Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g)
of the Securities Exchange Act of 1934
................................................................................
ARC COMMUNICATIONS, INC.
(Name of small business issuer in its charter)
New Jersey 22-3201557
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Arc Communications, Inc.
788 Shrewsbury Avenue
Tinton Falls, New Jersey 07724
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (732) 219-1766
Securities to be registered under Section 12(b) of the Act:
Title of each class to be registered Name of each exchange on which each
class is to be registered
None
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
- --------------------------------------------------------------------------------
(title of class)
CLASS A PREFERRED STOCK, $.20 PAR VALUE
- --------------------------------------------------------------------------------
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Arc Communications, Inc.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number and Caption in Form 10-SB Caption in Form 10-SB
------------------------------------- ---------------------
<S> <C>
1. Item 101. Description of Business ......................... Description of Business
2. Item 303. Management's Discussion and Analysis Management's Discussion
or Plan of Operation...................................... and Analysis
3. Item 102. Description of Property.......................... Description of Properties
4. Item 403. Security Ownership of Certain Security Ownership of Certain
Beneficial Owners and Management............................ Beneficial Owners and Management
5. Item 401. Directors, Executives Officers, Directors, Executives Officers,
Promoters and Control Persons.............................. Promoters and Control Persons
6. Item 402. Executive Compensation........................... Executive Compensation
7. Item 404. Certain Relationships and Related Certain Relationships and Related
Transactions.............................................. Transactions
8. Item 202. Description of Securities........................ Description of Securities
Market Price of and Dividends on
9. Item 201. Market for Common Equity and the Registrant's Common Equity
Related Stockholder Matters............................... and Other Shareholder Matters
10.Item 103. Legal Proceedings ............................... Legal Proceedings
11.Item 304. Changes in and Disagreements with ................ Changes in and Disagreements
with Accountants on Accounting and Financial Accountants
Disclosure
12.Item 701. Recent Sales of Unregistered Recent Sales of Unregistered
Securities ............................................... Securities
13.Item 702. Indemnification of Directors and Indemnification of Directors and
Officers ................................................. Officers
14.Item 310. Financial Statements ............................ Financial Statements
15.Item 601. Exhibits ........................................ Exhibits
</TABLE>
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TABLE OF CONTENTS
PART I.........................................................................5
ITEM 1. DESCRIPTION OF BUSINESS..........................................5
BACKGROUND....................................................5
GENERAL.......................................................6
Services..........................................7
THE COMPANY'S STRENGTHS.......................................7
Focus on Clients' Business Objectives.............7
Technological Expertise...........................7
Creative Expertise................................7
ARC'S STRATEGY................................................8
Capitalize on Accomplishments and
Market Opportunities.........................8
Deploy Leading Technologies.......................8
MARKETING.....................................................8
GOVERNMENT REGULATION.........................................8
COMPETITION...................................................9
EMPLOYEES.....................................................9
ARC INTERNET PUBLISHING, INC..................................9
PERSONAL EMERGENCY MEDICAL INFORMATION
SERVICES INC.................................................10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS............................10
FORWARD-LOOKING STATEMENTS ..................................10
RESULT OF OPERATIONS ........................................11
LIQUIDITY AND CAPITAL RESOURCES .............................12
ARC YEAR 2000 COMPLIANCE.....................................13
ITEM 3. DESCRIPTION OF PROPERTIES.......................................13
THE NEW JERSEY OFFICE........................................13
THE FLORIDA OFFICE...........................................13
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT...........................................13
SHAREHOLDERS AGREEMENT.......................................14
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS.................................................15
ITEM 6. EXECUTIVE COMPENSATION..........................................16
SUMMARY COMPENSATION TABLE...................................16
OPTIONS OF MANAGEMENT........................................17
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS....................................................17
ITEM 8. DESCRIPTION OF SECURITIES.......................................17
COMMON STOCK.................................................17
Dividends........................................18
Voting Rights....................................18
Preemptive Rights................................18
PREFERRED STOCK..............................................18
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OPTIONS......................................................19
TRANSFER AGENT...............................................19
PART II.......................................................................20
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER
MATTERS. .......................................................20
MARKET.......................................................20
OUTSTANDING SHARES AND SHAREHOLDERS OF
RECORD.......................................................20
DIVIDENDS....................................................21
ITEM 2. LEGAL PROCEEDINGS...............................................21
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS.....................................................21
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.........................21
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.......................22
PART F/S......................................................................23
ITEM 1. FINANCIAL STATEMENTS............................................23
PART III......................................................................24
ITEM 1. INDEX TO EXHIBITS...............................................24
INDEX OF FINANCIAL STATEMENTS...................................25
SIGNATURES......................................................26
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
a. BACKGROUND
Arc Communications, Inc. is a New Jersey corporation which was incorporated
on October 21, 1992 (hereinafter, "Arc", the "Company", "we", "us" and "our"
will each refer to Arc Communications, Inc.). The Company was originally
incorporated under the name Arc Slide Technologies Ltd. ("ASTL"). The Company
was initially authorized to issue an aggregate of 10,000 shares of common stock
with no par value.
On August 14, 1996, the Company, formerly Alliance Telecommunications
Holding Corp., acquired ASTL, a Florida corporation, acquired ASTL in a tax-free
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986. The Company issued 10,400,000 shares of common stock to
the shareholders of ASTL. The acquisition was accounted for as a pooling of
interest. Thereafter, ASTL became a wholly owned subsidiary of said Arc
Communications, Inc. On November 21, 1997, Arc Communications, Inc., a Florida
corporation (the "Parent"), was merged with and into its wholly owned New Jersey
subsidiary, ASTL, in a tax free reorganization within the meaning of section
368(a)(1)(A) of the Internal Revenue Code of 1986. In exchange for each share of
common stock of the Parent, the shareholders of the Parent received one share of
common stock of ASTL. At that time, ASTL changed its name to ARC Communications
Inc., the current name of the Company. The merger was accounted for as a pooling
of interest.
On July 23, 1996, Arc-Mesa Educators Ltd.("Arc-Mesa"), a New Jersey
corporation, was formed for the purpose of engaging in the business of offering
continuing education products and services. Arc-Mesa was owned 45% by Arc
Internet Publishing Corp., a wholly owned subsidiary of ASTL, 45% by Mesa
Marketing Inc., a Florida corporation, and 10% by Andrew Astrove, M.D. Said
parties entered into a Shareholders Agreement dated August 1, 1996 governing the
ownership and operation of Arc-Mesa. On October 17, 1997, Arc Internet
Publishing Corp. acquired all the assets of Mesa Marketing, Inc. ("Mesa"), a
Florida corporation, by statutory merger. The Company issued 100,000 shares of
common stock, with a par value of $.001 per share, to the shareholders of Mesa
in exchange for all the assets of Mesa. Pursuant to the purchase agreement,
50,000 shares remain held in escrow payable to Mesa shareholders based on the
achievement of certain financial goals. The shares remain in escrow as financial
goals have not been met as of this date. On April 6, 1998, Arc Internet
Publishing Corp. acquired all the assets of Arc-Mesa, by statutory merger. As a
result, Arc Internet Publishing Corp. acquired the remaining 10% interest in
Arc-Mesa from Andrew Astrove, M.D. In exchange, Dr. Astrove received 15,000
shares of common stock of the Company.
On December 19, 1997, the Company acquired all the assets of Navesink River
Group, Inc. ("Navesink"), a New Jersey corporation, in a tax free reorganization
within the meaning of Section
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368(a)(1)(A) of the Internal Revenue Code of 1986. The Company issued 100,000
shares of common stock, with a par value of $.001 per share, to the shareholders
of Navesink in exchange for all of the issued and outstanding shares of common
stock, with a no par value share, of Navesink.
As of May 17, 1999, the Company was authorized to issue 50,000,000 shares
of common stock, with a par value of $0.001 per share, and 5,000,000 shares of
preferred stock, with a par value of $0.20 per share. As of May 17, 1999,
13,750,622 shares of the Company's authorized shares of common stock were issued
and outstanding and 720,000 shares of preferred stock were issued and
outstanding.
The Company has not been subject to bankruptcy, receivership or any similar
proceedings.
The Company maintains two offices: 788 Shrewsbury Avenue, Tinton Falls, New
Jersey 07724; and 1648 Metropolitan Circle, Tallahassee, Florida 32308.
b. GENERAL
The Company is a full-service marketing consultancy and graphic design firm
specializing in the development and production of corporate marketing and
communications media. The Company's clients include fortune 500 companies with
concentrations in the pharmaceutical industry and information technology
industries. Services include marketing, consulting, general web site development
on the World Wide Web (the "Web"), electronic commerce, interactive multi-media,
graphics design and imaging.
The Company's graphic design and interactive multi-media products use
advanced technologies to create media for corporate communications. The Company
continues to expand its business through existing products such as a 3-D
animation design and multimedia presentations.
The Company's subsidiary, Arc Internet Publishing Corp (d/b/a Arc Mesa
Educators) is in the business of providing continuing education to a variety of
professions with a primary focus in the medical profession.
The Company has the ability to design and create specific websites for a
client and may operate such a site if so desired. The Company also designs and
develops interactive kiosks and advertising and promotional materials, including
packaging for retail products. The Company's Web expertise has positioned it to
effectively transition into a full service integrated, interactive marketing and
communication company. The Company's services are used by its clients to create
a new medium for advertisement, promotion and technical support of such
customer's products and services. Web sites can provide commercial organizations
benefits in addition to those available through conventional media, including
the ability to enhance a corporate brand, engage and entertain consumers,
provide in-depth information, reduce selling and operating costs, generate leads
and build retail traffic, expand distribution channels (otherwise known as
e-commerce), promote major sporting and entertainment events and monitor
popularity of content, conduct research, and build databases for on-going
marketing efforts.
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Services
The Company partners with clients to focus on how new and emerging
technologies can enable them to build one-on-one customer relationships. Tapping
into superior strategic expertise, media know-how, creative talent and technical
excellence, the Company guides clients to achieving a favorable return on
investment from Web-based marketing.
The scope of our services has ranged from consulting services to complete
marketing-driven design and construction of multi-level Web sites. The Company
also offers numerous integrated services in addition to those discussed above,
particularly offline media planning and buying related to identification,
negotiation for and purchase of banners, sponsorship and proprietary
partnerships on Web sites.
c. THE COMPANY'S STRENGTHS
Focus on Clients' Business Objectives
The Company has made understanding its clients' business challenges the
primary focus that guides its customer services. The Company often works with
its clients' management to determine how best to integrate Web sites with the
clients' business goals.
Technological Expertise
The Company believes the creative application of leading technologies is
also crucial to the success of its business. The Company's technical programming
personnel are skilled in various computer operating systems, tools and
languages, including, C/C++, Java, HTML, CGI, PERL, Visual Basic, Shockwave
Flash, among others. These programmers are responsible for providing complex
computer programming for special features on CD-ROM products and Web sites as
well as periodically assessing new technologies in order to identify and deploy,
directly and through independent contractors, those that are most promising for
enhancing the Company's business and that of its clients.
Creative Expertise
The Company believes that, in addition to the creative elements required in
traditional graphic design, superior interactive development requires that the
end product is easy-to-use, contains intuitive interfaces and seamless
integrated technologies and has an engaging look and feel. Management believes
that the Company's creative staff possesses a broad spectrum of expertise to
meet clients' creative needs. In order to maintain high levels of creativity and
quality, the Company intends to recruit the best talent available. However,
competition for creative personnel is especially intense and there can be no
assurance that the Company will attract or retain adequate creative talent to
accomplish these goals.
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d. ARC'S STRATEGY
Capitalize on Accomplishments and Market Opportunities
The Company believes that the proliferation of the Internet will continue
to provide substantial opportunities to the Company and that its successfully
completed projects will continue to enhance its marketing efforts. The Company's
management does not, however, believe that the Company's primary business will
always be limited to the Internet. The Company has the ability to produce
digital content which may be carried over a variety of emerging technologies
such as digital satellite and interactive television. Although there is no
assurance that any of these technologies will achieve acceptance in the
marketplace, the Company believes its services could be utilized over these
channels as well.
Deploy Leading Technologies
One of the Company's objectives is to apply both proven and emerging
technologies as they become available in order to maximize the effectiveness of
its Web site services. The Company has formed informal non-exclusive
relationships with key technology providers in an effort to gain access to, and
influence the features of, the Company's utilization of their technologies.
e. MARKETING
The Company markets its services directly and seeks to form strategic
marketing relationships with third parties. Presently, the Company had 5
employees dedicated to business development. Additionally, 3 of the Company's
executive officers spend a portion of their time marketing the Company's
services. The Company also seeks to attract new clients through other methods,
including referrals from existing clients. The Company seeks to cross-sell its
various services to its clients and prospective clients through sales
presentations that encourage clients to utilize all of the Company's services.
f. GOVERNMENT REGULATION
The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there are
currently few laws or regulations directly applicable to Web site service
companies and marketing and communications firms. However, due to the increasing
media attention focused on the Internet, it is possible that a number of laws
and regulations may be adopted with respect to the Internet, covering issues
such as user privacy, pricing and characteristics and quality of products and
services. The adoption of any such laws or regulations may decrease the growth
of the Internet, which could in turn decrease the demand for the Company's
services and products and increase the Company's cost of doing business or cause
the Company to modify its operations, or otherwise have an adverse effect on the
Company's business, operating results or financial condition. Moreover, the
applicability to the Internet of existing laws such as property ownership, libel
and personal privacy is uncertain. The Company cannot predict the impact, if
any, that future regulation or regulatory changes may have on its business. In
addition, Web site developers such as the Company face potential liability for
the
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actions of clients and others using their services, including liability for
infringement of intellectual property rights, rights of publicity, defamation,
libel and criminal activity under the laws of the U.S. and foreign
jurisdictions. Although the Company maintains $2,000,000 of general liability
insurance, and a $2,000,000 umbrella policy, any imposition of liability in
excess of such policies limits or if not covered by such policies could have a
material adverse effect on the Company.
g. COMPETITION
The markets for the Company's services are highly competitive and are
characterized by pressures to incorporate new technologies, accelerate
completion schedules and reduce prices. The Company expects competition for its
services to intensify in the future, partly because there are no substantial
barriers to entry into the Company's business. The Company faces competition
from a number of sources, including potential clients that perform interactive
marketing and communications services and Web site development services
in-house. These sources also include other Web site service boutique firms,
communications, telephone and telecommunications companies, computer hardware
and software companies, established online service companies, advertising
agencies, Internet-services and access providers as well as specialized and
integrated marketing communication companies, all of which are entering the Web
site design and creation market in varying degrees and are competing with the
Company. Many of the Company's competitors or potential competitors have
significantly greater financial, sales, marketing and other resources than the
Company. The Company's ability to retain relationships with its existing clients
and generate new clients and relationships depends to a significant degree on
the quality of its services and its reputation, as compared with the quality of
services provided by and the reputations of, the Company's competitors. The
Company also competes on the basis of creative reputation, price, reliability of
services and responsiveness. There can be no assurance that the Company will be
able to compete and its inability to do so would have a material adverse impact
on the Company's business, financial condition and operating results.
h. EMPLOYEES
At March 31, 1999, the Company had 24 employees, of which all are full-time
employees. Full-time employees include 8 in strategic planning, executive
management, business development; 3 account managers; 5 creative and production
personnel; and 3 programmers, in addition to administrative staff.
i. ARC INTERNET PUBLISHING CORP
The Company's wholly owned subsidiary, Arc Internet Publishing, Corp.,
develops and operates internet businesses and electronically publishes
interactive educational and reference material for the medical and dental
professions. Arc Internet Publishing, d/b/a, Arc Mesa Educators located at
http://www.arcmesa.com (the "Mesa Web site"), which provides continuing
professional education on the internet to the medical, dental and funeral
director's professions. Arc Mesa has achieved CCME Category One accreditation.
The Mesa Web site provides access to informative courses, administers state
mandated testing and provides immediate results in a live interactive setting.
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j. PERSONAL EMERGENCY MEDICAL INFORMATION SERVICES INC.
Personal Emergency Medical Information Services Inc. is a subsidiary of Arc
Internet Publishing Corp. The Company maintains an Emergency Medical Information
Services ("EMIS") website on the internet. EMIS provides 24-hour, worldwide
immediate access of a subscriber's personal medical records via the internet at
http://www.emis.org (the "EMIS Site"). Subscribers are issued an official EMIS
subscriber membership card that contains a secret personal subscriber
information number. Upon receipt of the card, subscribers must acknowledge
receipt in order to activate their records by calling the Company's customer
services department. Subscriber membership cards provide a unique identification
number that must be entered in order to retrieve a subscriber's record.
Individual subscribers or any authorized healthcare provider may obtain
individual records from anywhere in the world by entering or scanning the
barcoded identification number shown on each membership card into a computer
connected to the internet at the EMIS Site. The Company maintains a 24-hour help
hotline to provide assistance to those who might not have internet access or to
request an immediate fax. A patent application is presently pending for this
product.
The initial subscription fee for the EMIS service is $50.00. Payment of
such fee allows a subscriber to store the subscriber information form, EKG or
other medical records with a maximum page size of 8 1/2 x 14 inches. The annual
renewal fee is $25.00, and allows subscribers to update up to three of the
original records posted. Additional pages or updates may be purchased at a rate
of $15.00 per page.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
a. FORWARD-LOOKING STATEMENTS
Some of the information in this Form 10-SB may constitute forward-looking
statements which are subject to various risks and uncertainties. Such statements
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "anticipate," "estimate," "continue," "plan," or other similar
words. These statements discuss future expectations, contain projections of
results of operations or of financial conditions or state other
"forward-looking" information. Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors,
including but not limited to: competitive factors and pricing pressures;
relationships with its manufacturers and distributors; legal and regulatory
requirements; general economic conditions; and other risk factors which may be
described in our future filings with the Commission. We do not promise to update
forward-looking information to reflect actual results or changes in assumptions
or other factors that could affect those statements. In addition, when
considering such forward-looking statements, you should keep in mind the factors
described in other cautionary statements appearing elsewhere in this Form 10-SB.
Such statements describe circumstances which could cause actual results to
differ materially from those contained in any forward-looking statement.
This Form 10-SB may also include statistical data regarding the Internet.
This data may have been obtained from industry publications and reports which we
believe to be reliable sources. We have not independently verified such data nor
sought the consent of any organizations to refer to their reports herein.
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b. RESULT OF OPERATIONS
Three Months ended March 31, 1999 and March 31, 1998
Arc's net sales for the three months ended March 31, 1999 and March 31,
1998 were $965,944 and $601,843 respectively, an increase of 60.4%. The
significant volume for the first three months of 1999 was partially due to the
continued growth of the Mesa Web site. Also, the Company signed significant
deals for Interactive Sales Training Programs with major Pharmaceutical
companies.
Gross profits for the three months ended March 31, 1999 and 1998 were
$898,539 and $470,587 respectively, an increase of 91%. The increase in gross
profits is attributable to the sharp increase in net sales as discussed above.
Selling, general and administrative expenses for the three months ended
March 31, 1999 and March 31, 1998 were $614,067 and $641,821 respectively, a
decrease of 4.2%. The decrease is attributed to cutbacks in overhead that were
made during the second half of 1998. This decrease in overhead was maintained
while dramatically increasing sales during the latter part of 1998 and the first
quarter of 1999.
Depreciation and amortization expenses for the three months ended March 31,
1999 and March 31, 1998 were $35,934 and $49,554 respectively, a decrease of
27.5%. This decrease is attributable to write downs at December 31, 1998 in
intangible assets.
Net income for the three months ended March 31, 1999 was $241,580 compared
to a loss of $195,102 for the comparable period in 1998, for an increase of
436%. Management believes that the increase in net income is due to the dramatic
increase in sales coupled with the decrease in overhead.
Years Ended December 31, 1998 and December 31, 1997
Arc's net sales for the years ended December 31, 1998 and 1997 were
$2,867,591 and $2,396,988 respectively, an increase of 19.6%. Management
believes that this increase resulted from increasing an expanding client base in
its core business of Web site development and full-service marketing programs,
in addition to the continuing growth of its Mesa Web site.
Selling, general and administrative expenses for the years ended December
31, 1998 and December 31, 1997 were $2,575,692 and $1,474,225 respectively. The
increase was due to increased overhead due to the mergers of two companies at
the end of 1997. These mergers resulted in an increase in administrative
expenses due to the increase in personnel.
Depreciation and amortization expenses for the years ended December 31,
1998 and December 31, 1997 were $386,090 and $156,973 respectively. The increase
was due to write downs of intangible assets at December 31, 1998.
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Net loss for the year ended December 31, 1998 amounted to $929,657 after a
net income of $2,335 for the year ended December 31, 1997. The primary factors
in the decrease in net income were write-offs of investments in affiliates of
$213,188 and write downs of intangible assets of $200,372.
c. LIQUIDITY AND CAPITAL RESOURCES
Three Months Ended March 31, 1999 and March 31, 1998
Cash flow generated by operations were $(25,691) for the three months ended
March 31, 1999 and $(431,690) for the three months ended March 31, 1998.
Negative cash flow from operating activities for the first three months of 1998
is primarily attributable to a $129,801 increase in accounts receivable and a
decrease of $148,989 in Accounts Payable. Cash flow from operating expenses was
negative in 1999 primarily due to an increase in accounts receivable of
$251,934.
Cash used for investing activities during the three months ended March 31,
1999 and March 31,1998 was $13,040 and $14,323 respectively, which was primarily
used to purchase computer equipment.
Cash flow generated from financing activities was $40,000 for the three
months ended March 31, 1999 and $163,000 for the three months ended March 31,
1998. Net cash provided by financing activities decreased due to a significant
increase in sales which resulted in an increase in collections.
Cash increased during the three months ended March 31, 1999 by $1,269 and
decreased by $283,013 for the same period in 1998.
Years Ended December 31, 1998 and December 31, 1997
Cash flow generated by operations were $(573,125) for the year ended
December 31, 1998 and $45,172 for the year ended December 31, 1997. Positive
cash flow from operating activities for the year ended December 31, 1997 was
achieved, primarily due to an increase accounts payable and an increase in
accrued expenses and other current liabilities. The negative cash flow for the
year ended December 31, 1998 was due to an increase in depreciation and
amortization, losses from investment in affiliates, and a decrease in accounts
payable.
Cash flow from investing activities were positive for the years ended
December 31, 1998 and 1997. Net cash used in investing activities for the years
ended December 31, 1998 and 1997 were $442,470 and $648,819 respectively. The
significant increase in net cash used in investing activities in 1997 was
primarily due to the sale of common stock, which resulted in net proceeds of
$522,071. Financing cash flows were provided by loans and issuance of stock for
the year ending December 31, 1998. The company utilized $349,000 of its $475,000
line of credit through a banking institution. The company received net proceeds
from the sale of preferred stock of $113,149.
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ARC YEAR 2000 COMPLIANCE
Arc has taken steps to ensure that it is year 2000 compliant. All of the
hardware and software used by the Company have been protected. The Company
believes that the servers it uses to interact on the internet are Year 2000
compliant. Further, the Companies which presently supply products or services to
Arc have informed Arc that they have taken the appropriate steps to ready their
hardware and software for Year 2000. However, the Company cannot guarantee any
other company's Year 2000 readiness and in the event that any Company which Arc
relies upon for services or products is not Year 2000 ready, the Company may
suffer irreparable economic harm.
ITEM 3. DESCRIPTION OF PROPERTIES
THE NEW JERSEY OFFICE
The Company's maintains an office at 788 Shrewsbury Avenue, Tinton Falls,
New Jersey 07724 (the "New Jersey Office"). The New Jersey Office is comprised
of 7,209 square feet and Arc Slide Technologies, Inc. as the Lessee is presently
in the third year of a five year lease at a monthly rent of $9,011.25 (the "New
Jersey Lease"). Pursuant to the terms of the New Jersey Lease, the Company has
the option to renew such lease for an additional period of five years commencing
at the end of the New Jersey Lease's initial term (December 31, 2001).
THE FLORIDA OFFICE
The Company also maintains an office at 1648 Metropolitan Circle,
Tallahassee, Florida 32308 (the "Florida Office"). The Florida Office is
comprised of 2,000 square feet and Arc Internet Publishing Corp. as the Lessee
is presently in the first year of a four year option term at a monthly rent of
2,247.00 (the "Florida Lease"). Pursuant to the terms of the Florida Lease, the
Company has the option to renew such lease for an additional period of four
years commencing at the end of the Florida Lease's option term (July 31, 2002).
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's common
stock beneficially owned by each officer and director of the Company and each
shareholder who holds more than 5% of the outstanding common stock of the
Company as of May 17, 1999. At such date there were 13,750,622 shares of common
stock (the "Common Stock") and 720,000 shares of preferred stock, respectively,
issued and outstanding. Unless specifically indicated otherwise, all such
ownership interests are direct.
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<TABLE>
<CAPTION>
Name and Address of Beneficial
Title of Class Owner Amount Percent of Class
- -------------- ----- ------ ----------------
<S> <C> <C> <C>
Common Stock Ethel Kaplan (1)(2)(12) 4,549,270 33.08%
6 Edwards Point Road
Rumson, New Jersey 07760
Steven H. Meyer(3)(7)(9) 2,312,020 16.81%
7 Emma Drive
Wayside, New Jersey 07712 2523
Kenneth P. Meyer(4)(8)(9) 2,310,687 16.80%
7 Wemrock Drive
Wayside, New Jersey 07712 2563
Michael Rubel(5)(10) 100,000 .0072%
6 Almark Terrace
Wayside, New Jersey 07712
John Lisovitch(6)(11) 50,000 .0036%
75 White Pine Road
Columbus, New Jersey 08022
</TABLE>
(1) Does not include 90,000 shares held by three trusts to which Ms. Kaplan is
custodian under the Uniform Gift to Minors Act.
(2) Ethel Kaplan is a Director and Secretary of the Company.
(3) Steven Meyer is a Director, the Chief Executive Officer and the President
of the Company.
(4) Kenneth Meyer is a Director and the Vice President Creative Manager of the
Company.
(5) Michael Rubel is the Company's Chief Operating Officer.
(6) John Lisovitch is the Information Technology Vice President.
(7) Does not include the option to purchase 18,750 shares of the Company's
Common Stock pursuant to Mr. Meyer's Stock Option Agreement.
(8) Does not include the option to purchase 18,750 shares of the Company's
Common Stock pursuant to Mr. Meyer's Stock Option Agreement.
(9) Kenneth Meyer and Steven Meyer are brothers.
(10) Does not include the option to purchase 75,000 shares of the Company's
Common Stock pursuant to Mr. Rubel's Stock Option Agreement.
(11) Does not include the option to purchase 37,500 shares of the Company's
Common Stock pursuant to Mr. Lisovitch's Stock Option Agreement.
(12) Does not include the option to purchase 37,500 shares of the Company's
Common Stock pursuant to Ms. Kaplan's Stock Option Agreement.
SHAREHOLDERS AGREEMENT
On August 22, 1994, Steven H. Meyer, Kenneth P. Meyer, Ethel Kaplan, Peter
C. Cosmas (collectively, the "Shareholders" for the purposes of this section)
and Arc Slide Technologies Ltd. ("ASTL") entered into a shareholders agreement
whereby the Shareholders agreed to restrict the transfer of their shares of ASTL
for the term of such agreement (the "Shareholders Agreement"). The
14
<PAGE>
Shareholders Agreement restricts all transfers of the Shareholders' ASTL shares
with the exception of transfers of their respective shares to their immediate
family members. Although the Shareholders Agreement has been amended numerous
times, such agreement remains in effect.
Mr. Cosmos is a former director of the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Name Age Position
- ---- --- --------
Steven H. Meyer 37 Chief Executive Officer, President
and Director
Michael Rubel 45 Chief Operating Officer
Kenneth P. Meyer 40 Vice President Creative Manager
and Director
Ethel Kaplan 67 Secretary and Director
John Lisovitch 52 Vice President Information
Technology Services
The Board of Directors of the Company consists of three persons. Directors
serve until the next annual meeting of shareholders or until their successors
are duly elected and qualified. Officers are elected to serve, subject to the
discretion of the Board of Directors, until their successors are appointed. None
of the Directors of the Company hold directorships in any other public
companies.
STEVEN H. MEYER has served as the Company's Chief Executive Officer and
President since its inception. From 1987 to 1992, Mr. Meyer founded and was
employed by Slide Effects, Inc. Mr. Meyer received a Bachelor of Fine Arts
degree from Syracuse University in 1983. Mr. Meyer is the brother of Kenneth
Meyer who is also an officer and director of the Company.
MICHAEL RUBEL has served as the Company's Chief Operating Officer since
July of 1998. Mr. Rubel was the co-founder and eventually President and Chief
Executive Officer of CMP Advertising ("CMP") from 1976 to 1992, He then formed
the Navesink River Group which merged with the Company. Mr. Rubel received a
Bachelor of Science degree in accounting from Fairleigh Dickenson University in
1975.
KENNETH P. MEYER has served as the Company's Vice President Creative
Manager and Director since 1993. Mr. Meyer was a Vice President of Slide
Effects, Inc. from 1989 to 1993. Mr. Meyer attended the University of Florida
from 1976 to 1982 majoring in Fine Arts.
15
<PAGE>
ETHEL KAPLAN has served as the Company's Secretary and Director since 1993.
Ms. Kaplan was the founder and President of Arc Technologies, Inc. ("Arc
Technologies") from 1989 to 1993. Ms. Kaplan attended Syracuse University and
Alfred University.
JOHN LISOVITCH has served as the Company's Vice President of Information
Technology since 1997. Mr. Lisovitch was employed by CMP from 1988 to 1992. He
joined with Mr. Rubel to form the Navesink River Group which merged with the
Company. Mr. Lisovitch received a degree from Pennsylvania State University with
a Bachelor of Arts degree in Advertising and Journalism in 1968.
ITEM 6. EXECUTIVE COMPENSATION
Total cash compensation paid to all executive officers as a group for
services provided to Arc and its subsidiaries in all capacities during the
fiscal year ended December 31, 1998 aggregated $541,341. Set forth below is a
summary compensation table prepared in accordance with the applicable rules of
the Securities and Exchange Commission.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Other Securities
Annual Underly-
Name and Compensa- ing All Other
Principal Position Year Salary($) Bonus tion Options Compensation
- ------------------ ----- ---------- ----- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven H. Meyer 1998 88,093 none none 75,000(2) none
1997 86,648 none none none none
Michael Rubel 1998 139,031 none none 150,000(1) none
Kenneth P. Meyer 1998 88,093 none none 75,000(2) none
1997 83,090 none none none none
Ethel Kaplan 1998 88,093 none none 150,000(2) none
1997 86,648 none none none none
John Lisovitch 1998 138,031 none none 150,000(2) none
</TABLE>
(1) Mr. Rubel holds options to purchase 300,000 shares of the Company's Common
Stock pursuant to his employee Stock Option Agreement. Of those 300,000
options, 75,000 have vested.
(2) 25% of these options have vested as of June 1, 1999.
16
<PAGE>
OPTIONS OF MANAGEMENT
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% of Total % of
Granted Options Holder's
Granted to Total
Number of Employees in Options
Securities Year in which Fiscal Year in which have
Underlying Options were which Options Exercise vested as of Expiration
Name Options Granted Granted were Granted Price June 1, 1999 Date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Steven H. Meyer 75,000 1999 9.43% $0.50 25%
Michael Rubel 150,000 1997 27.77% $0.50 25%
150,000 1999 18.86% $0.50 25%
Kenneth P. Meyer 75,000 1999 9.43% $0.50 25%
Ethel Kaplan 150,000 1999 18.86% $0.50 25%
John Lisovitch 150,000 1999 18.86% $0.50 25%
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was not during the last two years and is not presently a party
to any transaction exceeding $60,000 with any of the following persons: (i) any
director or executive officer of the Company; (ii) any nominee for election as a
director; (iii) any holder of 5% or more of any class of the Company's voting
securities; and (iv) any member of the immediate family of any person in
(i),(ii) or (iii) above.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 50,000,000 shares of Common Stock, $.001
par value ("Common Stock") and 5,000,000 shares of preferred stock with a $.20
par value. As of the close of business on May 17, 1999, there were 13,750,622
shares of Common Stock and 720,000 shares of preferred stock outstanding.
