon such consolidation or merger by a
holder of the number of shares of Common Stock into which such shares of
the 1997-Major Series might have been converted immediately prior to such
consolidation or merger. Such provision shall also provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in the foregoing paragraph (i). The foregoing
provisions of this paragraph (ii) shall similarly apply to successive
consolidations and mergers.
(iii) If the Corporation shall sell or convey to another Person the
property of the Corporation as an entirety, or substantially as an
entirety, in connection with which shares or other securities or cash or
other property shall be issuable, distributable, payable or deliverable
for outstanding shares of Common Stock, then, unless the right to convert
such shares shall have terminated, lawful provision shall be made so that
the holders of the 1997-Major Series shall thereafter have the right to
convert each share of the 1997-Major Series into the kind and amount of
shares of stock or other securities or property that shall be issuable,
distributable, payable or deliverable upon such sale or conveyance with
respect to each share of Common Stock immediately prior to such
conveyance.
(e) Whenever the number of shares to be issued upon conversion of
the 1997-Major Series is required to be adjusted as provided in this paragraph
5, the Corporation shall forthwith compute the adjusted number of shares to be
so issued and prepare a certificate setting forth such adjusted conversion
amount and the facts upon which such adjustment is based, and such certificate
shall forthwith be filed with the Transfer Agent for the 1997-Major Series and
the Common Stock, and the Corporation shall mail to each holder of record of the
1997-Major Series notice of such adjusted conversion price.
(f) If at any time the Corporation shall propose:
(i) to pay any dividend or distribution payable in shares upon its
Common Stock or make any distribution (other than cash dividends) to the
holders of its Common Stock;
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<PAGE>
(ii) to offer for subscription to the holders of its Common Stock
any additional shares of any class or any other rights;
(iii) any capital reorganization or reclassification of its shares,
or the consolidation or merger of the Corporation with another
corporation; or
(iv) the voluntary dissolution, liquidation or winding-up of the
Corporation;
the Corporation shall cause at least fifteen (15) days' prior notice of the date
on which (A) the books of the Corporation shall close, or a record be taken for
such stock dividend, distribution or subscription rights, or (B) such capital
reorganization, reclassification, consolidation, merger, dissolution,
liquidation or winding-up shall take place, as the case may be, to be mailed to
the Transfer Agent for the 1997-Major Series and for the Common Stock and to the
holders of record of the 1997-Major Series.
(g) So long as any shares of the 1997-Major Series shall remain
outstanding and the holders thereof shall have the right to convert the same in
accordance with provisions of this paragraph 5, the Corporation shall at all
times reserve from the authorized and unissued shares of its Common Stock a
sufficient number of shares to provide for such conversions.
(h) The term "Common Stock" as used in this paragraph 5 shall mean
Common Stock of the Corporation as such stock is constituted at the date of
issuance thereof or as it may from time to time be changed, or shares of stock
of any class, other securities and/or property into which the shares of the
1997-Major Series shall at any time become convertible pursuant to the
provisions of this paragraph 5.
(i) The Corporation shall pay the amount of any and all issue taxes
which may be imposed in respect of any issue or delivery of stock upon the
conversion of any shares of the 1997-Major Series, but all transfer taxes that
may be payable in respect of any change of ownership of the 1997-Major Series,
or any rights represented thereby, or of stock receivable upon conversion
thereof, shall be paid by the Person or Persons surrendering such stock for
conversion.
6. Voting Rights.
Each share of the 1997-Major Series shall entitle its holder to two
votes, and with respect to such votes, a holder of shares of the 1997-Major
Series shall have full voting rights and powers equal to the voting rights and
powers of a holder of shares of Common Stock, and shall be entitled to a notice
of any stockholders' meeting in accordance with the By-laws of the Corporation
and shall be entitled to vote with holders of Common Stock together as a single
class.
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<PAGE>
7. Status of Converted Stock.
In case any shares of the 1997-Major Series shall be converted
pursuant to paragraph 5, or otherwise repurchased or reacquired, the shares so
converted or otherwise repurchased or reacquired shall resume the status of
authorized but unissued shares of Preferred Stock and shall no longer be
designated as shares of the 1997-Major Series.
8. No Preemptive Rights.
No holder of any shares of the 1997-Major Series, as such, shall be
entitled as a matter of right to subscribe for or purchase any part of any new
or additional issue of shares of any class or series, junior or senior thereto,
or securities convertible into, exchangeable for, or exercisable for the
purchase of, shares of any class or series, junior or senior, whether now or
hereafter authorized, and whether issued for cash, property, services, by way of
dividends, or otherwise.
9. Defined Terms.
As used herein the following terms have the following respective
meanings:
"Conversion Rate" has the meaning assigned to such term in Section
5(a) hereof.
"Corporation" has the meaning assigned to such term in certification
I hereof.
"Issue Date" has the meaning assigned to such term in paragraph 5(b)
hereof.
"Junior Stock" has the meaning assigned to such term in paragraph
3(a) hereof.
"Liquidation Value" means $4.00 per share of the 1997-Major Series.
"Payout Price" has the meaning assigned to such term in paragraph
5(c) hereof.
"Market Value" means the mean between the closing bid and asked
prices per share of the Common Stock over the 20 consecutive trading days prior
to the Issue Date.
"1997-Major Series" has the meaning assigned to such term in
paragraph 1 hereof.
"Person" means any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated association or
government (or any agency, instrumentality or political subdivision thereof).
"Transfer Agent" has the meaning assigned to such term in paragraph
5(c) hereof.
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<PAGE>
Signed on this ___ day of [_______], 1998.
BRUCE BENDELL
DORON COHEN
YOSSI KOREN
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of October 22, 1997 between
FIDELITY HOLDINGS, INC., a corporation organized under the laws of the State of
Nevada (the "Company"), and BRUCE BENDELL, an individual residing at 75 Georgian
Court, Roslyn, New York 11576 ("Bendell").
The Company, Bendell, Major Automotive Group, Inc. ("Major Auto"),
and Major Acquisition Corp. ("Major Acquisition") are parties to a Plan and
Agreement of Merger (the "Merger Agreement") pursuant to which, among other
things, Major Acquisition will acquire from Bendell all of the issued and
outstanding shares of Major Auto in exchange for 900,000 shares of the Company's
1997-MAJOR Series of Convertible Preferred Stock (the "1997-Major Series"). The
shares of the 1997-Major Series will be convertible into shares of the Company's
Common Stock on the terms and conditions set forth in the Certificate of
Designation of the Powers, Preferences, Limitations, Restrictions, and Relative
Rights of the 1997-MAJOR Series of Convertible Preferred Stock attached hereto
as Exhibit A (the "Certificate of Designation").
In order to induce Bendell to enter into the Merger Agreement and to
consummate the acquisition contemplated thereby, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company has agreed to grant to Bendell certain registration rights with respect
to the shares of Common Stock into which the shares of the 1997-Major Series are
convertible. Accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. As used herein, the following terms have the
following respective meanings:
"Certificate of Designation" has the meaning assigned to such term
in the second paragraph of this Agreement.
"Commission" means the Securities and Exchange Commission, and any
successor entity.
"Company" has the meaning assigned to such term in the first
paragraph of this Agreement.
"Cutback Registration" means any registration to be effected as an
underwritten Public Offering in with the Managing Underwriter with respect
thereto advises the Company and the Requesting Holders in writing that, in its
opinion, the number of securities requested to be included in such registration
(including the Company's securities that are not Registrable Securities) exceeds
the number which can be sold in such offering without a material reduction in
the selling price anticipated to be received for the securities to be sold in
such Public Offering.
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"Indemnified Party" means a Person entitled to indemnification in
accordance with Section 2.04 hereof.
"Indemnifying Party" means a Person obligated to provided
indemnification in accordance with Section 2.04 hereof.
"Losses" has the meaning assigned to such term in paragraph 2.04(a)
hereof.
"Major Acquisition" has the meaning assigned to such term in the
second paragraph of this Agreement.
"Major Auto" has the meaning assigned to such term in the second
paragraph of this Agreement.
"Managing Underwriter" means, with respect to any Public Offering,
the underwriter or underwriters managing such Public Offering.
"Merger Agreement" has the meaning assigned to such term in the
second paragraph of this Agreement.
"1997-Major Series" has the meaning assigned to such term in second
paragraph of this Agreement.
"Notice of Piggyback Registration" has the meaning assigned to such
term in Section 2.01(a) hereof.
"Person" means any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated association or
government (or any agency, instrumentality or political subdivision thereof).
"Public Offering" means any offering by the Company of any of its
securities to the public, either on behalf of the Company or any of its
securityholders, pursuant to an effective registration statement under the
Securities Act.
"Registrable Securities" means any shares of Common Stock issued
upon a conversion of shares of the 1997-Major Series in accordance with the
Certificate of Designation, provided that such Common Stock shall cease to be
Registrable Securities to the extent that (a) a registration statement with
respect to the sale of such Common Stock shall have become effective under the
Securities Act and such Common Stock shall have been disposed of in accordance
with such registration statement, (b) the shares of such Common Stock shall have
been distributed to the public pursuant to Rule 144 promulgated under the
Securities Act or (c) such Common Stock shall cease to be outstanding.
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"Registration Expenses" means all expenses incident to the Company's
performance or compliance with its obligations hereunder to effect the
registration of Registrable Securities, including, without limitation, all
registration, filing, securities exchange listing and National Association of
Securities Dealers' fees, all registration, filing, qualification and other fees
and expenses of complying with the securities or blue sky laws, all duplicating
and printing expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits or comfort letters required by or incident to such performance and
compliance, and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, in respect of Registrable Securities,
which transfer taxes shall be paid by each holder thereof.
"Requesting Holders" means, with respect to any registration of the
Company's securities, the holders of Registrable Securities requesting to have
Registrable Securities included in such registration in accordance with the
terms hereof.
"Securities Act" means the Securities Act of 1933, as amended.
Section 2. Piggyback Registration Rights.
2.01 Registrations.
(a) Right to Include Registrable Securities. If at any time the
Company proposes to register any of its securities under the Securities Act, it
will each such time give prompt written notice (a "Notice of Piggyback
Registration"), at least 30 days prior to the anticipated filing date, to all
holders of Registrable Securities of its intention to do so and of such holders'
rights under this Section 2.01(a), which Notice of Piggyback Registration shall
include a description of the intended method of disposition of such securities.
Upon the written request of the holders of all, but not less than all, of the
Registrable Securities made within 15 days after receipt of a Notice of
Piggyback Registration (which request shall specify the Registrable Securities
intended to be disposed of and the intended method of disposition thereof), the
Company will use its best efforts to include in the registration statement
relating to such registration all Registrable Securities which the Company has
been so requested to register. Notwithstanding the foregoing, if, at any time
after giving a Notice of Piggyback Registration and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay registration
of such securities, the Company may, at its election, give written notice of
such determination to each holder of Registrable Securities and, thereupon, (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), and (ii) in the case of a determination to delay
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registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other securities.
(b) Registration Expenses. The Company will pay all Registration
Expenses incurred in connection with each registration of securities.
(c) Priority in Cutback Registrations. If any such registration of
securities becomes a Cutback Registration, the Company will include in such
registration to the extent of the amount of the securities which the Managing
Underwriter advises the Company can be sold in such offering:
(i) if such registration as initially proposed by the Company was
solely a primary registration of its securities, (x) first the securities
proposed by the Company to be sold for its own account, and (y) second,
any Registrable Securities requested to be included in such registration
by the Requesting Holders and any other securities of the Company proposed
to be included in such registration, allocated among the holders thereof
in accordance with the priorities then existing among the Company and such
holders; and
(ii) if such registration as initially proposed by the Company was
in whole or in part requested by holders of securities of the Company,
other than holders of Registrable Securities in their capacities as such,
pursuant to demand registration rights, (x) first, such securities held by
the holders initiating such registration and, if applicable, any
securities proposed by the Company to be sold for its own account,
allocated in accordance with the priorities then existing among the
Company and such holders, and (y) second, any Registrable Securities
requested to be included in such registration by the Requesting Holders
and any other securities of the Company proposed to be included in such
registration, allocated among the holders thereof in accordance with the
priorities then existing among the Company and such holders;
and any securities so excluded shall be withdrawn from and shall not be included
in such registration.
2.02 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 2.01 hereof, the Company
will use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended methods of disposition
thereof specified by the Requesting Holders. Without limiting the foregoing, the
Company in such case will, as expeditiously as possible notify each holder of
Registrable Securities covered by such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which any prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
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therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The Company may require each holder of Registrable Securities as to
which any registration is being effected to, and each such holder, as a
condition to including Registrable Securities in such registration, shall,
furnish the Company with such information and affidavits regarding such holder
and the distribution of such securities as the Company may from time to time
reasonably request in writing in connection with such registration.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in the second sentence of this
Section 2.02, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of a
supplemented or amended prospectus and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
2.03 Underwritten Offerings. If the Company at any time proposes to
register any of its securities and such securities are to be distributed by or
through one or more underwriters, the Company will, subject to the provisions of
paragraph 2.01(c), use its best efforts, if requested by the holders of all of
the Registrable Securities, to arrange for such underwriters to include the
Registrable Securities to be offered and sold by such holders among the
securities to be distributed by such underwriters, and such holders shall be
obligated to sell their Registrable Securities in such registration through such
underwriters on the same terms and conditions as apply to the other Company
securities to be sold by such underwriters in connection with such registration.
The holders of Registrable Securities shall be parties to the underwriting
agreement between the Company and such underwriter or underwriters. No
Requesting Holder may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom.
2.04 Indemnification.
(a) Indemnification by the Company. The Company shall, to the full
extent permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with the
registration of the Company's securities, its directors and officers, and each
other Person, if any, who controls any such seller within the meaning of the
Securities Act, against any losses, claims, damages, expenses or liabilities,
joint or several (together, "Losses"), to which such seller or any
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such director or officer or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, and the Company will reimburse such seller
and each such director, officer and controlling Person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such Loss (or action or proceeding in respect thereof); provided
that the Company shall not be liable in any such case to the extent that any
such Loss (or action or proceeding in respect thereof) arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such seller for use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such seller or any such director, officer or controlling Person, and shall
survive the transfer of such securities by such seller. The Company shall also
indemnify each other Person who participates (including as an underwriter) in
the offering or sale of Registrable Securities, their officers and directors and
each other Person, if any, who controls any such participating Person within the
meaning of the Securities Act to the same extent as provided above with respect
to sellers of Registrable Securities.
(b) Indemnification by the Sellers. Each holder of Registrable
Securities which are included or are to be included in any registration
statement filed in connection with a registration of the Company's securities,
as a condition to including Registrable Securities in such registration
statement, shall, to the full extent permitted by law, indemnify and hold
harmless the Company, its directors and officers, and each other Person, if any,
who controls the Company within the meaning of the Securities Act, against any
Losses to which the Company or any such director or officer or controlling
Person may become subject under the Securities Act or otherwise, insofar as such
Losses (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of such seller for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the obligation to
provide indemnification pursuant to this paragraph (b) shall be several, and not
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joint and several, among such Indemnifying Parties on the basis of the number of
Registrable Securities included in such registration statement and the aggregate
amount which may be recovered from any holder of Registrable Securities pursuant
to the indemnification provided for in this paragraph (b) in connection with any
registration and sale of Registrable Securities shall be limited to the total
proceeds received by such holder from the sale of such Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling Person and shall survive the transfer of such securities by such
seller. Such holders shall also indemnify each other Person who participates
(including as an underwriter) in the offering or sale of Registrable Securities,
their officers and directors and each other Person, if any, who controls any
such participating Person within the meaning of the Securities Act to the same
extent as provided above with respect to the Company.
(c) Notices of Claims, Etc. Promptly after receipt by an
Indemnified Party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraph (a) or (b) of this
Section 2.04, such Indemnified Party will, if a claim in respect thereof is to
be made against an Indemnifying Party pursuant to such paragraphs, give written
notice to the latter of the commencement of such action, provided that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under the paragraph (a) or (b)
of this Section 2.04, as the case may be, except to the extent that the
Indemnifying Party is actually prejudiced by such failure to give notice. In
case any such action is brought against an Indemnified Party, the Indemnifying
Party shall be entitled to participate in and, unless, in the reasonable
judgment of any Indemnified Party, a conflict of interest between such
Indemnified Party and any Indemnifying Party exists with respect to such claim,
to assume the defense thereof, jointly with any other Indemnifying Party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the Indemnifying
Party to such Indemnified Party of its election so to assume the defense
thereof, the Indemnifying Party shall not be liable to such Indemnified Party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party may participate in such
defense at the Indemnified Party's expense; and provided further that the
Indemnified Party or Indemnified Parties shall have the right to employ one
counsel to represent it or them if, in the reasonable judgment of the
Indemnified Party or Indemnified Parties, it is advisable for it or them to be
represented by separate counsel by reason of having legal defenses which are
different from or in addition to those available to the Indemnifying Party, and
in that event the reasonable fees and expenses of such one counsel shall be paid
by the Indemnifying Party. If the Indemnifying Party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for the Indemnified Parties with
respect to such claim, unless in the reasonable judgment of any Indemnified
Party a conflict of interest may exist between such Indemnified Party and any
other Indemnified Parties with respect to such claim, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel for the Indemnified Parties or counsels. No Indemnifying
Party shall consent to entry of any judgment or enter into any settlement
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without the consent of the Indemnified Party. No Indemnifying Party shall be
subject to any liability for any settlement made without its consent, which
consent shall not be unreasonably withheld.
(d) Contribution. If the indemnity and reimbursement obligation
provided for in any paragraph of this Section 2.04 is unavailable or
insufficient to hold harmless an Indemnified Party in respect of any Losses (or
actions or proceedings in respect thereof) referred to therein, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party on the
other hand in connection with statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this paragraph were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first sentence of
this paragraph. The amount paid by an Indemnified Party as a result of the
Losses referred to in the first sentence of this paragraph shall be deemed to
include any legal and other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any Loss which is the
subject of this paragraph.
No Indemnified Party guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
the Indemnifying Party if the Indemnifying Party was not guilty of such
fraudulent misrepresentation.
(e) Other Indemnification. The provisions of this Section 2.04 shall
be in addition to any other rights to indemnification or contribution which an
Indemnified Party may have pursuant to law, equity, contract or otherwise.
Section 3. Representations and Warranties of Bendell. Bendell
represents and warrants to the Company that:
3.01 Investment. Bendell will purchase the 1997-Major Series only
for his own account, for investment purposes and not with a view to resale or
distribution, and not on behalf of any other Person.
3.02 No Agreement to Transfer. Bendell is not a party to any
agreement, arrangement or understanding concerning the transfer of the
1997-Major Series or any interest therein to any other Person.
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3.03 Knowledge and Experience. Bendell has (a) adequate knowledge
and experience in financial and business matters to be able to evaluate the
merits and risks of his investment in the Company and the 1997-Major Series or
(b) the advice or representation of a Person having such knowledge or
experience.
3.04 Access to Information. Bendell has had, and continues to have
access to sufficient information regarding the Company in order to evaluate the
merits and risks of his investment in the Company and the 1997-Major Series.
3.05 Risk. Bendell is able to bear the economic risk of its
investment in the Company and the 1997-Major Series and to hold the 1997-Major
Series for investment.
3.06. Restrictions on Transfer. The 1997-Major Series (i) will not
be registered by reason of an exemption from registration under Section 3(b) or
4(2) of the Securities Act, or Regulation D promulgated thereunder, and (ii) is
not publicly traded, no market exists for the 1997-Major Series and, except for
the conversion of the shares thereof into the Company's Common Stock in
accordance with the terms and conditions set forth in the Certificate of
Designation, Bendell must hold the 1997-Major Series indefinitely unless a
subsequent transfer or other disposition is registered under the Securities Act
or is exempt from registration thereunder at the time of such transfer or other
disposition.
Section 4. Miscellaneous.
4.01 Waiver. No failure on the part of either party hereto to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
4.02 Notices. All notices, requests and other communications
provided for herein shall be given or made in writing (including, without
limitation, by telecopy) by the close of business on the day the notice is given
or delivered to the intended recipient at (a) in the case of the Company, 80-02
Kew Gardens Road, Suite 5000, Kew Gardens, NY 11415, telecopy: 718-793-4830,
attention: President and (b) in the case of Bendell, 80-02 Kew Gardens Road,
Suite 5000, Kew Gardens, NY 11415, telecopy: 718-793-4830, attention: Bruce
Bendell; or, as to either party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
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4.03 Amendments. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Company and Bendell and any provision
of this Agreement may be waived only by an instrument in writing signed by the
party waiving such provision.
4.04 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
4.05 Captions. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
4.06 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
4.07 Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the law of the State of New
York.
4.08 Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
applicable law, (a) the other provisions hereof shall remain in full force and
effect in such jurisdiction in order to carry out the intentions of the parties
hereto as nearly as may be possible and (b) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision hereof in any other jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly execute and delivered as of the date first above written.
FIDELITY HOLDINGS, INC.
By__________________________________________
Name: Doron Cohen
Title: President, Chief Executive Officer
and Treasurer
BRUCE BENDELL
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STOCK PLEDGE AND SECURITY AGREEMENT
THIS STOCK PLEDGE AND SECURITY AGREEMENT, made this 26th day of March,
1996 by and among:
DORON COHEN and BRUCE BENDELL, adult individuals competent to contract,
residing, respectively, at 47 Parker Boulevard, Monsey, New York 10952 and 75
Georgian Court, Roslyn, New York 11576 (hereinafter "PLEDGORS")
AND
AVRAHAM NISSANIAN, an adult individual residing at 139-34 78th Drive,
Flushing, New York 11367; YOSSI KOREN, an adult individual residing at 124
Audley Street, Kew Gardens, New York 11418; and SAM LIVIAN, an adult individual
residing at 65 Tennis Place, Forest Hills, New York 11375; jointly and
severally, (hereinafter collectively "the PLEDGEES")
AND
ROBERT L. RIMBERG, an attorney licensed to practice law in the state of
New York having his principal office located at 866 Third Avenue, 30th Floor,
New York, New York 10022 (hereinafter "BAILEE")
WITNESSETH THAT:
WHEREAS, the PLEDGEES have formed a Delaware corporation, named Nissko
Telecon, Inc., which pursuant to a Purchase Agreement ("Purchase Agreement") has
agreed to purchase fifteen (15) "Talkie Power Web Line Machines" from Computer
Business Science, Inc., a New York corporation wholly-owned by Fidelity
Holdings, Inc., a Nevada corporation, of which the PLEDGORS are directors,
officers and controlling stockholders;
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WHEREAS, in the Purchase Agreement the PLEDGORS have each agreed to
collateralize the recovery by PLEDGEES of their initial purchase price of Six
Hundred Twenty-nine Thousand Dollars ($629,000) by each pledging Five Hundred
Thousand (500,000) shares of the Common Stock of Fidelity Holdings, Inc. owned
by them, whereby in the event of default, PLEDGEES can elect to direct BAILEE to
dispose of sufficient of the shares being deposited hereunder in order to secure
the funds necessary to meet the obligations of PLEDGORS; and
WHEREAS, the parties have negotiated and desire a written document to
formalize and evidence their understandings;
NOW, THEREFORE, intending to be legally bound, and in consideration of the
PLEDGEES' execution and closing of the Purchase Agreement and PLEDGORS'
agreement to collateralize the down payment being made for such machines, the
parties have agreed as follows:
1. (a) The PLEDGEES and PLEDGORS hereby appoint and designate ROBERT L.
RIMBERG, ESQ. 866 Third Avenue, 30th Floor, New York, New York 10022
(hereinafter "BAILEE") for the purpose set forth herein and BAILEE accepts such
appointment.
(b) The PLEDGEES and the PLEDGORS authorize BAILEE to act pursuant to
the terms of this Agreement. In the event of the disability, death, inability to
act or resignation of BAILEE, PLEDGORS and the PLEDGEES shall select a bank,
trust company or other appropriate person to act as substitute bailee hereunder.
In such event, PLEDGORS and the PLEDGEES shall be jointly and severally liable
for any service fees and costs notwithstanding Paragraph 5(a) below.
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The term "BAILEE-" as used herein is used merely for convenience as the
PLEDGORS recognize and agree that the BAILEE is acting as agent for the
PLEDGEES. Further, the parties recognize that possession of the "bailed" shares
by the "BAILEE" shall be deemed a possession by the PLEDGEES for all purposes
including, but not limited to, perfection of PLEDGEES' security interest in the
"bailed" shares.
2. (a) PLEDGORS hereby grant to the PLEDGEES a security interest in the
following listed shares of stock in Fidelity Holdings, Inc., a Nevada
corporation (hereinafter referred to as "the Shares") as follows:
CERTIFICATE SHARES REGISTERED OWNER
----------- ------ ----------------
0001 250,000 Bruce Bendell
0002 250,000 Bruce Bendell
0030 250,000 Doron Cohen
0038 250,000 Doron Cohen
(b) The PLEDGEES and PLEDGORS hereby deposit the shares with the
BAILEE. Contemporaneously, PLEDGORS are each depositing with the BAILEE three
(3) blank stock powers, with the signatures having Medallion guarantees.
(c) BAILEE shall hold and dispose of the Shares in accordance with the
terms and provisions of this Agreement.
3. (a) Subject to subparagraph (b) following, BAILEE shall keep and
preserve the Shares pending delivery to PLEDGORS or the disposition of the
Shares for the PLEDGEES as provided below or until tender into court as provided
in Paragraph 6 below.
(b) At such time as PLEDGORS believe that CBS has fully complied with
the terms of the Purchase Agreement and that their guarantee has therefore
become ineffective and that accordingly they are entitled to the return of the
Shares, PLEDGORS may give to BAILEE written demand (certified mail, return
receipt requested) for delivery of the Shares. Within three (3) business days
after receipt of any such demand, BAILEE shall notify PLEDGEES in writing by
certified mail, return receipt requested, of the demand made by PLEDGORS. Twenty
(20) days after BAILEE receives such demand from PLEDGORS, BAILEE, in the
absence of having actually received written objections (certified mail, return
receipt requested) from PLEDGEES specifying all defaults as outlined in (d)
below, shall deliver the Shares to PLEDGORS. Such delivery shall terminate the
pledge thereof as well as the PLEDGEES' security interest in the Shares.
<PAGE>
(d) At such time as PLEDGEES believe that CBS has defaulted on its
undertakings and obligations under the Subscription Agreement and that the
guarantee of PLEDGORS is activated, PLEDGEES may notify BAILEE in writing, by
certified mail, return receipt requested, of such belief and may advise BAILEE
that they wish to exercise their rights under the Purchase Agreement pursuant to
Article 9 of the Uniform Commercial Code (U.C.C.). The notice to Bailee shall
specifically state all defaults which PLEDGEES believe have occurred. Within
three (3) business days after receipt of any such notice, BAILEE shall notify
PLEDGORS in writing (certified mail, return receipt requested) of the PLEDGEES'
demand, also transmitting a copy of PLEDGEES, written notice. Within twenty (20)
days after receipt of the PLEDGEES' notice, BAILEE, in the absence of having
actually received written objection (certified mail, return receipt requested)
from PLEDGORS, shall comply with the PLEDGEES, instructions regarding their
rights under the Purchase Agreement pursuant to Article 9 of the U.C.C.
(e) The parties making objection (responding) under (c) or (d) above
shall mail their objection to BAILEE by certified mail, return receipt
requested, and mail a copy thereof, also by certified mail, return receipt
requested, to the party who made the demand for delivery. Any such objection
shall state with specificity the reason(s) for objection. If BAILEE shall not
have actually received the objection (response) by the close of business on the
twentieth day, BAILEE shall be entitled to proceed.
<PAGE>
(f) BAILEE shall have no responsibility to determine compliance or
default under (c) or (d) above. If BAILEE shall receive a timely written
objection to delivery from the PLEDGEES, as provided in (c) above, BAILEE shall
not make delivery to PLEDGORS until the controversy with respect thereto shall
have been settled either by an agreement between the PLEDGEES and the PLEDGORS
or by a final judgment of a court of competent jurisdiction not subject to
further appeal. Similarly, if BAILEE shall receive a timely written objection to
delivery from PLEDGORS as provided in (d) above, BAILEE shall not comply with
PLEDGEES' instructions until the controversy with respect thereto shall have
been settled either by an agreement between PLEDGEES and the PLEDGORS or by a
final judgment of a court of competent jurisdiction not subject to further
appeal. BAILEE shall have no authority or responsibility to resolve the dispute.
If settlement is achieved by agreement between the PLEDGEES and the PLEDGORS, a
copy of the settlement, with delivery instructions, signed by all the parties,
shall be delivered to BAILEE who shall deliver the Shares in accordance with the
instructions.
(g) If both the PLEDGORS and the PLEDGEES shall proceed respectively
under (b) and (c) above, the procedures set forth in (b), (c), (d) and (e) above
Paragraph 7(b) shall control.
(h) In the absence of prior demand and objection, if any, this
Agreement shall terminate on June 30, 1998, and upon such termination, BAILEE
shall deliver the Shares to the PLEDGORS.
(i) Upon the delivery of the Shares as provided in (c), (d), (f), (g)
or (h) above, all obligations between PLEDGORS and the PLEDGEES on the one hand,
and BAILEE on the other, shall cease.
4. In the event of a merger, acquisition, reorganization or
recapitalization of Fidelity Holdings, Inc. the shares and all other
consideration received in respect to the Shares shall be delivered and, or in
the alternative, paid to BAILEE. Upon receipt of such consideration if full,
BAILEE shall release and deliver the Shares to PLEDGORS or other persons
entitled hereto under the circumstances. In the event of a dissolution, sale of
assets or other such transaction, PLEDGORS and the PLEDGEES shall determine the
type and quantity of alternate security to be deposited with BAILEE in
substitution of the Shares, which BAILEE shall release and deliver as directed
in writing signed by both the PLEDGEES and PLEDGORS.
<PAGE>
5. In the event of PLEDGORS' default and delivery of the shares to
PLEDGEES, PLEDGEES shall sell sufficient shares to secure the funds necessary to
meet the obligations of PLEDGORS under the Purchase Agreement. Any such sales
may be at public or private sales but shall comply with all applicable federal
and state security laws and regulations.
6. (a) There shall be no fee or service charge payable to the BAILEE for
serving in that capacity under the terms of this Agreement.
(b) PLEDGORS and the PLEDGEES jointly and severally hereby agree to
indemnify and hold harmless BAILEE against any and all losses, claims, damages,
liabilities and expenses, including reasonable costs of investigation and
counsel fees and disbursements, which may be imposed upon BAILEE or incurred by
BAILEE in connection with his acceptance of appointment as BAILEE hereunder, or
the performance of his duties hereunder, including any litigation arising from
this Agreement or involving the subject matter hereof.
7. (a) in performing any of his duties hereunder, BAILEE shall not incur
any liability to anyone for damages, losses or expenses, except for willful
default or breach of trust, and he shall accordingly not incur any such
liability with respect (i) to any action taken or omitted in good faith upon
advice of his counsel or counsel for the parties given with respect to any
questions relating to his duties and responsibilities as BAILEE under this
Agreement, or (ii) to any action taken or omitted in reliance upon any
instrument, including any written notice or instruction provided for in this
Agreement, not only as to its due execution and the validity and effectiveness
of its provisions but also to the truth and accuracy of any information
contained therein, which BAILEE shall in good faith believe to be genuine, to
have been signed or presented by a proper person or persons, and to conform with
the provisions of this Agreement.
<PAGE>
(b) In the event of a dispute between any of the parties hereto
sufficient in the discretion of the BAILEE to justify his doing so, BAILEE shall
be entitled to tender into the registry or custody of any court of competent
jurisdiction, the Shares and all money or other property in his hands under this
Agreement, together with such legal pleadings as he deems appropriate, and
thereupon be discharged from all further duties and liabilities under this
Agreement. Any such legal action may be brought in such court as BAILEE shall
determine has jurisdiction thereof.
8. (a) Until BAILEE shall have proceeded, pursuant to the PLEDGEES'
instructions as provided in Paragraph 3(c) above, PLEDGORS shall be entitled to:
vote the Shares and to transfer, assign and otherwise have and exercise all
rights of ownership therein; but always subject to the terms and conditions of
this Agreement. Dividends shall be forthwith delivered to BAILEE. In the event
that PLEDGORS make any transfer or assignment, they shall provide written notice
to BAILEE of such and shall provide BAILEE with the name(s) and address(es) of
the transferee(s) or assignee(s).
(b) All dividends and distribution with respect to the Shares,
including stock dividends, shall be paid to the BAILEE who shall hold such as
additional collateral hereunder and dispose of such as otherwise provided for
the Shares themselves. The security interest of the PLEDGEES shall attach to all
dividends and distributions immediately upon declaration. All cash dividends
representing a distribution of profits (earned surplus or current earnings)
shall, in the event of default and delivery of the Shares to the PLEDGEES,
reduce proportionately the balance of the indebtedness from PLEDGORS to the
PLEDGEES upon delivery thereof to the PLEDGEES; all other dividends shall be
treated as additional collateral and reduce the liabilities only upon
disposition and only to the extent of the net proceeds thereof.
<PAGE>
9. The PLEDGEES' exercise of their rights hereunder shall not be deemed an
election of remedies. The PLEDGEES shall have the right to bid on and purchase
the Shares at any private or public sale in the event of default by PLEDGORS and
the debt of PLEDGORS, less the net proceeds of any such sale, shall survive such
sale.
10. All notices required hereunder shall be sent by certified mail, return
receipt requested, or by registered mail to the PLEDGORS, the PLEDGEES or BAILEE
(as may be applicable) at the addresses listed on page I hereof or to such other
address as shall be provided in writing.
11. This Agreement shall be binding upon and shall inure to the benefit of
the parties and their successors, assigns, heirs, legal representatives,
executors and administrators.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
Signed, sealed and delivered in the presence of:
WITNESS: PLEDGORS:
By:
---------------------------
DORON COHEN
By: /s/ Bruce Bendell
---------------------------
BRUCE BENDELL
BAILEE:
By:
---------------------------
ROBERT L. RIMBERG
<PAGE>
STOCK PLEDGE AND SECURITY AGREEMENT
Signatures continued
WITNESS: PLEDGEES:
By:
---------------------------
AVRAHAN NISSANIAN
By:
---------------------------
YOSSI KOREN
By:
---------------------------
SAM LIVIAN
<PAGE>
Doron Cohen, President
Bruce Bendell, President
Re: Amendment to Plan and Agreement of Merger
WITNESS:
/s/ Bruce Bendell
---------------------------
BRUCE BENDELL
cc: Robert E. Salad, Esquire
Michael Bellucci, Equire
Michael Dezorett, Esquire
Mr. Geofrey Alexander
<PAGE>
PLAN AND AGREEMENT OF MERGER
EXHIBIT "D"
Major Chevrolet, Inc. 61.0%
Major Dodge, Inc. 16.6%
Major Chrysler Plymouth Jeep Eagle, Inc. 16.6%
Major Suburu, Inc. 5.8%
EXHIBIT 4.9
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of October 22, 1997
between FIDELITY HOLDINGS, INC., a corporation organized under the laws of the
State of Nevada (the "Company"), BRUCE BENDELL, and CASTLE TRUST AND MANAGEMENT
SERVICES LIMITED, as Trustee (the "Trustee") under The Millenium Trust (the
"Trust") created under that certain Deed of Settlement dated October 2, 1996.
Pursuant to a Warrant Agreement dated as of October 2, 1996 (the
"Original Warrant Agreement") between the Company, Bruce Bendell and Harold
Bendell, which has been amended and restated by an Amended and Restated Warrant
Agreement between such parties dated as of October 11, 1997 (as so amended and
restated, and as further modified and supplemented and in effect from time to
time, the "Amended and Restated Warrant Agreement"). Pursuant to the Amended and
Restated Warrant Agreement, the Company has, among other things, issued to Bruce
Bendell warrants (the "Warrants") to acquire 50,000 shares of the Company's
Common Stock upon the terms and conditions set forth therein.
The Trust holds 125,000 shares of the Company's 1996-MAJOR
Series of Convertible Preferred Stock (the "1996-Major Series"). The shares of
the 1996-Major Series are convertible into shares of the Company's Common Stock
on the terms and conditions set forth in the Company's Certificate of
Designation, Powers, Preferences and Rights of the 1996-MAJOR Series of
Convertible Preferred Stock (as modified and supplemented and in effect from
time to time, the "Certificate of Designation").
The Company is in the process of filing with the Securities and
Exchange Commission a registration statement relating to an offering (the
"Current Offering") of certain shares of its Common Stock to the public. The
Trustee has the right to have registered in connection with the Current Offering
the Common Stock into which the 125,000 shares of the 1996-Major Series held by
the Trust are convertible. Bruce Bendell has the right to have registered in
connection with the Current Offering the Common Stock issuable upon exercise of
the Warrants.
The Company has requested that (a) the Trustee agree to waive its
right to have registered in connection with the Current Offering the Common
Stock into which the 125,000 shares of the 1996-Major Series owned by the
Trustee are convertible and (b) Bruce Bendell agree to waive his right to have
registered in connection with the Current Offering the Common Stock issuable
upon exercise of the Warrants. The Trustee and Bruce Bendell have agreed to
waive such rights upon the condition that the Company enter into this Agreement.
In consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company has agreed to grant to the Trustee certain
registration rights with respect to the shares of Common Stock into which the
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<PAGE>
shares of the 1996-Major Series are convertible and to grant to Bruce Bendell
certain registration rights with respect to the shares of Common Stock issuable
upon exercise of the Warrants. Accordingly, the parties hereto hereby agree as
follows:
Section 1. Definitions. As used herein, the following terms have
the following respective meanings:
"Amended and Restated Warrant Agreement" has the meaning assigned to
such term in second paragraph of this Agreement.
"Certificate of Designation" has the meaning assigned to such term in
the third paragraph of this Agreement.
"Commission" means the Securities and Exchange Commission, and
any successor entity.
"Company" has the meaning assigned to such term in the first
paragraph of this Agreement.
"Current Offering" has the meaning assigned to such term in the
fourth paragraph of this Agreement.
"Cutback Registration" means any registration to be effected as an
underwritten Public Offering in with the Managing Underwriter with respect
thereto advises the Company and the Requesting Holders in writing that, in its
opinion, the number of securities requested to be included in such registration
(including the Company's securities that are not Registrable Securities) exceeds
the number which can be sold in such offering without a material reduction in
the selling price anticipated to be received for the securities to be sold in
such Public Offering.
"Demand Registration" means any registration of Registrable
Securities under the Securities Act effected in accordance with Section 2.01
hereof.
"Effective Registration" means a Demand Registration which has been
declared effective or ordered effective in accordance with the rules of the
Commission.
"Indemnified Party" means a Person entitled to indemnification in
accordance with Section 2.05 hereof.
"Indemnifying Party" means a Person obligated to provided
indemnification in accordance with Section 2.05 hereof.
"Losses" has the meaning assigned to such term in paragraph
2.05(a) hereof.
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<PAGE>
"Managing Underwriter" means, with respect to any Public Offering,
the underwriter or underwriters managing such Public Offering.
"1996-Major Series" has the meaning assigned to such term in third
paragraph of this Agreement.
"Notice of Piggyback Registration" has the meaning assigned to such
term in Section 2.02(a) hereof.
"Original Warrant Agreement" has the meaning assigned to such term in
second paragraph of this Agreement.
"Person" means any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated association or
government (or any agency, instrumentality or political subdivision thereof).
"Piggyback Registration" means any registration of securities of the
Company under the Securities Act, whether for sale for the account of the
Company or for the account of any holder of securities of the Company (other
than Registrable Securities).
"Public Offering" means any offering by the Company of any of its
securities to the public, either on behalf of the Company or any of its
securityholders, pursuant to an effective registration statement under the
Securities Act, but excluding the Current Offering.
"Registrable Securities" means (a) any shares of Common Stock issued
upon a conversion of shares of the 1996-Major Series in accordance with the
Certificate of Designation and (b) any shares of Common Stock issued upon
exercise of the Warrants, provided that in each case such Common Stock shall
cease to be Registrable Securities to the extent that (i) a registration
statement with respect to the sale of such Common Stock shall have become
effective under the Securities Act and such Common Stock shall have been
disposed of in accordance with such registration statement, (ii) the shares of
such Common Stock shall have been distributed to the public pursuant to Rule 144
promulgated under the Securities Act or (iii) such Common Stock shall cease to
be outstanding.
"Registration Expenses" means all expenses incident to the
Company's performance or compliance with its obligations hereunder to effect the
registration of Registrable Securities, including, without limitation, all
registration, filing, securities exchange listing and National Association of
Securities Dealers' fees, all registration, filing, qualification and other fees
and expenses of complying with the securities or blue sky laws, all duplicating
and printing expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits or comfort letters required by or incident to such performance and
compliance, and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
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<PAGE>
commissions and transfer taxes, if any, in respect of Registrable Securities,
which transfer taxes shall be paid by each holder thereof.
"Registration Request" has the meaning assigned to such term in
Section 2.01(a) hereof.
"Requesting Holders" means, with respect to any registration of the
Company's securities, the holders of Registrable Securities requesting to have
Registrable Securities included in such registration in accordance with the
terms hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Trust" has the meaning assigned to such term in the first
paragraph of this Agreement.
"Trustee" has the meaning assigned to such term in the first
paragraph of this Agreement.
"Warrants" has the meaning assigned to such term in second
paragraph of this Agreement.
Section 2. Registration Rights.
2.01 Demand Registration.
(a) Demand Registration. At any time, upon the written request of the
holders of all, but not less than all, of the Registrable Securities requesting
that the Company effect the registration under the Securities Act of all or part
of such holders' Registrable Securities and specifying the number of Registrable
Securities to be registered and the intended method of disposition thereof (a
"Registration Request"), the Company will thereupon will use its best efforts to
effect the registration under the Securities Act of the Registrable Securities
to the extent requisite to permit the disposition (in accordance with the
intended methods thereof) of the Registrable Securities so to be registered. If
requested by the holders of the Registrable Securities requested to be included
in any Demand Registration, the method of disposition of all Registrable
Securities included in such registration shall be an underwritten offering
effected in accordance with Section 2.04(a) hereof. Subject to paragraph (e) of
this Section 2.01, the Company may include in such registration other securities
for sale for its own account or for the account of any other Person. If any
security holders of the Company (other than the holders of Registrable
Securities in such capacity) register securities of the Company in a Demand
Registration in accordance with this Section 2.01, such holders shall pay the
fees and expenses of their counsel and their pro rata share, on the basis of
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<PAGE>
the respective amounts of the securities included in such registration on behalf
of each such holder, of the Registration Expenses if the Registration Expenses
for such registration are not paid by the Company for any reason.
(b) Limitations on Demand Registrations. Notwithstanding
anything herein to the contrary, the Company shall not be required to honor a
request for a Demand Registration if:
(i) the Company has previously effected an Effective
Registration;
(ii) such request is received by the Company less than 90 days
following the effective date of any previous registration statement filed
in connection with a Demand Registration, regardless of whether any holder
of Registrable Securities exercised its rights under this Agreement with
respect to such registration.
(c) Registration Statement Form. Demand Registrations shall be on
such appropriate registration form promulgated by the Commission as shall be
selected by the Company, and shall be reasonably acceptable to the holders of
the Registrable Securities to which such registration relates, and shall permit
the disposition of such Registrable Securities in accordance with the intended
method or methods specified in their request for such registration.
(d) Registration Expenses. The Company will pay all Registration
Expenses incurred in connection with a Demand Registration.
(e) Priority in Cutback Registrations. If a Demand Registration
becomes a Cutback Registration, the Company will include in any such
registration to the extent of the number which the Managing Underwriter advises
the Company can be sold in such offering (i) first, Registrable Securities
requested to be included in such registration by the Requesting Holders, pro
rata on the basis of the number of Registrable Securities requested to be
included by such holders and (ii) second, other securities of the Company
proposed to be included in such registration, allocated among the holders
thereof in accordance with the priorities then existing among the Company and
the holders of such other securities; and any securities so excluded shall be
withdrawn from and shall not be included in such Demand Registration.
2.02 Piggyback Registrations.
(a) Right to Include Registrable Securities. If at any time the
Company proposes to register any of its securities under the Securities Act, it
will each such time give prompt written notice (a "Notice of Piggyback
Registration"), at least 30 days prior to the anticipated filing date, to all
holders of Registrable Securities of its intention to do so and of such holders'
rights under this Section 2.02(a), which Notice of Piggyback Registration shall
include a description of the intended method of disposition of such securities.
Upon the written request of the holders of all, but not less than all, of the
Registrable Securities made within 15 days after receipt of a Notice of
Piggyback Registration (which request shall specify the Registrable Securities
intended to be disposed of and the intended method of disposition thereof), the
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<PAGE>
Company will use its best efforts to include in the registration statement
relating to such registration all Registrable Securities which the Company has
been so requested to register. Notwithstanding the foregoing, if, at any time
after giving a Notice of Piggyback Registration and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay registration
of such securities, the Company may, at its election, give written notice of
such determination to each holder of Registrable Securities and, thereupon, (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other securities.
(b) Registration Expenses. The Company will pay all Registration
Expenses incurred in connection with each registration of securities.
(c) Priority in Cutback Registrations. If any such registration of
securities becomes a Cutback Registration, the Company will include in such
registration to the extent of the amount of the securities which the Managing
Underwriter advises the Company can be sold in such offering:
(i) if such registration as initially proposed by the Company was
solely a primary registration of its securities, (x) first the securities
proposed by the Company to be sold for its own account, (y) second, any
Registrable Securities requested to be included in such registration by
the Requesting Holders, pro rata on the basis of the number of Registrable
Securities requested to be included by such holders, and (z) third, any
other securities of the Company proposed to be included in such
registration, allocated among the holders thereof in accordance with the
priorities then existing among the Company and such holders; and
(ii) if such registration as initially proposed by the Company was in
whole or in part requested by holders of securities of the Company, other
than holders of Registrable Securities in their capacities as such,
pursuant to demand registration rights, (x) first, such securities held by
the holders initiating such registration and, if applicable, any
securities proposed by the Company to be sold for its own account,
allocated in accordance with the priorities then existing among the
Company and such holders, and (y) second, any Registrable Securities
requested to be included in such registration by the Requesting Holders,
pro rata on the basis of the number of Registrable Securities requested to
be included by such holders, and (z) third, any other securities of the
Company proposed to be included in such registration, allocated among the
holders thereof in accordance with the priorities then existing among the
Company and the holders of such other securities;
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<PAGE>
and any securities so excluded shall be withdrawn from and shall not be included
in such registration.
2.03 Registration Procedures. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 2.01 or 2.02 hereof, the Company
will use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended methods of disposition
thereof specified by the Requesting Holders. Without limiting the foregoing, the
Company in such case will, as expeditiously as possible notify each holder of
Registrable Securities covered by such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which any prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The Company may require each holder of Registrable Securities as to
which any registration is being effected to, and each such holder, as a
condition to including Registrable Securities in such registration, shall,
furnish the Company with such information and affidavits regarding such holder
and the distribution of such securities as the Company may from time to time
reasonably request in writing in connection with such registration.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in the second sentence of this
Section 2.03, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of a
supplemented or amended prospectus and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
2.04 Underwritten Offerings.
(a) Underwritten Demand Offerings. In the case of any
underwritten Public Offering being effected pursuant to a Demand Registration,
the Managing Underwriter and any other underwriter or underwriters with respect
to such offering shall be selected, after consultation with the Company, by the
holders of all of the Registrable Securities, which consent shall not be
unreasonably withheld. The Company shall enter into an underwriting agreement in
customary form with such underwriter or underwriters, which shall include, among
other provisions, indemnities to the effect and to the extent provided in
Section 2.05 hereof and shall take all such other actions as are reasonably
requested by the Managing Underwriter in order to expedite or facilitate the
registration and disposition of the Registrable Securities. The holders of
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<PAGE>
Registrable Securities shall be parties to such underwriting agreement. No
Requesting Holder may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to the Company and the Managing Underwriter.
(b) Underwritten Piggyback Offerings. If the Company at any time
proposes to register any of its securities and such securities are to be
distributed by or through one or more underwriters, the Company will, subject to
the provisions of paragraph 2.02(c), use its best efforts, if requested by the
holders of all of the Registrable Securities, to arrange for such underwriters
to include the Registrable Securities to be offered and sold by such holders
among the securities to be distributed by such underwriters, and such holders
shall be obligated to sell their Registrable Securities in such registration
through such underwriters on the same terms and conditions as apply to the other
Company securities to be sold by such underwriters in connection with such
registration. The holders of the Registrable Securities shall be parties to the
underwriting agreement between the Company and such underwriter or underwriters.
No Requesting Holder may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to the Company and the Managing Underwriter.
2.05 Indemnification.
(a) Indemnification by the Company. The Company shall, to the full
extent permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with the
registration of the Company's securities, its directors and officers, and each
other Person, if any, who controls any such seller within the meaning of the
Securities Act, against any losses, claims, damages, expenses or liabilities,
joint or several (together, "Losses"), to which such seller or any such director
or officer or controlling Person may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, and the Company will reimburse such seller and each such director,
officer and controlling Person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such Loss (or
action or proceeding in respect thereof); provided
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<PAGE>
that the Company shall not be liable in any such case to the extent that any
such Loss (or action or proceeding in respect thereof) arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such seller for use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such seller or any such director, officer or controlling Person, and shall
survive the transfer of such securities by such seller. The Company shall also
indemnify each other Person who participates (including as an underwriter) in
the offering or sale of Registrable Securities, their officers and directors and
each other Person, if any, who controls any such participating Person within the
meaning of the Securities Act to the same extent as provided above with respect
to sellers of Registrable Securities.
(b) Indemnification by the Sellers. Each holder of Registrable
Securities which are included or are to be included in any registration
statement filed in connection with a registration of the Company's securities,
as a condition to including Registrable Securities in such registration
statement, shall, to the full extent permitted by law, indemnify and hold
harmless the Company, its directors and officers, and each other Person, if any,
who controls the Company within the meaning of the Securities Act, against any
Losses to which the Company or any such director or officer or controlling
Person may become subject under the Securities Act or otherwise, insofar as such
Losses (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of such seller for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the obligation to
provide indemnification pursuant to this paragraph (b) shall be several, and not
joint and several, among such Indemnifying Parties on the basis of the number of
Registrable Securities included in such registration statement and the aggregate
amount which may be recovered from any holder of Registrable Securities pursuant
to the indemnification provided for in this paragraph (b) in connection with any
registration and sale of Registrable Securities shall be limited to the total
proceeds received by such holder from the sale of such Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling Person and shall survive the transfer of such securities by such
seller. Such holders shall also indemnify each other Person who participates
(including as an underwriter) in the offering or sale of Registrable Securities,
-9-
<PAGE>
their officers and directors and each other Person, if any, who controls any
such participating Person within the meaning of the Securities Act to the same
extent as provided above with respect to the Company.
(c) Notices of Claims, Etc. Promptly after receipt by an
Indemnified Party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraph (a) or (b) of this
Section 2.05, such Indemnified Party will, if a claim in respect thereof is to
be made against an Indemnifying Party pursuant to such paragraphs, give written
notice to the latter of the commencement of such action, provided that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under the paragraph (a) or (b)
of this Section 2.05, as the case may be, except to the extent that the
Indemnifying Party is actually prejudiced by such failure to give notice. In
case any such action is brought against an Indemnified Party, the Indemnifying
Party shall be entitled to participate in and, unless, in the reasonable
judgment of any Indemnified Party, a conflict of interest between such
Indemnified Party and any Indemnifying Party exists with respect to such claim,
to assume the defense thereof, jointly with any other Indemnifying Party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the Indemnifying
Party to such Indemnified Party of its election so to assume the defense
thereof, the Indemnifying Party shall not be liable to such Indemnified Party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party may participate in such
defense at the Indemnified Party's expense; and provided further that the
Indemnified Party or Indemnified Parties shall have the right to employ one
counsel to represent it or them if, in the reasonable judgment of the
Indemnified Party or Indemnified Parties, it is advisable for it or them to be
represented by separate counsel by reason of having legal defenses which are
different from or in addition to those available to the Indemnifying Party, and
in that event the reasonable fees and expenses of such one counsel shall be paid
by the Indemnifying Party. If the Indemnifying Party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for the Indemnified Parties with
respect to such claim, unless in the reasonable judgment of any Indemnified
Party a conflict of interest may exist between such Indemnified Party and any
other Indemnified Parties with respect to such claim, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel for the Indemnified Parties or counsels. No Indemnifying
Party shall consent to entry of any judgment or enter into any settlement
without the consent of the Indemnified Party. No Indemnifying Party shall be
subject to any liability for any settlement made without its consent, which
consent shall not be unreasonably withheld.
(d) Contribution. If the indemnity and reimbursement obligation
provided for in any paragraph of this Section 2.05 is unavailable or
insufficient to hold harmless an Indemnified Party in respect of any Losses (or
actions or proceedings in respect thereof) referred to therein, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party on the
other hand in connection with statements or omissions which resulted in such
-10-
<PAGE>
Losses, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this paragraph were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first sentence of
this paragraph. The amount paid by an Indemnified Party as a result of the
Losses referred to in the first sentence of this paragraph shall be deemed to
include any legal and other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any Loss which is the
subject of this paragraph.
No Indemnified Party guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
the Indemnifying Party if the Indemnifying Party was not guilty of such
fraudulent misrepresentation.
(e) Other Indemnification. The provisions of this Section 2.05 shall
be in addition to any other rights to indemnification or contribution which an
Indemnified Party may have pursuant to law, equity, contract or otherwise.
Section 3. Miscellaneous.
3.01 Waiver. No failure on the part of either party hereto to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
3.02 Notices. All notices, requests and other communications provided
for herein shall be given or made in writing (including, without limitation, by
telecopy) by the close of business on the day the notice is given or delivered
to the intended recipient at (a) in the case of the Company, 80-02 Kew Gardens
Road, Suite 5000, Kew Gardens, NY 11415, telecopy: 718-793-4830, attention:
President, (b) in the case of the Trustee, Suite 932 Europort, P.O. Box 777,
Gibraltar, and (c) in the case of Bruce Bendell, 80-02 Kew Gardens Road, Suite
5000, Kew Gardens, NY 11415, telecopy: 718-793-4830, attention: Bruce Bendell;
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when transmitted
by telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
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<PAGE>
3.03 Amendments. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Company, the Trustee and Bruce Bendell
and any provision of this Agreement may be waived only by an instrument in
writing signed by the party waiving such provision.
3.04 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
3.05 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
3.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
3.07 Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the law of the State of New
York.
3.08 Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
applicable law, (a) the other provisions hereof shall remain in full force and
effect in such jurisdiction in order to carry out the intentions of the parties
hereto as nearly as may be possible and (b) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision hereof in any other jurisdiction.
-12-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly execute and delivered as of the date first above written.
FIDELITY HOLDINGS, INC.
By
--------------------------------------------
Name: Doron Cohen
Title: President, Chief Executive Officer
and Treasurer
CASTLE TRUST AND MANAGEMENT
SERVICES LIMITED, as
Trustee under The Millenium Trust created
under that certain Deed of Settlement dated
October 2, 1996
By
--------------------------------------------
Title:
BRUCE BENDELL
-13-
NEITHER THIS DEBENTURE NOT THE SHARES OF COMMON STOCK UNDERLYING THIS
DEBENTURE (COLLECTIVELY THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE
PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE
STATE SECURITIES LAWS OR (ii) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH DEBENTURE, WHICH OPINION IS
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE PLEDGED,
SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS.
FIDELITY HOLDINGS, INC.
(Incorporated under the laws of
the State of Nevada)
No. D-_________
$______________ Dated: April __, 1998
10% Convertible Subordinated Debenture due 1999
FOR VALUE RECEIVED, FIDELITY HOLDINGS, INC., a Nevada corporation (the
"Company"), promises to _____________________ pay to or registered assigns (the
"Holder"), the principal amount of _____________ ($____________) Dollars (the
"Principal Amount") in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts, with interest (computed on the basis of a 360 day year of twelve
30 day months) on the unpaid balance of such principal amount at the rate of 10%
per annum from the date hereof. Interest on the unpaid principal amount shall be
paid semi-annually commencing on October , 1998. Principal and accrued and
unpaid interest shall be payable in one installment on a due date of June ____,
1999 (the "Initial Due Date"), unless this Debenture is fully converted or
redeemed before such date as provided herein; provided, however, that in the
event, but only in the event, that a Notice of Demand Registration (as
hereinafter defined) is made to the Company at any time on or following January
___, 1999 until and including April ___, 1999 and the Demand Registration
Statement (as hereinafter defined) has not been declared effective by the
Securities and Exchange Commission ("SEC") by the Initial Due Date, then unless
written notice to the contrary is received by the Company from the Holder of
this Debenture by no later than ten (10) days prior to the Initial Due Date, the
due date hereunder for payment of principal and accrued interest shall be the
earlier of (i) April ___, 2000 or (ii) thirty (30) days following written notice
by the Company to the Holder that the Demand Registration Statement has been
declared effective by the SEC; provided, further, however if the Company does
not, within five (5) business days after the Company's actual receipt of the
Conversion Notice (as hereinafter defined), issue certificates for shares of its
Common Stock issuable as a result of such conversion, then unless written notice
to the contrary is received by the Company from the Holder of this Debenture,
the Initial Due Date (or any extension thereof in accordance with the terms
hereof) shall be extended to the time such certificates are received, and the
Holder may, during such extension period, by written notice to the Company,
cancel the prior Conversion Notice and receive in lieu thereof such payment that
would be due it hereunder absent such Conversion Notice.
1. The Debentures. This Debenture is one of several convertible debentures
designated as 10% Convertible Subordinated Debentures due 1999 in the aggregate
principal amount of no less than $500,000 up to $1,500,000 (individually, a
"Debenture", and together, the "Debentures"). This Debenture has been
<PAGE>
issued by the Company pursuant to the terms and subject to the conditions of a
Securities Purchase Agreement between the Company and the Holder of even date
hereof (the "Securities Purchase Agreement"). Reference is made to the
Securities Purchase Agreement for certain agreements of the parties applicable
to this Debenture. Notwithstanding any provision to the contrary contained
herein, this Debenture is subject to and entitled to certain terms, conditions,
covenants and agreements contained in the Securities Purchase Agreement. Any
transferee of this Debenture, by his acceptance hereof, assumes the obligations
of the Holder in the Securities Purchase Agreement.
The Holder of this Debenture may, at his option and either in person or by
duly authorized attorney, surrender the same at the office of the Company and,
without expense to the Holder (other than transfer taxes, if any, arising in
connection with a transfer hereof), receive in exchange therefor a Debenture or
Debentures, for the same aggregate unpaid principal amount as the Debenture or
Debentures so surrendered for exchange and each payable to such person or
persons as may be designated by such Holder. Every Debenture so made and
delivered in exchange for this Debenture shall in all other respects be in the
same form and have the same terms as this Debenture.
2. Subordination.
2.1 The indebtedness evidenced by the Debentures shall be
subordinated and junior in right of payment to all Senior Indebtedness (as
defined below) to the extent and in the manner set forth in Sections 2.2
through 2.7 hereof.
2.2 In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, debt readjustment or composition or other
similar proceeding relative to the Company or its creditors or its
property, (ii) any proceeding for voluntary liquidation, dissolution or
other winding up of the Company, whether or not involving insolvency or
bankruptcy proceedings or (iii) any assignment for the benefit of
creditors or any other marshaling of the assets of the Company, then and
in any such event the holders of all Senior Indebtedness shall first be
paid in full the principal thereof and prepayment charges, if any, and
interest at the time due thereon before any payment or distribution of any
character, whether in cash, securities or other property, shall be made on
account of the Debentures.
2.3 Until the Senior Indebtedness is paid in full, the Holders of
the Debentures shall be subordinated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of assets or
securities of the Company applicable to Senior Indebtedness. For the
purposes of such subordination, no payments or distributions to the
holders of Senior Indebtedness of assets or securities which otherwise
would have been payable or distributable to Holders of the Debentures
shall, as between the Company, its creditors (other than the holders of
Senior Indebtedness) and the Holders of the Debentures, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness, and no
payments or distributions to the Holders of the Debentures of assets or
securities, by virtue of the subordination herein provided for shall, as
between the Company, its creditors (other than the holders of Senior
Indebtedness) and the Holders of the Debentures, be deemed to be a payment
by the Company to or on account of the Debentures.
2.4 Upon any distribution of assets or securities of the Company
referred to in this Section 2, the Holders of the Debentures shall be
entitled to rely upon a certificate of any liquidating trustee or agent or
other person making any distribution to the Holders of the Debentures for
the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to
this Section 2.
2.5 In the event and during the continuation of any default in the
payment of principal of, or prepayment charge, if any, or interest on, any
Senior Indebtedness beyond any applicable period of
2
<PAGE>
grace, or in the event that any event of default with respect to any
Senior Indebtedness shall have occurred and be continuing permitting the
holders of such Senior Indebtedness (or a trustee on behalf of the holders
thereof) to accelerate the maturity thereof, then unless and until such
default or event of default shall have been cured or waived or shall have
ceased to exist, no payment of principal, premium, if any, or interest
shall be made by the Company on the Debentures.
2.6 No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act,
in good faith, by any such holder, or by any non-compliance by the Company
with the covenants, agreements and conditions of the Debentures,
regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
2.7 "Senior Indebtedness" means all loans, advances, reimbursement
obligations regarding letters of credit, liabilities, covenants,
guarantees and duties now existing on or arising from time to time
thereafter and renewals, extensions and refundings of any such
indebtedness, whether for principal, premium or interest or otherwise of
the Company or any subsidiary of the Company to, but only to, any bank or
other lending or commercial financing institution, whether direct or
indirect, absolute or contingent, secured or unsecured, due or to become
due, including, without limitation, (i) any debt, liability or obligation
owing from the Company or any Subsidiary to others which such bank or
other commercial financing institution may have obtained by assignment,
pledge, purchase or otherwise, (ii) any overdraft or overadvance to the
Company, and (iii) all interest, charges, expenses and attorney's fees for
which the Company or any subsidiary of the Company is now or hereafter
becomes liable to any such bank or other lending institution under any
agreement or by law (unless in the instrument creating or evidencing such
indebtedness, or pursuant to which the same is outstanding, it is provided
that such indebtedness or such renewal, extension or refunding thereof is
subordinated in right of payment to the Debentures).
3. Conversion of Debenture.
3.1 The holder of any Debenture shall have the right, at his option,
at any time after the date of this Debenture, up to and including the
Maturity Date (except that, with respect to any Debenture which shall be
called for redemption or prepayment pursuant to Section 4 hereof, such
right shall terminate at the close of business on the business day next
preceding the date fixed for redemption or prepayment of such Debenture
(unless the Company shall default in payment due upon such prepayment or
redemption)) to convert, subject to the terms and provisions of this
Section 3, in whole or in part, the principal of any such Debenture into
shares of Common Stock of the Company (calculated to the nearest one
one-hundredth (1/100) of a share), at the price of $2.941176 per share or,
in case an adjustment of such price has taken place pursuant to the
provisions of Section 3.4 hereof, then at the price as last adjusted (the
"Initial Conversion Price"); provided, however, that if the Debenture is
converted at any time after the one year anniversary date of the issuance
of this Debenture and prior to the due date (the "Adjustment Period") at a
time when the Closing Price (as hereinafter defined) for twenty (20)
consecutive business days ending within 5 days of the Conversion Notice
(as hereinafter defined) is less than $5.00 per Share, then at a
conversion price equal to fifty (50%) of the Closing Price as of the date
of the Conversion Notice; provided, further, that if the Debenture is
being converted during the period following the delivery of a Notice of
Redemption (as hereinafter defined) but prior to the Redemption Effective
Date (as hereinafter defined), then at a conversion price equal to the
greater of $2.50 or fifty (50%) of the Closing Price as of the date of the
Conversion Notice (the Initial Conversion Price and adjustments, if any,
the "Conversion Price"), upon surrender of the Debenture to the Company at
any time during normal business hours, together with written notice (the
"Conversion Notice") that the holder elects to convert such Debenture, in
whole or in part, into such Common Stock in accordance with the provisions
of this Section 3, and specifying the name or names
3
<PAGE>
in which the shares of Common Stock issuable upon such conversion shall be
registered, together with the addresses of the persons so named, and, if
so required by the Company, accompanied by a written instrument or
instruments of transfer in the form annexed hereto duly executed by the
registered holder or his attorney duly authorized in writing.
3.2 As promptly as practicable after the surrender, as herein
provided, of any Debenture for conversion and the receipt of the
Conversion Notice relating thereto, the Company shall deliver to the
Holder, or upon the written order of the Holder of the Debenture so
surrendered, a certificate or certificates representing the number of
fully-paid and non-assessable shares of Common Stock of the Company into
which such Debenture shall be converted in accordance with the provisions
of this Section 3. Subject to the following provisions of this Section
3.2, such conversion shall be deemed to have been made at the close of
business on the date that such Debenture shall have been surrendered for
conversion together with the Conversion Notice, so that the rights of the
Holder as a holder of the Debenture shall cease at such time and the
person or persons entitled to receive the shares of Common Stock upon
conversion of such Debenture shall be treated for all purposes as having
become the record holder or holders of such shares of Common Stock at such
time and such conversion shall be at the Conversion Price in effect at
such time; provided, however, that no such surrender on any date when the
stock transfer books of the Company shall be closed shall be effective to
constitute the person or persons entitled to receive the shares of Common
Stock upon such conversion as the record holder or holders of such shares
of Common Stock on such date, but such surrender shall be effective to
constitute the person or persons entitled to receive such shares of Common
Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer
books of the Company are open and such conversion shall be at the
Conversion Price in effect at the close of business on such next
succeeding day.
If the last day for the exercise of the conversion right shall not
be a business day, then such conversion right may be exercised on the next
succeeding business day.
3.3 Upon such conversion, all principal due under this Debenture
shall be discharged and the Company released from all obligations
thereunder; provided, however, that all accrued and unpaid interest shall
be paid at such time.
3.4 The Conversion Price in effect from time to time shall be
proportionately decreased in the event that the Company shall at any time
(i) make a subdivision of shares of Common Stock outstanding or (ii) pay a
dividend in shares of Common Stock or make a distribution in shares of
Common Stock. The Conversion Price in effect from time to time shall be
proportionately increased in the event that the Company shall at any time
combine the shares of its Common Stock outstanding. An adjustment made
pursuant to this Section 3.4 shall, in the case of a subdivision or
combination, become effective retroactively immediately after the
effective date thereof and shall, in the case of a dividend or
distribution, become effective retroactively immediately after the record
date for the determination of stockholders entitled thereto.
3.5 Whenever the Conversion Price is adjusted pursuant to Section
3.4 hereof, the Company shall promptly cause a notice stating that such
adjustment has been effected and the adjusted Conversion Price to be given
to such holder of Debentures at his address appearing on the Debenture
registry books. Any calculation required to be made under this Section 3
shall be made to the nearest cent or the nearest one-hundredth of a share,
as the case may be.
3.6 No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any Debenture. If the conversion of
any Debenture results in a fraction, an amount equal to such fraction
multiplied by the Closing Price (as hereinafter defined) shall be paid to
the persons who would
4
<PAGE>
otherwise be entitled to receive such fractional interests in cash by the
Company.
3.7 In case of any reclassification or change of outstanding shares
of Common Stock issuable upon conversion of the Debentures (other than a
change in par value, or from par value to no par value, or from no par
value to par value), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger in which the
Company is the surviving corporation and which does not result in any
reclassification or change of outstanding shares of Common Stock, other
than a change in number of the shares issuable upon conversion of the
Debentures) or in case of any sale or conveyance to another entity of all
or substantially all of the assets of the Company, or in the case of an
exchange of outstanding shares of Common Stock for the shares or other
securities of another corporation or entity, or in the event of a dividend
or other distribution of the securities of a subsidiary of the Company or
of any other entity to holders of shares of Common Stock, the holder of
each Debenture then outstanding shall have the right thereafter to convert
such Debenture into the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale, conveyance, dividend or distribution by a
holder of the number of shares of Common Stock of the Company into which
such Debenture might have been converted immediately prior to such
reclassification, change, consolidation, merger, sale, conveyance,
dividend or distribution. The above provisions of this Section 3.7 shall
similarly apply to successive reclassifications and changes of shares of
Common Stock and to successive consolidations, mergers, sales,
conveyances, dividends or distributions.
3.8 The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon conversion of the Debentures as herein provided, such number
of shares of Common Stock as shall then be issuable upon the conversion of
all outstanding Debentures. The Company covenants that all shares of
Common Stock which shall be so issuable shall be duly and validly issued,
fully-paid and non-assessable.
3.9 Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value of the shares of
Common Stock issuable upon conversion of the Debentures, the Company will
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue
fully-paid and non-assessable shares of such Common Stock at such adjusted
Conversion Price, and at least fifteen days prior to the record date for
determining shareholders of record with respect to any such action, the
Company shall give the Holder written notice of such action by certified
or registered mail, return receipt requested.
3.10 The issuance of certificates for shares of Common Stock upon
the conversion of Debentures shall be made without charge to the
converting Holders for any tax in respect of the issuance of such
certificates, and such certificates shall be issued in the respective
names of, or in such names as may be directed by, the holders of the
Debentures converted; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate in a name
other than that of the holder of the Debenture converted, and the Company
shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
3.11 Upon conversion of this Debenture, but subject to Section 6
hereof, the registered holder may be required to execute and deliver to
the Company an instrument, in form reasonably satisfactory to the Company,
representing that the shares of the Common Stock issuable upon conversion
hereof are being acquired for investment and not with a view to
distribution within the meaning of the Securities Act of 1933, as amended
(the "Securities Act").
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3.12 Upon any partial conversion of this Debenture, the Company at
its expense will forthwith issue and deliver to or upon the order of the
holder thereof a new Debenture or Debentures in principal amount equal to
the unpaid and unconverted principal amount of such surrendered Debenture,
such new Debenture or Debentures to be dated and to bear interest from the
date to which interest has been paid on such surrendered Debenture.
3.13 Except as hereinafter provided, in case the Company shall at
any time after the date hereof issue or sell any shares of Common Stock
for a consideration per share less than the Conversion Price then in
effect at the time of issuance, then forthwith upon such issuance or sale,
the Conversion Price shall (until another such issuance or sale) be
reduced to the price (calculated to the nearest full cent) equal to the
quotient derived by dividing (A) an amount equal to the sum of (X) the
product of (a) the Conversion Price per share of Common Stock on the date
immediately prior to the issuance or sale of such shares, multiplied by
(b) the total number of shares of Common Stock outstanding immediately
prior to such issuance or sale, plus (Y) the aggregate of the amount of
all consideration, if any, received by the Company upon such issuance or
sale, by (B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale; provided, however, that in no
event shall the Conversion Price be adjusted pursuant to this computation
to an amount in excess of the Conversion Price in effect immediately prior
to such computation. For the purposes of any computation to be made in
accordance with this Section 3.13, the following provisions shall be
applicable: (i) In case of the issuance or sale or shares of Common Stock
for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash
received by the Company for such shares; (ii)In case of the issuance or
sale (otherwise then as a dividend or other distribution on any stock of
the Company) of shares of Common Stock for a consideration part or all of
which shall be other than cash, the amount of the consideration therefor
other than cash shall be the fair value of such consideration.
3.14 Except as herein provided, in case the Company shall at any
time after the date hereof issue options, rights or warrants to subscribe
for shares of Common Stock which are exercisable , or issue any securities
convertible into or exchangeable for shares of Common Stock, for a
consideration per share less than the then Conversion Price; immediately
prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, the Conversion Price in effect
immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making a computation in accordance with
the provisions of Section 3.13 hereof as if such options, rights, or
warrants had been exercised and/or such securities converted and/or
exchanged, immediately upon the grant or issuance thereof.
3.15 No adjustment of the Conversion Price shall be made pursuant to
the provisions of Sections 3.13 or 3.14 above: (a) upon the sale of shares
of Common Stock at a price which is 75% or more of the then Conversion
Price; (b) upon the grant or issuance of options, rights or warrants to
purchase, or the issuance of securities which are convertible or
exchangeable for shares of Common Stock at an exercise, conversion or
exchange price which is 75% or more of the then Conversion Price; (c) if
(i) the number of such shares of Common Stock sold in any twelve-month
period plus (ii) the number of shares of Common Stock issuable upon the
exercise of options, warrants and rights issued or granted in the same
twelve-month period, plus (iii) the number of shares of Common Stock
issuable upon the conversion of or exchange of other securities issued in
the same twelve-month period, which would otherwise be governed by the
provisions of Sections 3.13 and/or 3.14, aggregate 5% or less of the
shares of the Company's Common Stock outstanding at the time of such sale,
grant and/or issuance; (d) if the amount of such adjustment shall be the
lesser of (i) five cents (5c) per share or (ii) five percent (5%) of the
then Conversion Price, provided however that in any case where an
adjustment is not made because the provisions of this clause (d) then the
amount of such adjustment that would otherwise be
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required to be made shall be carried forward and shall be made at the time
of and together with the next subsequent adjustment which, together with
such adjustment carried forward, shall amount to the lesser of five cents
(5c) per share or five percent (5%) of the then Conversion Price; (e) upon
the exercise of any options, warrants, or rights, or the conversion or
exchange of any other securities, for the grant or issuance of which an
adjustment of the Conversion Price was made, or would have been required
to have been made except pursuant to the provisions of this Section 3.15,
pursuant to the provisions of Section 3.13 and/or 3.14 above; (f) upon the
exercise of up to 227,000 warrants or options issued prior to January 1,
1998 and exercisable at $1.50 per share; or (g) upon the exercise of
warrants or options which may be hereafter issued to full-time employees
of the Company and consultants for the performance of services relating to
the Company's day-to-day business operations, but not for financial
consulting, or financial advisory or similar services.
4. Optional Redemption.
4.1 The Debentures may be redeemed, at the Company's option, in
whole only, upon notice ("Notice of Redemption") to a holder of the
Debentures at such holder's address, at any time during the Adjustment
Period and prior to maturity, at a redemption price equal to 200% of the
principal amount thereof; provided, however, that the Debentures may not
be redeemed during the Adjustment Period unless the Closing Price, as
defined below, is $2.50 or less (the "Minimum Price"), subject, however,
to adjustment in the case of the same events which would result in an
adjustment of the Conversion Price.
4.2 The "Closing Price" on any trading day shall mean the last
reported sales price regular way of the Common Stock, or, in case no such
reported sale takes place on such day, the closing bid price regular way
of the Common Stock, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if not listed
or admitted to trading on any national securities exchange, on the NASDAQ
National Market or NASDAQ, as the case may be, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange or
quoted on the NASDAQ National Market or NASDAQ, the closing bid price in
the over-the-counter market as furnished by any New York Stock Exchange
member firm that is selected from time to time by the Company for that
purpose.
4.3 Notice of Redemption will be mailed at least twenty days but no
more than thirty days before the redemption date ("Redemption Date") to
each holder of Debentures to be redeemed at his registered address. On and
after the Redemption Date, interest shall cease to accrue on the
Debentures called for redemption. Notice of redemption shall be given to
holders of the Debentures to be redeemed by registered or certified mail,
return receipt requested, at their last address appearing on the books and
records of the Company.
5. Restrictions Upon Transferability. Neither this Debenture nor the
shares of Common Stock issuable upon conversion of this Debenture have been
registered under the Securities Act and may not be sold or transferred in whole
or in part unless the Holder shall have first given notice to the Company
describing such sale or transfer and furnished to the Company either (a) an
opinion of counsel, which counsel and opinion (in form and substance) shall be
reasonably satisfactory to the Company, to the effect that the proposed sale or
transfer may be made without registration under the Securities Act or (b) an
interpretive letter from the SEC to the effect that no enforcement action will
be recommended if the proposed sale or transfer is made without registration
under the Securities Act; provided, however, that the foregoing shall not apply
if there is in effect a registration statement with respect to this Debenture at
the time of the proposed sale or transfer.
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6. Registration Rights
6.1 (a) At any time commencing with the issuance of this Debenture,
if the Company shall determine to proceed with the actual preparation and
filing of a registration statement under the Securities Act in connection
with the proposed offer and sale of any of its securities by it or any of
its security holders (other than a registration statement on Form S-4, S-8
or other similar limited purpose form, it being understood that for this
purpose a registration statement on Form S-3 is not such a limited purpose
form)(the foregoing, a "Registration Triggering Event"), then the Company
will give written notice of such determination to all holders of the
Debentures (the "Holders"). Upon the written request of the Holders, or
their duly authorized agent (the "Responding Holders"), within twenty (20)
days after receipt of any such notice from the Company, the Company will,
except as provided herein, cause all of the shares of Common Stock
underlying the Debenturesand shares outstanding as a result of the prior
exercise thereof (the "Registrable Securities") owned by the Responding
Holders to be included in such registration statement, all to the extent
requisite to permit the sale or other disposition by the prospective
seller or sellers of the Registrable Securities to be so registered;
provided, however, that nothing provided herein shall prevent the Company
from, at any time, abandoning or delaying any such registration. If any
registration pursuant to this Section 6.1 (a) shall be underwritten, in
whole or in part, the Company shall require that the Registrable
Securities requested for inclusion pursuant to this Section 6.1 (a) be
included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. Notwithstanding
the foregoing, if the managing underwriter determines and advises in
writing that the inclusion of all of the Registrable Securities proposed
to be included in the underwritten public offering, together with any
other issued and outstanding securities proposed to be included therein by
holders of securities other than the Responding Holders, would interfere
with the successful marketing of such securities, then the number of such
Registrable Securities that the managing underwriter believes may be sold
in such underwritten public offering shall be allocated for inclusion in
the registration statement in the following order of priority: (i) the
securities being offered by the Company; (ii) to the extent not in
conflict with prior agreements of the Company, the number of Registrable
Securities then owned by each Responding Holder, on a pro rata basis,
based upon the number of Registrable Securities sought to be registered by
each such Responding Holder; and (iii) the number of securities held by
holders other than Responding Holders, on a pro rata basis, based upon the
number of securities sought to be registered by each such other holder.
The Registrable Securities that are excluded from the underwritten public
offering shall be withheld from the market by the Responding Holders for a
period (the "Holdback Period") that the managing underwriter reasonably
determines to be necessary to effect the underwritten public offering.
6.1(b) If the Holder desires that the Company file a Registration
Statement under the Securities Act with the SEC to register all or a
portion of the Registrable Securities owned by the Holder, the Holder, by
himself or in conjunction with other Holders, shall at any time after nine
months after the date hereof serve a Demand on the Company to prepare such
Registration Statement and file it with the SEC. The Demand shall specify
the number of Registrable Securities the Holder wants registered by such
Registration Statement. Within ten (10) days of the receipt of such Demand
by the Company from the Holder or any of the other Holders, who have not
joined in such Demand, the Company shall send a copy of such Demand to
each of the Holders together with a request that such Addressee Holder
advise the Company in writing within fifteen (15) days after the mailing
of the Demand and Request to such Addressed Holder whether:
(A) the Addressee Holder joins in such Demand, and
(B) in any event, how many of the Registrable Securities such
Addressee Holder elects to have registered by the Registration
Statement to be filed by the Company as a
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result of such Demand.
If the Addressee Holder does not respond to the Company's Request within
such fifteen (15) day period, the Addressee Holder shall be deemed not to
have joined in the Demand nor elected to have any of its Registrable
Securities registered in such Registration Statement. If the Addressee
Holder's response fails to state (i) whether or not it joins in such
Demand, the Addressee Holder shall be deemed not to have joined in the
Demand, and/or (ii) the number of its Registrable Securities the Addressee
Holder elects to have registered by such Registration Statement, the
Addressee Holder shall be deemed to have waived its right to have any of
its Registrable Securities registered by such Registration Statement.
After receipt of such Demand by a Holder or Holders within and after the
Company has mailed all requests to the Addressee Holders and so long as
the Company has received requests to register at least 20% of the
Registrable Securities, the Company shall proceed to prepare the
Registration Statement (as well as any necessary amendments and
supplements thereto) registering all of the Registrable Securities which
all Holders have elected to have registered and promptly proceed to take
all steps necessary to have such Registration Statement declared
effective.
6.2 When the Company is required by the provisions of Section 6.1
(a) or (b) to effect the registration of Registrable Securities under the
Securities Act, the Company will: (i) prepare and file with the SEC a
registration statement with respect to such securities, and use its best
efforts to cause such registration statement to become and remain
effective until such time as all of the Registrable Securities may be sold
without regard to volume limitations under Rule 144 under the Securities
Act ("Rule 144"); (ii) prepare and file with the SEC such amendments to
such registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement effective
until such time as all of the Registrable Securities may be sold without
regard to volume limitations under Rule 144; (iii) furnish to the security
holders participating in such registration and to the underwriters, if
any, of the securities being registered such reasonable number of copies
of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters, if any, may reasonably
request in order to facilitate the public offering of such securities;
(iv) use its best efforts to register or qualify the securities covered by
such registration statement under such state securities or blue sky laws
of such jurisdictions as such participating holders may reasonably request
in writing, except that the Company shall not for any purpose be required
to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified; (v) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the time
when such registration statement has become effective or a supplement to
any prospectus forming a part of such registration statement has been
filed; (vi) notify such holders promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or
for additional information; (vii) prepare and file with the SEC, promptly
upon the request of any such holders, any amendments or supplements to
such registration statement or prospectus which, in the opinion of counsel
for such holders (and concurred with by counsel for the Company), is
required under the Securities Act or the rules and regulations thereunder
in connection with the distribution of the Registrable Securities by such
holder; (viii) prepare and promptly file with the SEC and promptly notify
such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus would
include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading; and (ix) advise
such holders, promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by
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the SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued.
6.3 (a) If the Company has not filed a registration statement by
thirty (30) days following receipt of a Demand by a Holder or Holders for
the filing of such registration statement, or such registration statement
shall not have been declared effective by the SEC within five (5) months
after the initial filing of such registration statement with the SEC (or
such longer time equal to five (5) months plus the number of days in
excess of thirty, up to a maximum of 15, which it takes for the SEC to
issue its initial comment letter on such registration statement), the
number of share of Common Stock issuable upon the Conversion of this
Debenture (in whole or in part) shall be increased, and the purchase price
per share decreased by two percent (2%) and by an additional two percent
(2%) thereafter for each thirty (30) days thereafter that the Company
fails to file such registration statement or that the registration
statement is not declared effective, whichever the case may be.
(b) If such registrations statement has been declared effective by
the SEC but the prospectus which is a part thereof may not be used because
it is not then current; and if (A) pursuant to the provisions of Section
6.2 above the Company is required to file a post effective amendment to
such registration statement to keep such prospectus current, but fails to
file such post effective amendment, or (B) such post effective amendment
is not declared effective before such prospectus ceases to be current, the
number of shares of Common Stock issuable upon the Conversion of this
Debenture (in whole or in part) shall be increased, and the purchase price
per share decreased by two percent (2%) and by an additional two percent
(2%) thereafter for each thirty (30) days thereafter that the Company
fails to file such post effective amendment or such post effective
amendment is not declared effective, whichever the case may be.
(c) If upon conversion of this Debenture (in whole or in part) the
Company does not within five (5) business days after such conversion
deliver stock certificates as directed in the conversion exercise form
attached to this Debenture, the number of shares of Common Stock issuable
upon the conversion of this Debenture (in whole or in part) shall be
increased and the purchase price per share decreased, by two percent (2%)
and by an additional two percent (2%) thereafter for each business day
after such five (5) business days that the Company fails to deliver such
certificates.
6.4 (i) With respect to the registration, all fees, costs and
expenses of and incidental to such registration and public offering (as
specified in sub-paragraph (ii) below) in connection therewith shall be
borne by the Company, provided, however, that (x) should the first
Registration Statement pursuant to Section 6.1(b) hereof be filed and
declared effective by the SEC, then the costs of any subsequent
Registration Statements requested by any Holders pursuant to Section 6.1
(a) shall be borne on a pro rata basis among them and not by the Company
and (y) any security holders participating in such registration shall bear
their pro rata share of the underwriting discount and commissions and
transfer taxes; (ii)the fees, costs and expenses of registration to be
borne by the Company as provided in subparagraph (i) above shall include,
without limitation, all registration, filing, and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the
Company, and all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in
which the securities to be offered are to be registered and qualified
(except as provided in sub-paragraph (i) above). Fees and disbursements of
counsel and accountants for the selling security holders and any other
expenses incurred by the selling security holders not expressly included
above shall be borne by the selling security holders.
6.5 The Company will indemnify and hold harmless each holder of
Registrable Securities which are included in a registration statement
pursuant to the provisions of Sections 6.1 (a) or (b) hereof, its
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directors and officers, and any underwriter (as defined in the Securities
Act) for such holder and each person, if any, who controls such holder or
such underwriter within the meaning of the Securities Act, from and
against, and will reimburse such holder and each such underwriter and
controlling person with respect to, any and all loss, damage, liability,
cost and expense to which such holder or any such underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, damage, liability, cost or
expenses arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity
with information furnished by such holder, such underwriter or such
controlling person in writing specifically for use in the preparation
thereof. Each holder of the Registrable Securities included in a
registration pursuant to the provisions of Sections 6.1 (a) or (b) hereof
will indemnify and hold harmless the Company, its directors and officers,
any controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling person
and any underwriter with respect to, any and all loss, damage, liability,
cost or expense to which the Company or any controlling person and/or any
underwriter may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused
by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written information furnished
by or on behalf of such holder specifically for use in the preparation
thereof. Promptly after receipt by an indemnified party pursuant to the
provisions of this Section 6.4 of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of this Section 6.4,
promptly notify the indemnify party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those
available to the indemnifying party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties have
the right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party pursuant to the provisions of this Section 6.4 for
any legal or other expense subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed
counsel in accordance with the provisions of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after the notice of the commencement of the action or
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(iii) the indemnifying party has authorized the employment of counsel for
the indemnified party at the expense of the indemnifying party.
7. Events of Default and Remedies.
7.1 An "Event of Default" shall occur if:
(a) The Company defaults in the payment of this Debenture, when and
as the same shall become due and payable whether at maturity thereof, or
by acceleration or otherwise, which default shall continue for a period of
thirty (30) days from the date thereof; or
(b) The Company fails to comply with any of the covenants,
conditions or agreements set forth in this Debenture and such default
shall continue for a period of thirty (30) days; or
(c) The Company shall file or consent by answer or otherwise to the
entry of an order for relief or approving a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of
any jurisdiction, or shall make an assignment for the benefit of its
creditors, or shall consent to the appointment of a custodian, receiver,
trustee or other officer with similar powers of itself or of any
substantial part of this property, or shall be adjudicated a bankrupt or
insolvent, or shall take corporate action for the purpose of any of the
foregoing, or if a court or governmental authority of competent
jurisdiction shall enter an order appointing a custodian, receiver,
trustee or other officer with similar powers with respect to the Company
or any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding up or liquidation of the Company, or if any such
petition shall be filed against the Company and such petition shall not be
dismissed within one hundred and twenty (120) days.
7.2 In case an Event of Default (other than an Event of Default
resulting from the Company's failure to pay the principal of, or any
interest upon, this Debenture when the same shall be due and payable in
accordance with the terms hereof, after giving effect to applicable "cure"
provisions herein, which event of default shall not require prior written
notice) or bankruptcy, insolvency or reorganization shall occur and be
continuing, the holders of at least 25% in aggregate principal amount of
Debentures then outstanding, or their duly authorized agent, by notice in
writing to the Company may declare all unpaid principal and accrued
interest on all of the Debentures then outstanding, due and payable
without any other act on the part of the holders of the Debentures. Such
acceleration may be annulled and past defaults (except, unless theretofore
cured, a default in payment of principal or interest on the Debentures)
may be waived by the holders of any of the Debentures then outstanding or
their duly authorized agent.
7.3 Should the indebtedness represented by this Debenture or any
part thereof be collected in any proceeding, or this Debenture be placed
in the hands of attorneys for collection after default, the Company agrees
to pay as an additional obligation under this Debenture, in addition to
the principal due and payable hereon, all reasonable costs of collecting
this Debenture, including reasonable attorneys' fees.
8. Amendments. This Debenture may be amended, modified, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the Company and holders of a Debenture at the time
outstanding, or their duly authorized agent; provided, however, that consent by
all of the Holders shall be required to modify the terms of this Debenture
affecting the payment of principal of, or interest on, the Holder's Debenture.
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9. No Waiver. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver hereof, nor shall any
waiver on the part of any party of any right, power or privilege hereunder, nor
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise hereof or the exercise of any other
right, power or privilege hereunder. The rights and remedies provided herein are
cumulative and are not exclusive of any rights or remedies which any party may
otherwise have at law or in equity.
10. Loss, Theft, Destruction or Mutilation of Debenture. Upon receipt by
the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Debenture, and of indemnity or security
reasonably satisfactory to the Company, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of this Debenture, if mutilated, the Company will make and deliver a new
Debenture of like tenor and of the same series, in lieu of this Debenture. Any
Debenture made and delivered in accordance with the provisions of this Section
shall be dated as of the date hereof.
11. Notice. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, by facsimile or
sent by certified, registered, or express mail, postage prepaid, and shall be
deemed given when so delivered personally telegraphed or, if mailed, five days
after the date of deposit in the United States, as follows (i) if to the
Company, to FIDELITY HOLDINGS, INC., 80-02 Kew Gardens Road, Suite 5000, Kew
Garden NY 11415 Attn: President and (ii) if to the holder of this Debenture, at
such addresses as set forth in the Subscription Agreement of the holder of this
Debenture.
12. Corporate Obligation. It is expressly understood that this Debenture
is solely a corporate obligation of the Company, and that any and all personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every promoter, subscriber,
incorporator, shareholder, officer, or director, as such, are hereby expressly
waived and released by the holder hereof by the acceptance of this Debenture and
as a part of the consideration for the issue hereof.
13. Governing Law. This Debenture shall be governed by a construed in
accordance with the laws of the State of New York, without giving effect to
conflict of law principles.
14. Successors and Assigns. All the covenants, stipulations, promises and
agreements in this Debenture contained by or on behalf of the Company shall bind
its successors and assigns, whether or not so expressed.
15. Enforceability: If any provision of this Debenture shall be held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Debenture, and
this Debenture shall be construed as if any invalid, illegal or unenforceable
provisions had not been contained herein; provided however, that default in the
performance or observance by the Company of any provision of this Debenture
which has been held to be invalid, illegal or unenforceable shall,
notwithstanding such invalidity, illegality or unenforceability, constitute an
Event of Default hereunder, if such default would have constituted an Event of
Default without regard to such invalidity, illegality or unenforceability.
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed in
its corporate name by a duly authorized officer and to be dated as of the date
first above written.
FIDELITY HOLDINGS, INC.
By: /s/ Doron Cohen
------------------------------------
Doron Cohen, Chief Executive Officer
14
<PAGE>
CONVERSION NOTICE
(To be executed by the registered holder to convert all or a portion
of the principal amount of the within Debenture to shares of Common
Stock of the Company in accordance with provisions of the within
Debenture.)
FIDELITY HOLDINGS, INC.
80-02 Kew Gardens Road
Kew Gardens, NY 14618
The undersigned hereby converts $__________________ of the principal
amount of the within Debenture for shares of Common Stock of the Company
(as such terms are defined in the within Debenture) pursuant to and in
accordance with the terms and conditions of this Conversion Notice, and
requests that a certificate for such shares be issued in the names and be
delivered to the addresses stated below, and if such principal amount
hereby converted is not all of the principal amount of the within
Debenture, that a new Debenture of like terms for the balance of such
principal amount be delivered to the undersigned at the address stated
below:
Shares deliverable as follows ____________% to __________________________
__________________________
___________ % to ___________________________
__________________________
The new Debenture of like tenor for the balance of the principal amount not
converted, shall be delivered to the undersigned.
Dated:
Signed: __________________________________
Address:
15
<PAGE>
ASSIGNMENT
(To be executed by the registered holder to effect a transfer of all or
part of the within Debenture.
For Value received
(the "Assignor")
hereby sells, assigns, and transfers unto
(the "Assignee") $_______ of the principal
amount of the within Debenture and the rights represented thereby to convert all
or part of such principal
amount into shares of Common Stock of the Company in accordance with the terms
and conditions thereof, and does hereby irrevocably direct any authorized
officer of FIDELITY HOLDINGS, INC., to execute and deliver a new Debenture in
the amount of the balance of the principal amount of the within Debenture, if
any, to the undersigned Holder.
Dated: Signed:
16
AMENDMENT NO. I TO EMPLOYMENT AGREEMENT
AMENDMENT NO. I TO EMPLOYMENT AGREEMENT dated as of November 7. 1995, between:
FIDELITY HOLDINGS, INC.. a corporation duly organized and validly existing
under the laws of the
State of Nevada (the "Employer"): and
DORON COHEN. an adult individual residing at 47 Parker Boulevard. Monsey. New
York 10952 (the Employee').
The Employer and the Employee are parties to an Emploxment Agreement dated as
of November 7. 1995 (as heretofore modified and supplemented and in effect on
the date hereof, the "Employment Agreement'). The Employer and the Emploxee
wish to amend the Employment Agreement in certain respects, and accordingly,
the Employer and the Employee hereby agree as follows:
Section 1. Amendments. Subject to the condition precedent set forth in
Section 2 hereof, the Employment Agreement is hereby' amended as follows:
A. References in the Employment Agreement to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof) shall be
deemed to be references to the Employment Agreement as amended hereby.
B. Clause (b) of paragraph 3 of the Employment Agreement is hereby am ended
by' (i) replacing 1.0] "in the table therein with 1. 10" and (ii) inserting
the following sentence at the end thereof
"For purposes of this clause (b), profits per common share shall be rounded
upwards, if applicable, to the nearest whole cent."
C. The first sentence of paragraph 6 of the Employment Agree amended to read
in its entirety as follows:
entirety as follo~~ 5:
NEW'YOIAA 70270:1:091097 26914-I
"EMPLOYEE is engaged as the President, Chief Executive Officer and Treasurer
of EMPLOYER." D. Paragraph 7 of the Employment Agreement is hereby amended to
read in its
7. EXTENT OF SERVICES. EMPLOYEE agrees that this emplo~. merit constitutes his
exclusi\e employment and understands that his primary' loyalty and
responsibility is to EMPLOYER. Accordingl\. EMPLOYEE shall devote such adequate.
reasonable and proper time, attention and energies to the business of EMPLOYER
as shall be necessary or consistent with such understanding and EMPLOYEE shall
not. during the term of this Agreement be engaged in any' other business
activity (whether or not such business activity is pursued for gain. profit. or
other pecuniary advantage), which conflicts with EMPLOYEE'S employment
responsibilities hereunder, without prior written authorization of EMPLOYER'S
Board of Directors. Nothing contained herein shall be construed as preventing
EMPLOYEE from investing his assets in such form or manner as will not require
any services on EMPLOYEE'S part in the operation of the affairs of the companies
in which such investments are made." E. Clause (a) of the first sentence of
paragraph 10 of the Employment Agreement is hereby amended by replacing
"regarding the conduit pipe" therein with "regarding EMPLOYER and the business
and assets of EMPLOYER". F. Clause (b) of the first sentence of paragraph 10 of
the Emplox'ment Agreement is hereby amended b\ deleting "about the conduit pipe"
therein. G. The second sentence of paragraph 10 of the Employment Agreement is
hereby amended by deleting "regarding the conduit pipe" therein. H. Clause (a)
of paragraph II of the Employment Agreement is hereby amended to read in its
entirety as fo I lows: "(a) During the term of this Agreement and for a period
of one (I) year after the termination of this Agreement and any extension
thereof. EMPLOYEE shall not, within such geographical areas as EMPLOYER then
conducts business, directly' or indirectly. own, manage, operate, control, be
employed by. consult for, participate in, or be connected in any manner with the
ownership, management, operation or control of any business that offers any'
products or services that compete with the products or services offered by the
Company at the time of such termination." I. Clause (a) of paragraph 12 of the
Employment Agreement is hereby an~ended by deleting "relating to the conduit
pipe business" therein. J. Paragraph 14 of the Employment Agreement is hereby
amended by inserting the following clauses at the end thereof "(e) In the event
that Emplo~'er terminates Employee without Cause the provisions of Paragraph II
and Paragraph 12 of this Agreement shall no longer remain in effect. NEWYOI A:
170270:1:09/1097 26914-I
<PAGE>
(0 Employer agrees that upon termination of this Agreement Emplo~'ee will
receive his base salarx' through the remaining term of this Agreement as set
forth in Paragraph 2(b)." Section 2. Condition Precede . As provided in Section
I above, the amendments to the Emplo~'ment Agreement set forth in said Section I
shall become effective, as of the date hereof, upon the execution of this
Amendment No.
Ito Employment Agreement by Employer and Employee.
Section 3. Miscellaneous. Except as herein provided, the Employment Agreement
shall remain unchanged and in full force and effect. This Amendment No. Ito
Employment Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same amendator'~ instrument
and any' of the parties hereto may' execute this Amendment No. I to
EmpIo~'ment Agreement by signing any' such counterpart. This Amendment No.
Ito Employment Agreement shall be governed by, and construed in accordance
with, the law of the State of New York.
26914-I
IN WITNESS WHEREOF, the parties hereto have caused this ..\mendment No. Ito
Emplox ment Agreement to be duly executed and delivered as of the day and xear
flrst
aboxe xxritten.
FIDELITY HOLDINGS. INC.
By: `s Doron Cohen Doron Cohen. President
DO RON COHEN
<PAGE>
tompanx will use its best efforts to inclode in the registration staternLnt
rclitine to such registration all Registrable Securities \s hich the (ompany has
been so requested to register. Notss jibstanding the foregoing. it ut `ins time
after gis ing a Notice of Piggy back Registration and prior to the etfective
date of the registratiot1 statement filed in connection ss ith such
rcgistration. the (iompanx shall determine for ans reason not to register or to
delas registration of such securities, the Compan~ may. at its election gis c ss
rutten notice of such determination to each holder of Registrable Securities
and, thereupon. ( i I in the ease of a determination not to rcoistcr shall be
relies ed of its obligatioii to register ans Registrable Securities in
connection ss ith such registration I but not from its obligation to pas thc
Rcoistration Expenses in connection theresu itli I. and (ii in the case of a
determination to delay registering, shall be permitted to delay registcrin~ ans
Registrable Securities for the same period as the delas in registering such
other securities.
(bI Registration Expenses. [he Company will pax all Registration
Expenses incurred in connection us ith each registration of securities.
fe) Priority in Cutback Registrations. If any such registration of
securities becomes a Cutback Registration, the Companx ss ill include in such
registration to the extent of the amount of the securities s~ hich the Managing
tinders% riter ads ises the Company can be sold in such offering:
(it if such registration as initially' proposed by the Compan~ was
solely a priinars registration of its securities. (xl first the
securities proposed by the Company to be sold for its osun account. (y
second. any Registrable Securities requested to be included in such
reg ist ration by the Requesting I lolders. pro rata on the basis of
the number of Registrable Securities requested to be included bs such
holders, and (i) third, any other securities of the Company proposed
to be included in such registration, allocated among the holders
thereof in accordance ss ith the priorities then existing among the
Company and such holders: and
(ii) if such registration as initially proposed by the Company was in
s%hole or in part requested by holders of securities of the Company.
other than holders of Registrable Securities in their capacities as such.
pursuant to demand registration rights. (xl first. such securities held
by the holders initiating such registration and. if applicable, any
securities proposed by the Company to be sold for its Own account,
allocated in accordance us ith the priorities then existing among the
Compan~ and such holders, and (y') second. any Registrable Securities
requested to be included in such registration by the Requesting Ilolders.
pro rata on the basis of the number of Recistrable Securities requested
to be included by such holders, and (~) third, any other securities of
the Compan~ proposed to be included in such registration, allocated among
the holders thereof in accordance ss ith the priorities then existing
among the CompanY and the holders of such other securities:
<PAGE>
and ans securities so excluded shall be ssithdrassn from and shall not be
included in such registration.
2.03 Registration Procedures. If and whenever the C'ompan~ is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 2 01 or 2.(t2 hereofi
the Company ss ill use its best efforts to effect the registration and sale of
such Registrable Securities in accordance ss ith the intended methods of
disposition thereof specified by the Requesting 1-lolders. Without limiting the
foregoing, the Coinpan~ in such ease s~ ill. as expeditiousl~ as possible notifs
each holder of Registrable Securities cosered by such registration statement, at
ally time sshen a prospectus relating thereto is required to be delis ered under
the Securities Act, of the happening of ans event as a result of sshich any
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state ails material filet
required to be stated therein or necessars to make the statements therein, in
the light of the circumstances under sshich thes ssere made. not misleading.
[he Company may require each holder of Registrable Securities as to
sshich an~ registration is being effected to. and each such holder, as a
condition to including Registrable Securities in such registration, shall.
furnish the Compan~ ss ith such information and affidas its regarding such
holder and the distribution of such securities as the Compans max from time to
time reasonably request in ss riting in connection s~ ith such registration.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the (.ompanx of the
happening of any es em of the kind described in the second sentence of this
Section 2.03. such holder ss ill forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of tile copies of a
supplemented or amended prospectus and, if SO directed by the Compan~ . ss ill
delis er to the (`ompany (at the Compan~ `s expense) all copies. other tharl
permanent file copies. then in such holder's possession of the prospectus
relating to such Registrable Securities current at tile time of receipt of such
notice.
2.04 t nderss ritten Offerings.
(a) t nderssritten Demand Offerings. In the case of ans underssritten
I~ublic Olfering being effected pursuant to a Demand Registration. the Managing
tinderssriter and any other underssriter or underss riters ss ith respect to
such offering shall be selected. after consultation ss ith the Company. by' the
holders of all of the Regi'trable Securities. ss hich coiisent shall not be
unreasonabls s~ ithheld. [he Compan~ shall enter into an underss ritine
agreement in customars torm s~ itfi such underssriter or underssriters. sshich
shall include, among other pros isions. indemnities to the effect and to the
extent pros ided in Section 2.05 hereof and shall take all such other actions as
are reasonably requested by the Managing I lnderwriter in order to expedite or
facilitate the registration and disposition of the Recistrable Securities. I he
holders of
<PAGE>
Recistrable Securities shall be parties to such underssriting agreemeni. No
Reqtiesting tlolder may participate in such underssritien oticring unless such
holder agrees to sell its Recistrable Securities on the basis pros ided in such
underss riting agreement and completes and executes all questionnaires. possers
of attornes . indemnities and other documents reasonably required under the
terms of such unders% riting agreement If aiis Requesting I lolder disappros es
of the terms of an underwriting, such holder mis elect to ss ithdrass therefrom
and from such registration bs notice to the Compan~ and the Managing
tjnderssriter.
(hI Underssritten Pigg~ back Offerings. If the Compan~ at any time
proposes to register any of its securities and such securities are to be
distributed by or through one or more underssriters. the Compan~ s~ ill. subiect
to the pros isions of paragraph 2(12(c). use its best efforts, if requested by
the holders of all of the Registrable Securities, to arrange for such
underssriters to include the Registrable Securities to be offered and sold by
such holders among the securities to be distributed bs such underssriters. and
such holders shall be obligated to sell their Registrable Securities in such
registration through such unders~ riters on the same terms and conditions as
apply to the other Coinpan~ securities to be sold by such underss riters in
connection s~ ith such registration. I he holders of the Registrable Securities
shall be parties to the underssritine aereement between the Company and such
underssriter or unders~ riters. No Requesting I lolder may participate in such
underss ritten offering unless such holder agrees to sell its Registrable
Securities on the basis pros ided in such underss riting agreement and completes
and executes all questionnaires. poss ers of attornes . indemnities and other
documents reasonablx required tinder the ternis of such underss riting
agreement. If any Requesting I lolder disappros es of the terms of an underss
ruing, such holder inas elect to ss'ithdras% therefrom and from such
registration bs notice to the Conlpan~ and the Managing I nders~ riter.
2.05 Indemnification.
(a) Indemnification by the Company [he Company shall. to the full
extent permitted by law. indemnifs and hold harmless each seller of Registrable
Securities ilciuded in ans registration stateillent filed in coilnectioll ss ith
the registration of the Compans `s securities, its directors and otticers. and
each other Person, if any. ss ho controls ails such seller ss ithin the meaniilg
of the Securities Act, against any losses. claims. danlages. expeilses or
liabilities. mint or ses eral (togetller. "losses"), to sshich such seller or
ans such director or officer or controlling Person may beconle subject under
tIle Securites \ct or otherss ise. insofar as such losses (or acti(lns or
proceedings. ss hether conlmeilced or threatened, in respect thereof) arise out
of or are based upoi~ aily untrtie stateilleilt or alleged tintrue statement Of
ans material tact contaitled in any' such registration statement. ail\
prelimiilarx prospectus, final prospectus or sumillars prospectus contailled
therein, or ans amenctment or supplement thereto, or ans omission or alleced
omission to state therein a illaterial fact required to be stated thereiil or
necessars to make the statemeilts thereiil (in the case of a prospectus. in the
light of the circumstances under s~ hich thes ssere made) not nlisleadiilg. and
the Company ssill reimburse such seller and each such director. officer aild
coiltrolliilg Persoil for any legal or aily Other expeilses reasonably incurred
by them in connectioil with investigating or defeilding any such t oss (or
action or proceeding in respect thereof): pros ided
AMENDMENT NO. 1 TO CONSULTING AGREEMENT
AMENDMENT NO. 1 TO CONSULTING AGREEMENT dated as of November 7, 1995,
between:
FIDELITY HOLDINGS, INC., a corporation duly organized and validly existing
under the laws of the State of Nevada (the "Company"); and
BRUCE BENDELL, an adult having offices at 43-40 Northern Boulevard, Long
Island City, New York 11367 (the "Consultant").
The Company and the Consultant are parties to an Consulting Agreement
dated as of November 7, 1995 (as heretofore modified and supplemented and in
effect on the date hereof, the "Consulting Agreement"). The Company and the
Consultant wish to amend the Consulting Agreement in certain respects, and
accordingly, the Company and the Consultant hereby agree as follows:
Section 1. Amendments. Subject to the condition precedent set forth in
Section 2 hereof, the Consulting Agreement is hereby amended as follows:
A. References in the Consulting Agreement to "this Agreement" (and
indirect references such as "hereunder", "hereby", "herein" and "hereof") shall
be deemed to be references to the Consulting Agreement as amended hereby.
B. Clause (b) of paragraph 3 of the Consulting Agreement is hereby amended
by (i) replacing "$.01" in the table therein with "$.10", (ii) replacing "base
salary" in the last sentence thereof with "base compensation" and (iii)
inserting the following sentence at the end thereof:
"For purposes of this clause (b), profits per common share shall be
rounded upwards, if applicable, to the nearest whole cent."
C. The second sentence of Paragraph 7 of the Consulting Agreement is
hereby amended to read in its entirety as follows:
"Nothing contained herein is intended to limit CONSULTANT'S continuation
of existing business activities nor the commencement of new activities,
provided only that such activities are conducted in compliance with the
paragraphs 10, 11 and 12."
D. Clause (a) of the first sentence of paragraph 10 of the Consulting
Agreement is hereby amended by replacing "regarding the conduit pipe" therein
with "regarding COMPANY and the business and assets of COMPANY".
<PAGE>
E. Clause (b) of the first sentence of paragraph 10 of the Consulting
Agreement is hereby amended by deleting "about the conduit pipe" therein.
F. The second sentence of paragraph 10 of the Consulting Agreement is
hereby amended by deleting "regarding the conduit pipe" therein.
