<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g)
of the Securities Exchange Act of 1934
Royal Acceptance Corporation
(Exact name of registrant as specified in its charter)
Delaware 22-3680581
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
90 Jericho Turnpike
Floral Park, NY 11001
(Address of registrant's principal executive offices) (Zip Code)
(516) 488-8600
(Registrant's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
<TABLE>
Name of each exchange
Title of each class to be so registered: on which each class is to be registered:
- ----------------------------------------- -----------------------------------------
<S> <C>
None None
</TABLE>
Securities to be registered under Section 12(g) of the Act:
Common Stock,
par value $.001
Copies to: Gerald A. Adler, Esquire
Bondy & Schloss LLP
6 East 43rd Street
New York, New York 10017-4656
Telephone No. (212)-661-3535
Fax No. (212) 972-1677
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Index to Form 10-SB Registration Statement
Item Number and Caption Page
PART I
1. Description of Business
2. Management's Discussion and Analysis or Plan of Operations
3. Description of Property
4. Security Ownership of Certain Beneficial Owners and Management
5. Management
6. Executive Compensation
7. Certain Relationships and Related Transactions
8. Description of Securities
PART II
1. Market Price of and Dividends on the REgistrant's Common
Equity and Other Shareholder Matters
2. Legal Proceedings
3. Changes in and Disagreements with Accountants
4. Recent Sales of Unregistered Securities
5. Indemnification of Officers and Directors
PART F/S
Financial Statements
PART III
1. Index to Exhibits
2. Description of Exhibits
Signatures
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PART I
DESCRIPTION OF BUSINESS
The Company
The Company was formed in November 1996. On January 2, 1997, in a
corporate restructuring, it was merged with Royal Finance Company, a New Jersey
corporation ("RFC"). The Company had very limited operations and together with
RFC was a development stage company organized to develop and operate a financial
services business specializing in the acquisition and service of lease contracts
for previously owned automobiles. On August 1, 1999, the Company acquired from
Alliance Holdings Limited Partnership, all of the issued and outstanding shares
of RIT Auto Leasing Group, Inc. ("RIT") in exchange for 5,650,000 shares of the
Company's common stock.
RIT's Business
RIT is in the business of leasing new and pre-owned automobiles with
terms generally ranging from twelve to sixty months. It markets its leasing
services through telephone solicitation and advertising. The sources of RIT's
automobiles for lease are predominantly automobile dealers in the Eastern region
of the United States. The Company also leases and finances commercial industrial
equipment such as computers, airplanes, boats and construction equipment. Its
customer base is derived from the general public and corporate accounts.
RIT was incorporated in 1993, at which time it focused primarily on the
leasing of low end automotive and commercial vehicles. At that time it had a
lease portfolio of approximately 250 vehicles valued at approximately $3
Million. Presently, RIT has a leasing portfolio of approximately 1,500
vehicles with a value of $10.5 Million. Presently, its product lines consist
of commercial industrial equipment, high line vehicles (exotic and luxury),
limousines, ambulances, tow trucks, tractors, airplanes, boats and construction
equipment. RIT is also in the equipment leasing business.
RIT markets its leasing services through a network of dealer referrals,
trade shows and magazine advertising. The majority of RIT's leasing income is
derived from its dealers network throughout the country. RIT's management
estimates that approximately 75% of its gross leasing income is generated from
its dealer networks located in Florida, North Carolina, California, Georgia and
Illinois with the balance of its income generated from referrals, trade shows
and magazines. RIT has positive working relationships with commercial financial
institutions, including ford Motor Credit, European American Bank, Bombardier
Capital, 1st Source Bank and Associates Commercial Corp. RIT leases
approximately 50-90 units per month, generating anywhere from $3 Million to $5
Million in gross sales per month.
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RIT's business strategy is to (i) provide personal and attentive
service to its clientele, (ii) lease primarily to high-quality credit applicants
in order to continue to build a lease portfolio with low delinquency and credit
loss rates, (iii) finance its lease portfolio with competitive credit terms and
(iv) manage its residual risk relating to RIT's resale of automobiles after the
expiration of the lease term.
In general, companies have a variety of financing alternatives
available to them in acquiring the use of a new automobile, either through the
purchase or lease of such vehicle. In financing the purchase of a vehicle there
are various loan alternatives including, fully amortizing loans, balloon
payments, no money down or low down payments. In terms of leasing vehicles,
there are various options including, payment schedules, term, maintenance and
repurchase rights. The primary benefit of leasing over purchasing is that
leasing typically provides a consumer with the opportunity to acquire the use of
a new automobile at a lower monthly payment than financing the purchase of such
vehicle, usually without a significant initial cash outlay, and enables the
return of the automobile without any further liability at the end of the lease
term. Companies which provide employees with automobile transportation typically
lease such vehicles and expense the costs. The increase in new vehicle prices in
relation to annual median family income has been a contributing factor in the
growth in the leasing and used automobile markets. This has provided RIT with a
further opportunity for revenue growth through the resale of its vehicles after
the term of the lease or in the event there are defaults of the leases.
RIT's primary goal is to expand its leasing operations, increase and
obtain better terms with respect to the financing of the vehicles it leases and
to increase the profitability of its vehicle remarketing program. RIT's strategy
for continued growth is to (i) increase lease origination by (a) increased name
recognition, (b) acquisition of similar companies or their assets, (c) the
development, expansion and retention of existing clients, and (d) the expansion
into new geographic markets, (ii) increase and improve the terms of its
financing arrangements, (iii) further develop and increase the profitability of
its used automobile remarketing operations, and (iv) lease primarily to high
quality credit applicants in order to continue to build a lease portfolio with
low delinquency and credit loss rates.
RIT purchases each vehicle pursuant to its client's specifications and
finances its purchase. RIT usually finances the purchase of each vehicle to
correspond with the term of the lease, such that upon the completion of the
lease term the lessees have the option of purchasing the automobile at a
predetermined purchase price or turn the automobiles in and have no further
obligation.
The term of the leases average generally between 24 and 39 months,
with the average lease being 36 months. In addition to setting forth the lease
term, the amount of the rental payments and the mileage allowance, each lease
requires the lessee to pay all
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fees, taxes, fines and other costs relating to the use of the vehicle.
Generally, the lessee pays the first months lease payment in advance of the
lease term and puts up a security deposit equal to a one month lease amount. The
lessee is required to maintain liability and casualty insurance on each vehicle
at specified limits and to name RIT as an additional insured and loss payee.
Each lease applicant must provide information regarding, among other things,
corporate history, length of time in business, ability to pay based both on
income level and credit history, including comparable borrowing experience and
past history. The foregoing procedures provide the general basis for RIT's
credit decisions.
RIT's corporate headquarter are located at 90 Jericho Turnpike, Floral
Park, New York. RIT currently has ten employees and maintains an auto lease
portfolio of approximately 1,500 vehicles. It has satellite offices in
California, Florida, Georgia and North Carolina and intends to open three
additional satellite offices within the next twelve months. Mr. Toporek, RIT's
principal shareholder and chief executive officer has over 25 years of
experience in the equipment, auto financing and leasing business.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Introduction:
For a complete understanding of these activities, this management's discussion
and analysis should be read in conjunction with Part 1. Item 1. description of
Business and Part F/S Financial Statements to the Form 10-SB.
General:
Royal Acceptance Corporation (the "Company") was incorporated in the State of
Delaware on June 23, 1994. On July 15, 1999, it acquired all the issued and
outstanding capital stock of RIT Auto Leasing Company ("RIT") in exchange for
5,650,000 shares of its common stock. The transaction has been accounted for as
a reverse acquisition in a manner similar to a pooling of interests which
reflects the acquisition as if it had occurred at the beginning of the periods
presented in the accompanying consolidated financial statements.
RIT was incorporated in New York on April 1, 1993 and is in the business of
leasing new and pre-owned automobiles with terms generally ranging from twelve
to sixty months. It markets its leasing services through its dealer network and
advertising. The sources of RIT's automobiles for lease are predominantly
automobile dealers in the eastern region of the United States. RIT also leases
and finances commercial industrial equipment such as computers, airplanes, boats
and construction equipment.
Forward Looking Statements and Certain Risk Factors:
The Company cautions readers that certain important factors may affect the
Company's actual
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results and could cause such results to differ materially from any
forward-looking statements that may be deemed to have been made in this Form
10-SB or that are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in the Form 10-SB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may", "expect", "believe",
anticipate", "intend", "could", estimate", or "continue", or the negative
variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors that may affect the Company's results
include, but are not limited to, the lack of substantial profits, its dependence
on key personnel, its ongoing need for additional financing and its dependence
on the automobile industry. The Company is also subject to other risks detailed
herein or which will be detailed from time to time in the Company's future
filings with the Securities and Exchange Commission.
Results of Operations:
Nine months ended September 30, 1999 and 1998
Revenue, consisting of amortization of earned income, rental income and gains on
sales of vehicles, for the nine months ended September 30, 1999 was $2,919,949,
a 93% increase from the year earlier when total revenues aggregated $1,510,941.
When adjusted for rental income and gains on sale of vehicles which totaled
$118,917 in the current period compared to $533,329 in the earlier period,
revenues actually increased $1,823,420 or 187%. This increase is a result of
management's efforts to increase its dealer network which has been expanded to
include locations in Florida, North Carolina, California, Georgia and Illinois.
Management has also expanded its financial relationships to include several new
major financing institutions. The additional financing has given the Company the
ability to consummate additional lease agreements. Increases in customer
referrals have also had a favorable impact on the Company's revenues.
The Company's major costs consist of interest and depreciation which totaled
$1,496,463 (51% of total revenues) for the nine months ended September 30, 1999
and $905,426 (60% of total revenues) during the comparable prior year period.
The $591,037 (65%) increase in costs compares favorably to the 93% revenue
increase. The 9% decrease in interest and depreciation as a percentage of total
revenues is primarily due to the Company's ability to enter into more closed-end
leases for luxury automobiles which are more profitable than leases entered into
during the prior period when open-end leases comprised a higher percentage of
leases. The Company also recognized income in the current period from initial
payments made by its lessees. The gross margin therefore increased in the
current period due to the increase in such initial lease payments.
Selling, general and administrative expenses were $971,522 (33% of total
revenues) for the nine months ended September 30, 1999 and $496,108 (33% of
total revenues) for the same period in the prior year. The increase of $475,000
(96%) was principally due to the hiring of
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additional personnel. The almost doubling of expenses was required to adequately
service the 93% revenue increase.
The increase in the provision for taxes of $177,000 is due to deferred taxes on
the difference between book and tax income. The effective income tax rate was
49% for the nine months ended September 30, 1999 compared with 40% for the
earlier period. The difference is due to the tax effect on the non deductible
portion of compensatory common stock issuances.
The Company's net income for the nine months ended September 30, 1999 totaled
$230,964, or $.03 per share, compared to $65,407 or $.01 per share for the same
period in 1998. As discussed above, the reasons for the increase in the current
period included more lease revenue, less costs as a percentage of such revenues
and increases in selling, general and administrative expenses.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenue, consisting of amortization of earned income, rental income and gains on
sales of vehicles for 1998 was $2,257,457, a 46% increase form the year earlier
when total revenues aggregated $1,547,259. The decreases in rental income and
gains on vehicle sales in the current year of $218,664 was more than offset by
an increase in amortization of unearned income of $928,862. In 1997, few of the
company's leases qualified as direct finance leases and were classified as
operating leases thus accounting for the decrease in rental income and gains
from vehicle sales. This increase in amortization of unearned income is a direct
result of entering into more finance leases as well as management's efforts to
increase its dealer networks and an increase in its financial relationships to
include several new major financial institutions. The additional financing
availability has given the Company the ability to consummate additional lease
agreements.
The Company's major costs consists of interest and depreciation which totaled
$1,028,194 (54% of total revenue) in 1998 and $1,102,096 (72% of total revenues)
in 1997. The 18% decrease in interest and depreciation as a percentage of total
revenues is primarily due to the Company's ability to enter into more profitable
closed-end direct financing leases for luxury automobiles which are more
profitable than leases entered into during the prior period which consisted of a
larger percentage of open-end operating leases. The Company also recognized more
income on initial payments made by its lessees in the current period. The gross
margin therefore increased in the current period due to the increase in such
revenues without incurring comparable increased costs.
Selling, general and administrative expenses were $913,951 (40% of revenues) for
1999 and $391,309 (25% of revenues) for 1998. The increase of $522,642 (134%)
was principally due to the hiring of additional personnel to service the
increased business and an increase in fixed costs in the current year over the
prior year. The increased costs incurred in 1998 were required to increase and
enhance the Company's dealer network.
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The increase in the provision for income taxes of $40,000 is due to deferred
taxes on the difference between book and tax income. The effective income tax
rate was 40% in both 1999 and 1998.
The Company's net income for 1999 totaled $81,312 or $.01 per share, compared to
$21,854 or $.00 per share for 1998. As discussed above, 1998 included more lease
revenue, less costs as a percentage of such revenues and increases in selling,
general and administrative expenses.
FINANCIAL CONDITION:
September 30, 1999 Compared to December 31, 1998
The Company's cash position at September 30, 1999 showed a decrease of $199,025.
Accounts receivable, which represents among other things, amounts due from the
sale of vehicles increased by $850,591 over the accounts receivable outstanding
at December 31, 1998.
The net investment in direct financing leases represents the aggregate future
leases payments due to the Company from its leasees. Such amount was $23,324,780
at September 30, 1999 and $13,151,516 at December 31, 1998. The Company feels
that it has adequately reserved for any possible bad debts. The Company finances
the purchase of its leased vehicles under several separate credit facilities.
Such indebtedness aggregated $23,918,252 and $12,717,524 at September 30, 1999
and December 31, 1998, respectively.
The Company's vehicle inventory increased from $504,701 at December 31, 1998 to
$1,158,061 at September 30, 1999. Such increase was due to the higher volume of
autos coming off lease during the nine months ended September 30, 1999 compared
with the year ended December 31, 1998.
In September 1999, the Company loaned $435,150 to an equity owned by its
president. Such amount is due on demand and bears interest at 9%. There were no
amounts outstanding to this entity at December 31, 1998.
Accounts payable at September 30, 1999 was $323,896 compared with $43,307 at
December 31, 1998, an increase of $280,589. Such increase is related to the
higher volume of leases being entered into by the Company.
At September 30, 1999, the Company is indebted to its President in the amount of
$103,394. No such debt was outstanding at December 31, 1998.
Stockholders' equity increased by $399,739 during the period from December 31,
1999 to September 30, 1998. Such increase was the result of the sale of 377,100
shares for $93,775 in cash, issuance of 300,000 common shares for services
rendered valued at $75,000, and net income for the nine months ended September
30, 1999 of $230,964.
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Liquidity and Capital Resources:
The Company generated a positive cash flow from operations of $123,304 during
the nine month period ended September 30, 1999. During the same period, net cash
of $519,498 was used in investing activities by the loan of $435,150 to an
affiliate, by the purchase of $203,265 in furniture and equipment which was
offset by the receipt of $118,917 from the sale of vehicles. Cash was also
provided through the sale of 377,100 common shares for $93,775 plus the receipt
of $103,394 a loan to the Company by its president. For the nine months ended
September 30, 1999, cash decreased by $199,025.
The Company's working capital at September 30, 1999 and December 31, 1998 was
$2,664,854 and $855,649, respectively. Its primary sources of working capital
have been the proceeds from the financing of its leased vehicles and the sale of
its common stock.
During the period from January 1, 1998 through September 30, 1999, the Company
issued an aggregate of 1,250,000 common shares to consultants and employees for
services rendered valued at $84,500.
During the nine months ended September 30, 1999, the Company sold 377,100 common
shares for $93,775.
Management's primary goal is to expand its leasing operations, increase and
obtain better terms with respect to the financing of the vehicles it leases and
to increase the profitability of its vehicle remarketing program. The strategy
for continued growth is to (i) increase lease origination by a)increased name
recognition, b) acquisition of similar companies or their assets, c) the
development, expansion and retention of existing clients, and d) the expansion
into new geographic markets, ii) increase and improve the terms of its financing
arrangements, iii) further develop and increase the profitability of its used
automobile remarketing operations and (iv) lease primarily to high quality
credit applicants in order to continue to build a lease portfolio with low
delinquency and credit loss rates.
Pursuant to a confidential private offering memorandum, the Company is offering
600,000 shares of its common stock at a price of $1.00 per share. The offering
period commenced on October 5, 1999 and will end on April 5, 2000. The proceeds
of the offering will be used primarily for working capital, the acquisition of a
profitable lease portfolio and the hiring of additional personnel.
Management believes that anticipated cash flow from operations and the proceeds
raised through its private offering will be sufficient to fund its operations
for the next 12 months assuming that those operations are consistent with
management's expectations of its anticipated increase in revenues. The Company
may need additional financing thereafter. There can be no assurance that the
Company will be able to obtain financing on a favorable or timely basis. The
type, timing and terms of financing elected by the Company will depend upon its
cash needs, the availability of other financing sources and the prevailing
conditions in the financial markets. Moreover, any statement regarding the
Company's ability to fund its operations from
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expected cash flows is speculative in nature and inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified.
PROPERTY
RIT leases approximately 2,000 square feet of office space and a lot
for automobiles of approximately 11,500 square feet, both at 90 Jericho
Turnpike, Floral Park, New York 11001 at an annual rental of $120,000 per year
which lease expires in June, 2002. The property is leased directly from the
Alliance Holdings Limited Partnership, of which Richard Toporek is the General
Partner.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the name and address of each officer and
director of the Company and each person who owns beneficially more than five
percent of the Common Stock of the Company, and the number of shares owned by
each such person and by all officers and directors as a group:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Name and Address of Beneficial Owner Amount and Nature of Ownership Approximate % of Class
- ------------------------------------ --------------------------------- ----------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Richard Toporek, President/Secretary 5,650,000(1) 75%
and Director
- ------------------------------------------------------------------------------------------------------
Mark Caulo, -
Chief Financial Officer and Director
- ------------------------------------------------------------------------------------------------------
Robert Ricciuti, -
Vice President and Director
- ------------------------------------------------------------------------------------------------------
Alliance Holdings Limited Partnership 5,650,000 75%
- ------------------------------------------------------------------------------------------------------
Directors and Officers as a Group 5,650,000 75%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Toporek owns these shares beneficially solely by virtue of his status as
the general partner of Alliance Holdings Limited Partnership. He disclaims
beneficial ownership of such shares.
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MANAGEMENT
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Richard Toporek 48 President/Secretary and
Director
Mark Caulo 41 Chief Financial Officer
and Director
Robert Ricciuti 45 Vice President and Director
</TABLE>
Richard Toporek has over 25 years of experience in the equipment, auto
financing and leasing industry. He has been President and a Director of RIT
since 1993. His responsibilities include overseeing all aspects of the daily
management and operation of RIT, including the management of over $25 Million of
leases as well as RIT's credit facilities. Mr. Toporek has also been the Chief
Executive Officer of Professional Vehicle Leasing since 1976 and has been a Vice
President of Alpha Acceptance Corp. since 1990. He is also a Director of Chariot
Limousine, and Transportation, Ltd. and Liberty Sales & Truck Leasing, Inc. Mr.
Toporek is founder and past president of the Tri-State Chapter of the National
Vehicle Leasing Association. Mr. Toporek will not be devoting all of his time to
the business of the Company as some of his time will be devoted to Professional
Vehicle Leasing and Alpha Acceptance Corp. He is a graduate of Queens College
with a Bachelor of Arts degree. See "Risk Factors--Dependence on Richard
Toporek."
Mark Caulo is a certified public account and is currently with MCM Tax
Services Ltd. and Kornelia M. Sevfried CPA, PC, an accounting and tax planning
and preparation service founded by him in 1984. Mr. Caulo's experience is
concentrated in leasing and automotive related industries as well as the
financial services industries. His firm is presently the outside accounting firm
for RIT. Upon completion of the Offering, Mr. Caulo will join the Company as its
chief financial officer and will be devoting the majority of his time to the
business of the Company. Mr. Caulo is a graduate of St Frances College with a
Bachelor of Science Degree.
Robert Ricciuti has been Director of Operations of Great American
Commercial Leasing of Great Neck, New York, a commercial equipment and
automobile leasing company since February, 1997 where he is responsible for all
of the functions of the company's work flow from the initial marketing programs
to the finalization of lease transactions. From 1991 to 1997 he was Director of
Auto Portfolios for National Star Leasing where he was responsible for the
credit analysis of all applications for equipment, automobile and truck
leasing. From 1988 to 1991 he was an Assistant Vice President of Oxford
Resources, a major financial institution where he directed and oversaw all
aspects related to operations, collections and customer service.
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EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation
- ----------------------- ---- ------ ----- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard Toporek, 1999 $ - - -
President, Secretary and 1998 - -
Director 1997
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Richard Toporek, the President, Secretary and a Director of the
Company is the general partner of Alliance Holdings Limited Partnership, the
owner of 5,650,000 shares of the Company's common stock. Alliance Holdings
Limited Partnership is the lessor of the Company's commercial space.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 25,000,000 shares of common stock,
$.001 par value, of which 7,532,709 shares were issued and outstanding as of
February 28, 2000. The holders of common stock have one vote per share. None of
the shares have preemptive or cumulative voting rights, have any rights of
redemption or are liable for assessments or further calls. None of the shares
have any conversion rights. The holders of common stock are entitled to
dividends, when and as declared by the Board of Directors from funds legally
available therefor. Upon liquidations of the Company the holders of common stock
are entitled to share pro rata in any distribution to shareholders.
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock,
$.001 par value none of which issued and outstanding.
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Olde Monmouth Stock Transfer Co., 77 Memorial Parkway, Suite 101,
Atlantic Highlands, NJ 07716, is the transfer agent and registrar for the
Company's common stock.
Shares Eligible for Future Sale
The Company has 7,532,709 shares of common stock outstanding, but, of
these shares, only 819,759 shares are freely tradable. All of the remaining
shares of common stock are considered "restricted securities" and in the future,
may be sold only in compliance with rule 144 or in an exempt transaction under
the Securities Act of 1933 (the "Act") unless registered under the Act (the
"restricted shares").