COMMON STOCK
All shares of common stock which are issued and outstanding are fully paid
for and nonassessable. The following is a summary description of the general
terms and provisions of the Company's Common Stock.
17
<PAGE>
Dividends. Since its inception, the Company has not paid any cash dividends
on its Common Stock. Any declaration in the future of any cash or stock
dividends will be, at the discretion of the Board of Directors and will depend
upon, among other things, earnings, the operating and financial condition of the
Company, capital expenditure requirements, and general business conditions.
There are no restrictions currently in effect which preclude the Company from
granting dividends, with the exception that dividends may not be paid on the
Common Stock while there are accrued but unpaid dividends on the Class A
Preferred Stock (defined below). It is the current intention of the Company to
retain any earnings in the foreseeable future to finance the growth and
development of its business.
Voting Rights. A Holder of Common Stock is entitled to one vote per share
on all matters submitted for action by the shareholders. A quorum for the
transaction of business at any meeting of the holders of Common Stock is the
majority of the votes of all shares issued and outstanding. All shares of Common
Stock are equal to each other with respect to the election of directors;
therefore, the holders of more than 50% of the outstanding Common Stock present
at a meeting at which a quorum is present and at which directors are being
elected can, if they choose to do so, elect all of the directors. Thus, the
holders of as little as 25.01% of the outstanding Common Stock could elect
directors. The terms of directors are not staggered. Directors are elected
annually to serve until the next annual meeting of shareholders and until their
successor is elected and qualified. There are no preemptive rights to purchase
any additional shares of Common Stock or other securities of the Company, nor is
cumulative voting applicable to the election of the Board of Directors.
Preemptive Rights. The holders of Common Stock are not entitled to
preemptive or subscription rights.
PREFERRED STOCK
The articles of incorporation vest the Board of Directors with the
authority to divide the preferred stock into series and to fix and determine the
relative rights and preferences of the shares of any preferred series
established to the fullest extent permitted by the laws of the State of New
Jersey and the amended articles of incorporation with respect to among other
things: (a) the number of shares to constitute a series and the distinctive
designation thereof; (b) the rate and preference of dividends, if any, and, if
so, the time of the payment of dividends; (c) whether dividends are cumulative
and, if so, the date from which dividends begin accruing; (d) whether shares may
be redeemed and, if so, the redemption price and the terms and conditions of
redemption; (e) the liquidation preferences payable in the event of involuntary
or voluntary liquidation; (f) sinking fund or other provisions, if any, for the
redemption or purchase of shares; (g) the terms and conditions upon which shares
may be converted, if convertible, and (h) voting rights, if any.
Effective September 1, 1998, the Company issued a series of preferred
stock. The series was designated as Series A: 9% Cumulative, Preferred Stock,
with a par value of $0.20 per share (the "Class A Preferred Stock"). There are
1,500,000 shares in the series, each valued at the capital amount of $0.20, an
aggregate of $300,000 in total capital. Dividends accrue annually at the rate of
9% per annum, but are payable in the discretion of the Company only when funds
are available
18
<PAGE>
therefor. The Class A Preferred Stock may be redeemed at the election of the
Company at any time and from time to time in whole or in part by paying $0.20
per share plus all accrued but unpaid dividends, but only after 30-days prior
written notice. The Class A Preferred Stock also carries preferential
liquidation rights, but does not have voting rights or a sinking fund for
redemption.
OPTIONS
On May 29, 1997 the Company adopted an Incentive Stock Option Plan granting
to key employees options to purchase restricted shares of the Company's Common
Stock (the "ISOP"). Pursuant to the terms of the ISOP, the Board of Directors
determines the option price. The options granted under the ISOP generally vest
over a four year period and expire either three years after termination of
employment or ten years after the date of the grant. A total of 1,500,000 shares
have been reserved for present and future grants of stock options. The Company,
on November 15, 1998, adjusted the exercise price of all options from $1.50 per
share to $.50 per share. At December 31, 1998, options on 460,000 shares at $.50
per share were outstanding of which 97,500 were exercisable.
On April 15, 1999, the Company granted five separate options, among others,
to Steven H. Meyer, Kenneth P. Meyer, John Lisovitch, Ethel Kaplan and Michael
Rubel (the "SHM Option", the "KPM Option", the "JL Option", the "EK Option" and
the "MR Option", respectively and the "Five Options", collectively). The SHM
Option granted Steven H. Meyer the right to purchase 75,000 shares of Common
Stock at a price of $.50 per share. The KPM Option granted Kenneth P. Meyer the
right to purchase 75,000 shares of Common Stock at a price of $.50 per share.
The JL Option granted John Lisovitch the right to purchase 150,000 shares of
Common Stock at a price of $.50 per share. The EK Option granted Ethel Kaplan
the right to purchase 150,000 shares of Common Stock at a price of $.50 per
share. The MR Option granted Michael Rubel the right to purchase 150,000 shares
of Common Stock at a price of $.50 per share. The Five Options vest equally over
a four year period.
The shares of Common Stock which may be acquired under the above options
have not been registered under the Securities Act of 1933, as amended, and there
is no obligation by the Company to register such.
TRANSFER AGENT
Registrar and Transfer Company, 10 Commerce Drive, Cranford, NJ 07016
serves as the Company's transfer agent and registrar for the Company's Common
Stock.
19
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
MARKET. As of October 21, 1996, the prices for the shares of the Company's
Common Stock have been quoted on the "OTC-Bulletin Board," maintained by the
National Association of Securities Dealers, Inc. The Common Stock is presently
trading under the symbol "ACOC".
As of December 30, 1998, the prices for the Company's Class A Preferred
Stock have been quoted on the "OTC-Bulletin Board," maintained by the National
Association of Securities Dealers, Inc. The Class A Preferred Stock is presently
trading under the symbol "ACOCP".
The Following table sets forth the range of high and low bid quotations for
the Company's Common Stock and Class A Preferred Stock during each calendar
quarter since they began trading, each of which has been rounded to the nearest
whole cent.
- --------------------------------------------------------------------------------
SYMBOL TIME PERIOD LOW BID HIGH BID
- ------ ----------- ------- --------
ACOC January 1 - March 31, 1997 5 3/8 6 13/16
April 1- June 30, 1997 6 1/2 7 1/2
July 1 - September 30, 1997 6 7 9/16
October 1 - December 31, 1997 6 3/4 7 5/8
January 1 - March 31, 1998 3 1/16 6 3/4
April 1 - June 30, 1998 1 5/8 4 1/2
July 1 - September 30, 1998 1/4 1 3/16
October 1 - December 31, 1998 .20 15/16
January 1 - March 31, 1999 .20 7/16
March 31 - May 18, 1999 3/16 9/16
ACOCP January 1 - March 31, 1999 7/16 1 5/8
March 31 - May 18, 1999 3/4 13/16
- --------------------------------------------------------------------------------
The above prices were obtained from the National Quotation Bureau, Inc. The
quotations represent inter-dealer quotations without retail mark-up, mark-down
or commission, and may not necessarily represent actual transactions.
OUTSTANDING SHARES AND SHAREHOLDERS OF RECORD. As of May 12, 1999, the transfer
ledgers maintained by the Company's Stock Transfer Agent indicated that there
were approximately 13,750,622 shares of Common Stock issued and outstanding
which were held of record by 135 persons. As of May 12, 1999, the transfer
ledgers maintained by the Company's Stock Transfer Agent indicated that there
were approximately 720,000 shares of preferred stock issued and
20
<PAGE>
outstanding which were held of record by 11 persons.
DIVIDENDS. Since its inception, the Company has not paid any cash dividends on
its stock. Any declaration in the future of any cash or stock dividends will be,
at the discretion of the Board of Directors and will depend upon, among other
things, earnings, the operating and financial condition of the Company, capital
expenditure requirements, and general business conditions. There are no
restrictions currently in effect which preclude the Company from granting
dividends, with the exception that dividends may not be paid on the Common Stock
while there are accrued but unpaid dividends on the Class A Preferred Stock: 9%
Cumulative, Convertible, Redeemable Preferred Stock. It is the current intention
of the Company to retain any earnings in the foreseeable future to finance the
growth and development of its business.
ITEM 2. LEGAL PROCEEDINGS
No material legal proceedings to which the Company (or any officer or
director of the Company, or any affiliate or owner of record or beneficially of
more than five percent of the Common Stock, to management's knowledge) is party
or to which the property of the Company is subject is pending, and no such
material proceeding is known by management of the Company to be contemplated.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
During July and August 1996, the Company completed two private placement
offerings of securities whereby the Company issued a total of 1,800,000 shares
of common stock and received net proceeds of $451,500 after the deduction of
costs amounting to $113,500. During 1997, the Company issued a total of 585,000
shares of Common Stock for $497,071 after the deduction of costs amounting to
$87,929 in cash in a private placement offering which was exempted from
registration under Rule 504 of Regulation D of the Securities Act (the "1997
Private Placement"). Each investor was accredited and/or sophisticated. In order
to provide the 1997 Private Placement subscribers with full and complete
disclosure the Company distributed private placement memorandum and offered to
allow inspections of its books and records. The 1997 Private Placement
memorandum integrated audited financial statements for the two most recent
fiscal years.
On July 29, 1998, the Company issued 750,000 shares of its Class A Preferred
Stock for $150,000 in cash in a private placement offering which was exempted
from registration under Rule 504 of Regulation D of the Securities Act (the
"Preferred Offering"). Sixty subscribers purchased Class A Preferred Stock in
the Preferred Offering. In order to provide the subscribers to the Preferred
Offering with
21
<PAGE>
full and fair disclosure, the Company distributed private placement memorandum
and offered to allow inspections of its books and records. The Preferred
Offering memorandum integrated audited financial statements for the two most
recent fiscal years.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the Articles of Incorporation, the Company has such authority
as the New Jersey Business Corporation Act allows to indemnify its officers and
directors to the extent provided for in such statute, charter provision, bylaw,
contract or other arrangement under which any controlling person, director or
officer of the Company is insured or indemnified in any manner against which
liability they may incur in their capacity as such is the New Jersey Business
Corporation Act, as enacted and in effect upon adoption of the Articles of
Incorporation and Bylaws governing the Company. The provisions of the New Jersey
Business Corporation Act provide that a company may, but is not obligated to,
indemnify against the liability of an individual made a party to a lawsuit
because they were previously or currently a director or officer of the Company,
if such person acted in good faith and reasonably believed that his or her
actions were in the best interests of the Company. The Company may not indemnify
such persons if a judgement or other final adjudication adverse to the corporate
agent establishes that his acts or omissions (a) were in breach of his duty of
loyalty to the corporation or its shareholders, (b) were not in good faith or
involved a knowing violation of law or (c) resulted in receipt by the corporate
agent of improper personal benefit. The Company may indemnify such persons if
they are ultimately successful in the suit. Pending a final determination, the
Company may advance funds to these persons, but only if provision is made for
the return of all funds advanced in the event that such persons are subsequently
found to be unentitled to indemnification. Indemnification would include actions
of the officers and directors of the Company taken in connection with this
filing. If available at reasonable cost, the Company intends to maintain
insurance against any liability incurred by its officers and directors in
defense of any actions to which they are made parties by reason of their
positions as officers and directors.
22
<PAGE>
PART F/S
ITEM 1. FINANCIAL STATEMENTS
For information regarding this item, reference is made to the "Index of
Financial Statements."
23
<PAGE>
Part III
ITEM 1. INDEX TO EXHIBITS.
3.1 Certificate of Incorporation of Arc Slide Technologies Ltd., dated October
21, 1992.
3.2 Certificate of Amendment to the Certificate of Incorporation of Arc Slide
Technologies Ltd., dated August 1, 1994.
3.3 By-laws of Arc Slide Technologies Ltd., adopted August 1, 1994.
3.4 Certificate of Amendment to the Certificate of Incorporation of Arc Slide
Technologies Ltd., dated October 13, 1997, changing the name of the
corporation to Arc Communication, Inc., and increasing the authorized
common stock to 50,000,000 shares.
3.5 Letter from the Florida Department of State indicating that the Articles of
Merger were filed on November 19, 1997.
3.6 Articles of Merger of Arc Communications, Inc., a Florida corporation, into
its wholly-owned subsidiary Arc Communications, Inc., a New Jersey
corporation dated November 21, 1997.
3.7 Certificate of Merger of Navesink River Group Inc., into Arc Communications
Inc., dated December 19, 1997.
3.8 Plan of Merger of Navesink River Group Inc., into Arc Communications Inc.,
dated December 19, 1997.
3.9 Unanimous Consent of Directors in Lieu of Special meeting of directors of
ARC Communications dated July 14, 1998.
3.10 Certificate of Amendment to the Certificate of Incorporation of Arc
Communications Inc., dated August 31, 1998.
3.11 Certificate of Amendment to the Certificate of Incorporation by the Board
of Directors of Arc Communications Inc. dated September 1, 1998.
3.12 Class A Preferred Stock Provisions dated September 15, 1998.
9.1 Shareholders Agreement between Steven H. Meyer, Kenneth P. Meyer, Ethel
Kaplan, Peter C. Cosmas and Arc Slide Technologies, Inc. dated August 22,
1994.
10.1 $750,000 Promissory Note with Sovereign Bank, dated August 27, 1998.
10.2 The September 24, 1996 lease between Arc Slide Technologies, Inc. and
Robert F. Reynolds and Pauline Reynolds for the property located at 788
Shrewbury Avenue, Tinton Falls, New Jersey 07724.
10.3 The July 10, 1997 lease between MESA Marketing, Inc. and Steven E. Allen &
Kenneth L. Franklin for the property located at 1648 Metropolitan Circle,
Tallahassee, Florida 32308.
10.4 Consultation agreement between Wall Street Advancement, Inc. and Arc
Communications, Inc., dated March 8, 1999.
21.1 Arc Communications, Inc.'s Subsidiaries:
Name State of Incorporation
---- ----------------------
Arc Internet Publishing Corp. New Jersey
24
<PAGE>
INDEX OF FINANCIAL STATEMENTS
Page
ANNUAL FINANCIAL STATEMENTS:
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES:
Report of Independent Auditor F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7 to F-16
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES:
Consolidated Balance Sheets as of March 31, 1998 and 1997 F-17
Consolidated Statements of Operations for the Three Months
Ended March 31, 1998 and 1997 F-18
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997 F-19
Notes to Consolidated Financial Statements F-20
25
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 27, 1999
ARC COMMUNICATIONS, INC.
By: /s/ Steven H. Meyer
--------------------------------------------
Steven H. Meyer, Principal Executive Officer
By: /s/ Michael Rubel
--------------------------------------------
Michael Rubel, Principal Financial Officer
26
<PAGE>
ARC COMMUNICATIONS, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT
Financial Statements
Consolidated Balance Sheets, December 31, 1998 and 1997
Consolidated Statements of Operations for the Years Ended December 31, 1998
and 1997
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1998 and 1997
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998
and 1997
Notes to Consolidated Financial Statements
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Arc Communications, Inc. and Subsidiaries
Shrewsbury, New Jersey
We have audited the accompanying consolidated balance sheets of Arc
Communications, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These consolidated 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 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Arc Communications, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
BECK, WEISS & COMPANY
Edison, New Jersey
February 19, 1999
F-2
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 223,693 $ 428,329
Accounts receivable - net 535,838 417,614
Inventory 15,765 13,387
Prepaid expenses 11,222 20,134
Other receivables 6,000 23,050
----------- -----------
Total Current Assets 792,518 902,514
----------- -----------
PROPERTY AND EQUIPMENT - NET 396,196 496,745
----------- -----------
OTHER ASSETS
Goodwill - net 86,640 96,865
Security deposits 9,410 13,310
Due from related party 19,908 72,062
Intangible assets - net -0- 200,372
Investment in affiliates -0- 163,281
Officers' life insurance cash surrender value -0- 963
----------- -----------
Total Other Assets 115,958 546,853
----------- -----------
TOTAL ASSETS $ 1,304,672 $ 1,946,112
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 400,115 $ 51,115
Note payable - related party -0- 160,000
Capitalized lease obligations - current portion 4,061 19,484
Accounts payable 177,745 259,627
Accrued Expenses 59,776 113,284
Deferred revenue -0- 1,000
----------- -----------
Total Current Liabilities 641,697 604,510
----------- -----------
LONG-TERM LIABILITIES
Capitalized lease obligations, less current portion 1,695 5,951
Deferred income taxes -0- 24,113
----------- -----------
Total Long-Term Liabilities 1,695 30,064
----------- -----------
Total Liabilities 643,392 634,574
MINORITY INTEREST -0- 10,572
----------- -----------
COMMITMENTS AND CONTINGENCIES 643,392 645,146
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.20 par value, authorized 5,000,000 shares, issued
and outstanding 750,000 in 1998 and -0- in 1997 150,000 -0-
Common stock, $.001 par value, authorized 45,000,000 shares, issued
and outstanding 13,750,632 in 1998 and 13,538,132 in 1997 13,751 13,538
Additional paid-in capital 1,352,566 1,212,808
Retained earnings (accumulated deficit) (855,037) 74,620
----------- -----------
Total Stockholders' Equity 661,280 1,300,966
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,304,672 $ 1,946,112
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
NET SALES $ 2,867,591 $ 2,396,988
----------- -----------
COSTS AND EXPENSES
Operating costs 626,940 732,156
Selling, general and administrative 2,575,692 1,474,225
Depreciation and amortization 386,090 156,973
----------- -----------
Total Costs and Expenses 3,588,722 2,363,354
----------- -----------
OPERATING INCOME (LOSS) (721,131) 33,634
----------- -----------
OTHER INCOME (EXPENSES)
Interest income 9,596 13,167
Interest expense (28,904) (16,427)
Loss from investments in affiliates (213,188) (27,114)
----------- -----------
Net Other Expense (232,496) (30,374)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT) AND
MINORITY INTEREST (953,627) 3,260
INCOME TAX PROVISION (BENEFIT) (23,970) 1,036
----------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST (929,657) 2,224
MINORITY INTEREST IN EARNINGS OF SUBSIDIARY -0- (111)
----------- -----------
NET INCOME (LOSS) $ (929,657) $ 2,335
=========== ===========
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE $ (0.07) $ 0.00
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Preferred Stock Common Stock
-------------------- ------------------------
Number Number
of Shares Amount Of Shares Amount
--------- ------ --------- ------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 -0- $ -0- 12,750,000 $ 12,750
Issuance of common stock pursuant to private placement
offerings net of expenses
285,000 285
Issuance of common stock pursuant to acquisition of Mesa
Marketing, Ltd. 100,000 100
Issuance of common stock pursuant to private placement
offerings net of expenses 300,000 300
Issuance of common stock for professional services 10,000 10
Issuance of common stock for services related to private placement 93,132 93
------- ----------- ---------- -----------
Net income
BALANCE, DECEMBER 31, 1997 -0- -0- 13,538,132 13,538
Issuance of preferred stock, net of costs 750,000 150,000
Issuance of common stock for professional services 12,500 13
Issuance of common stock for purchase of 10% minority
interest in Arc/Mesa Educators, Ltd. 15,000 15
Issuance of common stock for services related to private placement 25,000 25
Expenses related to private placement offerings
Issuance of common stock related to conversion of loan from
stockholder 160,000 160
------- ----------- ---------- -----------
Net loss
BALANCE, DECEMBER 31, 1998 750,000 $ 150,000 13,750,632 $ 13,751
======= =========== ========== ===========
Additional Retained Total
Paid-In Earnings Stockholders'
Capital (Deficit) Equity
------- --------- ------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $ 686,525 $ 72,285 $ 771,560
Issuance of common stock pursuant to private placement
offerings net of expenses
242,473 242,758
Issuance of common stock pursuant to acquisition of Mesa
Marketing, Ltd. 24,900 25,000
Issuance of common stock pursuant to private placement
offerings net of expenses 254,013 254,313
Issuance of common stock for professional services 4,990
5,000
Issuance of common stock for services related to private placement (93) -0-
Net income 2,335 2,335
----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 1,212,808 74,620 1,300,966
Issuance of preferred stock, net of costs (31,851) 118,149
Issuance of common stock for professional services 6,237 6,250
Issuance of common stock for purchase of 10% minority
interest in Arc/Mesa Educators, Ltd. 10,557 10,572
Issuance of common stock for services related to private placement (25) -0-
Expenses related to private placement offerings (5,000) (5,000)
Issuance of common stock related to conversion of loan from
stockholder 159,840 160,000
Net loss (929,657) (929,657)
----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 $ 1,352,566 $ (855,037) $ 661,280
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(929,657) $ 2,335
--------- ---------
Adjustments to reconcile net income or loss to net cash
provided by operating activities:
Depreciation and amortization 386,090 156,973
Loss from investments in affiliates 213,188 11,349
Provision for uncollectible accounts 45,000 20,000
Issuance of common stock for professional services 6,250 5,000
Deferred income taxes (24,113) 836
Minority interest in earnings of subsidiary -0- (111)
Increase (decrease) in cash from changes in:
Accounts receivable (163,224) (135,843)
Inventory (2,378) (13,387)
Prepaid expenses 8,912 12,692
Other receivable 17,050 (23,050)
Security deposits 3,900 (2,800)
Due from related party 2,247 (62,366)
Accounts payable and accrued expenses (135,390) 144,332
Deferred revenue (1,000) (70,788)
--------- ---------
Total Adjustments 356,532 42,837
--------- ---------
Net Cash Provided (Used) in Operating Activities (573,125) 45,172
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property and equipment (58,041) (320,512)
Expenditures for intangible assets (16,903) (205,895)
Cash surrender value-officers' life insurance 963 (963)
--------- ---------
Net Cash Used in Investing Activities (73,981) (527,370)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 349,000 160,000
Repayment of capital lease obligations (19,679) (33,252)
Net proceeds from sale of common and preferred stock 113,149 522,071
--------- ---------
Net Cash Provided by Financing Activities 442,470 648,819
--------- ---------
NET INCREASE (DECREASE) IN CASH (204,636) 166,621
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 428,329 261,708
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 223,693 $ 428,329
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest $ 28,904 $ 16,427
Cash paid for income taxes $ 143 $ 200
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Arc Communications, Inc. is a full-service marketing consultancy and
New Media design firm specializing in sports marketing, high
technology and the pharmaceutical industry. Services include marketing
consulting, web-site development, electronic commerce, interactive
multi-media, graphics design and imaging.
Arc Communication's wholly owned subsidiary, Arc Internet Publishing
Corp. develops and operates internet businesses and electronically
publishes interactive educational and reference material for the
medical and dental professions, which provides continuing professional
education on the Internet to the medical, dental and funeral
director's professions.
Arc Internet Publishing's wholly owned subsidiary, Personal Emergency
Medical Information Services Inc., operates on an internet basis that
provides personal medical information on line.
On February 25, 1998, Arc Internet Publishing acquired the remaining
10% minority interest of Arc Mesa Educators, Ltd. becoming a wholly
owned subsidiary which was subsequently merged into Arc Internet
Publishing.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidations
The consolidated financial statements include the accounts of the
Company and all of its subsidiaries in which a controlling interest is
maintained. For those consolidated subsidiaries where Company
ownership is less then 100%, the outside stockholders' interests are
shown as minority interests. Investments in affiliates over which the
Company has significant influence but not a controlling interest are
carried on the equity basis.
Use of Estimates in Preparation of Financial Statements
The preparation of the accompanying consolidated financial statements
in conformity with generally accepted accounting principles requires
management to make certain estimates and assumptions that directly
affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results may differ from these estimates.
Allowance for Doubtful Accounts
The Company establishes an allowance for uncollectible trade accounts
receivable based on management's evaluation of collectibility of
outstanding accounts receivable. The allowances for doubtful accounts
is $65,000 and $20,000 as of December 31, 1998 and 1997, respectively.
Per Share Data
The basic and diluted per share data has been computed on the basis of
the net income or loss for each year after giving effect for the
accrued preferred stock dividends for 1998, divided by the weighted
average number of shares of common stock outstanding. The weighted
average shares of common stock outstanding for the years ended
December 31, 1998 and 1997 aggregated 13,573,809 and 12,903,652,
respectively.
Inventory
Inventories are stated at the lower cost or market, with cost
determined on a first-in, first-out basis.
F-7
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Property and Equipment
Property and equipment are stated at cost and are depreciated over
their estimated useful lives on the straight-line method for financial
statement purposes and the accelerated method for income tax purposes.
Cost of major additions and betterments are capitalized; maintenance
and repairs which do not improve or extend the life of respective
assets are charged to expense as incurred. When an asset is sold or
otherwise disposed of, the cost of the property and the related
accumulated depreciation is removed from the respective accounts and
any resulting gains or losses, if any, is included in the results of
operations.
Goodwill and Intangible Assets
Goodwill represents the excess of acquisition cost over the fair value
of net assets acquired in the purchase of Mesa Marketing, Inc. during
1997, as discussed more fully in Note 13. Goodwill is amortized on a
straight-line basis over ten years and is presented net of accumulated
amortization. For December 31, 1998 and 1997 the accumulate
amortization of goodwill is $11,443 and $1,218, respectively.
Amortization included as a charge to income amounted to $10,225 and
$1,218 for the years ended December 31, 1998 and 1997, respectively.
Intangible assets consists of costs incurred to acquire product and
process technology and the costs to develop internet sites to market
products and services provided by the Company. These assets are
amortized using the straight-line method. The amortization period for
product and process technology and internet site development is 15
years and 5 years, respectively.
"Accounting for Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed of", SFAS 121, requires that long-lived assets and
certain identifiable intangibles, including goodwill, to be held and
used by an entity, be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Impairments are recognized in operating
results to the extent that carrying value exceeds fair value. In 1998,
the Company recognized an asset impairment as discussed in Note 4 to
the consolidated financial statements.
Investment in Affiliates
The Company has investments in affiliates that are accounted for on
the equity method. The investments are 50% owned, development stage
entities. The carrying value as of December 31, 1998 and 1997 is as
follows:
Investment Carrying Value
- ---------------------------------------- ------------------
1998 1997
----- --------
IREX, Inc. $ -0- $151,427
International Writers' Exchange, A Joint Venture -0- 11,854
----- --------
-0- $163,281
===== ========
During the fourth quarter of 1998, the Company determined that the
assets held by the affiliates, consisting mainly of intangible assets,
were impaired and that the investments be written down to reflect no
value. Furthermore, loans to the affiliates were also determined to be
uncollectible. The investment and loans to affiliates were combined
and are reported as a loss from investments in affiliates of $213,188
on the statement of operations.
Property Under Capital Lease
The Company accounts for capital leases, which transfer substantially
all the benefits and risks incident to the ownership of property, as
an acquisition of an asset and the incurrence of an obligation. All
other leases (operating leases) are recorded as an expense in the
period incurred.
F-8
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
The Company presents cash flows under the indirect method of
reconciling net income to net cash flow.
Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
Revenue Recognition
The Company recognizes revenues from sales at the date the product is
shipped and as professional services are performed.
Recent Accounting Pronouncement
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for
the Cost of Computer Software Developed or Obtained for Internal Use"
("SOP 98- 1"). SOP 98-1 is effective for financial statements for
years beginning after December 15, 1998. SOP 98-1 provides guidance
over accounting for computer software developed or obtained for
internal uses including the requirements to capitalize specified costs
and amortization of such costs. The Company does not expect the
adoption of this standard to have a material effect on its
capitalization policy.
Reclassifications
Certain amounts in the prior year financial statements have been
reclassified for comparative purposes to conform with the presentation
in the current year financial statements.
NOTE 3 - PROPERTY AND EQUIPMENT
The costs and accumulated depreciation of property and equipment at
December 31 are summarized as follows:
1998 1997
-------- --------
Equipment and furniture $788,536 $732,373
Leasehold improvements 66,458 66,458
-------- --------
Total Property and Equipment 854,994 798,831
Accumulated depreciation 458,798 302,086
-------- --------
Property and equipment, net $396,196 $496,745
======== ========
Depreciation included as a charge to income amounted to $158,590 and
$120,077 for the years ended December 31, 1998 and 1997, respectively.
NOTE 4 - INTANGIBLE ASSETS
The costs and accumulated amortization of intangible assets at
December 31 are summarized as follows:
1998 1997
----- --------
Product and process technology $ -0- $ 79,995
Internet site development -0- 202,503
----- --------
Total Intangible Assets -0- 282,498
Accumulated amortization -0- 82,126
Intangible assets, net $ -0- $200,372
===== ========
F-9
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 4 - INTANGIBLE ASSETS - Continued
Amortization included as a charge to income amounted to $217,275 and
$36,896 for the years ended December 31, 1998 and 1997, respectively.
The Corporation recorded an impairment loss on the long-lived assets
of its product and process technology and internet sites. The Company
determined that there would be no further cash flows derived from
these assets. Accordingly, the Company recognized an asset impairment
loss of $167,686, the carrying value of the asset, as of December 31,
1998.
NOTE 5 - LINE OF CREDIT
At December 31, 1998, the Company has a $750,000 line of credit with
Sovereign Bank. The line bears interest at the bank's prime rate plus
1% and was incurring interest at the rate of 8.75% at December 31,
1998. The line of credit, which expires June 30, 1999, is secured by
accounts receivable. As of December 31, 1998 and 1997, the Company has
$400,115 and $51,115, respectively, outstanding on the line of credit.
As of December 31, 1998, the Company is in violation of a covenant
that requires borrowings under the line of credit not to exceed 80% of
the accounts receivable under 90 days outstanding. However, the bank
has agreed to waive the violation of this covenant as of December 31,
1998.
NOTE 6 - CAPITAL LEASE OBLIGATIONS
As mentioned in Note 2 and 3, the Company is obligated under various
capital leases for certain equipment that expire at various dates
during the next two years.
The following represents future minimum lease payments and the net
present value of the future minimum lease payments under capital
leases for the years ended December 31,:
1999 $ 4,669
2000 1,788
-------
Total minimum lease payments 6,457
Less: Amount representing interest (701)
-------
Present value of net minimum lease payments 5,756
Less: Current maturities (4,061)
-------
Long-term maturities $ 1,695
=======
NOTE 7 - ACCRUED EXPENSES
Accrued expense at December 31, are summarized as follows:
1998 1997
-------- --------
Payroll $ 19,560 $ 73,421
Commissions 13,249 10,000
Professional fees 20,000 23,500
Other 6,967 6,363
-------- --------
$ 59,776 $113,284
======== ========
F-10
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 8 - INCOME TAXES
The significant components of the Company's deferred income tax and
liabilities as of December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Net operating losses $ 228,000 $ 86,400
Deferred income tax liability:
Revenue and expense recognition differences
arising from the cash basis method of
accounting utilized for income tax purposes (78,073) (24,113)
Valuation allowance (149,927) (86,400)
--------- ---------
Net deferred income tax liability $ -0- $ (24,113)
========= =========
</TABLE>
The significant components of the provision (benefit) for income taxes
for the years ended December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Current:
Federal $ -0- $ -0-
State 143 200
--------- ---------
Total Current Taxes 143 200
--------- ---------
Deferred:
Federal (54,775) 523
State (32,865) 313
Change in valuation allowance 63,527 -0-
--------- ---------
Total Deferred Taxes (24,113) 836
--------- ---------
Provision (benefit) for income taxes $ (23,970) $ 1,036
========= =========
</TABLE>
The difference between the statutory federal and state income tax rate
and the effective rate for the Company's income tax provision and
benefit for each of the years ended December 31, 1998 and 1997,
respectively, is summarized as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Statutory federal income tax rate 15.00% 15.00%
Statutory state income tax rate 9.00 9.00
Increase in valuation allowance (26.90)
Miscellaneous 7.80
--------- ---------
Effective income tax rate (2.90)% 31.80%
========= =========
</TABLE>
As of December 31, 1998, the Company has a net operating loss
carrryforward of approximately $950,000 for federal income tax
purposes, which expires through 2018.