G. Clause (a) of paragraph 11 of the Consulting Agreement is hereby
amended to read in its entirety as follows:
"(a) During the term of this Agreement and for a period of one (1) year
after the termination of this Agreement and any extension thereof,
CONSULTANT shall not, within such geographical areas as COMPANY then
conducts business, directly or indirectly, own, manage, operate, control,
be employed by, consult for, participate in, or be connected in any manner
with the ownership, management, operation or control of any business that
offers any products or services that compete with the products or services
offered by the Company at the time of such termination."
H. Clause (a) of paragraph 12 of the Consulting Agreement is hereby
amended by deleting "relating to the conduit pipe business" therein.
Section 2. Condition Precedent. As provided in Section 1 above, the
amendments to the Consulting Agreement set forth in said Section 1 shall become
effective, as of the date hereof, upon the execution of this Amendment No. 1 to
Consulting Agreement by Company and Consultant.
Section 3. Miscellaneous. Except as herein provided, the Consulting
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 1 to Consulting Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same amendatory instrument
and any of the parties hereto may execute this Amendment No. 1 to Consulting
Agreement by signing any such counterpart. This Amendment No. 1 to Consulting
Agreement shall be governed by, and construed in accordance with, the law of the
State of New York.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
Consulting Agreement to be duly executed and delivered as of the day and year
first above written.
FIDELITY HOLDINGS, INC.
By: /s/Doron Cohen
Doron Cohen, President
By: /s/Bruce Bendell
Bruce Bendell, Chairman
-3-
DR. ZVI BARAK AND SARAH BARAK
I IashHafim 46
Raanana, Israel, 43724
7 August 1997
Fidelity Holdings, Inc.
80-02 Kew Gardens Rd., Suite 5000
Kew Gardens, NY 11415
Attention: Mr. Doron Cohen
Dear Mr. Cohen:
SUBJECT: BARAK AGREEMENT WITH FIDELITY HOLDINGS, INC.
Pursuant to the Master Agreement made as of the 18th day of April 1996, (the
"Master Agreement") a payment of $100,000.00 U.S. was to be paid to us on or
before August 8th, 1996. It is acknowledged that Fidelity Holdings, Inc.
(Fidelity) did not make this payment as required.
This will confirm that, subject to the provisions of this letter, we have agreed
to defer and amend the required payment provision pertaining to this one payment
of $100,000.00 U.S. which was due on or before August 8th, 1996, as follows:
1. The principal amount is reduced to $85,000.00 following Barak payment to
Fidelity of $15,000.00 as cost share of patent infringement.
2. We have agreed to permit Fidelity to pay this sum of $85,000.00 in 12
monthly installments of principal and interest at the rate of 6% per annum,
in an agreed aggregate monthly amount of $7,315.65, the first payment having
been made July 9th, 1997, with 11 subsequent payments payable on the first
day of each month from and including August 1st, 1997 to and including June
1st, 1998, each in the amount of $7,315.65 on account of principal and
agreed interest.
The foregoing amendments do not in any way change or amend any of the other
provisions of the Master Agreement or any document executed between the parties
in connection with the closing of the transaction contemplated by the Master
Agreement. It is further expressly stipulated that if there is any default at
any time on the part of Fidelity in connection with the payment
<PAGE>
terms set out in this letter or in connection with any other provisions of the
Master Agreement or any of the other documents entered into between us in
connection with the transaction contemplated by the Master Agreement, we reserve
the right to cancel the repayment terms (including the reduction of the
principal amount) agreed to in this letter and to rely upon the obligations of
Fidelity to have made the payment of $100,000.00 U.S. on August 8th, 1996, and
to consider the non-payment of same as a further act of default under the Master
Agreement.
If you are in agreement with the terms set out in this letter, please sign and
return a duplicate copy of this letter.
Yours very truly,
/s/ Zvi Barak
Dr. Zvi Barak
/s/ Sarah Barak
Sarah Barak
We hereby agree with the terms set out in this letter.
/s/ Doron Cohen
President
Fidelity Holdings, Inc.
-2-
AMENDMENT TO PLAN AND AGREEMENT OF MERGER
This is an Amendment to that certain Plan and Agreement of Merger
("Agreement of merger") by and between 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. The Merger Agreement was executed by all parties on or about April 21,
1997.
B. Article 1.2 of the Merger Agreement set a closing date (the "Closing
Date") on or before One Hundred Twenty (120) days from the execution of the
Merger Agreement unless such time period was mutually extended. By amendment
effective August 1, 1997, the parties hereto mutually extended the Closing Date
One Hundred Twenty (120) days from August 1, 1997.
C. The parties hereto have agreed that it is in their best interest to
once again mutually extend the closing date to a time and date mutually agreed
upon but in no event beyond One Hundred Twenty (120) days from the effective
date of this amendment, unless further extended by mutual consent.
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:
ARTICLE 1
EXTENSION OF CLOSING DATE
The closing of the transaction contemplated by the Merger Agreement (the
"Closing") shall occur on a mutually agreed upon date at the offices of
Fidelity, which date shall be not more than One Hundred Twenty (120) days from
November 20, 1997, unless mutually extended.
<PAGE>
ARTICLE 2
SURVIVAL OF MERGER AGREEMENT TERMS
All of the terms, conditions, liabilities, limitations and obligations set
forth in the Merger Agreement, except as expressly amended in this Agreement,
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the
20th day of November 1997.
FIDELITY HOLDINGS, INC.
ATTEST: /s/: Doron Cohen
-------------------------
Doron Cohen, President
MAJOR AUTOMOTIVE GROUP, INC.
ATTEST: /s/: Bruce Bendell
-------------------------
Bruce Bendell, President
MAJOR ACQUISITION CORP.
ATTEST: /s/: Doron Cohen
-------------------------
Doron Cohen, Vice President
AS TO ARTICLE 2
MAJOR CHEVROLET, INC.
ATTEST: /s/: Bruce Bendell
-------------------------
Bruce Bendell, President
AS TO ARTICLE 2
MAJOR DODGE, INC.
ATTEST: /s/: Bruce Bendell
-------------------------
Bruce Bendell, President
AS TO ARTICLE 2
MAJOR SUBARU, INC.
ATTEST: /s/: Bruce Bendell
-------------------------
Bruce Bendell, President
AS TO ARTICLE 2
MAJOR CHRYSLER, PLYMOUTH, JEEP,
EAGLE, INC.
ATTEST: /s/: Bruce Bendell
-------------------------
Bruce Bendell, President
ATTEST: /s/: Bruce Bendell
-------------------------
Bruce Bendell
-2-
LAW OFFICES
COOPER PERSKIE APRIL NIEDELMAN WAGENHEIM & LEVENSON
A PROFESSIONAL ASSOCIATION
1125 ATLANTIC AVENUE - 3rd FLOOR
PO BOX 1125
ATLANTIC CITY, NEW JERSEY 08404-1125
(609) 344-3161
TELECOPIER (609) 344-W39
VOICE MAIL (609) 343-7111
EXECUTIVE PLAZA 1415 ROUTE 70 EAST
2111 NEW ROAD CHERRY HILL PLAZA - SUITE 305
NORTHFIELD, NJ 08225-1836 CHERRY HILL, NJ 08034
(609) 383-1300 (609) 796-8641
TELECOPIER (609) 383-1375
211 NORTH MAIN STREET
SUITE 202
CAPE MAY COURT HOUSE. NJ 08210
(609) 465-3000
TELECOPIER (809) 465-1441
August 26, 1997
Atlantic City
File # 46,195
Doron Cohen, President
Fidelity Holdings, Inc.
80-02 Kew Gardens Road
Suite 5000
Kew Gardens, NY 11415
Bruce Bendell, President
c/o Major Automotive Group
43-40 Northern Boulevard
Long Island City, NY 11101
Re. Amendment to Plan and Agreement of Merger
Dear Gentlemen:
In accordance with my recent discussions with Doron, I have been advised
that you wish to amend the Plan and Agreement of Merger (the "Agreement") by and
between Fidelity Holdings, Inc. ("Fidelity"), Major Automotive Group, Inc. (the
"Merging Corporation"), Major Acquisition Corp. (the "Surviving Corporation")
and Bruce Bendell (the "Shareholder of the Merging Corporation"). Specifically,
subarticles 3.3.3 and 4.2, shall be deleted in their entirety and replaced with
the following:
3.3.3 Fidelity shall not have issued any new shares of stock from the date
of execution hereof through and including the Closing Date other than (a)
preferred shares to the Shareholder of the Merging Corporation pursuant to
Article 4 of this Agreement; (b) common shares in a public offering and (c)
common shares (i) pursuant to the exercise of options or warrants that become
exercisable prior to the Closing Date, (ii)
<PAGE>
Doron Cohen, President
Bruce Bendell, President
Re. Amendment to Plan and Agreement of Merger
August 26, 1997 Page 2
pursuant to the conversion of any shares of Fidelity's 1996-MAJOR Series of
Convertible Preferred Stock or (iii) ownership to which is scheduled to vest
pursuant to agreements heretofore entered into by Fidelity or any of its
subsidiaries.
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 "1 997 Preferred Stock") of Fidelity. In the event that 1.8 million
shares of 1997 Preferred Stock have a value on the Closing Date of less than Six
Million ($6,000,000.00) Dollars, the Shareholders of the Merging Corporation
shall be entitled to that number of shares of 1997 Preferred Stock which have a
value on the Closing Date of Six Million ($6,000,000.00) Dollars, with any
fraction of a share rounded upwards to the nearest whole number (the
"Consideration"). For purposes of this subarticle 4.2, the value assigned to
1997 Preferred Stock shall equal the mean between the closing bid and asked
prices per share of Fidelity's common stock over the 20 trading days prior to
the Closing Date multiplied by the number of common shares of Fidelity into
which the Shares are convertible. The Consideration shall be allocated among the
Owned Corporations as set forth on the attached Exhibit "D" which is
incorporated herein by this reference.
If you are in agreement with the amendments set forth above, I would ask
that each of you execute the copy of this letter which is enclosed and return it
to me in the envelope provided.
Should you have any questions, please do not hesitate to contact me. Thank
you.
Very truly yours,
/s/ Pacifico Agnellini
-----------------------
Pacifico S. Agnellini
We, the undersigned, in each of our respective capacities, do hereby agree
to the terms of the Amendment of the Plan and Agreement of Merger as described
above and as set forth above.
ATTEST MAJOR ACQUISITION CORP.
/s/ Robinson Markel By: /s/ Doron Cohen
DORON COHEN, VICE PRESIDENT
(SIGNATURES CONTINUED ON NEXT PAGE)
<PAGE>
Doron Cohen, President
Bruce Bendell, President
Re. Amendment to Plan and Agreement of Merger
August 26, 1997 Page 3
ATTEST MAJOR AUTOMOTIVE GROUP, INC.
By: /s/ BRUCE BENDELL,
Bruce Bendell, PRESIDENT
ATTEST MAJOR ACQUISITION CORP.
/s/ Robinson Markel /s/ Doron Cohen
BY: DORON COHEN, VICE PRESIDENT
ATTEST AS To ARTICLE 2
MAJOR CHEVROLET, IN.
/s/ Robinson Markel
- -------------------------- /s/ Bruce Bendell, PRESIDENT
AS To ARTICLE 2
ATTEST MAJOR DODGE, INC.
/s/ Bruce Bendell
BY: BRUCE BENDELL, PRESIDENT
AS To ARTICLE 2
ATTEST MAJOR SUBARU, INC.
/s/ Robinson Markel /s/ Bruce Bendell
BY: BRUCE BENDELL, PRESIDENT
AS To ARTICLE 2
ATTEST MAJOR CHRYSLER, PLYMOUTH, JEEP, EAGLE, INC.
/s/ Robinson Markel /s/ Bruce Bendell
BY: BRUCE BENDELL, PRESIDENT
(SIGNATURES CONTINUED ON NEXT PAGE)
<PAGE>
Doron Cohen, President
Bruce Bendell, President
Re. Amendment to Plan and Agreement of Merger
August 26, 1997 Page 4
WITNESS:
/s/ Bruce Bendell
Bruce Bendell
cc: Robert E. Salad, Esquire
Michael Bellucci, Esquire
Michael Dezorett, Esquire
Mr. Geofrey Alexander
SECOND AMENDMENT TO PLAN AND AGREEMENT OF MERGER
This is an Amendment to that certain Plan and Agreement of Merger ("Agreement
of merger") by and between 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
The Merger Agreement was executed by all parties on or about April 21, 1997.
Article 1.2 of the Merger Agreement set a closing date (the "Closing Date")
on or before One Hundred Twenty (120) days from the execution of the Merger
Agreement unless such time period was mutually extended.
By amendment effective August 1, 1997, the parties hereto mutually extended
the Closing Date One Hundred Twenty (120) days from August 1, 1997.
The parties hereto have agreed that it is in their best interest to once
again mutually extend the closing date to a time and date mutually agreed
upon but in no event beyond One Hundred Twenty (120) days from the effective
date of this amendment, unless further extended by mutual consent.
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:
ARTICLE 1
EXTENSION OF CLOSING DATE
The closing of the transaction contemplated by the Merger Agreement (the
"Closing") shall occur on a mutually agreed upon date at the offices of
Fidelity, which date shall be not more than One Hundred Twenty (120) days
from November 20, 1997, unless mutually extended.
ARTICLE 2
SURVIVAL OF MERGER AGREEMENT TERMS
All of the terms, conditions, liabilities, limitations and obligations set
forth in the Merger Agreement, except as expressly amended in this Agreement,
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the
20th day of November 1997.
FIDELITY HOLDINGS, INC.
/s/: Doron Cohen
- -----------------------------
Doron Cohen, President
MAJOR AUTOMOTIVE GROUP, INC.
/s/: Bruce Bendell
- -----------------------------
Bruce Bendell, President
MAJOR ACQUISITION CORP.
/s/: Doron Cohen
- -----------------------------
Doron Cohen, Vice President
AS TO ARTICLE 2
<PAGE>
MAJOR CHEVROLET, INC.
/s/: Bruce Bendell
- -----------------------------
Bruce Bendell, President
AS TO ARTICLE 2
MAJOR DODGE, INC.
/s/: Bruce Bendell
- -----------------------------
Bruce Bendell, President
AS TO ARTICLE 2
MAJOR SUBARU, INC.
/s/: Bruce Bendell
- -----------------------------
Bruce Bendell, President
AS TO ARTICLE 2
MAJOR CHRYSLER, PLYMOUTH, JEEP, EAGLE, INC.
/s/: Bruce Bendell
- -----------------------------
Bruce Bendell, President
BRUCE BENDELL
/s/: Bruce Bendell
- -----------------------------
AGREEMENT BETWEEN COMPUTER BUSINESS SCIENCES
AND
NISSKO TELECOM, LTD.
THIS AGREEMENT, made this 25th day of March, 1996 by and between
COMPUTER BUSINESS SCIENCES, INC., a New York corporation with itS principal
offices located at 144-15 Union Turnpike, Flushing, New York 11367 (hereinafter
"CBS")
AND
NISSKO TELECOM, LTD., a Delaware corporation with offices located at 7 West 45th
Street, New York, New York 10036 and formed by: AVRAHAM NISSANIAN, an adult
individual residing at 139-34 78th Drive, Flushing, New York 11367; YOSSI KOREN,
an adult individual residing at 124 Audley Street, Kew Gardens, New York 11418;
and CHAMUEL LIVIAN, an adult individual residing at 65 Tennis Place, Forest
Hills, New York 11375; (such corporation being hereafter referred to as "NT" and
such individuals being hereafter referred to as "INVESTORS")
WITNESSETH THAT:
WHEREAS, CBS' parent corporation, Fidelity Holdings, Inc. (hereinafter
"FIDELITY") has entered into a Letter of Intent to acquire certain computer
telephony, international telecommunications and business software and related
hardware known under the trade name "Talkie" and has begun exploitation of such
products;
<PAGE>
WHEREAS, CBS represents and warrants that the technology of the Talkie Power Web
Line Machine is the state of the art in the field of communications.
WHEREAS, INVESTORS and NT desire to own and commercially use the international
telecommunications and computer telephony modules of Talkie to accomplish the
intentions of this Agreement;
WHEREAS, NT, and CBS and its parent corporation, FIDELITY, and the parties have
reached certain agreements and understandings and desire this Agreement to
formalize and evidence such agreements and understandings;
NOW, THEREFORE, intending to be legally bound, and in consideration of the
mutual promises and covenants contained herein, the parties have agreed as
follows:
1. (a) on the terms and conditions of this Agreement, CBS agrees to sell to
NT, and NT agrees to purchase from CBS, fifteen (15) Talkie Power Web Line
Machines (hereinafter "Machines"), such Machines being more specifically
described on the Invoices attached hereto and made a part hereof, and
marked as Exhibit A. For placement of such Machines, NT has reserved
fifteen (15) cities, listed on the schedule attached hereto, made a part
hereof, and marked as Exhibit B. In the event that CBS shall determine
that a Machine cannot be sited in any city listed on Exhibit B, CBS shall
notify NT which shall then
2
<PAGE>
select an alternate city. Accordingly Exhibit B shall be amended from time
to time as necessary.
(b) In consideration of its purchase, NT shall pay for each Machine one
hundred and twenty five thousand dollars eight hundred dollars ($125,800)
for the total sum of One Million Eight Hundred Eighty-seven Thousand
Dollars ($1, 887, 000) of which Six Hundred Twenty-nine Thousand Dollars
($629,000)("'Deposit") shall be paid contemporaneously with the execution
of this Agreement and the balance shall be paid as provided under
paragraph (d) of this section.
(c) Of the 15 machines, CBS shall promptly manuf acture, program and site
three (3) machines. Title to the initial three (3) Machines and all other
machines covered by this Agreement shall pass when NT has tested the lines
and accepted the Machines as properly functioning for the intended
purposes or under such other conditions as the financing source may
dictate.
(d) Subject to sub-paragraph (e) following and 115 of this Agreement, CBS
shall deliver the balance of the Machines and NT shall pay the balance of
the purchase price as provided in Exhibit "C".
(e) Prior to NT being required to pay the balance of the purchase price
for the Machines, CBS shall provide satisfactory evidence that FIDELITY
has closed its acquisition
3
<PAGE>
of Talkie. if such acquisition has not been accomplished by
May 15, 1996, NT may either:
(i) elect to treat its Deposit as the purchase of the first 5 Machines and
cancel this Purchase Agreement with respect to the additional Machines; or
(ii) declare this Purchase Agreement in default.
If NT shall elect to cancel this Agreement, the Deposit shall be applied to the
purchase price of the first 5 Machines and the provisions of Paragraphs 4 and 9
shall remain in full force and effect, If NT shall elect to declare a default,
the provisions of Paragraph 9 shall be effective.
2. (a) Subject to completion of the initial 15 Machines, NT shall be
permitted to purchase an additional fifteen (15) Attachment Modules.
(b) Subject to completion of the purchase of the initial fifteen (15)
Machines at $125,800 each and the fifteen (15) Attachment Modules at
$60,000 each , NT shall have the option to purchase an additional fifteen
(15) Machines at $125,800 each and the fifteen (15) Attachment Modules at
$60,0OO each, provided only that any attachment modules may be purchased
only for attachment to a previously purchased Machine.
(c) In the event that during the term of this Purchase Agreement, CBS
shall develop a new system or new technology
4
<PAGE>
which performs the same function and/or provides the same service as the
Talkie Power Web Line Machines, but which is superior to or renders the
current Machines obsolete, NT shall have the options to:
(i) continue with this Purchase Agreement or substitute the new
system or the new technology for the balance of the Machines to be
purchased hereunder; and/or
(ii) purchase the new system or the new technology to replace the
Machines already purchased.
In either event, NT shall pay the standard market price established by CBS
for such new system or new technology.
(d) Upgrades of and /or improvements in technology on the current
technology in Machines ordered shall be provided at no extra cost to NT so
long as the Machines are in operation.
3. (a) CBS hereby grants NT a right of first refusal to place Machines in all
cities of the world in addition to those listed on Exhibit B.
(b) In the event that CBS shall receive a request from any third party to
acquire a Machine for placement in any city, in addition to those listed
on Exhibit B, CBS shall notify NT of such request in writing. NT shall
have a period of ten (10) business days to determine whether to exercise
the right of first refusal, If NT shall not elect to exercise its right,
5
<PAGE>
CBS shall be free to proceed with the third party. If NT shall elect to
exercise its right, subject to sub-paragraph (c) following, within Five
(5) business days it shall enter into a f urther Purchase Agreement to
acquire a Machine f or placement in such city. If at the time such option
is exercised, NT has not completed the purchase of the initial fifteen
(15) Machines as provided for under this Agreements NT shall be permitted
to substitute a city elected under the option for one contained in Exhibit
"D". For purposes of this provision, the term business days shall exclude
Saturdays, Sundays, U.S. holidays, and Jewish religious holidays (a list
of all recognized holidays are contained in Exhibit "E").
(c) In the event that CBS shall determine that a Machine cannot be sited
in any city listed an Exhibit "B", and NT shall exercise its right of
first refusal with respect to some other city, the city designated in the
exercise of the right of first refusal may be substituted for the
unavailable city on Exhibit B, at NT's option, in which event no
additional Purchase Agreement shall be required and the Machine shall
constitute one of the 15 Machines hereunder. When NT shall have placed 15
Machines, all subsequent exercises of its right of first refusal shall
require the execution of an additional Purchase Agreement.
4. In consideration of the Deposit which constitutes one-third of
6
<PAGE>
the purchase price for the 15 Machines, CBS guarantees that NT shall
recover the Deposit by March 31, 1998. If, by March 31, 1998, NT shall not
have earned cumulative (total) income before depreciation interest expense
and taxes of the first 5 Machines placed in service equal or greater to
$629,000, with CBS' capital contribution of $150,000 included as part of
that recovery, NT may:
(a) waive the failure and continue as theretofore; or
(b) terminate this Purchase Agreement; or
(c) declare this Purchase Agreement in default.
NT shall not have an independent cause of action to recover the $629,000
and the remedies of NT are limited to those listed. If NT terminates this
Purchase Agreement, the obligation of NT to purchase any further Machines,
if less than 15 have been purchased, shall be terminated and NT shall
retain and operate the Machines purchased as the sole remedy of NT and
INVESTORS. If NT elects to declare this Purchase Agreement in default, the
provisions of Paragraph 9 shall be effective as the sole remedy of NT and
INVESTORS In the event that NT elects to terminate this Purchase Agreement
or to declare this Purchase Agreement in default, NT shall notify CBS of
such election in writing, certified mail, return receipt requested.
5. (a) CBS acknowledges that CBS will arrange for and guarantee
7
<PAGE>
a line of credit or other credit facility to finance the payment of the
balance of the purchase price of the 15 Machines. CBS shall go to at least
three (3) financing institutions to seek out and find, if possible, one
that shall not require personal guarantees from INVESTORS. NT shall assist
CBS in good faith in obtaining a line of credit or other credit facility
to finance the payment of the balance of the purchase price of the 15
Machines and if required by financing institution shall provide written
guarantees. As the Machines are delivered and sited, NT shall draw against
such line of credit or credit facility and pay the balance of the purchase
price. Title to the Machines shall pass when NT has tested the lines and
accepted the Machines as properly functioning for the intented purposes
(b) In the event that CBS cannot arrange f or a line of credit or other
credit facility to finance the balance of the purchase price of the
fifteen (15) Machines then the deposit shall be applied to the purchase
price of the first five (5) Machines.
6. As an inducement to NT to make a purchase of 15 Machines and thereby
require financing:
(a) CBS guarantees that NT shall achieve the financial performance
projections, a copy of which is attached hereto, and made a part hereof
and marked as Exhibit "F"
8
<PAGE>
(b) CBS shall be responsible to assist and provide NT in its management
and business development. CBS shall make available the full time services
of Geoffrey Alexander, a CBS employee. NT and Mr. Alexander shall enter
into such employment or consulting agreement as they may negotiate. The
term of Mr. Alexander's employment shall be in the discretion of NT
(c) In the event that NT does not achieve such performance projections
during the management /consulting of Mr. Alexander, NT shall notify CBS of
the failure to achieve the performance projections and shall terminate Mr.
Alexander. It shall be the responsibility of CBS to provide an alternative
manager/consultant to assist NT in achieving the performance projections.
In determining It cumulative (total) income before depreciation, interest
expense and taxes" from operations of the first 5 Machines", the parties
shall utilize the performance projections which are attached hereto, and
made a part hereof and marked as Exhibit D pursuant to Paragraph 5(a)
below. Discretionary expenses not included in the performance projections
shall be added back in determining cumulative (total) income bef ore
depreciation, interest expense and taxes". GAAP accounting shall be
adjusted to the methods used in preparing the performance projections.
9
<PAGE>
(d) If NT does not achieve the performance projections, NT may:
(i) waive the failure and continue as theretofore; or
(ii) terminate this Purchase Agreement; or
(iii) declare this Purchase Agreement in default.
NT shall not have an independent cause of action for failure to achieve
the performance projections and the remedies of NT are limited to those
listed. If NT terminates this Purchase Agreement, the obligation of NT to
purchase any further Machines, if less than 15 have been purchased, shall
be terminated and NT shall retain and operate the Machines purchased as
the sole remedy of NT and INVESTORS. if NT elects to declare this Purchase
Agreement in default, the provisions of Paragraph 10 shall be effective as
the sole remedy of NT and INVESTORS. In the event that NT elects to
terminate this Purchase Agreement or to declare this Purchase Agreement in
default, NT shall notify CBS of such election in writing, certified mail,
return receipt requested.
7. (a) In consideration of the execution of this Agreement by NT, FIDELITY
shall contemporaneously issue to INVESTORS (including to such persons and
entities as INVESTORS may direct) Seven Hundred and Fifty Hundred Thousand
(750,000) warrants for the purchase of 750,000 shares of the Common
10
<PAGE>
Stock of FIDELITY at an exercise price of $1.25. FIDELITY represents that
it has the authority to issue such warrants. Such warrants, designated as
the 1996-A Warrants, may be exercised the later of:
(i) prior to 5:00 P.M, on September 19, 1996; or
(ii) within sixty (60) days after the effectiveness of the SB-2 of
FIDELITY excluding those Jewish holidays listed in Exhibit "E"
provided that this Purchase Agreement is in full force and effect as
of the date of exercise. Payment for the options shall be as
follows:
(i) Not less than ten (10%) percent shall be paid at the times
provided under Paragraph 7(a)(ii) ; and
(ii) The remainder of the payment for the options shall be
paid not later than 5:00 P.M. on December 31, 1996.
(b) In consideration of the payment of the full purchase price of
$1,887,000 for all 15 Machines, FIDELITY shall contemporaneously with the
execution of this Purchase Agreement issue to INVESTORS (including to such
persons and entities as INVESTORS may direct) Seven Hundred Fifty Thousand
(750,000) warrants for the purchase of 750,000 shares of the Common Stock
of FIDELITY at an exercise price of $1.25. Such warrants, designated as
the 1996-B Warrants, may be exercised at any time prior to 5:00 P.M. on
March 19, 1998 provided that this Purchase Agreement is in full force and
effect as of the
11
<PAGE>
date of exercise. FIDELITY represents that it has the authority to issue
such warrants.
(c) Contemporaneously with the execution of this Purchase Agreement
FIDELITY shall -adopt the Warrant Agreement, form of 1996-A Warrant, and
form of 1996-B Warrant attached hereto, and made a part hereof and marked
respectively as Exhibits "H", and "'I".
(a) Within seven (7) business days following execution of this Purchase
Agreement, INVESTORS shall cause NT to issue to CBS, and NT shall issue to
CBS, that number of shares of the common stock of NT as shall equal
forty-five percent (45%) of the issued and outstanding shares of Common
Stock of NT. CBS shall pay the par value, if any, for such stock. NT shall
be incorporated with a single class of Common Stock and the stockholders
shall have preemptive rights.
(b) As NT shall pay for each Machine, CBS shall make a nonrefundable
contribution to the capital of NT in the amount of Ten Thousand Dollars
($10,000); i.e., $10,000 per initial Machine Purchased, to a total of
$150,000, No further contribution shall be required on account of
additional Machines purchased by NT in exercising its right of first
refusal or purchased pursuant to 12 of this Agreement.
(c) During the first year of NT's operations, subject to the
12
<PAGE>
expenditure of the capital contribution of CBS for operations, as may be
required by NT in good faith, CBS shall make an unsecured bearing loans to
NT at the lowest interest rate permitted by Federal law and in such
amounts, from time to time, as may be required for NT to meet its cash f
low deficits, to a total of $300,000. Such loan(s) shall be repaid first
from available cash flow of NT as its business develops, from time to
time, and the unpaid balance of such loans shall mature on March 19, 1998.
CBS shall repay to Investors within six (6) months of NT's election under
Paragraphs 1(e) or 4 to declare a default the $629,000. As additional
security and to assure NT and INVESTORS that CBS will fulfill its
guarantee provided in Paragraph 4 above, Bruce Bendell, Chairman of the
Board of FIDELITY, and Doron Cohen, President/CEO of FIDELITY, both of
whom are major stockholders of FIDELITY, shall each pledge Five Hundred
Thousand (500,000) shares of the Common Stock of FIDELITY as collateral
for the performance by CBS of its guarantee of the recovery of the
$629,000. If NT and/or INVESTORS shall declare a default with respect to
this Purchase Agreement as a result of the failure to recover the
$629,000, CBS shall be primarily responsible for the payment of the
unrecovered balance of the $629,000. If CBS shall pay such unrecovered
balance, upon such payment INVESTORS shall
13
<PAGE>
by NT as provided in Paragraph 5 above. Upon notifying CBS of its election
to declare a default of this Purchase Agreement, INVESTORS shall cause to
transfer to FIDELITY at no further cost 55% of the shares in. Furthermore,
in the event that NT and/or INVESTORS shall declare a def ault with
respect to this Purchase Agreement as a result of the failure to meet the
performance projections, CBS and FIDELITY jointly and severally agree to
indemnify INVESTORS against, and hold INVESTORS harmless from, any
repayment demands with respect to such line of credit or credit facility
and with respect to any loss, charge, expense, claim, award or damages
arising from or directly related to such line of credit or credit facility
from and after the date of the declaration of default.
If, from and after the date of this Purchase Agreement, while this
Purchase Agreement remains in full force and effect without default by NT,
FIDELITY shall determine:
(a) to sell a total of 50% or more of CBS; or
(b) to have CBS become a public company;
then FIDELITY shall notify NT and INVESTORS, writing, of such
determination upon the earlier of:
(i) the execution of an Agreement contemplating such an event; or'
(ii) at least thirty (30) days prior to the effective date of such
event.
14
<PAGE>
NT's stockholders shall have the option to convert their stockholdings in NT
to shares of the Common Stock of CBS, so as to participate in the proposed
event. Such option shall expire if unexercised within ten (10) business days
after NT's receipt of notice from FIDELITY, unless otherwise agreed upon by the
parties. The intent of such conversion is to give the non-CBS stockholders of NT
a value for their 55% interest in NT equal to the value being received by CBS in
recognition of its 45% interest. The basis for such conversion shall be the
application to the 55% of NT owned by its non CBS stockholders of the same
valuation being applied, in the proposed transaction, to the 45% of NT owned by
CBS. If the proposed event is a sale of 50% or more of CBS, the value being
applied by the buyer to the 45% interest of CBS in NT shall be applied to the
55% of the non-CBS stockholders. If the proposed event is CBS becoming a public
company, the value being applied by the underwriter to the 45% interest of CBS
in NT shall be applied to the 55% of the non-CBS stockholders In the event that
the valuation method cannot be determined, the conversion shall be based upon an
independent appraisal of the value of NT. The parties acknowledge that this
provision will increase the price to be paid f or the interest in CBS being
sold, whether privately or publicly, and the parties shall cooperate, in good
faith, to accomplish any potential transaction and the intent of this paragraph.
15
<PAGE>
12. This Purchase Agreement shall be deemed to be made in New York and all
disputes arising hereunder shall be governed and controlled by the laws of
New York. In, the event of any litigation arising from this Purchase
Agreement, the parties hereto agree to submit themselves and the subject
matter of said dispute to the jurisdiction of the state and/or federal
courts in New York.
13. Any and all notices, requests, demands and other communications required
or permitted to be given pursuant to this Purchase Agreement shall be in
writing and shall be deemed to have been duly given when delivered by hand
or when deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, as follows:
If to CBS: Computer Business Sciences
144-15 Union Turnpike
Flushing, New York 11367
with a copy to: Richard C. Fox, Esq.
3401 Lakeview Drive
Delray Beach, Florida 33445
If to Nissko Telecom, Ltd.: Nissko, Telecom, Ltd.
7 West 45th Street
New York, New York 10036
with a copy to: Robert L. Rimberg, Esq.
866 Third Avenue, 30th Floor
New York, New York 10022
or to such other addresses as the parties hereto may from time
16
<PAGE>
to time give written notice of to the others.
14. This Purchase Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes
all prior agreements, understandings, negotiations and discussions, both
written and oral, between the parties hereto with respect to such subject
matter. This Agreement may not be amended or modified in any way except by
a written instrument executed by all of the parties hereto. This provision
shall not affect the validity not interpretation of the related documents
referred to herein and supporting the provisions of this Purchase
Agreement.
17
<PAGE>
15. This Purchase Agreement shall be for the benefit of and binding upon the
parties hereto and their respective heirs, personal representatives,
successors and, where applicable, assigns.
16. The waiver by any of the parties hereto of any other party's prompt and
complete performance, or breach or violation, of any provision of this
Purchase Agreement shall not operate nor be construed as a waiver of any
subsequent breach or violation, and the failure by either of the parties
hereunder to exercise any right or remedy which it may possess hereunder
shall not operate nor be construed as a bar to the exercise of
18
<PAGE>
such right or remedy by such party upon the occurrence of any subsequent
breach or violation. No right or remedy conferred upon or reserved to
either of the parties hereto by this Purchase Agreement shall exclude any
other right or remedy, except as expressly provided herein, but each such
right or remedy shall be cumulative and shall be in addition to every
other right or remedy hereunder or available at law or in equity.
17. The invalidity of any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Purchase Agreement
shall not affect the enforceability of the remaining portions of this
Purchase Agreement or any part hereof, all of which are inserted
conditionally on their being valid in law, and, in the event that any one
or more of the words, phrases, sentences, clauses, sections or subsections
contained in this Purchase Agreement shall be declared invalid by a court
of competent jurisdiction, this Purchase Agreement shall be construed as
if such invalid word or words, phrase or phrases, sentence or sentences
clause or clauses, section or sections or subsection or subsections had
not been inserted.
18. All of the legal, accounting and other costs and expenses incurred in
connection with this Purchase Agreement and the transactions contemplated
hereby shall be borne and paid by the party incurring such costs and
expenses, and no party shall be obligated for any cost or expense incurred
by any other party.
19. In any legal action or other proceeding involving, arising out of or in
any way relating to this Purchase Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs, and expenses of
litigation.
20. Upon consent of both parties, any controversy, dispute or claim arising
out of, or relating to this Agreement or breach thereof, shall be settled
by arbitration pursuant to the rules then obtaining of the American
Arbitration Association and shall be held at the offices of the American
Arbitration Association offices in New York City. Any award rendered
therein shall be binding on each and all of the parties and their personal
representatives. Expenses shall be borne by the non-prevailing party in
the arbitration proceeding. Judgement may be entered upon an arbitration
award in any court of competent jurisdiction, and any arbitration notice,
process, notice of motion or application to a court, including application
for judgement, may be served within or outside the State of New York by
mail or personal service, provided a reasonable time for appearance is
allowed. Each Stockholder hereby consents to the jurisdiction of any court
to which any
19
<PAGE>
motion or application shall be made in accordance with this agreement.
21. This Purchase Agreement may be executed -in any number of counterparts and
by the separate parties hereto in separate counterparts, each of which
shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed and delivered
this Agreement on the date first above written.
ATTEST: COMPUTER BUSINESS SCIENCES, INC.
By: /s/: Doron Cohen
---------------------------
Doron Cohen
Secretary
ATTEST: FIDELITY HOLDINGS, INC.
By: /s/: Doron Cohen
---------------------------
Doron Cohen
Secretary
ATTEST: NISSKO TELECOM, INC.
By: /s/ Avi Nissanian
---------------------------
Avi Nissanian
Secretary
WITNESSES: INVESTORS:
By: /s/: Avi Nissanian
---------------------------
Avi Nissanian
By: /s/: Yossi Koren
---------------------------
Yossi Koren
By: /s/: Chamuel Livian
---------------------------
Chamuel Livian
MEMORANDUM OF UNDERSTANDING
This memorandum of understanding, made this 9th day of September 1997 by
and among Computer Business Sciences, Inc., a New York Corporation with its
principal place of business located at 80-02 Kew Gardens Road, Kew Gardens, New
York 11375 ("CBS"), Nissko Telecom Ltd., a Delaware Corporation with offices
located at 7 West 45, Street, New York, New York 10036 ("LTD") and formed by
Avraham Nissanian, an adult individual residing at 138-34 78th Drive, Flushing,
New York 11367; Yossi Koren, an adult individual residing at 124 Audley Street,
Kew Gardens, New York 11418; and Chmuel Livian, an adult individual residing at
65 Tennis Place, Forest Hills, New York 11375 (the individuals to be referred to
as "Investors"), Fidelity Holdings, Inc. ("Fidelity"), a Nevada Corporation with
offices at 80-02 Kew Gardens Road, Kew Gardens, New York 11375; and Robert L.
Rimberg ("Rimberg") an adult individual with offices at 600 Third Avenue, New
York,New York 10016
WITNESSETH THAT:
WHEREAS, a valid agreement dated March 25, 1996 exists among CBS, Fidelity
and Investors;
WHEREAS, CBS now desires to acquire LTD in a tax free reorganization which
shall include Nissko Telecom LP. ("L.P.") in which LTD is the general partner;
WHEREAS, LTD desires to be acquired by CBS in a tax free reorganization;
WHEREAS, Investors agree to the transactions hereby as part of a tax free
reorganization;
NOW THEREFORE, intending to be legally bound, and in consideration of the
mutual promises and covenants confined herein, the parties have agreed as
follows:
CONDITION PRECEDENT
This Memorandum of Understanding and any subsequent final agreement
between the parties shall be null and void if the merger of Major Automotive,
Inc. into Fidelity is not completed.
<PAGE>
LEGAL ENTITIES AND OWNERSHIP
1. Nissko Telecom Associates ("Associates") is a general partnership
with CBS and L.P. as the only partners.
2. Nissko Telecom Associates was created under the agreement dated
March 25, 1996 and attached hereto as Exhibit "A".
3. LP owns 55% of Nissko Telecom Associates and CBS owns 45% of Nissko
Telecom Associates.
4. Investors own 55% of LTD and CBS owns 45% of LTD.
5. Investors and Robert L. Rimberg have a 54% limited partnership
interest in LP.
6. LTD is the general partner of LP with a 1% ownership interest.
PARTNERSHIPS WITH ASSOCIATES
7. A copy of the Nissko-Nassim general partnership agreement between
Nissko Telecom Associates and Dr. Roland Nassim and dated October
22, 1996 is annexed hereto as Exhibit "B".
8. A copy of the Thai Tel Communication general partnership agreement
between Nissko Telecom Associates and Wentworth and Stone, Inc. and
dated October 17, 1996 is annexed hereto as Exhibit "C".
TRANSACTIONS TO BE COMPLETED
9. A. It is acknowledged and agreed that there are valid business
purposes for L.P. to be dissolved and accordingly, the assets and
liabilities held by L.P. shall be transferred to LTD in a
transaction which shall equal as a tax free event.
2
<PAGE>
Given the transactions that will be occurring involving Major
Automotive and Fidelity, the parties involved in financing those
transactions have required that L.P. be consolidated into LTD.
Accordingly, this consolidation will take place as soon as
practicable after the execution of a final agreement between the
parties hereto.
B. As part and parcel of the transaction to be completed, CBS shall
control L.P., Associates Nissko-Nassim and Thai-Tel Communications.
C. As consideration for the merger of LTD into CBS, CBS shall cause
shares of common stock in Fidelity to be issued to the shareholders
of LTD in a tax free reorganization under section 368 (a) of the
Internal Revenue Code of 1986 which shall include the following;
(i) Upon execution of this Memorandum of Understanding, 520,750 shares of
common stock in Fidelity that has been paid for by the Investors and shall be
distributed as follows:
Yossi Koren or his designee: 173,583
Chmuel Livian or his designee: 173,584
Avraham Nissanian or his designee: 173,583
and 2,250 shares that have been paid for by Rimberg shall be distributed upon
execution of this Agreement to Rimberg during the period of two years that begin
on the date of the signing of a formal Agreement covering the matters in this
memorandum of understanding, none of the above shares shall be transferred in
any manner, otherwise than pursuant to an available exemption from
3
<PAGE>
registration under the Securities Act of 1933 as amended. Any transfers made in
compliance with this restriction shall made subject to the voting rights of
Bruce Bendell under the proxy referred to in paragraph 14 of this memorandum of
understanding. Certificates representing the above shares may be endorsed with
an appropriate legend reflecting the above restriction. These shares are from
exercising a portion of the warrants referred to in the March 25, 1996 agreement
as "1996-A Warrants";
(ii) Upon execution of the final agreement among the parties, Investors,
or their designee, shall receive 772,500 shares of common stock in Fidelity as
follows:
Yossi Koren or his designee: 257,500
Chmuel Livian or his designee: 257,500
Avraham Nissanian or his designee: 257,500
and Rimberg, or his designee, shall receive 27,500 shares of common stock in
Fidelity, the restrictions applicable to the shares in clause (i) of this
paragraph 9.C shall also be applicable to the shares in this clause (ii);
(iii) Upon execution of a final agreement among the parties, Investors, or
their designee, shall each have the right to purchase up to one third of 206,750
warrants of the common stock of Fidelity at $1.25 per share as follows:
Yossi Koren or his designee: up to 68,917 warrants
Chmuel Livian or his designee: up to 68,917 warrants
Avraham Nisanian or his designee: up to 68,916 warrants
and Rimberg shall have the right to purchase up to 20,250 warrants of the common
stock of Fidelity at $1.25 per share.
4
<PAGE>
These warrants are the remainder of the warrants referred to in the March 15,
1996 agreement as "1996-A Warrants". All warrants, unless all monies therefor
are paid to Rimberg & Associates, P.C., as escrow agent, shall automatically
expire 30 days after written notification that the Fidelity SB-2 is effective.
The monies for the warrants shall be held in escrow and shall not be paid to
Fidelity until such time as the merger of Major Automotive into Fidelity is
consummated. If, after 180 days following payment for the warrants, the merger
of Major Automotive into Fidelity is not consummated, Investors and Rimberg
shall have the absolute right to receive all monies paid for the warrants
without further delay. The Investors shall have the right to exercise the
warrants in their sole discretion. Notwithstanding the foregoing, if the
Investors do not exercise the warrants, this will not otherwise affect the
transactions contemplated hereby.
(iv) Notwithstanding any provision contained herein, it is agreed that prior to
the issuance of the common stock as provided in 9.C.2 there shall be a full
accounting if any money is owed by any party to any other party in this
Agreement and such monies shall be paid before the issuance of any of the stock.
NISSKO JEWELRY TRADING
10. On various dates and in various agreements, Investors and Nissko
Jewelry Trading, Inc., acting as guarantor and/or principal, executed agreements
that were for the benefit of LTD, L.P. and/or Fidelity. Upon execution of this
Memorandum of Understanding, Fidelity shall cause to be placed into escrow with
Rimberg 200,000 shares of common stock in Fidelity as (the "Escrowed Shares)
security for Nissko Jewelry Trading, Inc. Should any attempt be made to collect
any money against Nissko Jewelry Trading, Inc., or if any suit, action or
proceeding of any nature is commenced against Nissko Jewelry Trading, Inc.,
under the various agreements, the Escrowed Shares shall secure Nissko Jewelry
Trading, Inc.
5
<PAGE>
Notwithstanding the foregoing, Fidelity and CBS agrees to hold harmless,
indemnify and defend Nissko Jewelry Trading, Inc., from any and all lawsuits,
claims, proceedings, and action that may arise out of the agreements as
described above.
INVESTOR' OBLIGATIONS
11. Investors represent that Avraham Rachminov has agreed to enter into a
partnership with CBS for Moscow, Russia regarding telephony computer equipment.
Investors further represent that Avraham Rachminov has agreed to lend $300,000
for his participation in the partnership with CBS. As security for the loan of
Avraham Rachminov, Investors shall place in escrow with Rimberg & Associates,
P.C. 25,000 shares of Fidelity's stock and Fidelity shall cause Doron Cohen and
Bruce Bendell to place in escrow with Rimberg & Associates, P.C. 50,000 shares
of Fidelity's stock.
INDEMNIFICATION
12. To the fullest extent permitted by law, Fidelity and CBS shall
indemnify, defend, protect, and hold harmless Investors and Rimberg from and
against all liabilities, damages, loses, claims, demands, lawsuits, proceedings,
arbitrations, and actions of any nature whatsoever connected with L.P. and/or
LTD.
AGREEMENT DATED MARCH 25, 1996
13. At such time as the final agreement between the parties is executed or
the completion of the merger of Major Automotive, Inc. into Fidelity, whichever
is later, the Agreement dated March 25, 1996 and attached as Exhibit "D" shall
be deemed null and void and all parties shall be released of any and all
obligations, rights by investors to warrants and any stock held as
collateral/security pursuant to the March 25, 1996 agreement shall be released
that may have arisen thereunder.
6
<PAGE>
PROXY
14. Investors hereby agree that they shall give Bruce Bendell a proxy to
vote up to 500,000 shares of the stock being issued under this Agreement for a
period of not less than two (2) years from the execution of this Agreement.
FINAL AGREEMENT
15. This Memorandum of Understanding shall be replaced within thirty (30)
days of its execution by final agreement executed by all parties in interest.
IN WITNESS WHEREOF the parties have hereunto executed this document the
day and year first above written
Attest: Computer Business Science, Inc.
By: /s/ Doron Cohen
------------------------------
Doron Cohen
By: /s/ Avraham Nissanian
------------------------------
Attest: Avraham Nissanian
By: /s/ Yossi Korne
------------------------------
Attest: Yossi Koren
By: /s/ Chmuel Livian
------------------------------
Attest: Chmuel Livian
7
<PAGE>
Fidelity Holdings, Inc.
By: /s/ Doron Cohen
------------------------------
Attest: Doron Cohen
By: /s/ Robert L. Rimberg
------------------------------
Robert L. Rimberg
Attest: Nissko Telecom, L.P.
By: Nissko Telecom Ltd.
By: /s/ Avraham Nissarian
------------------------------
Avraham Nissarian
Attest: Nissko Telecom, Ltd.
By: /s/ Avraham Nissarian
------------------------------
Avraham Nissarian
8
SUN COAST CAPITAL CORP.
110 WALL STREET
NEW YORK, NEW YORK 10005
June 6, 1997
Bruce Bendell
Chairman of the Board
Fidelity Holdings Inc.
80-02 Kew Gardens Road
Suite 5000
Kew Gardens, New York 11415
Dear Mr. Bendell:
This letter has reference to discussions between Sun Coast Capital Corp.
("Underwriter") and Fidelity Holdings Inc. ("Company") concerning a proposed
public offering of the Company's common stock ("Common SOW).
We have made a preliminary analysis of the Company and will continue to
familiarize ourselves with its business, operations and financial condition. The
purpose of this letter ("Commitment Letter") is to state our present intention,
subject to market and other conditions prevailing at the time of the public
offering, to underwrite on a firm commitment basis the public offering by the
Company ("Offering") of the following securities ("Offered Securities"):
1,000,000 shares of Common Stock at a price between $6 and $8 per share
("Stock"). We may conduct the Offering ourselves or, if we deem it appropriate,
through a group of securities firms which we would organize and manage.
The Underwriter would purchase the Offered Securities from the Company
contemporaneously with the effectiveness of an underwriting agreement
("Underwriting Agreement") at a price per share to be mutually agreed, based on
market conditions and other factors, less an underwriting discount of 10%
("Underwriting Discount"). The Company agrees to grant the Underwriter an
over-allotment option exercisable for 45 days from the Offering Date
("Registration Statement") to purchase up to a further 15% of the number of
Offered Securities at the offering price less the Underwriting Discount.
In addition to other compensation contemplated by this letter, the Underwriter
will be entitled to 100,000 warrants to purchase Common Stock. These warrants
would have an exercise price equal to 110% of the price at which the Stock is
actually sold in
<PAGE>
Bruce Bendell 2 June 6, 1997
the Offering, would become exercisable on the first anniversary of the Offering
Date, and would expire on the fifth anniversary of the Offering Date.
The Underwriter understands that the Company wishes to complete the Offering
prior to September 30, 1997, and for its part will use all reasonable efforts to
achieve that result. The Underwriter understands and agrees that the Company's
desire to consummate the Offering depends upon successful completion of the
Company's acquisition of Major Automotive, which in turn depends upon approval
of that proposed transaction by certain major automobile manufacturers including
General Motors Corporation, Subaru of America and Chrysler Corporation.
The Underwriter intends to make a market in Common Stock following the effective
date of the Offering, but must reserve the right to discontinue doing so at any
time in its discretion.
Because substantial resources must be committed in order to prepare for the
Offering, we ask that you confirm your agreement to the following terms and
conditions, in addition to those that will be included in the underwriting
agreement to be negotiated prior to the offering:
1. Information. The Company agrees to furnish the Underwriter such information
about the Company, including detailed financial information, as the Underwriter
may request from time to time. The Company will take responsibility for
preparation and filing with the United States Securities and Exchange Commission
of a Registration Statement on Form SB-2 relating to the Offered Securities,
including financial statements and information prepared by an independent public
accounting firm of recognized national standing. We will take responsibility for
preparation of the Underwriting Agreement, the Agreement Among Underwriters (if
used) and the Selected Dealers Agreement and make all required filings with the
National Association of Securities Dealers and the various state securities
regulatory agencies that are required in connection with the Offering.
2. Exclusivity. From and after execution of this Commitment Letter to and
including the earlier of (a) its termination and (b) execution of the
Underwriting Agreement, (i) the Underwriter will be the Company's sole and
exclusive representative in connection with the Offering, and (ii) the Company
will not negotiate with any other entity concerning the public or private sale
of equity securities issued or to be issued by the Company.
3. No Conflict. The Company represents that the execution and delivery of this
Commitment Letter and the Company's performance of obligations hereunder does
not and will not conflict with, or result in breach of, any agreement or letter
of intent between the Company and an entity other than the Underwriter.
<PAGE>
Bruce Bendell 3 June 6, 1997
4. Lock-Up. Each of the Company's officers and directors will agree not to sell
any Common Stock without the Underwriter's consent, not to be unreasonably
withheld, during the period commencing on the filing date of the Registration
Statement and ending one year after completion of the Offering.
5. Expenses. (a) The Company will pay all expenses incurred in connection with
the Offering, including fees and expenses of Company accountants and legal
counsel and expenses incurred in connection with (i) preparation, printing,
filing, mailing and delivery of the Registration Statement and prospectus in
preliminary and final form and any amendments thereto, including without
limitation any fees payable to the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc.,(ii) if applicable, listing or
qualification of the Securities for trading on the NASDAQ National Market, (iii)
printing and mailing the Underwriting Agreement and related documents, (iv)
issuance, transfer and delivery of the Securities, qualification, registration
or exemption, if required, of the Securities under the laws of those states in
which the Underwriter reasonably determines to offer the Securities, including
costs of preparing, printing and mailing "Blue Sky" surveys and fees and
disbursements of Underwriter's counsel in connection therewith; (v) the
Company's and the Underwriter's travel in connection with a reasonable number of
informational meetings with the brokerage community and institutional investors,
(vi) costs of such tombstone advertisements as it reasonably elects to publish
and (vii) settlement in same-day funds if desired by the Company. The
Underwriter will bear all fees and expenses of its legal counsel and its other
incidental costs and expenses that are not covered under clauses (i) - (vii)
above.
(b) In addition to the payment of expenses by the Company as provided in clauses
(i) (vii) of paragraph 5(a), the Company will reimburse the Underwriter for its
expenses on a non-accountable basis in an amount equal to 3% of the aggregate
offering price of the Securities, of which $25,000 shall be paid upon execution
by the Company of this letter, a further $25,000 shall be paid 75 days after the
initial filing of Form SB-2 is made with the Securities and Exchange Commission,
and the balance shall be paid at the consummation of the Offering.
6. Termination. This Commitment Letter may be terminated by the Company or the
Underwriter at any time by giving the other written notice of termination. In
that event the Company will be responsible for (i) payment of fees and
disbursements covered by clauses (i) - (vi) of paragraph 5(a) and (ii)
reimbursement, indemnification and contribution obligations as set forth in
paragraph 9 below.
7. Certain Conditions. The Company understands that the Underwriter's intent to
act as lead or sole underwriter and to enter into the Underwriting Agreement is
subject, among other things, to (a) the Underwriter's and any prospective
co-underwriters' satisfaction with the Company's financial condition, results of
operation, current earnings and prospects, (b) completion to the Underwriter's
satisfaction of the Underwriter's investigation into the Company's business, (c)
market conditions
<PAGE>
Bruce Bendell 4 June 6, 1997
prevailing at the time of the Offering, (d) preparation of the Registration
Statement and other documents related to the Offering to the satisfaction of the
Underwriter and its legal counsel, (e) compliance to the Underwriter's counsel's
satisfaction with all legal requirements applicable to the Offering, (f) absence
of any legal or regulatory action involving the Company which if determined
adversely to the Company could have a material adverse effect on its business,
assets or financial condition, and (g) absence of any qualification by the
Company's independent public accounting firm of its opinion with respect to the
Company's financial statements included in the Registration Statement. Moreover,
the Company acknowledges and agrees that the Underwriter shall not incur any
obligation whatever to the Company unless and until a definitive Underwriting
Agreement in respect of the Offering is executed and delivered by the Company
and the Underwriter.
8.Underwriting Agreement. The Offering will be conducted pursuant to an
Underwriting Agreement which will (i) contain customary representations and
warranties from the Company, (H) require delivery of a comfort letter from the
Company's independent certified public accountants that is acceptable to the
Underwriter, (iii) provide for indemnification by the Company of the Underwriter
and any co-underwriters for (among other things) any material misstatement or
omission in the Registration Statement or, should the indemnification provisions
be determined to be unenforceable, customary provisions providing for
contribution among the parties, (iv) contain customary provisions allowing
termination of the Offering under certain circumstances such as (but not limited
to) a material adverse change or development in or affecting the publicly-held
securities markets or the Company or the Company's earnings, business or
management. The Company will use the services of a financial printing firm in
connection with all printed documentation relating to the Offering, as well as a
transfer agent for the Securities, both to be reasonably acceptable to the
Underwriter.
Indemnity and Contribution. Should the Underwriter become involved in any
capacity in any action, proceeding or investigation brought by or against any
person in connection with any of the matters to which this Commitment Letter
refers, the Company will periodically reimburse the Underwriter for its legal
and other expenses (including the cost of any investigation and preparation)
incurred in connection therewith. The Company will also indemnify the
Underwriter against any loss, claim, damage or liability to which the
Underwriter may become subject in connection with any such matter, except to the
extent that the same is the result of the Underwriter's gross negligence or bad
faith. Should indemnification be unavailable to the Underwriter for any reason,
or insufficient. to hold it completely harmless, the Company will contribute to
the amount paid or payable by the Underwriter as a result of such loss, etc., in
such proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and the Underwriter on the other, but
also the relative fault of the Company and the Underwriter, as well as any
relevant equitable considerations.
<PAGE>
Bruce Bendell 5 June 6, 1997
The reimbursement, indemnity and contribution obligations of the Company under
this paragraph 9 are in addition to any liability the Company may otherwise
have, are to be available on the same terms and conditions to the Underwriter's
affiliates, directors, officers, agents and employees and are to be binding upon
and to inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Underwriter and its affiliates, etc.
10. Survival of Certain Agreements. The agreements as to payment and
reimbursement of expenses (paragraph 5) and indemnification (paragraph 9) are
binding agreements of the Company and accordingly shall survive any termination
of this Commitment Letter. Otherwise, this Commitment Letter constitutes a
non-binding statement of the parties intentions regarding the Offering. The
parties will negotiate in good faith in order to promptly finalize and execute
the Underwriting Agreement relating to the Offering. If the Underwriter
determines at an earlier date not to proceed with the Offering, the Underwriter
will terminate this Commitment Letter promptly.
11. Entire Understanding; Governing Law. This Commitment Letter contains the
parties' entire understanding regarding its subject matter. It can only be
modified by a written instrument signed by both parties. It is to be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts negotiated, made and entirely to be performed in that State.
If the foregoing correctly expresses our understanding and, to the extent
provided in paragraph 9, the Company's intention to be legally bound, please so
indicate by signing and returning the enclosed copy of this Commitment Letter.
Yours sincerely,
SUN COAST CAPITAL CORP.
By: Marc Drimer
ACCEPTED AND AGREED FIDELITY HOLDINGS INC.
By: /s/Bruce Bendell
- ---------------------------
Bruce Bendell, Chairman
Date: June __, 1997
Marc M. Drimer, President
Fidelity Holdings, Inc.
80-02 Kew Gardens Road
Kew Gardens, NY 11415
(718) 520-6500
Fax (718) 793-4841
September 18, 1997
To: The Shareholders of Lichtenberg Robbins Buick, Inc.
d/b/a Lichtenberg Buick,
and Lichtenberg Motors Inc. d/b/a Lichtenberg Mazda,
listed on the signature pages hereof:
Re: Proposal by FIDELITY HOLDINGS, INC. or one of its wholly-owned
subsidiaries ("FDHG") to purchase all of the issued and
outstanding voting capital stock of Lichtenberg Buick and
Lichtenberg Mazda (collectively, the "Dealer")
Gentlemen:
1. This letter (the "Letter of Intent" or "LOI") shall serve to confirm
our proposed transaction (the "Transaction" regarding the purchase by Fidelity
Holdings, Inc., or one of its wholly-owned subsidiaries and the sale by all
shareholders of the Dealer (the "Sellers") of all of his, its or their shares of
Common Stock of Dealer (herein referred to as the "Common Stock" or the
"Shares"). The purchase price for all of the shares of Common Stock of Dealer
shall be equal to 8X pro forma after tax earnings of Dealer for the 12 months
ended December 31, 1997 (determined as if the Dealer was a tax paying "C"
corporation for federal and state tax purposes) determined by applying generally
accepted accounting principles ("GAAP") as certified by Dealer's independent
accountants, subject to adjustments for normalization of salaries and
perquisites, rents and other extraordinary expenses of operations of the Dealer,
and adjustments for any reserves for chargebacks, and used car reserves, payable
seventy-five (75) percent in the stock of FDHG and twenty-five (25) percent in
cash at the Closing, subject to appropriate reserves for post-closing purchase
price adjustments. In the event that, pursuant to the above formula, the
purchase price is less than $1.8 million, either FDHG or the Sellers shall have
the right to terminate the Transaction. In no event will the cash portion of the
purchase price be less than $500,000. The purchase price shall be allocated
between Lichtenberg Buick and Lichtenberg Mazda as agreed by the parties prior
to Closing.
2. The market value of the FDHG Common Stock delivered to the Stockholders
would be based upon the average of the closing sale prices of FDHG Common Stock
on NASDAQ, as reported in the Wall Street Journal, during the twenty (20)
trading days ending five (5) full trading days prior to the closing of the
Transaction (the "Closing"). This purchase price assumes that the Net Working
Capital (as hereinafter defined) of Dealer as of the Closing is not less than an
amount mutually agreed upon by FDHG and the Sellers (which amount shall be set
forth in the Agreement, as hereinafter defined), and that there is no material
decrease in the current fiscal year in revenues or operating earnings as
compared to the prior year. For purposes of this Letter of Intent, "Net Working
Capital" shall mean the net working capital of Dealer (i.e., total current
assets less total current liabilities), further reduced by any long-term debt of
Dealer. The purchase price may be adjusted downward in the event that any of
such assumptions proves incorrect.
<PAGE>
3. Seventy-five (75) percent of the purchase price, consisting of
two-thirds of the Shares and all of the cash, shall be payable at Closing with
the remainder of the Shares to be held in escrow by counsel for Sellers pending
determination of the purchase price, inclusive of any post-closing adjustments,
as contemplated under paragraph 2 hereof. Once such determination has been
completed, (a) the Sellers shall be obligated to repay 25% of any downward
adjustment in the purchase price in cash, (b) stock representing 5% of the
purchase price shall remain in escrow, (c) the balance of the purchase price, as
adjusted, shall be released from escrow and paid to the Sellers, and (d) any
remaining Shares shall be returned to FDHG. The remaining escrowed Shares shall
continue in escrow until the first anniversary of the Closing as a reserve
against any undisclosed liabilities of the Dealer.
4. The Sellers acknowledge that the Shares issued will not be registered
with the SEC for resale and that they will be acquiring the Shares for
investment purposes and not with any present intent to sell, pledge or otherwise
dispose of the Shares. As such, the Shares will be subject to restrictions on
their transfer and, in all likelihood, will not be saleable for at least one (1)
year from the date of Closing. The Company will attempt to make available to the
Sellers piggy back registration rights for the Shares, subject to the approval
of the underwriter in any underwritten offering of the Company's common stock.
5. As is customary in transactions of this kind, consummation of the
proposed purchase is subject to the satisfactory completion of a due diligence
investigation and will be conditioned upon several factors, including but not
limited to the following:
A. Preparation and execution of a definitive stock purchase
agreement (the "Agreement") and other closing documents, which Agreement and
other closing documents shall contain the terms and provisions expressed herein,
together with such further terms and conditions as are customary in a
transaction as contemplated. In the Agreement, the Stockholder will make certain
representations, warranties and covenants as to the title to the assets of the
Companies, collectability of receivables, inventories (new and used), charge
backs, warranty claims, absence of undisclosed litigation, claims against or
liabilities of the Companies, existence of insurance coverage, correctness of
the financial statements, absence of any material adverse change in the
Companies' business or financial condition since December 31, 1996, and as of
the date of Closing, and any other representations, warranties and covenants as
are customary in a transaction as contemplated. These representations,
warranties and covenants will survive the Closing for a period of two years,
except with respect to (i) specifically identified items and (ii) additional
income tax liabilities, which will survive the Closing as mutually agreed or
through the term of the statutes for the applicable income tax filings,
respectively.
B. The acquisition by FDHG of the Shares must represent one hundred
percent (100%) of the issued and outstanding Common Stock of Dealer at the
Closing, free and clear of any and all liens, claims or encumbrances of any
nature whatsoever.
C. The cancellation at or prior to the Closing, of any stock options
of Dealer outstanding, at no cost to FDHG.
<PAGE>
D. Letters of resignation from all of Dealer's directors, effective
as of the Closing.
E. Certain key employees (mutually agreed upon by FDHG and Sellers),
shall have agreed to remain in the employ of the Dealer. Peter Lichtenberg's
employment agreement will be for a term of five (5) years from the date of
Closing with base compensation of $150,000 per annum plus profit participation
incentives. The scope and duration of the restrictive covenants contained in
Peter Lichtenberg's agreement shall be dependent upon whether or not the Company
offers him continued employment on at least comparable terms at the expiration
of his employment agreement. If he is offered such employment but elects not to
accept it, he shall be prohibited from directly or indirectly participating in
the sale of new or used cars within the five Boroughs of New York City for a
period of three years following the termination of his employment and shall be
prohibited from servicing or soliciting any customers of Dealer or hiring any
employee of Dealer for a period of three years following termination of his
employment. If the company does not offer Peter Lichtenberg continued employment
on the basis contemplated above, the scope of the foregoing restriction on
competition shall be reduced to the Boroughs of Queens and Brooklyn.
F. All liens and security interests securing debts of Dealer which
have been paid in full prior to or at the Closing shall have been fully released
to the reasonable satisfaction of FDHG and all Uniform Commercial Code financing
statements covering such debts shall have been terminated.
G. All obligations of Dealer which are not being retired or
satisfied by the Sellers prior to or at the Closing will be modified in such a
manner that their covenants, repayment schedules, and other provisions will be
upon terms reasonably satisfactory to FDHG. If the Sellers are personal
guarantors of any of such obligations and the Company is not successful in
eliminating such guarantees, the Company will indemnify the Sellers against any
damages they suffer arising out of or related to such guarantees.
H. FDHG shall have received from counsel for Dealer and the Sellers
an opinion in scope and substance reasonably satisfactory to FDHG and its
counsel dated as of the date of Closing.
I. FDHG shall be satisfied in its sole discretion with the results
of its continuing legal, financial and business due diligence investigations of
Dealer.
J. No unsatisfied liens for the failure to pay taxes of any nature
whatsoever shall exist against Dealer, or against or in any way affecting any of
the Shares.
K. All officers and directors of Dealer and each of the
Sellers shall have repaid in full all debts or other obligations, if any, owed
to Dealer at or prior to the Closing. Obligations of Dealer, if any, owed to
Sellers will be assumed by FDHG or renegotiated at closing.
L. No material adverse change, as determined in FDHG's sole
discretion, shall have occurred in Dealer's business or its future business
prospects.
<PAGE>
M. No customer or customers representing a significant
amount in the aggregate of Dealer's business shall have materially curtailed or
terminated its or their relationship with Dealer.
N. FDHG shall have received from Dealer audited balance
sheets, income statements and statements of cash flows for the years ended
December 31, 1995 and December 31, 1996, unless FDHG's independent auditors
determine that, for SEC filing purposes, audited statements of Dealer are
required, in which event the historical financial statements of the Dealer must,
in the opinion of FDHG's independent public accountants, be suitable or readily
adaptable for incorporation in the registration statements, prospectuses and
annual reports to be filed by FDHG with the Securities and Exchange Commission
("SEC") under applicable federal securities laws and regulations.
O. Jeffrey Lichtenberg shall have covenanted that he will
not, for a period of two (2) years from the date of Closing (i) compete within
the five Boroughs of New York City, (ii) service or solicit any customers of
Dealer, or (iii) recruit any employee of Dealer.
P. Since December 31, 1996, Dealer shall have made no
dividend, consulting or other payment to the Sellers except for salaries (not to
exceed current compensation) approximately $72,000 in one-time bonuses and
distributions to cover their personal federal and state income obligations
arising due to the Sub-Chapter "S" status of Dealer.
Q. Dealer shall be required to deliver to FDHG the financial and
other information listed on Exhibit "A" hereto on an monthly basis from the date
of execution of this Letter of Intent until the date of Closing.
R. Sellers shall have assumed and/or discharged all deferred taxes
of Dealer.
S. Sellers shall take all necessary actions, including
joining in the required election, so that FDHG may obtain a stepped-up basis in
all of the assets of Dealer (i.e., a successful Section 338(h)(10) election, no
cash-to-accrual liability to FDHG or Dealer shall be created upon the sale of
the stock, and all deferred taxes on the books of Dealer shall have been
eliminated). The Company shall reimburse (as additional purchase price) the
Sellers in cash on any after-tax basis for any additional taxes payable by the
Sellers in connection with this Transaction as a result of such Section
338(h)(10) election.
T. The Transaction shall have received all necessary approval of
shareholders and directors of FDHG (or the purchasing entity, if not FDHG) and
the Sellers.
<PAGE>
U. FDHG shall have successfully completed its contemplated public
offering of securities and, in connection therewith, shall have received net
proceeds therefrom of a minimum of $6.9 million.
V. Appropriate arrangements for all premises contemplated to be
utilized by Dealer in its operations following the Closing shall have been
entered into on terms satisfactory to FDHG and sellers.
6. Immediately upon your acceptance of this Letter of Intent, our counsel
shall be instructed to prepare the Agreement, and Sellers shall cause Dealer to
provide to FDHG and its designated representatives complete access at the
offices of Dealer's accountants to all the books, records and documents
(financial and otherwise) of Dealer, and to further cause the directors,
officers and employees of Dealer to cooperate with and assist FDHG and its
representatives in conducting their examination of Dealer. In connection
therewith, FDHG agrees not to contact any lender, customer, or other person
associated in business with Dealer without first obtaining the consent of
Dealer. Sellers will permit representatives of FDHG to have access at reasonable
times, and in a manner so as not to interfere with the normal business
operations of Dealer, to the headquarters office of Dealer.
7. During FDHG's on-site investigation of Dealer, FDHG shall not discuss
any aspects of the operation of Dealer with any employee of Dealer, and FDHG
shall direct all requests for information and material only through Mr. Peter
Lichtenberg or his designated representatives, unless otherwise agreed to by
FDHG and the Dealer. Furthermore, and in addition to the provisions above,
Dealer shall arrange with FDHG a mutually agreeable time and place at which FDHG
may conduct interviews in a format and covering subjects reasonably acceptable
to Dealer with key customers and employees of Dealer mutually agreed to by FDHG
and the Sellers.
8. The Agreement shall specify a closing date, which may be extended to
March 30, 1998 by FDHG or to a later day by the mutual written consent of all
the parties, contingent, of course, upon any required approvals of
manufacturers, governmental authorities or agencies, and all other contingencies
provided herein. We would like the Agreement to be executed no later than
October 31, 1997, and the final closing and consummation of the transactions
contemplated herein and therein to occur on or before January 31, 1998.
9. Effective upon execution of this Letter of Intent, the Sellers will
cause Dealer to:
A. carry on its business in substantially the same manner as
heretofore and not introduce any material new method of management, operation or
accounting;
B. maintain its properties, facilities and equipment and other
assets in as good working order and condition as at present, ordinary wear and
tear excepted;
C. perform all its material obligations under debt and lease
instruments and other agreements relating to or affecting its assets,
properties, equipment and rights;
<PAGE>
D. subject to paragraph 5.V. hereof, maintain present debt and lease
instruments and not enter into new or amended debt or lease instruments other
than in the ordinary course of business, without the knowledge and consent of
United;
E. keep in full force and effect present insurance policies or other
comparable insurance coverage;
F. use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its relationship
with suppliers, customers and others having business relations with the Dealer;
G. not effect any change in the capital structure of the
organizations, including, but not limited to, the issuance of any option,
warrant, call, conversion right or commitment of any kind with respect to the
Dealer's capital stock or the purchase or other reacquisition of any outstanding
shares for treasury stock;
H. not materially increase present salaries and commission levels
for all officers, directors, employees and agents;
I. prohibit expenditures outside the normal course of business, and
prohibit capital expenditures in excess of $10,000 per expenditure or $50,000 in
the aggregate without the prior approval of FDHG;
J. maintain compliance with all permits, laws, rules and
regulations, consent order, etc.;
K. maintain its present agreements with manufacturers and perform
according to the terms of such agreements; and
L. not, without the knowledge and consent of FDHG, declare any
dividends nor pay out extraordinary bonuses, fees, commissions or any other
unusual distributions to any Seller, directors, management or other personnel
between the date of the Letter of Intent and the Closing.
10. Each party shall bear its own fees and expenses, including any
investment banking fees. Each party represents and warrants to the others that
they have not utilized the services of any broker in connection with the
transactions contemplated by this Agreement and that such parties shall not be
liable for any fees or expenses due or payable to any broker by reason of any
such transactions.
<PAGE>
11. In consideration of the substantial expenditures of time, effort and
money to be undertaken by FDHG in connection with the preparation and execution
of the Agreement and the various reviews, investigations and verifications
referred to above, Sellers and Dealer shall hereby undertake and agree (i) that
during the term of this Letter of Intent, Sellers and Dealer, neither
individually or collectively, shall enter into or conduct any discussions with
any other person for the purchase of any of the Shares or any of Dealer's assets
(except for acquisition or disposition of assets in the ordinary course of
business as permitted hereby, and (ii) individually and collectively, to
negotiate in good faith in an attempt to successfully conclude the Transaction.
In addition, pending execution and delivery of the Agreement (or the earlier
termination of this Letter of Intent), Dealer will not and will not permit its
representatives to solicit or encourage (including by way of furnishing any
non-public information concerning Dealer's business, properties or assets) any
acquisition proposal and will terminate all negotiations relating to an
acquisition proposal that may exist as of the date of this Letter of Intent. In
the event an acquisition proposal is received, Dealer shall promptly notify
FDHG. As used in this Letter of Intent, "acquisition proposal" means any
proposal for a merger or other business combination involving Dealer or for the
acquisition of an equity interest in, or a substantial portion of the assets of,
Dealer other than pursuant to the Transaction.
12. Dealer and Sellers each agree that he, she or it will not make any
public disclosure of this Letter of Intent or the execution of the Agreement
without FDHG's prior approval. Prior to issuing any press release or public
statement concerning the Transaction, a copy shall be made available to the
other parties for their comments. If the proposed Transaction is not consummated
for any reason whatsoever, the respective parties hereto shall keep confidential
any information (unless ascertainable from public or published information or
trade sources) concerning the business or operations of the parties hereto.
13. FDHG will hold and will cause its employees, representatives,
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process, or by other requirements of law,
all documents and information concerning Dealer to FDHG in connection with the
Transaction (except to the extent that such information can be shown to have
been (a) previously known by FDHG and where the disclosure of which is not in
violation of an obligation of FDHG, (b) in the public domain through no fault of
FDHG, or (c) later lawfully acquired by FDHG from other sources unless FDHG knew
such information was obtained in violation of an agreement of confidentiality)
and will not release or disclose such information to any other person, except
its auditors, attorneys, financial advisors and other consultants and advisors
in connection with the Agreement (it being understood that such persons shall be
informed by FDHG of the confidential nature of such information and shall be
directed by FDHG to treat such information confidentially).
14. It is acknowledged that, between the date hereof and the execution and
delivery of the Agreement, the Transaction is subject, as to structure only, to
the parties' reasonable satisfaction with respect to the corporate and tax
consequences thereof, including but not limited to the issues contemplated in
Paragraph 5.S hereof. While it is not the parties' intention to renegotiate the
financial terms of the Transaction, as described in this Memorandum of
Agreement, the parties merely wish to reserve their right to be reasonably
satisfied that the structure of the Transaction will effectuate the intentions
of the parties hereto without material adverse consequences to them from a
corporate or legal point of view. In connection therewith, at the election of
FDHG, the parties will use their best efforts to restructure the Transaction as
a purchase of assets rather than stock.
<PAGE>
15. It is, of course, understood that the respective rights and
obligations of Sellers and FDHG remain to be defined in the Agreement into which
this Letter of Intent and all prior discussions shall merge; provided however,
that the respective obligations of the Sellers and FDHG described in paragraphs
7, 8 and 10-14 hereof shall be binding upon each, respectively, when this Letter
of Intent is executed and delivered to FDHG.
If the foregoing meets with your approval, you should each execute and
return a copy of this Letter of Intent, whereupon this letter shall constitute a
Letter of Intent between FDHG and the Sellers in accordance with the terms and
conditions set forth herein. This letter of Intent may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. A facsimile signature by
any Party on a counterpart of this Letter of Intent shall be binding and
effective for all purposes. Such party shall, however, subsequently deliver to
the other party an original executed copy of this Letter of Intent. Whether or
not the Transaction is consummated, each Party shall pay their own expenses in
connection therewith. Unless otherwise agreed to in writing by the FDHG, each of
the Sellers and Dealer, this Letter of Intent will terminate in accordance with
its own terms if the Agreement is not executed on or before October 31, 1997.
THIS OFFER MADE BY FDHG IN THIS LETTER OF INTENT SHALL REMAIN OPEN UNTIL
5:00 P.M. SEPTEMBER 19, 1997, AT WHICH TIME IF EXECUTED SIGNATURE PAGES OF THIS
LETTER OF INTENT HAVE NOT BEEN DELIVERED BY PERSONS REPRESENTING ONE HUNDRED
PERCENT (100%) OF THE ISSUED AND OUTSTANDING COMMON STOCK, ALL OFFERS AND
AGREEMENTS MADE BY FDHG HEREIN SHALL BECOME IMMEDIATELY NULL AND VOID UNLESS AN
AGREEMENT TO THE CONTRARY IS EVIDENCED IN WRITING BY FDHG.
Very truly yours,
FIDELITY HOLDINGS, INC.
By: /s/ Doron Cohen
------------------------
Name: Doron Cohen
Title: President
ACCEPTED AND AGREED THIS ____ DAY OF SEPTEMBER 1997.
LICHTENBERG BUICK
By: /s/ Peter Lichtenberg
Name: Peter Lichtenberg
Title: President
LICHTENBERG MAZDA
By: /s/ Peter Lichtenberg
Name: Peter Lichtenberg
Title:President
/s/ Peter Lichtenberg
PETER LICHTENBERG, Seller
/s/ Jeffrey Lichtenberg
JEFFREY LICHTENBERG, Seller
Ronald Shapss Corporate Services, Inc.
Mergers and Acquisitions
75 Montebello Road
Suffern, NY 10901-3746
Phone (914) 368-3449
Fax (914) 368-3432
February 18, 1997
Mr. Jeffrey Alexander
Fidelity Holdings, Inc.
80-02 Kew Gardens Rd., #5000
Kew Gardens, NY 11415
Dear Jeff:
The following represents our understanding of terms and conditions for my
consulting with Fidelity Holdings/Canterbury.
1. Upon execution of an agreement. Fidelity/Canterbury will sell to
Shapss, for the price of $ 0.01 per share, 50,000 shares of Fidelity and, at no
cost to Shapss, 150,000 options to purchase an additional 150,000 shares at Four
and One Half (4 1/2 ) Dollars per share, The stock options will vest as follows:
50,000 after 90 days; 100,000 12 months thereafter. The parties recognize the
need and agree to make any necessary registrations as required by law. If for
any reason Fidelity is unable to issue said options, an amount equal to the
value of said options will be paid to Shapss in either stock or cash at the
Company's choice.
2. Six months from the date of signing our agreement if the parties
mutually agree to proceed, Fidelity shall sell to Shapss, for the price of $0.01
per share, an additional 100,000 shares. If the parties elect not to proceed,
Shapss shall retain his 50,000 shares and 50,000 options. All shares will have
the right to "piggyback" any subsequent public offering subject to normal
restrictions imposed by the underwriters. The remaining 100,000 options will not
vest and shall revert back to Fidelity.
Fidelity will pay all reasonable business, travel and entertainment
expenses of Shapss to offset business expenses incurred related to his
fulfilling the provisions hereof.
For discussed equity participation, Shapss will perform the following:
1) Assist Fidelity with viable merger targets and financial institutions to
accomplish the growth strategy of the Company.
<PAGE>
2) Provide follow-up assistance via phone, visits and in writing as directed by
Fidelity. Fidelity would expect approximately 50% of Shapss time during the term
of this agreement. The term of the agreement shall be six months. If paragraph 2
is exercised, it shall be for an additional term of twelve (12) months.
3) Assist Fidelity in understanding the consolidation concept and aiding in the
preparation of business plan, documentation, meetings and presentations.
4) Provide advice and help in drafting of documents for the Company.
5) Shapss will not transfer any rights hereunder other than to family members
without the prior approval of Fidelity.
If this letter accurately outlines our understanding, we may either enter into a
formal Agreement or an officer of Fidelity may execute this letter as our
understanding. Alternatively, kindly make any necessary changes that reflect our
discussion and we will make the appropriate modifications.
Yours truly,
/s/ Ronald Shapss
RONALD I. SHAPSS
Agreed and Accepted
this 27th day of February, 1997
By: /s/Bruce Bendell
Bruce Bendell
Title COB
<PAGE>
Marine Midland Bank
Member HSBC Group
RETAIL & WHOLESALE DEALER'S AGREEMENT
AGREEMENT#: 365
VALUE ADDED RESELLER AGREEMENT
THIS RESELLER Agreement for the purchase of Equipment and license of Programs
(hereinafter 'Agreement") Is between Summa Four, Inc,, a Delaware Corporation,
with Its principal place of business at 25 Sundial Avenue, Manchester. New
Hampshire 02103-7281 (hereinafter "Summa Four) and the Reseller whose name and
address Is set forth below (hereinafter "Reseller"),
Reseller: Computer Business Sciences, Inc.
Address: 80-02 Kew Gardens Rd.
City: Kew Gardens
State: New York
ZIP: 11415
WHEREAS, Summa Four is engaged in the manufacturing, sale and license worldwide
of communications equipment, and WHEREAS, Re~ markets and distributes
communications equipment and other services and support to its Customers and
desires to purchase and license Summa Few products and to combine such products
with Reseller's products, WHEREAS, Summa Four and Reseller desire to establish a
matter set of terms and conditions pursuant to which Summ Four shall sell and/or
license certain of its products to Reseller for subsequent resale and/or
sublicense by Reseller together With Re value added products and services to
Its; customers.
NOW THEREFORE the Parties agrees as follows:
I. In this Agreement the following expressions have the following meanings
unless the context denotes otherwise:
"Purchase Order", "Order means the Reseller's purchase order which shall
be subject to the terms of this Agreement whether referenced or not.
"Equipment" means the hardware equipment and peripheral devices purchased
by Reseller under this Agreement including that Equipment which is
identified by the Product numbers in Summa Four's published Price
Schedule.
'Designated Equipment" means the Equipment upon which Programs shall be
Installed and which is designated with a single Summa Four system serial
number.
"Documentation" means the user manuals, handbooks, demonstration software
packages and other materials provided by Summa Four for use in conjunction
with the Equipment and the Programs.
"Programs" means the software programs In object code form provided to the
Reseller pursuant to this Agreement by Summa Four as licensor or
sub-licensor, Including any subsequent updates, Improvements or
modifications which may be delivered to Reseller hereunder.
<PAGE>
"Products" means the Equipment, the Programs and the Documentation,
collectively. Summa Four reserves the right to modify. add to or delete
from this Agreement the Products which may be available hereunder.
'Value Added Reseller, "Reseller" means a purchaser of Products which adds
substantial value to such Products (including but not limited to
application programs, hardware equipment, support, services, functional
and/or performance enhancements, etc.) ("Value Added Products" and resells
such Value Added products to its end-user Customers.
2. Appointment
2.1 Subject to the terms and conditions of this Agreement, Summa Four hereby
appoints the Reseller as a limited and non-exclusive Reseller to resell
the Value Added Products and sublicense the Programs to Its end user
customers. The Reseller shall not appoint a secondary or sub-distributor
or any other reseller to distribute the Value Added Products without Summa
Four's prior written notice. With respect to any sales contemplated by
Reseller outside of the United States, the provisions of Article 21 hereto
shall apply.
2.2 It is understood and agreed by Reseller that Summa Four shall have and
shall retain and any of Summa Four's affiliates, subsidiaries,
distributors, agents or other resellers may have and may retain at all
times the right, directly or Indirectly, to promote, market, sell, license
or otherwise distribute Products in any manner and to any and all
customers at all times throughout the world.
3. Reseller Obligations
3.1 In recognition of the particular expertise necessary to market and
distribute the Products and in consideration of the right to remain on
authorized Reseller of this Products throughout the duration of this
Agreement Reseller warrants and undertakes that:
3.1.1 It has and shall maintain tie capacity, facility, resources and personnel
necessary to perform Its obligations under this Agreement,
3.1.2 It shall use its best efforts to purchase and license the minimum
quantities of the Products in accordance with Reseller's Business Plan
forecast set out In Attachment A to Schedule 11:
3.1.3 It shall actively promote the Products and resell Value Added Products
only to its end-users all in a manner which reflects favorably an the
Products and reputation of Summa Four,
3.1.4 It shall make available to Its customers professional, prompt and
workmanlike Installation, timing, warranty and maintenance services;
3.1.5 It shall advise Summa Four regarding pertinent market information
concerning Summa Four, the Products, market developments and customer
inquiries regarding Products;
3.1.6 It shall license all Programs as specified In this Agreement:
3.1.7 It shall submit upon the date hereof and each quarter thereafter a rolling
forecast of Resellers requirements for the Products for the following
twelve (12) month period;
3.1.5 Upon execution of this Agreement by Reseller, Reseller will piece an order
for at lead one (1) Product system for Its sole use in the development and
support of additional application features and/or demonstration purposes.
The configurations and prices for such system will be determined by mutual
agreement of the parties.
4. Obligations of Summa Four
2
<PAGE>
4.1 Summa Four shall:
4.1.1 Provide to Reseller such sales aids, data sheets end product brochures In
such quantities as may be required In support Its customers and In no
event any less than that which Is provided to other resellers;
4.1.2 Provide to Reseller technical assistance, Product updates and other
Information with respect to the Products as generally provided to other
resellers and/or as otherwise agreed to In the attached consulting
addendum;
4.1.3 Make available training classes for the operation and support of the
Products at times, rates and charges which are available to other
resellers and/or as specified In the attached consulting addendum.
5. Purchase of Equipment and License of Programs
5.1 From time to time throughout the term of this Agreement, Reseller may
place purchase Orders for Products and upon receipt and acceptance by
Summa Four, Summa Four will acknowledge such Order and advice Reseller of
the scheduled shipment date. All such Purchase Orders shall reference the
Agreement number specified above,
52 Except as otherwise provided for heroin. Reseller acknowledges and accepts
responsibility for the selection and subsequent use of the Products and
the results obtained thereby. Reseller also accepts responsibility for the
selection, operation, and results obtained from any other third party
equipment, programs, or services used In conjunction with the Products.
Prices and Discounts
0.1 The prices, license Ins, and other charges for the Products are got forth
in Summa Fours then current published Price Schedule which may be amended
by Summa Four from time to time throughout the term of this Agreement.
Summa Four's current published Pam Schedule Is attached hereto as Schedule
1. Such Products shall be discounted In accordance with Summa Four's then
current Reseller Discount Schedule. - Summa Four's current Reseller
Discount Schedule Is attached hereto as Schedule II. All orders accepted
by Summa Four before the effective date of any price Increase shall be
Invoiced at the price originally accepted by Summa Four if shipment of
such Order is completed within ninety (90) days of such price increase.
All prices are expressed and all payments must be made In U.S dollars.
6.2 Prices are exclusive of all extraneous or additional charges includng all
federal, state, local, municipal, or other excise, sales, value added,
use, occupation, or similar taxes now In force or enacted In the future,
all of which we the responsibility of and shall be paid by the Reseller.
To the extent Summa Four is required to pay any such charges or taxes.
Summa Four shall Invoice the Reseller for any such payments and Reseller
shallI reimburse Summa Four for such payment; within thirty (30) days of
the date of the invoice therefore. It shall be the Reseller's
responsibility to provide prior written verification to Summa Four of any
applicable tax exemptions.
7. Payment Terms
Payment terms for Products shall be 50% of the value of the order upon
placement of the order and the remaining 50% prior to the shipment from
Summa Four.
7.2 If Reseller fails to pay any amounts when payment Is due, the Reseller
shall pay Summa Four a late payment fee which shall be the lesser of 1.5%
per month or the maximum rate allowed by law on such unpaid amounts,
together with all costs and expenses Incurred by Summa Four in collecting
such overdue amounts.
3
<PAGE>
8. Delivery Lead Time
Summa Four's normal delivery lead time for standard released Products is
within (30) days after receipt and acceptance by Summa Four of an Order.
Nevertheless, Summa Four shall always provide Reseller an acknowledgment
of the actual scheduled shipment date. Summa Four will use reasonable
efforts to meet the Reseller's requested delivery date If less than thirty
(30) days and will advise the Reseller if additional charges are required
to facilitate such expedited delivery. Summa Four will meet acknowledged
scheduled shipment dates subject to the extent that such Products are
standard, released Products which had been previously forecasted in
Reseller's quarterly Product forecasts. In such event Summa Four also
reserves the right to make early and/or partial shipment of Products, to
Reseller.
9. Shipment, Risk of Loss and Title
9.1 Unless otherwise requested by Reseller and agreed by the Parties, Summa
Four will select the methods and routes of shipment. All Products under
this Agreement shall be shipped to the Reseller, FOB, Summa Four's
factory, Manchester, New Hampshire (unions designated otherwise by Summa
Four). All transportation, rigging, cartage, and handling charges shall be
paid directly by the Reseller. Summa Four may, however. Invoke the
Reseller for any such charges If Summa Four is required to make any
payments or prepayments directly to the carrier. Summa Four shall have no
liability In connection with any shipment or for any loss or damage to the
Products while In transit. Upon request, shipments may be insured by Summa
Four at the Reseller's expense, In any went the Reseller shall be
responsible for making claims with carriers, insurers, warehousemen, and
others for misdelivery, non-delivery, loss, damage, or delay.
9.2 Title to Equipment and risk of loss for the entire Order shall pass to the
Reseller upon shipment at the F.O.B. point stated above (title to Programs
shall always remain vested In Summa Four or Its; licensors), Nevertheless,
until all Products are fully paid for by the Reseller. the passing of
title pursuant to the Uniform Commercial Code shall be deemed conditional.
10. Force Majeure
Neither Party will be liable for any failure to perform or delay In
performance of Its obligations hereunder (except Reseller's obligation to
make payments when due) caused by circumstances beyond its control
Including acts of God, fires, strikes, floods or other natural emergencies
or other unforseen and/or uncontrolliable events which makes performance
commercially impracticable.
11. Program License and Sublicense
11.1 In consideration of Reseller's payment of the appropriate license fees
-and charges, Summa Four hereby grants to Reseller (subject to the terms
and conditions of this Agreement) a non-exclusive non-transferable license
to use and/or sublicense the use of each Program to its customers only on
the Designated Equipment.
11.2 Title to Programs. Title to and ownership of Me Programs, including all
patents, copyrights. trade secrets and proprietary rights applicable
thereto, shall at all times remain solely and exclusively with Summa Four
(and/or Summa Four's third party licensor) and the Reseller agrees not to
take any action inconsistent with such title and ownership. Reseller
acknowledges and agrees that the Programs and Documentation are
proprietary to Summa Four, were developed at private expense and that no
portion of such Programs shall be construed as In the public domain.
11.3 Protection of Programs. Reseller and Reseller's customer shall protect
such Programs to no less extent" Reseller protects Its own proprietary
Programs. In any event and always in accordance with subarticle 11.6
below, Reseller and Its customers shall not, without the prior written
consent of Summa Four (which shall not be unreasonably withheld), disclose
or otherwise make available such Programs, In any form, to any third
person or entity. Neither Reseller nor Its customers shall translate,
reverse engineer, decompile or disassemble the Programs without the prior
written consent of
4
<PAGE>
Summa Four. Reseller and/or Resellers customers may make one (1) copy of
each Program for back-up or archival purposes. Nevertheless, neither the
Reseller nor its customer shall remove or obscure any copyright patent,
trademark, trade secret, or similar notice affixed to any Program arid
shall reproduce and affix any such notice to any such copies of the
Programs.
11.4 Term of License. Summa Four may terminate any license of the Program
granted under this Agreement by written notice to the Reseller (who shall
notify its customer directly, If applicable) If the Reseller or its
customer falls to comply with any of the terms or conditions of this
Section 11. Within thirty (30) days after discontinued use of the Programs
by Reseller or Its end-user customer, as appropriate, or within ten (10)
days after Summa Four has terminated any license, the Reseller shall
return to Summa Four the original and all copies (Including partial
copies) of such Programs and certify, in writing, to Summa Four that it
has done so. The obligations of the Reseller and Its customers to protect
the proprietary nature of the Programs shall survive the termination of
any such license or this Agreement.
11.5 Equitable Relief. Summa Four reserves all rights and remedies It may have
In lww or In equity to enforce the terms of this Agreement, including but
not limited to injunctive relief and specific performance.
11.6 Sublicense Agreement. Resellers license to sublicense copies of Program to
Its customer Is expressly conditional upon the prior receipt by Reseller
of end-user software license terms, signed by a duly authorized officer of
each such customer, which, In total, constitute sublicense terms which are
no less comprehensive than the license terms of this Agreement.
11.1 Shrink-wrap Programs. Unless otherwise agreed by Summa Four, for all
Programs which may be "pre- packaged" or "shrink wrapped" by Summa Four
with preprinted license terms as an Integral part of such packaging,
Reseller shall sublicense and/or distribute all such Programs in its
original package and In the manner and form In which it was received from
Summa Four. In such event, the license term which form a part of such
Program will specifically apply to such Programs in lieu of the terms
hereof. Reseller shall make no modifications or alterations in the
packaging including the breaking of the seal of the Program license.
12. United Warranty
12.1 All warranty obligations of Summa Four as set forth in this Section 12 are
given by Summa Four solely to Reseller and may be enforced solely by
Reseller. In no event shall Summa Four have any direct warranty or support
obligations to any customers of Reseller unless Summa Four's then current
service and/or support agreements have been entered Into directly between
such customer and Summa Four.
12.2 Equipment. Summa Four warrants that upon shipment to Reseller, the
Equipment shall be In good working condition, free from defects in
material and workmanship and shall perform under normal use end operating
conditions in accordance with Summa Four's then current published
specifications for a period of one (1) year after the date of shipment.
Summa Four's sole obligation with respect to claims of non-conformance
made within this one (1) year warranty period described above shall be, at
Its option, to repair or replace any part of Equipment which Summa Four.
In Its sole discretion, determines to be defective. Reseller shall obtain
a return authorization number from Summa Four prior to returning any
Equipment to Summa Four under this warranty. Reseller shall prepay
shipping charges for Equipment returned to Summa Four for warranty
service, arid Summa Four shall pay freight charges for the return of the
Equipment to the Reseller, excluding customers duties or taxes, if any.
Replacement Equipment shall be new or Iike new In performance (or the same
Item repaired if Identified and agreed to In the return authorization) and
shall be warranted for the remaining duration of the warranty term of the
non-conforming Equipment or ninety (00) days, whichever Is longer. All
replaced Equipment shall become the property of Summa Four. Any claims of
defects not made within such one (1) year period shall be deemed waived by
Reseller.
5
<PAGE>
12.3 Programs Unless Otherwise specified by Summa Four, Summa Four warrants
that the Programs shall substantially conform to Summa Four's then
applicable Program specifications for a period of one (1) year after the
date of shipment to the Reseller. Summa Four's sole obligation with
respect to claims of material non-conformance shall be to use the effort
Identified In Article 3.3 of Addendum A hereto to Identify, Isolate and
thereafter Initiate remedial efforts to remedy the material non-Remedial
efforts may include bug fixes, patches, work wounds or other
recommendations which Summa Four may provide to Reseller. Any such
remedial efforts will be given a high priority status consistent with that
given to Summa Four's other high priority Resellers. Reseller acknowledges
that Summa Four does not warrant that a Program's performance shall be
uninterrupted or error free or that all non-conformances will be remedied.
12.4 Warranty Exclusions.
Summa Four's warranty obligations hereunder are expressly conditioned upon
(I)) the Products being property Installed, used and maintained at all
times by Reseller and or its customers; (II) the Products not being
subject to unusual mechanical stress or unusual electrical or
environmental condtions or other acts of God; (iii) the Products not being
subjected to misuse, accident or any unauthorized Installation/
deinstallation by Reseller and/or its customers or other third parties
end; (iv) the Products not being alter or modified, unldes authorized In
writing or performed by Summa Four. Summa Four does not warrant that the
Products will operate In any specific combination which may be selected
for use by Reseller or Its customers or that the operation of the Products
will be uninterrupted or error free, or that all non-conformance or
defects will be remedied. Additionally, Summa Four shall have no warranty
obligations for any failure of the Products to conform to the applicable
Product specifications resulting from the combination of any Product(s)
with hardware and/or software not supplied by Summa Four. If Summa Four
determines that any Products(s) reported as defective or non-conforming by
Reseller during the warranty period Is not defective or non-conforming,
Summa Four may, at Its option. charge labor provided and expenses incurred
by Summa Four In connection with such determination, at Summa Four's then
current rates or as otherwise agreed to in the consulting addendum.
12.5 THE WARRANTIES OF SUMMA FOUR AND REMEDIES OF RESELLER SET FORTH IN THIS
SECTION 12, LIMITED WARRANTY, ARE EXCLUSIVE AND ARE GIVEN BY SUMMA FOUR
AND ACCEPTED BY RESELLER IN LIEU OF ANY AND ALL OTHER WARRANTIES, WHETHER
EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION, ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ALL SUCH OTHER
WARRANTIES BEING HEREBY EXPRESSLY AND UNEQUIVOCALLY DISCLAIMED BY SUMMA
FOUR AND WAIVED BY RESELLER.
13. Limitation of Damages
13.1 Summa Four's liability for damages to the Reseller under this Agreement
for any cause or claim whatsoever regardless of the form of action,
whether for breach of warranty, contract or In tort (including negligence
and product liability) or otherwise, shall not exceed the greater of the
aggregate price paid for the Products which caused, or allegedly caused
the liability or $200,000. No action arising out of or In connection with
this Agreement may be brought by Reseller more than two (2) years after
the cause of action has occurred.
13.2 Furthermore, in no event will Summa Four be liable to Reseller or any
other person for loss of use of Products, data, or profits, or any other
special, indirect, incidental or consequential damages, arising out of or
in connection with the use or performance of any Products, even if Summa
Four has been advised of the possibility of such damages. Reseller shall
indemnify Summa Four against all such claims which may be asserted by
other third parties including its Customers.
14. Documentation
6
<PAGE>
All documentation provided by Summa Four together with each system of
Products shall be delivered with such Products by Reseller to its
customers. All other Documentation which may be furnished to Reseller
under this Agreement is solely for Reseller's internal use. Reseller may
make copies of such Documentation only to satisfy its internal
requirements, provided that all such copies include the appropriate
copyright and proprietary information notices. No other copies or use of
such Documentation or any portion thereof, shall be made without the prior
written approval of Sum.. Four. All such Documentation, and copies thereat
shall be maintained In secure promises by Reseller and Reseller shall take
appropriate measures to prevent the unauthorized disclosure thereof.
13. Patent and Copyright Indemnity
15.1 If notified promptly In writing of any action (and all prior claim
relating to such action) brought against Reseller based on a claim that
any of the Product supplied infringes a United States patent copyright or
other intellectual property right Summa Four shall defend such action at
its expense and pay any costs or damages finally awarded against Reseller
In such action which am found to be attributable to such claim: provided
that Summa Four shall have sole control of the defense (with reasonable
assistance from Reseller) of any such action and all negotiations for its
settlement or compromise; and further provided Reseller or Its customers
shall promptly cease to use Products if so requested by Summa Four. If a
final injunction is obtained against the use of any of the Products by
reason of infringement of a patent copyright, or other intellectual
property right, or If In Summa Fours opinion any of the Product supplied
to Reseller hereunder Is likely to become the subject of a successful
claim of infringement of a patent, copyright, or other intellectual
property right Summa Four shall, at its option and expense, either procure
for Reseller the right to continue using such Product, replace or modify
the same so that it becomes non-infringing, or grant Reseller a reasonable
credit for the return of such Product.
18.2 Notwithstanding the foregoing, Summa Four shall not have any liability to
Reseller ort its customers under the foregoing provisions if the
Infringement or claim Is based upon (i) the use of any of the Products in
combination with other equipment or software which is not furnished by
Summa Four. or (II) use of the Products which have been modified to
Reseller's or its customers" designs, specifications or instructions. No
costs or expenses shall be Incurred on behalf of Summa Four without the
prior written consent of Summa Four. The foregoing provisions state the
entire liability of Summa Four with respect to infringement of patents,
copyrights, trademarks and other Intellectual property rights by any of
the products or any part thereof or by their operation.
16. Support Service
Reseller may elect to purchase service and support for the Products In
accordance with the then current Summa Four agreement therefore.
17. Customer Support
17.1 As an authorized Reseller of Summa Four Products. Reseller is required to
provide support for its end-user customers. At a minimum. all problems or
questions from Reseller's customers regarding Summa Four Products shall be
addressed directly by the Reseller (and not Summa Four) in accordance with
the Reseller Support Obligations attached hereto as Addendum A.
17.2 If not already done so at the time of execution of this Agreement as soon
as practicable thereafter, Summa Four and Reseller shall establish the
minimum level of required service and support expertise that will be made
available by Reseller directly to an of Its end-user customers throughout
the Term of this Agreement. Such support program (by way of example and
not, by limitation) may include the following: 1) requirements for the
annual completion of Summa Four's Reseller Support, Services and
Maintenance Certification Program and, 2) requirements for Reseller's
on-going and expected participation at specified Summa Four hardware arid
software training courses and, 3) the required spans parts Inventory that
Reseller shall purchase in order to support Reseller's customers.
7
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18. Term and Termination
18.1 Term. The term of this Agreement shall commence on the Effective Date and
shall continue (unless terminated as hereinbefore provided) for twelve
(12) months thereafter ("Term"). After such Initial Term, this Agreement
will remain in effect unless and until either Party terminates this
Agreement upon thirty (30) days prior written notice to the other Party or
this Agreement Is terminated as hereinafter stated.
18.2 Termination. This Agreement may be terminated:
(i) At any time by either Party, If the other Party ha materially breached
Its obligations under this Agreement and if the defaulting Party has not
cured such default within thirty (30) days following the date upon which
the non-defaulting Party has given written notice specifying the facts
constituting the default;
(ii) At any time by either Party, upon notice, If the other Party flies
for or consents to any assignment for the benefit of creditors, files a
petition In bankruptcy or liquidation, is adjudicated bankrupt or
Insolvent or takes similar actions under laws of any jurisdiction for the
general benefit of creditors of an Insolvent or financially troubled
debtor.
(iii) By Summa Four upon the breach by Reseller of Articles 11 and/or 21
In the event Reseller fails to immediately caste "or remedy the breach;
(iv) By either Party, with or without cause, upon ninety (90) days written
notice. In the event Summa Four should choose to terminate this Agreement
without cause, Summa Four shall nevertheless honor any orders which May
have been previously accepted by Summa Four and which remain In the
backlog.
16.3 Effect of Termination. Upon termination of this Agreement for any reason,
all lights and obligations of the Parties under this Agreement shall
cease, except as follows:
(i)The Reseller's obligation for fees and other charges accrued prior to
the termination date shall become immediately due and payable.
(ii) To the extent that this Agreement IS terminated for reasons not
attributable to a breach by Reseller or Its customers, all sublicenses
previously granted by Reseller to its customers under this Agreement to
use the Programs and/or Documentation shall not be affected by the
termination of this Agreement.
(iii) The provisions of Sections 11, 11. 12, 13, 14.16 and 21 shall
survive the termination of this Agreement
19. Cancellation. The cancellation of any order previously acknowledged by
Summa Four will only be permitted with Summa Four's prior written approval
and payment by Reseller of cancellation charges as follows:
Cancellation Charge
Days Remaining Until Scheduled Shipment (Percentage of Purchase Price)
20 - 30 Days 20%
10 - 19 Days 40%
5 - 9 Days 60%
0-4 Days 100%
20. Reseller Subsidiaries
To the extent the Parties should choose to expand the Scope Of this
Agreement to accommodate transactions between Summa Four and any of
Reseller's subsidiaries, Addendum 8, Reseller ordering Locations may be
added to this Agreement by amendment hereto. In such event Reseller agrees
in be ultimately responsible for the prompt and faithful performance of
any such subsidiary in accordance with the terms of this Agreement.
8
<PAGE>
21. International Transactions
21.1 All Products are of United States origin. In the event Reseller should
elect to export Products from the U.S., Reseller acknowledges that the
export of such Products from the United States may be Subject to
regulation by the U.S. Export Administration Act of 1979, as amended, and
the rules and regulations promulagated thereunder, which restrict exports
and re-exports of certain computer hardware, software media, technical
data, and direct products of technical date, Reseller agrees to comply
with all U.S. Export Administration Regulations as aare in effect from
time to time (including, without limitation, all record-keeping
requirements Imposed thereunder), and will not export or reexport the
Products in violation of such Regulations.
21.2 Indemnification. Reseller agrees to indemnify and hold Summa Four harmless
from any and all fines, damages, losses, costs and expenses (including
reasonable attorneys fees) incurred by Summa Four. as a result of the
breach of this Section 21 by the Reseller.
21.3 Territory. This Agreement contemplates only domestic U.S. transactions
between the Parties. An such, nothing In this section 21 should give rise
to the presumption that Reseller has been granted the right to resell,
distribute or transfer Products and/or Value Added Products to its
customers outside of the United States. To the extent the Parties agree to
extend the applicability of this Reseller Agreement to include
International transactions by Reseller or between Reseller's International
subsidiaries and Summa Four, the parties shall amend this Agreement by
Including Addendum C, International Transactions, hereto.
22. Independent Contractors
The relationship between Summa Four and Reseller shall at all times be
that of Independent Contractors. Nothing contained in this Agreement shall
be construed as creating a joint venture, partnership or any other legal
relationship between the Parties other than that of buyer/seller. In no
event and under no circumstances shall Reseller represent or purport to
represent Summa Four or make any warranties, commitments or other
representations on its behalf.
23. Notices
All notices given by either Party to the other Party under this Agreement
shall be In writing and personally delivered or sent by registered or
certified mail, return receipt requested to the other Party at its address
set forth above. The date of personal delivery or the date of receipt, as
the case may be, shall be deemed to be the date on which such notice is
given.
24. Assignment
Reseller may not assign this Agreement or any of Its rights Or obligations
thereunder, without the prior written consent of Summa Four.
26. General
25.1 Section headings are for descriptive purposes only and shall not control
or alter the meaning of this Agreement.
26.2 The failure of either Party, in any one or more Instances to enforce any
of the items of this Agreement shall not be construed as a waiver of
future enforcement of that or any other term.
25.3 If any provision(s) of this Agreement shall, for any reason, be held to be
illegal or unenforceable such provision shall be deemed separable from the
remaining provisions of this Agreement and shall in no way affect or
impair the validity or enforceability of the remaining provisions of this
Agreement.
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25.4 Summa Four makes no representations to the Reseller except as expressly
set forth herein. The Reseller further agrees that this Agreement,
(together with any addendums Or schedules hereto), is to complete and
exclusive understanding of the Parties regarding the subject hereof and
that this Agreement supersedes and cancels all previous and
contemporaneous written and/or oral agreement and communications relating
to the subject matter of this Agreement. The terms of this Agreement shall
apply notwithstanding any proposed variations or additions which may be
contained in any Reseller Purchase Order or other communications submitted
by the Reseller. This /agreement may only be modified by written
correspondence signed by an authorized representative of both Parties.
25.5 The validity, construction and interpretation of this Agreement and the
rights and duties of the Parties hereto shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
26. The following Schedules and Addendums we attached hereto and made a part
of this Agreement as of the Effective Date above:
Schedule I - Price Schedule Yes
Schedule It - Reseller Discount Schedule Yes
Appendix A to Schedule II No
Addendum A - Reseller Support Obligations Yes
Addendum 8 - Reseller Ordering Locations ___
Addendum C - International Transactions ___
Other - Consulting Addendum ___
Reseller acknowledges and agrees that it has read this Agreement and understands
and agrees to be bound by its terms and conditions.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by its
duly authorized representatives.
RESELLER SUMMA FOUR, INC.
Authorized Signature Authorized Signature
/s/ Doron Cohen /s/ Robert J. Heggerich
- ------------------------ -------------------------
Doron Cohen Robert J. Heggerich
President Director, contracts
3/19/97 3/19/97
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<PAGE>
SCHEDULE II
TO
RESELLER AGREEMENT
RESELLER DISCOUNT SCHEDULE
I. Reseller Forecast; Initial Forecast; Discounts
A) Reseller's business plan and Product. purchase foam Is attached
hereto as Attachment A. In accordance therewith, Reseller forecasts
that in the Initial Term, Reseller shall purchase and take delivery
of that quantity of Products, whose aggregate list price shall be no
less than $3,000,000.
B) In consideration of such forecast, all hardware Products on Purchase
Orders placed by Reseller during the initial Term shall be
discounted at a discount percentage of 40%. Programs and services
are not entitled to any discount unless specifically noted as being
eligible therefor on Summa Four's then currant price list.
C) Should this Agreement be extended either monthly or for additional
terms after the Initial Term the discount percentage which shall be
applied to Hardware Products an all subsequent Reseller Purchase
Orders accepted by Summa Four shall be that then current discount
which Summa Four grants to other Reseller's which is associated with
the actual level of Aggregate List Price Dollar purchases of
Products shipped to Reseller in the preceding Term. Summa Four's
current Discount Schedule is detailed below.