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain conditions, a person, including an affiliate of the
Company (or persons whose shares are aggregated), who has owned restricted
shares of common stcok beneficially for at least one year is entitled to sell,
within any three month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares pf the same class or, if
the common stock is quoted on a national quotation system, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the three months preceding
the sale and who has beneficially owned shares of common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
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PART II
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's securities trade are traded on the OTC Bulletin Board and
in the over-the-counter market "pink sheets". The Company's trading symbol is
"RYFC". Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions. The following sets forth the range of high and low bid information
for the quarterly periods as reported by the National Quotation Bureau:
High Low
---- ---
1998: 2nd Quarter .25 .25
3rd Quarter .25 .25
4th Quarter .25 .25
1999: 1st Quarter 2.00 .25
2nd Quarter 2.375 .25
3rd Quarter 1.40625 .03125
4th Quarter 3.375 1.03125
Holders
As of February 28, 2000, the number of holders of record of common
stock, excluding the number of beneficial owners whose securities are held in
street name, was approximately 95.
Dividend Policy
The Company does not anticipate paying any cash dividends on its common
stock in the foreseeable future because it intends to retain its earnings to
finance the expansion of its business. Thereafter, the declaration of dividends
will be determined by the Board of Directors in light of conditions then
existing, including, without limitation, the Company's financial condition,
capital requirements and business condition.
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LEGAL PROCEEDINGS
The Company is not party to any material pending legal proceedings and
has no knowledge that any such proceedings are threatened.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
RECENT SALES OF UNREGISTERED SECURITIES
The following paragraphs set forth certain information with respect to
all securities sold by the Company within the past three years without
registration under the Securities Act of 1933, as amended (the "Securities
Act"). The information includes the names of the purchasers, the date of
issuance, the title and number of securities sold and the consideration received
by the company for the issuance of these shares.
On December 27, 1997, the Company issued to Loren Investment Group, Inc.,
250,000 shares of common stock as a retainer for its agreement to provide
consulting services to the Company. 100,000 shares were issued pursuant to Rule
504 of Regulation D and 150,000 shares were issued pursuant to Section 4(2) of
the Act.
On December 27, 1997, the Company issued to Bondy & Schloss LLP, 250,000 shares
of common stock as a retainer for legal services rendered. 100,000 shares were
issued pursuant to Rule 504 of Regulation D and 150,000 shares were issued
pursuant to Section 4(2) of the Act.
On December 27, 1997, the Company issued to Gerald Ponsiglione, an officer and
director of the Company 200,000 shares of common stock in consideration for his
agreement to serve in such capacity. The aforesaid shares were issued pursuant
to Section 4(2) of the Act.
On March 25, 1998, the Company issued to William Hayde, 250,000 shares
of common stock as a retainer for his agreement to provide consulting services
to the Company. 100,000 shares were issued pursuant to Rule 504 of Regulation D
and 150,000 shares were issued pursuant to Section 4(2) of the Act.
Commending in September 1998, the Company sold 410,300 shares of common
stock at a price of $0.25 per share to the following persons, each in the amount
set forth opposite his, her or its name:
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Harvey Bayard 30,000
Georgianna Gostkowski 200
Robert J. Ryan 1,000
A. Ruthenberg 3,000
Staci Gassoso 20,000
Tutta Italia Inc 10,000
Robert Tarantola 2,000
Joanne Gallo 2,000
John M. Young Jr. 10,000
Gus Sclafani 6,000
Darlene Bosco 37,000
Lillian and Richard Misiak 15,000
Larry Schwartz 5,000
Richard Cullen 4,000
Darryl Mathews and Donna
Mathews JTWROS 5,000
Daniel Miele 2,400
Rocco Urgo 6,000
Enice Lorenzo 2,500
Joe Lorenzo & Sons Provisions, Inc. 8,000
Vincent Lorenzo 2,500
Craig Fligel 4,000
Enice Lorenzo 2,500
Naim Haddad 10,000
Angela Vergona 4,000
Mary F. Calabro 4,000
Bethanne Thomas 100,000
Craig Fligel 4,000
Harvey Bayard 40,000
Catherine DeWitt 9,000
Joseph C. Larezza 4,000
Joseph C. Larezza 1,000
L. Rolls (Nominees) Ltd. 20,000
L. Rolls (Nominees) Ltd. 20,000
AJ & Company of New York Limited 2,000
Hugh Conlin 4,000
Monica Lloyd 2,000
Jacquelyn Rado 1,000
Rosella Valente 2,000
Anthony Amitrano 1,200
15
<PAGE>
In March of 1999, the Company sold the following shares at a price of
$2.00 per share to the following individuals under Rule 504:
Bhavin Patel 5,000
Patricia Novinski 2,000
Commencing November 1, 1999, the Company has offered and sold the
following shares to the listed individuals at a price of $1.00 per share under
Rule 504:
Jerome Breslaw 20,000
Jon Farbman 10,000
Henrietta Meltzer 20,000
Abraham Stahl 15,000
Solomon Shapiro 25,000
16
<PAGE>
PART III
Index and Description of Exhibits
1. Index to Exhibits
Exhibit No. Description
- ---------- ------------
3.1 Certificate of Incorporation, together with all amendments
3.2 Certificate of Merger
3.3 By-Laws
4.1 Specimen Common Stock Certificate
10.1 Exchange Agreement, dated as of July 13, 1999, by and between the
Company, RIT Auto Leasing Group, Inc. and Alliance Holdings
Limited Partnership
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify directors and officers as well as
other employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation, a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
bylaws, disinterested director vote, stockholder vote, agreement or otherwise.
The Company's Certificate of Incorporation contains no specific
provision pertaining to the liability or indemnification of its officers or
directors. However, the Company's by- laws provide that no director or officer
of the corporation shall be liable for the acts, defaults or neglects of any
other director or officer, or for any loss sustained by the corporation, unless
the same has resulted from his own willful misconduct, willful neglect, or
negligence. The by-laws further provide as follows:
Each director and officer of the corporation and each person who shall
serve at the corporation's request as a director or officer of another
corporation in
17
<PAGE>
which the corporation owns shares of capital stock or of which it is a
creditor shall be indemnified by the corporation against all reasonable
costs, expenses and liabilities (including reasonable attorney's fees)
actually and necessarily incurred by or imposed upon him in connection
with, or resulting from, any claim, action, suit, proceeding,
investigation or inquiry of whatever nature in which he may be involved
as a party or otherwise by reason of his being or having been a
director or officer of the corporation or such director or officer of
such other corporation, at the time of the incurring or imposition of
such costs, expenses or liabilities, except in relation to matters as
to which he shall be finally adjudged in such action, suit, proceeding,
investigation or inquiry to be liable for willful misconduct, willful
neglect, or gross negligence toward or on behalf of the corporation in
the performance of his duties as such director or officer of the
corporation or as such director or officer of such other corporation.
As to whether or not a director or officer was liable by reason of
willful misconduct, willful neglect, or gross negligence toward or on
behalf of the corporation in the performance of his duties as such
director or officer of the corporation or as such director or officer
of such other corporation, in the absence of such final adjudication of
the existence of such liability, the Board of Directors and each
director and officer may conclusively rely upon an opinion of legal
counsel selected by or in the manner designated by the Board of
Directors. The foregoing right to indemnification shall be in addition
to and not in limitation of all other rights to which such person may
be entitled as a matter of law and shall inure to the benefit of the
legal representative of such person.
CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
FINANCIAL SCHEDULES AND EXHIBITS
(a) The following financial statement are filed herewith:
Financial Statements. The financial statements filed as part of this
Form 10-SB are indexed below and are included at page F-1.
18
<PAGE>
Independent Auditors' Report.............................................. F-1
Consolidated Balance Sheet as at September 30, 1999 (unaudited)
and December 31, 1999 and 1998 (audited)...................................F-2
Consolidated Statement of Operations for the period
ended September 30, 1999 (unaudited) and for the
two years ended December 31, 1999 and 1998 (audited) ......................F-3
Statement of Stockholders' Equity for the period
ended September 30, 1999 (unaudited) and for the
years ended December 31, 1999 and 1998 (audited) ..........................F-4
Statements of Cash Flows for the years ended
December 30, 1998 and 1997 (audited)...................................... F-5
Notes to Financial Statements ......................................F-6 - F-20
Exhibits.
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf the
undersigned thereto duly authorized.
Dated: March 2, 2000
Royal Acceptance Corporation.
By: /s/ Richard Toporek
--------------------------------
Name: Richard Toporek
Title: President
19
<PAGE>
ROYAL ACCEPTANCE CORPORATION
AND SUBSIDIARY
CONSOLDIATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<PAGE>
ROYAL ACCEPTANCE CORPORATION AND SUBSIDIARY
SEPTEMBER 30, 1999
I N D E X
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
FINANCIAL STATEMENTS:
Independent Accountants' Report ................................................... F-2
Consolidated Balance Sheets
As of September 30, 1999 (Unaudited)
and December 31, 1998........................................................... F-3
Consolidated Statements of Income
For the Nine Months Ended September 30, 1999 and 1998 (Unaudited)
and For the Years Ended December 31, 1998 and 1997 ............................. F-4
Consolidated Statements of Stockholders' Equity
For the Nine Months Ended September 30, 1999 (Unaudited)
and For the Years Ended December 31, 1998 and 1997 ............................. F-5
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998 (Unaudited)
and For the Years Ended December 31, 1998 and 1997 ............................. F-6 - F-7
Notes to Consolidated Financial Statements ........................................ F-8 - F-15
</TABLE>
F-2
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Stockholders and Board of Directors
Royal Acceptance Corporation
We have audited the accompanying consolidated balance sheet of Royal Acceptance
Corporation and Subsidiary as at December 31, 1998, and the related statements
of operations, cash flows, and stockholders' equity for the two years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
stan-dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the over-all
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Royal Acceptance
Corporation and Subsidiary as at December 31, 1998, and the results of their
operations and their cash flows for the two years then ended, in conformity with
generally accepted accounting principles.
New York, New York
January 19, 2000
F-3
<PAGE>
ROYAL ACCEPTANCE CORPORAITON AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
A S S E T S
September 30, December 31,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 38,932 $ 237,957
Accounts receivable 990,969 140,378
Net investment in direct financing leases 6,860,550 3,727,850
Inventory 1,158,061 504,701
Vehicles held under operating leases -
net of accumulated depreciation -- --
------------ ------------
Total current assets 9,048,512 4,610,886
Net investment in direct financing leases 16,464,230 9,423,666
Furniture and equipment - net of depreciation
and amortization 119,256 97,146
Due from related party 435,150 --
Other assets 7,775 7,775
------------ ------------
$ 26,074,923 $ 14,139,473
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of loans payable $ 5,956,368 $ 3,711,930
Accounts payable and accrued expenses 323,896 43,307
Loan payable stockholder 103,394 --
------------ ------------
Total current liabilities 6,383,658 3,755,237
Loans payable - net of current maturities 17,691,884 9,005,594
Deferred income taxes 784,000 563,000
------------ ------------
Total liabilities 24,859,542 13,323,831
------------ ------------
Stockholders' equity:
Preferred stock, $.001 par value, authorized -
1,000,000 shares, none issued and outstanding
Common stock, $.001 par value, authorized -
25,000,000 shares, issued and outstanding -
7,494,509 shares at September 30, 1999,
6,817,409 shares at December 31, 1998 7,494 6,817
Additional paid-in capital 1,205,931 1,037,833
Retained earnings (deficit) 1,956 (229,008)
------------ ------------
Total stockholder's equity 1,215,381 815,642
------------ ------------
$ 26,074,923 $ 14,139,473
============ ============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
ROYAL ACCEPTANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Nine
Months Ended For the Years Ended
September 30, December 31,
------------------------------ -----------------------------
1999 1998 1998 1997
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Amortization of unearned
lease income $2,801,032 $ 977,612 $1,533,060 $ 604,198
Rental income -- 161,216 219,622 262,229
Gain on sale of vehicles 118,917 372,113 504,775 680,832
---------- ---------- ---------- ----------
Total revenues 2,919,949 1,510,941 2,257,457 1,547,259
---------- ---------- ---------- ----------
Costs and expenses:
Interest 1,315,308 864,941 1,154,214 811,760
Depreciation and
amortization 181,155 40,485 53,980 308,336
Selling, general and
administrative 971,522 496,108 913,951 391,309
---------- ---------- ---------- ----------
Total costs and expenses 2,467,985 1,401,534 2,122,145 1,511,405
---------- ---------- ---------- ----------
Income before provision
for income taxes 451,964 109,407 135,312 35,854
Provision for income taxes 221,000 44,000 54,000 14,000
---------- ---------- ---------- ----------
Net income $ 230,964 $ 65,407 $ 81,312 $ 21,854
========== ========== ========== ==========
Earnings per share:
Net income per share $ 0.03 $ 0.01 $ 0.01 $ --
========== ========== ========== ==========
Weighted average shares
outstanding 7,068,825 6,240,372 6,143,300 5,862,721
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
ROYAL ACCEPTANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (Unauidted)
<TABLE>
<CAPTION>
Common Shares Additional Total
----------------------- Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
--------- -------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 5,867,409 $ 5,867 $1,029,283 ($ 332,174) $ 702,976
Net income for the year ended December 31, 1997 -- -- -- 21,854 21,854
--------- -------- ---------- --------- ----------
Balance at December 31, 1997 5,867,409 5,867 1,029,283 (310,320) 724,830
Issuance of common stock for services rendered 950,000 950 8,550 -- 9,500
Net income for the year ended December 31, 1998 -- -- -- 81,312 81,312
--------- -------- ---------- --------- ----------
Balance at December 31, 1998 6,817,409 6,817 1,037,833 (229,008) 815,642
Issuance of shares of common stock for cash, net of
offering costs (Unaudited) 377,100 377 93,398 -- 93,775
Issuance of shares of common stock for
services rendered (Unaudited) 300,000 300 74,700 -- 75,000
Net income for the nine months ended
September 30, 1999 (Unaudited) -- -- -- 230,964 230,964
--------- -------- ---------- --------- ----------
Balance at September 30, 1999 (Unaudited) 7,494,509 $ 7,494 $1,205,931 $ 1,956 $1,215,381
========= ======== ========== ========= ==========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
ROYAL ACCEPTANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine
Months Ended For the Years Ended
September 30, December 31,
-------------------------------- -------------------------------
1999 1998 1998 1997
------------ ------------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 230,964 $ 65,407 $ 81,312 $ 21,854
------------ ------------ ------------ ------------
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Common stock issued for services 75,000 9,500 9,500 --
Amortization of unearned
lease income (2,801,032) (977,612) (1,533,060) (604,198)
Depreciation and amortization 181,155 40,486 53,980 308,330
Gain on sale of vehicles (118,917) (372,113) (504,775) (680,832)
Deferred income taxes 221,000 44,000 54,000 14,000
Increase (decrease) in cash
flows as a result of
changes in asset and
liability account balances:
Account receivables (850,591) 158,029 336,093 (455,435)
Net investment in direct
finance leases (7,372,232) (1,773,289) (4,505,720) 1,347,868
Inventory (653,360) 191,032 64,857 (96,132)
Loans payable 10,930,728 1,879,837 5,259,038 44,945
Accounts payable and
accrued expenses 280,589 (130,268) (140,917) 71,096
------------ ------------ ------------ ------------
Total adjustments (107,660) (930,398) (907,004) (50,358)
------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities 123,304 (864,991) (825,692) (28,504)
------------ ------------ ------------ ------------
Cash flows from investing
activities:
Due to related party (435,150) -- -- --
Purchases of furniture
and equipment (203,265) (28,561) (38,080) (793,710)
Proceeds of vehicles sold 118,917 872,594 1,015,936 860,382
------------ ------------ ------------ ------------
Net cash provided by
(used in) investing activities (519,498) 844,033 977,856 66,672
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements.
F-7
<PAGE>
ROYAL ACCEPTANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
For the Nine
Months Ended For the Years Ended
September 30, December 31,
----------------------------------- ---------------------------------
1999 1998 1998 1997
----------- ------------- ---------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from financing
activities:
Sale of capital stock 93,775 -- -- --
Loans payable officer 103,394 -- -- --
----------- ----------- ----------- -----------
Net cash provided by
financing activities 197,169 -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in cash (199,025) (20,958) 152,164 38,168
Cash at beginning of period 237,957 85,793 85,793 47,625
----------- ----------- ----------- -----------
Cash at end of period $ 38,932 $ 64,835 $ 237,957 $ 85,793
=========== =========== =========== ===========
Supplemental Disclosures of
Cash Flows Information:
Interest $ 1,315,308 $ 864,941 $ 1,154,214 $ 811,760
=========== =========== =========== ===========
Income taxes $ -- $ -- $ -- $ --
=========== =========== =========== ===========
Supplemental Disclosures of
Non-Cash Investing and
Financing Activities:
Common stock issued for
services rendered $ 75,000 $ 9,500 $ 9,500 $ --
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-8
<PAGE>
ROYAL ACCEPTANCE CORORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Information Relating to the Nine Months Ended
September 30, 1999 and 1998 is Unaudited) and
As at December 31, 1998 and for the Two Years Then Ended)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) Organization:
Royal Acceptance Corporation ("Royal") was incorporated in
the state of Deleware on June 23, 1994. In December 1997 the Board of
Directors authorized a 1 share for 20 share reverse stock split of
its common shares. On July 15, 1999, pursuant to a reorganization
under section 368(a)(1)(B) of the Internal Revenue Code, Royal
acquired all of the issued and outstanding capital stock of RIT Auto
Leasing Group, Inc. ("RIT") in exchange for 5,650,000 shares of
Royal's common stock. After the acquisition, the former RIT
stockholder owned approximately 72% of Royal's outstanding common
stock. The transaction is being accounted for as a reverse
acquisition in a manner similar to a pooling of interests and,
accordingly, the accompanying financial statements reflect the
reverse stock split and the acquisition as if they had occurred at
the beginning of the periods presented. Royal, prior to the RIT
acquisition had been virtually inactive since 1995 and incurred
losses since its inception to July 1999 of $987,000.
(b) Description of Business:
RIT was incorporated in New York on April 1, 1993 and is in
the business of leasing new and pre-owned automobile with terms
generally ranging from twelve to sixty months. It markets its leasing
services through its dealer network and advertising. The sources of
RIT's automobiles for lease are predominantly automobile dealers in
the Eastern region of the United States. RIT also leases and finances
commercial industrial equipment such as computers, airplanes, boats
and construction equipment.
(c) Principles of Consolidation:
The accompanying consolidated financial statements as at
September 30, 1999 and 1998 and the nine months ended September 30,
1999 and 1998 and as at December 31, 1998 and 1997 and the years
ended and December 31, 1998 and 1997 include the accounts of Royal
Acceptance Corporation and its wholly owned subsidiary, RIT Auto
Leasing Group, Inc. All material intercompany transactions have been
eliminated in consolidation.
F-9
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(c) Principles of Consolidation: (Continued)
The consolidated financial statements as at September 30,
1999 and for the nine months ended September 30, 1999 and 1998 have
not been audited. In the opinion of management, the unaudited interim
consolidated financial statements reflect all adjustments and
accruals, consisting only of normal recurring adjustments and
accruals, necessary to presently fairly the financial position of the
Company and its subsidiary as at September 30, 1999 and the results
of their operations, changes in capital deficiency and cash flows for
the nine months ended September 30, 1999 and 1998 are not necessarily
indicative of the results to be expected for the full year.
(d) Classification of Leases and Revenue Recognition:
Leases are either classified as "direct financing" or
"operating", pursuant to the Provisions of Statement of Financial
Accounting Standards Board Statement No. 13 - Accounting for Leases.
(i) Direct Financing Leases:
Includes all leases containing open-end lessee purchase options
and/or bargain purchase options. Open-end lessee purchase options
require each lessee upon termination to either purchase the related
vehicle for the stated options price or, if returned, to be
responsible for any deficiency between the stated option price and
the eventual realized by the Company upon the vehicles disposition.
Direct financing leases also include certain leases containing
closed-end lessee options whereby the Company expects the lessee to
purchase (although not a requirement) the vehicle for the stated
option price. The majority of these leases are situations where large
capital cost reductions were made and/or option prices are well below
the anticipated value of the related vehicle. The investment in
direct financing leases includes all future lease payments and the
lessee purchase options of the respective vehicles, net of unearned
income. Revenue under the direct financing leases is accounted for by
recognizing the excess of aggregate rentals receivable and lessee
purchase options over the cost of the leased vehicles during the term
of the lease in decreasing amounts related to the declining balance
of the unrecovered cost.
(ii) Operating Leases:
Operating leases consist of vehicles, which do not meet the direct
financing lease criteria. The majority of which are closed-end
leases, which may or may not contain lessee purchase options.
Vehicles, which are classified as operating leases are stated at,
cost less accumulated depreciation and unamortized capital cost
reduction payments. Depreciation is computed on the straight-line
basis over the terms of the leases to the vehicles estimated residual
values at the expiration of the lease periods. Rentals from operating
leases are recognized as revenue over the life of the lease on the
straight-line basis and expenses are charged against such revenues as
incurred. Initial lessee capital cost reduction payments are
amortized on a straight-line basis consistent with depreciation
periods and initial direct costs are included as a component of the
vehicles held and are amortized on a straight-line basis over the
lives of the related leases.
F-10
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(e) Inventory:
The inventory represents vehicles returned upon lease
termination which are either held for sale or re-lease. Amounts are
stated at the lower of net book value or market.
(f) Furniture and Equipment:
Depreciation of furniture and equipment is computed on the
straight-line method over the estimated useful lives of the related
assets. Expenditures for repairs and maintenance are charged to
income as incurred.
(g) Financial Statement Presentation:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and
disclosures accordingly, actual results could differ from those
estimates.
(h) Per Share Data:
Net income (loss) per share was computed by the weighted
average number of shares outstanding during cash period. The issuance
of all common shares in connection with the reverse stock split in
December 1997 and the acquisition of RIT have been retroactively
reflected in the computation as if they had occurred as at January 1,
1997.
NOTE 2 - NET INVESTMENT IN DIRECT FINANCING LEASES.