F-11
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company is involved in various related party transactions
consisting of loans receivable, notes payable and sales to related
companies.
Sales to related parties were $2,939 in 1998 and $38,781 in 1997.
During 1997, the Company sold Internet sites to IREX, Inc.
(International Real Estate Exchange) and International Writers'
Exchange, A Joint Venture. As described in Note 2, both IREX and
International Writers' Exchange are 50% owned investments of the
Company. These investments are accounted for using the equity method.
Accordingly, for the year ended December 31, 1997, the carrying amount
of the investment has been reduced by 50% of the gross profit to
reflect the Company's share not yet earned. In addition, as of
December 31, 1997, the Company had loans receivable due from IREX and
International Writers' Exchange. These loans were unsecured,
non-interest bearing and did not have any specific repayment terms. As
discussed in Note 2, as of December 31, 1998 the carrying amount of
these investments and the related loans receivable have been written
down to reflect no value.
The Company also has a loan receivable due from Medical Licensing
Service, Inc. (MLS), which is owned by certain stockholders of the
Company. The amount due in 1998 and 1997 from MLS includes an
unsecured note of $9,108 and $13,983, respectively, bearing interest
at 9.00% per annum and matures on October 1, 1999. The remaining
balance due from MLS is unsecured and non-interest bearing.
A summary of the amounts due from related parties is as follows:
December 31
------------------
1998 1997
------- -------
IREX, Inc. $ -0- $50,667
International Writers' Exchange, A Joint Venture -0- 2,719
Medical Licensing Service, Inc. 10,800 4,693
Medical Licensing Service, Inc. (note receivable) 9,108 13,983
------- -------
Total $19,908 $72,062
======= =======
Legal fees paid to corporate counsel, a related party, were $52,399
and $32,687 for 1998 and 1997, respectively.
NOTE 10 - STOCKHOLDERS' EQUITY
Preferred Stock
In July 1998, the shareholders authorized 5,000,000 shares of 9%
cumulative preferred stock of $.20 par value with a liquidation at par
plus accrued dividends, if any. Holders of the preferred stock have no
voting rights nor is it convertible to common stock. On August 31,
1998, the Company sold 750,000 preferred shares at par value in a
private placement offering and received net proceeds of $118,149.
Accrued dividends as of December 31, 1998 were $4,500.
Common Stock
As described in Note 1, the Company issued 15,000 shares of common
stock to acquire the 10% minority interest of Arc Mesa Educators, Ltd.
During 1998, the Company converted a note payable with an outstanding
balance of $160,000 to 160,000 shares of common stock.
F-12
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 10 - STOCKHOLDERS' EQUITY - Continued
Common Stock - (Continued)
During 1997, the Company completed two private placement offerings of
securities whereby the Company issued a total 585,000 shares of common
stock and received net proceeds of $497,071 after the deduction of
costs amounting to $87,929. In conjunction with the private placement
offerings, the Company issued 25,000 of common stock in 1998 and
93,132 shares of common stock in 1997 for services provided to
complete the private placement.
During 1997, the Company issued common stock to acquire two existing
companies as described more fully in Note 13. On November 1, 1997, the
Company issued 100,000 shares of common stock to acquire Mesa
Marketing, Inc. Pursuant to the purchase agreement 50,000 shares are
held in escrow subject to the Company obtaining certain financial
goals. On December 19, 1997, the Company issued an additional 100,000
shares to acquire Navesink River Group, Inc.
NOTE 11 - STOCK COMPENSATION PLAN
Effective May 31, 1997, the Company adopted an Incentive Stock Option
Plan granting to key employees options to purchase restricted shares
of Company common stock. The Board of Directors determines the option
price. Options generally vest over a four year period and expire
either three years after termination of employment or ten years after
the date of grant. A total of 1,500,000 shares have been reserved for
present and future grants of stock options. At December 31, 1998,
options on 460,000 shares at $.50 per share were outstanding of which
97,500 were exercisable. The Company, on November 15, 1998, adjusted
the exercise price of all options from $1.50 per share to $.50 per
share.
The following table summarizes stock option transactions under the
plan:
Year ended December 31,
1998 1997
-------------------- ------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Shares Price Shares Price
------- ------ ----- ------ -----
Granted and outstanding
at beginning of year 450,000 $1.50 -0-
Granted 530,000 0.63 450,000 $1.50
Canceled (520,000) 1.50 -0-
--------- ---- --------- ----
Outstanding at end of year 460,000 $0.50 450,000 $1.50
========= ==== ========= ====
Exercisable at end of year 97,500 -0-
========= =========
The following table summarizes information about stock options outstanding for
which the Company has an obligation to issue shares of common stock as of
December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- ------------------------------------
Number Weighted Weighted Number Weighted
Outstanding Average Average Exercisable Average
Exercise as of Remaining Exercise as of Exercise
Price 12/31/98 Life (in years) Price 12/31/98 Price
-------- ----------- --------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.50 460,000 3.74 0.50 97,500 0.50
</TABLE>
F-13
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 11 - STOCK COMPENSATION PLAN - Continued
The fair value of each option granted in 1997 and 1998 has been
estimated on the date of grant using the Black-Scholes options pricing
model with the following assumptions; no dividend yield, expected
volatility of 40%, an expected life of 3.74 years and a risk-free
interest rate of 6.75% and 4.83% for the 1997 and 1998 options,
respectively. The fair values of options granted during 1997 and 1998
ranged from $0.42 to $0.69 per share for 1997 and from $0.17 to $0.20
per share for 1998.
The Company applies APB 25 in accounting for its stock option
incentive plan and, accordingly, recognizes compensation expense for
the difference between fair value of the underlying common stock and
the exercise price of the option at the date of grant. The effect of
applying SFAS No. 123 on 1997 and 1998 pro forma net loss is not
necessarily representative of the effect on reported net income (loss)
in future years due to, among other things (1) the vesting period of
the stock options and (2) the fair value of additional stock options
in future years. Had compensation cost for the Company's stock option
plan been determined based upon the fair value at the grant date for
awards under the plan consistent with the methodology prescribed under
SFAS No. 123, the Company's pro forma net loss in 1997 and 1998 would
have been approximately $(35,985) and $(955,715), respectively, and
the pro forma loss per share would have remained unchanged at $0.00
and $(0.07), respectively.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space under operating leases expiring in
various years through 2003. As of December 31, 1998, minimum aggregate
annual rentals, excluding escalation charges, are as follows:
Year Ending
December 31,
------------
1999 $166,698
2000 153,494
2001 136,805
2002 31,681
2003 20,321
--------
Total $508,999
========
Total rent expense for facilities charged to operations for the years
ended December 31, 1998 and 1997 amounted to approximately $140,153
and $113,614, respectively.
NOTE 13 - BUSINESS COMBINATIONS
On October 31, 1997, Arc Internet Publishing Corp., a wholly owned
subsidiary of Arc Communications, Inc. acquired Mesa Marketing, Inc.
in a tax free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986. Arc Communications,
Inc. issued 100,000 shares of restricted common stock in exchange for
Arc Internet Publishing Corp. receiving all of the outstanding stock
of Mesa Marketing, Inc. The merger agreement provides that 50,000
shares of the common stock issued be held in escrow until such time as
certain financial goals are met by the business unit formerly known as
Mesa Marketing, Inc. Should the contingently issued common stock
become applicable, it will increase the purchase price of Mesa
Marketing, Inc. and will increase the amount of goodwill recorded on
this transaction. The acquisition was accounted for as a purchase, and
accordingly, was included with combined operations from the
acquisition date through December 31, 1997. The total cost of the
acquisition was $124,913 which included acquisition costs of $21,901,
various liabilities totaling $78,012 and the designated value of the
restricted stock issued of $25,000. This amount exceeded the fair
value of the net assets of Mesa Marketing, Inc. by $98,083. The excess
is being amortized on the straight-line method over 10 years.
F-14
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 13 - BUSINESS COMBINATIONS
The following values were assigned to the assets and liabilities
acquired:
Cash $ 3,769
Property and equipment 5,670
Deposits 1,000
Other receivable 16,066
Accounts payable (26,942)
Notes payable (28,493)
Investment (22,251)
Goodwill 76,181
-----------
Common Stock Issued $ 25,000
===========
The following summarized pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1997:
1997
-----------
Net Sales $ 2,607,457
===========
Net Income $ 32,357
===========
The pro forma financial information presented above is not necessarily
indicative of the operating results which would have been achieved had
the Company acquired Mesa Marketing, Inc. at the beginning of the
period presented or of the results to be achieved in the future.
NOTE 14 - MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK
Sales to several key customers, representing divisions of a single
company, for the year ended December 31, 1998 and 1997 consisted of
approximately 38.0% and 48.8%, respectively, of total sales. The
aggregate accounts receivable balances at December 31, 1998 and 1997
for these major customers were $201,859 and $154,690, respectively.
The Company maintains cash balances at several banks. At times, such
cash balances may be in excess of the Federal Deposit Insurance
Corporation insurance limit.
NOTE 15 - EMPLOYMENT AGREEMENTS
Steven Meyer, President of the Company, entered into an employment
agreement effective August 1, 1994 for a period of five years. The
employment agreement provides for a base annual compensation of
$85,000.
Kenneth Meyer, Executive Vice President and Treasurer of the Company
entered into an employment agreement effective August 1, 1994 for a
period of five years. The employment agreement provides for a base
annual compensation of $85,000.
Ethel Kaplan, Secretary of the Company entered into an employment
agreement effective August 1, 1994 for a period of five years. The
employment agreement provides for a base annual compensation of
$85,000.
F-15
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
During 1997, the Company entered into employment agreements with
several division managers effective for a period of four years. The
employment agreements provide for incentive compensation generally
determined in accordance with certain revenue goals established for
each division.
F-16
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
ASSETS
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 224,962 $ 145,316
Accounts Receivable - net of Allowances for Doubtful Accounts
of $65,000 and $20,000 respectively 787,772 547,415
Inventory 15,765 13,387
Prepaid expenses 9,798 16,458
Other receivables -0- 4,382
----------- -----------
Total Current Assets 1,038.297 726,958
----------- -----------
PROPERTY AND EQUIPMENT - NET 375,755 496,833
----------- -----------
OTHER ASSETS
Goodwill - net 84,188 94,413
Security deposits 9,410 13,310
Intangible assets - net 0 163,205
Investment in affiliates 0 165,000
Due from Related Party 20,943 69,495
Officers Life 963
----------- -----------
Total Other Assets 114,541 508,838
----------- -----------
TOTAL ASSETS $ 1,528,593 $ 1,730,177
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 440,115 $ 374,115
Accounts Payable and Accrued Expenses 180,973 223,922
Capitalized lease obligations - current portion 4,645 12,205
----------- -----------
Total Current Liabilities 625,733 610,242
----------- -----------
LONG-TERM LIABILITIES
Capitalized lease obligations, less current portion -0- 5,951
Deferred income taxes -0- -0-
----------- -----------
Total Long-Term Liabilities -0- 5,951
----------- -----------
Total Liabilities 625,733 616,193
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.20 par value, authorized 5,000,000 shares, issued
and outstanding 750,000 in 1999 and -0- in 1998 150,000 -0-
Common stock, $.001 par value, authorized 45,000,000 shares, issued
and outstanding 13,750,632 in 1999 and 13,553,132 in 1998 13,751 13,553
Additional paid-in capital 1,352,566 1,223,365
Retained earnings (accumulated deficit) (613,457) (122,934)
----------- -----------
Total Stockholders' Equity 902,860 1,113,984
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,528,593 $ 1,730,177
=========== ===========
</TABLE>
F-17
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
--------- ---------
<S> <C> <C>
NET SALES $ 965,944 $ 601,843
--------- ---------
COSTS AND EXPENSES
Operating costs 67,405 131,256
--------- ---------
Gross Profit 898,539 470,587
--------- ---------
Selling, general and administrative 614,067 641,821
Depreciation and amortization 35,934 49,554
--------- ---------
Total Costs and Expenses 650,001 691,375
--------- ---------
OPERATING INCOME (LOSS) 248,538 (220,788)
--------- ---------
OTHER INCOME (EXPENSES)
Interest income 2,889 4,804
Interest expense (11,847) (3,360)
Loss from investments in affiliates -0- 129
Other Income 2,000 -0-
--------- ---------
Net Other Expense (6,958) 1,573
--------- ---------
INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT)
241,580 (219,215)
INCOME TAX PROVISION (BENEFIT) -0- 24,113
--------- ---------
NET INCOME (LOSS) $ 241,580 $(195,102)
========= =========
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE $ 0.0176 $ (0.0144)
========= =========
</TABLE>
F-18
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES --------- ---------
<S> <C> <C>
Net income (loss) $ 241,580 $(195,102)
--------- ---------
Adjustments to reconcile net income or loss to net cash
provided by operating activities:
Depreciation and amortization 35,934 49,554
Loss from investments in affiliates -0- 129
Deferred income taxes -0- (24,113)
Increase (decrease) in cash from changes in:
Accounts receivable (251,934) (129,801)
Inventory -0- -0-
Prepaid expenses 1,424 3,676
Other Receivables 6,000 18,668
Due from related party (1,035) 2,567
Accounts payable and accrued expenses (56,548) (148,989)
Capitalized Lease Obligations (1,112) (7,279)
Deferred revenue -0- (1,000)
--------- ---------
Total Adjustments (267,271) (236,588)
--------- ---------
Net Cash Provided (Used) in Operating Activities (25,691) (431,690)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property and equipment (13,040) (12,604)
Expenditures for intangible assets -0- -0-
Cash surrender value-officers' life insurance -0- (1,719)
--------- ---------
Net Cash Used in Investing Activities (13,040) (14,323)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 40,000 163,000
--------- ---------
Net Cash Provided by Financing Activities 40,000 163,000
--------- ---------
NET INCREASE (DECREASE) IN CASH 1,269 (283,013)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 223,693 428,329
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 224,962 $ 145,316
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest $ 11,847 $ 3,360
Cash paid for income taxes -0- -0-
</TABLE>
F-19
<PAGE>
ARC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
MARCH 31, 1999
Basis of Presentation
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to fairly present the Company's financial position and
its results of operations and cash flows as of the dates and for the periods
indicated.
Certain information and footnote disclosures normally contained in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These condensed consolidated financial statements should be
read in conjunction with the audited December 31, 1998 consolidated financial
statements and related notes included in the Company's year end certified
Financial Statement. The results of operations for the three months are not
necessarily indicative of the operating results for the full year.
Amounts for the three months ended March 31,1998 have been reclassified to
conform with the March 31,1999 presentation.
F-20
FILED
OCT 21 1992
CERTIFICATE OF INCORPORATION DANIEL J. DALTON
Secretary of State
OF
ARC Slide Technologies Ltd.
To: The Secretary of State
State of New Jersey
The undersigned, of the age of eighteen years or over, for the purpose of
forming a corporation pursuant to the provisions of Title 14A, Corporations,
General, of the New Jersey Statutes, does hereby execute the following
Certificate of Incorporation:
FIRST: The name of the corporation is
ARC Slide Technologies Ltd.
SECOND: The purpose or purposes for which the corporation is organized are:
To do any lawful act or thing for which corporations may be organized
pursuant to the provisions of Title 14A, Corporations, General, of the New
Jersey Statutes.
THIRD: The aggregate number of shares which the corporation shall have the
authority to issue is
10,000 shares without nominal or par value
<PAGE>
FOURTH: The address of the corporation's initial registered office and the
name of the corporation's initial registered agent therein are:
Ethel Kaplan 6 Edwards Point Road, Rumson, N.J. 07760
FIFTH: The number of directors constituting the initial board of directors
shall be two and the names and addresses of the directors are as follows:
Ethel Kaplan 6 Edwards Point Road, Rumson, N.J. 07760
Steven H. Meyer 7 Emma Drive, Wayside, N.J. 07712
SIXTH: No director or officer of the corporation shall be personally liable
to the corporation or its shareholders for damages for breach of any duty owed
to the corporation or its shareholders, except for liability for any breach of
duty based upon an act or omission (a) in breach of such person's duty of
loyalty to the corporation or its shareholders, (b) not in good faith or
involving a knowing violation of law or (c) resulting in receipt by such person
of an improper personal benefit.
SEVENTH: The name and address of the incorporator is as follows:
Lenore K. Hodes 31 Stelton Road, Piscataway, New Jersey 08854
IN WITNESS WHEREOF, the undersigned, the incorporator of the above-named
corporation, has hereunto signed this Certificate of Incorporation.
Dated: October 21, 1992
/s/ Lenore K. Hodes
----------------------------
Lenore K. Hodes
FILED
AUG 22 1994
LONNA R. HOOKS
CERTIFICATE OF AMENDMENT TO THE Secretary of State
CERTIFICATE OF INCORPORATION
BY THE SHAREHOLDERS
OF
ARC SLIDE TECHNOLOGIES LTD.
To: The Secretary of State
State of New Jersey
THE UNDERSIGNED, for the purpose of amending the original Certificate of
Incorporation, as amended, of the above-named corporation, does hereby adopt the
following Certificate of Amendment, pursuant to the provisions of Section
14A:9-2(4), and Section 14A:9-4(3), corporations, General of the New Jersey
Statutes.
1. The name of the corporation is
ARC SLIDE TECHNOLOGIES LTD.
2. The original certificate of Incorporation of the Corporation was filed
on October 21, 1992.
3. Article Third of the certificate of Incorporation is hereby amended to
read as follows:
THIRD: The aggregate number of shares which the corporation shall have
the authority to issue is 10,000,000 common shares with $.01 par value.
4. Article sixth of the Certificate of Incorporation is hereby amended to
read as follows:
SIXTH: No director or officer of the corporation shall be personally
liable to the corporation or its shareholders for damages for breach of any
duty owed to the corporation or its shareholders, except for liability for
any breach of duty based upon an act or omission (a) in breach of such
person's duty of loyalty to the corporation or its shareholders, (b) not in
good faith or involving a knowing violation of law or (c) resulting in
receipt by such person of an improper personal benefit.
The corporation shall have the authority to indemnify any Corporate
Agent against expenses, including attorney's fees, judgments, fines, and
amounts paid in settlement, incurred in connection with any pending or
<PAGE>
threatened action, suit, or proceeding, with respect to which the Corporate
Agent is a party, or is threatened to be made a party, to the full extent
permitted by the New Jersey Business Corporation Act. The indemnification
provided in this subparagraph shall not be deemed exclusive of any other
right, including the right to be indemnified against liabilities and
expenses incurred in proceedings by or in the right of the corporation, to
which a Corporate Agent may be entitled under any by-law, agreement, vote
of shareholders or disinterested Directors, or otherwise, both as to action
in that Corporate Agent's official capacity and as to action in another
capacity. However, no indemnification shall be made to any Corporate Agent
if a judgment or other final adjudication establishes that the Corporate
Agent engaged in conduct that (1) breached the duty of loyalty to the
corporation or the shareholders, (2) was not undertaken in good faith, (3)
involved a knowing violation of the law, or (4) resulted in the receipt by
the Agent of an improper personal benefit. Conduct breaching the duty of
loyalty is conduct that a person knows or believes to be contrary to the
best interests of the corporation or its shareholders in connection with a
matter in which he or she has a material conflict of interest. These
indemnification rights shall insure to the benefit of the heirs, executors,
and administrators of the Corporate Agent. The corporation shall have the
power to purchase and maintain insurance on behalf of any Corporate Agent
against any liability asserted against the Corporate Agent and incurred by
the Corporate Agent in any capacity, arising out of the corporate Agent's
status as a Corporate Agent, whether or not the corporation would have the
power to indemnify the Corporate Agent against the liability under the
foregoing provisions. A "Corporate Agent" of the corporation shall be any
person who is or was a director, officer, employee, or agent of this
corporation or of any constituent corporation absorbed by this corporation
in a consolidation or merger, and other persons serving at the request of
the corporation as a director, officer, trustee, employee, or agent of
another corporation, association, partnership, joint venture, trust, or
other enterprise.
5. The foregoing amendment was adopted by the unanimous consent of the
shareholders on August 1, 1994.
6. The holders of all of the shares entitled to vote on this amendment have
signed a consent in writing adopting this amendment.
Dated this 1st day of August, 1994.
ARC SLIDE TECHNOLOGIES LTD.
By: /s/ Steven H. Meyer
--------------------------
Steven H. Meyer
President
BY-LAWS OF
ARC SLIDE TECHNOLOGIES LTD.
Adopted: August 1, 1994
ARTICLE I. OFFICES
Registered Office
1.01. ARC SLIDE TECHNOLOGIES LTD. (the "Corporation") shall continuously
maintain a registered office in the State of New Jersey and a registered agent
having a business office at the registered office. When the registered office is
changed or when the registered agent is changed, dies, resigns, or becomes
disqualified, the Board of Directors shall determine the address of a new
registered office or designate a successor registered agent or both, and shall
cause the proper officers of the Corporation to file the required certificates
with the Secretary of State of New Jersey.
Principal Place of Business
1.02. The principal place of business of the Corporation is 788 Shrewsbury
Avenue, Tinton Falls, New Jersey 07724. The Board of Directors has full power
and authority to change the principal place of business at any time to another
location within or outside of the State of New Jersey.
Other Places of Business
1.03. Other places of business or offices may at any time be established by
the Board of Directors at any place or places within or outside of the State of
New Jersey.
ARTICLE II. SHAREHOLDERS AND
SHAREHOLDERS' MEETINGS
Annual Meeting
2.01. The annual meeting of shareholders of the Corporation shall be held
at the time and place, either within or outside of the State of New Jersey,
fixed by the Board of Directors. The Secretary of the Corporation shall cause
written notice of the time, place, and purposes, including the election of
directors, of the meeting to be transmitted to shareholders within the time
periods prescribed by the Board of Directors not less than ten (10) days nor
more than sixty (60) days before the meeting.
Special Meetings
2.02. A special meeting of shareholders of the Corporation
<PAGE>
may be called for any purpose and at any time by the President or pursuant to a
resolution adopted by the Board of Directors. Special meetings may also be
called by the Secretary or, in the case of the death, absence, incapacity, or
refusal of the Secretary, by any other officer on the written request of
shareholders who hold, in the aggregate, at least ten (10%) percent of the
shares of stock of the Corporation entitled to vote on the matter to be acted on
at the meeting. The shareholders' written request must set forth the purpose or
purposes of the special meeting. In all instances in which a special meeting is
called, the Secretary shall cause written notice of the time, place, and
purposes of the meeting to be transmitted to shareholders within the time
prescribed by the Board of Directors not less than ten (10) days nor more than
sixty (60) days before the date of the meeting.
Consents Instead of Meeting
2.03. a. Except as otherwise provided in New Jersey Statutes Section
14A:5--6(l), any action required or permitted to be taken at a meeting of
shareholders may be taken without a meeting, provided that every shareholder who
is entitled to vote on the action consents in writing to the action.
b. In spite of Subparagraph (a) above, any action to be taken by the
shareholders, other than the annual election of directors, may be taken without
a meeting and without the unanimous written consent of the shareholders,
provided that
(1) Before the action, the Corporation obtains the written
consent of shareholders who would have been entitled to cast
the minimum number of votes necessary to authorize the
action at a meeting at which all shareholders entitled to
vote on the action were present and voting;
(2) If any shareholder has the right to dissent from the action,
the Board of Directors shall fix a date on which written
consents are to be tabulated; if no shareholder may dissent,
the fixing of a date for tabulation shall be optional.
(3) No consent shall be counted that is received more than sixty
days after the date on which the Board of Directors
authorizes the solicitation of consents or, in a case in
which consents (or proxies for consents) are solicited from
all shareholders who have been entitled to vote at a meeting
called to authorize the proposed action, more than sixty
days after the date of mailing of
2
<PAGE>
solicitations of consents (or of proxies for consents); and
(4) To the extent (if any) and in the manner required by New
Jersey Statutes Section 14A:5-6(2), the Secretary of the
Corporation shall provide advance written notice of the
proposed action and the conditions precedent to that action
to all nonconsenting shareholders who would have been
entitled to notice of a meeting to vote on the action.
c. All written consents obtained by the Corporation pursuant to this
Section 2.03 shall be filed in the minute book of the Corporation promptly after
submission by the shareholders. Written consents may be executed together or in
counterparts.
d. Any action taken pursuant to this Section 2.03 shall have the same
effect, for all purposes, as if taken at a shareholders' meeting.
Quorum
2.04. Except as otherwise required by New Jersey Statutes Sections 14A:5-2
and 14A:5-3, the presence at a meeting in person or by proxy of the holders of
shares entitled to cast a majority of the votes of all shares issued and
outstanding shall constitute a quorum. The shareholders present at a meeting at
which a quorum is present may continue to do business until adjournment, despite
the withdrawal of enough shareholders to leave less than a quorum. If an
insufficient number of shareholders is present at a meeting, in person or by
proxy, to constitute a quorum, those shareholders who are present and who are
entitled to vote at the meeting shall have the power to adjourn the meeting
until enough shareholders are present to constitute a quorum.
Adjournment of Meetings
2.05. Any annual or special shareholders' meeting may be adjourned by the
holders of a majority of the voting shares of the corporation who are present in
person or by proxy at the meeting. If the new time and place for the meeting are
announced at the time of adjournment, and the only business to be transacted
after reconvening could have been transacted at the original meeting, then no
further notice of the new time and place for the meeting need be given to
shareholders. If, however, after the adjournment, the Board of Directors fixes a
new record date for the meeting, new notice of the meeting shall be given to
each shareholder of record, as determined on a new record date.
3
<PAGE>
Voting
2.06. a. At every meeting of shareholders, each person entitled to vote and
present at the meeting in person or by proxy shall have one vote for each full
voting share of the Corporation that stands in that person's name on the books
of the Corporation. If the Corporation has more than one class of shares
outstanding on the applicable record date, then the foregoing provision shall
apply only to the common shares of the Corporation; the shareholders of all
other classes shall vote their shares in the manner provided in the certificate
of incorporation as amended from time to time.
b. If the Corporation holds its own shares, the Corporation shall not vote
those shares at any meeting and those shares shall not be counted in determining
the total number of outstanding shares at any given time. If the Corporation
holds a majority of the shares entitled to vote for the election of directors of
another domestic corporation or a foreign corporation, shares of the Corporation
held be the other domestic or foreign corporation may not be voted at any
meeting of shareholders of the Corporation for any purpose.
c. Except as otherwise provided in New Jersey Statutes Section 14A:5-ll
with regard to multiple classes or series of shares, whenever any action, other
than the election of directors, is to be taken by vote of the shareholders, the
action shall be authorized by a majority of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote unless a greater
plurality is required by the certificate of incorporation or by the New Jersey
Business Corporation Act.
Record Date
2.07. The Board of Directors shall fix, in advance, the record date for the
determination of shareholders entitled to notice of and to vote at any annual or
special meeting of shareholders. The record date shall not be more than sixty
(60) days or less than ten (10) days before the date of the meeting. If the
Board of Directors fails to fix a record date for any shareholders' meeting, the
record date shall be the close of business on the day before the day on which
notice of the meeting is given, or if no notice is given, the next day before
the day on which the meeting is held.
Proxies
2.08. Every shareholder entitled to vote at a meeting of shareholders may
authorize another person or persons to act by written proxy (which may be in the
form of a telegram or cable or its equivalent) given by the shareholder or the
shareholder's agent. No proxy shall be valid for more than eleven months, unless
4
<PAGE>
a longer time is expressly provided in the proxy. Unless it is coupled with an
interest or is otherwise irrevocable as provided in New Jersey Statutes Section
14A:5-19(3), a proxy shall be revocable at will. The grant of a later proxy
revokes any earlier proxy unless the earlier proxy is irrevocable. A proxy shall
not be revoked by the death or incapacity of the shareholder but shall continue
in force until revoked by the personal representative or guardian of the
shareholder. The presence at any shareholders' meeting of any shareholder who
has given a proxy shall not revoke the proxy unless the shareholder files
written notice of revocation with the Secretary of the meeting before the voting
of that proxy or the voting of the shares subject to the proxy by written
ballot. A person named in a proxy as the attorney or agent of a shareholder may,
if the proxy so provides, substitute another person to act in his or her place,
including any other person named as an attorney or agent in the same proxy. The
substitution shall not be effective until an instrument effecting it is filed
with the Secretary of the Corporation.
Voting of Pledged Shares
2.09. Any person who has pledged shares entitled to vote at an annual or
special meeting of shareholders of this Corporation shall have the right to vote
those shares until they have been transferred into the name of the pledgee or a
nominee of the pledgee.
Voting of Redeemable Shares
2.10. If the Corporation issues redeemable shares, the holders of those
shares shall not be entitled to vote on any matter on or after the date on which
(a) written notice of redemption of the shares has been mailed to the holders of
those shares, and (b) a sum sufficient to redeem the shares has been deposited
with a bank or trust company with irrevocable authorization to pay the
redemption price to the shareholders on the surrender of the share certificates.
2.11. The President, if present, shall preside at all meetings of
shareholders. In the absence of the President, the most senior Vice President
present at the meeting shall preside. The Secretary of the Corporation shall, if
present, act as secretary at all meetings of shareholders; In the absence of the
Secretary, any Assistant Secretary of the Corporation who is present may act as
secretary of the meeting. If no Assistant Secretary is present, a temporary
secretary for that particular meeting shall be designated by the presiding
officer.
Order of Business
2.12. The order of business at all meetings of the shareholders, unless
changed by a majority vote of the shares
5
<PAGE>
entitled to vote at the meeting, shall be as follows:
a. Call to order;
b. Report on presence of quorum;
c. Reading or waiver of proof of mailing of notice of
meeting and minutes of preceding meeting;
d. Designation of inspectors of election, if any;
e. Election of directors (if applicable);
f. Old business;
g. New business;
h. Reports of officers; and
i. Adjournment.
2.13. Elections of directors and other matters requiring shareholder
approval need not be by ballot unless a shareholder requests a vote by ballot on
a particular issue before the commencement of voting on that issue.
Inspectors
2.14. a. Before any annual or special meeting of shareholders, the Board of
Directors may appoint one or more inspectors to act as such at the meeting.
b. In connection with any annual or special meeting of shareholders, if
inspectors are not appointed by the Board of Directors or if they fail to
qualify, the presiding officer at the meeting may and, on the request of any
shareholder entitled to vote at the meeting, shall appoint one or more
individuals to act as inspectors at the meeting.
c. If an individual appointed as inspector fails to appear, qualify, or act
as an inspector, the vacancy may be filled by the Board of Directors before the
applicable meeting or at the meeting by the presiding officer at the meeting.
d. Before performing their duties, all inspectors shall sign an oath or
affirmation to execute faithfully the duties of inspector with strict
impartiality and according to the best of their abilities.
e. No person shall be elected a director at a meeting at which he or she
has served as an inspector.
6
<PAGE>
Voting List
2.15. At each shareholders' meeting, the Secretary or any Assistant
Secretary shall produce a list of shareholders entitled to vote at the meeting.
The list shall be certified to be complete by the Secretary or any Assistant
Secretary or by a transfer agent duly appointed by the Board of Directors. The
list, which may consist of cards or any equipment that permits a visual display,
shall be arranged alphabetically within each class and series, with the address
of, and the number of shares held by, each shareholder of record. The list
constitutes prima facie evidence of the identity of the shareholders entitled to
vote at the meeting and may be inspected by any shareholder during the meeting.
ARTICLE III. BOARD OF DIRECTORS
Responsibilities and Nature of the Board of Directors
3.01. a. The business and affairs of the Corporation shall be managed by
the Board of Directors. Directors must be at least eighteen years of age, but
need not be residents of New Jersey, citizens of the United States, or
shareholders of the Corporation.
b. In discharging his or her duties to the Corporation and in determining
what he or she reasonably believes to be in the best interest of the
Corporation, a director may, in addition to considering the effects of any
action on the shareholders, consider any of the following: (1) the effects of
the action on the Corporation's employees, suppliers, creditors, and customers;
(2) the effects of the action on the community in which the corporation
operates; and (3) the long-term as well as short-term interests of the
Corporation and its shareholders, including the possibility that these interests
may best be served by the continued independence of the corporation.
c. If on the basis of the above factors, the Board of Directors determines
that any proposal or offer to acquire the Corporation is not in the best
interest of the corporation, it may reject such proposal or offer. If the Board
of Directors determines to reject any such proposal or offer, the Board of
Directors shall have no obligation to facilitate, remove any barriers to, or
refrain from impeding the proposal or offer.