II. Discount schedule
Aggregate Dollar Volume
of Reseller Purchases In Discount Percentage
Preceding Year On Hardware Purchases
-------------- ---------------------
(in $thousands)
LESS than $100 0%
$100-500 25%
$500-1500 30%
$1500-3000 35%
$3000+ 40%
<PAGE>
ADDENDUM A
RESELLER SUPPORT OBLIGATIONS
1.0 RESELLER RESPONSBILITIES
RESELLER will be the primary customer contact point for questions, problems and
assistance concerning the Products whether or not Products an under warranty or
extended support from Summa Four. RESELLER shall provide support Services to its
customers for the Products which shall include but not necessarily be limited to
the following:
a) telephone Customer response line to respond to questions regarding
installation and use of the Products;
b) telephone customer response line to respond to customer's suspected
code defects and documentation error regarding installation and
operation of the Products;
c) Product maintenance through Maintenance Modifications to customers;
d) RESELLER personnel are Summa Four support trained:
e) Have available an adequate supply of recommended spare parts;
f) RESELLER to contact Summa Four Technical Support and obtain the
appropriate Return Authorization (RA) prior to returning defective
components, and
g) RESELLER will provide general technical assistance and levels 1& 2
support as set in Section 3.1 and 3.2 below.
2.0 SUMMA FOUR RESPONSIBILITIES
Summa Four will provide Level 3 and general technical assistance as set forth In
Article 3.3, below.
3.0 WORK SPECIFICATIONS
3.1 RESELLER's customers will initiate requests for support by contacting
RESELLER directly. The RESELLER representative will contact the request
originator and initiate remedial action on the problem. RESELLER will
perform the following Level I and Level 2 support responsibilities:
Level I support is defined as a problem which is completely disabling a
previously working service or one which is preventing Reseller's customer
from using 4 service. Level I Support includes, but is not limited to:
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a) create the Problem Description (PD);
b) call the customer and obtain a description of the problem and verify
its severity;
c) search the RESELLER data base for known problems,
d) provide available resolution If known problem;
e) recommend local RESELLER assistance as required;
f) it no resolution, pass PD to Level 2; and update PD, documenting
Level I actions;
Level 2 support Is defined as a problem which is imputing a Reseller
customer's ability to provide a stable service, or which is preventing the
launch of a now service for which them is no viable workaround Second level
support includes, but Is not limited to:
a) receive the PD from Level 1;
b) analyze the problem symptoms and gather additional date from
customer as required;
c) search the RESELLER database for known problems.
d) provide available resolution if known problem;
e) recommend local RESELLER assistance as required,
f) recreate problem on RESELLER Test System, if possible or at customer
site via remote seem;
g) determine if error is. due to Improper installation of the Products
by the customer;
h) determine if suspected error Is due to peripheral or other 3rd party
equipment or software at the customer location or as part of the
Integrated system;
i) attempt bypass at circumvention for high impact problems, i.e.,
Severity I and 2;
j) if no resolution and problem appears to be a newly discovered code
or documentation error, create Escalated Problem Description (EPD)
record,
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k) if suspected error appears to be in a Licensed Program(s), notify
Summa Four of the EPD providing problem description and supporting
documentation and materials.
l) at Summa Four's request, RESELLER will assist in obtaining
additional information or materials from customer to support EPD,
problem Source Identification and problem resolution;
m) update EPD documenting Level 2 actions; and
n) RESELLER will provide detailed product and problem information to
Summa Four as a prerequisite to Invoking Level 3 Support. Such
information should include, but not limited to, system serial
number, location, problem description and print out of error log,
updated EPD and a list describing what RESELLER attempts were made
to fix problem.
3.3 Summa Four will perform the following Level 3 support responsibilities to
the extent such Products are under warranty to RESELLER or covered under
an extended support Agreement with RESELLER.
Level 3 support is defined as a problem which is affecting (but not
preventing) the customer's ability to operate or support their network and
which may be addressed by Summa four in a subsequent Program maintenance
release, Typically a functional or configuration matter that can be
worked-around Level 3 support includes but may not be limited to:
a) receive the EPD from RESELLER, supporting documentation and
materials and issue a call ticket number, 30 minute telephone
response time an a 7 day by 24 hours to emergency calls. The Summa
Four support center is staffed Sam to 5pm, Monday through Friday
Eastern Time for all other call requests;
b) analyze the problem symptoms and diagnose the suspected error;
c) notify RESELLER Level 2 Support if additional information materials
or documentation is required;
d) attempt to recreate the problem on Text System, if required;
e) assist RESELLER In attempting to develop a workaround or
circumvention for high Impact problems e.g., Severity 1 and 2;
f) determine if maintenance modifications are required to the Licensed
Program(s);
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<PAGE>
g) if maintenance modifications are required to the Licensed
Program(s), and such modifications are agreed to be provIded, Summa
Four will provide code correction to RESELLER;
h) return call documentation to RESELLER with one of the defined PD
Closing Cods assigned, including describing the resolution of in
the, event a code error was found, provide the rational for the
closing of the ticket number;
i) Provide final documentation for the purpose of updating or closing
the trouble ticket, when appropriate;
j) receive from RESELLER technical questions (regardless of whether
severity Level 1, 2 or 3) and supporting documentation and
materials;
k) analyze the technical questions and provide answers;
l) provide technical backup support to RESELLER an Products including
assistance in Problem Determination, Problem Source Identification
and Problem Diagnosis. In addition Summa Four shall provide
assistance in answering questions that may arise concerning the
operation and use of the Licensed Program(s) that cannot be resolved
by RESELLER;
m) In accordance with Summa Four's then current standard operating
procedures, Summa Four may provide a corrected version of the
Licensed Program(s) that includes all maintenance modifications to
the Licensed Program(s), if available, Additional corrected versions
of the Licensed Program will be provided as determ ined by Summa,
Four and based upon the severity of the problem.
n) Summa Four will maintain procedures to endeavor to ensure that new
fixes are compatible with previous fixes;
p) packaging of maintenance modifications and migration code will be
done as mutually agreed to by RESELLER and Summa Four; and
q) If on site Summa Four support is requested by RESELLER, Summa Four
will respond an a best efforts basis but within two business days,
and RESELLER will be billed at the then current ad published rates
and charges. Such response time is limited to critical, Severity I
problems.
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<PAGE>
ADDENDUM "B"
TO
RESELLER AGREEMENT
RESELLER ORDERING LOCATIONS
In accordance with section 19 of the above referenced Agreement, the following
Reseller subsidiaries may place orders under this Agreement. As such, each such
subsidiary shall be subject to the terms and conditions of this Agreement:
1.____________________________________________________________
2.____________________________________________________________
3.____________________________________________________________
4.____________________________________________________________
5.____________________________________________________________
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<PAGE>
ADDENDUM C
TO
RESELLER AGREEMENT
INTERNATIONAL TRANSACTIONS
In accordance with Section 20.3 of the above referenced Agreement, the following
International subsidiaries of Reseller which are identified on Addendum A may
place orders subject to the following additional conditions:
1. All Products shall be shipped by Summa Four, EXW Summa Four's
Factory, Manchester, New Hampshire.
2. In addition to Reseller's responsibility for all costs, expenses and
charges identified in Section 2.1 of the above referenced Agreement
Reseller also agrees to be liable for all other costs and expenses
associated with the export or import of such Products (excluding the
cost to obtain any required export licenses from the United States)
Including any duties, value added taxes (VAT) or Other local
charges,
3. Notwithstanding the payment terms of Section 7 and unless otherwise
agreed by Summa Four all payments shall be made In U.S. dollars
through a confirmed, irrevocable sight letter of credit drawn art a
U.S. bank (of Summa Four's choice) in form and substance
satisfactory to Summa Four.
4. Reseller acknowledges that all Products and/or Proprerty Information
which may be provIded hereunder are of United States Origin and are
licensed for toe only In the country of original destination and as
such, are subject to all applicable United States Government Laws
and regulations governing or relating to the export of such Products
from the U.S.
Furthermore, Reseller acknowledges that it shall comply fully with
all such export/re-export related laws and regulations (including
local country regulation or other applicable multinational
conventions) which may be applicable to the Reseller's import use,
resale or re-export of such Products from rich country of original
destination.
5. Reseller's obligations stated above shall survive termination or
expiration of this Agreement
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<PAGE>
a. Type Approvals. Reseller acknowledges that Summa Pour makes no
representations or warranties tot the Products comply with any local
country telecommunications approvals safety or other standards (Type
Approvals) which may be established from time to time by the local
PTT or other authorities.
-8-
2/94
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
Agreement of Lease, made as of this day of March 1996 between
80-02 Leasehold Company, 80-02 Kew Gardens Road, Kew Gardens, New York 11415
party of the first part, hereinafter referred to as OWNER, and
Fidelity Holdings, Inc. party of the second part, hereinafter referred to as
TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
certain space on the fifth (5th) floor, as more particularly depicted on Exhibit
A hereto in the building known as Crossroads Tower, 80-02 Kew Gardens Road, Kew
Gardens, New York in the Borough of Queens , City of New York, for the term of f
ive (5) years
(or until such term shall sooner cease and expire as hereinafter provided) to
commence on the
Ist day of Apri I nineteen hundred and ninety-six and to end on the last day of
2001*
both dates inclusive, at an annual rental rate of as more particularly set forth
in the Rider hereto.
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this lease
be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
Ile parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
Rent: 1. Tenant shall pay die rent as above and as hereinafter provided.
Occupancy: 2. Tenant shall use and occupy demised premises for general executive
and office purposes.
and for no other purpose.
Tenant 3. Tenant shall make no changes in or to theshall also repair all damage
to the building and the demised premises caused Alterations: demised premises of
any nature without
Owner'sby the moving of Tenant s fixtures, furniture and equipment. Tenant shall
prior written consent. Subject to the prior writtenpromptly make, at Tenant's
expense, all repairs in and to the demised
consent of Owner, and to the provisions of this article. Tenant, at
Tenant'spremises for which Tenant is responsible, using only die contractor for
the ex rise, may make alterations, installations. additions or improvementstrade
or trades in question, selected from a list of at least two contractors expense
are non-structural and which do not affect utility services or plumbingper trade
submitted by Owner. Any other repairs in or to the buildi or and electrical
lines. in or to the interior of the demised remises by usingthe facilities and
systems thereof for which I enant is responsible ding b. contractors or
mechanics first approved in each instance Ely Owner. Tenantperformed by Owner at
the Tenant's expense. Owner shall maintain in shall, before making any
alterations, additions, installations or improve-good working order and repair
the exterior and the structural portions of ments, at its expense, obtain all
permits, approvals and certificates requiredthe building, including the
structural portions of its demised premises, and by any governmental or
quasi-governmental bodies and (upon completion)the public portions of the
building interior and the building plumbing, certificates of final approval
thereof and shall deliver promptly duplicateselectrical, heating and ventilating
systems.(to the extent such systems of all such permits, approvals and
certificates to Owner and Tenant agreespresently exist) serving the derrused
premises. Tenant agrees to give to carry and will cause Tenant's contractors and
sub-contractors to carryprompt notice of any defective condition in the premises
for which Owner such workman's compensation, general liability, personal.and pro
may be responsible hereunder. There shall be no allowance to Tenant for damage
insurance as Owner may require. If any mechanic s lien is PCdiminution of rental
value and no liability on the part of Owner by reason against the demised
premises, or the building of which the same forms a part,of inconvenience.
annoyance or injury to business arising from Owner or for work claimed to have
been done for, or materials furnished to, Tenant,others making repairs,
alterations, additions or improvements in or to any whether or not done pursuant
to this article. the same shall be discharged byportion of the building or the
demised premises or in and to the fixtures. Tenant within thirty days
thereafter, at Tenant's expense, by payment ora p rtenances or equipment
thereof. It is specifically agreed that Tenant filing the bond required by law.
All fixtures and all paneling, partitions,shall not be entitled to any setoff or
reduction of rent by reason of any failure railings and like installations,
installed in the premises at any time, either byof Owner to comply with the
covenants of this or any other article of this Tenant or b Owner on Tenant's
behalf, shall, upon installation, become theLease. Tenant agrees that Tenant's
sole remedy at law in such instance will roperty of Owner and shall remain upon
am be surrendered with thebe by way of an action for damages for breach of
contract. The provisions emised premises unless Owner, by nonce to Tenant no
later than twentyof this Article 4 shall not apply in the case of fire or other
casualty which days prior to the date fixed as the termination of this lease,
elects toare dealt with in Article 9 hereof. relinquish Owner's right thereto
and to have them removed b T t ,
which event the same shall be removed from the premises by Tenant prior Window
S. Tenant will not clean nor require, permit, suffer to the expiration of the
lease, at Tenant's expense. Nothing in this Articl Cleaning: or allow any window
in the demised premises to be le shall be construed to give Owner title to or to
prevent Tenant's removal of cleaned from the outside in violation of Section 202
trade fixtures. moveable office furniture anti equipment, but upon removalof the
Labor Law or any other applicable law or of the Rules of the Board of any such
from the premises or u n removal of other installations as mayof Standards and
Appeals, or of any other Board or body having or asserting be required by Owner.
Tenant shall immediately and at its expense. repairjurisdiction. and restore the
premises to the condition existing prior to installation AM
repair A building due to such Re quirements6. Prior to the commencement of the
lease term, if oval damage to the demised premises or the
remAli property permitted or required to be removed. by Tenant at .1 Tenant is
then in possession, and at all times the end of the term remaining in the
premises after Tenant's removal shall Fir ce,thereafter, Tenant. at Tenant's
sole cost and be deemed abandoned and may, at the election of Owner, either be
retainedFloor Loads: expense, shall promptly comply with all resent
as Owner's property or may be removed from the premises by Owner, at atand
future laws, orders and regulations of all state
Tenant' s expense. federal, municipal and local governments, departments,
commissions and 1 boards and any direction of any public officer pursuant to
law, and all
Maintenance 4. Tenant shall. throughout the term of this lease, orders. rules
and regulations of the New York Board of Fire Underwriters. and 0 '12 body which
shall impose any take good care of the demised premises and the Insurance
Services Office, or any s nu Repairs: fixtures and appurtenances therein. Tenant
shall be violation, order or duty upon Owner or Tenant with respect to the
demised responsible for all damage or injury to the demised premises. whether or
not arising out of Tenant's use or manner of use
s or any other part of the building and the systems and equ mentthereof,
(including Tenant's permitted use) or. with respect to the building thereof,
whether requiring structural or nonstructural repairs caused by orif arising out
of Tenant's use or manner of use of the premises or die resulting from
carelessness, omission. neglect or improper conduct ofbuilding (including the
use permitted under the lease). Nothing herein "I Tenant, Tenant's subtenants,
agents, employees, invitees or licensees, orrequire Tenant to make structural
repairs or alterations unless Tenant his. by its manner of use of the de which
&rise out of any work, labor. service or equipment done for or mised premises or
method of operation
<PAGE>
supplied to Tenant or any subtenant or arising out of the installation. use
ortherein, violated any such laws, ordinances. orders. rules, regulations or
operation of the property or equipment of Tenant or any subtenant.
Tenantrequirements with respect thereto. Tenant may, after securing Owner to
*subject to the rights of renewal and early termination as more particularly
provided for in the Rider hereto.
1.4 dim the service of notice of intention to re-enter or to institute legal
proceedings an entry into the demised premises, Owner or Owner's agents may
enterto that end. If Tenant shall make default hereunder prior to the date fixed
is the same whenever such entry may be necessary or permissible by masterthe
commencement of any renewal or extension of this loan, Owner may ke ble care Is
exercised to safeguard cancel and terminate such renewal or extension agreement
by written nonce.
key or forcibly and provided reasons nant' a property. such en not render Owner
or its agents liable therefor, nor in any event= obligations of Tenant hereunder
be Remedies of 18. In case of any such default. re-entry, expiration affected.
If during: the last month of the term Tenant shall have removed Owner and and/or
dispossess by summary proceedings or other all or substantially all of Tenant's
property therefrom Owner may Waiver of wise, (a) the rent shall become cue
thereupon and be immediately enter., alter, renovate or redecorate the demised
premises Redemption: paid up to the time of such re-entry, dispossess and/
without limitation or abatement of rent. or incurring liability to Tenant for or
expiration. (b) Owner may re-let the premises or
an compensation and such act shall have no effect an this lease or Tenant'sany
part or parts thereof, either in the name of Owner or otherwise. for a
obligations hereunder.term or terms. which may at Owner's option be less than or
exceed the od which would otherwise have constituted the balance of the term of
Vault, 14. No Vaults, vault space or area, whether or notthis case and may grant
concessions or free rent or charge a higher rental V ult Space, enclosed or
covered. not within the property line of =that in this lease, and/or (c) Tenant
or the legal representatives of Ar the building Is leased hereunder, anything
containedTenant shall also pay Owner as liquidated damages for the failure of
Tenant In or indicated on any sketch, blue print or plan, orto observe and
perform said Tenant's covenants herein contained, any
anything contained elsewhere in this lease to the contrary
notwithstanding.deficiency between die rent hereby reserved and/or covenanted to
be paid Owner makes no representation as to the location of the property line of
theand the net amount, if any. of the rents collected on account of the lease or
building. All vaults and vault space and all such areas not within theleases of
the demised premises for each month or the period which would property line of
the building, which Tenant may be permitted to use and/otherwise have
constituted the balance of the term of this lease. The failure or occupy, Is to
be used and/or occupied under a revocable license. and ifof Owner to re-let the
premises or any part or parts thereof shall not release Any suc license be
revoked, or if the amount of such space or area beor affect Tenant's liability
for damages. In computing such liquidated diminished or required by sub federal,
state or munici authori r publicdamages there shall be added to the said
deficiency such expenses as Owner utility. Owner shad not be su ject to any
liability nor so be onnection with re-lettin I Tenant entitled may incur in cS,
such as legal expenses reasonable to any compensation or diminution or abatement
of rent, nor shall suchattorneys' fees, brokerage, advertising and for keeping
the demised revocations diminution or requisition be deemed constructive or
actualpremises in good order or for preparing the same for re-letting. Any such
eviction. Any tax. fee or charge of municipal authorities for such vault
orliquidated damages shall be paid in monthly installments by Tenant on the area
shall be paid by Tenant. rent day specified in this lease and any suit brought
to collect the amount of the deficiency for any month shall not prejudice In any
way the rights of Occupancy: 15. Tenant will not at any time use or occupy the
Owner to collect the deficiency for any subsequent month by a similar demised
premises in violation of the certificate of proceeding. Owner. in putting the
demised promises in good order or
occ in I g of which the demised premises are a part..the same for re-rental may,
at Owner" a option, nuke such
Tenan preparing
nt I% ssued for the buildin
inspected the premises end accepts them as is, subject to thealterations,
repairs. replacements, and/or decorations in the demised
riders annexed hereto with respect to Owner s work, if any In any eventpremises
as Owner, in Owner's sole judgement. considers advisable and Owner makes no
representation as to the condition of the premises andnecessary for the purpose
of re-letting the demised promises. land the Tenant agrees to accept the same
subject to violations, whether or not ofmaking of such alterations, repairs.
replacements. and/or decorations shall record. not operate or be construed to
release Tenant from liability hereunder as aforesaid. Owner shall in no event be
liable In any way whatsoever for Bankruptcy;16. (a) Anything elsewhere In this
lease to thefailure to re-let the demised premises, or in the event that the
demised contrary notwithstanding, this lease may be can- premises are re-let,
for failure to collect the rent thereof under such re celled by Owner by the
sending of a written notice to Tenant within aletting, and in no event shall
Tenant be entitled to receive any excess, If any, reasonable time after the
happening of any one or more of the followingof such net rents collected over
the sums payable by Tenant to Owner vents., (1) the commencement of a case In
bankruptcy or under the laws ofhereunder. In the event of a breach or threatened
breach by Tenant of any. ny state naming Tenant as the debtor; or (2) e making
by Tenanta of inof the covenants or provisions hereof, Owner shall have the
right of Assignment or any other arrangement for the the of creditors under
anyinjunction and the right to invoke any remedy allowed at law or in equity
state statute. Neither Tenant nor any person claiming through or underas if
re-entry, summary proceedings and other remedies were not herein Tenant, or by
reason of any statute or order of court, shall thereafter beprovided for.
Mention in this lease of any particular remedy, shall not entitled to possession
of the premises demised but shall forthwith quit andpreclude Owner from any
other remedy, In few or in equity. Tenant hereby surrender the premises. If this
lease shall be assigned In accordance withexpressly waives any and all rights of
redem on granted by or under any its terms. the provisions of this Article 16
shall be applicable only to thepresent or future laws in the event of Tenant
being evicted or dispossessed party then owning Tenant's interest in this lease.
r any cause, or in the event of Owner obtaining possession of demised (b) it is
stipulated and agreed that in the event of thepremises, by reason of the
violation by Tenant of any of the covenants and termination of this lease
pursuant to (a) hereof, Owner shall forthwith.conditions of this lease. or
otherwise. notwithstanding any other provisions of this least to the contrary,
be entitled to recover from Tenant as and for liquidated damages in amount equal
to Fees and 19. If Tenant shall default in the observance or the difference
between the rent reserved hereunder for the unexpired Expenses: performance of
any term or covenant on Tenant's portion of the term demised and the fair and
reasonable rental value of the part to be observed or performed under or by
virtue demised premises for the same period. In the computation of such dama
Csof any of the terms or provisions in any article of this lease, after notice
if the difference between any installment of rent becoming due hereunder
afterrequired and upon expiration of any applicable grace period if any, (except
the date of termination and the fair and reasonable rental value of thein in
emergency). then, unless otherwise provided elsewhere in this lease. demised
promises for the period for which such installment was payableOwner may
immediately or at any time thereafter and without notice shall be discounted to
the date of termination at the rate of four percent (4%)perform the obligation
of Tenant thereunder. If Owner. In connection with thereof be re-let by the
Owner for the foregoing or in connection with any default by Tenant in the
covenant y part thereof, before presentation to pay rent hereunder, makes any
expenditures or incurs any obligations for any court. commission or tribunal,
the payment of money, including but not limited to reasonable attorneys'
re-letting shall be deemed to be the fees. in instituting, prosecuting or
defending any action or proceeding, and! part or the whole of the premises so
revails in any such action or proceeding then Tenant will reimburse Owner re-let
during the term of the re-letting. Nothing herein contained shall limitFar such
sums so paid or obligations incurred with interest and costs. The or prejudice
the right of the Owner to prove for and obtain as liquidated foregoin enses
incurred by reason of Tenant's default shall be deemed damages by reason of such
termination, an amount equal to the maximumto be additional rent hereunder and
shall be paid by Tenant to Owner within allowed by any statute or rule of law in
effect at the time when, andten (10) days of rendition of any bill or statement
to Tenant therefor. If gavethe proceedings in which, such damages are to be
proved,Tenant s lease term shall have expired at the time of making of such
governing not such amount be greater, equal to, or less than the
amountexpenditures or incurring of such obligations, such sums shall be recover
of the difference referred to above. ab e by Owner. as damages.
Default: 17. (1) If Tenant defaults in fulfilling any of the Buildin 20. Owner
shall have the right at any time covenants of this lease other than the
covenants for Alterations without the same constituting an eviction and with-
payment of rent or additional rent; or if the demised premises become and out
incurring liability to Tenant therefor to change vacant or deserted; or if any
execution or attachment shall be issued againstManagement: the arrangement
and/or location of public entrances, Tenant or any of Tenant's property
whereupon the demised premises shall passageways, doors. doorways, corridors,
elevabe taken or occupied by someone other than Tenant, or if this lease betars,
stairs, toilets or other public parts of die building and to change the
re ected under 1235 of Tide I I of the U.S. Code Code (bankruptcy code), or
ifname, number or designation b which the building may be known. There
Tenant shall fail to move into or take possession of the premises within
thirtyshell be no allowance to Tenant for diminution of rental value and no
liability (30) days after the commencement at the term of this lease. then, in
any oneon the part of Owner by reason of inconvenience. annoyance or injury to
or more of such events u n Owner serving a written fifteen (15) daysbusiness
arising from owner or other Tenants making any repairs In the t preci Ing the
notice upon Tenan I nature of said default and upon thebuildin dditions and
improvements. Further
ex iration of said fifteen (15) da s, if Tenant shall have failed to comply
more,nor by reason of Owner's with or remedy such default, or IT the said
default or omission complained I, siccess to the building by of shall be of it
nature that the same cannot be completely cured or remedied To!may deem
necessary for within said fifteen (15) da
b day period, and if Tenant shall not have diligentlythe security of the
building and its occupants. commenced curing such c suit within such fifteen (15
day period, and
shall not thereafter with reasonable diligence and in go faith. proceed to No R
21. Neither Owner nor Owner's agents have made remedy or cure such default, then
Owner may serve a written five (5) days' seats any representations or promises
with respect to the notice of cancellation of this lease upon Tenant, and upon
the expiration ofby Owner: physical condition of the building, the land upon
said five (5) days this lease and the term thereunder shall end aria expire as
which it is erected or the demised premises, the
pen were e rents, leases, expenses of operation or any other matter or thing
affecting lease and the or related to the premises except as herein expressly
set forth and no rights, premises easements or licenses am acquired by Tenant by
implication or otherwise except as expressly set forth in the provisions of this
lease. Tenant his (2)If the notice reof I have inspected the building and the
derrused premises and is thoroughly ac been given. and the term shall
expireTenant shall makequainted with their condition end agrees to take the same
- -as is and
per annum. If such premises or any part
the unexpired term of said lease, or an
such liquilted damages to
of ed upon such
fair and reasonable rental value for the
fully am corn etely as if the expiration of such rive (5) day finite y fixed for
the end and expiration of this term thereof and Tenant shall then quit and
surrender the demised to Owner but Tenant shall remain liable as hereinafter
provided.
provided for in (1) he shal
as aforesaid. or if
default in the payment of die rent reserved herein or any Item of
additionalacknowledges that the taking; of possession of the demised premises by
rent herein mentioned or any pan of either or in making any other paymentTenant
shall be conclusive evidence
that the said premises and the building
- -re in good and satisfactory condition at the herein egired; then and in any of
such events Owner may without notice, of which the same form a part we.
re-enterdemised premises either by force or otherwise, and dispossess time such
possession was so taken. except as to latent defects. All Tenant by summary
proceedings or otherwise. and the legal re sentative ween the parties hereto
.Pre understandings and agreements heretofore made bet% of Tenant or other
occupant of demisedand remove their effects and are merged in this contract,
which alone fully and completely expresses the hold the premises as if this
lease had not been made, and Tenant hereby waivesagreement between Owner and
Tenant and any executory agreement
"RENT-TO-OWN" LEASE PROGRAM
MASTER LEASE AGREEMENT
Lease No. 3822071(A)
THIS LEASE, made this 26 day of December, 1996, by and between MAJOR FLEET
& LEASING CORP. (MFL) ["Lessor") a corporation, having its principal place of
business at 55-19 Northern Boulevard, Woodside, NY 11377; and Nissko Telecom
LTD. ("Lessee") having its principal place of business at, 7 West 45th Street
10th FI New York N.Y. 10036
WITNESSETH:
For and in consideration of the mutual covenants and promises hereinafter
set forth, the parties hereto agree as follows:
1. LEASE. MFL hereby leases to Lessee, and Lessee hereby leases from MFL,
all machinery and equipment (collectively, the "Leased Property") described in
one or more Equipment Schedules (Exhibits(s)(A)("the Equipment') entered into
under this Agreement. Each Equipment Schedule shall be a separate lease on the
terms of this Agreement. In the event of any inconsistency between the terms of
this Agreement and any Equipment Schedule the terms of the Equipment Schedule
shall govern.
This master lease is intended to apply to the following Equipment, each
item of which Equipment shall become the object of a separate Equipment
Schedule, as referred to above, upon the delivery of said item of Equipment:
The leased property includes various software to be provided by MFL and
licensed by MFL for use by the Lessee on a month-to-month basis. In the event
that the lessee is in default of any of the terms of this lease, MFL shall no
longer be obligated to provide any updating of its licensed software and any
license provided to the lessee shall immediately expire upon notice of MFL to
the lessee of said default Such default by lessee does not waive any obligations
for payment under this lease agreement (see paragraph 16).
2. TERM OF MASTER LEASE AGREEMENT. This Agreement shall be effective as of
the date above, and may be terminated upon 90 days' written notice by MFL Any
notice of termination may not be revoked without the written consent by MFL. Any
such termination shall not relieve the parties of their obligations with respect
to any Equipment outstanding or Equipment Schedule in effect at the date of such
termination.
2.(A) TERM OF EQUIPMENT LEASE. The lease term for all Equipment on a
particular Equipment Schedule shall be the number of months specified in such
Equipment Schedule ("Initial. Term"). The initial Term shall begin on the first
of the month following the installation date. Major will not be liable for
transportation delays.
3. RENTAL PAYMENTS. The total rental payments due under this master lease
shall be in the total sum of which is specified in the equipment schedule
exhibit "A", which sum shall be paid monthly in accordance with the various
equipment schedules referred to in paragraph 1.
4. LESSEE'S USE OF THE LEASED PROPERTY. Lessee shall use the Leased
Property in a careful and proper manner and shall comply with and conform to all
laws, ordinances and regulations which relate in any manner to the possession,
use or maintenance of the Leased Property. Upon MFL's demand, Lessee shall
prominently affix to the Leased Property labels, plates or other markings
supplied by MFL, stating that the Leased Property is owned by MFL.
<PAGE>
5. LESSEE'S INSPECTION OF THE LEASED PROPERTY. Lessee shall inspect the
Leased Property within forty eight (48) hours after receiving it. Unless Lessee
gives written notice to the MFL within this time, specifying any defect or other
objection to the Leased Property, Lessee agrees that it shall be conclusively
presumed, as between the Lessee and MFL, that the Lessee has My inspected and
acknowledged that the Leased Property is in good condition and repair, and the
Lessee is satisfied therewith and has accepted the Leased Property in such good
condition and repair.
6. MFL'S RIGHT TO INSPECT THE LEASED PROPERTY. NFL shall have the right
during normal business hours to enter into and upon the premises where the
Leased Property is located for the purpose of inspecting the same or observing
its use.
7. ALTERATIONS PROHIBITED. Lessee shall not make any alterations,
additions or improvements to the Leased Property, without the prior written
consent of the MFL. All additions and improvements made to the Leased Property
shall belong to and become the property of the MFL upon the expiration of the
Lease.
8. LESSEE'S OBLIGATION TO REPAIR. Lessee, at its own cost and expense,
shall keep the Leased Property in good repair, condition and working order and
shall furnish any and all parts, mechanisms and devices required to keep the
equipment in good mechanical and working order,
9. RISK OF LOSS. Lessee hereby assumes and agrees to bear the entire risk
of loss and damage to the Leased Property from any cause whatsoever. No loss or
damage to the Leased Property or any part thereof shall impair or lessen any of
Lessees obligations under this Lease, which shall continue in full force and
effect.
In the event of loss or damage of any kind whatever to the Leased
Property, the Lessee shall, at Mil's sole option:
(I) Place the Leased Property in good repair, condition and working order,
or
(ii) Replace the Leased Property with like property in good repair,
condition and working order,
10. SURRENDER OF LEASED PROPERTY. Upon the expiration of the lease, with
respect to any item of the Leased Property, the Lessee shall return the same to
MFL in good repair, condition and working order, ordinary wear and tear
excepted, in the Mowing manner
(a) By delivering the item of Leased Property at Lessee's cost and expense
to such place as MFL shall specify-, or
(b) By loading such item of Leased Property at Lessees cost and expense on
board such carrier as MFL shall specify and shipping the same, freight
collect, to the place designated by MFL.
11. INSURANCE. Lessee shall keep the Leased Equipment insured against all
risks of loss or damage from every cause whatsoever for not less than the full
replacement value thereof as determined by MFL; and shall carry public liability
and property damage insurance covering the Leased Property. All of the aforesaid
insurance shall be in form and amount and with companies approved by NO, and
shall be in the joint names of MFL and Lessee. Lessee shall pay the premiums
therefor and deliver said policies, or duplicates thereof, to MFL. Each insurer
shall agree, by endorsement upon the policy or policies issued by it or by
independent instrument furnished to NOT, that it will give MFL thirty (30) days
written notice before the policy in question shall be altered or canceled. The
proceeds of such insurance, at the option of MFL, shall be applied (a) toward
the replacement, restoration or repair of the Leased Property, or (b) toward
payment of the obligations of Lessee hereunder. Lessee hereby appoints MFL as
Lessees attorney-in-fact to make claim for, receive payment of, and execute and
endorse all documents, checks or drafts for, loss or damage under any said
insurance policy.
2
<PAGE>
5. LESSEE'S INSPECTION OF THE LEASED PROPERTY. Lessee shall inspect the
Leased Property within forty eight (48) hours after receiving it. Unless Lessee
gives written notice to the MFL within this time, specifying any defect or other
objection to the Leased Property, Lessee agrees that it shall be conclusively
presumed, as between the Lessee and MFL, that the Lessee has fully inspected and
acknowledged that the Leased Property is in good condition and repair, and the
Lessee is satisfied therewith and has accepted the Leased Property in such good
condition and repair.
6. MFL's RIGHT TO INSPECT THE LEASED PROPERTY. MFL shall have the right
during normal business hours to enter into and upon the premises where the
Leased Property is located for the purpose of inspecting the same or observing
its use.
7. ALTERATIONS PROHIBITED. Lessee shall not make any alterations,
additions or improvements to the Leased Property, without the prior written
consent of the MFL. All additions and improvements made to the Leased Property
shall belong to and become the property of the MFL upon the expiration of the
Lease.
8. LESSEE'S OBLIGATION TO REPAIR Lessee, at its own cost and expense,
shall keep the Leased Property in good repair, condition and working order and
shall furnish any and all parts, mechanisms and devices required to keep the
equipment in good mechanical and working order.
9. RISK OF LOSS. Lessee hereby assumes and agrees to bear the entire risk
of loss and damage to the Leased Property from any cause whatsoever. No loss or
damage to the Leased Property or any part thereof shall impair or lessen any of
Lessee's obligations under this Lease, which shall continue in full force and
effect.
In the event of loss or damage of any kind whatever to the Leased
Property, the Lessee shall, at MFL's sole option:
(1) Place the Leased Property in good repair, condition and working
order, or
(ii) Replace the Leased Property with like property in good repair,
condition and working order,
10. SURRENDER OF LEASED PROPERTY. Upon the expiration of the lease, with
respect to any item of the Leased Property, the Lessee shall return the same to
MFL in good repair, condition and working order, ordinary wear and tear
excepted, in the following manner
(a) By delivering the item of Leased Property at Lessee's cost and
expense to such place as MFL shall specify-, or
(b) By loading such item of Leased Property at Lessee's cost and
expense on board such carrier as NFL shall specify and shipping the same,
freight collect, to the place designated by MFL.
11. INSURANCE. Lessee shall keep the Leased Equipment insured against all
risks of loss or damage from every cause whatsoever for not less than the full
replacement value thereof as determined by NM, and shall carry public liability
and property damage insurance covering the leased Property. All of the aforesaid
insurance shall be in form and amount and with companies approved by MFL, and
shall be in the joint names of MFL and Lessee. Lessee shall pay the premiums
therefor and deliver said policies, or duplicates thereof, to MFL Each insurer
shall agree, by endorsement upon the policy or policies issued by it or by
independent instrument furnished to MFL, that it will give MFL thirty (30) days
written notice before the policy in question shall be altered or canceled. The
proceeds of such insurance, at the option of MFL, shall be applied (a) toward
the replacement, restoration or repair of the Leased Property, or (b) toward
payment of the obligations of Lessee hereunder. Lessee hereby appoints MFL as
Lessees attorney-in-fact to make claim for, receive payment of, and execute and
endorse all documents, checks or drafts for, loss or damage under any said
insurance policy.
3
<PAGE>
12. TAXES. Lessee shall keep the Leased Property five and clear of all
levies, liens and encumbrances and shall pay all license fees, registration
fees, assessments, charges and taxes (municipal, state and federal) which may
now or hereafter be imposed upon the ownership, leasing, renting, sale,
possession or use of the Leased Property, excluding, however, all taxes on or
measured by MFL's income.
13. WARRANTIES. MFL MAKES NO WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO
ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE
LEASED PROPERTY, ITS MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE.
14. INDEMNITY. Lessee shall indemnify MFL against, and hold MFL harmless
from, any and all claims, actions, suits, proceedings, costs, expenses, damages
and liabilities, including reasonable attorneys' fees, arising out of connected
with, or resulting from the Leased Property, including without limitation the
manufacture, selection, delivery, possession, use operation or return of the
Leased Property.
15. SECURITY. As security for the prompt and full payment of the rent, and
the faithful and timely performance of all provisions of this lease, and any
extension or renewal thereof, on its part to be performed, Lessee has pledged
and deposited with MFL the amount of which is found in the "Equipment Schedule".
In the event any default shall be made in the performance of any of the
covenants on the part of the Lessee herein contained with respect to any item or
items of the Leased Property, MFL shall have the right, but not the duty, to
apply said security to the curing of such default. Any such application by MFL
shall not be a defense to any action by MFL arising out of said default; and,
upon demand, Lessee shall restore said security to the full amount set forth
above. Upon the expiration of this Lease, or any extension or renewal thereof,
provided Lessee has paid all of the rent herein called for and fully performed
all of the other provisions of this Lease on its part to be performed, MFL will
return to Lessee any then remaining balance of said security.
16. DEFAULT. If Lessee and/or personal guarantor, with regard to any item
or items of Leased Property, fails to pay any rent or other amount herein
provided with ten (10) days after the same is due and payable, or if Lessee with
regard to any item or items of Leased Property fails to observe, keep or perform
any other provision of this Lease required to be observed, kept or performed by
Lessee, MFL shall have the right to exercise any one or more of the following
remedies:
(a) To declare the entire amount of rent hereunder immediately due
and payable as to any or all items of Leased Property, without notice or
demand to Lessee.
(b) To sue lessee and/or personal guarantor for and recover all
rents, and other payments, then accrued or thereafter accruing, with
respect to any or all items of Leased Property.
c) To take possession of any or all items of equipment, without
demand or notice, wherever same may be located, without any court order or
other process of law. Lessee hereby waives any and all damages occasioned
by such taking of possession. Any said taking of possession shall not
constitute a termination of this Lease as to any or all items of Leased
Property unless MFL expressly so notifies Lessee in writing.
(d) To terminate this Lease as to any or all items of Leased
Property.
(e) To pursue any other remedy at law or in equity, including those
set forth in the Uniform Commercial Code.
Notwithstanding any said repossession, or any other action which MFL may
take, Lessee shall be and remain liable for the full performance of all
obligations on the part of Lessee to be performed under this Lease.
All such remedies am cumulative, and may be exercised concurrently or
separately.
17. GUARANTOR. By signing below, the personal guarantor(s) and/ or the
corporate guarantor(s) of this lease hereby guarantees each and every obligation
of the Lessee contained herein. MFL shall not be required to exhaust any
remedies it may
4
<PAGE>
have against the Lessee named herein before proceeding against the guarantor(s).
18. MFL's EXPENSES. Lessee shall pay MFL all costs and expenses, including
reasonable attorneys' fees, incurred by MFL in exercising any of its fights or
remedies hereunder or in enforcing any of the terms, conditions, and provisions
hereof
19. PROHIBITION UPON ASSIGNMENT. Without the prior written consent of MFL,
Lessee shall not (a) assign. transfer, pledge or hypothecate this lease, the
Leased Property or any part thereof, or any interest therein, or (b) sublet or
lend the Leased Property or any part thereof, or permit the Leased Property or
any part thereof to be used by anyone other than Lessee or Lessee's employees.
Consent to any of the foregoing prohibited acts applies only in the given
instance; and is not a consent to any subsequent like act by Lessee or any other
person.
Subject always to the foregoing, this lease inures to the benefit of, and
is binding upon the heirs, legatees, personal representatives, successors and
assigns of the parties hereto.
20. MFL's ASSIGNMENT. It is understood that MFL contemplates assigning
this lease or mortgaging the Leased Property, and that said assignee may assign
the same. All rights of MFL hereunder may be assigned, pledged, mortgaged,
transferred, or otherwise disposed of, either in whole or in part, without
notice to Lessee. If MFL assigns this Lease or the rentals due or to become due
hereunder or any other interest herein, whether as security for any of its
indebtedness or otherwise, no breach or default by MFL hereunder or pursuant to
any other agreement between MFL or Lessee, should there be one, shall excuse
performance by Lessee of any provision hereof. No such assignee shall be
obligated to perform any duty, covenant or condition required to be performed by
MFL under the terms of this Lease.
21. SECURITY INTEREST. The lessee hereby grants and creates a security
interest in favor of the lessor in the "leased property" described above. This
agreement shall constitute a security agreement under the New York Uniform
Commercial Code and the secured party (the lessor) is hereby authorized by the
debtor (lessee) to file or refile any financing statements or continuation
statements with respect to the security interest granted pursuant to this
Agreement which at any time may be required or appropriate, although the same
may have been executed only by secured party(lessor).
22. OWNERSHIP. The Leased Property is, and shall at all times be and
remain, the sole and exclusive property of MFL; and the Lessee shall have no
right, tide or interest therein or thereto except as expressly set forth in this
Lease.
23. PERSONAL PROPERTY. The Leased Property is, and shall at all times be
and remain, personal property notwithstanding that the Leased Property or any
part thereof may be, or hereafter become, in any manner affixed or attached to,
or imbedded in, or permanently resting upon, real property or any building
thereof, or attached in any manner to what is permanent as by means of cement,
plaster, nails, bolts, screws or otherwise.
24. LATE CHARGES AND INTEREST. Should Lessee fail to pay any part of the
rent herein reserved or any other sum required to be paid to MFL by Lessee
within ten (10) days after the due date thereof, Lessee shall pay unto MFL a
late charge of five cents (.05) for each one dollar ($ 1.00) of said monthly
rent or other sum which shall be delinquent.
25. OFFSET. Lessee hereby waives any and all existing and future claims,
and offsets, against any rent or other payments due hereunder, and agrees to pay
the rent and other amounts hereunder regardless of any offset or claim which may
be asserted by Lessee or on its behalf
26. NON-WAIVER. No covenant or condition of the Lease can be waived except
by the written consent of the MFL, Forbearance or indulgence by NFL in any
regard whatsoever shall not constitute a waiver of the covenant or condition to
be
5
<PAGE>
performed by Lessee to which the same may apply, and, until complete performance
by Lessee of said covenant or condition, MFL shall be entitled to invoke any
remedy available to MFL under this Lease or by law or in equity despite said
forbearance or indulgence.
27. ENTIRE AGREEMENT. This instrument constitutes the entire agreement
between MFL and Lessee; and it shall not be amended, altered or changed except
by a written agreement signed by the parties hereto.
28. NOTICES. Service of all notices under this agreement shall be
sufficient if given personally or mailed to the party involved at its respective
address hereinbefore set forth, or at such address as such party may provide in
writing from time to time. Any such notice mailed to such address shall be
effective when deposited in the United States mail, duly addressed and with
postage prepaid.
29. TITLES. The titles to the paragraphs of this Lease am solely for the
convenience of the parties, and am not an aid in the interpretation of the
instrument.
30. TIME. Time is of the essence of this Lease and each and all of its
provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement
as of the date written below.
Dated: 12/26/97
MAJOR FLEET & LEASING CORP.
By: /s/ Andrew Harrison, EVP
----------------------------
Andrew Harrison, EVP
LESSEE
NISSKO TELECOM ASSOCIATES
By:/s/ Avi Nissanian
----------------------------
Avi Nissanian, Pres.
PERSONAL GUARANTOR CORPORATE GUARANTOR
By: By
By:
6
<PAGE>
"Major" Capital Technology Management Services
Computer Rental Services
EXHIBIT B
Certificate of Acceptance
Pursuant to the Master Lease Agreement ( the "Agreement ") made by and between
the undersigned Lessee and Major Fleet and Leasing Corp. Computer Leasing
Division, Lessee (a) certifies and warrants that all Equipment Schedule No.
65465484 (the "Equipment") has been delivered and inspected, and (b) accepts the
Equipment for all purposes under the Master Lease Agreement.
LESSEE:
By: /s/ Avi Nissanian
------------------------
Name: Avi Nissanian
Title: President
7
<PAGE>
Major Capital Technology Management Services
Computer Rental Services
Purchase Option Lessor does hereby grant to Lessee the option to purchase
the above referenced equipment on an as is basis. WHERE IS basis, at the
expiration of the initial Term, provided the Leases is not then in default under
this agreement or any other agreement with the Lessor. This option may be
exercised by Lessee upon giving not less than thirty (30) days prior written
notice to lessor, and accompanied by the purchase option price of $1.00 plus
application taxes.
Required Document: Lessee shall provide the following documents prior to
the Initial Term: an executed Master Agreement, Equipment Schedule, Electronic
Funds Transfer Agreement, and Certificate of Acceptance.
Lease Commencement Date: December 26, 1996 (to be filled in by lessor)
Documentation Fee: $50.00
In witness whereof, the parties have caused the Agreement to be executed
by their duly authorized representatives as of the date first above-written.
LESSEE: LESSOR:
Major Fleet and Leasing Corp.
By: /s/ Avi Nissanian By:
Name: Avi Nissanian Name:
Title: President Title:
8
<PAGE>
EXHIBIT"A"
Equipment Schedule
Invoice No. 65465484 Lease Number 3822071 (A)
Major Fleet and Leasing Corp. Computer Leasing Division (" Lessor") and Nissko
Telecom Ltd. ("Leasee") are parties to a Master Equipment Lease Agreement dated
as of December 26, 1996 (the "Agreement"). This Schedule and the Agreement
together comprise a separate Lease between the parties. The terms and conditions
of the Agreement are hereby incorporated by reference into the Schedule. All
initially-capitalize terms not defined in this Schedule shall have the meanings
ascribed to them in the Agreement.
Payment Term: 18 Months
Monthly Rental Payment: $9103.17
Total Amount Financed: $143,866.33
Lease - Name and Address for Notices/Invoices:
Lessor - name and Address for Notices:.
Major Fleet and Leasing Corp.
Computer Rental Services Address:
55-19 Northern Blvd City: Woodside St.: NY Zip: 11377
SYSTEM A
Description/Model No Rate Qty Total
Info Systems- Mfg
DT1- DIGITAL SWITCHBOARD 24 CHANNELS TI $34,495.00 1 $38,495.00
INTERFACE
TVI - TALKIE VER 4.13 SOFTWARE 0.00 1 1 0.00
AN1 -ANALOG ADD-ON CHANNELS 695.00 24 16,680.00
SA1 - SPLIT ACCESS UNIT 3,695.00 2 7,390.00
UP1 - UPS 1400 VA 1,425.00 1 1,425.00
EM1 - ENCODER MODEL RX//1 1 OHP4+REDANDENT 5,255.00 4 21,020.00
KCL
KL - KLM1 UNITS 0.00 1 0.00
VC1 -VOICE CIRCUITS LOW BIT KVC-3 FXS 2,225.00 24 53,400.00
VC2 -VOICE CIRCUITS LOW BIT KVC-3 FXO 2,050.00 24 49,200.00
9
<PAGE>
December 26, 1996
FIDELITY HOLDINGS, INC
C.C.O.A.
80-02 Kew Gardens Rd.,Cellular Credit Corp. of America
Suite 5000 P.O. Box 300726
Kew Gardens
New York 11415 Jamaica, NY 11430-0726
Tel: 718.520.6500
Fax: 718.793.4830
E-mail: -info 0 talkie.com
FDHG-NASDAQ BB
STATEMENT OF ACCOUNT
Invoice No. 65465495 $125,800.00 Jamaica-1 12/23/96
65465496 125,800.00 Jamaica-2 12/23/96
65465497 61,810.00 Jamaica-3 12/23/96
Total Invoices $313,410.00
Balance Due $313,410.00
Prepared for Computer Business Sciences, Inc.
By: /s/ Solisha Alexander
Solisha Alexander-Asst. Comptroller
10
<PAGE>
Computer Business Sciences, Inc. Invoice
80-02 Kew Gardens Rd., Suite 5000
Kew Gardens, NY 11415 DATE INVOICE NO.
12/19/96 65465484
BILL TO SHIP TO
Nissko Telecom LTD for Allied Research & Development Co. Ltd 4 Levontin Street
Tel Aviv 65111 Israel
P.O. NO. TERMS REP SHIP VIA FOB PROJECT
Israel-1
ITEM DESCRIPTION QTY RATE AMOUNT
DT1 DIGITAL SWITCHBOARD 24 CHANNELS TI 1 38,495.00 38,495.00
INTERFACE,
TV1 TALKIE VER 4.13 SOFTWARE 0.00 0.00
ANI ANALOG ADD-ON CHANNELS 24 695.00 16,680.00
SA1 SPLIT ACCESS UNIT 2 3,695.00 7,390.00
UP1 UPS 1400 VA 1 1,425.00 1,425.00
EM1 ENCODER MODEL RX2/1 1 OHP4+REDANDENT 4 5,255.00 21,020.00
KCL &
KL KLM 1 UNITS 0.00 0.00
VC1 VOICE CIRCUITS LOW SIT KVC-3 FXS 24 2,225.00 53,400.00
VC2 VOICE CIRCUITS LOW BIT KVC-3 FXO 24 2,050.00 49,200.00
Disc Master Agent Discount -1,810.00 -1,810.00
Nissko/Allied Acceptance:
By: /s/ Avi Nissanian
--------------------------
Avi Nissanian, President
We appreciate your valued business
Total
$185,800.00
SUBLEASE
AGREEMENT
AGREEMENT OF SUBLEASE made as of the day of March.
1995. by and between SPEEDY RAC. [NC.. A New York corporation
with Offices at 55-1 1 Northern Boulevard, Woodside. New York
(hereinafter "Sublessor") and MAJOR SUBARU INC a
corporation with offices at 43-40 Northern Boulevard. Long Island City.
New York (hereinafter "Sublessee").
W I TN E S ST H
WHEREAS. pursuant to a certain lease dated as of February. 1995.
between H&M Holding Co., a
partnership. as landlord (hereinafter the "Landlord") and Sublessor. as
tenant. Sublessor is a tenant of
premises known as 55-I I Northern Boulevard, Woodside New York (the
"Demised Promises") (a copy' of ~~hich lease is annexed hereto as
Exhibit A); and
W'HEREAS Sublessee desires to sublease a portion of the Demised
Promises from Sublessor (the "Subleased Premises") and Sublessor is
desirous of subleasing same to Sublessee; and
WHEREAS, the parties hereto wish to set forth the terms of such
sublease in writing:
NOW. THEREFORE, in consideration of the mutual covenants herein
contained as well as other good and valuable consideration, it is
hereby a greed as follows:
I. RECITALS. The recitals set forth hereinabove are incorporated in
this sublease as if more fully set forth herein at length.
2. PREMISES. Sublessor hereby subleases to Sublessee.
and Sublessee hereby hires from Sublessor, the Subleased Premises known
as 55-09 Northern Boulevard.
Woodside. Now York. consisting of front office showroom, front three
roll up doors as well as one roll-up door on side of premises fronting
on 56th Street. subject to the terms and conditions of the Lease and
this sublease.
3. COMMENCEMENT. This sublease shall commence as of February 1, 1995
(the "Commencement Date").
4. TERM; RENEWAL. The term of this sublease shall commence on the
Commencement Date and shall
terminate on January 31. 1998. unless sooner terminated pursuant to any
of the terms and conditions of this sublease or of the Lease.
upon expiration or other termination of this Sublease, Sublessee shall
quit and surrender the Subleased
Premises in the condition and state of repair required under the Lease,
as at the inception of the sublease. reasonable wear and tear excepted.
> USE. Sublessee shall use the Subleased Premises as a showroom,
offices and for the making of minor automobile repairs only. and in
conformity with the Lease and all City. County. State. Federal and
other municipal or governmental regulations.
6. PREMISES "AS 15W. Sublessee acknowledges that it has inspected the
Subleased Premises and hereby accepts the same in an "as is" condition
on the date hereof Sublessor shall have no obligation whatsoever to
make any alterations, -improvements or repairs to the Subleased
Premises.
7. RENT. ADDITIONAL RENT.
2
Sublessee covenants and
<PAGE>
agrees to pay' to Sublessor, at its address set forth hereinaboxe.its
rental for the term hereof on the first dax of each calendarmonth
xvithout notice or demand and without abatement, deduction orset-off of
any amount xvhatsoever. except as may be expressl~provided for herein),
as folloxvs:
(a) For the period February 1. 1995 through January 3 I, 19960 the sum
of Sixty-Three Thousand ($63,000).
Dollars per annum, payable in equal monthly installments of Five
Thousand Txvo Hundred Fifty ($5,250.00) Dollars;
(b) For the period February 1. 1996 through January
311 19971. the sum of Sixty-Six Thousand One Hundred Fifty' ($66.1
50.00) Dollars per annum, payable in equal monthly installments of Five
Thousand Five Hundred Txxelxe and 50 100 ($5,512.50) Dollars:
(c) For the period February 1. 1997 through January
31. 1998. the sum of Sixty-Nine Thousand Four Hundred Fifty-Sexen and
56 100 ($69,457.56) Dollars. pa~'able in equal monthly installments of
Five Thousand Seven Hundred Eightx-Fh~ht and 13 100 ($5,788.13)
Dollars. Sublessee shall be required to and shall pay the Nexv York
Cirt Commercial Rent and Occupancy Tax in respect of this sublease.
Payments of additional rent, if any. required to be made hereunder,
shall be due and paxable three (3) days after submission by Sublessor
of the bill evidencing same, and Sublessee shall not be entitled to any
credits or offsets of any kind xx ith respect to same. In the event of
a default by Sublessee xx ith respect to the payment of items of
additional rent. such default shall be deemed to be a breach of this
sublease.
a. UTILITY Sublessee shall be responsible, at its
sole cost and expense. for the installation of separate meters
xv ith
respect to heat, gas. Electricity and hot water servicing the
Subleased Promises, and for the payment of all such utility
charges
a
directly to the respective agencies providing same. In the event that, xx ith
the prior consent of Sublessor, Sublessee chooses not to have such separate
meters installed, then in that event Sublessee shall pay to Sublessor, as and
for additional rent, the folloxx'ing: (a) With respect to electricity, such
amount as shall exceed the sum of$ per month billed by Con Edison with respect
to account number (b) With respect to heat and gas . such amount as shall exceed
the sum of$ per month billed by Brook I vn Union Gas with respect to account
number 9
(c) With respect to water, % of such amount as
shall be billed to the entire premises of which the Subleased Premises
form a part.
91. SUBORDINATION ASSUMPTION OF CERTAIN LEASE TERMS. This Sublease shall
be subject and subordinate to the Lease and to all of the terms, provisions,
covenants and conditions contained therein. To the extent not inconsistent with
the agreements or understandings expressed or implied in this Sublease or
applicable only to the original parties to the Lease the rent and additional
rent reserved under the Lease), the terms.
<PAGE>
provisions.
covenants and conditions of the Lease are hereby' incorporated herein by
reference on the folloxvine understandings: (a) The term `Landlord, as used
therein, shall refer to Sublessor hereunder, its successors and assigns. The
term "Tenant", as used therein, shall refer to Sublessee hereunder, its
permitted successors and 4
assigns. and the term "Demised Premises" or "Premises", as used therein, shall
refer to the Subleased Promises. (b) Wherever it is provided in the Lease that
Landlord has the right to elect to perform any covenant of the tenant thereunder
upon default of the tenant in observing or complying with such covenant, such
rieht shall inure to the benefit of Sublessor. (c) Without limiting the
generality of the foregoing provisions, Sublessor shall not be responsible for
furnishing any' service. maintenance or repairs to the Subleased Premises, and
Sublessee shall in no event whatsoever be entitled to any allowance, reduction,
or adjustment of the rent or additional rent pa~'able under this Sublease by
reason of the failure of Landlord or Sublessor to comply with Landlords
obligations, if any, to supply or render the same unless such failure of
Landlord shall result in an allowance, reduction, or adjustment of the rent
payable by' Sublessor under the Lease, in xxhich event Sublessee shall be
alloxved a reduction on the rent payable under this Sublease in any amount equal
to the product of(i) the allowance, reduction, or adjustment of the rent payable
by Sublessor under the Lease: and (ii) the ratio of the extent to xxhich such
failure affects the Subleased Premises to the extent to x~hich such failure
affects the Demised Premises.
(d) Except as expressly set forth in this Sublease. Sublessee shall observe and
perform the terms. provisions, covenants and conditions of the Lease on the part
of the tenant thereunder to be observed and performed. and shall not do or
suffer or permit anything to be done which would result in a default under the
Lease or cause same to be terminated or forfeited.' 10. NOTICES. Except as
otherwise set forth herein, whenever a time is specified in the Lease for the
giving of any notice or the making ofany demand by tenant thereunder. such time
shall be deemed, for the purpose of this Sublease only to be three (3) days
prior thereto: whenever a time is specified in the Lease for the giving of any
notice or the making of any demand by the Landlord thereunder, such time shall
be deemed, for the purpose of this Sublease only, to be three days (3)
thereafter. Whenever a time is specified in the Lease within which the Landlord
thereunder must give notice or make a demand following an event. or within which
Landlord must respond to any notice, request, or demand 0 previously given or
made by tenant, such time shall be deemed to be. for the purposes of this
Sublease only, to be three (3) days thereafter. It is the purpose and intent of
the foregoing provisions to provide Sublessor with time within which to transmit
to Landlord any notices or demands received from Sublessee. and to transmit to
Sublessee any notices or demands received from Landlord. All notices and other
communications required or desired 6
<PAGE>
to be given pursuant to this Sublease shall be in xvriting and shall be deemed
given either ifdelixered personally.' x~ ith receipt acknowledged in xvriting.
or sent by certified or registered mail postage prepaid. return receipt
requested, to the party entitled to such notice, at their respectixe addresses
set forth hereinabove II. Plan OF SUBLESSOR TO CURB SUBLESSEE'S DEFAULT. In the
event Sublessee shall fail to perform any' of the terms, provisions, covenants
or conditions of this Sublease on its part to be performed. and in the further
exent such failure shall constitute a default under the Lease, then Sublessor
may. after notice and at its sale option. perform any such term, provision,
covenant or condition, and the full cost and expense of such performance shall
immediately be due and oxving by Sublessee to Sublessor. together x~ ith
interest thereon at the rate oftwelve (l20o) percent per annum from the date
ofpaxment thereof by Sublessor. In the event Sublessee shall default in the
performance or. observance of any tern, covenant, or aereement contained herein
or in the Lease as herein incorporated, and if such default shall not haxe been
remedied after notice given bx Sublessor to Sublessee within any grace period
(as modified in paragraph 9 this Sublease) provided for under the Lease, then in
that event Sublessor shall be entitled to exercise any and all rights and
remedies to which Sublessor is entitled by laxv or which are specifically
granted to Landlord under the Lease. which rights and remedies are hereby
incorporated herein and made a part hereof 7
xvith the same force and effect as though herein specifically set forth.
Sublessee shall have similar rights -to cure any default of Sublessor hereunder.
12. COVENANTS AND APPROVALS OF SUBLESSOR In the event this sublease requires the
consent or approval of Sublessor prior to the taking of any action, then it
shall be a condition precedent to the taking of such action that the prior
consent or approval of Landlord shall have been obtained if the same must be
obtained under the Lease. If Sublessee is not in default hereunder then
Sublessor's consent or approxal shall not be unreasonably withheld in any such
case in xvhich Landlord has gixen its consent. 13. BROKE Sublessee covenants*
xxarrantsand
represents that it has dealt xvith no broker in connection with this
Sublease. Sublessee hereby Indemnities and holds Sublessor harmless against any
claims, loss. `costs and expenses (including reasonable attorney's fees)
resulting from a breach by such indemnitor
ofthis covenant, representation and xvarrant'v.
14. TERMINATION OF LEASE, in the event the Lease shall be terminated
for any reason whatsoever. including, but not limited to. termination
by Sublessor or Landlord in accordance with any right or option given
to any such party in the Lease. then in that event this sublease shall
terminate automatically without notice to Sublessee. and Sublessee
shall have no further obligations hereunder.
15. INSURANCE. Sublessee shall obtain and keep in full
8
Iforce and effect, during the term hereof a policy of comprehensive general
public liability and property damage insurance for general off ice use, with a
contractual liability endorsement under which Sublessee is named as the insured,
and Sublessor. Landlord and any lessors and any mortgage es (whose names shall
have been furnished to Sublessee) are named as additional insured parties. Such
policy shall contain a provision that no act or omission of the Sublessee shall
affect or limit the obligation of the insurance company to pay the amount of any
loss sustained and that the policy shall be non-cancellable with respect to
Sublessor, Landlord and such lessors and mortgages unless thirty (30) days"
xxritten notice shall have been given to Sublessor by certified mail, return
receipt requested. which notice shall contain the policy number and the names of
the insured and additional insureds. A certificate of such insurance shall be
delivered to Sublessor prior to the Commencement Date. The minimum limits of
liability shall be combined single limits with respect to each occurrence in an
aniount of
<PAGE>
not less than $l.000.000.00 for injury to persons (or death) and $50,000 for
damage to property. All insurance required to be carried by' S ublessee pursuant
to the terms of this Sublease shall be effected under valid and enforceable
policies issued by reputable and dependent insurers licensed to do business in
the State of Nexv York, and reasonably acceptable to Sublessor. 16. SIGNS.
Sublessee shall have the -right to place such signs as may' be necessary for its
business on the subleased Premises upon prior approval of Sublessor. which
approval shall not 9
be unreasonably withheld, and so long as same areWith the Lease and
applicable local laws and rules. 17.
MISCELL ANE OUS.
in accordance
(a) This sublease and the Lease incorporated herein contain the entire agreement
between the parties xx ith respect to the subject matter of this Sublease, and
all prior negotiations and agreements with respect thereto are merged in this
Sublease. (b) This sublease may not be changed, modified or discharged. in whole
or in part. and no oral or executory agreement shall be effective to change,
modifY or discharge this Sublease, in whole or in part. or an', obligations
hereunder, unless such agreement is set forth in a xvritten instrument executed
by' the party against xvhom enforcement is sought. (c) No consent or approval of
Sublessor shall be deemed to have been given or to be effective for any purpose
unless such consent or approval is set forth in a written instrument executed
by' Sublessor. (d) The terms, covenants, and conditions contained in this
Sublease shall bind and inure to the benefit of Sublessor and Sublessee and
their successors and assigns, except as otherwise expressly' provided in this
Sublease. fe) The xvaiver of any provision contained herein shall not constitute
a further waiver of that or any other provision hereof (0 in the event any
provision contained herein is deemed unenforceable, such determination shall not
affect any other 10
provision contained herein.
IN WITNESS WHEREOF, the parties hereto have
executed this Sublease as of the day' and year
first above written.
SUBLESSOR:
SPEEDY P.A.C., INC.
By: ts'
SUBLESSEE:
MAJOR SUBARU. INC.
By: s' Bruce Bendell Bruce Bendell
<PAGE>
All such remedies am cumulative, and may be exercised concurrently or
separately.
17. GUARANTOR. By signing below, the personal guarantor(s) and/or the corporate
guarantor(s) of this lease hereby guarantees each and every obligation of the
Lessee contained herein. MFL shall not be required to exhaust any remedies it
may
have against the Lessee named herein before proceeding against the
guarantor(s).
8. MFL's EXPENSES. Lessee shall pay MFL all costs and expenses.
including reasonable attorneys' fees. incurred by MFL in exercising any
of its fights or remedies hereunder or in enforcing any of the terms.
conditions, and provisions hereof
19. PROHIBITION UPON ASSIGNMENT. Without the prior xxritten consent of MFL.
Lessee shall not (a) assign. transfer, pledge or hypothecate this lease, the
Leased Property or any part thereof, or any' interest therein, or (b) sublet or
lend the Leased Property or any part thereof, or permit the Leased Property or
any part thereof to be used by anyone other than Lessee or Lessee's eniplo~ees.
Consent to any of the foregoing prohibited acts applies only in the given
instance: and is not a consent to any subsequent like act by [.essee or any
other person.
Subject alxvays to the foregoing, this lease inures to the benefit of and is
binding upon the heirs, legatees. personal representatives, successors and
assigns of the parties hereto.
20. MFL's ASSIGNMENT. It is understood that MFL contemplates assigning this
lease or mortgaging the Leased Property, and that said assignee may assign the
same. All rights of MFL hereunder may' be assigned. pledged, mortgaged.
transferred, or otherwise disposed of. either in whole or in part. xvithout
notice to Lessee. If N'IFL assigns this Lease or the rentals due or to become
due hereunder or any other interest herein, whether as security for any of its
indebtedness or otherwise, no breach or default by' N4FL hereunder or pursuant
to any other agreement between MEL or Lessee, should there be one, shall excuse
performance by' Lessee of any provision hereof No such assignee shall be
obligated to perform any duty'. covenant or condition required to be performed
by MEL under the terms of this Lease.
21. SECURITY INTEREST. The lessee hereby grants and creates a security interest
in favor of the lessor in the "leased property" described above. This agreement
shall constitute a security agreenient under the New York Uniform Commercial
Code and the secured party (the lessor) is hereby authorized by the debtor
(lessee) to file or refile any financing statements or continuation statements
with respect to the security interest granted pursuant to this Agreement which
at any time may' be required or appropriate. although the same may have been
executed only by secured party(lessor).
~2. OWNERSHIP. The Leased Property is. and shall at all times be and
remain, the sole and exclusive property of MFL: and the Lessee shall
have no right, tide or interest therein or thereto except as expressly
set forth in this Lease.
~3. PERSONAL PROPERTY. The Leased Property is, and shall at all times
be and remain, personal property notwithstanding that the Leased
Property or any part thereof may be. or hereafter become, in anx manner
affixed or attached to, or imbedded in, or permanently resting upon,
real property or any building thereof or attached in any manner to what
is permanent as by means of cement, plaster. nails, bolts. screws or
otherwise.
24. LATE CHARGES AND INTEREST. Should Lessee fail to pay any part of the rent
herein reserved or any other sum required to be paid to MFL by Lessee xvithin
ten (10) day's after the due date thereof. 1.essee shall pay unto MFL a late
charge of five cents (.05) for each one dollar ($ I .00) of said monthly rent or
other sum x~hich shall be delinquent.
This Agreement between
GLORIA HINSCH, residing at 1010 Torchwood Drive; DeLand, Florida 32724 as
Landlord and MAJOR CHRYSLER-PLYMOUTH, INC. c/o MAJOR CHEVROLET, INC. 43-40
Northern Boulevard, Long Island City, NY as Tenant
Witnesseth:The Landlord hereby leases to the Tenant the following premises:
approximately 17,400 square feet as shown on the survey of
Keller Powell dated 9/16/60, and located at 44th Street and
Northern Boulevard, Long Island City, New York Address 44-15
Northern Blvd L.I.C.N.Y. a/k/a Block 704 Lot I Borough of
Queens
for the term of ten (10) years
to commence from the first day of November 1991 and to end on the 31st day of
October 2001 to be used and occupied only for offices and sales, leasing and
storage of automobiles, trucks and other motor vehicles, and the repair thereof
upon the conditions and covenants following:
1st. That the Tenant shall pay the annual rent of FIFTY FOUR THOUSAND
($54,000.00) DOLLARS as augmented by the rider hereto
said rent to be paid in equal monthly payments in advance on the first day of
each and every month during the term aforesaid, as follows: FOUR THOUSAND FIVE
HUNDRED ($4,500.00) DOLLARS as augmented by the rider hereto.
2nd. That the Tenant shall take good care of the premises and shall, at the
Tenant's own cost and expense make all repairs as set out in the rider hereto
and at the end or other expiration of the term, shall deliver up the demised
premises in good order ot condition, damages by the elements excepted.
3rd. That the Tenant shall promptly execute and comply with all statutes,
ordinances, rules, orders, regulations and requirements of the Federal, State
and Local Governments and of any and all their Departments and Bureaus
applicable; to said premises, for the correction, prevention, and abatement of
nuisances or other grievances, in, upon, or connected with said premises during
said term; and shall also promptly comply with and execute all rules, orders and
regulations of the New York Board of Fire Underwriters, or any other similar
body, at the Tenant's own cost and expense.
4th. That the Tenant, successors, heirs, executors or administrators shall not
assign this agreement, or underlet or underlease the premises, or any part
thereof, or make any alterations on the premises, without the Landlord's consent
in writing; or occupy, or permit or suffer the same to be occupied for any
business or purpose deemed disreputable or extra-hazardous on account of fire,
under the penalty of damages and forfeiture, and in the event of a breach
thereof, the term herein shall immediately cease and determine at the option of
the Landlord as if it were the expiration of the original term.
5th. Tenant must give Landlord prompt notice of fire, accident, damage or
dangerous or defective condition. If the Premises can not be used because of
fire or other casualty, Tenant is not required to pay rent for the time the
Premises are unusable. If part of the Premises can not be used, Tenant must pay
rent for the usable part. Landlord shall have the right to decide which part of
the Premises is usable. Landlord need only repair the damaged structural parts
of the Premises, Landlord is not required to repair or replace any equipment,
fixtures, furnishings or decorations unless originally installed by Landlord,
Landlord is not responsible for delays due to settling insurance claims,
obtaining estimates, labor and supply problems or any other cause not fully
under Landlord's control.
If the fire or other casualty is caused by an act or neglect of Tenant,
Tenant's employees or invitees, or at the time of the fire or casaulty Tenant is
in default in any term of this Lease, then all repairs will be made at Tenant's
expense and Tenant must pay the full rent with no adjustment. The cost of the
repairs will be added rent.
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Landlord has the right to demolish or rebuild the Building if there is
substantial damage by fire or other casualty, Landlord may cancel this Lease
within 30 days after the substantial fire or casualty by giving Tenant notice of
Landlord's intention to demolish or rebuild. The Lease will end 30 days after
Landlord's cancellation notice to Tenant, Tenant must deliver the Premises to
Landlord on or before the cancellation date in the notice and pay all rent due
to the date of the fire or casualty. If the Lease is cancelled Landlord is not
required to repair the Premises or Buidling. The cancellation does not release
Tenant of liability in connection with the fire or casualty. This Section is
intended to replace the terms of New York Real Property Law Section 227.
6th. The said Tenant agrees that the Landlord and the Landlord's agents and
other representatives shall have the right to enter into and upon said premises,
or any part thereof, at all reasonable houri for the purpose of examining the
same, or making such repairs or alterations therein as may be necessary for the
safety and preservation thereof.
7th. The Tenant also agrees to permit the Landlord or the Landlord's agents to
show the premises to persons wishing to hire or purchase the same; and the
Tenant further agrees that on and after the sixth month, next preceding the
expiration of the term hereby granted, the Landlord or the Landlord's agents
shall have the right to place notices on the front of said premises, or any part
thereof, offering the premises "To Let" or "For Sale", and the Tenant hereby
agrees to permit the same to remain thereon without hindrance or molestation.
8th. That if the said premises, or any part thereof shall be deserted or become
vacant during said term, or if any default be made in the payment of the said
rent or any part thereof, or if any default be made in the performance of any of
the covenants herein contained, the Landlord or representatives may re-enter the
said premises by force, summary proceedings or otherwise, and remove all persons
therefrom, without being liable to prosecution therefor, and the Tenant hereby
expressly waives the service of any notice in writing of intention to re-enter,
and the Tenant shall pay at the same time as the rent becomes payable under the
terms hereof a sum equivalent to the rent reserved herein, and the Landlord may
rent the premises on behalf of the Tenant, reserving the right to rent the
premises for a longer period of time than fixed in the original lease without
releasing the original Tenant from any liability, applying any moneys collected,
first to the expense of resuming or obtaining possession, second to restoring
the premises to a rentable condition, and then to the payment of the rent and
all other charges due and to grow due to the Landlord, any surplus to be paid to
the Tenant, who shall remain liable to; any deficiency.
9th. Landlord may replace, at the expense of Tenant, any and all broken glass in
and about the demised premises. Landlord may insure, and keep insured, all plate
glass in the demised premises for and in the name of Landlord, Bills, for the
premiums therefor shall be rendered by Landlord to Tenant at such times as
Landlord may elect, and shall be due from, and payable by Tenant when rendered,
and the amount thereof shall be deemed to be, and be paid as, additional rental.
Damage and injury to the said premises, caused by the carelessness, negligence
or improper conduct on the part of the said Tenant or the Tenant's agents or
employees shall be repaired as speedily as possible by the Tenant at the
Tenant's own cost and expense.
10th. That the Tenant shall neither encumber nor obstruct the sidewalk in front
of, entrance to, or halls and stairs of said premises, nor allow the same to be
obstructed or encumbered in any manner.
11th. The Tenant shall neither place, or cause or allow to be placed, any sign
or signs of any kind whatsoever at, in or about the entrance to said premises or
any other part of same, except in or at such place or places as may be indicated
by the Landlord and consented to by the Landlord in writing. And in case the
Landlord or the Landlord's representatives shall deem it necessary to remove any
such sign or signs in order to paint the said premises or the building wherein
same is situated'or make any other repairs, alterations or improvements in or
upon said premises or building or any part thereof, the Landlord shall have the
right to do so, providing the same be removed and replaced at the Landlord's
expense, whenever the said repairs, alterations or improvements shall be
completed.
12th. That the Landlord is exempt from any and all liability for any damage or
injury to person or property caused by or resulting from steam, electricity,
gas, water, rain, ice or snow, or any leak or flow from or into any part of said
building or from any damage or injury resulting or arising from any other cause
or happening whatsoever unless adid damage or injury be caused by or be due to
the neglegence of the Landlord.
13th. That if default be made in any of the covenants
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<PAGE>
15th. The Tenant has this day deposited with the Landlord the sum of $9,000.00
as security for the full and faithful performance by the Tenant of all the
terms, convenants and conditions of this lease upon the Tenant's part to be
performed, which said sum shall be returned to the Tenant after the time fixed
as the expiration of this term herein, provided the Tenant has fully and
faithfully carried out all of said terms, convenants and conditions of Tenant's
part to be performed. In the event of a bona fide sale, subject to this lease,
the Landlord shall have the right to transfer the security to the vendee for the
benefit of the Tenant and the Landlord shall be considered release by the Tenant
from all liability for the return of such security; and the Tenant agrees to
look to the new Landlord solely for the return of the said security, and it is
agreed that this shall apply to every transfer or assignment made of the
security to a new Landlord.
16th. That the security deposited under this lease shall not be mortgaged,
assigned or encumbered by the Tenant without the written consent of the
Landlord.
17th. It is expressly understood and agreed that in case the demised premises
shall be deserted or vacated, or if default be made in the payment of the rent
or any part thereof as herein specified, or if, without the consent of the
Landlord, the Tentant shall sell, assign, or mortgage this lease or if default
be made in the performance of any of the covenants and agreements in this lease
contained on the part of the Tenant to be kept and performed, or if the Tenant
shall fail to comply with any of the statutes, ordinances, rules, orders,
regulations and requirements of the Federal, State and Local Governments or of
any and all their Departments and Bureaus, applicable to said premises, or if
the Tenant shall file or there be filed against Tenant a petition in bankruptcy
or arrangement, or Tenant be adjudicated a bankrupt or make an assignment for
the benefit od creditor or take advantage of any insolvency act, the Landlord
may, if the Landlord so elects, at any time thereafter terminate the lease and
the term hereof, on giving to the Tenant five days' notice in writing of the
Landlord's intention so to do, and the lease and the term hereof shall expire
and come to an end on the date fixed in such notice as if the said date were the
date originally fixed in this lease for the expiration hereof. Such notice may
be given by mail to the Tenant addressed to the demised premises.
19th. That the Tenant will not nor will the Tenant permit undertenants or other
persons to do anything in said premises, or bring anything into said premises,
or permit anything to be brought into said premises or to be kept therein, which
will in any way increase the rate of fire insurance on said demised premises,
nor use the demised premises or any part thereof, nor suffer or permit their use
for any business or purpose which would cause an increase in the rate of fire
insurance on said building and the Tenant agrees to pay on demand any such
increase.
20th. The failure of the Landlord to insist upon a strict performance of any of
the terms, conditions and covenants xxxxxxx shall not be deemed a waiver of any
rights or remedies that the Landlord may have, and shall not be deemed a waiver
of any subsequent breach or default in the terms, conditions and covenants
herein contained. This instrument may not be changed, modified, discharged or
terminated orally.
21st. If the whole or any part of the demised premises shall be acquired or
condemend by Eminent Domain for any public a quasl public use or purpose, then
and in that event, the term of this lease shall cease anbd terminate from the
date of title vesting in such proceeding and Tenant shall have no claim against
Landlord for the value of any unexpected term of said lease in part of any award
shall belong to the Tenant.
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<PAGE>
22nd. If after default in payment of rent or violation of any other provision of
this lease, or upon the expiration of this lease, the Tenant moves out or is
dispossessed and fails to remove any trade fixtures or other property prior to
such said default, removal, expiration of lease, or prior to the issuance of the
final order or execution of the warrant, then and in that event, the said
fixtures and property shall be deemed abandoned by the said Tenant and shall
become the property of the Landlord.
23rd. In the event that the relation of the Landlord and Tenant may cease or
terminate by reason of the re-entry of the Landlord under the terms and
covenants contained in this lease or by the ejectment of the Tenant by summary
proceedings or otherwise, or after the abandonment of the premises by the
Tenant, it is hereby agreed that the Tenant shall remain liable and shall pay in
monthly payments the rent which accures su]Ssequent to the re-entry by the
Landlord, and the Tenant expressly agrees to pay as damages for the breach of
the covenants herein contained, the difference between the rent reserved and the
rent collected and received, if any, by the Landlord during the remainder of the
unexpired term, such difference or deficiency between the rent herein reserved
and the rent collected if any, shall become due and payable in monthly payments
during the remainder of the unexpired term, as the amounts of such difference or
deficiency shall from time to time be ascertained; and it is mutually agreed
between Landlord and Tenant that the respective parties hereto shall and hereby
do waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other on any matters whatsoever arising out of
or in any way connected with this lease, the Tenant's use or occupany of said
premises, and/or any claim of injury or damage.
24th. The Tenant waives all rights to redeem under any law of the State of New
York.
25th. This lease and the obligation of Tenant to pay rent hereunder and perform
all of the other covenants and agreements hereunder on part of Tenant to be
performed shall in nowise be affected, impaired or excused because Landlord is
unable to supply or is delayed in supplying any service expressly or impliedly
to be supplied or is unable to make, or is delayed in making any repairs,
additions, alternations or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if Landlord is prevented or delayed from so
doing by reason of government preemption in connection with a National Emergency
or in connection with any rule, order or regulation of any department or
subdivision thereof of any governmental agency or by reason of the condition of
supply and demand which have been or are affected by war or other emergency.
26th. No diminution or abatement of rent, or other compensation, shall be
claimed or allowed for inconvencience or discomfort arising from the making of
repairs or improvements to the building or to its appliances, nor for any space
taken to comply with any law, ordinance or order of a government authority. In
respect to the various "services," if any, herein expressly or impliedly agreed
to be furnished by the Landlord to the Tenant, it is agreed that there shall be
no diminution or abatement of the rent, or any other compensation, for
interruption or curtailment of such "service" when such interruption or
curtailment shall be due to accident, alterations or repairs desirable or
necessary to be made or to inability or difficulty in securing supplies or labor
for the maintenance of such "service" or to some other cause, not gross
negligence on the part of the Landlord. No such interruption or curtailment of
any such "service" shall be deemed a constructive eviction. The Landlord shall
not be required to furnish, and the Tenant shall not be entitled to receive, any
of such "services" during any period, wherein the Tenant shall be in default in
respect to the payment of rent. Neither shall there be any abatement or
diminution of rent because of making of repairs, improvements or decorations to
the demised premises after the date above fixed for the commencement of the
term, it being understood that rent shall, in any event, commence to run at such
date so above fixed.
RIDER TO LEASE DATED
BETWEEN
GLORIA HINSCH (LANDLORD)
and
MAJOR CHRYSLER-PLYMOUTH, INC. (TENANT)
28th. The rentals hereunder shall be paid by the Tenant in lawful money of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of paymnent, in equal monthly installments in
advance on the first day of each month during said term, at the office of
Landlord or such other place as Landlord may designate.
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<PAGE>
29th. Tenant, at its sole cost and expense, shall keep any building on the
demised premises insured for the mutual benefit of the Landlord and the
Landlord's mortgagees, if any, such as their interest may appear, during the
term of this lease, against loss or damage by fire and against loss or other
risks now or hereafter embraced by extended broad form in amounts sufficient to
prevent the Landlord from becoming a co-insurer under the terms of the
applicable policy, but in any event, in an amount of not less than 80% of the
then "full replacement costs." Certificates evidencing such policy or policies
of insurance shall be delivered to and be in the possession of the Landlord at
all times during the term of this lease or any renewal thereof. In the event
that Tenant fails to provide such insurance and keep same in force, then
Landlord may procure the same and the cost thereof shall be added to the next
month's rent thereafter becoming due and shall be deemed additional rent
hereunder.
30th. The Tenant covenants to provide and keep in force during the term of this
lease, for itself and the benefit of the Landlord, general and public liability
insurance in standard form, protecting the Landlord against any liability,
occasioned by accident, disaster or otherwise, at the demised premises. Such
policy or policies of insurance shall be for $1,000,000 aggregate per occurrence
and $90,000 property damage and certificates evidencing such policy or policies
of insurance shall be delivered to and be in the possession of the Landlord at
all times during the term of this lease or any renewal thereof. In the event
that Tenant fails to provide such insurance and keep same in force, then
Landlord may procure the same and the cost thereof shall be added to the next
month's rent thereafter becoming due and shall be deemed additional rent
hereunder.
31st. The Tenant shall pay as additional rent before any fine, penalty, interest
or cost that may be added thereto for the nonpayment thereof, all real estate
taxes, assessments, water rates and water charges, and sewer rent and all other
governmental levies and charges, general and special, ordinary and
extraordinary, of any kind, which are assessed or imposed upon the leased
property (both land and building) or any part thereof or become payable during
the term of this lease. Nothing contained in this lease shall require the Tenant
to pay any franchise, corporate, estate, inheritance, succession, capital levy
or transfer tax of the Landlord or any income, profits, or revenue tax or any
other tax, assessment, charge or levy upon the rent payable by the Tenant under
this lease; provided, however, that if at any time during the term of this lease
under the laws of the United States, the State of New York or any political
subdivision thereof, a tax on rents is assessed against the Landlord for the
basic rent as a substitution in whole or in part for taxes assessed by such
state or political subdivision on land and/or buildings, such tax shall be
deemed to be included within the amount which the Tenant is required to pay
under this article. All taxes assessed to but payable in whole or installments
after the effective date of the lease term and all taxes assessed during the
term or any renewal thereof, but payable in whole or installments after the
lease term, shall be adjusted and prorated so that the Landlord shall pay its
prorated share for the period prior to or for the period subsequent to the lease
period and the Tenant shall pay its prorated share for the lease term and any
renewal thereof.
32nd. The Tenant may assign the within Lease or sublet any portion of the
premises, provided that:
a) The proposed assignee/subtenant submits reasonably required proof of
financial responsibility and is deemed financially responsible in the reasonable
judgment of the Landlord;
b) In the event of an assignment, Tenant furnishes Landlord with a duly executed
assignment and assumption agreement;
c) Added security of $10,000.00 shall be delivered to Landlord;
d) Int-he event the rentals reserved under a sublease exceeds the rent reserved
hereunder, or in the event Tenant profits from a lease assignment, it is agreed
such profits shall be applied as follows:
i) first to repayment of Tenant's cost of construction of any buildings
erected at the premises; and (Tenant shall furnish proof of cost on
completion of building).
ii) the balance, if any, shall belong to Landlord.
33rd. The Tenant may place signs on outside of building provided they first
obtain Landlord's consent, which shall not be withheld unreasonably, and obtain
necessary license and permits and keep same in force during all times of this
lease or any renewal thereof, and further comply with all applicable laws,
ordinances, rules and regulations of governmental agencies having jurisdiction.
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<PAGE>
34th. The Tenant and Landlord represent that neither has dealt with any broker
other than Henry Cavaliere/H. Cavaliere Realty, Inc. in this transaction. Each
party agrees to indemnify and save the other party harmless from the claim or
claims of any broker (including reasonable attorneys, fees for counsel defending
such claims) for commissions herein resulting from the acts of such party.
35th. The Tenant agrees to maintain any buildings Tenant may in the future erect
in a state of good repair (ordinary wear and tear excepted), and make all
necessary repairs, including structural repairs, at his own cost.
36th. A transfer of any stock interest in a corporate Tenant (except transfers
to or among Harold Bendell and Bruce Bendell, Chrysler Corporation, and
transfers of less than fifty (50%) percent of the stock) shall be deemed a
prohibited assignment unless there is compliance with paragraph 32nd of the
within Rider.
37th. Any discontinuance of the Tenant's operations at the premises may be
considered by the Landlord as an abandonment of the premises, entitling, but not
obligating the Landlord to cancel and terminate this lease. Suspension of
business for more than thirty (30) consecutive days may be considered
presumptive of Tenant's abandonment of the premises.
38th. In the event that any payment due from the Tenant to the Landlord
hereunder shall become overdue by a period in excess of ten (10) days after
notice has been given to Tenant of the claimed default, a "late charge" in an
amount equal to five (5%) percent of any payment so overdue, may be charged by
Landlord for the purpose of defraying the expense incidental to handling such
deliquent payment, which "late charge,, shall be deemed to be additional rent
payable by Tenant to Landlord upon the Landlord's rendering a bill to Tenant
therefor.
39th. The Tenant is given permission to erect a new building or buildings
suitable for an auto showroom, auto repairs and offices at the premises,
provided Tenant in each instance complies with the following provisions:
a) The Tenant must submit proposed plans to the Landlord in advance of
commencement of any construction, for the Landlord's approval, which
approval will not be unreasonably withheld. In the event the Landlord does
not approve or disapprove of the palns within thirty (30) days, the plans
shall be deemed approved;
b) The Tenant must permit an inspection of the completed construction by
an engineer or architect of Landlord's choosing, and Tenant agrees to
reimburse Landlord's reasonable expenses in connection therewith;
c) The Tenant must obtain all necessary permits and provide all required
environmental impact studies;
d) The Tenant must furnish prior to the commencement of any such
construction an undertaking by Chrysler Corporation* to promptly complete
the building should Tenant fail to do so and to promptly pay or bond any
mechanics liens on the premises if Tenant fails to do so;
* or any licensed insurance or bonding company
e) The Tenant shall not permit the filing of any mechanics liens against
the property and in the event of any such filing, Tenant agrees to have
such lien discharged or bonded within ninety (90) days after notice of
such filing has been given to the Tenant. If the Tenant shall fail to
cause any such liens to be discharged of record or bonded within the
aforesaid 90-day period (unless Tenant shall contest the validity of such
lien and during the period of contest, such proceedings shall suspend the
collection thereof or no part of the premises would be subject to loss,
sale or forfeiture before determination of such contest) or satisfy such
lien within sixty (60) days after any judgment in favor of such lien
holders (unless an appeal is taken), then Landlord shall have the right to
cause the same to be discharged. All amounts paid by Landlord to cause
liens to be discharged shall constitute additional rent payable by Tenant
to Landlord;
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<PAGE>
f) The Tenant agrees to provide Landlord with a copy of the Certificate of
Occupancy and Board of Fire Underwriters certificate obtained by Tenant
upon completion of the building(s);
g) Any building so erected (not including fixtures, signs, equipment,
furniture or other personal property of whatever kind and nature kept or
installed on the premises by Tenant, no matter how affixed) shall become
the property of the Landlord at the termination of the lease.
40th. In the event Tenant constructs a building or buildings at the premises, or
contemplates such construction, the Landlord agrees:
a) to cooperate in the filing of all necessary applications for permits
and the like, provided Tenant pays th~ costs of such applications;
b) To permit Tenant to apply for and obtain, at Tenant's sole cost and
expense, any necessary zoning variances; and
c) to permit the Tenant's pledging of the within lease as security for
repayment of its construction or other financing.
41st. A memorandum of the within lease shall be executed simultaneously herewith
and be recorded. Landlord shall furnish Tenant with a suitable metes and bounds
description for this purpose. Tenant agrees to furnish a termination statement
to be held in escrow by Landlord's attorney, to be used, pursuant to a separate
escrow agreement only in the event of Tenant's default hereunder which default
is sufficient to cause a termination of the lease.
42nd. Notwithstanding the rental figure set out in item I hereof, the said
rental figure shall be increased as follows:
a) The Consumer Price Index (CPI) published by the U.S. Department of
Labor, Bureau of Labor Statistics, for All Urban Consumers -- New York
-Northeastern New Jersey -- all items for the month of July, 1991 shall be
the "basic CPI figure".
b) The same CPI figure for the month of July, 1992 shall be compared to
the "basic CPI figure" and a percentage of increase shall be calculated.
The monthly rental from November 1, 1992 through October 31, 1993 shall be
increased by the same percentage of increase.
c) Similarly, each succeeding year, the July figure shall be compared to
the basic CPI figure and percentage of increase determined. The monthly
rental for the next ensuing year commencing on November 1 will be
increased by said percentage of increase. This proceedure will continue
throughout the term of the Lease.
d) The above procedure shall not operate to decrease the rent below the
amount being paid during the immediately preceding period.
e) If the CPI is altered, the said increases shall be calculated on the
basis of the nearest comparable figures published by the Bureau of Labor
Statistics or its successor in function.
f) On November 1, 2001 the base rent shall be modified to reflect the then
current market rent of the land portion of the premises excluding
improvements. In the event the parties cannot agree upon the "market
rent", each party shall appoint an appraiser (who is licensed and
designated by SRA or MAI), who shall then attempt to agree upon a "market
rent". In the event the two appraisers do not agree, they together shall
appoint a third appraiser, whose decision shall be binding. In the event
the two appraisers cannot agree upon the appointment of a third appraiser,
the third appraiser shall be appointed by the American Arbitration
Association. Each party shall bear the cost of its own appraiser, and the
partie~s shall share equally the cost of the third appraiser and the fee
of the American Arbitration Association. The "market rent" so established
shall become the new "base rent" (but such market rent shall not be less
than the base rent at the time of appraisal) and shall thereafter be
adjusted annually pursuant to this paragraph, but the "market rent" shall
become the new base rent and the basic CPI figure shall become that for
July 1, 2001 (if the market rent causes a rental increase).
43rd. It is intended that this be a net lease and Tenant shall pay all charges,
including taxes and insurance, repairs of all sorts (including sidewalks), which
pertain to demised premises and improvements thereto, except as otherwise
specifically provided herein.
44th. Tenant may elect to extend this lease for a period of ten (10) years by
written notice to Landlord provided that:
7
<PAGE>
a) Tenant shall have completed the construction of a building as provided
herein, and a certificate of occupany therefor shall have been issued, and
b) Tennant shall not be in default of the terms hereof.
45th. Landlord makes no representation as to underground fuel storage tanks and
Tenant undertakes to repair, remove, maintain or replace the same as necessary
or required by any governmental authority including the Environmental Protection
Agency.
46th. Tenant hereby assign to Landlord any award or payment on account of any
damage, destruction or taking which is payable in connection with the premises,
except that Tenant shall be entitled to that portion of the net award
representing payment for Tenant's leasehold-interest, trade fixtures, moving
expenses, business interruption, building erected by Tenant, and loss of
profits. All amounts paid pursuant to an agreement with a condemning authority
in connection with any taking shall be deemed to constitute an award on account
of such taking. Each party agrees to notify the other of any such proceedings.
47th. Tenant shall have the right to contest any tax assessment affecting the
premises, and the Landlord agrees to cooperate therein. If there shall be any
refunds or rebates of any imposition paid by Tenant, such refunds or rebates
shall belong to the Tenant. Any refunds received by Landlord shall be deemed
trust funds and as such are to be received by Landlord in trust and paid to
Tenant forthwith.
48th. If Landlord fails to pay any liens or encumbrances affecting the premises
and to which this Lease may be subordinate when any of the same become due or in
any other respects fails to perform any convenant or agreement in this lease
contained on the part of Landlord to be performed, then, and in such event,
after the continuance of any such failure or default for thirty (30) days after
notice is given by the Tenant to the Landlord, Tenant may pay said lien or
encumbrance and cure such default, Tenant may further make all necessary
payments in connection therewith, including, but not limited to the payment of
any reasonable attorney's fees, costs, and charges of or in connection with any
legal action which may have been brought. All sums charged to Landlord by Tenant
shall be indebtedness of Landlord to Tenant payable on demand, or deductable
from rents payable hereunder. Any court action by Landlord with respect thereto
shall suspend the application of this paragraph.
49th. If Tenant shall fail to make or perform any payment or act required by
this lease, then Landlord may make such payment or perform such act of the
account of Tenant. All amounts so paid, shall be paid to Landlord on demand, or
at Landlord's option be added to the next rent to come due hereunder.
50th. This lease and all right of the Tenant hereunder are and shall be subject
and subordinate to the lien of any and all mortgages which may now or hereafter
affect the premises, and to all renewals, modifications, consolidations,
replacements and extensions thereof, provided that any such mortgage placed upon
the premises shall provide that so long as there shall be outstanding no
continuing event of default in any of the terms, conditions, covenants or
agreements of this lease on the part of the Tenant to be performed, the
leasehold estate of the Tenant created hereby and Tenant's peaceful and quiet
possession of the premises shall be undisturbed by any foreclosure of such
mortgage.
51st. Notwithstanding any contrary provision in this lease, neither party shall
be deemed in default (except with respect to the payment of rent) unless the
other has sent a written notice of such claimed default, specifying the nature
of the default and giving the other an opportunity to cure same within thirty
(30) days, in which event the party shall have such longer period as shall be
necessary to cure the default, so long as it promptly proceeds to cure the same
and proceeds with due diligence. No bankruptcy or insolvency shall constitute a
default if Tenant pays the rent and otherwise complies with the provisions of
this Lease.-
52nd. All notices, requests, consents, approvals, offers, statements and other .
struments hereunder shall be in writing and shall be deemed to have been given
'1__~W_ en delivered, or when mailed by first class certified or registered
mail, postage prepaid, addressed:
a) if to Landlord, to:
Mrs. Gloria Hinsch
1010 Torchwood Drive
DeLand, FL 32724
with a copy to:
Henry C. Cavaliere
124 Plandome Road
Manhasset, NY 11030
8
<PAGE>
b) if to Tenant, to:
Bruce Bendell
c/o major Chevrolet, Inc.
43-40 Northern Boulevard
Long Island City, NY 11101
with a copy to:
Michael J. DeZorett, Esq.
150 Broadway
New York, NY 10038
53rd. All disputes concerning the validity, interpretation or performance of
this Agreement and any of its terms or provisions, or of any rights or
obligations of the parties hereto, shall be governed by and resolved in
accordance with the laws of the State of New York.
54th. No waiver by either party of any breach or series of breaches or defaults
in performance by the other party, and no failure, refusal or neglect of either
party to exercise any right, power or portion given to it hereunder or to insist
upon strict compliance with or performance of either party's obligations under
this Agreement shall constitute a waiver of the provisions of this Agreement, or
of its right at any time thereafter to require exact and strict compliance with
the provisions thereof.
55th. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto, subject to the restrictions on
assignment contained herein.
56th. This Agreement contains the terms and conditions agreed upon by the
parties hereto with reference to the subject matter hereof. No other agreement,
oral or otherwise, shall be deemed to exist or to bind either of the parties
hereto, and all prior agreements and understandings are superseded hereby. This
agreement cannot be modified or changed except by written instrument signed by
both the parties hereto.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day and
year first above written.
/s/ Gloria Hinsch
-----------------------------
GLORIA HINSCH (LANDLORD) MAJOR CHRYSLER-PLYMOUTH, INC.
/s/ Bruce Bendell
-----------------------------
BY: BRUCE BENDELL (TENANT)
STATE OF FLORIDA )
) SS.:
COUNTY OF DOLUSIA )
On this 10th day of September, 1991, before me personally came GLORIA
HINSCH to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged that she executed the same.
/s/ Cheryl J. Ball
---------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) SS.:
COUNTY OF QUEENS )
On the 3rd day of September, 1991, before me personally came BRUCE
BENDELL, to me known, who, being by me duly sworn, did depose and say that he
resides at North Hills, New York; that he is the Vice-President of MAJOR
CHRYSLER-PLYMOUTH, INC., the corporation described in and which executed the
within instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of directors of said corporation, and that he signed his name
thereto by like order.
/s/ Harry Presser
-----------------------------
Notary public
HARRY PRESSER
Notary Public, State of New York
No. 24-8434975
Qualified in Kings County
Commission Expires March 30, 1992
9
<PAGE>
ADDITIONAL RIDER TO LEASE
RE: 44-15 Northern Blvd., Long Island City, New York
1. In lieu of paragraph 1145th" of the "Rider to lease,, herein, the
following provision shall apply:
"Landlord makes no representation as to the underground fuel storage
tanks. In the event any governmental authority including the Environmental
Protection Agency shall require any repair, removal, maintenance or replacement
of same, the Landlord agrees to comply with such requirements, except that in
the event such repair, removal, maintenance or replacement is required by reason
of the construction of a building at the premises by the Tenant, the Tenant
agrees to be responsible for such compliance. Further, in the event the
Landlord, in compliance with any future requirement of any governmental agency,
removes the underground storage tanks during the term of this Lease, and Tenant
thereafter constructs a building at the premises which construction would have
required the removal of the underground storage tanks, were it not for the
Landlord's prior removal of same, the Tenant agrees to reimburse the Landlord
for its cost of removal of such underground storage tanks."
/s/ Gloria Hinsch 9/10/91
- -------------------------- ---------
GLORIA HINSCH Date
MAJOR CHRYSLER-PLYMOUTH, INC.
/s/ Bruce Bendell 8/9/91
- ------------------------- --------
BY: BRUCE BENDELL Date
Cheryl J. Ball 9/10/91
And the said Landlord doth covenant that the said Tenant on paying the
said yearly rent, and performing the covenants aforesaid, shall and may
peacefully and quietly have, hold and enjoy the said demised premises for the
term aforesaid, provided however, that this convenant shall be conditioned upon
the retention of title to the premises by the Landlord.
And it is mutually understood and agreed that the covenants and agreements
contained in the within lease shall be binding upon the parties hereto and upon
their respective successors, heirs, executors and administrators.
In Witness Whereof, the parties have interchangeably set their hands and
seals (or caused these presents to be signed by their proper corproate officers
and caused their proper corporate seal to be hereto affixed) this day of 19
Signed, seal and delivered
in the presence of
XXXXXXXXXXXXXXX L.
Gloria Hinsch L.
L .
10
-------------------------------------
STANDARD FORM OF STORE LEASE 5/5/80 B
The Real Estate Board of New York, Inc.
-------------------------------------
AGREEMENT OF LEASE, made as of this 10th day of JUNE 1992, between BILL K.
KNRTSONIS party of the first part, hereinafter referred to as OWNER, and MAJOR
AUTOMOTIVE GROUP party of the second part, hereinafter referred to as TENANT.
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner
BLOCK 706 LOTS 36 and 38 in the LOT known as 46-23 NORTHERN BOULEVARD, ASTORIA,
N.Y. 11103 in the Borough of QUEENS, City of New York, for the term of (5) FIVE
YEARS (or until such term shall sooner cease and expire as hereinafter provided)
to commence on the FIRST day of JULY nineteen hundred and NINETY TWO, and to end
on the THIRTIETH day of JUNE nineteen hundred and NINETY SEVEN both dates
inclusive, at an annual rental rate of
SEE ATTACHED RIDER
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this lease
be a renewal).
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
Rent 1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy. 2. Tenant shall use and occupy demised premises for
NEW AND USED CAR SALES; RETAIL AND WHOLESALE
and for no other purpose. Tenant shall at all times conduct its business in a
high grade and reputable manner, shall not violate Article 37 hereof, and shall
keep show windows and signs in a neat and clean condition.
Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
without Owner's prior written consent. Subject to the prior written consent of
owner, and to the provisions of this article, Tenant at Tenant's expense, may
make alterations, installations, additions or improvements which are
non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved by Owner. Tenant shall, before making
any alterations, additions, installations or improvements, at its expense,
obtain all permits, approvals and certificates required by any governmental or
quasi-governmental bodies and (upon completion) certificates
<PAGE>
of final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner and Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may require. If any mechanic's lien is filed against the demised premises, or
the building of which the same forms a part, for work claimed to have done for,
or materials furnished to, Tenant, whether or not done pursuant to this article,
the same shall be discharged by Tenant within ten days thereafter, at Tenant's
expense, by filing the bond required by law. All fixtures and all paneling,
partitions, railings and like installations, installed in the premises at any
time, either by Tenant or by Owner in Tenant's behalf, shall, upon installation,
become the property of Owner and shall remain upon and be surrendered with the
demised premises unless Owner, by notice to Tenant no later than twenty days
prior to the date fixed as the termination of this lease, elects to relinquish
Owner's rights thereto and to have them removed by Tenant, in which event, the
same shall be removed from the premises by Tenant prior to the expiration of the
lease, at Tenant's expense. Nothing in this article shall be construed to give
Owner title to or to prevent Tenant's removal of trade fixtures, moveable office
furniture and equipment, but upon removal of any such from the premises or upon
removal of other installations as may be required by Owner, Tenant shall
immediately and at its expense, repair and restore the premises to the condition
existing prior to installation and repair any damage to the demised premises or
the building due to such removal. All property permitted or required to be
removed by Tenant at the end of the term remaining in the premises after
Tenant's removal shall be deemed abandoned and may, at the election of Owner,
either be retained as Owner's property or may be removed from the premises by
Owner at Tenant's expense.
Tenant's Liability Insurance Property Loss, Damage, Indemnity:
8. Owner or its agent shall not be liable for any damage to property of Tenant
or of others entrusted to employees of the building, nor for loss of or damage
to any property of Tenant by theft or otherwise, nor for any injury or damage to
persons or property resulting from any cause of whatsoever nature, unless caused
by or due to the negligence of Owner, its agents, servants or employees. Owner
or its agents will not be liable for any such damange caused by other tenants or
persons in, upon or about said building or caused by operations in construction
of any private, public or quasi public work. Tenant agrees, at Tenant's sole
cost and expense, to maintain general public liability insurance in standard
form in favor of Owner and Tenant against claims for bodily injury or death or
property damage occurring in or upon the demised premises, effective from the
date Tenant eiiters into possession and during the term of this lease. Such
insurance shall be in an amount and with carriers acceptable to the Owner. Such
policy or policies shall be delivered to the Owner. On Tenant's default in
obtaining or delivering any such policy or policies or failure to pay the
charges therefor. Owner may secure or pay the charges for any such policy or
policies and charge the Tenant as additional rent therefor. Tenant shall
indemnify and save harmless Owner against and from all liabilities, obligations,
damages, penalties, claims, costs and expenses for which owner shall not be
reimbursed by insurance, including reasonable attorney's fees, paid, suffered or
incurred as a result of any breach by Tenant, Tenant's agent, contractors,
employees, invitees, or licensees, of any covenant on condition of this lease,
or the carelessness, negligence or improper conduct of the Tenant, Tenant's
agents, contractors, employees, invitees or licensees. Tenant's liability under
this lease extends to the acts and omissions of any subtenant, and any agent,
contractor, employee, invitee or licensee of any subtenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written
<PAGE>
notice from Owner, will, at Tenant's expense, resist or defend such action or
proceeding by Counsel approved by Owner in writing, such approval not to be
unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) If the demised premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give immediate notice thereof to Owner and this
lease shall continue in full force and effect except as hereinafter set forth.
(b) If the demised premises are partially damanged or rendered partially
unusable by fire or other casualty, the damages thereto shall be repaired by and
at the expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the premises shall have been
repaired and restored by Owner, subject to Owner's right to elect not to restore
the same as hereinafter provided. (d) If the demised premises are rendered
wholly unusable or (whether or not the demised premises are damaged in whole or
in part) if the building shall be so damaged that owner shall decide to demolish
it or to rebuild it, then, in any xxxxxx Tenant gives, within 90 days after such
fire or casualty specifying a date for the expiration of the lease, which date
shall not be more than 60 days after the giving of such notice, and upon the
date specified in such notice the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination of
this lease and Tenant shall forthwith quit, surrender and vacate the premises
without prejudice however, to Owner's rights and remedies against Tenant under
the lease provisions in effect prior to such termination, and any rent owing
shall be paid up to such date and any payments of rent made by Tenant which were
on account of any period subsequent to such date shall be returned to Tenant.
Unless Owner shall serve a termination notice as provided for herein, Owner
shall make the repairs and restorations under the conditions of (b) and (c)
hereof, with all reasonable expedition subject to delays due to adjustment of
insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, Tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of Tenant's salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy, (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
each party shall look first to any insurance in its favor before making any
claim against the other party for recovery for loss or damage resulting from
fire or other casualty, and to the extent that such insurance is in force and
collectible and to the extent permitted by law, Owner and Tenant each hereby
releases and waives all right of recovery against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The foregoing
release and waiver shall be in force only if both releasors' insurance policies
contain a clause providing that such a release or waiver shall not invalidate
the insurance and also, provided that such a policy can be obtained without
additional premiums. Tenant acknowledges that Owner will not carry insurance on
Tenant's furniture and/or furnishings or any fixtures or equipment,
improvements, or appurtenances removable by Tenant and agrees that Owner will
not be obligated to repair any damage thereto or replace the same, (f) Tenant
hereby waives the provisions of Section 227 of the Real Property Law and agrees
that the provisions of this article shall govern and control in lieu thereof.
Repairs:
4. owner shall maintain and report the public portions of the building, both
exterior and interior, except that if Owner allows Tenant to erect on the
outside of the building a sign or signs, or a hoist, lift or sidewalk elevator
for the exclusive use of Tenant. Tenant shall maintain such exterior
installations in good
<PAGE>
appearance and shall cause the same to be operated in a good and workmanlike
manner and shall make all repairs thereto necessary to keep same in good order
and condition, at Tenant's own cost and expense, and shall cause the same to be
covered by the insurance provided for hereafter in Article 8. Tenant shall,
throughout the term of this lease, take good care of the demised premises and
the fixtures and appurtenances therein, and the sidewalks adjacent thereto, and
at its sole cost and expense, make all non-strutural repairs thereto as and when
needed to preserve them in good working order and condition, reasonable wear and
tear, obsolescence and damage from the elements, fire or other casualty,
excepted. If the demised premises be or become infested with vermin, Tenant
shall at Tenant's expense, cause the same to be exterminated from time to time
to the satisfaction of Owner. Except as specifically provided in Article 9 or
elsewhere in this lease, there shall be no allowance to the Tenant for the
diminuation of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from owner, Tenant or
others making or failing to make any repairs, alterations, additions or
improvements in or to any portion of the building including the erection or
operation of any crane, derrick or sidewalk shed, or in or to the demised
premises or the fixtures, appurtenances or equipment thereof. The provisions of
this Article 4 with respect to the making of repairs shall not apply in the case
of fire or other casualty which are dealt with in article 9 hereof.