The net investment in direct financing leases consists of
the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
Total minimum lease payments to be received $ 26,334,415 $ 13,271,920
Estimated residual value of leased property 5,100,080 4,031,623
Allowance for uncollectable payments (57,328) (229,312)
------------ ------------
31,377,167 17,074,231
Less: Unearned income 8,052,387 3,922,715
------------ ------------
Net investment in direct financing leases $ 23,324,780 $ 13,151,516
============ ============
</TABLE>
F-11
<PAGE>
NOTE 2 - NET INVESTMENT IN DIRECT FINANCING LEASES. (Continued)
Net minimum lease payments to be received as of September
30, 1999 for each of the next five (5) years are:
Year Ending
September 30,
-------------
2000 $ 6,860,550
2001 5,538,165
2002 4,841,814
2003 3,150,550
2004 2,033,201
Thereafter 900,500
-----------
$23,324,780
===========
NOTE 3 - FURNITURE AND EQUIPMENT.
Furniture and equipment consist of the following:
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
Furniture and equipment $193,035 $159,000
Less: Accumulated depreciation 73,779 61,854
Net furniture and equipment $119,256 $ 97,146
-------- --------
Depreciation charged to operations $ 11,925 $ 15,900
======== ========
NOTE 4 - LOANS PAYABLE.
The Company finances the purchase of its leased vehicles
under several separate credit facilities which are materially
identical in their terms and conditions. The obligations are secured
by the leases and the underlying leased property and are payable
monthly with interest ranging from 8% to 14% per annum. The President
of the Company has personally guaranteed the loans.
Following are maturities of loans payable as of September
30, 1999 for each of the next five (5) years:
Year Ending
September 30,
-------------
2000 $ 5,956,368
2001 5,326,530
2002 5,096,765
2003 3,762,896
2004 3,505,693
-----------
$23,648,252
===========
F-12
<PAGE>
NOTE 5 - DEFERRED TAXES.
During the initial years of the leases, the Company receives
the benefit for income tax purposes of deductions for depreciation on
the vehicles, and interest on the debt that in the aggregate exceed
the rental income from the related leases. During the later years
rental income will exceed related deductions. Provision has been made
for the deferred income taxes that arise from these timing
differences using the deferred method.
The components of the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
For the Nine Months Ended For the Years Ended
September 30, December 31,
------------------------- -----------------------
1999 1998 1998 1997
--------- --------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Currently payable:
Federal $ -- $ -- $ -- $ --
State and local -- -- -- --
-------- -------- -------- --------
-- -- -- --
-------- -------- -------- --------
Deferred:
Federal 50,000 10,000 12,000 3,000
State and local 171,000 34,000 42,000 11,000
-------- -------- -------- --------
221,000 44,000 54,000 14,000
-------- -------- -------- --------
Total provision $221,000 $ 44,000 $ 54,000 $ 14,000
======== ======== ======== ========
</TABLE>
During the initial years of the leases, the Company receives
the benefit for income tax purposes of deductions for depreciation on
the vehicles, and interest on the debt that in the aggregate exceed
the rental income from the related leases. During the later years
rental income will exceed related deductions. Provision has been made
for the deferred income taxes that arise from these timing
differences using the deferred method. The net deferred tax liability
consists of the following temporary differences:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Net investment in finance leases ($1,499,000) ($ 853,000)
Net operating loss carryforward 688,000 275,000
Other 27,000 15,000
----------- -----------
Net furniture and equipment ($ 784,000) ($ 563,000)
=========== ===========
</TABLE>
F-13
<PAGE>
NOTE 5 - DEFERRED TAXES. (Continued)
The difference between income taxes computed using the
statutory federal income tax rate and the rate shown in the financial
statements is summarized as follows:
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-------------------------------------------
1999 % 1998 %
------------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Increase before provision for taxes $451,864 $109,407
======== ========
Computed tax provision at statutory rate $154,000 34.0 $ 37,000 34.0
Non-deductible portion of common
stock issuances 24,000 5.3 -- --
State tax provision, net of
federal tax effect 33,000 7.4 6,000 5.5
Other, net 10,000 2.2 1,000 0.9
-------- ---- -------- ----
$221,000 48.9 $ 44,000 40.4
======== ==== ======== ====
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------------------------
1998 % 1997 %
------------------ --------------------
<S> <C> <C> <C> <C>
Increase before provision for taxes $135,312 $ 35,854
======== ========
Computed tax provision at statutory rate $ 46,000 34.0 $ 12,000 34.0
State tax provision, net of
federal tax effect 7,000 5.2 2,000 5.0
Other, net 1,000 0.7 -- --
-------- ---- -------- ----
$ 54,000 39.9 $ 14,000 39.0
======== ==== ======== ====
</TABLE>
The net operating loss carryforwards at September 30, 1999
expired as follows:
Year Ending
September 30,
-------------
2009 $ 10,000
2011 180,000
2013 497,000
2014 1,215,000
----------
$1,902,000
==========
F-14
<PAGE>
NOTE 6 - CAPITAL STOCK.
(a) Stock Issued for Consideration Other Than Cash:
On December 11, 1997, the Company issued 250,000 shares of
its common stock to an attorney at their fair value of $2,500 for
legal services rendered. Of the 250,000 shares, 150,000 are
restricted securities under Rule 144 of the Securities Act of 1933
(The "Act").
Also on that date the Company issued another 250,000 shares
of its common stock to a consultant at their fair value of $2,500 as
a non refundable retainer for consulting services rendered in
December 1997. Of the 250,000 shares, 150,000 are restricted under
Rule 144 of the Act.
In December 1997, the Company issued 200,000 shares of its
common stock to an officer/director of the Company at their fair
value of $3,000. Such shares were issued as consideration for his
agreement to serve in such capacity. All 200,000 shares are
restricted securities under Rule 144 of the Act.
In March 1998, the Company issued 250,000 shares of its
common stock to a consultant at their fair value of $2,500 for
consulting services rendered. Of the 250,000 shares, 150,000 are
restricted securities under Rule 144 of the Act. And in March 1999,
the Company issued 150,000 shares of its common stock which have been
restricted to an officer/stockholder and 150,000 shares to a
consultant at their fair value of $75,000 for services rendered.
(b) Stock Issued for Cash:
During the nine months ended September 30, 1999, the Company
sold 377,100 shares of its common stock for $93,775.
(c) Stock Split:
On December 24, 1997, the Board of Directors authorized a 1
for 20 reverse stock split of the Company's $.001 par value common
stock. At a result of the split 3,820,068 shares were retired and
additional paid-in capital was increased by $3,820. All references in
the accompanying consolidated financial statements to the number of
common shares and per share amounts have been restated for all
periods presented.
(d) Other:
On December 24, 1997, the Company amended its Certificate of
Incorporation to increase its authorized common shares from
19,995,000 to 25,000,000 shares and its authorized preferred shares
from 5,000 to 1,000,000 shares.
F-15
<PAGE>
NOTE 7 - RELATED PARTY TRANSACTIONS.
(a) Leases:
The Company leases space on a month to month basis from an
entity, which is owned by the Company's president. Minimum annual
rental payments are $120,000 per annum, plus escalations. Rent
expense for the nine months ended September 30, 1999 and 1998 was
$137,070 and $88,199, respectively, and for the years ended December
31, 1998 and 1997 was $117,598 and $75,550, respectively.
(b) Due from related party:
At September 30, 1999, a corporation owned by the Company's
President was indebted to the Company in the amount of $435,150. The
amount is due on demand and bears interest at 9%.
(c) Loan payable - Stockholder:
At September 30, 1999, the Company is indebted to its
President in the amount of $103,150. The obligation is due on demand
and bears interest at 9%.
NOTE 8 - COMMON STOCK.
On July 12, 1999, pursuant to a reorganization under
Sections 368(a)(1)(B) of the Internal Revenue Code, the Company's
shareholder exchanged his 100 common stock for shares in Royal
Acceptance Corporation, ("Royal") a publicly held Company.
Accordingly, the Company will operate as a wholly owned subsidiary of
Royal.
On October 5, 1999, Royal offered 600,000 shares of its
common stock at a price of $1.00 per share pursuant in a confidential
private offering memorandum. The offering period, as extended, ends
on April 5, 2000.
F-16
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "ROYAL ACCEPTANCE CORPORATION", FILED IN THIS OFFICE ON THE
FIFTEENTH DAY OF NOVEMBER, A.D. 1996, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
----------------------------------
Edward J. Freel, Secretary of State
[Seal]
AUTHENTICATION: 0286214
2683944 8100
001100606 DATE: 02-29-00
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/15/1996
960335271 - 2683944
CERTIFICATE OF INCORPORATION
OF
ROYAL ACCEPTANCE CORPORATION
---------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is ROYAL ACCEPTANCE CORPORATION
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington, 19805, County of New Castle; and the name of the
registered agent of the corporation in the State of Delaware at such address is
Corporation Service Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 19,995,000 shares of common stock, par value $0.001
per share (the "Common Stock") and 5,000 shares of preferred stock, par value
$0.001 per share (the "Preferred Stock").
The Preferred Stock may be issued in one or more series, from time to
time, with each such series to have such designation, powers, preferences, and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue of such series adopted by the
board of directors of the Corporation, subject to the limitations prescribed by
law and in accordance with the provisions hereof, the board of directors being
hereby expressly vested with authority to adopt any such resolution or
resolutions.
-1-
<PAGE>
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
John S. Hoenigmann 375 Hudson Street, 11th Floor
New York, New York 10014
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
ss. 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
ss. 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the Bylaws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
corporation would have if there were no vacancies. No election of directors
need be by written ballot.
-2-
<PAGE>
2. After the original or other Bylaws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of ss. 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws of the
corporation may be exercised by the Board of Directors of the corporation;
provided, however, that any provision for the classification of directors
of the corporation for staggered terms pursuant to the provisions of
subsection (d) of ss. 141 of the General Corporation Law of the State of
Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by
the stockholders entitled to vote of the corporation unless provisions for
such classification shall be set forth in this certificate of
incorporation.
3. Whenever the corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to notice
of, and the right to vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under
the provisions of the certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of stockholders except as the
provisions of paragraph (2) of subsection (b) of ss. 242 of the General
Corporation Law of the State of Delaware shall otherwise require; provided,
that no share of any such class which is otherwise denied voting power
shall entitle the holder thereof to vote upon the increase or decrease in
the number of authorized shares of said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of ss. 102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the
provisions of ss. 145 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented, indemnify any and all persons whom
it shall have power to indemnify under said section from and against any and all
of the expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, office, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws
-3-
<PAGE>
corporation by this certificate of incorporation are granted subject to the
provisions of this Article ELEVENTH.
Signed on November 15, 1996.
John S. Hoenigmann
--------------------------------
John S. Hoenigmann, Incorporator
-4-
<PAGE>
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "ROYAL ACCEPTANCE CORPORATION", FILED IN THIS OFFICE ON THE
TWENTY-NINTH DAY OF JANUARY, A.D. 1998, AT 9 O'CLOCK A.M.
[Illegible Signature]
----------------------------------
Edward J Freel, Secretary of State
[Seal]
AUTHENTICATION: 8907418
2683944 8100
981037374 DATE: 02 -06-98
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
ROYAL ACCEPTANCE CORPORATION.
Pursuant to the provisions of Section 242 of the General Corporation
Law of the State of Delaware, the undersigned officers do hereby certify:
FIRST: The name of the Corporation is corporation (the "Corporation");
Royal Acceptance (the "Corporation"):
SECOND: The Board of Directors of the Corporation, by Unanimous Consent
on December 24, 1997, adopted a resolution to amend Article Fourth of the
Certificate of Incorporation to read as follows:
Article Fourth. (a) The total number of shares of Common stock which
the corporation shall have authority to issue is Twenty Five Million
(25,000,000). The par value of each of such shares is one Mil ($.001);
(b) The total number of shares of Preferred Stock which the corporation
shall have authority to issue is One Million (1, 000, 000). The par
value of each such shares is one Mil ($.001); (c) The 4,021,125 shares
of Common Stock, $001 par value, presently outstanding shall be reduced
to 201,057 shares of Common Stock, $.001 par value and such additional
fraction of a share of Common Stock as may be necessary to increase a
fractional share to a full share by effecting a one for twenty reverse
stock split and such reduction in shares of common Stock outstanding
shall take effect on any date selected by the Board of Directors
occurring within nine months afterauthorization by the shareholders
after the filing of a Certificate of Amendment of the Certificate of
Incorporation with the state of Delaware;
SECOND: On December 24, 1997, by shareholders action by written consent
in lieu of a meeting, pursuant to Section 229 of the General corporation Law of
the state of Delaware, a majority of the shares entitled to vote, voted to amend
the Certificate of Incorporation to increase the number of shares of common
Stock that the Corporation is authorized to issued from 19,995,000 shares, $.001
par value to 25,000,000 shares, $.001 par value; to increase the number of
shares of Preferred Stock that the Corporation is authorized to issued from
5,000 shares, $.001 par value to $1,000,000 shares, $.001 par value; and to
reduce the number of outstanding shares of common stock from 4,021,125 shares to
201,057 shares S.001 par value and such additional fraction of a share of Common
Stock as may be necessary to increase a fractional Share to a full share by
affecting a one for twenty reverse stock split. As a result of the foregoing,
Article Fourth of the Certificate of Incorporation of the Corporation is hereby
amended to read as follows:
<PAGE>
"Article Fourth: (a) The total number of shares of Common Stock which the
corporation shall have authority to issue is Twenty Five Million
(25,000,000). The par value of each of such shares is One Mil ($.001);
(b) The total number of shares of Preferred Stock which the corporation
shall have authority to issue is One Million (1,000,000). The par value
of each of such shares is One Mil ($.001); (c) The 4,021,125 shares of
Common Stock, S.001 par value, presently outstanding shall be reduced to
201,057 shares of common Stock, $.001 par value and such additional
fraction of a share 'of Common Stock as may be necessary to increase a
fractional share to a full share by effecting a one for twenty reverse
stock split and such reduction in shares of Common Stock outstanding
shall take affect on any date selected by the Board of Directors
occurring within nine months after authorization by the shareholders
after the filing of a Certificate of Amendment of the Certificate of
Incorporation with the state of Delaware."
THIRD: This amendment was approved by shareholders action by written
consent in lieu of a meeting, pursuant to Section 228 of the General Corporation
Law of the state of Delaware by a majority, of the shares entitled to vote. A
total of 2,340,715 shares of 4,021,125 shares took such action by written
consent on December 24,1997.
Dated: New York, New York
December 24, 1997
Royal Acceptance Corporation
By:__________________________________
Sean Campbell,
President/Secretary
<PAGE>
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
CHANGE OF REGISTERED AGENT OF "ROYAL ACCEPTANCE CORPORATION", FILED IN THIS
OFFICE ON THE TWENTY-THIRD DAY OF JULY, A.D. 1998, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
[Illegible Signature]
----------------------------------
Edward J Freel, Secretary of State
[Seal]
AUTHENTICATION: 8303118
2683944 8100
981286051 DATE: 07 -24-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 0712311998
981286051 - 2683944
CERTIFICATE OF CHANGE OF LOCATION OF
REGISTERED OFFICE AND REGISTERED AGENT
OF
ROYAL ACCEPTANCE CORPORATION
The undersigned corporation hereby certifies as follows:
FIRST: The name of the corporation is:
ROYAL ACCEPTANCE CORPORATION
SECOND: The address of the new registered office shall be 15 East North
Street, in the City of Dover, County of Kent, State of Delaware 19901.
THIRD: The name of the new registered agent is United Corporate Services, Inc.
FOURTH: The aforesaid changes were duly authorized by appropriate
resolutions adopted by the Board of Directors at a meeting thereof.
IN WITNESS WHEREOF, I have hereunto signed my name and affirm that the
statements made herein are true under the penalties of perjury this twenty-first
day of July 1998.
ROYAL ACCEPTANCE CORPORATION
BY: /s/ Gerald Ponsiglione
---------------------------
Gerald Ponsiglione
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
---------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
RENEWAL OF "ROYAL ACCEPTANCE CORPORATION", FILED IN THIS OFFICE ON THE
TWENTY-EIGHTH DAY OF JULY, A.D. 1999, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
----------------------------------
Edward J. Freel, Secretary of State
[Seal]
AUTHENTICATION: 0286218
2683944 8100
001100606 DATE: 02-29-00
<PAGE>
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
Royal Acceptance Corporation, a corporation organized under the laws of
Delaware, the charter of which was voided for non-payment of taxes, now desires
to procure a restoration, renewal and revival of its charter, and hereby
certifies as follows:
1. The name of the corporation is Royal Acceptance Corporation.
2. Its registered office in the State of Delaware is located at 1013
Centre Road, City of Wilmington, 19805, County of New Castle. The name of its
registered agent at that address is Corporation Service Company.
3. The date of filing of the original Certificate of Incorporation was
November 15, 1996.
4. The date when restoration, renewal, and revival of the charter of
this company is to commence is the 28th of February, A.D. 1999 same being prior
to the date of the expiration of the charter. This renewal and revival of the
charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business
authorized by its charter until the 1st day of March, A.D. 99, at which time its
charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival is filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section
312 of the General Corporation Law of the State of Delaware, as amended,
providing for the renewal, extension and restoration of charters, Gerald
Ronsiglione the last and acting President of Royal Acceptance Corporation, have
hereunto set his hand to this certificate this 27th day of July, 1999.
BY: /s/ Gerald Ronsiglione
-----------------------------
Gerald Ronsiglione
TITLE OF OFFICER: President
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 07/28/1999
991312171 - 2683944
<PAGE>
Exhibit 3.2 Certificate of Merger
<PAGE>
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CFRTIFITCATE OF MERGER, WHICH MERGES:
"ROYAL FINANCE CORPORATION, A NEW JERSEY CORPORATION,
WITH AND INTO "ROYAL.. ACCEPTANCE CORPORATION UNDER THE NAME
OF ROYAL ACCEPTANCE CORPORATION" . A CORPORATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED
AND FILED IN THIS OFFICE THE SECOND DAY OF JANUARY, A.D., 1997,
AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[Illegible Signature]
----------------------------------
Edward J Freel, Secretary of State
[Seal]
AUTHENTICATION: 8303118
2683944 8100M
971027380 DATE: 01 -28-97
<PAGE>
CERTIFICATE OF MERGER
OF
ROYAL FINANCE CORPORATION
(a New Jersey corporation)
INTO
ROYAL ACCEPTANCE CORPORATION
(a Delaware corporation)
Pursuant to Sections 103 and 252(c) of the General
Corporation Law of the State of Delaware
Royal Finance Corporation, a New Jersey corporation (the "Merging Corporation"),
and Royal Acceptance Corporation, a Delaware corporation (the "Surviving
Corporation"), pursuant to the provisions of Section 252(c) of the General
Corporation Law of the State of Delaware, each hereby certifies as follows:
FIRST: The names and states of incorporation of the constituent corporations
which plan to merge hereby (the "Constituent Corporations") are as follows:
Name State of Incorporation
---- ----------------------
Royal Finance Corporation New Jersey
Royal Acceptance Corporation Delaware
SECOND: An Agreement and Plan of Merger, dated as of November 20, 1996
between the Surviving Corporation and the Merging Corporation (die "Merger
Agreement"), has been approved, adopted, certified, executed and acknowledged by
each of the Constituent Corporations in accordance with the requirements of
Subsection 252(c) of the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation shall be Royal Acceptance
Corporation, which will continue its existence as the Surviving Corporation
under the name Royal Acceptance Corporation upon the effective date of said
merger pursuant to the provisions of the General Corporation Law of the State of
Delaware.
FOURTH: The Certificate of Incorporation of the Surviving Corporation, as now in
force and effect, shall continue to be the Certificate of Incorporation of the
Surviving Corporation until amended and changed pursuant to the provisions of
the General Corporation Law of the State of Delaware.
<PAGE>
FIFTH: The executed Merger Agreement is on file at the principal place of
business of the Surviving Corporation. The address of the principal place of
business of the Surviving Corporation is 621 Shrewsbury Avenue, Suite 10B,
Shrewsbury, New Jersey 07702.
SIXTH: A copy of the executed Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any of
the Constituent Corporations.
EIGHTH: The authorized capital stock of the Merging Corporation is 9,995,000
shares of common stock, par value $.001 per share and 5,000 shares of preferred
stock, par value $.001 per share.
IN WITNESS WHEREOF, Royal Acceptance Corporation and Royal Finance Corporation
have each caused this Certificate of Merger to be signed by its Executive Vice
President, as of this 30th day of December 1996.
ROYAL FINANCE CORPORATION
By: /s/ Sean F. Campbell
-------------------------------
Name: Sean F. Campbell
Title: Executive Vice President
ROYAL ACCEPTANCE CORPORATION
By: /s/ Sean F. Campbell
-------------------------------
Name: Sean F. Campbell
Title: Executive Vice President
<PAGE>
BYLAWS
OF
Royal Acceptance Corporation
(A Delaware corporation)
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the stockholders for
the election of directors and for the transaction of such other business as may
properly come before such meeting shall be held at such time and date as the
Board of Directors, by resolution, shall determine and as set forth in the
notice of meeting. The annual meeting shall be held at such place, within or
without the State of Delaware, as the Directors may, from time to time, fix. In
the event the Board of Directors fails to determine the time, date and place of
meeting, the annual meeting of stockholders shall be held at the registered
office of the corporation in the State of Delaware. The meeting shall be open to
all shareholders, whether or not said shareholder is entitled to vote on any
matters as provided herein.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose
other than the election of directors may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting.
SECTION 3. NOTICE OF MEETINGS. Written notice, stating the place, day
and hour of the meeting, shall be given by or under the direction of the
President or Secretary. The notice of an annual meeting shall state that the
meeting is called for the election of directors and for the transaction of other
business which may properly come before the meeting, and shall (if any other
action which could be taken at a special meeting is to be taken at such annual
meeting) state the purpose or purposes. The notice of a special meeting shall in
all instances state the purpose or purposes for which the meeting is called.
Except as otherwise provided by the General Corporation Law, a copy of the
notice of any meeting shall be given, personally or by mail not less than ten
(10) days nor more than thirty (30) days before the date fixed for such meeting,
unless the lapse of the prescribed period of time shall have been waived, and
directed to each stockholder at his record address or at such other address
which he may have furnished by request in writing to the Secretary of the
corporation. Notice shall be given to each stockholder entitled to vote at such
meeting, of record at the close of business on the day fixed by the Board of
Directors as a record date for the determination of the stockholders entitled to
vote at such meeting or, if no such date has been fixed, of record at the close
of business on the day next
<PAGE>
preceding the day on which notice is given. Notice shall be in writing and shall
be delivered to each stockholder in person or sent by United States mail,
postage prepaid. A waiver of such notice, in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to such notice. Except as otherwise required
by statute, notice of any adjourned meeting of the stockholders shall not be
required. Attendance of a stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders need be specified
in any written waiver of notice.