Number of Directors
3.02. The Board of Directors shall consist of not less than four (4) nor
more than nine (9) Directors. The precise number of Directors within this range
shall be fixed by the Board of Directors each year before the annual meeting of
shareholders. The Board of Directors immediately following the adoption of these
bylaws shall consist of four (4) Directors.
7
<PAGE>
Regular Meetings
3.03. Regular meetings of the Board of Directors shall be held, without
call or notice, immediately following the annual meeting of shareholders of the
Corporation, and with notice at any other time that the Board of Directors so
determines.
Special Meetings
3.04. A special meeting of the Board of Directors may be called for any
purpose at any time by the President or by a majority of the Directors.
Notice of Meetings
3.05. The Secretary shall give notice of the time, date, and place of each
special meeting of the Board of Directors and of each regular meeting of the
Board other than the meeting that immediately follows the annual meeting of
shareholders. Notice shall be given at least two (2) days before the meeting if
given orally, at least three (3) days before the meeting if given by cable,
telegram, telecopier, or overnight messenger, and at least five (5) days before
the meeting if given by mail or in any other manner. Any notice given by mail
shall be deposited in the United States deposited with the United States Postal
Service, postage prepaid and addressed to the director's last known residence or
business address. The notice need not specify the business to be transacted at
the meeting or its purpose.
Location of Meetings
3.06. Meetings of the Board of Directors may be held at any place within or
outside the State of New Jersey, provided that the regular meeting of the Board
of Directors following the annual meeting of shareholders is held at the same
location as the annual meeting.
Unanimous Consent Instead of Meeting
3.07. Any action required or permitted to be taken pursuant to
authorization voted at a meeting of the Board of Directors may be taken without
a meeting on the written consent of each member of the Board of Directors.
Written consents may be executed together or in counterparts, and may be given
before or after the action is taken. All consents shall be filed in the minute
book of the Corporation promptly after they are given by the Directors. Written
consents by all of the members of the Board of Directors shall have the same
effect as a unanimous vote of the Board for all purposes.
8
<PAGE>
Quorum
3.08. Each Director shall have one vote at meetings of the Board of
Directors, and the participation of the Directors with a majority of the votes
of the entire Board of Directors shall constitute a quorum for the transaction
of business.
Voting
3.09. Except as otherwise provided by law, every act or decision by a
majority of the Directors present at a duly held meeting at which a quorum is
present shall be regarded as the act of the Board of Directors.
Use of Communication Equipment
3.10. Where appropriate communication facilities are reasonably available,
any or all of the members of the Board of Directors may participate in part or
in all of a meeting of the Board of Directors by means of conference telephone
or by any other means of communication by which all persons participating in the
meeting are able to hear each other.
Resignation and Removal
3.11. a. Any Director may resign at any time by written notice to the
Corporation. A resignation shall be effective on receipt by the Corporation or
at any later date specified by the resigning Director in the notice of
resignation.
b. Any Director may be removed for cause by the Board of Directors. The
Board of Directors shall also have the power to suspend Directors pending a
final determination that cause exists for removal.
Vacancies
3.12. a. A vacancy or vacancies in the Board of Directors shall be deemed
to exist (1) in the case of the death, resignation, or removal of any Director;
(2) if the authorized number of Directors shall be increased; or (3) if, at any
meeting at which Directors are to be elected, the shareholders fail to elect the
authorized number of Directors to be elected at the meeting. No reduction of the
authorized number of Directors shall have the effect of removing any Director
prior to the expiration of his or her term of office.
b. Vacancies in the Board of Directors existing for any reason, including
vacancies arising as a result of an increase in the number of Directors, may be
filled by the affirmative vote of a majority of the remaining Directors then in
office, even if their number is insufficient to constitute a quorum, or by a
sole
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remaining director. A Director so elected to fill a vacancy shall hold office
until a successor is elected and qualified at the next annual meeting of the
shareholders.
c. If a Director resigns from the Board of Directors effective at some
future date, the future vacancy may be filled by the affirmative vote of a
majority of the Directors then in office, including the Director who has
resigned, even if their number is insufficient to constitute a quorum. The term
of the newly elected Director will begin when the resignation becomes effective.
A Director elected to fill a future vacancy shall hold office from the effective
date of the predecessor's resignation until a successor is elected and qualified
at the next annual or special meeting of the shareholders.
d. The shareholders may elect a Director or Directors at any time to fill
any vacancy or vacancies not filled by the Directors.
e. If, for any reason, the Corporation has no Directors in office, any
shareholder, or the executor or administrator of a deceased shareholder, has the
right to call a special meeting of shareholders for the election of Directors.
Any shareholder electing to exercise this right shall give notice of the meeting
in accordance with Section 2.02 of these by-laws.
Common Directorships; Directors' Personal Interest
3.13. a. It shall not be necessary for a Director to leave a meeting of the
Board of Directors or abstain from voting merely because the Board of Directors
may be voting on (1) a transaction between the Corporation and that Director or
(2) a transaction between the Corporation and one or more entities in which that
Director is interested, whether as a director of that entity or otherwise, and
whether alone or with other Directors, provided that one or more of the
conditions set forth in New Jersey Statutes Section 14A:6--8(l) is satisfied.
b. Common or interested Directors may be counted in determining the
presence of a quorum at a Board of Directors meeting at which a transaction
described in Subparagraph 3.13(a) above is authorized, approved, or ratified.
Presiding Officer
3.14. The President, if a member of the Board of Directors, shall preside
at all meetings of the Board of Directors at which he or she is present. If the
President is not present, the Board of Directors shall select one person from
among its members present at the meeting to preside at the meeting. If the
Secretary or any Assistant Secretary is present at meetings of the Board of
Directors, that person shall record the minutes; if neither the
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Secretary nor the Assistant Secretary is present, the Board of Directors shall
select one person from among its members present at the meeting to record the
minutes.
Adjournments
3.15. A majority of the members of the Board of Directors present at a
meeting of the Board of Directors may adjourn any Directors' meeting to meet
again at a time and place fixed in the resolution adjourning the meeting. Notice
need not be given if the period of adjournment does not exceed ten (10) days,
and the time and place of the adjourned meeting are fixed in the resolution.
Compensation of Directors
3.16. Directors shall be compensated for their services and reimbursed for
their expenses as employees, officers, Directors, and members of Board of
Directors committees. The Board of Directors shall periodically determine a
reasonable basis for compensation, and a majority of the Board of Directors must
adopt any resolution determining compensation. The Board of Directors may, if it
deems it appropriate, provide for reduced or no additional compensation for
Board of Directors members who are compensated employees of the Corporation.
Dissenting Votes
3.17. Any Director who disagrees with any action taken by the Board of
Directors shall have the right to record a dissent in the minute books of the
Corporation; provided, however, that the legal effect of that action shall be
governed by applicable law.
ARTICLE IV. COMMITTEES
Establishment of Committees
4.01. The Board of Directors may designate an executive committee from
among its members, consisting of two (2) or more Directors, and may at any time
designate additional committees, each of which shall consist of two (2) or more
Directors, by the affirmative vote of a majority of the entire Board of
Directors. Subject to the limitations contained in Section 4.08 below, the
executive committee shall have the maximum authority permitted by law in effect
at the time of the exercise of that authority. Each additional committee shall
have the authority, not exceeding the authority of the executive committee,
specified by the Board of Directors in resolutions adopted by a majority of the
entire Board of Directors.
Presiding Officer and Secretary
4.02. If the President is a member of any committee, the
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President shall serve as the chairperson of the committee. If the President is
not a member of a committee, then the committee may choose one of its members to
act as chairperson, unless the Board of Directors designates a chairperson. Each
committee shall from time to time designate a secretary of the committee who
shall keep a record of its proceedings.
Vacancies
4.03. Vacancies in the membership of any committee may be filled by the
Board of Directors, pursuant to a resolution adopted by a majority of the entire
Board of Directors, for the unexpired term of the member whose death,
resignation, removal, or disability caused the vacancy.
Meetings
4.04. Each committee shall adopt its own rules or procedure. Each committee
shall meet at whatever times it may determine by resolution, and shall also meet
whenever called together by the Board of Directors. Members of committees may
attend meetings through the medium of communications equipment, in the same
manner as members of the Board of Directors. Any committee may act by unanimous
written consent instead of a meeting, in the same manner as the Board of
Directors. Written consents submitted by all of the members of a committee shall
have the same effect as a unanimous vote of the committee for all purposes.
Notice of Meetings
4.05. If a committee establishes regular meeting dates, it shall not be
necessary to give notice of a regular meeting. Notice of every special meeting
shall be given in the manner and within the time periods specified in these
by-laws with respect to notices of special meetings of the Board of Directors.
Quorum; Voting
4.06. Each Director shall have one vote at a meeting of a Board of
Directors committee, and the participation of the Directors with a majority of
the votes of the committee shall constitute a quorum for the transaction of
business. A quorum at any meeting of any committee shall be a majority of the
entire committee. Every act or decision by a majority of the Directors present
at a duly held committee meeting at which a quorum is present shall be regarded
as the act of the committee.
Reports
4.07. Actions taken at a meeting of any committee shall be reported to the
Board of Directors at its next meeting, except that when the meeting of the
Board of Directors is held within two (2)
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days after a committee meeting, the report may be made at the second Board of
Directors meeting following the committee meeting.
Limitations on Power
4.08. No committee of the Board of Directors shall have authority to do any
of the following:
a. Make, alter, or repeal any by--law of the Corporation;
b. Elect or appoint any Director, or remove any officer or Director;
c. Submit to the shareholders any action that requires their approval; or
d. Amend or repeal any resolution adopted by the Board of Directors that by
its terms is amendable or repealable only by the Board.
Powers of the Board of Directors
4.09. By resolution adopted by a majority of the entire Board of Directors,
the Board of Directors shall have the power to:
a. Appoint one or more Directors to serve as alternate members of any
committee and to act, in the absence or disability of members of any committee,
with all the powers of the absent or disabled members;
b. Abolish any committee at its pleasure; and
c. Remove any Director from membership on any committee at any time, with
or without cause.
ARTICLE V. WAIVER OF NOTICE
Requirements for Waiver
5.01. Any notice required to be given pursuant to these bylaws may be
waived in writing either before or after the meeting that is the subject of the
notice. Copies of the waivers shall be filed in the minute book of the
Corporation promptly after they are given. The attendance of any Director,
committee member, or shareholder at a meeting without protesting the lack of
notice before the conclusion of the meeting constitutes a waiver of the right to
notice.
Nature of Business
5.02. A waiver of notice of a Board of Directors meeting need not specify
the nature of business transacted or to be transacted
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at the meeting or the purpose of the meeting. A waiver of notice of a
shareholders' meeting shall specify the nature of business transacted or to be
transacted at the meeting and the purpose of the meeting.
ARTICLE VI. OFFICERS
Election
6.01. The officers of the Corporation shall consist of a President, a
Treasurer, a Secretary, and any other officers, including without limitation one
or more Executive Vice Presidents, one or more Vice Presidents, one or more
Assistant Treasurers, and one or more Assistant Secretaries, as the Board of
Directors deems necessary. All officers shall be elected by the Board of
Directors. The President, Treasurer, Secretary, and any other officers that the
Board of Directors considers appropriate shall be elected at the regular Board
of Directors meeting immediately following the annual meeting of shareholders.
Any two or more offices may be held by the same person; provided, however, that
no officer shall be authorized to verify any instrument in more than one
capacity if the instrument is required by law to be executed, acknowledged, or
verified by two or more officers.
Additional Officers
6.02. The Board of Directors may from time to time elect any other officers
that it deems necessary, who shall hold their offices for the terms and have the
powers and duties prescribed by the Board of Directors.
Election and Term of Office; Removal
6.03. Each officer shall hold office from the date elected until the next
annual election of officers, and until a successor has been elected unless the
officer has previously resigned or been removed. All officers of the Corporation
shall hold office at the pleasure of the Board of Directors.
Vacancies
6.04. Any vacancy in the offices of President, Treasurer, and Secretary
shall be filled promptly by the Board of Directors. Any vacancy in any other
office may be filled by the Board of Directors at its discretion.
Removal, Suspension and Resignation
6.05. a. Any officer elected by the Board of Directors may be removed by
the Board of Directors either with or without cause. The removal or suspension
of an officer shall be without prejudice to any contract rights that the officer
may have. Election of an
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officer shall not, in and of itself, create contract rights.
b. Any officer may resign at any time by giving written notice to the Board
of Directors or to the President. The resignation will be effective on receipt,
or at any later time specified in the resignation. Unless otherwise specified in
the resignation, its acceptance is not necessary to make it effective.
Powers and Duties
6.06. The officers of the Corporation shall have the responsibilities set
forth in these by-laws. The officers may have additional responsibilities as
determined by the Board of Directors, the Executive Committee (if any) and, in
the case of all officers other than the President, the President, provided that
any additional responsibilities are not inconsistent with the provisions of
these by-laws. Without limiting the foregoing, the officers shall have the
following duties and responsibilities:
President
a. The President shall be the chief executive officer of the Corporation
and, as such, shall have general supervision over the business and affairs of
the Corporation, subject to the control of the Board of Directors. The President
shall be a member ex officio of each standing committee to which he or she is
not personally appointed. Subject to the control of the Board of Directors, the
President may enter into any contract or execute and deliver any instruments on
behalf of the Corporation. The President shall preside at all meetings of the
shareholders and at all meetings of the Board of Directors that he or she
attends. In general, the President shall perform all duties incident to the
office of the President, and any other duties that may be assigned by the Board
of Directors.
Vice President
b. In the order of their seniority unless otherwise determined by the Board
of Directors, the Executive Vice Presidents (if any) shall perform the functions
of the President in the absence or disability of the President. In addition,
they shall perform all other functions prescribed by the President or the Board
of Directors.
In the order of their seniority unless otherwise determined by the Board of
Directors, the Vice Presidents (if any) shall perform the functions of the
President in the absence or disability of the President and the Executive Vice
Presidents (if any). They shall perform all other duties and have whatever other
powers prescribed by the President or the Board of Directors.
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Treasurer
c. The Treasurer shall have charge and custody of, and be responsible for,
all funds and securities of the Corporation. The Treasurer shall deposit all
funds in the name of the Corporation in the institutions selected by the Board
of Directors. The Treasurer shall keep or cause to be kept books of account on
behalf of the Corporation and shall make these books available to any of the
Directors of the Corporation during business hours at the office of the
Corporation where the books and records are kept. In general, the Treasurer
shall perform all the duties incident to the office of the Treasurer and any
other duties as may be assigned by the President or the Board of Directors.
Assistant Treasurer
d. Assistant Treasurers shall perform all of the duties and
responsibilities of the Treasurer whenever the Treasurer is unavailable to
perform the duties of the office, and shall perform all other duties as may be
assigned to them by the Board of Directors, the President, or the Treasurer.
Secretary
e. The Secretary, if present, shall act as secretary at all meetings of the
Board of Directors and of the shareholders and shall keep the minutes of those
meetings in a book or books to be provided for that purpose. The Secretary shall
cause notice of meetings to be given in accordance with these by--laws. In
general, the Secretary shall perform all the duties incident to the office of
the Secretary and any other duties as may be assigned by the President or the
Board of Directors.
Assistant Secretary
f. Assistant Secretaries shall perform all of the duties and
responsibilities of the Secretary whenever the Secretary is unavailable to
perform the duties of the office, and shall perform all other duties and
exercise all other powers as may be assigned to them by the Board of Directors,
the President, or the Secretary.
ARTICLE VII. SHARES
7.01. The certificates for shares of the Corporation shall be in the form
determined by the Board of Directors, subject to these by-laws, the certificate
of incorporation, and applicable provisions of law. Each certificate shall
indicate that the Corporation is organized under the laws of the State of New
Jersey, and shall set forth the registered holder's name and the number of
shares. Each certificate shall be signed by the President or any Executive Vice
President or Vice President and the Treasurer, any Assistant Treasurer, the
Secretary, or any Assistant Secretary, and
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shall bear the seal of the Corporation or its facsimile. If any certificate is
countersigned by a transfer agent or registrar who is not an officer or an
employee of the Corporation, any and all other signatures may be facsimiles. If
any officer, transfer agent, or registrar who has signed, or whose facsimile
signature has been placed on, any certificate shall have ceased to serve in that
capacity before the certificate is issued, the certificate may be issued by the
Corporation with the same effect as if that person continued to serve in his or
her former capacity at the date of the certificate's issue. Provided that it
otherwise complies with the requirements of this Section 7.01 and applicable
provisions of law, a card that is punched, magnetically coded, or otherwise
treated so as to facilitate machine or automatic processing may be used by the
Corporation as a share certificate.
Description of Rights and Preferences
7.02. If the Corporation is at any time authorized to issue shares of more
than one class, then each share certificate issued by the Corporation shall
contain the following information on the face or back of the certificate, or
shall state that the Corporation will furnish the following information to any
shareholder on request and without charge:
a. The designations, relative rights, preferences and limitations of the
shares of each class and series authorized to be issued, so far as they have
been determined; and
b. The authority of the Board of Directors to divide the shares into
classes or series and to determine and change the relative rights, preferences,
and limitations of any class or series.
Replacement Certificates
7.03. The Board of Directors may direct that a new share certificate be
issued to replace any certificate alleged to have been lost, destroyed, or
wrongfully taken, on written notice received from the shareholder before the
Corporation is informed that the share has been acquired by a bona fide
purchaser. The notice required from the shareholder shall be in the form of an
affidavit showing that the certificate has been lost, destroyed, or wrongfully
taken. When authorizing the issuance of a new certificate, the Board of
Directors may, in its discretion and as a condition precedent to the
certificate's issuance, require the shareholder or the shareholder's legal
representative to file a bond with the Corporation in whatever reasonable sum as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost,
destroyed, or wrongfully taken.
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Transfer of Securities
7.04. The Corporation's securities shall be transferable only on the books
of the Corporation. Transfer shall be permitted only by the person in whose name
the securities appear on the Corporation's books, by that person's legal
representative, or by that person's attorney if authorized by power of attorney
duly executed and filed with the Corporation or its transfer agent. Transfers of
securities may be made on surrender to the Corporation or to its agents of an
outstanding certificate or certificates representing the security with a duly
executed assignment and authorization to transfer endorsed on or attached to the
certificate, together with proof of the authenticity of the signature and of the
power of the assignor to transfer the security as the Corporation or its agents
may require. On surrender, the Corporation or its agent shall issue a new
certificate to the person entitled to it, cancel the old certificate, and record
the transaction on its books. Except as provided in these by-laws or by the laws
of the State of New Jersey, the person in whose name registered securities stand
on the books of the Corporation shall be deemed the owner for all purposes.
Record Date for Dividends or Rights
7.05. The Board of Directors may fix, in advance, a date as the record date
for determining the shareholders entitled to receive payment of any dividend or
the allotment of any right. The record date may in no case be more than sixty
(60) days before the event to which it relates. If the Board of Directors does
not fix a record date in connection with these matters, then the record date
with respect to these matters shall be at the close of business on the day on
which the Board of Directors adopts the resolution authorizing a dividend or
allotment of rights.
Issue of New Shares or Sale of Treasury Shares
7.06. Shares of the Corporation that are authorized but not yet issued and
treasury shares may be issued or sold from time to time for the consideration
determined by the Board of Directors, but in no case for less than par value,
subject to the provisions of the Business Corporation Act.
ARTICLE VIII. FISCAL YEAR
Designation
8.01. The fiscal year of the Corporation shall end on the last day of
December in each year.
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ARTICLE IX. AMENDMENTS
Amendments in General
9.01. The power to alter, amend, or repeal these by-laws is vested in both
the shareholders and the Board of Directors, subject to Paragraphs 9.02 and 9.03
below.
Amendments by Shareholders
9.02. Any by-law made or amended by the Board of Directors may be amended
or repealed by the shareholders, and new by-laws may be added by the
shareholders. The shareholders may provide as to any or all by-laws that by-law
provisions adopted by them may not be altered or repealed by the Board of
Directors.
Amendments by the Board of Directors
9.03. Any by-law made or amended by the shareholders may be amended or
repealed by the Board of Directors, and new by-laws may be added by the Board of
Directors unless the shareholders prescribe in the by-law that it shall not be
altered or repealed by the Board of Directors.
ARTICLE X. MISCELLANEOUS
Seal
10.01. The Corporation's seal shall be inscribed with the name of the
Corporation, the year of its incorporation, and the words "New Jersey." The seal
may be used by causing it or a facsimile to be impressed or reproduced on a
document or instrument, or affixed to a document or instrument.
Maintenance of Books and Records
10.02. The Corporation shall maintain books and records of account and
minutes of the meetings of its shareholders and Directors, including meetings of
committees of the Board of Directors. These documents shall be maintained at one
or more locations within or outside of the State of New Jersey, the location or
locations to be designated by the Board of Directors. Each of these documents
shall be in written form or in any other form capable of being converted into
written form within a reasonable time.
Inspection of Corporate Records
10.03. Any shareholder of record of the Corporation who has been a
shareholder of record for at least six (6) months immediately preceding his or
her demand and any person holding, or so authorized in writing by the holders
of, at least five (5%)
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percent of the outstanding shares of any class or series shall have the right,
on at least five (5) days' written demand to the president or the Secretary of
the Corporation and for a purpose deemed proper under any applicable law, to
examine in person, or by an agent or attorney, during usual business hours, the
minutes of the Corporation's shareholders' meeting and the Corporation's record
of its shareholders and to make extracts. The examination shall take place where
the minutes and record are maintained.
Execution of Contracts
10.04. The Board of Directors may authorize any person to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation. Authorization may be general or specific.
Voting Shares of Other Corporations
10.05. The President and any Executive Vice President or Vice President are
authorized to vote any shares of any other corporation or corporations standing
in the name of the Corporation. This authority may be exercised by these
officers either in person, by proxy, or by a duly executed power of attorney.
Bonds
10.06. The seal of the Corporation and any or all signatures of the
officers or other agents of the Corporation on a bond of the Corporation and on
any coupon attached to the bond may be facsimiles if the bond is countersigned
by an officer of other agent of a trustee or by other certifying or
authenticating authority. If any officer or other agent of the Corporation who
has signed or whose facsimile signature has been placed on a bond or coupon has
ceased to be an officer or agent before the bond is issued, the bond may be
issued by the Corporation with the same effect as it that person were an officer
or agent at the date of its issue.
Indemnification of Corporate Agents
10.07. No director or officer of the Corporation shall be personally liable
to the Corporation or its shareholders for damages for breach of any duty owed
to the Corporation or its shareholders, except for liability for any breach of
duty based upon an act or omission (a) in breach of such person's duty of
loyalty to the Corporation or its shareholders, (b) not in good faith or
involving a knowing violation of law or (c) resulting in receipt by such person
of an improper personal benefit.
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The Corporation shall have the authority to indemnify any Corporate Agent
against expenses, including attorney's fees, judgments, fines, and amounts paid
in settlement, incurred in connection with any pending or threatened action,
suit, or proceeding, with respect to which the Corporate Agent is a party, or is
threatened to be made a party, to the full extent permitted by the New Jersey
Business Corporation Act. The indemnification provided in this subparagraph
shall not be deemed exclusive of any other right, including the right to be
indemnified against liabilities and expenses incurred in proceedings by or in
the right of the Corporation, to which a Corporate Agent may be entitled under
any by--law, agreement, vote of shareholders or disinterested Directors, or
otherwise, both as to action in that Corporate Agent's official capacity and as
to action in another capacity. However, no indemnification shall be made to any
Corporate Agent if a judgment or other final adjudication establishes that the
Corporate Agent engaged in conduct that (1) breached the duty of loyalty to the
Corporation or the shareholders, (2) was not undertaken in good faith, (3)
involved a knowing violation of the law, or (4) resulted in the receipt by the
Agent of an improper personal benefit. Conduct breaching the duty of loyalty is
conduct that a person knows or believes to be contrary to the best interests of
the Corporation or its shareholders in connection with a matter in which he or
she has a material conflict of interest. These indemnification rights shall
insure to the benefit of the heirs, executors, and administrators of the
Corporate Agent. The Corporation shall have the power to purchase and maintain
insurance on behalf of any Corporate Agent against any liability asserted
against the Corporate Agent and incurred by the Corporate Agent in any capacity,
arising out of the Corporate Agent's status as a Corporate Agent, whether or not
the Corporation would have the power to indemnify the Corporate Agent against
the liability under the foregoing provisions. A "Corporate Agent" of the
Corporation shall be any person who is or was a director, officer, employee, or
agent of this Corporation or of any constituent Corporation absorbed by this
Corporation in a consolidation or merger, and other persons serving at the
request of the Corporation as a director, officer, trustee, employee, or agent
of another Corporation, association, partnership, joint venture, trust, or other
enterprise.
Subscription for Shares
10.09. The Corporation may enter into subscription agreements with regard
to the issuance of its shares, subject to the provisions of New Jersey Statutes
Section 14A:7-3.
Stock Purchase Plan
10.10. The Corporation may establish and operate one or more stock purchase
plans on the terms and conditions specified herein. A stock purchase plan may
provide for the issue and sale of
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options, or, for the granting of options for the purchase of the Corporations
unissued shares or issued shares purchased or to be purchased or acquired by the
Corporation. A stock purchase plan may be made available to employees, officers,
directors, and agents of the Corporation or any subsidiary of the Corporation,
or other persons who are or have been actively engaged in the conduct of the
business of the Corporation or any subsidiary of the Corporation, including
persons who have retired, become disabled, or died prior to the establishment of
the plan. A stock purchase plan may specify the type of consideration to be
received as payment for those shares and whether payment must be made in
installments, at one time, or in either manner. A stock purchase plan may
specify methods for aiding any eligible persons in paying for the shares by
compensation for services rendered, promissory notes, or other means. Any stock
purchase plan, before becoming effective, must be adopted by the Board of
Directors.
A stock purchase plan may include provisions determining or providing for
the determination of the following issues by the Board of Directors or a
committee of the Board of Directors:
(1) The eligibility of directors and employees to participate in the plan.
(2) The number and class of shares that may be subscribed for or for which
options may be granted under the plan.
Employee Benefit Plans
10.11. The Corporation may adopt, by resolution of the Board of Directors,
to the extent permitted by law in effect when the resolutions are adopted, any
one or more of the following plans for the benefit of some or all Employees (as
defined below) and their families, dependents, or beneficiaries:
1. Plans providing for payments solely in cash or property other than
shares of the Corporation, including profit-sharing, bonus, savings, pension,
retirement, deferred compensation, and other plans of similar nature; and
2. Plans that do not involve the issuance or transfer of shares of the
Corporation, for furnishing medical services; dental services; life, sickness,
accident, disability, or unemployment insurance benefits; education; housing;
social and recreational services; and other similar aids and services.
For purposes of this Section, the term "Employees" means employees,
officers, Directors, and agents of the Corporation and any subsidiary, and other
persons who are or who have been actively engaged in the conduct of the business
of the Corporation or any subsidiary, including any persons who have retired,
become disabled, or died before the establishment of any plan of the
Corporation.
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CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
BY THE SHAREHOLDERS FILED
NOV 14 1997
OF LONNA R. HOOKS
Secretary of State
ARC SLIDE TECHNOLOGIES LTD.
To: Secretary of State
State of New Jersey
THE UNDERSIGNED, for the purpose of amending the orginal Certificate of
Incorporation, as amended, of the above-named corporation, does hereby adopt the
following Certificate of Amendment, pursuant to the provisions of Section
14A:9-2(4), and Section 14A:9-4(3), Corporations, General of the New Jersey
Statutes.
1. The name of the corporation is
ARC SLIDE TECHNOLOGIES LTD.
2. The original Certificate of Incorporation of the Corporation was filed
on October 21, 1992, which was amended by Amendment filed on August 22, 1994.
3. Article First of the Certificate of Incorporation is hereby amended to
read as follows:
FIRST: The name of the Corporation is
ARC COMMUNICATIONS INC.
4. Article Third of the Certificate of Incorporation is hereby amended to
read as follows:
THIRD: The aggregate number of shares which the corporation shall have
the authority to issue is 50,000,000 common shares with $.001 par value.
5. The foregoing amendment was adopted by the unanimous consent of the
shareholders on October 13, 1997.
6. The holders of all of the shares of the corporation entitled to vote on
this amendment have signed a consent in writing adopting this amendment.
<PAGE>
Dated this 13th day of October, 1997.
ARC SLIDE TECHNOLOGIES LTD.
By:/s/ Steven H. Meyer
---------------------------
Steven H. Meyer, President
[SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
November 19,1997
CAPITAL CONNECTION, INC.
TALLAHASSEE, FL
The Articles of Merger were filed on November 19, 1997, for ARC COMMUNICATIONS
INC., the surviving New Jersey corporation not authorized to transact business
in Florida.
Should you have any further questions regarding this matter, please feel free to
call (850) 487-6050, the Amendment Filing Section.
Karen Gibson
Corporate Specialist
Division of Corporations Letter N umber: 597A00055535
Division of Corporations - P.O. Box 6327 - Tallahassee, Florida 32314
FILED
97 NOV 19 PM 3:19
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
ARTICLES OF MERGER
of
ARC COMMUNICATIONS INC., a Florida corporation
into its wholly-owned subsidiary
ARC COMMUNICATIONS INC., a New Jersey corporation
UNDER THE NAME OF
ARC COMMUNICATIONS INC.
Pursuant to the provisions of Chapter 10 of the New Jersey Business
Corporation Act and Chapter 607 of the Florida Business Corporation Act, the
undersigned corporations, ARC Communications Inc. (also referred to as the
"Parent" and "Merging Corporation"), a Florida corporation, and its wholly-owned
subsidiary, ARC Communications Inc. (also referred to as the "Subsidiary" and
"Surviving Corporation"), a New Jersey corporation, adopt the following Articles
of Merger for the purpose of merging the Parent into the Subsidiary under the
name of ARC Communications Inc.
Plan of Merger
1. The Plan of Merger provides for the merger of the Parent into the
Subsidiary as a statutory merger pursuant to Section 368(a) (1) (A) of the
Internal Revenue code of 1986. In exchange for their shares of common stock in
the Parent, each of the shareholders of the Parent shall receive in the merger a
total of one (1) share of common stock of the Subsidiary for each one (1) share
of common stock held by each of such shareholders in the Parent as of the
Effective Date of the merger. All issued and outstanding shares of common stock
in the Subsidiary
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held by the Parent prior to the Effective Date shall be deemed canceled as of
the Effective Date. All officers and directors of the Subsidiary immediately
prior to the Effective Date shall be the officers and directors of the Surviving
Corporation. The Certificate of Incorporation and By-Laws of the Subsidiary
immediately prior to the Effective Date shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation. The name of the
Surviving Corporation shall be Arc Communications Inc.
Adoption of Plan
2. a) The board of directors of the Merging Corporation approved the plan
of merger at a board of directors meeting on October 13, 1997.
b) Whereas the Merging Corporation owns 100% of the outstanding shares of
each class of stock of the Surviving Corporation, pursuant to Sec. 607.1104(1)
(a) of the Florida Business Corporation Act, no approval of the shareholders of
the Merging Corporation was required.
(c) The plan of merger was approved by the board of directors of the
Surviving Corporation at a board of directors meeting on October 13, 1997.
d) The plan of merger was approved by unanimous consent of shareholders of
the Surviving Corporation on October 13, 1997.
Effective Date
3. The Plan of Merger shall be effective as of the close of business on November
21, 1997.
Each of the undersigned corporations has caused these Articles to be signed
as of November 21, 1997.
