SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
(x) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-1665
DCAP GROUP, INC.
(Name of small business issuer in its charter)
Delaware 36-2476480
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
90 Merrick Avenue, East Meadow, New York 11554
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (516) 794-6300
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
none
Securities registered under Section 12(g) of the
Exchange Act:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No .
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.(X)
State issuer's revenues for its most recent fiscal year: $1,031,033
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days: $3,931,344 as of February 28, 1999
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No .
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 11,780,260 shares as of
February 28, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
During 1998 and prior to February 25, 1999, the sole business of DCAP
Group, Inc. (formerly EXTECH Corporation) (the "Company") was the operation,
through a wholly-owned subsidiary, IAH, Inc., of the International Airport Hotel
in San Juan, Puerto Rico (the "Hotel"). See "International Airport Hotel" in
Item 1(b) hereof.
On February 25, 1999, pursuant to an Agreement, dated as of May 8,
1998, by and among the Company, Morton L. Certilman, Jay M. Haft, Kevin Lang and
Abraham Weinzimer (Messrs. Lang and Weinzimer are sometimes referred to
collectively as the "DCAP Shareholders"), as amended (the "DCAP Agreement"), the
Company acquired from the DCAP Shareholders all of the issued and outstanding
shares of Common Stock of Dealers Choice Automotive Planning Inc. ("DCAP") as
well as interests held by them in certain companies affiliated with DCAP
(collectively with DCAP, the "DCAP Companies"). The DCAP Companies are engaged
primarily in placing various types of insurance, including automobile,
motorcycle, boat, life, business and homeowner's insurance, with insurance
underwriters on behalf of their customers. In addition, the DCAP Companies offer
income tax return preparation services and automobile club services for roadside
emergencies. The DCAP Companies also provide services with regard to obtaining
insurance premium financing from a third party, and intend to provide similar
services with regard to personal and automobile loans. The DCAP Companies also
intend to provide direct insurance premium financing services and mortgage
brokerage services to their clients.
Between November 1997 (at the time of the execution of a letter of
intent with respect to the acquisition of the DCAP Companies (the "DCAP
Acquisition")) and the closing, the Company loaned to DCAP the aggregate net sum
of $885,000 for working capital purposes.
At the closing of the DCAP Agreement, and pursuant to the terms
thereof, the following transactions and events, among others, occurred:
(i) Messrs. Lang and Weinzimer transferred all of the outstanding
shares of Common Stock of DCAP as well as all of their holdings
in the other DCAP Companies (generally ranging between 50% and
100%) (collectively, the "DCAP Shares") to the Company, and the
Company issued 1,650,000 Common Shares to each of them (an
aggregate of 3,300,000 Common Shares).
(ii) Messrs. Lang and Weinzimer each purchased from the Company
475,000 Common Shares (an aggregate of 950,000 Common Shares) at
a purchase price of $.25 per share.
(iii)Messrs. Certilman and Haft (or their designees) each purchased
from the Company 226,000 Common Shares (an aggregate of 452,000
Common Shares) at a purchase price of $.25 per share.
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(iv) Messrs. Certilman, Haft, Lang and Weinzimer (or their designees)
each purchased 450,000 Common Shares of the Company (an aggregate
of 1,800,000 Common Shares) (the "Sterling Foster Shares"),
beneficially owned by Sterling Foster Holding Corp. ("Sterling
Foster") and held by Mr. Certilman as voting trustee pursuant to
a voting trust agreement with Sterling Foster, at a purchase
price of $.25 per share. Mr. Certilman did not receive any
portion of such purchase price. Concurrently with the purchase of
the Sterling Foster Shares, the voting trust agreement
terminated.
(v) The Company loaned to each of Messrs. Lang and Weinzimer the sum
of $112,500 (an aggregate of $225,000) (the "Closing Loans"). The
proceeds of the Closing Loans were used by Messrs. Lang and
Weinzimer solely for the purpose of acquiring their respective
Sterling Foster Shares.
(vi) Messrs. Certilman, Haft, Lang and Weinzimer entered into
employment agreements with the Company and were granted stock
options in connection therewith.
(vii)The size of the Board of Directors of the Company was initially
increased to four, Leon Lapidus resigned as a director of the
Company, and Messrs. Lang and Weinzimer were appointed as
directors thereof.
(viii) Messrs. Lang and Weinzimer were appointed President
and Executive Vice President of the Company. Messrs.
Certilman and Haft, formerly President and Chairman
of the Board, respectively, were appointed Chairman
of the Board and Vice Chairman of the Board,
respectively.
(ix) The Company changed its name to DCAP Group, Inc.
Concurrently with the closing of the DCAP Agreement, pursuant to a
Subscription Agreement, dated as of October 2, 1998, as amended (the "Eagle
Agreement"), the Company issued and sold to Eagle Insurance Company ("Eagle")
1,486,893 Common Shares for an aggregate purchase price of approximately
$1,000,000, or $.67 per share (the "Eagle Issuance").
Eagle is a New Jersey insurance company wholly-owned by The Robert Plan
Corporation ("The Robert Plan"), an insurance holding company that is engaged in
providing services to insurance companies. Pursuant to separate agency
agreements between certain DCAP Companies and certain insurance company
subsidiaries of The Robert Plan, such DCAP Companies have been appointed agents
of the insurance companies with regard to the offering of automobile and other
insurance products.
Pursuant to the Eagle Agreement, at the closing of the DCAP Agreement,
the size of the Board of Directors of the Company was increased further to five
and Robert M. Wallach, Eagle's Vice President and the President, Chairman and
Chief Executive Officer of The Robert Plan, was appointed as a member of the
Board of Directors.
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Reference is made to Items 10 and 12 hereof for further information
with regard to the DCAP Agreement and the Eagle Issuance.
(b) Business of Issuer
General
The Company, through the DCAP Companies, is engaged primarily in
placing various types of insurance, including automobile, motorcycle, boat,
life, business and homeowner's insurance, with insurance underwriters on behalf
of its customers. In addition, the DCAP Companies offer income tax return
preparation services and automobile club services for roadside emergencies. The
DCAP Companies also provide services with regard to obtaining insurance premium
financing from a third party, and intend to provide similar services with regard
to personal and automobile loans. The DCAP Companies also intend to provide
direct insurance premium financing services and mortgage brokerage services to
their clients.
The Company is compensated for its insurance-related services by
commissions paid by insurance companies; the commission is usually a percentage
of the premium paid by the insured. The Company does not engage in underwriting
activities and therefore does not assume underwriting risks.
There are 56 "DCAP" offices in the New York metropolitan area. Five are
wholly-owned by the Company (each a "wholly-owned office"). Twenty-three are
owned partially by the Company (directly or beneficially, generally ranging
between 50% and 67%) and partially by other persons who generally operate the
location (the "joint venture partner") (each a "joint venture office").
Twenty-eight are franchises (each a "franchise"), in which the Company has no
equity interest; the franchisor, DCAP Management Corp., however, is wholly-owned
by the Company.
The Company, through IAH, also operates the International Airport Hotel
in San Juan, Puerto Rico.
DCAP Companies
Insurance Brokerage
Commissions and other amounts received in connection with the selling
of automobile insurance policies, as well as other types of property and
casualty insurance, represent approximately 95% of the revenues of the DCAP
Companies. Initially, the DCAP Companies specialized in offering assigned-risk
and nonstandard insurance policies. Assigned-risk and nonstandard policies are
issued after an analysis of such factors as the driver's accident record, the
kind of car being insured, the age and credit risk of the driver, where the
insured lives, and other items. Over the last several years, the DCAP Companies
have also been marketing and selling standard and preferred policies;
commissions and other amounts received in connection with the issuance of
standard and preferred policies now represents approximately 10% of their auto
insurance revenues. Because DCAP has insurance underwriting relationships with
several nationally known insurance carriers, including Chubb, Travelers,
Progressive Casualty, General Accident, and The Robert Plan (see
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"Eagle" in Item 12 hereof), the DCAP Companies, serving as either brokers or
agents, can offer their customers many carrier and premium options.
The DCAP Companies have established a presence in all five New York
City boroughs, Westchester, Nassau and Suffolk Counties, New York and New Jersey
(see "Locations"). Locations are selected to maximize the attraction of
"walk-in" retail customers, i.e., customers without an established relationship
with the DCAP Companies and who come to the store without an appointment. Such
customers constitute the majority of the DCAP Companies' business.
In addition to automobile insurance brokerage, the DCAP Companies offer
property and casualty insurance for motorcycles and boats, life and mortgage
insurance, commercial property insurance, and homeowner's insurance. The DCAP
Companies also offer agency and brokerage services with regard to the obtaining
of premium financing from a third party (see "Premium Financing" below), as well
as personal and automobile loans, and intend to offer mortgage brokerage
services.
DCAP has obtained the right to receive calls placed to
"1-800-insurance" in the states of New York, New Jersey, Connecticut and
Pennsylvania (except for one area code in Pennsylvania) and "1- 888-insurance"
nationwide as a means to increase its insurance brokerage business.
Income Tax Return Preparation
Income tax return preparation services have been provided by a small
number of the DCAP Companies since 1997. The tax return preparation service
allows the DCAP Companies to offer an additional service to the walk-in
customers who comprise the bulk of their customer base, as well as to existing
customers. DCAP has also obtained the right to receive calls placed to
"1-800-income tax" and "1-888-income tax" nationwide as a means to increase its
tax preparation business.
The participating DCAP Companies gather information from filers and
forward it to an unaffiliated third party, which processes the information,
generates returns to be submitted to the Internal Revenue Service and other
taxing authorities, manually or electronically files the returns and processes
any refunds. DCAP uses a wholly-owned subsidiary as an intermediary between the
various DCAP Companies and the third party processor. DCAP management believes
that the provision of this service not only increases the revenues of the DCAP
Companies, but also enhances their presence in the various markets that they
serve and aids in customer retention. The Company expects that greater emphasis
will be placed upon this business operation in the near future.
Premium Financing
Clients who purchase insurance policies are often unable to pay the
premium in a lump sum, or make the required down payment, and, therefore,
require financing. The DCAP Companies currently out source premium financing for
their clients. Based upon the perceived need for premium financing, Payments,
Inc., a wholly-owned subsidiary, was formed and became licensed by the New York
State Banking Department as a premium finance agency. The Company intends to
discontinue outsourcing premium financing needs and offer such service directly
to its customers.
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It is anticipated by the Company that approximately $350,000 in capital
will be utilized to initiate the planned premium finance business. An additional
$2,500,000 in credit availability is being sought in connection therewith.
Although no definitive commitments are in place, this credit availability is
being sought from an institutional lender. The contemplated financing terms
include a secured revolving credit facility in the amount of $2,500,000 and
interest at a rate equal to 1.5% in excess of the prime rate. The contemplated
financing is conditioned upon an initial capitalization of Payments, Inc. by the
Company in the amount of $350,000. It is contemplated that $350,000 of the net
proceeds of the contemplated private placement discussed in Item 6 hereof will
be used for such purpose. No assurance can be given that such credit facility or
other financing will become available, or that, if such alternative financing
does become available, it will be on terms acceptable to the Company.
Automobile Club
As a complement to the automobile insurance operations, the DCAP
Companies offer automobile club services for roadside emergencies. Memberships
are offered by the DCAP Companies for such services, and arrangements are made
with service stations and towing companies to fulfill service call requirements.
Locations
The following reflects the locations of the DCAP offices, the nature of
the ownership (i.e., wholly-owned, joint venture or franchise) and the services
currently being provided by the office:
Office Location Nature of Ownership Services Provided
- - --------------- ------------------- -----------------
New York State
- - --------------
Nassau County
-------------
1905 Hempstead Tpke. Insurance Brokerage
East Meadow Joint Venture Tax Preparation
17-19 West Sunrise Highway Insurance Brokerage
Freeport Joint Venture Tax Preparation
53 Forest Avenue
Glen Cove Franchise Insurance Brokerage
28 Main Street Insurance Brokerage
Hempstead Wholly-owned Tax Preparation
418 South Broadway Insurance Brokerage
Hicksville Joint Venture Tax Preparation
535 Burnside Avenue
Inwood Franchise Insurance Brokerage
8 West Park Avenue
Long Beach Franchise Insurance Brokerage
416 Hillside Avenue
New Hyde Park Franchise Insurance Brokerage
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Office Location Nature of Ownership Services Provided
- - --------------- ------------------- -----------------
3789 Merrick Road Insurance Brokerage
Seaford Joint Venture Tax Preparation
290 W. Merrick Road
Valley Stream Franchise Insurance Brokerage
149 Post Avenue
Westbury Franchise Insurance Brokerage
Suffolk County
--------------
709 North Broadway Insurance Brokerage
Amityville Joint Venture Tax Preparation
779 Suffolk Avenue Insurance Brokerage
Brentwood Joint Venture Tax Preparation
809 Jericho Tpke Insurance Brokerage
Huntington Joint Venture Tax Preparation
2690 Rte. 112 Insurance Brokerage
Medford Joint Venture Tax Preparation
1472 Deer Park Avenue
North Babylon Franchise Insurance Brokerage
1065 Old Country Road
Riverhead Franchise Insurance Brokerage
1116 Middle Country Road
Selden Franchise Insurance Brokerage
861 Montauk Highway
Shirley Franchise Insurance Brokerage
105 East Main Street
Smithtown Franchise Insurance Brokerage
New York City
-------------
Queens
------
29-28 Hoyt Avenue South
Astoria Franchise Insurance Brokerage
43-04A Bell Blvd. Insurance Brokerage
Bayside Joint Venture Tax Preparation
159-03 Northern Blvd. Insurance Brokerage
Flushing Joint Venture Tax Preparation
176-69 Union Tpke.
Fresh Meadows Franchise Insurance Brokerage
89-13 37th Avenue Insurance Brokerage
Jackson Heights Joint Venture Tax Preparation
167-10A Hillside Avenue Insurance Brokerage
Jamaica Wholly-owned Tax Preparation
120-01 Liberty Avenue Insurance Brokerage
Richmond Hill Joint Venture Tax Preparation
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Office Location Nature of Ownership Services Provided
- - --------------- ------------------- -----------------
59-30 Myrtle Avenue Insurance Brokerage
Ridgewood Joint Venture Tax Preparation
86-56 Woodhaven Blvd. Insurance Brokerage
Woodhaven Joint Venture Tax Preparation
60-15 Woodside Avenue Insurance Brokerage
Woodside Joint Venture Tax Preparation
Bronx
-----
1980 East Tremont Avenue Joint Venture Insurance Brokerage
Tax Preparation
3434 Boston Road Joint Venture Insurance Brokerage
Tax Preparation
660 East Fordham Road Franchise Insurance Brokerage
318B East 149th Street Franchise Insurance Brokerage
1363 Jerome Avenue Franchise Insurance Brokerage
Brooklyn
--------
2300 86th Street
Bensenhurst Franchise Insurance Brokerage
5110 16th Avenue
Borough Park Franchise Insurance Brokerage
2875 West 8th Street
Coney Island Franchise Insurance Brokerage
318A Utica Avenue
Crown Heights Franchise Insurance Brokerage
483 Hudson Avenue Insurance Brokerage
Downtown Brooklyn Wholly-owned Tax Preparation
330 McGuiness Blvd.
Greenpoint Franchise Insurance Brokerage
4501 5th Avenue
Sunset Park Franchise Insurance Brokerage
Staten Island
-------------
2048 Victory Blvd. Joint Venture Insurance Brokerage
Tax Preparation
Manhattan
---------
90 Worth Street Insurance Brokerage
Downtown Joint Venture Tax Preparation
667 Amsterdam Avenue Insurance Brokerage
Uptown Joint Venture Tax Preparation
62 9th Avenue
West Side Franchise Insurance Brokerage
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790 11th Avenue
West Side Franchise Insurance Brokerage
203 Dyckman Street
Washington Heights Franchise Insurance Brokerage
Westchester County
------------------
295 Main Street
Mount Kisco Franchise Insurance Brokerage
680 Main Street
New Rochelle Franchise Insurance Brokerage
1045 Park Street Insurance Brokerage
Peekskill Wholly-owned Tax Preparation
728 Central Avenue
Scarsdale Franchise Insurance Brokerage
200 Hamilton Avenue Insurance Brokerage
White Plains Wholly-owned Tax Preparation
6KA Mall Walk Insurance Brokerage
Yonkers Joint Venture Tax Preparation
New Jersey
- - ----------
119-131 Rte. 22 East Insurance Brokerage
Greenbrook Joint Venture Tax Preparation
109 Main Street Insurance Brokerage
Hackensack Joint Venture Tax Preparation
Structure and Operations
As indicated above, of the 56 "DCAP" offices, five are wholly-owned
offices, 23 are joint venture offices and 28 are franchises. The joint venture
offices and franchises consist of both "conversion" operations, i.e., where an
existing insurance brokerage with an established business becomes a DCAP office,
and "startup" operations, i.e., where an entrepreneur commences business
operations as a DCAP office. The wholly-owned offices are managed by persons
employed by the respective DCAP Company; each joint venture office is managed
either by the joint venture partner or a person employed by the DCAP Company;
and each franchise is managed by or under the supervision of the franchisee.
To promote consistency and efficiency, all DCAP office managers
(including a joint venture partner, if a manager) are trained by DCAP. The DCAP
training program covers marketing and sales training, office and logistics
training, and extensive computer training, including training with regard to the
DCAP Management System described below.
DCAP provides the administrative services and functions of a "central
office" to the wholly-owned and joint venture offices. Among the services
rendered to these storefront offices are sales
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training, bookkeeping and accounting, processing services and customer service
functions provided primarily in connection with insurance policy brokerage. DCAP
has approximately 25 employees engaged in the provision of "central office"
services. Franchises operate without the assistance of DCAP's "central office"
functions.
The DCAP staff also provides to all stores management support services
that include assistance with regard to the hiring of employees and the writing
of local advertising, and advice concerning appropriate potential carriers for
particular customers. DCAP also manages the cooperative advertising program in
which all of the DCAP offices participate.
In addition to the above services, DCAP provides to all DCAP offices a
direct business relationship with nationally-known and local insurance carriers
that would otherwise be beyond the reach of small, privately-owned retail
insurance operations. As a result, an individual DCAP office can offer policy
and premium options to its customers that other local insurance brokerages
cannot. This direct relationship is enhanced by a software system, known as the
DCAP Management System ("DMS"), that provides a direct link to certain carrier
databases. DMS enables each DCAP office to access policy coverage and cost
information, application requirements, and other kinds of information. It also
enables the DCAP offices' brokers to search various databases to obtain
pertinent information about potential customers.
Strategy
The Company seeks to achieve an increase in market share through a
three-pronged strategy of (i) increasing name recognition, (ii) expanding and
diversifying the products and services offered by the DCAP offices, and (iii)
utilizing toll-free telephone numbers.
Increased name recognition will be pursued through the establishment of
additional DCAP storefront sites (both conversion and start-up types), combined
with increased marketing activities such as a proposed consumer education
newsletter. In addition, the cooperative advertising program will continue to
use the aggregated buying power of the DCAP offices to advertise in various
editions of directories, in automobile sales and other publications and on the
radio.
The second strategy, expanding and diversifying the products and
services offered, will capitalize on the nature of the typical DCAP customer. It
is contemplated that such person, the "walk-in" customer, will be offered not
only a variety of automobile insurance products, but, as noted above, additional
types of insurance currently offered, including life, mortgage, commercial
property and homeowner's insurance, other brokerage services with regard to
personal and automobile loans, and other services, including an income tax
return processing program, a premium financing service and a mortgage brokerage
service.
The final strategy, utilizing toll-free telephone numbers, has been
recently instituted. Telephone calls received are routed to the DCAP office
nearest the call (based on the zip code of the caller) for handling. DCAP is
promoting "1-800-insurance" and "1-800-income tax" in its current
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markets and intends to utilize such numbers, as well as "1-888-insurance" and
"1-888-income tax," in the future as its market expands.
International Airport Hotel
General
The Company, through IAH, operates the International Airport Hotel in
San Juan, Puerto Rico (the "Hotel"). The Hotel is located on the site of the San
Juan International Airport (the "Airport") and occupies the third and fifth
floors of the main terminal building. In addition to its 57 guest rooms, the
Hotel has a lobby area. The Hotel caters generally to commercial and tourist
travelers in transit; it is marketed through brochures, local advertising and
in-airport advertising. IAH also operates a video game room on the terminal
level of the Airport. The operations of the Hotel are highly seasonal, with a
disproportionate share of its revenues generated during the first several months
of the calendar year. Approximately 11% of the total room sales for the Hotel
for 1998 were attributable to one customer, American Airlines. During 1998, the
Hotel's average occupancy rate was approximately 61%. From 1994 to 1997, the
average occupancy rate was approximately 60%. The Hotel's average room rate
during 1998 was approximately $73.
The Hotel is the only hotel actually located on the site of the
Airport. As such, it has little direct competition for the tourist trade or
commercial travelers seeking only sleeping accommodations at the Airport. The
Puerto Rico Ports Authority (the "Ports Authority"), the owner of the Airport,
had authorized the construction of an additional hotel in the parking lot of the
Airport; however, the Ports Authority has advised IAH that it has abandoned that
plan and instead has determined to upgrade and expand the Hotel. No assurance
can be given, however, that an additional hotel or hotels will not be developed
at the site of, or near, the Airport, in which case IAH could encounter
significant competition with respect to the operations of the Hotel.
Dispute with Ports Authority
On July 22, 1988, IAH entered into a lease agreement with the Ports
Authority pursuant to which the Ports Authority granted IAH a lease to operate
the Hotel for five years until June 30, 1993, plus, at the option of IAH, an
additional five year term to end June 30, 1998 (subject to agreement as to the
rental amount payable, which the parties agreed to negotiate in good faith).