SECTION 4. QUORUM. Except as may otherwise be required by statute, the
presence at any meeting, in person or by proxy, of the holders or record of a
majority of the shares then issued and outstanding and entitled to vote shall be
necessary and sufficient to constitute a quorum for the transaction of business.
The stockholders present may adjourn the meeting despite the absence of a
quorum. The stockholders present at a duly organized meeting may continue to do
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 5. VOTING. Each stockholder entitled to vote in accordance with
the terms of the certificate of incorporation and in accordance with the
provisions of these bylaws shall be entitled to one (1) vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three (3) years from its date unless such proxy
provides for a longer period. Any action shall be authorized by a majority of
the votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these bylaws.
SECTION 6. STOCKHOLDER LIST. A complete list of the stockholders
entitled to vote at the ensuing election, arranged in alphabetical order, with
the address of each, and the number of shares held by each, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and it may be inspected by any stockholder who is present.
2
<PAGE>
SECTION 7. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Whenever the
vote of stockholders at a meeting thereof is required or permitted to be taken
in connection with any corporate action, by any provision or statute, these
bylaws, or the certificate of incorporation, the meeting and vote of
stockholders may be dispensed with if a majority of the stockholders of the
class of stock entitled to vote at the meeting, who would have been entitled to
vote at the action if such meeting were held, shall consent in writing to such
corporate action being taken. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the
corporation shall be managed by the Board of Directors, except as
otherwise provided by statute, the certificate of incorporation or
these bylaws.
SECTION 2. NUMBER AND QUALIFICATIONS. The Board of Directors shall
consist of a minimum of three (3) and a maximum of nine (9) members. This number
may be changed from time to time by resolution of the Board of Directors.
Directors need not be a resident of the State of Delaware, citizen of the United
States or a stockholder of the Corporation. Directors shall be natural persons
of the age of eighteen (18) years or older.
SECTION 3. ELECTION AND TERM OF OFFICE. Members of the initial Board of
Directors of the corporation shall hold office until the first annual meeting
stockholders. At the first annual meeting of stockholders, and at each annual
meeting thereafter, the stockholders shall elect directors to hold office until
the next succeeding annual meeting. Each director shall hold office until his
successor is duly elected and qualified, or until their earlier resignation or
removal. Election of directors need not be by ballot.
SECTION 4. COMPENSATION. The Board of Directors may provide by
resolution that the corporation shall allow a fixed sum and reimbursement of
expenses for attendance at meetings of the Board of Directors and for other
services rendered on behalf of the corporation. Any director of the corporation
may also serve the corporation in any other capacity, and receive compensation
therefor in any form, as the same may be determined by the Board of Directors in
accordance with these bylaws.
3
<PAGE>
SECTION 5. REMOVAL AND RESIGNATION. Except as may otherwise be provided
by statute, the stockholders may, at any special meeting called for the purpose,
by a vote of the holders of the majority of the shares then entitled to vote at
an election of directors, remove any or all directors from office, with or
without cause.
A director may resign at any time by giving written notice to the Board
of Directors, the president or the secretary of the corporation. The resignation
shall take effect immediately upon the receipt of notice, or an any later period
of time specified therein. The acceptance of such resignation shall not be
necessary to make it effective, unless the resignation requires acceptance for
it to be effective.
SECTION 6. VACANCIES. Any vacancy occurring in the office of a
director, whether by reason of an increase in the number of directorships or
otherwise, may be filled by a majority of the directors then in office, though
less than a quorum. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office, unless sooner displaced. When
one or more directors resign from the Board of Directors, effective at a future
date, a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each director so chosen shall hold office as herein provided in the filling of
other vacancies.
SECTION 7. POWERS. The Board of Directors shall exercise all
of the powers of the corporation except such as are by statute, the
certificate of incorporation or these bylaws conferred upon or
reserved to the stockholders.
SECTION 8. EXECUTIVE COMMITTEE. By resolution adopted by a majority of
the Board of Directors, the Board of Directors may designate one (1) or more
committees, including an executive committee, each consisting of one (1) or more
directors. The Board of Directors may designate one (1) of more directors as
alternate members of any such committee, who may replace any absent or
disqualified member at any meeting of such committee. Any such committee, to the
extent provided in the resolution and except as may otherwise be provided by
statute, shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers that may require the same;
but the designation of such committee and delegation thereto of authority shall
not operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him by law. If there be more than two (2)
members on such committee, a majority of any such committee may determine its
action and may fix the time and place of its meetings, unless provided otherwise
4
<PAGE>
by the Board of Directors; however, if there be only two (2) members, unanimity
of action shall be required. Committee action may be by way of a written consent
signed by all committee members. The Board of Directors shall have the power at
any time to fill vacancies on committees, to discharge or abolish any such
committee, and to change the size of any such committee. Except as otherwise
prescribed by the Board of Directors, each committee may adopt such rules and
regulations governing its proceedings, quorum, and manner of acting as it shall
deem proper and desirable.
Each such committee shall keep a written record of its acts and
proceedings and shall submit such record to the Board of Directors. Failure to
submit such record or failure of the Board of Directors to approve any action
indicated therein, will not however, invalidate such action to the extent it has
been carried out by the corporation prior to the time the record or such action
was, or should have been, submitted to the Board of Directors as herein
provided.
SECTION 9. MEETINGS. The newly elected directors may hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum be present, immediately after the annual meeting of the stockholders; or
the time and place of such meeting may be fixed by consent, to writing, of all
the directors.
Regular meetings of the directors may be held without notice at such
place and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the board of Directors may be called by the
president or by the secretary on the written request of any two (2) directors on
at least two (2) days' notice to each director and shall be held at such place
or places as may be determined by the directors, or as shall be stated in the
call of the meeting. Nothing shall prohibit a telephone meeting of the Board of
Directors provided a quorum is present.
SECTION 10. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the Board of Directors, or of such committee
as the case may be, and such written consent is filed with the minutes of
proceedings of the Board of Directors or such committee.
5
<PAGE>
ARTICLE III
OFFICERS
SECTION 1. NUMBER. The Corporation shall have a president, a secretary
and a treasurer, and such other officers and agents as may be deemed necessary.
More than one office may be held by the same person.
SECTION 2. SUBORDINATE OFFICERS. The Board of Directors, from time to
time, may appoint other officers and agents, including one or more assistant
secretaries and one or more assistant treasurer, each of whom shall hold office
for such period and each of whom shall have such authority and perform such
duties as are provided in these bylaws or as the Board of Directors from time to
time may determine. The Board of Directors may delegate to any officer the power
to appoint any such subordinate officers and agents and to prescribe their
respective authorities and duties.
SECTION 3. REMOVALS AND RESIGNATIONS. The Board of Directors may, by
vote of a majority of its entire number, remove from office any officer or agent
of the corporation that was appointed by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors. The resignation shall take effect immediately upon the
receipt of the notice, or any later period of time specified therein. The
acceptance of such resignation shall not be necessary to make it effective,
unless the resignation requires acceptance for it to be effective.
SECTION 4. VACANCIES. Whenever any vacancy shall occur in any office by
death, resignation, removal or otherwise, the same shall be filled at any
meeting of directors for the unexpired portion of the term in the manner
prescribed by these bylaws for the regular election or appointment to such
office.
SECTION 5. CHAIRMAN. The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and shall have
and perform such other duties as from time to time may be assigned to him by the
Board of Directors.
SECTION 6. SALARIES. The salaries of the officers of the corporation
shall be fixed from time to time by the Board of Directors, except that the
Board of Directors may delegate to any person the power to fix the salaries or
other compensation of any officers or agents appointed, in accordance with the
provisions of these bylaws or any statute. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation. Nothing contained in this bylaw shall be construed so as to
obligate the corporation to pay any officer a salary, the same being within the
sole discretion of the Board of Directors.
6
<PAGE>
SECTION 7. SURETY BOND. The Board of Directors may in its
discretion secure the fidelity of any or all of the officers of the
corporation by bond or otherwise.
ARTICLE IV
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate, signed in the name of the
corporation by the president and by the secretary of the corporation, certifying
the number of shares owned by that person in the corporation. Any or all of the
signatures on any such certificate may be a facsimile.
Certificates of stock shall be in such form as shall, in conformity to
law, be prescribed from time to time by the Board of Directors. Any restrictions
on the transfer or registration of transfer of any shares of stock of any class
or series shall be noted conspicuously on the certificate representing such
shares.
SECTION 2. TRANSFER OF STOCK. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if any,
transfers or registration of transfers of shares of stock of the corporation
shall be made only on the stock ledger of the corporation by the registered
holder thereof or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and, in case of shares represented by
certificates, on surrender of the certificate or certificates for such shares of
stock properly endorsed and the payment of all taxes due thereon.
SECTION 3. LOST, DESTROYED, AND STOLEN CERTIFICATES. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, and alleged to have been lost,
destroyed or stolen, and the Board of Directors may require the owner of such
lost, destroyed or stolen certificate, or his representative, to furnish an
affidavit as to such loss, to give the corporation a bond sufficient to
indemnify the corporation against any claim that may be made against it on
account of the alleged loss, theft, or destruction of any such certificate or
the issuance of any such new certificate, and satisfy such other reasonable
requirements, including evidence of such loss, destruction, or theft, as may be
imposed by the corporation.
SECTION 4. UNCERTIFICATED SHARES. Subject to any conditions imposed by
the General Corporation Law, the Board of Directors of
7
<PAGE>
the corporation may provide by resolution or resolutions that some or all of any
or all classes or series of the stock of the corporation shall be uncertificated
shares. Within a reasonable time after the issuance or transfer of any
uncertificated shares, the corporation shall send to the registered owner
thereof any written notice prescribed by the General Corporation Law.
SECTION 5. FRACTIONAL SHARE INTERESTS. The corporation may, but shall
not be required to, issue fractions of a share. If the corporation does not
issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered form
(either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder to receive a full
share upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share or an uncertificated fractional share shall,
but scrip or warrants shall not unless otherwise provided therein, entitle the
holder to exercise voting rights, to receive dividends thereon, and to
participate in any of the assets of the corporation in the event of liquidation.
The Board of Directors may cause scrip or warrants to be issued subject to the
conditions that they shall become void if not exchanged for certificates
representing the full shares or uncertificated full shares before a specified
date, or subject to the conditions that the shares for which scrip or warrants
are exchangeable may be sold by the corporation and the proceeds thereof
distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board of Directors may impose.
ARTICLE V
DIVIDENDS
SECTION 1. DIVIDENDS. Subject to the provisions of the certificate of
incorporation, the Board of Directors may, at any regular or special meeting and
out of funds legally available therefor, declare dividends upon the capital
stock of the corporation as and when it deems expedient. Before any dividend is
declared, there may be set apart out of any funds of the corporation available
for dividends such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends of for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 2. RELIANCE ON CORPORATE RECORDS. A director shall be fully
protected in relying in good faith upon the books of account as to the value and
amount of the assets, liabilities and
8
<PAGE>
net profits of the corporation, or any other facts pertinent to the existence
and amount of surplus or other funds from which dividends might properly be
declared and paid.
SECTION 3. MANNER OF PAYMENT. Dividends may be paid in cash, in
property, or in shares of the capital stock of the corporation.
ARTICLE VI
SEAL AND FISCAL YEAR
SECTION 1. SEAL. The corporate seal, subject to alteration by the Board
of Directors, shall be in the form of a circle, shall bear the name of the
corporation and shall indicate its formation under the laws of the state of
Delaware and the year of incorporation. Such seal may be used by causing it or a
facsimile thereof to be impressed, affixed or otherwise reproduced.
SECTION 2. FISCAL YEAR. The Board if Directors shall in its
sole discretion, designate a fiscal year for the corporation.
ARTICLE VII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 1. EXCULPATION. No director or officer of the corporation shall
be liable for the acts, defaults or neglects of any other director or officer,
or for any loss sustained by the corporation, unless the same has resulted from
his own willful misconduct, willful neglect, or negligence.
SECTION 2. INDEMNIFICATION. Each director and officer of the
corporation and each person who shall serve at the corporation's request as a
director or officer of another corporation in which the corporation owns shares
of capital stock or of which it is a creditor shall be indemnified by the
corporation against all reasonable costs, expenses and liabilities (including
reasonable attorney's fees) actually and necessarily incurred by or imposed upon
him in connection with, or resulting from, any claim, action, suit, proceeding,
investigation or inquiry of whatever nature in which he may be involved as a
party or otherwise by reason of his being or having been a director or officer
of the corporation or such director or officer of such other corporation, at the
time of the incurring or imposition of such costs, expenses or liabilities,
except in relation to matters as to which he shall be finally adjudged in such
action, suit, proceeding, investigation or inquiry to be liable for willful
misconduct, willful neglect, or gross negligence toward or on behalf of the
corporation in the performance of his duties as such director or officer of the
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<PAGE>
corporation or as such director or officer of such other corporation. As to
whether or not a director or officer was liable by reason of willful misconduct,
willful neglect, or gross negligence toward or on behalf of the corporation in
the performance of his duties as such director or officer of the corporation or
as such director or officer of such other corporation, in the absence of such
final adjudication of the existence of such liability, the Board of Directors
and each director and officer may conclusively rely upon an opinion of legal
counsel selected by or in the manner designated by the Board of Directors. The
foregoing right to indemnification shall be in addition to and not in limitation
of all other rights to which such person may be entitled as a matter of law and
shall inure to the benefit of the legal representative of such person.
SECTION 3. INSURANCE. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation or who is or was a director, officer, employee or agent
of the corporation, or who is or was serving, at the request of the corporation,
as director, officer, employee or agent of any partnership, joint venture,
trust, association or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such, whether or not he is indemnified against such liability by this Article
VII.
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<PAGE>
INDEX
PAGE
ARTICLE I Meetings of Stockholders . . . . . . . . . . . 1
ARTICLE II Board of Directors . . . . . . . . . . . . . . 3
ARTICLE III Officers . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV Capital Stock . . . . . . . . . . . . . . . . . 7
ARTICLE V Dividends . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI Seal and Fiscal Year . . . . . . . . . . . . . 9
ARTICLE VII Indemnification of Officers and directors . . 9
<PAGE>
Exhibit 4.1
<PAGE>
NUMBER THESE SHARES REPRESENT A 1X20 REV SPLIT EFF 12/24/97 SHARES
RA
ROYAL ACCEPTANCE CORPORATION
INCORPORATED
UNDER THE LAWS OF
THE STATE OF NEW
JERSEY SEE REVERSE FOR
CERTAIN DEFINITIONS
- --------------------------------------------------------------------------------
COMMON STOCK
CUSIP 78004R 201
THIS CERTIFIED THAT:
IS THE OWNER OF
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.001 PAR VALUE
EACH OF
ROYAL ACCEPTANCE CORPORATION
transferable on the books of the Corporation in person or by attorney
upon surrender of this certificate duly endorsed or assigned. This
certificate and the shares represented hereby are subject to the laws of
the State of New Jersey, and to the Certificate of Incorporation and
Bylaws of the Corporation, as now or hereafter amended. This certificate
is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
DATED:
<PAGE>
COUNTERSIGNED:
OLDE MONMOUTH STOCK TRANSFER CO., INC.
MEMORIAL PARKWAY, SUITE 101, ATLANTIC HIGHLANDS, NJ 07716
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ........Custodian.......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of
survivorship and not as tenants Act.................
in common (State)
</TABLE>
Addition abbreviations may also be used though not in the above list.
For Value Received, __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING SIP CODE, OR ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
of the stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
- --------------------------------------------------------------------------------
Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated_________________________
-------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS AGREEMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
<PAGE>
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OR A NATIONAL OR REGIONAL OR
OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE
MEDALLION PROGRAM.
<PAGE>
EXCHANGE AGREEMENT
Between
ROYAL ACCEPTANCE CORPORATION,
RIT AUTO LEASING GROUP, INC.,
and
ALLIANCE HOLDINGS LIMITED PARTNERSHIP
Dated July 13, 1999
<PAGE>
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement"),
is entered into as of this 12th day of July, 1999, by and among Royal Acceptance
Corporation , a Delaware corporation ("Royal"), RIT Auto Leasing Group, Inc., a
New York corporation ("RIT") and Alliance Holdings Limited Partnership, the
beneficial owner of 100 shares of common stock of RIT common stock, which
constitutes 100% of the outstanding capital stock of RIT ("RIT Shareholder").
Premises
This Agreement provides for the acquisition by Royal of all of the
issued and outstanding shares of RIT solely in exchange for voting shares of
Royal, on the terms and conditions hereinafter provided, all for the purpose of
effecting a so-called "tax-free" reorganization pursuant to Sections
368(a)(1)(B) of the Internal Revenue Code of 1954, as amended.
Agreement
NOW THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF ROYAL
As an inducement to, and to obtain the reliance of the RIT Shareholder,
Royal represents and warrants as follows:
Section 1.01 Organization. Royal is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Delaware.
Royal has the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in Schedule 1.01 are complete
and correct copies of the certificate of incorporation, as amended, and bylaws
of Royal as in effect on the date hereof. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not, violate any provision of
the certificate of incorporation or bylaws. Royal has taken all action required
by law, its articles of incorporation, its bylaws, or otherwise to authorize the
execution and delivery of this Agreement. Royal has full power, authority, and
legal right and has taken all action required by law, its certificate of
incorporation, bylaws, and otherwise to consummate the transactions herein
contemplated.
Section 1.02 Capitalization. The authorized capitalization of Royal
consists of 25,000,000 shares of common stock, $.001 par value per share, of
which approximately 1,867,409 shares are currently issued and outstanding and
1,000,000 shares of preferred stock $.001 par value per share, none of which
have been issued. A shareholder list is set forth in Schedule 1.02. All issued
and outstanding shares are legally issued, fully paid, and non-assessable and
not issued in violation of the pre-emptive or other rights of any
<PAGE>
person. There are no options, warrants, rights or convertible securities
outstanding to purchase any capital stock of Royal.
Section 1.03 Subsidiaries and Predecessor Corporations. Royal does not
have any subsidiaries and does not own, beneficially or of record, any shares of
any other corporation.
Section 1.04 Financial Statements.
(a) Included in Schedule 1.04(a) are the unaudited financial
statements of Royal for each of its last two fiscal years ended March
31, 1999.
(b) All such financial statements have been prepared in
accordance with generally accepted accounting principles. The unaudited
balance sheet presents fairly as of its date the financial condition of
Royal. Except as set forth on Schedule 1.04(b), Royal did not have, as
of the date of such balance sheet, except as and to the extent
reflected or reserved against therein, any liabilities or obligations
(absolute or contingent) which should be reflected in a balance sheet
or the notes thereto, prepared in accordance with generally accepted
accounting principles, and all assets reflected therein are properly
reported and present fairly the value of the assets of Royal in
accordance with generally accepted accounting principles. The
statements of income, stockholders' equity, and changes in financial
condition reflect fairly the information required to be set forth
therein by generally accepted accounting principles.
(c) Royal has filed all state, federal, or local income tax
returns required to be filed by it from inception to the date hereof.
Except as set forth on Schedule 104(c), Royal does not owe any federal,
state, county, local, or other taxes (including any deficiencies,
interest, or penalties) through the date hereof, for which Royal may be
liable in its own right or as a transferee of the assets of, or as a
successor to, any other corporation or entity. Furthermore, except as
accruing in the normal course of business, Royal does not owe any
accrued and unpaid taxes to date of this Agreement.
(d) The books and records, financial and otherwise, of Royal
are in all material respects complete and correct and have been
maintained in accordance with good business and accounting practices.
(e) Royal has good and marketable title to its assets and,
except as set forth in the financial statements of Royal or the notes
thereto, has no material contingent liabilities, direct or indirect,
matured or unmatured.
Section 1.05 Information. The information concerning Royal set forth in
this Agreement and in the Schedules attached hereto is complete and accurate in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading.
Section 1.06 Absence of Certain Changes or Events. Except as set forth
in this Agreement, since March 31, 1999:
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<PAGE>
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or financial condition of
Royal; or (ii) any damage, destruction, or loss to Royal (whether or
not covered by insurance) materially and adversely affecting the
business, operations, properties, assets, or financial condition of
Royal;
(b) Royal has not (i) amended its certificate of incorporation
or bylaws; (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind
whatsoever to stockholders or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock; (iii) waived any rights
of value which in the aggregate are extraordinary or material
considering the business of Royal; (iv) made any material change in its
method of management, operation, or accounting; (v) entered into any
other material transaction; (vi) made any accrual or arrangement for
payment of bonuses or special compensation of any kind or any severance
or termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by it
to any of its officers or directors or any of its employees whose
monthly compensation exceeds $1,000; or (viii) made any increase in any
profit sharing, bonus, deferred compensation, insurance, pension,
retirement, or other employee benefit plan, payment, or arrangement
made to, for, or with its officers, directors, or employees;
(c) Royal has not (i) borrowed or agreed to borrow any funds
or incurred, or become subject to, any material obligation or liability
(absolute or contingent); (ii) paid any material obligation or
liability (absolute or contingent) other than current liabilities
reflected in or shown on the most recent Royal balance sheet; (iii)
sold or transferred, or agreed to sell or transfer, any of its assets,
properties, or rights, or canceled, or agreed to cancel, any debts or
claims; (iv) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of
Royal; or (v) except as reflected on Schedule 1.02, issued, delivered,
or agreed to issue or deliver any stock, bonds or other corporate
securities including debentures (whether authorized and unissued or
held as treasury stock).