Window Cleaning:
5. Tenant will not clean nor require, permit, suffer or allow any window in the
demised premises to be cleaned from the outside in violation of Section 202 of
the New York State Labor Law or any other applicable law or of the Rules of the
Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
Requirements of Law, Fire Insurance:
6. Prior to the commencement of the lease term, if Tenant is then in possession,
and at all times thereafter, Tenant at Tenant's sole cost and expense, shall
promptly comply with all present and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions and
boards and any direction of any public officer pursuant to law, and all orders,
rules and regulations of the New York Board of Fire Underwriters or the
Insurance Services Office, or any similar body which shall impose any violation,
order or duty upon Owner or Tenant with respect to the demised premises, and
with respect to the portion of the sidewalk adjacent to the premises. If the
premises are on the street level, whether or not arising out of Tenant's use or
manner of use thereof, or with respect to the building if arising out of
Tenant's use or manner of use of the premises or the building (including the use
permitted under the lease). Except as provided in Article 29 hereof, nothing
herein shall require Tenant to make structural repairs or alterations unless
Tenant has by its manner of use of the demised premises or method of operation
therein, violated any such laws, ordinances, orders, rules, regulations or
requirements with respect thereto. Tenant shall not do or permit any act or
thing to be done in or to the demised premises which is contrary to law, or
which will invalidate or be in conflict with public liability, fire or other
policies of insurance at any time carried by or for the benefit of Owner. Tenant
shall pay all costs, expenses, fines, penalties or damages, which may be imposed
upon Owner by reason of Tenant's failure to comply with the provisions of this
article. If the fire insurance rate shall, at the beginning of the lease or at
any time thereafter, be higher than it otherwise would be, then Tenant shall
reimburse owner, as additional rent hereunder, for that portion of all fire
insurance premiums thereafter paid by Owner which shall have been charged
because of such failure by Tenant, to comply with the terms of this article. In
any action or proceeding wherein Owner and Tenant are parties, a schedule or
"make-up" of rate for the building or demised premises issued by a body making
fire insurance rates applicable to said premises shall be conclusive evidence of
the facts therein stated and of the several items and charges in the fire
insurance rate then applicable to said premises.
Subordination:
7. This lease is subject and subordinate to all ground or underlying leases
<PAGE>
and to all mortgages which may now or hereafter affect such leases or the real
property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be selfoperative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request.
Eminent Domain:
10. if the whole or any part of the demised premises shall be
acquired or condemned by Eminent Domain for any public or quasi public use or
purpose, then and in that event, the term of this lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said leave. Assignment,
Mortgage, Etc.:
11. Tenant, for itself, its heirs, distributees, executors,
adminstrators, legal representatives, successors and assigns expressly covenants
that it shall not assign, mortgage or encumber this agreement, nor underlet, or
suffer or permit the demised premises or any part thereof to be used by others,
without the prior written consent of Owner in each instance. If thise lease be
assigned, or if the demised premises or any part thereof be underlet or occupied
by anybody other than Tenant, Owner may, after default by Tenant, collect rent
from the assignee, under-tenant or occupant, and apply the net amount collected
to the rent herein reserved, but no such assignment, underletting, occupancy or
collection shall be deemed a waiver of the covenant, or the acceptance of the
assignee, under-tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an assignment or underletting shall not in
any wise be construed to relieve Tenant from obtaining the express consent in
writing of owner to any further assignment or underletting. Electric Current:
(Graphic of Pointing Finger) Rider to be added if necessary
12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
convenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
Access to Premises:
<PAGE>
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to any portion of the building of which owner may elect to perform. In
the premises, following Tenant's failure to make repairs or perform any work
which Tenant is obligated to perform under this lease, or for the purpose of
complying with laws, regulations and other directions of government authorities.
Tenant shall permit owner to use and maintain and replace pipes and conduits in
and through the demised premises and to erect new pipes and conduits therein,
provided they are within the walls. Owner may, during the progress of any work
in the demised premises, take all necessary materials and equipment into said
premises without the same constituting an eviction nor shall the Tenant be
entitled to any abatement of rent while such work is in progress nor to any
damages by reason of loss or interruption of business or otherwise. Throughout
the term hereof Owner shall have the right to enter the demised premises at
reasonable hours for the purpose of showing the same to prospective purchasers
or mortgages of the building, and during the last six months of the term for the
purpose of showing the same to prospective tenants and may, during said six
months period, place upon the premises the usual notice "To Let" and "For Sale"
which notices Tenant shall permit to remain thereon without molestation. If
Tenant is not present to open and permit an entry into the premises, Owner or
Owner's agents may enter the same whenever such entry may be necessary or
permissible by master key or forcibly and provided reasonable care is exercised
to safeguard Tenant's property and such entry shall not render Owner or its
agents liable therefor, nor in any event shall the obligations of Tenant
hereunder be affected. If during the last month of term Tenant shall have
removed all or substantially all of Tenant's property therefrom, Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitation or abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder. Owner shall have the right at any time, without the same
constituting an eviction and without incurring liability to Tenant therefor to
change the arrangement and/or location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets, or other public parts of the
building and to change the name, number or designation by which the building may
be known.
Vault, Vault Space, Area:
14. No vaults, vault space or area, whether or not enclosed or
covered, not within the property line of the building is leased hereunder,
anything contained in or indicated on any sketch, blue print or plan, or
anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to
<PAGE>
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee, or charge of municipal
authorities for such vault or area shall be paid by Tenant. Occupancy:
15. Tenant will not at any time use or occupy the demised premises
in violation of Articles 2 or 37 hereof, or of, the certificate of occupancy
issued for the building of which the demised premises are a part. Tenant has
inspected the premises and accepts them as is, subject to the riders annexed
hereto with respect to Owner's work, if any. In any event, Owner makes no
representation as to the condition of the premises and Tenant agrees to accept
the same subject to violations whether or not of record. Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Landlord by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (1) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtor; or (2) the making by
Tenant of an assignment or any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming through or under
Tenant, or by reason of any statute or order of court, shall thereafter be
entitled to possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 16 shall be applicable only to the party
then owning Tenant's interest in this lease.
(b) It is stipulated and agreed that in the event of the termination
of this lease pursuant to (a) hereof. Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demise premises for the same period.
In the computation of such damages the difference between any installments of
rent becoming due hereunder after the date of termination and the fair and
reasonable rental value of the demised premises for the period for which such
installments was payable shall be discounted to the date of termination at the
rate of four per cent (4%) per annum. If such premises or any part thereof be
re-let by the Owner for the unexpired term of said lease, or any part thereof,
before presentation of proof of such liquidiated damages to any court,
commission or tribunal, the amount of rent reserved upon such reletting shall be
deemed to be the fair and reasonable rental value for the part or the whole of
the premises to re-let during the term of the re-letting. Nothing herein
contained shall limit or prejudice the right of the owner to prove for and
obtain as liquidated damages by reason of such termination, an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above. Default:
17. (1) If Tenant defaults in fulfilling any of the covenants of
this lease other than the covenants for the payment of rent or additional rent;
or if the demised premises become vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant,
or, if this lease be rejected under Section 365 of Title II of the U.S. Code
(Bankruptcy
<PAGE>
Code); or if Tenant shall fail to move into or take possession of the premises
within fifteen (15) days after the commencement of the term of this lease, of
which fact Owner shall be the sole judge; then, in any one or more of such
events, upon Owner serving a written five (5) days notice upon Tenant specifying
the nature of said default and upon the expiration of said five (5) days, if
Tenant shall have failed to
(2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid; or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. Remedies
of Owner and Waiver of Redemption:
18. In case of any such default, re-en~try, expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent, and additional
rent, shall become due thereupon and be paid up to the time of such reentry,
dispossess and/or expiration. (b) Owner may re-let the premises or any part or
parts thereof, either in the name of Owner or otherwise, for a term or terms,
which may at Owner's option be less than or exceed the period which would
otherwise have constituted the balance of the term of this lease and may grant
concessions or free rent or charge a higher rental than that in this lease,
and/or (c) Tenant or the legal representatives of Tenant shall also pay Owner as
liquidated damages or the failure of Tenant to observe and perform said Tenant's
covenants herein contained, any deficiency between the rent hereby reserved
and/or covenanted to be paid and the net amount, if any, of the rents collected
on account of the subsequent lease or leases of the demised premises (or each
month of the period which would otherwise have constituted the balance of the
term of this lease. The falure of Owner to re-let the premises or any part or
parts thereof shall not release or affect Tenant,s liability for damages. In
computing such liquidated damages there shall be added to the said deficiency
such expenses as owner may incur in connection with re-letting, such as legal
expenses, attorneys' fees, brokerage, advertising and for keeping the demised
premises in good order or for preparing the same for re-letting. Any such
liquidated damages shall be paid in monthly installments by Tenant on the rent
day specified in this lease. owner, in putting the demised premises in good
order or preparing the same for re-rental may, at Owner's option, make such
alterations, repairs, replacements, and/or decorations in the demised premises
as Owner, in Owner's sole judgement, considers advisable and necessary for the
purpose of re-letting the demised premises, and the making of such alterations,
repairs, replacements, and/or decorations shall not operate or be construed to
release Tenant from liability. Owner shall in no event be liable in any way
whatsoever for failure to re-let the demised premises, or in the event that the
demised premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
<PAGE>
any, of such net rent collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant or any of the
covenants or provisions hereof, owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waivers any and all rights of
redemption granted by or under any present or future laws. Fees and Expenses:
19. If Tenant shall default in the observance or performance of any
term or covenant on Tenant's part to be observed or performed under or by virtue
of any of the terms of provisions in any article of this lease, then, unless
otherwise provided elsewhere in this lease, Owner may immediately or at any time
thereafter and without notice perform the obligation of Tenant thereunder, and
if Owner, in connection therewith or in connection with any default by Tenant in
the covenant-to pay rent hereunder, makes any expenditures or incurs any
obligations for the payment of money, including but not limited to attorney's
fees, in instituting, prosecuting or defending any actions or proceeding, such
sums so paid or obligations incurred with interest and costs shall be deemed to
be additional rent hereunder and shall be paid by Tenant to owner within five
(5) days of rendition of any bill or statement to Tenant therefor, and if
Tenant's lease term shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable by
Owner as damages.
20. Neither Owner nor Owner's agents have made any representations
or promises with respect to the physical condition of the building, the land
upon which it is erected or the demised premises, the rents, leases, expenses of
operation, or any other matter or thing affecting or related to the premises
except as herein expressly set forth and no rights, easements or licenses are
acquired by Tenant by implication or otherwise except as expressly set forth in
the provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition, and agrees to take
the same "as is" and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same forms a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract which alone fully and completely expresses the agreement
between Owner and Tenant and any executory agreement hereafter made shall be
ineffective to change, modify, discharge or effect an abandonment of it in whole
or in part, unless such executory agreement is in writing and signed by the
party against whom enforcement of the change, modification, discharge or
abandonment is sought. End of Term:
21. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender to Owner the demised premises, broom
clean, in good order and condition, ordinary wear excepted, and Tenant shall
remove all
<PAGE>
its property. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this lease. If the last day of
the term of this lease or any renewal thereof, falls on Sunday, this lease shall
expire at noon on the preceding Saturday unless it be a legal holiday in which
case it shall expire at noon on the preceding business day. Quiet Enjoyment:
22. owner covenants and agrees with Tenant that upon Tenant paying
the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 33 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned. Failure to Give Possession:
23. If Owner is unable to give possession of the demised premises on
the date of the commencement of the terms hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants, or if the
premises are located in a building being constructed, because such building has
not been sufficiently completed to make the premises ready for occupancy or
because of the fact that a certificate of occupancy has not been procured or for
any other reason. Owner shall not be subject to any liability for failure to
give possession on said date and the validity of the lease shall not be impaired
under such circumstances, nor shall the same be construed in any way to extend
the term of this lease, but the rent payable hereunder shall be abated (provided
Tenant is not responsible for the inability to obtain possession) until after
owner shall have given Tenant written notice that the premises are substantially
ready for Tenant's occupancy. If permission is given to Tenant to enter into the
possession of the demised premises or to occupy premises other than the demised
premises prior to the date specified as the commencement of the term of this
lease. Tenant covenants and agrees that such occupancy shall be deemed to be
under all the terms, covenants, conditions and provisions of this lease, except
as to the covenant to pay rent. The provisions of this article are intended to
constitute "an express provision to the contrary" within the meaning of Section
223-a of the-New York Real Property Law.
No Waiver:
24. The failure of owner to seek redress for violation of, or to insist upon the
strict performance of any covenant or condition of this lease or of any of the
Rules or Regulations set forth or hereafter adopted by Owner, shall not prevent
a subsequent act which would have originally constituted a violation from having
all the force and effect of an original violation. The receipt by owner of rent
with knowledge of the breach of any covenant of this lease shall not be deemed a
waiver of such breach and no provision of this lease shall be deemed to have
been waived by Owner unless such waiver be in writing signed by Owner. No
payment by Tenant or receipt by Owner of a lesser amount than the monthly rent
herein stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any_endorsement of any check or any letter
accompanying any check or payment as rent be deemed an accord,and satisfaction,
and Owner may accept such check or payment without prejudice to Owner's right to
recover the balance of such rent or pursue any other remedy in this lease
provided. No act or thing done by Owner or Owner's agents during
<PAGE>
the term hereby demised shall be deemed in acceptance of a surrender of said
premises and no agreement to accept such surrender shall be valid unless in
writing signed by Owner. No employee of Owner or Owner's agent shall have any
power to accept the keys of said premises prior to the termination of the lease
and the delivery of the keys to any such agent or employee shall not operate as
a termination of the lease or a surrender of the premises.
Waiver of Trial by Jury:
25. It is mutually agreed by and between Owner and Tenant that the respective
parties hereto shall and they hereby do waive trial by jury in any action,
proceeding or counterclaim, brought by either of the parties hereto against the
other (except for personal injury or property damage) or any matters whatsoever
arising out of or in any way connected with this lease, the relationship of
Owner and Tenant, Tenant's use of or occupancy of said premises and any
emergency statutory or any other statutory remedy. It is further mutually agreed
that in the event Owner commences any summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceedings.
Inability to Perform:
26. This lease and the obligations of Tenant to pay rent hereunder and perform
all of the other covenants and agreement hereunder on part of Tenant to be
performed shall in no way be affected, impaired or excused because owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if owner is prevented or delayed from so doing by reason of strike or
labor troubles, government preemption in connection with a National Emergency or
by reason of any rule, order or regulation of any department or subdivision
thereof of any goverment agency or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency, or when, in
the judgement of owner, temporary interruption of such services is necessary by
reason of accident, mechanical breakdown, or to make repairs, alterations or
improvements.
Bills and Notices:
27. Except as otherwise in this lease provided, a bill, statement, notice or
communication which Owner may desire or be required to give to Tenant, shall be
deemed sufficiently given or rendered if, in writing, delivered to Tenant
personally or sent by registered or certified mail addressed to Tenant at the
building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
Water Charges:
28. If Tenant requires, uses or consumes water for any purpose in addition to
ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the
sole judge) Owner may install a water meter and thereby measures Tenant's water
comsumption for all purposes. Tenant shall pay Owner for the cost of the meter
and the cost of the installation thereof and throughout the duration of Tenant's
occupancy Tenant shall keep said meter and installation equipment in good
working order and repair at Tenant's own cost and expense. Tenant agrees to pay
for water consumed, as shown on said meter as and when bills are rendered.
<PAGE>
Tenant covenants and agrees to pay the sewer rent, charge or any other tax,
rent, levy or charge which now or hereafter is assessed, imposed or a lien upon
the demised premises or the reality of which they are part pursuant to law,
order or regulation made or issued in connection with the use, consumption,
maintenance or supply of water, water system or sewage or sewage connection or
system. The bill rendered by Owner shall be payabe by Tenant as additional rent.
If the building or the demised premises or any part thereof be supplied with
water through a meter through which water is also supplied to other premises
Tenant shall pay to owner as additional rent, on the first day of the month, ($
) of the total meter charges, as Tenant's portion. Independently of and in
addition to any of remedies reserved to owner hereinabove or elsewhere in this
lease. Owner may sue for and collect any monies to be paid by Tenant or paid by
Owner for any of the reasons or purposes hereinabove set forth. Sprinklers:
29. Anything elsewhere in this lease to the contrary notwithstanding, if
the New York Board of Fire Underwriters or the Insurance Services Office or any
bureau, department or official of the federal, state or city government require
or recommend the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler system
installations, changes, modifications, alterations, additional sprinkler heads
or other such equipment, become necessary to prevent the imposition of a penalty
or charge against the full allowance for a sprinkler system in the fire
insurance rate set by any said Exchange or by any fire insurance company. Tenant
shall, at Tenant's expense, promptly make such sprinkler system installations,
changes, modifications, alterations, and supply additional sprinkler heads or
other equipment as required whether the work involved shall be structural or
non-structural in nature. Tenant shall pay to owner as additional rent the sum
of $ .00 on the first day of each month during the term of this lease, as
Tenant's portion of the contract price for sprinkler supervisory service. Heat,
Cleaning:
30. As long as Tenant is not in default under any of the covenants of this
lease owner shall, if and insofar as existing facilities permit furnish heat to
the demised premises, when and as required by law, on business days from 8:00
a.m. to 6:00 p.m. and on Saturdays from 8:00 a.m. to 1:00 p.m. Tenant shall at
Tenant's expense, keep demised premises clean and in order, to the satisfaction
to Owner, and if demised premises are situated on the street floor, Tenant
shall, at Tenant's own expense, make all repairs and replacement to the
sidewalks and curbs adjacent thereto, and keep said sidewalks and curbs free
from snow, ice, dirt and rubbish. Tenant shall pay to Owner the cost of removal
of any of Tenant's refuse and rubbish from the building. Bills for the same
shall be rendered by Owner to Tenant at such times as Owner may elect and shall
be due and payable when rendered, and the amount of such bills shall be deemed
to be, and be paid as, additional rent. Tenant shall, however, have the option
of independently contracting for the removal of such rubbish and refuse in the
event that Tenant does not wish to have same done by employees of Owner. Under
such circumstances, however, the removal of such refuse and rubbish by others
<PAGE>
shall be subject to such rules and regulations as, in the judgment of Owner, are
necessary for the present operation of the building. Security:
31. Tenant has deposited with Owner the sum of $5,050.00 security for the
faithful performance and observance by Tenant of the terms, provisions and
conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which Tenant is in default or for any sum which owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including but not limited to, any
damages or deficiency in the re-letting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Captions:
32. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease or the
intent of any provision thereof.
Definitions:
33. The terms "Owner" as used in this ~ease means only the owner of the
mortgagee in possession, for the time being of the land and buildings of the
Owner of a lease of the building or of the land and building of which the
demised premises form a part, so that in the event of any future sales of said
land and building or of said lease, or in the event of a lease of said building,
or of the land and building, the said owner shall be and hereby is entirely
freed and relieved of all convenants and obligations of Owner hereunder, and it
shall be deemed and construed without further agreement between the parties of
their sucessors in interest, or between the parties and the purchaser, at any
such sale, or the said lessee of the building, or of the land and building, that
the purchaser of the lease of the building has assumed and agreed to carry out
any and all covenants and obligatons of owner hereunder. The words 'Ire-enter"
and "re-entry" as used in this lease are not restricted in their technical
legislating. The term, "business days" as used in this lease shall exclude
<PAGE>
Saturdays (except such portion thereof as is covered by specific hours in
Article 30 hereof; Sundays and all days designatged as holidays by the
applicable building service union employees service contract or by the
applicable Operating Engineers contract with respect to H V A C service.
Adjacent Excavation--Shoring:
34. If an excavation shall be made upon land adjacent to the demised
premises, it shall be authorized to be made. Tenant shall afford to the person
causing or authorized to cause such excavation license to enter upon the demised
premises for the purpose of xxxxxx such work as said person shall deem necessary
to preserve the wall of the building of which demised premises from a part from
injury or damage and to support the same by proper foundations without any claim
for damages or indemnity againstg Owner, or diminution of abatement of rent.
Rules and Regulations:
35. Tenant and Tenant's servants, employees, agents, visitors, and
licensors shall observe faithfully, and comply strictly with the Rules and
Regulations and such other and further reasonable Rules and Regulations as owner
or Owner's agents may from time to time adopt. Notice of any additional rules or
regulations shall be given in such manner as Owner may elect. In case Tenant
disputes the reasonbleness of any additional Rule or Regulation hereafter made
or adopted by Owner or Owner's agents, the parties hereto agree to submit the
question of the resonableness of such Rule or Regulation for decision to the New
York office of the American Arbitration Association, whose determination shall
be final and conclusive upon the parties hereto. The right to dispute the
reasonableness of any additional Rule or Regulation upon Tenant's part shall be
deemed waived unless the same shall be asserted by service of a notice, in
writing upon owner within ten (10) days after the giving of notice thereof.
Nothing in this lease contained shall be construed to impose upon Owner any duty
or obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, as against any other tenant and Owner shall not
be liable to Tenant for violation of the same by any other tenant, its servants,
employees, agents, visitors or licensees.
Glass:
36. owner shall replace, at the expense of Tenant, any and all plate and
other glass damaged or broken from any cause whatsoever in and about the demised
premises. Owner may insure, and keep insured, at Tenant's expense, all plate and
other glass in the demised premises for and in the name of owner. Bills for the
premiums therefor shall be rendered by Owner to Tenant at such times as Owner
may elect, and shall be due from, and payable by, Tenant when rendered. and the
amount thereof shall be deemed to be, and be paid as, additional rent.
37. Tenant agrees that the value of the demised premises and the reputation
of the Owner will be seriously injured if the premises are used for any obscene
or pornographic purposes or any sort of commercial sex establishment. Tenant
agrees that Tenant will not bring or permit any obscene or pornographic material
on the premises, and shall not permit or conduct any obscene, nude, or semi-nude
live performances on the premises, nor permit use of the premises for nude
modeling, rap sessions, or as a so-called rubber goods shops, or as a sex club
or any sort, or as a "massage parlor." Tenant agrees further that Tenant will
not permit any of these uses by any subleasee or assignee of the premises. This
Article shall directly bind any successions in interest to the Tenant. Tenant
<PAGE>
agrees that if at any time Tenant violates any of the provisions of this
Article, such violation shall be deemed a breach of a substantial obligation of
the terms of this lease and objectionable conduct. Pornographic material is
defined for purposes of this Article as any written or pictorial matter with
prutient appeal or any objects of instrument that are primarily concerned with
lewed or prutient sexual activity. obscene material is defined here as it is in
Penal law Section 235.00. Estoppel Certificate:
38. Tenant, at any time, and from time to time, upon at least 10 days prior
notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any
other person, firm or corporation specified by Owner, a statement certifying
that this lease is unmodified and in full force and effect (or, if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), stating the dates which the rent and additional rent
have been paid, and stating whether or not there exists any defaults by Owner
under this leease, and, if so, specifying each such default.
Successors and Assigns:
39. The covenants, conditions and agreements contained in this lease shall
bind and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns.
- ---------------------
Space to be filled in or deleted
In Witness Whereof, Owner and Tenant have respectively signed and
sealed this lease as of the day and year first above written. CORP.
Witness for Owner: .................................SEAL
......................................................................(L.S.)
..............................CORP.
Witness for Tenant: .................................SEAL
...................................................................... (L. S.)
PLEASE MAIL PAYMENTS BILL FOR REAL ESTATE TAXES
TO THIS ADDRESS BOROUGH OF QUEENS
DEPARTMENT OF FINANCE TAX YEAR JULY 1, 1991 to JUNE 30, 1992
P.O. BOX 3183
NEW YORK, NY 10009
<PAGE>
4/ 706/ 36 RETAIN THIS PORTION FOR YOUR RECORDS 919
NOTIFY THE BOROUGH OFFICE OF THE REAL PROPERTY ASSESSMENT BUREAU IF THE
DESCRIPTION OF PROPERTY IS INCORRECT OR MISSING. SEE REVERSE FOR ADDRESSES.
- -------------------------------------------------------------------------------
OWNER OF RECORD ADDRESS OF PROPERTY PARCEL SIZE
- ----------------------------------------- 7 ------------------------------------
BILL KARTSONIS 4610 47 STREET 30 X 74
- -------------------------------------------------------------------------------
CHECK BLOCK AND LOT NUMBER
- --------------------------- ------------------
BLOCK LOT C SIZE ASSESSED VALUATON
706 36 6 G9 22,080
- --------------------------- ------------------- KARTSONIS REALTY
BILL KARTSONIS
42-21 BROADWAY
TAXABLE VALUATION 22,080 ASTORIA, NY 11103
- -------------------------------------------------
SCHOOL RATE PER $100 SCHOOL
NOT APPLICABLE
ASSESSED VALUATION TAX
- -------------------------------------------------------------------------------
REAL ESTATE RATE PER $100 REAL ESTATE TOTAL TAX 1991-92 QUARTERLY INSTALLMENT
*-10,631 2,347.32 2,347.32 586
ASSESSED VALUATION TAX
- -------------------------------------------------------------------------------
THE PERIOD FOR PROTESTING ASSESSED VALUATION FOR 1992-93 ON ONE, TWO AND THREE
FAMILY DWELLINGS IS JANUARY 15, 1992 - MARCH 15, 1992. ON ALL OTHER PROPERTIES
FROM JANUARY 15, 1992 - MARCH 1, 1992.
19,71
YOUR TAX IS DUE IN FOUR INSTALLMENTS. ON
JULY 1, 1991, OCTOBER 1, 1991, JANUARY 1,
1992 AND APRIL 1, 1992. THE APPROPRIATE BILL
MUST BE DETACHED AND FORWARDED WHEN PAYMENT
<PAGE>
IS MADE. IF PAYMENT OF THE INSTALLMENT IS NOT
MADE BY THE DUE DATE OR THE END OF THE GRACE
PERIOD (IF ANY), INTEREST WILL BE CHARGED MAIL PAYMENTS TO:
FROM THE ORIGINAL DUE DATE OF THE INSTALLMENT NYCDEPT. OF FINANCE
TO THE DATE OF PAYMENT. PLEASE MAKE CHECK OR BOX 32
MONEY ORDER PAYABLE TO: NYC DEPT. OF FINANCE. NEW YORK, N.Y. 10008-003
** 177 OF WHICH PUTS MORE POLICE ON OUR STREETS
YOUR CANCELLED CHECK IS YOUR RECEIPT. PLEASE DO NOT MAIL CASH. RECEIPTS WILL NOT
BE PROVIDED UNLESS YOU HAVE CHECKED OFF THE APPROPRIATE BOX ON EACH BILL. A
$15.00 SERVICE CHARGE WILL BE ASSESSED FOR EACH DISHONORED CHECK.
- ---------------------------------------------------------CASH PAYMENTS MAY BE
ESTIMATED LOCAL ASSISTANCE SEE REVERSE IF THE WORD MADE TO ANY BOROUGH
FROM NEW YORK STATE DURING "ARREARS" APPEARS BELOW OFFICE OF CITY
1991/92 CONTROLLER
$6,110,871,881 ARREARS AS OF JUNE 7, 1991Mon.-Fri. 9 AM to 3 PM
- --------------------------------------------------------
4/ 706/ 36
- --------------------------------------------------------
2.00% PER ANNUM 18.99 2,328.33 INTEREST PAID AT THE
ALLOWABLE DISCOUNT, TOTAL DISCOUNT IF TOTAL TAX DUE RATE OF PER ANNUM
SEE REVERSE'SIDE PAID ON OR BEFORE 1991-1992 IF COMPOUNDED DAILY XXX
JULY 1, 1991 PAID ON OR CHARGED IF THE TAX IS
BEFORE JULY 1, NOT PAID ON
1991
- ---------------------------------------------------------
FOR YOUR RECORDS
lst QUARTER PAID - 3rd QUARTER PAID
2nd QUARTER PAID - 4th QUARTER PAID
- -------------- -------------------------------------------
SEE REVERSE SIDE FOR DISCOUNT BENEFITS AND INFORMATION ON ARREARS
1991-92
THE CITY OF NEW YORK BILL FOR REAL ESTATE TAXES TAX YEAR
DEPARTMENT OF FINANCE July 1,1991 to
P.O. BOX 3163 DO NOT MAIL PAYMENT TO THIS ADDRESS June 30,1992
NEW YORK, NY 10008
BOROUGH OF: QUEENS
<PAGE>
- -----------------------------------------------------------------
410007060036600000000101920000000000000000586834000000000000000000
- -----------------------------------------------------------------
- -------------------------------------------Make check or money order payable
INTEREST CHARGED AFTER 04/15/92 to the order of: NYC DEPT. OF
4Q FINANCE. A $15.00 service charge
will be assessed for each
- ------------------------------------------- dishonored check.
MAIL PAYMENT TO:
NYC DEPT. OF FINANCE
P.O. BOX 32
<PAGE>
RIDER TO LEASE
-------------
PREMISES: 46-23 NORTHERN BOULEVARD, ASTORIA, N.Y. 11103
LANDLORD: BILL K. KARTSONIS
TENANT: MAJOR AUTOMOTIVE GROUP
40. Tenant agrees to pay the following ann4al rents for the terms indicated
hereunder:
From July, 1, 1992 to June 30, 1993 the sum of $24,000.00 per annum, payable
$2,000.00 per month.
From July 1, 1993 to June 30, 1994 the sum of $25,440.00 per annum, payable
$2,120.00 per month.
From July 1, 1994 to June 30, 1995 the sum of $26,964.00 per annum, payable
$2,247.00 per month.
From July 1, 1995 to June 30, 1996 the sum of $28,584.00 per annum, payable
$2,382.00 per month.
From July 1, 1996 to June 30, 1997 the sum of $30,300.00 per annum, payable
$2,525.00 per month.
41. In the event tenant herein fails to make any of the installments of rent or
additional rents as herein stated, and landlord is required to employ counsel
for the collection thereof, then tanant shall be liable for reasonable
attorney's fee.
42. It is agreed by the parties hereto that in the event tenant fails to make
payment of rent on or before the 15th day of each month, then, it is agreed that
irrespective of any and all of the remedies reserved by landlord, and without
acting as a waiver thereof, tenant agrees to pay an additional sum of 10% to
compensate landlord for his additional administrative fees.
<PAGE>
43. Tenant expressly agrees that he will hold harmless and indemnify the
landlord for and against any and all liability damage, suit, and judgements
arising from any injury or damage during said term to person or property of any
nature occassioned wholly or in part by act or commission of the tenant or of
the employees, customers, patrons, servants, agents or visitors of the tenant,
but only to the extent occassioned by tenant or its employees, customers,
patrons, servants, agents or visitor if not wholly occassioned by them. 44. The
tenant shall not, without landlord's prior written consent, place or install any
sign on the exterior of the demised premises or the building of which it is a
part, or on the inner or outer faces of the windows or doors of the demised
premises, which consent shall not be unreasonably withheld or delayed.
a. Tenant agrees, at tenant's sole cost and expense, to obtain all necessary
approvals and permits, and to continue to keep same in effect during the term of
this lease, prior to the installation of said sign.
45. That tenant, at tenant's own cost and expense, shall remove all snow and ice
from adjacent sidewalks, as required by law.
46. Tenant shall be responsible to maintain the demised premises and adjacent
sidewalks in a clean condition. Tenant shall, at its own cost and expense, keep
the demised premises free from any vermin, rodents, bugs, insects, or anything
of like objectionable character. In line with the foregoing, the tenant agrees,
at its own cost and expenses, to employ an exterminator, if the need for one
should ever arise.
47. Landlord shall not be required to furnish to the tenant any service or
facility of any kind, nature or description, including but not limited to heat,
hot water, painting or decoration, and any and all services or facilities,
including gas, electric, heat and water, required by tenant or required to be
furnished by law, shall be furnished and supplied to tenant at its own cost and
expense.
48. Tenant will make appropriate and necessary arrangements to install and
maintain all necessary facilities at tenant's sole cost and expense to heat the
premises, sufficient for its purposes.
49. Tenant will do all necessary acts, so as to supply sufficient heat to
prevent waste and/or damages to the plumbing or other facilities located in or
passed through the premises, or in that part of the building in which the
demised premises are located.
54. It is tenant's responsibility to provide the landlord with a plate glass
insurance policy. It shall at all times be the responsibility of the tenant to
replace any broken or cracked plate glass in the demised premises, at tenant's
sole cost and expense. If tenant fails to replace any broken or cracked plate
glass within two days after notification by landlord, landlord may replace the
same at tenant's expense and the bill for cost of same shall be due and payable
by tenant when rendered, and the amount thereof shall be deemed to be, and be
paid as, additional rent.
55. If the landlord, or any successor in interest, shall be an individual, joint
venture, tenancy in common, firm or partnership, general or limited, it is
specifically understood and agreed that there shall be no personal liability on
<PAGE>
each individual or the members of that firm, partnership or joint venture, in
respect to any of the covenants or conditions of this lease. Tenant shall look
for the satisfaction of its remedies solely to the equity of the landlord in the
demised premises.
56. The tenant agrees to deposit with the landlord the total sum of $5,050.00 as
security deposit. The tenant's security deposit will be returned to the tenant
at the termination of this lease without interest.
57. Tenant shall, at its own cost and expense, upon the expiration or
termination by landlord of this lease, remove his equipment, except those that
have been installed by the landlord, are structural in nature, or by agreement,
will become the property of the landlord and restore premises in as good
condition as demised premises will be in after landlord delivers possession.
58. The tenant agrees that, anything to the contrary notwithstanding, the
landlord's liability for its negligence or failure to perform its obligations
hereunder shall be limited to its interest in the Land and Building. Tenant
shall not seek to enforce any judgement or other remedy against any other asset
of this landlord or any party who holds any interest in the landlord.
59. The tenant agrees to maintain, in full force and effect, during the total
lease term hereof, i.e., five years, a policy of public liability insurance
under which the landlord and the tenant are named as insureds and under which
the insurer agrees to indemnify and hold tenant and landlord harmless from and
against all costs, and/or liability arising out of or based upon any and all
personal injuries sustained and accidents occuring in or about the demised
premises. Said insurance policy shall be non-cancelable with respect to the
landlord and the landlord's designee without first affording the landlord ten
(10) days written notice. A duplicate original or insurance certificate must be
delivered to the landlord within (5) days of the commencement of the lease term
hereof.
The minimum limits of liability of said insurance shall be ONE MILLION
($1,000,000.00) DOLLARS for injury to one person; ONE MILLION ($1,000,000.00)
DOLLARS for any one accident; and FIVE HUN15RED THOUSAND ($500,000.00) DOLLARS
for property damage.
60. Tenant has been advised that landlord is a licensed real estate broker.
61. Landlord waives the rent for the month of June 1992.
IN WITNESS WHEREOF, the parties below have read the preceding rider to the
instant main lease and agree to its terms and directives thereof:
BILL K. KARTSONIS
<PAGE>
ACKNOWLEDGMENTS
CORPORATE OWNER
STATE OF NEW YORK, ss:
County of
On this day of 19 before me
personally came
to me known, who being by me duly sworn, did dispose and say that he resides
in .
that he is the of
the corporation described in and which executed the foregoing instrument, as
OWNER: that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name thereto by like
order.
............ I
INDIVIDUAL OWNER
STATE OF NEW YORK, ss:
County of
on this day of 19 before me
personally came
to me known and known to me to be the individual described
in and who, as OWNER, executed the foregoing instrument and acknowledged to me
that ........be executed the same.
........................................................
CORPORATE TENANT
STATE OF NEW YORK, ss:
County of
on this day of 19 before me
personally came
to me known, who being by me duly sworn, did dispose and say that he resides
in
that he is the of
the corporation described in and which executed the foregoing instrument, as
TENANT: that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.
......................................................
INDIVIDUAL TENANT
<PAGE>
STATE OF NEW YORK, ss:
County of 1.
On this day of 19 before me
personally came
to me known and to me to be the individual described
in and who, as TENANT, executed the foregoing instrument and acknowledged to me
that be executed the same.
<PAGE>
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 35.
1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by any
Tenants or used for any purposes other than for ingress to and egress from the
demised premise and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner, There - not be used in any space, or in the public hall of the building.
by jobbers, or others in the delivery or receipt of mechandise, any hand jacks
excep~ those equipped with rubber tires and safeguards.
2. If the premises are situated on the ground floor of the building, Tenants
thereof shall further, at Tenant's expense, keep the sidewalks and curb in front
of said premises clean and free from ice, snow, etc.
3. The water and wash closets and plumbing fixtures shall not be used for
purposes other than those for which they were designed or constructed,
4. Tenantsshall not use, keep or permit to be used or keep any foul or substance
in the demised premises, or permit or suffer the demised premises. occuppied or
used in a manner offensive or objectionable to Owner or other occupants of the
building by reason of noise, odors and/or vibrations or interfere in any way
with other Tenants or those having business therein.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant or any part of the outside of the
demised premises of the building or on the inside of the demised premises if
visible from the outside of the premises without the prior written consent of
Owner, except that the name of Tenant may appear on the entrance door of the
premises. In the event of the violation of the foregoing by any Tenant, Owner
may remove same without any liability and may charge the expense incurred by
such removal to the Tenant or Tenants violating this rule. Signs on interior
doors and be inscribed, painted or affixed for each Tenant by Owner at the
expense of such Tenant, and shall be of a size, color and style acceptable to
Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part of the
demised premises or the building of which they form a cutting or stringing of
wires shall be permitted, except with the prior written consent of Owner, and as
Owner may direct. No Tenant shall lay linoleum, or other similar floor covering,
so that the same shall come in direct contact with the floor of the demised
premises, and, if linoleum or other similar floor covering is desired to be of
builder's shall be first affixed to the floor, by a paste or other material,
soluble in water, the use of cement or other similar adhesive material being
expressly prohibited.
7. Freight, furniture, business equipment, merchandise and bulky matter of any
description shall be delivered to and removed from the premises only on the
freight elevator and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
8. Owner reserves the right to exclude from the building between the hours of 6
P.M. and 8 A.M. and at all hours on Sundays, and holidays all persons who do not
present a pass to the building signed by Owner. Owner will furnish passes to
persons for.whom. any Tenant requests same in writing, each Tenant shall be
responsible for all persons for whom he requests such pass and shall be liable
to Owner for all acts of such person.
9. Owner shall have the right to prohibit any advertising by any Tenant which,
in Owner's opinion, tends to impair the reputation of Owner or its desirability
as a building for stores or offices, and upon written notice from Owner, Tenant
shall refrain from or discontinue such advertising.
10. Tenant shall not bring or permit to be brought or kept in or on the demised
premises, any inflammable, combustable or explosive mixture, material, chemical
or substance, or cause or permit any odors of cooking or other processes, or any
unusual or other objectionable odors to permeate in or emulate into the demise
premises.
11. Tenant shall not place a load on any floor of the demised premises exceeding
the floor load per square foot area which was designed to carry and which is
allowed by law. Owner reserves the right to prescribe the weight and position of
all safes, business machines and mechanical equipment. Such installations shall
beand maintained by Tenant at Tenant's expense in in Owner's judgement to absorb
and prevent vibration, noise and annoyance.
<PAGE>
GUARANTY
The undersigned Guarantor guarantees to Owner, Owner's successors
and assigns, the full performance and observance of all the agreements to be
performed and observed by Tenant in the attached Lease, including the "Rules and
Regulations" as therin provided, without requiring any notice to of nonpayment
or, nonperformance, or proof, or notice of demand, responsible under this
guaranty, all of which the undersigned hereby expressly waives and expressly
agrees that the legality of this agreements and of the Guarauter under this
agreement shall not be ended, or changed by reasons of the claims to Owners
against Tenants of any of the rights or remedies given to Owner as agreed in the
attached Lease. The Guarantor further agrees that this shall remain and continue
in full force and effect as to any renewal, change or extension of the Lease. As
a further inducement to Owner to make the Lease Owner and Guarantor agree that
in any action or proceeding brought by either Owner or the Guarantor against the
other on any matters concerning the Lease of this guaranty that owner and this
undersigned shall and do waive trial by jury.
Guarantor
<PAGE>
Address
Premises
TO
STANDARD FORM OF
STORE
LEASE
The Real Estate Board of New York, Inc.
Copyright All Rights Reserved.
Reproduction whole or in part prohibited
Dated 19
Rent per Year
Rent per Month
Term
From
To
Drawn by Checked by
Entered by Approved by
LEASE AGREEMENT
THIS LEASE made this 3rd day of June 1994, between GENERAL MOTORS CORPORATION, a
Delaware corporation, with its principal address at 3044 West Grand Boulevard,
Detroit, Michigan 48202, hereinafter referred to as Lessor, and MAJOR CHEVROLET
INC., a New York corporation, with its principal address at 43-40 Northern
Boulevard, Long Island City, New York 11101, hereinafter referred to as Lessee,
(1) PREMISES, USE, TERM AND RENT
A. Lessor hereby lets to Lessee, and Lessee hires from Lessor: That certain
parcel of land and the improvements thereon in the City of New York, County of
Queens, and State of New York, commonly known as 43-40 Northern Boulevard, and
more particularly described in Exhibit "A" attached hereto and made a part
hereof, for a term commencing June 1, 1994, and expiring February 1, 2004, at an
annual fixed rent of THREE HUNDRED THOUSAND AND 00/100 DOLLARS ($300,000.00),
payable, without demand, in advance in equal 'monthly installments of $25,000.00
on the first day of each and every month during the term, without any deduction
or set-off whatsoever.
B. Lessee shall use and operate the premises for the operation of an automobile
dealership selling and servicing automobiles sold by Chevrolet Motor Division of
GENERAL MOTORS CORPORATION ("GM Dealership Use"). Related businesses incidental
to any automobile operations shall also be permitted along with selling and
servicing of Chevrolet Motor Division products.
C. Provided Lessee is not in default beyond any applicable grace and notice
period at the time of the exercise of such right or at the commencement of such
period, Lessee may, at its option, extend the term of this Lease for three (3)
additional periods of five (5) years each upon all the terms and conditions as
herein set forth by providing written notice to Lessor within at least six (6)
months and no more than twelve (12) months prior to the expiration of the then
current term.
If Lessee exercises its option to renew the Lease for the first renewal term,
the annual rent shall be calculated as follows:
THREE HUNDRED THOUSAND AND 00/100 DOLLARS ($300,000.00) plus the change in the
Consumers Price Index (the "Consumers Price Index For All Urban Consumers
Selected Area' N.Y. - Northern N.J. - Long Island, All Items [1982-84 = 100] ")
between February, 1999, and January, 2004, not to exceed, however, an increase
in the annual fixed rent of fifteen percent (15 %) over the initial Lease term.
If Lessee exercises its option to renew the Lease for the second renewal term,
the annual rent shall be calculated as follows: The annual fixed rent during the
first renewal term and the change in the Consumers Price Index (the "Consumers
Price Index For All Urban Consumers Selected Area N.Y. - Northern N.J. - Long
Island, All Items [1982-84 = 100]") between February, 2004, and January, 2009,
not to exceed, however, an increase in the annual fixed rent of fifteen percent
(15 %) over the first renewal term.
If Lessee exercises its option to renew the Lease for the third renewal term,
the annual rent shall be calculated as follows: The annual fixed rent during the
second renewal term plus the change in the Consumers Price Index (the "Consumers
Price Index For All Urban Consumers Selected Area N.Y. - Northern N.J. - Long
Island, All Items [ 1982-84 = 100] ") between February, 2009, and January, 2014,
not to exceed, however, an increase in the annual fixed rent of fifteen percent
(15%) over the second renewal term.
(2) PAYMENT OF RENT
A. Lessee shall pay the rent at the times and in the manner aforesaid to Lessor,
in care of Argonaut Realty, General Motors Corporation, 485 West Milwaukee
Avenue, Detroit, Michigan 48202.
-2-
<PAGE>
B. In the-event any amounts required hereunder to be paid are not received on or
before the day which is ten (10) days after the same are due, then, for each and
every such payment, Lessee shall immediately pay a service charge in the amount
of two percent (2 %) of the amount due and a like charge for each thirty (30)
day period or portion thereof that such amount is past due. Said service charge
is a fair and reasonable charge for Lessor's additional administrative expenses
under the circumstances and shall not be construed as interest on a debt
payment.
C. Lessor acknowledges that it is also the Lessor of certain real estate used
for dealership purposes and commonly known as 43-20 and 43-60 Northern Boulevard
located adjacent to and on either side of the premises herein. In the event that
the Lessor herein agrees to abate, reduce, or otherwise decrease the rent or
rent equivalents for such properties, then the Lessor of this Lease will notify
of same and will grant to Lessee herein the same percentage abatement,
reduction, or decrease.
(3) REPAIRS AND MAINTENANCE
For the purpose of this clause the premises as shown on Exhibit "A" to this
Lease shall consist of Site "A" and Site "B". Site "A" shall consist of the
building, including without limitation the roof, exterior, walls, and all
interior and-exterior modifications, improvements, and utilities as well as the
lighting, fencing, and any underground or overhead utilities serving the
building.
With respect to Site "A", Lessee has Inspected the premises and Lessee accepts
the premises in its present "as is" condition. Except as otherwise provided in
this Lease, Lessee shall keep, maintain, repair and replace the premises as
necessary so that the premises may be returned to Lessor in present order,
condition and repair, excepting only ordinary wear and tear, damage by reason of
structural defects in the common elements ("Common Elements" being defined-and
limited to foundations, trusses, columns, and beams), damage by fire, the
elements and casualty. . Lessee agrees that it is a condition of this Lease
that, except as otherwise provided herein, Lessor shall have no obligation to
make repairs or replacements of any kind or nature to the premises, and Lessee
shall make any and all repairs and replacements to the premises during the term
of this Lease or any renewal period thereof; provided, however, that if repairs
or replacements are required due to the substantial failure of any building
component or system not caused by the neglect or abuse of Lessee, then Lessor
will make said repairs or replacements at its expense. If Lessee fails to make
any such repairs or replacements to be made, Lessor may make such repairs or
replacements and charge Lessee accordingly.
Site "B" as shown on Exhibit "A" to this Lease shall consist of a building,
including without limitation the "Common Area", roof, exterior walls, and all
interior and exterior modifications, improvements, and utilities, as well as the
parking lot, exterior lighting, fencing, bridge, and access areas.
With respect to Site "B", Lessee has inspected the premises and Lessee accepts
the premises in its present "as is" condition. Except as otherwise provided
herein, Lessee shall keep, maintain, repair, and replace the portion of the
premises marked "Chevrolet" on Site "B" including all interior improvements,
machinery', equipment, and utilities serving the premises so that the premises
may be returned to Lessor in present order, condition, and repair, excepting
only ordinary wear and tear, damage by fire, the elements, and casualty.
Except as hereinafter set forth, Lessee agrees that it is a condition of this
Lease that Lessor shall have no obligation to make repairs or replacements to
the premises, and Lessee shall make any and all repairs and replacements to the
premises during the term
-4-
<PAGE>
of this Lease or any renewal period thereof. If Lessee fails to make any such
required repairs or replacements to be made, Lessor may make such repairs or
replacements and charge Lessee accordingly.
With respect to Site "B", Lessor shall, at its expense, maintain, repair, and
replace the bridge and access area, parking lot, lighting and fencing, the areas
marked "Common Area", the roof, structure, and exterior of the building, the
primary electrical service, sprinkler service, mechanical service, and plumbing
service to the premises of Lessee. If Lessor fails to make any such- required
repairs or replacements to be made, Lessee may make such repairs or replacements
and charge Lessor accordingly as an offset against the rent hereunder.
(4) EASEMENTS
The enjoyment and use of all entrances, 'exits, approaches and means of entrance
and approach, now existing in favor of the premises shall not be interfered with
or interrupted by any act or assent of Lessor" during the term of this Lease,
except in the event it becomes necessary for Lessor to interfere with same,
Lessee will be provided, in advance, with a substitute entrance, exit and/or
approach.
(5) ASSIGNMENT
Lessee shall not assign (except for such assignment to an entity owned or
controlled by Lessee which is at the time of such assignment a franchised
General Motors Corporation dealer), mortgage or encumber this Lease nor sublet
or license the premises without Lessor's consent, which will not be unreasonably
withheld or delayed.
(6) NEGATIVE COVENANTS
A. Lessee shall not consent to any unlawful use of the premises and shall comply
promptly with all statutes, ordinances, rules, orders, regulations and
requirements of the federal, state and municipal governments and of any of their
departments and bureaus
-5-
<PAGE>
applicable to said premises; provided, however, that Lessee has the right to
challenge or appeal by any lawful means. Lessee shall also comply promptly with
all rules and regulations of the fire insurance underwriters.
B. (i) Lessee warrants and agrees that Lessee, including, Lessee's employees,
agents and contractors, shall not treat, store or dispose of any hazardous
substances, hazardous wastes or toxic substances, as those terms are defined
under CERCLA, 42 U.S.C. 9601 et RCRA 42 U.S.C. 6901 et seq or TSCA 15 U.S.C.
2601 et seq., on or below the premises; provided, however, that Lessee may
accumulate such wastes as allowed under applicable laws and regulations so long
as such wastes are generated on-site.
(ii) Lessee warrants and agrees that it will comply with all applicable
federal, state and local environmental laws, regulations and ordinances,
including those governing underground storage tanks and including
satisfying any reporting requirements, in connection with its use of or
operations conducted at the premises.
(iii) Lessee acknowledges and agrees that Lessor has the 'right to inspect
the premises from time to time to observe Lessee's compliance With
applicable federal, state and local laws, regulations and ordinances. This
right of inspection does not constitute a duty on Lessor's part to so
inspect and in no event relieves Lessee of its compliance obligations
under this Lease or under law.
(iv) Lessee warrants and agrees that it shall obtain any necessary,
federal, state and local permits, licenses, registrations and
authorizations required to conduct its operations at or use of the
premises and further wan-ants and agrees to comply with all such
requirements.
-6-
<PAGE>
i
(v) --Lessee warrants and agrees that it shall not introduce any
PCB-containing fluids in any equipment used at or operations conducted at
the premises.
(vi) Lessee warrants and agrees that, it shall promptly notify the
appropriate agency as required and Lessor in writing of any releases of
hazardous substances, hazardous wastes, or toxic substances, as herein
defined, which may constitute a violation of any federal, state or local
environmental laws, regulations or ordinances. Lessee warrants and agrees
that it shall promptly undertake cleanup or remediation. of such releases
and shall document to Lessor's reasonable satisfaction, including
providing Lessor with copies of any correspondence with appropriate
agencies and any data, test results or environmental reports generated,
that such cleanup or remediation has been properly completed.
(vii) Lessee shall indemnify and hold Lessor harmless from and against any
liability, damage, penalties, losses or fines ("Claims") to which Lessor
may be subjected to the extent such Claims result from Lessee's breach of
any warranties contained herein.
(viii) Lessee shall not be responsible for the presence of any
environmental condition in violation of any environmental law prior to
Lessee's possession of the premises.
(7) VIEWING PREMISES
Lessor and its representatives shall have the right to enter upon said premises
or any part thereof at all reasonable hours for the purpose of examining the
same or making such repairs or alterations thereto as may be necessary for the
safety and preservation thereof, and Lessee also agrees to permit Lessor or its
representatives to show the premises during the last year of any term of this
Lease to persons interested in purchasing or leasing the property.
-7-
<PAGE>
(8) DEFAULT,
A. In the event Lessee shall fail to pay the rent reserved herein when due,
Lessor shall give Lessee written notice of such default and if Lessee shall fail
to cure such default within ten (10) days after receipt of such notice, Lessor
shall, in addition to its other remedies provided by law, have the remedies set
forth in Paragraph (8) C.
B. If Lessee shall be in default in performing any of the terms of this Lease
other than the payment of rent, Lessor shall give Lessee written notice of such
default, and if Lessee shall fail to cure such default within twenty (20) days
after the receipt of such notice, or if the default is of such a character as to
require more than twenty (20) days to cure, then if Lessee shall fail within
said twenty (20) day period to commence and thereafter proceed diligently to
cure such default, and in either of such events, Lessor may (at its option and
in addition to its other legal remedies) cure such default for the account of
Lessee and any sum so expended by Lessor shall be additional rent for all
purposes hereunder, including Paragraph 8 (A), and shall be paid by Lessee with
the next monthly installment of rent.
C. If any rent shall be due and unpaid or Lessee shall be in default upon any of
the other terms of this Lease, and such default has not been cured after notice
and within the time provided in Paragraphs (8) A and B, Lessor shall have the
immediate right to obtain or withhold from Lessee's General Motors Corporation
Dealer Company Holdback Account any monies then owing Lessor. If the premises
are abandoned or vacated, then Lessor, in addition to its other remedies, shall
have the immediate right of re-entry. Should Lessor elect to re-enter or take
possession pursuant to legal proceedings or any notice provided for by law,
Lessor may either terminate this Lease or from time to time, without terminating
this Lease, relet the premises or any part thereof on such terms and conditions
as Lessor shall, in its sole discretion, deem advisable. The avails of such
reletting shall be applied first, to the payment of any indebtedness of Lessee
to Lessor other than rent due hereunder; second, to the payment of any
reasonable costs of such
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<PAGE>
reletting, including the cost of any reasonable alterations and repairs to the
premises; third, to the payment of rent due and unpaid hereunder; and the
residue, if any, shall be held by Lessor and applied in payment of future rent
as the same may become due and payable hereunder. Should the avails of such
reletting during any month be less than the monthly rent reserved hereunder,
then Lessee shall, during each such month, pay such deficiency to Lessor.
D. All rights and remedies of Lessor hereunder shall be cumulative and none
shall be exclusive of any other rights and remedies allowed by law.
(9) INDEMNITY
Lessee shall indemnify Lessor, its officers, directors, stockholders,
representatives, agents and employees and save them harmless from and against
any and all claims, actions, damages, liabilities, costs and expenses (excluding
those covered by insurance), including reasonable attorneys' fees, in connection
with all losses, including loss of life, personal injury and/or damage to
property arising from or out of any occurrence in, upon or at the premises or
the occupancy or use by Lessee of the premises, or any other part thereof, or
arising from or out of Lessee's failure to comply with any provision of this
Lease or occasioned wholly or in part by any act or omission of Lessee, its
agents, contractors, suppliers, employees, servants, customers or licensees and
any person conducting business in the premises.
(10) SUBORDINATION
This Lease shall be subject and subordinate to the lien of any mortgages
hereafter placed on the premises provided that the mortgagee shall execute and
deliver a non-disturbance agreement in a form reasonably acceptable to Lessee's
attorney. Lessee agrees to execute and deliver upon demand in confirmation of
such subordination, such further instruments as shall be required by any
mortgagees or proposed mortgagees, provided that such instrument or instruments
are in a form reasonably acceptable to Lessee's attorney. In - the event that
Lessee shall fail to execute and deliver any such instrument or instruments
after ten (10) days notice in writing requesting same, Lessee hereby appoints
Lessor the attorney-in-fact of Lessee irrevocably to execute and deliver any
such instrument or instruments on behalf of Lessee.
INSOLVENCY OF LESSEE
If at any time proceedings in bankruptcy, or pursuant to any other act for the
relief of debtors, shall be instituted by or against Lessee, or if Lessee shall
assign over Lessee's estate, or effects, for payment thereof, or if any
execution shall issue against Lessee, or any of Lessee's effects whatsoever, or
if a receiver or trustee shall be appointed of Lessee's property, or if this
Lease shall by operation of law devolve upon or pass to any person or persons
other than Lessee, then and in each of said cases, Lessor may terminate this
Lease forthwith by notifying Lessee as herein provided. Upon such termination
and unless the Lease is assumed in connection with the bankruptcy proceedings,
all sums due and payable or to become due and payable by Lessee, shall at once
become due and payable.
If, as a matter of law, Lessor has no right on the bankruptcy of Lessee to
terminate this Lease, then, if Lessee, as debtor, or its trustee wishes to
assume or assign this Lease, in addition to curing or adequately assuring the
cure of all defaults existing under this Lease on Lessee's part on the date of
filing of the proceeding (such assurances being defined below), Lessee, as
debtor, or the trustee or assignee must also furnish adequate assurances of
future performance under this Lease (as defined below). Adequate assurance of
curing defaults means the posting with Lessor of a sum in cash sufficient to
defray the cost of such a cure. Adequate assurance of future performance under
this Lease means posting a deposit equal to three (3) months rent, including all
other charges payable by Lessee hereunder, and, in the case of an assignee,
assuring Lessor that the assignee is financially capable of assuming this Lease.
In a reorganization under Chapter 11 of the Bankruptcy Code, the debtor or
trustee must assume this Lease or
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assign it within sixty (60) days from the filing of the proceeding or such
greater time as may be authorized by the bankruptcy court, or he shall be deemed
to have rejected and terminated this Lease..
(12) NON-WAIVER
The failure of Lessor to insist upon a strict performance of any of the terms,
conditions and covenants herein shall not be deemed a waiver of any. rights or
remedies that Lessor may have and shall -not be deemed a waiver of any
subsequent breach or default in the terms, conditions and covenants. "This
instrument may not be changed, modified or discharged orally.
(13) CONDEMNATION
A. Permanent Taking: If (a) the whole of the premises shall be lawfully taken by
condemnation or other eminent domain proceedings pursuant to any law, general or
special, or (b) "substantially all of the premises" (hereinafter defined) shall
be taken in or by such proceedings and within thirty (30) days after receipt
from Lessor of a notice of a pending condemnation Lessee shall have given notice
to Lessor of its intention to terminate the Lease if such taking is effected,
the Lease shall terminate on the date of such taking. All rent required to be
paid by Lessee under the Lease shall be paid up to the date of such termination
and upon such termination the Lease shall be of no further force and effect,
except that any obligation or liability of either party, actual or contingent,
under the Lease which has accrued on or prior to such termination date shall
survive and any prepayment of rent shall be prorated between the parties. For
purposes of this Article, "substantially all of the premises" shall be deemed to
mean such portion of the premises as, when so taken, would leave remaining a
balance of the premises which, due either to the area so taken or the location
of the part so taken in relation to the part not so taken, would not, under
economic conditions, applicable zoning laws, building regulations then existing
or prevailing, substantially comply with Lessor's existing guidelines for
dealership facilities as the same are generally applied in the New
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York Metropolitan Area. Lessee, in cooperation with Lessor, shall have the right
to participate in any condemnation proceedings and be represented by counsel for
the purpose of protecting its interests hereunder.
B. Rent Reduction: If less than substantially all of the premises shall be so
taken such that Section A. above does not apply, the Lease shall be unaffected
by such taking, except that fixed rent and any additional rent payable by Lessee
pursuant to the provisions of the Lease shall be equitably reduced to a just and
appropriate amount according to the nature and extent of the taking.
C. Award: Lessor shall be entitled to receive the entire award in any proceeding
with respect to any taking provided for in this clause without deduction
therefrom for any estate vested in Lessee by the Lease and Lessee shall receive
no part of such award, except that, in the case of a partial taking which does
not result in a termination of the Lease, the award, provided no default shall
have occurred and be continuing, shall be paid and held in trust with respect to
insurance proceeds and, provided no default shall have occurred and be
continuing, shall be paid in the same manner as insurance proceeds are paid to
Lessee, to reimburse Lessee for or to pay the cost of restoration of the
building or buildings as the case may be. Lessee hereby assigns to Lessor all of
its right, title, and interest in or to every such award. Nothing herein
contained shall be deemed to prohibit Lessee from making a separate claim, to
the extent permitted by law, for the value of Lessee's. inventory, movable trade
fixtures, machinery, and moving expenses, provided that the making of such claim
does not adversely affect or diminish Lessor's award.
D. Temporary Taking: If the temporary use or occupancy of all or any part of the
premises shall be lawfully taken by condemnation or in any other manner for any
public or quasi-public use or purpose during the term of the Lease, Lessee shall
be entitled, except as hereinafter set forth, to receive that portion of the
award for such taking which
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represents compensation for these and occupancy of the premises and, if so
awarded, for the talking of Lessee's inventory, movable trade fixtures,
machinery, and for moving expenses, and that portion which represents
reimbursement for the cost of restoration of the premises. The I&= shall be and
remain unaffected by such taking and Lessee shall be responsible for all
obligations hereunder not affected by such taking and shall continue to pay in
full when due the fixed rent, additional rent, and all other sums required to be
paid by Lessee pursuant to the provisions of the Lease provided, however, if the
temporary taking exceeds a one hundred eighty (180) day period and results in
Lessee being closed for business for a one hundred eighty (180) continuous day
period, then Lessee shall have the option to terminate the Lease by giving
Lessor written notice of such termination within thirty (30) days of the
completion of said one hundred eighty (180) day period. If the period of
temporary use or occupancy shall extend beyond the expiration date, that part of
the award which represents compensation for the use or occupancy of the premises
(or a part thereof) shall be divided between Lessor and Lessee so that Lessee
shall receive so much thereof as represents the period to and including the
expiration date and Lessor shall receive so much as represents the period
subsequent to the expiration date and Lessor shall be entitled to receive that
portion which represents reimbursement for the cost of restoration of the
premises. All moneys received by Lessee as, or as part of, an award for
temporary use and occupancy for a period beyond the date to which the sums to be
paid by Lessee hereunder have been paid by Lessee shall be received, held, and
applied by Lessee as a trust fund for payment of all sums payable by Lessee
hereunder.
E. Restoration: In the event of any taking of the premises which does not result
in a termination of the Lease, or in the event of a taking for a temporary use
or occupancy of all or any part of the premises, Lessor at Lessor's expense,
shall proceed with reasonable diligence to repair, alter, and restore the
remaining parts of the premises to substantially the condition existing
immediately prior to the date of taking to the extent that the same may be
feasible and so as to constitute a complete and tenantable premises.
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<PAGE>
(14) FIRE CLAUSE
In case of fire or other damage to the premises, Lessee shall give immediate
notice to Lessor. If such damage is partial, Lessor will thereupon cause the
premises to be repaired as speedily as possible, and a just proportion of the
rent reserved according to the extent to which the premises have been rendered
untenantable shall abate until the premises have been restored-, but if the
premises shall be substantially destroyed, either party may serve notice upon
the other, within ten (10) days after such destruction, of its intention to
terminate this Lease and upon the receipt of such notice, this Lease shall
terminate and Lessee shall surrender the premises and pay all accrued rent to
the date of such surrender.
(15) INSURANCE
A. Liability Insurance: Throughout the term, Lessee shall, at its own cost and
expense, provide and keep in force, for the benefit of Lessor and Lessee with
Lessor as a named insured thereon, (a) general public liability insurance
including blanket contractual coverage protecting and indemnifying Lessor and
Lessee against all claims for damages to person or property or for loss of life
or of property occurring thereon, in, or about the premises, the streets,
gutters, sidewalks, curbs, and other areas adjacent thereto, if any, in limits
of at least $5,000,000 for bodily injury or death to any one person, $5,000,000
for bodily injury or death to any number of persons in respect of any one
accident or occurrence, and $5,000,000 for property damage in respect of one
accident or occurrence, or such greater limits as may be required from time to
time by Lessor consistent with insurance coverage on properties similarly
constructed, occupied, and maintained; (b) Worker's Compensation Insurance
(including Employers' Liability Insurance) with limits of not less than $250,000
covering all persons employed at the premises to the extent required by the laws
and statutes of the State in which the premises are located, including, without
limitation, during the course of work to the premises; (e) Garagekeepers legal
liability coverage of not less than $2,000,000; (d) Comprehensive automobile
liability covering all owned vehicles and non-owned third
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party vehicles of at least $5,000,000 combined. single-limit for personal injury
and property damage combined; and (e) such other or further insurance, in such
amounts and in such form, as is customarily obtained by owners of properties
similarly constructed, occupied, and maintained.
B. Modifications to Policies: All insurance shall contain endorsements to the
effect that such policies will not be changed, modified, altered, or cancelled
without at least thirty (30) days prior written notice to Lessor and that the
act or omission of Lessee, any occupancy or use of the premises for purposes
more hazardous than permitted by such policy, any foreclosure or other
proceedings relating to the premises or any change in title to or ownership of
the premises will not invalidate the policy as to Lessor.
C. Delivery of Policies: All of the abovementioned insurance policies or
certificates shall be obtained by Lessee and delivered to Lessor on or prior to
the commencement date, and thereafter as provided for herein, and shall be
written by insurance companies of recognized responsibility which are reasonably
satisfactory to Lessor and well rated by national rating organizations.
D. Renewal: At least thirty (30) days prior to the expiration of any policy or
policies of such insurance, Lessee shall renew such insurance by delivering to
Lessor, within the said period of time, the original policies or certificates of
insurance, endorsed in accordance with Paragraph B hereof, together with proof
of payment of all premiums therefor.
E. Violation: Lessee shall not violate or permit to be violated any of the
conditions of any of the said policies of insurance, and Lessee shall perform
and satisfy the requirements of the companies writing such policies so that
companies of good standing, reasonably satisfactory to Lessor, shall be willing
to write or continue such insurance.
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F. No Concurrent Policies: Lessee shall not carry separate or additional
insurance concurrent in form and contributing in the event of any loss or damage
to the premises with any insurance required to be obtained by Lessee under this
Lease, unless such separate or additional insurance shall comply with and
conform to all of the provisions and conditions of this Article. Lessee shall
promptly give notice to Lessor of such separate or additional insurance.
G. Lessor's Insurance: Lessor shall maintain fire and extended coverage
insurance (including, at Lessor's election, earthquake, flood, and rental income
insurance) (the "Insurance") on the buildings situated on the premises covered
by the Lease. Inclusion of this property in Lessor's corporate blanket insurance
policy shall be sufficient compliance with this provision.
(16) NOTICES
All notices to be given hereunder by either party shall be in writing and given
by personal delivery or shall be sent by telecopier or by facsimile transmission
together with registered or certified mail addressed to the party intended to be
notified at the post office address of such party last known to the party giving
such notice and notice given as aforesaid shall be a sufficient service thereof,
and shall be deemed given when personally delivered or three (3) business days
after mailing by certified or registered mail. Notices to Lessee shall be sent
to Bruce Bendell, President, Major Chevrolet, Inc., 43-40 Northern Boulevard,
Long Island City, New York 1110 1, and Warren A. Estis, c/o Rosenberg & Estis,
P.C., 733 Third Avenue, New York, New York 10017. Notices to Lessor shall be
sent to the Director of Real Estate, Argonaut Realty, General Motors
Corporation, 485 West Milwaukee Avenue, Detroit, Michigan 48202.
(17) EXCAVATION OF ADJACENT PREMISES
In the event that an excavation is to be made for any purpose upon land adjacent
to the premises hereby leased, Lessee shall afford to the person who is to cause
such excavation
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<PAGE>
license to enter upon the premises hereby leased for the purpose of doing such
work as said person shall deem necessary, provided such work shall not unduly
interfere with Lessee's business operations, to preserve the building on the
premises from injury, and in any such case, Lessee shall notify Lessor.
(18) NET LEASE
The purpose and intent of this Lease as to Site "A" is that the rental provided
for herein shall be an absolutely net return to Lessor and shall continue
unreduced and unabated [except as provided in Articles (14) and (15) hereof]
throughout the entire term of this Lease, that all charges of every kind and-
nature in connection with the maintenance, upkeep and preservation of the
premises (except for those repairs which are the Lessor's obligation) and of
Lessee's leasehold interest and of this Lease during the term shall be borne and
paid by Lessee, excepting federal, state, county or city income taxes now
imposed or which may hereafter be imposed on the rentals accruing under the
terms of this Lease.
(19) ALTERATIONS
Except as set forth below, Lessee will not make any alterations or add any
construction whatsoever to the premises without the prior written consent of
Lessor in each instance, and if Lessee makes any alterations or adds any
construction, such additional construction or alterations shall, at Lessor's
option, be removed at the expiration of the term and the premises shall be
restored at the sole expense of Lessee to the condition existing as of the date
of this Lease.
Lessor shall maintain design control on any and all leasehold improvements
Lessee shall make to the dealership facilities or exterior of the premises. All
leasehold improvements proposed to be made by Lessee shall only be permitted
provided Lessee submits such plans to Lessor for approval, which approval will
not be unreasonably withheld or delayed. Such plans will include architectural
drawings as well as detailed plans and
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IN
specifications. Lessor shall have fifteen (15) days from date of receipt of such
plans and the specifications to review same and advise Lessor of its approval or
disapproval for e proposed improvements; provided, however, that leasehold
improvements costing TEN THOUSAND AND 00/100 DOLLARS ($10,000.00) or less in
total will not require Lessor's approval., Failure to object within said fifteen
(15) day period shall be deemed to constitute Lessor's consent.
(20) NO ABNORMAL LOADING
Lessee will store only such equipment and material in such quantity and weight
as any buildings in their present condition are fitted for and Lessee further
agrees that in storing such equipment and material it will not stress the
building's floors or supports beyond their normal capacity.
(21) WAIVER OF SUBROGATION
Lessor and Lessee waive all rights, each against the other, for damages caused
by fire or other perils covered by insurance where such damages are sustained in
connection with the occupancy of the- premises.
(22) LESSOR'S COVENANT
Lessor covenants that Lessee on paying the rent and performing the covenants
herein contained may peacefully and quietly have, -hold and enjoy the premises
for the term aforesaid. Lessor shall comply promptly with all statutes,
ordinances, rules, orders, regulations, and requirements of the federal, state,
and municipal governments and of any of their departments and bureaus applicable
to the premises which are not the responsibility of the Lessee.
(23) PARTIAL INVALIDITY
If any covenant, provision or condition of this Lease shall be held invalid or
unenforceable by any court having jurisdiction, the remainder of the covenants,
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Lessee, at its option and expense, may provide additional levels of security for
its premises and employees. provisions or conditions of this Lease shall remain
valid and enforceable to the fullest extent permitted by law.
(24) UTILITIES
Lessee at its expense shall provide and pay for any telephone, water, gas,
electricity or fuel consumed on the premises at Site "A" Lessor at its expenses
shall provide and pay for any water, gas, electricity or fuel heating consumed
on the premises at site "B".
(25) TAXES
Lessee shall pay any and all personal property taxes which may become due and
payable and a lien on Lessee's personal property, and further, Lessee shall pay
any and all excise taxes, income taxes, or any other taxes which are applicable
to Lessee's business and use of the premises.
(26) SECURITY
Lessor, at its expense, shall provide and pay for security at Sites "A" and "B"
as determined solely by the Lessor
(27) DELIVERY OF PREMISES UPON EXPIRATION
Upon the expiration or earlier termination of this Lease, Lessee agrees to
vacate and deliver up possession of the premises on the termination date, free
and clear of any liens and shall remove its personal property and equipment
prior to such termination date. If Lessee damages the premises in the removal of
its equipment and property, Lessee shall forthwith repair such damage to the
reasonable satisfaction of Lessor. Lessee shall deliver the premises to Lessor
in a broom clean condition.
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(28) NON-LIABILITY OF LESSOR
A. In the event of any transfer or transfers of Lessor's interest in the
premises, the transferor shall be automatically relieved of any and all
obligations on the part of Lessor accruing-from and after the date of such
transfer.
B. If Lessor shall fail to perform any covenant, term or condition of this Lease
upon Lessor's part to be performed and if, as a consequence of such default,
Lessee shall recover a money judgment against Lessor, such judgment shall be
satisfied only out of the proceeds of sale -received upon execution of such
judgment and levied thereon against the right, title and interest of Lessor in
the premises and out of the consideration received by Lessor from the sale or
other disposition of all or any part of Lessor's right, title and interest in
the premises and Lessor shall not be liable for any deficiency.
(29) LIENS
Lessee will at all times keep the premises free from all construction liens and
other liens arising out of Lessee's actions.
(30) BINDING ON SUCCESSORS
The covenants and agreements contained in this Lease are binding upon the
parties hereto and their respective successors and assigns.
(31) WAIVER OF TRIAL BY JURY AND COUNTERCLAIM
Lessor and Lessee hereby waive trial by jury in any action, proceeding, or
counterclaim brought by Lessor or Lessee against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Lessor to Lessee, the use or occupancy of the premises by Lessee
or any person claiming through or under the Lessee, any claim of injury or
damage, and any emergency or other statutory remedy; provided, however, the
foregoing waiver shall not apply to any action for personal injury or property
damage.
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(32) COMPLETE AGREEMENT -
IN
There are no oral agreements or representations between Lessor and Lessee
affecting this Lease, and this Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements and understandings, if any,
between Lessor and Lessee with respect to the subject matter of this Lease.
(33) ACCORD AND SATISFACTION
Payment by Lessee or receipt by Lessor of a lesser amount than the rent or other
charges herein stipulated may be, at Lessor's sole option, deemed to be on
account of the earliest due stipulated rent or other charges, or deemed to be on
account of rent owing for the current period only, notwithstanding any
instructions by or on behalf of Lessee to the contrary, which instructions shall
be null and void, and no endorsement or statement on any check or any letter
accompanying any check payment as rent or other charges shall be deemed an
accord and satisfaction, and Lessor shall accept such check or payment without
prejudice to Lessor's right to recover the balance of such rent or other charges
or pursue any other remedy in this Lease or in law or in equity against Lessee.
(34) DELAYS
In the event that either party hereto shall be delayed in the performance of its
maintenance and/or repair obligations by reason of strikes, lockouts, labor
troubles, inability to procure materials or shall at any time be so delayed by
reason of failure of power, restrictive governmental laws or reasons of similar
nature not the fault of the party delayed in performing work or doing acts
required under the terms of this Lease, then performance of such act shall be
excused for the period of the delay and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay.
The provisions of this Paragraph (33) shall not operate to excuse Lessee from
payment of rent or any other payments required by the terms of this Lease.
IN WITNESS WHEREOF, the Lessor has signed and sealed this instrument this 13th
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BY: /s/ G.G. Fox
----------------
G.G. Fox
ATTEST /s/
Assistant Secretary
P7
/s/
/s/
day of January 1994 and the Lessee has signed and sealed this instrument this
3rd day of June, 1994.
In the presence of
In the presence of
/s/
/s/
By: /s/ Bruce Bendell
----------------------------
Bruce Bendell, President
President
GENERAL MOTORS CORPORATION
BY
MAJOR CHEVROLET, INC.
BY ~~ k--
ATTEST /s/ Bruce Bendell
-------------------------
Bruce Bendell, Secretary
<PAGE>
Exhibit "A"
Page 1 of 3
Site "A"
EMBED Word.Picture.8
Premises - Major Chevrolet
<PAGE>
FIRST FLOOR PLAN
Exhibit "A"
Page 2 of 3
Site "B"
Premises - Major Chevrolet (Interior)
A 35-Lease, Business Premises. JULIUS BLUMBERG, INC.. LAw BLANK PUBLISHERS
Loft. Office or Store- 2.65
Lease made the day of August 19 9 0. between BRUCE BENDELL and HAROLD
BENDELL, having a place of business at 43-40 Northern Blvd., Long Island City,
New York, hereinafter referred to as LANDLORD, and MAJOR CHRYSLER-PLYMOUTH,
INC., having a place of business at 460-1 Northern Blvd., Long Island City, New
York, hereinafter jointly, severally and collectively referred to. as TENANT.
Witnesseth, that the Landlord hereby leases to the Tenant, and the Tenant hereby
hires and takes from the Landlord the entire premises known as 46-01/05 Northern
Blvd., Long Island City, New York per annexed survey to be used find occupied by
the Tenant for the sale and lease of automobiles and related purposes, and for
no other purpose, for a term to commence on September 1, 1990 , and to end on
August 31, 19 9 5, unless sooner terminated as hereinafter provided, at the
ANNUAL RENT of one hundred eight thousand ($108,000.00) dollars, in the amount
of $9 000.00 all payable In equal monthly Instalments/in advance on the first
day of each and every calendar month during said term, except the first
Instalment, which shall be paid upon the execution hereof.
THE TENANT JOINTLY AND SEVERALLY COVENANTS:
REPAIRS
ORDINANCES AND
VIOLATIONS
ENTRY
INDEMNIFY LANDLORD
MOVING
INJURY
SURRENDER
NEGATIVE
COVENANTS
OBSTRUCTION
SIGNS
AIR
CONDITIONING
FIRE CLAUSE
EMINENT
DOMAIN
LEASE NOT IN EFFECT
DEFAULTS
TEN DAY
NOTICE
F IRST-that the Tenant will pay the rent as above provIded.
SECOND-That throughout said term the Tenant will take good care of the demised
premises, fixtures and appurtenances, find all alterations, additions find
Improvements to either ; make all repairs In and about the same necessary to
preserve them In good order and condition, which repairs shall be, In quality
and class, equal to the original work; promptly pay the expense of such repairs;
stiffer no waste or Injury; give prompt notice to the Landlord of any fire that
may occur; execute and comply with all laws, rules, orders, ordinances and
regulations at any time Issued or In force (except those requiring structural
alterations), applicable to the demised premises or to the Tenant's occupation
thereof, of the Federal, State and Local Governments, and of each and every
department, bureau and official thereof, and of the New York Board
<PAGE>
of Fire Underwriters; permit at all times during usual business hours, the
Landlord and representatives of the Landlord to enter the demised premises for
the purpose of inspection, and to exhibit them for purposes of sale or rental ;
suffer the Landlord to make repairs and Improvements to all parts of the
building, and to comply with all orders and requirements of governmental
authority applicable to said building or to any occupation thereof; suffer the
Landlord to erect, use, maintain, repair and replace pipes and conduits in the
demised premises and to the floors above and below; forever indemnify and save
harmless the Landlord for and against tiny and all liability, penalties,
damages, expenses and judgments arising from Injury during said term to person
or property of any nature, occasioned wholly or In part by any act or acts,
omission or omissions of the Tenant, or of the employees, guests, agents,
assigns or undertenasnts of the Tenant find also for any matter or thin.-
growing out of the occupation of the demised premises or of the streets,
sidewalks or vaults adjacent thereto ; permit, during the six months next prior
to the expiration of the term the usual notice "To Let" to be placed and to
remain unmolested In a conspicuous place upon the exterior of the demised
premises; repair, at or before the end of the term, all Injury done by the
Installation or removal of furniture and property ; and at the end of the term,
to quit and surrender the demised premises with all alterations, additions and
Improvements In good order and condition.
THIRD.-That the Tenant will not disfigure or deface any part of the building, or
suffer the same to be (lone, except so far as may be necessary to ifll\ such
trade fixtures as are herein consented to by the Landlord ; the Tenant will not
obstruct, or permit the obstruction of the street or the sidewalk adjacent
thereto ; will Dot do anything or suffer anything to be done upon the demised
premises which will increase the rate of fire Insurance upon the building or any
of Its contents, or be liable to cause structural injury to said building; will
not permit the accumulation of waste or refuse matter, and will not, without the
written consent of the Landlord first obtained in each case, either sell,
assign, mortgage or transfer this lease, underlet the demised premises or any
part thereof, permit the same or any part thereof to be occupied by anybody
other than the Tenant and the Tenant's employees, make any alterations in the
demised premises, use the demised premises or any part thereof for any purpose
other than the one first above stipulated, or for any purpose deemed extra
hazardous on account of fire risk, nor In violation of any law or ordinance.
That the Tenant will not obstruct or permit the obstruction of the light, halls
stairway or entrances to the building, and will not erect or Inscribe any sign,
signals or advertisements unless and Until the style and location thereof have
been approved by the Landlord ; and if any be erected or inscribed without such
approval, the Landlord may remove the same. No water cooler, air conditioning
unit or system or other apparatus shall be Installed or used without the prior
written consent of Landlord.
IT IS MUTUALLY COVENANTED AND AGREED, THAT
FOURTH.-If the demised premises shall be partially damaged by fire or other
cause without the fault or neglect of Tenant, Tenant's servants. employees,
agents, visitors or licensees, the damages shall be repaired by and at the
expense of Landlord and the rent until such repairs shall be made shall be
apportioned according to the part of the demised premises which Is usable by
Tenant. But If such partial damage is due to the fault or neglect of Tenant,
Tenant's servants, employees, agents, visitors or licensees, without prejudice
to any other rights and remedies of Landlord and without prejudice to the rights
of subrogation of Landlord's insurer, the damages shall be repaired by Landlord
but there shall be no apportionment or abatement of rent. No penalty shall
accrue for reasonable delay which may &rise by reason of adjustment of Insurance
on the part of Landlord and/or Tenant, and for reasonable delay on account of
"labor troubles" ' or any other cause beyond Landlord's control. If the demised
premises are totally damaged or are rendered wholly untenantable by fire or
other cause, and if Landlord shall decide not to restore or not to rebuild the
same, or if the building shall be so damaged that Landlord shall decide to
demolish it or to rebuild it' then or in any of such events Landlord may, wl
thin ninety (90) days after such fire or other cause, give Tenant a notice In
writing of such decision, which notice shall be given as in Paragraph Twelve
hereof provided, and thereupon the term of this lease shall expire by lapse of
time upon the third day after such notice is given, and Tenant shall vacate the
demised promises and surrender the same to Landlord. If Tenant shall not be in
default under this lease then, Upon the termination of this lease under the
conditions provided for in the sentence Immediately preceding, Tenant's
liability for rent shall cease as of the day following the casualty. Tenant
hereby expressly waives the provisions of Section 227 of the Real Property Law
and agrees that the foregoing provisions of this Article shall govern and
control In lieu thereof. If the damage or destruction be due to the fault or
neglect of Tenant the debris shall be removed by, and at the expense of, Tenant.
<PAGE>
FIFTH-If the whole or any part of the premises berchy demised shall be taken or
condemned by any competent authority for an), public use or purpose then the
term hereby granted shall cease front the time when possession of the part so
taken shall be required for such public purpose and without apportionment of
award, the Tenant hereby assigning to the Landlord all right and claim to any
such award, the current rent, however, in such case to be apportioned.
SIXTH - If before the commencement of the term. the Tenant be adjudicated a.
bankrupt, or make a "general assignment." or take the benefit of any insol%,ent
act. or If a Receiver or Trustee be appointed for the Tenant's property, or if
this lease or the estate of the Tenant hereunder be transferred or pass to or
devolve upon any other person or corporation. or If the Tenant shall default in
the performance of any agreement by the Tenant contained in any other lease to
the Tenant by the Landlord or by any corporation of which an officer of the
Landlord Is EL Director, this lease shall thereby, at the option of the
Landlord. be terminated and In that case, neither the Tenant nor anybody
claiming under the Tenant shall be entitled to go Into possession of the demised
premises. If after the commencement of the term, any of the events mentioned
above In this subdivision shall occur. or If Tenant shall make default in
fulfilling any of the covenants of this lease, other than the covenants for the
payment of rent or "additional rent" or if the demised premises become vacant or
deserted. the Landlord may give to the Tenant ten days' notice of intention to
end the term of this lease, and thereupon at the expiration of said ten days'
(if said condition which was the basis of said notice shall continue to exist)
the term under this lease shall expire as fully and completely as If that day
were the date herein definitely fixed for the expiration of the term and the
Tenant will then quit and surrender the demised premises to the Landlord. but
the Tenant shall remain liable as hereinafter provided
REPOSSESSION
BY
LANDLORD
RE-
LETTING
TENANT
REMEDIES
ARE
CUMULATIVE
LANDLORD
MAY
PERFORM
ADDITIONAL
RENT
AS TO
WAIVERS
COLLECTION
OF RENT
FROM
OTHERS
MORTGAGES
IMPROVEMEN
<PAGE>
TS
NOTICE$
NO
LIABILITY
NO
ABATEMENT
RULES,
ETC.
SHORING
OF
WALLS
VAULT
SPACE
ENTRY
NO REPRESENTATIONS
ATTORNEY'S
FEES
POSSESSION
It the Tenant shall make default In the payment of the rent reserved hereunder,
or any Item of "additional rent" herein mentioned, or any part of either or In
making any other payment herein provided for, or if the notice last above
provided for shall have been given and if the condition which was the basis of
said notice shall exist at the expiration of said ten (lays' period, the
Landlord may I im med lately, or at any time thereafter, reenter the demised
premises and remove all persons and all or any property therefrom, either by
Summary dispossess proceedings, or by any suitable action or proceeding at law,
or by force or otherwise. without being liable to Indictment, prosecution or
damages therefor, and repossess and enjoy said premises together with all
additions, alterations anti Improvements. In any such case or In the event that
this lease be "terminated" before the commencement of the term, as above
provided. the Landlord may either re-let the demised premises or any part or
parts thereof for the Landlord's own account, or may, a t the Landlord's option,
re-let the demised Premises or any Part or parts thereof as the agent of tile
Tenant. and receive the rents therefor, applying the same first to the payment
of such expenses as the Landlord may have incurred, and then to the fulfillment
of the covenants of the Tenant herein. and the balance, If any. at the
expiration of the term first above Provided for, shall be paid to the Tenant.
Landlord may rent the premises for a term extending beyond the term hereby
granted without releasing Tenant from any liability. In the event that the term
of this lease shall expire as above in this subdivision "Sixth" provided, or
terminate by summary proceedings or otherwise. and If the Landlord shall not
re-let the demised premises for the Landlord's own account, then. whether or not
the premises be re-let. the Tenant shall remain liable for, and the Tenant
hereby agrees to pay to tile Landlord. until the time when this lease would have
expired but for such termination or expiration. tile equivalent of the amount of
all of the rent and "additional rent" reserved herein. less tile avails of
reletting. if any, and the same shall be due and payable by the Tenant to the
Landlord on the several rent days above specified, that Is, upon each of such
rent days the Tenant shall pay to the Landlord the amount of deficiency then
existing. The Tenant hereby expressly waives any and all right of redemption In
case tile Tenant shall be dispossessed by judgment or warrant of any court or
judge and the Tenant %valves anti will waive nil right to trial by jury in any
summary proceedings hereafter Instituted by tile Landlord against the Tenant In
respect to the demised premises. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning.
In the event of a breach or threatened breach by the Tenant of any of the
covenants or provisions hereof, the Landlord shall have the right of Injunction
anti the right to invoke any remedy allowed at law or in equity, as it re-entry.
summary p roceedings and other remedies were not herein provided for.
<PAGE>
SEVENTH.-If the Tenant Shall make default In the performance of any covenant
herein contained, the Landlord may Immediately. or at any time thereafter,
without notice. perform the same for the account of the Tenant. If EL notice of
mechanic's lien be filed against the demised premises or against premises of
which the demised premises are part, for, or purporting to be for, labor or
material alleged to have been furnished, or to be furnished to or for the Tenant
at the demised premises, and If the Tenant shall fall to take such action as
shall cause such lien to be discharged within fifteen days after the filing of
such notice, the Landlord may pay the amount of such lien or discharge the same
by deposit or by bonding proceedings, and In the event of such deposit or
bonding proceedings, the Landlord may require the lienor to prosecute an
appropriate action to enforce the lienor claim. In such case, the Landlord ma
pay any judgment recovered on such claim. Any amount paid or expense Incurred by
the Landlord as In this subdivision of thy. lease provided, and any amount as to
which the Tenant shall at any time be In default for or In respect to the use of
water, electric current or sprinkler Supervisory service, and any expense
incurred or sum of money paid by the Landlord by reason of the failure of the
Tenant to comply with any provision hereof, or In defending any such action,
shall be deemed to be "additional rent" for the demised premises, and shall be
due and payable by the Tenant to the Landlord on the first clay of tile next
following month, or, at the option of the Landlord, on tile first day of any
succeeding month. The receipt by tile Landlord of any Instalment of the regular
stipulated rent hereunder or any of said "additional rent" shall not be a waiver
of any other "additional rent" then due.
EIGHTH.-The failure of the Landlord to Insist, In any one or more Instances upo
n a strict performance of any of the covenants of this lease. or to exercise any
option herein contained, shall not be construed as a. waiver or a relinquishment
for the fu ture of such covenant or option, but the same shall continue and
remain In full force and effect. The receipt by the Landlord of rent, with
knowledge of the breach of any covenant hereof, shall not be deemed a. waiver of
such breach and no waiver b the Landlord of any provision hereof shall be deemed
to have been made unless expressed in writing and signed by the Larillord. Even
though the Landlord shall consent to an assignment hereof no further assignment
shall be made without express consent in writing by the Landlord.
NINTH-If this lease be assigned. or If the demised premises or any part thereof
be underlet or occupied by an body other than the Tenant the Landlord may
collect rent from the assignee, under-tenant or occupant, and apply the net
amount collected to the rent herein reserved, and no such collection shall be
deemed a waiver of tile covenant herein against assignment and underletting, or
the acceptance of the assignee, under-tenant or occupant as tenant, or a release
of the Tenant from the further performance by the Tenant of tile covenants
herein contained on the part of the Tenant.
TENTH-This lease shall be subject and subordinate at all times, to the lien of
the mortgages now on the demised premises. and to all advances made or hereafter
to be made upon the security thereof, and Subject and subordinate to the lien of
any mortgage or mortgages which at any time may be made a lien upon the
premises. The Tenant will execute and deliver such further instrument or
Instruments subordinating this lease to the lien of any such mortgage or
mortgages as shall be desired by any mortgagee or proposed mortgagee. The Tenant
hereby appoints the Landlord the attorney-In-fact of the Tenant, Irrevocable. to
execute and deliver any such Instrument or Instruments for the Tenant.
ELEVENTH.-All Improvements made by the Tenant to or upon the demised premises,
except said trade fixtures, shall when made. at once be deemed to be attached to
the freehold. and become the property of the Landlord, and at the end or other
expiration of the term shall be surrendered to the Landlord in as good order
anti condition as they were when installed, reasonable wear anti damages by the
elements excepted.
TWELFTH.-Any notice or demand which under the terms of this lease or under any
statute must or may be given or made by the parties hereto shall be In writing
and shall be given or made by mailing the Same by certified or registered mail
addressed to the respective parties at the addresses set forth in this lease.
THIRTEENTH--The Landlord shall not be liable for any failure of water supply or
electrical current. sprinkler damage. or failure of sprinkler service, nor for
Injury or damage to person or property caused by the elements or by other
tenants or persons In said building, or resulting from steam. gas, electricity,
water, rain or snow, which may leak or flow from any part of said buildings. or
from the pipes. appliances or plu m bing works of the same, or from the street
or sub-surface, or from any other place, nor for interference with light or othe
r Incorporeal hereditaments by anybody other than the Landlord, or caused by
operations by or for a governmental authority in construction of any public or
quasl-public work, neither shall the Landlord be liable for any latent defect in
the building.
<PAGE>
FOURTEENTH-No diminution or abatement of rent, or other compensation shall be
claimed or allowed for Inconvenience or discomfort arising from the malting of
repairs or Improvements to the building or to Its appliances, nor for any space
taken to comply with any law ordinance or order of a governmental authority. In
respect to the various "services." If any. herein expressly or Impliedly agreed
to be furnlshed by the Landlord to the Tenant, It Is agreed that there shall be
no diminution or abatement of the rent, or any other compensation, for
Interruption or curtailment of uch "service" when such Interruption or
curtailment shall be due to accident, alterations or repairs desirable or
necessary to be made or to Inability or difficulty In securing supplies or labor
for the maintenance of such "service" or to some other cause, not gross
negligence on the part of the Landlord. No such Interruption or c urtailment of
any such "service" shall be deemed a constructive eviction. The Landlord shall
not be required to furnish, and the Tenant shall not be entitled to receive. any
of such "services" during any Period wherein the Tenant shall be in default In
respect to the payment of rent. Neither shall there be any abatement or
diminution of rent because of making of repairs. improvements or decorations to
the demised premises after the (late above fixed for the commencement of the
term, it being understood that rent shall, in any event, commence to run at such
date so above fixed.
FIFTEENTH-The Landlord may prescribe and regulate the placing of safes.
machinery. quantities of merchandise and other things. The Landlord may also
prescribe and regulate which elevator and entrances shall be used by the
Tenant's employees, anti for tile Tenant's shipping. The Landlord may make such
other and further rules and regulations as. In the Landlord's judgment, may from
time to time be needful for the safety, care or cleanliness of the building, and
for the preservation of good order therein. The Tenant and the employees and
agents of the Tenant will observe and conform to all such rules and regulations.
SIXTEENTH - In the event that an excavation shall be made for building or other
purposes upon land adjacent to the demised premises or shall be contemplated to
be made, the Tenant shall afford to the person or persons causing or to cause
such excavation. license to enter upon tile demised premises for the purpose of
doing such work as said person or persons shall deem to be necessary to preserve
the wall or walls, structure or structures u Pon the demised premises from
injury and to support the same by proper foundations.
SEVENTEENTH.-No vaults or space not within the property line of the building are
]eased hereunder. Landlord makes no representation as to the location of the
property line of the building. Such vaults or space as Tenant may be permitted
to use or occupy are to be used or occupied under a revocable license and If
such license be revoked by the Landlord as to the use of part or all of the
vaults or space Landlord shall not be subject to any liability; Tenant shall not
be entitled to any compensation or reduction In rent nor shall this be deemed
constructive or actual eviction. Any tax, fee or charge of municipal or other
authorities for such vaults or space shall be paid by the Tenant for the period
of the Tenant's use or occupancy thereof.
EIGHTEENTH--That during seven months prior to the expiration of the term hereby
granted. applicants shall be admitted at all reasonable hours of the day to view
the premises until rented; and the Landlord and the Landlord's agents shall be
permitted at any time during the term to visit anti examine them at any
reasonable hour of the day, anti workmen may enter at any time, when authorized
by the Landlord or the Landlord's agents, to make or facilitate repairs In any
part of the building; and If the said Tenant shall not be personally present to
open and permit an entry into said premises, at any time, when for any reason an
entry therein shall be necessary or permissible hereunder, the Landlord or the
Landlord's agents may forcibly enter the same without rendering the Landlord or
s ch agents liable to any claim or cause of action for damages by reason thereof
(if during such entry the Landlord shall accord reasonable care to the Tenant's
property) and without In any manner affecting the obligations and covenants of
this lease; it Is, however, expressly understood that tile right and authority
hereby reserved. does not im pose, nor does tile Landlord assume, by reason
thereof. any responsibility or liability whatsoever for the care or supervision
of said premises. or any of the pipes, fixtures, appliances or appurtenances
therein contained or therewith in any manner connected.
NINETEENTH.-The Landlord has made no representations or promises In respect to
said building or to the demised premises except those contained herein, and
those, If any, contained In some wrItten communication to the Tenant, signed by
the Landlord. This instrument may not be changed, modified, discharged or
terminated orally.
<PAGE>
TWENTIETH-iF the Tenant shall at any time be In default hereunder, and If the
Landlord shall Institute an action or summary proceeding against the Tenant
based upon such default. then tile Tenant will reimburse the Landlord for the
expense of attorneys' fees and disbursements thereby Incurred by the Landlord I
so far as the same are reasonable In amount. Also so long as the Tenant shall be
a tenant hereunder the amount of such expenses shall be deemed to be "additional
rent" hereunder and shall be due from the Tenant to the Landlord on the first
day of the month following the Incurring of such respective expenses.
TWENTY-FIRST - Landlord shall not be liable for failure to give possession of
the premises upon commencement date by reason of the fact that premises are not
ready for occupancy, or due to It. prior Tenant wrongfully holding over or any
other person wrongfully In possession or for any other reason: in such event the
rent shall not commence until possession Is given or is available, but the term
herein shall not be extended.
RIDER TO LEASE DATED AUGUST 1 1990
RE: Premises 46-01/46-05 Northern Blvd., L.I.C., NY
1. The rentals hereunder shall be paid by the tenant in lawful money of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, in equal monthly installments in
advance on the first day of each month during said term, at the office of
Landlord or such other place as Landlord may designate, without any set off or
deduction whatsoever, except that Tenant shall pay the first monthly installment
on the execution hereof.
2. Tenants, at their sole cost and expense, shall keep the demised premises
insured for the mutual benefit of the Landlord and the Landlord's mortgagees, if
any, such as their interest may appear during the term of this lease, against
loss or damage by fire and against loss or other risks now or hereafter embraced
by extended broad form in amounts sufficient to prevent the Landlord from
becoming a co-insurer under the terms of the applicable policy, but in any
event, in an amount of net less than 80% of the then "full replacement costs."
Certificates evidencing such policy or policies of insurance shall be delivered
to and be in the possession of the Landlord at all times during the term of this
lease or any renewal thereof. In the event that Tenant fails to provide such
insurance and keep same in force, then Landlord may procure the same and the
cost thereof shall be added to the next month's rent thereafter becoming due and
shall be deemed additional rent hereunder.
3. The Tenants from and after the date that the term of this lease shall be
commenced, shall hold the Landlord harmless against any and all claims, suits,
damages or cause or causes of action for damages, arising after the taking of
possession of demised premises by Tenants, and against any orders or decrees or
judgments which may be entered herein, brought for damages or alleged damages,
resulting from any injury to person and/or property or loss of life sustained in
or about the demised premises during the term of this lease; and the Tenants
further covenant to provide and.keep.in force during the term of this lease, for
themselves and the benefit of the Landlord, general and public liability
insurance in standard form, protecting the Landlord against any liability
whatsoever, occasioned by accident, disaster or otherwise, on, in or about the
demised premises or any appurtenances thereof, inside and out, including the
parking lot. Such policy or policies of insurance shall be in an amount
reasonably required by landlord and certificates evidencing such policy or
policies of insurance shall be delivered to and be in the possession of the
Landlord at all times during the term of this lease of any renewal thereof. In
the event that Tenants fail to provide such insurance and keep same in force,
then Landlord may procure the same and the cost thereof shall be added to the
next month's rent thereafter becoming due and shall be deemed additional rent
hereunder.
4. The Tenants shall pay as additional rent before any fine, penalty, interest
or cost that may be added thereto for the nonpayment thereof, all real estate
taxes, assessments, water rates.and water charges, and sewer rent and all other
governmental levies and charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind, which are assessed
or imposed upon the leased
<PAGE>
property or any part thereof or become payable during the term of this lease.
Such payment shall be made to the Landlord within fifteen (15) days of the
Landlord furnishing to the Tenants a photostatic copy of the tax bill or bills.
Nothing contained in this lease shall require the Tenants to pay any franchise,
corporate, estate, inheritance, succession, capital levy or transfer tax of the
Landlord or any income, profits, or revenue tax or any other tax, assessment,
charge or levy upon the rent payable by the Tenants under this lease; provided,
however, that if at any time during the term of this lease under the laws of the
United States, the State of New York or any political subdivision thereof, a tax
on rents is assessed against the Landlord for the basic rent as a substitution
in whole or in part for taxes assessed by such state or political subdivision on
land and/or buildings, such tax shall be deemed to be included within the amount
which the Tenants are required to pay under this article.
All taxes assessed to but payable in whole or instalments after the effective
date of the lease term and all taxes assessed during the term or any renewal
thereof, but payable in whole or instalments after the lease term, shall be
adjusted and prorated so that the Landlord shall pay its prorated share for the
period prior to or for the period subsequent to the lease period and the Tenants
shall pay their prorated share for the lease term and any renewal thereof.
It is the intention of the Landlord and the Tenants that the rent herein
specified shall be net to the Landlord in each year during the term of this
lease and any renewal thereof; that all costs, expenses and obligations of every
kind relating to the leased property (except Landlord's obligation to pay
interest and amortization on any mortgage or mortgages affecting the premises)
which may arise or become due during the term of this lease shall be paid by the
Tenants and that the Landlord shall be indemnified by the Tenants against such
costs, expenses and obligations. The net rent shall be paid to the Landlord
without notice or demand and without abatement, deduction or setoff.
5. The Tenants at their own cost and expense shall provide and pay for their own
fuel for heat and hot water and shall also furnish at their own cost and expense
and pay for consumption of
- -2
gas and electricity. The Tenants herein shall pay for all sewer and water
charges affecting the demised premises.
6. The Tenants may place signs on outside of building provided they first obtain
Landlord's consent, which shall not be withheld unreasonably, and obtain
necessary license and permits and keep same in force during all times of this
lease or any renewal thereof, and further comply with all applicable laws,
ordinances, rules and regulations of governmental agencies having jurisdiction.
7. The Tenants represent that no broker brought about this transaction, and
agree to indemnify and save the Landlord harmless from the claim or claims of
any broker (including reasonable attorneys fees for Landlord's counsel defending
such claims) for commissions herein resulting from the acts of the Tenants
herein.
8. Tenants agree to accept the premises "AS IS" and do hereby acknowledge that
they are fully familiar with the premises, and that no-representations have been
made to them by the Landlord or anyone acting in its behalf concerning the
physical condition of the premises or any other matter or thing. The Tenant
agrees to put, keep and maintain the premises in a state of good repair, and
make all necessary repairs, structural and nonstructural.
9. Supplementing paragraph "Third," a transfer of any stock interest in a
corporate tenant shall be deemed a prohibited assignment.
10. The parties agree not to record this lease or any memorandum thereof in the
office of the county clerk or city register.
11. Any discontinuance of the Tenant's operations at the premises may be
considered by the Landlord as an abandonment of the premises, entitling, but not
obligating the Landlord to cancel and terminate this lease. Suspension of
business for more than five consecutive days may be considered presumptive of
Tenant's abandonment of the premises.
<PAGE>
12. In the event of a breach or threatened breach by the Tenant of any of the
covenants or provisions of this lease, the Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity,
including summary proceedings.
13. It is mutually covenanted and agreed that if the Landlord shall pay or be
compelled to pay any sum of money, or to do any act which shall require the
payment of any sum of money by
- -3-
reason of the failure of the Tenant to perform any one or more of the covenants,
then, all costs, interest and damages shall be added to the rent becoming due on
the first day of the next ensuing month, or on the first day of any subsequent
month succeeding such payment, and shall be collectible as "additional rent" in
the same manner and with the remedies a if it had been originally reserved as
rent hereunder, upon ten days' written notice to Tenant.
14. In the event that any payment due from the Tenant to the Landlord hereunder
shall become overdue by a period in excess of ten days, a "late charge" in an
amount equal to 5% of any payment so overdue, may be charged by Landlord for the
purpose of defraying the expense incidental to handling such delinquent payment,
which "late charge" shall be deemed to be additional rent payable by Tenant to
Landlord upon the Landlord's rendering a bill to Tenant therefor.
IN WITNESS WHEREOF, the-parties have signed this agreement as of the day and
year first above written.
GET MORE AUTO CARS, INC.
BY:
BY:
- -4-
MAJOR CHRYSLER-PLYMOUTH, INC.
State of New York, County of 83
On the day of 19 before me personally came to me known, who, being by
me duly sworn, did depose and say that he resides at ; that he is of the
corporation described In and which executed the within Instrument; that he knows
the seal of said corporation; that the seal affixed to said Instrument is such
corporate seal; that It was so affixed by order of the Board of Directors of
said corporation, and that he signed his name thereto by like order.
State of New York, County of
33 :
On the day of 19 , before me personally came to me known, who, being
by me duly sworn, did depose and say that he resides at ; that he is Of the
corporation described In and which executed the within Instrument; -that he
knows the seal of said corporation; that the seal affixed to said Instrument Is
such corporate seal; that It was so affixed by order of the Board of Directors
of said corporation, and that he signed his name thereto by like order.
State of New York, County of
83 :
On the day of 19 , before me personally came I
to me known and known to me to be the Individual described In and who executed
the foregoing Instrument, and duly acknowledged that he executed the same.
<PAGE>
State of New York, County of
On the day of
33 :
19 , before me personally came subscribing witness to the
foregoing Instrument, with whom I am personally acquainted, who, being by me
duly sworn, did depose and say, that he resided, at the time of the execution of
said Instrument, and still resides, in , and knew that he Is and then was
acquainted with to be the Individual described In and who executed the foregolng
Instrument; and that he, said subscribing witness, was present and saw as
witness thereto.
z
execute the same; and that he, said witness, thereupon at the same time
subscribed his name
C3
9
E-4
0
GUARANTY
In consideration of the letting of the premises within mentioned to the Tenant
within named, and of the sum of One Dollar, to the undersigned In hand paid by
the Landlord within named, the undersigned hereby guarantees to the Landlord and
to the heirs, successors and/or assigns of the Landlord, the -payment by the
Tenant of the rent, within provided for, and the performance by the Tenant of
all of the provisions of the within lease. Notice of all defaults Is waived, and
consent Is hereby given to all extensions of time that any Landlord may grant.
Dated, 19
. .
STATE OF COUNTY OF SS :
On this day of '19 before me personally appeared
. . . r. S.
to me known and known to me to be the Individual described In and who executed
the foregoing Instrument, and duly ac. knowledged to me that he executed the
same.
[A57
ONE S'TORY
BRICK BLDG.
6yr4t 46-us
j,,, 1V
. -k
"o
N
AVE I
<PAGE>
RIDER TO LEASE DATED AUGUST 1 1990
RE: Premises 46-01/46-05 Northern Blvd., L.I.C., NY
1. The rentals hereunder shall be paid by the tenant in lawful money of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, in equal monthly installments in
advance on the first day of each month during said term, at the office of
Landlord or such other place as Landlord may designate, without any set off or
deduction whatsoever, except that Tenant shall pay the first monthly installment
on the execution hereof.
2. Tenants, at their sole cost and expense, shall keep the demised premises
insured for the mutual benefit of the Landlord and the Landlord's mortgagees, if
any, such as their interest may appear during the term of this lease, against
loss or damage by fire and against loss or other risks now or hereafter embraced
by extended broad form in amounts sufficient to prevent the Landlord from
becoming a co-insurer under the terms of the applicable policy, but in any
event, in an amount of net less than 80% of the then "full replacement costs."
Certificates evidencing such policy or policies of insurance shall be delivered
to and be in the possession of the Landlord at all times during the term of this
lease or any renewal thereof. In the event that Tenant fails to provide such
insurance and keep same in force, then Landlord may procure the same and the
cost thereof shall be added to the next month's rent thereafter becoming due and
shall be deemed additional rent hereunder.
3. The Tenants from and after the date that the term of this lease shall be
commenced, shall hold the Landlord harmless against any and all claims, suits,
damages or cause or causes of action for damages, arising after the taking of
possession of demised premises by Tenants, and against any orders or decrees or
judgments which may be entered herein, brought for damages or alleged damages,
resulting from any injury to person and/or property or loss of life sustained in
or about the demised premises during the term of this lease; and the Tenants
further covenant to provide and keep in force during the term of this lease, for
themselves and the benefit of the Landlord, general and public liability
insurance in standard form, protecting the Landlord against any liability
whatsoever, occasioned by accident, disaster or otherwise, on, in or about the
demised premises or any appurtenances thereof, inside and out, including the
parking lot. Such policy or policies of insurance shall be in an amount
reasonably required by landlord and certificates evidencing such policy or
policies of insurance shall be delivered to and be in the possession of the
Landlord at all times during the term of this lease of any renewal thereof. In
the event that Tenants fail to provide such insurance and keep same in force,
then Landlord may procure the same and the cost thereof shall be added to the
next month's rent thereafter becoming due and shall be deemed additional rent
hereunder.
4. The Tenants shall pay as additional rent before any fine, penalty, interest
or cost that may be added thereto for the nonpayment thereof, all real estate
taxes, assessments, water rates and water charges, and sewer rent and all other
governmental levies and charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind, which are assessed
or imposed upon the leased property or any part thereof or become payable during
the term of this lease. Such payment shall be made to the Landlord within
fifteen (15) days of the Landlord furnishing to the Tenants a photostatic copy
of the tax bill or bills.
Nothing contained in this lease shall require the Tenants to pay any franchise,
corporate, estate, inheritance, succession, capital levy or transfer tax of the
Landlord or any income, profits, or revenue tax or any other tax, assessment,
charge or levy upon the rent payable by the Tenants under this lease; provided,
however, that if at any time during the term of this lease under the laws of the
United States, the State of New York or any political subdivision thereof, a tax
on rents is assessed against the Landlord for the basic rent as a substitution
in whole or in part for taxes assessed by such state or political subdivision on
land and/or buildings, such tax shall be deemed to be included within the amount
which the Tenants are required to pay under this article.
All taxes assessed to but payable in whole or installments after the effective
date of the lease term and all taxes assessed during the term or any renewal
thereof, but payable in whole or installments after the lease term, shall be
adjusted and prorated so that the Landlord shall pay its prorated share for the
period prior to
<PAGE>
or for the period subsequent to the lease period and the Tenants shall pay their
prorated share for the lease term and any renewal thereof.