In 1992, in accordance with the lease agreement, IAH exercised its
right for a five year extension of its lease. At the time, the Ports Authority
was uncertain as to whether it wished to build a new hotel in the parking lot of
the Airport or upgrade the Hotel and, therefore, requested that IAH accept a 30
month extension of the then existing term. IAH agreed to a 30 month extension
and signed a supplemental lease agreement with the Ports Authority in May 1992
extending the lease term to December 31, 1995. IAH is of the belief that,
pursuant to the supplemental lease agreement, it retained the option to continue
the lease for a period of five years to December 31, 2000.
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In July 1993, the Assistant Director of Operations of the Ports
Authority forwarded to IAH a letter containing the terms of a proposed ten year
lease extension (the "Proposed Extension Letter") which IAH approved, signed and
returned to the Ports Authority. Although the Proposed Extension Letter does not
make the Ports Authority's approval conditional upon the approval of its Board
of Directors, the Ports Authority has taken such position and, since Board of
Directors approval was not obtained, the Ports Authority contends that the
extension is not in effect. IAH is of the belief that a ten year agreement has
been entered into between IAH and the Ports Authority pursuant to the Proposed
Extension Letter or that, alternatively, it exercised its right to extend the
term of the lease to December 31, 2000.
Based upon IAH's refusal to acknowledge that, effective January 1,
1996, it occupied the Hotel on a month-to-month basis, in February 1996, the
Ports Authority requested that IAH vacate, surrender and deliver the premises by
February 29, 1996. Following the receipt of such request, on February 26, 1996,
IAH brought an action in the Superior Court of San Juan, Puerto Rico for
declaratory judgment and possessory injunction against the Ports Authority with
respect to the Hotel. The action seeks a declaratory judgment that IAH exercised
an option with respect to its lease for the Hotel for an extension of the term
of five years commencing on January 1, 1996 or, in the alternative, that the
Ports Authority executed a new lease agreement for a ten year period commencing
on such date. Certain discovery proceedings have taken place, and the action is
still pending. IAH has continued to operate the Hotel during the pendency of the
action.
In seeking to protect its interests under the original lease agreement,
as extended, in April 1997, IAH purchased a bank certificate of deposit in the
amount of $40,000 and pledged it to the Ports Authority as security for the
payment of amounts due under the lease agreement, as required by the terms
thereof (but which previously had not been delivered).
Employees
The Company and its subsidiaries employ approximately 115 persons, none
of whom are represented by a collective bargaining organization. The Company
believes that its relationship with its employees is good.
ITEM 2. DESCRIPTION OF PROPERTY
The executive offices of the Company are located at 90 Merrick Avenue,
East Meadow, New York where approximately 200 square feet of space are occupied
on a month-to-month basis at a monthly rental of $500.
DCAP's executive offices are located at 2545 Hempstead Turnpike, East
Meadow, New York. The 29 wholly-owned or joint venture "DCAP" offices (including
DCAP's executive offices) are operated pursuant to leases that expire from time
to time through 2006 and provide for an aggregate base rental of approximately
$775,000 per annum.
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The Hotel is leased by IAH from the Ports Authority. The annual rental
obligation for the Hotel equals the greater of $169,400 or 20% of annual gross
revenues, as defined. Total rent expense under the lease amounted to $184,634
for 1998 as compared to $181,178 for 1997. See "International Airport Hotel -
Dispute with Ports Authority" in Item 1(b) hereof.
Reference is made to "International Airport Hotel - Dispute with Ports
Authority" in Item 1(b) hereof for a discussion of certain pending litigation
with regard to IAH's lease rights in the Hotel.
ITEM 3. LEGAL PROCEEDINGS
In November, 1996, an action was commenced in the United States
District Court for the Eastern District of Pennsylvania by Regent National Bank
("Regent") against DCAP and Payments, Inc. alleging that DCAP and Payments, Inc.
breached a certain contract in connection with Regent's agreement to provide
funding to finance the purchase of automobile insurance for customers of DCAP,
Payments, Inc. and affiliated agencies. Subsequently, Regent amended its
pleading to add Kevin Lang and Abraham Weinzimer, DCAP's principals, as
defendants. Regent claims that the defendants are liable to it for the losses
Regent allegedly suffered as a result of unpaid loans made through DCAP
agencies. Regent claims damages in excess of $800,000. DCAP and Payments, Inc.
have interposed several affirmative defenses and have asserted counterclaims
against Regent for breach of contract and fraud. DCAP and Payments, Inc. seek
damages of $40,000. The court is currently considering motions for summary
judgment. DCAP believes that it has meritorious defenses to Regent's claims and
intends to continue to defend and pursue its counterclaim vigorously. In March
1997, DCAP, Payments, Inc. and their affiliated agencies brought a separate
action against, among others, Regent in the Supreme Court of the State of New
York alleging, among other things, breach of contract, negligence and fraud and
seeking damages of at least $2,000,000 as well as punitive damages in the amount
of $2,000,000. Such action has been stayed pending the resolution of the
Pennsylvania action.
Reference is made to "International Airport Hotel - Dispute with Ports
Authority" in Item 1(b) hereof for a discussion of a certain action brought with
respect to the term of the Hotel lease.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the stockholders of the
Company during the last quarter of the fiscal year ended December 31, 1998.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
The Company's Common Shares are traded on the NASD OTC Electronic
Bulletin Board (the "Bulletin Board") under the symbol "DCAP". The following
table sets forth, for the periods indicated, the high and low closing bid prices
for the Company's Common Shares as reported by the Bulletin Board:
1998 Calendar Year High Low
First Quarter $ 3/4 $11/16
Second Quarter 13/16 9/16
Third Quarter 1-13/16 5/8
Fourth Quarter 2-3/8 3/4
1997 Calendar Year High Low
First Quarter $ 1/2 $ 3/8
Second Quarter 1/2 1/2
Third Quarter 1-1/4 1/2
Fourth Quarter 1-5/16 11/16
The above quotations reflect interdealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
(b) Holders
As of March 15, 1999, there were approximately 3,000 record holders of
the Company's Common Shares.
(c) Dividends
Holders of the Company's Common Shares are entitled to dividends when,
as and if declared by the Board of Directors out of funds legally available
therefor. The Company has not declared or paid any dividends in the past and
does not currently anticipate declaring or paying any dividends in the
foreseeable future. The Company intends to retain earnings, if any, to finance
the development and expansion of its business. Future dividend policy will be
subject to the discretion of the Board of Directors and will be contingent upon
future earnings, if any, the Company's
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financial condition and capital requirements, and general business conditions
and other factors. Therefore, there can be no assurance that dividends will ever
be paid.
(d) Recent Sales of Unregistered Securities
Not applicable.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Results of Operations:
In 1998, the Company had total revenues of $1,031,033 and a net loss of
$111,581 as compared to revenues of $996,618 and a net loss of $143,992 for
1997.
Room rental and other departmental revenue for the Hotel increased by
$13,278 (1.4%) during 1998. The net profit for the Hotel, on a "stand-alone"
basis, was $116,379 in 1998 as compared to $96,876 in 1997.
Interest income increased by $21,137 from 1997 to 1998 as a result of
loans made to DCAP in 1997 and 1998 in the aggregate amount of $782,000 which
bore interest at the rate of 10% per annum. See Item 1(a) hereof.
In 1998, the Company incurred costs and expenses of $1,138,284 as
compared to $1,136,616 in 1997, representing an increase of $1,668. The increase
was attributable primarily to an increase in bad debt and departmental costs and
expenses and was offset by a decrease in corporate and sundry, administrative
and general, and depreciation and amortization costs and expenses.
Reference is made to Item 1(a) hereof for a discussion regarding the
acquisition of DCAP and related entities. Reference is also made to
"International Airport Hotel - Dispute with Ports Authority" in Item 1(b) hereof
for a discussion of a certain litigation with the Ports Authority with regard to
the Hotel.
Liquidity and Capital Resources:
As of December 31, 1998, the Company had $353,431 in cash and cash
equivalents as compared to $1,040,389 in 1997, representing a decrease of
$686,958. Such decrease was primarily the result of the loans in the aggregate
amount of $457,000 made during 1998 to DCAP as discussed under Item 1(a) hereof.
As of December 31, 1998, the Company had a working capital surplus of
$1,064,590. Such working capital surplus included a note receivable (including
accrued interest) of $846,362 from DCAP (now a wholly-owned subsidiary of the
Company) which would be eliminated in
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consolidation. As of December 31, 1997, the Company had a working capital
surplus of $1,150,732. As of December 31, 1998, the Company had no material
commitments for capital expenditures.
The Company is seeking to obtain a line of credit in the amount of
$250,000 for working capital purposes. No assurances can be given that such line
of credit will be obtained.
Reference is also made to Item 1(b) hereof for a discussion of certain
litigation with the Ports Authority with regard to the Hotel.
Subsequent Events:
As discussed in Item 1(a) hereof, on February 25, 1999, the Company
acquired all the outstanding stock of DCAP as well as interests in related
entities. In connection with the DCAP Acquisition, Messrs. Certilman and Haft
and their affiliates purchased Common Shares of the Company for an aggregate
purchase price of $113,000, and the Company loaned to Messrs. Lang and Weinzimer
an aggregate of $225,000 in connection with their purchase of Common Shares of
the Company from a third party. In addition, concurrently with the closing of
the DCAP Agreement, Eagle purchased Common Shares of the Company for a purchase
price of approximately $1,000,000.
As of September 30, 1998, the combined stockholders' deficit of the
DCAP Companies (unaudited) was $1,444,246. In addition, on a preliminary
unaudited basis, during the year ended December 31, 1998, the DCAP Companies had
a loss before provision for income taxes and minority interest of approximately
$1,400,000. During the nine months ended September 30, 1998 (unaudited), such
loss was $554,181. Based upon the foregoing, the Company requires additional
financing to meet its cash flow needs.
In January 1999, the Company entered into a letter of intent with
respect to a private placement of its equity securities. The Company intends to
offer, through a placement agent, up to 40 Units (consisting of Common Shares
and warrants) at a purchase price of $50,000 per Unit (or an aggregate offering
of up to $2,000,000). The proceeds of the maximum offering are intended to be
used for advertising, DCAP's premium finance operations (see Item 1(b) hereof),
computer upgrades and working capital purposes. No assurances can be given that
the offering will be consummated.
The securities offered in the private placement will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered or sold in the United States absent registration under the Securities
Act or an exemption from the registration requirements thereof. The letter of
intent provides for the grant of certain registration rights to the purchasers
of the offered securities.
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Year 2000:
DCAP Companies
The Year 2000 ("Y2K") problem is the result of computer programs being
written using two digits, rather than four, to define the applicable year. Any
of the programs of the DCAP Companies that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000, which
could result in miscalculations or system failures. DCAP has implemented a Y2K
compliance program designed to ensure that its computer systems, applications
and embedded operating systems will function properly beyond 1999. DCAP believes
that all of its "mission critical" systems have been identified, and will be
brought into compliance in a timely fashion.
There are only two information technology ("IT") systems that require
Y2K analysis. One of these is in DCAP's headquarters and is already Y2K
compliant. The second is the storefront point of sale system, to which each DCAP
store is connected; currently, this system is not compliant. DCAP believes that
this second IT system will be fully compliant by the end of the third quarter of
1999.
The remediation of the storefront computer system will be accomplished
by the installation of an entirely new system of leased computers The lease
agreement obligates DCAP to make payments totaling $92,000. It is anticipated
that this cost will be expensed as incurred and funded through cash from
operations. The programs that have been installed in these computers have been
tested by an independent third party with whom DCAP has had a maintenance
contract for the past four years. The testing of the storefront computer system,
which occurred prior to installation, has been completed. Other than the testing
of the new storefront computer system, DCAP does not anticipate any independent
verification of its Y2K readiness.
The only material non-IT system which might be impacted by the Y2K
problem is DCAP's telephone system. DCAP has been assured by the manufacturer of
the system that it has addressed its Y2K problems, and that it is prepared to
upgrade the DCAP phone system, at a cost of $5,000, in order to make the system
Y2K compliant. DCAP management has not yet determined whether to upgrade its
phone system through an agreement with the manufacturer, or otherwise, but it
anticipates that this single non-IT Y2K issue will be fully remediated by the
end of the second quarter of 1999. An inventory and assessment of other
potential non-IT systems, which could have an impact on the business,
operations, and financial position of the DCAP Companies, has been completed by
the management of DCAP. It was determined that no other non-IT systems will pose
any Y2K problem.
DCAP's executive management has been contacted by all of the major
insurance carriers with which it does a significant amount of business. Most of
these major carriers, such as Chubb and Travelers, have notified DCAP that their
Y2K compliance programs are at or near completion, and DCAP therefore
anticipates no Y2K problems with these parties. The object of the contacts by
these companies was to ensure that DCAP itself would be Y2K compliant, in order
to ensure the
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orderly continuation of business with them. DCAP anticipates receiving similar
communications from all of the major carriers with which it deals by the end of
the third quarter of 1999. However, neither the Company nor the management of
DCAP can assure that the systems of these insurance carriers, upon which the
business of the DCAP Companies depends, will be Y2K compliant on a timely basis.
DCAP is developing contingency plans designed to enable it to continue its
operations in the event of the loss of business from one or more of these
carriers or due to other third party failures.
DCAP's management intends to develop a "worst-case scenario" with
respect to Y2K non-compliance and to develop contingency plans designed to
minimize the effects of such scenario. Both the worst-case scenario and the
contingency plan will involve analysis of (i) the use of alternative sources of
insurance coverage (of which DCAP has several) in the event of the loss of
availability of one or more major carriers, and (ii) the use of alternative,
non-IT methods of processing applications, including manual processing, in the
event of IT-system failure on the part of outside parties. The executive
management of DCAP intends to have its worst-case scenario and contingency plan
fully developed and completely in place by the end of the second quarter of
1999.
Hotel Operations
The Company's wholly-owned subsidiary, IAH, Inc. ("IAH"), operates the
International Airport Hotel (the "Hotel") at San Juan International Airport,
Puerto Rico. IAH does not have any IT systems. Of the non-IT systems that
comprise part of the Hotel's operations, the switchboard is the only such system
that contains imbedded technology not Y2K - compliant. The Hotel has a plan in
place, which is designed to avoid any Y2K difficulties, both before and after
January 1, 2000. The plan consists primarily of a series of physical and
practical alterations in the Hotel's switchboard procedures, and does not
involve any replacement of equipment or any significant effort or cost. All
other non-IT systems are operated manually.
ITEM 7. FINANCIAL STATEMENTS
- - ------- --------------------
The financial statements required by this Item 7 are included in this
Annual Report on Form 10-KSB following Item 13 hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
- - ---------------------------------------------------------
There were no changes in accountants due to disagreements on accounting
and financial disclosure during the twenty-four month period ended December 31,
1998.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
- - ---------------------------------------------------------------
Executive Officers and Directors
The names and ages of, and the positions held by, the executive
officers and directors of the Company are set forth below.
Name Age Position Held
---- --- -------------
Morton L. Certilman 67 Chairman of the Board
and Director
Jay M. Haft 63 Vice Chairman of the Board
and Director
Kevin Lang 40 President and Director
Abraham Weinzimer 41 Executive Vice President
and Director
Robert M. Wallach 46 Director
Brian K. Ziegler 44 Secretary
Morton L. Certilman
Mr. Certilman was elected Chairman of the Board of the Company in
February 1999 concurrently with the closing of the DCAP Acquisition. Prior
thereto and from October 1989, he served as the Company's President. He has also
served as a director of the Company since October 1989. Mr. Certilman has been
engaged in the practice of law since 1956 and is a member of the law firm of
Certilman Balin Adler & Hyman, LLP. Mr. Certilman is Chairman of the Long Island
Regional Planning Board, the Nassau County Coliseum Privatization Commission,
and the Northrop/Grumman Master Planning Council, and is a director of the Long
Island Association, the New Long Island Partnership and the Long Island Sports
Commission. Mr. Certilman has lectured extensively before bar associations,
builders' institutes, title companies, real estate institutes, banking and law
school seminars, The Practicing Law Institute, The Institute of Real Estate
Management and at annual conventions of such organizations as the National
Association of Home Builders, the Community Associations Institute and the
National Association of Corporate Real Estate Executives. He was a member of the
faculty of the American Law Institute/American Bar Association, as well as the
Institute on Condominium and Cluster Developments of the University of Miami Law
Center.
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Mr. Certilman has written various articles in the condominium field, is the
author of the New York State Bar Association Condominium Cassette and the
Condominium portion of the State Bar Association book on "Real Property Titles."
Mr. Certilman received an LL.B. degree, cum laude, from Brooklyn Law School.
Jay M. Haft
Mr. Haft was elected Vice Chairman of the Board of the Company in
February 1999 concurrently with the closing of the DCAP Acquisition. Prior
thereto and from October 1989, he served as the Company's Chairman of the Board.
He has also served as a director of the Company since October 1989. Mr. Haft has
been engaged in the practice of law since 1959 and since 1994 has served as
counsel to Parker Duryee Rosoff & Haft. From 1989 to 1994, he was a senior
corporate partner of such firm. Mr. Haft is a strategic and financial consultant
for growth stage companies. He is active in international corporate finance,
mergers and acquisitions, as well as in the representation of emerging growth
companies. He has actively participated in strategic planning and fund raising
for many high-tech companies, leading edge medical technology companies and
technical product, service and marketing companies. Mr. Haft is a Managing
General Partner of Gen Am "1" Venture Fund, an international venture capital
fund. He is also a director of numerous public and private corporations,
including Robotic Vision Systems, Inc., NCT Group, Inc., Encore Medical
Corporation, PC Service Source, Inc., DUSA Pharmaceuticals, Inc., Oryx
Technology Corp., and Thrift Management, Inc, all of whose securities are traded
in the over-the-counter market, and serves as Chairman of the Board of NCT
Group, Inc. Mr. Haft is a past member of the Florida Commission for Government
Accountability to the People, and a national trustee and Treasurer of the Miami
Ballet. Mr. Haft received B.A. and LL.B. degrees from Yale University.
Kevin Lang
Mr. Lang was elected President and a director of the Company in
February 1999 concurrently with the closing of the DCAP Acquisition. He has
served as President of DCAP since its inception in 1982. Mr. Lang also serves as
an officer and director of each of the other DCAP Companies.
Abraham Weinzimer
Mr. Weinzimer was elected Executive Vice President and a director of
the Company in February 1999 concurrently with the closing of the DCAP
Acquisition. He has served as Vice President of DCAP since its inception in
1982. Mr. Weinzimer also serves as an officer and director of each of the other
DCAP Companies.
Robert M. Wallach
Mr. Wallach was elected a director of the Company in February 1999
concurrently with the Eagle Issuance. He has served since 1993 as President,
Chairman and Chief Executive Officer of
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The Robert Plan Corporation ("The Robert Plan"), an insurance company holding
company that is engaged in providing services to insurance companies.
Brian K. Ziegler
Mr. Ziegler has served as Secretary of the Company since 1991. He also
served as Treasurer of the Company from 1991 to February 1999. He has been
engaged in the practice of law since 1979 and is a member of the law firm of
Certilman Balin Adler & Hyman, LLP. Mr. Ziegler received a B.S. degree, cum
laude, from the Wharton School of the University of Pennsylvania, and a J.D.
degree and an LL.M. degree in Taxation from the University of Miami School of
Law.
Mr. Ziegler is Mr. Certilman's son-in-law. There are no other family
relationships among any of the Company's executive officers and directors.
Each director will hold office until the next annual meeting of
stockholders and until his successor is elected and qualified or until his
earlier resignation or removal. Each executive officer will hold office until
the initial meeting of the Board of Directors following the next annual meeting
of stockholders and until his successor is elected and qualified or until his
earlier resignation or removal.
Section 16(a) Beneficial Ownership Reporting Compliance
To the Company's knowledge, based solely on a review of written
representations that no reports were required during the fiscal year ended
December 31, 1998, all Section 16(a) filing requirements applicable to the
Company's officers, directors and 10% stockholders were complied with.
ITEM 10. EXECUTIVE COMPENSATION
(a) Summary Compensation Table
The following table sets forth certain information concerning the
compensation of Mr. Certilman for the fiscal years ended December 31, 1998, 1997
and 1996. No other executive officer of the Company as of December 31, 1998 had
a total salary and bonus for the year then ended in excess of $100,000.
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- - ---------------------------------------------------------------------------
Annual
Compensation
- - ---------------------------------------------------------------------------
Name and Principal All Other
Position Year Salary Compensation
- - ---------------------------------------------------------------------------
Morton L. Certilman 1998 $150,000 -0-*
President
------------------------------------------------
1997 $150,000 -0-*
------------------------------------------------
1996 $101,250 -0-*
- - ---------------------------------------------------------------------------
* Excludes fees payable during 1996, 1997 and 1998 by the Company to
Certilman Balin Adler & Hyman, LLP, a law firm of which Mr. Certilman
is a member. See Item 12 hereof.
(b) Option Grants
No grants of stock options were made to Mr. Certilman during the fiscal
year ended December 31, 1998.
At the closing of the DCAP Acquisition, Messrs. Certilman, Haft, Lang
and Weinzimer were granted stock options by the Company. See "Employment
Contracts, Termination of Employment and Change-in-Control Arrangements - Stock
Options."
(c) Aggregated Option Exercises and Fiscal Year-End Option Value
Mr. Certilman did not exercise any options during the year ended
December 31, 1998 and held no options as of such date.
(d) Long-Term Incentive Plan Awards
No awards were made to Mr. Certilman during the fiscal year ended
December 31, 1998 under any long-term incentive plan.
(e) Compensation of Directors
Directors of the Company are not entitled to receive any compensation
for their services as such.
(f) Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
At the closing of the DCAP Acquisition, the Company entered into
employment agreements with Messrs. Certilman, Haft, Lang and Weinzimer
(collectively, the "Employment Agreements")
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pursuant to which Mr. Certilman is employed as the Company's Chairman of the
Board, Mr. Haft as its Vice Chairman, Mr. Lang as its President and Mr.