Section 1.07 Title and Related Matters. Royal has good and marketable
title to all of its properties, inventory, interests in properties, and assets,
real and personal, which are reflected in the most recent balance sheet or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the ordinary course of
business), free and clear of all liens, pledges, charges, or encumbrances except
(a) statutory liens or claims not yet delinquent; and (b) such imperfections of
title and easements as do not and will not materially detract from or interfere
with the present or proposed use of the properties subject thereto or affected
thereby or otherwise materially impair present business operations on such
properties. Royal owns, free and clear of any liens, claims, encumbrances,
royalty interests, or other restrictions or limitations of any nature
whatsoever, any and all products it is currently manufacturing, including the
underlying technology and data, and all procedures, techniques, marketing plans,
business plans, methods of management, or other information utilized in
connection with Royal's business. No third party has any right to, and Royal has
not received any notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade secrets, know-how,
proprietary techniques, trademarks, service marks, tradenames, or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling, or finding, would have a materially adverse effect on the business,
operations, financial condition, income, or business prospects of Royal or any
material portion of its properties, assets, or rights.
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Section 1.08 Litigation and Proceedings. There are no actions, suits,
proceedings, or investigations pending or, to the knowledge of Royal, after
reasonable investigation, threatened by or against Royal or affecting Royal or
its properties, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind. Royal does not have any knowledge of any default on its part with respect
to any judgment, order, writ, injunction, decree, award, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality or of any
circumstances which, after reasonable investigation, would result in the
discovery of such a default.
Section 1.9 Contracts.
(a) There are no material contracts, agreements, franchises,
license agreements, or other commitments to which Royal is a party or
by which it or any of its assets, products, technology, or properties
are bound;
(b) All contracts, agreements, franchises, license agreements,
and other commitments to which Royal is a party or by which its
properties are bound and which are material to the operations of Royal
taken as a whole are valid and enforceable by Royal in all respects,
except as limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally;
(c) Royal is not a party to or bound by, and the properties of
Royal are not subject to, any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any
judgment, order, writ, injunction, decree, or award which materially
and adversely affects, or in the future may (as far as Royal can now
foresee) materially and adversely affect, the business, operations,
properties, assets, or financial condition of Royal; and
(d) Royal is not a party to any oral or written (i) contract
for the employment of any officer or employee; (ii) profit sharing,
bonus, deferred compensation, stock option, severance pay, pension
benefit or retirement plan, agreement, or arrangement covered by Title
IV of the Employee Retirement Income Security Act, as amended; (iii)
agreement, contract, or indenture relating to the borrowing of money;
(iv) guaranty of any obligation, for the borrowing of money or
otherwise; (vi) collective bargaining agreement; (vii) agreement with
any present or former officer or director of Royal or (viii) contract,
agreement, or other commitment, with the exception of professional fees
to accountants and attorneys related to this Agreement and, involving
payments by it of more than $1,000 in the aggregate.
Section 1.10 Material Contract Defaults. Royal is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets, or financial condition of Royal and there is no event of default in any
material respect under any such contract, agreement, lease, or other commitment
in respect of which Royal has not taken adequate steps to prevent such a default
from occurring.
Section 1.11 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust,
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or other material contract, agreement, or instrument to which Royal is a party
or to which any of its properties or operations are subject.
Section 1.12 Governmental Authorizations. Royal has all licenses,
franchises, permits, and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by Royal of this Agreement and the consummation by Royal
of the transactions contemplated hereby.
Section 1.13 Compliance With Laws and Regulations. Royal has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or financial condition of Royal or except to the extent that
noncompliance would not result in the incurrence of any material liability for
Royal.
Section 1.14 Insurance. All the insurable properties of Royal, if any,
are insured in their full replacement value against all risks customarily
insured against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Such policy or policies, if any, containing
substantially equivalent coverage will be outstanding on the date of
consummation of the transactions contemplated by this Agreement.
Section 1.15 Approval of Agreement. The board of directors of Royal has
authorized the execution and delivery of this Agreement and has approved the
transactions contemplated hereby, and approved the submission of this Agreement
and the transactions contemplated hereby to the shareholders of Royal for their
approval with the recommendation that the reorganization be accepted if it has
been deemed necessary.
Section 1.16 Labor Relations. Royal has not had a work stoppage
resulting from labor problems. To the knowledge of Royal, no union or other
collective bargaining organization is organizing or attempting to organize any
employee of Royal.
Section 1.17 Royal Schedules. Royal has delivered to RIT a copy of the
board of directors' and shareholders' minutes (if applicable) of Royal approving
this transaction.
Section 1.18 Additional Capital. Within ninety days from the Closing
Date (as that term is defined in Section 4.03 hereof) contemplated by this
Agreement, the present principal shareholders of Royal will arrange for a
minimum of $600,000 of additional equity capital to be invested in Royal (the
"Additional Equity Investment"). In the event the Additional Equity Investment
is not made, Royal shall issue to the RIT Shareholder to 1,500,000 additional
shares of Royal common stock, on a pro rata basis, based upon the actual amount
of the Additional Equity Investment. For example, if a $200,000 Additional
Equity Investment is made, the RIT Shareholder will receive an additional
1,000,000 shares of Royal common stock.
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Section 1.19 Absence of Liabilities. Except as set forth in Schedule
1.19 and liabilities for professional fees relating to this transaction and the
auditing of Royal's financial statements, Royal shall have no other liabilities.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE RIT SHAREHOLDER
As an inducement to, and to obtain reliance of Royal, the RIT
Shareholder represents and warrants as follows:
Section 2.01 Ownership of RIT Shares. It is the legal and beneficial
owner of the number of RIT shares set forth opposite its name at the foot of
this agreement, free and clear of any claims, charges, equities, liens, security
interests, and encumbrances whatsoever, and it has full right, power, and
authority to transfer, assign, convey, and deliver its RIT shares; and delivery
of such shares at the closing will convey to Royal good and marketable title to
such shares free and clear of any claims, charges, equities, liens, security
interests, and encumbrances whatsoever.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF RIT AUTO LEASING GROUP, INC.
As an inducement to, and to obtain the reliance of Royal, RIT
represents and warrants as follows:
Section 3.01 Organization. RIT is a corporation duly organized, validly
existing, and in good standing under the laws of the state of New York. RIT has
the corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification. Included in Schedule 3.01 are complete and correct
copies of the articles of incorporation, as amended, and bylaws of RIT as in
effect on the date hereof. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated by this Agreement in
accordance with the terms hereof will not, violate any provision of these
articles of incorporation or bylaws. RIT has taken all action required by laws,
its articles of incorporation, its bylaws, or otherwise to authorize the
execution and delivery of this Agreement. RIT has full power, authority, and
legal right and has taken all action required by law, its certificate of
incorporation, bylaws, and otherwise to consummate the transactions herein
contemplated.
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Section 3.02 Capitalization. The authorized capitalization of RIT
consists of 200 shares of common stock, no par value per share, of which 100
shares are currently issued and outstanding. There are no outstanding options,
warrants, rights or convertible securities to purchase any capital stock of RIT.
All issued and outstanding shares are legally issued, fully paid, and
non-assessable and not issued in violation of the pre-emptive or other rights of
any person.
Section 3.03 Subsidiaries and Predecessor Corporations. RIT does not
have any subsidiaries and does not own, beneficially or of record, any shares of
any other corporation.
Section 3.04 Financial Statements.
(a) Included in Schedule 3.04 (a) are unaudited financial
statements for each of the last two fiscal years ended December 31,
1998.
(b) All such financial statements have been prepared in
accordance with generally accepted accounting principles. The unaudited
balance sheet presents fairly as of its date, the financial condition
of RIT. RIT did not have, as of the date of such balance sheet, except
as and to the extent reflected or reserved against therein, any
liabilities or obligations (absolute or contingent) which should be
reflected in a balance sheet or the notes thereto, prepared in
accordance with generally accepted accounting principles, and all
assets reflected therein are properly reported and present fairly the
value of the assets of RIT in accordance with generally accepted
accounting principles. The statements of income, stockholders' equity,
and changes in financial condition reflect fairly the information
required to be set forth therein by generally accepted accounting
principles.
(c) RIT has filed all state, federal, and local income tax
returns required to be filed by it from inception to the date hereof.
Included in Schedule 3.04(c) are true and correct copies of the federal
income tax returns of RIT filed since 1996. None of such federal income
tax returns have been examined by the Internal Revenue Service. Each of
such income tax returns reflects the taxes due for the period covered
thereby, except for amounts which, in the aggregate, are immaterial.
(d) RIT does not owe any unpaid federal, state, county, local,
or other taxes (including any deficiencies, interest, or penalties)
through the date hereof, for which RIT may be liable in its own right
or as a transferee of the assets of, or as a successor to, any other
corporation or entity. Furthermore, except as accruing in the normal
course of business, RIT does not owe any accrued and unpaid taxes to
date of this Agreement.
(e) The books and records, financial and otherwise, of RIT are
in all material respects complete and correct and have been maintained
in accordance with good business and accounting practices.
(f) RIT has good and marketable title to its assets and,
except as pledged in the ordinary course of business or as set forth in
the financial statements of RIT or the notes thereto, has no material
contingent liabilities, direct or indirect, matured or unmatured.
Section 3.05 Information. The information concerning RIT set forth in
this Agreement and in Schedules attached hereto is complete and accurate in all
material respects and does not contain any untrue
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statement of a material fact or omit to state a material fact required to make
the statements made, in light of the circumstances under which they were made,
not misleading.
Section 3.06 Absence of Certain Changes or Events. Since December
31, 1998:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or financial condition of RIT
or (ii) any damage, destruction, or loss to RIT (whether or not covered
by insurance) materially and adversely affecting the business,
operations, properties, assets, or financial condition of RIT;
(b) RIT has not (i) amended its articles of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind
whatsoever to stockholders or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock; (iii) waived any rights
of value which in the aggregate are extraordinary or material
considering the business of RIT; (iv) made any material change in its
method of management, operation, or accounting; (v) entered into any
other material transaction; (vi) made any accrual or arrangement for
payment of bonuses or special compensation of any kind or any severance
or termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by it
to any of its officers or directors or any of its employees whose
monthly compensation exceeds $7,500; or (viii) made any increase in any
profit sharing, bonus, deferred compensation, insurance, pension,
retirement, or other employee benefit plan, payment, or arrangement
made to, for, or with its officers, directors, or employees;
(c) RIT has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability
(absolute or contingent) except liabilities incurred in the ordinary
course of business; (ii) paid any material obligation or liability
(absolute or contingent) other than current liabilities reflected in or
shown on the most recent RIT balance sheet, and current liabilities
incurred since that date in the ordinary course of business; (iii) sold
or transferred, or agreed to sell or transfer, any of its assets,
properties, or rights (except assets, properties, or rights not used or
useful in its business which, in the aggregate have a value of less
than $10,000), or canceled, or agreed to cancel, any debts or claims
(except debts or claims which in the aggregate are of a value of less
than $10,000); (iv) made or permitted any amendment or termination of
any contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of RIT;
or (v) issued, delivered, or agreed to issue or deliver any stock,
bonds or other corporate securities including debentures (whether
authorized and unissued or held as treasury stock); and
(d) to the best knowledge of RIT, RIT has not become subject
to any law or regulation which materially and adversely affects, or in
the future may adversely affect, the business, operations, properties,
assets, or financial condition of RIT.
Section 3.07 Title and Related Matters. RIT has good and marketable
title to all of its properties, inventory, interests in properties, and assets,
real and personal, which are reflected in the most recent balance sheet or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the ordinary course of
business), free and clear of all liens, pledges, charges, or encumbrances except
(a) statutory liens or claims not yet delinquent; (b) such imperfections of
title and easements as do not and will not materially detract from or interfere
with the
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present or proposed use of the properties subject thereto or affected thereby or
otherwise materially impair present business operations on such properties; and
(c) except as pledged in the ordinary course of business. Except as pledged in
the ordinary course of business, RIT owns, free and clear of any liens, claims,
encumbrances, royalty interests, or other restrictions or limitations of any
nature whatsoever, any and all procedures, techniques, marketing plans, business
plans, methods of management, or other information utilized in connection with
RIT's business. No third party has any right to, and RIT has not received any
notice of infringement of or conflict with asserted rights of others with
respect to any product, technology, data, trade secrets, know-how, proprietary
techniques, trademarks, service marks, tradenames, or copyrights which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling, or
finding, would have a materially adverse effect on the business, operations,
financial condition, income, or business prospects of RIT or any material
portion of its properties, assets, or rights.
Section 3.08 Litigation and Proceedings. Except as set forth in
Schedule 3.08, there are no actions, suits, proceedings, or investigations
pending or, to the knowledge of RIT after reasonable investigation, threatened
by or against RIT or affecting RIT or its properties, at law or in equity,
before any court or other governmental agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind. RIT does not have any knowledge
of any default on its part with respect to any judgment, order, writ,
injunction, decree, award, rule, or regulation of any court, arbitrator, or
governmental agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a default.
Section 3.09 Contracts.
(a) There are no material contracts, agreements, franchises,
license agreements, or other commitments to which RIT is a party or by
which it or any of its assets, products, technology, or properties are
bound outside of the ordinary course of business;
(b) All contracts, agreements, franchises, license agreements,
and other commitments to which RIT is a party or by which its
properties are bound and which are material to the operations of RIT,
taken as a whole, are valid and enforceable by RIT in all respects,
except as limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally;
(c) RIT is not a party to or bound by, and the properties of
RIT are not subject to, any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any
judgment, order, writ, injunction, decree, or award which materially
and adversely affects, or in the future may (as far as RIT can now
foresee) materially and adversely affect, the business, operations,
properties, assets, or financial condition of RIT; and
(d) Except as incurred in the ordinary course of business or
reflected in the most recent RIT balance sheet, RIT is not a party to
any oral or written (i) contract for the employment of any officer or
employee which is not terminable on 30 days or less notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance pay,
pension benefit or retirement plan, agreement, or arrangement covered
by Title IV of the Employee Retirement Income Security Act, as amended;
(iii) agreement, contract, or indenture relating to the borrowing of
money; (iv) guaranty of any obligation, other than one on which RIT is
a primary obligor, for the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties of obligations,
which, in the aggregate do not exceed more than one year or providing
for payments
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in excess of $10,000 in the aggregate; (vi) collective bargaining
agreement; (vii) agreement with any present or former officer or
director of RIT or (viii) contract, agreement, or other commitment
involving payments by it of more than $10,000 in the aggregate.
Section 3.10 Material Contract Defaults. RIT is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets, or financial condition of RIT and there is no event of default in any
material respect under any such contract, agreement, lease, or other commitment
in respect of which RIT has not taken adequate steps to prevent such a default
from occurring.
Section 3.11 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which RIT is a
party or to which any of its properties or operations are subject.
Section 3.12 Governmental Authorizations. RIT has all licenses,
franchises, permits, and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by RIT of this Agreement and the consummation by RIT of
the transactions contemplated hereby.
Section 3.13 Compliance With Laws and Regulations. RIT has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or financial condition of RIT or except to the extent that noncompliance
would not result in the incurrence of any material liability for RIT.
Section 3.14 Insurance. All the insurable properties of RIT are
insured for their full replacement value against all risks customarily insured
against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Such policy or policies containing substantially
equivalent coverage will be outstanding on the date of consummation of the
transactions contemplated by this Agreement.
Section 3.15 Approval of Agreement. The board of directors of RIT has
authorized the execution and delivery of this Agreement and has approved the
transactions contemplated hereby.
Section 3.16 Labor Relations. RIT has not had a work stoppage resulting
from labor problems. To the knowledge of RIT, no union or other collective
bargaining organization is organizing or attempting to organize any employee of
RIT.
Section 3.17 RIT Schedules. RIT has delivered to Royal a copy of the
board of directors' minutes of RIT approving this transaction.
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ARTICLE IV
PLAN OF EXCHANGE
Section 4.01 The Exchange. On the terms and subject to the conditions
set forth in this Agreement, on the Closing Date (as defined in Section 4.04),
the RIT Shareholder hereby agrees to assign, transfer, and deliver to Royal,
free and clear of all liens, pledges, encumbrances, charges, restrictions, or
known claims of any kind, nature, or description, the number of shares of common
stock of RIT set forth on Schedule 2.01 to this Agreement, constituting all of
the issued and outstanding shares of common stock of RIT and Royal agrees to
acquire such shares on such date by issuing and delivering in exchange therefor
shares of Royal restricted common stock, par value $0.001, in the amount of
56,500 shares of Royal for each outstanding share of RIT, or an aggregate amount
of 5,650,000 shares of Royal common stock, or approximately 72% of the
outstanding shares of Royal common stock. At the Closing, the RIT Shareholder
shall, upon surrender of its certificate or certificates representing such RIT
shares to the registrar and transfer agent, be entitled to receive a certificate
or certificates evidencing shares of the exchanged shares of Royal common stock
as provided herein. Upon the consummation of the transaction contemplated
herein, all shares of capital stock of RIT shall be held by Royal.
Section 4.02 Appointment of New Directors. In connection with the
Closing of the transactions contemplated by this Agreement, Gerald Ponsiglione
shall resign as a Director of Royal, seriatim, and shall appoint Richard
Toporek, Mark Caulo and Robert Ricciuti as directors to fill the vacancies
created thereby, to serve until the next annual stockholders' meeting of Royal
and their successors shall have been elected and qualified.
Section 4.03 Closing. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date"), but no later than July 15, 1999, provided
that the covenants and conditions set forth in Articles V, VI and VII have been
satisfied. Such Closing shall take place at a mutually agreeable time and place.
Section 4.04 Closing Events. At the Closing, each of the respective
parties hereto shall execute, acknowledge, and deliver (or shall cause to be
executed, acknowledged, and delivered) any and all certificates, opinions,
financial statements, schedules, agreements, resolutions, rulings, or other
instruments required by this Agreement to be so delivered at or prior to the
Closing, together with such other items as may be reasonably requested by the
parties hereto and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby.
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ARTICLE V
SPECIAL COVENANTS
Section 5.01 Board of Directors Action by Royal. Prior to the Closing,
the Board of Directors of Royal shall:
(a) effect the authorization and approval of this Agreement
and the transactions contemplated thereby;
(b) effect the action described in Section 4.02; and
(c) take such other actions as the directors may determine
are appropriate.
Section 5.02 Access to Properties and Records. Royal and RIT will each
afford to the officers and authorized representatives of the other full access
to the properties, books, and records of each other as the case may be, in order
that each may have full opportunity to make such reasonable investigation as it
shall desire to make of the affairs of the other, and each will furnish the
other with such additional financial and operating data and other information as
to the business and properties of each other, as the case may be, as the other
shall from time to time reasonably request.
Section 5.03 Delivery of Books and Records. At the Closing, each
company shall deliver each other the originals of the corporate minute books,
books of account, contracts, records, and all other books or documents now in
each company's possession or its representatives.
Section 5.04 Special Covenants and Representations Regarding the
Exchanged Stock. The consummation of this Agreement and the transactions herein
contemplated, including the issuance of the exchanged shares of Royal common
stock to the RIT Shareholder as contemplated hereby, constitutes the offer and
sale of securities under the Securities Act and applicable state statutes. Such
transaction shall be consummated in reliance on exemptions from the registration
and prospectus delivery requirements of such statutes which depend, inter alia,
upon the circumstances under which the RIT Shareholder acquired such securities.
The RIT Shareholder represents and warrants that the Royal shares to be
acquired by it pursuant to the terms of Section 4.1 hereof is being acquired for
its own account, with no intention of assigning any participation or interest
therein, and without a view to the distribution of any portion thereof, except
in accordance with the Securities Act of 1933, as amended (the "Act"). The RIT
Shareholder will not sell, assign, transfer or encumber any of such shares
unless (i) a registration statement under the Act with respect thereto is in
effect and the prospectus included therein meets the requirements of the Act, or
(ii) a no-action letter is obtained from the staff of the Securities and
Exchange Commission (the "Commission") in respect of such proposed sale,
assignment, transfer or encumbering, or (iii) Royal has received a written
opinion of counsel reasonably satisfactory to Royal that, after an investigation
of the relevant facts, such counsel is of the opinion that such proposed sale,
assignment, transfer or encumbering does not require registration under the Act.
The RIT Shareholder understands that the Royal Stock is not being
registered under the Act and must be held indefinitely unless it is subsequently
registered thereunder or an exemption from such registration is available.
Furthermore, the RIT Shareholder understands that the Royal Stock is not being
registered under the Act in part on the ground that the issuance thereof is
exempt under Section 4(2) of
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the 1933 Act as a transaction by an issuer not involving any public offering;
that Royal's reliance on such exemption is predicated in part on the foregoing
representation and warranty of the RIT Shareholder and that in the view of the
Commission, the statutory basis for the exemption claimed would not be present
if, notwithstanding such representation and warranty, the RIT Shareholder
contemplates acquiring any of the shares of Royal common stock for sale upon the
occurrence or non-occurrence of some predetermined event.
Section 5.05 Restrictive Legend. The RIT Shareholder understands that
Royal will have an appropriate stop order placed on its stock records indicating
the existence of the terms of this Agreement, and that the certificates
representing the shares of Royal common stock shall bear a legend in
substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE SOLD, TRANSFERRED OR ENCUMBERED ONLY PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, PURSUANT TO A NO-ACTION LETTER FROM THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION OR PURSUANT TO
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS UNNECESSARY.
Section 5.06 Third Party Consents and Certificates. Royal and RIT agree
to cooperate with each other in order to obtain any required third party
consents to this Agreement and the transactions herein and therein contemplated.
Section 5.07 Actions Prior to Closing.
(a) From and after the date of this Agreement until the
Closing Date and except as set forth in the Agreement or Schedules
attached hereto or as permitted or contemplated by this Agreement,
Royal and RIT respectively, will each:
(i) carry on its business in substantially the same
manner as it has heretofore;
(ii) maintain and keep its properties in states of good
repair and condition as at present, except for depreciation
due to ordinary wear and tear and damage due to casualty;
(iii) maintain in full force and effect insurance
comparable in amount and in scope of coverage to that now
maintained by it;
(iv) perform in all material respects all of its
obligation under material contracts, leases, and instruments
relating to or affecting its assets, properties, and business;
(v) use its best efforts to maintain and preserve its
business organization intact, to retain its key employees, and
to maintain its relationship with its material suppliers and
customers; and
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(vi) fully comply with and perform in all material
respects all obligations and duties imposed on it by all
federal and state laws and all rules, regulations, and orders
imposed by federal or state governmental authorities.