It is the intention of the Landlord and the Tenants that the rent herein
specified shall be net to the Landlord in each year during the term of this
lease and any renewal thereof; that all costs, expenses and obligations of every
kind relating to the leased property (except Landlord's obligation to pay
interest and amortization on any mortgage or mortgages affecting the premises)
which may arise or become due during the term of this lease shall be paid by the
Tenants and that the Landlord shall be indemnified by the Tenants against such
costs, expenses and obligations. The net rent shall be paid to the Landlord
without notice or demand and without abatement, deduction or setoff.
5. The Tenants at their own cost and expense shall provide and pay for their own
fuel for heat and hot water and shall also furnish at their own cost and expense
and pay for consumption of
- -2
gas and electricity. The Tenants herein shall pay for all sewer and water
charges affecting the demised premises.
6. The Tenants may place signs on outside of building provided they first obtain
Landlord's consent, which shall not be withheld unreasonably, and obtain
necessary license and permits and keep same in force during all times of this
lease or any renewal thereof, and further comply with all applicable laws,
ordinances, rules and regulations of governmental agencies having jurisdiction.
7. The Tenants represent that no broker brought about this transaction, and
agree to indemnify and save the Landlord harmless from the claim or claims of
any broker (including reasonable attorneys fees for Landlord's counsel defending
such claims) for commissions herein resulting from the acts of the Tenants
herein.
8. Tenants agree to accept the premises "AS IS" and do hereby acknowledge that
they are fully familiar with the premises, and that no-representations have been
made to them by the Landlord or anyone acting in its behalf concerning the
physical condition of the premises or any other matter or thing. The Tenant
agrees to put, keep and maintain the premises in a state of good repair, and
make all necessary repairs, structural and nonstructural.
9. Supplementing paragraph "Third," a transfer of any stock interest in a
corporate tenant shall be deemed a prohibited assignment.
10. The parties agree not to record this lease or any memorandum thereof in the
office of the county clerk or city register.
11. Any discontinuance of the Tenant's operations at the premises may be
considered by the Landlord as an abandonment of the premises, entitling, but not
obligating the Landlord to cancel and terminate this lease. Suspension of
business for more than five consecutive days may be considered presumptive of
Tenant's abandonment of the premises.
12. In the event of a breach or threatened breach by the Tenant of any of the
covenants or provisions of this lease, the Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity,
including summary proceedings.
13. It is mutually covenanted and agreed that if the Landlord shall pay or be
compelled to pay any sum of money, or to do any act which shall require the
payment of any sum of money by
- -3-
reason of the failure of the Tenant to perform any one or more of the covenants,
then, all costs, interest and damages shall be added to the rent becoming due on
the first day of the next ensuing month, or on the first day of any subsequent
month succeeding such payment, and shall be collectible as "additional rent" in
the same manner and with the remedies a if it had been originally reserved as
rent hereunder, upon ten days' written notice to Tenant.
14. In the event that any payment due from the Tenant to the Landlord hereunder
shall become overdue by a period in excess of ten days, a "late charge" in an
amount equal to 5% of any payment so
<PAGE>
overdue, may be charged by Landlord for the purpose of defraying the expense
incidental to handling such delinquent payment, which "late charge" shall be
deemed to be additional rent payable by Tenant to Landlord upon the Landlord's
rendering a bill to Tenant therefor.
IN WITNESS WHEREOF, the-parties have signed this agreement as of the day and
year first above written.
GET MORE AUTO CARS, INC.
BY: /s/
BY: /s/Bruce Bendell
Bruce Bendell, President
- -4-
MAJOR CHRYSLER-PLYMOUTH, INC.
EXTENSION AGREEMENT
RE; LEASE DATFI) EEBRUARY . 1995
BENDELI. REALTY. L.L.C.. LANDLORI) and
MAJOR ChRYSLER PlYMOUTH JEEI~ EA(il E. INC.. TENAN V
PREMISES: 34-2045111 Street. l..l.C.. NY
WHEREAS, LANDLORI) and TENANT acknov. ledge that the aboxe lease H. and
between BENDIELL REAllY. L.L.C.. LANDLORD and MAJOR CI IRYSLER PLYMOI III JEEP
EAG[ 1K INC.. ] ILNANT is in full force and effect (the `lease'): and
WI IEREAS. the Lease had a stated termination date of l)ecember 31, 1995:
and
WI JEREAS. thereafter, by Extension Agreement dated Nlay 29. 1996. the
termination date was e\tended to December 31, 1996: and
WhEREAS. LANDLORD and lENAN F desire'to further extend the l.ease to
December 31, 1997:
NOW. TI IEREI:ORE. in consideration of the premises, and for other good
and x aluable consideration receipt X% hereof is herebx acknowledged. the
parties agree as follows:
I. The lease termination date is modified to December 31. 1997.
2. Except as modified herein, the lease remains in full force and
effoct.
Dated: August 14. 1997
BRUCE BENDEI.I. and I IAROID BENI)EIL. lANDIORI)
BY: IsI Bruce Bendell BRUCE BENDEIl.
BY: /s/ I Iar~.Id Bendehi
HAROI.D BLN[)l:I.I.
MAJOR DOI)GE. INC. (formerly known as MAJOR CIIRYSIER-PLYMOLUl. INC.), FENAN F
BY: is! Bruce Bendell
BRUCE BENI)EI.I.
EXTENSION AGREEMENT
RE: LEASE DATED FEBRUARY - 1995
BENDELL REALTY, L.L.C., LANDLORD and
MAJOR CHRYSLER PLYMOUTH JEEP EAGLE, INC., TENANT
PREMISES: 34-20 45TH Street, L.I.C., NY
WHEREAS, LANDLORD and TENANT acknowledge that the above lease by and
between BENDELL REALTY, L.L.C., LANDLORD and MAJOR CHRYSLER PLYMOUTH JEEP EAGLE,
INC., TENANT is in full force and effect (the "Lease"); and
WHEREAS, the Lease had a stated termination date of December 31,
1995; and
WHEREAS, thereafter, by Extension Agreement dated May 29, 1996, the
termination date was extended to December 31, 1996; and
WHEREAS, thereafter, by Extension Agreement dated August 14, 1997,
the termination date was extended to December 31, 1997;
WHEREAS, LANDLORD and TENANT desire to further extend the Lease to
December 31, 1998 on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration receipt whereof is hereby acknowledged, the parties
agree as follows:
1. The Lease termination date is modified and extended to December
31, 1998.
2. The monthly rentals are modified and, for the period January 1,
1998 to December 31, 1998, shall be at the rate of $11,000.00 per month.
3. Except as modified herein, the Lease remains in full force and
effect.
Dated: December 16, 1997
BENDELL REALTY, L.L.C., LANDLORD
BY: /s/ Bruce Bendell
--------------------------------
BRUCE BENDELL
MAJOR CHRYSLER PLYMOUTH JEEP EAGLE,
INC., TENANT
BY: /s/ Bruce Bendell
--------------------------------
BRUCE BENDELL
EXHIBIT 10.35 Lease Agreement -- Bendell
Realty, L.L.C. and Major Chrysler
<PAGE>
A 35 Lease, Business Premises, JULIUS BLUMBERG, INC., LAW BLANK PUBLISHERS
Loft, Office or Store 2-85
This Lease made the - day of February 1995, between BENDELL REALTY, L.L.C.,
having its office at 43-40 Northern Blvd., Long Island City, New York,
hereinafter referred to as LANDLORD, and MAJOR CHRYSLER PLYMOUTH JEEP EAGLE,
INC., having its office at Northern Blvd., Long Island City, NY, hereinafter
jointly, severally and collectively referred to as TENANT.
Witnesseth, that the Landlord hereby leases to the Tenant, and the Tenant
hereby hires and takes from the Landlord the entire premises known as 34-20 45th
Str'eet, Long Island City, NY, as is more particularly described in Exhibit "A"
to be used and occupied by the Tenant as an automobile and motor vehicle repair
facility and for no other purpose, for a term to commence on January 1, 1995,
and to end on December 31, 1995 unless sooner terminated as hereinafter
provided, at the ANNUAL RENT of One hundred twenty thousand ($120,000.00)
dollars all payable in equal monthly instalments in advance on the first day of
each and every calendar month during said term, except the first instalment,
which shall be paid upon the execution hereof.
THE TENANT JOINTLY AND SEVERALLY COVEWANTS:
FIRST.--That the Tenant will pay the rent as above provided.
REPAIRS
ORDINANCES AND VIOLATIONS
ENTRY
INDEMNIFY LANDLORD
SECOND.--That, throughout said term the Tenant will take good care of the
demised premises, fixtures and appurtenances, and all alterations, additions and
improvements to either; make all repairs in and about the same necessary to
preserve them in good order and condition, which repairs shall be, in quality
and class, equal to the original work; promptly pay the expense of such repairs;
suffer no waste or injury; give prompt notice to the Landlord of any fire that
may occur; execute and comply with all laws, rules orders, ordinances and
regulations at any time issued or in force (except those requiring structural
alterations), applicable to the demised premises or to the Tenant's occupation
thereof, of the Federal, State and Local Governments, and of each and every
department, bureau and official thereof, and of the New York Board of Fire
Underwriters; permit at all times during usual business hours, the Landlord and
representatives of the Landlord to enter the demised premises for the purpose of
inspection, and to exhibit them for purposes of sale or rental; suffer the
Landlord to make repairs and improvements to all parts of the building, and to
comply with all orders and requirements of governmental authority applicable to
said building or to any occupation thereof; suffer the Landlord to erect, use,
maintain, repair and replace pipes and conduits in the demised premises and to
the floors above and below; forever indemnify and save harmless the Landlord for
and against any and all liability, penalties, damages, expenses and judgments
arising from injury during said term to person or property of any nature,
occasioned wholly or in part by any act or acts, omission or omissions of the
Tenant, or of the employees, guests, agents, assigns or undertenants of the
Tenant and also for any matter or thing growing out of the occupation of the
demised premises or of the streets, sidewalks or vaults adjacent thereto;
permit, during the six months next prior to the expiration of the term the usual
notice "To Let" to be placed and to remain unmolested in a conspicuous place
upon the exterior of the demised premises; repair, at or before the end of the
term, all injury done by the installation or removal of furniture and property;
and at the end of the term, to quit and surrender the demised premises with all
alterations, additions and improvements in good order and condition.
7__7~
<PAGE>
MOVING INJURY SURRENDER
NEGATIVE COVENANTS
OBSTRUCTION SIGNS
AIR CONDITIONING
THIRD.--That the Tenant will not disfigure or deface any part of the
building, or suffer the same to be done, except so far as may be necessary to
affix such trade fixtures as are herein consented to by the Landlord; the Tenant
will not obstruct, or permit the obstruction of the street or the sidewalk
adjacent thereto; will not do anything, or suffer anything to be done upon the
demised premises which will increase the rate of fire insurance upon the
building or any of its contents, or be liable to cause structural injury to said
building; will not permit the accumulation of waste or refuse matter, and will
not, without the written consent of the Landlord first obtained in each case,
either sell, assign, mortgage or transfer this lease, underlet the demised
premises or any part thereof, permit the same or any part thereof to be occupied
by anybody other than the Tenant and the Tenant's employees, make any
alterations in the demised premises, use the demised premises or any part
thereof for any purpose other than the one first above stipulated, or for any
purpose deemed extra hazardous on account of fire risk, nor in violation of any
law or ordinance. That the Tenant will not obstruct or permit the obstruction of
the light, halls, stairway or entrances to the building, and will not erect or
inscribe any sign, signals or advertisements unless and until the style and
location thereof have been approved by the Landlord; and if any be erected or
inscribed without such approval, the Landlord may remove the same. No water
cooler, air conditioning unit or system or other apparatus shall be installed or
used without the prior written consent of Landlord.
IT IS MUTUALLY COVENANTED AND AGREED, THAT
FIRE CLAUSE
FOURTH.--If the demised premises shall be partially damaged by fire or
other cause without the fault or neglect of Tenant, Tenant's servants,
employees, agents, visitors or licensees, the damages shall be repaired by and
at the expense of Landlord and the rent until such repairs shall be made shall
be apportioned according to the part of the demised premises which is usable by
Tenant. But if such partial damage is due to the fault or neglect of Tenant,
Tenant's servants, employees, agents, visitors or licensees, without prejudice
to any other rights and remedies of Landlord and without prejudice to the rights
of subrogations of Landlord's insurer, the damages shall be repaired by Landlord
but there shall be no apportionment or abatement of rent. No penalty shall
accrue for reasonable delay which may arise by reason of adjustment of insurance
on the part of Landlord and/or Tenant, and for reasonable delay on account of
"labor troubles", or any other cause beyond Landlord's control. If the demised
premises are totally damaged or are rendered wholly untenantable by fire or
other cause, and if Landlord shall decide not to restore or not to rebuild the
same, or if the building shall be so damaged that Landlord shall decide to
demolish it or to rebuild it, then or in any of such events Landlord may, within
ninety (90) days after such fire or other cause, give Tenant a notice in writing
of such decision, which notice shall be given as in Paragraph Twelve hereof
provided, and thereupon the term of this lease shall expire by lapse of time
upon the third day after such notice is given, and Tenant shall vacate the
demised premises and surrender the same to Landlord. If Tenant shall not be in
default under this lease then, upon the termination of this lease under the
conditions provided for in the sentence immediately preceding, Tenant's
liability for rent shall cease as of the day following the casualty. Tenant
hereby expressly waives the provisions of Section 227 of the Real Property Law
and agrees that the foregoing provisions of this Article shall govern and
control in lieu thereof. If the damage or destruction be due to the fault or
neglect of Tenant the debris shall be removed by, and at the expense of, Tenant.
EMINENT DOMAIN
FIFTH.--If the whole or any part of the premises hereby demised shall be
taken or condemned by any competent authority for any public use or purpose then
the term hereby granted shall cease from the time when possession of the part so
taken shall be required for such public purpose and without apportionment of
award, the Tenant hereby assigning to the Landlord all right and claim to any
such award, the current rent, however, in such case to be apportioned.
LEASE NOT IN EFFECT
DEFAULTS
TEN DAY NOTICE
SIXTH.--If, before the commencement of the term, the Tenant be adjudicated
a bankrupt, or make a "general assignment," or take the benefit of any insolvent
act, or if a Receiver or Trustee be appointed for the Tenant's property, or if
this lease or the estate of the Tenant hereunder by tranferred or pass to or
devolve upon any other person or corporation, or if the Tenant shall default in
the performance of any agreement by the Tenant contained in any other lease to
the Tenant by the Landlord or by any corporation of which an officer to the
Landlord is a Director, this lease shall thereby, at the option of the Landlord,
be terminated and in that case, neither the Tenant nor anybody claiming under
the Tenant shall be entitled to go into possession of the demised premises. If
after the commenc nt of the term, any of the events mentioned above in this
r
subdivision shall, c 3 , or if Tenant shall make default in fulfilling any of
<PAGE>
L)L ui"b Lea5e, or-ner r-nan cne covenants tor the payment of rent or
"additional rent" or if the demised premises become vacant or deserted, the
Landlord may give to the Tenant ten days' notice of intention to end the term of
this lease, and thereupon at the expiration of said ten days' (if said condition
which was the basis of said notice shall continue to exist) the term under this
lease shall-expire as fully and completely as if that day were the date herein
definitely fixed for the expiration of the term and the Tenant will then quit
and surrender the demised premises to the Landlord, but the Tenant shall remain
liable as hereinafter provided.
<PAGE>
RE-POSSESSION BY LANDLORD
RE-LETTING
WAIVER BY TENANT
If the Tenant shall make default in the payment of the rent reserved
hereunder, or any item of "additional rent" herein mentioned, or any part of
either or in making any other payment herein provided for, or if the notice last
above provided for shall have been given and if the condition which was the
basis of said notice shall exist at the expiration of said ten days, period, the
Landlord may immediately, or at any time thereafter, re-enter the demised
premises and remove all persons and all or any property therefrom, either by
summary dispossess proceedings, or by any suitable action or proceeding at law,
or by force or otherwise, without being liable to indictment, prosecution or
damages therefor, and re-possess and enjoy said premises together with all
additions, alterations and improvements. In any such case or in the event that
this lease be "terminated" before the commencement of the term, as above
provided, the Landlord may either re-let the-demised premises or any part or
parts thereof for the Landlord's own account, or may, at the Landlord's option,
re-let the demised premises or any part or parts thereof as the agent of the
Tenant, and receive the rents therefor, applying the same first to the payment
of such expenses as the Landlord may have incurred, and then to the fulfillment
of the covenants of the Tenant herein, and the balance, if any, at the
expiration of the term first above provided for, shall be paid to the Tenant.
Landlord may rent the premises for a term extending beyond the term hereby
granted without releasing Tenant from any liability. In the event that the term
of this lease shall expire as above in the this subdivision "Sixth" provided, or
terminate by summary proceedings or otherwise, and if the Landlord shall not
re-let the demised premises for the Landlord's own account, then, whether or not
the premises be re-let, the Tenant shall remain liable for, and the Tenant
hereby agrees to pay to the Landlord, until the time when this lease would have
expired but for such termination or expiration, the equivalent of the amount of
all of the rent and "additional rent" reserved herein, less the avails of
reletting, if any, and the same shall be due and payable by the Tenant to the
Landlord on the several rent days above specified, that is, upon each of such
rent days the Tenant shall pay to the Landlord the amount of deficiency then
existing. The Tenant hereby expressly waives any and all right of redemption in
case the Tenant shall be dispossessed by judgment or warrant of any court or
judge, and the Tenant waives and will waive all right to trial by jury in any
summary proceedings hereafter instituted by the Landlord against the Tenant in
respect to the demised premises. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning.
REMEDIES ARE CUMULATIVE
In the event of a breach or threatened breach by the Tenant of any of the
covenants or provisions hereof, the Landlord shall have the right of injunction
and the right to invoke any remedy allowed at law or in equity, as if re-entry,
summary proceedings and other remedies were not herein provided for.
LANDLORD MAY PERFORM
ADDITIONAL RENT
SEVENTH.--If the Tenant shall make default in the performance of any
covenant herein contained, the Landlord may immediately, or at any time
thereafter, without notice, perform the same for the account of the Tenant. If a
notice of mechanic's lien be filed against the demised premises or against
premises of which the demised premises, are part, for, or purporting to be for,
labor or material alleged to have been furnished, or to be furnished to or for
the Tenant at the demised premises, and if the Tenant shall fail to take such
action as shall cause such lien to be discharged wiLhin fifteen days after the
filing of such notice, the Landlord may pay the amount of such lien or discharge
the same by deposit or by bonding proceedings, and in the event of such deposit
or bonding proceedings, the Landlord may require the lienor to prosecute an
appropriate action to enforce the lienor's claim. In such case, the Landlord may
pay any judgment recovered on such claim. Any amount paid or expense incurred by
the Landlord as in this subdivision of this lease provided, and any amount as to
which the Tenant shall at any time be in default for or in respect to the use of
water, electric current or sprinkler supervisory service, and any expense
incurred or sum or money paid by the Landlord by reason of the failure of the
Tenant to comply with any provision hereof, or in defending any such action,
shall be deemed to be "additional rent" for the demised premises, and shall be
due and payable by the Tenant to the Landlord on the first day of the next
following month, or, at the option of the Landlord, on the first day of any
succeeding month. The receipt by the Landlord of any instalment of the regular
stipulated rent hereunder or any of said "additional rent" shall not be a waiver
of any other "additional rent" then due.
<PAGE>
AS TO WAIVERS
EIGHTH.--The failure of the Landlord to insist, in any one or more
instances upon a strict performance of any of the covenants of this lease, or to
exercise any option herein contained, shall not be construed as a waiver or a
relinquishment for the future of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by the Landlord of
rent, with knowledge of the breach of any covenant hereof, shall not be deemed a
waiver of such breach and no waiver by the Landlord of any provision hereof
shall be deemed to have been made unless expressed in writing and signed by the
Landlord. Even though the Landlord shall consent to an assignment hereof no
further assignment shall be made without express consent in writing by the
Landlord.
COLLECTION OF RENT FROM OTHERS
NINTH.--If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than the Tenant the Landlord
may collect rent from the assignee, under-tenant or occupant, and apply the net
amount collected to the rent herein reserved, and no such collection shall be
deemed a waiver of the covenant herein against assignment and underletting, or
the acceptance of the assignee, under-tenant or occupant as tenant, or a release
of the Tenant from the further performance by the Tenant of the covenants herein
contained on the part of the Tenant.
MORTGAGES
TENTH.--This lease shall be subject and subrodinate at all times, to the
lien of the mortgages now on the demised premises, and to all advances made or
hereafter to be made upon the security thereof, and subject and subordinate to
the lien of any mortgage or mortgages which at any time may be made a lien upon
the premises. The Tenant will execute and deliver such further instrument or
instruments subordinating this lease to the lien of any such mortgage or
mortgages as shall be desired by any mortgagee or proposed mortgagee. The Tenant
hereby appoints the Landlord the attorney-in-fact of the Tenant, irrevocable, to
execute and deliver any such instrument or instruments for the Tenant.
IMPROVEMENTS
ELEVENTH.--All improvements made by the Tenant to or upon the demised
premises, except said trade fixtures, shall when made, at once be deemed to be
attached to the freehold, and become the property of the Landlord, and at the
end or other expiration of the term, shall be surrendered to the Landlord in as
good order and condition as they were when installed, reasonable wear and
damages by the elements excepted.
NOTICES
TWELFTH.--Any notice or demand which under the terms of this lease or
under any statute must or may be given or made by the parties hereto shall be in
writing and shall be given or made by mailing the same by certified or
registered mail addressed to the respective parties at the addresses set forth
in this lease.
NO LIABILITY
THIRTEENTH.--The Landlord shall not be liable for any failure of water
supply or electrical current, sprinkler damage, or failure of sprinkler service,
nor for injury or damage to person or property caused by the elements or by
other tenants or persons in said building, or resulting from steam, gas,
electricity, water, rain or snow, which may leak or flow from any part of said
buildings, or from the pipes, appliances or plumbing works of the same, or from
the street or sub-surface, or from any other place, nor for interference with
light or other incorporeal hereditaments by anybody other than the Landlord, or
caused by operations by or for a governmental authority in construction of any
public or quasi-public work, neither shall the Landlord be liable for any intent
defect in the building.
NO ABATEMENT
FOURTEENTH.--No diminution or abatement of rent, or other compensation
shall be claimed or allowed for inconvenience or discomfort arising from the
making of repairs or improvements to the building or to its appliances, nor for
any space taken to comply with any law, ordinance or order of a governmental
authority. In respect to the various "services," if any, herein expressly or
impliedly agreed to be furnished by the Landlord to the Tenant, it is agreed
that there shall be no diminution or abatement of the rent, or any other
compensation, for interruption or curtailment of such "service" when such
interruption or curtailment shall be due to accident, alterations or repairs
desirable or necessary to be made or to inability or difficulty in securing
supplies or labor for the maintenance of such "service" or to some other cause,
not gross negligence on the part of the Landlord. No such interruption or
curtailment of any such "service,, shall be deemed a constructive eviction. The
Landlord shall not be required to furnish, and the Tenant shall not be entitled
to receive, any of such "services" during any period wherein the Tenant shall be
in default in respect to the payment f Neither shall there be any
i
0 ro
abatement or dimunution of rent because -1 _k ng repairs, improvements or
decorations to the demised premises after ~e date above fixed for the
commencement of the term, it being underQtfi that rent shall, in any event,
commence to run at such date so above fixed.
<PAGE>
RULES, ETC.
FIFTEENTH.--The Landlord may prescribe and regulate the placing of safes,
machinery, quantities of merchandise and other things. The Landlord may also
prescribe and regulate which elevator and entrances shall be used by the
Tenant's employees, and for the Tenant's shipping. The Landlord may make such
other and further rules and regulations as, in the Landlord's judgment, may from
time to time be needful for the safety, care or cleanliness of the building, and
for the preservation of good order therein. The Tenant and the employees and
agents of the Tenant will observe and conform to all such rules and regulations.
SHORING OF WALLS
SIXTEENTH.--In the event that an excavation shall be made for building or
other purposes upon land adjacent to the demised premises or shall be
contemplated to be made, the Tenant shall afford to the person or persons
causing or to cause such excavation, license to enter upon the demised premises
for the purpose of doing such work as said person or persons shall deem to be
necessary to preserve the wall or walls, structure or structure upon the demised
premises from injury and to support the samEf by proper foundations.
VAULT SPACE
SEVENTEENTH.--No vaults or space not within the property line of the
building are leased hereunder. Landlord makes no representation as to the
location of the property line of the building. Such vaults or space as Tenant
may be permitted to use or occupy are to be used or occupied under a revocable
license and if such license be revoked by the Landlord as to the use of part or
all of the vaults or space Landlord shall not be subject to any liability;
Tenant shall not be entitled to any compensation or reduction in rent nor shall
this be deemed constructive or actual eviction. Any tax, fee or charge of
municipal or other authorities for such value or space shall be paid by the
Tenant for the period of the Tenant's use or occupancy thereof.
ENTRY
EIGHTEENTH.--That during seven months prior to the expiration of the term
hereby granted, applicants shall be admitted at all reasonable hours of the day
to view the premises until rented; and the Landlord and the Landlord's agents
shall be permitted at any time during the term to visit and examine them at any
reasonable hour of the day, and workmen may enter at any time, when authorized
by the Landlord or the Landlord's agents, to make or facilitate repairs in any
part of the building; and if the said Tenant shall not be personally present to
open and permit an entry into said premises, at any time, when for any reason an
entry therein shall be necessary or permissable hereunder, the Landlord or the
Landlord's agents may forcibly enter the same without rendering the Landlord or
such agents liable to any claim or cause of action for damages by reason thereof
(if during such entry the Landlord shall accord reasonable care to the Tenant's
property) and without in any manner affecting the obligations and covenants of
this lease; it is, however, expressly understood that the right and authority
hereby reserved, does not impose, nor does the Landlord assume, by reason
thereof, any responsibility or liability whatsoever for the care or supervision
of said premises, or any of the pipes, fixtures, appliances or appurtenances
therein contained or therewith in any manner connected.
NO REPRESENTATIONS
NINETEENTH.--The Landlord has made no representations or promises in
respect to said building or to the demised premises except those contained
herein, and those, if any, contained in some written communication to the
Tenant, signed by the Landlord. This instrument may not be changed, modified,
discharged or terminated orally.
ATTORNEY'S FEES
7WENTIETH.--If the Tenant shall at any time be in default hereunder, and
if the Landlord shall institute an action or summary proceeding against the
Tenant based upon such default, then the Tenant will reimburse the Landlord for
the expense of attorneys' fees and disbursements thereby incurred by the
Landlord, so far as the same are reasonable in amount. Also so long as the
Tenant shall be a tenant hereunder the amount of such expenses shall be deemed
to be "additional rent" hereunder and shall be due from the Tenant to the
Landlord on the first day of the month following the incurring of such
respective expenses.
POSSESSION ,
TWENTY-FIRST.--Landlord shall not be liable for failure to give possession
of the premises upon commencement date by reason of the fact that premises are
not ready for occupancy, or due to a prior Tenant wrongfully holding over or any
other person wrongfully in possession or for any other reason: in such event the
rent shall not commence until possession is given or is available, but the term
herein shall not be extended.
<PAGE>
THE TENANT FURTHER COVENANTS:
IF A FIRST FLOOR
TWENTY-SECOND.--If the demised premises or any part thereof consist of a
store, or of a first floor, or of any part thereof, the Tenant will keep the
sidewalk and curb in front thereof clean at all times and free from snow and
ice, and will keep insured in favor of the Landlord, all plate glass therein and
furnish the Landlord with policies of insurance covering the same.
INCREASED FIRE INSURANCE RATE
TWENTY-THIRD.--If by reason of the conduct upon the demised premises of a
business not herein permitted, or if by reason of the improper or careless
conduct of any business upon or use of the demised premises, the fire insurance
rate shall at any time be higher than it otherwise would be, then the Tenant
will reimburse the Landlord, as additional rent hereunder, for that part of all
fire insurance premiums hereafter paid out by the Landlord which shall have been
charged because of the conduct of such business not so permitted, or because of
the improper or careless conduct of any buiiness upon or use of the demised
premises, and will make such reimbursement upon the first day of the month
following such outlay by the Landlord; but this covenant shall not apply to a
premium for any period beyond the expiration date of this lease, first above
specified. In any action or proceeding wherein the Landlord and Tenant are
parties, a schedule or "make up" of rate for the building on the demised
premises, purporting to have been issued by New York Fire Insurance Exchange, or
other body making fire insurance rates for the demised premises, shall be prima
facie evidence of the facts therein stated and of the several items and charges
included in the fire insurance rate then applicable to the demised premises.
WATER RENT
SEWER
TWENTY-FOURTH.--If a separate water meter be installed for the demised
premises, or any part thereof, the Tenant will keep the same in repair and pay
the charges made by the municipality or water supply company for or in respect
to the consumption of water, as and when bills therefor are rendered. If the
demised premises, or any part thereof, be supplied with water through a meter
which supplies other premises, the Tenant will pay to the Landlord, as and when
bills are rendered therefor, the Tenant's proportionate part of all charges
which the municipality or water supply company shall make for all water consumed
through said meter, as indicated by said meter. Such proportionate part shall be
fixed by apportioning the respective charge according to floor area against all
of the rentable floor area in the building (exclusive of the basement) which
shall have been occupied during the period of the respective charges, taking
into account the period that each part of such area was occupied. Tenant agrees
to pay as additional rent the Tenant's proportionate part determined as
aforesaid, of the sewer rent or charge imposed or assessed upon the building of
which the premises are a part.
ELECTRIC CURRENT
TWENTY-FIFTH.--That the Tenant will purchase from the Landlord, if the
Landlord shall so desire, all electric current that the Tenant requires at the
demised premises, and will pay the Landlord for the same, as the amount of
consumption shall be indicated by the meter furnished therefor. The price for
said current shall be the same as that charged for consumption similar to that
of the Tenant by the company supplying electricity in the same community.
Payments shall be due as and when bills shall be rendered. The Tenant shall
comply with like rules, regulations and contract provisions as those prescribed
by said company for a consumption similar to that of the Tenant.
SPRINKLER SYSTEM
TWENTY-SIXTH.--If there now is or shall be installed in said building a
"sprinkler system" the Tenant agrees to keep the appliances thereto in the
demised premises in repair and good working condition, and if the New York Board
of Fire Underwriters or the New York Fire Insurance Exchange or any bureau,
department or official of the State or local government requires or recommends
that any changes, modifications, alterations or additional sprinkler heads or
other equipment be made or supplied by reason of the Tenant's business, or the
location of partitions, trade fixtures, or other contents of the demised
premises, or if such changes, modifications, alterations, additional sprinkler
heads or other equipment in the demised premises are necessary to prevent the
imposition of a penalty or charge against the full allowance for a sprinkler
system in the fire insurance rate as fixed by said Exchange, or by any Fire
Insurance Company, the Tenant will at the Tenant's own expense, promptly make
and supply such changes, modifications, alterations, additional sprinkler heads
or other equipment. As additional rent hereunder the Tenant will pay to the
Landlord, annually in advance, throughout the term $ ...........................
toward the contract price for sprinkler supervisory service.
<PAGE>
THE TENANT FURTHER COVENANTS:
IF A FIRST FLOOR
TWENTY-SECOND.--If the demised premises or any part thereof consist of a
store, or of a first floor, or of any part thereof, the Tenant will keep the
sidewalk and curb in front thereof clean at all times and free from snow and
ice, and will keep insured in favor of the Landlord, all plate glass therein and
furnish the Landlord with policies of insurance covering the same.
INCREASED FIRE INSURANCE RATE
TWENTY-THIRD.--If by reason of the conduct upon the demised premises of a
business not herein permitted, or if by reason of the improper or careless
conduct of any business upon or use of the demised premises, the fire insurance
rate shall at any time be higher than it otherwise would be, then the Tenant
will reimburse the Landlord, as additional rent hereunder, for that part of all
fire insurance premiums hereafter paid out by the Landlord which shall have been
charged because of the conduct of such business not so permitted, or because of
the improper or careless conduct of any buiiness upon or use of the demised
premises, and will make such reimbursement upon the first day of the month
following such outlay by the Landlord; but this covenant shall not apply to a
premium for any period beyond the expiration date of this lease, first above
specified. In any action or proceeding wherein the Landlord and Tenant are
parties, a schedule or "make up" of rate for the building on the demised
premises, purporting to have been issued by New York Fire Insurance Exchange, or
other body making fire insurance rates for the demised premises, shall be prima
facie evidence of the facts therein stated and of the several items and charges
included in the fire insurance rate then applicable to the demised premises.
WATER RENT
SEWER
TWENTY-FOURTH.--If a separate water meter be installed for the demised
premises, or any part thereof, the Tenant will keep the same in repair and pay
the charges made by the municipality or water supply company for or in respect
to the consumption of water, as and when bills therefor are rendered. If the
demised premises, or any part thereof, be supplied with water through a meter
which supplies other premises, the Tenant will pay to the Landlord, as and when
bills are rendered therefor, the Tenant's proportionate part of all charges
which the municipality or water supply company shall make for all water consumed
through said meter, as indicated by said meter. Such proportionate part shall be
fixed by apportioning the respective charge according to floor area against all
of the rentable floor area in the building (exclusive of the basement) which
shall have been occupied during the period of the respective charges, taking
into account the period that each part of such area was occupied. Tenant agrees
to pay as additional rent the Tenant's proportionate part determined as
aforesaid, of the sewer rent or charge imposed or assessed upon the building of
which the premises are a part.
ELECTRIC CURRENT
TWENTY-FIFTH.--That the Tenant will purchase from the Landlord, if the
Landlord shall so desire, all electric current that the Tenant requires at the
demised premises, and will pay the Landlord for the same, as the amount of
consumption shall be indicated by the meter furnished therefor. The price for
said current shall be the same as that charged for consumption similar to that
of the Tenant by the company supplying electricity in the same community.
Payments shall be due as and when bills shall be rendered. The Tenant shall
comply with like rules, regulations and contract provisions as those prescribed
by said company for a consumption similar to that of the Tenant.
SPRINKLER SYSTEM
TWENTY-SIXTH.--If there now is or shall be installed in said building a
"sprinkler system" the Tenant agrees to keep the appliances thereto in the
demised premises in repair and good working condition, and if the New York Board
of Fire Underwriters or the New York Fire Insurance Exchange or any bureau,
department or official of the State or local government requires or recommends
that any changes, modifications, alterations or additional sprinkler heads or
other equipment be made or supplied by reason of the Tenant's business, or the
location of partitions, trade fixtures, or other contents of the demised
premises, or if such changes, modifications, alterations, additional sprinkler
heads or other equipment in the demised premises are necessary to prevent the
imposition of a penalty or charge against the full allowance for a sprinkler
system in the fire insurance rate as fixed by said Exchange, or by any Fire
Insurance Company, the Tenant will at the Tenant's own expense, promptly make
and supply such changes, modifications, alterations, additional sprinkler heads
or other equipment. As additional rent hereunder the Tenant will pay to the
Landlord, annually in advance, throughout the term $............................
toward the contract price for sprinkler supervisory service.
<PAGE>
SECURITY
TWENTY-SEVENTH.--The sum of ............................... Dollars is
deposited by the Tenant herein with the Landlord herein as security for the
faithful performance of all the covenants and conditions of the lease by the
said Tenant. If the Tenant faithfully performs all the covenants and conditions
on his part to be performed, then the sum deposited shall be returned to said
Tenant.
NUISANCE
TWENTY-EIGHTH.--This lease is granted and accepted on the especially
understood and agreed condition that the Tenant will conduct his business in
such a manner, both as regards noise and kindred nuisances, as will in no wise
interfere with, annoy, or distrub any other tenants, in the conduct of their
several businesses, or the landlord in the management of the building; under
penalty of forfeiture of this lease and consequential damages.
BROKERS COMMISSIONS
TWENTY-NINTH-The Landlord recognizes as the broker who negotiated and
consummated this lease with the Tenant herein, and agrees that if, as, and when
the Tenant exercises the option, if any, contained herein to renew this lease,
or fails to exercise the option, if any, contained therein to cancel this lease,
the Landlord will pay to said broker a further commission in accordance with the
rules and commission rates of the Real Estate Board in the community. A sale,
transfer,,or other disposition of the Landlord's interest in said lease shall
not operate to defeat the Landlord's obligation to pay the said commission to
the said broker. The Tenant herein hereby represents to the Landlord that the
said broker is the sole and only broker who negotiated and consummated this
lease with the Tenant.
WINDOW CLEANING
THIRTIETH.--The Tenant agrees that it will not require, permit, suffer,
nor allow the cleaning of any window, or windows, in the demised premises from
the outside (within the meaning of Section 202 of the Labor Law) unless the
equipment and safety devices required by law, ordinance, regulation or rule,
including, without limitation, Section 202 of the New York Labor Law, are
provided and used, and unless the rules, or any supplemental rules of the
Industrial Board of the State of New York are fully complied with; and the
Tenant hereby agrees to indemnify the Landlord, Owner, Agent, Manager and/or
Superintendent as a result of the Tenant's requiring, permitting, suffering, or
allowing any window, or windows in the demised premises to be cleaned from the
outside in violation of the requirements of the aforesaid laws, ordinances,
regulations and/or rules.
VALIDITY
THIRTY-FIRST.--The validity or uneforceability of any provision of this
lease shall in no way affect the validity or uneforceability of any other
provision hereof.
EXECUTION & DELIVERY OF LEASE
THIRTY-SECOND.--In order to avoid delay, this lease has been prepared and
submitted to the Tenant for signature with the understanding that it shall not
bind the Landlord unless and until it is executed and delivered by the Lnadlord.
EXTERIOR OF PREMISES
THIRTY-THIRD.--The Tenant will keep clean and polished all metal, trim,
marble and stonework which are a part of the exterior of the premises, using
such materials and methods as the Landlord may direct and if the tenant shall
fail to comply with the provisions of this paragraph, the Landlord may cause
such work to be done at the expense of the Tenant.
<PAGE>
PLATE GLASS
THIRTY-FOURTH.--The Landlord shall replace at the expense of the Tenant
any and all broken glass in the skylights, doors and walls in and about the
demised premises. The Landlord may insure and keep insurd all plate glass in the
skylights, doors and walls in the demised premises, for and in the name of the
Landlord and bills for the premiums therefor shall be rendered by the Landlord
to the Tenant at such times as the Landlord may elect, and shall be due from and
payable by the Tenant when rendered, and the amount thereof shall be deemed to
be, and shall be paid as, additional rent.
WAR EMERGENCY
THIRTY-FIFTH.--This lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in nowise be affected, impaired or excused
because Landlord is unable to supply or is delayed in supplying any service
expressly or, impliedly to be supplied or is unable to make, or is delayed in
making any repairs, additions, alterations or decorations or is unable to supply
or is delayed in supplying any equipment or fixtures if Landlord is prevented or
delayed from so doing by reason of governmental preemption in connection with a
National Emergency declared by the President of the United States or in
connection with any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency.
THE LANDLORD COVENANTS
QUIET POSSESSION
FIRST.--That if and so long as the Tenant pays the rent and "additional
rent" reserved hereby, and performs and observes the covenants and provisions
hereof, the Tenant shall quietly enjoy the demised premises, subject, however,
to the terms of this lease, and to the mortgagees above mentioned, provided
however, that this covenant shall be conditioned upon the retention of title to
the premises by Landlord.
ELEVATOR
HEAT
And it is mutually understood and agreed that the covenants and agreements
contained in the within lease shall be binding upon the parties hereto and upon
their respective successors, heirs, executors and administrators.
In Witness Whereof, the Landlord and Tenant have respectively signed and
sealed these presents the day and year first above written.
BENDELL REALTY, L.L.C.
--------------------------- [L.S.]
By: Landlord IN PRESENCE OF:
MAJOR CHRYSLER PLYMOUTH JEEP EAGLE, INC.
- --------------------------- [L.S.3
By: Tenant
<PAGE>
State of New York, County of ss:
On the day of 19-, before me personally came,
, to me known, who, being by me duly sworn, did depose and say the he
resides at ; that he is of , the corporation described in and which executed the
within instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporation seal; that it was so affixed by
order of the Board of Directors of said corporation, and that he signed his name
thereto by like order.
State of New York, County of ss:
On the day of 19-, before me personally came,
I to me known, who, being by me duly sworn, did depose and say the he resides at
-; that he is ---of- , the corporation described in
and which executed the within instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporation seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order.
State of New York, County of SS:
On the _ day of 19-, before me personally came,
, to me known and known to me to be the individual described in
and who executed the foregoing instrument, and duly acknowledged that he
executed the same.
State of New York, County of ss:
On the _ day of 19-, before me personally came,
, subscribing witness to the foregoing instrument, with whom I am
personally acquainted, who, being by me duly sworn, did depose and say, that he
resided, at the time of the execution of said instrument, and still resides, in
that he is and then was acquainted with -
I and he knew - to be - the individual described in and who executed the
foregoing instrument; and that he, said subscribing witness, was present and saw
execute the same; and that he, said witness, thereupon at the same time
subscribed his name as witness thereto.
BUILDING
Premises
Landlord
to
Tenant
L E A S E
<PAGE>
GUARANTY
In consideration of the letting of the premises within mentioned to the
Tenant within named, and of the sum of One Dollar, to the undersigned in hand
paid by the Landlord within named, the undersigned herby guarantees to the
Landlord and to the heirs, successors and/or assigns of the Landlord, the
payment by the Tenant of the rent, within provided for, and the performance by
the Tenant of all of the provisions of the within lease. Notice of all defaults
is waived, and consent is hereby given to all extensions of time that any
Landlord may grant.
Dated, ......19
...... ............................ L.S.
STATE OF COUNTY OF ...... ss:
On this day of 19-, before me personally
appeared to me known and known to me to be the individual described in and who
executed the foregoing instrument, and duly acknowledged to me that he executed
the same.
<PAGE>
State of New York, County of ss:
On the _ day of 19_, before me personally came, I to me known,
who, being by me duly sworn, did depose and say the he resides at ; that he is
of the corporation described in and
which executed the within instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order.
State of New York, County of ss:
on the _ day of 19_, before me personally came,
I to me known, who, being by me duly sworn, did depose and say the he
resides at ; that he is of the corporation
described in and which executed the within instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
State of New York, County of ss:
on the day of 19-, before me personally
came, _ and known to me to be the individual described in and who
executed the foregoing instrument, and duly acknowledged that he executed the
same.
State of New York, County of ss:
on the _ day of 19_, before me personally came,
, subscribing witness to the foregoing instrument, with whom I am
personally acquainted, who, being by me duly sworn, did depose and say the he
resided, at the time of the execution of said instrument, and still resides, in
and knew to be the individual described in and who
executed the foregoing instrument, and that he, said subscribing witness, was
present and saw execute the same; and that he, said witness, thereupon at the
same time subscribed his name thereto.
BUILDING ................................................ Premises .............
Landlord
to
Tenant
L E A S E
<PAGE>
GUARANTY
In consideration of the letting of the premises within mentioned to the
Tenant within named, and of the sum of one Dollar, to the undersigned in hand
paid by the Landlord within named, the undersigned hereby guarantees to the
Landlord and to the heirs, successors and/or assigns of the Landlord, the
payment by the Tenant of the rent, within provided for, and the performance by
the Tenant of all of the provisions of the within lease. Notice of all defaults
is waived, and consent is hereby given to all extensions of time that any
Landlord may grant.
Dated, ......19
...... ............................ L.
STATE OF COUNTY OF ...... ss:
On this day of 19_, before me
personally appeared to me known and known to me to be the individual described
in and who executed the foregoing instrument, and duly acknowledged to me that
he executed the same.
EXTENSION AGREEMENT
RE: LEASE DATED FEBRUARY _, 1995
BENDELL REALTY, L.L.C., LANDLORD and
MAJOR CHRYSLER PLYMOUTH JEEP EAGLE, INC., TENANT
PREMISES: 34-20 45TH Street, L.I.C., NY
WHEREAS, LANDLORD and TENANT acknowledge that the above lease by and
between BENDELL REALTY, L.L.C., LANDLORD and MAJOR CHRYSLER PLYMOUTH JEEP EAGLE,
INC., TENANT is in full force and effect (the "Lease"); and
WHEREAS, the Lease had a stated termination date of December 31,
1995; and
WHEREAS, thereafter, by Extension Agreement dated May 29, 1996, the
termination date was extended to December 31, 1996; and
WHEREAS, LANDLORD and TENANT desire'to further extend the Lease to
December 31, 1997;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration receipt whereof is hereby acknowledged, the parties
agree as follows:
1. The Lease termination date is modified to December 31, 1997.
2. Except as modified herein, the Lease remains in full force and
effect.
Dated: August 14, 1997
BRUCE BENDELL and HAROLD BENDELL, LANDLORD
BY: /s/ Bruce Bendell
---------------------------------
BRUCE BENDELL
BY: /s/ Harold Bendell
---------------------------------
HAROLD BENDELL
MAJOR DODGE, INC. (formerly known as MAJOR CHRYSLER-PLYMOUTH, INC.), TENANT
BY: /s/ Bruce Bendell
----------------------------------
BRUCE BENDELL
EXTENSION AGREEMENT
RE: LEASE DATED FEBRUARY - 1995
BENDELL REALTY, L.L.C., LANDLORD and
MAJOR CHRYSLER PLYMOUTH JEEP EAGLE, INC., TENANT
PREMISES: 34-20 45TH Street, L.I.C., NY
WHEREAS, LANDLORD and TENANT acknowledge that the above lease by and
between BENDELL REALTY, L.L.C., LANDLORD and MAJOR CHRYSLER PLYMOUTH JEEP EAGLE,
INC., TENANT is in full force and effect (the "Lease"); and
WHEREAS, the Lease had a stated termination date of December 31,
1995; and
WHEREAS, thereafter, by Extension Agreement dated May 29, 1996, the
termination date was extended to December 31, 1996; and
WHEREAS, thereafter, by Extension Agreement dated August 14, 1997,
the termination date was extended to December 31, 1997;
WHEREAS, LANDLORD and TENANT desire to further extend the Lease to
December 31, 1998 on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration receipt whereof is hereby acknowledged, the parties
agree as follows:
1. The Lease termination date is modified and extended to December
31, 1998.
2. The monthly rentals are modified and, for the period January 1,
1998 to December 31, 1998, shall be at the rate of $11,000.00 per month.
3. Except as modified herein, the Lease remains in full force and
effect.
Dated: December 16, 1997
BENDELL REALTY, L.L.C., LANDLORD
BY: /s/ Bruce Bendell
--------------------------------
BRUCE BENDELL
MAJOR CHRYSLER PLYMOUTH JEEP EAGLE,
INC., TENANT
BY: /s/ Bruce Bendell
--------------------------------
BRUCE BENDELL
THIS INDENTURE made the day of February, 1996.
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT.
B E T W E E N
W I T N E S S E T H :
Demise Parking
PRAJS DRIMMER ASSOCIATES
hereinafter called the "Landlord"
- - and -
BARAK TECHNOLOGY INC. o/a INFO SYSTEMS hereinafter called the "Tenant", OF THE
FIRST PART; OF THE SECOND PART;
1. That in consideration of the rents, covenants, agreements and conditions
hereinafter reserved and contained on the part of the Tenant to be paid,
observed and performed, the Landlord does demise and lease unto the Tenant the
premises comprising part of the Building municipally known as SUITE 906, 1110
FINCH AVENUE WEST, DOWNSVIEW, situate in the CITY OF NORTH YORK (hereinafter
called the "Building"), containing an area of 1,415 square feet and measured
from the glass line of all exterior walls, from the corridor side of the
corridor walls and from the centre line of all interior walls separating the
herein described premises from adjacent premises, being part of the ninth floor
of the Building as shown outlined in red on the floor plan attached hereto
(hereinafter called the "Premises" or the "Leased Premises" or the "Demised
Premises").
2. The use and occupation by Tenant of the Leased Premises shall include the use
in common with others entitled thereto of the parking and common area facilities
appurtenant to the Building; provided such parking and common area facilities
shall be subject to the terms and conditions of this Lease and to reasonable
rules and regulations for the use thereof as prescribed by Landlord from time to
time; and provided the Landlord shall have the right to make such changes and
improvements or alterations as the Landlord may from time to time decide in
respect of such parking and common area facilities including the right to change
the location and layout of the parking areas.
3. To have and to hold the Leased Premises for and during the term (hereinafter
called the "term") of One (1) year to be computed from the first day of
November, 1995, and from thenceforth next ensuing and fully to be completed and
ended on the 31st day of October, 1996. Provided, however, that if the Leased
Premises, or any part thereof, are not ready on the commencement date of the
term due to the failure of the Landlord to complete construction or to make
available the services which it is hereby obligated to furnish, no part of the
rent or only the proportionate part thereof in the event the Tenant shall occupy
a part of the Leased Premises shall be payable for the period prior to the date
when the entire Leased Premises are ready for
<PAGE>
2 occupancy, and the full rent shall accrue only after such last mentioned date,
and the Tenant hereby agrees to accept any such abatement of rent in full
settlement of all claims which the Tenant might otherwise have by reason of the
Leased Premises not being ready for occupancy on the commencement date of the
term.
Provided further, however, that when the Landlord has completed construction of
the Leased Premises and made available the aforesaid services, the Tenant shall
not be entitled to any abatement of rent for any delay in occupancy due to the
Tenant's failure to complete the installations and other work required for its
purposes, or due to any other reason, nor shall the Tenant be entitled to any
abatement of rent for any delay in occupancy if the Landlord has been unable to
complete construction of the Leased Premises by reason of the Tenant's failure
to complete the installation and other work required for its purpose.
A certificate of Landlord's architect as to the date of completion of
construction of the Leased Premises (or as to the date upon which Landlord would
have been able to complete construction but for the aforesaid delay of Tenant)
shall be conclusive and binding and full rent shall accrue and become payable
from such date.
Rent
Payment
Deposit
Use of
Premises
Tenant's
4. YIELDING AND PAYING THEREFORE yearly and every year without a prior demand
therefor and without any deduction, defaulcation or set off whatsoever, during
the term hereof, as Rent, the sum of NINETEEN THOUSAND EIGHT HUNDRED AND TEN
DOLLARS ($19,810.00)of lawful money of Canada to be paid in advance in equal
monthly instalments of ONE THOUSAND SIX HUNDRED AND FIFTY DOLLARS AND
EIGHTY-THREE CENTS ($1,650.83), PLUS GST each on the first day of each month
during the term hereby demised. If the term commences on any day other than the
first or ends on any day other than the last day of the month; rent for the
fractions of a month at the commencement and at the end of the term shall be
adjusted pro rata.
S. All payments required to be made by the Tenant under or in respect of this
Lease shall be made to the Landlord at the Landlord's office at 2065 FINCH
AVENUE WEST, SUITE 405, NORTH YORK, ONTARIO, M3N 2V7, or to such agent or agents
of the Landlord or at such other place as the Landlord shall hereafter from time
to time direct in writing to the Tenant.
6. Landlord acknowledges receipt of ONE THOUSAND SEVEN HUNDRED AND SIXTY-SIX
DOLLARS AND THIRTY-NINE CENTS ($1,766.39) from the Tenant to be held by the
Landlord as security for the due performance by Tenant of all its covenants and
obligations on its part herein contained and to be applied to any damages
resulting from default by Tenant of any of its covenants and obligations
hereunder, or towards the payment or reduction of any claim of the Landlord
against the Tenant; provided that the Tenant is not in default or in breach of
any of its covenants or obligations and has not been declared bankrupt, then the
aforesaid deposit shall be applied on account of the last month's rent due
hereunder.
7. The Tenant shall use and occupy the Leased Premises only for general offices,
and for no other purpose; provided the Tenant in the use and occupation of the
Leased Premises and in the prosecution or conduct of any business therein shall
comply with all requirements of all laws, orders, ordinances, rules and
regulations of the Federal, Provincial and Municipal authorities and with any
direction or certificate of
<PAGE>
occupancy issued pursuant to any law by any public officer or officers. The
Tenant covenants that it will not use or permit to be used any part of the
Leased Premises for any dangerous, noxious or offensive trade or business and
will not cause or maintain any nuisance in, at or on the Leased Premises or
cause or permit the Leased Premises to be used for the purpose of any bankrupt,
liquidation or auction sale.
I
Realty Taxes
Value Added Tax or Sales Tax
Tenant's Covenants
Electric Lights
Repair
Entry By Landlord
Repair According to Notice
Repairs to Building
6. If the Tenant or any licensee, concessionaire or School sub-tenant of the
Tenant shall elect to have the Leased Taxes Premises or any part thereof
assessed for separate school taxes, Tenant shall pay to Landlord, as additional
rent within twenty days after demand therefor by Landlord, any amount by which
the amount of the separate school taxes exceeds the amount which would have been
payable for school taxes had such election not been made.
7 Tenant shall pay to the Landlord as additional rent after demand thereof by
Landlord, any value added tax or sales tax which may become payable by the
Landlord under Federal Legislation, and which is calculated or computed on the
rent payable by the tenant hereunder. It is acknowledged that any such
additional rent shall not include the Landlord's income taxes.
B.
The Tenant covenants with the Landlord:
(a) to pay rent;
(b) to pay the total cost of any replacement of any electric light bulbs, tubes,
starters and ballasts in the Leased Premises;
(c) to maintain and keep, at its own expense, the interior of the Leased
Premises and every part thereof in good order and condition and promptly make
all needed repairs and replacements (reasonable wear and tear and damage by
fire, lightning and tempest only excepted) and, without limiting the generality
of the foregoing, the Tenant shall keep the Leased Premises well painted, clean
and in such condition as a careful owner would do.
(d) that it shall be lawful for the Landlord and its agents, at all reasonable
times during the said term, to enter the Leased Premises to inspect the
condition thereof.
(e) where an inspection reveals repairs are necessary, the Landlord shall give
to the Tenant notice in writing and thereupon the Tenant will,
<PAGE>
within three calendar months from the date of delivery of the notice, make the
necessary repairs in a good and workmanlike manner. Provided that if the Tenant
neglects to make such repairs within the time limited, the Landlord may at its
option make such repairs at the expense of the Tenant, and in any and every such
case the Tenant covenants with the Landlord to pay to the Landlord forthwith, as
additional rent, all sums which the Landlord may have expended in making such
repairs and shall not have previously received from the Tenant; provided further
that the making of any repairs by the Landlord shall not relieve the Tenant from
the obligation to repair.
(f) if the Building, including the Leased Premises, the elevators, boilers,
engines, pipes and other apparatus (or any of them) used for the purpose of
heating or air-conditioning the Building or operating the elevators or if the
water pipes, drainage pipes, electric lighting or other equipment of the
Building or the roof or outside walls of the Building get out of repair or
become damaged or destroyed through the negligence, carelessness or misuse of
the Tenant, his servants, agents, employees or anyone permitted by him to be in
the Building, or through him or them in any way
4 Leave Premises in Good Repair compliance With Law Waste and Nuisance Assigning
Insurance stopping up or injuring the heating apparatus, elevators, water pipes,
drainage piper or other equipment or part of the Building, the expense of the
necessary repairs, replacements or alterations shall be borne by the Tenant who
shall pay the same to the Landlord forthwith on demand.
(g) and further, that the Tenant will, at the expiration or sooner determination
of the said term, peaceably surrender and yield up unto the Landlord the said
premises hereby demised with the appurtenances, together with all buildings or
erections which at any time during the said term shall be made therein or
thereon, in good and substantial repair and condition, reasonable wear and tear
and damage by fire, lightning and tempest only excepted.
(h) to comply with all provisions of law including without limitation
federal and provincial legislative enactments, building by-laws, and any other
governmental or municipal regulations which relate to the partitioning,
equipment, operation and use of the Leased Premises, and to the making of any
repairs, replacements, alterations, additions, changes, substitutions or
improvements
<PAGE>
of or to the Leased Premises. And to comply with all police, fire and sanitary
regulations imposed by any federal, provincial or municipal authorities or made
by fire insurance underwriters, and to observe and obey all governmental and
municipal regulations and other requirements governing the conduct of any
business conducted in the Leased Premises not to do or omit or permit to be done
or omitted upon or about the Leased Premises anything which shall be or result
in a nuisance or menace to the Landlord or any other tenant of the Building.
(j) and will not assign or sublet or permit the premises to be occupied by
anyone other than the Tenant, without leave, provided such leave shall not be
unreasonably withheld.
(k) in the event the Tenant's use and occupation of the Leased Premises,
whether or not the Landlord has consented to the same, causes any increase in
premiums for fire and extended coverage insurance, rental, boiler, casualty and
other types of insurance carried by the Landlord from time to time on the
Building above the rate for the least hazardous type of occupancy legally
permitted in the Leased Premises, the Tenant shall pay the additional premium on
the aforementioned policies caused by reason thereof. The Tenant shall also pay,
in such event, any additional premium on the rent insurance policies that may be
carried by the Landlord for the Landlord's protection against rent lost through
fire or other casualty. If notice of cancellation shall be given respecting any
insurance policy, or any insurance policy on the said Building or any part
thereof shall be cancelled or refused to be renewed by any insurer by reason of
the use or occupation of the Leased Premises, whether or not the Landlord has
consented to such use and occupation, the Tenant shall forthwith remedy or
rectify such use or occupation upon being requested to do so in writing by the
Landlord, and if the Tenant shall fail to do so
Glass
Alterati ons, etc.
Liens
Interior Walls
Signs
5 forthwith, the Landlord may, at its option, determine this Lease forthwith by
leaving upon the Leased Premises notice in writing of its intention so to do,
and thereupon rent and any other payment for which the Tenant is liable under
this Lease shall be apportioned and paid up in full to the date of such
determination of the Lease, and the Tenant shall immediately deliver up vacant
possession of the Leased Premises to the Landlord.
Bills for such additional premiums as aforementioned shall be rendered by the
Landlord to the Tenant at such time as the Landlord may elect, and shall be due
from and payable by the Tenant when rendered, and the amount thereof shall be
deemed to be, and paid as, additional rent.
(1) that the Tenant shall pay the cost of
<PAGE>
replacement with as good quality and size of any glass broken on the Leased
Premises during the continuance of this Lease, unless such breakage is not the
result of any act of the Tenant, his employees, servants, agents, contractors,
licensees or invitees.
(m) that the Tenant will not make or erect in, at or upon the Leased
Premises any installations, alterations, changes, additions or improvements
without submitting plans and specifications to the Landlord and obtaining the
Landlord's prior written consent in each instance. And work performed by or for
the Tenant shall be completed in a good and workmanlike manner using first-class
equipment and materials, and shall be performed by workmen and contractors whose
union affiliations or lack of union affiliations do not conflict with those of
Landlord's workmen, suppliers or contractors who may be employed in the
Building.
(n) that if any Construction or other liens or Order for the payment of money
shall be filed against the Leased Premises by reason of, or arising out of any
labour, material, work or service furnished to the Tenant or to anyone claiming
through the Tenant, the Tenant shall within fifteen days after notice to the
Tenant of the filing thereof cause the same to be discharged by bonding,
deposit, payment, Court Order or otherwise. The Tenant shall defend all suits to
enforce such lien or Order, whether against the Tenant or the Landlord, at the
Tenant's own expense. The Tenant hereby indemnifies the Landlord against any
expense or damage as a result of such lien or order.
(o) that the Tenant will not deface or mark any part of the said Building and
will not permit any hole to be drilled or made, or nails, screws, hooks or
spikes to be driven in the interior walls, doors or floors or stone or brick
work of the said Building or any appurtenances thereof without the written
consent of the Landlord.
(p) that the Tenant will not paint, place, affix, inscribe or display on any of
the windows of the Building, or on any part of the-outside or inside of the
Building, any sign, picture, direction, lettering, advertisement or notice
without the prior written consent of the Landlord. The Landlord will prescribe a
uniform pattern of identification signs for tenants to be placed on the outside
of
Name of
Building
Rules and
<PAGE>
Regulations
Landlord I s Covenants
Quiet
Enjoyment
Heating and Air-Conditioni ng
Elevator
9.
6 doors leading into the premises of tenants of part floors. The Tenant, on
ceasing to be the Tenant of the Leased Premises, will before leaving them cause
any sign, advertisement or notice as aforesaid to be removed or obliterated at
his own expense and in a good and workmanlike manner. The Tenant shall be
entitled to have his name shown upon the directory board of the Building, but
the Landlord shall in its sole discretion design the style of such
identification and allocate the space on the directory board for each tenant.
(q) not to refer to the Building by any name other than that designated from
time to time by the Landlord, nor use the name of the Building for any purpose
other than that of the business address of the Tenant.
(r) that the Tenant and his employees and all persons visiting or doing
business with them on the Leased Premises shall be bound by and shall observe
and perform the Rules and Regulations attached to this Lease and any further and
other reasonable Rules and Regulations made hereafter by Landlord of which
notice in writing shall be given to the Tenant, and all such Rules and
Regulations shall be deemed to be incorporated in and form part of this Lease.
The Landlord covenants with the Tenant:
(a) for quiet enjoyment.
(b) to heat and air-condition the Leased Premises with heating and
air-conditioning equipment or appliances in such manner as to keep the Leased
Premises reasonably warm or airconditioned, as the case may be for the
reasonable and comfortable use thereof by the Tenant, his employees, servants
and agents, during each day, except on Sundays and public holidays, during the
hours when the building is open to the public for business, but in case the
boilers, engines, pipes or other apparatus or any of them used in effecting the
heating or air-conditioning of the Leased Premises at any time become incapable
of heating or air-conditioning the Leased Premises as aforesaid or be damaged or
destroyed, the Landlord shall have a reasonable time within which to repair such
damage or replace such boilers, engines, pipes or apparatus or any of them, and
the Landlord shall repair and replace the said boilers, engines, pipes or other
apparatus with all reasonable speed, but the Landlord shall not be liable for
indirect or consequential damages or for damages for personal discomfort or
illness by reason of the breach of this covenant.
(c) to furnish, except when repairs are being made, passenger elevator service
during normal business hours and limited elevator service at other times.
Operatorless automatic elevator service, if made available, shall be deemed
"elevator service" within the meaning of this paragraph. And to permit the
Tenant and the employees of the Tenant to have free use of such elevator service
in common with others, but the
Janitor
Mainten
Areas
Taxes and Utilities
Access
<PAGE>
Washrooms
Evidence of Payments
Status
Statement
Subordina tion
7 Tenant and such employees and all other persons using the same shall do so at
their sole risk and under no circumstances shall the Landlord be held
responsible for any damage or injury happening to any person while using the
same or occasioned to any person by any elevator or any of its appurtenances.
(d) to cause when reasonably necessary from time to time the floors of the
Leased Premises to be swept and cleaned and the desks, tables and other
furniture of the Tenant to be dusted; and to cause when reasonably necessary
from time to time, but not more than once in every two month period, the windows
of the Leased Premises to be washed; but with the exception of the obligation to
cause such work to be done the Landlord shall not be responsible for any act of
omission or commission on the part of the person or persons employed to perform
such work; such work shall be done at the Landlord's direction and without
interference by the Tenant, his servants or employees, and in connection with
such janitorial service, the Tenant agrees that any such authorized
representative shall have free access to the Leased Premises.
(e) to maintain and keep in good repair the parking and common area facilities
appurtenant to the Building, and to provide reasonably adequate snow clearance
to permit ingress and egress to and from the Leased Premises and parking areas.
(f) to pay all charges for public utilities including gas, electrical power or
energy, steam or hot water rates and all taxes and rates whether municipal,
parliamentary or otherwise assessed against the Leased Premises.
(g) to permit the Tenant and the employees of the Tenant and all persons
lawfully requiring communication with them to have the use at all reasonable
times in common with others of the main entrance and stairways and corridors
leading to the Leased Premises.
(h) to permit the Tenant and the employees of the Tenant in common with others
entitled thereto to use the washrooms in the Building on the floor or floors in
which the Leased Premises are situate.
10. The Tenant shall from time to time, at the request of the Landlord, produce
to the Landlord satisfactory evidence of the due payment by the Tenant of all
payments required to be made by the Tenant under this Lease.
11. Within ten days after request therefor by Landlord, Tenant agrees to execute
and deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if modified stating the
modifications and certifying that the Lease as modified is in full force and
effect) the amount of the annual rental then being paid hereunder, the dates to
which the rental (by instalments or otherwise) and other charges hereunder have
been paid, and whether or not there is any existing default on the part of the
Landlord of which the Tenant has notice.
12. Provided that this Lease and everything herein contained shall be deemed to
be subordinate to any charge or charges from time to time created by the
Landlord with respect
<PAGE>
Limitation of Landlords Liability Public Liability Indemnif ication 8 to the
Building, by way of mortgage, and the Tenant hereby covenants and agrees that he
will promptly at any time and from time to time, as required by the Landlord
during the term hereof, execute all documents and give all further assurances to
this proviso as may be reasonably required to effectuate the postponement of his
rights and privileges hereunder to the holder or holders of such charge or
charges; provided, however, that no such subordination by the Tenant shall have
the effect of permitting the holder or holders of any mortgage or lien or other
security to disturb the occupation and possession by the Tenant of the Leased
Premises so long as the Tenant shall perform all of the terms, covenants,
conditions, agreements and provisos contained in this Lease.
13. The term "Landlord" as used in this Lease so far as covenants or obligations
on the part of the Landlord are concerned, shall be limited to mean and include
only the owner or owners at the time in question of the Leased Premises, and in
the event of any transfer or conveyance of ownership the Landlord herein named,
and in the case of any subsequent transfers or conveyances, the then vendor or
transferor, shall be automatically freed and relieved from and after the date of
such transfer or conveyance of all personal liability as respects the
performance of any covenants or obligations on the part of the Landlord
contained in this Lease thereafter to be performed, provided that:
(a) Any funds in the hands of such Landlord or the then vendor or transferor at
the time of such transfer, in which the Tenant has an interest shall be turned
over to the purchaser or transferee and any amount then due and payable to the
Tenant by the Landlord or the then vendor or transferor under any provision of
this Lease shall be paid to the Tenant; and
(b) Upon any such transfer, the purchaser or transferee shall be deemed to have
assumed, subject to the limitations of this paragraph, all of the terms,
covenants and conditions in this Lease contained to be performed on the part of
the Landlord; it being intended hereby that the covenants and obligations
contained in this Lease on the part of the Landlord shall, subject as aforesaid,
be binding on the Landlord, its successors and assigns, only during and in
respect of their respective successive periods of ownership.
14. The Landlord shall not be liable nor responsible in any way for any personal
injury or death that may be suffered or sustained by the Tenant or any employee
of the Tenant or any other person who may be upon the Leased Premises or in the
Building or on the lands appurtenant to the Building, or for any loss or damage
or injury to any property belonging to the Tenant or to its employees or to any
other person while such property is on the Leased Premises or in the Building or
on the lands appurtenant to the Building, unless same shall be caused by the
negligence of the Landlord or its employees, servants or agents, and the
Landlord shall not be liable in any event for any damage to any such property
caused by steam, water, rain or snow which may leak into, issue or flow from any
part of the Building or from the water, steam or drainage pipes or plumbing
works of the Building or from any other place or quarter, nor for any damage
caused by or attributable to the condition or
<PAGE>
arrangement of any electric or other wiring, nor for any damage caused by
anything done or omitted by any other tenant.
15. The Tenant will indemnify and save harmless the Landlord from any and all
liabilities, fines, suits, claims, of Landlord Seizure and Bankruptcy Re-Entry 9
demands, costs and actions of any kind or nature whatsoever to which the
Landlord shall or may become liable for or suffer by reason of any breach,
violation or non-performance by the Tenant of any covenant, term or provision
hereof or by reason of any injury, loss, damage or death resulting from,
occasioned to or suffered by any person or persons or any property by reason of
any act, neglect or default on the part of the Tenant or any of its agents,
customers, employees, servants, contractors, licensees or invitees in or about
the Leased Premises or any part thereof; such indemnification in respect of any
such breach, violation, non-performance, damage to property, loss, injury or
death occurring during the term of this Lease shall survive any termination of
this Lease, anything in this Lease to the contrary notwithstanding.
16. It is hereby expressly agreed that, in case, without the written consent of
the Landlord, the Leased Premises shall become and remain vacant or not used for
a period of thirty days while the same are suitable for use by the Tenant, or be
used by any other person than the Tenant, or in case the term hereby granted or
any of the goods and chattels of the Tenant shall be at any time seized or taken
in execution or in attachment by any creditor of the Tenant, or the Tenant shall
make an assignment for the benefit of creditors or give any bill of sale without
complying with the Bulk Sales Act (Ontario), or become bankrupt or insolvent or
take the benefit of any Act now or hereafter in force for bankrupt or insolvent
debtors or any Order shall be made for the winding-up of the Tenant, then and in
every such case the then current month's rent and the next ensuing three month's
rent shall immediately become due and payable and, at the option of the
Landlord, this Lease shall cease and determine and the said term shall
immediately become forfeited and void, in which event the Landlord may re-enter
and take possession of the Leased Premises as though the Tenant or any occupant
or occupants of the Leased Premises was or were holding over after the
expiration of the term without any right whatever.
17. Proviso for re-entry by the Landlord on non-payment of rent or
non-performance of covenants. The above powers may be exercised, whether legal
demand for the rent has been made or not. Provided that, notwithstanding
anything hereinbefore contained, the Landlord's right of re-entry hereunder for
non-payment of rent, nonperformance of covenants, seizure or forfeiture of the
said term shall become exercisable immediately upon such default being made.
Provided further that upon such re-entry by the Landlord under the terms of this
paragraph or any other provision or provisions of this Lease, the Landlord may,
in addition to any other remedies to which the Landlord may be entitled, at its
option, at any time and from time to time, relet the Leased Premises or any part
or parts thereof for the account of the Tenant or otherwise and receive and
collect the rents therefor, applying the same first to the payment of such
expenses as the Landlord may have incurred in recovering possession of the
Leased Premises including the legal expenses and solicitor's fees and for
putting the same into good order or condition or preparing or
<PAGE>
altering the same for re-rental and all other expenses, commissions and charges
paid, assumed or incurred by the Landlord in or about reletting the Leased
Premises, and then to the fulfilment of the covenants of the Tenant hereunder.
Any such reletting herein provided for may be for the remainder of the term as
originally granted or for a longer or shorter period. In any such case and
whether or not the Leased Premises or any part thereof be relet, the Tenant
shall pay to the Landlord the rental hereby reserved and all other sums required
to be paid by the Tenant up to the time of the termination of this Lease or of
recovery of possession of the Leased Premises by the Landlord, as the case may
be, and thereafter the Tenant covenants and agrees, if required by the
10 Landlord, to pay to the Landlord until the end of the term of this Lease the
equivalent of the amount of all the rentals hereby reserved and all other sums
required to be paid by the Tenant hereunder, less the net avails of reletting,
if any, and the same shall be due and payable by the Tenant to the Landlord on
the days herein provided for rental, that is to say, upon each of the days
herein provided for payment of rental the Tenant shall pay to the Landlord the
amount of the deficiency then existing.
Non
Waiver
Fixtures
Removal of Goods
No Exceptions for Distress
Holding
Over
Inspect
Premises
Notices for Sale or To Let
18. No condoning, excusing or overlooking by the Landlord of any default, breach
or non-observance by the Tenant at any time or times in respect of any covenant,
proviso or condition herein contained shall operate as a waiver of the
Landlord's rights hereunder in respect of any continuing or subsequent default,
breach or non-observance, or so as to defeat or affect in any way the rights of
the Landlord herein in respect of any such continuing or subsequent default or
breach, and no waiver shall be inferred from or implied by anything done or
omitted by the Landlord save only express waiver in writing. All rights and
remedies of the Landlord in this Lease contained shall be cumulative and not
alternative.
19. Provided that the Tenant may remove his fixtures if all rent due or to
become due is full paid; provided further, however, that all installations,
alterations, additions, partitions and fixtures other than trade or tenant's
fixtures in or upon the Leased Premises, whether placed there by the Tenant or
Landlord, shall be the Landlord's property upon the termination of this Lease
without compensation therefor to the Tenant and shall not be removed from the
Leased Premises at any time either during or after the term. Notwithstanding
anything herein contained the Landlord shall be under no obligations to repair
or maintain the Tenant's installations, alterations, additions, partitions and
fixtures or anything in the nature of a leasehold improvement made or installed
by the Tenant; and further notwithstanding anything herein contained the
Landlord shall have the right upon the termination of this Lease by effluxion of
time or otherwise to require the Tenant to remove his installations,
alterations, additions, partitions and fixtures or anything in the nature of a
leasehold improvement made or installed by the Tenant and to make good any
damage caused to the Leased
<PAGE>
Premises by such installation or removal.
20. Provided that in case of removal by the Tenant of the goods and chattels of
the Tenant from off the Leased Premises, the Landlord may follow the same for
thirty days in the same manner as is provided for in The Landlord and Tenant
Act.
21. The Tenant hereby waives and renounces the benefit of any present or future
Statute taking away or limiting the Landlord's right of distress, and covenants
and agrees that notwithstanding any such Statute none of the goods and chattels
of the Tenant on the Leased Premises at any time during the term shall be exempt
from levy by distress for rent in arrears.
22. That if the Tenant shall continue to occupy the Leased Premises after the
expiration of this Lease, with or without the consent of the Landlord and
without any further written agreement, the Tenant shall be a monthly tenant at
the monthly rental herein reserved and otherwise on the terms and conditions
herein set forth except as to the length of tenancy.
23. Provided that during the term hereby created any person or persons may
inspect the Leased Premises and all parts thereof at all reasonable times on
producing a written order to that effect signed by the Landlord or its agents.
24. Provided that the Landlord shall have the right during the term of this
Lease to place upon the Leased Premises a notice stating that the Leased
Premises are for sale and shall, within six months from the termination of the
said term,
Exhibiting
Premises
Fire
11 have the right to place upon the Leased Premises a notice stating that the
Leased Premises are for rent; and further provided that the Tenant will not
remove such notice or permit the same to be removed.
25. Provided that the Landlord or its agents shall have the right during the
last six months of the term to exhibit the Leased Premises to prospective
tenants during normal business hours.
26. Provided, and it is hereby expressly agreed, that if and whenever during the
term hereby demised the Building shall be destroyed or damaged by fire,
lightning or tempest or any of the perils normally insured against under the
provisions of standard extended coverage fire insurance policies, then and in
every such event:
I
(a) If the damage or destruction of the Building renders fifty percent or
more of the said Building wholly unfit for occupancy or impossible or unsafe for
use and occupancy, the Landlord may, at its option, terminate this Lease by
giving to the Tenant notice in writing of such termination in which event this
Lease and the term hereby demised shall cease and be at an end as of the date of
such
<PAGE>
destruction or damage and the rent and all other payments for which the Tenant
is liable under the terms of this Lease shall be apportioned and paid in full to
the date of such destruction or damage.
(b) If the damage or destruction is such that the portion of the Building
hereby demised is rendered wholly unfit for occupancy or it is impossible or
unsafe to use and occupy it and if in either event the damage, in the opinion of
the Landlord to be given to the Tenant within twenty days of the happening of
such damage or destruction cannot be repaired with reasonable diligence within
one hundred and twenty days from the happening of such damage or destruction,
then either the Landlord or the Tenant may, within five days next succeeding the
giving of the Landlord's opinion as aforesaid, terminate this Lease by giving to
the other notice in writing of such termination in which event this Lease and
the term hereby demised shall cease and be at an end as of the date of such
damage or destruction and the rent and all other payments for which the Tenant
is liable under the terms of this Lease shall be apportioned and paid in full to
the date of such damage or destruction; in the event that neither the Landlord
nor the Tenant so terminates this Lease, then the Landlord shall repair the
Building with all reasonable speed and the rent hereby reserved shall abate from
the date of the happening of the damage until the damage shall be made good to
the extent of enabling the Tenant to use and occupy the Leased Premises.
(c) If the damage be such that the portion of the Building hereby demised
is wholly unfit for occupancy or if it is impossible or unsafe to use or occupy
it but if in either event the damage, in the opinion of the Landlord to be given
to the Tenant within twenty days from the happening of such damage, can be
repaired with reasonable diligence within one hundred and twenty days from the
happening of such damage,then the rent hereby reserved shall abate from the date
of the happening of such damage until the damage shall be made good to the
extent of enabling the Tenant to use and occupy the Leased Premises and the
Landlord shall repair the damage with all reasonable speed.
12
(d) If in the opinion of the Landlord the damage can be made good as
aforesaid within one hundred and twenty days of the happening of such damage or
destruction, and the damage is such that the portion of the Building hereby
demised is capable of being partially used for the purposes for which it is
hereby demised, then until such damage has
<PAGE>
been repaired the rent shall abate in the proportion that the part of the
portion of the Building hereby demised is rendered unfit for occupancy bears to
the whole of the said portion of the Building hereby demised, and the Landlord
shall repair the damage with all reasonable speed.
Impossibi lity of Performance
Notices
Lease Entire Agree ments
Captions
Number and
27. It is understood and agreed that whenever and to extent that the Landlord
shall be unable to fulfil or shall be delayed or restricted in the fulfilment of
any obligation hereunder in respect of the supply or provision of any service or
utility or the doing of any work or the making of any repairs by reason of being
unable to obtain the material, goods, equipment, service, utility or labour
required to enable it to fulfil such obligation or by reason of any Statute, Law
or Order-in-Council or any regulation or order passed or made pursuant thereto
or by reason of the order or direction of any administrator, controller or board
or any governmental department or officer or other authority, or by reason of
not being able to obtain any permission or authority required thereby, or by
reason of any other cause beyond its control whether of the foregoing character
or not, the Landlord shall be relieved from the fulfilment of such obligation
and the Tenant shall not be entitled to compensation for any inconvenience,
nuisance or discomfort thereby occasioned.
28. Any notice, request or demand herein provided for or given hereunder, if
given by the Tenant to the Landlord shall be sufficiently given if mailed by
registered mail in the Municipality of Metropolitan Toronto, postage prepaid,
addressed to the Landlord at 2065 FINCH AVENUE WEST, SUITE 405, NORTH YORK,
ONTARIO M3N 2V7.
Any notice herein provided for or given hereunder, if given by the Landlord to
the Tenant, shall be sufficiently given if mailed as aforesaid addressed to the
Tenant at the Leased Premises.
Any notice mailed as aforesaid shall be conclusively deemed to have been given
on the next business day following the day on which such notice is mailed as
aforesaid. Either Landlord or Tenant may at any time, give notice in writing to
the other(s) of any change of address of the party giving such notice. From and
after the giving of such notice the address therein specified shall be deemed to
be the address of the party for the giving of such notices thereafter.
29. This Lease, and the Schedules and Rider if any,
attached hereto and forming a part hereof, set forth all the
covenants, promises, agreements, conditions and understanding
between the Landlord and Tenant concerning the Leased Premises
and there are no covenants, promises, agreements, conditions or
understandings, either oral or written, between them other than
are herein set forth. Except as herein otherwise provided, no
subsequent alteration, amendment, change or addition to this
Lease shall be binding upon Landlord or Tenant unless reduced
to writing and signed by them.
30. The captions appearing in the margin of this Lease have been inserted as a
matter of convenience and for reference only and in no way define, limit or
enlarge the scope of meaning of this Lease nor any of the provisions hereof.
31. Words importing the singular number only shall
<PAGE>
include the plural and vice versa; words importing the
Gender
Effect of Lease
Registration
Rider
13 masculine gender shall include the feminine gender and viceversa; and words
importing persons shall include firms and corporations and vice-versa.
32. This Indenture and everything herein contained shall extend to and
bind and enure to the benefit of the respective heirs, executors,
administrators, successors and assigns (as the case may be) of each and
every of the parties hereto, subject to the consent of the Landlord being
obtained, as hereinbefore provided, to any assignment or sublease by
Tenant. All covenants herein contained shall be deemed joint and several and all
rights and powers reserved to the Landlord may be exercised by either Landlord
or its agents or representatives.
33. Tenant shall not register this Lease without the written consent of
Landlord, however, upon the request of either party hereto the other party shall
join in the execution of a memorandum or so called "short form" of this Lease
for the purposes of registration. Said memorandum or short form of this Lease
shall describe the parties, the Leased Premises and the term of this Lease and
shall incorporate this Lease by reference.
34. A Rider consisting of 1 page with paragraph numbers (consecutively) 1 to 8
is attached hereto and made a part hereof.
IN WITNESS WHEREOF the parties hereto have executed this Indenture. SIGNED,
SEALED AND DELIVERED in the presence of per:
PRAJS DRIMMER ASSOCIATES
Landlord
BARAK TECHNOLOGY INC.
O/A INFO SYSTEMS
per:
Tenant
I have authority to bind the
Corporation
I
15
R I D E R
1. CONDITIONAL AGREEMEN
The Landlord shall not be deemed to have made an offer to the Tenant by
furnishing to the Tenant a copy of this Lease with particulars inserted therein,
notwithstanding that the first instalment of Minimum Rental may be received by
the Landlord when this Lease is received by it for signature. No contractual or
other rights shall exist or be created between the Landlord and the Tenant until
such time as all parties to this Lease have executed the same.
2. INTEREST ON ARREARS
<PAGE>
All rent in arrears and all sums paid or expenses incurred on behalf of the
Tenant or for which the Landlord is entitled hereunder to reimbursement from the
Tenant, shall bear interest from the date upon which the same was due until
actual payment thereof at a rate equal to the lesser of two percent (2%) per
annum above the prime commercial loan rate charged to borrowers having the
highest credit rating from time to time by the Landlord's principal bank and the
maximum amount allowed under the laws of the jurisdiction in which the Building
is located.
3. SERVICE CHARGE
The Tenant hereby further agrees to pay to Landlord in compensation for
Landlord's costs and expenses a service charge of $25.00 for each cheque
tendered to Landlord in payment of monies due under this Lease and which is not
honoured by the Tenant's bank or depository.
4. OPTION TO RENEW
It is understood and agreed between the Landlord and the Tenant that if the
Tenant shall not be in continuing default in any of its obligations under the
terms of the Lease, the Tenant shall have the option of renewing the Lease for
two further periods of two (2) years each, by giving written notice to the
Landlord of its intention to renew at least one (1) month before the expiration
date of the Lease, such renewals to be on the same terms and conditions, save as
to any further renewal rights and rent shall continue to be set at $14.00 per
square foot gross plus GST. The Landlord agrees to pay to the Tenant the sum of
$2,500.00 upon the first renewal to be applied toward leasehold improvements
5.
RENTAL PAYMENTS
Payments to be made by post-dated cheques, submitted annually.
"AS IS" CONDITIO
The premises will be accepted by you in an "as is" condition.
7. LANDLORD'S MOVING ALLOWANCE
The Landlord agrees to provide the Tenant with $2,500.00 towards moving expenses
to cover the Tenant's move from unit 614 to 906. The Tenant agrees and
acknowledges that this payment has already been paid to it.
8. INCREASE OF LEASABLE SPACE
In the event that the Tenant wishes to increase it's leaseable area, the
Landlord agrees to rent this additional space to the Tenant at $14.00 per square
foot gross plus GST.
I
9-
pNINTH FLOORTTIJr,.,l~A0c)111,~ I
RULES AND REGULATIONS FORMING PART OF THE WITHIN LEASE 1. The sidewalks, entry
passages, elevators, fire escapes and common stairways shall not be obstructed
by any of the Tenants or used by them for any other purpose other than for
ingress and egress to and from their respective demised premises. Tenants will
not place or allow to be placed in the building corridors or public stairways
any waste paper, dust, garbage, refuse or anything whatever that would tend to
make them unclean or untidy.
2. The skylights and windows that reflect or admit light into passageways and
common areas of the Building shall not be covered or obstructed by any of the
tenants, and no awnings shall be put up, without the written consent of the
Landlord.
3. The water-closets and other water apparatus shall not be used for any purpose
other than those for which they were constructed, and no sweepings, rubbish,
rags, ashes or other substances shall be thrown therein. Any damage resulting by
misuse shall be borne by the Tenant by whom or by whose agents, servants or
employees the same is caused. Tenants shall not let the water run unless in
actual use, nor shall they deface any part of the said Building.
4. No Tenant shall do or permit anything to be done in said premises
<PAGE>
or bring or keep anything therein which will in any way increase the risk of
fire, or obstruct or interfere with the rights of other Tenants, or violate or
act at variance with the laws relating to fires or with the regulations of the
Fire Department or the Board of Health.
5. Tenants, their clerks or servants, shall not make or commit any improper
noises in the Building, lounge about doors or corridors or interfere in any way
with other Tenants or those having business with them.
6. Nothing shall be thrown by the Tenants, their clerks or servants out of
windows or doors or down the passages, elevator shafts or skylights of the
Building.
7. No birds or animals shall be kept in or about the Premises nor shall the
Tenants operate or permit to be operated any musical or sound producing
instrument or device inside or outside the Premises which may be heard outside
the Premises.
8. No one shall use the Premises for sleeping apartments or residential
purposes, or for the storage of personal effects or articles other than those
required for business purposes. The Landlord shall have the right:
(a) To require all persons entering or leaving the Building during such hours As
the Landlord may reasonably determine to identify themselves to a watchman by
registration or otherwise to establish their right to enter or leave; and
(b) To exclude or expel any pedlar or beggar at any time from the premises of
the Building.
10. All Tenants must observe strict care not to allow their windows to remain
open so as to admit rain or snow, or so as to interfere with the heating of the
Building. Any injury or damage caused to the Building or its appointments,
furnishings, heating or other appliances, or to any other tenant or to the
premises occupied by any other Tenant, by reason of windows being left open, so
as to admit rain or snow, or by interference with or neglect of the heating
appliances, or by reason of any other misconduct or neglect upon the part of the
Tenant or any other person or servant subject to him shall be made good by the
Tenant in whose premises the neglect, interference or misconduct occurred.
11. It shall be the duty of the respective tenants to assist and cooperate with
the Landlord in preventing injury to the premises demised to them respectively.
12. No inflammable oils or other inflammable, dangerous or explosive materials
shall be kept or permitted to be kept in said Premises. Nothing shall be placed
on the outside of window sills or projections.
13. Furniture, effects and supplies shall not be taken into or removed from the
Premises, except at such time and in such manner as may be previously approved
by the Landlord.
14. No bicycles or other vehicles shall be brought within the said building
except in the parking garage.
15. Business machines, filing cabinets, heavy merchandise or other articles
liable to overload, injure or destroy any part of the Building shall not be
taken into it without the written consent of the Landlord and the Landlord shall
in all cases retain the right to prescribe the weight and proper position of all
such articles and the
<PAGE>
times and routes for moving them into or out of the Building; the cost of
repairing any damage done to the Building by such moving or by keeping any such
articles on the Premises shall be paid by the Tenant.
16. The Tenant shall not place any additional lock upon any door of the Building
without the written consent of the Landlord.
17. The Tenant shall give the Landlord prompt notice of any accident to or any
defect in the plumbing, heating, air-conditioning, mechanical or electrical
apparatus or any part of the Building.
18. The Tenant shall not instal or permit the installation or use of any machine
dispensing goods for sale in the Premises or the Building or permit the delivery
of any food or beverage to the Premises without the approval of the Landlord or
in contravention of any regulations fixed or to be fixed by the Landlord. Only
persons authorized by the Landlord shall be permitted to deliver or to use the
elevators in the Building for the purpose of delivering food or beverages to the
Premises.
19. The parking of cars in the said parking garage shall be subject to the
reasonable regulations of the Landlord.
20. The Tenant shall not mark, paint, drill into or in any way deface the walls,
ceilings, partitions, floors or other parts of the Premises and the Building
except with the prior written consent of the Landlord and as it may direct.
21. The lining of all window drapes facing the interior surface of exterior
walls shall be subject to the prior approval of the Landlord as to colour and
material and the Tenant shall not hang and will remove any draperies which in
the Landlord's opinion do not conform to any uniform scheme of window coverings
established for the Building.
22. The Landlord shall have the right to make such other and further reasonable
rules and regulations as in its judgment may from time to time be needful for
the safety, care, cleanliness and appearance of the Premises and the Building,
and for the preservation of good order therein, and the same shall be kept and
observed by the tenants, their clerk and servants.
23. The Tenant agrees to the foregoing RULES AND REGULATIONS, which are hereby
made a part of this Lease, and each of them, and agrees that for such persistent
infraction of them, or any of them, as may in the opinion of the Landlord be
calculated to annoy or disturb the quiet enjoyment of any other tenant, or for
gross misconduct upon the part of the Tenant, or any one under him, the Landlord
may declare a forfeiture and cancellation of the accompanying Lease and may
demand possession of the Premises upon one week's notice.
AGREEMENT OF SUBLEASE, dated as of the 8th day of January, 1997 by and
between NEWSDAY, INC., a New York corporation, having its principal office at
235 Pinelawn Road, Melville, New York 11747 ("Newsday or Sublessor"), and MAJOR
FLEET AND LEASING CORP., a New York corporation, having its principal place of
business at 80-02 Kew Gardens Road, Suite 3500, Kew Gardens, New York 11415
("Sublessee").
W I T N E S S E S
WHEREAS, Newsday is the tenant under a certain Agreement of Lease dated July 25,
1989, between 80-02 Leasehold Company, as landlord ("Landlord"), and Newsday for
the premises (the "Demised Premises") located on the fourth floor of the
building at 80-02 Queens Boulevard, Queens, New York (the "Lease"); and
WHEREAS, Sublessee desires to sublet from Newsday a portion of the fourth floor
of the Demised Premises, and Newsday is willing to sublet a portion of the
fourth floor of the Demised Premises as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereby agree as follows:
1. Newsday hereby subleases to Sublessee and Sublessee hereby hires and takes
from Newsday a portion of the fourth floor of the Demised Premises consisting of
4,000 rentable square feet as designated in Exhibit A hereto (the "Subleased
Premises"), for the purpose of general offices and for insurance claims and
sales and for no other purpose, unless approved in advance by Landlord and
Newsday for a term to commence on January 15, 1997 and to expire on January 14,
2000.
2. (a) Sublessee acknowledges that it has reviewed and is familiar with all of
the terms, covenants and conditions of the Lease, a copy of which is annexed
hereto as Exhibit B, and which is incorporated herein and made a part hereof as
if set forth herein at length. Sublessee agrees and obligates itself to perform,
observe and comply with all of the terms, covenants and conditions on Newsday's
part to be performed, observed and complied with under the Lease as the same may
or shall relate to the occupancy of the Subleased Premises, except for the
payment of rent in the amounts set forth in the Lease, which is to be paid to
Newsday by Sublessee in such amounts as provided in paragraph 3 of this
Agreement of Sublease.
2
(b) Sublessee shall pay as Additional Rent the amount of $666.66 per month
during the term of this Sublease for electric.
(b) Subject to the terms and conditions of this Sublease, Newsday hereby grants
to Sublessee all of Newsday's rights and privileges enumerated in the Lease as
they pertain to the Subleased Premises.
(c) If Newsday receives any notice or demand from Landlord under the Lease which
affects Sublessee or the Subleased Premises, Newsday shall give a copy thereof
to Sublessee in a timely fashion.
3. (a) Sublessee shall pay to Newsday a rental at the rate of $66,000.00
annually, or $5,500.00 monthly, in equal monthly installments on the first day
of each and
<PAGE>
every month during the term of this Agreement of Sublease, commencing January
15, 1997. Sublessee shall pay Newsday, upon the execution of this Agreement of
Sublease by Sublessee, the first month's rent and one month's security deposit.
The rental rate is fixed for the term of thie Agreement of Sublease. Sublessee
shall be responsible for all repairs to the Subleased Premises, unless caused by
the gross negligence of Newsday or landlord under the Lease.
3
(c) Sublessee shall pay as Additional Rent its proportionate share of any real
estate taxes due pursuant to the Lease. The ""Tax Year" for such taxes shall be
1996, and Sublessee's proportionate share shall include any and all escalations
under the Lease.
4. Sublessee acknowledges that it has inspected the Subleased Premises and is
fully familiar with the physical conditions thereof, and agrees to take the same
"as is". Sublessee shall make no alteration, construction, or improvement to the
Subleased Premises or install any equipment, other than standard furniture,
computers, phones, other communication devices, and fixtures, in the Subleased
Premises without the prior written consent of Newsday, which shall not be
unreasonably withheld. Sublessee shall be permitted to install/display signage
in the hallway outside the elevators so long as it is not bigger than the
Newsday sign presently in place. Sublessee shall be permitted to remove, and
return to Newsday in good condition, all Newsday signs and/or insignias
throughout the Demised Premises including, but not limited to, all doors,
windows and walls. Neither Newsday nor Landlord or any employee or agent of
Landlord have made any representation or promise with respect to the Subleased
Premises.
5. (a) Sublessee shall be entitled to receive all services, if any, to be
rendered by the Landlord to Newsday under the Lease. Sublessee shall look solely
to the Landlord for all such services and shall not, except in the case of
electric, heating or air conditioning, seek or require Newsday to perform any of
such services, nor shall Sublessee make any claim upon Newsday for any damages
which may arise by reason of Landlord's default under the Lease or Landlord's
negligence, whether by omission or commission, under the Lease.
(b) In furtherance of the foregoing, Sublessee does, to the extent permitted by
law, hereby waive any cause of action and any right to bring any action against
Newsday by reason of any act or omission of Landlord under the Lease. In
consideration of the foregoing waiver by Sublessee, and in the event Landlord
fails to render the aforesaid services to be rendered by Landlord under the
Lease to the Subleased Premises, Newsday shall assign to Sublessee whatever
rights Newsday possesses under the Lease to bring an action against Landlord for
Landlord's failure
5
to render the services provided for under the Lease. In the event that Sublessee
institutes any action against Landlord under this paragraph 5, Sublessee shall
fully indemnify, defend, and hold Newsday harmless from any claim, action,
liability, cost or expense, including attorneys' fees, which Newsday may incur
by reason of any such suit initiated by Sublessee.
(c) Neither Newsday nor Landlord shall be liable for any failure or delay in
services due to a force major event, which shall include fires, strikes, floods,
power failures, acts of God or similar causes
<PAGE>
6. Sublessee shall, at Sublessee's own expense, obtain and maintain, throughout
the term of this Agreement of Sublease, with such established insurance
companies as are reasonably acceptable to Newsday, commencing no later than the
earlier of the commencement of construction or occupancy: (i) comprehensive
general liability insurance with minimum limits of $2,000,000 as to personal
injury and property damage, or in such reduced amount as is agreed upon by
Sublessee, Newsday and Landlord and (ii) all risks insurance, including but not
limited to, fire, vandalism and malicious mischief, theft and other loss or
damage in and
6
about the Subleased Premises and areas adjacent thereto including coverage for
all interior and exterior glass, in an amount adequate to cover the full
replacement value thereof. Sublessee shall have the option to self-insure,
subject to the terms of this paragraph. All such policies shall name Subleases
and Newsday as insureds, as their interests may appear, and Subleases shall
provide Newsday with a certificate of such insurance prior to the commencement
of the term of this Agreement of Sublease. All such certificates shall contain
an endorsement which shall provide that such insurance may not be canceled
except upon thirty (30) days prior written notice to Newsday. In the event of
Sublessee's default of this paragraph 6, Newsday may obtain such insurance and
collect from Subleases the premiums thereon as additional rent.
7. In the event that Subleases shall default in the full performance of any of
the terms, covenants or conditions on its part to be performed under this
Agreement of Sublease, then Newsday shall have the same rights and remedies with
respect to such default as are given to Landlord under the Lease with respect to
defaults by Newsday under the Lease, all with the same force and effect as
7
though the provision of the Lease with respect to defaults and the rights and
remedies of Landlord under the Lease in the event thereof were set forth at
length in this Agreement of Sublease.
8. Subleases does hereby agree to indemnify Newsday and to defend and hold
Newsday harmless from any claim, action, liability, cost or expense, including
reasonable attorneys' fees, which Newsday may incur by reason of Sublessee's
failure to perform, observe or comply with any of the terms, covenants or
conditions of this Agreement of Sublease or of the Lease.
9. If Subleases defaults in respect of any of the terms, covenants or conditions
of this Agreement of Sublease or of the Lease, including but not limited to
payment of rent, Newsday may, but shall not be required to, use, apply or retain
the whole or any part of the security, for the payment of any rent in default or
for any other sum which Newsday may expend or be required to expend by reason of
Sublessee's default, including any damages or deficiency in the reletting of the
Subleased Premises, whether such damages or deficiency accrue before or after
summary proceedings or other re-entry by Newsday. If Subleases
8
shall fully and faithfully comply with all of the terms, covenants and
conditions of this Agreement of Sublease and of the Lease, the security, or any
balance thereof, shall be returned to Subleases after the time fixed as the
expiration of the term of the Sublease and after the removal of Subleases and
the surrender of possession of the Subleased Premises to Newsday in its original
condition as of the commencement date of this Sublease, less normal wear and
tear.
<PAGE>
10. Subleases shall not mortgage or encumber this Agreement of Sublease, nor
assign or underlet the Subleased Premises or any part thereof, without the
express prior written consent of Newsday and Landlord. Newsday shall have the
right to enter the Subleased Premises at any time during normal business hours
upon notice for the purpose of inspecting the Subleased Premises and for any
other proper purpose. Newsday shall in no event permit its entry to interfere
with Sublessee's conduct of business.
11. Subleases agrees that, notwithstanding any other provision of this Agreement
of Sublease, if Newsday or Landlord defaults hereunder, Subleases shall look
solely to the interest of Newsday and Landlord or its successor in the
9
Demised Premises for the satisfaction of any judgment or other judicial process
requiring the payment of money by Newsday or Landlord based upon any default
hereunder, and no other assets of Landlord and Newsday or any such successor
shall be subject to levy, execution, or other enforcement procedure for the
satisfaction of any such judgment or process. Upon any conveyance or transfer of
the building, the transferee shall be relieved from all liability hereunder.
Newsday and Landlord shall not be held liable for any injury to or death of any
person or persons, or injury or damage to merchandise, goods, furniture,
fixtures, or other property, from theft or accident, or from steam, gas,
electricity, water, or rain which may seep into, issue or flow from the
building, unless same shall be due to Newsday's or Landlord's gross negligence.
12. This Agreement of Sublease is subject to and conditioned upon the consent of
Landlord, as well as Landlord's consent to Sublessee's plans and specifications.
13. Subleases shall make no improvements to or undertake any construction at the
Subleased Premises without the prior written consent of Newsday and Landlord.
10
Notwithstanding the foregoing, Subleases shall have the right to commence the
decorations and alterations upon execution of this Sublease and Landlord's
consent to the Sublease and the alterations. Subleases represents and warrants
that all such work shall be performed within the guidelines of all required
governmental standards. Subleases shall not be responsible for any code
violations that existed when Newsday leased the premises in 1988. Sublessee's
alterations, to be provided by Subleases, are a material component of Subleases
entering into this Sublease. In the event Landlord shall not consent to such
alterations without restoration of the Demised Premises, at Sublessee's option,
Subleases can terminate this Sublease.
14. It is understood and agreed between the Landlord and the original Tenant,
Newsday, that all of the terms and conditions of the Lease still apply to the
original Tenant, except as set forth herein.
15. Subleases is not, and shall not be deemed to be, an agent, servant or
employee of Newsday.
16. Subleases represents that it has dealt with no brokers other than Newmark &
Company Real Estate, Inc. in connection with the procurement of this Sublease.
Subleases
11
<PAGE>
and Newsday agree to indemnify each other against any claim by any other broker
for brokerage commissions arising out of this Sublease. Newsday shall pay a
commission to Newmark & Company Real Estate, Inc. for the procurement of this
Sublease in accordance with a separate agreement between Newsday and Newmark &
Company Real Estate, Inc.
IN WITNESS WHEREOF, the parties have executed this Agreement of Sublease
as of the date first above written.
WITNESS FOR NEWSDAY
WITNESS FOR SUBLESSEE MAJOR FLEET & LEASING CORP.
CONSENTED TO:
WITNESS FOR LANDLORD
sublease
12/20/96
12
NEWSDAY, INC.
By: /s/ Frank E. Toner
Name: Frank E. Toner
Title: Information Systems
& Engineering Services
Engineering Services
By:/S/ Doron Cohen
Doron Cohen, VP
Title:
80-02 LEASEHOLD COMPANY
By:
Name:
Title:
CONSENT TO SUBLEASE
This Consent to Sublease is entered into as of the 6th day of January 1997, by
and among, 80-02 LEASEHOLD COMPANY ("Owner") NEWSDAY, INC.("Tenant"), and MAJOR
FLEET and LEASING CORP. ("Subtenant"), and is made with reference to the
following
WHEREAS, owner and Tenant are parties to that certain lease dated July 25, 1929,
an amended January 31, 1996 (the "Lease"), demising certain premises. in the
building (the "building) located at 80-02 Kew Gardens Road, Kew Gardens, as more
particularly described in the Lease (the "Demised Premises"); and
WHEREAS, Tenant has requested that Owner consent to the subleasing of a portion
of the Demised Premises (the "Sublease Premises") to the Subtenant on the term
contained in a certain Sublease by and between Tenant and Subtenant, dated
January 8, 1997.
(The sublease); "and
WHEREAS, Owner is willing to consent to the Sublease upon the express terms and
conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows;
1. Each of the recitals set forth above is incorporated herein by this
reference.
2. Tenant hereby represents and warrants that it has delivered to owner a true,
correct and complete copy of the sublease.
3. Owner hereby consents to the subleasing of the Sublease Premises to Subtenant
upon the terms and conditions herein.
4. The consent by owner to such subleasing shall not operate as a waiver of any
term, condition, or provision of the Lease nor Shall the same in any -manner be
construed to modify any term, condition or provision or the Lease, and such
consent shall not be deemed to be a consent to any subsequent assignment of the
Lease or subsequent subleasing of the Demised Promises or any portion thereof,
nor Shall such consent- be deemed to constitute the consent or approval of any
specific terms or conditions contained in the sublease. I
5. Tenant and Subtenant expressly acknowledge and agree that any Work or
alterations to the Sublease Premises Shall be performed In a good and
workmanlike manner, in compliance with all applicable laws, without any expense
to Owner, and in compliance with the terms and conditions relating thereto as
set forth in the Lease.
6. The aforesaid consent by Owner shall not in any manner serve to release or
discharge Tenant from any obligation,
i
I
liabilities, or duties under the terms of the Lease.
3.0. Under no circumstances shall owner be liable for any brokerage commission
or other charge Or expense in connection with the Sublease, and Tenant hereby
indemnifier. and agrees to hold Owner harmless from any claim or liability,
wither meritorious or not, in connection with any such brokerage commission or
charge.
IN WITNESS WHEREOF, the parties have executed this Consent to Sublease as of the
day and year first written above.
8O-02 LEASEHOLD COMPANY,
Owner
By: /s/
NEWSDAY, INC., Tenant
7. The Sublease shall at all times remain subject and subordinate to the Lease,
and Subtenant by executing this Consent to Sublease agrees that Subtenant shall
km fully and completely
<PAGE>
bound by each and every term of both the Lease insofar as such terms are
expressly incorporated in the Sublease. Any breach of the Lease, caused by the
Subtenant, Shall entitled owner to avail itself of any remedy set forth in the
Lease in the event of any such breach, as well as any other remedy available to
owner at law or in equity as AX the breach had been caused by Tenant.
a. Subtenant, by execution of this Consent to Sublease, acknowledges that
Subtenant has examined and is familiar with all Of the applicable terms,
provisions, and conditions of the Lease.
9. Tenant and Subtenant agree that to the extent any terms, conditions, or
provisions of the Sublease are contrary to the terms of the Lease, "the terms,
conditions, and provisions of the Sublease are not binding on Owner.
- -2-
Name: /s/ FRANK E. TONER
Frank E. Toner
Titles: Information
Systems & Engineering Services
MAJOR FLEET AND LEASING CORP.,
Subtenant
By: /s/ Doron Cohen
Doron Cohen, V.P.
GENERAL SECURITY AGREEMENT
Date March 30 1995
NAME NO. AND STREET
Major Fleet & Leasing Corp. 43-40 Northern Boulevard
CITY, VILLAGE OR TOWN COUNTY STATE
Long Island City Queens New York 11101
CHIEF EXECUTIVE CIFFICE (I( different from Business Address)-
(Debtor) and
LENDING OFFICE. DEPARTMENT DIVISION
MARINE MIDLAND BANK Queens/Long Island Commercial.
ITT AND STREET CITY STATE
534 Broad Hollow Road, Room 110 Melville New York 11747
(Secured Party) agree as follows:
1. Security Interest. Debtor hereby grants to Secured Party a security interest
(Security Interest) in all property of the following types, wherever located and
whether now owned or hereafter owned or acquired by Debtor, whether or not
affixed to realty, in all Proceeds and Products thereof in any form, in all
part, accessories, attachments, special tools, additions, replacements,
substitutions and accessions thereto or therefor, and in all increases or
profits received therefrom, including, WITHOUT LIMITATION, all property
described in any schedule from time to time delivered by Debtor to Secured
Party: Equipment; Fixtures: Inventory; Accounts; Chattel Paper; Documents;
Instruments; and General Intangibles (Collateral).
2. Indebtedness Secured. The Security Interest secures payment of any and all
indebtedness (Indebtedness) of Debtor to Secured Party, whether now existing or
hereafter incurred, of every kind and character, direct or indirect, and whether
such Indebtedness is from time to time reduced and thereafter increased, or
entirely extinguished and thereafter reincurred including, without limitation:
(a) Indebtedness not yet outstanding, but contracted for, or with respect to
which any other commitment by Secured Party exists; (b) all interest provided in
any instrument, document, or agreement (including this Security Agreement) which
accrues on any Indebtedness until payment of such Indebtedness in full; (c) any
moneys payable as hereinafter provided; and (d) any debts owed or to be owed by
Debtor to others which Secured Party has obtained, or may obtain, by assignment
or otherwise.
3. Representations and Warranties of Debtor. Debtor represents and warrants,
and, so long as this Security Agreement is in effect, shall be deemed
continuously to represent and warrant that: (a) Debtor is the owner of the
Collateral free of all security interests or other encumbrances, except the
Security Interest and except as specified in an appropriate schedule hereto; (b)
Debtor is authorized to enter into this Security Agreement; (c) any and all
tradenames, division names, assumed names or other names under which Debtor
transacts any part of its business are specified in an appropriate schedule
hereto; Debtor's business address and chief executive office are specified above
or on an appropriate schedule hereto; and Debtor's records concerning the
Collateral are kept at one of the addresses specified above; (d) each Account,
General Intangible and Chattel Paper constituting Collateral is genuine and
enforceable in accordance with its terms against the party obligated to pay it
(Account Debtor); and no Account Debtor has any defense, setoff, claim or
counterclaim against Debtor which can be asserted against Secured Party, whether
in any proceeding to enforce the Collateral or otherwise; (e) the amounts
represented from time to time by Debtor to Secured Party as owing by each
Account Debtor or by all Account Debtors will be and are the correct amounts
actually and unconditionally owing by such Account Debtor or Debtors
individually and in the aggregate, except for normal cash discounts where
applicable; (f) each Instrument and each Document constituting Collateral is
genuine and in all respects what it purports to be; and (g) any Collateral which
is a Fixture is affixed to real property at Debtor's address specified above or
as specified in an appropriate schedule hereto, and such real property is owned
by Debtor or by the person or persons named in such schedule and is encumbered
only by the mortgage or mortgages listed on such schedule.