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ARC COMMUNICATIONS, INC.,
a Florida corporation
By: /s/ Steven H. Meyer
-------------------------
Name: Steven H. Meyer
Title: President
ARC COMMUNICATIONS, INC.,
a New Jersey corporation
By: /s/ Steven H. Meyer
-------------------------
Name: Steven H. Meyer
Title: President
CERTIFICATE OF MERGER OF
NAVESINK RIVER GROUP INC. INTO FILED
ARC COMMUNICATIONS INC. DEC 24, 1997
Lonna R. Hooks
Secretary of State
Pursuant to the provisions of the New Jersey Business Corporation Act, the
undersigned corporations, Arc Communications Inc., a New Jersey corporation and
Navesink River Group Inc., a New Jersey corporation, adopt the following
Certificate of Merger for the purpose of merging Navesink River Group Inc. into
Arc Communications Inc.:
Plan of Merger
1. The Plan of Merger provides for the merger of Navesink River Group Inc.
into Arc communications Inc. as a statutory merger pursuant to Section 368(a)
(1) (A) of the Internal Revenue Code of 1986. In exchange for their shares of
stock in Navesink River Group Inc., the shareholders of Navesink River Group
Inc. shall receive in the merger a total of one hundred thousand (100,000)
shares of common stock of Arc Communications Inc. A copy of the Plan of Merger
is annexed hereto as "Exhibit I".
Adoption of Plan
2. (A) Pursuant to the New Jersey Business corporation Act, N.J.S.A.
14A:l0(3) (4), this merger was not required to be approved by the shareholders
of Arc communications Inc.
(B) There are 200 shares of common stock, each of no par value, of Navesink
River Group Inc. issued and outstanding that were entitled to vote on the Plan
of Merger. 200 shares were voted in favor of the Plan of Merger, and -0- shares
were voted against the Plan of Merger, by unanimous consent of shareholders in
lieu of
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special meeting of the shareholders of Navesink River Group Inc. held on
December 3, 1997.
3. (A) The Plan of Merger was approved by the Board of Directors of
Navesink River .Group Inc. by unanimous consent of Directors in lieu of special
meeting of the Board of Directors held on December 3, 1997.
(B) The Plan of Merger was approved by the Board of Directors of Arc
Communications Inc. at a meeting of the Board of Directors held on December 3,
1997.
Effective Date
4. The Plan of Merger shall be effective as of the close of business on
December 24, 1997.
Each of the undersigned corporations has caused this certificate of Merger
to be signed as of December 19, 1997.
NAVESINK RIVER GROUP INC.
By: /s/ Michael Rubel
-------------------------
Name: Michael Rubel
Title: President
ARC COMMUNICATIONS, INC.,
By: /s/ Steven Meyer
-------------------------
Name: Steven Meyer
Title: President
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EXHIBIT I
PLAN OF MERGER
OF
NAVESINK RIVER GROUP INC.
INTO
ARC COMMUNICATIONS, INC.
ARTICLE I
Names of Constituent Corporations
1. The name of each constituent corporation (together the "Constituent
Corporations") to this Merger is Navesink River Group Inc. a New Jersey
corporation, ("NRG") and ARC COMMUNICATIONS, INC., a New Jersey ("ARC").
2. NRG proposes to merge with and into ARC, which shall be, and is
sometimes referred to herein as the "Surviving Corporation", under the name Arc
Communications Inc.
ARTICLE II
Effective Time of the Merger
The Merger shall become effective upon the filing, by the secretary of
State of the State of New Jersey, pursuant to Section 14A:l0-4 of the New Jersey
Business Corporation Act, of a Certificate of Merger (the "Certificate of
Merger"), by and between ARC and NRG. The time when the Merger becomes effective
shall be the "Effective Time of the Merger" referred to in the Agreement.
ARTICLE III
Terms and Conditions of Proposed Merger
The terms and conditions of the proposed Merger are as follows:
1. The certificate of Incorporation of ARC, which is incorporated herein by
reference, as in effect immediately prior to the Effective Time of the Merger
shall be the Certificate of Incorporation of the Surviving Corporation.
2. The By-Laws of ARC as in effect immediately prior to the Effective Time
of the Merger shall be the By-Laws of the Surviving Corporation.
3. The Directors and Officers of ARC shall continue to serve as the
Officers and Directors of the Surviving Corporation.
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ARTICLE IV
Conversion and Exchange of Shares
Terms of Merger:
a. Conversion of Shares: Each One (1) share of the Common Stock of NRG (the
"NRG Shares") issued and outstanding immediately prior to the Effective Time of
the Merger shall by virtue of such Merger and without any action on the part of
the owner thereof, be deemed automatically canceled and converted into Five
Hundred (500) fully paid, nonassessable shares of the Common Stock of ARC (the
"ARC Shares").
b. Exchange of Shares. The holders and record owner(s) of the outstanding
certificate or certificates theretofore representing the NRG Shares shall
surrender their shares on or before the Effective Time of the Merger, and upon
surrender of such certificate or certificates to ARC, such certificates shall be
exchanged for a certificate or certificates representing the number of ARC
Shares into which the NRG Shares shall have been converted as set forth above.
Until so exchanged, each such outstanding certificate or certificates which
prior to the Effective Time of the Merger represented the NRG Shares shall be
deemed for all corporate purposes to evidence ownership of the number of ARC
Shares into which such NRG Shares shall have been so converted.
ARTICLE V
Abandonment of Merger
The Agreement, the Plan of Merger and the certificate of Merger may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time of the Merger as follows:
(i) by mutual agreement of the Board of Directors of NRG and ARC pursuant
to resolutions adopted by such Boards;
(ii) by NRG or ARC, if the conditions set forth in the Agreement of Merger
shall not have been satisfied or waived on or before December 31, 1997;
(iii) by the Board of Directors of NRG or ARC if the Merger shall not have
become effective on or before December 31, 1997; which date may be extended by
mutual agreement of the Boards of Directors of both parties.
(iv) by NRG if at any time before the Effective Time of the Merger NRG
determines that the Merger will not quality as a tax free reorganization.
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ARTICLE VI
Miscellaneous
1. At the Effective Time of the Merger the separate existence of NRC shall
cease, and the Constituent Corporations shall be merged into ARC, the Surviving
Corporation, in accordance with the provisions of this Plan of Merger and the
Certificate of Merger. As of the Effective Time of the Merger, ARC shall possess
all the rights, privileges, powers and franchises of a public and of a private
nature and be subject to all the restrictions, disabilities and duties of each
of the Constituent Corporations; and all and singular, the rights, privileges,
powers and franchises of each of the Constituent Corporations; and all property,
real, personal and mixed, and all debts due to each of the Constituent
Corporations on whatever account, as well for stock subscriptions as all other
things in action or belonging to each of the Constituent Corporations shall be
vested in the Surviving Corporation; and all property, rights and privileges,
powers and franchises and all and every other interest shall be thereafter as
effectual the property of the surviving Corporation as they were of the
Constituent Corporations; and the title or rights to any real or personal
property, whether by deed or otherwise, vested in either of the Constituent
Corporations, shall not revert or be in any way impaired by reason of the
Merger; provided that all rights of creditors and all liens upon the property of
either of said Constituent Corporations shall be preserved unimpaired, limited
in lien to the property affected by such liens immediately prior to the
Effective Time of the Merger; and all debts, liabilities and duties of NRG shall
henceforth attach to the Surviving Corporation and may be enforced against it to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by the Surviving Corporation.
2. If at any time the Surviving Corporation shall consider or be advised
that any further assignments or assurances are necessary or desirable to vest in
the Surviving Corporation, according to the terms hereof, the title to any
property or rights of NRG, the proper officers and directors of NRG shall and
will execute and make all such proper assignments and assurances and do all
things necessary or proper to vest title in such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes of this Plan of
Merger and the Certificate of Merger.
IN WITNESS WHEREOF, the duly authorized Constituent Corporation's have
executed this Plan of Merger on the this 19th day of December, 1997
ATTEST: ARC COMMUNICATIONS, INC.
/s/ Kenneth Meyer, V.P. By: /s/ Steven Meyer
- ----------------------------- --------------------------
Kenneth Meyer, Vice-President Steven Meyer, President
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ATTEST: NAVESINK RIVER GROUP, INC.
/s/ John Lisovitch By: /s/ Michael Rubel
- ----------------------------- --------------------------
John Lisovitch, Secretary Michael Rubel, President
UNANIMOUS CONSENT OF DIRECTORS IN LIEU
OF SPECIAL MEETING OF DIRECTORS
OP ARC COMMUNICATIONS INC.
The undersigned, being all the Directors of ARC COMMUNICATIONS INC. (the
"Corporation"), do hereby adopt the following resolutions:
RESOLVED, that Section 3.02 of the by-laws of the Corporation shall be
amended to provide that the Board of Directors shall consist of not less than
three (3) nor more than nine (9) directors. At any time during the year at the
discretion of the Board of Directors, the Board of Directors shall have the
authority to increase the total number of Directors within the above range by
special meeting of the Board of Directors.
FURTHER RESOLVED, that for the purposes of the annual meeting of
shareholders on July 16, 1998, Brian Tepper, Controller of the Corporation, is
hereby appointed as the official inspector of the election.
Dated as of July 14, 1998
/s/ Steven Meyer
-----------------------
STEVEN MEYER
/s/ Kenneth Meyer
-----------------------
KENNETH MEYER
/s/ Ethel Kaplan
-----------------------
ETHEL KAPLAN
FILED
SEP 4 1998
James A. DiEloutario, Jr.
State Treasurer
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
BY THE SHAREHOLDERS
OF
ARC COMMUNICATIONS INC.
To: The Secretary of State
State of New Jersey
THE UNDERSIGNED, for the purpose of amending the original Certificate of
Incorporation, as amended, of the above-named Corporation, does hereby adapt the
following Certificate of Amendment, pursuant to the provisions of Section
14A:9-2(4), and Section 14A:9-4(3), Corporation, General of the New Jersey
Statutes.
1. The name of the Corporation is ARC COMMUNICATIONS INC.
2. Article Third of the Certificate of Incorporation is hereby amended to read
as follows:
THIRD:
Aggregate Number of Shares
The aggregate number of shares which the Corporation shall have authority
to issue is 50,000,000 shares. These shares are divided into 45,000,000 common
shares with $.001 par value and 5,000,000 preferred shares with $.20 par value.
Power of Board of Directors to Amend Certificate of Incorporation
The Board of Directors may, at any time or from time to time, (a) divide any or
all of the preferred shares into classes or series; (b) determine for any class
or series established by the Board, its designation, number of shares, and
relative rights, preferences, and limitations; (c) change the designation,
number of shares, relative rights, preferences, or limitations of the shares of
any class or series established by the Board, no shares of which have been
issued; and (d) cause to be executed and filed without further approval of the
Shareholders of this Corporation, any amendment or amendments to this
certificate of incorporation as may be required to accomplish any of these
amendments.
In particular, but without limiting the generality of the above authority,
the Board shall have authority to determine the following concerning
preferred stock established by the Board:
(1) A distinctive designation for each class or series and the number of
shares which shall constitute each class or series.
(2) The dividend rate or rates on shares of the series of the series, any
restrictions, limitations, or conditions on the payment of the
dividends, whether dividends shall be cumulative and, if so, the date
or dates from which dividends shall cumulate, and the dates on which
dividends, if declared, shall be payable.
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(3) Whether the shares of the series shall be redeemable and, if so, the
time or times, the price or prices, the required notice or notices,
and the other terms and conditions on which the shares may be
redeemed.
(4) Whether the shares of the class or series are entitled to a retirement
or sinking fund for the purchase or redemption of such shares, and the
amount and terms of such fund.
(5) The rights of the holders of shares of the series in the event of the
liquidation, dissolution, dissolution, or winding up of the
corporation.
(6) Whether the shares of the series shall be convertible into shares of
any class, classes, or series, and if convertible, the price, prices,
rate, or rates of conversion, any method of adjusting these prices or
rates, and any other terms and conditions on which the shares shall be
convertible.
(7) The extent of any voting powers of the shares of the series.
(8) Whether the shares of the class or series are to be prior, equal or
junior, to the shares of any other class or series in any respect.
(9) Any other preferences, qualifications, privileges, options, and other
related or special rights and limitations of the class or series.
3. The foregoing amendment was approved by the unanimous consent of the Board of
Directors on July 1, 1998 and was adopted by the Shareholders at a meeting of
Shareholders on July 16, 1998, at which a quorum of Shareholders was present.
4. The number of shares voting for and against this amendment is as follows:
9,441,977 shares in favor, 0 shares against, and 290,350 shares abstain.
Dated this 31st day of August, 1998.
ARC COMMUNICATIONS INC.
By: /s/ Steven H. Meyer
------------------------------
Steven H. Meyer, President/CEO
FILED
SEP 15 1998
James A. DiElauterio, Jr.
State Treasurer
[LOGO]
Arc Communications, Inc.
www.arcomm.com
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
BY THE BOARD OF DIRECTORS
OF
ARC COMMUNICATIONS INC.
To: Secretary of State
State of New Jersey
THE UNDERSIGNED, for the purpose of amending the original Certificate of
Incorporation, as amended, of the above-named Corporation, does hereby adopt the
following Certificate of Amendment, pursuant to the provisions of Section
14A:9-2(2), and Section 14A:7-2(4), Corporations, General of the New Jersey
Statutes.
1. The name of the Corporation is ARC COMMUNICATIONS INC.
2. A copy of the resolution of the Board of Directors authorizing this
amendment is attached hereto. Said resolution of the Board of Directors was
adopted on the date set forth on the attached resolution.
3. Article Third of the Certificate of Incorporation is hereby amended to add
the provisions of Exhibit A annexed to the attached resolution of the Board
of Directors of the Corporation.
Dated this 1 day of September, 1998.
ARC COMMUNICATIONS INC.
By: /s/ STEVEN H. MEYER
--------------------------------
Steven H. Meyer, President/CEO
ARC COMMUNICATIONS INC.
ESTABLISHMENT OF CLASS A PREFERRED STOCK
By this Amendment to the Certificate of Incorporation, a class of preferred
shares is created pursuant to resolution of the Board of Directors of ARC
COMMUNICATIONS INC., consisting of 1,500,000 shares that shall have the
following designation, rights, preferences, and limitations.
Designation
1. The designation of the class of preferred shares is "Class A Preferred
Stock".
Dividends
2. The holders of the Class A Preferred Stock shall be entitled to receive, and
the Corporation shall pay on those shares, fixed cumulative dividends at an
annual rate of nine (9%) percent in arrears for each share and no more, payable
in cash or Class A Preferred Stock at the option of the Board of Directors.
Class A Preferred Stock dividends, when and if declared, shall be paid at the
rate of one (1) share of Class A Preferred Stock for each twenty ($.20) cents of
dividend declared. This right to receive and obligation to pay shall arise as,
if, and when declared by the Board of Directors from the funds of the
Corporation properly available for the payment of dividends in any fiscal year.
These dividends shall be payable or accrued annually in arrears commencing on
September 1, 1999. Dividends on the Class A Preferred Stock shall be cumulative
from the original issue of each share of the Class A Preferred Stock to the
extent not paid, whether earned or not earned. No dividends or other
distributions in any fiscal year shall be declared or paid on, nor shall there
be a redemption of, the common shares of the Corporation or any shares of the
Corporation that rank lower in priority to the Class A Preferred Stock with
respect to payment of dividends unless and until all accrued and unpaid
dividends provided for in this paragraph 2 have been paid, or have been declared
and funds set aside for the payment thereof.
Participation in Assets on Dissolution
3. In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of shares of the
Class A Preferred Stock shall be entitled to be paid the amount of twenty ($.20)
cents for each share, together with all accrued and unpaid dividends on the
shares, and no more, before any distribution to the holders of the common shares
or any other shares of the Corporation ranking lower in priority to the Class A
Preferred Stock with respect to distribution on liquidation.
Redemption At Corporation's Option
4. The Corporation shall have the right, at its option and on notice as provided
in this paragraph 4, to redeem at any time all or any portion of the Class A
Preferred Stock at a price of twenty ($.20) cents for each share, together with
all accrued and unpaid dividends on those shares. In all cases of redemption of
the Class A Preferred Stock, thirty (30) days advance written notice of the
redemption shall be given by the Corporation through registered mail addressed
to the shareholders whose shares are to be redeemed at their respective
addresses appearing on the books of the Corporation.
EXHIBIT A
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If notice is given and if on or before the date set for redemption the
Corporation shall have set aside all funds necessary for the redemption, then on
and after the date set for redemption all of these shares shall no longer be
outstanding, all dividends on these shares shall cease to accrue, and all rights
of the holders of these shares shall terminate, except the right to receive the
amount payable on redemption of the shares, without interest, on the surrender
of the certificate representing the shares. Funds necessary for redemption shall
be considered to be set aside only if they are held separate and apart from
other corporate finds in trust for the benefit of the holders of the shares with
respect to which the notice of redemption is given. If only a portion of the
Class A Preferred Stock is redeemed, the shares to be redeemed shall be selected
by lot.
Voting Rights
5. The holders of shares of the Class A Preferred Stock shall not be entitled to
vote at, or receive notices of, any meeting of the Shareholders of the
Corporation, except as required under the New Jersey Business Corporation Act.
9-15-98
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made as of the 22nd day of August, 1994, by and among
STEVEN H. MEYER, residing at 7 Emma Drive, Wayside, New Jersey 07712, KENNETH P.
MEYER, residing at 8 Gimbel Place, Wayside, New Jersey 07712, ETHEL KAPLAN,
residing at Edwards Point Road, Rumson, New Jersey 07724, and PETER C. COSMAS,
residing at 42 Sawmill Road, Kinnelon, New Jersey 07405 (hereinafter referred to
individually as "Shareholder" and collectively as the "Shareholders"), and ARC
SLIDE TECHNOLOGIES LTD., a New Jersey corporation with its principal place of
business at 788 Shrewsbury Avenue, Tinton Falls, New Jersey 07724 (hereinafter
referred to as the "Corporation").
WITNESSETH:
WHEREAS, the Shareholders own all of the total issued and outstanding
shares (hereinafter the "Shares") of the Corporation as set forth on SCHEDULE A
annexed hereto; and
WHEREAS, the Shareholders are actively engaged in the management and
control of the Corporation and further desire to provide for the continued
operation, management and control of the Corporation and to provide for the
method of disposition of the Shares of the Corporation after the withdrawal or
death of a Shareholder.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto
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agree as follows:
ARTICLE 1 - TRANSFER RESTRICTIONS
1.1 - No Shareholder shall, at any time during the term of this Agreement,
either directly or indirectly sell, assign, transfer by gift or otherwise,
bequeath, pledge, mortgage, hypothecate or create a security interest in or lien
on, encumber, or otherwise dispose of (hereinafter "transfer") any of his Shares
in the Corporation now owned or hereafter acquired, without the prior written
consent of the other Shareholders, except as otherwise provided in this
Agreement. Any purported transfer of Shares in violation of the terms of this
Agreement shall be considered void and of no effect.
1.2 - Notwithstanding anything herein contained to the contrary, any
Shareholder, including the estate of a deceased Shareholder, shall have the
right at any time to transfer his/her Shares in the Corporation free of the
terms and conditions of this Agreement to (a) as to all Shareholders, to such
Shareholder's immediate family member (which term shall be defined as siblings,
spouses and children) or another Shareholder, and (b) as to Peter Cosmas only,
to Robert Nemiroff, James Sidor, Thomas Driscol or Nicholas Norm; provided,
however, that any transfer pursuant to this Section 1.2 shall be subject to and
shall conform with any provisions contained in any loan agreement, mortgage or
other financing arrangement of the Corporation and applicable laws, providing
for restrictions on transfer.
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1.3 - With respect to any transfers pursuant to Section 1.2 above, any such
transferee shall at the time of transfer of the Shares to the transferee execute
an amendment to this Agreement agreeing to abide by all terms, conditions and
restrictions contained herein. Subsequent transfers shall be subject to all
restrictions on transfer set forth in this Article 1.
ARTICLE 2 - TRANSFER OF SHARES
2.1 - Offer Notice. In the event of the death, legal incapacity, or
bankruptcy of a Shareholder, or in the event that a Shareholder desires to sell
his/her Shares ("Selling Shareholder"), such Selling Shareholder shall be
required to offer to sell all of his/her Shares to the other Shareholders or the
corporation as hereinafter provided. Such Selling Shareholder (or his/her legal
representative) shall serve written notice upon all the other Shareholders and
the Corporation of his/her offer to transfer his/her Shares within sixty (60)
days following the triggering event or decision to offer such Shares for sale
("Offer Notice").
2.2 - Option to Purchase.
2.2.1 - First Option. Each of the other Shareholders shall have the first
option to purchase a "proportionate share", as herein defined, of all of the
Shares so offered for a period of sixty (60) days from the receipt of the Offer
Notice and
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determination of the Purchase Price as defined in Article 6 herein.
2.2.2 - Second Option. In the event that a Shareholder fails or refuses to
exercise the option to purchase a proportionate share of all of the Selling
Shareholder's Shares within the sixty (60) day option period, the Selling
Shareholder shall notify the other Shareholders in writing of the availability
of said Shares ("Second Offer Notice") and the other Shareholders shall have the
second option for a period of fifteen (15) days after the receipt of the Second
Offer Notice to purchase a "proportionate share" of all of the Selling
Shareholder's Shares remaining.
2.2.3 - Third Option. In the event that the options to purchase the Shares
of the Selling Shareholder set forth in Sections 2.2.1 and 2.2.2 above expire
unexercised, the Selling Shareholder shall notify the Corporation in writing of
the availability of said Shares ("Third Offer Notice") and the Corporation shall
have the option for a period of forty-five (45) days after the receipt of the
Third Offer Notice to purchase all of the Selling Shareholder's Shares
remaining.
2.3 - Option Exercise. An option to purchase the Shares of a Selling
Shareholder under this Article 2 shall be exercised by either a Shareholder or
the Corporation, as the case may be, by delivering written notice to that effect
to the Selling Shareholder within the time specified in the relevant option
period.
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2.4 - Terms. The Purchase Price of any purchase of Shares under this
Article 2 shall be payable and the transaction shall close in accordance with
the terms and conditions as provided in Articles 5 and 6 herein.
2.5 - Proportionate Share. The term "proportionate share" as used herein
means that portion of the Shares of the Corporation offered for sale or intended
to be transferred which the Shares of the Corporation then owned by a
non-Selling Shareholder bear to all the outstanding Shares of the Corporation,
excluding those offered for sale or otherwise intended to be transferred. In
addition, if any of the Shares offered for sale are not purchased by the
Shareholder first entitled thereto, the term "proportionate share" shall include
that portion of the Shares of the Corporation not purchased by the Shareholder
first entitled thereto which the Shares of the Corporation owned by a
Shareholder bear to the Shares of the corporation (other than those offered for
sale or intended to be transferred) owned by all Shareholders, other than the
Shareholder first entitled to purchase.
2.6 - In the event that the Shares offered for sale under this Article 2
remain unpurchased after the expiration of the options provided for in Section
2.2.1 through 2.2.3, inclusive, then the Selling Shareholder shall be free to
transfer all but not less than all of such Shares provided, however, that any
transfer of Shares by the Selling Shareholder to a third party shall be at a
purchase
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<PAGE>
price which is at least equal to or in excess of the Purchase Price set forth in
Article 6 herein.
ARTICLE 3 - CLOSING.
3.1 - If an option to purchase Shares has been exercised pursuant to
Article 2 herein, the purchaser shall, contemporaneously with the exercise of
the purchase option, notify the Selling Shareholder in writing that the closing
of such purchase and sale shall take place at a specified time and date no later
than thirty (30) days after the date of option exercise at the principal offices
of the Corporation or at such other date, time and place as may be mutually
agreed upon by the parties thereto.
ARTICLE 4 - PAYMENT OF PURCHASE PRICE.
4.1 - The purchasing Shareholder or Corporation, as the case may be
(sometimes referred to collectively herein as "purchaser"), shall have the
option to either pay to the Selling Shareholder or personal representative as
the case may be (sometimes hereinafter referred to collectively as
"transferor"), the Purchase Price in full or in installments.
4.1.1 - If the purchaser elects to pay the Purchase Price in full at
closing, the purchaser shall tender at closing to the transferor either cash or
certified or cashiers check for the full Purchase Price. Simultaneously, the
transferor shall endorse and
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<PAGE>
deliver the Shares to the purchaser. As soon thereafter as may be practical, the
Corporation will issue a new share certificate to the purchaser reflecting the
Shares purchased.
4.1.2 - In the event that the purchaser elects to pay the Purchase Price in
installments, the purchaser shall pay to the transferor twenty (20%) percent of
the purchase price in cash or by certified or cashiers check at the closing. The
balance of the purchase price shall be evidenced by a promissory note (the
"Note") executed by the purchaser and delivered to the transferor at closing,
which shall be payable in equal monthly installments over a period of five (5)
years, beginning with the date of closing and which shall bear interest at a
rate equal to the "prime" rate determined or set by The Chase Manhattan Bank,
N.A., from time to time, plus one (1%) percent. Further, the Note shall provide
(a) that the maker shall have the privilege to prepay all or any portion of the
Note, at any time, without penalty; (b) that default in any payment when due
after thirty (30) days advance written notice of such default shall cause the
remaining unpaid balance to be immediately due and payable; (c) the obligation
of the maker under the Note shall be fully recourse; (d) that the maker shall
pay all costs and expenses of collection, including reasonable attorney's fees.
ARTICLE 5 - SECURITY FOR PAYMENT.
5.1 - Escrow. If the purchaser elects to pay the Purchase
7
<PAGE>
Price for the Shares in installments, the transferor shall deposit with a
mutually acceptable escrow agent the certificates evidencing the Shares to be
transferred, together with the appropriate stock powers, duly endorsed in blank
for transfer. Further, the transferor hereby appoints the escrow agent his
attorney-in-fact to transfer the Shares on the books of the Corporation to the
name of the purchaser.
5.2 - Duties of Escrow Agent. The escrow agent shall hold such Shares as
security for payment in full by the purchaser of the Purchase Price, and said
Shares shall not be encumbered or disposed of, except as otherwise provided in
this Agreement. Upon payment of the last installment due under the Note, the
escrow agent shall, upon receipt of written acknowledgement of "payment in full"
by the transferor, deliver the share certificates to the purchaser and shall
thereupon be relieved of its duties as escrow agent with respect to that
particular transaction.
5.3 - Voting Rights. As long as a purchaser under this Agreement is not in
default with respect to any payments due under the Note, the purchaser shall
have the right to vote the Shares on deposit with the escrow agent.
ARTICLE 6 - PURCHASE PRICE.
6.1 - The purchase price ("Purchase Price") for Shares sold to another
Shareholder or the corporation pursuant to Article 2 above
8
<PAGE>
shall be the fair market value of such Shares as determined by two certified
public accountants ("C.P.A.") (one chosen by the Selling Shareholder, and the
other chosen by the purchaser(s), using such valuation methods as such
accountants deem appropriate and customary under the circumstances. If the
higher of such valuations shall not exceed 110% of the lower of such valuations,
then the valuations shall be averaged, and the average shall be he fair market
value. If the higher valuation is more than 110% of the lower valuation, then
the two CPA's shall mutually agree upon a third C.P.A. Upon completion of the
third valuation, if the third valuation is between the two prior valuations,
then the third valuation shall be the fair market value. If the third valuation
exceeds the higher of the prior valuations, then the higher prior valuation
shall be the fair market value. If the third valuation is less than the lower
prior valuation, then the lower prior valuation shall be the fair market value.
The cost of the valuations shall be shared equally by the Selling Shareholder
and the purchasers. All valuations shall be completed within thirty (30) days
after the appointment of each C.P.A.
ARTICLE 7 -DEFAULT.
7.1 - Purchaser Default. If a purchaser hereunder defaults in any payments
due under the Note, and such default is not cured within thirty (30) days after
written notice thereof has been given by the transferor to the purchaser, the
transferor may elect one of the following remedies: (i) the transferor may, upon
written demand
9
<PAGE>
made upon the escrow agent, obtain the return of all such Shares as to which a
default has occurred and the purchaser shall have no further right, title or
interest in and to such Shares and the purchase transaction shall thenceforth be
deemed null and void; (ii) any other rights and remedies available to a secured
party under Article 9 of the Uniform Commercial Code, as in effect in the State
of New Jersey.
ARTICLE 8 - NOTATION.
8.1 - The Shareholders agree, immediately after execution of this
Agreement, to present the certificates representing the Shares in the
Corporation presently owned to the Secretary of the Corporation and cause the
Secretary to stamp on each certificate the following notation in a conspicuous
manner:
"The shares represented by this certificate are subject to an agreement
dated August 22, 1994 a copy of which is on file at the principal office of
the corporation, and these shares may not be transferred, assigned,
pledged, hypothecated, or otherwise disposed of except in strict accordance
with the terms of that agreement."
8.2 - In addition, the Shares shall contain any other legends required by
federal or state securities laws.
ARTICLE 9 - MISCELLANEOUS.
9.1 - Equitable Remedies. In the event any party hereto breaches the
covenants or conditions herein provided, any other party may enforce his/its
rights hereunder against such party by injunction as well as by other remedies,
the parties agreeing that remedies at law alone for the breach of any of the
aforesaid
10
<PAGE>
provisions and conditions are inadequate.
9.2 - Complete Agreement.
This Agreement constitutes the complete agreement and understanding among
the parties hereto with respect to the matters set forth herein, and supersedes
and terminates any and all prior existing agreements or understandings between
or among any of the parties hereto with respect to such matters. No alteration,
amendment or modification of any of the terms and provisions hereof shall be
valid unless made pursuant to an instrument in writing signed by each of the
parties. The failure of any party at any time to enforce his rights hereunder
shall in no manner affect the right of such party at a later time to enforce the
same. No waiver by any party of any condition, or breach of any provision, term,
covenant, representation or warranty contained herein, whether by conduct or
otherwise, shall be deemed to be or be construed as a further or continuing
waiver of any such condition or of the breach of any other provision, term,
covenant, representation or warranty hereof.
9.3 - Interpretation of Syntax and Headings. All references made and
pronouns used in this Agreement shall be construed in the singular or plural,
and in such gender as the sense and circumstances require. Section headings are
for convenience only and shall not affect nor be used in construing this
Agreement.
11
<PAGE>
9.4 - Notice. Whenever under the provisions of this Agreement notice is
required to be given, it shall be deemed given when either served personally,
sent by recognized courier service, or mailed, return receipt requested, to the
party noticed at the address set forth herein. All notices shall be effective
upon receipt or refusal thereof.
9.5 - Benefit. This Agreement shall be binding upon, and shall inure to the
benefit of the respective parties hereto and their heirs, executors,
administrators, successors and assigns.
9.6 - Invalidity. If any of the terms or provisions of this Agreement shall
be declared invalid or illegal, then notwithstanding such invalidity or
illegality, the remaining terms and provisions of the Agreement shall remain in
full force and effect in the same manner as if the invalid or illegal terms or
provisions had not been contained therein.
9.7 - Governing Law.
9.7.1 This Agreement shall be construed and governed in accordance with the
laws of the State of New Jersey.
9.7.2 Each of the Shareholders acknowledges that the Shares have not been
registered under the Securities Act of 1933 or under the securities laws of any
state or other jurisdiction. The Shareholders understand that, as a consequence
of the foregoing, in addition to the provisions of this Agreement, they may be
restricted from reselling or otherwise transferring or disposing of
12
<PAGE>
their Shares under federal and state securities laws. Accordingly,
notwithstanding anything to the contrary set forth in this Agreement, any sale
or other transfer of Shares hereunder shall be subject to compliance with all
applicable federal and state securities laws. Any sale or other transfer in
violation of any such federal or state securities laws shall be null and void.
9.8 - After-Acquired Securities.
All of the provisions of this Agreement shall apply to all securities of
the Corporation now owned or that may be issued or transferred hereafter to a
Shareholder as a result of any additional issuance, purchase, exchange or
reclassification of securities, corporate reorganization or any other form of
capitalization, consolidation, merger, share split, or share dividend, or which
are acquired by a Shareholder in any other manner. In addition, all of the
provisions of this Agreement shall apply to all securities of the Corporation
acquired by any other person pursuant to Article 2 of this Agreement.