(b) From and after the date of this Agreement until the
Closing Date, neither RIT nor Royal will:
(i) make any change in their articles of incorporation
(except as provided for in Section 5.01) or bylaws;
(ii) take any action described in section 1.06 in the case
of Royal, or in section 3.06, in the case of RIT (all except
as permitted therein or as disclosed in the applicable party's
schedules); or
(iii) enter into or amend any contract, agreement, or
other instrument of any of the types described in such party's
schedules, except that a party may enter into or amend any
contract, agreement, or other instrument in the ordinary
course of business involving the sale of goods or services.
Section 5.08 Indemnification.
(a) Royal hereby agrees to indemnify RIT, the RIT
Shareholders, and each of the officers, agents and directors of RIT as
of the date of execution of this Agreement against any loss, liability,
claim, damage, or expense (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever), to which it or they may become subject arising out of or
based on any inaccuracy appearing in or misrepresentation made under
Article I of this Agreement. The indemnification, as well as the rights
and remedies thereto, provided for in this paragraph shall survive the
Closing and consummation of the transactions contemplated hereby and
termination of this Agreement.
(b) RIT hereby agrees to indemnify Royal and each of the
officers, agents and directors of Royal as of the date of execution of
this Agreement against any loss, liability, claim, damage, or expense
(including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever), to
which it or they may become subject arising out of or based on any
inaccuracy appearing in or misrepresentation made under Article III of
this Agreement. The indemnification, as well as the rights and remedies
thereto, provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of
this Agreement.
Section 5.09 Reverse Split. For a two (2) year period, commencing with
the closing of the transaction contemplated by this Agreement, the RIT
Shareholder shall not vote its shares of Royal in favor of a reverse stock split
unless a reverse stock split is necessary in connection with raising the price
of Royal's common stock in connection with a listing of its shares on NASDAQ or
the American Stock Exchange or as a condition imposed by an underwriter in
connection with an underwritten offering of Royal's securities. Anything to the
contrary herein notwithstanding, a majority of the shares of common
14
<PAGE>
stock outstanding, not including the shares of the RIT shareholder, may waive
this provision by written consent.
Section 5.10 Exchange Act Registration Statement. The present officers,
directors and principal shareholders of Royal agree to cooperate with the filing
of a Form 10SB with the Securities and Exchange Commission to enable Royal to
become a fully reporting company.
Section 5.11 Issuance of Additional Shares. For a one (1) year period,
commencing with the Closing, if any additional shares of Common Stock of Royal
are issued to any of the RIT Shareholder, other than in "arms-length"
transactions, and except as may be set forth in Section 1.18 hereof, additional
shares of Common Stock of Royal will also be issued to the present shareholders
of Royal, pro rata to their current ownership. Anything to the contrary in this
Section 5.10 notwithstanding, after the Closing, Royal shall be able to issue
shares of common stock or employee stock options to key employees of Royal but
no such shares and/or options shall be issuable to Richard Toporek during the
first year after the Closing.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF ROYAL
The obligations of Royal under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 6.01 Accuracy of Representations. The representations and
warranties made by RIT in this Agreement were true when made and shall be true
at the Closing Date with the same force and effect as if such representations
and warranties were made at and as of the Closing Date (except for changes
therein permitted by this Agreement), and RIT shall have performed or complied
with all covenants and conditions required by this Agreement to be performed or
complied with by RIT prior to or at the Closing. Royal shall be furnished with a
certificate, signed by a duly authorized officer of RIT and dated the Closing
Date, to the foregoing effect.
Section 6.02 Good Standing. Royal shall have received a certificate of
good standing from the Secretary of State of the State of New York or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that RIT is in good standing as a corporation in the State of New
York and has filed all tax returns required to have been filed by it to date and
has paid all taxes reported as due thereon.
Section 6.03 Other Items. Royal shall have received such further
documents, certificates, or instruments relating to the transactions
contemplated hereby as Royal may reasonably request in order to satisfy due
diligence concerns.
15
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF RIT
AND THE RIT SHAREHOLDERS
The obligations of RIT and the RIT Shareholder under this Agreement are
subject to the satisfaction, at or before the Closing Date, of the following
conditions:
Section 7.01 Accuracy of Representations. The representations and
warranties made by Royal in this Agreement were true when made and shall be true
as of the Closing Date (except for changes therein permitted by this Agreement)
with the same force and effect as if such representations and warranties were
made at and as of the Closing Date, and Royal shall have performed and complied
with all covenants and conditions required by this Agreement to be performed or
complied with by Royal prior to or at the Closing. RIT shall have been furnished
with a certificate, signed by a duly authorized executive officer of Royal and
dated the Closing Date, to the foregoing effect.
Section 7.02 Good Standing. RIT shall have received a certificate of
good standing from the Secretary of State of the state of Delaware or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that Royal is in good standing as a corporation in the State of
Delaware and has filed all tax returns required to have been filed by it to date
and has paid all taxes reported as due thereon.
Section 7.03 Other Items.
(a) RIT shall have received a list of shareholders of Royal
containing the name, address, and number of shares held by each Royal
shareholder as of the date of Closing, certified by an executive
officer of Royal as being true, complete, and accurate.
(b) RIT shall have received bank cards appointing Richard
Toporek and/or his designees as signatory on the Royal bank account
with Chase Manhattan Bank N.A.
(c) RIT shall have received such further documents,
certificates, or instruments relating to the transactions contemplated
hereby as RIT may reasonably request in order to satisfy due diligence
concerns.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Brokers. Royal and RIT agree that there were no finders or
brokers involved in bringing the parties together or who were instrumental in
the negotiation, execution, or consummation of this Agreement. RIT and Royal
each agree to indemnify the other against any claim by any third person other
than those described above for any commission, brokerage, or finders' fee
arising from the transactions contemplated hereby based on any alleged agreement
or understanding between the indemnifying party and such third person, whether
express or implied from the actions of the indemnifying party.
16
<PAGE>
Section 8.02 Governing Law. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to matters of state law, with the laws of
New York.
Section 8.03. Publicity. The parties agree that no publicity, release
or other public announcement concerning the transactions contemplated by this
Agreement shall be issued by either party without the advance approval of both
the form and substance of the same by the other party and its counsel, which
approval, in the case of any publicity, release or other public announcement
required by applicable law, shall not be unreasonably withheld or delayed.
Section 8.04 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to Royal to: Gerald Ponsiglione
Royal Acceptance Corporation
738 Third Avenue
Brooklyn, NY 11232
If to RIT to: Richard Toporek
RIT Auto Leasing Group,
90 Jericho Turnpike
Floral Park, New York 11232
With copies to: Gerald A. Adler
Bondy & Schloss LLP
6 East 43rd Street
New York, New York 10007
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
Section 8.05 Attorney's Fees. In the event that any party institutes
any action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the breaching party or parties shall
reimburse the non-breaching party or parties for all costs, including reasonable
attorneys' fees, incurred in connection therewith and in enforcing or collecting
any judgment rendered therein.
Section 8.06 Confidentiality. Each party hereto agrees with the other
parties that, unless and until the transactions contemplated by this Agreement
have been consummated, it and its representatives will hold in strict confidence
all data and information obtained with respect to another party or any
subsidiary thereof from any representative, officer, director, or employee, or
from any books or records or from personal inspection, of such other party, and
shall not use such data or information or disclose the same to others, except
(i) to the extent such data or information is published, is a matter of public
knowledge, or is required by law to be published; and (ii) to the extent that
such data or information must be used or disclosed in order to consummate the
transactions contemplated by this Agreement.
17
<PAGE>
Section 8.07 Schedules; Knowledge. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 8.08 Third Party Beneficiaries. This contract is solely between
Royal and RIT and the RIT Shareholder, and, except as specifically provided, no
director, officer, stockholder, employee, agent, independent contractor, or any
other person or entity shall be deemed to be a third party beneficiary of this
Agreement.
Section 8.09 Entire Agreement. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof and fully
and completely expresses the agreement of the parties relating to the subject
matter hereof. There are no other courses of dealing, understandings,
agreements, representations, or warranties, written or oral, except as set forth
herein.
Section 8.10 Survival; Termination. The representations, warranties,
and covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated.
Section 8.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 8.12 Amendment or Waiver. Every right and remedy provided
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended.
.
Section 8.13 Section Headings. The section headings contained in this
Agreement are inserted for conveniences of reference only and shall not affect
the meaning or interpretation of this Agreement.
(THIS SPACE LEFT BLANK INTENTIONALLY)
18
<PAGE>
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly authorized,
as of the date first above-written.
ROYAL ACCEPTANCE CORPORATION
By: /s/ Gerald Ponsiglione
-------------------------------------
Gerald Ponsiglione, President
RIT AUTO LEASING GROUP, INC.
By: /s/ Richard Toporek
-------------------------------------
Richard Toporek, President
ALLIANCE HOLDINGS
LIMITED PARTNERSHIP (100 Shares)
By: /s/ Richard Toporek
-------------------------------------
Richard Toporek, General Partner
19
<PAGE>
SCHEDULE 1.02
Royal Shareholder List
<PAGE>
SHAREHOLDER LIST - ROYAL ACCEPTANCE CORPORATION
CLOSE OF BUSINESS: July 20, 1999
<TABLE>
<CAPTION>
LAST(1) FIRST(l) MI (1) LAST(2) FIRST(2) MI (2) SSN ADDRESS(l)
------- -------- -- --- ------- -------- -- --- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ADLER GERALD A. BONDY & SCHLOSS
ADLER GERALD A. BONDY & SCHLOSS
AMITRANO ANTHONY
ANDERSON STEVEN
ARATO JESSICA
BARBETTA ANDREW C/O LOREN INVESTMENT
GROUP, INC.
BARBETTA LENA C/O LOREN INVESTMENT
GROUP, INC.
BATT FAMILY IRREVOCABLE C/O THE LOREN
TRUST INVESTMENT GROUP
BAYARD HARVEY C/O BONDY & SCHLOSS
BHOJ PRADEEP
BONDY & SCHLOSS LLP
BONDY & SCHLOSS LLP
BORZOMATI ALBERT C/O LOREN INVESTMENT
GROUP, INC.
BRANDENBURG F. JEAN BRANDENBURG GLORIA I JTWROS
BRYAN FAITH BRYAN STEPHEN JTTEN ###-##-####
CAL-TEX ENTERPRISES PROF 86-0693853
SH PLAN
CALABRO MARY F.
CAMPBELL SEAN ###-##-####
CAMPBELL SEAN F. ###-##-#### C/O ROYAL FINANCE CO
CANTOR IRWIN
CARNEY KEVIN C/O LOREN INVESTMENT
GROUP, INC.
CASSESE NEIL C/O LOREN INVESTMENT
GROUP, INC.
CASSESE NEIL C/O LOREN INVESTMENT
GROUP, INC.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAST(1) ADDRESS(2) CITY ST ZIP DATE PRE # #SHS ST
- ------- ---------- ---- -- --- ----- --- ----- ---- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ADLER 6 EAST 43RD STREET NEW YORK NY 10017 3/11/99 RA 2074 50,000 F
ADLER 6 EAST 43RD STREET NEW YORK NY 10017 3/11/99 RA 2073 75,000 R
AMITRANO 157 PARIS AVE, #4 NORTHVALE NJ 7647 3/25/99 RA 2077 1,200 F
ANDERSON 7425 CLAIRMONT DR #2710 NEW ROCHELLE NY 11374 9/3/97 RA 2002 50 F
ARATO 68-36 BURNS ST FOREST HILLS NY 11375 7/27/95 1032 50 F
BARBETTA 25 CREST STREET, #107 WESTWOOD NJ 7675 11/18/98 RA 2062 10,000 R
BARBETTA 25 CREST STREET, #107 WESTWOOD NJ 7675 11/18/98 RA 2064 2,000 R
BATT FAMILY IRREVOCABLE 25 CREST AVE #107 WESTWOOD NJ 7675 4/14/99 RA 2106 5,000 R
TRUST
BAYARD 6 EAST 43RD STREEI NEW YORK NY 10017 7/14/99 RA 2133 40,000 F
BHOJ 10690 CASTINE AVE CUPERTINO CA 95014 10/9/97 RA 2017 500 R
BONDY & SCHLOSS LLP 6 EAST 43RD STREET NEW YORK NY 10017 3/11/99 RA 2072 75,000 R
BONDY & SCHLOSS LLP 6 EAST 43RD STREET NEW YORK NY 10017 3/11/99 RA 2075 50,000 F
BORZOMATI 25 CREST STREET, #107 WESTWOOD NJ 7675 11/18/98 RA 2065 10,000 R
BRANDENBURG 3045 AVALON TERR VALRICO FL 33594 9/3/97 RA 2010 100 F
BRYAN 779 CONCOURSE VILLAGE #7 BRONX NY 10451 6/13/95 1001 100 F
CAL-TEX ENTERPRISES PROF 150 HILLSIDE ST ATHENS GA 30601 6/13/95 1002 500 F
SH PLAN
CALABRO 901-73RD ST N. BERGEN NJ 7047 3/25/99 RA 2060 4,000 F
CAMPBELL 134 PACIFIC ST BROOKLYN NY 11201 4/21/98 RA 2044 57,036 F
CAMPBELL 621 SHREWSBURY AVE #108 SHREWSBURY NJ 7702 6/13/95 1003 50,000 R
CANTOR 180 BIRCH DR ROSLYN NY 11576 7/27/95 1036 750 F
CARNEY 25 CREST STREET, #107 WESTWOOD NJ 7675 11/18/98 RA 2063 2,000 R
CASSESE 25 CREST STREET, #107 WESTWOOD NJ 7675 11/18/98 RA 2060 500 R
CASSESE 25 CREST STREET. #107 WESTWOOD NJ 7675 11/18/98 RA 2055 500 F
</TABLE>
OLDE MONMOUTH STOCK TRANSFER CO., INC. PAGE 1
<PAGE>
SHAREHOLDER LIST - ROYAL ACCEPTANCE CORPORATION
CLOSE OF BUSINESS: July 20, 1999
<TABLE>
<CAPTION>
LAST(1) FIRST(l) MI (1) LAST(2) FIRST(2) MI (2) SSN ADDRESS(l)
------- -------- -- ----- ------- -------- -- --- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2555119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2555119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2555119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2555119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2551119 PO BOX 20
CEDE & CO 13-2555119 PO BOX 20
CEDE & CO 13-2555119 PO BOX 20
CEDE & CO 13-2555119 PO BOX 20
CEDE & CO 13-2555119 PO BOX 20
CEDE & CO 13-2555119 PO BOX 20
CHENEY BARBARA K.
CHOKSI SHITAL G.
CONLON JAMES A.
CONTINENTAL TERMINALS
DAVIDO JOSEPH DAVIDO ANGELINE JT TEN
DEEMER LARRY
DEWITT J. C/O FRANK LORENZO
DIAZ MARCUS
DUIN SPENCER C/O CUTLER HAMMER
DUIN SPENCER C/O CUTLER HAMMER
EPSTEIN ISIDORE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAST(1) ADDRESS(2) CITY ST ZIP DATE PRE # #SHS ST
- ------- ---------- ---- -- --- ----- --- ----- ---- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 3/17/99 RA 2076 100,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 6/1/99 RA 2120 5,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 4/6/99 RA 2104 16,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 7/6/99 RA 2130 4,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 4/17/98 RA 2042 250 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 4/14/99 RA 2105 2,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 7/13/99 RA 2132 6,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 5/3/99 RA 2115 4,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 6/3/99 RA 2121 37,500 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 6/21/99 RA 2128 9,500 F
CEDE & CO BOWLING GREEN SATION NEW YORK NY 10004 5/26/99 RA 2119 5,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 5/25/99 RA 2117 5,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 7/6/99 RA 2131 8,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 4/30/99 RA 2114 4,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 6/29/99 RA 2129 4,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 4/29/99 RA 2113 37,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 4/27/99 RA 2112 2,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 6/15/99 RA 2123 450 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 6/11/99 RA 2122 10,000 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 4/20/98 RA 2043 3,250 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 5/9/98 RA 2048 1,250 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 5/13/98 RA 2047 500 F
CEDE & CO BOWLING GREEN STATION NEW YORK NY 10004 3/26/98 RA 2034 330 F
CHENEY 4444 U.S. 98 N/ LOT 2 LAKELAND FL 33809 9/3/97 RA 2013 50 F
CHOKSI 255 GATEWOOD LN BARTLETT IL 60103 9/3/97 RA 2014 150 F
CONLON 4 LEAH LN PLAINVIEW NY 11893 9/3/97 RA 2003 100 F
CONTINENTAL TERMINALS 2/10/97 1079 2,958 F
DAVIDO 672 10TH ST BROOKLYN NY 11215 7/27/95 1034 100 F
DEEMER 46 LOYOLA DR ORLANDO BEACH FL 32018 7/27/95 1035 1,250 F
DEWITT 25 CREST STREET SUITE 107 WESTWOOD NJ 7675 10/6/98 RA 2053 17,000 R
DIAZ 3150 BROADWAY #21 NEW YORK NY 10027 7/27/95 1033 200 F
DUIN 5 PARKWAY CENTER PITTSBURGH PA 15220 10/9/97 RA 2019 1,000 R
DUIN 5 PARKWAY CENTER PITTSBIRGH PA 15220 10/17/96 1074 250 F
EPSTEIN 8107 NW 9TH AVE TAMARAC FL 33321 7/27/95 1038 100 F
</TABLE>
OLDE MONMOUTH STOCK TRANSFER CO., INC. PAGE 2
<PAGE>
SHAREHOLDER LIST - ROYAL ACCEPTANCE CORPORATION
CLOSE OF BUSINESS: July 20, 1999
<TABLE>
<CAPTION>
LAST(1) FIRST(l) MI (1) LAST(2) FIRST(2) MI (2) SSN ADDRESS(l)
------- -------- -- --- ------- -------- -- --- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FALCO JOHN FALCO VERA JT TEN C/O LOREN INVESTMENT
GROUP, INC.
FESCHAREK RICHARD J.
FESCHAREK RICHARD ###-##-#### 175 MOWER STREET
FREY DAVID
GASSOSO STACI F.
GENEROSO CLINTON DAVID GENEROSO HARRIET R. JT TEN C/O ASSIST
ASSOCIATES, INC.
GUHA AJOY
HADDAD NAIM
HADDAD NAIM ###-##-####
HALL KATHRYN ###-##-####
HARDDON BARBARA ###-##-####
HAYDE WILLIAM C/O BONDY & SCHLOSS
LLP
IMPERIALE ANDREW
KELLEY IVOR
KHANIMOV ALBERT ###-##-####
L. ROLLS (NOMINEES) LTD 45 RIVER CT
L. ROLLS (NOMINEES) LTD 45 RIVER CT
LEIMER RITA ###-##-####
LEVITAN EDWARD ###-##-####
LIERMAN RICHARD ###-##-####
LOREN INVESTMENT GROUP,
INC.
LOREN INVESTMENT GROUP,
INC.
MIELE DANIEL
MILLER ERIC ###-##-####
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAST(1) ADDRESS(2) CITY ST ZIP DATE PRE # #SHS ST
- ------- ---------- ---- -- --- ----- --- ----- ---- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FALCO 25 CREST STREET, #107 WESTWOOD NJ 7675 11/18/98 RA 2061 9,500 R
FESCHAREK 175 MOWER STREET WORCESTER MA 1602 6/17/99 RA 2126 5,000 F
FESCHAREK WORCESTER MA 1602 10/9/97 RA 2022 5,000 F
FREY 1346 E. 59TH ST BROOKLYN NY 11203 7/27/95 1040 50 R
GASSOSO 192 GOLDMINE LANE OLD BRIDGE NJ 8857 3/25/99 RA 2084 20,000 F
GENEROSO 179 RT 46 SUITE 504 ROCKAWAY NJ 7866 9/3/97 RA 2007 250 F
GUHA 2350 HAMILTON AVE EL CENTRO CA 92243 10/9/97 RA 2018 600 R
HADDAD 62 JACKSON PLACE MOONACHIE NJ 7074 3/25/99 RA 2085 10,000 F
HADDAD 62 JACKSON PLACE MOONACHIE NJ 7074 6/13/95 1010 500 F
HALL P.O. BOX 55 BURGAM NC 28425 6/13/95 1011 175 F
HARDIDON 3 IMPERIAL GATE DIX HILLS NY 11746 6/13/95 1012 2,500 F
HAYDE 6 E. 43RD ST NEW YORK NY 10017 4/16/98 RA 2040 150,000 R
IMPERIALE 72 TARPON DR SEA GIRT NJ 8750 9/3/97 RA 2008 300 F
KELLEY #3 THORN HILL GROVE LONDON, ENGLAND 6/13/95 1013 500 F
KHANIMOV 184-69 ABERDEEN RD JAMAICA ESTATES NY 11432 6/13/95 1014 200 F
L. ROLLS (NOMINEES) LTD UPPER GROUND LONDON, ENGLAND SE1 9PC 7/22/96 1054 2,500 F
L. ROLLS (NOMINEES) LTD UPPER GROUND LONDON, ENGLAND SE1 9PC 7/22/96 1056 5,000 RS
LEIMER 1912 GREEN RIDGE RD JACKSON MO 63750 6/13/95 1015 550 F
LEVITAN 22 CANDLEWOOD CT COLONIA NJ 7087 6/13/95 1016 50 F
LIERMAN 3733 S. MAIN ROCKFORD IL 61102 6/13/95 1017 50 F
LOREN INVESTMENT GROUP, INC. 25 CREST STREET, #107 WESTWOOD NJ 7675 11/18/98 RA 2068 65,000 R
LOREN INVESTMENT GROUP, INC. 25 CREST STREET STE 107 WESTWOOD NJ 7675 1/11/99 RA 2068 73,000 F
MIELE 30-06 MARLOT AVE FAIRLAWN NJ 7410 3/25/99 RA 2090 2,400 F
MILLER 12 KERWICK CT N. WALES PA 19454 6/13/95 1019 250 F
</TABLE>
OLDE MONMOUTH STOCK TRANSFER CO., INC. PAGE 3
<PAGE>
SHAREHOLDER LIST - ROYAL ACCEPTANCE CORPORATION
CLOSE OF BUSINESS: July 20, 1999
<TABLE>
<CAPTION>
LAST(1) FIRST(l) MI (1) LAST(2) FIRST(2) MI (2) SSN ADDRESS(l)
------- -------- -- --- ------- -------- -- --- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLER SHARI 055-4O-7909
MISLAK RICHARD J.