Weinzimer as its Executive Vice President.
General
The Employment Agreements entered into by Messrs. Certilman, Haft, Lang
and Weinzimer are identical in all respects, except as discussed below under
"Special Provisions for Lang and Weinzimer."
Term
The term of each Employment Agreement is five years commencing February
25, 1999 (the "Initial Term"), with an automatic three year renewal term (the
"Extended Term") unless, at least 90 days prior to the expiration of the Initial
Term, the Company, by vote of 75% of all of the members of its Board of
Directors (including, for purposes of determining the number of members of the
Board, the particular employee, if a member) (as provided for in the Company's
By-Laws) notifies the employee of its desire not to extend the term of the
Employment Agreement. In the event the Company makes such election, the employee
generally shall be entitled to receive, as termination payments, his then annual
base salary for a period of two additional years (the "Severance Amount"). See
"DCAP Agreement - Agreement as to Voting" in Item 12 hereof with regard to a
By-Law provision that requires a unanimous vote of the members of the Board
under certain circumstances.
Devotion of Time
During the term of the Employment Agreement, Messrs. Lang and Weinzimer
are required to expend all of their working time for the Company. Messrs.
Certilman and Haft are to perform such part-time services as are reasonably
necessary for them to fulfill their responsibilities as Chairman and Vice
Chairman, respectively.
Salary
During the employment period, Messrs. Lang and Weinzimer each will be
entitled to receive a salary of $250,000 per annum, while Messrs. Certilman and
Haft are to receive annual salaries of $125,000 and $22,500, respectively. Each
employee will also be entitled to such additional compensation as may be
determined by the Board of Directors of the Company in its sole discretion.
Termination
Pursuant to the terms of the Employment Agreements, an employee's
employment terminates automatically on his death and, at the Company's option,
if the employee becomes disabled. In addition, an employee's employment may be
terminated at any time for "cause." Pursuant to the terms of the Employment
Agreements and the Company's By-Laws, the Company may terminate an employee's
employment based upon a claim of "cause" only if a majority of all of the
members
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of its Board of Directors (including, for purposes of determining the number of
members of the Board, the particular employee, if a member) shall have approved
the action. As provided for in the Employment Agreements and the Company's
By-Laws, if the Company desires to terminate an employee's employment not based
upon a claim of "cause," then 75% of all of the members of the Board of
Directors (including, for purposes of determining the number of members, the
particular employee, if a member) must approve the action. See "DCAP Agreement -
Agreement as to Voting" in Item 12 hereof with regard to a By-Law provision that
requires a unanimous vote of the members of the Board under certain
circumstances.
In the event of termination of an employee's employment without
"cause," the employee will be entitled to receive, as liquidated damages, an
amount equal to all compensation that he would have been entitled to receive for
the remainder of the term, including the Extended Term, as if his employment had
not terminated; however, if the termination notice is given (i) prior to 90 days
before the expiration of the Initial Term, or (ii) subsequent to such time, but
after the date the Company has given timely notice of its desire not to extend
the Initial Term, the terminated employee shall be entitled to receive the
Severance Amount. The terminated employee is not required to seek other
employment after termination of his employment without "cause;" however, any
amounts paid or payable to the terminated employee from other employment or
other services will reduce, dollar for dollar, the amounts otherwise payable to
him pursuant to his Employment Agreement.
Restrictive Covenants
For a period of two years after the expiration or termination of the
Employment Agreement, without the prior written consent of the Company, the
terminated employee is restricted, within a radius of five miles of any office
or franchise of the Company, from, among other things, directly or indirectly,
engaging or participating in a business which is similar to or competitive with
the business activities of the Company. The restrictive covenants, however, do
not apply if the Employment Agreement is terminated based on a disability of the
employee and will cease to apply if:
(i) the Company defaults in any obligation to pay any
post-termination amounts that are payable pursuant to
the provisions of the Employment Agreement and such
default continues for a period of 20 days following
receipt by the Company of written notice thereof; or
(ii) if all of the following conditions exist: (a) the
term of the Employment Agreement is extended for the
Extended Term; (b) prior to the expiration of the
Extended Term, the employee is not offered a further
two-year extension, with the same base annual salary
and substantially the same terms as provided for in
the Employment Agreement; (c) the employee's
employment is not terminated for "cause" during the
Extended Term and he does not
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voluntarily terminate his employment; and (d) the
employee's employment ends on the last day of the
Extended Term.
Stock Options
At the closing of the DCAP Acquisition, each of Messrs. Certilman and
Haft was granted options to purchase up to 225,000 Common Shares of the Company
and each of Messrs. Lang and Weinzimer was granted options to purchase up to
200,000 Common Shares of the Company. Such options were granted upon the
following terms:
(i) the exercise price of such options was $2.69 per
share (110% of the fair market value of the Common
Shares on the date of the grant);
(ii) the options will expire five years from the
date of grant; and
(iii) the options will vest to the extent of one-half
thereof on the first anniversary of the date of grant
and one-half on the second anniversary.
Special Provisions for Lang and Weinzimer
Loans
For each of the twelve-month periods of the Initial Term, the Company
will be obligated, upon the written request of each of Messrs. Lang and
Weinzimer, to lend to him up to $20,000. The right of Messrs. Lang and Weinzimer
to obtain such $20,000 annual loan is assignable by each to the other. Each such
loan is to be evidenced by a promissory note in the principal amount of the loan
and is to provide for, among other things, the following:
(i) interest at the prime rate (as published in the Wall
Street Journal); and
(ii) payment of principal and interest in four equal
annual installments, commencing one year from the
date of each loan (but in no event after the seventh
anniversary of the closing of the DCAP Acquisition),
subject to acceleration to the extent that the
borrower receives any proceeds from the sale or other
disposition of any Common Shares (see "DCAP Agreement
Sale of Company Shares" in Item 12 hereof).
The repayment of all amounts due under each such note is to be secured
by the pledge by the borrower, pursuant to a pledge agreement, of five Common
Shares of the Company for each one dollar loaned.
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Bonus
In the event that the Company's Pre-Tax Net Income (as such term is
defined in the Employment Agreements) for any fiscal year of the Employment
Agreement of Mr. Lang or Mr. Weinzimer (but commencing only with the fiscal year
ending December 31, 2000 and continuing only through the fiscal year ending
December 31, 2005) is at least $100,000, he will be entitled to receive a bonus
in the amount of $37,500 for each such year. No bonus will be payable for a
particular fiscal year if no amounts are then payable by Mr. Lang or Mr.
Weinzimer to the Company pursuant to his Additional Shares Note (as described
under "DCAP Agreement - Acquisition of Common Shares" in Item 12 hereof).
Furthermore, the amount of any bonus payable may never exceed the amount payable
by Mr. Lang or Mr. Weinzimer pursuant to his Additional Shares Note, and the
Company will be entitled to offset against any such bonus any amount so payable.
Automobile Allowance
Each of Messrs. Lang and Weinzimer is entitled to the use of a
Company-leased automobile during the employment period for business purposes.
The Company's lease obligation is not to exceed $1,200 per month per automobile.
In addition, the Company is responsible for all insurance premiums with respect
to the automobile (not to exceed $3,000 per year per automobile) as well as all
expenses for gasoline, maintenance and repairs.
Disability Insurance Policy
Pursuant to the Employment Agreements, the Company is obligated to
obtain a disability insurance policy on behalf of each of Messrs. Lang and
Weinzimer and maintain such policy in effect during the employment period. The
maximum amount of premiums for each policy is to be $6,500 per annum.
1998 Stock Option Plan
In November 1998, the Company's Board of Directors adopted, and in
February 1999 the stockholders of the Company approved, the Company's 1998 Stock
Option Plan (the "1998 Plan"). Pursuant to the 1998 Plan, the Company has
reserved for issuance 2,000,000 Common Shares.
The 1998 Plan provides for the grant of options intended to qualify as
"incentive stock options" ("ISOs") under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and options that are not intended to so
qualify ("Nonstatutory Stock Options").
The 1998 Plan is presently administered by the Board of Directors of
the Company, which selects the eligible persons to whom options shall be
granted, determines the number of Common Shares subject to each option, the
exercise price therefor and the periods during which options are exercisable,
interprets the provisions of the 1998 Plan and, subject to certain limitations,
may amend
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<PAGE>
the 1998 Plan. Each option granted under the 1998 Plan is evidenced by a written
agreement between the Company and the optionee.
ISOs may be granted to all employees (including officers) of the
Company or any subsidiary of the Company. Nonstatutory Stock Options may be
granted to all such employees as well as non-employee directors of, and certain
consultants and advisors to, the Company or subsidiary thereof.
The per share exercise price for ISOs granted under the 1998 Plan may
not be less than the per share fair market value of the Common Shares on the
date the option is granted, except that the per share exercise price of ISOs
granted to 10% stockholders of the Company may not be less than 110% of such
fair market value. The exercise price for Nonstatutory Stock Options is
determined by the Board of Directors. ISOs granted under the 1998 Plan have a
maximum term of ten years, except for 10% stockholders who are subject to a
maximum term of five years. The term of Nonstatutory Stock Options is determined
by the Board of Directors. Options granted under the 1998 Plan are not
transferable, except by will and the laws of descent and distribution. The total
number of ISOs that may be granted to any individual person in any calendar year
is limited; however, there is no limit as to Nonstatutory Stock Options.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of February 28,
1999 with respect to the beneficial ownership of the outstanding Common Shares
of the Company by (i) each holder of more than 5% of the outstanding Common
Shares; (ii) each of the Company's directors; and (iii) the directors and
executive officers of the Company as a group.
Number of
Name and Address Common Shares
of Beneficially Approximate
Beneficial Owner Owned Percentage of Class
---------------- ----- -------------------
Kevin Lang 2,575,000(1)(2) 21.9%
2545 Hempstead Turnpike (3)
East Meadow, New York
Abraham Weinzimer 2,575,000(1)(2) 21.9%
2545 Hempstead Turnpike (3)
East Meadow, New York
Jay M. Haft 1,563,893(2)(3) 13.3%
1001 Brickell Bay Drive (4)
Miami, Florida
26
<PAGE>
Number of
Name and Address Common Shares
of Beneficially Approximate
Beneficial Owner Owned Percentage of Class
---------------- ----- -------------------
Eagle Insurance Company 1,486,893(5) 12.6%
c/o The Robert Plan
Corporation
999 Stewart Avenue
Bethpage, New York
Morton L. Certilman 1,470,393(2)(3) 12.5%
The Financial Center (6)
at Mitchel Field
90 Merrick Avenue
East Meadow, New York
Robert M. Wallach -0- (7) -
c/o The Robert Plan
Corporation
999 Stewart Avenue
Bethpage, New York
All executive officers 9,751,179(1)(2) 82.8%
and directors as a group (3)(4)
(6 persons) (5)(6)
(7)(8)
- - ---------
(1) Of the shares beneficially owned by each of Messrs. Lang and Weinzimer,
1,020,000 shares are pledged to the Company as security for the payment of
certain promissory notes. See "DCAP Agreement - Acquisition of Common
Shares" in Item 12 hereof.
(2) Reference is made to "DCAP Agreement - Agreement as to Voting" in Item 12
hereof for a discussion of a certain agreement as to voting among Messrs.
Lang, Weinzimer, Certilman and Haft.
(3) Messrs. Lang, Weinzimer, Certilman and Haft have filed a Schedule 13D under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
respect to their respective equity interests in the Company. In view of the
voting agreement referenced in footnote (2) hereof, Messrs. Lang,
Weinzimer, Certilman and Haft may be deemed a group. Accordingly, the group
of Messrs. Lang, Weinzimer, Certilman and Haft beneficially owns 8,217,286
Common Shares. Such amount represents approximately 69.8% of the
outstanding Common Shares of the Company. However, each of Messrs. Lang,
Weinzimer,
27
<PAGE>
Certilman and Haft independently makes his own decisions with respect to
the acquisition and disposition of the Common Shares directly owned by him,
as well as with respect to the voting of Common Shares on matters not
covered by the voting agreement, and neither Mr. Lang, Mr. Weinzimer, Mr.
Certilman nor Mr. Haft has any economic interest in the Common Shares
directly owned by any of the others.
(4) Includes 15,380 shares held in a retirement trust for the benefit of Mr.
Haft.
(5) Eagle is a wholly-owned subsidiary of The Robert Plan. See "Eagle" under
Item 12 hereof.
(6) Includes 902,452 shares held in a retirement trust for the benefit of Mr.
Certilman.
(7) Excludes shares owned by Eagle, of which Mr. Wallach, a director of the
Company, is a Vice President. Eagle is a wholly-owned subsidiary of The
Robert Plan, of which Mr. Wallach is President, Chairman and Chief
Executive Officer.
(8) Includes 5,000 shares held in a retirement trust for the benefit of an
executive officer and 37,500 shares held by such executive officer's wife.
Such executive officer disclaims beneficial ownership of the shares owned
by his wife.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DCAP Agreement
On February 25, 1999, pursuant to the terms of an Agreement dated as of
May 8, 1998 among the Company and Messrs. Lang, Weinzimer, Certilman and Haft,
as amended (the "DCAP Agreement"), the Company acquired the DCAP Shares. The
following is a summary of the material terms of the DCAP Agreement.
Acquisition of Common Shares
Pursuant to the DCAP Agreement, the Company acquired the DCAP Shares.
At the closing of the DCAP Acquisition, the following Common Shares of the
Company were issued:
(i) 3,300,000 Common Shares to Messrs. Lang and Weinzimer
(1,650,000 Common Shares to each) (the "Acquisition
Shares") in consideration for the transfer of the
DCAP Shares;
(ii) 950,000 Common Shares to Messrs. Lang and Weinzimer
(475,000 Common Shares to each) (the "950,000
Additional Shares") at a purchase price of $.25 per
share (an aggregate of $237,500), paid as follows:
28
<PAGE>
(a) an amount in cash equal to the par value of
the 950,000 Additional Shares (an aggregate
of $9,500); and
(b) the balance by the delivery by each of
Messrs. Lang and Weinzimer of a promissory
note in the principal amount of $114,000 (an
aggregate of $228,000) (collectively, the
"Additional Shares Notes"). The Additional
Shares Notes provide for, among other
things, the following:
(I) interest at the rate of 6% per
annum; and
(II) payment of principal and interest in
six equal annual installments
commencing April 15, 2001 and
continuing through April 15, 2006,
subject to acceleration to the
extent that Mr. Lang or Mr.
Weinzimer receives any proceeds from
the sale or other disposition of any
Common Shares (see "Sale of Company
Shares"); and
(iii) 452,000 Common Shares to Messrs. Certilman, Haft and
Ziegler or their designees (208,500 Common Shares to
each of Messrs. Certilman and Haft or his retirement
trust and an aggregate of 35,000 Common Shares to Mr.
Ziegler and his wife) (the "Company Management
Additional Shares") at a purchase price of $.25 per
share (an aggregate of $113,000), paid in cash.
At the closing of the DCAP Agreement, each of Messrs. Haft, Lang and
Weinzimer and Mr. Certilman's retirement trust also purchased 450,000 Common
Shares of the Company (1,800,000 Common Shares in the aggregate) (the "Sterling
Foster Shares"), beneficially owned by Sterling Foster Holding Corp. ("Sterling
Foster") and held by Mr. Certilman as voting trustee pursuant to a Voting Trust
Agreement with Sterling Foster, at a purchase price of $.25 per share. Mr.
Certilman did not receive any portion of such purchase price. Upon such
purchase, the Voting Trust Agreement was terminated.
Pursuant to the DCAP Agreement, at the closing, the Company loaned
$112,500 to each of Messrs. Lang and Weinzimer (an aggregate of $225,000) (the
"Closing Loans"). The proceeds of the Closing Loans were used by Messrs. Lang
and Weinzimer solely for the purpose of purchasing their Sterling Foster Shares.
Each of the Closing Loans is evidenced by a promissory note (the "Closing Loan
Notes") that provides for, among other things, the following:
(i) interest at the rate of 6% per annum;
(ii) payment of principal and interest in six equal annual
installments commencing April 15, 2001 and continuing
through April 15, 2006, subject to acceleration to
the extent that Mr. Lang or Mr. Weinzimer receives
any
29
<PAGE>
proceeds from the sale or other disposition of any
Common Shares (see "Sale of Company Shares");
(iii) non-recourse against Messrs. Lang and Weinzimer,
i.e., Messrs. Lang and Weinzimer will not be
personally liable for the payment of the Closing Loan
Notes; instead, in the event of a default, the
Company's sole remedy will be pursuant to a pledge by
Messrs. Lang and Weinzimer of their Sterling Foster
Shares, as discussed below; and
(iv) the right of each of Messrs. Lang and Weinzimer to
satisfy the amounts due under his respective Closing
Loan Note by delivering Common Shares of the Company
valued at the greater of (A) $.25 per share or (B)
the average market price of the Company's Common
Shares for the 20 trading days immediately preceding
the date of delivery of the shares.
The payment of all amounts due under the Additional Shares Notes is
secured by a pledge by each of Messrs. Lang and Weinzimer to the Company of
570,000 Common Shares of the Company pursuant to pledge agreements that were
entered into at the closing of the DCAP Agreement. The payment of all amounts
due under the Closing Loan Notes is secured by a pledge by each of Messrs. Lang
and Weinzimer to the Company of the Sterling Foster Shares acquired by him,
pursuant to pledge agreements that were entered into at the closing of the DCAP
Agreement.
Buy-Out Upon Death
In connection with the closing of the DCAP Agreement, the Company
intends to enter into an agreement with Messrs. Lang and Weinzimer (the "Death
Buy-Out Agreement") that provides that, in the event of the death of either or
both of them, the estate of the deceased person shall sell to the Company, and
the Company shall purchase from the estate, such number of Common Shares as
shall equal the lesser of (i) the quotient of the proceeds of a particular
insurance policy on the life of the particular person divided by the Fair Market
Value per Share (as defined in the Death Buy-Out Agreement) or (ii) the number
of shares owned, beneficially or of record, by the deceased shareholder. The
purchase price per share will be such Fair Market Value per Share. The Company's
obligation to purchase the shares of the deceased person will be conditioned
upon its receipt of proceeds from the insurance policies.
In connection with the Death Buy-Out Agreement, Messrs. Lang and
Weinzimer are to assign to the Company insurance policies on their respective
lives in the approximate amounts of $560,000 and $355,000, respectively. If the
insurance proceeds exceed the purchase price of the shares, the balance of the
proceeds will belong to the Company. If the deceased person is indebted to the
Company at the time of his death, the amount of such debt will first be deducted
from the amount payable to his estate.
30
<PAGE>
Restrictive Covenant Agreements
At the closing of the DCAP Agreement, each of Messrs. Lang and
Weinzimer executed and delivered to the Company a restrictive covenant agreement
(collectively, the "Restrictive Covenant Agreements") pursuant to which each
agreed that he will not, within five years of the date of the closing, without
the prior written consent of the Company, directly or indirectly, anywhere
within five miles of the location of any office of any of the DCAP Companies or
any franchisee, among other things, engage or participate in a business that is
similar to or competitive with, directly or indirectly, the DCAP Business (as
defined in the DCAP Agreement). The restrictive covenants shall cease to apply
in the event (i) the employment of Mr. Lang or Mr. Weinzimer with the Company is
terminated by the Company without "cause" (see "Employment Contracts,
Termination of Employment and Change-in-Control Arrangements - Termination" in
Item 10 hereof), or (ii) the Company defaults in its obligation to make any
post-termination payments as provided for in the Employment Agreement and such
default continues for a period of 20 days following receipt by the Company of
written notice thereof. The restrictive covenants contained in the Restrictive
Covenant Agreements are separate and independent from the restrictive covenants
discussed in Item 10 hereof.
Agreement as to Voting
Pursuant to the DCAP Agreement, each of Messrs. Certilman, Haft, Lang
and Weinzimer has agreed that, during the eight year period following the
closing of the DCAP Agreement, (i) he will vote his respective shares of stock
of the Company in favor of each of the others as a director of the Company
provided that the particular person in whose favor the vote would be remains in
the employ of the Company, (ii) in the event Mr. Certilman or Mr. Haft dies or
otherwise ceases to serve as a director of the Company, Messrs. Lang and
Weinzimer will vote their respective shares of stock of the Company in favor of
the designee of the survivor of Mr. Certilman or Mr. Haft (or, in the case of a
reason other than death, the one remaining as a director), (iii) in the event
Mr. Lang or Mr. Weinzimer dies or otherwise ceases to serve as a director of the
Company, Messrs. Certilman and Haft will vote their respective shares of stock
of the Company in favor of the designee of the survivor of Mr. Lang or Mr.
Weinzimer (or, in the case of a reason other than death, the one remaining as a
director) and (iv) he will not vote his shares to (a) increase the size of the
Board of Directors of the Company or (b) amend the Certificate of Incorporation
or By-Laws of the Company, in each case without the written approval of the
others. In the event of the death or other cessation of directorship of any of
Messrs. Certilman, Haft, Lang or Weinzimer during such period, the Company has
agreed that, unless the Board vacancy is otherwise filled as provided for above,
it will promptly call a special meeting of stockholders to fill such vacancy.
At the closing of the DCAP Agreement, the Company's By-Laws were
amended to provide that, in the event the number of directors in office is less
than four, any action taken by the Board of Directors requires the approval of
all of the directors then in office. During such time as the number of directors
in office is less than four, the Company may be unable to take actions that a
majority of its Board members deems desirable.