4. Covenants of Debtor. So long as this Security Agreement is in effect. Debtor:
<PAGE>
(a) will defend the Collateral against the claims and demands of all other
parties, including, without limitation, defenses, setoffs, claims and
counterclaims asserted by any Account Debtor against Debtor or Secured Party,
except, as to Inventory, purchasers and lessees in the ordinary course of
Debtor's business; will keep the Collateral free from all security interests or
other encumbrances, except the Security Interest and except as specified in an
appropriate schedule hereto; and will not sell, transfer, lease, assign, deliver
or otherwise dispose of any Collateral or any interest therein without the prior
written consent of Secured Party, except that, until the occurrence of an event
of default as specified in paragraph 10 hereof, Debtor may sell or lease
Inventory in the ordinary course of Debtor's business; (b) will furnish to
Secured Party financial statements in such form and at such intervals as Secured
Party shall request; will keep, in accordance with generally accepted accounting
principles consistently applied, accurate and complete books and records,
including, without limitation, records concerning the Collateral; at Secured
Party's request, will mark any and all such books and records to indicate the
Security Interest; will permit Secured Party or its agents to inspect the
Collateral and to audit and make extracts from or copies of such books and
records and any of Debtor's ledgers, reports, correspondence or other books and
records; and will duly account to Secured Party's satisfaction, at such time or
times as Secured Party may require, for any of the Collateral; (c) will deliver
to Secured Party upon demand, all Documents and all Chattel Paper (duly endorsed
to Secured Party) constituting, representing or relating to the Collateral or
any part thereof, and any schedules, invoices, shipping documents, delivery
receipts, purchase orders, contracts or other documents representing or relating
to the Collateral or any part thereof; (d) will notify Secured Party promptly in
writing of any change in Debtor's business address or chief executive office,
any change in the address at which records concerning the Collateral are kept
and any change in Debtor's name, identity or corporate or other structure; (e)
will not, wit ' hour Secured Party's written consent, make or agree to make any
alteration, modification or cancellation of. or substitute tion for, or credits,
adjustments or allowances on. Accounts, General Intangibles or Chattel Paper
constituting Collateral; will furnish to Secured Party, on request, all credit
and other information respecting the financial condition of any Account Debtor;
and will notify Secured Party promptly of any default by any Account Debtor in
payment or other performance of obligations with respect to any Collateral; (f)
will keep the Collateral in good condition and repair; and will not use the
Collateral in violation of any provisions of this Security Agreement, of any
applicable statute, regulation or ordinance or of any policy insuring the
Collateral; (g) will pay all taxes, assessments and other charges of every
nature which may be imposed, levied or assessed against Debtor or any of
Debtor's assets, prior to the date of attachment of any penalties or liens with
respect thereto (other than liens attaching prior to payment becoming
L 21315 SF (81W) APS 1002308 (P Marine Midland Banks. Inc 1988
<PAGE>
To or to enter into this or any other agreement with Debtor, proves to have been
false in any material respect at the time as of which the facts therein set
forth were stated or certified, or to have omitted any substantial contingent or
unliquidated liability or claim against Debtor or any such Third Party; or, if
upon the date of execution be, if payment is made when due), provided, however,
Debtor shall not be required to pay any such tax, assessment or other charge so
long as its validity is being contested in good faith by appropriate proceedings
diligently conducted; (h) will insure the Collateral against risks, in coverage.
form and amount, and by insurer, satisfactory to Secured Party, and, at Secured
Party's request, will cause each policy to be payable to Secured Party as a
named insured or loss payee, as its interest may appear, and deliver each policy
or certificate of insurance to Secured Party; (i) will prevent the Collateral or
any part thereof from being or becoming an accession to other goods not covered
by this Security Agreement; (ii) in connection herewith, will execute and
deliver to Secured Party such financing statements, assignments and other
documents and do such other things relating to the Collateral and the Security
Interest as Secured Party may request, and pay all costs of title searches and
filing financing statements, assignments and other documents in all public
offices requested by Secured Party; and will not, without the prior written
consent of Secured Party, file or authorize or permit to be filed in any public
office any financing statement naming Debtor as debtor and not naming Secured
Party as secured party; (k) will not place the Collateral in any warehouse which
may issue a negotiable document with respect thereto; and (1) if Secured Party
in its sole discretion and at any time or from time to time determines that the
liquidation value of the Collateral has become inadequate, will immediately on
demand: (i) deliver to Secured Party additional collateral of a kind and value
satisfactory to Secured Party, or (ii) make payments of Indebtedness, sufficient
to cause the relationship of the liquidation value of Collateral to Indebtedness
(including Indebtedness for which a commitment to lend exists) to become
satisfactory to Secured Party.
5. Verification of Collateral. Secured Party shall have the right to verify all
or any Collateral in any manner and through any medium Secured Party may
consider appropriate, and Debtor agrees to furnish all assistance and
information and perform any acts which Secured Party may require in connection
therewith and to pay all of Secured Party's costs therefor.
6. Notification and Payments. Before or after the occurrence of an event of
default, Secured Party may notify all or any Account Debtors of the Security
Interest and may also direct such Account Debtors to make all payments on
Collateral to Secured Party. All payments on and from Collateral received by
Secured Party directly or from Debtor shall be applied to the Indebtedness in
such order and manner and at such time as Secured Party shall, it its sole
discretion, determine. Secured Party may demand of Debtor in writing, before or
after notification to Account Debtors and without waiving in any manner the
Security Interest, that any payments on and from the Collateral received by
Debtor: (a) shall be held by Debtor in trust for Secured Party in the same
medium in which received; (b) shall not be commingled with any assets of Debtor;
and (c) shall be delivered to Secured Party in the form received, properly
endorsed to permit collection, not later than the next business day following
the day of their receipt; and Debtor shall comply with such demand. Debtor shall
also promptly notify Secured Party of the return to or repossession by Debtor of
Goods underlying any Collateral, and Debtor shall hold the same in trust for
Secured Party and shall dispose of the same as Secured Party directs.
7. Registered Holder of Collateral. If any Collateral consists of investment
securities, Debtor authorizes Secured Party to transfer the same or any part
thereof into its own name or that of its nominee so that Secured Party or its
nominee may appear of record as the sole owner thereof; provided, that so long
as no event of default has occurred, Secured Party shall deliver promptly to
Debtor all notices, statements or other communications received by it or its
nominee as such registered owner, and upon demand and receipt of payment of
necessary expenses thereof, shall give to Debtor or its designee a proxy or
proxies to vote and take all action with respect to such securities. After the
occurrence of any event of default, Debtor waives all rights to be advised of or
to receive any notices, statements or communications received by Secured Party
or its nominee as such record owner, and agrees that no proxy or proxies given
by Secured Party to Debtor or its designee as aforesaid shall thereafter be
effective.
B. Income from and Interest on Collateral Consisting of Instruments.
(a) Until the occurrence of an event of default, Debtor reserves the right to
receive all income from or interest on the Collateral consisting of Instruments,
and if Secured Party receives any such income or interest prior to such event of
default, Secured Party shall pay the same promptly to Debtor.
<PAGE>
(b) Upon the occurrence of an event of default, Debtor will not demand or
receive any income from or interest on such Collateral, and if Debtor receives
any such income or interest without any demand by it, same shall be held by
Debtor in trust for Secured Party in the same medium in which received, shall
not be commingled with any assets of Debtor and shall be delivered to Secured
Party in the form received, properly endorsed to permit collection, not later
than the next business day following the day of its receipt. Secured Party may
apply the net cash receipts from such income or interest to payment of any of
the Indebtedness provided that Secured Party shall account for and pay over to
Debtor any such income or interest remaining after payment in full of the
Indebtedness.
9. Increases, Profits, Payments or Distributions.
(a) Whether or not an event of default has occurred, Debtor authorizes Secured
Party: (i) to receive any increase in or profits on the Collateral (including,
without limitation, any stock issued as a result of any stock split or dividend,
any capital distributions and the like), and to hold the same as part of the
Collateral; and (ii) to receive any payment or distribution on the Collateral
upon redemption by, or dissolution and liquidation of, the issuer; to surrender
such Collateral or any part thereof in exchange therefor; and to hold the net
cash receipts from any such payment or distribution as part of the Collateral.
(b) If Debtor receives any such increase, profits, payments or distributions,
Debtor will receive and deliver same promptly to Secured Party on the same terms
and conditions set forth in paragraph 8(b) hereof respecting income or interest,
to be held by Secured Party as part of the Collateral.
10. Events of DefaulL
(a) Any of the following events or conditions shall constitute an event of
default hereunder: (i) nonpayment when due, whether by acceleration or
otherwise, of principal of or interest on any Indebtedness, or default by Debtor
in the performance of any obligation, term or condition of this Security
Agreement or any other agreement between Debtor and Secured Party; (ii) death or
judicial declaration of incompetency of Debtor, if an individual; (iii) the '
filing by or against Debtor of a request or petition for liquidation.
reorganization. arrangement, adjustment of debts, adjudication as a bankrupt,
relief as a debtor or other relief under the bankruptcy, insolvency or similar
laws of the United States or any state or territory thereof or any foreign
jurisdiction. now or hereafter in effect; v) the making of any general
assignment by Debtor for the benefit of creditors; the appointment of a receiver
or trustee for Debtor or for any assets of Debtor, including, without
limitation, the appointment of or taking possession by a "custodian", as defined
in the federal Bankruptcy Code; the making of any, or sending notice of any
intended, bulk sale; or the institution by or against Debtor of any other type
of insolvency proceeding (under the federal Bankruptcy Code or otherwise) or of
any formal or informal proceeding for the dissolution or liquidation of,
settlement of claims against or winding up of affairs of, Debtor; (v) the sale,
assignment, transfer or delivery of all or substantially all of the assets of
Debtor; the cessation by Debtor as a going business concern; the entry of
judgment against Debtor, other than a judgment for which Debtor is fully
insured, if ten days thereafter such judgment is not satisfied, vacated, bonded
or stayed pending appeal; or if Debtor is generally not paying Debtor's debts as
such debts become due; (vi) the occurrence of any event described in paragraph
10(a) (ii), (iii), (iv) or (v) hereof with respect to any endorser, guarantor or
any other party liable for, or whose assets or any interest therein secures,
payment of any Indebtedness (Third Party), or the occurrence of any such event
with respect to any general partner of Debtor, if Debtor is a partnership; (vii)
if any certificate, statement, representation. warranty or audit heretofore or
hereafter furnished by or on behalf of Debtor or any Third Party, pursuant -to
or in connection with this Security Agreement, or otherwise (including, without
limitation, representations and warranties contained herein), or as an
inducement to Secured Party to extend any credit to to or to or to enter into
this or any other agreement with Debtor, proves to have been false in any
material respect at the time as of which the facts therein set forth were stated
or certified, or to have omitted any substantial contingent or unliquidated
liability or claim against Debtor or any such Third Party; or. if upon the date
of execution
L 205 SF (8/88)
<PAGE>
I
of this Security Agreement. there shall have been any materially adverse change
in any of the facts disclosed by any such certificate, statement,
representation, warranty or audit, which change shall not have been disclosed in
writing to Secured Party at or prior to the time of such execution; (viii)
nonpayment by Debtor when due of any indebtedness for borrowed money owing to
any Third Party, or the occurrence of any event which could result in
acceleration of payment of any such indebtedness; or (ix) the reorganization,
merger or consolidation of Debtor (or the making of any agreement therefor)
without the prior written consent of Secured Party.
(b) Secured Party, at its sole election, may declare all or any part of any
Indebtedness not payable on demand to be immediately due and payable without
demand or notice of any kind upon the happening of any event of default (other
than an event of default under either paragraph 10(a) (iii) or (iv) hereof), or
if Secured Party in good faith believes that the prospect of payment of all or
any part of the Indebtedness or performance of Debtor's obligations under this
Security Agreement or any other agreement now or hereafter in effect between
Debtor and Secured Party is impaired. All or any part of any Indebtedness not
payable on demand shall be immediately due and payable without demand or notice
of any kind upon the happening of one or more events of default under paragraph
10(a) (iii) or (iv) hereof. The provisions of this paragraph are not intended in
any way to affect any rights of Secured Party with respect to any Indebtedness
which may now or hereafter be payable on demand.
(c) Secured Party's rights and remedies with respect to the Collateral shall be
those of a Secured Party under the Uniform Commercial Code and under any other
applicable law, as the same may from time to time be in effect. in addition to
those rights granted herein and in any other agreement now or hereafter in
effect between Debtor and Secured Party. Upon the existence or occurrence of an
event of default, Secured Party may require Debtor to assemble the Collateral
and make it available to Secured Party at a place or places designated by
Secured Party, and Secured Party may use and operate the Collateral.
(d) Without in any way requiring notice to be given in the following time and
manner, Debtor agrees that any notice by Secured Party of sale, disposition or
other intended action hereunder or in connection herewith, whether required by
the Uniform Commercial Code or otherwise, shall constitute reasonable notice to
Debtor if such notice is mailed by regular or certified mail, postage prepaid,
at least five (5) days prior to such action, to either of Debtor's addresses
specified above or to any other address which Debtor has specified in writing to
Secured Party as the address to which notices hereunder shall be given to
Debtor.
(e) Debtor agrees to pay on demand all costs and expenses incurred by Secured
Party in enforcing this Security Agreement. in realizing upon or protecting any
Collateral and in enforcing and collecting any Indebtedness or any guaranty
thereof, including, without limitation, if Secured Party retains counsel for
advice, suit, appeal, insolvency or other proceedings under the federal
Bankruptcy Code or otherwise, or for any of the above purposes. the actual
attorney's fees incurred by Secured Party. Payment of all sums hereunder is
secured by the Collateral.
11. Miscellaneous.
(a) Debtor hereby authorizes Secured Party, at Debtor's expense, to file such
financing statement or statements relating to the Collateral without Debtor's
signature thereon as Secured Party at its option may deem appropriate, and
appoints Secured Party as Debtor's attorney-in-fact (without requiring Secured
Party) to execute any such financing statement or statements in Debtor's name
and to perform all other acts which Secured Party deems appropriate to perfect
and continue the Security Interest and to protect, preserve and realize upon the
Collateral. This power of attorney shall not be affected by the subsequent
disability or incompetence of Debtor.
(b) Secured Party may demand, collect and sue on any of the Accounts, Chattel
Paper, Instruments and General Intangibles (in either Debtor's or Secured
Party's name at the latter's option); may enforce, compromise, settle or
discharge such Collateral without discharging the Indebtedness or any part
thereof; and may endorse Debtor's name on any and all checks, commercial paper,
and any other Instruments pertaining to or constituting Collateral.
(c) (i) As further security for payment of the Indebtedness, Debtor hereby
grants to Secured Party a Security Interest in and lien on any and all property
of Debtor which is or may hereafter be in the possession or control of Secured
Party in any capacity or of any Third Party acting on its behalf, including,
without limitation, all deposit and other accounts and all moneys owed or to be
owed by Secured Party to
<PAGE>
Debtor; and with respect to all of such property, Secured Party shall have the
same rights hereunder as it has with respect to the Collateral; (ii) without
limiting any other right of Secured Party, whenever Secured Party has the right
to declare any Indebtedness to be immediately due and payable (whether or not it
has so declared), Secured Party at its sole election may set off against the
Indebtedness any and all moneys then or thereafter owed to Debtor by Secured
Party in any capacity, whether or not the Indebtedness or the obligation to pay
such moneys owed by Secured Party is then due, and Secured Party shall be deemed
to have exercised such right of set off immediately at the time of such election
even though any charge therefor is made or entered on Secured Party's records
subsequent thereto.
(d) Upon Debtor's failure to perform any of its duties hereunder, Secured Party
may. but shall not be obligated to, perform any or all such duties, including,
without limitation, payment of taxes, assessments, insurance and other charges
and expenses as herein provided, and Debtor shall pay an amount equal to the
cost thereof to Secured Party on -demand by Secured Party. Payment of all moneys
hereunder shall be secured by the Collateral.
(e) Unless any instrument, document, or agreement evidencing any Indebtedness
expressly provides a rate for the accrual of interest after such Indebtedness
becomes due, the rate at which interest on such Indebtedness shall accrue after
such Indebtedness becomes due, whether by reason of default or otherwise and
until such Indebtedness is paid in full, shall be the rate provided in such
instrument. document. or agreement which is in effect immediately prior to such
Indebtedness becoming due.
(0 No course of dealing between Debtor and Secured Party and no delay or
omission by Secured Party in exercising any right or remedy hereunder or with
respect to any Indebtedness shall operate as a waiver thereof or of any other
right or remedy, and no single or partial exercise thereof shall preclude any
other or further exercise thereof or the exercise of any other right or remedy.
Secured Party may remedy any default by Debtor hereunder or with respect to any
Indebtedness in any reasonable manner without waiving the default remedied and
without waiving any other prior or subsequent default by Debtor. All rights and
remedies of Secured Party hereunder are cumulative.
(g) Secured Party shall have no obligation to take, and Debtor shall have the
sole responsibility for taking, any and all steps to preserve rights against any
and all prior parties to any Instrument or Chattel Paper constituting Collateral
whether or not in Secured Party's possession. Secured Party shall not be
responsible to Debtor for loss or damage resulting from Secured Party's failure
to enforce or collect any such Collateral or to collect any moneys due or to
become due thereunder. Debtor waives protest of any Instrument constituting
Collateral at any time held by Secured Party on which Debtor is in any way
liable and waives notice of any other action taken by Secured Party.
(h) Debtor authorizes Secured Party, without notice or demand and without
affecting Debtor's obligations hereunder, from time to time: (i) to exchange,
enforce or release any collateral or any part thereof (other than the
Collateral) taken from any party for payment of the Indebtedness or any part
thereof; (ii) to release, substitute or modify any obligation of any endorser.
guarantor or other party in any way obligated to pay the Indebtedness or any
part thereof, or any party who has given any security, mortgage or other
interest in any other collateral as security for the payment of the Indebtedness
or any part thereof; (iii) upon the occurrence of any event of default as
hereinabove provided, to direct the order or manner of disposition of the
Collateral and any and all other collateral and the enforcement of any and all
endorsements, guaranties and other obligations relating to the Indebtedness or
any part thereof. as Secured Party, in its sole discretion, may determine; and
(iv) to determine how, when and what application of payments and credits, if
any. shall be made on the Indebtedness or any part thereof.
L 205 SF OM)
The rights and benefits of Secured Party hereunder shall, if Secured Party so
directs, inure to any party acquiring any interest in the Indebtedness or any
part thereof.
(j) Secured Part- of those parties.
(j) Secured Party and Debtor as used herein shall include the heirs, executors
or administrators, or successors or assigns, of those parties.
<PAGE>
parties.
and their obligations, warranties and representations hereunder shall be joint
and several.
(l) No modification, rescission, waiver, release or amendment of any provision
of this Security Agreement shall be made, except by a written agreement
subscribed by Debtor and by a duly authorized officer of Secured Party.
(m) This Security Agreement and the transaction evidenced hereby shall be
construed under the laws of New York State, as the same may from time to time be
in effect.
(n) All terms, unless otherwise defined in this Security Agreement, shall have
the definitions set forth in the Uniform Commercial Code adopted in New York
State, as the same may from time to time be in effect.
(o) Debtor hereby irrevocably appoints Secured Party the Debtor's agent with
full power, in the same manner, to the same extent and with the same effect as
if Debtor were to do the same: to receive and collect all mail addressed to
Debtor; to direct the place of delivery thereof to any location designated by
Secured Party; to open such mail; to remove all contents therefrom; to retain
all contents thereof constituting or relating to the Collateral; and to perform
all other acts which Secured Party deems appropriate to protect, preserve and
realize upon the Collateral. The agency hereby created is unconditional and
shall not terminate until all of the Indebtedness is paid in full and until all
commitments by Secured Party to lend funds to Debtor have expired or been
terminated. This power of attorney shall not be affected by the subsequent
disability or incompetence of Debtor.
(p) This Security Agreement is and is intended to be a continuing Security
Agreement and shall remain in full force and effect until the officer in charge
of the Lending Office, Department or Division of Secured Party indicated above
shall actually receive from Debtor written notice of its discontinuance;
provided, however, this Security Agreement shall remain in full force and effect
thereafter until all of the Indebtedness outstanding, or contracted or committed
for (whether or not outstanding), before the receipt of such notice by Secured
Party, and any extensions or renewals thereof (whether made before or after
receipt of such notice), together with interest accruing thereon after such
notice, shall be finally and irrevocably paid in full. If, after receipt of any
payment of all or any part of the Indebtedness, Secured Party is for any reason
compelled to surrender such payment to any person or entity, because such
payment is determined to be void or voidable as a preference, impermissible
setoff, or a diversion of trust funds, or for any other reason, this Security
Agreement shall continue in full force notwithstanding any contrary action which
may have been taken by Secured Party in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to Secured Party's rights
under this Security Agreement and shall be deemed to have been conditioned upon
such payment having become final and irrevocable.
(k) If more than one Debtor executes this Security Agreement, the term "Debtor"
shall include each as well as all of them
DEBTOR:
Major Fleet & Leasing Corp.
BY: /s/ Bruce Bendell
Bruce Bendell, President
SCHEDULE
1. Other encumbrances, if any (Par. 3a, 4a):
2. Other names under which Debtor transacts business (Par 3c):
3. (a) Fixtures affixed to real property (Par 3g):
(b) Owner of such real property (Par 3g):
(c) Mortgages on real property (Par 3g):
4. Additional schedules describing Collateral, if any, follow hereafter (Par 1).
L 205 SF (&188)
RETAIL & WHOLESALE DEALER'S AGREEMENT
This Dealer's Agreement is entered into this 30th day of March, 1995
between Marine Midland Bank ("the Bank") and the dealer ("Dealer") whose name
and address are set forth on the last page of this Agreement. The Bank and
Dealer hereby agree as follows:
RETAIL PROGRAM
1. Purchase of Retail Contracts. The Bank may purchase from Dealer retail
instalment contracts, conditional sales contracts, security agreements or other
documents (collectively "Contracts") designated by the Bank as eligible for
purchase hereunder. Each of the Contracts represents the indebtedness of a
customer ("Customer") of the Dealer with respect to all or part of the purchase
price of a new or used motor vehicle ("Contract Vehicle") purchased by the
Customer from the Dealer. All purchases of Contracts will be made on a
nonrecourse basis except as provided in a Supplementary Dealer's Agreement
applying to a specific Contract, or as provided in Section 10 or Section 11
below. The Bank will purchase a Contract only after the Contract has been
accepted in accordance with the procedures described in Sections 2 and 3 below.
The Bank's purchase of Contracts shall include the purchase and assignment to
the Bank of all security interests and liens securing the payment of the
Contracts together with all guarantees and other documents supporting the
payment of the Contracts.
2. Credit Application. When a Dealer wishes the Bank to consider the
purchase of a Contract, the Dealer will submit to the Bank a Customer credit
application ("Credit Application") in a form and containing the information
concerning Customer as specified by the Bank. Credit Applications shall be
submitted by facsimile transmission or other means acceptable to the Bank.
Following receipt and review by the Bank of any Credit Application, the Bank
will notify Dealer whether the Bank has accepted or rejected the Credit
Application and in the case of a rejected Credit Application will specify the
basis of that rejection. The Dealer will make no representation whatsoever
regarding the Bank's acceptance or rejection of any Credit Application except
that following the Bank's advice to Dealer of the Bank's decision to accept the
Credit Application, the Dealer may so advise the Customer.
3. Retail Contract Submission. Following acceptance by the Bank of the
related Credit Application, the Dealer shall submit to the Bank with respect to
each Contract offered by Dealer for purchase hereunder, the following:
a. A completed Contract signed by the Customer and endorsed by an
authorized representative or officer of the Dealer containing the terms and
provisions specified by the Bank.
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b. Copies of all documents which shall have been submitted by Dealer
for filing and recording as necessary with the appropriate government agency,
required under the Uniform Commercial Code, certificate of title statutes and
other applicable laws to convey to the Bank the Contract, and/or to perfect a
valid and enforceable first priority security interest in the related Contract
Vehicle in favor of the Bank.
C. If the Contract arises from the sale to a Customer of a new motor
vehicle, a copy of the invoice reflecting the sale of the Contract Vehicle to
the Dealer, and if the Contract arises from the sale to Customer of a used motor
vehicle, such evidence as the Bank may request reflecting the sale of the
Contract Vehicle to the Dealer.
d. Documentation describing the nature and Dealer's cost of all
accessories and other items installed by the Dealer in the Contract Vehicle.
e. Copies of all service contracts, extended warranty policies or
other insurance policies, if any, issued with respect to the Contract Vehicle.
f. Any other documents, information and/or verifications which are
requested by the Bank.
Following its receipt and review of the foregoing documents, the Bank will
purchase the Contract if the documents are in a form and substance satisfactory
to the Bank and if they comply with the credit consideration and contract
eligibility requirements that the Bank may take into account in the evaluation
of the Contract. The purchase will be made by remitting to the Dealer as
provided in Section 5 below, the purchase price for the Contract. The purchase
price for any Contract purchased by the Bank shall be the "total amount
financed" or other similar amount as determined by the Bank for the Contract.
4. Insurance, Service Contracts, and Dealer Installed Options. The "total
amount financed" or other similar amount described in any Contract purchased by
the Bank under the terms of this Agreement may include, with the Bank's prior
approval, the price of all Dealer installed accessories and options and other
items sold by Dealer in conjunction with the related Contract Vehicle, including
but not limited to credit life and disability insurance, and mechanical
breakdown protection contracts and service contracts, in each case with terms
and issued by a firm satisfactory to the Bank, and subject to cancellation by
the Bank if the Customer is in default under the Contract or the Contract is for
any reason terminated. The Bank may limit the amount of any accessories, options
and other items that may be financed under the Contract.
5. Dealer Payments. The Bank will pay for Contracts purchased hereunder
upon its determination that the Contracts and additional documentation conform
with the Bank's requirements. If the Bank determines that the documents fail to
satisfy the Bank's requirements or if the Bank otherwise determines not to
complete the purchase, then the documents will be returned to Dealer and no
payments will be made.
6. Dealer Finance Participation. Contracts purchased by the Bank under the
terms of this Agreement must bear interest at a rate per annum ("Contract Rate")
equal to or greater than the rate per annum specified by the Bank as the minimum
acceptable rate ("Buy Rate") for Contracts with similar terms, payment schedules
and other credit characteristics. Subject to applicable usury limits, the Dealer
may enter into Contracts having Contract Rates in excess of the applicable Buy
Rates then in effect; provided, however, that the Bank shall have the right,
upon notice to Dealer, to limit its purchase of Contracts to those that do not
exceed the maximum Contract Rates established by the Bank. If the Contract Rate
for any Contract purchased by the Bank exceeds the applicable Buy Rate then in
effect, Dealer shall earn with respect to those Contracts a finance
participation ("Finance Participation"). The Finance Participation shall be
computed and paid to Dealer in accordance with payment procedures specified by
the Bank in a Dealer Reserve Supplement Letter or other notice as provided by
the Bank. However, except as the Bank may otherwise agree in writing or elect,
no Finance Participation will be earned by the Dealer with respect to any
Contract for a term of less than twelve months, or covering an employeels,
partner's, officer's or owner's demonstrator, or covering a vehicle purchased by
an employee, partner, officer or owner. In the case of the Customer(s) default
under any contract purchased by the Bank, the Dealer will be obligated to remit
the total Finance Participation which was paid to the Dealer by the Bank for
such Contract, in an amount not exceeding the Bank's loss, actual or
prospective, with respect to such Contract. If any Contract purchased by the
Bank hereunder is prepaid in part or in full prior to its stated maturity,
Dealer will be obligated to remit to the Bank that portion of the Finance
Participation paid by the Bank for the Contract that the Bank determines is
unearned as a result of the prepayment. This payment obligation will be
determined and paid in accordance with programs and procedures specified by the
Bank.
7. Reserve Account. The Bank will credit to a Reserve Account in the
Dealer's favor the amounts of any Finance Participation which are earned by the
Dealer pursuant to Section 6 above. Whenever, as a result of charges against the
Reserve Account ' the Reserve Account has a negative balance, the Dealer will,
upon the Bank's demand, pay the Bank that amount necessary to increase the
Reserve Account balance to zero; For all active Reserve Accounts, the Bank will
issue periodic Reserve Account statements at intervals determined by the Bank.
8. Insurance and Service contract Cancellations. Upon the cancellation by
the Bank, the Customer or the issuing firm of any credit life insurance,
mechanical breakdown protection contract or other service contract financed
under any Contract purchased by the Bank hereunder, whether as a result of the
prepayment of the Contract or otherwise, Dealer shall remit to the Customer, the
Bank or any third party, as directed by the Bank, any portion of the unearned
charge for the insurance contract, mechanical breakdown protection contract or
other service contract required to be refunded pursuant to the terms of the
Contract or applicable law.
9. Representation and Warranties. AS to each Contract sold by the Dealer
to the Bank under the terms of this Agreement, the Dealer represents and
warrants that as of the time of sale:
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a. All business permits and other operating authorizations necessary in
connection with Dealer's execution of the Contract and sale thereof to the Bank,
are in full force and effect in all necessary jurisdictions.
b. The Contract and all other agreements or other documents executed by
Customers and/or the Dealer in connection with the sale of the Contract Vehicle
and its financing with the Bank are valid, legal and are binding obligations of
the Customer and/or the Dealer, enforceable against the Customer and/or the
Dealer in accordance with their terms and conditions, and each signature thereon
is the genuine and duly authorized signature of the person whose signature it
purports to be.
C. Information contained in the Contract, and the information contained in
the Credit Application submitted to the Bank in connection with the Contract, is
true and accurate.
d. Immediately prior to the execution of the Contract by the Dealer, the
Dealer was the sole and exclusive owner of the Contract Vehicle and had the
right and authority to dispose of the Vehicle as provided in the Contract.
e. The Dealer has caused title to the Contract to be conveyed to the Bank
and to no other individual, corporation or other entity, and the Contract and
Contract Vehicle are free and clear of any security interest, lien, claim or
encumbrance other than those in favor of the Bank.
f. The Contract accurately describes the Contract Vehicle and contains all
representations, warranties, and agreements made by the Dealer to the Customer
with respect to the Contract Vehicle.
g. There is only one original executed Contract, and at the time the
Contract was executed, each person signing the Contract received a fully
completed and legible copy of the signed Contract.
h. The Dealer has complied with all applicable requirements of the Federal
Truth In Lending Act, the Federal Equal Credit Opportunity Act, the Fair Credit
Reporting Act and all other federal, state and local laws, rules or regulations
applicable to consumer protection or the extension of credit or otherwise
affecting the Contract, the transactions contemplated thereby and all dealings
between the Dealer and the Customer in connection therewith.
i. The Dealer has installed all equipment and accessories, and performed
in a good and workmanlike manner all services as described in the Contract and
has performed all of the Dealer's other obligations under the Contract, and
Customer has no~ asserted, does not have and will not have, any defense, offset,
counterclaim or right of rescission with respect to the Contract.
j. The Contract is not in default and has not been subordinated in whole
or in part, satisfied or rescinded, and the lien on the Contract Vehicle has not
been released in whole or in part, and the Dealer knows of no fact or
circumstance which might impair the validity or enforceability of the Contract
or render it less valuable than it appears on its face to be.
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k. All documents required under the Uniform Commercial Code, any
certificate of title statute as in effect in any applicable jurisdiction and
other applicable law to convey the Contract and to perfect a valid and
enforceable first priority security interest in the related Contract Vehicle in
favor of the Bank have been submitted for filing with the appropriate government
agency and all action with respect thereto has been completed.
1. The Contract Vehicle has been delivered to and accepted and retained by
the Customer and when so delivered the Contract Vehicle was new and unused,
except as otherwise stated in the Contract, in good operating condition and
repair and free of all mechanical defects, and met all equipment requirements of
applicable law.
m. Insurance coverage as specified by Section 12 below is in effect for
the Contract Vehicle.
n. The Dealer has not received any funds with respect to the Contract
which Dealer has not remitted to the Bank, properly endorsed to the Bank where
appropriate.
o. Dealer has received the downpayment to the extent and in the form
specified in the Contract, and, except to the extent specifically indicated on
the face of the Contract, Dealer has not extended a loan to the Customer or
assisted the Customer in obtaining a loan from any third party other than the
Bank for purposes of paying such downpayment or extended any financing for any
other amounts payable by Customer under the Contract, or in connection with the
Contract Vehicle or the purchase thereof, and the "total amount financed" or
other similar amount described therein will be the actual principal amount owed
by Customer with respect to the Contract Vehicle and services related thereto
sold pursuant to the Contract.
p. The Dealer has not modified, extended, waived or otherwise altered any
term of the Contract or any other document executed in connection therewith or
made any representations of a similar nature prior to the sale of the Contract
hereunder.
q. Each registered and legal owner of the Contract Vehicle has signed the
Contract either as a Customer or as an individual, or other entity granting a
security interest in such Contract Vehicle to Dealer or Dealer's assignee.
r. All parties to the Contract had the capacity to execute the Contract.
s. The Contract arises from the sale of the Contract Vehicle to a Customer
of the Dealer in the regular course of the Dealer's business.
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10. Contract Repurchase, If: (i) the Bank determines at its sole but
reasonable discretion that the documentation relating to any Contract is
unsatisfactory; or (ii) any representation and warranty made by Dealer with
respect to any Contract is not true and accurate when made; or (iii) the Dealer
breaches any other agreement with respect to the Contract contained herein, or
in any other agreement between Dealer and the Bank; or (iv) a Customer under a
Contract notifies the Bank of a claim or defense against the Dealer and the Bank
in its judgment would, as an assignee of the Contract, be subject to that claim
or defense, and if after notification from the Bank of the Bank's receipt of
notice of such claim or defense, the Dealer does not within thirty (30) days
resolve such dispute, Dealer shall repurchase the Contract on demand by the Bank
for a repurchase price equal to the sum of the unpaid principal balance of the
Contract plus all accrued and unpaid interest, the amount of any Dealer Finance
Participation, and expenses incurred by the Bank in enforcing its rights under
this Agreement. The Bank may deduct the amount of the repurchase price from the
Reserve Account. The Dealer also agrees that if the Bank holds a dealer sight
draft while waiting for the related Contract or other documentation to be
completed or corrected, the Dealer will indemnify the Bank for any losses or
costs the Bank incurs because of any late return or nonpayment of the sight
draft. All repurchases pursuant to this section shall be without recourse to the
Bank and without representation or warranty by the Bank, express or implied, as
to the repurchased Contract. The foregoing rights are in addition to and not in
limitation of any other rights the Bank may have under this Agreement or any
related agreements, instruments or other documents or under applicable law.
11. Exceptional Contracts, Vehicles and Buyers. Each contract covering:
a. a commercial vehicle used for long-distance hauling or of more
than two tons capacity,
b. a bus,
c. a vehicle used for taxi, jitney, or "drive-yourself" service,
d. a used vehicle of a year model more than four years previous
to the then current model year of the same make, if any, or if
none, of any other make, or
e. a vehicle sold to an employee of the Dealer, or to a relative
of one of the Dealer's owners, officers, partners or
stockholders, will be sold to the Bank subject to the Dealer's
agreement to repurchase the Contract from the Bank, for a
repurchase price equal to the sum of the unpaid principal
balance of the Contract plus all accrued and unpaid interest
and the amount of any Dealer Finance Participation, if the
entire amount unpaid on the Contract becomes due or at the
Bank's option may be declared to be due. If the Dealer omits
to execute a Supplementary Dealer's Agreement containing the
Dealer's Contract Repurchase Agreement as to such Contract,
any of the Bank's officers or employees may do so in the
Dealer's name and behalf.
12. Insurance. Each Contract Vehicle must be insured at all times against
damage or loss pursuant to a comprehensive property damage insurance policy
containing terms and amounts satisfactory to the Bank. At the time any Contract
is purchased by the Bank hereunder, Dealer will verify that the Customer has
obtained a satisfactory insurance policy covering the related Contract Vehicle.
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13. Contract Forms. The Bank shall be in no way liable or responsible for
the legal validity or sufficiency of any form or Contract or other instrument
which the Bank may furnish to the Dealer which is assigned to anyone other than
the Bank. The Dealer agrees not to use forms that the Bank furnishes the Dealer
pursuant to this Agreement for any purposes other than the assignment of
Contracts to the Bank.
14. Retail Program Covenants. As long as the Bank shall own any Contract
purchased from the Dealer under the terms of this Agreement, the Dealer will:
a. Take any action that is necessary or that the Bank may request to
evidence and perfect the Bank's interest in each Contract purchased by the Bank
under the terms of this Agreement, the Contract Vehicle related to that Contract
and all proceeds of the foregoing.
b. Comply with the Dealer's record retention obligations under the
Equal Credit Opportunity Act and any other federal or state law with respect to
Contracts, Credit Applications, and their related documents.
c. Neither take or omit to take any action, in respect of any
obligation of the Dealer under any Contract, which may give the Customer with
respect to any Contract, any defense, offset or counterclaim as to the
enforcement of that Contract.
d. Neither repossess nor accept redelivery of a Contract Vehicle
related to a Contract purchased by the Bank under the terms of this Agreement,
without the prior written consent of the Bank.
WHOLESALE PROGRAM
1. Program Initiation and Advances by the Bank. The Dealer will advise the
Bank when the Dealer elects to participate in the wholesale program and the Bank
will then determine, at its sole option, if the Dealer is eligible for
participation. The Bank may make advances, in each case at its sole option, to
or for the benefit of the Dealer, repayable on demand, in such amounts as the
Bank may determine ("Advances"). Any Advances made by the Bank to Dealer are
made exclusively to allow Dealer to finance the purchase of new or used motor
vehicles designated by the Bank as eligible for wholesale financing under the
terms of this Agreement. Any such vehicle is referred to hereafter as an
"Eligible Vehicle." Any eligible Vehicles against which an Advance has been made
and remains unpaid is referred to hereafter as a "Financed Vehicle."
2. Security Interest. To secure Dealer's obligation to repay the Advances
and Dealer's other payments and performance obligations under this Agreement,
the Dealer shall execute security agreements ("Security Agreement") in a form
and containing terms specified by the Bank, and any other agreements the Bank
may request.
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3. Monthly Statements and Promissory Notes. The indebtedness of the Dealer
relating to the Advances shall be evidenced by entries made on the Bank's books
and records in accordance with the Bank's customary accounting practices. The
Bank will send to Dealer on a monthly basis a statement reflecting the amounts
of all Advances made, all interest and other charges accrued and all payments
received from the Dealer since the date of the preceding monthly statement.
Dealer shall have (15) calendar day following the receipt of each monthly
statement to review the statement and to deliver to the Bank in writing any
objections to its contents, specifying in reasonable detail the basis for the
Dealer's objections. If Dealer fails to object within the fifteen-day period the
statement shall constitute an account stated between the Bank and the Dealer.
The demand nature of the advances shall not be affected by any partial billing
by the Bank, which billings are made only for the convenience of the parties.
Dealer will, on the Bank's request, execute one or more promissory notes in form
and substance satisfactory to the Bank to further evidence any indebtedness of
Dealer relating to the Advances.
4. Interest Rate. Dealer shall pay interest as billed by the Bank on the
outstanding principal amount of each Advance from the date of the Advance until
the Advance is paid in full at the rates specified by the Bank. If any Advance
is not paid by the Dealer when due under the terms of this Agreement, interest
shall accrue from and after the due date until that Advance is paid in full at a
rate specified by the Bank for late payments. Interest shall be computed daily
on the basis of a 360-day year and actual days elapsed. The interest rate
charged pursuant to the terms of this Agreement shall not exceed the highest
rate permissible under any law which a court of competent jurisdiction shall in
a final determination, deem applicable to this Agreement. If a court determines
that the Bank has received interest under the terms of this Agreement in excess
of the highest applicable rate, the Bank shall promptly refund the excess
interest to Dealer. All payments by Dealer under this Agreement shall be made in
accordance with the procedures and requirements specified by the Bank.
5. Preconditions to Each Advance. The Bank will make Advances under this
Agreement only if: W prior to the initial Advance the Bank shall have received a
Security Agreement executed by Dealer together with any additional agreements,
instruments, approvals, opinions or other documents (collectively "the Other
Documents") the Bank may request; (ii) prior to any Advance including the
initial Advance, the Bank shall have received the manufacturer's statement of
origin for each Financed Vehicle related to the Advance together with any Other
Documents the Bank may request; and (iii) on the date of the Advance including
the initial Advance, the representations and warranties made by the Dealer in
this Agreement shall be true and correct as though made on and as of such date,
and no event of the kind described in the termination section of this Agreement
shall have occurred.
6. Representations and Warranties, Dealer represents and warrants to the
Bank that all of the Financed Vehicles are located at the Dealer's Address as
specified on the last page of this Agreement. The Dealer further warrants that
none of the Financed Vehicles are subject to any security interests, liens,
claims or other encumbrances other than those in favor of the Bank. These
representations and warranties shall be automatically reaffirmed by Dealer on
each day that an Advance is made.
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7. Repayment of Advances. Unless the Bank makes an earlier demand for
repayment, the Dealer shall repay the principal amount of each Advance at the
earliest of the day which shall occur one calendar year after the date of the
Advance, or the day that any Financed Vehicle related to the Advance is sold by
dealer, or the day on which any Financed Vehicle related to the Advance is
materially damaged or removed from the Dealer's Address other than in accordance
with guidelines which the Bank may establish with respect to demonstrators and
customer test drives. If an Advance relates to several Financed Vehicles, only
that portion of the Advance which relates to the sold, damaged or absent
Financed Vehicle must be repaid on the date of such sale, damage or absence and
the balance of the Advance, or portion thereof, shall be repaid when the related
Financed Vehicles are sold, damaged or missing or as otherwise provided under
the terms of this Agreement.
8. Location of Financed Vehicles. The Dealer will, at all times, maintain
each Financed Vehicle in Dealer's possession at Dealer's Address and at Dealer's
sole risk of loss or injury thereto, for the sole purpose of securing the sale
or lease of the Financed Vehicle in the ordinary course of the Dealer's
business. Dealer may use designated Financed Vehicles as demonstrators and for
test drives in accordance with guidelines which the Bank may establish.
9. Insurance. The Dealer will insure each Financed Vehicle with insurance
companies satisfactory to the Bank and in amounts and against risks specified by
the Bank and will obtain all endorsements required by the Bank to the policies
evidencing the insurance. In the event the Dealer fails to insure the Financed
Vehicles as provided in this Agreement, the Bank shall have the right, but not
the obligation, to obtain the insurance and the dealer agrees to reimburse the
Bank on demand for the premium cost,
10. No Liens. From the date of this Agreement until all Advances plus
unpaid interest and all amounts owed under this Agreement are paid in full and
the Dealer's participation in the wholesale program is terminated, the Dealer
will not, unless the Bank shall otherwise consent in writing and except as
otherwise permitted in this Agreement, create or permit to exist any security
interest, lien, claim or other encumbrances in favor of any party other than the
Bank upon or with respect to any of the Dealer's property that is subject to a
security interest in favor of the Bank, including without limitation any
Financed Vehicles.
MISCELLANEOUS
1. Dealer Representations and Warranties. The Dealer represents and
warrants the following:
a. This Agreement and each other agreement, instrument and other
documents executed by Dealer in conjunction with this Agreement, including but
not limited to the Security Agreement, the Other Documents and each Contract
sold to the Bank hereunder and each other agreement, instrument or other
document executed by Dealer in connection with each Contract sold to the Bank
hereunder is, or when executed and delivered will be, the duly authorized,
valid, legal and binding obligation of the Dealer, enforceable against Dealer in
accordance with its terms.
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b. The Dealer is an entity of the type indicated on the last page of
this Agreement, and to the full extent necessary for an entity of that type, is
duly organized and existing and is duly authorized to transact business and is
in good standing under the laws of the state of Dealer's Address. The Dealer it
also duly authorized to transact business and is in good standing in all other
jurisdictions where the nature of its business requires it to be so authorized.
c. All Credit Applications submitted to the Bank will contain an
authorization which complies with the Fair Credit Reporting Act, enabling the
Bank to obtain necessary credit information concerning the Customer.
These representations and warranties will be automatically reaffirmed by Dealer
on each day that an Advance is made by the Bank or a Contract is purchased by
the Bank under the terms of this Agreement.
2. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Dealer, the Bank and their respective successors and
assigns (including a debtor in possession); provided, however, that Dealer may
not assign any of its rights hereunder or any interest herein without the prior
written consent of the Bank.
3. Agency. The Dealer is not the agent or representative for the Bank for
any purpose. The Dealer has neither the express nor implied right or authority
to bind the Bank in any manner whatsoever. Whenever in this Agreement reference
is made to an agent of the Bank, that reference is intended to mean any third
party that the Bank may from time to time appoint to fulfill any of its
obligations under this Agreement. The Dealer hereby appoints the Bank as the
Dealer's agent and authorizes the Bank in Dealer's or the Bank's name, to
execute and acknowledge an assignment from the Dealer to the Bank of any
Contract purchased hereunder, to execute and file any financing statements or
continuation statements or amendments thereto or assignments thereof and any
other instruments or notice the Bank deems necessary and appropriate, to endorse
in the name of Dealer any check, draft or other instrument received by Dealer or
the Bank representing payment on, or other proceeds of, any Contract purchased
hereunder, or any collateral securing Dealer's payment and performance
obligations hereunder, and to take any other action the Bank deems necessary or
appropriate to preserve, protect or more fully evidence the Bank's rights under
this Agreement, the Security Agreement or Other Documents, any other agreements
related hereto, or thereto in any Contract purchased under the terms of the
Agreement.
4. Additional Procedures and Supplements. In connection with the retail
program, the Bank at its sole discretion will by necessity, establish, modify
and/or amend procedures, requirements, conditions and policies applicable to
those programs. The Bank will advise Dealer of these changes to procedures,
conditions and policies by sending the Dealer bulletins, notices and other
informational documents. The terms and conditions described in those bulletins,
notices and documents will become effective upon receipt by the Dealer.
<PAGE>
5. Terminating the Relationship. Either the Bank or the Dealer may
terminate this Agreement without cause by giving ten (10) days written notice to
the other of the intent to terminate.
The Bank may terminate this Agreement on notice to Dealer upon the occurrence of
any of the following events:
a. Dealer shall fail to make any payment when due to the Bank under
the terms of this Agreement, the Security Agreement, the Other Documents, or any
other agreements between Dealer and the Bank.
b. Any representation or warranty made by Dealer under this
Agreement, the Security Agreement or Other Documents, or any other agreements
between Dealer and the Bank shall prove to be incorrect when made or reaffirmed.
c. Dealer shall fail to perform or observe any other term, covenant
or condition contained in this Agreement, the Security Agreement, the Other
Documents, or any other agreements between the Dealer and the Bank.
d. Any default including but not limited to any payment default,
occurring under any agreement or instrument relating to any indebtedness or
obligation of Dealer to any person, corporation or other entity, other than the
Banl~ and such default shall continue after the applicable grace period, if any,
specified in such agreement or instrument.
e. Dealer shall generally not pay its debts as such debts become due
or shall admit in writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors or any proceeding shall
be instituted by or against Dealer under any bankruptcy or insolvency law, or
any proceeding shall be instituted by or against Dealer seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or a
composition of Dealer or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors or seeking the entry of an order
for relief or the appointment of a receiver, trustee, or other similar official
for it or for any substantial part of its property, or the Dealer shall take any
action to authorize any of the actions set forth above in this section.
f. A material adverse change in the Dealer's financial condition or
operations which occurs after the date of this Agreement.
No termination of this Agreement will affect the rights, interests or
obligations of either party hereto which accrued or existed prior to such
termination. The Dealer hereby waives any claim against the Bank for
consequential or punitive damages arising from any act or admission of the Bank
under this Agreement, including but not limited to any termination of this
Agreement by the Bank.
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6. Rights After Termination. At any time on or after the termination of
this Agreement and in pursuing any rights and remedies the Bank may have under
this Agreement, the Security Agreement, the Other Documents, or any other
agreements between Dealer and the Bank, the Bank may declare the Advances to
Dealer, all interest thereon and all other amounts payable under this Agreement
to be immediately due and payable without presentment, demand, protest, or
further notice of any kind, all of which are hereby expressly waived by Dealer,
and the Bank may exercise all the rights and remedies of a secured party under
the Uniform Commercial Code or any other applicable law, all of which aforesaid
rights and remedies shall be cumulative and not exclusive, to the extent
permissible by law. Nothing in this section is intended to limit any of the
Bank's rights prior to any termination of this Agreement, including but not
limited to the Bank's rights to demand payment in full at any time of any
Advance, all interest thereon and any other amounts payable under this
Agreement.
7. Right of Offset. All of the Dealer's payments and performance
obligations under this Agreement shall be secured by all property of Dealer in
which the Bank has been granted a lien or security interest pursuant to the
Security Agreement, the Other Documents or any othee agreements executed in
conjunction with this Agreement or otherwise. The Bank shall have at all times,
to the fullest extent permitted by law, a right to offset and apply any funds,
credits or other amounts owing to Dealer or any property of Dealer in the Bank's
possession or control, against any obligation of Dealer to the Bank.
8. Amendments, Governing Law and Severability. If any term or provision of
this Agreement is deemed invalid or unenforceable, the remainder of this
Agreement shall not be affected thereby and each term and provision thereof
shall be valid and enforceable to the fullest extent permitted by law. This
Agreement shall be construed in accordance with, and governed by, the laws of
the state of New York. All amendments to this Agreement must be in writing,
signed by the Dealer and the Bank, except that the Bank may from time to time
establish procedures, requirements, conditions and policies applicable to this
Agreement, and those procedures, requirements, conditions and policies shall
modify or supplement the relevant terms and provisions of this Agreement.
9. Indemnifying the Bank. The Dealer shall indemnify the Bank against all
costs, losses and expenses, including but not limited to reasonable attorney's
fees and expenses incurred or suffered by the Bank as a result of any breach by
the Dealer of any term of this Agreement or any agreement, instrument or other
documents executed by Dealer in conjunction with this Agreement or any action
brought by a Customer against the Bank as a consequence of any actual or alleged
act or omission of the Dealer.
10. Inspecting Books, Records and Collateral. The Bank shall have the
right at any time during regular business hours to examine any collateral
securing the Dealer's payment and performance obligations under this Agreement
and to examine and make copies of any or all of the Dealer's books, records and
documents (including but not limited to computer tapes and disks) concerning
Dealer's participation in and transactions related to the wholesale and retail
programs. In addition, the Dealer will deliver to the Bank at such time and in
such form as the Bank shall designate, schedules and reports relating to matters
in connection with the Dealer's participation in and transactions relating to
the wholesale and retail programs, including but not limited to schedules and
reports relating to the wholesale collateral.
<PAGE>
11. Monies and Proceeds Received By Dealer. The Dealer will at Dealer's
risk segregate and hold in trust for the Bank, in the identical form received,
any cash, checks, instruments, or other payments or proceeds received by Dealer
in connection with any Contract purchased by the Bank under the terms of this
Agreement, including but not limited to any Customer payments and any returned
or repossessed Contract Vehicles. Dealer will promptly provide to the Bank an
accounting thereof and upon the Bank's request deliver any and all such items to
the Bank as the Bank may direct, with all necessary or appropriate endorsements;
provided, however, that any cash, checks, instruments or other payments shall be
delivered to the Bank within one business day after the Dealer's receipt of the
cash, checks, or instruments.
12. Additional Rights of the Bank. The Dealer authorizes the Bank, its
officers or employees, without notice to the Dealer and without limiting or
affecting the Dealer's obligations to the Bank, to:
a. grant to the Customer(s) under any Contract purchased from the
Dealer under this Agreement any indulgence(s) or extension(s) of time of
payment, in whole or in part;
b. discharge, compromise or settle the obligation(s) of (any of) the
Customer(s) under any such Contract; or
c. retake the motor vehicle relating to any such Contract, or omit
to do so, and if retaken, either retain or resell the same, to the Bank or
otherwise, with or without complying with any applicable provisions of law.
13. Defaults. The Bank may notify the Dealer in writing that a vehicle has
come into the Bank's possession in lieu of delivering it to the Dealer if the
Dealer is in default in the performance of any of the Dealer's agreements with
the Bank or if the Dealer has stopped doing businessas a going concern. The Bank
may withhold any payment out of the Reserve Account in Dealer's favor while the
Dealer is in default in the performance of any of the Dealer's agreements with
the Bank or, if the Bank stops buying Contracts from the Dealer, until all
Contracts bought from the Dealer are fully liquidated. if the Dealer fails to
purchase from the Bank, and pay the Bank for any Contract or vehicle in
accordance with this Agreement or any other agreement with the Bank, the Bank
may without limiting any other right or remedy, enforce such Contract and/or
sell such Contract or vehicle at public or private sale (with full right to the
Bank to bid and purchase at any public sale), in which event the Dealer will
reimburse the Bank for any difference between the net proceeds of such
enforcement and/or sale and the amount agreed to be paid by the Dealer to the
Bank for such Contract or vehicle.
14. Notices. All notices and communications provided for under the terms
of this Agreement shall, unless otherwise stated herein, be in writing,
including facsimile transmission, and shall be mailed, transmitted or personally
delivered to the Dealer or to the Bank, as the case may be, at its address set
forth on the last page of this Agreement, or at any other address as may
hereafter be designated in writing to the other party. All such notices and
communications shall be effective three business days after being deposited in
the mail if postpaid, and if sent by facsimile transmission, upon transmission,
and otherwise upon receipt.
<PAGE>
15. The Bank Waivers. No failure on the part of the Bank to exercise and
no delay in exercising any right under the terms of this Agreement shall operate
as a waiver of those rights, nor shall any single or partial exercising of any
right under the terms of this Agreement preclude any other or future exercise of
those rights or the exercise of any other right.
16. Returned or Repossessed Vehicles. Upon the Bank's request, Dealer will
store at no expense to the Bank and will recondition for the Bank at the
Dealer's then lowest prevailing rates any returned or repossessed Contract
Vehicle related to the Contract purchased by the Bank under the terms of this
Agreement, provided that the Bank delivers the Contract vehicle to the Dealer's
Address.
17. Entire Agreement. This Agreement, the Security Agreement, the Other
Documents and the other agreements executed in connection herewith and therewith
and as modified and supplemented from time to time, set forth the entire
Agreement between the Dealer and the Bank with respect to the subject matter
herein and supersedes all prior agreements, proposals and understandings,
whether written or oral relating to the same subject matter.
IN WITNESS WHEREOF, this Dealer's Agreement has been duly executed by the
undersigned.
MARINE MIDLAND BANK Major Fleet & Leasing Corp.
NAME OF DEALER
43-40 Northern Boulevard
Long Island City, New York 11101
ADDRESS OF DEALER
By /s/ Allen Davis, AVP By /s/ Bruce Bendell
Authorized Bank Signature Authorized Dealer Signature and Title
[LOGO] Dealer Lease Plan Agreement
GE Capital
The Agreement is entered into by and between GENERAL ELECTRIC CAPITAL AUTO
LEASE, INC. (GECAL), located at P.O. Box 310, Barrington, Illinois 60011, and
the undersigned ("Dealer").
1. DEALER FEE. Unless previously remitted, DEALER shall pay to GECAL, upon
execution of this Agreement a non-refundable fee of $
2. PURCHASE OF LEASES.
a. Purchase Price. GECAL small purchase a lease and leased vehicle
for a sum agreed upon between GECAL and DEALER.
b. Payment Of Purchase Price. GECAL shall become obligated to
purchase the lease and leased vehicle on the date GECAL has received all
of the following items and the purchase price shall be payable within 10
days after such date:
(1) The subject lease which
(a) is in a correct and complete form in accordance with
GECAL's instructions;
(b) has been duly and properly executed by lessee and
DEALER;
(c) has been duly and properly assigned by DEALER to
GECAL; and
(d) has been issued an approval number within the 60 day
period preceding receipt of the lease by GECAL.
(2) All other documents in an acceptable form and information
which GECAL may require in connection with the subject lease
transaction; and
(3) All monies received by DEALER from the leasee prior to, at
the time of, or subsequent to lease execution and vehicle and
vehicle delivery dexcept for (a) amounts necessary to pay
appropriate government entities for the registration and titling of
the leased vehicle if DEALER is to perform such function, and (b)
other amounts as directed by GECAL.
c. Joint Payees. GECAL reserves the right to make any check ordraft
jointly payable to DEALER and to any third person who either holds a
security interest in the inventory assets of DEALER or who sold the leased
vehicle to DEALER.
3. MECHANICAL BREAKDOWN PROTECTION CONTRACTS.
a. Acceptability Of MBP Contract. Dealer may sell to the lessee a
mechanical breakdown protection contract ("MBP Contract") covering the
leased vehicle subject to the acceptability of the form, administrator, if
any, and underwriter of the MBP Contract to GECAL.
b. Cancellation of MBP Contract. Whether an acceptable MBP Contract
is sold to the lessee for cash or the cash price therefor is financed in
connection with the lease, DEALER agrees that the MBP Contract shall be
cancellable upon the demand of either the lessee, in which case DEALER
shall immediately notify GECAL thereof, or GECAL or by operation of law.
In the event of any such cancellation the lessee shall be entitled to a
refund credit of the unearned portion of the cash price as provided in the
MBP Contract or lease or as otherwise required by law, whichever provides
for the greatest refund credit. DEALER's liability under this paragraph
shall be limited to that amount DEALER collected and retained or otherwise
received in connectin with the sale of the MBP Contract which is
determined by the foregoing standards to be subject to refund. DEALER
shall remit its portion of the credit to the lessee. GECAL or some third
party within 16 days of cancellation as directed by GECAL. Such refund
credit may, if so provided in the lease, be subject to GECAL's security
interest therein.
<PAGE>
4. DEALER LIABILITY FOR LESSEE DEFAULT.
a. New Vehicle Lease. Where the lessed vehicle is a new vehicle,
DEALER shall not be liable for any deposit of the lessee under a lease
which occurs after the date GECAL becomes obligated to purchase the lease
and leased vehicle pursuant to paragraph 2b.
b. Used Vehicle Lease. Where the leased vehicle is a used vehicle
and for any casue or reason the lease becomes in default or the Lessee
otherwise refuses to perform thereunder within 90 days of the due date of
the initial lease payment billed by GECAL. DEALER shall repurchase the
lease and leased vehicle upon GECAL's tendering the vehicle to DEALER not
more than 30 days after the expiration of such 90 day period.
5. DEALER'S GENERAL WARRANTIES. So long as this agreement is in effect,
DEALER warrants, covenants and agrees that:
a. If it is a corporation, and is good standing in the state of its
incorporation and it has obtained the necessary resolution of its Board of
Directors and, if required, the necessary shareholders, ratification of
the making of this agreement.
b. It is prior to entering into a lease which is subsequently
assigned to GECAL licensed and authorized to enter into such lease in the
state or states where the provisions of the lease are negotiated, the
lease is executed and the leased vehicle is delivered.
c. If it conducts business under a fictitious trade name or trade
style, that it has and will comply with all applicable laws relating to
the doing of business under a fictitious trade name or trade style.
d. It shall not represent that it is the agent of GECAL.
6. DEALER'S SPECIFIC WARRANTIES AS TO EACH LEASE. As to each lease
purchased by GECAL, DEALER further warrants that as of the date GECAL becomes
obligated to purchase the lease and issued vehicle:
a. DEALER has good title to the lease and the leased vehicle both of
which shall be free and clear from all liens and encumbrances.
b. DEALER has complied with all applicable state, federal and local
laws and regulations or relating to the lease transaction.
c. Neither DEALER nor any of the employees has made any oral or
written promise, affirmation, warranty or representation to any lessee
that is not contained in the lease including, without limiting the
generality of the foregoing, any representation that the lessee has any
option to purchase the leased vehicle unless such an option is contained
in the Lease or any warranty which is inconsistent with or greater than
any manufacturer's warrants then in effect as to the leased vehicle.
d. Lessee is not in default under the lease.
e. Any credit information furnished by DEALER as to the lessee is
true, complete and accurate to the best of DEALER's information and
belief.
f. Lessee has no offsets or counterclaims regarding or defenses to
the enforcement of the lease.
g. Lessee has obtained prior to or contemporaneously with vehicle
delivery and maintains the insurance coverage as required under the lease.
h. Lessee excuted the lease prior to vehicle delivery and Lessee has
accepted vehicle delivery.
i. DEALER has titled and registered the leased vehicle, or has made
application therefor, as instructed by GECAL.
7. GECAL'S REMEDIES UPON DEALER DEFAULT OR BREACH OR WARRANTY. Should
dealer default in the performance of any term or condition herein or should
DEALER breach any warranty herein, then in addition to the rights and remedies
hereinabove set forth. GECAL may demand DEALER repurchase the subject lease(s)
and leased vehicle(s) purchased by GECAL from DEALER pursuant to this Agreement
and the repurchase price shall be computed in accordance with paragraph 8
hereof. Should any bankruptcy or insolvency proceeding be initiated by or
against DEALER, then in addition to the rights and remedies hereinabove set
forth. GECAL may demand that DEALER repurchase all, or any portion of the leases
and leased vehicles purchased by GECAL from DEALER pursuant to this Agreement
and the repurchase price shall be computed in accordance with paragraph 8
hereof. Should suit be initiated to enforce any provision of this Agreement the
prevailing party shall be entitled to an award of all costs incurred and
reasonable attorney's fees.
<PAGE>
8. DEALER REPURCHASE OF LEASES.
a. Repurchase Price. As to each lease which DEALER must repurchase
hereunder, the repurchase price shall be the sum of the following
(1) The residual value of the leased vehicle;
(2) The aggregate of all past due lease payments; and
(3) The amount which is the product of the montly depreciation
factor times the number of months remaining in the lease term. If
the repurchase price of the lease and/or leased vehicle is, or is
subsequently determined to be, a taxable event giving rise to an
obligation of GECAL to pay sales or use tax to any governmental
entity, said amount of tax shall also be paid upon repurchase or, if
not collected at time of repurchase, upon demand for payment by
GECAL.
b. GECAL's Rights Pending Payment,Of Repurchase Price. Until the
repurchase price has been received by GECAL, it is the intent of the
parties that DEALER have no right, title or interest in either the lease
or the leased vehicle. If, however, after demand for repurchase but prior
to payment DEALER shall be deemed to have acquired an interest in a lease
or vehicle giving DEALER title therein or the right to force GECAL to
deliver title thereto. GECAL shall have a security interst therein under
the Uniform Commercial Code as security for the performance by DEALER of
its obligations hereunder, and GECAL and DEALER shall have the respective
rights, remedies and obligations of a creditor and debtor with respect
thereto. DEALER shall remain liable for any deficiency following
disposition.
9. SERVICE, GECAL shall have no obligation to service any vehicle leased
by DEALER pursuant to this agreement. DEALER shall service or procure service
through a franchised dealer affilitate of DEALER for each vehicle at the
Lessee's or GECAL's request to the extent of DEALER's or its affiliate's best
servicing capabilities and at prices consistent with prices charged to other
customers of DEALER or its affiliate. DEALER shall perform warranty service or
procure warranty service through a franchised dealer affiliate of DEALER on each
leased vehicle for which DEALER or an affiliate is the manufacturer's franchised
dealer as requested by GECAL or the lessee.
10. LEASE CONTRACT FORMS. GECAL shall be under no obligation to purchase
any lease which is not in a contract term acceptable to GECAL. GECAL shall
furnish DEALER with standard contract forms for use by DEALER. Except that such
standard contract forms shall be considered to be in preprinted form which is
acceptable to GECAL. GECAL makes no representation or warranty of any kind,
express or implied, with respect thereto.
11. TERM. This Agreement shall continue in force until terminated by
either party. Either party may terminate this Agreement by sending to the other
party notice of termination which shall be effective three days after the
mailing of such notice. Termination by either party shall not relieve DEALER or
its obligations set forth therein as to any lease purchased by GECAL from DEALER
pursuant to this Agreement.
12. DEALER INDEMNITY. DEALER shall indemnify, defend and hold GECAL
harmless from any claim, loss, damage, liability or expense, including court
costs and attorney's fees, incurred by GECAL in connection with a lease or
leased vehicle arising out of an event which occurs either prior to the date on
which GECAL becomes obligated to purchase the lease and leased vehicle or
subsequent to the date of repurchase thereof by DEALER pursuant to paragraph 8
hereof. This indemnity shall include strict liability proceedings.
13. WAIVER. No failure or delay be GECAL either to exercise any right or
remedy it may have or to require the existence of any condition or to require
the performance of any obligation of DEALER hereunder shall operate as a waiver
thereof and such right, remedy, obligation or condition shall remain in full
force and effect as if such failure or delay had not occurred. Without limiting
the generality of the foregoing. GECAL may excuse the failure of DEALER to
execute duly and'properly the assignment provisions of a lease tendered to GECAL
in which case the lease shall be deemed duly and properly assigned as of the
date GECAL otherwise becomes obligated to purchase the lease and leased vehicle.
<PAGE>
14. APPLICABLE LAW. The interpretation and construction of this Agreement,
wherever made and executed and wherever to be performed shall be governed by the
laws of the State of Illinois. Should any particular provision of this
Agreement, or any phrase, sentence, clause or paragraph be determined to be
unenforceable by any court of competent jurisdiction such unenforceability shall
not affect any other term or condition of this Agreement, but this Agreement
shall be construed as if such invalid, illigal or unenforceable term or
condition has never been contained herein. This Agreement shall become effective
upon its execution by DEALER and subsequent acceptance by GECAL at its address
set forth above.
15. NOTICES. Except as expressly permitted in this Agreement, all notices
required or permitted to be given hereunder shall be in writing and shall be
effective upon personal delivery or deposited in the U.S. mail, postage prepaid
and properly addressed. Each party shall promptly provide the other with notice
of any change in the first party's address.
16. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement
between the parties hereto pertaining to the purchase of leases by GECAL from
DEALER and may not be modified other than by a written agreement executed by the
party to be charged.
17. AMENDM ENT S. This Agreement shall be amended either by a separate
writing which is dated and executed by both GECAL and DEALER or by a separate
writing which is forwarded to and received by DEALER from GECAL in which case
the amendments contained therein shall be deemed accepted without qualification
by DEALER upon the issuance, pursuant to Dealer's request, of the first lease
approval numnber by GECAL following the receipt of such writing.
18. MISCELLANEOUS. Headings inserted at the beginning of each section
hereof are for convenience only and are intended to otherwise influence or
affect the interrelations of any provision of this agreement.
Executed on 11 / 1 / 1989
----------------
Major Fleet & Leasing Corp.
-------------------------------------
Accepted, DEALER (Legal Name)
General Electric Capital Auto Lease Inc.
By: Title By: Title
Address P.O. Box 310 By: Title
Barrington & 60011 ---------
Address: 1044 Northern Blvd.
----------------------------
By: Roslyn State NY 11676
----------------- ---------
CHRYSLER
CORPORATION
- --------------------------------------------------------------------------------
Chrysler Corporation
Fleet Operations
November 4, 1993
Mr. Harold Bendell
Major Fleet & Leasing Corporation
15 Wimbledon Drive
Roslyn, NY 11576
Dear Mr. Bendell:
it is my pleasure to inform you that your new Chrysler Leasing System
License Agreement has been approved. Your licensee code number is #6876 and the
effective date is August 24, 1993.
Your approval enables you to receive special benefits that are meant to
enhance your leasing and rental operations. Your Zone Dealer Leasing and Rental
manager will review these programs with you and work closely with you to develop
a relationship that will prove both profitable and beneficial for yourself and
Chrysler Corporation.
Although the License Agreement is between Chrysler Corporation and your
dealership, our records will show the name of your leasing operation to be the
licensee name. Any advertising should include the name of your leasing operation
in order to qualify for Co-Op Advertising reimbursement.
Sincerely,
/s/ Peter W. Allen
- -----------------------
P. W. ALLEN
DEALER LEASING & RENTAL SALES MANAGER
27777 Franklin Road 19th Floor
Southfield MI 48034
<PAGE>
'Irtiuz,
Application for Appointment as a CHRYSLER
Licensee of Chrysler Leasing System LEASING SYSTEM
THE LEASING
PROFESSIONALS
APPLICATION IS MADE TO CHRYSLER MOTORS FOR APPOINTMENT AS A LICENSEE UNDER THE
CHRYSLER LEASING SYSTEM. CHRYSLER MOTORS IS AUTHORIZED TO INQUIRE OF OUR
CREDITORS AND OTHER COMMERCIAL ACCOUNTS NAMED HEREIN AS TO OUR CREDIT AND TRADE
STANDING AND TO OBTAIN FROM THEM SUCH INFORMATION ABOUT OUR OPERATIONS AS YOU
DEEM NECESSARY WE UNDERSTAND YOU ARE UNDER NO OBLIGATION TO APPOINT US AS A
LICENSEE OF THE CHRYSLER LEASING SYSTEM AND THE APPOINTMENT, IF MADE, WILL ONLY
BE BY WRITTEN AGREEMENT SIGNED BY AN APPROPRIATE REPRESENTATIVE OF CHRYSLER
MOTORS
Applicants Trade Name - Lease/Rental Operation
Major Fleet & Leasing Corp.
- --------------------------------------------------------------------------------
Address city State zip
15 Wimbledon Drive, Roslyn NY 11576
- --------------------------------------------------------------------------------
Check if Entity is Proposed & Approximate Date
Complete Information at Right Entity will be Organized
or Incorporated
- --------------------------------------------------------------------------------
In What State? Telephone No.
New York (516) 484-1010
Type of Existing [X] Corporation Partnership
and/or Proposed
Lease and/or Single Proprietorship Dealership Department
Rental Operation
Complete Date of Incorporation President Vice President
If Existing 8/12/85 Bruce Bendell Harold Bendell
Entity is a -----------------------------------------------------------
Corporation State of Incorporation Secretary Treasurer
New York Bruce Bendell Warren Forman
Names and Addresses of all Partners
Complete
If Existing -----------------------------------------------------------
Entity is a
Partnership -----------------------------------------------------------
Name, Title and Name (First) (Middle) (Last) (Title)
Address of Person Bruce Bendell President
to be listed in -----------------------------------------------------------
Paragraph 2b of Address city State Zip
the License 15 Wimbledon Drive Roslyn NY 11576
Agreement
Name of Investor(s) Amt. Initial Investment
Ownership Bruce Bendell $250,000
of Applicant,s Harold Bendell $250,000
Operation in -----------------------------------------------------------
Separate Leasing Amt. Investment Owned Amt. Investment Borrowed
Company $250,000 None
$250,000 None
<PAGE>
Applicant's Dealer Name Address Code
Affiliated Major Dodge, Inc. 46-01 Northern Boulevard 32-68204
Chrysler Corp. ----------------------------------------------------------
Dealership city State zip Single Proprietorship
LIC NY 11101 Partnership [X] Corporation
Management of Type of Agreement Effective Date
Dealership as Dodge 9/91
Named in -----------------------------------------------------------
XXXXXXXXXXXX Name Title
Chrysler Motors Harold Bendell President
Direct Dealer Bruce Bendell Vice President
Agreement(s)
Ownership of Type of Agreement x-1CXXxx Percent Owned
Dealership as Dodge Bruce Bendell 50
XXXX-V-V-Xxx -----------------------------------------------------------
XXXXXXXXXXXXXX Harold Bendell 50
XY-V-------V-Xxx -----------------------------------------------------------
XXXXXXXXXXX
Name of x_-_-_xxx XX.XXXXXXX
Y---V-VXXX Major Dodge Inc. Major Fleet & Leasing Corp.
Proposed ----------------------------------------------------------
Financial Sources Line of Credit Established: $5,000,000
Note: 1. If Entity Listed as Applicant is now in existence attach a copy of its
most recent Financial Statement.
2. Attach Copy of Direct Dealers most recent Financial Statement.
By - Name I Print
Bruce Bendell
-----------------------------
By - Name I Signature
/s/ Harold Bendell
-----------------------------
Title: President
<PAGE>
VIII. MISCELLANEOUS
1. Changes in Chrysler Leasing System. Licensor reserves and shall have
the right, at any time and from time to time, to discontinue or change, in its
sole discretion, any part of parts or all of Chrysler Leasing System, including,
without limitation, any documents, procedures, forms, advertising, promotions,
trade-marks, service marks, trade names, symbols, slogans, and devices, and
Chrysler Leasing System as so changed at any time shall be deemed to be Chrysler
Leasing System referred to in this agreement. Licensor shall have no liability
to Licensee of any kind either during or after the time that this agreement
shall be in effect, if it shall use, or include as a part of Chrysler Leasing
System or license others thereunder to use, any or all improvements in or
additions to Chrysler Leasing System or the leasing business developed by
Licensee while this agreement is in effect.
2. Licensee Not an Agent. This agreement does not in any way create the
relationship of principal and agent between Licensor and Licensee and under no
circumstances shall either party be considered to be an agent of the other.
Licensee shall not act or attempt to act or represent Licensee, directly or by
implication, as agent of Licensor or in any manner, assume or create, or attempt
to assume or create, any obligations on behalf of or in the name of Licensor.
3. Notices. Any notice required or permitted by this agreement, or given
in connection herewith, shall be in writing and may be by personal delivery or
by first-class registered or certified mail. Notices to Licensor shall be
delivered or mailed to Fleet Operations, Chrysler Motors, 901 Wilshire Dr.,
Troy, Michigan 48084. Notices to Licensee shall be delivered or mailed to any
person designated in Paragraph 2(b) of Article 1 hereof as having managerial
authority or delivered or mailed to Licensee at Licensee's place of business
above stated. Notices given by mail shall be deemed given when accepted for
registered or certified mail by the U.S. Postal Department.
4. Non-Waiver of Rights. The waiver by Licensor of any breach or violation
of or default under any provision of this Agreement will not operate as a waiver
of such provision or of any subsequent breach or violation thereof or default
thereunder.
5. Interpretation. This agreement has been signed by Licensee and sent to
Licensor for final approval and execution in Michigan. The parties intend this
agreement to be a Michigan contract and to be construed in accordance with the
laws of the State of Michigan.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement
in duplicate as of the day and year first above written.
CHRYSLER MOTORS CORPORATION Major Fleet & Leasing Corp.
----------------------------------
(LICENSEE'S TRADE NAME)
By By /s/ Bruce Bendell
President
----------------------------------
(TITLE) (TITLE)
10.42* GMAC Retail Plan Agreement
GMAC RETAIL PLAN
This Agreement between General Motors Acceptance Corporation, 3044 West
Grand Boulevard, Detroit, Michigan, 48202 ("GMAC") and Major Fleet & Leasing
Corp. located at 1044 Northern Blvd. Roslyn, NY 11576 (Dealership Name)
hereinafter called Dealer, sets out the basic terms under which retail
installment contracts between Dealer and a retail buyer ("Contracts") may be
purchased by GMAC from Dealer and the rights and obligations of Dealer and GMAC
with regard to those Contracts. Sections I and IV of this Agreement also set out
additional rights and obligations of Dealer and GMAC with regard to Contracts
assigned to GMAC by General Motors Corporation.
I Sale and Purchase of Contracts
GMAC may purchase Contracts offered by Dealer it acceptable to GMAC at a
discount rate established from time to time by GMAC. Any excess of the finance
charge stated in the Contract over the GMAC discount ("Difference") shall be
governed by the following:
A On Contracts assigned with recourse ('Recourse Transactions"), Dealer
unconditionally guarantees payment on demand of the unpaid balance of the
Contract and all losses and expenses Incurred by GMAC in the event of a default
in payment of any installment that results in repossession of the vehicle,
except as otherwise provided by the terms of this Agreement. GMAC will retain
from the Difference and credit to a Dealer account with GMAC an amount
designated by GMAC, constituting a percentage of the unpaid balance on
Contracts. The remainder of the Difference will be paid to Dealer by GMAC. The
Dealer account will secure all obligations of Dealer to GMAC and will be reduced
by: (a) the amount of Dealer's proportionate share of any prepayment rebate and
(b) any other obligations of Dealer to GMAC. Periodically, GMAC will pay Dealer
the amount of credits in the Dealer account which are in excess of a percentage
designated by GMAC of the total unpaid balances outstanding on Contracts. GMAC
reserves the right to suspend such payments or require Dealer to increase the
amount of credits in such account if GMAC deems such action necessary to protect
its interests.
B On Contracts assigned without recourse ("Non-Recourse Transactions"), Dealer
has no payment obligations to GMAC In the event of default in payment by Buyer
under a Contract, except such obligations as may be imposed by operation of
Section IV below. On Contracts assigned with limited recourse ("Limited Recourse
Transactions"), Dealer unconditionally guarantees payment on demand of the
unpaid balance of the Contract up to the amount agreed upon between Dealer and
GMAC, except as modified by operation of Section IV below. On Non-Recourse
Transactions and Limited Recourse Transactions, GMAC will credit the Difference
to a Dealer account, which will secure all obligations of Dealer to GMAC.
Monthly, the amount so credited will be paid to Dealer, less (a) the Dealer's
proportionate share of any prepayment rebate and (b) any other obligations of
Dealer to GMAC. If, in any month, the credits in the Dealer account are
insufficient to cover (a) and (b) above, the shortage will be promptly paid by
Dealer.
II Perfection of Security Interest in Vehicles Covered by Contracts
Unless required by local law, it is not necessary for Dealer to file or record
Contracts or other documents to perfect the security interest in a vehicle sold
pursuant to a Contract, as this responsibility will be assumed by GMAC. However.
it is Dealer's responsibility to complete the necessary forms and documents at
the time of sale and forward them together with the appropriate fees to those
public officials who are responsible for issuing the certificate of title or
registration.
III Insurance
A Unless prohibited by law, there must be physical damage Insurance acceptable
to GMAC covering the vehicle referred to in a Contract against fire, theft and
collision. However, collision coverage is not required on vehicles having an
unpaid cash price balance less than $2000, or such other amount as may be
established from time to time by GMAC.
B If complete and accurate information about insurance is furnished to GMAC at
the time GMAC purchases the Contract, GMAC wit assume responsibility for the
Buyer's compliance with insurance
<PAGE>
requirements thereafter. If complete and accurate information about insurance is
not furnished to GMAC at the time GMAC purchases the Contract, Dealer will be
responsible for any loss that would have been covered by required insurance.
However. GMAC will assume responsibility for any uninsured losses occurring
after twelve (12) months from the date of the Contract.
C on Recourse Transactions involving repossessed vehicles with insurable damage,
GMAC will adjust any unpaid balance due from Dealer after repossession by the
amount of one collision deductible and/or one comprehensive deductible not to
exceed maximum deductible amounts established from time to time by GMAC. In each
case the damage on a single loss must exceed the deductible. In the case of a
vehicle not covered by collision insurance because the unpaid cash price balance
was less than $2000 or such other amount as GMAC shall establish from time to
time, GMACs adjustment will be limited to the lesser of the cost of repair, or
the unpaid balance reduced by the salvage value of the vehicle.
IV Dealer Warranties, Representations and Indemnification
With respect to any Contracts, Dealer warrants and represents: (1) The Contract
arose from the sale of the property described on the face of the Contract; (2)
Dealer had title to the property at the time of sale free of any liens, except
liens In favor of General Motors Corporation or GMAC; (3) All disclosures
required by the law were properly made to the Buyer prior to the Buyer signing
the Contract; (4) All insurance documentation will be delivered to the Buyer
within the time required by law-, (5) To the best of Dealer's knowledge, the
Customer Statement submitted is accurate; (6) The downpayment received by Dealer
is exactly as stated; (7) The Contract is enforceable; and (f Dealer is licensed
as required by law.
Each of these warranties and representations is material to GMAC's acceptance of
the Contract. If any of them Is breached or Is erroneous Dealer unconditionally
promises to accept assignment of the Contract and to pay GMAC, upon demand, the
full amount of the unpaid balance under the Contract. Dealer also agrees to
indemnify GMAC to the full extent of all losses or expenses incurred by GMAC as
result of such breach or error.
Dealer agrees to indemnify GMAC for any judicial set-off or loss suffered as a
result of acclaim or defense of Buyer against Dealer
If a Contract is rescinded. declared unenforceable. or voided by a court or an
arbitrator. Dealer shall pay GMAC the full amount GM paid for the contract.
Dealer shall be liable even if a waiver. compromise. settlement or variation of
the terms of the Contract releases the Buyer.
It Dealer breaches this Agreement Dealer shall pay GMAC all losses and expenses
incurred by GMAC as a result of such breach. addition Dealer shall indemnify
GMAC to any losses incurred by GMAC because of any judicial set-off or recovery
suffered because
Major Fleet & Leasing Corp.
/s/ Bruce Bendell
Bruce Bendell, President
V Extended Warranty Protection and Service Contracts
If a Contract includes a charge for extended warranty protection or for a
service contract offered by or through Dealer Dealer agrees to purchase the
Contract from GMAC upon demand for the amount of the unpaid balance of the
Contract if a claim or defense is asserted under the warranty or service
contract and Dealer Is not able to resolve the dispute with the Buyer within
ninety (90) days of the oldest unpaid installment.
V1 Repossession, Redemption and Disposition
A Recourse Transactions-in the event a default by the Buyer results in
repossession, Dealer shall pay GMAC the unpaid balance (less applicable
adjustments) if the vehicle Is returned to Dealer within ninety (90) days or
such other period as the Dealer and GMAC may agree after the Buyer's default in
payment of the oldest unpaid installment; provided, however, that (1) this time
period will not be applicable if Dealer is
<PAGE>
in breach of this Agreement or the Contract covering the vehicle at the time of
repossession; and provided further that (11) the running of this time period
will be suspended In the event legal proceedings or arbitration, or confiscation
or impoundment of the vehicle temporarily preclude GMAC from repossessing or
returning the vehicle.
With respect to all repossessions returned to Dealer after the date of this
Agreement, regardless of when the Contract covering that vehicle was purchased
by GMAC, Dealer shall dispose of the vehicle and account to the Buyer in
accordance with the following (to the extent permitted under applicable law.
1 The Buyer has by law the right to redeem the vehicle at any time before the
vehicle has been disposed of or a contract is entered into for its disposition.
2 Following repossession, GMAC will send a notice informing the Buyer of the
right to redeem. the amount necessary to redeem as of the date of the notice,
and the date before which the vehicle may not be disposed of. A copy of this
notice will be sent to Dealer. Dealer must permit the Buyer to redeem the
vehicle in accordance with this notice, except In the limited circumstances set
forth in the Repossession Accounting Procedures In the General Motors Dealers
Standard Accounting System Manual ("Repossession Accounting Procedures"). Only
such expenses as are allowable under the Repossession Accounting Procedures
shall be Included in computing the amount Buyer must pay to redeem the vehicle.
3 If the Buyer fails to redeem the vehicle by the date before which the vehicle
may not be disposed of, the Contract will be assigned to Dealer without recourse
against GMAC. Dealer shall pay GMAC the amount due within fifteen (15) days of
the date of GMAC's request for payment or immediately upon disposition of the
vehicle, whichever occurs first. It payment is not received by GMAC within the
fifteen (15) day period, GMAC may assess a charge thereafter at a rate
established from time to time by GMAC.
4 Unless the Buyer redeems the vehicle, Dealer shall (1) dispose of it and (H)
account to the Buyer, in accordance with the Repossession Accounting Procedures,
which set forth the procedure for determining whether a surplus exists. Dealer
is responsible for determining if a surplus or deficiency results from the
disposition of the vehicle and In doing so may deduct only allowable expenses
and other Items defined In the Repossession Accounting Procedures.
5 If there are available funds as calculated under the Repossession Accounting
Procedures, Dealer shall pay GMAC Its allowable expenses and allowances out of
the proceeds of disposition.
6 Dealer is responsible for paying the Buyer any surplus resulting from the
disposition of the vehicle and Dealer must pay the surplus and account to the
Buyer within a reasonable period of time of disposition.
7 If a deficiency results which is legally collectible and Dealer elects to
attempt collection, Dealer must provide the Buyer with an accounting of the
disposition In accordance with the Repossession Accounting Procedures.
8 If all or a portion of a deficiency is collected, Dealer shall pay GMAC such
portion of the net amount collected as the amount of GMAC's allowable expenses
and allowances bears to the total deficiency.
B Non-Recourse Transactions and Limited Recourse Transactions- Except as
provided herein or as otherwise agreed, Dealer will have no responsibility for a
Buyer default or disposition of a repossessed vehicle.
VII Termination
GMAC or Dealer may terminate this Agreement upon written notice to the other
party, effective immediately The termination of this Agreement shall not release
GMAC or Dealer from any obligations incurred with regard to Contracts that are
subject to this Agreement or any other agreement.
VIll Miscellaneous
A Dealer Not Made Agent or Representative of GMAC-This Agreement does not make
either party the agent or legal representative of the other for any purpose
whatsoever, nor does It grant either party any authority to assume or to create
any obligation on behalf of - or in the name of the other Neither party owes the
other any fiduciary obligation.
8 Dealer's participation in the GMAC Retail Plan is at Dealer's sole election
and GMAC and Dealer acknowledge that Dealer Is free to secure either wholesale
or retail financing from the financial institution of Dealer's choice.
IX Other Agreements
This Agreement cancels and supersedes the provisions relating to the GMAC Retail
Plan In the "GMAC Manual for Exclusive Use of Dealers In Motor Vehicles of
General Motors Make" ("Manual"). The terms of this Agreement may be modified and
supplemented by agreements now existing, except for the Manual,
<PAGE>
or subsequently entered Into between GMAC and Dealer relating to the retail
financing of motor vehicles (e.g.. General Motors Acceptance Corporation Dealer
Retail Passenger Car Fleet Financing Agreement, General Motors Acceptance
Corporation Dealer Retail Truck Financing Agreement).
No modification of the terms of this Agreement shall be binding upon Dealer or
GMAC unless it is in writing and is signed by authorized representatives of
Dealer and GMAC. Dealer waives notice of acceptance of any guarantee in this
agreement and notices of non-payment and non-performance.
Dated: April 26, 1990
GENERAL MOTORS ACCEPTANCE CORPORATION
10.43* 1996 Employees' Performance
Recognition Plan
FIDELITY HOLDINGS, INC. 1996 EMPLOYEES' PERFORMANCE RECOGNITION PLAN 1. Purpose
and Non-exclusive scope. The purpose of this 1996 Employees! Performance
Recognition Plan is to secure for this Corporation and its stockholders the
benefits which flow from recognizing and acknowledging the performance of
employees and consultants, rewarding them for such performance, and retaining
them by providing them with the on-going Incentive Inherent In common stock
ownership. The shares of Common Stock granted under this Plan are intended to
qualify as deferred compensation under Section 83 of the Internal Revenue Code.
Nothing contained in this Plan is intended to create any limitation on the power
of the Corporation and/or Its Board of Directors to adopt such other additional
incentive or compensation plans or arrangements as the Corporation or its Board
of Directors may deem necessary or appropriate.
2. Amount of Stock, The total number of shares of Common Stock to be subject to
grant on and after December 1, 1996 pursuant to this Plan shall not exceed
500,000 shares of the Corporation's Common Stock, utilizing either treasury
stock or authorized, unissued shares. This total number of shares shall be
subject to appropriate increase or decrease in the event of a stock dividend
upon, or subdivision, split-up, combination or reclassification of, the
Corporation's Common Stock. In the event that shares granted under this Plan
shall be forfeited, as provided below, such shares shall be returned to the Plan
and may be again granted under the Plan.
3. Compensation Committee. The Board of Directors may, from time to time,
appoint a Compensation Committee (hereinafter called the "Committee"), to serve
under this Plan and to administer it. The Committee shall consist of three or
more directors. In the absence of such a committee, the entire Board of
Directors shall serve as the Compensation Committee. in which event all
references herein to the Committee shall apply to the entire Board of Directors.
The Committee, if one is appointed, or otherwise the entire Board of Directors
shall have the full and final authority to
(a) interpret conclusively the provisions of this Plan and decide all questions
of fact arising in its application;
(b) adopt, amend and rescind rules and regulations relating to this Plan-,
(c) determine the employees to whom shares shall be granted and the amount of
the shares to be granted to each selected employee; and
(d) make any other determinations it deems necessary or advisable.
4. Eligibility and Participation Shares of the Corporation's Common Stock may be
granted pursuant to the Plan to any employee or consultant, and the
beneficiaries of such employees and consultants, of the Corporation and its
Subsidiaries (hereinafter called employees/consultants. From time to time the
Committee shall select the employees/consultants to whom shares may be granted
by the Board of Directors and shall determine the number of shares to be covered
by each option so granted, Future as well as present employees/consultants
(including directors, officers, executives, managerial employees and key
consultants) shall be eligible to participate in the Plan. In no event shall any
Individual recipient be entitled to receive an aggregate of more than ten (10)
percent of the shares of Common Stock available under this Plan. No shares may
be granted under the Plan after November 30, 2001. Nothing in this Plan shall be
construed to give any employee/consultant of the Corporation or any of its
subsidiaries any right to be granted shares other than in the sole discretion of
the Committee, or any right with respect to the shares except as specifically
provided In this Plan, or any right to have employment continued or to have any
specific employment, position, term of employment or compensation. 5. Terms and
Provisions of Participation. The terms and provisions for the granting of shares
of the Corporations Common Stock to employees/consultants shall be as follows;
(a) Grants may be made at any time, and from time to time, prior to November 30,
2001, and may be made to any employees consultant regardless of whether prior
grants may have been made to such recipient.
<PAGE>
(b) Upon the awarding of a grant, the Committee shall promptly notify the
recipient of the amount of the grant, the fair market value of the shares
granted, the conditions for forfeiture, and such other terms and conditions as
the Committee may deem appropriate.
(e) The obligations of the Corporation to issue or transfer shares granted
pursuant to this Plan are subject to compliance with applicable governmental
rules and regulations, including the restrictions Imposed by the Securities and
Exchange Commission,
(d) The certificates for the shares of Common Stock granted pursuant to this
Plan shall be issued in the sole name of the recipient employee/ consultant and
shall bear legends Indicating that (i) the shares have not been registered under
the Securities Act of 1933 and transfer is therefore restricted regardless of
the lapse of the vesting restrictions and (ii) the shares are subject to the
terms and conditions of this Plan and shall not be sold, transferred, assigned,
pledged, encumbered, or otherwise alienated or hypothecated until the
restrictions have lapsed.
6. Restrictions, Lapse of Restrictions and Forfeiture All grants of shares
pursuant to this Plan shall be subject to the following restrictions:
(a) to the complete restriction on the rights and powers of a recipient to sell,
transfer, assign, pledge, encumber, or otherwise alienate or hypothecate the
shares granted prior to a lapse of such restrictions; and
(b) to the continuous employment requirement for the vesting of the shares
granted.
The foregoing restrictions shall lapse as follows:
(1) the shares shall vest on the earliest to occur of the employee/consultant's
death, the employee/consultant's authorized retirement, and the first day of the
thirteenth full month following the date of grant, provided that the recipient
has been in the continuous employment of the Corporation and/or its subsidiaries
during such vesting period (excluding authorized, temporary leaves of absence,
death, authorized retirement and permanent disability); and
(2) the complete restriction on sale, transfer etc. shall lapse upon vesting,
subject, nevertheless, to all applicable restrictions on sale, transfer etc.
imposed by applicable governmental rules and regulations, including the
restrictions imposed by the Securities and Exchange Commission.
In the event that the employment of a recipient is terminated, either (a) by the
Corporation or one or more of its subsidiaries or (b) by the recipient, the
shares granted under this plan shall be forfeited and the certificate(s) for the
shares granted shall be returned to the Corporation for cancellation and
redeposit under this Plan. In such event, the Corporation shall pay to the
forfeiting recipient a sum equal to the difference between (i) the book value of
the shares on the day of the grant of the shares and (ii) the book value of the
shares on the day of forfeiture of the shares.
2
Notwithstanding the foregoing, the shares granted shall Immediately vest (prior
to the first day of the thirteenth month following the date of grant) If
(a) the employee/consultant shall Q) retire upon or after reaching the age which
at the time of retirement is established as the normal retirement age for
employees of the Corporation (such normal retirement age now being 65 years) or
(11) with the written consent of the Corporation retire prior to such age on
account of physical or mental disability (such retirement pursuant to (i) or
(ii) being deemed an "authorized retirement'); or
(b) the employee/consultant shall die (at a time when he is still an
employee/consultant of the Corporation and/or its subsidiaries); or
(c) the employee/consultant shall become permanently disabled (at a time when he
is still an employee/consultant of the Corporation and/or its subsidiaries).
7. Fair Market Value The compensation value of the shares of Common Stock
granted pursuant to this Plan shall be deemed to be the fair market value at the
time the shares are granted. So long as the shares are restricted by Securities
and Exchange Commission regulations on the date of issuance (ie., not
registered), the Fair Market Value shall be fifty percent (50%) of the closing
market price on the trading day immediately preceding the date on which the
grant is made. However, if the shares have been registered
<PAGE>
with the Securities and Exchange Commission on the date of issuance (i.e.,
free-trading and subject to restrictions on transfer), the Fair Market Value
shall be the dosing market price on the trading day immediately preceding the
date on which the grant is made.
8. Assignability No rights pursuant to any grant under this Plan and no shares
granted under this Plan shall be transferable or assignable by the
employee/consultant otherwise than by will or by the laws of descent and
distribution.
9. Stock for investment The grant of any shares shall provide that the
employee/consultant shall, upon receipt of the certificate(s) for the shares
granted, represent and warrant that he shall hold such shares for investment
only, and not with a view to distribution involving a public offering.
SECURED PROMISSORY NOTE
December 31, 1996
FOR VALUE RECEIVED, the undersigned, Doron Cohen ("Makers") residing at 47
Parker Avenue Monsey New York 10952 ("Maker") (as "Holder"), in lawful money of
the United States of America, the principal sum of one hundred
($140,000.00)fourty thousand dollars, together with interest thereon at the
annual rate of seven (5.77%) percent, based on a year of 360 days, payable as
follows:
PRINCIPAL AND INTEREST DUE AND PAYABLE ON DECEMBER 31, 1998
All payments of principal and accrued interest payable on December 31 of 1998
and must be received no later than the end of that business day;
Any and all amounts which remain unpaid for seven (7) calendar days after the
date upon which they become due shall bear interest at the rate of two (2%)
percent per month but in no event to exceed the maximum rate of interest
permitted by law. In the event that the Holder of this Note in enforcing its
rights hereunder or at any other time determines that the charges and fees
incurred in connection with this note may under applicable laws cause the
interest rate herein to exceed the maximum rate of interest allowed by law, than
such interest shall be deemed automatically recalculated and any excess over the
maximum interest permitted by said laws shall be credited to the, then
outstanding principle amount to reduce said balance by that amount. It is the
intention of the parties hereto that the Maker under no circumstances shall be
required to pay nor shall the payee be entitled to collect any interest which is
in excess of the maximum legal rate permitted under applicable law;
Maker may, at its option, prepay in whole or in part the principal of this Note
at any time and from time to time without premium or penalty;
If, after any default hereunder, Holder expends any effort or expense in any
attempt to enforce or collect payment of all or any part of installment of any
sum due Holder hereunder, or if this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings, Maker will
bear and pay all reasonable costs and fees incurred by Holder in connection with
the investigation and collection hereof, including but not limited to reasonable
fees and expenses of counsel;
Maker and each surety, guarantor, endorser and other party ever liable for
payment of any sums of money payable on this Note jointly and severally waive
demand for payment, notice of acceleration or intent to accelerate except as
otherwise provided herein, notice of intent to demand, and diligence in
collecting, and consent to all extensions without notice for any period or
periods of time and partial payments, before or after maturity, without
prejudice to Holder. Holder shall similarly have the right to deal in any way,
at any time, with one or more of the f oregoing parties without notice to any
other party, and to grant any such party any extensions of time for payment of
any of said indebtedness, or to release part or all of any collateral at any
time securing this Note, or to grant any other indulgences or forbearance
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder;
This Note shall be governed by and construed and enforced in accordance with the
laws of the State of New York applicable to promissory notes issued and
delivered within such State and without giving effect to choice of law
principles of such State. Notwithstanding the place where any liability
originates or arises, or is to be paid, any suit, action or proceeding arising
out of or relating to this promissory note may be instituted in, or if
instituted elsewhere may be removed to, the Circuit Court of the State of New
York sitting in the County of Queens, and Maker hereby irrevocably waives any
objection Maker may now or hereafter have to the laying of venue of any such
suit, action or proceeding in the above-described courts and any claim that any
suit, action or proceeding has been brought in an inconvenient forum, and Maker
<PAGE>
hereby irrevocably submits its person and property to the jurisdiction of any
such court in any such suit, action or proceeding. Maker consents to the service
of process in any suit, action or proceeding arising out of or relating to this
Note in the manner provided herein for the giving of Notices. Nothing in this
Paragraph shall affect the right of any party to serve process in any other
manner permitted by law;
Any and all notices or other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given when
personally delivered or one (1) business day after delivery to a licensed
overnight messenger service or five (5) days after the date mailed, postage
prepaid, by first class registered mail, return receipt requested, addressed to
the parties at the addresses set forth above (or at such other address as any
party may specify by notice to the other party given as aforesaid);
If (a) Maker shall default in the payment of any installment of this Note when
and as the same shall become due and payable and such default shall not have
been remedied within seven (7) calendar days following the giving of written
notice by Holder of the occurrence of the default (a "default").
This Note and the rights and obligations of the parties shall be governed by and
be construed in accordance with laws of the State of New York-.
The Maker and the Holder waive any right to a trial by jury in connection
herewith.
Make
By: /s/: Doron Cohen
Doron Cohen
By: /s/: Doron Cohen
Fidelity Holdings, Inc.
STATE -OF NEW YORK SS: COUNTY OF
On this (3rd) day of March 1997, before me personally came Doron Cohen to
me known, and who, being duly sworn, did depose and say that he resides at
_______________ and that he executed the foregoing instrument and that he duly
acknowledged to me that he executed the foregoing instrument.
/s/: Naomi Borsekofsky
NOTARY PUBLIC
NAOMI BORSEKOFSKY
Commissioner of Deeds
City of New York, No. 4-4614
Certificate Filed in Queens Co
Commission Expires May 1, 1997
Computer Business Sciences, Inc.
Dealer-Master Agent Agreement and License
ARTICLE 1 - PARTIES
This Agreement is made by and between Computer Business Sciences, Inc. , a New
York corporation, having its principal office and place of business at 144-15
Union Turnpike, Flushing, New York, 11367 and Progressive Polymerics
International, Inc.
RECITALS
.IT IS MUTUALLY CONTEMPLATED AND AGREED AS FOLLOWS:
WHEREAS, Master Agent desires to purchase and resell software, hardware,
products and services of CBS. To operate as a distributor/agent representing the
business of CBS, and using its MARKS and good will; and
WHEREAS, CBS is further desirous of distributing its products and services and
aiding the Master Agent on a non exclusive basis, with the use of CBS names, and
trademarks: "Talkie","Talkie-Software", "Pay-As-You Use", "Call-Back USA",
"Talkie-Globe", "Talkie-Fax", "Talkie-Dial", "Talkie-Query", "Talkie-Trans",
"Talkie-Ad", "Talkie-Form", "Talkie-Mail", "Talkie-Audio", "Talkie-Gen", "BCS",
and Info-Systems"; and
WHEREAS, CBS and Master Agent are agreeable thereto upon the terms and
conditions more particularly herein set forth; and
WHEREAS, Master Agent acknowledges that CBS owns certain software and hardware
systems for the operation of Long distant Reseller under the name
"Talkie/Globe". CBS uses and owns the service mark "Talkie" and related logos,
and possesses all rights under various registered copyrights, trademarks,
service marks, trade names, and other marks which CBS developed or own, and may
develop or own in the future ; and styles including distinctive
A
logos and also certain copyrighted material embodying the use of such marks
including but not limited to enumerate marks and has promoted the use of and
acceptance of such Marks through its own operations and
144-15 Union Turnpike - Flushing, NY 11367
Tel. (718) 380-7200 - Fax (718) 380-7064. E-mail InfoSys [email protected]
operations of licensees, and is developing an international marketing and sales
system identified with its Marks which has public acceptance and good will and
identifying to the public the existence of CBS company products, services and
additionally newly developed marks and registered are reserved for CBS (all
hereinafter generally referred to as "Marks"); and
WHEREAS, CBS possesses rights under various registered copyrights, trademarks,
service marks, trade names and styles including distinctive logos and also
certain copyrighted material embodying the use of such marks including but not
limited to enumerate marks and (all hereinafter generally referred to and to be
included as "Marks") CBS has promoted the use of and acceptance of such Marks
through its own operations and the operations of licensees and is developing an
international sales system identified with its
<PAGE>
Marks which has public acceptance and good will and identifying to the public
the, existence of Talkie's voice processing software modules and programs, CBS
service bureau, and BCS software accounting system; and
WHEREAS, CBS expressly disclaims the making of, and Master Agent acknowledges
that it has not received or relied upon, any warranty or guaranty, express or
implied, as to the revenues, profits or success of the this dealership venture
contemplated by this Agreement. Master Agent acknowledges that it has read this
Agreement and conducted its own independent research, agrees that this is not a
"franchised offering", and that it has no knowledge of any representations by
CBS, or its officers, shareholders, employees or agents that are contrary to the
statements made in this Agreement or the terms herein; and
WHEREAS, Licensor has developed and perfected a plan and/or system utilizing CBS
software and hardware ("System") for providing licensed FCC telephone companies
, and resellers of long distance services, certain facilities, hardware and
software, and related services; other products and services of distinctive
nature, and of other distinguishing characteristics, placed in operation by CBS
provided under the name "CBS", "Computer Business Sciences, "Info Systems",
"Talkie", "Talkie Globe". The distinguishing characteristics of said System, and
of the Business services provided pursuant thereto, include the following:
(1) The words *Talkie","Talkie-Software", "Pay-As-You Use", "Call-Back USA",
"Talkie-Globe", "Talkie-Fax", "Talkie-Dial", "Talkie-Query", "Talkie-Trans",
"Talkie-Ad", "Talkie-Form", "Talkie-Mail" "Talkie-Audio", "Talkie-Gen", "BCS*,
Info-Systems" or other combinations of words, either alone, or in combination or
association with any color scheme or pattern, office design, insignia, slogans,
signs, emblems trade names, trade marks, service marks, or with the CBS service,
now or hereafter provided or used by CBS as part of the said sales system, or in
association with the idea of an Long Distance Reseller of telephone service, and
cellular service of software, hardware, all, providing standardized, high
quality, and distinctive service;
(2) A distinctive and readily recognizable design and service;
(3) The color scheme, pattern and design, and the color combinations of the
exteriors and interiors of said products and marketing tools;
(4) Appearance of certain of said marketing tools, structures, and the
distinctive trademarks, service marks, design, slogans, name and matter now or
hereafter displayed thereon, or used as part thereof;
(5) The trade marks, trade names, service marks, insignia, emblems, software
documentation, software, hardware, signs, designs, color or patterns, and other
distinctive features, as now or hereafter in use as part of the sales System,
both as identifying the System of CBS, and as identifying the type, character,
and standard of quality of service which the public may expect to receive from
businesses and services of Master Agent
NOW, THEREFORE, in consideration of the foregoing, CBS and Master Agent, hereby
mutually agree as follows*
ARTICLE 2 - GRANT OF CBS AND RELATED LICENSES
A. Names and Marks to be Licensed
Subject to the provisions of this agreement, CBS hereby grants to Master Agent a
Dealership ( "Dealership") , without any territory or exclusivity, to operate a
Dealership business ("Business") offering CBS software, hardware, products, and
services utilizing at Master Agent's option CBS formats, methods, standards,
operating procedures and the MARKS (identified in Section (_) of Exhibit (_)
which is annexed hereto and made a part hereof bv this reference) for a term of
three (3) years commencing on the date of
<PAGE>
execution hereof. Termination or expiration of this Agreement constitutes
termination or expiration of the Dealership.
B. Territorial, Location and Customer Restrictions on License.
Master Agent hereby agrees that no territorial exclusivity has been implied or
offered by Licensor to Master Agent That, CBS reserves the right to approve
locations, and sites to be served.
C. Restrictions on the Goods and Services Sold Under the Marks.
(i) Master Agent agrees to use the MARKS in connection with, and exclusively
for, the promotion and conduct of CBS business, as provided hereunder,
(ii) Master Agent agrees that for the purpose of protecting and enhancing the
value and good will of the Marks and of insuring that the public may rely upon
said Marks as identifying quality, type and standard of business, that the
license granted by this agreement is subject to the continued faithful adherence
by Master Agent to the standards, terms and conditions set forth in, or
established in accordance with this Agreement.
D. Master Agent's obligation to Protect and Defend the Licensed Marks.
(i) Master Agent recognizes and acknowledges that CBS is the sole and exclusive
owner of the Marks and hereby agrees not to register or attempt to register such
Marks in CBS's name or that of any other firm, persons, corporation or any
entity and that it will not use the Marks or any part thereof as any part of any
corporate name and does promise not to do anything to derogate that ownership or
call it into question. Master Agent does hereby obligate itself to call to CBS's
attention any infringing uses it learns of.
(ii) Immediately upon the expiration or termination of this Agreement or any
renewal hereof-, Master Agent agrees to cease and forever abstain from using the
aforesaid Marks and shall return within thirty (30) days
<PAGE>
to CBS or effectively destroy all documents at Master Agent's sole expense,
which shall include but not be limited to instructions, display items, and the
like bearing any of the Marks .
E. License to use Trade Secrets.
Operating manuals, formulas, software, hardware, CBS vendors, customer lists and
computer programs, among other things, may all be deemed trade secrets. CBS has
a protectable interest in those secrets and the Master Agent hereby acknowledges
CBS's interest in preserving the Trade Secrets, and information disclosed in
writing as confidential, and CBS requires that the Master Agent keep them
confidential during the term of the Agreement
and after its termination or expiration. Failure to do so is a material breach
of this Agreement and Master Agent Acknowledges that it will cause irreparable
harm to CBS.
F. Master Agent's Minimum Sales Provision.
In consideration of the opportunity to establish and maintain a CBS Dealership
and license as herein provided Master Agent represents and shall purchase a
minimum of ten (10) Talkie/Globe systems annually and/or a minimum of gross
sales in excess of one ($1.800,000) million eight hundred thousand dollars,
annually.
ARTICLE 3 - DEALER'S FINANCIAL OBLIGATIONS TO CBS
A. Should Master Agent utilize any maintenance and or service agreements of CBS,
or the reselling of services to Master Agent customers, Master Agent or customer
shall pay to CBS monthly service fees. Amount of said fees shall be under the
exclusive direction of CBS.
B. All terms of payment and credit approval shall be upon CBS invoice and
discretion. A service charge not to exceed 1 1/2% monthly or the highest legal
contract rate may be added to all accounts not paid within thirty (30) days of
date of invoice. Master Agent agrees to promptly review and advise CBS
concerning any corrections which may be required in invoices received. Invoices
outstanding for more than sixty (60) days without advice of correction shall be
deemed to represent the true and correct statement of Master Agent's account
Failure to pay within sixty (60) days of the date of invoice shall be deemed a
material breach of this Agreement and CBS, may at its sole discretion may
terminate this Agreement with notice without any recourse by Master Agent.
ARTICLE 4 - DEALER'S OBLIGATIONS REGARDING OPERATIONS
A. Master Agent shall commence operations within ninety (30) days from he date
of this Agreement from at least one CBS "Talkie/Globe" Long Distance Reseller
System (hereafter "Talkie/Globe System).
B. Master Agent shall purchase for its operations a minimum 10 systems annually
at the rate of one "Talkie/Globe" system per month the first six months of this
Agreement. Completing minimum sales requirement during second half of each year
of this Agreement. During each year thereafter, the annual sales requirements
must be satisfied
<PAGE>
December 1. of any calendar year. Master Agent recognizes that CBS shall has the
right to establish and adjust the sales requirement for Master Agent during the
life of this Agreement In no event shall Master Agent be restricted from
generating additional sales over the minimum requirement for Master Agent.
C. CBS at its option may require Master Agent to prominently display CBS's then
current signs, insignia, symbols, slogans and other forms and devices as
specified from time to time by CBS for uniform system and Marks recognition by
the public. Master Agent may not use any of CBSs Marks in any advertising or
promotion without the prior written approval of CBS.