MOORE DAVID
MOORE DAVID ###-##-####
MOORE DAVID
NATIONAL INVESTOR SERVICES 13-3842038
NEARING RICHARD
NEARING RICHARD
NUSBAUM SARAH
JACQUELINE
ORNELAS JOSEPH Z.
OYAGA ENRIQUE ###-##-####
PIZZICARA ANNE
PIZZICARA DIERDRE
PONSIGLIONE GERALD PONSIGLIONE DIANE JT TEN
PONSIGLIONE GERALD C/O BONDY & SCHLOSS
LLP
PONSIGLIONE GERALD PONSIGLIONE DIANE JT TEN
PONSIGLIONE JAMES MICHAEL C/O THE LOREN
INVESTMENT GROUP
PONSIGLIONE MARK JAMES C/O THE LOREN
INVESTMENT GROUP
PROTESTA ROLAND ###-##-####
RATCLIFFE THOMAS W. ###-##-####
RAZA MOHAMMED ###-##-####
RIORDAN JOHN RIORDAN JAN JT TEN
ROLLS LEN 45 RIVER CT
ROTH PAUL
RUSSO JOHN
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAST(1) ADDRESS(2) CITY ST ZIP DATE PRE # #SHS ST
- ------- ---------- ---- -- --- ----- --- ----- ---- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLER 175 W. 79TH ST NEW YORK NY 10024 6/13/95 1018 250 F
MISLAK 267 MADIE AVE SPOTSWOOD NJ 8864 3/25/99 RA 2091 15,000 F
MOORE 105 THOMPSON ST #1 NEW YORK NY 10012 9/14/95 1048 250 F
MOORE 105 THOMPSON ST #1 NEW YORK NY 10012 6/13/95 1020 350 F
MOORE 10/9/97 RA 2023 2,000 R
NATIONAL INVESTOR SERVICES 55 WATER ST 32ND FL NEW YORK NY 10041 1/27/97 1076 350 F
NEARING 1114 CHESTERTON DR RICHARDSON TX 75080 10/9/97 RA 2025 6,250 R
NEARING 1114 CHESTERTON DR RICHARDSON TX 75080 10/9/97 RA 2015 2,500 R
NUSBAUM 46 W. 95TH ST #313 NEW YORK NY 10025 9/14/95 1049 1,750 R
ORNELAS 2512 ALTA MIRA DR TYLER TX 75701 10/9/97 RA 2015 2,500 R
OYAGA 1972 E. 16TH ST BROOKLYN NY 11229 6/13/95 1022 125 F
PIZZICARA 142 ST. JOHNS PL BROOKLYN NY 11217 7/27/95 1037 50 F
PIZZICARA 843 CARROL ST BROOKLYN NY 11215 7/27/95 1042 100 F
PONSIGLIONE 2/10/97 1078 7,500 F
PONSIGLIONE 6 E. 43RD ST NEW YORK NY 10017 4/16/98 RA 2041 200,000 R
PONSIGLIONE 10/9/97 RA 2027 2,033 F
PONSIGLIONE 25 CREST AVE #107 WESTWOOD NJ 7675 4/14/99 RA 2109 75,000 R
PONSIGLIONE 25 CREST AVE #107 WESTWOOD NJ 7675 4/14/99 RA 2108 75,000 R
PROTESTA 2221 W. TOLEDO PL GREAT NECK NY 11045 6/13/95 1023 750 F
RATCLIFFE 2105 OCEAN AVE SPRING LAKE NJ 7762 6/13/95 1024 25,000 R
RAZA 1520 PENNINGTON RD TRENTON NJ 8618 6/13/95 1025 500 F
RIORDAN 3958 N. OLEANDER CHICAGO IL 60634 7/27/95 1044 50 F
ROLLS UPPER GROUND LONDON 3/25/99 RA 2092 20,000 F
ROTH 33-15 MURRAY LN FLUSHING NY 11354 10/9/97 RA 2021 1,000 R
RUSSO 99 WALL ST NEW YORK NY 10005 7/27/95 1043 50 F
</TABLE>
OLDE MONMOUTH STOCK TRANSFER CO., INC. PAGE 4
<PAGE>
SHAREHOLDER LIST - ROYAL ACCEPTANCE CORPORATION
CLOSE OF BUSINESS: July 20, 1999
<TABLE>
<CAPTION>
LAST(1) FIRST(l) MI (1) LAST(2) FIRST(2) MI (2) SSN ADDRESS(l)
------- -------- -- --- ------- -------- -- --- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RUTHENBERG A.
SCHMIDT CHRIS M.
SCHMIDT FRANK T.
SCHUMANN ALBERT ###-##-####
SEIFF B. C/O FRANK LORENZO
SEIFF L. C/O FRANK LORENZO
SIEGEL JOSEPH SIEGEL ETHEL JT TEN ###-##-####
SIGNORELLI LINDO
SIGNORELLI LINDO A. SIGNORELLI MARILYN F JTWROS
SINGH HARJINDER PAL ###-##-####
STEWART DUANE STEWART MAILE JT TEN C/O RIT AUTO LEASING
GROUP, INC.
SWARTZ PHILIP
TARANTOLA ROBERT
THE LOREN INVESTMENT C/O RIT AUTO LEASING
GROUP, INC. GROUP, INC
THOMAS BETHANNE
THOMAS STEPHEN
TUNG HSUE DONG HUI JT TEN
TUNG HSUE DONG HUI JT TEN
TUTTA ITALIA INC.
UMANOFF EDWIN ###-##-####
VERGONA ANGELA
WELLINGTON JASON T. ###-##-####
WESLOCK MICKEY ###-##-####
YAULEY JENKINS
ZITTEL GREGORY T.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAST(1) ADDRESS(2) CITY ST ZIP DATE PRE # #SHS ST
- ------- ---------- ---- -- --- ----- --- ----- ---- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RUTHENBERG 7810 17TH AVE BROOKLYN NY 11214 3/25/99 RA 2094 3,000 F
SCHMIDT 3444 W. MONTROSS CHICAGO IL 60616 9/3/97 RA 2005 50 F
SCHMIDT 3444 W. MONTROSS CHICAGO IL 60618 9/3/97 RA 2012 100 F
SCHUMANN 11 CANTERBURY RD MANALAPAN NJ 7726 6/13/95 1026 50 F
SEIFF 25 CREST STREET SUITE 107 WESWTWOOD NJ 7675 10/6/98 RA 2050 17,000 R
SEIFF 25 CREST STREET SUITE 107 WESWTWOOD NJ 7675 10/6/98 RA 2051 17,000 R
SIEGEL 2800 S. OCEAN BLVD BOCA RATON FL 6/13/95 1027 250 F
SIGNORELLI 10/9/97 RA 2026 1,715 R
SIGNORELLI 15 FAIRFAX ST WYNANTSKILL NY 12196 9/3/97 RA 2001 500 F
SINGH 144 ATLANTIC AVE #1 BROOKLYN NY 11201 4/21/98 RA 2045 10,000 F
STEWART 90 JERICHO TPKE FLORAL PARK NY 11001 4/22/99 RA 2111 5,000 R
SWARTZ 315 LINDA ST BELFORD NJ 7727 7/27/95 1041 500 F
TARANTOLA 6605 14TH AVE BROOKLYN NY 11219 3/25/99 RA 2097 2,000 F
THE LOREN INVESTMENT
GROUP, INC. 90 JERICHO TPKE FLORAL PARK NY 11001 4/22/99 RA 2110 140,000 R
THOMAS 76 CLIFF RD BELLE TESSE NY 11777 3/25/99 RA 2098 100,000 F
THOMAS 4201 TERRA VERDE DR VERDALE WA 99037 10/9/97 RA 2020 1,250 R
TUNG 11 E. LAUREL HILL RD GREENBELT MD 20770 6/13/95 1028 1,000 F
TUNG 11 E. LAUREL HILL RD GREENBELT MD 20770 9/14/95 1047 1,850 F
TUTTA ITALIA INC. 16 TWIN LAKES DR COLTS NECK NJ 7722 3/25/99 RA 2099 10,000 F
UMANOFF 9712 FLATLANDS AVE BROOKLYN NY 6/13/95 1029 250 F
VERGONA 11 FIRST ST ENGLEWOOD CLIFFS NJ 7632 3/25/99 RA 2101 4,000 F
WELLINGTON 4658 YEAGER RD COLUMBIA MO 65202 6/13/95 1030 250 F
WESLOCK 616 HEMLOCK ST ROSELLE PARK NJ 7204 9/25/95 1050 227 F
YAULEY 477 AUDIBON PKWY SYRACUSE NY 13224 9/3/97 RA 2011 1,250 F
ZITTEL 335 RUNYON AVE MIDDLESEX NJ 6645 9/3/97 RA 2006 50 F
==================== ========================= ================ == ===== ======= === ==== ========= ==
TOTAL COUNT 1,831,508
131
</TABLE>
OLDE MONMOUTH STOCK TRANSFER CO., INC. PAGE 5
<PAGE>
SCHEDULE 1.04(a)
Royal Financial Statement
Presentation of Royal Audited Financial Statements for fiscal years Ending March
1998 and 1999 have been waived by RIT
<PAGE>
SCHEDULE 1.04(b)
Liabilities or Obligations Not Reflected in Financial Statements
Presentation of Royal Liabilities not set forth in Royal Balance Sheet have been
waived by RIT
<PAGE>
SCHEDULE 1.04(c)
Federal, State, County, Local or Other Taxes Owed
NONE
<PAGE>
SCHEDULE 1.19
Royal Liabilities Other Than Professional Fees
NONE
<PAGE>
SCHEDULE 3.01
RIT Certificate of Incorporation, as Amended, and By-Laws
<PAGE>
CERTIFICATE OF INCORPORATION
OF
RIT AUTO LEASING GROUP, INC.
Under Section 402 of the Business Corporation Law
The undersigned, a natural person of the age of eighteen years or over,
desiring to form a corporation pursuant to the provisions of the Business
Corporation Law of the State of New York, hereby certifies as follows:
FIRST: The name of the corporation is:
RIT AUTO LEASING GROUP, INC.
SECOND: The purpose for which it is formed is as follows:
To engage in any lawful act or activity for which corporations may be
formed under the Business Corporation Law provided that the corporation is not
formed to engage in any act or activity which requires the consent or approval
of any state official, department, board agency or other body, without such
approval or consent first being obtained.
For the accomplishment of the aforesaid purposes, and in furtherance
thereof, the corporation shall have and may exercise all of the powers conferred
by the Business Corporation Law upon corporations formed thereunder, subject
to any limitations contained in Article 2 of said law or in accordance with the
Provisions of any other statute of the State of New York.
THIRD: The office of the corporation in the State of New York is to be
located in the County of Nassau.
FOURTH: The aggregate number of shares which the corporation shall have
the authority to issue is 200, no par value.
<PAGE>
FIFTH: The Secretary of State is designated as agent of the corporation
upon whom process against the corporation may be served, and the address to
which the Secretary of State shall mail a copy of any process against the
corporation served upon him is: c/o, 90 Jericho Turnpike, Floral Park, NY 11001.
SIXTH: A director of the corporation shall not be liable to the
corporation or its shareholders for damages for any breach of duty in such
capacity except for liability if a judgment or other final adjudication adverse
to a director establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or that the
director personally gained in fact a financial profit or other advantage to
which he or she was not legally entitled or that the director's acts violated
Section 719 of the Business Corporation Law; or liability for any act or
omission prior to the adoption of this provision.
IN WITNESS WHEREOF, I hereunto sign my name and affirm that
the statements made herein are true under the penalties of perjury.
Dated: March 16, 1993
_______________________________
Scott J. Schuster, Incorporator
283 Washington Avenue
Albany, New York 12206
<PAGE>
BY-LAWS
OF
RIT AUTO LEASING GROUP INC.
____________________________________
ARTICLE I. SHAREHOLDERS' MEETING
Section 1. Annual Meeting.
The annual meeting of the shareholders shall be held within five months
after the close of the fiscal year of the Corporation, for the purpose of
electing directors, and transacting such other business as may properly come
before the meetings.
Section 2. Agenda at the Shareholders' Annual Meeting.
(a) Calling the meeting to order;
(b) Roll call;
(c) Reading of the minutes of the last meeting;
(d) Reports of the Officers;
(e) Reports of the Committees;
(f) Election of the Directors;
(g) Adjournment
Section 3. Special Meetings.
Special meetings of the shareholders may be called at any time
by the Board of Directors or by the President or the Secretary at the written
request of the holders of fifty percent (50%) of the shares then outstanding and
entitled to vote thereat, or as otherwise required under the provisions of the
Business Corporation Law.
Section 4. Place of Meetings.
All meetings of shareholders shall be held at the principal
office of the Corporation, or at such other places within or without the State
of New York as shall be designated in the notices or waivers of notice of such
meetings.
BY-LAWS
1
<PAGE>
Section 5. Notice of Meetines.
(a) Written notice of each meeting of shareholders, whether
annual or special, stating the time when and place where it is to be held, shall
be served either personally or by mail, not less than ten or more than fifty
days before the meeting, upon each shareholder of record entitled to vote at
such meeting, and to any other shareholder to whom the giving of notice may be
required by law. Notice of a special meeting shall also state the purpose or
purposes for which the meeting is called, and shall indicate that it is being
issued by, or at the direction of, the person or persons calling the meeting.
If, at any meeting, action is proposed to be taken that would, if taken, entitle
shareholders to receive payment for their shares pursuant to the Business
Corporation Law, the notice of such meeting shall include a statement of that
purpose and to that effect. If mailed, such notice shall be directed to each
such shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed to some other address, in which case, it shall be mailed to the address
designated in such request.
(b) Notice of any meeting need not be given to any person who
may become a shareholder of record after the mailing of such notice and prior to
the meeting, or to any shareholder who attends such meeting in person or by
proxy, or to any shareholder who, in person or by proxy, submits a signed waiver
of notice either before or after such meeting. Notice of any adjourned meeting
of shareholders need not be given, unless otherwise required by statute.
Section 6. Quorum of Shareholders:
(a) Except as otherwise provided herein, or by statute, or in
the Certificate of Incorporation (such Certificate and any amendments thereof
being hereinafter collectively referred to as the "Certificate of
Incorporation"), at all meetings of shareholders of the Corporation, the
presence at the commencement of such meetings in person or by proxy of
shareholders holding of record a majority of the total number of shares of the
Corporation then issued and outstanding and entitled to vote, shall be necessary
and sufficient to constitute a quorum for the transaction of any business. The
withdrawal of any shareholder after the commencement of a meeting shall have no
effect on the existence of a quorum, after a quorum has been established at such
meeting.
(b) Despite the absence of a quorum at any annual or special
meeting of shareholders, the shareholders, by a majority of the votes cast by
the holders of shares entitled to vote thereon, may adjourn the meeting. At any
such adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally called
if a quorum had been present. However, if after the adjournment, the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given to each shareholder of record on the new record
date.
BY-LAWS
2
<PAGE>
Section 7. Voting:
(a) Except as otherwise provided by statute or by the
Certificate of Incorporation, any corporate action, other than the election of
directors to be taken by vote of the shareholders, shall be authorized by a
majority of votes cast at a meeting of shareholders by the holders of shares
entitled to vote thereon. Election of directors shall be accomplished by a
candidate receiving a plurality of the votes cast at a shareholder's meeting by
the shareholders entitled to vote in the election.
(b) Except as otherwise provided by statute or by the
Certificate of Incorporation, at each meeting of shareholders, each holder of
record of stock of the Corporation entitled to vote thereat, shall be entitled
to one vote for each share of stock registered in his name on the books of the
Corporation. Upon demand of the shareholders holding ten percent (10%) in
interest of the shares, present in person or by proxy, and entitled to vote, and
voting shall be by ballot.
Section 8. Proxies.
Each shareholder entitled to vote or to express consent or
dissent without a meeting, may do so by proxy; provided, however, that the
instrument authorizing such proxy to act shall have been executed in writing by
the shareholder himself, or by his attorney-in-fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of eleven months from the
date of its execution, unless the persons executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting and shall be filed with the records of
the Corporation.
Section 9. Action Without a Meeting.
Any resolution in writing, signed by all of the shareholders
entitled to vote thereon, shall constitute action by such shareholders to the
effect therein expressed, with the same force and effect as if the same had been
duly passed by unanimous vote at a duly called meeting of shareholders, and such
resolution so signed shall be inserted in the minute book of the Corporation
under its proper date.
BY-LAWS
3
<PAGE>
ARTICLE II. DIRECTORS
Section 1. Number.
The affairs and the business of the Corporation, except as
otherwise provided in the Certificate of Incorporation, shall be managed by the
Board of Directors. The number of the directors of the Corporation shall be
( ) unless and until otherwise determined by vote of a majority of the entire
Board of Directors. The "entire Board" as used in this Article shall mean the
total number of directors which the Corporation would have if there were no
vacancies. The number of directors shall not be less than three, unless all of
the outstanding shares are owned beneficially and of record by less than three
shareholders, in which event the number of directors shall not be less than the
number of shareholders.
Section 2. How Elected.
At the annual meeting of shareholders, the persons duly
elected by the votes cast at the election held thereat shall become the
directors for the ensuing year.
Section 3. Term of Office and Qualifications.
The term of office of each of the directors shall be until the
next annual meeting of shareholders and thereafter until a successor has been
elected and qualified. Each director shall be at least eighteen years of age.
Section 4. Duties of Directors.
The Board of Directors shall have the control and general
management of the affairs and business of the Corporation unless otherwise
provided in the certificate of Incorporation. Such directors shall in all cases
act as a Board regularly convened by a majority, and they may adopt such rules
and regulations for the conduct of their meetings, and the management and
business of the Corporation as they may deem proper, not inconsistent with these
By-Laws and the Laws of the State of New York.
Section 5. Directors' Meetings.
Regular meetings of the Board of Directors shall be held
immediately following the annual meetings of the shareholders, and at such other
times as the Board of Directors may determine. Special meetings of the Board of
Directors may be called by the President at any time and must be called by the
President or the Secretary upon the written request of two directors. All
meetings, both regular and special, shall be held at the principal office of the
Corporation or at such other location, within or without the State of New York,
as the Board of Directors may from time to time determine.
BY-LAWS
4
<PAGE>
Section 6. Notice of Meetings.
Notice of the place, day and hour of every regular and special
meeting shall be given to each director by delivering the same to him personally
or sending the same to him by telegraph or leaving the same at his residence or
usual place of business, at least one (1) day before the meeting, or shall be
mailed to each director, postage prepaid and addressed to him at the last known
Post Office address according to the records of the Corporation, at least three
(3) days before the meeting. No notice of any adjourned meeting of the Board of
Directors needs to be given other than by announcement at the meeting, subject
to the provisions of Section 7 of this Article.
Section 7. Quorum of Directors.
At any meeting of the Board of Directors, except as otherwise
provided by the Certificate of Incorporation, or by these By-Laws, a majority of
the Board of Directors shall constitute a quorum for the transaction of
business. However, a lesser number, when not constituting a quorum, may adjourn
the meeting until a quorum shall be present or represented.
Section 8. Director and Committee Action by Conference Telephone.
Any one or more members of the Board of Directors, or of any
committee thereof, may participate in a meeting of such Board or committee by
means of a conference telephone or similar equipment which allows all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at such a meeting.
Section 9. Voting.
Except as otherwise provided by statute, or by the Certificate
of Incorporation, or by these By-Laws, the affirmative vote of a majority of the
Directors present at any meeting of the Board of Directors at which a quorum is
present shall be necessary for the transaction of any item of business thereat.
Any resolution in writing, signed by all of the directors entitled to vote
thereon, shall constitute action by such directors to the effect therein
expressed, with the same force and effect as if the same had been duly passed by
unanimous vote at a duly called meeting of directors and such resolution so
signed shall be inserted in the minute book of the Corporation under its proper
date.
Section 10. Vacancies.
Unless otherwise provided in the Certificate of Incorporation,
vacancies in the Board of Directors occurring between annual meetings of the
shareholders, other than vacancies due to the removal of directors without
cause, shall be filled for the unexpired portion of the term by a majority vote
of the remaining directors, even though less than a quorum exists. Vacancies
occurring in the Board by reason of the removal of directors
BY-LAWS
5
<PAGE>
without cause may be filled only by vote of the shareholders. A director so
elected shall hold office for the unexpired term of his predecessor, and until
his successor has been elected and qualified.
Section 11. Removal of Directors.
Any or all of the directors may be removed, either with or
without cause at any time by a vote of the shareholders at any meeting called
for such purpose, and another director, or more than one may be elected by such
shareholders in the place of the director(s) so removed, to serve for the
remainder of the term.
Section 12. Resignation.
Any director may resign at any time by giving written notice
to the Board of Directors, the President or the Secretary of the Corporation.
Unless otherwise specified in such written notice, such resignation shall take
effect upon receipt thereof by the Board of Directors or such officer, and the
acceptance of such resignation shall not be necessary to make it effective.
However, such resignation will not be effective to discharge any accrued
obligations or duties of a director.
Section 13. Salary.
No stated salary shall be paid to directors, as such, for
their services, but by resolution of the Board of Directors a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board, provided, that nothing herein contained shall be
construed to prevent any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 14. Contracts.
(a) No contract or other transaction between this Corporation
and any other Corporation shall be impaired, affected or invalidated, nor shall
any director be liable in any way by reason of the fact that any one or more of
the directors of this Corporation is or are interested in, or is a director or
officer, or are directors or officers of such other Corporation, provided that
such facts are disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting. This Section shall not
be construed to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law (common, statutory or
otherwise) applicable thereto.
BY-LAWS
6
<PAGE>
(c) However, if there was no such disclosure or knowledge, or
if the vote of such interested director was necessary for the approval of such
contract or transaction at a meeting of the Board or committee at which it was
approved, the Corporation may avoid the contract or transaction, unless the
party or parties thereto shall establish affirmatively that the contract or
transaction was fair and reasonable as to the Corporation, at the time it was
approved by the Board, a committee or the shareholders.
Section 15. Committees.
The Board of Directors, by resolution adopted by a majority of
the entire Board, may designate from among its members an executive committee
and such other committees, and alternate members thereof, as they deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board of
Directors.