31
<PAGE>
Sale of Company Shares
Pursuant to the DCAP Agreement, while any loan made to either Mr. Lang
or Mr. Weinzimer pursuant to his Employment Agreement is outstanding, he will be
obligated to sell, as soon as legally permissible, the maximum number of Common
Shares that he is permitted by law to sell, and to use the proceeds thereof to
satisfy his obligations under his respective notes. Until the foregoing notes,
the Additional Shares Notes and the Closing Notes have been satisfied in full,
neither Mr. Lang nor Mr. Weinzimer may sell or otherwise dispose of any of his
Company Common Shares for less than $.25 per share (subject to adjustment for
stock splits and the like) without the prior written consent of the Company.
Eagle
Concurrently with the closing of the DCAP Agreement, pursuant to a
Subscription Agreement (the "Eagle Agreement"), the Company issued and sold to
Eagle 1,486,893 Common Shares for an aggregate purchase price of approximately
$1,000,000, or $.67 per share (the "Eagle Issuance").
Eagle is a New Jersey insurance company wholly-owned by The Robert
Plan, one of the largest insurers of assigned-risk drivers in the United States.
Pursuant to separate agency agreements between certain DCAP Companies and
certain insurance company subsidiaries of The Robert Plan, such DCAP Companies
have been appointed agents of the insurance companies with regard to the
offering of automobile and other insurance products.
Pursuant to the Eagle Agreement, at the closing of the DCAP Agreement,
the size of the Board of Directors of the Company was increased to five and
Robert M. Wallach, Eagle's Vice President and the President, Chairman and Chief
Executive Officer of The Robert Plan, was appointed as a member of the Board of
Directors. The Company has agreed that, during the five year period following
the closing, provided that Eagle remains the beneficial owner of at least
1,000,000 Common Shares (subject to adjustment for stock splits and the like),
the Company shall continue to nominate Mr. Wallach as a director.
Pursuant to the Eagle Agreement, Eagle was also granted the right to
purchase up to ten of the Units offered by the Company pursuant to the
contemplated private placement discussed in Item 6 hereof.
Other
Four of the DCAP Companies are one-half owned by Mr. Certilman's
daughter; however, her interest in such entities was not purchased, and no
Company Common Shares or other consideration was issued to her in connection
with the DCAP Acquisition.
32
<PAGE>
Certilman Balin Adler & Hyman, LLP ("Certilman Balin"), a law firm of
which Mr. Certilman is a member, serves as counsel to the Company. It is
presently anticipated that such firm will continue to represent the Company and
its subsidiaries and affiliates and will receive fees for its services at rates
and in amounts not greater than would be paid to unrelated law firms performing
similar services. Certilman Balin has also served as counsel to DCAP and The
Robert Plan with respect to certain matters; however, such firm did not serve as
counsel to DCAP or Messrs. Lang and Weinzimer in connection with the DCAP
Agreement or to Eagle in connection with the Eagle Agreement.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
- - ------ ----------------------
3(a) Certificate of Amendment of Certificate of Incorporation filed with
the State of Delaware on February 25, 1999
(b) By-laws, as amended
10(a) Agreement, dated July 22, 1988, between the Ports Authority and IAH(1)
10(b) Resolution of Board of Directors of Ports Authority, dated August 10,
1994, regarding rental obligation of the Hotel(2)
10(c) 1998 Stock Option Plan
10(d) License and Royalty Agreement, dated July 1991, among the Company,
IFTI Capital Appreciation Management Corporation, and NPS Products,
Inc.(3)
10(e) Agreement, dated as of May 8, 1998, by and among the Company and
Morton L. Certilman, Jay M. Haft, Kevin Lang and Abraham Weinzimer, as
amended
10(f) Promissory Note, dated February 25, 1999, from Kevin Lang to the
Company in the principal amount of $114,000
10(g) Pledge Agreement, dated February 25, 1999, between the Company and
Kevin Lang ($114,000 Note)
10(h) Promissory Note, dated February 25, 1999, from Kevin Lang to the
Company in the principal amount of $112,500
33
<PAGE>
10(i) Pledge Agreement, dated February 25, 1999, between the Company and
Kevin Lang ($112,500 Note)
10(j) Promissory Note, dated February 25, 1999, from Abraham Weinzimer to the
Company in the principal amount of $114,000
10(k) Pledge Agreement, dated February 25, 1999, between the Company and
Abraham Weinzimer ($114,000 Note)
10(l) Promissory Note, dated February 25, 1999, from Abraham Weinzimer to the
Company in the principal amount of $112,500
10(m) Pledge Agreement, dated February 25, 1999, between the Company and
Abraham Weinzimer ($112,500 Note)
10(n) Employment Agreement, dated February 25, 1999, between the Company and
Morton L. Certilman
10(o) Employment Agreement, dated February 25, 1999, between the Company and
Jay M. Haft
10(p) Employment Agreement, dated February 25, 1999, between the Company and
Kevin Lang
10(q) Employment Agreement, dated February 25, 1999, between the Company and
Abraham Weinzimer
10(r) Stock Option Agreement, dated February 25, 1999, between the Company
and Morton L. Certilman
10(s) Stock Option Agreement, dated February 25, 1999, between the Company
and Jay M. Haft
10(t) Stock Option Agreement, dated February 25, 1999, between the Company
and Kevin Lang
10(u) Stock Option Agreement, dated February 25, 1999, between the Company
and Abraham Weinzimer
10(v) Subscription Agreement, dated as of October 2, 1998, between the
Company and Eagle Insurance Company and amendments thereto
21 Subsidiaries of the Registrant
27 Financial Data Schedule
34
<PAGE>
(1) Denotes document filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1993 and incorporated
herein by reference.
(2) Denotes document filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1994 and incorporated
herein by reference.
(3) Denotes document filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991 and incorporated herein
by reference.
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the last quarter
of the fiscal year ended December 31, 1998.
35
DCAP GROUP, INC. AND SUBSIDIARIES
REPORT ON AUDITS OF
CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 1998
<PAGE>
Item ___. Consolidated Financial Statements
INDEX
Page
Independent auditors' report F-2
Consolidated balance sheet F-3
Consolidated statements of operations F-4
Consolidated statement of stockholders' equity F-5
Consolidated statements of cash flows F-6
Notes to consolidated financial statements F-7 - F-11
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Independent Auditors' Report
Board of Directors and Stockholders
DCAP Group, Inc.
East Meadow, New York
We have audited the accompanying consolidated balance sheet of DCAP Group, Inc.
(formerly EXTECH CORPORATION) and Subsidiaries as of December 31, 1998 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the two-year period ended December 31, 1998.
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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 DCAP Group, Inc. and
Subsidiaries as of December 31, 1998 and the results of their operations and
their cash flows for each of the years in the two-year period ended December 31,
1998 in conformity with generally accepted accounting principles.
/S/HOLTZ RUBENSTEIN & CO., LLP
------------------------------
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
March 17, 1999
F-2
<PAGE>
DCAP GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 353,431
Accounts receivable 77,116
Notes receivable (Note 3) 846,362
Prepaid expenses and other current assets 142,593
-------------
Total current assets 1,419,502
PROPERTY AND EQUIPMENT, net (Note 4) 102,608
RESTRICTED CERTIFICATE OF DEPOSIT (Note 5) 40,000
-------------
$ 1,562,110
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Notes 6 and 7) $ 200,712
Debentures payable (Note 8) 154,200
-------------
Total current liabilities 354,912
-------------
MINORITY INTEREST 560
-------------
COMMITMENT AND CONTINGENCY (Notes 11 and 15)
STOCKHOLDERS' EQUITY: (Note 12 and 15)
Common stock, $.01 par value; authorized 10,000,000 shares;
issued and outstanding 5,591,367 shares 55,914
Capital in excess of par 5,264,950
Deficit (4,114,226)
-------------
1,206,638
-------------
$ 1,562,110
=============
See notes to consolidated financial statements
F-3
<PAGE>
DCAP GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended
December 31,
------------
1998 1997
---- ----
REVENUES: (Note 13)
Rooms $ 905,445 $ 895,238
Other operating departments 38,062 34,991
Interest, net 87,526 66,389
------------- -------------
Total revenues 1,031,033 996,618
------------- -------------
COSTS AND EXPENSES:
Administrative and general 111,005 123,366
Bad debt 37,180 13,421
Corporate and sundry (Note 9) 329,187 343,189
Departmental 389,082 372,217
Depreciation and amortization 40,492 52,185
Energy costs 19,572 23,197
Lease rentals (Note 11) 184,634 181,178
Property operation and maintenance 27,132 27,863
------------- -------------
Total costs and expenses 1,138,284 1,136,616
------------- -------------
LOSS BEFORE INCOME TAXES (107,251) (139,998)
INCOME TAXES (Note 10) 4,330 3,994
------------- -------------
NET LOSS $ (111,581) $ (143,992)
============= =============
BASIC LOSS PER COMMON SHARE $ (.020) $ $(.026)
============= =============
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 5,591,367 5,591,367
============= =============
See notes to consolidated financial statements
F-4
<PAGE>
DCAP GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital
Common Stock in Excess
Shares Amount of Par Deficit Total
------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 5,591,367 $ 55,914 $ 5,264,950 $ (3,858,653) $ 1,462,211
Net loss for the year - - - (143,992) (143,992)
----------- --------- ------------ ------------- ------------
Balance, December 31, 1997 5,591,367 55,914 5,264,950 (4,002,645) 1,318,219
Net loss for the year - - - (111,581) (111,581)
----------- --------- ------------ ------------- ------------
Balance, December 31, 1998 5,591,367 $ 55,914 $ 5,264,950 $ (4,114,226) $ 1,206,638
=========== ========= ============ ============= ============
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
DCAP GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
December 31,
------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (111,581) $ (143,992)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 40,492 52,185
Bad debts (1,700) 1,200
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (38,916) 25,112
Prepaid expenses and other assets (120,513) 107,137
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 51,359 22,398
------------- -------------
Net cash (used in) provided by operating activities (180,859) 64,040
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (15,053) (16,091)
Notes receivable - net (491,046) (285,681)
Purchase of restricted certificate of deposit - (40,000)
------------- -------------
Net cash used in investing activities (506,099) (341,772)
------------- -------------
Net decrease in cash and cash equivalents (686,958) (277,732)
Cash and cash equivalents, beginning of year 1,040,389 1,318,121
------------- -------------
Cash and cash equivalents, end of year $ 353,431 $ 1,040,389
============= =============
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
DCAP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1. Summary of Significant Accounting Policies:
a. Description of business
The Company's operations are within one industry as lodging sales and
related revenues accounted for substantially all revenues during the two-year
period ended December 31, 1998.
b. Principles of consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries and a 90% owned inactive subsidiary. All
intercompany transactions and balances have been eliminated.
c. Property and equipment
Property and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the related
assets. Leasehold improvements are being amortized using the straight-line
method over the remaining term of the lease.
d. Concentration of credit risk
The Company invests its excess cash in deposits and money market
accounts with major financial institutions and has not experienced losses
related to these investments.
e. Statement of cash flows
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid debt instruments with a maturity of three months or
less, as well as bank money market accounts, to be cash equivalents.
f. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period Actual results could differ from those estimates.
g. Loss Per Share:
The Company's net loss per share was calculated by dividing net income
by the weighted average number of common shares outstanding.
h. Stock-based compensation
The Company applies APB Opinion No. 25 and related interpretations in
accounting for stock-based compensation to employees. Stock compensation to
non-employees is accounted for at fair value in accordance with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
F-7
<PAGE>
1. Summary of Significant Accounting Policies: (Cont'd)
i. Reclassifications
Certain reclassifications have been made to the consolidated financial
statements for the year ended December 31, 1997 to conform with the
classifications used in 1998.
2. Supplementary Information - Statement of Cash Flows:
Cash paid for income taxes was $5,870 and $4,918 during the years ended
December 31, 1998 and 1997, respectively.
3. Notes Receivable and Acquisition of DCAP:
Included in notes receivable at December 31, 1998, is approximately
$782,000 and $64,000 of advances to Dealers Choice Automotive Planning Inc.
("DCAP") and accrued interest, respectively. The notes bear interest at 10% per
annum with principal and interest due February 28, 1999.
On February 25, 1999, the Company acquired all of the outstanding stock
of DCAP as well as interests in other related companies. In exchange for all of
the outstanding stock of DCAP and interests in the related entities, the Company
issued 3,300,000 common shares to the DCAP shareholders. This acquisition will
be accounted for under the purchase method of accounting.
Pursuant to this agreement, the Company issued 950,000 common shares to
the DCAP shareholders for $9,500 in cash and $228,000 in promissory notes. The
notes bear interest at 6% per annum with principal and interest due in six equal
annual installments commencing April 15, 2001 and continuing through April 15,
2006. The due dates are subject to acceleration to the extent that the DCAP
shareholders receive any proceeds from the sale or other disposition of any
common shares.
Additionally, the Company received non-recourse promissory notes
aggregating $225,000 from the DCAP shareholders in consideration of loans made
to them in such aggregate amount. The notes bear interest at 6% per annum with
principal and interest due in six equal annual installments commencing April 15,
2001 and continuing through April 15, 2006. The due dates are subject to
acceleration to the extent that the DCAP shareholders receive any proceeds from
the sale or other disposition of any common shares. The proceeds of the loans
were used to purchase 900,000 common shares from an existing shareholder.
The promissory notes received at the closing of the DCAP agreement are
secured by 2,040,000 common shares of the Company.
4. Property and Equipment:
At December 31, 1998, property and equipment consists of the following:
Furniture, fixtures and equipment $ 402,100
Leasehold improvements 133,410
-----------
535,510
Less accumulated depreciation and amortization 432,902
-----------
$ 102,608
===========
5. Restricted Certificate of Deposit:
In April 1997, the Company purchased a bank certificate of deposit and
pledged it to the Puerto Rico Ports Authority ("Ports Authority") as security
for payment of amounts due under the lease agreement.
F-8
<PAGE>
6. Accounts Payable and Accrued Expenses:
At December 31, 1998, accounts payable and accrued expenses consist of
the following:
Accounts payable $ 5,190
Rent 69,552
Professional fees 70,834
Payroll and related costs 20,044
Deferred compensation (Note 7) 12,655
Room tax 8,247
Other 14,190
-----------
$ 200,712
===========
7. Deferred Compensation:
The Company has an agreement to pay special compensation to certain
employees who at the date of retirement have accumulated 20 years of
uninterrupted service. Maximum amount payable per employee is $3,000. There are
seven employees covered by this plan, four of them with 15 years of accumulated
service. Compensation is accrued pro-ratably from the inception of the plan to
the date each employee is eligible for benefits. At December 31, 1998,
approximately $13,000 has been accrued.
8. Debentures Payable:
In 1971, the Company, pursuant to a plan of arrangement, issued a series
of debentures which matured in 1977. As of December 31, 1998, $154,200 of these
debentures have not been presented for payment. Accordingly, this balance has
been included as a current liability in the accompanying consolidated balance
sheet. Interest has not been accrued on the remaining debentures payable. In
addition, no interest, penalties or other charges have been accrued with regard
to any escheat obligation of the Company.
9. Related Party Transaction:
During the years ended December 31, 1998 and 1997, the Company leased its
corporate office facility from a partnership of which a stockholder/officer is a
member. Rent expense amounted to $6,000 for each of the years ended December 31,
1998 and 1997.
10. Income Taxes:
The 1998 and 1997 income of IAH, Inc., a wholly-owned subsidiary, has
been calculated excluding the loss of DCAP Group, Inc., as it is separately
taxed under the laws of Puerto Rico. For 1998 and 1997, a provision of
approximately $4,000 has been made for this tax liability.
At December 31, 1998, the Company had net operating loss carryforwards
("NOLs") of approximately $1,175,000, expiring in various years from 2006
through 2012, available to offset against future federal income tax liabilities.
However, under Section 382 of the Internal Revenue Code of 1986, should there
occur a greater than 50% "ownership change" of a company, the ability of the
company to utilize the available NOLs would be restricted to a prescribed annual
amount. The February 1999 stock issuance in connection with the acquisition of
DCAP, described in Note 3, meets the criteria of Section 382. Accordingly,
future utilization of NOLs will be limited to approximately $480,000 per year.
Additional equity-related transactions initiated by the Company in the
future may result in a further restriction of the prescribed annual amount.
F-9
<PAGE>
10. Income Taxes: (Cont'd)
In addition, the Company has general business tax credit carryforwards
available to reduce future income taxes of approximately $33,000. If not
utilized, these credits are scheduled to expire in various amounts through 2010.
The Company incurred operating losses during the past six years and losses are
expected in the early subsequent periods. As a result, the Company has not
recorded a deferred tax asset in 1998 due to the fact that a 100% valuation
allowance would be needed. The valuation allowance at December 31, 1998
approximated $550,000.
11. Commitment and Contingency:
IAH, Inc. leases the International Airport Hotel (the "Hotel") property
pursuant to an operating lease with the Ports Authority, which expired in
December 1995. As discussed below, IAH is of the belief that pursuant to a
supplemental lease agreement, it retained the option to continue the lease for a
period of five years to December 31, 2000, which right it exercised, or
alternatively, that the Ports Authority executed a new lease agreement for a ten
year term commencing on January 1, 1996. The lease agreement provides for the
annual rental payments to be equal to the greater of $169,400 or 20% of the
annual gross revenues, as defined, effective January 1, 1994. Total rent expense
under this lease amounted to approximately $185,000 for 1998 and $181,000 for
1997.
Based upon IAH's refusal to acknowledge that, effective January 1, 1996,
it occupied the Hotel on a month-to-month basis, in February 1996, the Ports
Authority requested that IAH vacate, surrender and deliver the premises by
February 29, 1996. Following the receipt of such request, IAH brought an action
in the Superior Court of San Juan, Puerto Rico for declaratory judgment and
possessory injunction against the Ports Authority with respect to the Hotel. The
action seeks a declaratory judgment that, among other alternatives, IAH
exercised an option with respect to its lease for the Hotel for an extension of
the term of five years commencing on January 1, 1996 or that the Ports Authority
executed a new lease agreement for a ten year period commencing on such date.
Certain discovery proceedings have taken place, and the action is still pending.
Management is of the opinion that the Company will prevail on the declaratory
judgment; therefore, management will vigorously defend its position.
12. Stockholders' Equity:
a. Stock options
The Company maintains a stock option plan which provides for the
granting of options to individuals rendering service to the Company to purchase
up to 300,000 shares of common stock of the Company. Such options may be either
incentive stock options or non-statutory stock options.
No options are outstanding as of December 31, 1998.
In November 1998, the Company adopted the 1998 Stock Option Plan
(approved by stockholders in February 1999) which provides for the issuance of
incentive stock options or non-statutory stock options. Under this plan, options
to purchase not more than 2,000,000 shares of common stock may be granted, at a
price to be determined by the Board of Directors or the Stock Option Committee
at the time of grant. Incentive stock options granted under this plan expire ten
years from date of grant (except five years for a grant to a 10% stockholder of
the Company). The Board of Directors or the Stock Option Committee will
determine the expiration date with respect to non-statutory options granted
under this plan. No options are outstanding as of December 31, 1998.
b. Common shares reserved
Stock Option Plans 2,300,000
=========
F-10
<PAGE>
13. Major Customer:
Sales to a major customer approximated 11% and 10% of total room sales
for the years ended December 31, 1998 and 1997, respectively.
14. Fair Value of Financial Instruments:
The methods and assumptions used to estimate the fair value of the
following classes of financial instruments were:
Current Assets and Current Liabilities: The carrying amount of cash,
current receivables and payables and certain other short-term financial
instruments approximate their fair value.
15. Subsequent Events:
a. Private Placement Offering
On January 18, 1999, the Company announced that it had entered into a
letter of intent with respect to a private placement of between $1,500,000 and
$2,000,000 in equity securities.
b. Employment Agreement
In connection with the DCAP Acquisition, the Company entered into
five-year employment agreements with certain directors/officers and DCAP
shareholders commencing February 25, 1999. The agreements provide for a
three-year renewal term, which is automatic unless the Company, by a vote of 75%
of all of the members of the Board of Directors (including, for purposes of
determining the number of members of the Board, the employee, if a member)
determines otherwise. In the event that the Company does not extend an
employment agreement, the employee will receive an additional two years of his
base salary. Total annual compensation provided for under these agreements is
$647,000. During the initial term of the employment agreements, the Company is
obligated to make loans of up to $20,000 per year to each of the DCAP
shareholders.
Additionally, certain directors/officers were granted options to
purchase a total of 850,000 shares of the Company's common stock with an
exercise price of $2.69 per share (110% of the fair market value of the common
shares on the date of grant). The options expire February 2004 and vest over the
first and second year (425,000 shares per year) from the date of grant.
c. Eagle Insurance Agreement
Immediately following the closing of the DCAP Acquisition, the Company
issued 1,486,893 common shares to Eagle Insurance Company for an aggregate
purchase price of approximately $1,000,000.
F-11
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DCAP GROUP, INC.
Dated: March 31, 1999 By: /s/ Morton L. Certilman
------------------------
Morton L. Certilman
Chairman of the Board
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signatures Capacity Date
---------- -------- ----
Chairman of the Board
and Director (Principal
Executive, Financial and
/s/ Morton L. Certilman Accounting Officer) March 31, 1999
- - ------------------------
Morton L. Certilman
Vice Chairman of the Board
/s/ Jay M. Haft and Director March 31, 1999
- - -------------------------
Jay M. Haft
/s/ Kevin Lang President and Director March 31, 1999
- - -------------------------
Kevin Lang
Executive Vice President
/s/ Abraham Weinzimer and Director March 31, 1999
- - -------------------------
Abraham Weinzimer
Director ---------, 1999
- - -------------------------
Robert M. Wallach
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
EXTECH CORPORATION
(Pursuant to Section 242 of the
General Corporation Law of Delaware)
EXTECH Corporation, a corporation organized and existing under the Delaware
General Corporation Law (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended to change the name of the Corporation, to increase the number of Common
Shares that the Corporation shall be authorized to issue, and to require that,
under certain circumstances, action to be taken by the stockholders of the
Corporation without a meeting be taken on the written consent of the holders of
all of the shares of capital stock of the Corporation entitled to vote on such
action.