9.9 - Arbitration and Specific Performance.
(a) Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be resolved by binding arbitration by a panel of
three (3) arbitrators in accordance with the Rules of the American Arbitration
Association then prevailing, and such arbitration shall be held in the State of
New Jersey or other place mutually agreeable to the parties. The
13
<PAGE>
decision of such panel shall be enforceable in any court having jurisdiction.
Pursuant to this provision, arbitration shall be a condition precedent to the
commencement of any other proceeding or litigation. The panel can enter an ex
parte order if a Shareholder fails or refuses to participate in the arbitration
proceeding.
IN WITNESS WHEREOF, the undersigned executed this Agreement on the day and
year first above written.
/s/ STEVEN H. MEYER
--------------------------------------
STEVEN H. MEYER
/s/ KENNETH P. MEYER
--------------------------------------
KENNETH P. MEYER
/s/ ETHEL KAPLAN
--------------------------------------
ETHEL KAPLAN
/s/ PETER C. COSMAS
--------------------------------------
PETER C. COSMAS
ATTEST: ARC SLIDE TECHNOLOGIES LTD.
/s/ ETHEL KAPLAN By: /s/ STEVEN H. MEYER
- ------------------------------------- ---------------------------------
ETHEL KAPLAN, Secretary STEVEN H. MEYER, President
14
<PAGE>
SCHEDULE A
SHAREHOLDER NUMBER OF SHARES
- ----------- ----------------
STEVEN H. MEYER 427,500
KENNETH P. MEYER 427,500
ETHEL KAPLAN 855,000
PETER C. COSMAS 90,000
PROMISSORY NOTE
- --------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$750,000.00 08-27-98 06-30-99 340 907 CMP
- --------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
Borrower: ARC Communications, Inc. (TIN: 650622481) Lender: Sovereign Bank
788 Shrewsbury Avenue Ocean Office
Tinton Falls, NJ 07724 901 West Park Avenue
Ocean, NJ 07712
================================================================================
Principal Amount: $750,000.00 Initial Rate: 9.500% Date of Note: 08-27-98
PROMISE TO PAY. ARC Communications, Inc. ("Borrower") promises to pay to
Sovereign Bank ("Lender"), or order, in lawful money of the United States of
America, on demand, the principal amount of Seven Hundred Fifty Thousand &
00/100 Dollars ($750,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each advance.
Interest shall be calculated from the date of each advance until repayment of
each advance. Borrower also promises to pay all applicable fees and expenses.
PAYMENT. Borrower will pay this loan immediately upon Lender's demand. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning August 31, 1998, with all
subsequent interest payments to be due on the last day of each month after
that. Interest on this Note is computed on a 365/360 simple interest basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Prime Rate as
established at the sole discretion of the Lender (the "Index"). The Index is
not necessarily the lowest rate charged by Lender on its loans and is set by
Lender in its sole discretion, If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after notifying
Borrower. Lender will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based on other rates
as well. The interest rate change will not occur more often than each Day.
The index currently is 8.500% per annum. The Interest rate to be applied to
the unpaid principal balance of this Note will be at a rate of 1.000
percentage point over the Index, resulting in an initial rate of 9.500% per
annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
LATE CHARGE. If a regularly scheduled interest payment is 15 days or more
late, Borrower will be charged 5.000% of the unpaid portion of the regularly
scheduled payment. This late charge shall be paid to Lender by Borrower for
the purpose of defraying the expense incident to the handling of the
delinquent payment. If Lender demands payment of this loan, and Borrower does
not pay the loan within 15 days after Lender's demand, Borrower also will be
charged 5.000% of the unpaid portion of the sum of the unpaid princIpal plus
accrued unpaid interest.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially
affect any of Borrowers property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related
Documents. (d) Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (e) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding
is commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (f) Any creditor tries to take any of Borrower's property on
or in which Lender has a lien or security interest. This includes a
garnishment of or levy on any of Borrowers accounts with Lender. (g) Any
guarantor dies or any of the other events described in this default section
occurs with respect to any guarantor of this Note. (h) A material adverse
change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the indebtedness is impaired. (i)
Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within thirty
(30) days; or (b) if the cure requires more than thirty (30) days,
immediately initiates steps which Lender deems in Lender's sole discretion to
be sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, increase the variable interest rate on this
Note to 4.000 percentage points over the Index. The interest rate will not
exceed the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower
also will pay Lender that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses whether
or not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of New Jersey.
If there is a lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of Monmouth County, the State of New Jersey.
Lender and Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower against the
other. This Note shall be governed by and construed in accordance with the
laws of the State of New Jersey.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrowers right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all
accounts Borrower may open in the future, excluding however all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided on this paragraph.
COLLATERAL. This Note is secured by first security interest on all accounts
receivable.
-24-
<PAGE>
PROMISSORY NOTE
(Continued)
Loan No 340 Page 2
================================================================================
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note may be requested orally by Borrower or as provided in this
paragraph. All oral requests shall be confirmed in writing on the day of the
request. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized as provided in this paragraph to
request advances under the line of credit until Lender receives from Borrower
at Lender's address shown above written notice of revocation of their
authority: Steven Meyer, President; Kenneth Meyer, Vice President; and Ethel
Kaplan, Secretary. Advances based on 80% of Accounts Receivable under 90
days. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to
any of Borrower's accounts with Lender. The unpaid principal balance owing on
this Note at any time may be evidenced by endorsements on this Note or by
Lenders internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Note or any other loan with Lender; (d) Borrower has applied funds
provided pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or
any other agreement between Lender and Borrower.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether
as maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
ARC Communications, Inc.
COPY
By: /s/ Steven Meyer By: /s/ Kenneth Meyer
--------------------------------(SEAL) -----------------------------(SEAL)
Steven Meyer, President Kenneth Meyer, Vice President
By: /s/ Ethel Kaplan
--------------------------------(SEAL)
Ethel Kaplan, Secretary
ATTEST
/s/ Ethel Kaplan
- -----------------------------------(SEAL) (Corporate Seal)
Secretary or Assistant Secretary
LENDER
Sovereign Bank
By: /s/ [illegible]
--------------------------------
Authorized Officer
================================================================================
Variable Rate. Line of credit. LASER PRO, Reg. U.S. Pat. & T.M. Off.,
Ver. 3.22b (c) 1998 CFI ProServices, Inc.
All rights reserved. [NJ-D20 F3.22a
ARCCOMM.LN]
LEASE AGREEMENT
BY AND BETWEEN:
ROBERT F. REYNOLDS AND
PAULINE REYNOLDS
"Landlord"
- -and-
ARC SLIDE TECHNOLOGIES, INC.
A NEW JERSEY CORPORATION
"Tenant"
PREMISES:
788 Shrewsbury Avenue
Tinton Falls, New Jersey 07724
DATED: As of September 24, 1996
<PAGE>
THIS LEASE AGREEMENT, made as of the 24 day of September, 1996, between
ROBERT F. REYNOLDS AND PAULINE REYNOLDS, having an office at 788 Shrewsbury
Avenue, Tinton Falls, New Jersey , 07724, hereinafter called the "Landlord"; and
Arc Slide Technologies, Inc., having its principal office at 788 Shrewsbury
Avenue, Tinton Falls, New Jersey, 07724 hereinafter called the "Tenant".
WITNESSETH
WHEREAS, the Landlord is the owner of certain lands and premises located at
788 Shrewsbury Avenue,, in the Town of Tinton Falls, County of Monmouth and
State of New Jersey, hereinafter referred to as the "Property" ; and
WHEREAS, the Landlord has agreed to lease and the Tenant has agreed to rent
7,209 square feet of office space (hereinafter the "leased premises") located on
the first floor of the Property as more particularly set forth herein.
NOW, THEREFORE, in consideration of the covenants and conditions
hereinafter set forth and for other good and valuable considerations, the
Landlord does demise, lease and let unto the Tenant, and the Tenant does rent
and take from the Landlord the leased premises, and the Landlord and Tenant
mutually covenant and agree as follows:
1. LEASED PREMISES
1.1 The leased premises shall consist of 7,209 square feet of office space,
outside dimensions (inclusive of a proportionate share of core and common
areas), hereinafter referred to as the "leased premises" located on the first
floor of the Property. The leased premises shall be as delineated on a sketch,
approved by both Landlord and Tenant and attached to and made a part of this
lease as Exhibit A and shall be accepted by Tenant in its existing condition.
1.2 Parking shall be available to Tenant in the parking area of the
Property in non-designated areas on an as available basis. In the event that
Tenant leases from Landlord all of the additional space presently occupied by
Columbia Research, then at such time Tenant shall be entitled to the use of the
reserved parking spaces presently used by Columbia Research.
1.3 Subject to the terms and conditions hereinafter set forth, the leased
premises hereunder are demised to Tenant expressly subject to such title
exceptions as may be shown by a title search of the lands and premises which are
the subject of the within lease, and subject to such state of facts as an
accurate survey and inspection of the premises might disclose, providing any of
the foregoing shall not interfere with or prohibit the use by Tenant of the
leased premises, including the use of and access to the common areas, parking
areas, and access driveways for Tenant's business use as intended by the within
lease.
2. TERM OF LEASE
2.1 The Landlord leases unto the Tenant and the Tenant hires the leased
premises for
-1-
<PAGE>
the term of five years, to commence on the first day of the first month
following issuance of a Certificate of Occupancy for the leased premises upon
completion of the Tenant fit up as contemplated hereby, or on December 1, 1996,
whichever date first occurs (hereinafter called the "Commencement Date"). If the
issuance of a Certificate of Occupancy occurs in October, 1996, then the
Commencement Date and ending dates shall be adjusted accordingly, and the
parties will execute a letter specifying the adjusted dates, and setting forth
the revised total rental due for each of the periods set forth in paragraph 3.1
following. The obligation of the Tenant hereunder shall be subject to the
following provisos:
(a) That on or before the Commencement Date, the Landlord shall have
substantially completed the leased premises as required by the terms and
conditions of Article 6 of this lease. Upon the delivery by the Landlord to the
Tenant of the leased premises, the lease term shall commence in accordance with
this Article 2 and the Tenant's obligation to pay rent shall begin.
2.2 It is expressly understood and agreed that for the purpose of this
lease wherever and whenever the term "substantial completion" is used, the term
"substantial completion" shall not include items of maintenance, service or
guarantee, which may be required pursuant to the terms and conditions of this
lease, nor items of work to be completed by Tenant.
2.2 Anything herein contained to the contrary notwithstanding, Tenant shall
not be obligated to accept delivery of the leased premises, unless all building
systems attributable to the leased premises and ancillary support systems
applicable to the leased premises, including HVAC, plumbing and electric, are
hooked up and in operable condition for Tenant to use the premises for Tenant's
leased purposes.
3. RENT
3.1 The Tenant covenants and agrees to pay during the term of this lease,
total rent in the amount of $526,257.00. Upon execution hereof, Tenant shall pay
$8,410.50 representing the first months rent due hereunder plus the additional
security deposit required under Article 38. The rent due hereunder shall be
payable as follows:
a. During the period from December 1, 1996 through November 30, 1998
rent of $201,852.00 payable at the rate of $8,4 10.50 monthly.
b. During the period commencing December 1, 1998 though November 30,
2001 rent of $324,405.00 payable at the rate of $9,011.25 monthly.
All Monthly rent payments shall be made promptly in advance on the
first day of each and every month during the term of the lease without
demand and without off-set, deduction or abatement, together with such
additional rent and other charges required to be paid by Tenant as are
hereinafter set forth.
3.2 Tenant acknowledges that late payment by Tenant to Landlord of rent and
other sums due hereunder will cause Landlord to incur costs not contemplated by
this Lease, the amount of which will be extremely difficult to ascertain.
Accordingly, if any payment due Landlord from Tenant shall not be received by
Landlord, or Landlord's designee, within ten (10) days after such amount shall
be due, Tenant shall pay to Landlord a late charge equal to five (5%) percent of
such overdue amount.
-2-
<PAGE>
The parties agree that such late charge represents a fair and reasonable
estimate of the costs Landlord will incur by reason of late payment by Tenant
Acceptance of the late charge by Landlord shall in no event constitute a waiver
of Tenant's default with respect to such overdue amount, nor prevent Landlord
from exercising any of the other rights and remedies granted hereunder. Payment
of the late fee by Tenant shall be made to Landlord on the first day of the
first month following the date on which the late charge accrues.
4. UTILITIES
4.1 Landlord shall pay all utility charges for water, electricity, and gas
used in and about the leased premises during the term of the lease.
5. USE
5.1 The Tenant covenants and agrees to use and occupy the demised premises
(i) as an electronic design studio (SIC # 7333, commercial photo, art and
graphics) and (ii) for all lawful purposes incident to its business, and for no
other purpose. Landlord represents and warrants that (i) upon the Commencement
Date Tenant may lawfully use and occupy the demised premises for the purposes
specified in this Article 5; and (ii) prior to the Commencement Date an
appropriate Certificate of Occupancy will have been obtained, by Landlord, if
required. Except as otherwise in this lease provided and upon and after issuance
of the Certificate of Occupancy, and any other permits or consents which may be
required in order that Tenant have legal occupancy of the leased premises, the
Tenant shall comply with the terms and conditions of the lease on the part of
the Tenant to be performed, and the Tenant, in connection with its use of the
leased premises, shall thereafter comply with all applicable laws and ordinances
of governmental boards, bureaus or instrumentalities having jurisdiction thereof
5.2 The Tenant covenants and agrees that it will not use the leased
premises for any use which creates an extra hazard of fire or other danger or
casualty, or which will increase the rate which Landlord must pay to secure fire
or liability insurance, or which will render the building or its improvements
uninsurable, or which will bring the leased premises or the property of which it
is a part within the provisions of the Industrial Site Recovery Act of the State
of New Jersey.
6. CONSTRUCTION AND APPROVALS
6.1 Tenant agrees to construct the repairs, modifications, and improvements
to that portion of the leased premises not presently occupied by Slide Effects,
Inc. (the "Affililated Tenant") (the "New Space") in accordance with the sketch
plat attached hereto as Exhibit A (or referred to therein). Except as otherwise
provided herein, all costs connected with the improvement of the New Space,
including but not limited to construction, labor, materials, and clean up costs,
are to be borne by the Tenant
6.2 It is expressly understood and agreed that any work performed by Tenant
to the extent reimbursed by Landlord, shall be deemed to be institutional and
part of the realty owned by the Landlord so that the same shall remain the
property of and in possession of the Landlord at the expiration of the lease
term.
6.3 Landlord hereby agrees to reimburse Tenant for the cost of tenant
improvements
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installed in the leased premises by Tenant prior to the Commencement Date, up to
a maximum reimbursement by Landlord to Tenant in the amount of $50,000.00.
Landlord shall pay to Tenant the reimbursement required hereunder, from time to
time, upon delivery to Landlord by Tenant of invoices for work installed,
including materials purchased by Tenant at the direction of the contractor or
subcontractor, in the leased premises, along with an appropriate waiver of right
to file lien from the contractor or subcontractor submitting the said invoices.
Payment shall be made by Landlord upon confirmation by Landlord that the work
for which reimbursement is being requested has been completed in a good and
workmanlike manner, but in any event within three business days of receipt by
Landlord of said request for reimbursement from Tenant.
6.4 If necessary, Landlord agrees, at no cost to Landlord, to sign any
applications submitted to Landlord by Tenant for building permits as required by
Tinton Falls.
7. REPAIRS AND MAINTENANCE
7.1 During the term of this lease, the Landlord, at its cost and expense
shall keep in good order, safe condition and repair, the exterior walls,
structural steel, roof, roof membrane, foundation, floors, load bearing members,
plate glass (except as provided in Article 11), elevators, HVAC and plumbing, as
well as all sanitary sewer, storm sewer and utility lines and facilities serving
the leased premises, except for repairs or maintenance occasioned by the
negligence or deliberate act of Tenant, or its agents, servants, employees and
invitees which shall be then repaired at the cost and expense of the Tenant,
limited, however, to the extent of Tenant's said negligence. Landlord agrees to
maintain the Building of which the leased premises are a part as a Class B
office building. In addition, the Landlord shall: (i) take care of and maintain
and repair the lawns, shrubbery, driveways, sidewalks, curbs, exterior and
common area lighting, walkways and parking area on the property, and the
Landlord shall keep the parking area free of snow and ice and provide dumpster
service; and (ii) with respect to general building maintenance, shall undertake
general maintenance of the building core and common areas, except as otherwise
hereinafter set forth in Article 7.2.
7.2 Tenant, at its sole cost and expense, shall take good care of the
leased premises and shall keep and maintain the interior of the leased premises
so as to maintain the same as a Class B office facility; provided, however,
Tenant shall only be required to maintain these items in the same condition as
exists as of the Commencement Date, reasonable wear and tear excepted. The
obligations of the Tenant in connection with the foregoing shall include the
following obligations for maintenance, service and repair applicable to Tenant's
leased premises (but not the replacement of items which might otherwise be
required to be replaced at the termination of this Lease if due to ordinary wear
and tear)
(a) Janitorial services;
(b) Cleaning service as to floors, carpeting and interior windows;
(c) Maintenance and repair of all interior doors, including entrance door
to the leased premises;
(d) Maintenance and repair of any and all fixtures and equipment, including
water coolers, if any;
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(e) Maintenance and repair of venetian blinds, floor coverings and drapes,
if any;
(f) Maintenance and repair or replacement of any and all interior building
locks and/or security devices;
(g) Replacement of all bulbs, ballasts and fluorescent tubes, including
labor.
7.3 If after the Commencement Date and by reason of strike, labor disputes
or other cause outside Landlord's control, including, but not limited to,
governmental preemption in connection with a national emergency or any rule,
order regulation of any governmental agency, or conditions of supply and demand
which are affected by war or other emergency or acts of God, Landlord shall be
unable to fulfill its obligations under this Lease, or to supply any service
which Landlord is obligated to supply, this Lease and Tenant's obligations to
pay rent hereunder shall in no way be affected, impaired or excused, except that
Tenant shall receive an equitable pro rata reduction in that portion of the Base
Rent provided for in Article 3, which reduction shall be based upon the
Landlord's cost savings resulting from such inability to perform or supply
services, which sum shall be credited to Tenant by Landlord on the next monthly
rent obligation. Landlord agrees, however, that it will use reasonable efforts
to obtain restoration of services based on the then existing circumstances.
Tenant may terminate this lease if services required to be provided by Landlord
remain unavailable for more than ten (10) days, and as a result thereof, the
premises are untenantable.
8. INSURANCE
8.1 It is expressly understood and agreed that the Landlord, at its sole
cost and expense shall carry fire insurance with full extended coverage in broad
form in an amount equivalent to the full replacement cost of the insurable
improvements to the Buildings, exclusive of foundation, (without depreciation),
inclusive of broad form boiler and machinery coverage, including
air-conditioning system, together with coverage for sprinkler damage to the
building or its improvements (if applicable). In addition, the Landlord shall
obtain commercial public liability insurance in the minimum amount of FIVE
HUNDRED THOUSAND AND 00/100 ($500,000.00) DOLLARS per accident, together with
excess coverage limits of not less than TWO MILLION FIVE HUNDRED THOUSAND AND
00/100 ($2,500,000.00) DOLLARS per accident.
8.2 The Tenant covenants and agrees that it will carry liability insurance
in the minimum amount of ONE MILLION AND 00/100 ($1,000,000.00) DOLLARS per
accident and ONE HUNDRED THOUSAND AND 00/100 ($100,000.00) DOLLARS for property
damage. The Tenant further covenants and agrees that it will indemnify, defend
and save Landlord and Landlord's mortgagee harmless from any claim,
responsibility or liability which may be occasioned by reason of damage or
injury for which Tenant is required to provide insurance coverage as
hereinbefore referred to. Landlord agrees to give Tenant timely notice in
writing of any claim it may receive for which it seeks indemnity, as hereinabove
provided, in order that Tenant may undertake defense of such claim. The Tenant
agrees that such insurance coverage will be maintained in full force and effect
during the term of the lease pursuant to policies issued by solvent companies
authorized to do business in the State of New Jersey.
8.3 Landlord and Tenant hereby release the other from any and all
liabilities.
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responsibility (to the other or anyone claiming through or under them by way of
subrogation or otherwise) under fire and extended coverage and supplementary
contract casualties, if such fire, casualty or damage shall have been caused by
default or negligence of the other party, or anyone for whom such party may be
responsible; provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such time
as the releasor's policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair said policies or
prejudice the right of the releasor to recover thereunder. Each of Landlord and
Tenant agree that its policies will include such a clause or endorsement so long
as the same shall be obtainable without extra cost, or if such cost shall be
charged therefor, so long as the other party pays such extra cost. If extra cost
shall be chargeable therefor, each party shall notify the other party of the
amount of the extra cost, and the other party shall be obligated to pay the
extra cost unless, within ten (10) days after such notice, it elects not to be
obligated so to do by written notice to the original party. If such clause or
endorsement is not available, or if either party should not desire the coverage
at extra cost to it, then the provisions of this paragraph shall not apply to
the policy or policies in question.
8.4 Anything in this lease to the contrary notwithstanding, the Tenant
covenants and agrees that it will indemnify, defend and save harmless the
Landlord against and from all liabilities, obligations, damages, penalties,
claims, costs, charges and expenses, including, without limitation, reasonable
attorneys' fees, which may be imposed upon or incurred by Landlord by reason of
any of the following occurring during the term of this lease:
(i) Any matter, cause or thing arising out of the use and occupancy of the
leased premises or any part thereof caused by the negligence or willful acts of
the Tenant, or any of its agents, contractors, servants, employees, licensees or
invitees;
(ii) Any failure on the part of Tenant to perform or comply with any of the
covenants, agreements, terms or conditions contained in this lease on its part
to be performed or complied with. Landlord shall promptly notify Tenant in a
timely manner in writing of any such claim asserted against it and shall
promptly send to Tenant copies of all papers or legal process served upon it in
connection with any action or proceeding brought against Landlord by reason of
any such claim in order that Tenant shall interpose a timely defense to such
action.
8.5 Anything in this lease to the contrary notwithstanding, the Landlord,
subject to the provisions of Article 28, covenants and agrees that it will
indemnify, defend and save harmless the Tenant against and from all liabilities,
obligations, damages, penalties, claims, costs, charges and expenses, including,
without limitation, reasonable attorneys' fees, which may be imposed upon or
incurred by Tenant by reason of any of the following occurring during the term
of this lease:
(i) Any matter, cause or thing arising out of the use and occupancy of the
leased premises or any part thereof caused by the negligence or willful acts of
the Landlord, or any of its agents, contractors, servants, employees, licensees
or invitees;
(ii) Any failure on the part of Landlord to perform or comply with any of
the covenants, agreements, terms or conditions contained in this lease on its
part to be performed or complied
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with, Tenant shall promptly notify Landlord in a timely manner in writing of any
such claim asserted against it and shall promptly send to Landlord copies of all
papers or legal process served upon it in connection with any action or
proceeding brought against Tenant by reason of any such claim in order that
Landlord shall interpose a timely defense to such action.
8.6 Anything in this Article 8 to the contrary notwithstanding, it is
expressly understood and agreed that after the initial rating by the applicable
rating insurance organization applicable to the building for any insurance which
Landlord shall carry as in this Article provided, in the event the insurance
rates shall be increased due to the use, activities or operation of any tenant
of the building of which the leased premises are a part, including the Tenant
hereunder, any increase in premiums occasioned or caused by such activities of
any applicable tenant, including the Tenant, shall be paid for at the sole cost
and expense of the Landlord or such tenant, but shall not be an obligation of
the Tenant hereunder unless the Tenant hereunder shall be the effective cause of
such premium increase. The foregoing shall not apply to general rate increases
as shall be applicable and customary throughout the industry or applicable to
the community with respect to any such applicable insurance coverage.
9. LANDLORD'S ACCESS FOR FUTURE CONSTRUCTION.
ALTERATIONS AND REPAIRS
The Landlord reserves the right, upon reasonable notice to Tenant, to enter
the leased premises in connection with the construction and erection of
additions or improvements or to make necessary repairs, alterations or
improvements, and may temporarily close entrances, doors, corridors, elevators,
and other facilities, all without liability to Tenant, provided that in the
exercise of such rights the Landlord shall not unreasonably interfere with (i)
the business operations of Tenant; (ii) the utility to Tenant of the leased
premises; or (iii) the appearance of the leased premises.
10. TRADE FIXTURES
10.1 It is agreed that the trade fixtures, machinery, equipment and office
furnishings installed by Tenant in the leased premises shall be and remain
personal property even though they may be attached to the leased premises, and
may be removed by Tenant. Tenant shall repair or cause to be repaired any damage
to the leased premises caused by the aforesaid removals.
10.2 Except as otherwise expressly provided in this lease, any trade
fixtures, machinery, equipment, office furnishings or other property of the
Tenant, including property remaining within the leased premises which Tenant is
entitled to remove upon the termination of this Lease Agreement or upon any
quitting, vacating or abandonment of the premises by the Tenant, shall be
removed from the leased premises prior to the expiration or termination of the
leased term. If Tenant shall fail to remove the same prior to the expiration or
termination of the lease, Landlord, at Tenant's sole cost and expense, shall be
permitted to remove and store the said trade fixtures, machinery, equipment,
office furnishings or other property of the Tenant, and, after thirty days
written notice advising Tenant where the same have been stored and requesting
the removal of all such property by Tenant, and the failure of Tenant to so
remove all of such property, the same shall be considered abandoned and the
Landlord shall have the right thereafter, without any further notice to Tenant,
to retain, sell or otherwise dispose of the same, and
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Landlord shall not be accountable to Tenant for any part of the proceeds of any
sale which may be made by the landlord nor shall the Landlord be accountable to
the Tenant for any such equipment and/or property that shall be retained by the
Landlord. Tenant shall be liable for and shall reimburse Landlord for any
reasonable expenses or damages incurred by Landlord in removing and/or storing
any abandoned equipment or other property to the extent that said expenses are
not recovered through the sale or disposition of said equipment or property.
10.3 All installation and removal of Tenant's fixtures, property and
equipment shall be done in accordance with all applicable laws and ordinances
and the rules and regulations of all governmental boards and bodies having
jurisdiction.
11. GLASS
The Landlord agrees to replace, at its expense, any broken glass in the
windows or other apertures of the leased premises, except where such damage or
casualty is caused by the negligence or act of the Tenant, its agents, servants
or employees, or where broken from the inside (unless caused by Landlord, or its
agents, contractors, servants, employees, licensees or invitees), in which
event, Landlord shall replace or repair the same at the cost and expense of the
Tenant.
12. ASSIGNMENT AND SUBLETTING
12.1 The Tenant may not assign this lease agreement or sublease the whole
or any part of the leased premises without first advising the Landlord in
writing of its intention to assign or sublease the leased premises as
aforementioned, which notice shall be in writing, by certified mail, return
receipt requested, by Tenant to Landlord. The notice shall specify (i) the date
on or after which Tenant desires to assign this lease agreement or to sublease
the whole or any part of the leased premises provided that such date shall not
be less than forty-five days after the date of such notice, and (ii) in the
event of a partial sublease, the location of the portion of the Premises to be
sublet. Landlord shall then have fourteen (14) days after receipt of such notice
by Tenant within which (i) in the case of an assignment to elect to recapture
the leased premises and terminate the lease agreement and to release Tenant from
its obligations hereunder, effective on the date specified in Tenant's notice to
Landlord as the date on or after which Tenant desires to assign the Lease
Agreement; or (ii) in the case of a sublease of all or part of the leased
premises, to accept a release pro tanto of said subleased space from the scope
of the lease and to adjust the rent proportionately and other lease obligations
with respect to any subleased space, effective on the date specified in Tenant's
notice to Landlord as the date on or after which Tenant desires to sublease the
whole or any part of the leased premises. If the Landlord shall so elect (i) to
recapture the leased premises, or (ii) to accept a release pro tanto and thereby
recapture said subleased space, the Landlord shall give written notice thereof
to Tenant as provided in Article 17 below, prior to the expiration of forty-five
(45) days from the date of receipt of Tenant's notice. In either of such events,
rent and all other charges due shall be paid by Tenant to Landlord effective up
to and including the date of the applicable lease termination. Tenant agrees
that it will surrender possession of the space recaptured by the Landlord on the
effective date of termination. Tenant also agrees to execute a release of space,
or a lease termination statement in recordable form in the event the lease is
terminated as hereinabove provided.
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Tenant may assign or sublease the leased premises, or a portion thereof, to an
affiliate of Tenant, without Landlord's consent, and without being subject to
recapture, provided that Tenant remains primarily liable for all tenant's
obligations hereunder.
12.2 In the event Landlord does not elect to recapture the premises and
terminate the lease as hereinabove provided, then, in that event, the Tenant may
assign this lease, or sublease all or any portion or part of the leased
premises, without the consent of Landlord, provided the Tenant gives the
Landlord notice of any such assignment and any assignees (but not sublessees)
undertake in writing to assume the terms and conditions of this lease,
providing, in any event, that the Tenant shall remain directly and primarily
liable for the payment and performance of the terms and conditions of this
lease. The Landlord reserves the right, at all times, to require and demand that
the primary Tenant hereunder pay and perform the terms and conditions of this
lease after prior demand by Landlord of such assignee. No such assignment or
subletting shall be made to any tenant who shall occupy the premises for any
use, other than the use permitted herein, or which would in any way violate the
applicable ordinances, rules and regulations of applicable governmental boards
and bureaus having jurisdiction thereof, or of the carrier of the fire insurance
or other insurance to be provided under this lease.
12.3 In the event the Tenant or its assignee shall undertake any further
and subsequent assignment or subletting, Tenant's or Tenant's assignee's right
to assign or sublet shall be subject to the same required prior consent of
Landlord in accordance with the same terms and conditions as provided in Article
12.1.
12.4 Notwithstanding anything herein to the contrary, Tenant shall be
allowed to assign or sublet the leased premises to an affiliated entity of
Tenant without the Landlord's prior written consent, provided, however, that the
provisions of Articles 12.2 and 12.3 shall continue to be applicable to such
assignment.
13. FIRE AND CASUALTY
13.1 In case of any damage to or destruction to the leased premises by fire
or other casualty, tantamount to substantial destruction, so that Tenant cannot
use its leased premises for its intended business purposes, occurring during the
term of this lease which is not covered by the insurance required to be carried
by Article 8, or which cannot be repaired within ninety (90) days from the
happening of such casualty, then, in such event, the term hereby created shall,
at the option of either party, upon written notice to the other by certified
mail, return receipt requested, within thirty (30) days of such fire or
casualty, cease and become null and void from the date of such destruction or
damage. The party terminating shall certify to the other in connection with its
notice such facts upon which it has determined that reconstruction of the
building cannot be accomplished within the ninety (90) day period hereinabove
provided. In such event, the Tenant shall immediately surrender the leased
premises and the Tenant's interest in said lease to the Landlord, and the Tenant
shall only pay rent to the time of such destruction or damage in which event,
the Landlord may re-enter and repossess the leased premises thus discharged from
this lease and may remove all parties therefrom. However, if neither party shall
elect to cancel this lease within the thirty (30) day period hereinabove
provided, the Landlord shall thereupon repair and
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restore the leased premises to its condition existing prior to such casualty
with reasonable speed and dispatch, and the rent shall not be accrued after said
damage from the date on which Tenant is unable to use its Leased Premises for
its intended business purposes, and while the repairs and restorations are being
made, but shall recommence immediately after said premises are restored and a
certificate of occupancy issued.
13.2 In the event of any other insured casualty, which shall be repairable
within ninety (90) days from the happening of such damage or casualty, the
Landlord shall repair and restore the leased premises with reasonable speed and
dispatch, and the rent shall abate and be equitably apportioned as the case may
be as to any portion of the leased premises which shall be unfit for occupancy
by the Tenant, or which cannot be used by the Tenant so as to conduct its
business substantially in the same manner as conducted by Tenant prior to such
fire or casualty as shall be determined by the reasonable judgment of the
Tenant. The rent, however, shall accrue and recommence immediately upon
restoration of the leased premises and delivery of the Certificate of Occupancy
by Landlord to Tenant.