D. All service and maintenance on CBS's equipment or equipment used in
connection with this Agreement shall by performed by CBS or their authorized
representatives under a CBS service Agreement.
ARTICLE 5 - INDEMNIFICATION REQUIREMENTS:
A. 1. To the fullest extent permitted by law, the Master Agent shall indemnify,
defend, protect, and hold harmless CBS, its agents and employees, their
respective partners, officers, directors, shareholders, representatives, agents,
employees , and anyone else acting for or on behalf of any or them (herein
individually called "Indemnitee" and collectively called "Indemnitee") from and
against all liabilities, damages, losses, claims, demands, lawsuits,
proceedings, arbitrations, and actions of any nature whatsoever ("Claims") which
arise out of or are connected with, or are claimed to arise out of or be
connected with:
A.2. The performance of Work or any act or omission of Master Agent, its
Contractors, Subcontractors, sub-subcontractors, suppliers, materialmen or
anyone directly or indirectly employed by any of them or anyone for whose acts
they may be liable, regardless of whether or not such claims or expense in
caused in part by an Indemnitee;
A.3. The use, misuse, erection, maintenance, operation or failure of any
machinery or equipment whether or not such machinery or equipment was furnished,
rented, bought, leased or loaned by the CBS or their officers, employees,
agents, servants or others, to Master Agent.
<PAGE>
B. 1. Without limiting the generality of the foregoing, such defense and
indemnity includes all Claims on account of bodily and personal injury, death or
Property damage and loss to any Indemnitee, any of Indemnitee's limitation,
attorneys and consultants' fees and expenses, costs related to preparing for
and/or defending any action and court costs) suffered, incurred of any kind.
8. Master Agent shall pay any judgment finally awarded in any Claim which is
brought against any Indemnitee, regardless of whether the Indemnitee or Master
Agent directs the defense thereof, and shall pay any amounts payable in
settlement or compromise of any such claim.
9. In the event that Master Agent is requested but refuses to honor its
indemnity obligations hereunder, then Master Agent shall, in addition to its
other obligations, pay the cost of bringing any action to enforce Master Agent's
indemnity obligations, Including, without limitation, attorneys' and
consultants' fees, expenses, and court costs, to the party requesting indemnity
ARTICLE 6 - MASTER AGENT INSURANCE REOUIREMENTS:
A. Upon execution of this Agreement; Master Agent shall file with the CBS valid
duplicate original certificates of Insurance and/or, at the CBS's option, a
certified copy of the insurance policies and any and all endorsements or riders
thereto, evidencing compliance with all requirements contained in this contract,
all in form and substance satisfactory to CBS. Master Agent shall provide CBS
with proof of payment of premium in full for the current period or, if such
premiums are financed, evidence that premiums are current.
B. Acceptance and/or approval of the insurance herein does not and shall not be
construed to relieve Master Agent from any obligations, responsibilities or
liabilities under this Agreement
C. All insurance required by the contract shall be obtained at the sole cost and
expense of Master Agent, shall be maintained with insurance carriers properly
licensed to do business in all states required by the terms of this Contract and
acceptable in all respects, to CBS; shall be "primary" and non-contributing to
any insurance maintained by Owner, shall contain a Waiver of Subrogation in
favor of CBS; so that in no event shall the insurance carriers have any right of
recovery against CBS, their agents or employees; shall contain a separation of
insured provision (severability of interest clause); shall provide written
notice be given to CBS, and all additional insured and certificate holders at
least thirty (30) days prior to the cancellation, non-renewal or modification of
any such policies, which notice shall be evidenced by return receipt of United
States certified mail; shall name CBS, and any subsidiary, parent or affiliates
of the CBS and their partners, directors, officers, agents, and employees or
other persons or entities with an insurable interest designated by the CBS as
additional insured thereunder.
D. Master Agent shall cause all insurance to be in full force and effect as of
the date of this Agreement and to remain in full force and affect throughout the
term of this Agreement and as further required by this Contract. Master Agent
shall not take any action. or omit to take any action that would suspend or
invalidate any of the required coverage during the time period such coverage are
required to be in effect.
E. Not less than thirty (30) days prior to the expiration date or renewal date,
Master Agent shall supply Master Agent with updated replacement Certificates of
Insurance, amendatory riders, and endorsements, and/or certified copies of
insurance policies, together with evidence of payment of the premium, that
clearly evidence the continuation of all of the terns and conditions of the
coverage, limits of protection, and
<PAGE>
scope of coverage as was provided by the expiring Certificates of Insurance,
certified copies of insurance policies and amendatory riders or endorsements as
originally supplied.
F. If Master Agent fails to purchase and maintain or fails to require to be
purchased and maintained, the liability insurance specified in this Contract,
CBS may (but shall not be obligated to) purchase such insurance on the Master
Agent's behalf and shall be entitled to be repaid by Master Agent for any
premiums paid therefor.
G. Master Agent shall select reputable and financially sound insurers to
underwrite the required Coverage acceptable to Owner. In all instances, each
insurer selected must be rated at least "A-" (Excellent) Class "VH" in the most
recently published Best's insurance Report. If an insurer's rating falls below
"A-" (Excellent) Class "VII" during the term of the policy, the insurance must
be replaced no later than the renewal date of the policy with an insurer
acceptable to CBS and having an "A-" (Excellent) Class "VII" rating in the most
recently published Best's Insurance Report.
IL No act or omission of any insurance agent, broker or insurance company
representative shall relieve Master Agent of any of its obligations under this
Contract. .
1
1. Master Agent, throughout the term of this Contract or as otherwise required
by this Contract, shall obtain and maintain in full force and effect the
following casualty/liability insurance with limits not less than specified
herein and as required by the terms or this Contract or as required by law,
whichever is greater
I
1. Commercial General Liability Insurance or its coverage equivalent is to be
provided under the Insurance Service Office's (ISO) most current form, with a
combined single limit for bodily injury and property damage of not less than $ .
which insurance shall include a comparable limit with respect to Personal Injury
and Advertising injury, as well as (any other). (This limit may be provided
through a combination of primary and umbrella/excess liability policies.) Such
insurance shall include the following coverage:
A. Premises Operations coverage, including Independent contractors, with limits
of liability applying on a per location basis.
B. Product Liability and Completed operations coverage, with the provision that
coverage shall extend for a period of at least twelve (12) months from the date
of final completion and acceptance by the Owner of all of Contractor's Work
C. Personal injury and Advertising Liability coverage to Include Injury
sustained by any person as a result of an offense directly or indirectly related
to employment of such person by the insured, or by any other person and
liability assumed under contracts.
D. Extended Bodily injury coverage with respect to bodily injury resulting from
the use of reasonable force to protect persons or property.
E. Premises and Operations Medical Payments coverage.
F. Broad Form Property Damage Liability coverage, including coverage for
completed operations.
<PAGE>
G. Explosion, Collapse, and Underground Property Damage Coverage providing
protection for Property damage resulting from these hazards.
H. Worker's Compensation, Occupational Diseases benefits, Voluntary
Compensation, and Disability Benefits, U. S. Longshoremen's and Harbor Worker's
compensation, Admiralty/Jones Act; Defense Base Act, and any other federal
and/or state coverage, as required, for not less than the statutory limits, and
if applicable, an "Other States Endorsements"; Employers' Liability Insurance or
stop-Gap Employers, Liability insurance with limits of not less than by accident
$1,000,000 each accident by disease $1,000,000 policy limit by disease $
1,000,000 each employee; (These limits may be provided through a combination of
primary and umbrella excess liability policies.). 0
I. The following shall be named an additional insured in all insurance policies
required under this Contract:
J. The following shall be identified as certificate holders in all insurance
policies required under this Contract:
ARTICLE 7 - NON COMPETE
During the term of this Agreement and for a period of two (2) years after the
expiration or termination of this Agreement or any renewal hereof, neither
MasterAgent nor Master Agent's principals or associates, whether individually or
through a partnership or corporation, will engage, either directly or
indirectly, in the operation of any telecommunications, telephone long distance
businesses or any of the business activates of CBS in the United States and
Canada.
ARTICLE 8 - DEFAULT
No failure to perform in accordance with any of the terms or conditions of this
or any collateral agreement or other fault or defect shall be deemed to exist or
occur unless such failure cannot be cured or if curable shall continue for ten
no more than ten (10) days following mailing or wiring to the party to be put
into default of written notification of such failure, except, however, that if
the failure to perform is the non-payment, in excess of thirty (30) days, of
moneys due and in such failure shall continue for three (3) days or more
following mailing or wiring to the party to be put into default of written
notification of such failure. In addition. in the event of non-payment under
this Agreement or any collateral agreement as above provided, CBS may require
Master Agent to furnish complete up-to-date financial information.
ARTICLE 9 - Term
This Agreement shall be in effect from the date of acceptance and execution by
CBS and continue for three (3) years unless terminated sooner as provided
herein, and may be renewed at the option of the Master Agent under CBS's then
current standard terms for new dealers, for additional successive periods of
three (3) years, for a maximum of two (2) such periods (total of 6 years)
provided that Master Agent has complied with the provisions contained herein.
Master Agent must notify CBS of its election to exercise such option to renew in
writing ninety (90) days prior to the expiration of his Agreement of any renewal
hereof. I
<PAGE>
ARTICLE 10 - TERMINATION
A. TERMINATION BY MASTER AGENT.
Master Agent, being in good standing, may terminate this Agreement at any time
by giving ninety (90) days written notice to CBS, except that such termination
shall not relieve MASTER AGENT of any obligation to CBS that shall have matured
under or survived this Agreement or under any collateral written agreement of
the parties.
B. TERMINATION BY CBS
CBS may terminate this Agreement and revoke all licenses upon the occurrence of
the following:
a) If Master Agent is in default or fails to fulfill any provision of this
Agreement;
b) If Master Agent discontinues the active conduct of its business;
C) Upon the transfer or assignment of any part of Master Agent business assets
which results in the passage of control of the business, unless consented to in
writing by CBS;
d) Upon the insolvency, the making of an assignment for benefit of creditors,
appointment for a receiver or trustee of any part of the assets of Master
Agent's business, the service of a warrant of attachment upon any of the assets
of the business or upon service of an execution.
ARTICLE 11 - RIGHTS OF CBS IN EVENT OF TERMINATION
Upon termination of this Agreement, CBS shall be entitled to recover immediately
upon termination from Master Agent all moneys due under this Agreement, together
with interest at the highest level contract rate and all costs and expenses,
including reasonable attorney's fees and disbursements, incurred or accrued by
CBS in enforcing its rights under this Agreement Master Agent shall deliver and
CBS may assume possession of any service guaranty by CBS. Master Agent also
entitles CBS the option to exercise only upon termination, for the assignment
for collection of Master Agent accounts receivable. Master Agent also assigns at
CBS's option all telephone lines, 800 line services and vanity numbers,
telephone listings, International and Domestic Private Lines, as described
herein shall take effect upon termination. CBS shall also have the exclusive
option and right to assume any and all leases for equipment Master Agent shall
return to CBS, or effectively destroy, all literature, signs, advertising
material, promotional matter and other materials identifying the form Master
Agent with CBS and shall immediately cease to refer to or identify itself with
CBS or use the Marks or any simulation thereof. Master Agent shall thereafter
take no action detrimental to CBS or the Business of CBS. Master Agent
irrevocably authorizes, appoints and empowers CBS as Master Agent's lawful
attorney in fact, to act for Master Agent, and in its name, place and stead.
12
.1
ARTICLE 15 - TRANSFER, ASSIGNMENT AND SUBLICENSE
CBS's rights under this Agreement shall inure to the benefit of its successors
and assigns. Such rights may be assigned provided that the assignee shall agree
in writing to assume all of CBS's obligations hereunder and notice thereof is
served upon Master Agent. Such assignment shall discharge CBS from any further
obligation hereunder. The license herein granted is personal to Master Agent and
cannot be transferred,
<PAGE>
assigned or sublicense without the prior written consent of CBS, which consent
shall not be unreasonably withheld. In the event CBS shall consent in writing to
a transfer, assignment or sublicense, the transferee, assignee, or sublicenses
shall be bound by each and all covenants and conditions contained herein and
shall have no right to the further transfer of this license except with the
prior written consent of CBS.
ARTICLE 16 - SEPARABILITY
In the event that any provision herein is in conflict with the law of any state
of jurisdiction, such provision shall be deemed not to be a part of this
Agreement in that jurisdiction.
ARTICLE 17 - HEADINGS
Headings in this Agreement are inserted solely for the purpose of convenience of
reference and are in no manner to be construed as part of the Agreement.
ARTICLE 18 - SIGNATORY LIABILITY
All signatories to this Agreement, whether individually, a partner -on behalf of
the partnership, or corporate officer on behalf of the corporation, are to be
deemed parties hereto and hereby agree to be jointly and severally bound by the
terms and conditions contained herein and agree that they shall act as
guarantors for any unpaid balance on Master Agent's account with CBS. Such
signatories hereby expressly waive and dispense with all rights and defenses as
guarantors to include, but not restricted to notice of acceptance of this
Agreement notices of non-payment or non-performance, notices of amount of
indebtedness outstanding at any time, protests, demands and prosecution of
collection, foreclosure and possessory remedies.
to do all acts and things herein provided for upon termination; to sell or relet
the same; to execute all contracts, instruments and documents of transfer of
ownership, or otherwise; and to pay the costs and expense of doing such acts and
things. It is agreed that after expiration or termination, any use of the Marks
by Master Agent win result in irreparable injury to CBS and Master Agent hereby
consents to the entry of an order enjoining Master Agent from using CBS Marks in
any way.
ARTICLE 12 - COMPLIANCE WITH LAWS
Master Agent shall be solely responsible for compliance with all laws, statutes,
ordinances, orders or codes of any public or governmental authority pertaining
to the use of CBS products, services and particularly the reselling of domestic
and long distance, domestic and international private line telephone voice
services and its business, and for payment of all taxes, permits, license and
registration fees and other charges or assessments arising out of the
establishment and operation of Master Agent's business.
ARTICLE 13 - RELATIONSHIP BETWEEN PARTIES
CBS and Master Agent are not and shall not be considered as joint venturers,
partners, agents, servants, employees or fiduciaries of each other or as,
franchisor or franchisee, and neither shall have the power to bind or obligate
the other except as set forth in this Agreement. There shall be no liability on
the part of CBS to any person for any debts incurred by Master Agent unless CBS
agrees in writing to pay such debts. Master Agent acknowledges and represents
that it is completely independent of CBS.
ARTICLE 14 - WAIVER
<PAGE>
The failure of either party to enforce at any time any of the provisions of this
Agreement or to exercise any option or remedy herein provided shall in no way be
construed to be a waiver of such provisions of in any way to affect the validity
of this Agreement The exercise by either party of any of their rights hereunder
or of any options or remedies under the terms of covenants herein shall not
prejudice them from thereafter exercising the same or any other right it may
have under this Agreement, irrespective of any previous action or proceeding
taken by the parties hereunder. All remedies contained herein are cumulative and
severable.
ARTICLE 15 - TRANSFER, ASSIGNMENT AND SUBLICENSE
CBS's rights under this Agreement shall inure to the benefit of its successors
and assigns. Such rights may be assigned provided that the assignee shall agree
in writing to assume all of CBS's obligations hereunder and notice thereof is
served upon Master Agent. Such assignment shall discharge CBS from any further
obligation hereunder. The license herein granted is personal to Master Agent and
cannot be transferred, assigned or sublicense without the prior written consent
of CBS, which consent shall not be unreasonably withheld. In the event CBS shall
consent in writing to a transfer, assignment or sublicense, the transferee,
assignee, or sublicenses shall be bound by each and all covenants and conditions
contained herein and shall have no right to the further transfer of this license
except with the prior written consent of CBS.
ARTICLE 16 - SEPARABILITY
In the event that any provision herein is in conflict with the law of any state
of jurisdiction such provision shall be deemed not to be a part of this
Agreement in that jurisdiction.
ARTICLE 17 - HEADINGS
Headings in this Agreement are inserted solely for the purpose of convenience of
reference and are in no manner to be construed as part of the Agreement
ARTICLE 18 - SIGNATORY LIABILITY
All signatories to this Agreement, whether individually, a partner -on behalf of
the partnership, or corporate officer on behalf of the corporation, are to be
deemed parties hereto and hereby agree to be jointly and severally bound by the
terms and conditions contained herein and agree that they shall act as
guarantors for any unpaid balance on Master Agent's account with CBS. Such
signatories hereby expressly waive and dispense with all rights and defenses as
guarantors to include, but not restricted to notice of acceptance of this
Agreement, notices of non-payment or non-performance, notices of amount of
indebtedness outstanding at any time, protests, demands and prosecution of
collection, foreclosure and possessory remedies.
ARTICLE 19 - DEALER'S WARRANTIES ON EXECUTION OF AGREEMENT
Master Agent hereby acknowledges by execution of this Agreement that Master
Agent has read and understands each and every term and condition of this
Agreement and the documents referred to below and is not relying on any
representations, promises or agreements not expressed herein and that this
Agreement supersedes and cancels any previous understanding or agreement between
the parties relating to the subject covered hereby.
Specifically, Dealer warrants:
<PAGE>
a) It understands this Agreement contemplates the operation of a business by
Master Agent and the Master Agents success will depend upon Master Agent's
active participation in such business;
b) It has investigated the potential of the effect of CBS's non-exclusive
territory. Master Agent agrees that the non-exclusivity of TERRITORY is a
reasonable and shall not effect the business of Master Agent.
c) It has examined and is fully conversant with CBS's PROCEDURES, PRODUCTS,
SERVICES AND SALES MANUAL.
ARTICLE 20 - NO ORAL REPRESENTATIONS OR SIDE AGREEMENTS
This Agreement, when accepted in by an authorized officer of CBS, together
with any collateral written agreement, signed by an authorized officer of CBS,
constitutes the entire Agreement and understanding between the parties and NO
OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE, SHALL BE OF ANY
FORCE OF EFFECT
This Agreement when accepted in by an authorized officer of Master Agent,
together with any collateral written agreement signed by an authorized officer
of CBS, constitutes the entire Agreement and understanding between the parties
and NO OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE, SHALL BE
OF ANY FORCE OF EFFECT.
ARTICLE 21 - ENFORCEMENT
At CBS's option, any dispute or disagreement between the parties hereto arising
out of or relating to this agreement shall be submitted the American Arbitration
Association in New York City under the rules then in effect, and judgment upon
the award may be entered in any court having jurisdiction.
ARTICLE 22 - NOTICES AND PAYMENTS.
Ali notices and statements to be given and all payments to be made hereunder
shall be given or made at the respective addresses of the parties as set forth
above unless notification of a change of address is given in writing, Any notice
shall be sent by registered or certified mail and shall be deemed to have been
given at the time mailed.
IN WITNESS WHEREOF, intending to be legally bound, the parties have signed this
Dealer Master Agent Agreement and License on February 1996.
Witness: Computer Business Sciences, Inc.
By:
Witness: Progressive Polymerics International, nc.
/s/ Terrence A. Davis
<PAGE>
By: Terrance A. Davis
STATE OF CALIFORNIA
:ss.: COUNTY OF LOS ANGELES
On this. 17TH day of February 1996, before me personally came Terrence A. Davis,
known to be to be the person described herein and who executed the foregoing
instrument on behalf of the Contractor, who, being by me duly sworn, did depose
and say: the he resides at 5715 Lemona Ave., Van Nicks, CA 9141 that he is the
President of Progressive Polymerics International, Inc., the Corporation that
executed the foregoing contract and that he is duly authorized by said
Corporation to sign his name on behalf of Progressive Polymerics International.
Notary Public
/s/ Marilyn C. Kumbo
Marilyn C. Kimbo, Notary Publikc
Com. 1005028
Notary Public California
Los Angeles County, Exp. Jan 19, 1998
Computer Business Sciences, Inc.
Dealer-Master Agent Agreement and License
ARTICLE 1 - PARTIES
This Agreement is made by and between Computer Business Sciences, Inc. , a New
York corporation, having its principal office and place of business at 144-15
Union Turnpike, Flushing, New York, 11367 and Cellular Credit Corp. of America,
Inc., having its principal office and place of business at P.O. Box 300726,
Jamaica, NY 11430-0726.
RECITALS
.IT IS MUTUALLY CONTEMPLATED AND AGREED AS FOLLOWS:
WHEREAS, Master Agent desires to purchase and resell software, hardware,
products and services of CBS. To operate as a distributor/agent representing the
business of CBS, and using its MARKS and good will; and
WHEREAS, CBS is further desirous of distributing its products and services and
aiding the Master Agent on a non exclusive basis, with the use of CBS names, and
trademarks: "Talkie","Talkie-Software", "Pay-As-You Use", "Call-Back USA",
"Talkie-Globe", "Talkie-Fax", "Talkie-Dial", "Talkie-Query", "Talkie-Trans",
"Talkie-Ad", "Talkie-Form", "Talkie-Mail", "Talkie-Audio", "Talkie-Gen", "BCS",
and Info-Systems"; and
WHEREAS, CBS and Master Agent are agreeable thereto upon the terms and
conditions more particularly herein set forth; and
WHEREAS, Master Agent acknowledges that CBS owns certain software and hardware
systems for the operation of Long distant Reseller under the name
"Talkie/Globe". CBS uses and owns the service mark "Talkie" and related logos,
and possesses all rights under various registered copyrights, trademarks,
service marks, trade names, and other marks which CBS developed or own, and may
develop or own in the future ; and styles including distinctive
A
logos and also certain copyrighted material embodying the use of such marks
including but not limited to enumerate marks and has promoted the use of and
acceptance of such Marks through its own operations and
144-15 Union Turnpike - Flushing, NY 11367
Tel. (718) 380-7200 - Fax (718) 380-7064. E-mail InfoSys [email protected]
operations of licensees, and is developing an international marketing and sales
system identified with its Marks which has public acceptance and good will and
identifying to the public the existence of CBS company products, services and
additionally newly developed marks and registered are reserved for CBS (all
hereinafter generally referred to as "Marks"); and
WHEREAS, CBS possesses rights under various registered copyrights, trademarks,
service marks, trade names and styles including distinctive logos and also
certain copyrighted material embodying the use of such marks including but not
limited to enumerate marks and (all hereinafter generally referred to and to be
included as "Marks") CBS has promoted the use of and acceptance of such Marks
through its own
<PAGE>
operations and the operations of licensees and is developing an international
sales system identified with its Marks which has public acceptance and good will
and identifying to the public the, existence of Talkie's voice processing
software modules and programs, CBS service bureau, and BCS software accounting
system; and
WHEREAS, CBS expressly disclaims the making of, and Master Agent acknowledges
that it has not received or relied upon, any warranty or guaranty, express or
implied, as to the revenues, profits or success of the this dealership venture
contemplated by this Agreement. Master Agent acknowledges that it has read this
Agreement and conducted its own independent research, agrees that this is not a
"franchised offering", and that it has no knowledge of any representations by
CBS, or its officers, shareholders, employees or agents that are contrary to the
statements made in this Agreement or the terms herein; and
WHEREAS, Licensor has developed and perfected a plan and/or system utilizing CBS
software and hardware ("System") for providing licensed FCC telephone companies
, and resellers of long distance services, certain facilities, hardware and
software, and related services; other products and services of distinctive
nature, and of other distinguishing characteristics, placed in operation by CBS
provided under the name "CBS", "Computer Business Sciences, "Info Systems",
"Talkie", "Talkie Globe". The distinguishing characteristics of said System, and
of the Business services provided pursuant thereto, include the following:
(1) The words *Talkie","Talkie-Software", "Pay-As-You Use", "Call-Back USA",
"Talkie-Globe", "Talkie-Fax", "Talkie-Dial", "Talkie-Query", "Talkie-Trans",
"Talkie-Ad", "Talkie-Form", "Talkie-Mail" "Talkie-Audio", "Talkie-Gen", "BCS*,
Info-Systems" or other combinations of words, either alone, or in combination or
association with any color scheme or pattern, office design, insignia, slogans,
signs, emblems trade names, trade marks, service marks, or with the CBS service,
now or hereafter provided or used by CBS as part of the said sales system, or in
association with the idea of an Long Distance Reseller of telephone service, and
cellular service of software, hardware, all, providing standardized, high
quality, and distinctive service;
(2) A distinctive and readily recognizable design and service;
(3) The color scheme, pattern and design, and the color combinations of the
exteriors and interiors of said products and marketing tools;
(4) Appearance of certain of said marketing tools, structures, and the
distinctive trademarks, service marks, design, slogans, name and matter now or
hereafter displayed thereon, or used as part thereof;
(5) The trade marks, trade names, service marks, insignia, emblems, software
documentation, software, hardware, signs, designs, color or patterns, and other
distinctive features, as now or hereafter in use as part of the sales System,
both as identifying the System of CBS, and as identifying the type, character,
and standard of quality of service which the public may expect to receive from
businesses and services of Master Agent
NOW, THEREFORE, in consideration of the foregoing, CBS and Master Agent, hereby
mutually agree as follows*
ARTICLE 2 - GRANT OF CBS AND RELATED LICENSES
A. Names and Marks to be Licensed
Subject to the provisions of this agreement, CBS hereby grants to Master Agent a
Dealership ( "Dealership") , without any territory or exclusivity, to operate a
Dealership business ("Business") offering CBS software, hardware, products, and
services utilizing at Master Agent's option CBS formats, methods, standards,
operating procedures and the MARKS (identified in Section (_) of Exhibit (_)
which is annexed
<PAGE>
hereto and made a part hereof bv this reference) for a term of three (3) years
commencing on the date of execution hereof. Termination or expiration of this
Agreement constitutes termination or expiration of the Dealership.
B. Territorial, Location and Customer Restrictions on License.
Master Agent hereby agrees that no territorial exclusivity has been implied or
offered by Licensor to Master Agent That, CBS reserves the right to approve
locations, and sites to be served.
C. Restrictions on the Goods and Services Sold Under the Marks.
(i) Master Agent agrees to use the MARKS in connection with, and exclusively
for, the promotion and conduct of CBS business, as provided hereunder,
(ii) Master Agent agrees that for the purpose of protecting and enhancing the
value and good will of the Marks and of insuring that the public may rely upon
said Marks as identifying quality, type and standard of business, that the
license granted by this agreement is subject to the continued faithful adherence
by Master Agent to the standards, terms and conditions set forth in, or
established in accordance with this Agreement.
D. Master Agent's obligation to Protect and Defend the Licensed Marks.
(i) Master Agent recognizes and acknowledges that CBS is the sole and exclusive
owner of the Marks and hereby agrees not to register or attempt to register such
Marks in CBS's name or that of any other firm, persons, corporation or any
entity and that it will not use the Marks or any part thereof as any part of any
corporate name and does promise not to do anything to derogate that ownership or
call it into question. Master Agent does hereby obligate itself to call to CBS's
attention any infringing uses it learns of.
(ii) Immediately upon the expiration or termination of this Agreement or any
renewal hereof-, Master Agent agrees to cease and forever abstain from using the
aforesaid Marks and shall return within thirty (30)
<PAGE>
days to CBS or effectively destroy all documents at Master Agent's sole expense,
which shall include but not be limited to instructions, display items, and the
like bearing any of the Marks .
E. License to use Trade Secrets.
Operating manuals, formulas, software, hardware, CBS vendors, customer lists and
computer programs, among other things, may all be deemed trade secrets. CBS has
a protectable interest in those secrets and the Master Agent hereby acknowledges
CBS's interest in preserving the Trade Secrets, and information disclosed in
writing as confidential, and CBS requires that the Master Agent keep them
confidential during the term of the Agreement and after its termination or
expiration. Failure to do so is a material breach of this Agreement and Master
Agent Acknowledges that it will cause irreparable harm to CBS.
F. Master Agent's Minimum Sales Provision.
In consideration of the opportunity to establish and maintain a CBS Dealership
and license as herein provided Master Agent represents and shall purchase a
minimum of ten (10) Talkie/Globe systems annually and/or a minimum of gross
sales in excess of one ($1.800,000) million eight hundred thousand dollars,
annually.
ARTICLE 3 - DEALER'S FINANCIAL OBLIGATIONS TO CBS
A. Should Master Agent utilize any maintenance and or service agreements of CBS,
or the reselling of services to Master Agent customers, Master Agent or customer
shall pay to CBS monthly service fees. Amount of said fees shall be under the
exclusive direction of CBS.
B. All terms of payment and credit approval shall be upon CBS invoice and
discretion. A service charge not to exceed 1 1/2% monthly or the highest legal
contract rate may be added to all accounts not paid within thirty (30) days of
date of invoice. Master Agent agrees to promptly review and advise CBS
concerning any corrections which may be required in invoices received. Invoices
outstanding for more than sixty (60) days without advice of correction shall be
deemed to represent the true and correct statement of Master Agent's account
Failure to pay within sixty (60) days of the date of invoice shall be deemed a
material breach of this Agreement and CBS, may at its sole discretion may
terminate this Agreement with notice without any recourse by Master Agent.
ARTICLE 4 - DEALER'S OBLIGATIONS REGARDING OPERATIONS
A. Master Agent shall commence operations within ninety (30) days from he date
of this Agreement from at least one CBS "Talkie/Globe" Long Distance Reseller
System (hereafter "Talkie/Globe System).
B. Master Agent shall purchase for its operations a minimum 10 systems annually
at the rate of one "Talkie/Globe" system per month the first six months of this
Agreement. Completing minimum sales requirement during second half of each year
of this Agreement. During each year thereafter, the annual sales requirements
must be satisfied
<PAGE>
December 1. of any calendar year. Master Agent recognizes that CBS shall has the
right to establish and adjust the sales requirement for Master Agent during the
life of this Agreement In no event shall Master Agent be restricted from
generating additional sales over the minimum requirement for Master Agent.
C. CBS at its option may require Master Agent to prominently display CBS's then
current signs, insignia, symbols, slogans and other forms and devices as
specified from time to time by CBS for uniform system and Marks recognition by
the public. Master Agent may not use any of CBSs Marks in any advertising or
promotion without the prior written approval of CBS.
D. All service and maintenance on CBS's equipment or equipment used in
connection with this Agreement shall by performed by CBS or their authorized
representatives under a CBS service Agreement.
ARTICLE 5 - INDEMNIFICATION REQUIREMENTS:
A. 1. To the fullest extent permitted by law, the Master Agent shall indemnify,
defend, protect, and hold harmless CBS, its agents and employees, their
respective partners, officers, directors, shareholders, representatives, agents,
employees , and anyone else acting for or on behalf of any or them (herein
individually called "Indemnitee" and collectively called "Indemnitee") from and
against all liabilities, damages, losses, claims, demands, lawsuits,
proceedings, arbitrations, and actions of any nature whatsoever ("Claims") which
arise out of or are connected with, or are claimed to arise out of or be
connected with:
A.2. The performance of Work or any act or omission of Master Agent, its
Contractors, Subcontractors, sub-subcontractors, suppliers, materialmen or
anyone directly or indirectly employed by any of them or anyone for whose acts
they may be liable, regardless of whether or not such claims or expense in
caused in part by an Indemnitee;
A.3. The use, misuse, erection, maintenance, operation or failure of any
machinery or equipment whether or not such machinery or equipment was furnished,
rented, bought, leased or loaned by the CBS or their officers, employees,
agents, servants or others, to Master Agent.
<PAGE>
B. 1. Without limiting the generality of the foregoing, such defense and
indemnity includes all Claims on account of bodily and personal injury, death or
Property damage and loss to any Indemnitee, any of Indemnitee's limitation,
attorneys and consultants' fees and expenses, costs related to preparing for
and/or defending any action and court costs) suffered, incurred of any kind.
8. Master Agent shall pay any judgment finally awarded in any Claim which is
brought against any Indemnitee, regardless of whether the Indemnitee or Master
Agent directs the defense thereof, and shall pay any amounts payable in
settlement or compromise of any such claim.
9. In the event that Master Agent is requested but refuses to honor its
indemnity obligations hereunder, then Master Agent shall, in addition to its
other obligations, pay the cost of bringing any action to enforce Master Agent's
indemnity obligations, Including, without limitation, attorneys' and
consultants' fees, expenses, and court costs, to the party requesting indemnity
ARTICLE 6 - MASTER AGENT INSURANCE REOUIREMENTS:
A. Upon execution of this Agreement; Master Agent shall file with the CBS valid
duplicate original certificates of Insurance and/or, at the CBS's option, a
certified copy of the insurance policies and any and all endorsements or riders
thereto, evidencing compliance with all requirements contained in this contract,
all in form and substance satisfactory to CBS. Master Agent shall provide CBS
with proof of payment of premium in full for the current period or, if such
premiums are financed, evidence that premiums are current.
B. Acceptance and/or approval of the insurance herein does not and shall not be
construed to relieve Master Agent from any obligations, responsibilities or
liabilities under this Agreement
C. All insurance required by the contract shall be obtained at the sole cost and
expense of Master Agent, shall be maintained with insurance carriers properly
licensed to do business in all states required by the terms of this Contract and
acceptable in all respects, to CBS; shall be "primary" and non-contributing to
any insurance maintained by Owner, shall contain a Waiver of Subrogation in
favor of CBS; so that in no event shall the insurance carriers have any right of
recovery against CBS, their agents or employees; shall contain a separation of
insured provision (severability of interest clause); shall provide written
notice be given to CBS, and all additional insured and certificate holders at
least thirty (30) days prior to the cancellation, non-renewal or modification of
any such policies, which notice shall be evidenced by return receipt of United
States certified mail; shall name CBS, and any subsidiary, parent or affiliates
of the CBS and their partners, directors, officers, agents, and employees or
other persons or entities with an insurable interest designated by the CBS as
additional insured thereunder.
D. Master Agent shall cause all insurance to be in full force and effect as of
the date of this Agreement and to remain in full force and affect throughout the
term of this Agreement and as further required by this Contract. Master Agent
shall not take any action. or omit to take any action that would suspend or
invalidate any of the required coverage during the time period such coverage are
required to be in effect.
E. Not less than thirty (30) days prior to the expiration date or renewal date,
Master Agent shall supply Master Agent with updated replacement Certificates of
Insurance, amendatory riders, and endorsements, and/or certified copies of
insurance policies, together with evidence of payment of the premium, that
clearly evidence the continuation of all of the terns and conditions of the
coverage, limits of protection, and
<PAGE>
scope of coverage as was provided by the expiring Certificates of Insurance,
certified copies of insurance policies and amendatory riders or endorsements as
originally supplied.
F. If Master Agent fails to purchase and maintain or fails to require to be
purchased and maintained, the liability insurance specified in this Contract,
CBS may (but shall not be obligated to) purchase such insurance on the Master
Agent's behalf and shall be entitled to be repaid by Master Agent for any
premiums paid therefor.
G. Master Agent shall select reputable and financially sound insurers to
underwrite the required Coverage acceptable to Owner. In all instances, each
insurer selected must be rated at least "A-" (Excellent) Class "VH" in the most
recently published Best's insurance Report. If an insurer's rating falls below
"A-" (Excellent) Class "VII" during the term of the policy, the insurance must
be replaced no later than the renewal date of the policy with an insurer
acceptable to CBS and having an "A-" (Excellent) Class "VII" rating in the most
recently published Best's Insurance Report.
IL No act or omission of any insurance agent, broker or insurance company
representative shall relieve Master Agent of any of its obligations under this
Contract. .1
1. Master Agent, throughout the term of this Contract or as otherwise required
by this Contract, shall obtain and maintain in full force and effect the
following casualty/liability insurance with limits not less than specified
herein and as required by the terms or this Contract or as required by law,
whichever is greater
I
1. Commercial General Liability Insurance or its coverage equivalent is to be
provided under the Insurance Service Office's (ISO) most current form, with a
combined single limit for bodily injury and property damage of not less than $ .
which insurance shall include a comparable limit with respect to Personal Injury
and Advertising injury, as well as (any other). (This limit may be provided
through a combination of primary and umbrella/excess liability policies.) Such
insurance shall include the following coverage:
A. Premises Operations coverage, including Independent contractors, with limits
of liability applying on a per location basis.
B. Product Liability and Completed operations coverage, with the provision that
coverage shall extend for a period of at least twelve (12) months from the date
of final completion and acceptance by the Owner of all of Contractor's Work
C. Personal injury and Advertising Liability coverage to Include Injury
sustained by any person as a result of an offense directly or indirectly related
to employment of such person by the insured, or by any other person and
liability assumed under contracts.
D. Extended Bodily injury coverage with respect to bodily injury resulting from
the use of reasonable force to protect persons or property.
E. Premises and Operations Medical Payments coverage.
F. Broad Form Property Damage Liability coverage, including coverage for
completed operations.
<PAGE>
G. Explosion, Collapse, and Underground Property Damage Coverage providing
protection for Property damage resulting from these hazards.
H. Worker's Compensation, Occupational Diseases benefits, Voluntary
Compensation, and Disability Benefits, U. S. Longshoremen's and Harbor Worker's
compensation, Admiralty/Jones Act; Defense Base Act, and any other federal
and/or state coverage, as required, for not less than the statutory limits, and
if applicable, an "Other States Endorsements"; Employers' Liability Insurance or
stop-Gap Employers, Liability insurance with limits of not less than by accident
$1,000,000 each accident by disease $1,000,000 policy limit by disease $
1,000,000 each employee; (These limits may be provided through a combination of
primary and umbrella excess liability policies.). 0
I. The following shall be named an additional insured in all insurance policies
required under this Contract:
J. The following shall be identified as certificate holders in all insurance
policies required under this Contract:
ARTICLE 7 - NON COMPETE
During the term of this Agreement and for a period of two (2) years after the
expiration or termination of this Agreement or any renewal hereof, neither
MasterAgent nor Master Agent's principals or associates, whether individually or
through a partnership or corporation, will engage, either directly or
indirectly, in the operation of any telecommunications, telephone long distance
businesses or any of the business activates of CBS in the United States and
Canada.
ARTICLE 8 - DEFAULT
No failure to perform in accordance with any of the terms or conditions of this
or any collateral agreement or other fault or defect shall be deemed to exist or
occur unless such failure cannot be cured or if curable shall continue for ten
no more than ten (10) days following mailing or wiring to the party to be put
into default of written notification of such failure, except, however, that if
the failure to perform is the non-payment, in excess of thirty (30) days, of
moneys due and in such failure shall continue for three (3) days or more
following mailing or wiring to the party to be put into default of written
notification of such failure. In addition. in the event of non-payment under
this Agreement or any collateral agreement as above provided, CBS may require
Master Agent to furnish complete up-to-date financial information.
ARTICLE 9 - Term
This Agreement shall be in effect from the date of acceptance and execution by
CBS and continue for three (3) years unless terminated sooner as provided
herein, and may be renewed at the option of the Master Agent under CBS's then
current standard terms for new dealers, for additional successive periods of
three (3) years, for a maximum of two (2) such periods (total of 6 years)
provided that Master Agent has complied with the provisions contained herein.
Master Agent must notify CBS of its election to exercise such option to renew in
writing ninety (90) days prior to the expiration of his Agreement of any renewal
hereof. I
<PAGE>
ARTICLE 10 - TERMINATION
A. TERMINATION BY MASTER AGENT.
Master Agent, being in good standing, may terminate this Agreement at any time
by giving ninety (90) days written notice to CBS, except that such termination
shall not relieve MASTER AGENT of any obligation to CBS that shall have matured
under or survived this Agreement or under any collateral written agreement of
the parties.
B. TERMINATION BY CBS
CBS may terminate this Agreement and revoke all licenses upon the occurrence of
the following:
a) If Master Agent is in default or fails to fulfill any provision of this
Agreement;
b) If Master Agent discontinues the active conduct of its business;
C) Upon the transfer or assignment of any part of Master Agent business assets
which results in the passage of control of the business, unless consented to in
writing by CBS;
d) Upon the insolvency, the making of an assignment for benefit of creditors,
appointment for a receiver or trustee of any part of the assets of Master
Agent's business, the service of a warrant of attachment upon any of the assets
of the business or upon service of an execution.
ARTICLE 11 - RIGHTS OF CBS IN EVENT OF TERMINATION
Upon termination of this Agreement, CBS shall be entitled to recover immediately
upon termination from Master Agent all moneys due under this Agreement, together
with interest at the highest level contract rate and all costs and expenses,
including reasonable attorney's fees and disbursements, incurred or accrued by
CBS in enforcing its rights under this Agreement Master Agent shall deliver and
CBS may assume possession of any service guaranty by CBS. Master Agent also
entitles CBS the option to exercise only upon termination, for the assignment
for collection of Master Agent accounts receivable. Master Agent also assigns at
CBS's option all telephone lines, 800 line services and vanity numbers,
telephone listings, International and Domestic Private Lines, as described
herein shall take effect upon termination. CBS shall also have the exclusive
option and right to assume any and all leases for equipment Master Agent shall
return to CBS, or effectively destroy, all literature, signs, advertising
material, promotional matter and other materials identifying the form Master
Agent with CBS and shall immediately cease to refer to or identify itself with
CBS or use the Marks or any simulation thereof. Master Agent shall thereafter
take no action detrimental to CBS or the Business of CBS. Master Agent
irrevocably authorizes, appoints and empowers CBS as Master Agent's lawful
attorney in fact, to act for Master Agent, and in its name, place and stead, to
do all acts and things herein provided for upon termination; to sell or relet
the same; to execute all contracts, instruments and documents of transfer of
ownership, or otherwise; and to pay the costs and expense of doing such acts and
things. It is agreed that after expiration or termination, any use of the Marks
by Master Agent win result in irreparable injury to CBS and Master Agent hereby
consents to the entry of an order enjoining Master Agent from using CBS Marks in
any way.
ARTICLE 12 - COMPLIANCE WITH LAWS
Master Agent shall be solely responsible for compliance with all laws, statutes,
ordinances, orders or codes of any public or governmental authority pertaining
to the use of CBS products, services and particularly the reselling of domestic
and long distance, domestic and international private line telephone voice
services and its business, and for payment of all taxes, permits, license and
registration fees and other charges or assessments arising out of the
establishment and operation of Master Agent's business.
<PAGE>
ARTICLE 13 - RELATIONSHIP BETWEEN PARTIES
CBS and Master Agent are not and shall not be considered as joint venturers,
partners, agents, servants, employees or fiduciaries of each other or as,
franchisor or franchisee, and neither shall have the power to bind or obligate
the other except as set forth in this Agreement. There shall be no liability on
the part of CBS to any person for any debts incurred by Master Agent unless CBS
agrees in writing to pay such debts. Master Agent acknowledges and represents
that it is completely independent of CBS.
ARTICLE 14 - WAIVER
The failure of either party to enforce at any time any of the provisions of this
Agreement or to exercise any option or remedy herein provided shall in no way be
construed to be a waiver of such provisions of in any way to affect the validity
of this Agreement The exercise by either party of any of their rights hereunder
or of any options or remedies under the terms of covenants herein shall not
prejudice them from thereafter exercising the same or any other right it may
have under this Agreement, irrespective of any previous action or proceeding
taken by the parties hereunder. All remedies contained herein are cumulative and
severable.
ARTICLE 15 - TRANSFER, ASSIGNMENT AND SUBLICENSE
CBS's rights under this Agreement shall inure to the benefit of its successors
and assigns. Such rights may be assigned provided that the assignee shall agree
in writing to assume all of CBS's obligations hereunder and notice thereof is
served upon Master Agent. Such assignment shall discharge CBS from any further
obligation hereunder. The license herein granted is personal to Master Agent and
cannot be transferred, assigned or sublicense without the prior written consent
of CBS, which consent shall not be unreasonably withheld. In the event CBS shall
consent in writing to a transfer, assignment or sublicense, the transferee,
assignee, or sublicenses shall be bound by each and all covenants and conditions
contained herein and shall have no right to the further transfer of this license
except with the prior written consent of CBS.
ARTICLE 16 - SEPARABILITY
In the event that any provision herein is in conflict with the law of any state
of jurisdiction such provision shall be deemed not to be a part of this
Agreement in that jurisdiction.
ARTICLE 17 - HEADINGS
Headings in this Agreement are inserted solely for the purpose of convenience of
reference and are in no manner to be construed as part of the Agreement
ARTICLE 18 - SIGNATORY LIABILITY
All signatories to this Agreement, whether individually, a partner -on behalf of
the partnership, or corporate officer on behalf of the corporation, are to be
deemed parties hereto and hereby agree to be jointly and severally bound by the
terms and conditions contained herein and agree that they shall act as
guarantors for any unpaid balance on Master Agent's account with CBS. Such
signatories hereby expressly waive and dispense with all rights and defenses as
guarantors to include, but not restricted to notice of acceptance of this
Agreement, notices of non-payment or non-performance, notices of amount of
indebtedness outstanding at any time, protests, demands and prosecution of
collection, foreclosure and possessory remedies.
<PAGE>
ARTICLE 19 - DEALER'S WARRANTIES ON EXECUTION OF AGREEMENT
Master Agent hereby acknowledges by execution of this Agreement that Master
Agent has read and understands each and every term and condition of this
Agreement and the documents referred to below and is not relying on any
representations, promises or agreements not expressed herein and that this
Agreement supersedes and cancels any previous understanding or agreement between
the parties relating to the subject covered hereby.
Specifically, Dealer warrants:
a) It understands this Agreement contemplates the operation of a business by
Master Agent and the Master Agents success will depend upon Master Agent's
active participation in such business;
b) It has investigated the potential of the effect of CBS's non-exclusive
territory. Master Agent agrees that the non-exclusivity of TERRITORY is a
reasonable and shall not effect the business of Master Agent.
c) It has examined and is fully conversant with CBS's PROCEDURES, PRODUCTS,
SERVICES AND SALES MANUAL.
ARTICLE 20 - NO ORAL REPRESENTATIONS OR SIDE AGREEMENTS
This Agreement, when accepted in by an authorized officer of CBS, together
with any collateral written agreement, signed by an authorized officer of CBS,
constitutes the entire Agreement and understanding between the parties and NO
OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE, SHALL BE OF ANY
FORCE OF EFFECT
This Agreement when accepted in by an authorized officer of Master Agent,
together with any collateral written agreement signed by an authorized officer
of CBS, constitutes the entire Agreement and understanding between the parties
and NO OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE, SHALL BE
OF ANY FORCE OF EFFECT.
ARTICLE 21 - ENFORCEMENT
At CBS's option, any dispute or disagreement between the parties hereto arising
out of or relating to this agreement shall be submitted the American Arbitration
Association in New York City under the rules then in effect, and judgment upon
the award may be entered in any court having jurisdiction.
ARTICLE 22 - NOTICES AND PAYMENTS.
Ali notices and statements to be given and all payments to be made hereunder
shall be given or made at the respective addresses of the parties as set forth
above unless notification of a change of address is given in writing, Any notice
shall be sent by registered or certified mail and shall be deemed to have been
given at the time mailed.
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the parties have signed this
Dealer Master Agent Agreement and License on February 1996.
Witness: Computer Business Sciences, Inc.
By:
Witness: Cellular Credit Corp. of America, Inc.
/s/ Stephen Seller
By: Stephen Seller
/s/ Stuart Feld
Stuart Feld, Notary Public State of NY
No. 24-1184238
Qualified in Nassaue County
Commission expires March 30, 1998
STATE OF NEW YORK
:ss.: COUNTY OF NEW YORK
On this. 28th day of February 1996, before me personally came ,
known to be to be the person described herein and who executed the foregoing
instrument on behalf of the Contractor, who, being by me duly sworn, did depose
and say: the he resides at that he is the of Cellular
Credit Corp. of America, Inc., the Corporation that executed the foregoing
contract and that he is duly authorized by said Corporation to sign his name on
behalf of
Notary Public
Computer Business Sciences, Inc.
Dealer Master Agent Agreement and License
ARTICLE I - PARTIES
This Agreement is made by and between Computer Business Sciences. Inc, a New
York corporation, having its principal office and place of business at 144-15
Union Turnpike, Flushing, New York, 11367 and America's New Beginning, Inc.,
having its principal office and place of business at 200 Hempstead Avenue, West
Hempstead New York, 11722
RECITALS IT IS MUTUALLY contemplated AND AGREED AS FOLLOWS: AS, Master Agent
desires to purchase and resell software, hardware, products and services of CBS.
To operate as a distributor/agent representing the business of CBS, and using
its MARKS and good will; and WHEREAS, CBS is further desirous of distributing
its products and services and aiding the Master Agent on a non exclusive basis,
with the use of CBS names, and trademarks: "Talkie", "Talkie-Software",
"Pay-As-You Use", "Call-Back USA', "TalkieGlobe", 'Talkie-Fax", 'Talkie-Dial",
"Talkie-Query", "Talkie-Trans', "Talkie-Ad",'Talkie-Form",'Talkie-Mail",
'Talkie-Audio", "Talkie-Gen", TCS", and Info-Systems"; and
WHEREAS, CBS and Master Agent are agreeable thereto upon the terms and
conditions more particularly herein set forth; and WHEREAS, Master Agent
acknowledges that CBS owns certain software and hardware systems for the
operation of Long distant Rostellar under the name 'Talkie-Globe". CBS uses and
owns the service mark "Talkie" and related logos, and possesses all rights under
various registered copyrights, trademarks, service marks, trade names, and other
marks which CBS developed or own. and may develop or own in the future; and
styles including distinctive logos and also certain copyrighted material
embodying the use of such marks including but not limited to enumerate marks and
has promoted the use of and acceptance of such Marks through its own operations
and operations of licensees, and is developing an international marketing and
sales system identified with its Marks which has public acceptance and good will
and identifying to the public the existence of CBS company products, services
and additionally newly developed ~ 9 marks and registered are reserved for CBS
(all hereinafter generally referred to as "Marks"); and
WHEREAS, CBS possesses rights under various registered copyrights, trademarks.
service marks, trade names and styles including distinctive logos and also
certain copyrighted material embodying the use of such networks including but
not limited to enumerate marks and (all hereinafter generally referred to and to
be included as "Marks') CBS has promoted the use of and acceptance of such Marks
through its own operations and the operations of licensees and is developing an
international sales system identified with its Marks which has public acceptance
and good will and identifying to the public the existence of Talkie's voice
processing software modules and programs, CBS service bureau, and BCS software
accounting system; and
WHEREAS, CBS expressly disclaims the making of, and Master Agent acknowledges
that it has not received or relied upon, any warranty or guaranty, express or
implied, as to the revenues, profits or success of the this dealership venture
contemplated by this Agreement. Master Agent acknowledges that it has read this
Agreement and conducted its own independent research, agrees that this is not a
'franchised offering', and that it has no knowledge of any representations by
CBS, or its officers, shareholders, employees or agents that are contrary to the
statements made in this Agreement or the terms herein; and WHEREAS, Licensor has
developed and perfected a plan and/or system utilizing CBS software and hardware
("System") for providing licensed FCC telephone companies , and resellers of
long distance services, certain facilities, hardware and software, and related
services; other products and services of distinctive nature, and of other
distinguishing characteristics, placed in operation by CBS provided under the
name "CBS", 'Computer Business Sciences, "Info Systems', 'Talkie', 'Talkie
Globe". The distinguishing characteristics of said System and of the Business
services provided pursuant thereto, include the following:
<PAGE>
(1) The words 'Talkie', "Talkie-Software", Pay-As-You Use", 'Call-Back USA".
"Talkie-Globe", 'Talkie-Fax", "Talkie-Dial",'Talkie-Query", "Talkie-Trans",
"Talkie-Ad','Talkie-Form", "Talkie-Mail", "Talkie-Audio", "TalkieGen", "BCS",
Info-Systems'or other combinations of words, either alone, or in combination or
association with any color scheme or pattern, office design, insignia, slogans,
signs, emblems trade names, trade marks. service marks, or with the CBS service,
now or hereafter provided or used by CBS as part of C. Restrictions on the Goods
and Services Sold Under the Marks.
(i) Master Agent agrees to use the MARKS in connection with, and exclusively
for, the promotion and conduct of CBS business, as provided hereunder,
(ii) Master Agent agrees that for the purpose of protecting and enhancing the
value and good will of the Marks and of insuring that the public may rely upon
said Marks as identifying quality, @ and standard of business, that the license
granted by this agreement is subject to the continued faithful adherence by
Master Agent to the standards, terms and conditions set forth in, or established
in accordance with this Agreement.
D. Master Agent's obligation to Protect and Defend the Licensed Market
(i) Master Agent recognizes and acknowledges that CBS is the sole and exclusive
owner of the Marks and hereby agrees not to register or attempt to register such
Marks, in CBS's name or that of any other @ persons, corporation or any entity
and that it will not use the Marks or any part thereof as any part of any
corporate name and does promise not to do anything to derogate that ownership or
call it into question. Master Agent does hereby obligate itself to call to CBS's
attention any infringing uses it deems of (ii) Immediately upon the expiration
or termination of this Agreement or any renewal hereof, Master Agent agrees to
cease and forever abstain from using the aforesaid Marks and shall return within
thirty (30) days to CBS or effectively destroy all documents at Master Agent's
sole expense, which shall include but not be limited to instructions, display
items, and the like bearing any of the Marks .
E. License to use Trade Secrets
Operating manuals, formulas, software. hardware, CBS vendors, customer lists and
computer programs, among other things, may all be deemed trade secrets. CBS has
a protectable interest in those secrets and the Master Agent hereby acknowledges
CBS's interest in preserving the Trade Secrets, and information disclosed in
writing as confidential, and CBS requires that the Master Agent keep them
confidential during the term of the Agreement and after its termination or
expiration. Failure to do so is a material breach of this Agreement and Master
Agent Acknowledges that it will cause irreparable harm to CBS.
F. Master Agent's Minimum Sales Provision.
In consideration of the opportunity to establish and maintain a CBS Dealership
and license as herein provided @r Agent represents and shall purchase a minimum
of ten (10) Talkie/Globe systems annually and/or a minimum of gross sales in
excess of one (S 1,800,000) million eight hundred thousand dollars, annually.
ARTICLE 3 - DEALER'S FINANCIAL OBLIGATIONS TO CBS
A. Should Master Agent utilize any maintenance and or service agreements of CBS,
or the reselling of services to Master Agent customers, or Agent or customer
shall pay to CBS monthly service fees. Amount of said fees shall be under the
exclusive direction of CBS.
B. All terms of payment and credit approval shall be upon CBS invoice and
discretion. A service charge not to exceed 1 1/2% monthly or the highest legal
contract rate may be added to all accounts not paid within thirty (30) days of
date of invoice. Master Agent agrees to promptly review and advise CBS
concerning any corrections which may be required in invoices received. Invoices
outstanding for more than sixty (60) days without advice of correction shall be
deemed to represent the true and correct statement of Master Agent's account.
Failure to pay within sixty (60) days of the date of invoice shall be deemed a
material breach of this Agreement and CBS, may at its sole discretion may
terminate this Agreement with notice without any recourse by Master Agent.
<PAGE>
C. In the event Master Agent shall:
(a) enter into any partnership, joint venture, joint operating agreement, or
other entity relationship with any other party or parties for le providing of
telecommunications services;
(b) operate, either singly or with another or others any business or entity for
the providing of telecommunications services:
(c) sell telecommunication services; or
(d) otherwise participate in the sale of the time or services created by the use
of CBS telecommunication equipment; where the telecommunication equipment and/or
software utilized for the providing of such telecommunication services is that
of Computer Business Sciences, Inc., InfoSystems ("TALKIE"), or any subsidiary
or affiliate thereof then Master Agent shall pay to Computer Business Sciences
Inc., a sum equal to forty-five percent (45%) of the net revenues derived by the
Master Agent from each and any gross revenues less only the direct costs of
providing die telecommunication services, and shall not be reduced by the Master
Agent's overhead, partnership distribution, or general expenses. The Master
Agent shall at all times maintain not less than a 5 1 % interest in any entity,
partnership, joint venture, or relationship with any other party or parties
providing telecommunication services.
ARTICLE 4 - DEALER'S OBLIGATIONS REGARDING OPERATIONS
A. Master Agent shall commence operations within ninety (30) days from the date
of this Agreement from at least one CBS "Talkie/Globe Long Distance Reseller
System (hereafter Talkie/Globe System).
B. Master Agent shall purchase for its operations a minimum 10 systems annually
at the rate of one "Talkie/Globe" system per month the first six months of this
Agreement. Completing minimum sales requirement during second half of each year
of this Agreement. During each year thereafter. the annual sales requirements
must be satisfied by December 1, of the calendar year. Master Agent recognizes
that CBS shall has the right to establish and adjust the minimum sales
requirement for master Agent during the life of this Agreement. In no event
shall Master Agent be restricted from generating additional sales over the
minimum requirement for Master Agent.
C. CBS at its option may require Master Agent to prominently display CBS's then
current signs. insignia, symbols, slogans and other forms and devices as
specified from time to time by CBS for uniform system and Marks recognition by
the public. Master Agent may not use any of CBS's Marks in any advertising or
promotion without the prior written approval of CBS.
D. All service and maintenance on CBS's equipment or equipment used in
connection with this Agreement shall be performed by CBS or their authorized
representatives under a CBS service Agreement.
ARTICLE 5 - INDEMNIFICATION REQUIREMENTS:
A. 1. To the fullest extent permitted by law, the Master Agent shall indemnify
defend, protect. and hold harmless CBS, its agents and employees, their
respective partners, officers, directors, shareholders, representatives, agents,
employees , and anyone else acting for or on behalf of any or them (herein
individually called "Indemnitee" and collectively called Indemnitee") from and
against all liabilities, damages, losses, claims, demands, lawsuits,
proceedings, arbitrations, and actions of any nature whatsoever ("Claims") which
arise out of or are connected with, or are claimed to arise out of or be
connected with:
2. The performance of Work or any act or omission of Master Agent, its
Contractors, Subcontractors, subsubcontractors, suppliers, materialmen or anyone
directly or indirectly employed by any of them or anyone for whose acts they may
be liable, regardless of whether or not such claims or expense in caused in part
by an Indemnitee;
3. The use, misuse, erection, maintenance, operation or failure of any machinery
or equipment whether or not such machinery or equipment was furnished, rented,
bought, leased or loaned by the CBS or their officers, employees, agents,
servants or others, to Master Agent.
4. Without limiting the generality of the foregoing, such defense and indemnity
includes all Claims on account of bodily and personal injury, death or Property
damage and loss to any Indemnitee, any of Indemnitee's employees, agents,
contractors or subcontractors, licensees or invites, or any other persons,
whether based upon, or claimed to be based upon, statutory (including, without
limiting the generality or the foregoing, worker's compensation),
<PAGE>
contractual, tort or other liability of any Indemnity or any other persons. In
addition, the Claims indemnified against shall include all claims for
trademark-, copyright or patent infringement, for unfair competition or
infringement of any other soiled "intangible" property rights, for defamation,
false arrest, malicious prosecution or any other infringement of personal or
property rights of any kind whatever or which arise, or is specified in the
contract Documents, including, without limitation. these General conditions. CBS
expressly understands and agrees that any performance bond or insurance
protection required by the Contract Documents, or otherwise provided to CBS,
shall in no way limit the responsibility to indemnify, save, and hold harmless
and defend the Indemnity as herein provided. The indemnification provisions
contained herein shall be included in each of CBS's and Master Agents
Subcontracts and shall be in favor of the Indemnitee and Master Agent. Any
Indemnity, at its election. may defend against or settle any Claim, or at the
request of any Indemnity, Master Agent shall assume the defense on behalf of
such Indemnitee, of any such Claim, provided however, that any attorney employed
In such defense must be satisfactory to such lndemnitee. Master Agent shall bear
any and all expense, whether incurred or paid, of any Indemnitee because of any
Claim or other matter indemnified against hereunder, including without
limitation, attorneys' and consultants' fees and expenses, court costs, and
costs related to the defense of, or preparing for the defense against, any such
Claim, even if such Claim is groundless, false or fraudulent 1.In any and all
Claims against the Indemnitee by any employee of Master Agent any Subcontractor,
supplier, materialmen anyone directly or indirectly employed by any of them or
anyone for whose acts any of then may be liable. the indemnification obligation
under this section 2 shall not be limited in any way by any limitation on the
amount or @ or damages, compensation or benefits payable by or for Master Agent
or any Contractor. subcontractor, or sub-subcontractor under workers' or
workman's compensation acts, disability benefit acts or other employee benefit
acts.
2. Master Agent shall further indemnify defend, protect, and hold harmless the
Indemnity
3. Indemnity from and against any and all claims and shall bear any and all
expense, whether incur-red or paid, of any Indemnitee (including without
limitation, attorneys and consultants' fees and expenses, costs related to
preparing for and/or defending any action and court costs) suffered, incurred of
any kind.
4. Master Agent shall pay any judgment finally awarded in any Claim which is
brought against any Indemnitee, regardless of whether the Indemnitee or Master
Agent directs the defense thereof, and shall pay any amounts payable in
settlement or compromise of any such claim. In the event that Master Agent is
requested but refuses to honor its indemnity obligations hereunder, then Master
Agent shall, in addition to its other obligations, plus the cost of bringing any
action to enforce Master Agent's indemnity obligations, Including, without
limitation, attorneys' and consultants' fees, expenses, and court costs, to t
the party re questing indemnity
ARTICLE 6 - MASTER AGENT INSURANCE REQUIREMENTS:
A. Upon execution of this Agreement Master Agent shall file with the CBS valid
duplicate original certificates of Insurance and/or, at the CBS's option, a
certified copy of the insurance policies and any and all endorsements or riders
thereto, evidencing compliance with all requirements contained in this contract,
all in form and substance
<PAGE>
satisfactory to CBS. Master Agent shall provide CBS with proof of payment of
premium in full for the current annual period or, if such premiums are financed,
evidence that premiums are current.
B. Acceptance and/or approval of the insurance herein does not and shall not be
construed to relieve Master Agent from any obligations, responsibilities or
liabilities under this Agreement.
C All insurance required by the contract shall be obtained at the sole cost and
expense of Master Agent, shall be maintained with insurance carriers properly
licensed to do business in all states required by the terms of this Contract and
acceptable in all respects, to CBS; shall be'primary" and non-contributing to
any insurance maintained by Owner-, shall contain a Waiver of Subrogation in
favor of CBS; so that in no event shall the insurance carriers have any right of
recovery against CBS, their agents or employees; shall contain a separation of
insured provision (severability of interest clause); shall provide written
notice be given to CBS, and all additional insured and certificate holders at
least thirty (30) days prior to the cancellation, non-renewal or modification of
any such policies, which notice shall be evidenced by return receipt of United
States certified mail; shall name CBS, and any subsidiary, parent or affiliates
of the CBS and their partners, directors, officers, agents, and employees or
other persons or entities with an insurable interest designated by the CBS as
additional insured thereunder.
<PAGE>
D. Master Agent shall cause all insurance to be in full force and effect as of
the date of this Agreement and to remain in full force and affect throughout the
term of this Agreement and as further required by this Contract. Master Agent
shall not take any action, or plan to take any action that would suspend or
invalidate any of the required coverage during the time period such coverage are
required to be in effect.
E. Not less than thirty (30) days prior to the expiration date or renewal date,
Master Agent shall supply Master Agent with updated replacement Certificates of
Insurance, amendatory riders, and endorsements, and/or certified copies of
insurance policies, together with evidence of payment of the premium, that
clearly evidence the continuation of all of the terms and conditions of the
coverage, limits of protection, and scope of coverage as was provided by the
expiring Certificates of Insurance, certified copies of insurance policies and
amendatory riders or endorsements as originally supplied
F. If Master Agent fails to purchase and maintain or fails to require to be
purchased and maintained, the liability insurance specified in this Contract,
CBS may (but shall not be obligated to) purchase such insurance on the Master
Agent's behalf and shall be entitled to be repaid by Master Agent for any
premiums paid therefor.
G. Master Agent shall select reputable and financially sound insurers to
underwrite the required Coverage acceptable to Owner. In all instances, each
insurer selected must be rated at least "AT(Excellent) Class 'VH' in the most
recently published Bests insurance Report. If an insurer's rating falls below
"A-' (Excellent) Class 'VH' during the term of the policy the insurance must be
replaced no later than the renewal date of the policy with an insurer acceptable
to CBS and having an "A-' (Excellent) Class "VII" rating in the most recently
published Best's Report.
H. No act or emission of any insurance agent, broker or insurance company
representative shall relieve Master Agent of any of its obligations under this
Contract.
1. Master Agent throughout the term of this Contract or as otherwise required by
this Contract, shall obtain and maintain in full force and effect the following
casualty/liability insurance with limits not less than specified herein and as
required by the terms or this Contract or as required by law', whichever is
greater:
J. Commercial General Liability Insurance or its coverage equivalent is to be
provided under the Insurance Service Office's (ISO) most current form. with a
combined single limit for bodily injury and property damage of not less than
$______ , which insurance shall include a comparable limit with respect to
Personal Injury and Advertising injury, as well as (any other). (Master Agent
may be provided with a combination of primary and umbrella/excess liability
policies.) Such insurance shall include the following coverage:
A. Premises Operations coverage, including Independent contractors, with limits
of liability applying on a per location basis.
B. Product Liability and Completed operations coverage, with the provision that
coverage shall extend for a period of at least twelve (12) months from the date
of final completion and acceptance by the Owner of an of Contractor's Work.
C. Personal injury and Advertising Liability coverage to Include Injury
sustained by any person as a result of an offense directlv or indirectly related
to employment of such person by the insured, or by any other person and
liability assumed under contracts.
<PAGE>
D. Extended Bodily injury cover-age with
respect to bodily injury resulting from the use of reasonable force to protect
persons or property.
E. Premises and Operations Medical Payments coverage.
F. Broad Form Property Damage Liability coverage, including coverage for
completed operations.
G. Explosion, Collapse, and Underground Property Damage Coverage providing
protection for Property damage resulting from these hazards.
H. Worker's Compensation, Occupational Diseases benefits, Voluntary
Compensation, and Disability Benefits, Longshoremen's and Harber Worker's
compensation, Admiralty/Jones Act Defense Base Act and any other federal and/or
state coverage, as required, for not less than the statutory limits, and if
applicable, an "Other States Endorsements"; Employers' Liability Insurance or
stop-Gap Employers, Liability insurance with limits of not less than by accident
$1,000,000 each accident by disease $ 1,000,000 policy limit by disease
<PAGE>
$1,000,000 each employee; (These limits may be provided through a combination of
primary and umbrella/excess liability policies.).
I. The following shall be named an additional insured in all insurance policies
required under this Contract:
L. The following shall be identified as certificate holders in all insurance
policies required under this Contract:
ARTICLE 7 - NON COMPETE
During the term of this Agreement and for a period of two (2) years after the
expiration or termination of this Agreement or any renewal hereof. neither
MasterAgent nor Master Agent's principals or associates, whether individually or
through a partnership or corporation, will engage, either directly or
indirectly, in the operation of any telecommunications, telephone long distance
businesses or any of the business activates of CBS in the United States and
Canada.
ARTICLE 8 - DEFAULT
No failure to perform in accordance with any of the terms or conditions of this
or any collateral agreement, or other fault or defect shall be deemed to exist
or occur unless such failure cannot be cured or if curable shall continue for
ten no more than ten (10) days following mailing or wiring to the party to be
put into default of written notification of such failure, except however, that
if the failure to perform is the non-payment, in excess of thirty (30) days,. of
moneys due and in such failure shall continue for three (3) days or more
following mailing or wiring to the party to be put into default of written
notification of such failure. In addition, in the event of non-payment under
this Agreement or any collateral agreement as above provided, CBS may require
Master Agent to furnish complete up-to-date financial information.
ARTICLE 9 - Term
This Agreement shall be in effect from the date of acceptance and execution by
CBS and continue for three (3) years unless terminated sooner as provided
herein, and may be renewed at the option of the Master Agent under CBS's then
current standard terms for new dealers, for additional successive periods of
three (3) years, for a sum of two (2) such periods (total of 6 years) provided
that Master Agent has complied with the provisions contained herein. Master
Agent must notify CBS of its election to exercise such option to renew in
writing ninety (90) days prior to the expiration of his Agreement of any renewal
hereof.
ARTICLE 10 - TERMINATION
A. TERMINATION BY MASTER AGENT.
Master Agent being in good standing, may terminate this- Agreement at any time
by giving ninety (90) days written notice to CBS, except that such termination
shall not relieve MASTER AGENT of any obligation to CBS that shall have matured
under this Agreement or under any collateral written agreement of the parties.
B. TERMINATION BY CBS CBS may terminate this Agreement and revoke all licenses
upon the occurrence of the following: a) If Master Agent is in default or fails
to fulfill any provision of this Agreement,
<PAGE>
b) If Master Agent discontinues the active conduct of its business;
c) Upon the transfer or assignment of any part of Master Agent business assets
which results in the passage of control of the business, unless consented to in
writing by CBS;
d) Upon the insolvency, the making of an assignment for benefit of creditors,
appointment for a receiver or trustee of any part of the assets of Master
Agent's business, the service of a warrant of attachment upon any of the assets
of the business or upon service of an execution.
<PAGE>
ARTICLE I I - RIGHTS OF CBS IN EVENT OF TERMINATION Upon termination of this
Agreement, CBS shall be entitled to recover immediately upon termination from
Master Agent all moneys due under this Agreement. together with interest at the
highest level contract rate and all costs and expenses, including reasonable
attorney's fees and disbursements. incurred or accrued by CBS in enforcing its
rights under this Agreement. Master Agent shall deliver and CBS may 'assume
possession of any service guaranty by CBS. Master Agent also entitles CBS the
option to exercise only upon termination, for the assignment for collection of
Master Agent accounts receivable. Master Agent also assigns at CBS's option all
telephone lines, 800 line services and vanity numbers, telephone listings,
International and Domestic Private Lines, as described herein shall take effect
upon termination. CBS shall also have the exclusive option and right to assume
any and all leases for equipment. Master Agent shall return to CBS, or
effectively destroy, all literature, signs, advertising material, promotional
matter and other materials identifying the form Master Agent with CBS and shall
immediately cease to refer to or identify itself with CBS or use the Marks or
any simulation thereof. Master Agent shall thereafter take no action detrimental
to CBS or the Business of CBS. Master Agent irrevocably authorizes, appoints and
empowers CBS as Master Agent's lawful attorney in fact, to act for Master Agent
and in its name, place and stead 12 to do all acts and things herein provided
for upon termination; to sell or resell the same; to execute all contracts,
instruments and documents of transfer of ownership, or otherwise; and to pay the
costs and expense of doing such acts and things. It is agreed that after
expiration or termination, any use of the Marks by Master Agent will result in
irreparable injury to CBS and Master Agent hereby consents to the entry of an
order enjoining Master Agent from using CBS Marks in any way
ARTICLE 12 - COMPLIANCE WITH LAWS Master Agent shall be solely responsible for
compliance with all laws. statutes. ordinances, orders or codes of any public or
governmental authority pertaining to the use of CBS products, services and
particularly the reselling of domestic and long distance, domestic and
international private line telephone voice services and its business, and for
payment of all taxes, permits, license and registration fees and other charges
or assessments arising out of the establishment and operation of Master Agent's
business.
ARTICLE 13 - RELATIONSMP BETWEEN PARTIES CBS and Master Agent are not and shall
not be considered is joint venturers, partners, agents, servants, employees or
fiduciaries of each other or as, franchiser or franchisee, and neither shall
have the power to bind or obligate the other except as set forth in this
Agreement. There shall be no liability on the part of CBS to any person for any
debts incurred by Master Agent unless CBS agrees in writing to pay such debts.
Master Agent acknowledges and represents that it is completely independent of
CBS.
ARTICLE 14 - WAIVER
The failure of either party to enforce at any time any of the provisions of this
Agreement or to exercise any option or remedy herein provided shall in no way be
construed to be a waiver of such provisions of in any way to affect the validity
of this Agreement. The exercise by either party of any of their rights hereunder
or of any options or remedies under the terms of covenants herein shall not
prejudice them from thereafter exercising the same or any other right it may
have under this Agreement irrespective of any previous action or proceeding
taken by the parties hereunder. AU remedies contained herein are cumulative and
severable.
ARTICLE 15 - TRANSFER, ASSIGNMENT AND SUBLICENSE CBS's rights under this
Agreement shall inure to the benefit of its successors and assigns. Such rights
may be assigned provided that the assignee shall agree in writing to assume all
of CBS's obligations hereunder and notice therefore is served upon Master Agent.
Such assignment shall discharge CBS from any further obligation hereunder. The
license herein granted is personal to Master Agent and cannot be transferred,
assigned or sublicense without the prior written consent of CBS, which consent
shall not be unreasonably withheld. In the event CBS shall consent in writing to
a transfer, assignment or sublicense, the transferee, assignee, or sublicenses
shall be bound by each and all covenants and conditions contained herein and
shall have no right to the Master transfer of this license except with the prior
written consent of CBS.
<PAGE>
ARTICLE 16 - SEPARABILITY
In the event that any provision herein is in conflict with the law of any state
of jurisdiction, such provision shall be deemed not to be a part of this
Agreement in that jurisdiction.
<PAGE>
ARTICLE 17 - READINGS
Headings in this Agreement are inserted solely for the purpose of convenience of
reference and are in no manner to be construed as part of the Agreement.
ARTICLE 18 - SIGNATORY LIABILITY All signatories to this Agreement, whether
individually, a partner on behalf of the partnership, or corporate officer on
behalf of the corporation, are to be deemed parties hereto and hereby agree to
be jointly and severally bound by the terms and conditions contained herein and
agree that they shall act as guarantors for any unpaid balance on Master Agent's
account with CBS. Such signatories hereby expressly waive and dispense with all
rights and defenses as guarantors to include, but not restricted to notice of
acceptance of this Agreement, notices of non-payment or nonperformance, notices
of amount of indebtedness outstanding at any time, protests, demands and
prosecution of collection, foreclosure and possessory remedies.
ARTICLE 19 - DEALER'S WARRANTIES ON EXECUTION OF AGREEMENT Master Agent hereby
acknowledges by execution of this Agreement that Master Agent has read and
understands each and every term and condition of this Agreement and the
documents referred to below and is not relying on any representations, promises
or agreements not expressed herein-and that this Agreement supersedes and
cancels any previous understanding or agreement between the parties relating to
the subject covered hereby. Specifically, Dealer warrants:
a) It understands this Agreement contemplates the operation of a business by
Master Agent and the Master Agent's success will depend upon Master Agent's
active participation in such business;
b) It has investigated the potential of the effect of CBS's non-exclusive
territory. Master Agent agrees that the non-exclusivity of TERRITORY is a
reasonable and shall not effect the business of Master Agent.
c) It has examined and is fully conversant with CBS's PROCEDURES, PRODUCTS,
SERVICES AND SALES.
ARTICLE 20 - NO ORAL REPRESENTATIONS OR SIDE AGREEMENTS
This Agreement. when accepted in by an authorized officer of CBS, together
with any collateral written agreement. signed by an authorized officer of CBS,
constitutes the entire Agreement and understanding between the parties and NO
OTHER REPRESENTATION. PROMISE OR AGREEMENT, ORAL OR OTHERWISE. SHALL BE OF ANY
FORCE OF EFFECT.
This Agreement when accepted in by an authorized officer of Master Agent
together with any collateral written agreement, signed by an authorized officer
of CBS, constitutes the entire Agreement and understanding between the parties
and NO OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE, SHALL BE
OF ANY FORCE OF EFFECT.
ARTICLE 21 - ENFORCEMENT
At CBS's option, any dispute or disagreement between the parties hereto arising
out of or relating to this agreement shall be submitted the American Arbitration
Association in New York City under the rules then in effect, and judgment upon
the award may be entered in any court having jurisdiction.
<PAGE>
ARTICLE 22 - NOTICES AND PAYMENTS.
AR notices and statements to be given and all payments to be made hereunder
shall be given or made at the respective addresses of the parties as set forth
above unless notification of a change of address is given in writing. Any notice
shall be sent by registered or certified mail and shall be deemed to have been
given at the time mailed.
IN WITNESS WHEREOF, intending to be legally bound, the parties have signed this
Dealer Master Agent Agreement and License on February 1996.
Witness: Computer Business Sciences.
By:
Witness: America's New Beginning. Inc
STATE OF NEW YORK
ss::
COUNTY OF NEW YORK
On this day of 1996, before me personally came Marty Silver, known to be to be
the person described herein and who executed the foregoing instrument on behalf
of the Contractor, who, being by me duly sworn, did depose and say: the he
resides at that he is the President of America's New Beginning, Inc., the
Corporation that executed the foregoing contract and that he is duly authorized
by said Corporation to sign his name on behalf of America's New Beginning.
Notary Public
16
<PAGE>
ARTICLE 22 - NOTICES AND PAYMENTS.
All notices and statements to be given and all payments to be made hereunder
shall be given or made at the respective addresses of the parties as set forth
above unless notification of a change of address is given in writing. Any notice
shall be sent by registered or certified mail and shall be deemed to have been
given at the time mailed.
IN WITNESS WHEREOF, intending to be legally bound, the parties have signed this
Dealer Agent Agreement and License on February 1996.
Witness:
Witness:
STATE OF NEW YORK
COUNTY OF NEW YORK
Computer Business Sciences, Inc.
By: /s/ Doron Cohen
Doron Cohen, President
America's New Beginning, Inc.
By: /s/ Marty Silver
Marty Silver, President
:ss.:
On this 25th day of February 1996, before me personally came Marty Silver, known
1996, before me personally came Marty Silver, known to be to be the person
described herein and who executed the foregoing instrument on behalf of the
Contractor, who, being by me duly sworn, did depose and say: that he resides at
that he is the President of America's New Beginning, Inc., the Corporation that
executed the foregoing contract and that he is duly authorized by said
Corporation to sign his name on behalf of America's New Beginning.
Notary Public
16
Computer Business Sciences, Inc.
Dealer-Master Agent Agreement and License
ARTICLE 1 - PARTIES
This Agreement is made by and between Computer Business Sciences, Inc. , a New
York corporation, having its principal office and place of business at 144-15
Union Turnpike, Flushing, New York, 11367 and Korean Telecom, having its
principal office and place of business at 34-57 Junction Blvd., Corona NY 11372.
RECITALS
.IT IS MUTUALLY CONTEMPLATED AND AGREED AS FOLLOWS:
WHEREAS, Master Agent desires to purchase and resell software, hardware,
products and services of CBS. To operate as a distributor/agent representing the
business of CBS, and using its MARKS and good will; and
WHEREAS, CBS is further desirous of distributing its products and services and
aiding the Master Agent on a non exclusive basis, with the use of CBS names, and
trademarks: "Talkie","Talkie-Software", "Pay-As-You Use", "Call-Back USA",
"Talkie-Globe", "Talkie-Fax", "Talkie-Dial", "Talkie-Query", "Talkie-Trans",
"Talkie-Ad", "Talkie-Form", "Talkie-Mail", "Talkie-Audio", "Talkie-Gen", "BCS",
and Info-Systems"; and
WHEREAS, CBS and Master Agent are agreeable thereto upon the terms and
conditions more particularly herein set forth; and
WHEREAS, Master Agent acknowledges that CBS owns certain software and hardware
systems for the operation of Long distant Reseller under the name
"Talkie/Globe". CBS uses and owns the service mark "Talkie" and related logos,
and possesses all rights under various registered copyrights, trademarks,
service marks, trade names, and other marks which CBS developed or own, and may
develop or own in the future ; and styles including distinctive
A
logos and also certain copyrighted material embodying the use of such marks
including but not limited to enumerate marks and has promoted the use of and
acceptance of such Marks through its own operations and
144-15 Union Turnpike - Flushing, NY 11367
Tel. (718) 380-7200 - Fax (718) 380-7064. E-mail InfoSys [email protected]
<PAGE>
operations of licensees, and is developing an international marketing and sales
system identified with its Marks which has public acceptance and good will and
identifying to the public the existence of CBS company products, services and
additionally newly developed marks and registered are reserved for CBS (all
hereinafter generally referred to as "Marks"); and
WHEREAS, CBS possesses rights under various registered copyrights, trademarks,
service marks, trade names and styles including distinctive logos and also
certain copyrighted material embodying the use of such marks including but not
limited to enumerate marks and (all hereinafter generally referred to and to be
included as "Marks") CBS has promoted the use of and acceptance of such Marks
through its own operations and the operations of licensees and is developing an
international sales system identified with its Marks which has public acceptance
and good will and identifying to the public the, existence of Talkie's voice
processing software modules and programs, CBS service bureau, and BCS software
accounting system; and
WHEREAS, CBS expressly disclaims the making of, and Master Agent acknowledges
that it has not received or relied upon, any warranty or guaranty, express or
implied, as to the revenues, profits or success of the this dealership venture
contemplated by this Agreement. Master Agent acknowledges that it has read this
Agreement and conducted its own independent research, agrees that this is not a
"franchised offering", and that it has no knowledge of any representations by
CBS, or its officers, shareholders, employees or agents that are contrary to the
statements made in this Agreement or the terms herein; and
WHEREAS, Licensor has developed and perfected a plan and/or system utilizing CBS
software and hardware ("System") for providing licensed FCC telephone companies
, and resellers of long distance services, certain facilities, hardware and
software, and related services; other products and services of distinctive
nature, and of other distinguishing characteristics, placed in operation by CBS
provided under the name "CBS", "Computer Business Sciences, "Info Systems",
"Talkie", "Talkie Globe". The distinguishing characteristics of said System, and
of the Business services provided pursuant thereto, include the following:
(1) The words *Talkie","Talkie-Software", "Pay-As-You Use", "Call-Back USA",
"Talkie-Globe", "Talkie-Fax", "Talkie-Dial", "Talkie-Query", "Talkie-Trans",
"Talkie-Ad", "Talkie-Form", "Talkie-Mail" "Talkie-Audio", "Talkie-Gen", "BCS*,
Info-Systems" or other combinations of words, either alone, or in combination or
association with any color scheme or pattern, office design, insignia, slogans,
signs, emblems trade names, trade marks, service marks, or with the CBS service,
now or hereafter provided or used by CBS as part of
<PAGE>
the said sales system, or in association with the idea of an Long Distance
Reseller of telephone service, and cellular service of software, hardware, all,
providing standardized, high quality, and distinctive service;
(2) A distinctive and readily recognizable design and service;
(3) The color scheme, pattern and design, and the color combinations of the
exteriors and interiors of said products and marketing tools;
(4) Appearance of certain of said marketing tools, structures, and the
distinctive trademarks, service marks, design, slogans, name and matter now or
hereafter displayed thereon, or used as part thereof;
(5) The trade marks, trade names, service marks, insignia, emblems, software
documentation, software, hardware, signs, designs, color or patterns, and other
distinctive features, as now or hereafter in use as part of the sales System,
both as identifying the System of CBS, and as identifying the type, character,
and standard of quality of service which the public may expect to receive from
businesses and services of Master Agent
NOW, THEREFORE, in consideration of the foregoing, CBS and Master Agent, hereby
mutually agree as follows*
ARTICLE 2 - GRANT OF CBS AND RELATED LICENSES
A. Names and Marks to be Licensed
Subject to the provisions of this agreement, CBS hereby grants to Master Agent a
Dealership ( "Dealership") , without any territory or exclusivity, to operate a
Dealership business ("Business") offering CBS software, hardware, products, and
services utilizing at Master Agent's option CBS formats, methods, standards,
operating procedures and the MARKS (identified in Section (_) of Exhibit (_)
which is annexed hereto and made a part hereof bv this reference) for a term of
three (3) years commencing on the date of execution hereof. Termination or
expiration of this Agreement constitutes termination or expiration of the
Dealership.
B. Territorial, Location and Customer Restrictions on License.
Master Agent hereby agrees that no territorial exclusivity has been implied or
offered by Licensor to Master Agent That, CBS reserves the right to approve
locations, and sites to be served.
<PAGE>
C. Restrictions on the Goods and Services Sold Under the Marks.
(i) Master Agent agrees to use the MARKS in connection with, and exclusively
for, the promotion and conduct of CBS business, as provided hereunder,
(ii) Master Agent agrees that for the purpose of protecting and enhancing the
value and good will of the Marks and of insuring that the public may rely upon
said Marks as identifying quality, type and standard of business, that the
license granted by this agreement is subject to the continued faithful adherence
by Master Agent to the standards, terms and conditions set forth in, or
established in accordance with this Agreement.
D. Master Agent's obligation to Protect and Defend the Licensed Marks.
(i) Master Agent recognizes and acknowledges that CBS is the sole and exclusive
owner of the Marks and hereby agrees not to register or attempt to register such
Marks in CBS's name or that of any other firm, persons, corporation or any
entity and that it will not use the Marks or any part thereof as any part of any
corporate name and does promise not to do anything to derogate that ownership or
call it into question. Master Agent does hereby obligate itself to call to CBS's
attention any infringing uses it learns of.
(ii) Immediately upon the expiration or termination of this Agreement or any
renewal hereof-, Master Agent agrees to cease and forever abstain from using the
aforesaid Marks and shall return within thirty (30) days to CBS or effectively
destroy all documents at Master Agent's sole expense, which shall include but
not be limited to instructions, display items, and the like bearing any of the
Marks .
E. License to use Trade Secrets.
Operating manuals, formulas, software, hardware, CBS vendors, customer lists and
computer programs, among other things, may all be deemed trade secrets. CBS has
a protectable interest in those secrets and the Master Agent hereby acknowledges
CBS's interest in preserving the Trade Secrets, and information disclosed in
writing as confidential, and CBS requires that the Master Agent keep them
confidential during the term of the Agreement
<PAGE>
and after its termination or expiration. Failure to do so is a material breach
of this Agreement and Master Agent Acknowledges that it will cause irreparable
harm to CBS.
F. Master Agent's Minimum Sales Provision.
In consideration of the opportunity to establish and maintain a CBS Dealership
and license as herein provided Master Agent represents and shall purchase a
minimum of ten (10) Talkie/Globe systems annually and/or a minimum of gross
sales in excess of one ($1.800,000) million eight hundred thousand dollars,
annually.
ARTICLE 3 - DEALER'S FINANCIAL OBLIGATIONS TO CBS
A. Should Master Agent utilize any maintenance and or service agreements of CBS,
or the reselling of services to Master Agent customers, Master Agent or customer
shall pay to CBS monthly service fees. Amount of said fees shall be under the
exclusive direction of CBS.
B. All terms of payment and credit approval shall be upon CBS invoice and
discretion. A service charge not to exceed 1 1/2% monthly or the highest legal
contract rate may be added to all accounts not paid within thirty (30) days of
date of invoice. Master Agent agrees to promptly review and advise CBS
concerning any corrections which may be required in invoices received. Invoices
outstanding for more than sixty (60) days without advice of correction shall be
deemed to represent the true and correct statement of Master Agent's account
Failure to pay within sixty (60) days of the date of invoice shall be deemed a
material breach of this Agreement and CBS, may at its sole discretion may
terminate this Agreement with notice without any recourse by Master Agent.
ARTICLE 4 - DEALER'S OBLIGATIONS REGARDING OPERATIONS
A. Master Agent shall commence operations within ninety (30) days from he date
of this Agreement from at least one CBS "Talkie/Globe" Long Distance Reseller
System (hereafter "Talkie/Globe System).
B. Master Agent shall purchase for its operations a minimum 10 systems annually
at the rate of one "Talkie/Globe" system per month the first six months of this
Agreement. Completing minimum sales requirement during second half of each year
of this Agreement. During each year thereafter, the annual sales requirements
must be satisfied
<PAGE>
December 1. of any calendar year. Master Agent recognizes that CBS shall has the
right to establish and adjust the sales requirement for Master Agent during the
life of this Agreement In no event shall Master Agent be restricted from
generating additional sales over the minimum requirement for Master Agent.
C. CBS at its option may require Master Agent to prominently display CBS's then
current signs, insignia, symbols, slogans and other forms and devices as
specified from time to time by CBS for uniform system and Marks recognition by
the public. Master Agent may not use any of CBSs Marks in any advertising or
promotion without the prior written approval of CBS.
D. All service and maintenance on CBS's equipment or equipment used in
connection with this Agreement shall by performed by CBS or their authorized
representatives under a CBS service Agreement.
ARTICLE 5 - INDEMNIFICATION REQUIREMENTS:
A. 1. To the fullest extent permitted by law, the Master Agent shall indemnify,
defend, protect, and hold harmless CBS, its agents and employees, their
respective partners, officers, directors, shareholders, representatives, agents,
employees , and anyone else acting for or on behalf of any or them (herein
individually called "Indemnitee" and collectively called "Indemnitee") from and
against all liabilities, damages, losses, claims, demands, lawsuits,
proceedings, arbitrations, and actions of any nature whatsoever ("Claims") which
arise out of or are connected with, or are claimed to arise out of or be
connected with:
A.2. The performance of Work or any act or omission of Master Agent, its
Contractors, Subcontractors, sub-subcontractors, suppliers, materialmen or
anyone directly or indirectly employed by any of them or anyone for whose acts
they may be liable, regardless of whether or not such claims or expense in
caused in part by an Indemnitee;
A.3. The use, misuse, erection, maintenance, operation or failure of any
machinery or equipment whether or not such machinery or equipment was furnished,
rented, bought, leased or loaned by the CBS or their officers, employees,
agents, servants or others, to Master Agent.
B. 1. Without limiting the generality of the foregoing, such defense and
indemnity includes all Claims on account of bodily and personal injury, death or
Property damage and loss to any Indemnitee, any of Indemnitee's
<PAGE>
limitation, attorneys and consultants' fees and expenses, costs related to
preparing for and/or defending any action and court costs) suffered, incurred of
any kind.
8. Master Agent shall pay any judgment finally awarded in any Claim which is
brought against any Indemnitee, regardless of whether the Indemnitee or Master
Agent directs the defense thereof, and shall pay any amounts payable in
settlement or compromise of any such claim.
9. In the event that Master Agent is requested but refuses to honor its
indemnity obligations hereunder, then Master Agent shall, in addition to its
other obligations, pay the cost of bringing any action to enforce Master Agent's
indemnity obligations, Including, without limitation, attorneys' and
consultants' fees, expenses, and court costs, to the party requesting indemnity
ARTICLE 6 - MASTER AGENT INSURANCE REOUIREMENTS:
A. Upon execution of this Agreement; Master Agent shall file with the CBS valid
duplicate original certificates of Insurance and/or, at the CBS's option, a
certified copy of the insurance policies and any and all endorsements or riders
thereto, evidencing compliance with all requirements contained in this contract,
all in form and substance satisfactory to CBS. Master Agent shall provide CBS
with proof of payment of premium in full for the current period or, if such
premiums are financed, evidence that premiums are current.
B. Acceptance and/or approval of the insurance herein does not and shall not be
construed to relieve Master Agent from any obligations, responsibilities or
liabilities under this Agreement
C. All insurance required by the contract shall be obtained at the sole cost and
expense of Master Agent, shall be maintained with insurance carriers properly
licensed to do business in all states required by the terms of this Contract and
acceptable in all respects, to CBS; shall be "primary" and non-contributing to
any insurance maintained by Owner, shall contain a Waiver of Subrogation in
favor of CBS; so that in no event shall the insurance carriers have any right of
recovery against CBS, their agents or employees; shall contain a separation of
insured provision (severability of interest clause); shall provide written
notice be given to CBS, and all additional insured and certificate holders at
least thirty (30) days prior to the cancellation, non-renewal or modification of
any such policies, which notice shall be evidenced by return receipt of United
States certified mail; shall name CBS,
<PAGE>
and any subsidiary, parent or affiliates of the CBS and their partners,
directors, officers, agents, and employees or other persons or entities with an
insurable interest designated by the CBS as additional insured thereunder.
D. Master Agent shall cause all insurance to be in full force and effect as of
the date of this Agreement and to remain in full force and affect throughout the
term of this Agreement and as further required by this Contract. Master Agent
shall not take any action. or omit to take any action that would suspend or
invalidate any of the required coverage during the time period such coverage are
required to be in effect.
E. Not less than thirty (30) days prior to the expiration date or renewal date,
Master Agent shall supply Master Agent with updated replacement Certificates of
Insurance, amendatory riders, and endorsements, and/or certified copies of
insurance policies, together with evidence of payment of the premium, that
clearly evidence the continuation of all of the terns and conditions of the
coverage, limits of protection, and scope of coverage as was provided by the
expiring Certificates of Insurance, certified copies of insurance policies and
amendatory riders or endorsements as originally supplied.
F. If Master Agent fails to purchase and maintain or fails to require to be
purchased and maintained, the liability insurance specified in this Contract,
CBS may (but shall not be obligated to) purchase such insurance on the Master
Agent's behalf and shall be entitled to be repaid by Master Agent for any
premiums paid therefor.
G. Master Agent shall select reputable and financially sound insurers to
underwrite the required Coverage acceptable to Owner. In all instances, each
insurer selected must be rated at least "A-" (Excellent) Class "VH" in the most
recently published Best's insurance Report. If an insurer's rating falls below
"A-" (Excellent) Class "VII" during the term of the policy, the insurance must
be replaced no later than the renewal date of the policy with an insurer
acceptable to CBS and having an "A-" (Excellent) Class "VII" rating in the most
recently published Best's Insurance Report.
IL No act or omission of any insurance agent, broker or insurance company
representative shall relieve Master Agent of any of its obligations under this
Contract. .1
1. Master Agent, throughout the term of this Contract or as otherwise required
by this Contract, shall obtain and maintain in full force and effect the
following casualty/liability insurance with limits not less than specified
herein and as required by the terms or this Contract or as required by law,
whichever is greater
I
<PAGE>
1. Commercial General Liability Insurance or its coverage equivalent is to be
provided under the Insurance Service Office's (ISO) most current form, with a
combined single limit for bodily injury and property damage of not less than
$ . which insurance shall include a comparable limit with respect to Personal
Injury and Advertising injury, as well as (any other). (This limit may be
provided through a combination of primary and umbrella/excess liability
policies.) Such insurance shall include the following coverage:
A. Premises Operations coverage, including Independent contractors, with limits
of liability applying on a per location basis.
B. Product Liability and Completed operations coverage, with the provision that
coverage shall extend for a period of at least twelve (12) months from the date
of final completion and acceptance by the Owner of all of Contractor's Work
C. Personal injury and Advertising Liability coverage to Include Injury
sustained by any person as a result of an offense directly or indirectly related
to employment of such person by the insured, or by any other person and
liability assumed under contracts.
D. Extended Bodily injury coverage with respect to bodily injury resulting from
the use of reasonable force to protect persons or property.
E. Premises and Operations Medical Payments coverage.
F. Broad Form Property Damage Liability coverage, including coverage for
completed operations.
G. Explosion, Collapse, and Underground Property Damage Coverage providing
protection for Property damage resulting from these hazards.
H. Worker's Compensation, Occupational Diseases benefits, Voluntary
Compensation, and Disability Benefits, U. S. Longshoremen's and Harbor Worker's
compensation, Admiralty/Jones Act; Defense Base Act, and any other federal
and/or state coverage, as required, for not less than the statutory limits, and
if applicable, an "Other States Endorsements"; Employers' Liability Insurance or
stop-Gap Employers, Liability insurance with limits of not less than by accident
$1,000,000 each accident by disease $1,000,000 policy limit by disease $
1,000,000 each employee; (These limits may be provided through a combination of
primary and umbrella excess liability policies.). 0
I. The following shall be named an additional insured in all insurance policies
required under this Contract:
J. The following shall be identified as certificate holders in all insurance
policies required under this Contract:
<PAGE>
ARTICLE 7 - NON COMPETE
During the term of this Agreement and for a period of two (2) years after the
expiration or termination of this Agreement or any renewal hereof, neither
MasterAgent nor Master Agent's principals or associates, whether individually or
through a partnership or corporation, will engage, either directly or
indirectly, in the operation of any telecommunications, telephone long distance
businesses or any of the business activates of CBS in the United States and
Canada.
ARTICLE 8 - DEFAULT
No failure to perform in accordance with any of the terms or conditions of this
or any collateral agreement or other fault or defect shall be deemed to exist or
occur unless such failure cannot be cured or if curable shall continue for ten
no more than ten (10) days following mailing or wiring to the party to be put
into default of written notification of such failure, except, however, that if
the failure to perform is the non-payment, in excess of thirty (30) days, of
moneys due and in such failure shall continue for three (3) days or more
following mailing or wiring to the party to be put into default of written
notification of such failure. In addition. in the event of non-payment under
this Agreement or any collateral agreement as above provided, CBS may require
Master Agent to furnish complete up-to-date financial information.
ARTICLE 9 - Term
This Agreement shall be in effect from the date of acceptance and execution by
CBS and continue for three (3) years unless terminated sooner as provided
herein, and may be renewed at the option of the Master Agent under CBS's then
current standard terms for new dealers, for additional successive periods of
three (3) years, for a maximum of two (2) such periods (total of 6 years)
provided that Master Agent has complied with the provisions contained herein.
Master Agent must notify CBS of its election to exercise such option to renew in
writing ninety (90) days prior to the expiration of his Agreement of any renewal
hereof. I
<PAGE>
ARTICLE 10 - TERMINATION
A. TERMINATION BY MASTER AGENT.
Master Agent, being in good standing, may terminate this Agreement at any time
by giving ninety (90) days written notice to CBS, except that such termination
shall not relieve MASTER AGENT of any obligation to CBS that shall have matured
under or survived this Agreement or under any collateral written agreement of
the parties.
B. TERMINATION BY CBS
CBS may terminate this Agreement and revoke all licenses upon the occurrence of
the following:
a) If Master Agent is in default or fails to fulfill any provision of this
Agreement;
b) If Master Agent discontinues the active conduct of its business;
C) Upon the transfer or assignment of any part of Master Agent business assets
which results in the passage of control of the business, unless consented to in
writing by CBS;
d) Upon the insolvency, the making of an assignment for benefit of creditors,
appointment for a receiver or trustee of any part of the assets of Master
Agent's business, the service of a warrant of attachment upon any of the assets
of the business or upon service of an execution.
ARTICLE 11 - RIGHTS OF CBS IN EVENT OF TERMINATION
Upon termination of this Agreement, CBS shall be entitled to recover immediately
upon termination from Master Agent all moneys due under this Agreement, together
with interest at the highest level contract rate and all costs and expenses,
including reasonable attorney's fees and disbursements, incurred or accrued by
CBS in enforcing its rights under this Agreement Master Agent shall deliver and
CBS may assume possession of any service guaranty by CBS. Master Agent also
entitles CBS the option to exercise only upon termination, for the assignment
for collection of Master Agent accounts receivable. Master Agent also assigns at
CBS's option all telephone lines, 800 line services and vanity numbers,
telephone listings, International and Domestic Private Lines, as described
herein shall take effect upon termination. CBS shall also have the exclusive
option and right to assume any and all leases for equipment Master Agent shall
return to CBS, or effectively destroy, all literature, signs, advertising
material, promotional matter and other materials identifying the form Master
Agent with CBS and shall immediately cease to refer to or identify itself with
CBS or use the Marks or any simulation thereof. Master Agent shall thereafter
take no action detrimental to CBS or the Business of CBS. Master Agent
irrevocably authorizes, appoints and empowers CBS as Master Agent's lawful
attorney in fact, to act for Master Agent, and in its name, place and stead, to
do all acts and things herein provided for upon termination; to sell or relet
the same; to execute all contracts, instruments and documents of transfer of
ownership, or otherwise; and to pay the costs and expense of doing such acts and
things. It is agreed that after expiration or termination, any use of the Marks
by Master Agent win result in irreparable injury to CBS and Master Agent hereby
consents to the entry of an order enjoining Master Agent from using CBS Marks in
any way.
ARTICLE 12 - COMPLIANCE WITH LAWS
Master Agent shall be solely responsible for compliance with all laws, statutes,
ordinances, orders or codes of any public or governmental authority pertaining
to the use of CBS products, services and particularly the reselling of domestic
and long distance, domestic and international private line telephone voice
services and its business, and for payment of all taxes, permits, license and
registration fees and other charges or assessments arising out of the
establishment and operation of Master Agent's business.
ARTICLE 13 - RELATIONSHIP BETWEEN PARTIES
<PAGE>
CBS and Master Agent are not and shall not be considered as joint venturers,
partners, agents, servants, employees or fiduciaries of each other or as,
franchisor or franchisee, and neither shall have the power to bind or obligate
the other except as set forth in this Agreement. There shall be no liability on
the part of CBS to any person for any debts incurred by Master Agent unless CBS
agrees in writing to pay such debts. Master Agent acknowledges and represents
that it is completely independent of CBS.
ARTICLE 14 - WAIVER
The failure of either party to enforce at any time any of the provisions of this
Agreement or to exercise any option or remedy herein provided shall in no way be
construed to be a waiver of such provisions of in any way to affect the validity
of this Agreement The exercise by either party of any of their rights hereunder
or of any options or remedies under the terms of covenants herein shall not
prejudice them from thereafter exercising the same or any other right it may
have under this Agreement, irrespective of any previous action or proceeding
taken by the parties hereunder. All remedies contained herein are cumulative and
severable.
ARTICLE 15 - TRANSFER, ASSIGNMENT AND SUBLICENSE
CBS's rights under this Agreement shall inure to the benefit of its successors
and assigns. Such rights may be assigned provided that the assignee shall agree
in writing to assume all of CBS's obligations hereunder and notice thereof is
served upon Master Agent. Such assignment shall discharge CBS from any further
obligation hereunder. The license herein granted is personal to Master Agent and
cannot be transferred, assigned or sublicense without the prior written consent
of CBS, which consent shall not be unreasonably withheld. In the event CBS shall
consent in writing to a transfer, assignment or sublicense, the transferee,
assignee, or sublicenses shall be bound by each and all covenants and conditions
contained herein and shall have no right to the further transfer of this license
except with the prior written consent of CBS.
ARTICLE 16 - SEPARABILITY
In the event that any provision herein is in conflict with the law of any state
of jurisdiction such provision shall be deemed not to be a part of this
Agreement in that jurisdiction.
ARTICLE 17 - HEADINGS
Headings in this Agreement are inserted solely for the purpose of convenience of
reference and are in no manner to be construed as part of the Agreement
ARTICLE 18 - SIGNATORY LIABILITY
All signatories to this Agreement, whether individually, a partner -on behalf of
the partnership, or corporate officer on behalf of the corporation, are to be
deemed parties hereto and hereby agree to be jointly and severally bound by the
terms and conditions contained herein and agree that they shall act as
guarantors for any unpaid balance on Master Agent's account with CBS. Such
signatories hereby expressly waive and dispense with all rights and defenses as
guarantors to include, but not restricted to notice of acceptance of this
Agreement, notices of non-payment or non-performance, notices of amount of
indebtedness outstanding at any time, protests, demands and prosecution of
collection, foreclosure and possessory remedies.
<PAGE>
ARTICLE 19 - DEALER'S WARRANTIES ON EXECUTION OF AGREEMENT
Master Agent hereby acknowledges by execution of this Agreement that Master
Agent has read and understands each and every term and condition of this
Agreement and the documents referred to below and is not relying on any
representations, promises or agreements not expressed herein and that this
Agreement supersedes and cancels any previous understanding or agreement between
the parties relating to the subject covered hereby.
Specifically, Dealer warrants:
a) It understands this Agreement contemplates the operation of a business by
Master Agent and the Master Agents success will depend upon Master Agent's
active participation in such business;
b) It has investigated the potential of the effect of CBS's non-exclusive
territory. Master Agent agrees that the non-exclusivity of TERRITORY is a
reasonable and shall not effect the business of Master Agent.
c) It has examined and is fully conversant with CBS's PROCEDURES, PRODUCTS,
SERVICES AND SALES MANUAL.
ARTICLE 20 - NO ORAL REPRESENTATIONS OR SIDE AGREEMENTS
This Agreement, when accepted in by an authorized officer of CBS, together with
any collateral written agreement, signed by an authorized officer of CBS,
constitutes the entire Agreement and understanding between the parties and NO
OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE, SHALL BE OF ANY
FORCE OF EFFECT
This Agreement when accepted in by an authorized officer of Master Agent,
together with any collateral written agreement signed by an authorized officer
of CBS, constitutes the entire Agreement and understanding between the parties
and NO OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE, SHALL BE
OF ANY FORCE OF EFFECT.
ARTICLE 21 - ENFORCEMENT
At CBS's option, any dispute or disagreement between the parties hereto arising
out of or relating to this agreement shall be submitted the American Arbitration
Association in New York City under the rules then in effect, and judgment upon
the award may be entered in any court having jurisdiction.
<PAGE>
ARTICLE 22 - NOTICES AND PAYMENTS.
Ali notices and statements to be given and all payments to be made hereunder
shall be given or made at the respective addresses of the parties as set forth
above unless notification of a change of address is given in writing, Any notice
shall be sent by registered or certified mail and shall be deemed to have been
given at the time mailed.
IN WITNESS WHEREOF, intending to be legally bound, the parties have signed this
Dealer Master Agent Agreement and License on February 1996.
Witness: Computer Business Sciences, Inc.
By:
Witness: Korean Telecom
/s/ Andrew Kim
By: Andrew Kim
/s/
STATE OF NEW YORK
:ss.: COUNTY OF NEW YORK
On this. 29th day of February 1996, before me personally came , known to be to
be the person described herein and who executed the foregoing instrument on
behalf of the Contractor, who, being by me duly sworn, did depose and say: the
he resides at that he is the of Korean Telecom, the Corporation that executed
the foregoing contract and that he is duly authorized by said Corporation to
sign his name on behalf of
Notary Public
Computer Business Sciences, Inc.
Dealer-Master Agent Agreement and License
ARTICLE 1 - PARTIES
This Agreement is made by and between Computer Business Sciences, Inc. , a New
York corporation, having its principal office and place of business at 144-15
Union Turnpike, Flushing, New York, 11367 and Philcom Telecommunications, having
its principal office and place of business at 138-27 247th St., Rosedale, NY
11422.