SECOND: Article FIRST of the Certificate of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
"FIRST: The name of the Corporation is DCAP Group, Inc."
THIRD: Article FOURTH of the Certificate of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
"FOURTH: The total number of shares of Common Stock which the
Corporation shall have authority to issue is Twenty- Five
Million (25,000,000) shares of Common Stock, $.01 par value
per share."
<PAGE>
FOURTH: A new Article SIXTEENTH is hereby added to the Certificate of
Incorporation, to read in its entirety as follows:
"SIXTEENTH: If action is to be taken by the stockholders of
the Corporation without a meeting, then the written consent of
the holders of all of the shares of capital stock entitled to
vote on such action shall be required to take such action,
unless the action has been authorized by the Board of
Directors of the Corporation, in which case the written
consent of the holders of not less than a majority of the
shares of capital stock entitled to vote on such action shall
be required to take such action."
FIFTH: The foregoing amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the President of the Corporation has hereunto set his
hand to this Certificate this 25th day of February, 1999.
EXTECH Corporation
By: /s/ Morton L. Certilman
---------------------------
Morton L. Certilman,
President
<PAGE>
Effective as of 2/25/99
DCAP GROUP, INC.
BY-LAWS
ARTICLE I
OFFICES
Section 1. The principal office of the corporation in the State of
Delaware shall be in the City of Wilmington, County of New Castle.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders shall be held at such time
and place as may be fixed from time to time by the board of directors of the
corporation.
Section 2. Annual meetings of stockholders shall be held for the
election of directors of the corporation. At such annual meeting, the
stockholders shall elect a board of directors by a plurality vote (as provided
in Section 10 of this Article II), and shall transact such other business as may
properly be brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by, at the direction of or upon authority granted by
the board of directors, (b) otherwise brought before the meeting by, at the
direction of or upon authority granted by the board of directors, or (c) subject
to Section 12 hereof, otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation. To be timely, a stockholder's notice must be
received at the principal executive offices of the corporation not less than 60
days nor more than 90 days prior to the meeting; provided, however, that, in the
event that less than 70 days' notice of the date of the meeting is given to
stockholders and public disclosure of the meeting date, pursuant to a press
release, is either not made or is made less than 70 days prior to the meeting
date, then notice by the stockholder to be timely must be so received not later
than the close of business on the tenth day following the earlier of (a) the day
on which such notice of the date of the annual meeting was mailed to
stockholders or (b) the day on which any such public disclosure was made.
A stockholder's notice to the secretary must set forth as to
each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting, and the reasons for conducting such business at the annual
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<PAGE>
meeting, (b) the name and address, as they appear on the corporation's books, of
the stockholder proposing such business, (c) the class and number of shares of
the corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in the By-Laws to the contrary, but subject to Section 12 hereof, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Section 2. The chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 2, and, if he should so determine, he shall so declare to the meeting,
and any such business not properly brought before the meeting shall not be
transacted.
Section 3. Written notice of the annual meeting shall be given to each
stockholder entitled to vote thereat not less than ten nor more than sixty days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address and number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, during ordinary business hours, for a period
of at least ten days prior to the election, either at a place within the city,
town or village where the election is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
said meeting is to be held, and the list shall be produced and kept at the time
and place of election during the whole time thereof, and subject to the
inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, shall be called by the secretary of the corporation at the
request in writing of a majority of the entire board of directors. Such request
shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting of stockholders, stating
the time, place and purposes thereof, shall be given to each stockholder
entitled to vote thereat, not less ten nor more than sixty days before the date
fixed for the meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
2
<PAGE>
transacted which might have been transacted at the meeting as originally
notified.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of a statute, the
by-laws or the certificate of incorporation, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
Section 10. Except as provided in the certificate of incorporation,
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period. At all elections
of directors of the corporation, each stockholder having voting power shall be
entitled to exercise the right of cumulative voting as provided in the
certificate of incorporation.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by any
provisions of the statutes or of the certificate of incorporation, the meeting
and vote of stockholders may be dispensed with, if all the stockholders who
would have been entitled to vote upon the action if such meeting were held shall
consent in writing to such corporate action being taken unless such action has
been authorized by the board of directors, in which event such action may be
taken by the written consent of the holders of not less than a majority of the
shares of capital stock entitled to vote upon such action.
Section 12. Only persons who are nominated in accordance with the
procedures set forth in this Section 12 shall be qualified for election as
directors. Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the board of directors or by any stockholder of the corporation entitled to vote
for the election of directors at the meeting who complies with the procedures
set forth in this Section 12. In order for persons nominated to the board of
directors, other than those persons nominated by or at the direction of the
board of directors, to be qualified to serve on the board of directors, such
nomination shall be made pursuant to timely notice in writing to the secretary
of the corporation. To be timely, a stockholder's notice must be received at the
principal executive offices of the corporation not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that, in the event that
less than 70 days' notice of the date of the meeting is given to stockholders
and public disclosure of the meeting date, pursuant to a press release, is
either not made or is made less than 70 days prior to the meeting date, then
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the earlier of (a) the day on which
such notice of the date of the meeting was mailed to stockholders or (b) the day
on which such public disclosure was made.
A stockholder's notice to the secretary must set forth (a) as
to each person whom the stockholder proposes to nominate for election or
re-election as a director (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
3
<PAGE>
person, (iii) the class and number of shares of the corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitation of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
from time to time (including, without limitation, such documentation as is
required by Regulation 14A to confirm that such person is a bona fide nominee);
and (b) as to the stockholder giving the notice (i) the name and address, as
they appear on the corporation's books, of such stockholder and (ii) the class
and number of shares of the corporation which are beneficially owned by such
stockholder. At the request of the board of directors, any person nominated by
the board of directors for election as a director shall furnish to the secretary
of the corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be qualified
for election as a director of the corporation unless nominated in accordance
with the procedures set forth in this Section 12. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with procedures prescribed by the By-Laws,
and, if he should so determine, he shall so declare to the meeting, and the
defective nomination shall be disregarded.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be fixed from time to time by the board of directors of the
corporation. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
Section 3. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
4
<PAGE>
shall be held immediately following the close of the annual meeting of
stockholders at the place of the holding of said annual meeting. No notice of
any such meeting shall be necessary to the newly elected directors in order
legally to constitute the meeting, provided a quorum shall be present. In the
event such meeting is not held at such time and place, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board of directors may be called by
the chairman of the board or the president on one (1) day's notice to each
director, either personally, by overnight mail, by telegram, by telecopier or by
telephone. For purposes hereof, one (1) day's notice shall be satisfied by the
delivery of such notice as shall result in the director receiving notice by 5:00
p.m., New York City time, on the day immediately preceding the date of the
meeting (provided that the time of the meeting is no earlier than 8:00 a.m., New
York City time).
Section 8. At all meetings of the board, a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors; provided, however, that, in the
event the number of directors in office is less than four, any action to be
taken by the Board of Directors shall require the affirmative vote of all of the
directors then in office, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the board of directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, 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 or such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the board or
committee.
COMMITTEES OF DIRECTORS
Section 10. The board of directors, by resolution adopted by a majority
of the entire board, may designate from among its members an executive committee
and other committees, which committees shall serve at the pleasure of the board
of directors. The board of directors may designate one or more directors as
alternate members of any such committee, who may replace any absent member or
members of such committee. The board of directors, by resolution adopted by a
majority of the entire board, may remove a member of any such committee with or
without cause. To the extent provided in said resolution and to the extent
permitted by the laws of the State of Delaware, each such committee shall have
and may exercise the powers of the board of directors.
5
<PAGE>
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors and such salary or
other compensation as directors, as the board by resolution may determine. No
such payment shall preclude any director from serving the corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing
and delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated herein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a chairman of the board, a vice-chairman of the board,
a president, an executive vice-president, a secretary and a treasurer. The board
of directors may also choose one or more vice-presidents, assistant secretaries
and assistant treasurers. Two or more offices may be held by the same person.
Section 2. The board of directors, at its first meeting after each
annual meeting of stockholders, shall choose a chairman of the board, a
vice-chairman of the board, a president, an executive vice-president, a
secretary and a treasurer, none of whom need be a member of the board.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
6
<PAGE>
Section 4. The salaries of all officers of the corporation shall be
fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the entire board of directors. Any vacancy occurring in any office
of the corporation shall be filled by the board of directors.
Section 6. In order to (i) terminate the employment of a person who is
an officer and director of the corporation (including, without limitation, the
Chairman of the Board, Vice Chairman of the Board, President and Executive Vice
President of the corporation) and who is a party to an employment agreement with
the corporation or (ii) elect not to extend the term thereof, then (x) the
approval of the Board of Directors shall be required and (y) (I) if the
termination is based upon a claim of cause, the approval of a majority of all of
the members (including, for purposes of determining the number of members of the
Board, the subject employee, if a Board member) shall be required and (II) if
the termination is not based upon a claim of cause, or if the corporation
desires to elect not to extend the term of the particular employment agreement,
the approval of seventy-five percent (75%) of all of the members (including, for
purposes of determining the number of members of the Board, the subject
employee, if a Board member) (rounded to the nearest integer) shall be
required."
CHAIRMAN OF THE BOARD
Section 7. The chairman of the board of directors shall have general
supervision and control over the finances of the corporation, subject to the
control of the board of directors; shall preside at all meetings of the board of
directors and stockholders; shall be ex-officio a member of all standing
committees; and shall perform such other duties as from time to time may be
assigned to him by the board of directors.
VICE-CHAIRMAN OF THE BOARD
Section 8. The vice-chairman of the board shall, in the absence or
disability of the chairman of the board, perform the duties and exercise the
powers of the chairman of the board, and shall generally assist the chairman of
the board and perform such other duties as the board or the chairman of the
board shall prescribe.
PRESIDENT
Section 9. The president shall have general supervision and control
over the day-to-day business and management of the corporation, subject to the
control of the board of directors, and shall see that all orders and resolutions
of the board are carried into effect.
EXECUTIVE VICE-PRESIDENT
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Section 10. The executive vice-president shall generally assist the
president in the management of the day-to-day business and affairs of the
corporation and, in the absence or disability of the president, shall perform
the duties and exercise the powers of the president, and shall perform such
other duties and have such other powers as the board of directors may from time
to time prescribe.
VICE-PRESIDENTS
Section 11. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the board of directors, shall, in the
absence or disability of the executive vice-president, perform the duties and
exercise the powers of the executive vice-president and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
SECRETARY AND ASSISTANT SECRETARIES
Section 12. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors, under
whose supervision he shall be. He shall keep in safe custody the seal of the
corporation and, when authorized by the board of directors, affix the same to
any instrument requiring it and, when so affixed, it shall be attested by his
signature or by the signature of an assistant secretary.
Section 13. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
TREASURER AND ASSISTANT TREASURERS
Section 14. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books and belongings to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of directors.
Section 15. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
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all his transactions as treasurer and of the financial condition of the
corporation.
Section 16. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 17. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may form time to time
prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman of the board, the vice-chairman of the board, the president, the
executive vice-president or a vice-president and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation.
Section 2. Where a certificate is signed (a) by a transfer agent or an
assistant transfer agent or (b) by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such chairman of the board,
vice-chairman of the board, president, executive vice-president, vice-president,
treasurer, assistant treasurer, secretary or assistant secretary may be
facsimile. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the corporation, whether because
of death, resignation or otherwise, before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of
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stock to be lost or destroyed. When authorizing such issue of a new certificate
or certificates, the board of directors may, in its discretion and as a
condition precedent to the issuance thereof, require
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the owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 5. The board of directors may close the stock transfer books of
the corporation for a period not exceeding fifty days preceding the date of any
meeting of stockholders or the date for payment of any dividend or the date for
the allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect or for a period of not exceeding fifty days
in connection with obtaining the consent of stockholders for any purpose. In
lieu of closing the stock transfer books as aforesaid, the board of directors
may fix in advance a date, which date shall not be more than sixty nor less than
ten days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting, and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent, and in such case such stockholders and only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any 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 provided by the laws of
Delaware.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demand for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
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Section 7. The corporation shall to the full extent permitted by
Section 145 of the Delaware General Corporation Law, as amended from time to
time, indemnify all persons whom it may indemnify pursuant thereto. The
indemnifications authorized hereby shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled under or through
any agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in the official capacity of those seeking indemnification 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, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
persons. 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 is or was serving at the request of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of Section 145.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed (a) at any regular
meeting of the stockholders or of the board of directors, (b) at any special
meeting of the stockholders or of the board of directors if notice of such
alteration or repeal be contained in the notice of such special meeting or (c)
by unanimous written consent of the stockholders or board of directors.
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DCAP GROUP, INC.
1998 Stock Option Plan
1. Purpose of the Plan. The DCAP Group, Inc. 1998 Stock Option
Plan (the "Plan") is intended to advance the interests of DCAP Group, Inc. (the
"Company") by inducing individuals or entities of outstanding ability and
potential to join and remain with, or provide consulting or advisory services
to, the Company, by encouraging and enabling eligible employees, non-employee
Directors, consultants and advisors to acquire proprietary interests in the
Company, and by providing the participating employees, non-employee Directors,
consultants and advisors with an additional incentive to promote the success of
the Company. This is accomplished by providing for the granting of "Options,"
which term as used herein includes both "Incentive Stock Options" and
"Nonstatutory Stock Options," as later defined, to employees, non-employee
Directors, consultants and advisors.
2. Administration. The Plan shall be administered by the Board
of Directors of the Company (the "Board of Directors") or by a committee (the
"Committee") consisting of at least one (1) person chosen by the Board of
Directors. Except as herein specifically provided, the interpretation and
construction by the Board of Directors or the Committee of any provision of the
Plan or of any Option granted under it shall be final and conclusive. The
receipt of Options by Directors, or any members of the Committee, shall not
preclude their vote on any matters in connection with the administration or
interpretation of the Plan.
3. Shares Subject to the Plan. The stock subject to Options
granted under the Plan shall be shares of the Company's common stock, par value
$.01 per share (the "Common Stock"), whether authorized but unissued or held in
the Company's treasury, or shares purchased
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from stockholders expressly for use under the Plan. The maximum number of shares
of Common Stock which may be issued pursuant to Options granted under the Plan
shall not exceed in the aggregate two million (2,000,000) shares, subject to
adjustment in accordance with the provisions of Section 12 hereof. The Company
shall at all times while the Plan is in force reserve such number of shares of
Common Stock as will be sufficient to satisfy the requirements of all
outstanding Options granted under the Plan. In the event any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, the unpurchased shares subject thereto shall again be available for
Options under the Plan.
4. Participation. The class of individuals and entities that
shall be eligible to receive Options under the Plan shall be (a) with respect to
Incentive Stock Options described in Section 6 hereof, all employees (including
officers) of either the Company or any subsidiary corporation of the Company,
and (b) with respect to Nonstatutory Stock Options described in Section 7
hereof, all employees (including officers) and non-employee Directors of, or
consultants and advisors to, either the Company or any subsidiary corporation of
the Company; provided, however, that Nonstatutory Stock Options shall not be
granted to any such consultants and advisors unless (i) bona fide services have
been or are to be rendered by such consultant or advisor and (ii) such services
are not in connection with the offer or sale of securities in a capital raising
transaction. The Board of Directors or the Committee, in its sole discretion,
but subject to the provisions of the Plan, shall determine the employees and
non-employee Directors of, and the consultants and advisors to, the Company and
its subsidiary corporations to whom Options shall be granted, and the number of
shares to be covered by each Option, taking into account the nature of the
employment or services
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rendered by the individuals or entities being considered, their annual
compensation, their present and potential contributions to the success of the
Company, and such other factors as the Board of Directors or the Committee may
deem relevant.
5. Stock Option Agreement. Each Option granted under the Plan
shall be authorized by the Board of Directors or the Committee, and shall be
evidenced by a Stock Option Agreement which shall be executed by the Company and
by the individual to whom such Option is granted. The Stock Option Agreement
shall specify the number of shares of Common Stock as to which any Option is
granted, the period during which the Option is exercisable, and the option price
per share thereof, and such other terms and provisions as the Board of Directors
or the Committee may deem necessary or appropriate.
6. Incentive Stock Options. The Board of Directors or the
Committee may grant Options under the Plan, which Options are intended to meet
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and which are subject to the following terms and conditions and
any other terms and conditions as may at any time be required by Section 422 of
the Code (referred to herein as an "Incentive Stock Option"):
(a) No Incentive Stock Option shall be granted to
individuals other than employees of the Company or of a
subsidiary corporation of the Company.
(b) Each Incentive Stock Option under the Plan must be
granted prior to November 2, 2008, which is within ten (10) years
from the date the Plan was adopted by the Board of Directors.
(c) The option price of the shares subject to any Incentive
Stock Option shall not be less than the fair market value (as
defined in subsection (f) of this Section 6) of the Common
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Stock at the time such Incentive Stock Option is granted;
provided, however, if an Incentive Stock Option is granted to an
individual who owns, at the time the Incentive Stock Option is
granted, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of a parent or
subsidiary corporation of the Company (a "10% Stockholder"), the
option price of the shares subject to the Incentive Stock Option
shall be at least one hundred ten percent (110%) of the fair
market value of the Common Stock on the date upon which such
Incentive Stock Option is granted.
(d) No Incentive Stock Option granted under the Plan shall
be exercisable after the expiration of ten (10) years from the
date of its grant. However, if an Incentive Stock Option is
granted to a 10% Stockholder, such Incentive Stock Option shall
not be exercisable after the expiration of five (5) years from
the date of its grant. Every Incentive Stock Option granted under
the Plan shall be subject to earlier termination as expressly
provided in Section 10 hereof.
(e) For purposes of determining stock ownership under this
Section 6, the attribution rules of Section 424(d) of the Code
shall apply.
(f) For purposes of the Plan, fair market value shall be
determined by the Board of Directors or the Committee. If the
Common Stock is listed on a national securities exchange or The
Nasdaq Stock Market ("Nasdaq") or traded on the NASD OTC
Electronic Bulletin Board (the "Bulletin Board") or the
Over-the-Counter market, fair market value shall be the closing
selling price or, if not available, the closing bid price or, if
not available, the high bid price of the Common Stock quoted on
such exchange or Nasdaq, or as reported by the Bulletin Bord or,
with respect to the Over-the-Counter market, the National
Quotation Bureau, Incorporated or other reporting bureau, on the
day immediately preceding the day on which the Option is granted
(or, if granted after the close of
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trading, on the day on which the Option is granted), or, if there
is no selling or bid price on that day, the closing selling
price, closing bid price or high bid price on the most recent day
which precedes that day and for which such prices are available.
If there is no selling or bid price for the thirty (30) day
period preceding the date of grant of an Option hereunder, fair
market value shall be determined in good faith by the Board of
Directors or the Committee.
7. Nonstatutory Stock Options. The Board of Directors or the
Committee may grant Options under the Plan which are not intended to meet the
requirements of Section 422 of the Code, as well as Options which are intended
to meet the requirements of Section 422 of the Code but the terms of which
provide that they will not be treated as Incentive Stock Options (referred to
herein as a "Nonstatutory Stock Option"). Nonstatutory Stock Options which are
not intended to meet those requirements shall be subject to the following terms
and conditions:
(a) A Nonstatutory Stock Option may be granted to any
individual or entity eligible to receive an Option under the Plan
pursuant to clause (b) of Section 4 hereof.
(b) The option price of the shares subject to a Nonstatutory
Stock Option shall be determined by the Board of Directors or the
Committee, in its sole discretion, at the time of the grant of
the Nonstatutory Stock Option.
(c) A Nonstatutory Stock Option granted under the Plan may
be of such duration as shall be determined by the Board of
Directors or the Committee (subject to earlier termination as
expressly provided in Section 10 hereof).
8. Rights of Option Holders. The holder of any Option granted
under the Plan shall have none of the rights of a stockholder with respect to
the stock covered by his Option until such stock shall be transferred to him
upon the exercise of his Option.
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9. Transferability. No Option granted under the Plan shall be
transferable by the individual or entity to whom it was granted otherwise than
by will or the laws of descent and distribution, and, during the lifetime of
such individual, shall not be exercisable by any other person, but only by him.
10. Termination of Employment, Etc.
(a) Subject to the terms of the Stock Option Agreement, if
the employment of an employee by, or the services of a
non-employee Director for, or consultant or advisor to, the
Company or a subsidiary corporation of the Company shall be
terminated for cause or voluntarily by the employee, non-employee
Director, consultant or advisor, then his or its Option shall
expire forthwith. Subject to the terms of the Stock Option
Agreement, and except as provided in subsections (b) and (c) of
this Section 10, if such employment or services shall terminate
for any other reason, then such Option may be exercised at any
time within three (3) months after such termination, subject to
the provisions of subsection (d) of this Section 10. For purposes
of the Plan, the retirement of an individual either pursuant to a
pension or retirement plan adopted by the Company or at the
normal retirement date prescribed from time to time by the
Company shall be deemed to be termination of such individual's
employment other than voluntarily or for cause. For purposes of
this subsection (a), an employee, non-employee Director,
consultant or advisor who leaves the employ or services of the
Company to become an employee or non-employee Director of, or a
consultant or advisor to, a subsidiary corporation of the Company
or a corporation (or subsidiary or parent corporation of the
corporation) which has assumed the Option of the Company as a
result of a corporate reorganization, etc., shall not be
considered to have terminated his employment or services.
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(b) Subject to the terms of the Stock Option Agreement, if
the holder of an Option under the Plan dies (i) while employed
by, or while serving as a non-employee Director for or a
consultant or advisor to, the Company or a subsidiary corporation
of the Company, or (ii) within three (3) months after the
termination of his employment or services other than voluntarily
or for cause, then such Option may, subject to the provisions of
subsection (d) of this Section 10, be exercised by the estate of
the employee or non-employee Director, consultant or advisor, or
by a person who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of such employee
or non-employee Director, consultant or advisor, at any time
within one (1) year after such death.