BY-LAWS
7
<PAGE>
ARTICLE III. OFFICERS
Section 1. Number of Officers.
The officers of the Corporation shall consist of a President,
a Secretary, a Treasurer, and such other officers, including a Chairman of the
Board of Directors, and one or more Vice Presidents, as the Board of Directors
may from time to time deem advisable. Any officer other than the Chairman of the
Board of Directors may be, but is not required to be, a director of the
Corporation. Any officer may hold more than one office except the same person
may not hold the office of President and Secretary.
Section 2. Election of Officers.
Officers of the Corporation shall be elected at the first
meeting of the Board of Directors. Thereafter, and unless otherwise provided in
the Certificate of Incorporation, the officers of the Corporation shall be
elected annually by the Board of Directors at its meeting held immediately after
the annual meeting of shareholders and shall hold office for one year and until
their successors have been duly elected and qualified.
Section 3. Removal of Officers.
Any officer elected by the Board of Directors may be removed,
with or without cause, and a successor elected, by a vote of the Board of
Directors. Any officer elected by the shareholders may be removed, with or
without cause, and a successor elected, only by a vote of the shareholders.
Additionally, an officer elected by the shareholders may have his authority
suspended, for cause, by the Board of Directors.
Section 4. President.
The President shall be the chief executive officer of the
Corporation and shall have general charge of business, affairs and property
thereof, subject to direction of the Board of Directors, and shall have general
supervision over its officers and agents. He shall, if present, preside at all
meetings of the Board of Directors in the absence of a Chairman of the Board and
at all meetings of shareholders. He may do and perform all acts incident to the
office of President.
Section 5. Vice President.
In the absence of or inability of the President to act, the
Vice President shall perform the duties and exercise the powers of the President
and shall perform such other functions as the Board of Directors may from time
to time prescribe.
BY-LAWS
8
<PAGE>
Section 6. Secretary.
The Secretary shall:
(a) Keep the minutes of the meetings of the Board of Directors
and of the shareholders in appropriate books.
(b) Give and serve all notice of all meetings of the
Corporation.
(c) Be custodian of the records and of the seal of the
Corporation and affix the latter to such instruments or documents as may be
authorized by the Board of Directors.
(d) Keep the shareholder records in such a manner as to show
at any time the amount of shares, the manner and the time the same was paid for,
the names of the owners thereof alphabetically arranged and their respective
places of residence, or their Post Office addresses, the number of shares owned
by each of them and the time at which each person became owner, and keep such
shareholder records available daily during the usual business hours at the
office of the Corporation subject to the inspection of any person duly
authorized, as prescribed by law.
(e) Do and perform all other duties incident to the office of
Secretary.
Section 7. Treasurer.
The Treasurer shall:
(a) Have the care and custody of and be responsible for all of
the funds and securities of the Corporation and deposit of such funds in the
name and to the credit of the Corporation in such a bank and safe deposit vaults
as the directors may designate.
(b) Exhibit at all reasonable times his books and accounts to
any director or shareholder of the Corporation upon application at the office of
the Corporation during business hours.
(c) Render a statement of the condition of the finances of the
Corporation at each stated meeting of the Board of Directors if called upon to
do so, and a full report at the annual meeting of shareholders. He shall keep at
the office of the Corporation correct books of account of all of its business
and transactions and such books of account as the Board of Directors may
require. He shall do and perform all other duties incident to the office of
Treasurer.
(d) Give the Corporation security for the faithful performance
of his duties in such sum and with such surety as the Board of Directors may
require.
Section 8. Duties of Officers May be Delegated.
In the case of the absence of any officer of the Corporation,
or for any reason the Board may deem sufficient, the Board may, except as
otherwise provided in these By-Laws, delegate the powers or duties of such
officers to any other officer or any director for the time being, provided a
majority of the entire Board concur therein.
BY-LAWS
9
<PAGE>
Section 9. Vacancies - How Filled.
Should any vacancy in any office occur by death, resignation
or otherwise, the Board of Directors may appoint any qualified person to fill
such vacancy, without undue delay, at its next regular meeting or at a special
meeting called for that purpose, except as otherwise provided in the Certificate
of Incorporation.
Section 10. Compensation of Officers.
The officers shall receive such salary or compensation as may
be fixed and determined by the Board of Directors, except as otherwise provided
in the Certificate of Incorporation. No officer shall be precluded
from receiving any compensation by reason of the fact that he is also a
director of the Corporation.
BY-LAWS
10
<PAGE>
ARTICLE IV. CERTTFICATES REPRESENTING SHARES
Section 1. Issue of Certificates Representing Shares.
The President shall cause to be issued to each shareholder one
or more certificates, under the seal of the Corporation, signed by the President
(or Vice-President) and the Treasurer (or Secretary) certifying the number of
shares owned by him in the Corporation. Each certificate shall state upon the
face thereof: (1) That the Corporation is formed under the laws of this state.
(2) The name of the person or persons to whom issued. (3) The number and class
of shares, and the designation of the series, if any, which such certificate
represents. Any restrictions upon transfers imposed by the Corporation should be
conspicuously noted on the certificate.
Section 2. Lost, Destroyed and Stolen Share Certificates.
The holder of any certificate representing shares of the
Corporation shall immediately notify the corporation of any loss, destruction or
wrongful taking of the certificate representing the same. The Corporation may
issue a new certificate in the place of any certificate thereto issued by it,
alleged to have been lost, destroyed or wrongfully taken. On production of such
evidence of loss as the Board of Directors in its discretion may require, the
Board of Directors may require the owner of the missing certificate, or his
legal representatives, to give the Corporation a bond in such sum as the Board
may direct, and with such surety or sureties as may be satisfactory to the
Board, to indemnify the Corporation against any claims, loss, liability or
damage it may suffer on account of the issuance of the new certificate. A new
certificate may be issued without requiring any such evidence or bond when, in
the judgment of the Board of Directors, it is proper so to do.
Section 3. Transfers of Shares.
(a) Transfers of shares of the Corporation shall be made on
the shares records of the Corporation only by the holder of record thereof, in
person or by his duly authorized attorney, upon surrender for cancellation of
the certificate or certificates representing such shares, with an assignment or
power of transfer endorsed thereon or delivered therewith, duly executed, with
such proof of the authenticity of the signature and of authority to transfer and
of payment of transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of
record of any share or shares as the absolute owner thereof for all purposes
and, accordingly, shall not be bound to recognize any legal, equitable or other
claim to, or interest in, such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
BY-LAWS
11
<PAGE>
ARTICLE V. SEAL
The seal of the Corporation shall be as follows:
ARTICLE VI. INDEMNIFICATION.
The Corporation shall indemnify any person, made a party to an
action by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he, his testator or intestate, is or was a director,
officer, or employee of the Corporation, against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred by him in
connection with the defense of such action, or in connection with an appeal
therein, except in relation to matters as to which such person is adjudged to
have breached his duty to the Corporation. The Corporation shall indemnify any
person made a party to an action against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such action, if such person acted in good
faith, for a purpose which he reasonably believed to be in the best interests of
the Corporation, and, in criminal actions, had no reasonable cause to believe
that his conduct was unlawful. Such rights of indemnifiation shall not exclude
other rights to which such person may be entitled.
ARTICLE VII. DIVIDENDS OR OTHER DISTRIBUTIONS
The Corporation, by vote of the Board of Directors, may
declare and pay dividends or make other distributions in cash or its bonds or
its property on its outstanding shares to the extent as provided and permitted
by law, unless contrary to any restriction contained in the Certificate of
Incorporation.
ARTICLE VII. NEGOTIABLE INSTRUMENTS
All checks, notes or other negotiable instruments shall be signed
on behalf of this Corporation by such of the officers, agents and employees as
the Board of Directors may from time to time designate, except as otherwise
provided in the Certificate of Incorporation.
ARTICLE IX. FISCAL YEAR
The fiscal year of the Corporation shall be determined by
resolution of the Board Director.
BY-LAWS
12
<PAGE>
ARTICLE X. AMENDMENTS
Section 1. By Shareholders.
All by-laws of the Corporation shall be subject to alteration
or repeal, and new by-laws may be made, by a majority vote of the shareholders
at the time entitled to vote in the election of directors.
Section 2. By Directors.
The Board of Directors shall have power to make, adopt, alter,
amend and repeal, from time to time, the by-laws of the Corporation; provided,
however, that the shareholders entitled to vote with respect thereto, as in this
Article X above-provided, may alter, amend or repeal by-laws made by the Board
of Directors; except that the Board of Directors shall have no power to change
the quorum for meetings of shareholders or of the Board of Directors, or to
change any provisions of the by-laws with respect to the removal of directors or
the filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the by-law so adopted. amended or repealed, together with a concise statement of
the changes made therein.
ARTICLE XI. OFFICES
The offices of the Corporation shall be located in the City,
County and State designated in the Certificate of Incorporation. The Corporation
may also maintain offices at such other places within or without the United
States as the Board of Directors may, from time to time, determine.
The undersigned Incorporator certifies that he has adopted the
foregoing by-laws as the first by-laws of the Corporation, in accordance with
the requirements of the Business Corporation Law.
Dated:_____________________
------------------------------
Incorporator
BY-LAWS
13
<PAGE>
SCHEDULE 3.04(a)
RIT Financial Statements
<PAGE>
RIT AUTO LEASING GROUP, INC
REPORT ON REVIEW OF COMPARATIVE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<PAGE>
Kornelia M. Seyfried
Certified Public Accountant, P.C.
2103 Deer Park Avenue
Suite 202
Deer Park, New York 11729
--------------------
Tel. 516-242-8194
Fax. 516-242-8209
Rit Auto Leasing Group Inc.
90 Jericho Turnpike
Floral Park, NY 11001
To the Board of Directors:
I have reviewed the accompanying balance sheets and statements of income,
expenses and retained earnings and statements of cash flows for the years ended
December 31, 1997 and 1996 in accordance with standards established by the
American Institute of Certified Public Accountants.
A review of financial information consists principally of obtaining an
understanding of the system for preparation of financial information, applying
analytical review procedures of financial information, inquiries of persons
responsible for financial and accounting matters. It is substantially less in
scope than an examination in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, I do not express such an
opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements for them to be in conformity with
generally accepted accounting principles.
April 15, 1998
Deer Park, New York
<PAGE>
<TABLE>
<CAPTION>
RIT AUTO LEASING GROUP INC.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31,
************************************************************************************************************************************
ASSETS
1997 1996
<S> <C> <C>
Cash in Bank $85,793 $ 46,384
Accounts Offlease Receivable (Net of an allowance of $244,185 & $18,500) 476,471 21,036
Investment in Direct Financing Leases (Note & B) 7,112,736 7,856,396
Vehicle Inventory (Note A) 569,558 743,426
Automobiles held under Operating Leases 634,161 618,512
Net of accumulated depreciation of $555,573 and $303,673
(Note A & B)
Office Furniture & Equipment & leasehold Improvements
Net of Accumulated Depreciation of $45,954 & $30,308 113,046 128,692
Other Assets - Due From Related Party (Note F) 0 0
Security Deposits 7,775 7,775
---------- ----------
Total Assets $8,999,540 $9,152,221
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Loans Payable (Note B) $7,458,486 $7,413,543
Accounts Payable 154,891 83,795
Taxes Payable 5,099 0
Deferred Taxes Payable (Note E) 134,000 445,000
---------- ----------
Total Liabilities 7,752,476 7,942,338
---------- ----------
STOCKHOLDERS' EQUITY
Common Stock (Note A) 150,000 150,000
Retained Earnings 1,097,064 1,059,883
---------- ----------
Total Stockholders' Equity 1,247,064 1,209,883
---------- ----------
Total Liabilities and Stockholders' Equity $8,999,540 $9,152,221
========== ==========
</TABLE>
See Accountants' Review Letter & Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
RIT AUTO LEASING GROUP INC.
COMPARATIVE STATEMENT OF REVENUE, EXPENSES & RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31,
************************************************************************************************************************************
1997 1996
<S> <C> <C>
Leasing Income
Rental Income Operating Leases (Note A- B) $ 262,229 $ 287,760
Amortization of Unearned Lease Income (Note A) 604,198 1,224,562
Gain On Sale of Auto's (Note A-F) 680,832 655,948
---------- ----------
Total Leasing Income 1,547,259 2,168,270
Interest Expense 811,760 814,684
Amortization of Initial Direct Cost 23,798 24,391
Depreciation Expense Operating Leases (Note A- B) 284,538 251,900
---------- ----------
Total Directly Related Leasing Cost 1,120,096 1,090,975
---------- ----------
Gross Profit 427,163 1,077,295
---------- ----------
Operating Expenses:
Salaries & Wages 104,732 117,523
Rent & Related Taxes 75,550 47,648
Promotional & Entertainment 62,820 26,376
Medical and Insurance 40,003 14,764
Telephone & Utilities 19,933 22,307
Professional Fees 18,908 87,481
Depreciation - Furniture 15,646 17,646
Office & Administrative Expense 13,141 27,076
Payroll Taxes 10,425 12,460
Federal Express and Postage 5,055 3,935
Cleaning and Maintenance 1,355 3,853
---------- ----------
Total Operating Expenses 367,568 381,069
---------- ----------
Income From Operations Before Provision for Taxes 59,595 696,226
Provision for Taxes (Note E) 14,000 301,075
---------- ----------
Net Income 45,595 395,151
Retained Earnings - Beginning of Year 1,059,883 53,752
Dividends (8,414) 189,020
---------- ----------
Retained Earnings - End of Year $1,097,064 $1,059,883
========== ==========
</TABLE>
See Accountant's Review Letter & Notes to Financial Statements
<PAGE>
RIT AUTO LEASING GROUP, INC.
COMPARATIVE STATEMENT OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31,
********************************************************************************
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 45,595 $ 395,151
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 300,184 269,546
(Increase) Decrease in:
Accounts Receivable (455,435) 235,394
Inventory (96,132) 170,948
Due from Related Party 0 54,708
Security Deposits 0 (2,000)
Increase (Decrease) in:
Taxes Payable (305,903) 297,563
Accounts Payable 71,096 30,809
Due to Related Party 0 (18,500)
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (440,595) 1,433,619
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Direct Financing Leases 743,660 1,188,200
Investment in Operating Leases (300,187) (201,824)
Purchases of Property and Equipment 0 0
Dividends Paid (8,414) (189,020)
----------- -----------
NET CASH PROVIDED BY (USED) BY INVESTING
ACTIVITIES 435,059 797,356
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
New borrowings 1,783,750 2,898,870
Debt--reduction (1,738,805) (5,126,153)
----------- -----------
NET CASH PROVIDED BY (USED) BY
FINANCING ACTIVITIES 44,945 (2,227,283)
----------- -----------
NET INCREASE (DECREASE) IN CASH 39,409 3,692
CASH AT BEGINNING OF YEAR 46,384 42,692
----------- -----------
CASH AT END OF YEAR $85,793 $46,384
=========== ===========
</TABLE>
See Accountant's Review Report and Notes to Financial Statements
<PAGE>
RIT AUTO LEASING GROUP, INC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
********************************************************************************
NOTE A Summary of Significant Accounting Policies
The company was incorporated under the laws of the State
of New York with an authorized capital of 200 shares
common stock, no par value. The company is engaged in
the arranging of financing of automobiles on a long term
basis.
1) Cash and Cash Equivalents
For purposes of the statement of cash flows, the company
considers cash and cash equivalents to include cash on
hand, amount due from banks and other high liquid debt
instruments purchased with a maturity of three months or
less.
2) Revenue Recognition and Lease Classifications
The company is engaged in long-term leasing of vehicles
with terms generally ranging from twelve to sixty
months. Substantially all vehicles are financed on a
lease by lease basis through recourse notes payable.
Leases are either classified as direct financing leases
or as operating leases.
a) Direct Financing Leases
Includes all leases containing open-end lessee
purchase options and/or bargain purchase options.
Open-end lessee purchase options require each lessee
upon termination to either purchase the related
vehicle for the stated option price or, if returned,
to be responsible for any deficiency between the
stated option price and the eventual amount realized
by the company upon the vehicles disposition.
<PAGE>
RIT AUTO LEASING GROUP, INC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
********************************************************************************
NOTE A Summary of Accounting Policies (continued)
Direct financing leases also include certain leases
containing closed-end Lessee options whereby the company
expects the lessee to purchase (although not a
requirement) the vehicle for the stated option price.
The majority of these leases are situations where large
capital cost reductions were made and/or option prices
are well below the anticipated value of the related
vehicle.
The investment in direct financing leases includes all
future lease payments and the lessee purchase options of
the respective vehicles, net of unearned income.
Revenue under the direct financing leases is accounted
for by recognizing the excess of aggregate rentals
receivable and lessee purchase options over the cost of
the leased vehicles during the term of the lease in
decreasing amounts related to the declining balance of
the unrecovered cost.
b) Operating Leases
Operating leases consists of vehicles which do not meet
the direct financing lease criteria. The majority of
these leases contain closed-end lessee purchase options,
or closed end leases with no purchase option.
Vehicles which are classified as operating leases are
stated at cost less accumulated depreciation and
unamortized capital cost reduction payment.
Depreciation is computed on a straight-line basis over
the terms of the leases to estimated residual values at
expiration of the lease periods.
Rentals from operating leases are recognized as revenue
over the life of the lease on the straight-line basis
and expenses are charged against such revenue as
incurred.
Initial lessee capital cost reduction payments are
amortized on a straight line basis consistent with
depreciation periods.
Initial direct costs are included as a component of the
equipment held and are amortized on a straight-line
basis over the lives of the related leases.
<PAGE>
RIT AUTO LEASING GROUP, INC.
NOTES TO COMPARATIVE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
********************************************************************************
NOTE A Summary of Accounting Policies (continued)
c) Vehicle Inventory
Represents vehicles returned upon lease termination's
and held for sale or re-lease. Amounts are stated at the
lower of net book value or market. It is management's
estimate that the fair market value of their offlease
and paid off vehicles is $698,000.00. Subsequent to the
issuance of this report, the Company has liquidated
$190,950 of this inventory.
d) Property and Equipment
Depreciation of property and equipment is computed on
the straight-line method over the estimated useful lives
of the related assets.
e) Net Leasing Income
Income from leasing activities includes revenues from
direct financing leases, rentals from operating leases
and proceeds from sales of vehicles. Cost and expenses
primarily represent the net book value of vehicles sold.
f) Gain on Sale of Autos'
Represents the net gain derived from the sale of auto's
classified as operating leases.
1997 1996
Gross Sales Proceeds $860,382 $826,916
Net Depreciated Basis $179,550 $170,948
-------- --------
Gain on Sale $680,832 $655,968
-------- --------
NOTE B Investment in Direct Financing Leases
The investment in direct financing leases consists of
the following.
1997 1996
Future Lease payments $6,213,946 $7,406,264
Lease purchase Options 2,583,711 2,338,820
---------- ----------
$8,797,657 $9,745,084
Unearned income (net of
unamortized initial direct
costs) 1,708,359 1,888,688
---------- ----------
$7,112,736 $7,856,396
========== ==========
In the opinion of Management, no allowance for
uncollectibles was deemed necessary.
Future Lease payments and lessee purchase options due
are summarized as follows:
<PAGE>
RIT AUTO LEASING GROUP INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
********************************************************************************
NOTE B Investment In Direct Financing Leases (continued)
Year ending December 31 1997 1996
-----------------------
1996 $ -0- $2,241,639
1997 3,325,912 2,319,083
1998 2,089,617 2,093,112
1999 1,297,621 1,297,863
2000 892,001 1,195,040
2001 619,221 598,347
2002 573,285 -0-
---------- ----------
$8,797,657 $9,745,084
========== ==========
NOTE C Operating Leases
Future minimum rental payments due, (excluding
unguaranteed residual values of approximately $244,905
and $378,125) are summarized as follows:
Year ending December 31 1997 1996
-----------------------
1997 $ -0- $231,435
1998 239,070 185,148
1999 191,111 111,089
2000 114,753 92,574
2001 95,114 46,287
2002 24,237 -0-
-------- --------
$664,285 $666,533
======== ========
NOTE D Loans Payable
Represents borrowings for leased vehicles under several
separate credit facilities which are materially identical
in their terms and conditions. The obligations are
collateralized by the leases and first lien on each
vehicle. The shareholders have also guaranteed the loans.
The obligations are payable on a monthly basis. Interest
range from 8% to 14% per annum.
<PAGE>
RIT AUTO LEASING GROUP INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
********************************************************************************
NOTE E Income Taxes
Income taxes are provided for the tax effects of the
transactions reported on the financial statements and consists
of taxes currently due, plus deferred taxes. Deferred taxes
are recorded to provide for differences between the basis of
assets and liabilities for financial and income tax purposes.
The differences relate to, primarily, to revenue recognition
and depreciation expense for assets for leasing transactions.
The deferred taxes payable represent the future tax
consequences of those differences. These differences will be
taxable when the liability is settled.
NOTE F Related Party Transactions
The Company leases space from a related party. The minimum
annual rental payments are $72,000. per annum, plus
escalation's. In 1997 and 1996 rent expenses to the related
party was $75,550 and $47,648 respectively.
<PAGE>
SCHEDULE 3.04(b)
RIT Income Tax Returns
<PAGE>
SCHEDULE 3.08
RIT Litigation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the interim
financial statements of Royal Acceptance Corporation and Subsidiary as at and
for the nine months September 30, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 38,932
<SECURITIES> 0
<RECEIVABLES> 990,969
<ALLOWANCES> 0
<INVENTORY> 1,158,061
<CURRENT-ASSETS> 9,048,512
<PP&E> 193,035
<DEPRECIATION> 73,779
<TOTAL-ASSETS> 26,074,923
<CURRENT-LIABILITIES> 6,383,658
<BONDS> 0
0
0
<COMMON> 7,494
<OTHER-SE> 1,207,887
<TOTAL-LIABILITY-AND-EQUITY> 26,074,923
<SALES> 0
<TOTAL-REVENUES> 2,919,949
<CGS> 0
<TOTAL-COSTS> 1,152,677
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,315,308
<INCOME-PRETAX> 451,964
<INCOME-TAX> 221,000
<INCOME-CONTINUING> 230,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 230,964
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