RECITALS
.IT IS MUTUALLY CONTEMPLATED AND AGREED AS FOLLOWS:
WHEREAS, Master Agent desires to purchase and resell software, hardware,
products and services of CBS. To operate as a distributor/agent representing the
business of CBS, and using its MARKS and good will; and
WHEREAS, CBS is further desirous of distributing its products and services and
aiding the Master Agent on a non exclusive basis, with the use of CBS names, and
trademarks: "Talkie","Talkie-Software", "Pay-As-You Use", "Call-Back USA",
"Talkie-Globe", "Talkie-Fax", "Talkie-Dial", "Talkie-Query", "Talkie-Trans",
"Talkie-Ad", "Talkie-Form", "Talkie-Mail", "Talkie-Audio", "Talkie-Gen", "BCS",
and Info-Systems"; and
WHEREAS, CBS and Master Agent are agreeable thereto upon the terms and
conditions more particularly herein set forth; and
WHEREAS, Master Agent acknowledges that CBS owns certain software and hardware
systems for the operation of Long distant Reseller under the name
"Talkie/Globe". CBS uses and owns the service mark "Talkie" and related logos,
and possesses all rights under various registered copyrights, trademarks,
service marks, trade names, and other marks which CBS developed or own, and may
develop or own in the future ; and styles including distinctive
A
logos and also certain copyrighted material embodying the use of such marks
including but not limited to enumerate marks and has promoted the use of and
acceptance of such Marks through its own operations and
144-15 Union Turnpike - Flushing, NY 11367
Tel. (718) 380-7200 - Fax (718) 380-7064. E-mail InfoSys [email protected]
<PAGE>
operations of licensees, and is developing an international marketing and sales
system identified with its Marks which has public acceptance and good will and
identifying to the public the existence of CBS company products, services and
additionally newly developed marks and registered are reserved for CBS (all
hereinafter generally referred to as "Marks"); and
WHEREAS, CBS possesses rights under various registered copyrights, trademarks,
service marks, trade names and styles including distinctive logos and also
certain copyrighted material embodying the use of such marks including but not
limited to enumerate marks and (all hereinafter generally referred to and to be
included as "Marks") CBS has promoted the use of and acceptance of such Marks
through its own operations and the operations of licensees and is developing an
international sales system identified with its Marks which has public acceptance
and good will and identifying to the public the, existence of Talkie's voice
processing software modules and programs, CBS service bureau, and BCS software
accounting system; and
WHEREAS, CBS expressly disclaims the making of, and Master Agent acknowledges
that it has not received or relied upon, any warranty or guaranty, express or
implied, as to the revenues, profits or success of the this dealership venture
contemplated by this Agreement. Master Agent acknowledges that it has read this
Agreement and conducted its own independent research, agrees that this is not a
"franchised offering", and that it has no knowledge of any representations by
CBS, or its officers, shareholders, employees or agents that are contrary to the
statements made in this Agreement or the terms herein; and
WHEREAS, Licensor has developed and perfected a plan and/or system utilizing CBS
software and hardware ("System") for providing licensed FCC telephone companies
, and resellers of long distance services, certain facilities, hardware and
software, and related services; other products and services of distinctive
nature, and of other distinguishing characteristics, placed in operation by CBS
provided under the name "CBS", "Computer Business Sciences, "Info Systems",
"Talkie", "Talkie Globe". The distinguishing characteristics of said System, and
of the Business services provided pursuant thereto, include the following:
(1) The words *Talkie","Talkie-Software", "Pay-As-You Use", "Call-Back USA",
"Talkie-Globe", "Talkie-Fax", "Talkie-Dial", "Talkie-Query", "Talkie-Trans",
"Talkie-Ad", "Talkie-Form", "Talkie-Mail" "Talkie-Audio", "Talkie-Gen", "BCS*,
Info-Systems" or other combinations of words, either alone, or in combination or
association with any color scheme or pattern, office design, insignia, slogans,
signs, emblems trade names, trade marks, service marks, or with the CBS service,
now or hereafter provided or used by CBS as part of
<PAGE>
the said sales system, or in association with the idea of an Long Distance
Reseller of telephone service, and cellular service of software, hardware, all,
providing standardized, high quality, and distinctive service;
(2) A distinctive and readily recognizable design and service;
(3) The color scheme, pattern and design, and the color combinations of the
exteriors and interiors of said products and marketing tools;
(4) Appearance of certain of said marketing tools, structures, and the
distinctive trademarks, service marks, design, slogans, name and matter now or
hereafter displayed thereon, or used as part thereof;
(5) The trade marks, trade names, service marks, insignia, emblems, software
documentation, software, hardware, signs, designs, color or patterns, and other
distinctive features, as now or hereafter in use as part of the sales System,
both as identifying the System of CBS, and as identifying the type, character,
and standard of quality of service which the public may expect to receive from
businesses and services of Master Agent
NOW, THEREFORE, in consideration of the foregoing, CBS and Master Agent, hereby
mutually agree as follows*
ARTICLE 2 - GRANT OF CBS AND RELATED LICENSES
A. Names and Marks to be Licensed
Subject to the provisions of this agreement, CBS hereby grants to Master Agent a
Dealership ( "Dealership") , without any territory or exclusivity, to operate a
Dealership business ("Business") offering CBS software, hardware, products, and
services utilizing at Master Agent's option CBS formats, methods, standards,
operating procedures and the MARKS (identified in Section (_) of Exhibit (_)
which is annexed hereto and made a part hereof bv this reference) for a term of
three (3) years commencing on the date of execution hereof. Termination or
expiration of this Agreement constitutes termination or expiration of the
Dealership.
B. Territorial, Location and Customer Restrictions on License.
Master Agent hereby agrees that no territorial exclusivity has been implied or
offered by Licensor to Master Agent That, CBS reserves the right to approve
locations, and sites to be served.
<PAGE>
C. Restrictions on the Goods and Services Sold Under the Marks.
(i) Master Agent agrees to use the MARKS in connection with, and exclusively
for, the promotion and conduct of CBS business, as provided hereunder,
(ii) Master Agent agrees that for the purpose of protecting and enhancing the
value and good will of the Marks and of insuring that the public may rely upon
said Marks as identifying quality, type and standard of business, that the
license granted by this agreement is subject to the continued faithful adherence
by Master Agent to the standards, terms and conditions set forth in, or
established in accordance with this Agreement.
D. Master Agent's obligation to Protect and Defend the Licensed Marks.
(i) Master Agent recognizes and acknowledges that CBS is the sole and exclusive
owner of the Marks and hereby agrees not to register or attempt to register such
Marks in CBS's name or that of any other firm, persons, corporation or any
entity and that it will not use the Marks or any part thereof as any part of any
corporate name and does promise not to do anything to derogate that ownership or
call it into question. Master Agent does hereby obligate itself to call to CBS's
attention any infringing uses it learns of.
(ii) Immediately upon the expiration or termination of this Agreement or any
renewal hereof-, Master Agent agrees to cease and forever abstain from using the
aforesaid Marks and shall return within thirty (30) days to CBS or effectively
destroy all documents at Master Agent's sole expense, which shall include but
not be limited to instructions, display items, and the like bearing any of the
Marks .
E. License to use Trade Secrets.
Operating manuals, formulas, software, hardware, CBS vendors, customer lists and
computer programs, among other things, may all be deemed trade secrets. CBS has
a protectable interest in those secrets and the Master Agent hereby acknowledges
CBS's interest in preserving the Trade Secrets, and information disclosed in
writing as confidential, and CBS requires that the Master Agent keep them
confidential during the term of the Agreement
<PAGE>
and after its termination or expiration. Failure to do so is a material breach
of this Agreement and Master Agent Acknowledges that it will cause irreparable
harm to CBS.
F. Master Agent's Minimum Sales Provision.
In consideration of the opportunity to establish and maintain a CBS Dealership
and license as herein provided Master Agent represents and shall purchase a
minimum of ten (10) Talkie/Globe systems annually and/or a minimum of gross
sales in excess of one ($1.800,000) million eight hundred thousand dollars,
annually.
ARTICLE 3 - DEALER'S FINANCIAL OBLIGATIONS TO CBS
A. Should Master Agent utilize any maintenance and or service agreements of CBS,
or the reselling of services to Master Agent customers, Master Agent or customer
shall pay to CBS monthly service fees. Amount of said fees shall be under the
exclusive direction of CBS.
B. All terms of payment and credit approval shall be upon CBS invoice and
discretion. A service charge not to exceed 1 1/2% monthly or the highest legal
contract rate may be added to all accounts not paid within thirty (30) days of
date of invoice. Master Agent agrees to promptly review and advise CBS
concerning any corrections which may be required in invoices received. Invoices
outstanding for more than sixty (60) days without advice of correction shall be
deemed to represent the true and correct statement of Master Agent's account
Failure to pay within sixty (60) days of the date of invoice shall be deemed a
material breach of this Agreement and CBS, may at its sole discretion may
terminate this Agreement with notice without any recourse by Master Agent.
ARTICLE 4 - DEALER'S OBLIGATIONS REGARDING OPERATIONS
A. Master Agent shall commence operations within ninety (30) days from he date
of this Agreement from at least one CBS "Talkie/Globe" Long Distance Reseller
System (hereafter "Talkie/Globe System).
B. Master Agent shall purchase for its operations a minimum 10 systems annually
at the rate of one "Talkie/Globe" system per month the first six months of this
Agreement. Completing minimum sales requirement during second half of each year
of this Agreement. During each year thereafter, the annual sales requirements
must be satisfied
<PAGE>
December 1. of any calendar year. Master Agent recognizes that CBS shall has the
right to establish and adjust the sales requirement for Master Agent during the
life of this Agreement In no event shall Master Agent be restricted from
generating additional sales over the minimum requirement for Master Agent.
C. CBS at its option may require Master Agent to prominently display CBS's then
current signs, insignia, symbols, slogans and other forms and devices as
specified from time to time by CBS for uniform system and Marks recognition by
the public. Master Agent may not use any of CBSs Marks in any advertising or
promotion without the prior written approval of CBS.
D. All service and maintenance on CBS's equipment or equipment used in
connection with this Agreement shall by performed by CBS or their authorized
representatives under a CBS service Agreement.
ARTICLE 5 - INDEMNIFICATION REQUIREMENTS:
A. 1. To the fullest extent permitted by law, the Master Agent shall indemnify,
defend, protect, and hold harmless CBS, its agents and employees, their
respective partners, officers, directors, shareholders, representatives, agents,
employees , and anyone else acting for or on behalf of any or them (herein
individually called "Indemnitee" and collectively called "Indemnitee") from and
against all liabilities, damages, losses, claims, demands, lawsuits,
proceedings, arbitrations, and actions of any nature whatsoever ("Claims") which
arise out of or are connected with, or are claimed to arise out of or be
connected with:
A.2. The performance of Work or any act or omission of Master Agent, its
Contractors, Subcontractors, sub-subcontractors, suppliers, materialmen or
anyone directly or indirectly employed by any of them or anyone for whose acts
they may be liable, regardless of whether or not such claims or expense in
caused in part by an Indemnitee;
A.3. The use, misuse, erection, maintenance, operation or failure of any
machinery or equipment whether or not such machinery or equipment was furnished,
rented, bought, leased or loaned by the CBS or their officers, employees,
agents, servants or others, to Master Agent.
B. 1. Without limiting the generality of the foregoing, such defense and
indemnity includes all Claims on account of bodily and personal injury, death or
Property damage and loss to any Indemnitee, any of Indemnitee's
<PAGE>
limitation, attorneys and consultants' fees and expenses, costs related to
preparing for and/or defending any action and court costs) suffered, incurred of
any kind.
8. Master Agent shall pay any judgment finally awarded in any Claim which is
brought against any Indemnitee, regardless of whether the Indemnitee or Master
Agent directs the defense thereof, and shall pay any amounts payable in
settlement or compromise of any such claim.
9. In the event that Master Agent is requested but refuses to honor its
indemnity obligations hereunder, then Master Agent shall, in addition to its
other obligations, pay the cost of bringing any action to enforce Master Agent's
indemnity obligations, Including, without limitation, attorneys' and
consultants' fees, expenses, and court costs, to the party requesting indemnity
ARTICLE 6 - MASTER AGENT INSURANCE REOUIREMENTS:
A. Upon execution of this Agreement; Master Agent shall file with the CBS valid
duplicate original certificates of Insurance and/or, at the CBS's option, a
certified copy of the insurance policies and any and all endorsements or riders
thereto, evidencing compliance with all requirements contained in this contract,
all in form and substance satisfactory to CBS. Master Agent shall provide CBS
with proof of payment of premium in full for the current period or, if such
premiums are financed, evidence that premiums are current.
B. Acceptance and/or approval of the insurance herein does not and shall not be
construed to relieve Master Agent from any obligations, responsibilities or
liabilities under this Agreement
C. All insurance required by the contract shall be obtained at the sole cost and
expense of Master Agent, shall be maintained with insurance carriers properly
licensed to do business in all states required by the terms of this Contract and
acceptable in all respects, to CBS; shall be "primary" and non-contributing to
any insurance maintained by Owner, shall contain a Waiver of Subrogation in
favor of CBS; so that in no event shall the insurance carriers have any right of
recovery against CBS, their agents or employees; shall contain a separation of
insured provision (severability of interest clause); shall provide written
notice be given to CBS, and all additional insured and certificate holders at
least thirty (30) days prior to the cancellation, non-renewal or modification of
any such policies, which notice shall be evidenced by return receipt of United
States certified mail; shall name CBS,
<PAGE>
and any subsidiary, parent or affiliates of the CBS and their partners,
directors, officers, agents, and employees or other persons or entities with an
insurable interest designated by the CBS as additional insured thereunder.
D. Master Agent shall cause all insurance to be in full force and effect as of
the date of this Agreement and to remain in full force and affect throughout the
term of this Agreement and as further required by this Contract. Master Agent
shall not take any action. or omit to take any action that would suspend or
invalidate any of the required coverage during the time period such coverage are
required to be in effect.
E. Not less than thirty (30) days prior to the expiration date or renewal date,
Master Agent shall supply Master Agent with updated replacement Certificates of
Insurance, amendatory riders, and endorsements, and/or certified copies of
insurance policies, together with evidence of payment of the premium, that
clearly evidence the continuation of all of the terns and conditions of the
coverage, limits of protection, and scope of coverage as was provided by the
expiring Certificates of Insurance, certified copies of insurance policies and
amendatory riders or endorsements as originally supplied.
F. If Master Agent fails to purchase and maintain or fails to require to be
purchased and maintained, the liability insurance specified in this Contract,
CBS may (but shall not be obligated to) purchase such insurance on the Master
Agent's behalf and shall be entitled to be repaid by Master Agent for any
premiums paid therefor.
G. Master Agent shall select reputable and financially sound insurers to
underwrite the required Coverage acceptable to Owner. In all instances, each
insurer selected must be rated at least "A-" (Excellent) Class "VH" in the most
recently published Best's insurance Report. If an insurer's rating falls below
"A-" (Excellent) Class "VII" during the term of the policy, the insurance must
be replaced no later than the renewal date of the policy with an insurer
acceptable to CBS and having an "A-" (Excellent) Class "VII" rating in the most
recently published Best's Insurance Report.
H. No act or omission of any insurance agent, broker or insurance company
representative shall relieve Master Agent of any of its obligations under this
Contract. .1
1. Master Agent, throughout the term of this Contract or as otherwise required
by this Contract, shall obtain and maintain in full force and effect the
following casualty/liability insurance with limits not less than specified
herein and as required by the terms or this Contract or as required by law,
whichever is greater
<PAGE>
1. Commercial General Liability Insurance or its coverage equivalent is to be
provided under the Insurance Service Office's (ISO) most current form, with a
combined single limit for bodily injury and property damage of not less than
$ . which insurance shall include a comparable limit with respect to Personal
Injury and Advertising injury, as well as (any other). (This limit may be
provided through a combination of primary and umbrella/excess liability
policies.) Such insurance shall include the following coverage:
A. Premises Operations coverage, including Independent contractors, with limits
of liability applying on a per location basis.
B. Product Liability and Completed operations coverage, with the provision that
coverage shall extend for a period of at least twelve (12) months from the date
of final completion and acceptance by the Owner of all of Contractor's Work
C. Personal injury and Advertising Liability coverage to Include Injury
sustained by any person as a result of an offense directly or indirectly related
to employment of such person by the insured, or by any other person and
liability assumed under contracts.
D. Extended Bodily injury coverage with respect to bodily injury resulting from
the use of reasonable force to protect persons or property.
E. Premises and Operations Medical Payments coverage.
F. Broad Form Property Damage Liability coverage, including coverage for
completed operations.
G. Explosion, Collapse, and Underground Property Damage Coverage providing
protection for Property damage resulting from these hazards.
H. Worker's Compensation, Occupational Diseases benefits, Voluntary
Compensation, and Disability Benefits, U. S. Longshoremen's and Harbor Worker's
compensation, Admiralty/Jones Act; Defense Base Act, and any other federal
and/or state coverage, as required, for not less than the statutory limits, and
if applicable, an "Other States Endorsements"; Employers' Liability Insurance or
stop-Gap Employers, Liability insurance with limits of not less than by accident
$1,000,000 each accident by disease $1,000,000 policy limit by disease $
1,000,000 each employee; (These limits may be provided through a combination of
primary and umbrella excess liability policies.). 0
I. The following shall be named an additional insured in all insurance policies
required under this Contract:
J. The following shall be identified as certificate holders in all insurance
policies required under this Contract:
<PAGE>
ARTICLE 7 - NON COMPETE
During the term of this Agreement and for a period of two (2) years after the
expiration or termination of this Agreement or any renewal hereof, neither
MasterAgent nor Master Agent's principals or associates, whether individually or
through a partnership or corporation, will engage, either directly or
indirectly, in the operation of any telecommunications, telephone long distance
businesses or any of the business activates of CBS in the United States and
Canada.
ARTICLE 8 - DEFAULT
No failure to perform in accordance with any of the terms or conditions of this
or any collateral agreement or other fault or defect shall be deemed to exist or
occur unless such failure cannot be cured or if curable shall continue for ten
no more than ten (10) days following mailing or wiring to the party to be put
into default of written notification of such failure, except, however, that if
the failure to perform is the non-payment, in excess of thirty (30) days, of
moneys due and in such failure shall continue for three (3) days or more
following mailing or wiring to the party to be put into default of written
notification of such failure. In addition. in the event of non-payment under
this Agreement or any collateral agreement as above provided, CBS may require
Master Agent to furnish complete up-to-date financial information.
ARTICLE 9 - Term
This Agreement shall be in effect from the date of acceptance and execution by
CBS and continue for three (3) years unless terminated sooner as provided
herein, and may be renewed at the option of the Master Agent under CBS's then
current standard terms for new dealers, for additional successive periods of
three (3) years, for a maximum of two (2) such periods (total of 6 years)
provided that Master Agent has complied with the provisions contained herein.
Master Agent must notify CBS of its election to exercise such option to renew in
writing ninety (90) days prior to the expiration of his Agreement of any renewal
hereof. I
<PAGE>
ARTICLE 10 - TERMINATION
A. TERMINATION BY MASTER AGENT.
Master Agent, being in good standing, may terminate this Agreement at any time
by giving ninety (90) days written notice to CBS, except that such termination
shall not relieve MASTER AGENT of any obligation to CBS that shall have matured
under or survived this Agreement or under any collateral written agreement of
the parties.
B. TERMINATION BY CBS
CBS may terminate this Agreement and revoke all licenses upon the occurrence of
the following:
a) If Master Agent is in default or fails to fulfill any provision of this
Agreement;
b) If Master Agent discontinues the active conduct of its business;
C) Upon the transfer or assignment of any part of Master Agent business assets
which results in the passage of control of the business, unless consented to in
writing by CBS;
d) Upon the insolvency, the making of an assignment for benefit of creditors,
appointment for a receiver or trustee of any part of the assets of Master
Agent's business, the service of a warrant of attachment upon any of the assets
of the business or upon service of an execution.
ARTICLE 11 - RIGHTS OF CBS IN EVENT OF TERMINATION
Upon termination of this Agreement, CBS shall be entitled to recover immediately
upon termination from Master Agent all moneys due under this Agreement, together
with interest at the highest level contract rate and all costs and expenses,
including reasonable attorney's fees and disbursements, incurred or accrued by
CBS in enforcing its rights under this Agreement Master Agent shall deliver and
CBS may assume possession of any service guaranty by CBS. Master Agent also
entitles CBS the option to exercise only upon termination, for the assignment
for collection of Master Agent accounts receivable. Master Agent also assigns at
CBS's option all telephone lines, 800 line services and vanity numbers,
telephone listings, International and Domestic Private Lines, as described
herein shall take effect upon termination. CBS shall also have the exclusive
option and right to assume any and all leases for equipment Master Agent shall
return to CBS, or effectively destroy, all literature, signs, advertising
material, promotional matter and other materials identifying the form Master
Agent with CBS and shall immediately cease to refer to or identify itself with
CBS or use the Marks or any simulation thereof. Master Agent shall thereafter
take no action detrimental to CBS or the Business of CBS. Master Agent
irrevocably authorizes, appoints and empowers CBS as Master Agent's lawful
attorney in fact, to act for Master Agent, and in its name, place and stead to
do all acts and things herein provided for upon termination; to sell or relet
the same; to execute all contracts, instruments and documents of transfer of
ownership, or otherwise; and to pay the costs and expense of doing such acts and
things. It is agreed that after expiration or termination, any use of the Marks
by Master Agent win result in irreparable injury to CBS and Master Agent hereby
consents to the entry of an order enjoining Master Agent from using CBS Marks in
any way.
ARTICLE 12 - COMPLIANCE WITH LAWS
Master Agent shall be solely responsible for compliance with all laws, statutes,
ordinances, orders or codes of any public or governmental authority pertaining
to the use of CBS products, services and particularly the reselling of domestic
and long distance, domestic and international private line telephone voice
services and its business, and for payment of all taxes, permits, license and
registration fees and other charges or assessments arising out of the
establishment and operation of Master Agent's business.
ARTICLE 13 - RELATIONSHIP BETWEEN PARTIES
<PAGE>
CBS and Master Agent are not and shall not be considered as joint venturers,
partners, agents, servants, employees or fiduciaries of each other or as,
franchisor or franchisee, and neither shall have the power to bind or obligate
the other except as set forth in this Agreement. There shall be no liability on
the part of CBS to any person for any debts incurred by Master Agent unless CBS
agrees in writing to pay such debts. Master Agent acknowledges and represents
that it is completely independent of CBS.
ARTICLE 14 - WAIVER
The failure of either party to enforce at any time any of the provisions of this
Agreement or to exercise any option or remedy herein provided shall in no way be
construed to be a waiver of such provisions of in any way to affect the validity
of this Agreement The exercise by either party of any of their rights hereunder
or of any options or remedies under the terms of covenants herein shall not
prejudice them from thereafter exercising the same or any other right it may
have under this Agreement, irrespective of any previous action or proceeding
taken by the parties hereunder. All remedies contained herein are cumulative and
severable.
ARTICLE 15 - TRANSFER, ASSIGNMENT AND SUBLICENSE
CBS's rights under this Agreement shall inure to the benefit of its successors
and assigns. Such rights may be assigned provided that the assignee shall agree
in writing to assume all of CBS's obligations hereunder and notice thereof is
served upon Master Agent. Such assignment shall discharge CBS from any further
obligation hereunder. The license herein granted is personal to Master Agent and
cannot be transferred, assigned or sublicense without the prior written consent
of CBS, which consent shall not be unreasonably withheld. In the event CBS shall
consent in writing to a transfer, assignment or sublicense, the transferee,
assignee, or sublicenses shall be bound by each and all covenants and conditions
contained herein and shall have no right to the further transfer of this license
except with the prior written consent of CBS.
ARTICLE 16 - SEPARABILITY
In the event that any provision herein is in conflict with the law of any state
of jurisdiction, such provision shall be deemed not to be a part of this
Agreement in that jurisdiction.
ARTICLE 17 - HEADINGS
Headings in this Agreement are inserted solely for the purpose of convenience of
reference and are in no manner to be construed as part of the Agreement.
ARTICLE 18 - SIGNATORY LIABILITY
All signatories to this Agreement, whether individually, a partner -on behalf of
the partnership, or corporate officer on behalf of the corporation, are to be
deemed parties hereto and hereby agree to be jointly and severally bound by the
terms and conditions contained herein and agree that they shall act as
guarantors for any unpaid balance on Master Agent's account with CBS. Such
signatories hereby expressly waive and dispense with all rights and defenses as
guarantors to include, but not restricted to notice of acceptance of this
Agreement notices of non-payment or non-performance, notices of amount of
indebtedness outstanding at any time, protests, demands and prosecution of
collection, foreclosure and possessory remedies.
<PAGE>
ARTICLE 19 - DEALER'S WARRANTIES ON EXECUTION OF AGREEMENT
Master Agent hereby acknowledges by execution of this Agreement that Master
Agent has read and understands each and every term and condition of this
Agreement and the documents referred to below and is not relying on any
representations, promises or agreements not expressed herein and that this
Agreement supersedes and cancels any previous understanding or agreement between
the parties relating to the subject covered hereby.
Specifically, Dealer warrants:
a) It understands this Agreement contemplates the operation of a business by
Master Agent and the Master Agents success will depend upon Master Agent's
active participation in such business;
b) It has investigated the potential of the effect of CBS's non-exclusive
territory. Master Agent agrees that the non-exclusivity of TERRITORY is a
reasonable and shall not effect the business of Master Agent.
c) It has examined and is fully conversant with CBS's PROCEDURES, PRODUCTS,
SERVICES AND SALES MANUAL.
ARTICLE 20 - NO ORAL REPRESENTATIONS OR SIDE AGREEMENTS
This Agreement, when accepted in by an authorized officer of CBS, together
with any collateral written agreement, signed by an authorized officer of CBS,
constitutes the entire Agreement and understanding between the parties and NO
OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE, SHALL BE OF ANY
FORCE OF EFFECT
This Agreement when accepted in by an authorized officer of Master Agent,
together with any collateral written agreement signed by an authorized officer
of CBS, constitutes the entire Agreement and understanding between the parties
and NO OTHER REPRESENTATION, PROMISE OR AGREEMENT, ORAL OR OTHERWISE, SHALL BE
OF ANY FORCE OF EFFECT.
ARTICLE 21 - ENFORCEMENT
At CBS's option, any dispute or disagreement between the parties hereto arising
out of or relating to this agreement shall be submitted the American Arbitration
Association in New York City under the rules then in effect, and judgment upon
the award may be entered in any court having jurisdiction.
<PAGE>
ARTICLE 22 - NOTICES AND PAYMENTS.
Ali notices and statements to be given and all payments to be made hereunder
shall be given or made at the respective addresses of the parties as set forth
above unless notification of a change of address is given in writing, Any notice
shall be sent by registered or certified mail and shall be deemed to have been
given at the time mailed.
IN WITNESS WHEREOF, intending to be legally bound, the parties have signed this
Dealer Master Agent Agreement and License on February 1996.
Witness: Computer Business Sciences, Inc.
By:
Witness: Philcom Telecommunications
/s/ Genvaru Schiano
By: Genvaru Schiano
STATE OF NEW YORK
:ss.: COUNTY OF NEW YORK
On this. 29th day of February 1996, before me personally came , known to be to
be the person described herein and who executed the foregoing instrument on
behalf of the Contractor, who, being by me duly sworn, did depose and say: the
he resides at that he is the of Philcom Communications, the Corporation that
executed the foregoing contract and that he is duly authorized by said
Corporation to sign his name on behalf of
Notary Public
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT, made this 23rd day of August, 1996 by and
between MAJOR FLEET a LEASING CORP., a New York corporation having its principal
office located at 80-02 Kew Gardens Road, Suite 5000, Kew Gardens, New York
11415 (hereinafter "MF&LC")
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, MF&LC has been engaged in the business of supplying and leasing
motor vehicles, in connection with the previously affiliated businesses of
MANAGERS, known as the Major Automotive Group and based at 43-40 Northern
Boulevard, Long Island City, New York 11101;
WHEREAS, MF&LC has been acquired by Fidelity Holdings, Inc. (hereinafter
"FIDELITY"), a Nevada corporation with principal offices located at 80-02 Kew
Gardens Boulevard, Suite 5000, Kew Gardens, New York, 11415, which is a holding
company that owns, inter alia, a subsidiary named Computer Business Science,
Inc. which is engaged in telecommunications and requires the ability to finance
leases of its equipment, for which reason it is acquiring MF&LC;
WHEREAS, the Management of FIDELITY has no experience in the purchasing,
financing, leasing, or otherwise dealing in or with motor vehicles'. but desires
to maintain continuity of MF&LC's existing motor vehicle leasing business, while
utilizing MF&LC for the financing of the leases of its telecommunications
equipment, and FIDELITY therefore desires that MF&LC continue the managerial
services of MANAGERS, who have been the managers of MF&LC prior to the
acquisition of the corporation 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 . MF&LC, under the terms and conditions of this Management Agreement,
hereby appoints, hires, and engages MANAGERS to manage the motor vehicle
operations of MF&LC as heretofore conducted, including but not limited to the
purchase, financing, leasing and sale of motor vehicles. MANAGERS, under the
terms and conditions of this Management Agreement, hereby accept the appointment
and engagement to manage such operations.
<PAGE>
2. NATURE OF-ENGAGEMENT,
(a) This Management Agreement is exclusive with respect to the motor
vehicle operations of MF&LC and MANAGERS shall have the sole right to manage
such operations. For purposes of this Management Agreement, the motor vehicle
operations shall be treated as a separate division within MF&LC.
(b) As heretofore, MANAGERS may deal with and through other entities which
they may own or control or have an interest in, including but not limited to the
Major Automotive Group, and such dealings shall not constitute a conflict of
interest hereunder, FIDELITY recognizing that such other entities are a primary
source for MF&LC's purchases, leases and disposal of motor vehicles.
Furthermore, MANAGERS may use so-called "leased employees" from the Major
Automotive Group, provided that such persons are paid only from, or their
payroll costs are reimbursed only from, revenues generated by the motor vehicle
operations, as hereinafter provided in Paragraph 7.
(c) The parties are separate entities. Except as otherwise resulting from
their managerial relationship, or as specifically described herein, nothing in
this Management Agreement is intended to form a partnership, joint venture or
profit-sharing arrangement between the parties, nor to give any party an
interest in the assets, business, revenues or profits of another.
(d) MANAGERS are independent contractors and shall be responsible for
their conduct of the motor vehicle operations by either "leased employees",
separately compensated by the Major Automotive Group or otherwise with such
compensation being reimbursed only from revenues-generated by the motor vehicle
operations, or employees of MF&LC compensated by MF&LC only from revenues
generated by the motor vehicle operations.
(e) All payroll taxes and costs of fringe benefits for employees in the
motor vehicle operations if* paid by the Major Automotive Group or otherwise
shall be reimbursed only from revenues generated by the motor vehicle operations
or if compensated directly by MF&LC shall be paid only from revenues generated
by the motor vehicle operations.
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 and the stockholders of MF&LC and, unless sooner
terminated pursuant to Paragraph 10, below, shall end on December 31, 2001.
(b) 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), MF&LC 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. All costs for obtaining such licenses and/or authorizations,
renewing such licenses and/or
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<PAGE>
authorizations, and maintaining such licenses and/or authorizations (including
any fines, penalties, interest or other assessments imposed by any such agency
or regulatory authority) shall be paid only from revenues generated by the motor
vehicle operations.
5. DUTIES OF MANAGERS,
(a) MANAGERS shall continue the existing motor vehicle operations of
MF&LC, manage such continuing motor vehicle operations, and vigorously seek to
expand such operations to the full extent of available credit lines without
additional or extended personal guarantees consistent with competitive market
conditions, including, but not limited to:
(i) Hiring, firing, training, supervising, setting pay scales for
and paying, all required personnel;
(ii) establishing and enforcing personnel, safety and environmental
policies;
(iii) determining and establishing sources for new and used
vehicles, outlets for vehicles coming out of lease or being repossessed,
sources for credit lines and lease financing, facilities for the repair
and maintenance of leased and inventoried motor vehicles, etc., with it
being understood that MANAGERS may contract with the Major Automotive
Group to the full extent necessary;
(iv) establishing and applying budgets, cost controls, performance
quotas, lease and rental terms and rates, and other operational criteria,
and maintaining sufficient cash flow to continue the motor vehicle
operations;
(v) maintaining, repairing, refurbishing and replacing all
equipment, machinery, vehicles, fixtures, buildings and improvements
required for the motor vehicle operations and its personnel, meeting all
safety (OSHA) and environmental requirements, and/or generally for
management of the motor vehicle operations;
(vi) applying for, obtaining, re-applying for, and retaining all
licenses, permits and other authorizations required for the motor vehicle
operations;
(vii) establishing, applying and enforcing all governmental
workplace safety (e.g. OSHA) and environmental regulations and
requirements;
(viii) insuring MF&LC and the motor vehicle operations, including
all leased and inventoried vehicles, against damage or loss to the extent
required by all lenders and credit providers, but not less than full
market value;
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<PAGE>
(ix) establishing and maintaining security of the books and records
of the motor vehicle operations; and
(x) establishing credit lines and financial accommodations to
support the motor vehicle operations, including the purchasing and leasing
of motor vehicles, for which purpose MANAGERS -may pledge the credit of
MF&LC.
(b) From the revenues generated by the motor vehicle operations, MANAGERS
shall pay all costs and expenses incurred in such operations, as well as all
financing costs and debt service pertaining to the financing obtained for such
operations including the purchase and leasing of vehicles. From such revenues,
MANAGERS shall pay all space and equipment rent, including such pass-through
costs as apportioned real estate taxes, I levies and assessments, insurance,
maintenance, etc. and MANAGERS shall keep the areas utilized for the motor
vehicle operations insured.
6. DUTIES OF MF&LC.
(a) MF&LC shall manage its corporate operations and its separate financing
and leasing of telecommunications equipment such that the divisional autonomy of
the motor vehicle operations shall be recognized and protected. Notwithstanding
this provision, however, MANAGERS shall be subject to the corporate control of
the Board of Directors and executive officers of MF&LC and FIDELITY and shall
function consistent with all corporate requirements as may be imposed from time
to time.
(b) MF&LC shall cooperate with MANAGERS to obtain and maintain all
licenses and authorizations required for the motor vehicle operations. However,
MANAGERS shall be responsible for all costs and fees, etc. due under such
licenses and authorizations, as provided in Paragraph 4 and subparagraph
5(a)(vi).
(c) The parties intend, subject to subparagraph 7(h) below, that MF&LC
shall renegotiate and/or replace, with all due speed, with the support of
FIDELITY which shall utilize its own corporate assets and credit as necessary,
all existing credit lines and financial accommodations which require personal
guarantees by either Bruce Bendell and/or Harold Bendell or guarantee by one or
more of the constituent companies of the Major Automotive Group, so that the
motor vehicle operations may utilize credit lines collateralized by the motor
vehicle assets and guaranteed solely by FIDELITY, if required.
(d) MF&LC shall negotiate and obtain such credit lines and financial
accommodations as may be necessary or desirable for the purchase and leasing of
the telecommunications equipment of "CBS" or other operations! of FIDELITY and
the existing credit lines of MF&LC which have the personal guarantees of Bruce
Bendell and/or Harold Bendell or the guarantee of one or more of the constituent
companies of the Major Automotive Group shall not be used by "CBS" or any other
operation of FIDELITY.
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<PAGE>
7. COMPENSATION To MANAGERS
(a) The motor vehicle operations of MF&LC shall be treated as a separate
division for all accounting and bookkeeping purposes and such division shall be
subject to the exclusive control of MANAGERS.
(b) All gross revenues from the motor vehicle operations of MF&LC shall be
subject to the control of MANAGERS, who shall determine the costs of such
operations and shall apply such funds to such costs. None of such revenues,
except as specifically provided herein, shall be subject to the control of MF&LC
otherwise or applied to any other operations of MF&LC.
(c) From the existing credit lines of MF&LC, the credit lines to be
established with respect to the motor vehicle operations and from the gross
revenues from the motor vehicle operations of MF&LC, MANAGERS shall purchase all
required vehicles. Upon disposition of each leased vehicle, MANAGERS shall pay
off all credit lines, notes, liens, debts and liabilities applicable to such
motor vehicle and the balance shall, for purposes hereof and without regard to
tax or GAAP accounting, shall be deemed gross revenues from the motor vehicle
operations.
Likewise, insurance proceeds for any vehicle shall be deemed gross
revenues from the motor vehicle operations.
(d) From the gross revenues from the motor vehicle operations of MF&LC
(including gross proceeds from the disposition of vehicles and insurance
proceeds), the MANAGERS shall service all credit lines financial obligations,
debts, and liabilities now existing or incurred with respect to the motor
vehicle operations, including but not limited to all principal, interest,
points, financing charges, and other such financing costs and charges.
(e) From the revenues from the motor vehicle operations of MF&LC, MANAGERS
shall pay all costs- and expenses incurred in such operations of MF&LC,
including but not limited to labor, payroll taxes, fringe benefits,
reimbursement to the Major Automotive Group for "leased employees", insurance
(including automotive and liability insurance required for such motor vehicle
operations), repairs, towing, maintenance, vehicle service including "loaners",
repossessions including related legal fees and costs, other vehicle costs such
as dealer handling and preparation costs, freight in and out, equipment rentals,
travel and entertainment costs and professional fees, as well as all office and
administrative costs attributable to the motor vehicle operations, including but
not limited to furniture, equipment, supplies.
(f) MANAGERS shall pay to MF&LC a corporate management fee in a sum equal
to fifteen percent (15%) of the net income of the motor vehicle operations
treated as a separate division, calculated prior to deduction of the management
fee being determined, which is to reimburse MF&LC f or it share of corporate
group costs (e.g., audit costs) and costs incurred on MF&LC's behalf (e.g.,
corporate/SEC legal and other professional fees).
(g) The net revenues of the motor vehicle operations shall be (i) the
gross revenues, as defined above, including but not limited to all lease/rental
income, vehicle disposition proceeds and insurance proceeds, less (ii) the
financing costs and costs and expenses of the motor vehicle operations, as
defined above, including the MF&LC corporate management fee.
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<PAGE>
(h) The net revenues of the motor vehicle operations shall be calculated
annually by the independent certified public accountants of FIDELITY as part of
the audit of the financial statements of FIDELITY. In making the calculation,
income derived from the block of leases held by MF&LC as of the date of the
acquisition of MF&LC shall be segregated, as owned by FIDELITY. "Income derived
from the block of leases" shall include all items of income including gains on
the disposition of vehicles, financing buy-out discounts, release of reserves
attributable to leased vehicles, as well as the on-going interest and other
income from such leases. The calculation shall utilize GAAP, following MF&LC's
existing accounting procedures and methods consistently, and shall not be
adjusted for other costs, expenses and charges of MF&LC outside the motor
vehicle operations. Prior to such audit, MANAGERS may withdraw quarterly, as a
draw against their anticipated management fee, a sum not to exceed twenty
percent (20%) of the net revenues derived from "new business" (i.e., not from 7
the block of business as of the date of acquisition of MF&LC by FIDELITY)
calculated on a quarterly, cumulative basis utilizing the compiled quarterly
financial statements. Upon release of the audit, there shall be first be
segregated the income derived from the block of leases held by MF&LC as of the
date of the acquisition of MF&LC ("old" operations). This portion of the
proceeds shall be deposited in the Sinking Fund required under the Plan of
Reorganization for redemption of the Preferred Stock and/or the Debentures. The
balance of such net income less any quarterly draws previously withdrawn shall
be paid over to the MANAGERS as their compensation for the management of the
motor vehicle operations.
In the event that the balance of the net proceeds of the motor vehicle
operations of MF&LC payable to MANAGERS as their compensation are insubstantial
or negative, MF&LC has no obligation to pay any management fee to MANAGERS, or
to assure that MANAGERS achieve any specific level of compensation, or to
reimburse MANAGERS for any loss or deficit in the motor vehicle operations. If
MANAGERS shall have made quarterly withdrawals which are more than ten percent
(10%) greater than the management fee to which they are entitled, as determined
from the audit, MANAGERS shall (a) immediately (within ten business days after
written demand, by MF&LC) repay the excess to MF&LC and (b) not make further
quarterly withdrawals until after a quarterly profit & loss statement showing
that a management fee is being earned.
(j) In the event of a loss or def icit in the motor vehicle operations,
MANAGERS shall be responsible for such and shall pay any unpaid costs and
expenses of the motor vehicle operations. However, in the event of any such loss
or losses, MANAGERS may, in the exercise of their management authority, in their
discretion, determine to terminate the motor vehicle operations. Such
termination shall affect all "new" operations, but MANAGERS shall continue the
operations for the purpose of completing all "old" operations, as purchased by
FIDELITY. MANAGERS shall not be responsible for any losses with respect to such
"old" operations.
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<PAGE>
(k) To the extent that any funds remain in the Sinking Fund, unexpended
for the purposes thereof, upon the termination thereof as provided In the Plan
of Reorganization and related documents, MANAGERS shall be entitled to receive
therefrom the reimbursement of all losses or deficits paid pursuant to
subparagraph (j) above.
(1) The calculation in subparagraph (h) above assumes the continuance of
the existing credit lines, guaranteed by or cross-collateralized by MANAGERS
and/or Major Automotive Group. As the existing credit lines and financial
accommodations are assumed by FIDELITY and/or MF&LC without such guarantees
and/or cross collateralization, the parties shall renegotiate the calculation in
subparagraph (h) above to provide FIDELITY and/or MF&LC with appropriate
compensation for the providing of such credit'. MANAGERS may, in their
discretion, continue existing or obtain new credit lines or financial
accommodations requiring their guarantees and/or cross collateralization and not
use the new lines, in which event no compensation shall be due to FIDELITY
and/or MF&LC.
8. SIGNING BONUS, (a) As a "signing bonus", to induce MANAGERS to execute
this Management Agreement and undertake the responsibilities herein, FIDELITY
hereby agrees to issue to MANAGERS, 50% / 50% to each, Common Stock Purchase
Warrants exercisable f or the purchase of One Hundred Thousand (100, 000) shares
of FIDELITY'S Common Stock at an exercise (purchase) price of One Dollar and
Twenty-five Cents ($1.25) per share; (i.e., Fifty Thousand (50,000) each). Such
Common Stock Purchase Warrants shall not be transferable nor exercisable prior
to December 31, 1996. FIDELITY covenants that it will register sufficient shares
of its Common Stock in its proposed SB-2 Registration Statement, expected to be
filed in the fourth quarter of 1996,- to permit MANAGERS to exercise such
warrants for free trading shares following effectiveness. The Common Stock
Purchase Warrants shall expire at the close of the business day (5:00 p.m.) six
(6) months after effectiveness of the SB-2 Registration Statement. MANAGERS
acknowledge awareness that if they exercise such common Stock Purchase Warrants
prior to the effectiveness of FIDELITY'S SB-2, they will acquire shares which
are restricted as to further transfer (non-free trading); MANAGERS jointly and
severally represent and warrant that they are acquiring the Common Stock
Purchase Warrants and any shares, issued upon exercise of such warrants prior to
effectiveness of the SB-2 for personal investment purposes and not with a view
to resale or distribution; the Common Stock Purchase Warrants and the
certificates for such shares if 9 exercised prior to effectiveness of the SB-2,
shall bear a legend on the face thereof indicating that such warrants and shares
have not been registered under the Securities Act of 1933 and are restricted as
to further transfer.
(b) If MANAGERS breach the terms of this Management Agreement at any time
prior to exercise of the Common Stock Purchase Warrants, and such breach is
material and is uncured within the time period provided, or within a reasonable
time if no time period is provided, such warrants shall be cancelable by
FIDELITY and the value thereof shall be forfeited by MANAGERS.
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<PAGE>
9. ENVIRONMENTAL HAZARDS, The motor vehicle operations of MFUC may involve
certain environmental hazards, such as the removal and disposal of used motor
oil, the replacement of air conditioner gases, and the disposal of parts
containing toxic, hazardous wastes. MANAGERS shall manage the motor vehicle
operations (utilizing the services of Major Automotive Group and others, as
necessary) strictly in conformity with the terms of all permits and the
regulations of all environmental agencies having jurisdiction. MANAGERS shall
establish and maintain strict controls and procedures to protect against
discharge, emission, spillage or other contamination or pollution, whether
deliberate, voluntary,. involuntary or accidental. MANAGERS shall establish and
maintain monitoring procedures. In the event of any discharge, spillage,
emission or other contamination, MANAGERS shall (i) comply with all federal,
state, and local reporting requirements, (ii) take all steps to limit the extent
of the contamination and to terminate its source, and (iii) promptly remediate
the contamination in accordance with the requirements of environmental agencies
having jurisdiction.
10. MAINTENANCE OF AND ACCESS To BOOKS AND RECORDS. Although intended to
operate as an autonomous division within MF&LC, the motor vehicle operations
are, in fact, a part of the on-going business of MF&LC which, in turn, is a
wholly-owned subsidiary of FIDELITY, a public company which anticipates SEC
financial filing requirements. During the term of this Management Agreement,
MANAGERS shall:
(a) maintain the books and records of the motor vehicle operations in a
timely, complete and accurate manner, consistent with the existing accounting
procedures and methods, but subject to the requirements of FIDELITY'S
accountants for GAAP and SEC accounting purposes;
(b) give access to the assets, books and records, facilities, files,
documents, and other data depositaries, at any reasonable time and from time to
time, to FIDELITY, MF&LC and their agents and representatives. MANAGERS shall
furnish any and all information in their possession with reference to the motor
vehicle operations that FIDELITY and/or MF&LC may reasonably request; and
(c), keep such books and records as required by FIDELITY's and/ or MF&LC's
accountants, in compliance with GAAP and SEC requirements and cooperate fully
and in good faith to meet all quarterly and annual filing deadlines.
FIDELITY shall designate the accountants for the motor vehicle operations,
consistent with the appointment for MF&LC and FIDELITY.
11. TERMINATION, In reliance upon this Management Agreement, and pending
renegotiation and replacement of the existing credit lines and financial
accommodations, MANAGERS are maintaining their personal financial guarantees and
the guarantees of constituent corporations of the Major Automotive Group, and
are continuing (and may expand) the motor vehicle operations under such credit
lines and financial accommodations. Accordingly, this Management Agreement shall
not be subject to termination by MF&LC, regardless of the violation of this
Agreement by MANAGERS and regardless of MANAGERS' default, until and unless MFUC
shall have made provision for the assumption, servicing and repayment of all
such indebtedness, together with the release of all such existing guarantors.
Subject to such requirement, this Management Agreement may be terminated:
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<PAGE>
(a) By either party upon a material default by the other party which is
not cured within thirty (30) days after notice of such default or, if such
default is not curable within such time, if reasonable efforts to cure such are
not commenced within thirty (30) days after notice of default and thereafter
prosecuted in good faith; or
(b) Mutual agreement of the parties.
12. GOVERNMENTAL REGULATIONS.. This Management Agreement is subject to the
terms of all applicable federal, state, and municipal laws, regulations, and
decisions, whether existing or enacted hereafter, including the regulations and
actions of all governmental administrative agencies and commissions having
jurisdiction.
13. ASSIGNMENT AND DELEGATION. Neither party may assign any rights or
delegate any duties hereunder without the express prior written consent of the
other.
14. ENTIRE AGREEMENT, This Management Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior negotiations and understandings which are deemed to have
been merged herein. No representations were made or relied upon by either party,
other than those expressly set forth herein.
15. MODIFICATION, This writing contains the entire agreement of the
parties and shall be amended only by a further writing. No agent, employee, or
other representative of any party is empowered to alter any of the terms hereof,
including specifically this Paragraph 14, unless done in writing and signed by
MANAGERS and an executive officer of MF&LC.
16. CONSTRUCTION, Whenever required by the context hereof: the masculine
gender shall be deemed to include the feminine and neuter; and the singular
member shall be deemed to include the plural. Time is expressly declared to be
of the essence of this Agreement. This Agreement shall be deemed to have been
mutually prepared by all parties and shall not be construed against any
particular party as the draftsman. The invalidity of any one or more of the
words, phrases, sentences, clauses, sections or subsections contained in this
Agreement shall not affect the enforceability of the remaining portions of this
Agreement or any part hereof, all of which are inserted conditionally on their
being valid in law, and, in the event that any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in 12 this
Agreement shall be declared invalid by a court of competent jurisdiction, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, section or sections, or
subsection or subsections had not been inserted.
17. CONTROLLING LAW., The validity, interpretation, and performance of
this Agreement shall be controlled by and construed under the laws of the State
of New York. Venue and jurisdiction of any controversy or claim arising out of,
or relating to this Management Agreement, or the breach thereof, that cannot be
resolved by negotiation, shall be in Queens County, New York. In any legal
action or other proceeding involving, arising out of or in any way relating to
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys fees, costs, and expenses of litigation.
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<PAGE>
18. WAIVER. The failure of any party to object to, or to take affirmative
action with respect to, any conduct of any other party which is in violation of
the terms of this Agreement shall not be construed as a waiver of such violation
or breach, or of any future breach, violation, or wrongful conduct. No delay or
failure by any party to exercise any right under this Agreement, and no partial
or single exercise of that right, shall constitute a waiver or exhaustion of
that or any other right, unless otherwise expressly provided herein.
19. NOTICES, All notices or other communications to be sent as provided
for by this Management Agreement shall be in writing and shall be sent by
certified mail, postage prepaid, to the persons and addresses herein designated,
or such other persons and/or addresses as may hereafter be designated in writing
by the parties:
If to MF&LC: Doron Cohen, Pres.
Fidelity Holdings, Inc.
80-02 Kew Gardens Boulevard, Suite 5000
Kew Gardens, New York 11415
with a copy to: Richard C. Fox, Esq.
3401 Lakeview Drive
Delray Beach, Florida 33445
if to MANAGERS: Bruce Bendell
Major Chevrolet/Geo
43-40 Northern Boulevard
Long Island City, New York 11101
with a copy to: Robert Salad
Cooper, Perskie, April, Niedelman, Wagenheim & Levinson
1125 Atlantic Avenue
Atlantic City, New Jersey 08401
20. HEADINGS. Headings in this Management Agreement are for convenience
only and shall not be used to interpret or construe its provisions.
21. COUNTERPARTS. This Management Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
22. BINDING EFFECT, The provisions of this Management Agreement shall be
binding upon and inure to the benefit of each of the parties and their
respective successors and assigns.
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<PAGE>
23. COSTS, All of the legal, accounting and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be borne and paid by the party incurring such costs and expenses,
and no party shall be obligated for any cost or expense incurred by any other
party.
IN WITNESS WHEREOF, intending to be legally bound, the parties have
executed this Management Agreement the day and year first above written:
MAJOR FLEET & LEASING CORP.
ATTEST,
BY: /s/ Harold Bendell BY: /s/ Bruce Bendell
Harold Bendell, Secretary Bruce Bendell,President
MANAGEMENT AGREEMENT
MAJOR FLEET & LEASING CORP. - BRUCE AND HAROLD BENDELL Signatures, continued
WITNESSES:
/s/ Anna Torres /s/ BRUCE BENDELL
Anna Torres Bruce Bendell
/s/ E. Davis /s/HAROLD BENDELL
E. Davis Harold Bendell
JOINDER
For purposes of Paragraph 8 of the foregoing Management Agreement, Fidelity
Holdings, Inc. hereby joins in the agreement, intending to be legally bound by
Paragraph 8.
FIDELITY HOLDINGS INC.
ATTEST: /s/ Doron Cohen
/s/ Richard C. Fox BY: Doron Cohen
Richard C. Fox President
Secretary
SECURITY
AGREEMENT AMENDING THE WHOLESALE
AGREEMENT AMD CONDITIONALLY AUTHORIZING
THE SALE OF NEW FLOOR PLAN VEHICLES ON A
DELAYED PAYMENT PRIVILEGE BASIS
This Agreement is made and executed by and between the undersigned dealer
("Dealer and General Motors Acceptance Corporation ("GMAC") effective the date
set forth below.
WHEREAS, Dealer previously, or simultaneous with the execution of this
Agreement, executed and delivered to GMAC a Wholesale Security Agreement, by
which, among other things, (a) GMAC provides wholesale floor plan financing of
motor vehicles for Dealer, and Dealer agrees to promptly pay to GMAC the actual
amount financed, as each such financed motor vehicle is sold or leased by Dealer
(the "Vehicle Amount Financed"); and (b) GMAC consents to Dealer selling and
leasing such financed motor vehicles at retail in the ordinary course of
business (the "Routine Disposition of Vehicles"); and
WHEREAS, Dealer has requested the privilege of delaying payment of the Vehicle
Amount Financed in the limited instances where such financed motor vehicles are
sold by Dealer to a purchaser for whom both Dealer and GMAC have agreed to a
delayed payment period (the "Delayed Payment Privilege"); and
WHEREAS, Dealer and GMAC may have previously executed an Agreement for the
Delayed Payment Privilege for New Floor Plan units, which the parties hereby
intend be superseded by this Agreement for all such transactions arising on or
after the effective date hereof; and
WHEREAS, Dealer and GMAC desire and intend hereby to retain, in full force and
effect, the validity, enforceability and relative priority of GMAC's security
interest in any and all such financed motor vehicles as are sold or leased by
Dealer pursuant to the Delayed Payment Privilege, notwithstanding GMAC's prior
consent to the Routine Disposition of Vehicles, unless and until GMAC receives
the Vehicle Amount Financed under the terms and conditions as hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises, the convenants herein set
forth, and for other good and valuable consideration, the sufficiency and
receipt of which is hereby acknowledged, Dealer and GMAC hereby agree as
follows:
1. The aforementioned Wholesale Security Agreement and any and all
documents, plans, instruments or agreements relating, modifying, substituting or
attendant thereto, executed between Dealer and GMAC are hereby amended in form
and substance by inserting therein the following language as a separate and
distinct paragraph:
"Notwithstanding anything contained herein to the contrary, Dealer (i.e.,
we) agrees that GMAC's security interest in any and all vehicles sold or
leased, more than one Vehicle per individual transaction, to a customer,
and in which the full payment thereof by cash or on a properly perfected
retail installment contract or other security agreement basis is not made
contemporaneous with the delivery of such Vehicles by Dealer (the "Delayed
Payment Vehicles"), shall remain in full force and effect in such Delayed
Payment Vehicles and shall not be relinquished, extinguished, released or
terminated as a consequence of such sale or release unless and until the
customer makes payment therefore directly to GMAC or jointly to Dealer and
GMAC. Moreover, Dealer is expressly prohibited and shall not have any
express, implied or apparent authority to sell, lease, transfer or
otherwise dispose of any Delayed Payment Vehicles unless and until the
express written permission of GMAC is first obtained, and then such
authority shall be, in each and every instance, limited to the terms and
conditions of such permission; it being further agreed that the terms of
this paragraph shall not be altered, modified, supplemented, qualified,
waived or amended by reason of any agreement (unless in writing executed
by Dealer and GMAC), or by the course of performance, course of dealing,
or usage of trade by Dealer and GMAC, of either of them.
<PAGE>
2. Any previously executed Agreement for the Delayed Payment Privilege for
New Floor Plan Units between Dealer and GMAC is superseded by the terms and
conditions of this Agreement for all Delayed Payment Privilege transactions
arising on or after the effective date thereof.
3. Dealer shall advise GMAC of each and every potential transaction in
which Dealer requests GMAC to grant the Delayed Payment Privilege, and the
period of time for which the Delayed Payment Privilege is being requested. Such
request shall be made of GMAC in writing and on a form of the type and kind
provided by GMAC from time to time. GMAC's consent, it any, to the request must,
be obtained prior to the sale, lease, transfer or delivery of any vehicles
proposed by Dealer to be disposed by the Delayed Payment Privilege (the "Delayed
Payment Privilege Vehicles").
4. GMAC's consent to the Dealer's request for disposition of Delayed
Payment Privilege vehicles shall be further subject and contingent upon the
following additional terms and conditions:
(a) GMAC may, in its sole and exclusive discretion limit the number of
Vehicles, amount outstanding and terms and conditions for which the
Delayed Payment Privilege is requested by Dealer.
(b) GMAC may, in its sole and exclusive discretion withdraw, cancel, or
suspend the Delayed Payment Privilege at anytime and for any reason
upon a ten-day advance written notice and immediately if Dealer is
in default of any agreement which Dealer has with GMAC; provided,
however, that such withdrawal, cancellation or suspension shall not
affect the rights, interests and duties under this Agreement prior
thereto.
(c) Dealer shall complete, execute and deliver to GMAC, immediately upon
the delivery of Delayed Payment Privilege Vehicles, a form of the
type and kind provided by GMAC from time to time (the "Delivery
Schedule").
(d) Dealer shall immediately pay GMAC the Vehicle Amount Financed upon
the earliest of W demand by GMAC; or (ii) receipt of the amount due
from the disposition of each of the Delayed Payment Privilege
Vehicles; or (iii) the "Purchaser Payment Date', set forth on the
applicable Delivery Schedule.
(e) Dealer shall obtain from the person acquiring the Delayed Payment
Privilege Vehicle a duly authorized and executed acknowledgement
from the Purchaser confirming that the terms of sale include the
continuation of GMAC's security interest in the Delayed Payment
Privilege Vehicles. The acknowledgement shall be in writing and on a
form of the type and kind provided by GMAC from time to time, which
shall be delivered to GMAC prior to any sale, lease, transfer or
delivery of any Delayed Payment Privilege Vehicle to such person
(the "Acknowledgement of Purchaser").
(f) The grant and exercise of the Delayed Payment Privilege by Dealer
shall in no way extinguish, release or terminate GMAC's security
interest in the Delayed Payment Privilege Vehicles unless and until
the conditions described in the amending paragraph set forth in
paragraph 1 of this Agreement and the aforesaid Acknowledgement of
Purchaser are first fulfilled, which shall then and thereafter
continue in the proceeds thereof.
5. GMAC shall have no duty or obligation to examine, review or consider
the creditworthiness of any proposed or actual customer of Dealer for which
Dealer seeks GMAC's consent to the Delayed Payment Privilege and any such
examination, review or consideration by GMAC shall be for its sole and exclusive
use and purposes; the Dealer expressly agreeing that any receipt or reliance on
such information from GMAC would be gratuitous and unreasonable, respectively.
6. Dealer's obligation to pay GMAC for the Vehicle Amount Financed shall
be absolute, unconditional and primary, notwithstanding (a) GMAC consenting to
the Delayed Payment Privilege; or (b) default in the payment or acquisition
terms by the customer of the Dealer for Delayed Payment Privilege Vehicles, or
that of any of customer's surety, guarantor, co-obligor or lender; or (c)
rejection or revocation of acceptance of any Delayed Payment Privilege Vehicles
by such customer; or (d) the acceptance by GMAC of any assignment or proceeds
from any Delayed Payment Privilege Vehicles; provided, however, that nothing in
this paragraph 6 is intended to permit payment to GMAC of any more than the
greater of (i) the Vehicle Amounts Financed or (ii) the value of GMAC's security
interest in the Delayed Payment Privilege Vehicles.
<PAGE>
7. Upon demand by GMAC, Dealer shall provide GMAC with an assignment of
all right, title and interest of the Dealer in and to the accounts, contract
rights, sale proceeds or any other interest Dealer may then or thereafter have
in the Delayed Payment Privilege Vehicle. Said assignment shall be for the
purpose of additional security only and shall be on a form of the type and kind
provided by GMAC from time to time.
8. GMAC may take such actions as it deems appropriate to assure and
enforce compliance with this Agreement, including requesting, for audit
purposes, verification from Dealer's customers the fact of delivery, possession,
and amount, date and circumstances of payment of any Delayed Payment Privilege
Vehicles, and the notification to appropriate persons of any security interest,
assignment or other claim in the Delayed Payment Privilege Vehicles of GMAC.
In witness whereof the parties hereto execute this agreement the 14th day
of February, 1991.
GENERAL MOTORS ACCEPTANCE CORPORATION MAJOR FLEET & LEASING CORP.
---------------------------
(Dealer's Name)
BY: /s/ XXXXXXXXXXX By: Isl Bruce Bendell
------------------------ -----------------------
President
Its XXXXXXXXXXX Its
--------------------------- ---------------------
(Title) (Title)
SECURITY
AGREEMENT AMENDING THE WHOLESALE
AGREEMENT AMD CONDITIONALLY AUTHORIZING
THE SALE OF NEW FLOOR PLAN VEHICLES ON A
DELAYED PAYMENT PRIVILEGE BASIS
This Agreement is made and executed by and between the undersigned dealer
("Dealer and General Motors Acceptance Corporation ("GMAC") effective the date
set forth below.
WHEREAS, Dealer previously, or simultaneous with the execution of this
Agreement, executed and delivered to GMAC a Wholesale Security Agreement, by
which, among other things, (a) GMAC provides wholesale floor plan financing of
motor vehicles for Dealer, and Dealer agrees to promptly pay to GMAC the actual
amount financed, as each such financed motor vehicle is sold or leased by Dealer
(the "Vehicle Amount Financed"); and (b) GMAC consents to Dealer selling and
leasing such financed motor vehicles at retail in the ordinary course of
business (the "Routine Disposition of Vehicles"); and
WHEREAS, Dealer has requested the privilege of delaying payment of the Vehicle
Amount Financed in the limited instances where such financed motor vehicles are
sold by Dealer to a purchaser for whom both Dealer and GMAC have agreed to a
delayed payment period (the "Delayed Payment Privilege"); and
WHEREAS, Dealer and GMAC may have previously executed an Agreement for the
Delayed Payment Privilege for New Floor Plan units, which the parties hereby
intend be superseded by this Agreement for all such transactions arising on or
after the effective date hereof; and
WHEREAS, Dealer and GMAC desire and intend hereby to retain, in full force and
effect, the validity, enforceability and relative priority of GMAC's security
interest in any and all such financed motor vehicles as are sold or leased by
Dealer pursuant to the Delayed Payment Privilege, notwithstanding GMAC's prior
consent to the Routine Disposition of Vehicles, unless and until GMAC receives
the Vehicle Amount Financed under the terms and conditions as hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises, the convenants herein set
forth, and for other good and valuable consideration, the sufficiency and
receipt of which is hereby acknowledged, Dealer and GMAC hereby agree as
follows:
1. The aforementioned Wholesale Security Agreement and any and all
documents, plans, instruments or agreements relating, modifying, substituting or
attendant thereto, executed between Dealer and GMAC are hereby amended in form
and substance by inserting therein the following language as a separate and
distinct paragraph:
"Notwithstanding anything contained herein to the contrary, Dealer (i.e.,
we) agrees that GMAC's security interest in any and all vehicles sold or
leased, more than one Vehicle per individual transaction, to a customer,
and in which the full payment thereof by cash or on a properly perfected
retail installment contract or other security agreement basis is not made
contemporaneous with the delivery of such Vehicles by Dealer (the "Delayed
Payment Vehicles"), shall remain in full force and effect in such Delayed
Payment Vehicles and shall not be relinquished, extinguished, released or
terminated as a consequence of such sale or release unless and until the
customer makes payment therefore directly to GMAC or jointly to Dealer and
GMAC. Moreover, Dealer is expressly prohibited and shall not have any
express, implied or apparent authority to sell, lease, transfer or
otherwise dispose of any Delayed Payment Vehicles unless and until the
express written permission of GMAC is first obtained, and then such
authority shall be, in each and every instance, limited to the terms and
conditions of such permission; it being further agreed that the terms of
this paragraph shall not be altered, modified, supplemented, qualified,
waived or amended by reason of any agreement (unless in writing executed
by Dealer and GMAC), or by the course of performance, course of dealing,
or usage of trade by Dealer and GMAC, of either of them.
<PAGE>
2. Any previously executed Agreement for the Delayed Payment Privilege for
New Floor Plan Units between Dealer and GMAC is superseded by the terms and
conditions of this Agreement for all Delayed Payment Privilege transactions
arising on or after the effective date thereof.
3. Dealer shall advise GMAC of each and every potential transaction in
which Dealer requests GMAC to grant the Delayed Payment Privilege, and the
period of time for which the Delayed Payment Privilege is being requested. Such
request shall be made of GMAC in writing and on a form of the type and kind
provided by GMAC from time to time. GMAC's consent, it any, to the request must,
be obtained prior to the sale, lease, transfer or delivery of any vehicles
proposed by Dealer to be disposed by the Delayed Payment Privilege (the "Delayed
Payment Privilege Vehicles").
4. GMAC's consent to the Dealer's request for disposition of Delayed
Payment Privilege vehicles shall be further subject and contingent upon the
following additional terms and conditions:
(a) GMAC may, in its sole and exclusive discretion limit the number of
Vehicles, amount outstanding and terms and conditions for which the
Delayed Payment Privilege is requested by Dealer.
(b) GMAC may, in its sole and exclusive discretion withdraw, cancel, or
suspend the Delayed Payment Privilege at anytime and for any reason
upon a ten-day advance written notice and immediately if Dealer is
in default of any agreement which Dealer has with GMAC; provided,
however, that such withdrawal, cancellation or suspension shall not
affect the rights, interests and duties under this Agreement prior
thereto.
(c) Dealer shall complete, execute and deliver to GMAC, immediately upon
the delivery of Delayed Payment Privilege Vehicles, a form of the
type and kind provided by GMAC from time to time (the "Delivery
Schedule").
(d) Dealer shall immediately pay GMAC the Vehicle Amount Financed upon
the earliest of W demand by GMAC; or (ii) receipt of the amount due
from the disposition of each of the Delayed Payment Privilege
Vehicles; or (iii) the "Purchaser Payment Date', set forth on the
applicable Delivery Schedule.
(e) Dealer shall obtain from the person acquiring the Delayed Payment
Privilege Vehicle a duly authorized and executed acknowledgement
from the Purchaser confirming that the terms of sale include the
continuation of GMAC's security interest in the Delayed Payment
Privilege Vehicles. The acknowledgement shall be in writing and on a
form of the type and kind provided by GMAC from time to time, which
shall be delivered to GMAC prior to any sale, lease, transfer or
delivery of any Delayed Payment Privilege Vehicle to such person
(the "Acknowledgement of Purchaser").
(f) The grant and exercise of the Delayed Payment Privilege by Dealer
shall in no way extinguish, release or terminate GMAC's security
interest in the Delayed Payment Privilege Vehicles unless and until
the conditions described in the amending paragraph set forth in
paragraph 1 of this Agreement and the aforesaid Acknowledgement of
Purchaser are first fulfilled, which shall then and thereafter
continue in the proceeds thereof.
5. GMAC shall have no duty or obligation to examine, review or consider
the creditworthiness of any proposed or actual customer of Dealer for which
Dealer seeks GMAC's consent to the Delayed Payment Privilege and any such
examination, review or consideration by GMAC shall be for its sole and exclusive
use and purposes; the Dealer expressly agreeing that any receipt or reliance on
such information from GMAC would be gratuitous and unreasonable, respectively.
6. Dealer's obligation to pay GMAC for the Vehicle Amount Financed shall
be absolute, unconditional and primary, notwithstanding (a) GMAC consenting to
the Delayed Payment Privilege; or (b) default in the payment or acquisition
terms by the customer of the Dealer for Delayed Payment Privilege Vehicles, or
that of any of customer's surety, guarantor, co-obligor or lender; or (c)
rejection or revocation of acceptance of any Delayed Payment Privilege Vehicles
by such customer; or (d) the acceptance by GMAC of any assignment or proceeds
from any Delayed Payment Privilege Vehicles; provided, however, that nothing in
this paragraph 6 is intended to permit payment to GMAC of any more than the
greater of (i) the Vehicle Amounts Financed or (ii) the value of GMAC's security
interest in the Delayed Payment Privilege Vehicles.
<PAGE>
7. Upon demand by GMAC, Dealer shall provide GMAC with an assignment of
all right, title and interest of the Dealer in and to the accounts, contract
rights, sale proceeds or any other interest Dealer may then or thereafter have
in the Delayed Payment Privilege Vehicle. Said assignment shall be for the
purpose of additional security only and shall be on a form of the type and kind
provided by GMAC from time to time.
8. GMAC may take such actions as it deems appropriate to assure and
enforce compliance with this Agreement, including requesting, for audit
purposes, verification from Dealer's customers the fact of delivery, possession,
and amount, date and circumstances of payment of any Delayed Payment Privilege
Vehicles, and the notification to appropriate persons of any security interest,
assignment or other claim in the Delayed Payment Privilege Vehicles of GMAC.
In witness whereof the parties hereto execute this agreement the 14th day
of February, 1991.
GENERAL MOTORS ACCEPTANCE CORPORATION MAJOR FLEET & LEASING CORP.
---------------------------
(Dealer's Name)
BY: /s/ XXXXXXXXXXX By: Isl Bruce Bendell
------------------------ -----------------------
President
Its XXXXXXXXXXX Its
--------------------------- ---------------------
(Title) (Title)
DIRECT LEASING PLAN DEALER AGREEMENT
Subject to the terms of the GMAC Direct Leasing Plan ("Plan") as set forth
below, General Motors Acceptance Corporation
(GMAC) hereby appoints Major Fleet & Leasing Corp. ("Dealer") to arrange leasing
transactions between GMAC and third parties ("Lessees") and Dealer agrees to
make such arrangements.
1. Eligible Vehicles: New passenger cars and light trucks up to 15,000 pounds
GVW which are listed (including options) in the Residual Value Lease
Guide. Vehicles which will be sub-leased or rented are not eligible.
2. Eligible Lessees: Credit-worthy individuals and businesses.
3. Eligible Leases: Closed-end leases with terms not to exceed forty-eight
months. Maintenance leases are not eligible. GMAC will provide all lease
agreements and other necessary forms.
4. Insurance: Unless otherwise approved by GMAC, leased vehicles must be
covered with primary bodily injury and property damage insurance with
minimum limits of $100,000/300,000/50,000 or a combined single limit of
$300,000 and physical damage coverage with deductibles not to exceed $500
for collision and $250 for comprehensive. Such coverages must be
maintained for the term of the lease through a carrier acceptable to GMAC
which is licensed in the state where the vehicle is garaged. Appropriate
evidence of such coverages must be provided to GMAC. Such coverages must
name GMAC as "Additional insured" and loss payee. GMAC will maintain
contingency and excess bodily injury and property damage coverage with a
combined single limit of $10,000,000. Such coverage will also protect
Dealer as attorney-in-fact for GMAC.
5. Dealer Compensation: Dealer compensation will consist of (i) Dealer's
mark-up on the vehicle and Dealer-installed options as limited in
Paragraph 8(f), and (ii) any additional amount as announced from time to
time by GMAC.
6. Lease Pricing: Dealer agrees that the lease will be priced utilizing the
vehicle residual value factor which is listed in the Residual Value Lease
Guide published by Automotive Lease Guide for the model and make of
vehicle leased (including options). Dealer may, however, with prior GMAC
approval, establish a higher residual value. In these instances, GMAC may
withhold the difference from payment to the Dealer for the vehicle and
Dealer will be responsible for any loss sustained by GMAC as a result of
early termination or termination at scheduled maturity up to the amount of
the difference between the two residuals.
7. GMAC's Responsibility: GMAC will consider all transactions submitted to it
by Dealer and will be responsible for:
(a) Checking credit of proposed Lessees after receiving Lessee Statement
from Dealer;
(b) Promptly notifying Dealer as soon as possible as to whether or not
the transaction is acceptable as submitted;
(c) Purchasing the vehicle from the Dealer if GMAC accepts the
transaction;
(d) Endeavoring to advise Dealer of the impending maturity of a lease at
least sixty days before the end of the term.
8. Dealer's Responsibilities: The Dealer will be responsible for
(a) Promoting the Plan;
(b) Submitting Lessee Statements to GMAC which have been completed and
signed by prospective Lessees;
(c) Obtaining and Submitting to GMAC evidence of apPropriate insurance
coverage documented on the prescribed form supplied by GMAC.
(d) Preparing the lease agreements and other necessary forms and,
following approval of the transaction by GMAC, having them executed
by the Lessee;
(e) Executing the lease agreements for GMAC under a limited power of
attorney;
<PAGE>
(f) Providing vehicles for purchase by GMAC which are to be leased under
the Plan at a cost not to exceed 110% of the Manufacturer's
Suggested List Price. In addition, Dealer-installed options,
acceptable to GMAC, may be included at a mark-up price not to exceed
suggested retail price, provided a used vehicle guidebook normally
used by GMAC indicates the wholesale value of the vehicle is
increased by installation of such options. For Dealer-installed
options on which there is no suggested retail price, the retail
price will be Dealer cost plus mark-up, not to exceed 20% of the
Dealer's cost of such options. if any equipment has been removed
from the vehicle, the maximum purchase price is to be reduced by an
amount equal to the suggested retail price of such items.
(g) Registering and titling vehicles in GMAC's name;
(h) Receiving and inspecting vehicles returned from lease and completing
a vehicle condition report, supplied by GMAC, in the presence of the
Lessee and obtaining the Lessee's signature on the bottom of the
report acknowledging the condition of the vehicle. Further, Dealer
will, at GMAC's option, provide GMAC safe storage of returned lease
vehicles at no charge for a period not to exceed 30 days. Dealer is
not required to provide primary insurance coverage on stored
vehicles; however, if a vehicle is damaged while in possession of
Dealer, Dealer is required to document the facts relating to the
damage. If a dealership employe is-responsible for the damage,
Dealer is required to file a claim under the garage-keepers legal
liability insurance policy.
(i) Indemnifying GMAC for any action of Dealer outside the scope of
Dealer's authority under the Plan which results in a loss to GMAC;
and
(j) Accepting -an assignment of the lease and repurchasing the vehicle
from GMAC for the residual value as determined at the inception of
the lease plus the unpaid rentals (adjusted to extract unearned
money costs) and any other amounts owing under the lease if there is
a default under the lease resulting from any material
misrepresentation made on the Lessee Statement or in the insurance
verification provided.
Dealer will have no other responsibility other than that outlined above and in
Provision 6 unless Dealer takes Lessee out of the leased vehicle prior to lease
maturity. In those instances, Dealer will be obligated to purchase the vehicle
by paying GMAC an amount equal to the higher of the Fair Market Value as defined
in the lease agreement or the Lessee's early termination liability as defined in
the Option To Purchase and Early Termination and Default Provisions of the lease
agreement covering the leased vehicle. If, however, Dealer takes Lessee out of
the lease prior to lease maturity, and Lessee, within seven (7) days of
returning the leased vehicle, enters into a new Direct Leasing Plan lease with
Dealer, Dealer's purchase price will be an amount equal to the higher of
Lessee's early termination liability less any termination penalties as specified
in the lease agreement or the wholesale value from a guidebook selected by GMAC.
The wholesale value established will be the "clean" or "average" value of a like
vehicle including options and with the mileage that would have accrued if the
vehicle had been operated in accordance with the mileage provision of the lease.
9. Dealer's Option To Purchase Leased Vehicle: If Lessee does not purchase
the leased vehicle at scheduled termination of the lease, Dealer has the
option to purchase the vehicle. The price shall be the residual value as
stated in the lease, if within seven days from the date Lessee returns the
leased vehicle, Lessee enters into a new Direct Leasing Plan lease with
GMAC. If Lessee does not enter into a new Direct Leasing Plan lease with
GMAC, the Dealer purchase price will be the wholesale value as determined
by the used vehicle guidebook utilized by GMAC.
10. Tax Benefits: All tax benefits of vehicle ownership will accrue to and be
retained by GMAC.
11. Miscellaneous Provision:
(a) The terms of this Agreement shall not be waived, altered modified,
amended or supplemented except by a written Instrument sinned by
GMAC and Dealer.
(b) This Agreement shall terminate any Direct Leasing Plan Dealer
Agreement presently in effect between General Motors Acceptance
Corporation and/or GMAC Leasing Corporation and Dealer. Such
termination shall not affect the rights and responsibilities of
either party in respect to vehicles already leased thereunder.
(c) This Agreement may be terminated by either party upon written notice
to the other. Such termination shall not affect the rights and
responsibilities of either party in respect to vehicles already
leased hereunder.
<PAGE>
(d) Any provision of this Agreement which may be prohibited by law or
unenforceable shall be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions
hereof.
(e) This agreement shall be construed and determined according to the
laws of the State of Michigan.
Executed in duplicate this 24th day of July, 1986
General Motors Acceptance Corporation Major Fleet & Leasing Corp.
By Isl Illegible Asst Sec. By Isl Illegible Pres.
----------------------------------- -------------------------------
Title Title
42-40 Bell Blvd. 34-14 Steinway Street
- ------------------------------------- ----------------------------------
Address Address
Bayside, New York 11361 LIC, New York 11101
RETAIL LEASE SERVICE PLAN AGREEMENT
PASSENGER CARS AND LIGHT TRUCKS
Agreement executed April 3, 1987 by and between General Motors Acceptance
Corporation ("GMAC") and Major Fleet and Leasing Corp. ("Lessor")
WITNESSETH:
WHEREAS, GMAC will from time to time grant permission to Lessor to lease
to third persons motor vehicles in which GMAC has a security interest and Lessor
desires to obtain the services of GMAC in respect of Lessor's leasing operation;
and
WHEREAS, GMAC is willing to extend the services under the terms and
conditions set forth below;
NOW, THEREFORE, it is agreed that:
A. Scope of Agreement
This Agreement applies to the billing and collection by GMAC of certain
rentals payable under leases (acceptable to GMAC) of motor vehicles, consisting
of eligible passenger cars and light trucks having a gross vehicle weight of
less than 15,000 pounds, in which GMAC has a security interest pursuant to a
Security Agreement in a form acceptable to GMAC.
B. Procedure
Credit investigation--Lessor shall furnish to GMAC the name and address of
each prospective Lessee whose rental payments Lessor desires to be administered
under this Agreement, together with any further information GMAC may reasonably
request to enable it to investigate the credit standing of Lessee. Upon receipt
of the information, GMAC shall conduct a credit investigation and notify Lessor
whether it will administer Lessee's rentals under this Agreement.
Documentation--Upon notification by GMAC that it will administer the
rentals, Lessor shall furnish GMAC with:
(1) An executed Security Agreement in the form provided by GMAC covering the
motor vehicles leased; and
(2) An executed copy of the completed Non Maintenance Lease Agreement in the
form provided by GMAC together with any attachments; or
(3) When the Non Maintenance Lease Agreement is not used, an executed copy of
the completed lease agreement, including any attachments, together with an
executed Acknowledgment of Notice of Assignment in the form provided by
GMAC.
C. GMAC Services
GMAC agrees to:
1. Investigate the credit standing of each prospective Lessee
designated by the Lessor;
2. Bill each Lessee, whose rentals are administered under this
Agreement, in advance for each monthly rental, except for the
monthly rental for the first month of the lease term which will be
collected by the Lessor upon delivery of the vehicle;
3. Collect rentals and follow any Lessee in default for payment of past
due rentals;
4. Notify Lessor of each Lessee in arrears in excess of 45 days;
5. Apply collected rentals, less monthly service charges, to Lessor's
obligations to GMAC under the Security Agreement and remit monthly
to the Lessor any excess as may be applicable to sales taxes and/or
insurance premiums.
6. Repossess a leased motor vehicle, in its own or Lessor's behalf, if,
in the opinion of GMAC, repossession is necessary or desirable by
reason of the Lessee's default under the lease;
7. Return any leased motor vehicle to Lessor within 90 days after
default in payment of the oldest rental payment remaining unpaid on
the date the vehicle is returned to Lessor, provided, however, that
GMAC will not be responsible to repossess and return any leased
motor vehicle if it is unable to repossess the vehicle because of
(a) Lessor's failure to have obtained a proper certificate of title
when required by state law, or (b) an alleged breach by Lessor under
its lease with the Lessee. In the event GMAC is unable to repossess
because of any legal proceedings (bankruptcy, receivership,
replevin, or other litigation) the running of the time period shall
be suspended during such period, and
<PAGE>
8. In the event of repossession to reduce the Lessor's responsibility
under Provision D for the unpaid balance under the Security
Agreement governing any leased motor vehicle covered by deductible
physical damage insurance, where physical damage in excess of the
deductible is incurred prior to repossession, to the extent of one
deductible not to exceed $250 for collision insurance and $100 for
comprehensive insurance.
D. Lessor's Agreements
Lessor understands and agrees that:
1. Lessor will forward to the appropriate governmental authorities
promptly when due the sales taxes, if any, remitted to Lessor
monthly by GMAC under Provision C(5) above.
2. Lessor shall pay to GMAC a monthly service charge with respect to
each lease administered hereunder, which fee shall be deducted
monthly from the applicable Lessee's payment prior to application of
the surplus thereof as set forth in Provision C(5). The monthly
service charge with respect to each lease shall be that in effect at
the time the lease is accepted for administration by GMAC and shall
not vary during the term of the lease. GMAC shall quote the fee
applicable to new leases from time to time and on request.
3. Lessor shall indemnify GMAC against and hold it harmless from any
and all loss, liability, damages, costs and counsel fees in any way
arising out of any claim or action by a lessee or other party
relating to a breach or alleged breach by Lessor under a lease
covering a vehicle in which GMAC has or had a security interest.
4. GMAC's assumption of responsibility pursuant to Provisions C(6),
C(7) and C(8) is conditioned on the following:
a. That liability insurance coverage acceptable to GMAC with
minimum limits of $100,000/$300,000 for bodily injury and
$25,000 for property damage is provided under the lease and
maintained during the term thereof.
b. That physical damage insurance, acceptable to GMAC and
protecting its interest against the hazards of fire, theft,
and collision, is provided under the lease and maintained
during the term thereof.
C. That the Lessee was of legal age at the time the lease was
executed.
d. That the leased motor vehicle is accurately identified in the
lease.
e. That the security deposit, if any, obtained from the Lessee
under the lease is exactly as specified therein.
f. That the leased motor vehicle will be used exclusively by the
Lessee or in his own business and not for hire.
9. That all disclosures required by law were made to the Lessee
prior to execution of the lease.
5. Lessor shall pay to GMAC the unpaid balance due under the applicable
Security Agreement promptly upon the earliest of:
a. The 30th day following termination of the lease term (including
extensions thereof approved by GMAC); or
b. the 30th day after Lessor obtains possession of the vehicle for any
reason unless the vehicle has been placed in lease with another
Lessee approved by GMAC; or
C. the 30th day after loss of the vehicle by theft or similar cause if
the vehicle is not recovered prior thereto; or
d. the 30th day after the vehicle is destroyed or so damaged as to be
rendered unsuitable for repair and further rental; or
e. the sale of the vehicle; or
f. otherwise in accordance with the terms of the Security Agreement.
<PAGE>
E. Payment in Full of Security Agreement
GMAC's assumption of responsibility under this Agreement will terminate
with respect to any leased motor vehicle upon payment in full of Security
Agreement covering said vehicle, in which event GMAC shall reassign to
Lessor its right to any rentals thereof.
F. Substitution for Prior Agreement
This Agreement shall terminate any Retail Lease Service Plan Agreement for
passenger cars and light trucks presently in effect between GMAC and
Lessor, provided that the rights and responsibilities of GMAC and Lessor
under said Retail Lease Service Plan Agreement for passenger cars and
light trucks with respect to rentals being administered thereunder on the
date of this Agreement shall not be affected.
G. Duration of Agreement
This Agreement shall terminate 5 days after receipt by either party of
written notice of termination. Termination shall not affect the rights and
responsibilities of GMAC and Lessor with respect to rentals being
administered under this Agreement at the effective termination date.
GENERAL MOTORS ACCEPTANCE CORPORATION Major Fleet and Leasing Corp.
EAB Plaza-West Tower 1044 Northern Boulevard
Uniondale, NY 11553 Roslyn, NY 11576
By [ILLEGIBLE] By [ILLEGIBLE]
------------ -----------------------------
(Title) (Title)
Isl Jacquelynn Bruce
JACQUELYNN BRUCE
NOTARY PUBLIC, State of New York
No. 41-0463650 - Queens County
CONTRIBUTION AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of this 6th day of October,
1997 by and between FIDELITY HOLDINGS, INC., a Nevada Corporation (the
"Company"), DORON COHEN, an individual ("Cohen"), and Bruce Bendell, an
individual ("Bendell").
Recitals
WHEREAS, in connection with that certain Agreement dated March 25, 1996
(the "Master Agent Agreement") by and between Computer Business Sciences, Inc.
("CBS"), Nissko Telecom, Ltd. (the "Agent"), Avraham Nissanian ("Nissanian"),
Yossi Koren ("Koren"), and Chamual Livian ("Livian" and together with Nissanian
and Koren, the "Nissko Principals") under which the Agent has agreed to purchase
certain machines.
WHEREAS, under the terms of the Master Agent Agreement, CBS has agreed
that in the event that the Nissko Principals do not realize certain revenues
from the operations of the machines purchased from CBS that CBS will pay the
shortfall (the "Payment Obligations").
WHEREAS, to secure the Payment Obligations, Cohen and Bendell have each
pledged 500,000 shares of the common stock of the Company (the "Pledged Shares")
to the Nissko Principals.
WHEREAS, in the event that CBS does meet its Payment Obligations and the
Nissko Principals foreclose on the Pledged Shares, the Nissko Principals will be
required to transfer to Cohen and Bendell in equal shares the remaining 55% of
the Agent's issued and outstanding stock (the "Agent's Shares").
WHEREAS, Cohen and Bendell agree that upon receipt of the Agent's Shares,
Cohen and Bendell will contribute the Agent's Shares to the Company in exchange
for reimbursement by the Company to Cohen and Bendell of the value of the
Pledged Shares foreclosed upon by the Nissko Principals.
Terms of Agreement
In consideration of their mutual covenants and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Contribution of Agent's Shares to the Company. The parties agree that,
in the event that the Nissko Principals foreclose upon the Pledged Shares, Cohen
and Bendell will contribute the Agent's Shares received from the Nissko
Principals to the Company in exchange for reimbursement by the Company of the
Fair Market Value (as defined below) of the Pledged Shares.
-1-
<PAGE>
2. Fair Market Value. The parties agree that the "Fair Market Value" of
the Pledged Shares of the Company will be equal to (i) the closing price of the
Company's common stock as reported by the NASDAQ National Market or SmallCap
Market, or other exchange upon which the Company's shares are listed, for the
trading day immediately preceding the date of the foreclosure on the Pledged
Shares or (ii) the mean between the closing bid and asked prices per share of
the Company's common stock over the 20 consecutive days prior to the date of the
foreclosure on the Pledged Shares.
3. Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the subject matter of this Agreement, and supersedes
all prior agreements, written or oral, with respect thereto.
4. Waivers and Amendments. This Agreement may be amended, superseded or
canceled, and the terms hereof may be waived, only by a written instrument
signed by both parties or, in the case of a waiver, by the party waiving
compliance.
5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State.
6. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
FIDELITY HOLDINGS, INC.
/s/ Doron Cohen
---------------------
Doron Cohen
President
/s/ Bruce Bendell
---------------------
Bruce Bendell
/s/ Doron Cohen
---------------------
Doron Cohen
March 16, 1998
Mr. Geofrey Alexander
Fidelity Holdings, Inc.
80-02 Kew Gardens Road
Suite 5000
Kew Gardens, New York 11415
Re: Major Automotive Group, Inc.
Gentlemen
Falcon Financial, L.I.C., ("Falcon") is pleased to inform you that Falcon has
approved your loan application ("Application") for a loan (The "Loan"), and
agrees to lend to the captioned borrower" (the "Borrower") the principal amount
and subject to the terms and conditions set forth in this letter and the exhibit
hereto.
The principal ten-as and conditions on and subject to which Lender is willing to
make the Loan arc set forth herein in this letter (the "Commitment Letter"), and
the Summary of Terms (the "Term Sheet") in the attached Exhibit A
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings accorded to such terms in the Term Sheet. Unless otherwise. defined
therein, capitalized terms used in the Term Sheet shall have the meaning given
to such terms in this Commitment Letter. This Commitment Letter and the terms
set forth in the Term Sheet may not be amended except Pursuant to a writing
signed by each of the parties hereto.
Although Falcon is committing to provide the entire amount of the Loan on the
terms set forth in the Term Sheet, (i) the Loan may be funded by an affiliate of
Falcon (collectively, Falcon or such affiliate, "Lender") and (ii) Lender may
transfer, sell or dispose of all or any part of the Loan or participation
interests therein, as whole loans or in a securitization or other disposition
(the "Securitization or Other Disposition"). Borrower understands that such a
transaction may be a Securitization or Other Disposition in which all or any
part of the Loan is sold to a special purpose entity which issues bonds or other
securities collateralized by such Loan and such securities may be rated by one
or more statistical rating agencies (each a "Rating Agency") and privately
placed (in transactions which may be eligible for private resales pursuant to
Rule 144A under the Securities Act of 1933 (" 1933 Act")) or sold in public
offerings registered under the L933 Act. Borrower agrees to fully cooperate with
Falcon Financial LLC 1015 West Main Street - Stamford, Connecticut 06902 -Tel
2,03-967-0000 - Pax 203-967-1717
P.O. BOX Y177 - Rancho Santa Fe, California 9ZO67 . Tel '619-759-0011 - Fax
619-759-1199
Lender in connection with any Securitization or Other Disposition, including,
but not limited to providing Lender with any inform ation deemed necessary to
complete the Securitization or Other Disposition.
Borrower represents and warrants and covenants that:
(1) all information which has been or 15 hereafter made available to Lender by
Borrower or any of its representatives in connection with the transactions
contemplated hereby is and will be complete and correct
<PAGE>
in all material respects and does not and will not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained therein not materially misleading in light of the
circumstances under which such statements are made-, and
(2) all financial projections that have been or are hereafter prepared by or on
behalf of Borrower or an), of its Representatives and made available to Lender,
any Rating Agency or potential investors, or their respective counsel have been
or will be prepared in good faith and based upon reasonable assumptions.
Borrower agrees to supplement in writing the information and projections
referred to in the two preceding paragraphs from time to time until the
Completion of the Securitization or Other Disposition, so that the
representations and warranties in the preceding sentence remain correct. Lender
may use and rely on such information and projections in connection with the Loan
and the Securitization or Other Disposition of the Loan, without independent
verification thereof and notwithstanding any diligence or investigation made by
or on behalf of Lender.
Lender's commitment hereunder is subject to, but shall not be limited to, the
conditions set forth herein and in the Term Sheet, the execution and delivery of
this Commitment Letter, and the negotiation, execution and delivery of various
loan documents with respect to the Loan substantially in the form of Lender's
standard loan documentation, including, but not limited to, a Secured Promissory
Note, a Security Agreement, Guarantees, Mortgages, and other legal documents
that may be required by Lender (collectively, the "Loan Documents"), Lender's
commitment is also subject to the completion of the review and due diligence
efforts that Lender shall deem necessary regarding the organization and capital
structure of Borrower and Guarantor.
If at any time prior to closing, Lender learns of facts and circumstances,
either pursuant to Lender's due diligence review or other-wise, that in the
opinion of Lender could materially and adversely affect the Loan or the
satisfactory Securitization or Other Disposition of the Loan, Lender in. its
sole discretion may suggest alternative financing amounts or structures, or may
decline to provide the proposed Loan, or decline to participate in the
Securitization or Other Disposition. Any matters which are not addressed herein
or in the Term Sheet shall be subject to the approval of Lender.
All costs and expenses (including, without limitation, the fees and expenses of
counsel and other professionals retained by Lender and other out-of-pocket
expenses) arising out or or in any way related to the preparation, negotiation,
execution and delivery of this Commitment Letter, the Loan Documents and any
transactions contemplated therein shall solely be for the account of Borrower,
and Borrower agrees to pay such costs and expenses directly, or through the
prompt reimbursement of Lender. Borrower further agrees to indemnify and hold
harmless Lender and each of its officers,
622094.4 1/16198
directors, employees, agents and representatives (the "Representatives") (each,
an "Indemnified Person") against, and to reimburse each Indemnified Person, upon
its demand, for, any losses, claims, damages, liabilities or other expenses
("Losses") tp which such Indemnified Person may become subject, to the extent
that such Losses arise out of or in any way relate to or result from this
Commitment Letter, the Loan Documents or the transactions contemplated therein,
including, without limitation, any costs or expenses incurred in connection with
investigating, defending or otherwise participating in any legal proceeding
relating to any of the foregoing (whether or not such Indemnified Person is a
party thereto); provided, however, that the foregoing will not apply to any
Losses to the extent that they are adjudged by a final decree or order of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. Borrower obligations under this
paragraph shall remain effective whether or not definitive financing
documentation is executed and notwithstanding any termination of this Commitment
Letter. Neither Lender Borrower nor any other Indemnified Person ages shall be
responsible
<PAGE>
or liable to any other person for consequential darnages which may be alleged
arising out of or in any way related to this Commitment Leiter, the Loan
Documents or the transactions contemplated therein.
By executing this Commitment Letter, Borrower acknowledges that this Commitment
Letter, and the Loan Documents contemplated herein are the only agreements
between you and Lender with respect to the Loan and set forth the entire
understanding of the parties with rcspecL thereto. This Commitment Letter may
not be changed except pursuant to a writing signed by each of the parties
hereto. This letter shall be governed by, and construed in accordance with, the
laws of the State of New York.
This letter is delivered to you on the understanding that prior to its
acceptance by you, neither this letter nor any of its terms or substance shall
be disclosed, directly or indirectly, to any other person except to your
employees, agents, representatives and advisers who are directly involved in the
consideration of this matter Or as disclosure may be compelled to be disclosed
in a judicial or administrative proceeding or as otherwise requ red by law.
[SIGNATURE PAGE FOLLOWS]
6.12094.4
If you are in agreement with the foregoing, please sign and return to Lender die
enclosed copies of this letter no later than 5:00 P.M., New York time, on March
16, 1998. This offer shall terminate at such time unless prior thereto we shall
have received a signed copy of this Letter.
We look forward to working with you on this transaction.
FALCON FINANCIAL LLC
By: /s/ David Karp,
Name: David A. Karp
Chief Operating Officer
ACCEPTED AND AGREED TO;
Major Automotive Group,
By: /s/ Bruce Bendell
Title: President
3
EXHIBIT A
SUMMARY OF TERMS
TERM LOAN
1. Lender: FALCON FINANCIAL, LLC
2. Borrower: Major Automotive Group, Inc.
<PAGE>
3. Principal Amount: The principal amount of the Loan ("Principal Amount") will
be seven million five hundred thousand dollars ($7,500,000). The Loan will be
evidenced by a secured promissory note (the "Note"). This amountd is subject to
adjustment in accordance with the Lender's underwriting guidelines based upon
Lender's verification of the information submitted to the Lender and based upon
the appraised business value of the collateral locations.
4. Term: The terms of the Notes shall be fifteen (15) years.
5. Interest Rate: Default Rate Borrower agrees to pay interest on the
outstanding Principal Amount until the Loan has been paid in full in accordance
with its terms. The interest rate for each loan prior to an event of default
will be a fixed rate of interest (the "Interest Rate") determined by Lender at
the time of closing of the Loan. Lender currently anticipates that the Notes
will bear interest at a fixed per annum raze of interest equal to The sum of (a)
450 basis points and (b) the yield on the I 0-year U.S. Treasury bond rate at
the time of the closing of the Loan. Lender makes no representation as to what
the actual rate shall be or as to whether sources of funds or indices upon which
the indicative rate is based shall be available at closing. Interest shall be
computed based on a 360 day year of twelve 30 day months based on the actual
number of days elapsed with respect to any partial month. Upon the occurrence
and during the continuation of any event of default, the outstanding Principal
Amount shall, at the Lender's option.. bear interest at a rate equal to the sum
of the Interest Rate and 300 basis points.
6. Commitment Fee: In consideration of the delivery of this Commitment Letter,
each Borrower will pay to Lender a commitment fee (the "Commitment Fee") in the
sum of one percent (1.00%) of the principal amount of the Loan. One half of the
Commitment Fee shall be due and payable upon the execution of this Commitment
Letter, with the remainder due and payable at closing if and when a closing
should occur. The Commitment Fee will be non-refundable; provided, however, that
the Commitment Fee will be refunded to Borrower if Borrower satisfies the
conditions set forth in the Commitment Letter and, notwithstanding Borrower's
satisfaction of conditions.. Lender refuses to close the Loan.
7. Payments of Principal and Interest: The first payment shall be due on the
date that such loan closes (the "Borrower's Funding Date Payment"), and will be
paid from the loan proceeds to be disbursed at closing. Such first payment will
be an amount equal to the interest payable from the date of closing through the
last day of the month in which closing occurs (unless funding occurs on the
first day of the month). The required monthly payment amount will consist of (i)
amortization of the Principal Amount over the Amortization Period (described
below), and (ii) interest on the outstanding Principal Amount. All payments
after the Borrower's Funding Date Payment through the maturity date shall be
made on the first day of each calendar month (each a "Payment Date") (or if such
date is not a business day, the first
622094.4 1:55PNI
business day of the month), in United States dollars and in immediately
available funds, at such place or places as the Lender may request.
8. Amortization : Borrower will be required to amortize the full Principal
Amount over an amortization period of one hundred eighty (180) months
("Amortization Period").
9. Late Charge: In the event that Lender has not received a required monthly
payment amount on any Payment Date, or any other amount when due, Borrower shall
promptly pay, upon demand, a late charge in an amount equal to the product of
(a) the amount due on any such date less the amount actually received on such
date multiplied by (b) 6.05.
10. Prepayment: Borrower will not be permitted to make any prepayment during
five (5) years after the closing (the "Lockout Period"). After expiration of the
Lockout Period, each Note or the Loan may be prepaid in full but not in part on
any Payment Date. Any prepayment shall also require the
<PAGE>
payment of a Yield Maintenance Amount (as defined in the Loan Documents)
generally to mean an amount equal to the excess, if any, of the value of all
remaining payments, discounted to the prepayment date, over the outstanding Loan
Amount using as a discount rate generally equal to the sum of: (i ) the U.S.
Treasury bond rate for obligations having a maturity equal to the Remaining
Average Life of the Loan; and (ii) 225 basis points. Borrower shall not be
permitted to make any prepayment without the written consent of Lender if an
Event of Default has occurred or is continuing.
11. Use of Proceeds: Borrower will use the proceeds of the Loan solely for
lawful business or commercial purposes identified in the Borrower's application
and not otherwise prohibited by the terms hereof or the Loan Documents. It is
anticipated that approximately four million dollars ($4,000,000) shall be used
to finance Borrower's acquisition of the 50% interest of Harold Bendell in Major
Dodge, Inc. and Major Chrysler, Plymouth, Jeep, Eagle, Inc. and approximately
three million dollars ($3,000,000) shall be used to acquire real estate related
to the operations of such dealerships.
12. Collateral: Borrower Will grant Lender a first mortgage, deed of trust or
deed to secure debt on the real property located at 46-01 Northern Boulevard and
3 420 45" Street in Long Island City, New York on which Borrower operates its
business and, subject to the interest of Chrysler Credit or any replacement
lender thereof with respect to its floorplan and existing cap loan financing, a
first priority perfected security interest in and right of set off with respect
to the Collateral (as defined in the Loan Documents) including the following
property and assets, whether now owned and existing or hereafter acquired or
arising: all goods (including equipment and inventory (but excluding Inventory
subject to a permitted encumbrance)), general intangibles (other than the
franchise agreements and licenses except as provided below), accounts,
certificates of title, fixtures, money, instruments, securities, investment
property, documents, chattel paper, credit balances. deposits, deposit accounts,
letters of credit, bankers' acceptances, guaranties, credits, claims, chose,- in
action, demands, and all present and future liens, security interests, rights,
insurance, remedies, title and interest in, to and in respect of accounts and
other Collateral and all other personal property, now or herafter owned,
acquired., existing, arising, held, used, sold or consumed in connection with
Borrower's business or property and any other property, rights and interests of
Borrower which at any time relate to, arise out of or in connection with the
foregoing or which shall come into the possession or custody or tinder the
control of Lender or any of its agents, representatives, associates or
correspondents, for any purpose, all additions and accessions thereto,
substitutions therefor and replacements and improvements of or to any or all of
the foregoing, all interest, income, dividends, distributions and earnings
thereon or other monies or revenues derived
622094.4
therefrom. including any such property received in connection with any
disposition of the franchiseI nsuring the Collateral or agreements and all
moneys which rnay become payable unde any policy i * other-wise required to be
maintained hereunder (including return of unearned premium) and all products and
Proceeds (as defined in the Loan Documents) of the foregoing. In the event and
to the extent that the franchise agreement and license now or hereafter may be
pledged or Borrower now or hereafter may grant a security interest in its rights
thereunder either because the terms of the franchise agreement and/or license do
not restrict such pledge or grant, or the franchisor has consented to such
pledge or grant or applicable law permits such pledge or grant without Borrower
breaching or being in default under such franchise agreement or license, then
Borrower will grant a security interest in the franchise agreements and
licenses, whether now owned or hereafter acquired, and all Proceeds thereof to
the extent allowed by law. In connection therewith, Borrower will execute one or
more Security Agreements. In addition to the restrictions on the disposition of
Collateral, Borrower will agree not to sell, assign, transfer, grant a security
interest in, or otherwise encumber or dispose of any of the Collateral
(including the franchise agreements and licenses) except as
<PAGE>
expressly permitted in the Loan Documents. Borrower will be permitted to sell or
assign its interest in a franchise and substitute such interest with an.
interest in another franchise or with sufficient cash collateral upon the
consent of Under, in its sole discretion, provided that, among other things.,
such sale or assignment will not result in an inability by Borrower to maintain
its Financial covenants and that, based upon a current Business Valuation, the
ratio of (i) the outstanding loan balance at the time of substitution over (ii)
the collateral for the loan, including the substituted franchise and any
additional cash collateral, is not greater than .70 to 1.00.
13. Assignment. Borrower may not, in whole or in part, directly or indirectly,
assign it rights and obligations hereunder or under the Loan Document without
specific prior Assignment consent of Lender, and the payment to Lender of an
amount equal to one percent (1.00% ' ) of the then outstanding Loan Amount and
all reasonable costs and expenses incurred by Lender in connection with said
assignment Notwithstanding the foregoing, the one-percent (1.00%) fee will not
be charged in connection with a transfer pursuant to a merger of Borrower and
Fidelity Holdings, Inc.
14. Event of Default: An event of default is defined to include (i) Borrower's
failure to make any payment when due under the Loan Documents or Borrower's
disclaimer of liability under or enforceability of any Loan Document; (ii) the
nonrenewal or termination of any franchise agreements, real property leases and
licenses to use trademarks of the franchisor, if any (the "Principal
Agreements"); or (iii) Borrower's default under, failure to perform or observe
any covenant or condition of or agreement in, or breach of, or making of a
material inaccuracy in or omission from, any representation or warranty under or
in any of the Loan Documents, the Principal Agreements, any financial or other
statement delivered to Secured Party or any agreement, instrument or obligation.
in connection with any Permitted 'Encumbrance, and in the case of (iii), which
default, failure, breach, inaccuracy or omission continues beyond any applicable
grace period provided therein.
15. Remedies. In the event of default under any of the Loan Documents, the term
of the Loan may be accelerated (requiring Borrower to pay the full amount due in
the event of a prepayment) and Lender will. among other things, be accorded all
rights and remedies under the Loan Documents and by law (including the Uniform
Commercial Code), including, without limitation, the right to take possession of
and operate the Collateral and to dispose of such Collateral.
16. Closing Documents:
62'
a. At the closing Borrower must execute and deliver the Loan Documents in form
and substance satisfactory to Lender and Lender's counsel, including the
following:
i. Secured Promissory Note evidencing Borrower's obligation to repay the
Loan;
ii. Security Agreement(s) granting to Lender security interests in the
Collateral referred to above;
iii. Guarantee of Fidelity Holdings, Inc. (the "Guarantor") which shall be
unconditional;
iv. Mortgages, Deeds of Trust, Deeds to Secure Debt, and/or collateral
assignments of lease, if any ("Mortgages"), encumbering die Collateral referred
to above;
<PAGE>
V. Subordination Agreements in connection with any indebtedness of officers,
employees or affiliates of Borrower; and
vi. Any and all other documents required by us and our counsel in
connection with each loan.
b. At or prior to closing, Lender shall have received each of the following
documents, in form and substance satisfactory to us and our counsel:
i, Opinions of Borrower's legal counsel in all applicable jurisdictions and
conforming with Lender's standard form opinion;
ii, Organizational documents for each entity borrower and guarantor, certified
by the respective Secretaries of State of the state Where organized and/or
appropriate officers;
iii. Certificate of good standing for each entity borrower and guarantor issued
by the respective Secretaries of State of the state where appropriate, together
with evidence of payment of all corporation and/or franchise taxes in each such
state".
iv. Certified transactional resolutions and incumbency of officers and
signatories, as appropriate;
V. Insurance policies satisfying Lender's requirements from providers satisfying
Lender's requirements generally rated A-/V or better by Best and, among other
things covering the full replacement value of all improvements, and providing
for business interruption insurance and key man life insurance, naming Lender,
its successors and assigns, as additional insured and/or loss payee;
vi. Flood, earthquake, or other hazard insurance policies for each location as
appropriate:
vii. A valid permanent certificate of occupancy for each location, covering all
improvements or satisfactory letter [Tom appropriate authority;
622094.4
Viii. Business and all other required licenses, permits, and certificates
required to lawfully operate each business at the location;
ix. Complete copies of all leases (including superior leases in the case of any
sublease) with respect to each location;
X. An ALTA policy of mortgage title insurance in the amount of the loan with
respect to each loan secured by fee or ground lease mortgage, containing no
exceptions other than those approved by Lender and our attorneys;
xi. A currently dated title survey satisfying Lender's requirements;
xii. With respect to each leased location an estoppel letter in Lender's
standard form, similar estoppels maybe required of lessor's of each superior
loan, if any;
<PAGE>
xiii. With respect to each leased location a non-disturbance agreement in
Lender's standard form may be required from each mortgagee and lessor; and
xiv. Any and all other documents required by Lender in connection with the Loan.
Lender's forms of Loan Documents arid required closing documents., including
legal opinions and resolutions will be provided to you and your counsel
following your acceptance of this letter.
17. Conditions to Acceptance : This offer is subject to the following additional
conditions:
a. You must sign, date and return the enclosed copy of this letter by facsimile
transmission on or before March 16, 1998.
b. You must complete, sign, date and return the authorization form attached
hereto, which allows certain third parties the opportunity to conduct due
diligence investigation on behalf of Lender, necessary to substantiate the
financial, legal and factual premises upon which this Commitment Letter is
based.
e. You must submit (i) payment of one half of the Commitment Fee as required in
paragraph 6 of this letter, and (ii) payment in the amount of twenty-seven
thousand five hundred dollars ($27,500) (the "Due Diligence Deposit") to be
applied to the fees and expenses associated with required third-party due
diligence reports and legal review and documentation. Borrower's payment of the
Due Diligence Deposit in no way limits its obligations to pay Lender's costs and
expenses in connection with the preparation, negotiation, execution and delivery
of the Commitment Letter and the Loan Documents , the transactions contemplated
thereby and the related Closing. Should a closing of the Loan not occur, then
Lender shall return to Borrower the Due Diligence Deposit less the out-of-pocket
costs expenses incurred by or on behalf of Lender.
18. Additional Conditions to Closing:
a. Disposition satisfactory to Lender of all outstanding liens, claims,
encumbrances or rights of others affecting the Collateral.
Exhibit 11
Statement re: Computation of Per Share Earnings
FIDELITY HOLDINGS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Number of shares outstanding January 1, 1997 6,279,200
Common stock issued during the year:
Weighted
Average
Date Days Number of Number of
Issued Outstanding Shares Shares
March 20,1997 286 26,500 20,764
August 8, 1997 145 50,000 19,863
September 30, 1997 92 523,000 131,822
November 3, 1997 58 17,000 2,701
-----
Weighted average number of shares issued during 1997 175,150
-------
Number of shares used in computing basic earnings per share 6,454,350(A)
Dilution:
250,000 shares of Preferred Stock, each share
convertible into 2 shares of common stock 500,000
Warrants representing 1,077,000 shares, exercisable
at $1.25 per share, with the average market value
approximately $2.80 per share 596,196
-------
Number of shares used in computing diluted earnings per share 7,550,546(B)
---------
Earnings Per Share:
Net Income $ 369,139(C)
Earnings per share - basic [(C)/(A)] $ 0.06
Earnings per share - diluted [(C)/(B)] $ 0.05
-56-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND
RELATED FOOTNOTES OF FIDELITY HOLDINGS, INC. AND SUBSIDIARIES AS OF AND FOR THE
YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
FOOTNOTES.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 217,191 574,486
<SECURITIES> 0 0
<RECEIVABLES> 1,650,919 179,837
<ALLOWANCES> 0 0
<INVENTORY> 164,661 1,212,062
<CURRENT-ASSETS> 4,200,918 3,544,991
<PP&E> 1,703,731 1,146,852
<DEPRECIATION> (467,218) (123,329)
<TOTAL-ASSETS> 9,401,343 9,316,864
<CURRENT-LIABILITIES> 1,780,988 3,060,920
<BONDS> 1,002,572 1,159,585
0 0
2,500 2,500
<COMMON> 68,957 62,792
<OTHER-SE> 6,453,278 5,178,921
<TOTAL-LIABILITY-AND-EQUITY> 9,401,343 9,316,864
<SALES> 2,909,251 3,175,528
<TOTAL-REVENUES> 3,862,284 3,434,475
<CGS> 823,397 965,792
<TOTAL-COSTS> 3,084,065 2,270,797
<OTHER-EXPENSES> 137,475 32,410
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 121,092 24,132
<INCOME-PRETAX> 528,139 1,116,966
<INCOME-TAX> 159,000 441,000
<INCOME-CONTINUING> 369,139 675,966
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 369,139 675,966
<EPS-PRIMARY> .06 0.12
<EPS-DILUTED> .05 0.11
</TABLE>