(c) Subject to the terms of the Stock Option Agreement, if
the holder of an Option under the Plan ceases employment or
services because of permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) while employed by, or
while serving as a non-employee Director for or consultant or
advisor to, the Company or a subsidiary corporation of the
Company, then such Option may, subject to the provisions of
subsection (d) of this Section 10, be exercised at any time
within one (1) year after his termination of employment,
termination of Directorship or termination of consulting or
advisory services, as the case may be, due to the disability.
(d) An Option may not be exercised pursuant to this Section
10 except to the extent that the holder was entitled to exercise
the Option at the time of termination of employment, termination
of Directorship, termination of consulting or advisory services,
or death, and in any event may not be exercised after the
expiration of the Option.
(e) For purposes of this Section 10, the employment
relationship of an
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employee of the Company or of a subsidiary corporation of the
Company will be treated as continuing intact while he is on
military or sick leave or other bona fide leave of absence (such
as temporary employment by the Government) if such leave does not
exceed ninety (90) days, or, if longer, so long as his right to
reemployment is guaranteed either by statute or by contract.
11. Exercise of Options.
(a) Unless otherwise provided in the Stock Option Agreement,
any Option granted under the Plan shall be exercisable in whole
at any time, or in part from time to time, prior to expiration.
The Board of Directors or the Committee, in its absolute
discretion, may provide in any Stock Option Agreement that the
exercise of any Options granted under the Plan shall be subject
(i) to such condition or conditions as it may impose, including,
but not limited to, a condition that the holder thereof remain in
the employ or service of, or continue to provide consulting or
advisory services to, the Company or a subsidiary corporation of
the Company for such period or periods from the date of grant of
the Option as the Board of Directors or the Committee, in its
absolute discretion, shall determine; and (ii) to such
limitations as it may impose, including, but not limited to, a
limitation that the aggregate fair market value (determined at
the time the Option is granted) of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first
time by any employee during any calendar year (under all plans of
the Company and its parent and subsidiary corporations) shall not
exceed one hundred thousand dollars ($100,000). In addition, in
the event that under any Stock Option Agreement the aggregate
fair market value (determined at the time the Option is granted)
of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any employee during any
calendar year (under all plans of the Company and its parent and
subsidiary corporations) exceeds one hundred thousand dollars
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($100,000), the Board of Directors or the Committee may, when
shares are transferred upon exercise of such Options, designate
those shares which shall be treated as transferred upon exercise
of an Incentive Stock Option and those shares which shall be
treated as transferred upon exercise of a Nonstatutory Stock
Option.
(b) An Option granted under the Plan shall be exercised by
the delivery by the holder thereof to the Company at its
principal office (attention of the Secretary) of written notice
of the number of shares with respect to which the Option is being
exercised. Such notice shall be accompanied, or followed within
ten (10) days of delivery thereof, by payment of the full option
price of such shares, and payment of such option price shall be
made by the holder's delivery of (i) his check payable to the
order of the Company, or (ii) previously acquired Common Stock,
the fair market value of which shall be determined as of the date
of exercise, or by the holder's delivery of any combination of
the foregoing (i) and (ii).
12. Adjustment Upon Change in Capitalization.
(a) In the event that the outstanding Common Stock is
hereafter changed by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
split-up, combination of shares, reverse split, stock dividend or
the like, an appropriate adjustment shall be made by the Board of
Directors or the Committee in the aggregate number of shares
available under the Plan, and in the number of shares and option
price per share subject to outstanding Options. If the Company
shall be reorganized, consolidated, or merged with another
corporation, the holder of an Option shall be entitled to receive
upon the exercise of his Option the same number and kind of
shares of stock or the same amount of property, cash or
securities as he would have been entitled to receive upon the
happening of any such corporate event as if he had been,
immediately prior to
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such event, the holder of the number of shares covered by his
Option; provided, however, that in such event the Board of
Directors or the Committee shall have the discretionary power to
take any action necessary or appropriate to prevent any Incentive
Stock Option granted hereunder which is intended to be an
"incentive stock option" from being disqualified as such under
the then existing provisions of the Code or any law amendatory
thereof or supplemental thereto; and provided, further, however,
that in such event the Board of Directors or the Committee shall
have the discretionary power to take any action necessary or
appropriate to prevent such adjustment from being deemed or
considered as the adoption of a new plan requiring shareholder
approval under Section 422 of the Code and the regulations
promulgated thereunder.
(b) Any adjustment in the number of shares shall apply
proportionately to only the unexercised portion of the Option
granted hereunder. If fractions of a share would result from any
such adjustment, the adjustment shall be revised to the next
lower whole number of shares.
13. Further Conditions of Exercise.
(a) Unless prior to the exercise of the Option the shares
issuable upon such exercise have been registered with the
Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended, the notice of exercise shall be accompanied
by a representation or agreement of the person or estate
exercising the Option to the Company to the effect that such
shares are being acquired for investment purposes and not with a
view to the distribution thereof, or such other documentation as
may be required by the Company, unless in the opinion of counsel
to the Company such representation, agreement or documentation is
not necessary to comply with such Act.
(b) The Company shall not be obligated to deliver any Common
Stock until
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it has been listed on each securities exchange or stock market on
which the Common Stock may then be listed or until there has been
qualification under or compliance with such federal or state
laws, rules or regulations as the Company may deem applicable.
The Company shall use reasonable efforts to obtain such listing,
qualification and compliance.
14. Effectiveness of the Plan. The Plan was adopted by the
Board of Directors on November 2, 1998. The Plan shall be subject to approval on
or before November 1, 1999, which is within one (1) year of adoption of the Plan
by the Board of Directors, by the affirmative vote of the holders of a majority
of the outstanding shares of capital stock of the Company present in person or
by proxy at a meeting of stockholders and entitled to vote thereon (or, in the
case of action by written consent in lieu of a meeting of stockholders, a
majority of the outstanding shares of capital stock of the Company entitled to
vote thereon) ("Stockholder Approval"). In the event such Stockholder Approval
is withheld or otherwise not received on or before the latter date, the Plan
and, subject to the terms of the Stock Option Agreement, all Options that may
have been granted hereunder shall become null and void.
15. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted under the
Plan) shall terminate on November 1, 2008, which is within ten
(10) years from the date of its adoption by the Board of
Directors, or sooner as hereinafter provided, and no Option shall
be granted after termination of the Plan.
(b) The Plan may from time to time be terminated, modified,
or amended by the affirmative vote of the holders of a majority
of the outstanding shares of capital stock of the Company
entitled to vote thereon.
11
<PAGE>
(c) The Board of Directors may at any time, on or before the
termination date referred to in Section 15(a) hereof, terminate
the Plan, or from time to time make such modifications or
amendments to the Plan as it may deem advisable; provided,
however, that the Board of Directors shall not, without
Stockholder Approval, increase (except as otherwise provided by
Section 12 hereof) the maximum number of shares as to which
Incentive Stock Options may be granted hereunder, change the
designation of the employees or class of employees eligible to
receive Incentive Stock Options, or make any other change which
would prevent any Incentive Stock Option granted hereunder which
is intended to be an "incentive stock option" from qualifying as
such under the then existing provisions of the Code or any law
amendatory thereof or supplemental thereto.
(d) No termination, modification, or amendment of the Plan
may, without the consent of the individual or entity to whom any
Option shall have been granted, adversely affect the rights
conferred by such Option.
16. Not a Contract of Employment. Nothing contained in the
Plan or in any Stock Option Agreement executed pursuant hereto shall be deemed
to confer upon any individual or entity to whom an Option is or may be granted
hereunder any right to remain in the employ or service of the Company or a
subsidiary corporation of the Company or any entitlement to any remuneration or
other benefit pursuant to any consulting or advisory arrangement.
17. Use of Proceeds. The proceeds from the sale of shares
pursuant to Options granted under the Plan shall constitute general funds of the
Company.
18. Indemnification of Board of Directors or Committee. In
addition to such other rights of indemnification as they may have, the members
of the Board of Directors or the Committee, as the case may be, shall be
indemnified by the Company to the extent permitted under
12
<PAGE>
applicable law against all costs and expenses reasonably incurred by them in
connection with any action, suit, or proceeding to which they or any of them may
be a party by reason of any action taken or failure to act under or in
connection with the Plan or any rights granted thereunder and against all
amounts paid by them in settlement thereof or paid by them in satisfaction of a
judgment of any such action, suit or proceeding, except a judgment based upon a
finding of bad faith. Upon the institution of any such action, suit, or
proceeding, the member or members of the Board of Directors or the Committee, as
the case may be, shall notify the Company in writing, giving the Company an
opportunity at its own cost to defend the same before such member or members
undertake to defend the same on his or their own behalf.
19. Captions. The use of captions in the Plan is for
convenience. The captions are not intended to provide substantive rights.
20. Disqualifying Dispositions. If Common Stock acquired upon
exercise of an Incentive Stock Option granted under the Plan is disposed of
within two years following the date of grant of the Incentive Stock Option or
one year following the issuance of the Common Stock to the Optionee (a
"Disqualifying Disposition"), the holder of the Common Stock shall, immediately
prior to such Disqualifying Disposition, notify the Company in writing of the
date and terms of such Disqualifying Disposition and provide such other
information regarding the Disqualifying Disposition as the Company may
reasonably require.
21. Withholding Taxes. Whenever under the Plan shares of
Common Stock are to be delivered by an Optionee upon exercise of a Nonstatutory
Stock Option, the Company shall be entitled to require as a condition of
delivery that the Optionee remit or, in appropriate cases, agree to remit when
due, an amount sufficient to satisfy all current or estimated future Federal,
state and
13
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local income tax withholding requirements, including, without limitation, the
employee's portion of any employment tax requirements relating thereto. At the
time of a Disqualifying Disposition, the Optionee shall remit to the Company in
cash the amount of any applicable Federal, state and local income tax
withholding and the employee's portion of any employment taxes.
22. Other Provisions. Each Option granted under the Plan may
contain such other terms and conditions not inconsistent with the Plan as may be
determined by the Board or the Committee, in its sole discretion.
Notwithstanding the foregoing, each Incentive Stock Option granted under the
Plan shall include those terms and conditions which are necessary to qualify the
Incentive Stock Option as an "incentive stock option" within the meaning of
Section 422 of the Code and the regulations thereunder and shall not include any
terms and conditions which are inconsistent therewith.
23. Definitions. For purposes of the Plan, the terms "parent
corporation" and "subsidiary corporation" shall have the meanings set forth in
Sections 424(e) and 424(f) of the Code, respectively, and the masculine shall
include the feminine and the neuter as the context requires.
24. Governing Law. The Plan shall be governed by, and all
questions arising hereunder shall be determined in accordance with, the laws of
the State of Delaware.
14
<PAGE>
AGREEMENT
AMONG
EXTECH CORPORATION
MORTON L. CERTILMAN
JAY M. HAFT
KEVIN LANG
AND
ABRAHAM WEINZIMER
As of May 8, 1998
<PAGE>
TABLE OF CONTENTS
Page
RECITALS:......................................................................2
ARTICLE I
DEFINED TERMS; SCHEDULES.......................................................3
1.1 Defined Terms.........................................................3
1.2 Schedules.............................................................3
ARTICLE II
PURCHASE AND SALE; LOANS.......................................................3
2.1 Agreement to Sell.....................................................3
2.2 Agreement to Purchase.................................................3
2.3 Purchase Price........................................................3
2.3.1 Purchase Price.................................................3
2.3.2 Delivery of Purchase Price.....................................3
2.3.3 Allocation of Purchase Price...................................4
2.4 Additional Purchases..................................................4
2.4.1 Purchases from EXTECH..........................................4
2.4.2 Purchases from Sterling Foster.................................5
2.5 Loans to DCAP and the Shareholders....................................5
2.5.1 $311,000 Loan..................................................5
2.5.2 Closing Loans..................................................6
2.5.3 Prior Loans....................................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES THE SHAREHOLDERS................................7
3.1 Valid Existence; Qualification........................................7
3.2 Capitalization; Subsidiaries; Affiliated Entities.....................8
3.3 Consents..............................................................8
3.4 Authority; Binding Nature of Agreement................................8
3.5 Financial Statements..................................................9
3.6 Liabilities...........................................................9
3.7 Actions Since the Balance Sheet Date..................................9
3.8 Adverse Developments.................................................10
3.9 Taxes................................................................10
3.10 Ownership of Assets; Interest in Assets.............................10
3.10.1 Assets Generally.............................................10
EXTECH CORPORATION
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3.10.2 Interest in Assets...........................................10
3.11 Insurance......................................................10
3.12 Litigation; Compliance with Law................................11
3.13 Real Property..................................................11
3.14 Agreements and Obligations; Performance........................12
3.15 Condition of Assets............................................12
3.16 Permits and Licenses...........................................12
3.17 Occupational Heath and Safety and Environmental Matters........13
3.18 Intellectual Property..........................................13
3.19 Compensation Information.......................................14
3.20 Employee Benefit Plans.........................................14
3.21 No Breach......................................................15
3.22 Brokers........................................................16
3.23 Employment Relations...........................................16
3.24 Prior Names and Addresses......................................17
3.25 Payments.......................................................17
3.26 Books and Records..............................................17
3.27 Americans with Disabilities Act Compliance.....................17
3.28 Proxy Statement................................................17
3.29 Untrue or Omitted Facts........................................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EXTECH......................................18
4.1 Valid Corporate Existence............................................18
4.2 Capitalization.......................................................18
4.3 Consents.............................................................18
4.4 Corporate Authority; Binding Nature of Agreement.....................19
4.5 SEC Report...........................................................19
4.6 No Breach............................................................19
4.7 Actions Since the Balance Sheet Date.................................19
4.8 Adverse Developments.................................................20
4.9 Taxes................................................................20
4.10 Ownership of Assets; Interest in Assets.............................21
4.10.1 Assets Generally.............................................21
4.10.2 Interest in Assets...........................................21
4.11 Insurance...........................................................21
4.12 Litigation; Compliance with Law.....................................21
4.13 Real Property.......................................................21
4.14 Agreements and Obligations; Performance.............................21
4.15 Condition of Assets.................................................22
4.16 Permits and Licenses................................................22
4.17 Occupational Heath and Safety and Environmental Matters. ...........22
EXTECH CORPORATION
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4.18 Intellectual Property...............................................23
4.19 Compensation Information............................................23
4.20 Employee Benefit Plans..............................................23
4.21 Brokers.............................................................25
4.22 Employment Relations................................................25
4.23 Payments............................................................26
4.24 Books and Records...................................................26
4.25 Americans with Disabilities Act Compliance..........................26
4.26 Proxy Statement.....................................................26
4.27 Untrue or Omitted Facts.............................................26
ARTICLE V
PRE-CLOSING COVENANTS.........................................................26
5.1 Shareholder Covenants...............................................26
5.2 EXTECH Covenants....................................................29
ARTICLE VI
ACQUISITION OF SHARES.........................................................31
6.1 Investment Intent; Qualification as Purchaser.......................31
6.2 Restrictive Legend..................................................32
6.3 Certain Risk Factors................................................33
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION OF EXTECH TO CLOSE.....................33
7.1 Representations and Warranties......................................33
7.2 Covenants...........................................................33
7.3 Certificate.........................................................33
7.4 Shares; Purchase Price..............................................33
7.5 Sterling Foster Purchases...........................................33
7.6 Stockholder Approval................................................33
7.7 DCAP Financial Statements...........................................33
7.8 Employment Agreements...............................................34
7.9 Restrictive Covenant Agreements.....................................34
7.10 Fairness Opinion....................................................34
7.11 "Cold Comfort" Letter...............................................34
7.12 Closing Notes; Closing Pledge Agreements............................34
7.13 Opinions of Counsel.................................................34
7.14 Buy Out Agreement...................................................34
7.15 Size of Boards; Election as Members ................................34
EXTECH CORPORATION
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7.16 No Actions..........................................................34
7.17 Consents; Licenses and Permits......................................35
7.18 Sections 4(2) and 4(1) Compliance...................................35
7.19 Actions.............................................................35
7.20 Additional Documents................................................35
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SHAREHOLDERS TO CLOSE...........35
8.1 Representations and Warranties......................................36
8.2 Covenants...........................................................36
8.3 Certificate.........................................................36
8.4 EXTECH Shares.......................................................36
8.5 Sterling Foster Purchases...........................................36
8.6 Stockholder Approval................................................36
8.7 Employment Agreements; Stock Option Agreements......................36
8.8 Certilman and Haft Purchases........................................36
8.9 Closing Loans.......................................................36
8.10 Size of Board and Committees; Election as Directors and Members.....36
8.11 Tax Opinion.........................................................37
8.12 Opinion of Counsel..................................................37
8.13 Buy Out Agreement...................................................37
8.14 No Actions..........................................................37
8.15 Consents; Licenses and Permits......................................37
8.16 Corporate Actions...................................................37
8.17 Additional Documents................................................37
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATION OF CERTILMAN AND HAFT TO CLOSE.........38
9.1 Shares/EXTECH Acquisition Shares....................................38
9.2 Sterling Foster Purchases...........................................38
9.3 Stockholder Approval................................................38
9.4 EXTECH Additional Shares............................................38
9.5 Shareholder Purchases...............................................38
9.6 Employment Agreements; Stock Option Agreements......................38
9.7 No Actions..........................................................38
9.8 Corporate Actions...................................................38
9.9 Additional Documents................................................39
EXTECH CORPORATION
<PAGE>
ARTICLE X
CLOSING.......................................................................39
10.1 Time and Location...................................................39
10.2 Items to be Delivered by the Shareholders...........................39
10.3 Items to be Delivered by EXTECH.....................................40
10.4 Items to be Delivered by Certilman and Haft.........................40
ARTICLE XI
POST-CLOSING MATTERS..........................................................40
11.1 Further Assurances..................................................40
11.2 Agreement as to Voting..............................................40
11.3 Sales of EXTECH Shares..............................................41
ARTICLE XII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION..................................41
12.1 Survival............................................................41
12.2 Indemnification.....................................................41
12.2.1 General Indemnification Obligation of the Shareholders......41
12.2.2 General Indemnification Obligation of EXTECH................42
12.2.3 Method of Asserting Claims, Etc.............................42
12.2.4 Limitations.................................................44
12.3 Arbitration.........................................................44
12.4 Other Rights and Remedies Not Affected..............................45
ARTICLE XIII
TERMINATION AND WAIVER........................................................45
13.1 Termination.........................................................45
13.2 Waiver..............................................................46
ARTICLE XIV
DEFINED TERMS.................................................................46
14.1 Defined Terms.......................................................46
ARTICLE XV
MISCELLANEOUS PROVISIONS......................................................52
15.1 Expenses............................................................52
15.2 Confidential Information............................................52
EXTECH CORPORATION
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15.3 Equitable Relief...................................................53
15.4 Publicity..........................................................53
15.5 Entire Agreement...................................................53
15.6 Notices............................................................53
15.7 Choice of Law; Severability........................................54
15.8 Successors and Assigns; No Assignment..............................54
15.9 Counterparts.......................................................54
15.10 Facsimile Signatures...............................................55
15.11 Representation by Counsel; Interpretation..........................55
15.12 Headings; Gender...................................................55
SCHEDULES
A Affiliated Companies
B Joint Ventures
2.5.1 Uses of Loan Proceeds
3.2(a) Liens
3.2(b) Investments
3.3 Consents
3.5 Financial Statements
3.7 Actions Since the Balance Sheet Date
3.8 Adverse Developments
3.10.1 Assets Generally
3.11 Insurance
3.12 Litigation; Compliance with Law
3.13 Real Property
3.14 Agreements and Obligations; Performance
3.15 Condition of Assets
3.16 Permits and Licenses
3.18 Intellectual Property
3.19 Compensation Information
3.20 Employee Benefits
3.21 No Breach
3.24 Prior Names and Addresses
4.3 Consents
4.7 Actions Since the Balance Sheet Date
4.8 Adverse Developments
4.11 Insurance
4.12 Litigation; Compliance with Law
4.13 Real Property
4.14 Agreements and Obligations; Performance
4.15 Condition of Assets
4.16 Permits and Licenses
4.18 Intellectual Property
4.19 Compensation Information
4.20 Employee Benefits
8 Excluded DCAP Entity Provisions
EXTECH CORPORATION
<PAGE>
EXHIBITS
2.4.1(a) Additional Shares Note
2.4.1(b) Additional Shares Pledge Agreement
2.5.2(a) Closing Loan Note
2.5.2(b) Closing Loan Pledge Agreement
7.8 Employment Agreement
7.9 Restrictive Covenant Agreement
7.13 Opinion of Counsel
7.14 Buy Out Agreement
8.7 Stock Option Agreement
EXTECH CORPORATION
<PAGE>
AGREEMENT, dated as of May 8, 1998 (the "Agreement"), by and among
EXTECH CORPORATION, a Delaware corporation ("EXTECH"), MORTON L. CERTILMAN
("Certilman"), JAY M. HAFT ("Haft"), KEVIN LANG ("Lang") and ABRAHAM WEINZIMER
("Weinzimer" and together with Lang, individually, a "Shareholder" and
collectively, the "Shareholders").
RECITALS:
The Shareholders own (i) all of the outstanding Common Shares of
Dealers Choice Automotive Planning Inc. ("DCAP") and certain other corporations,
as set forth on Schedule A attached hereto (collectively with DCAP, the
"Affiliated Companies") (the "Company Shares") and (ii) certain of the
outstanding Common Shares of certain other corporations and certain membership
interests in a certain limited liability company, all as set forth on Schedule B
attached hereto (collectively, the "Joint Ventures" and together with the
Affiliated Companies, the "DCAP Entities") (the "Joint Venture Shares"). The
Joint Venture Shares and the Company Shares are referred to collectively as the
"Shares".