13.3 Nothing hereinabove contained with respect to the Tenant's right to
abate rent as in this Article 13 provided shall be construed to limit or affect
the Landlord's right to payment under any claim for damages covered by the rent
insurance policy pursuant to the contract therefor required to be provided
pursuant to Paragraph 8 of this lease.
13.4 For the purposes of this Paragraph 13, in determining what constitutes
reasonable speed and dispatch, consideration shall be given for delays which
would be excuses for non-performance as in Paragraph 23 hereinafter provided
(Force Majeure).
13.5 In the event of such fire or casualty as above provided, wherein the
Landlord shall rebuild, the Tenant agrees, at its cost and expense, to forthwith
remove any and all of its equipment, fixtures, stock and personal property as
the same may be required to permit Landlord to expedite rebuilding and/or
repair. In any event, the Tenant shall assume at its sole risk the
responsibility for damage or security with respect to such fixtures and
equipment in the event the Building area where the same may be located has been
damaged, until the Building shall be restored and made secure. The Landlord
agrees, however, that it will cooperate with Tenant in order to take all
reasonable steps to protect and/or make secure Tenant's fixtures, goods or
equipment during such period of reconstruction.
13.6 Anything in this Article 13 to the contrary notwithstanding, it is
expressly understood and agreed that wherever reconstruction shall be
undertaken, in the event of damage or casualty as in this Article 13 provided,
the Landlord shall prosecute such reconstruction with reasonable speed and
dispatch. In the event, however, such reconstruction or repair shall not be
completed within ninety (90) days from the date of casualty (such time period of
ninety (90) days shall be extended for such reasonable period of time as is
required by reasons of Force Majeure or if occasioned by default on the part of
the Tenant) then, in that event, the Tenant shall have the option at the
expiration of the ninety (90) day period (as the same may be extended as
hereinabove provided) to terminate the lease. In the event of such termination,
neither party shall have any further liability, one to the other, in accordance
with the terms and conditions of the lease. The Landlord during such period of
reconstruction shall give the Tenant reasonable notice
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at least thirty (30) days in advance of the date on which the Building shall be
ready for re-occupancy. Rent shall recommence upon restoration of the leased
premises and delivery of the Certificate of Occupancy by Landlord to Tenant.
14.COMPLIANCE WITH LOCAL RULES AND REGULATIONS
14.1 Landlord covenants and agrees with Tenant that upon acceptance and
occupancy of the leased premises, the leased premises will comply with all
statutes, ordinances, rules, orders, regulations and requirements of the
Federal, State and Municipal Government and of any and all their departments and
bureaus, and to the requirements of the Board of Fire Underwriters or their
equivalent in the State of New Jersey, which are applicable to the use and
construction of the same.
14.2 The Tenant covenants and agrees that upon and after acceptance and
occupancy of the leased premises, except to the extent due to Landlord's failure
to comply with Section 14.1, it will promptly execute and comply with all
statutes, ordinances, rules, orders, regulations and requirements of the
Federal, State and Municipal Government and any and all their departments and
bureaus or to the reasonable rules promulgated by the Landlord in writing, for
the correction, prevention and abatement of nuisances, violations or other
grievances, in, upon or connected with said premises during said term, at the
Tenant's cost and expense, subject to the right of the Tenant to contest the
decision by any such governmental decision, and Tenant shall indemnify, defend
and save the Landlord harmless from any fine, penalty, costs and liability
imposed upon the Landlord as a result of Tenant's failure so to comply. Except
for compliance with governmental requirements due solely to the special use and
occupancy of the Tenant in the conduct of its business which shall be the sole
responsibility of the Tenant, with respect to any other required governmental
compliance by reason of general requirements throughout the community not
attributable to Tenant's special use, the cost of compliance shall be Landlord's
sole responsibility and expense.
14.3 The Tenant covenants and agrees, at its own cost and expense, to
comply with such regulations or request as may be required by the fire or
liability insurance carriers providing insurance for the leased premises, and
will further comply with such other requirements that may be promulgated by the
Board of Fire Underwriters or their equivalent in connection with the use and
occupancy of the leased premises by the Tenant in the conduct of its business,
provided that such regulations, request and/or requirements apply to Tenant's
activities within the leased premises.
14.4 Subject to the provision or limitations contained in Sections 14.2 and
14.3, if the Tenant shall fail or neglect to comply with the aforesaid statutes,
ordinances, rules, orders, regulations and requirements or any of them, failure
of the Tenant to comply with the requirements of subparagraph 14.1 above shall
be deemed an item of default for which the Landlord shall have recourse by
termination of this lease or exercise of any other rights reserved to the
Landlord hereunder, in accordance with the terms and conditions of this lease.
15.DEFAULT
15.1 Subject to the provisions of Section 15.3 and Section 15.4, if there
should occur any default on the part of the Tenant in the performance of any
conditions and covenants herein contained,
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or should the Tenant be evicted by summary proceedings or otherwise, the
Landlord, in addition to any other remedies herein contained or as may be
permitted by law, may without being liable for damages, re-enter the said
premises and take possession thereof as may be permitted by law. The Landlord
may, at its option, relet the premises and receive the rents therefor and apply
the same, first to the payment of such expenses, including real estate
brokerage, reasonable attorney fees and costs, as the Landlord may have been put
to in re-entering and repossessing the same and in making such repairs and
alterations as may be necessary for any new tenancy; and second to the payment
of rents, additional rents and other lease charges due hereunder. The Tenant
shall remain liable for such rents, additional rents and other lease charges as
may be in arrears and also the rents, additional rents and other lease charges
as may accrue subsequent to the re-entry by the Landlord, to the extent of the
difference between the rents, additional rents and other lease charges reserved
hereunder and the rents, additional rents and other lease charges, if any,
received by the Landlord during the remainder of the unexpired term hereof,
after deducting the aforementioned expenses, fees and costs; the same to be paid
as such deficiencies arise and are ascertained. Landlord shall take reasonable
steps to mitigate any such damages.
15.2 If the Tenant be adjudicated bankrupt or insolvent, or be placed in
receivership, or should proceedings be instituted by or against the Tenant for
bankruptcy, insolvency, receivership, agreement of compositions or assignment of
the benefit of creditors, or if this lease, or the estate of the Tenant
hereunder shall pass to another by virtue of any court proceedings, writ of
execution, levy, sale or by operation of law, then in either of such events,
unless they shall be cured within sixty (60) days, the Landlord may, at any time
thereafter, terminate this lease and the term hereof upon giving to the Tenant
or to any trustee, receiver, assignee or other person in charge of or acting as
custodian of the assets or property of the Tenant, thirty (30) days' notice of
such termination in writing and sent in the manner provided in Article 17. This
lease and the term hereof shall end on the date fixed in such notice as if the
said date was the date originally fixed in this lease for the expiration hereof
Notwithstanding the termination, the Landlord may still enforce its rights
reserved pursuant to sub-paragraph 15.1.
15.3 Any default by Tenant in the payment of rent or any other monetary
obligation shall be cause for termination if the same is not cured within five
(5) days after written notice of default.
15.4 Any other default by Tenant in the lease shall be cause for
termination if the same is not cured within thirty (30) days after written
notice of default, provided that if Tenant in good faith attempts to cure any of
such non-monetary defaults which cannot otherwise be cured within the thirty
(30) day period, the time to cure shall be extended to such reasonable time as
may be required to effectuate the curing of any such default otherwise required
to be performed within said thirty (30) day period.
15.5 As expressly required pursuant to the terms and conditions of this
lease, in case the Tenant shall fail or neglect to comply with any statutes,
ordinances, laws, rules, orders, regulations and requirements or any of them
(unless Tenant is in the process of contesting the applicability or legality of
the same in a court of competent jurisdiction, and has posted a bond for the
benefit of Landlord, protecting Landlord from any loss resulting from Tenant's
non-compliance), or in case the Tenant shall neglect or fail to make any
necessary or required repairs, then the Landlord or the Landlord's agents may
after thirty
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(30) days' notice (except for emergency repairs, which may be made immediately)
enter said premises and make said repairs and comply with any and all of the
said statutes, ordinances, laws, rules, orders, regulations or requirements, at
the cost and expense of the Tenant and in case of the Tenant's failure to pay
therefor, the said cost and expense shall be added to the next month's rent and
be due and payable as additional rent.
16. INSPECTION BY LANDLORD
The Tenant agrees that the said Landlord's agents, and other
representatives, shall have the right to enter into and upon the leased
premises, or any part thereof, during business hours, upon prior reasonable oral
or written notice to Tenant at the leased premises without unduly disturbing the
operations of the Tenant for the purpose of examining the same for making such
repairs or alterations therein as may be necessary for the safety and
preservation thereof.
17. NOTICES
All notices required or permitted to be given to the Landlord shall be
given by certified mail, return receipt requested, addressed to the Landlord at
the address set forth at the head of this agreement or such other place as the
Landlord shall designate in writing. All notices required or permitted to be
given to the Tenant shall be given by certified mail, return receipt requested,
addressed to the Tenant at the address set forth at the head of this agreement
or such other place as the Tenant shall designate in writing. Notice shall be
deemed given upon receipt of the same by the person to whom such notice is
given, or the first refusal to accept the same. In addition, notice may be given
via facsimile transmission, provided that the person giving such notice shall
retain electronic proof that the transmission was successfully sent. Notice
given by facsimile shall be deemed given upon sending the same.
18. NON-WAIVER
The failure of the Landlord or Tenant to insist upon strict performance of
any of the covenants or conditions of this lease, or to exercise any remedy or
election as in this Lease Agreement provided, shall not be construed as a waiver
or relinquishment of any such covenants, conditions, elections or remedies, but
the same shall be and remain in full force and effect. If the Landlord or Tenant
pursues any remedy granted by the terms of applicable law, it shall not be
construed as a waiver or relinquishment of any other remedy afforded thereby.
19. ALTERATIONS AND IMPROVEMENTS BY TENANT
19.1 The Tenant shall not without the Landlord's prior written consent,
which consent Landlord shall not be obligated to give, make any alterations,
additions or improvements to the demised premises, of a structural nature,
structural intended to mean any modification to the exterior walls, structural
steel framing, floors, ceilings or any construction or installations which will
affect the building structural systems, including plumbing, heating,
ventilating, air-conditioning, elevators or stairwells, electrical circuitry,
excluding relocation of light fixtures or outlets, or materially change or alter
the Tenant's Plan as set forth on Schedule A.
19.2 Tenant shall have the right to make non-structural alterations,
installations, changes replacements, additions and/or improvements which do not
materially change or alter the Tenant [illegible]
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ATTACHMENT TO EXHIBIT A
OUTLINE OF SCOPE OF WORK TO BE PERFORMED FOR EXIST1NG SPACE AND NEW
SPACE
I. NEW SPACE:
1) Dismantling area
2) Rewire for telephones and electronics and new darkroom
3) New light fixtures
4) Replace ceiling tiles
5) Carpet
6) Exhaust Fan for New Dark Room/Graphic Area including three (3)
220 volt outlets
7) Plumbing for new dark room of graphic area
8) Tile Floor for graphic area
9) New doors
10) Paint
11) New walls
12) Other items related to fit-up of new space, including
architectural and planning fees
II. EXISTING LEASE PREMISES (already occupied by Slide Effects,Inc.) : to
be completed in two stages
A. Promptly after lease execution
1) Dismantle area/Take out walls
2) Replace front door or do second phase
3) Paint
B. Subsequent to December 31, 1996 (to be modified based on whether or
not the Columbia Research space is to be occupied by tenant):
1) Dismantle as needed
2) Replace walls as needed
3) Carpet
4) Paint
5) Other items related to fit-up of Columbia Research space
[INITIALED]
9/24/96
9/26/96
9/25/96
<PAGE>
as set forth on Exhibit B (hereinafter sometimes individually and sometimes
collectively referred to as "alterations") to the demised premises during the
term of the lease, provided the same shall not exceed $10,000.00 per annum
(non-cumulative); provided, in any event, that any such permitted installation
shall not affect the basic building structure or basic Building systems. Any
installation in excess of $10,000.00 shall require Landlord's prior written
consent, which consent shall not be unreasonably withheld or delayed, providing
such changes are non-structural and providing the same do not affect the
building structural or operating systems as above defined; which consent may,
however, contain provisions relating to the procedures to be followed for the
removal of such alterations at the termination of the lease. Landlord agrees
that it will not unreasonably withhold its consent to any such non-structural
alterations. Each such alteration shall be of the same quality as the original
construction and finishing of the office space, and shall be done in a good
workmanlike manner. Tenant shall have no obligation to remove the alterations or
to restore the demised premises to their original condition at the termination
of the Lease, unless the same may be required by Landlord, at its option, in
connection with its required consent as set forth under this Article 19, to be
obtained by Tenant. Any alterations or improvements done by Tenant as permitted
hereunder shall be in compliance with all applicable governmental laws, rules,
or regulations pertaining thereto, and Tenant shall indemnify, defend and save
harmless Landlord from damage or liability occasioned by Tenant's alterations or
improvements. Any consent required by Landlord under this Article 19 shall be
deemed to have been given if Landlord shall fail to respond to Tenant's request
within ten (10) days after receipt of Tenant's written request.
19.3 Nothing herein contained shall be construed as a consent on the part
of the Landlord to subject the estate of the Landlord to liability under the
Mechanic's Lien Law of the State of New Jersey, it being expressly understood
that the Landlord's estate shall not be subject to such liability.
20. NON-LIABILITY OF LANDLORD
20.1 The Landlord shall not be liable for any damage or injury to property
or person 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, excepting the negligence of the Landlord (subject to Landlord's
limitation of liability as set forth in paragraph 28), its agents, servants,
employees, contractors or invitees, for which Landlord shall be responsible.
21. CONDEMNATION
21.1 If due to condemnation or taking or seizure by any authority having
the right of eminent domain, (1) more than twenty (20) percent in aggregate of
the total leased premises is taken, or (ii) if access to the leased premises be
denied, then, in the event of any such takings as hereinabove provided, the
lease term created shall, at the option of the Tenant, terminate, cease and
become null and void from the date when the authority exercising the power of
eminent domain takes or interferes with the use of the leased premises, or area
of access to the leased premises, or substantially and [illegible] interferes
with the Tenant's ability to conduct its business in the same manner as
conducted by tenant to [illegible] condemnation.
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The Tenant shall only be responsible for the payment of rent until the time
of surrender. In any event, no part of the Landlord's condemnation award shall
belong to or be claimed by the Tenant. Without diminishing Landlord's award, the
Tenant shall have the right to make a claim against the condemning authority for
such independent claim (not including any claim for loss of leasehold value)
which it may have and as may be allowed by law, for costs and damages due to
relocating moving, loss of trade fixtures and other similar costs and charges
directly incurred by the Tenant and resulting from such condemnation.
21.2 In the event of any partial taking which would not be cause for
termination of the within lease or in the event of any partial taking in excess
of the percentages provided in subparagraph 19.1, and in which event the Tenant
shall elect to retain the balance of the leased premises remaining after such
taking, then and in either event, the rent shall abate in an amount mutually to
be agreed upon between the Landlord and Tenant based (i) on the relationship
that the character and quantum of the property taken bears to the property which
shall remain after such condemnation, and (ii) the cost to the Landlord of
restoration of the property, if applicable, as hereinafter provided, in excess
of the net condemnation award received by Landlord. In any event, no part of the
Landlord's condemnation award shall belong to or be claimed by the Tenant.
However, the Landlord shall, to the extent permitted by applicable law and as
the same be practicable on the site of the leased premises, at the Landlord's
sole cost and expense, promptly and with due diligence make such repairs and
alterations in order to restore the Building and/or improvements to the
condition substantially to that prior to such condemnation so as to make the
same tenantable and secure. If Landlord shall not complete such restoration
within sixty (60) days from such taking by condemnation as above provided,
Tenant shall have the right to terminate the within lease in accordance with and
in the same manner provided in Article 13.6.
22. TENANT'S FIRE AND CASUALTY INSURANCE
The Tenant, at its own cost and expense, shall insure its own fixtures,
equipment and contents for fire and other casualty damage, including any of
Tenant's leasehold improvements, it being expressly understood and agreed that
the obligation to provide such insurance is not the responsibility of the
Landlord nor shall it be liable therefor.
23. FORCE MAJEURE
Except for the obligation of the Tenant to pay rent and other charges as in
this lease provided, the period of time during which the Landlord or Tenant is
prevented from performing any act required to be performed under this lease by
reason of fire, catastrophe, strikes, lockouts, civil commotion, acts of God or
the public enemy, governmental prohibitions, the act or default of the other
party, or other events beyond the reasonable control of Landlord or Tenant, as
the case may be, shall be added to the time for performance of such act.
24. SUBORDINATION
24.1 This lease shall be subject and subordinate at all times to the lien
of any mortgages or other encumbrances now or hereafter placed on the land and
building and leased premises without necessity of any further instrument or act
on the part of Tenant to effectuate such subordination if said
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<PAGE>
mortgage shall provide in its mortgage the terms and conditions hereinafter
provided in Article 24.2, or if the mortgagee agrees with the Tenant in writing
to the terms and conditions hereinafter referred to in Article 24.2.
24.2 The foregoing provisions of this Article shall be effective only in
the event that any such mortgage by its terms, or the mortgage or holder of
other encumbrances provides, or the holder thereof agrees with Tenant, as
follows:
(a) That this lease is and shall be subject and subordinate to the Mortgage
insofar as it affects the real property of which the demised premises form a
part, and to all renewals, modifications, consolidations, replacements and
extensions thereof, to the full extent of the principal sum secured thereby and
interest thereon.
(b) That in the event it should become necessary to foreclose the mortgage,
the mortgagee thereunder will not join the Tenant under any lease in summary or
foreclosure proceedings so long as the Tenant is not in default under any of the
terms, covenants, or conditions of this lease.
(c) That in the event the mortgagee shall, in accordance with the
foregoing, succeed to the interest of the Landlord under this lease, the
mortgagee agrees to be bound to the Tenant under all of the terms, covenants and
conditions of this lease, and the Tenant agrees, from and after such event, to
attorn to the mortgagee and/or purchaser at any foreclosure sale of the
premises, all rights and obligations under this lease to continue as though the
interest of Landlord had not terminated or such foreclosure proceedings had not
been brought, and the Tenant shall have the same remedies against the mortgagee
for the breach of an agreement contained in this lease that the Tenant might
have had under this lease against the Landlord if the mortgagee had not
succeeded to the interest of the Landlord; provided, however, that the mortgagee
shall not be
(i) liable for any act or omission of the Landlord, except as otherwise
provided by law; or
(ii) subject to any offsets or defenses which Tenant might have against the
Landlord, except as otherwise provided by law; or
(iii) bound by any rent or additional rent which the Tenant might have paid
to the Landlord for more than the current month and one additional month.
25. QUIET ENJOYMENT
The Landlord covenants and represents that the Landlord is the owner of the
premises herein leased and has the right and authority to enter into, execute
and deliver this lease, and does further covenant that the Tenant on paying the
rent and performing the conditions and covenants herein contained, shall and may
peaceably and quietly have, hold and enjoy the leased premises for the term
aforementioned.
26. SIGNS
The Tenant shall secure the prior written approval of the Landlord for any
identifying sign as may be located in front of or on the exterior of the
Buildings, which consent shall not be unreasonably withheld or delayed. Failure
of Landlord to respond to Tenant's request for approval within thirty (30)
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<PAGE>
days after written demand shall be deemed an approval. The Tenant shall not have
the right to put any identifying sign on the roof of the building or above the
first floor level of the building. Any signs to be approved shall comply with
all governmental laws of applicable instrumentalities, boards or bureaus having
jurisdiction thereof, and shall be compatible with the general design and decor
of the building. At the expiration of the lease term, Tenant shall remove its
signs and repair any damage to the building or Property occasioned by such
removal. In the event that Tenant leases from Landlord all of the additional
space presently occupied by Columbia Research, then at such time Tenant, at
Tenant's sole cost and expense, shall be entitled to combine its space with the
space previously used by Columbia Research on the identifying sign located in
front of the exterior of the Buildings in order to create one larger sign.
27. STATEMENT OF ACCEPTANCE
Upon the Tenant's accepting the leased premises and entering possession,
pursuant to the terms and conditions hereof, effective as of the Commencement
Date, the Tenant covenants and agrees that it accepts the leased premises and
agrees to pay rent from the date of acceptance, subject to the terms and
conditions of the lease as herein contained, and upon the request of Landlord,
it will furnish to the Landlord a statement of acceptance in recordable form, if
required by the Landlord. Tenant further agrees that it will execute, as a
condition of the within lease, subsequent to the Commencement Date, an estoppel
letter as may be required from Landlord's mortgagee from time to time,
certifying among other things the Commencement Date and Expiration Date of the
lease, status of current rent payments by Tenant, and any other pertinent
information as may be reasonably required by such mortgagee as it affects the
status of the within lease.
28. LIMIT OF LANDLORD'S LIABILITY
In case the Landlord shall be a joint venture, partnership, tenancy in
common, association or other form of joint ownership, the individual members
shall have absolutely no personal liability or obligation with respect to any
provision of this lease, or any obligation or liability arising therefrom or in
connection therewith, except to the extent of any individual member's equity in
the Property, which covenant hereinabove referred to, shall be deemed effective
as of the date Landlord completes and delivers the leased premises in accordance
with the terms and conditions of the lease and the specifications herein
provided.
29. LANDLORD'S REMEDIES AND EXPENSES
29.1 All rights and remedies of Landlord herein enumerated shall be
cumulative, and none shall exclude any other right or remedy allowed by law. For
the purposes of any suit brought or based hereon, this lease shall be construed
to be a divisible contract, to the end that successive actions may be maintained
on this Lease on successive periodic sums which mature hereunder.
Notwithstanding the foregoing, Landlord agrees that all cognizable claims shall
be filed in one action.
29.2 Except as otherwise provided herein, Tenant shall pay, upon demand,
all of the Landlord's costs, charges and expenses, including the reasonable fees
of counsel, agents and others retained by Landlord, incurred in enforcing
Tenant's obligation hereunder.
30. LEASE CONSTRUCTION
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<PAGE>
The lease shall be construed pursuant to the laws of the State of New
Jersey.
31. BINDING EFFECT
The terms, covenants and conditions of the within lease shall be binding
upon and inure to the benefit of each of the parties hereto, and their
respective heirs, successors, executors, administrators and assigns.
32. DEFINITIONS
The neuter gender, when used herein and in the acknowledgment hereafter set
forth, shall include all persons, firms and corporations, and words used in the
singular shall include words in the plural where the text of the instrument so
requires.
33. PARAGRAPH HEADING
The paragraph headings herein are inserted only as a matter of convenience
and for reference, and in no way define, limit or describe the scope of this
lease nor the intent of any provision hereof.
34. ENTIRE AGREEMENT
This lease contains the entire agreement between the parties and no
modifications shall be effective unless set forth in an instrument in writing
executed by both parties hereto.
35. BROKERAGE
Tenant represents that no real estate broker or agent negotiated or
introduced Tenant to Landlord, except John D. Lazarus, Inc., and that no real
estate commission, finders fee, or other payment is due upon consummation of the
within lease by reason of Tenant's acts other than to John D. Lazarus, Inc. Any
commission due John D. Lazarus, Inc. as a result of the within Lease shall be
adjusted for that portion of commissions previously paid to John D. Lazarus,
Inc. for the prior lease agreement, to the extent said prior lease agreement has
been superseded by this lease agreement. Each party further agrees to indemnify
and hold the other party harmless for any and all claims for brokerage fees
arising out of this agreement caused by the acts or arising out of the acts of
such other party.
36. SHORT FORM LEASE
It is understood between the parties hereto that this lease will not be
recorded, but that a short form lease, describing the leased premises, giving
the term of this lease, and making particular mention of any special clauses as
herein contained, may be recorded in accordance with the laws governing and
regulating the recording of such documents in the State of New Jersey.
37. SURRENDER OF PREMISES
On the last day, or earlier permitted termination of the lease term, Tenant
shall quit and surrender the premises in good and orderly condition and repair
(reasonable wear and tear, and damage by fire or other casualty excepted) and
shall deliver and surrender the leased premises to the Landlord peaceably,
together with all alterations, additions and improvements in, to or on the
premises [illegible] Tenant as permitted under the lease. Prior to the
expiration of the lease term the Tenant shall remove all of its property,
fixtures, equipment and trade fixtures from the premises. If the premises
[illegible] surrendered to the end of the lease term, Tenant shall indemnify
Landlord against loss or liability resulting from delay by Tenant in
surrendering the premises, including, without limitation any claims made
[illegible]
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succeeding Tenant founded on the delay.
38. SECURITY DEPOSIT
The Affiliated Tenant has previously deposited $3,454.50 as security
hereunder. The Affiliated Tenant has agreed to allow the security deposit
previously deposited to be applied to the security deposit due from Tenant.
Therefore, upon execution hereof Tenant will deposit an additional $4,956.00 as
additional security hereunder, making the total security deposit $8,410.50.
Landlord may use as much of the deposit as necessary to pay for damages
resulting from Tenant's occupancy. If this occurs prior to the end of the lease
term, Landlord may demand that Tenant replace the amount of the deposit used by
Landlord. If Landlord sells the leased premises. Landlord may transfer the
deposit to the new owners for Tenant's benefit. Landlord will notify Tenant of
any sale and transfer of the deposit. Landlord will then be released of all
liability to return the security deposit.
39. OPTION TO RENEW
Provided the Tenant is not in default uncured pursuant to the terms and
conditions of this lease, the Tenant is hereby given the right and privilege to
renew the within lease, including any additional space leased by Tenant in
accordance with the terms hereof, for one (1) additional period of five (5)
years, to commence at the end of the initial term of this lease. The renewal
term shall be upon the same terms and conditions as in this lease contained,
except that the rent shall be determined in the following manner:
I. DETERMINATION OF RENT DURING EXTENDED TERM.
If Tenant elects to extend the Lease Term pursuant to this Section, Rent
for each Extended Term shall be an amount equal to one hundred percent (100%) of
the Renewal Base Rent (as defined in par.(c) of this Section) for the Premises
in relation to market conditions at the time of the extension. The Renewal Base
Rent for the Premises shall be determined as follows:
(a) Mutual Agreement. After timely receipt by Landlord of Tenant's notice
of exercise of an option to extend the Lease Term, Landlord and Tenant shall
have a period of thirty (30) days in which to agree on the Renewal Base Rent for
the Premises. If Landlord and Tenant agree on the Renewal Base Rent for the
Premises, then they shall immediately execute an amendment to this Lease stating
and incorporating such agreed upon Renewal Base Rent as the Rent for the
applicable Extended Term.
(b) Arbitration.
(1) If Landlord and Tenant are unable to agree upon the Renewal Base Rent
within thirty (30) days following Tenant's exercise of the option, then the
dispute shall proceed to arbitration. The arbitration procedure shall commence
when either party submits the matter to arbitration. Not later than ten (10)
days after the arbitration procedure has commenced, each party shall appoint an
arbitrator and notify the other party of such appointment by identifying the
appointee. Each party hereto agrees to select as its respective appointee a
licensed real estate broker, who is an individual of substantia1 experience with
respect to office building ownership, management and marketing in the Tinton
Falls area of Monmouth County, New Jersey, which person shall not be regularly
employed or have been retained during the last two (2) years by the party
selecting such person. Neither party may consult directly or indirectly with any
arbitrator regarding the Renewal Base Rent prior to appointment, or after
appointment
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outside the presence of the other party. The arbitration shall be conducted in
Red Bank, New Jersey, under the provisions of the commercial arbitration rules
of the American Arbitration Association and Title 2A, Chapter 24 of the Laws of
the State of New Jersey.
(2) Not later than (10) days after both arbitrators are appointed, each
party shall separately, but simultaneously, submit in a sealed envelope to each
arbitrator their separate suggested Renewal Base Rent and shall provide a copy
of such submission to the other party. The two (2) selected arbitrators, after
reviewing such submissions, shall determine whether Landlord's or Tenant's
estimate of the Renewal Base Rent is closer to the actual Renewal Base Rent for
the Premises. If both arbitrators agree that one of said declared estimates is
closer to the actual Renewal Base Rent, they shall declare that estimate to be
the Renewal Base Rent, and their decision shall be final and binding upon the
parties.
(3) If the two selected arbitrators are unable to agree on the Renewal Base
Rent within thirty (30) days after receipt of Landlord's and Tenant's submitted
estimates, then the arbitrators shall inform the parties. Unless the parties
shall both otherwise then direct, said arbitrators shall select a third
arbitrator, not later than ten (10) days after the expiration of said thirty
(30) day period. If no arbitrator is selected within such ten (10) day period,
either party may immediately petition a court with appropriate jurisdiction to
appoint such third arbitrator. The third arbitrator shall have the
qualifications and restrictions set forth in paragraph (b)(l) above, and shall
conduct an arbitration pursuant to the commercial arbitration rules of the
American Arbitration Association. The third arbitrator's decision shall be final
and binding as to which estimate (as between Landlord's and Tenant's) of the
Renewal Base Rent is closer to the actual Renewal Base Rent. Such third
arbitrator shall make a decision not later than thirty (30) days after
appointment.
(4) Each party shall be responsible for the costs, charges and/or fees to
its respective appointee, and the parties shall share equally in the costs,
charges and/or fees of the third arbitrator. The decision of the arbitrator(s)
may be entered in any court having jurisdiction thereof.
(e) Renewal Base Rent. The term "Renewal Base Rent" shall mean the Base
Rent for that space which would be paid by a willing Tenant to a willing
Landlord, neither of whom is compelled to rent, for a term of five (5) years,
disregarding "tenant concessions," if any, then being offered on comparable
vacant space only to prospective new tenants in the Building. The term "tenant
concessions" shall include, without limitation, such inducements as free rent,
free parking, standard tenant improvement allowances or work letter and
Landlord's assumption of existing leases. The Renewal Base Rent shall not
reflect the value of any improvements to the Premises made by Tenant which
Tenant has the right to remove at the end of the Term.
II. NOTICE REQUIREMENT.
The right, option, and privilege of the Tenant to renew this lease as
hereinabove set forth is expressly conditioned upon the Tenant delivering to the
Landlord, in writing, by certified mail, return receipt requested, nine (9)
months' prior notice of its intention to renew, which notice shall be given to
the Landlord by the Tenant no later than nine (9) months prior to the date fixed
for termination of the original term hereinbefore provided. Tenant shall
exercise the options granted hereunder by notifying Landlord
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as hereinafter provided of its intention to renew.
III. LEASE AMENDMENT AS TO RENT.
Upon determination of the Renewal Base Rent, the parties shall execute a
letter amendment establishing in writing the applicable annual rent for the
renewal term. It is expressly understood and agreed that the annual rent as
determined for any renewal term shall not be less than the prior annual rent for
the immediate prior lease term. As the determination of the applicable renewal
rent may not be made at the inception of any renewal term, any excess
differential in adjusted rent not paid by Tenant for months elapsed shall be
paid together with the next monthly rent succeeding determination of the new
revised Original Base Rent.
40. ENVIRONMENTAL LAWS
A. Tenant shall, at Tenant's own expense, comply with the Industrial Site
Recovery Act, N.J.S.A. 13: lK-6 et seq. and the regulations promulgated
thereunder ("ISRA") in line with the closing, termination or transfer of
Tenant's operation at the premises. Tenant shall also provide all information
within Tenant's control requested by Landlord or the Bureau of Industrial Site
Evaluation (the "Bureau") of the New Jersey Department of Environmental
Protection and Energy (the "NJDEP") for preparation of non-applicability
affidavits should Landlord or NJDEP so request, and Tenant shall promptly
execute such affidavits should the information contained therein be found by
Tenant to be complete and accurate. In the event that ISRA compliance becomes
necessary at the premises due to any action or non-action on the part of the
Tenant, including but not limited to Tenant's execution of a sale agreement for
Tenant's business, any change in use of the leased premises, initiation of
bankruptcy proceedings, Tenant's financial reorganization or sale of the
controlling share of Tenant's assets, then Tenant shall comply with ISRA and all
requirements of the ISRA Bureau at Tenant's own expense. Should the Bureau or
any other division of NJDEP determine that a cleanup plan be prepared and that a
cleanup be undertaken because of any spills or discharges of hazardous
substances or wastes at the leased premises which occur during the term of this
lease, then Tenant shall, at Tenant's own expense, prepare and submit the
required plans and financial assurances, and carry out the approved plans.