The DCAP Entities are engaged in the following businesses: (i) retail
automotive, motorcycle and boat casualty and liability insurance brokerage
("Insurance Brokerage"); (ii) insurance premium finance ("Premium Finance");
(iii) income tax preparation ("Tax Preparation"); and (iv) automobile and travel
club ("Auto Club") (collectively, the "DCAP Business"), as identified for each
DCAP Entity on Schedules A and B attached hereto.
Subject to the terms and conditions hereof, at the Closing (as
hereinafter defined), the Shareholders desire to sell to EXTECH, and EXTECH
desires to purchase from the Shareholders, the Shares.
Subject to the terms and conditions hereof, at the Closing, each of
Lang and Weinzimer desires to purchase from EXTECH, and EXTECH desires to sell
to each of them, 475,000 shares of Common Stock (950,000 shares in the
aggregate) of EXTECH.
Subject to the terms and conditions hereof, at the Closing, each of
Certilman and Haft desires to purchase from EXTECH (directly or indirectly
through a retirement trust or designee), and EXTECH desires to sell to each of
them, 226,000 shares of Common Stock (452,000 shares in the aggregate) of
EXTECH.
Subject to the terms and conditions hereof, concurrently with the
Closing, each of Certilman, Haft, Lang and Weinzimer desires to purchase from
Sterling Foster Holding Corp. 450,000 shares of Common Stock (1,800,000 shares
in the aggregate) of EXTECH currently registered in the name of Certilman, as
voting trustee.
The parties intend that the transactions contemplated hereby satisfy
the provisions of Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code").
EXTECH CORPORATION
2
<PAGE>
NOW, THEREFORE, in consideration of the recitals and the respective
covenants, representations, warranties and Agreements herein contained and
intending to be legally bound hereby, the parties hereby agree as follows:
ARTICLE I
DEFINED TERMS; SCHEDULES
1.1 Defined Terms. Capitalized terms used in this Agreement will have the
meanings given such terms in Article XIV hereof or elsewhere in the text of this
Agreement, and variants and derivatives of such terms shall have correlative
meanings.
1.2 Schedules. References to a Schedule will include any applicable disclosure
expressly set forth on the face of any other Schedule if specifically
cross-referenced to such other Schedule. Each Schedule and the information,
Agreements and documents expressly listed in each Schedule will be considered a
part of this Agreement as if set forth herein in full and will be deemed to
constitute representations and warranties under this Agreement, limited as set
forth in the applicable provision of this Agreement under which such Schedule is
delivered; provided, however, that the representations and warranties set forth
in this Agreement shall not be affected or deemed qualified, modified or limited
in any respect by the information provided in the Schedules except to the extent
that any qualification, modification or limitation to any representation and
warranty is expressly and conspicuously set forth on the face of such particular
Schedule.
ARTICLE II
PURCHASES AND SALES; LOANS
2.1 Agreement to Sell. At the Closing, upon and subject to the terms and
conditions of this Agreement, the Shareholders shall sell, assign and transfer
to EXTECH all of their right, title and interest in and to all of the Shares,
free and clear of all Liens.
2.2 Agreement to Purchase. At the Closing, upon and subject to the terms and
conditions of this Agreement, EXTECH shall purchase the respective Shares from
the Shareholders in exchange for the Acquisition Purchase Price.
2.3 Purchase Price.
2.3.1Purchase Price. The aggregate purchase price for the Shares (the
"Acquisition Purchase Price") shall be Three Million Three Hundred Thousand
(3,300,000) shares of Common Stock of EXTECH (the "EXTECH Acquisition Shares").
2.3.2 Delivery of Purchase Price. At the Closing, subject to the terms and
conditions hereof, in payment of the Acquisition Purchase Price, EXTECH shall
EXTECH CORPORATION
3
<PAGE>
deliver to each of the Shareholders a certificate representing one-half of the
EXTECH Acquisition Shares against delivery by the Shareholders of certificates
representing their respective Shares, duly endorsed or accompanied by stock
powers duly executed. The certificates representing the Shares shall also be
accompanied by evidence satisfactory to EXTECH of the Shareholders' payment of
all transfer taxes with respect thereto.
2.3.3 Allocation of Purchase Price. The Acquisition Purchase Price shall be
allocated among the Shares acquired hereunder as may be agreed to among the
parties hereto in order to properly reflect the respective fair market values of
the Shares. The Shareholders and EXTECH hereby covenant and agree that they will
not take a position on any income tax return, before any governmental agency
charged with the collection of any income tax, or in any judicial proceeding
that is in any way inconsistent with the terms of this Section 2.3.3.
2.4 Additional Purchases.
2.4.1 Purchases from EXTECH. (a) Subject to the terms and conditions
hereof, at the Closing, each of Certilman and Haft will purchase (or, to the
extent necessary to comply with the requirements of Section 351 of the Code,
will cause a retirement trust established for his benefit and/or other designee
to purchase) from EXTECH, and EXTECH shall issue and sell to each of them, Two
Hundred Twenty-Six Thousand (226,000) shares of Common Stock (452,000 shares in
the aggregate) of EXTECH (collectively, the "EXTECH Management Additional
Shares") at a purchase price of Twenty-Five Cents ($.25) per share (the "EXTECH
Additional Shares Purchase Price"). The EXTECH Additional Shares Purchase Price
shall be paid by certified check or, at the option of EXTECH, wire transfer to
EXTECH of immediately available funds.
(b) Subject to the terms and conditions hereof, at the Closing, each
of Lang and Weinzimer will purchase (or, in the case of Lang, will cause a
retirement trust established for his benefit to purchase) from EXTECH, and
EXTECH shall issue and sell to each of them, Four Hundred Seventy-Five
Thousand (475,000) shares of Common Stock (950,000 shares in the aggregate)
of EXTECH (collectively, the "950,000 Additional Shares" and together with
the EXTECH Management Additional Shares, the "EXTECH Additional Shares" and
together further with the EXTECH Acquisition Shares, the "EXTECH Shares")
at the EXTECH Additional Shares Purchase Price. The EXTECH Additional
Shares Purchase Price shall be paid as follows: (i) an amount in cash equal
to the par value of the 950,000 Additional Shares ($.01 per share or an
aggregate of $9,500) and (ii) the balance thereof by the delivery by each
of Lang and Weinzimer of a promissory note in the principal amount of One
Hundred Fourteen Thousand Dollars ($114,000) (an aggregate of $228,000)
(collectively, the "Additional Shares Notes") that will provide for, among
other things, the following:
(i) interest at the rate of six percent (6%) per annum; and
(ii) payment of the principal amount thereof, together with
accrued interest thereon, in six (6) equal annual installments,
EXTECH CORPORATION
4
<PAGE>
commencing April 15, 2001 and continuing through April 15, 2006, in
such annual amount as shall be necessary to self-amortize the
Additional Shares Note by April 15, 2006, subject to acceleration to
the extent the respective Shareholder receives any proceeds from the
sale or other disposition of any shares of Common Stock of EXTECH.
The Additional Shares Notes shall be in, or substantially in, the form of
Exhibit 2.4.1(a) attached hereto.
The payment of all amounts due under the Additional Shares Notes shall be
secured by a pledge by each of the Shareholders to EXTECH of Five Hundred
Seventy Thousand (570,000) shares of Common Stock of EXTECH pursuant to pledge
agreements that will be entered into at the Closing (collectively, the
"Additional Shares Pledge Agreements"). The Additional Shares Pledge Agreements
shall be in, or substantially in, the form of Exhibit 2.4.1(b) attached hereto.
2.4.2 Purchases from Sterling Foster. The parties acknowledge that One
Million Eight Hundred Thousand (1,800,000) shares of Common Stock of EXTECH (the
"Sterling Foster Shares") are registered in the name of "Morton Certilman as
Voting Trustee U/A dated December 30, 1996" and are held pursuant to a Voting
Trust Agreement dated as of December 30, 1996 between Certilman and Sterling
Foster Holding Corp. ("Sterling Foster") (the "Voting Trust Agreement") pursuant
to which a voting trust certificate was issued to Sterling Foster with regard to
the Sterling Foster Shares. Subject to the terms and conditions hereof, each of
Certilman, Haft, Lang and Weinzimer shall use his best efforts to purchase,
contemporaneously with the Closing, Four Hundred Fifty Thousand (450,000) of the
Sterling Foster Shares (1,800,000 shares in the aggregate) at a purchase price
of Twenty-Five Cents ($.25) per share (collectively, the "Sterling Foster
Purchases"). The parties acknowledge and agree that any such purchase will be
conditioned upon the concurrent termination of the Voting Trust Agreement.
2.5 Loans to DCAP and the Shareholders.
2.5.1 $311,000 Loan. Simultaneously herewith, EXTECH is loaning to DCAP the
sum of Three Hundred Eleven Thousand Dollars ($311,000) (the "$311,000 Loan").
The $311,000 Loan is evidenced by a promissory note in such principal amount
(the "311,000 Note") that provides for, among other things, the following:
(i) payment of the principal amount thereof on September 30, 1998; and
(ii) interest at the rate of ten percent (10%) per annum, payable with
the principal payment.
The $311,000 Loan may be used by DCAP only for the purposes set forth on
Schedule 2.5.1 attached hereto, and for no other purpose.
The repayment of all amounts due under the $311,000 Note is secured by the
pledge by the Shareholders of the Shares pursuant to the terms of a certain
EXTECH CORPORATION
5
<PAGE>
Pledge Agreement, dated as of November 26, 1997, by and among the Shareholders
and EXTECH, as amended by the terms hereof (the "Initial Pledge Agreement").
2.5.2 Closing Loans. Subject to the terms and conditions hereof, at the
Closing, EXTECH will loan to each of Lang and Weinzimer the amount of One
Hundred Twelve Thousand Five Hundred Dollars ($112,500) (an aggregate of
$225,000) (collectively, the "Closing Loans"). The proceeds of the Closing Loans
will be used by the Shareholders solely for the purpose of purchasing the
Sterling Foster Shares from Sterling Foster. The Closing Loans will be evidenced
by promissory notes of the respective Shareholders, each in the principal amount
of One Hundred Twelve Thousand Five Hundred Dollars ($112,500) ($225,000 in the
aggregate) (collectively, the "Closing Loan Notes" and together with the
Additional Shares Notes, the "Closing Notes"), that will provide for, among
other things, the following:
(i) interest at the rate of six percent (6%) per annum;
(ii) payment of the principal amount thereof, together with accrued
interest thereon, in six (6) equal annual installments, commencing April
15, 2001 and continuing through April 15, 2006, in such annual amount as
shall be necessary to self-amortize the Closing Loan Note by April 15,
2006, subject to acceleration to the extent the respective Shareholder
receives any proceeds from the sale or other disposition of any shares of
Common Stock of EXTECH;
(iii) non-recourse against the Shareholder; and
(iv) the right of the Shareholder to satisfy the amounts due under the
Closing Loan Note by delivering his respective shares of Common Stock of
EXTECH valued at the greater of (A) twenty-five cents ($.25) per share or
(B) the average Market Price (as such term is defined in the Closing Loan
Note) for the twenty (20) trading days immediately preceding the date of
delivery of the shares.
The Closing Loan Notes shall be in, or substantially in, the form of
Exhibit 2.5.2(a) attached hereto.
The repayment of all amounts due under the Closing Loan Notes shall be
secured by a pledge by each of the Shareholders to EXTECH of his respective
acquired Sterling Foster Shares pursuant to pledge agreements that will be
entered into at the Closing (collectively, the "Closing Loan Pledge Agreements"
and together with the Additional Shares Pledge Agreements, the "Closing Pledge
Agreements"). The Closing Loan Pledge Agreements shall be in, or substantially
in, the form of Exhibit 2.5.2(b) attached hereto.
2.5.3 Prior Loans. (a) The parties acknowledge that, on November 26, 1997,
EXTECH loaned to DCAP Three Hundred Twenty-Five Thousand Dollars ($325,000) (the
"$325,000 Loan"). The $325,000 Loan is evidenced by a promissory note in such
principal amount (the "$325,000 Note"). The parties acknowledge further that, on
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March 20, 1998, EXTECH loaned to DCAP the additional sum of One Hundred Fourteen
Thousand Dollars ($114,000) (the "$114,000 Loan"). The $114,000 Loan is
evidenced by a promissory note in such principal amount (the "$114,000 Note").
The repayment of all amounts due under the $325,000 Note and $114,000 Note is
secured by the pledge by the Shareholders of the Shares pursuant to the terms of
the Initial Pledge Agreement.
(b) The parties agree that the $325,000 Note is amended to provide
that (i) the principal amount thereof shall be payable on September 30,
1998, subject to acceleration as set forth therein (except that the payment
default occurring prior to the date hereof is hereby waived by EXTECH),
(ii) the reference in the $325,000 Note to that certain letter of intent of
even date therewith by and among DCAP, Lang, Weinzimer and EXTECH (the
"Letter of Intent") shall hereafter refer instead to this Agreement and
(iii) the payment of amounts due thereunder shall be subject to no defense,
counter-claim or right of offset or setoff (it being understood that, in
all other respects, the $325,000 Note shall continue in full force and
effect in accordance with its terms). The parties agree further that the
$114,000 Note is amended to provided that the reference therein to the
Letter of Intent shall hereafter refer instead to this Agreement (it being
understood that, in all other respects, the $114,000 Note shall continue in
full force and effect in accordance with its terms).
(c) The parties agree further that the Initial Pledge Agreement is
hereby amended to provide that all references therein to "Pledged Shares"
as being security for the performance by DCAP of all of its obligations
under the Notes (as defined therein, which shall be deemed to include the
$325,000 Note, the $114,000 Note and the $311,000 Note) shall be deemed to
include (i) all proceeds thereof (as such term is defined in Section 9-306
of the Code (as defined therein)), including, without limitation, all
dividends or other income from the Pledged Shares, collections thereon and
distributions with respect thereto, whether arising before or after the
date hereof and (ii) all shares, stock certificates, options or rights of
any nature whatsoever that may be issued, or may have been issued, to
either Shareholder with regard thereto, in substitution or replacement
thereof, as a conversion thereof, in exchange therefor or otherwise in
respect thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
The Shareholders, jointly and severally, make the following representations
and warranties to EXTECH, each of which shall be deemed material, and EXTECH, in
executing, delivering and consummating this Agreement, has relied upon the
correctness and completeness of each of such representations and warranties:
3.1 Valid Existence; Qualification. Each DCAP Entity (other than Tax Services)
is a corporation organized, validly existing and in good standing under the laws
of the state of its incorporation. Tax Services is a limited liability company
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duly organized, validly existing and in good standing under the laws of New
York. Each DCAP Entity has the power to carry on its respective DCAP Business as
now conducted and to own its assets. No DCAP Entity is required to qualify in
any other jurisdiction in order to own its assets or to carry on its respective
DCAP Business as now conducted, and there has not been any claim by any other
jurisdiction to the effect that any DCAP Entity is required to qualify or
otherwise be authorized to do business as a foreign corporation or foreign
limited liability company therein. The copies of each DCAP Entity's Certificate
of Incorporation, as amended to date (certified by the Secretary of the State of
the state of its incorporation), and each DCAP Entity's By-Laws or, in the case
of Tax Services, Articles of Organization and Operating Agreement, as amended to
date (certified by the Secretary of the respective DCAP Entity), which have been
delivered to EXTECH, are true and complete copies of those documents as in
effect on the date hereof.
3.2 Capitalization; Subsidiaries; Affiliated Entities. (a) The Shareholders own
(i) all of the outstanding Common Shares of each of the Affiliated Companies and
(ii) the percentage of the outstanding Common Shares or, in the case of Tax
Services, membership interests of each of the Joint Ventures as is set forth on
Schedule B attached hereto, in each case free and clear of all Liens (except as
set forth on Schedule 3.2(a) attached hereto). All of the Shares are duly
authorized, validly issued, fully paid and nonassessable. No DCAP Entity is
authorized to issue any capital stock other than Common Shares, there are no
outstanding securities or evidences of indebtedness of any DCAP Entity that are
convertible into or exchangeable for any Common Shares of any DCAP Entity
("Derivative Securities") and there are no outstanding options, warrants or
other rights or commitments for the purchase or acquisition of any Common Shares
or Derivative Securities of any DCAP Entity. At the Closing, EXTECH will acquire
good and marketable title to the Shares, free and clear of all Liens.
(b) The DCAP Entities are engaged in the respective businesses identified
on Schedule B attached hereto. No DCAP Entity has made any investments in, or
owns, any of the capital stock of, or any other proprietary interest in, any
other Person.
(c) Except for the DCAP Entities or as set forth on Schedule 3.2(b)
attached hereto, neither Shareholder has made any investments in, or owns, any
of the capital stock of, or any other proprietary interest in, any other Person
engaged in any business which is similar to or competitive with the DCAP
Business.
3.3 Consents. Except as set forth on Schedule 3.3 attached hereto, no consent of
any Body or other Person was or is required to be received by or on the part of
any DCAP Entity or either of the Shareholders to enable either Shareholder to
enter into and carry out this Agreement and the transactions contemplated
hereby, including, without limitation, the transfer to EXTECH of all of the
right, title and interest of the Shareholders in and to the Shares. Except as
set forth on Schedule 3.3, all such consents have been obtained.
3.4 Authority; Binding Nature of Agreement. Each of the Shareholders has the
power to enter into this Agreement and to carry out his respective obligations
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hereunder. This Agreement constitutes the valid and binding obligation of each
of the Shareholders and is enforceable in accordance with its terms.
3.5 Financial Statements. The DCAP Financial Statements (i) are true and
complete, (ii) are in accordance with the Books and Records of the DCAP
Entities, (iii) fairly present the combined financial position of the DCAP
Entities and separate financial position of each DCAP Entity as of the DCAP
Balance Sheet Date and the combined and separate results of their operations for
the year then ended, and (iv) were prepared in conformity with generally
accepted accounting principles consistently applied throughout the periods
covered thereby.
3.6 Liabilities. As at the DCAP Balance Sheet Date, no DCAP Entity had any
Liabilities, other than those Liabilities reflected or reserved against in the
DCAP Balance Sheet, and there was no basis for the assertion against any DCAP
Entity of any material Liability not so reflected or reserved against therein.
As of the date hereof, the aggregate Liabilities of the Affiliated Companies to
the Joint Ventures do not exceed $104,000.
3.7 Actions Since the Balance Sheet Date. Except as otherwise expressly provided
or set forth in, or required by, this Agreement, or as set forth in Schedule 3.7
attached hereto, since the DCAP Balance Sheet Date, no DCAP Entity has (i)
incurred any material Liability, (ii) made any wage or salary increases or
granted any bonuses; (iii) mortgaged, pledged or subjected to any Lien any of
its assets, or permitted any of its assets to be subjected to any Lien; (iv)
sold, assigned or transferred any of its assets, except in the ordinary and
usual course of business consistent with past practice; (v) changed its
accounting methods, principles or practices; (vi) revalued any of its assets,
including, without limitation, writing down the value of inventory or writing
off notes or accounts receivable; (vii) incurred any damage, destruction or loss
(whether or not covered by insurance) adversely affecting its assets or business
which has had or could be reasonably expected to have a Material Adverse Effect;
(viii) cancelled any indebtedness or waived or released any right or claim which
has had or could be reasonably expected to have a Material Adverse Effect; (ix)
incurred any material adverse change in employee relations; (x) amended,
cancelled or terminated any Contract or Permit or entered into any Contract or
Permit which is not in the ordinary course of business consistent with past
practice; (xi) increased or changed its assumptions underlying, or methods of
calculating, any doubtful account contingency or other reserves; (xii) paid,
discharged or satisfied any Liabilities other than the payment, discharge or
satisfaction in the ordinary course of business of Liabilities set forth or
reserved for on the DCAP Balance Sheet or incurred in the ordinary course of
business; (xiii) made any capital expenditure, entered into any lease or
incurred any obligation to make any capital expenditure; (xiv) failed to pay or
satisfy when due any Liability; (xv) failed to carry on its business in the
ordinary course, consistent with the past practices, so as to reasonably keep
available the services of its employees, and to preserve its assets and business
and the goodwill of its suppliers, customers, distributors and others having
business relations with it; (xvi) disposed of or allowed the lapse of any
Proprietary Rights or disclosed to any person any Proprietary Rights not
theretofore a matter of public knowledge; or (xvii) other than this Agreement or
the transactions contemplated hereby, entered into any transaction or course of
conduct not in the ordinary and usual course of business and consistent with
past practice.
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3.8 Adverse Developments. Except as set forth on Schedule 3.8 attached hereto,
since the DCAP Balance Sheet Date, there has been no material adverse change in
the assets, business, operations (financial or otherwise), or prospects of any
DCAP Entity, there has been no act or omission on the part of any DCAP Entity or
others which would form the basis for the assertion against any DCAP Entity of
any material Liability, no other event has occurred which could be reasonably
expected to have a Material Adverse Effect and neither of the Shareholders knows
of any development or threatened development of a nature which could be
reasonably expected to have a Material Adverse Effect.
3.9 Taxes. All taxes, including, without limitation, income, property, sales,
use, utility, franchise, capital stock, excise, value added, employees'
withholding, social security and unemployment taxes imposed by the United
States, any state, locality or any foreign country, or by any other taxing
authority, which have or may become due or payable by each DCAP Entity, and all
interest and penalties thereon, whether disputed or not, have been paid in full
or adequately provided for by reserves shown in its Books and Records; all
deposits required by law to be made by each DCAP Entity or with respect to
estimated income, franchise and employees' withholding taxes have been duly
made; and all tax returns, including estimated tax returns, required to be filed
have been duly and timely filed. No extension of time for the assessment of
deficiencies for any year is in effect. No deficiency notice is proposed, or to
the knowledge of either Shareholder, threatened against any DCAP Entity. The tax
returns of the DCAP Entities have never been audited. No sales or use taxes are
required to be collected in connection with the operation of the DCAP Business.