B. Tenant shall not (either with or without negligence) cause or permit the
escape, disposal or release of any biologically or chemically active or other
hazardous substances, or materials. Tenant shall not allow the storage or use of
such substances or materials in any manner not sanctioned by law or by the
highest standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the Project any such
materials or substances except to use in the ordinary course of Tenant's
business, and then only after written notice is given to Landlord of the
identity of such substances or materials. Without limitation, hazardous
substances and materials shall include those described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq., any applicable state or local laws and
the regulations adopted under these acts. If any lender or governmental agency
shall ever require testing to ascertain whether or not there has been release of
hazardous materials, then the reasonable costs thereof shall be reimbursed by
Tenant to
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Landlord upon demand as additional charges if such requirement applies to the
Premises. In addition, Tenant shall execute affidavits, representations and the
like from time to time as Landlord's request concerning Tenant's best knowledge
and belief regarding the presence of hazardous substances or materials on the
Premises. In all events, Tenant shall indemnify any release of hazardous
materials on the Premises occurring while Tenant is in possession, or elsewhere
if caused by Tenant or persons acting under Tenant. The within covenants shall
survive the expiration or earlier termination of the lease term.
41. RIGHT OF FIRST REFUSAL
A. Tenant shall have the right to rent the space in the Property presently
occupied by Columbia Research consisting of 3,000 square feet (the "Columbia
Space") provided that Tenant notifies Landlord not later than December 31, 1996
in writing of Tenant's election to rent such space. In the event that Tenant
makes a timely election to rent the Columbia Space as provided herein, then the
following provisions shall apply:
i) Tenant will have sixty days from December 31, 1996 to cause
Columbia Research to vacate the Columbia Space, but in any event, Landlord
shall not be liable to Tenant in the event, due to causes beyond Landlord's
control, Columbia Research has failed to vacate by such date.
ii) Upon The Columbia Space being vacated, the Columbia Space will
thereafter be considered a part of the leased premises.
iii) Landlord will reimburse Tenant for the cost of tenant
improvements installed in the Columbia Space, up to a maximum amount of
$25,000.00, under the same terms and procedures as provided in Article 6.3
above.
iv) Upon delivery of the Columbia Space to Tenant, additional rent
will be paid by Tenant to Landlord in the amount of $3,500.00 per month
through November 30, 1998, and in the amount of $3,750.00 per month from
December 1, 1998 through November 30, 2001. Rent for any partial month
shall be prorated for that month.
B. If Tenant fails to make a timely election to rent the Columbia Space as
provided above, Landlord shall be free to extend Columbia Research's lease of
the Columbia Space under such terms and conditions as Landlord may choose. At
such time as Columbia Research has vacated the Columbia Space, if thereafter
Landlord shall receive from any third party, other than one controlled by
Landlord or any principal of Landlord, an acceptable bona fide offer to lease
the Columbia Space, Landlord shall notify Tenant in writing, and Tenant shall
thereafter have ten (10) days within which to elect to lease such space under
the same terms, as to rent and lease term, as provided under the terms of this
Lease Agreement. If Tenant elects to rent such space, Tenant shall give Landlord
written notice of such decision within ten (10) days from receipt of Landlord's
notice advising Tenant of such offer, and the rent on such additional space
shall commence upon delivery of possession of said space by Landlord to Tenant.
42. PRIOR LEASE BY AFFILIATED TENANT
The parties hereby agree that upon occupancy of the leased premises by
Tenant and pays rent in accordance with the terms hereof, the Affiliated Tenant
shall be released from the terms
-22-
<PAGE>
provisions of that lease agreement between Landlord and Affiliated Tenant for
the portion of the leased premises presently being rented by Affiliated Tenant,
it being the intent hereby that rent for that portion of the leased premises
rented by Affiliated Tenant shall continue without interruption until the
Commencement Date hereunder. Tenant hereby represents to Landlord that by
executing this Lease Agreement, Tenant covenants that Tenant has obtained the
consent of Affiliated Tenant to take over the area of the leased premises
presently being rented by Affiliated Tenant.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals or
caused these presents to be signed by its proper corporate officers and cause
its proper corporate seal to be hereunto affixed, the day and year first above
written.
WITNESS LANDLORD
/s/ Robert F. Reynolds
- ------------------------- ------------------------------
Robert F. Reynolds
/s/ Pauline Reynolds
------------------------------
Pauline Reynolds
ATTEST: TENANT:
Arc Slide Technologies, Inc.
BY: /s/ [illegible] president
---------------------------
/s/ Ethel Kaplan
- -------------------------
,Secretary
-23-
THIS LEASE AGREEMENT is made and entered into this 10th day of JULY, 1997
by and between Steven E. Allen & Kenneth L. Franklin, hereinafter called the
"Lessor," and MESA Marketing, Inc., a Florida corporation, hereinafter called
the "Lessee."
W I T N E S S E T H:
WHEREAS, the Lessor is the owner of that property located at 1648
Metropolitan Circle Tallahassee, Florida, and depicted in "Exhibit A" attached
hereto and by reference made a part hereof, hereinafter referred to as the
"Premises"; and
WHEREAS, the Lessee is desirous of leasing the Premises from the Lessor,
and the parties hereto have reached an agreement as to terms of such Lease.
NOW, THEREFORE, in consideration of the hereinabove set forth premises and
in consideration of the hereinafter set forth covenants and agreements, the
Lessor does hereby lease to the Lessee, and the Lessee does hereby lease from
the Lessor, the Premises, subject in the following terms and conditions:
1. The Lessor covenants that it has good title to the Premises, and that
the Lessee, upon paying the rentals herein reserved and upon its observing,
performing and keeping all and singular the covenants and agreements herein
specified to be kept and performed by the Lessee, shall, and may lawfully,
peacefully and quietly have, hold, use, occupy, possess and enjoy the Premises
hereby leased for and during the term hereof, without any hindrance, eviction,
molestation or interruption of or by the Lessor, or any person or persons.
2. The Lessee agrees to accept the Premises in the condition existing on
the date of this commencement of the term.
3. The Lessor agrees to, and does hereby, lease the Premises to the Lessee
for a term of ten (10) years commencing on July 10, 1997, (the "Commencement
Date") and ending at midnight on July 9, 2007.
4. The Lessee shall pay to the Lessor upon the execution of this agreement
the sum of $1,000.00 to be held by the Lessor as security for the performance,
payment and satisfaction by the Lessee
<PAGE>
of all terms, obligations and liabilities under this agreement.
5. As rent for the Premises for the original term, the Lessee agrees to pay
to the Lessor at 1648 Metropolitan Cir. Tallahassee, Florida, or at such other
place as may be designated in writing by the Lessor, as minimum rent, the total
sum of $26,964.00, which includes all sales taxes, which shall be payable in
equal monthly installments of $2,247.00, each commencing on August 10, 1997, and
continuing on the 10th day of each and every month thereafter. The minimum rent
shall increase each year, commencing one year from the Commencement Date and on
each annual anniversary thereafter, by an amount equal to five percent (5%) of
the minimum rent due and payable during the preceding year.
6. All real property taxes assessed against the Premises shall be paid by
the Lessor as the same shall become due. The Lessee agrees to pay all taxes
assessed against personal property owned by it on the Premises. The Lessee shall
be responsible for and pay all sales or use taxes imposed upon this agreement or
the lease payments hereunder. Such tax shall be due and payable with each lease
payment.
7. The Lessee agrees to indemnify, protect and save the Lessor harmless
from any and all claims of others for injuries to persons or property arising
out of the occupancy or operation of the Premises by the Lessee or resulting
from the failure of the Lessee to perform or abide by any term or condition of
this agreement.
8. The Lessee agrees to maintain, at its own expense, during the full term
of this Lease, a policy of public liability and property damage insurance issued
by a reputable company authorized to do business in the State of Florida, in
which policy the Lessor and the Lessee shall be named as co-insureds, and to
furnish to the Lessor current certificates evidencing the existence of such
insurance. Such policy shall provide personal injury coverage in an amount not
less than $500,000.00, combined single limit, to cover all situations where any
person or persons claim any damages as a result of personal injury, death or
property damage in or upon the Premises or as a result of the use of the
Premises by the Lessee. It is further understood and agreed that the Lessee at
all times
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<PAGE>
shall maintain the insurance coverage it is required to carry hereunder for the
benefit of the Lessor with a provision in such insurance that there will be no
cancellations without at least thirty (30) day written notice by the insurer to
the Lessor.
9. Provided the Lessee is not in default, the Lessee, upon expiration of
this Lease, shall have the right to remove the furniture, furnishings and
equipment which it may have installed on or in the Premises and which have not
been permanently affixed to the Premises, provided, however, that the Lessee
shall repair any and all damage to the Premises resulting from any such removal
and fully restore the Premises. Any improvement incorporated into the realty
shall become and remain the property of the Lessor.
10. The Lessor shall be responsible for all mechanical, electrical,
plumbing, exterior and structural maintenance as well as any repairs or
maintenance of the grounds, plantings and parking areas and any major repairs
which would be considered capital improvements for federal income tax purposes
as opposed to repair and maintenance. The Lessee agrees to perform all interior
maintenance of the Premises which would be considered ordinary and routine
maintenance. The Lessor and the Lessee shall both perform all maintenance
obligations provided under this agreement in a timely and reasonable manner to
prevent loss, waste or inconvenience to the other party. Notwithstanding
anything in this agreement to the contrary, the Lessee shall be responsible for
and pay for all repairs and maintenance required to remedy any damages to the
Premises caused by the Lessee or its guests or invitees. In the event either
party fails to perform maintenance and repairs as required hereby, the other
party may make any repairs to the Premises that have not been made by the
responsible party and shall be entitled to reimbursement for the cost thereof on
demand. Notwithstanding the foregoing, neither party shall make any repairs for
which the party is responsible (except those of an emergency nature or those
required by a governmental authority to be completed within a set period of
time) until ten (10) days after written notice to the other party and such
party's failure to make the necessary repairs. Additionally, neither party shall
have the right
3
<PAGE>
to make repairs which are to be made by the other party solely for the pruposes
of improving or upgrading conditions of the Premises. The Lessor shall have the
right to enter the Premises at any reasonable time for the purpose of inspecting
the same or for the pupose of doing anything that is required or allowed under
this agreement.
11. The Lessee shall not commit waste or permit waste to be committed in or
upon the Premises, create or allow any nuisance to continue on the Premises or
use the Premises for any unlawful purpose. The Lesses shall not make any
alterations to the Premises without the Lessor's prior written consent.
12. At the termination of this Lease, the Lessee shall surrender and
deliver the Premises to the Lessor in at least as good condition as the same
were at the commencement of the term, allowing for reasonable use and wear. The
Lessee shall remove all business signs or symbols placed on the premises by it
before redelivery of the premises to the Lessor, and shall restore the portion
of the Promised on which they were placed to the same condition as before their
placement.
13. The Lessor shall have the right to approve the design and placement of
any and all signs of any nature upon the exterior of the Premises; provided,
however, that such approval shall not be unreasonably withheld.
14. The Premises shall be used for general office purposes. The Lessee
agrees to abide by all Rules, regulations and restrictions set forth in "Exhibit
B" attached hereto and by reference made a part hereof. Any violation of any of
the said rules, regulations or restrictions shall constitute a default under
this agreement. The Lessee shall be responsible for and pay all costs and
expenses incurred by the Lessor as a result of any violation of any rule,
regulation or restriction. THe Lessee agrees it shall not keep anything within
the Premises or use the Premises for any purpose which will invalidate any
insurance policy(s) carried on the Promises by the Lessor or cause the rates on
any such policy to be increased.
15. If, at any time during the original or any renewal term
4
<PAGE>
hereof, the Premises shall be partially damaged by fire, windstorm or other
casualty, but the extent thereof is not sufficient to deprive the Lessee of more
than 25% of the floor space of the Premises or use of the Premises in a
reasonable fashion for the purposes for whcih such Premises have been leased,
this Lease shall continue in full force and effect. The Lessee shall notify the
Lessor in writing of any damage due to fire, windstorm or other casuality within
a reasonable period of time after discovering such damage. If, at any time
during the term of the original or any renewal term hereof, the Premises shall
be partially or totally damaged by a casualty and the extent of such damage
shall be sufficient to deprive the Lessee of more than 25% of the floor space of
the Premises or shall damage the Premises in such a manner that Lessee may not
reasonably use such Premises for its purposes under this Agreement, and repairs
of such casualty may not reasonably be completed within thirty (30) days, either
party may elect to terminate this Agreement by notifying the other party in
writing of such election within fifteen (15) days from the date the party giving
Notice received notice of the damage. In the event of the Lessee's election to
terminate this Lease or in the event of damage to the Premises and continuation
of this Agreement, the Lessee shall pay rent on a prorated basis to the date of
occurrence of such damage if this Agreement shall terminate or on a prorated
basis to the extent of reduction and use of the Premises based on the percentage
of usable floor space or the Premises until the date of the completion of
repairs.
16. If all of the Premises shall be taken under the right of eminent domain
by any authority having the right of condemnation, or if a portion of the
Premises is so condemned as will prevent the practical use of the Premises for
the Lessee's purpose, this Lease, and all obligations hereunder, shall terminate
on the date title vests pursuant to such proceedings, The Lessor shall be
entitled to all sums paid or payable with regard to any such taking except for
any business damages which the Lessee might be separately entitled to from such
condemning authority.
17. Unless the written consent of the Lessor is first obtained,
5
<PAGE>
the Lessee shall have no right, during the term of this Lease, or any renewal
term, to sublet all or any portion of the Premises, or to assign this Lease,
either in whole or in part, and such consent shall not be unreasonable withheld.
In the event the Lessor consents to such subletting or assignment, no such
subletting or assignment shall release the Lessee form any of the obligations
under the terms of this Lease, and the Lessor shall, at all times, have the
right to look to the Lessee for the performance of all the covenants to be
performed on the part of the Lessee.
18. If the Lessee remains in possession of the Premises after the
expiration of this Lease, or any renewal term, without the execution of a new
lease, is shall be deemed to be occupying the Premises as a tenant from
month-to-month, subject to all the conditions, provisions and obligations of
this Lease insofar as the same are applicahble to a month-to-month tenancy,
except that the monthly rental shall b eequal to 150% of the monthly
installments due during the last year of the lease term.
19. The Lessor reserves the right to enter the Promises at reasonable times
to inspect the Premises. The Lessor may, at any time within one hundred and
twenty (120) days before the expiration of the initial term of this Lease or any
renewal term, enter the Premises at reasonable hours for the purpose of offering
the Premises for rent or sale, and place "For Rent" or "For Sale" signs on the
exterior of the Premises.
20. The Lessee agrees to pay all electric, water, gas, sewer, and utility
charges. The Lessee agrees to provide and pay for all janitiorial services and
supplies and keep the Premises in a clean and sanitary condition.
21. The Lessee further covenants with the Lessor that if the rent or any
part thereof is not paid when it becomes due, or if the Lessee shall violate or
neglect any covenant, agreement or stipulation herein contained on its part to
be kept, performed or observed and such defaul does or reasonably will result in
damages to the Lessor, then, in addition to the other remedies or causes of
action now or hereafter provide by law, the Lessor, at its option, may enter and
take possession of the Premises immediately, and may
6
<PAGE>
remove all persons, furniture, fixtures and equipment from the Premises, at the
Lessee's expense, in order to recover at once, full and exclusive possession of
the Premises, and such entry shall not operate as a waiver or satisfaction, in
whole or in part, of any claim or demand arising out of, or connected with, any
breach or violation by the Lessee of any covenant or agreement on its part to be
performed. Should the Lessor elect to re-enter , as herein provided, or should
it take possession pursuant to legal proceedings or pursuant to any notice
provided for by law, the Lessor may either terminate this lease or it may from
time to time, without terminating this lease, re-let the Premises or any part
thereof for such term or terms (which may be for a term extending beyond the
term of this lease) and at such rent or rents and on such other terms and
conditions as the Lessor in its sole discretion may deem advisable with the
right to make alterations and repairs to the Premises. On each such re-letting:
(a) The Lessee shall be immediately liable to pay to the Lessor, in
addition to any indebtedness other than rent due hereunder, the expenses of such
re-letting and of such alterations and repairs, incurred by the Lessor, and the
amount, if any, by which the rent reserved in this lease for the period of such
re-letting (up to but not beyond the term of this lease) exceeds the amount
agreed to be paid as rent for the Premises for such period on such re-letting;
or
(b) At the option of the Lessor, rents received by the Lessor from such
re-letting shall be applied first, to the payment of any indebtedness, other
than rent due hereunder from the Lessee to the Lessor; second, to the payment of
any expenses of such re-letting and of any alterations and repairs; third, to
the payment of rent due and unpaid hereunder; and the residue, if any, shall be
held by the Lessor and applied in payment of future rent as the same may become
due and payable.
If any event of default occurs, the Lessor shall have the right, at its
option, to declare the rents for the entire remaining term and other
indebtedness, if any, immediately due and payable without regard to whether
possession shall have been surrendered to
7
<PAGE>
or taken from Lessor and may commence action immediatedly thereupon and recover
judgment therefor.
In any event of default occurs, the Lessor shall further have the right to
remove all or any part of the Lessee's property from the Premises, and any
property removed may be stored in any public warehouse or elsewhere at the cost
of the Lessee, and the Lessor shall not be responsible for the care or
safekeeping thereof, and the Lessee hereby waives any and all loss, destruction
and/or damage or injury which may be occasioned by any of the aforesaid acts.
The foregoing rights of the Lessor shall be in addition to all other rights
and remedies available to the Lessor under law or in equity.
23. Any notice required or desired to be given to either party shall be in
writing and be sent by certified mail, return receipt requested, postage
prepaid, or by hand-delivery.
24. The Lessee agrees that this Lease shall be subordinate to any existing
or future mortgages encumbering the Premises or any revewals or extensions
thereof.
25. The Lessee shall not take any action or allow any act to be done which
would create a mechanic's lien upon the Lessor's interest in the real property
and shall keep the Lessor's interest from any liens arising from any work or
improvements performed for, by or on behalf of the Lessee. Any person or entity
performing any work upon or furnishing any materials to the Promises shall look
solely to the Lessee's leashold interest herein. In the event any lien is placed
upon the Premises, the Lessee shall have the same transferred to a bond within
ten (10) days after receiving notice of the filing thereof.
26. If, at any time during the term of this Lease or any extensions
thereof, a petition has been filed to have the Lessee adjudicated a bankrupt, or
a petition for reorganization or arrangement under any of the laws of the United
States Bankruptcy Act be filed by the Lessee or be filed against the Lessee and
not be dismissed within sixty (60) days from the date of such filing, or if the
Lessee has filed a petition to be adjudicated a bankrupt, or if the assets of
the Lessee or the business counducted by the Lessee on
8
<PAGE>
the Premises be taken over or sequestered by a trustee or any other person
pursuant to any judicial proceedings, or if the Lessee makes an assignment for
the benefit of creditors, then the occurrence of any such act shall be deemed,
at the option of the Lessor, to constitute a breach of this Lease by the Lessee.
The Lessor, at its election, may terminate this Lease in the event or occurrence
of any of the events enumerated herein, by giving not less than twenty (20)
days' written notice to the Lessee or to the assignee or to the trustee or such
other person appointed pursuant to any order of a court, and thereupon the
Lessor may re-enter the Premises. However, the Lessor shall be entitled to
exercise all available rights and remedies and to recover from the Lessee all
moneys which may be due or become due, including damages resulting from the
breach of the terms of this Lease by the Lessee.
27. The Lessee shall at any time and from time to time within ten (10) days
after written notice form the Lessor, execute, acknowledge and deliver to the
Lessor a statement in writing certifying that this Agreement is in full force
and effect, setting forth and confirming any amendments hereto, stating the
amount of rental paid hereunder, the date to which rental payments have been
made and acknowledging that there are not, to the Lessee's knowledge, any
uncured defaults by the Lessor hereunder or specifying any defaults which may be
claimed. Any such statement may be relied upon by any mortgagee or prospective
purchaser of any portion or all of the Premises.
28. In the event another party utilizes the services of an attorney at law
in connection with any dispute which arises hereunder or to enforce any other
provision of this Lease, then, in such event, the prevailing party shall be
entitled to recover its legal expenses, including a reasonable attorneys' fee,
whether incurred in connection with legal proceedings or not and if legal
proceedings are instituted, then to recover reasonable attorneys' fees on both
the trial and appellate level.
29. This agreement shall be binding upon and shall inure to the benefit of
the parties hereto, their heirs, executors, administrators, successors and
assigns.
9
<PAGE>
30. This lease contains the entire agreement of the parties hereto with
respect to the matters covered hereby, and no other agreement, statement, or
promise made by any party hereto, or to any employee, officer or agent of any
party hereto, which is not contained herein, shall be binding or valid. No
modification of this lease shall be binding on the parties unless it is in
writing and executed by both the Lessee and the Lessor.
IN WITNESS WHEREOF, the parties hereto have hereunto set their respective
hands and seals the day and year first above written.
WITNESSES:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- --------------------------- ---------------------------
[ILLEGIBLE] [ILLEGIBLE]
"LESSOR"
/s/ [ILLEGIBLE]
- ---------------------------
[ILLEGIBLE]
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- --------------------------- ---------------------------
[ILLEGIBLE] [ILLEGIBLE]
President--MESA Marketing, Inc.
/s/ [ILLEGIBLE]
- ---------------------------
[ILLEGIBLE]
10
<PAGE>
[FLOOR PLAN FOR THE 1st FLOOR]
EXHIBIT "A"
<PAGE>
RULES, REGULATIONS AND RESTRICTIONS
The following rules, regulations and restrictions shall govern and control
the use by the Lessee and the Lessee's guests, invitees and employees of the
Premises:
1. No flamable or explosive material shall be allowed or kept within the
Premises.
2. No animal of any kind shall be allowed or kept within the Premises.
3. No tobacco products of any nature, including, but not limited to,
cigarettes, cigars, pipe tobacco, chewing tobacco and snuff, shall be used or
allowed within the Premises.
4. All refuse and trash shall be kept in sanitary containers and removed
from the Premises on a daily basis.
5. All furniture, equipment and supplies shall be placed in the Premises
and moved with due care, proper equipment and sufficient labor to prevent any
damage to flooring, walls or wall coverings.
6. The Premises shall be kept free of all trash, debris and accumulated
dirt, dust and grime. Flooring shall be routinely washed, vacuumed or polished
(as dictated by the type of flooring and the manufacturer's recommendations).
[ILLEGIBLE]
-----------------------------
Initials
[ILLEGIBLE]
-----------------------------
Initials
"EXHIBIT D"
<PAGE>
LEASE AGREEMENT
ADDENDUM #1
The lease agreement made and entered into on the 10th day of July 1997 by
and between Steven E. Allen & Kenneth L. Franklin, hereinafter called the
"Lessor", and MESA Marketing, Inc., a Florida corporation, hereinafter called
the "Lessee".
WITNESSETH:
Section 3, Page 1. Terms: The original lease agreement is herein amended to
reflect the following change:
3. The Lessor agrees to, and does hereby, lease the Premises to the Lessee
for a term of ONE (1) year commencing on August 1, 1997 (the "Commencement
Date") and ending at midnight on July 31, 1998. Lessor further agrees to extend
two (2) options to renew the present agreement for an additional four (4) year
term (per option), at the terms and conditions as stated within the original
lease agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto set their respective
hands and seals this 15th day of August, 1997.
WITNESSES:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- --------------------------- ---------------------------
[ILLEGIBLE] [ILLEGIBLE]
"LESSOR"
/s/ [ILLEGIBLE]
- ---------------------------
[ILLEGIBLE]
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- --------------------------- ---------------------------
[ILLEGIBLE] "LESSEE"
MESA Marketing, Inc.
/s/ [ILLEGIBLE]
- ---------------------------
[ILLEGIBLE]
Consultation Agreement
THIS FINANCIAL PUBLIC RELATIONS CONSULTING AGREEMENT, made this 8th day of
March, 1999 by and between Wall Street Advancement, Inc. (hereinafter referred
to as CONSULTANT) located at 120 Broadway, 28th Floor, New York, NY 10271 and
Arc Communications, Inc. (hereinafter referred to as COMPANY) located at 788
Shrewsbury Avenue, Tinton Falls, NJ 07724.
WITNESSETH THAT:
WHEREAS, the COMPANY requires media and other public relations services and
desires to employ CONSULTANT to provide such services as an independent
contractor consultant, and CONSULTANT is agreeable to such employment, and the
parties desire a written document formalizing and defining their relationship
and evidencing the terms of their Agreement.
NOW, THEREFORE, intending to be legally bound, and in consideration of the
mutual promises and covenants, the parties have agreed as follows:
1. APPOINTMENT. The COMPANY hereby appoints CONSULTANT as its media and public
relations advisor and hereby retains and employs CONSULTANT on the terms
and conditions of this Agreement. CONSULTANT accepts such appointment and
agrees to perform the services upon the terms and conditions of this
Agreement.
2. TERM. The term of this Agreement shall be six (6) months, from this day
forward, with an automatic renewal for another six (6) months, unless
written notice not to continue the service is received by the CONSULTANT 30
days before the expiration of the sixth (6th) month of the date hereof.
Notwithstanding the foregoing, the COMPANY shall have the right to
terminate this Agreement at any time on thirty (30) days notice with or
without case. In such event, CONSULTANT shall only be entitled to payment
of such sums and exercise of such options as shall be earned as of the date
of termination.
<PAGE>
3. SERVICES.
(a) CONSULTANT shall act, generally, as media and public relations
advisor, and it intends to provide the following services:
(i) locate and introduce COMPANY to fund managers, buy-side analysts
and selected retail and institutional brokers.
(ii) Introduce the COMPANY to investment and other newsletter writers
4. LIMITATION OF SERVICES. The parties recognize that certain responsibilities
and obligations are imposed by federal and state securities laws and by the
applicable rules and regulations of stock exchanges, the National
Association of Securities Dealers, in-house "due diligence" or "compliance"
departments of brokerage houses, etc. Accordingly, CONSULTANT agrees:
(a) CONSULTANT shall NOT release any financial or other information or
date about the COMPANY.
(b) CONSULTANT shall NOT conduct any meetings with financial analysts
without informing the COMPANY in advance of the proposed meeting and
the format and agenda of such meeting and the COMPANY may elect to
have a representative of the COMPANY attend at such meeting.
(c) CONSULTANT shall release any information or data about the COMPANY to
any selected or limited person(s), entity, or group if CONSULTANT is
aware that such information has not been generally releases or
promulgated.
(d) After notice by the COMPANY of filing of proposed public offering of
securities of the COMPANY, and during any period of restriction on
publicity, CONSULTANT shall not engage in any public relations efforts
not in the normal course without approval of counsel for the COMPANY
and of counsel for the underwriter(s), if any.
5. DUTIES OF COMPANY.
(a) COMPANY shall supply CONSULTANT, from time to time, with approved data
and information about the COMPANY, its management, its products, and
its operations, and the COMPANY shall be responsible for advising
CONSULTANT of any facts which would affect the accuracy of any prior
data and information previously supplied to CONSULTANT.
2
<PAGE>
(b) COMPANY shall promptly notify CONSULTANT of the filing of any
registration statement for the sale of securities and of any other
event that triggers or results in any restrictions on publicity.
(c) COMPANY shall contemporaneously notify CONSULTANT if any information
or data being supplied to CONSULTANT has not been generally released
or promulgated.
6. REPRESENTATION and INDEMNIFICATION.
(a) The COMPANY shall be deemed to make a continuing representation of the
accuracy of any and all material facts, material, information and data
which it supplies to CONSULTANT and the COMPANY acknowledges its
awareness that CONSULTANT will rely on such continuing representation
in disseminating such information and otherwise performing its public
relations functions.
(b) CONSULTANT, in the absence of notice in writing from the COMPANY, will
rely on the continuing accuracy of material, information and data
supplied by the COMPANY.
(c) COMPANY hereby agrees to indemnify CONSULTANT against, and to hold
CONSULTANT harmless from any claims, demands, suits, loss, damages,
etc., arising out of CONSULTANT'S reliance upon the accuracy and
continuing accuracy of such facts, material, information and data,
unless CONSULTANT has been negligent in fulfilling the duties and
obligations hereunder.
7. COMPENSATION. For all general financial public relation services.
COMPANY shall compensate the CONSULTANT with a two (2) year option to
purchase 225,000 shares of the common stock of the COMPANY at one dollar
($1.00) per share. The COMPANY has not agreed to register such options or
shares with any state or federal securities agency. CONSULTANT acknowledges
that transfer of said options and shares shall be restricted under state
and federal securities laws. The first 75,000 of options shall be
exercisable upon signing, the next 75,000 of options shall be exercisable
in the third month, and the final 75,000 of options shall be exercisable in
the fifth month. The options shall expire two (2) years after the date when
they are exercisable hereunder. The issuance of said options and stock to
CONSULTANT shall be subject to the compliance with all state and federal
3
<PAGE>
securities laws. COMPANY also agrees to allocate thirty thousand dollars
($30,000) to Wall Street Advancement, Inc., which will be used to buy
promotional media in Wall Street Reporter Magazine, Wallstreetreporter.com
and Hamilton's Wall Street week. Payment terms of the thirty thousand
dollars ($30,000): five thousand dollars ($5,000) per month. The foregoing
shall be subject to the termination rights of the COMPANY in Paragraph 2
above.
8. BILLING AND REPAYMENT. The monthly basic fee provided for in Paragraph 7
Shall be due and payable upon receipt of bill via facsimilie. Billings and
payments for special services (Paragraph 7) shall be agreed.
9. RELATIONSHIP OF PARTIES. CONSULTANT is an independent contractor,
Responsible for compensation of its agents, employees and representatives,
as well as all applicable withholding therefrom and taxes thereon
(including unemployment compensation) and all workmen's compensation
insurance. This agreement does not establish any partnership, joint
venture, or other business entity in association between the parties and
neither party is intended to have any interest in the business or property
of the other.
10. TERMINATION. This agreement may not be terminated be either party prior to
the expiration of the term provided in Paragraph 2 above except as follows:
(a) Upon failure of the other party to cure a default under, or a breach
of, this Agreement within ten days after written notice is given as to
such or breach by the terminating party;
(b) Upon the bankruptcy or liquidation of the other party, whether
voluntary or involuntary;
(c) Upon the other party having or applying for a receiver appointed for
all or a substantial part of such party's assets or business.
11. WAIVER OF BREACH. The waiver by either party of a breach of any provision
of This Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach by the other party.
12. ASSIGNMENT. The rights and obligations of the parties under this Agreement
shall Inure to the benefit of, and shall be binding upon, the successors
and assigns to the parties.
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<PAGE>
13. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing, and if sent by certified mail, return
receipt requested, to the principal office of the party being notified.
14. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties and may be modified only be agreement in writing, signed by the
party against whom enforcement of any waiver, change, modification,
extension or discharge is sought. This Agreement shall be governed for all
purposes by the state of New Jersey. If any provision of this Agreement is
declared void, such provision shall be deemed severed from this Agreement,
which shall otherwise remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this AGREEMENT.
/s/ LARRY ERBER /s/ MICHAEL RUBEL
- ------------------------------ --------------------------------
LARRY ERBER MICHAEL RUBEL
President Chief Operating Officer
Wall Street Advancement, Inc. Arc Communications, Inc.
/s/ TOM GUCCIARDO
- ------------------------------
TOM GUCCIARDO
Director
Wall Street Advancement, Inc.
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