3.10 Ownership of Assets; Interest in Assets.
3.10.1 Assets Generally. Except as set forth on Schedule 3.10.1 attached
hereto, the DCAP Entities own outright, and have good and marketable title to,
or lease pursuant to leases described on Schedule 3.14, all of their respective
assets (including all assets reflected in the DCAP Balance Sheet, except as the
same may have been disposed of in the ordinary and usual course of business
consistent with past practice since the DCAP Balance Sheet Date), free and clear
of all Liens. Upon consummation of the transactions contemplated by this
Agreement, except as set forth on Schedule 3.10.1, the DCAP Entities will own
their respective assets, free and clear of all Liens. The assets of the DCAP
Entities are sufficient to permit them to conduct the DCAP Business as now
conducted. None of the assets of the DCAP Entities are subject to any
restriction with regard to transferability. There are no Contracts with any
Person with respect to the acquisition of any of the assets of the DCAP Entities
or any rights or interests therein.
3.10.2 Interest in Assets. Neither Shareholder, directly or indirectly,
owns any property or rights, tangible or intangible, used in or related,
directly or indirectly, to the DCAP Business.
3.11 Insurance. Schedule 3.11 attached hereto sets forth a true and complete
list and brief description of all policies of fire, liability and other forms of
insurance held by each DCAP Entity. Except as set forth in Schedule 3.11, such
policies are valid, outstanding and enforceable policies, as to which premiums
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have been paid currently, are with reputable insurers believed by the
Shareholders to be financially sound and are consistent with the practices of
similar concerns engaged in substantially similar operations as those currently
conducted by the DCAP Entities. Except as set forth in Schedule 3.11, there
exists no state of facts, and no event has occurred, which might reasonably (i)
form the basis for any claim against any DCAP Entity not fully covered by
insurance for liability on account of any express or implied warranty or
tortious omission or commission, or (ii) result in any material increase in
insurance premiums.
3.12 Litigation; Compliance with Law. Except as set forth on Schedule 3.12
attached hereto, there are no Actions relating to any DCAP Entity or any of its
assets or business pending or, to the knowledge of each of the Shareholders,
threatened, or any order, injunction, award or decree outstanding, against any
DCAP Entity or against or relating to any of its assets or business; and there
exists no basis for any such Action which would have a Material Adverse Effect.
No Affiliated Company and, to the knowledge of each of the Shareholders and
DCAP, no Joint Venture is in violation of any law, regulation, ordinance, order,
injunction, decree, award, or other requirement of any governmental or other
regulatory body, court or arbitrator relating to its assets or business, the
violation of which would have a Material Adverse Effect. Without limiting the
generality of the foregoing, each of the Affiliated Companies has complied in
all material respects with all laws, regulations and other requirements of all
government and other regulatory bodies with respect to franchises. Neither the
establishment nor operation of the Joint Ventures (including, without
limitation, the use by the Joint Ventures of the "DCAP" or "DCAP Insurance"
name) required or requires any filings with the New York State Department of
State or any other governmental or other regulatory body with respect to
franchising, or was or is subject to any laws, rules or regulations of the
States of New York or New Jersey or the Untied States of America with respect to
franchising. None of the DCAP Entities has any Liability to any franchisee, for
rescission or otherwise, in connection with the offering or sale of franchises.
DCAP Management Inc. ("Management") is the only DCAP Entity that has ever
offered or sold franchises. No DCAP Entity has ever offered or sold franchises
to any Person residing or doing business outside of the State of New York.
Management did not offer or sell franchises prior to the effective date of its
registration with the State of New York with respect thereto.
3.13 Real Property. Schedule 3.13 attached hereto sets forth a brief description
of all real properties which are leased to the DCAP Entities and the terms of
the respective leases, including the identity of the lessor, the rental rate and
other charges, and the term of the lease. No DCAP Entity owns outright the fee
simple title in and to any real property. The real property leases described in
Schedule 3.13 that relate to the leased properties described therein are in full
force and effect and all amounts payable thereunder have been paid. All uses of
such real properties by the Affiliated Companies and, to the knowledge of each
of the Shareholders and DCAP, the Joint Ventures conform in all material
respects to the terms of the leases relating thereto and conform in all material
respects to all applicable building and zoning ordinances, laws and regulations.
None of such leases may be expected to result in the expenditure of material
sums for the restoration of the premises upon the expiration of their respective
terms.
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3.14 Agreements and Obligations; Performance. Except as listed and briefly
described in Schedule 3.14 attached hereto (the "Listed Agreements"), no DCAP
Entity is a party to, or bound by, and neither Shareholder, with respect to any
DCAP Entity, is a party to, or bound by, any: (i) Contract which involves
aggregate payments or receipts in excess of $5,000 that cannot be terminated at
will without penalty or premium or any continuing Liability; (ii) Contract of
any kind with any officer, director, shareholder, manager, member or partner of
the DCAP Entity; (iii) Contract which is violation of applicable law; (iv)
Contract for the purchase, sale or lease of any materials, products, supplies or
services which contains, or which commits or will commit it for, a fixed term;
(v) Contract of employment not terminable at will without penalty or premium or
any continuing Liability; (vi) deferred compensation, bonus or incentive plan or
Contract not cancelable at will without penalty or premium or any continuing
obligation or liability; (vii) management or consulting Contract not terminable
at will without penalty or premium or any continuing Liability; (viii) except as
set forth in Schedule 3.13, lease for real or personal property; (ix) license or
royalty Contract; (x) Contract relating to indebtedness for borrowed money; (xi)
union or other collective bargaining Contract; (xii) Contract which, by its
terms, requires the consent of any party thereto to the consummation of the
transactions contemplated hereby; (xiii) Contract containing covenants limiting
the freedom of the DCAP Entity or any officer, employee, partner, manager or
member thereof to engage or compete in any line of business or with any Person
in any geographical area; (xiv) Contract or option relating to the acquisition
or sale of any business; (xv) voting agreement or similar Contract; (xvi) option
for the purchase of any asset, tangible or intangible; or (xvii) franchise,
license or advertising Contract; (xviii) Contract with the United States
government, any state, local or foreign government or any agency or department
thereof; (xix) Contract that grants any person any right of first refusal or
similar right; (xx) other Contract which materially affects any of its assets or
business, whether directly or indirectly, or which was entered into other than
in the ordinary and usual course of business consistent with past practice. A
true and correct copy of each of the written Listed Agreements has been
delivered, or made available, to EXTECH. Each DCAP Entity has in all material
respects performed all obligations required to be performed by it to date under
all of the Listed Agreements, is not in Default under any of the Listed
Agreements and has received no notice of any dispute, Default or alleged Default
thereunder which has not heretofore been cured or which notice has not
heretofore been withdrawn. Neither Shareholder knows of any Default under any of
the Listed Agreements by any other party thereto or by any other Person bound
thereunder.
3.15 Condition of Assets. Except as set forth on Schedule 3.15 attached hereto,
all machinery, equipment, vehicles and other assets used by the DCAP Entities in
the conduct of the DCAP Business are in good operating condition, ordinary wear
and tear excepted.
3.16 Permits and Licenses. Schedule 3.16 attached hereto sets forth a true and
complete list of all Permits from all Bodies held by the DCAP Entities. Each
DCAP Entity has all Permits of all Bodies required to carry on its business as
presently conducted and to offer and sell its products and services; all such
Permits are in full force and effect, and, to the knowledge of the Shareholders,
no suspension or cancellation of any of such Permits is threatened; and each
DCAP Entity is in compliance in all material respects with all requirements,
standards and procedures of the Bodies which have issued such Permits. Except as
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set forth on Schedule 3.16, no notice to, declaration, filing or registration
with, or Permit from, any Body or any other Person is required to be made or
obtained by any DCAP Entity or either Shareholder in connection with the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.
3.17 Occupational Heath and Safety and Environmental Matters. The operations of
the DCAP Business do not require, and no DCAP Entity has, any Permits from any
Bodies relating to occupational health and safety or environmental matters to
lawfully conduct the DCAP Business. There is no litigation, investigation or
other proceeding pending or, to the knowledge of each of the Shareholders,
threatened or known to be contemplated by any Body in respect of or relating to
the DCAP Business or the assets of the DCAP Entities with respect to
occupational health and safety or environmental matters. All operations of the
DCAP Business have been conducted in compliance with all, and no DCAP Entity is
liable in any respect for any violation of any, applicable federal, state or
local laws or regulations pertaining to occupational health and safety and
environmental matters, including, without limitation, those relating to the
emission, discharge, storage, release or disposal of Materials of Environmental
Concern into ambient air, surface water, ground water or land surface or
sub-surface strata or otherwise relating to the manufacture, processing,
distribution, use, handling, disposal or transport of Materials of Environmental
Concern. No DCAP Entity nor either Shareholder has received any notice of a
possible claim or citation against or in respect of any real property leased by
any DCAP Entity, or with regard to its assets or business, relating to
occupational health and safety or environmental matters and neither of the
Shareholders is aware of any basis for any such Action.
3.18 Intellectual Property. Schedule 3.18 sets forth a true and complete list
and brief description of all Proprietary Rights which are owned by any DCAP
Entity or in which, or with regard to which, it has any right or interest
(including, without limitation, the identity of the DCAP Entity, each
application number, serial number or registration number, the class of goods or
services covered and the expiration date for each country in which Intellectual
Property has been registered). Except as set forth in Schedule 3.14 attached
hereto, DCAP owns all right, title and interest in and to all software utilized
by the DCAP Entities in the operation of their business (such software being
described on Schedule 3.18), free and clear of all Liens, subject only to
license agreements with the Joint Ventures as described on Schedule 3.14. No
other Person has any proprietary or other interest in any such Proprietary
Rights and no DCAP Entity is a party to or bound by any Contract requiring the
payment to any Person of any royalty. No DCAP Entity is infringing upon any
Proprietary Rights or otherwise is violating the rights of any third party with
respect thereto, and no proceedings have been instituted, and no claim has been
received by any DCAP Entity, and neither Shareholder is aware of any claim,
alleging any such violation. There are no pending applications with regard to
any Proprietary Right. Each DCAP Entity has taken all reasonable and prudent
steps to protect the Proprietary Rights from infringement by any other Person.
No other Person (i) has the right to use any Trademark of any DCAP Entity either
in identical form or in such near resemblance thereto as to be likely, when
applied to the goods or services of any such Person, to cause confusion with
such Trademarks or to cause a mistake or to deceive, (ii) has notified any DCAP
Entity that it is claiming any ownership of or right to use any Proprietary
Rights, or (iii) to the best of each Shareholder's knowledge, is infringing upon
any Proprietary Rights in any way.
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3.19 Compensation Information. Schedule 3.19 attached hereto contains a true and
complete list of the names and current salary rates of, bonus commitments to,
and other compensatory arrangements with, all officers and other persons
employed and/or retained by each DCAP Entity.
3.20 Employee Benefit Plans.
(a) Schedules 3.20 (a), (b) and (c) attached hereto list all of the
"pension" and "welfare" benefit plans (within the respective meanings of
sections 3(2) and 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ["ERISA"]), maintained by each DCAP Entity, or to which it makes
employer contributions with respect to its employees, a complete and correct
copy of each of which has been delivered to EXTECH. There are no vested and
unfunded benefits under any such plans.
(b) All of the pension and profit sharing plans maintained by the DCAP
Entities (herein collectively referred to as the "Pension Plans") are listed in
Schedule 3.20(a). Each of the Pension Plans has received a favorable
determination letter as to its qualification under section 401(a) of the Code
(including, but not limited to, amendments made by ERISA), nothing has occurred
with respect to any such Pension Plan which would cause the loss of such
qualification, and the Shareholders have delivered to EXTECH true and correct
copies of all such determination letters.
(c) All of the pension plans not maintained by the DCAP Entities but to
which they make employer contributions with respect to their employees (herein
collectively referred to as the "Other Pension Plans") are listed in Schedule
3.20(b). Each of the Other Pension Plans is a "multi- employer plan" (within the
meaning of section 3(37) of ERISA), but no DCAP Entity is a "substantial
employer" (within the meaning of section 4001(a)(2) of ERISA) with respect to
any of the Other Pension Plans.
(d) All contributions required by law or required under the Pension Plans
with respect to plan years ended prior to the Closing Date have been made by
each DCAP Entity. With regard to the current plan year of each of the Other
Pension Plans, all contributions required to meet the employer contribution
obligations of each DCAP Entity, under section 412 of the Code, Part 3 of Title
I(B) of ERISA, such Other Pension Plan or any applicable collective bargaining
agreement, with respect to that portion of the current plan year ending on the
Closing Date, shall have been made on or prior to the Closing Date by such DCAP
Entity.
(e) No Pension Plan or related trust has terminated, and no "reportable
event" (within the meaning of section 4043(b) of ERISA) has occurred with
respect to any of the Pension Plans or the participation of any DCAP Entity in
any of the Other Pension Plans, other than the transactions contemplated by this
Agreement, since the effective date of ERISA.
(f) None of the Pension Plans which are subject to the provisions of
section 412 of the Code or Part 3 of Title I(B) of ERISA or their related trusts
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has incurred any "accumulated funding deficiency" (within the meanings of
section 412(a) of the Code and section 302 of ERISA) since the effective date of
ERISA.
(g) No DCAP Entity has incurred any Liability (except for required premium
payments, which premium payments have been made for plan years ended prior to
the Closing Date, to the Pension Benefit Guaranty Corporation), with respect to
the Pension Plans.
(h) All of the welfare plans maintained by each DCAP Entity or to which it
makes employer contributions with respect to its employees (herein collectively
referred to as the "Welfare Plans" and together with the Pension Plans and Other
Pension Plans, the "Pension and Welfare Plans")) are listed in Schedule 3.20(c).
There are no Actions pending or, to the knowledge of either of the Shareholders,
threatened, and neither of the Shareholders has any knowledge of any facts which
could give rise to any Actions against any of the Pension Plans, or (with
respect to the participation of any DCAP Entity therein) against any of the
Other Pension Plans or Welfare Plans, or against any DCAP Entity with respect
thereto.
(i) Each DCAP Entity has satisfied in all material respects all reporting
and disclosure requirements applicable to it under ERISA, and the Department of
Labor and Internal Revenue Service regulations promulgated thereunder, with
respect to all of the Pension and Welfare Plans, and each DCAP Entity has
delivered to EXTECH true and complete copies of the most recently filed and
disclosed Forms EBS-1, Forms 5500 and 5500-C (with exhibits), 1976 "ERISA
Notices" and summary plan description for the Pension and Welfare Plans.
(j) None of the Pension and Welfare Plans or any of their related trusts,
or any DCAP Entity or any trustee, administrator or other "party in interest" or
"disqualified person" (within the meaning of section 3(14) of ERISA or section
4975(e)(2) of the Code, respectively) with respect to the Pension or Welfare
Plans, has engaged in any "prohibited transaction" (within the meaning of
section 408 of ERISA or section 4975(c)(23) or (d) of the Code), with respect to
the participation of any DCAP Entity therein, which could subject any of the
Pension or Welfare Plans or related trusts, or any trustee, administrator or
other fiduciary of any Plan, or any DCAP Entity or EXTECH, or any other party
dealing with the Pension or Welfare Plans, to the penalties or excise tax
imposed on prohibited transactions by section 502(i) of ERISA or section 4975 of
the Code.
(k) The Trustees of each of the Pension Plans have completed their required
annual accountings for the most recent plan years, such accountings accurately
reflect the financial positions of the Pension Plans as at such date, and true
and complete copies of the Trustees' reports or schedules of such accountings
have been delivered to EXTECH.
3.21 No Breach. Neither the execution and delivery of this Agreement nor
compliance by either of the Shareholders with any of the provisions hereof nor
the consummation of the transactions contemplated hereby, will:
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(a) violate or conflict with any provision of the Certificate of
Incorporation, ByLaws or other organizational document of any DCAP Entity;
(b) except as set forth on Schedule 3.21 attached hereto (the "Required
Waivers"), (i) violate or, alone or with notice or the passage of time, or both,
result in a breach or termination of, or otherwise give any party the right to
terminate, or declare a Default under, or have any right of first refusal under,
the terms of any real property lease, license agreement or shareholders
agreement to which either Shareholder or any DCAP Entity is a party or is
otherwise bound or (ii) require either Shareholder to resign, or permit another
Person to require that either Shareholder resign, as an officer or director of
any DCAP Entity (it being represented and warranted that, except as set forth on
Schedule 3.21, all Required Waivers have been obtained);
(c) violate or, alone or with notice or the passage of time, or both,
result in the breach or termination of, or otherwise give any party the right to
terminate, or declare a Default under, the terms of any other Contract to which
any DCAP Entity or either of the Shareholders is a party or by which any of them
may be bound, the violation, breach or termination of which, or Default under
which, would have a Material Adverse Effect ;
(d) result in the creation of any Lien upon any of the assets of any DCAP
Entity;
(e) violate any judgment, order, injunction, decree or award against, or
binding upon, any DCAP Entity or either of the Shareholders or upon any of the
assets of any DCAP Entity; and/or
(f) violate any law or regulation of any jurisdiction relating to any
Affiliated Company, either of the Shareholders, or the DCAP Business, or, to the
knowledge of each of the Shareholders and DCAP, any Joint Venture, the violation
of which would have a Material Adverse Effect.
3.22 Brokers. No DCAP Entity nor either of the Shareholders has engaged,
consented to, or authorized any broker, finder, investment banker or other third
party to act on its or his behalf, directly or indirectly, as a broker or finder
in connection with the transactions contemplated by this Agreement.
3.23 Employment Relations. (a) Each DCAP Entity is in compliance with all
Federal, state and other applicable laws, rules and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and has not engaged in any unfair labor practice which, in any
of the foregoing cases, could have a Material Adverse Effect; (b) there is not
pending, or, to the knowledge of each of the Shareholders, threatened, any
unfair labor practice charge or complaint against any DCAP Entity by or before
the National Labor Relations Board or any comparable state agency or authority;
(c) there is no labor strike, dispute, slowdown or stoppage pending or, to the
knowledge of each of the Shareholders, threatened against or involving any DCAP
Entity; (d) neither of the Shareholders is aware of any union organization
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effort respecting the employees of any DCAP Entity; (e) no grievance which might
have a Material Adverse Effect on any DCAP Entity or the conduct of its
business, nor any arbitration proceeding arising out of or under any collective
bargaining agreement, is pending and no claim therefor has been asserted; (f) no
litigation, arbitration, administrative proceeding or governmental investigation
is now pending, and, to the knowledge of each of the Shareholders, no Person has
made any claim or has threatened litigation, arbitration, administrative
proceeding or governmental investigation against, arising out of any law
relating to discrimination against employees or employment practices; (g) no
collective bargaining agreement is currently being negotiated by any DCAP
Entity; and (h) no DCAP Entity has experienced any material labor difficulties
during the last three (3) years. There has not been, and neither of the
Shareholders anticipates, any material adverse change in relations with
employees of any DCAP Entity as a result of the announcement of the transactions
contemplated by this Agreement.
3.24 Prior Names and Addresses. Since inception, except as set forth on Schedule
3.24 attached hereto, no DCAP Entity has used any business name or had any
business address other than its current name and the business address set forth
in Schedule A and B attached hereto.
3.25 Payments. No Affiliated Company and, to the knowledge of each of the
Shareholders and DCAP, no Joint Venture has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other Person, in the United States or any other country, which is
illegal under any federal, state or local laws of the United States (including,
without limitation, the U.S. Foreign Corrupt Practices Act).
3.26 Books and Records. Each Affiliated Company and, to the knowledge of each of
the Shareholders and DCAP, each Joint Venture has made and kept (and given
EXTECH access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of its business. No DCAP Entity has
engaged in any material transaction, maintained any bank account or used any
corporate funds in connection with its business except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of the DCAP Entity.
3.27 Americans with Disabilities Act Compliance. All facilities owned, leased or
used by the Affiliated Companies and, to the knowledge of each of the
Shareholders and DCAP, the Joint Ventures (collectively "Facilities") have been
constructed and maintained in full compliance with the ADA. No Affiliated
Company and, to the knowledge of each of the Shareholders and DCAP, no Joint
Venture has received any notice to the effect, or otherwise been advised, that
any such Facilities are not in compliance with the ADA. Neither Shareholder has
any reason to anticipate that any existing circumstances at any of the
Facilities are likely to result in violation of the ADA.
3.28 Proxy Statement. The information to be furnished by the Shareholders and
each DCAP Entity for inclusion in the Proxy Statement, when furnished, and at
all times to and including the time of the stockholders' meeting convened for
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the purpose of obtaining Stockholder Approval, will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein contained not misleading.
3.29 Untrue or Omitted Facts. No representation, warranty or statement by the
Shareholders in this Agreement contains any untrue statement of a material fact,
or omits to state a fact necessary in order to make such representations,
warranties or statements not materially misleading. Without limiting the
generality of the foregoing, there is no fact known to either of the
Shareholders that has had, or which may be reasonably expected to have, a
Material Adverse Effect that has not been disclosed in this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EXTECH
EXTECH makes the following representations and warranties to the
Shareholders, each of which shall be deemed material, and the Shareholders, in
executing, delivering and consummating this Agreement, have relied upon the
correctness and completeness of each of such representations and warranties:
4.1 Valid Corporate Existence. EXTECH is a corporation validly existing and in
good standing under the laws of the State of Delaware. EXTECH has the power to
carry on its business as now conducted and to own its assets. EXTECH is
qualified to do business in the State of New York, is not required to qualify in
any other jurisdiction in order to own its assets or to carry on its business as
now conducted, and there has not been any claim by any other jurisdiction to the
effect that EXTECH is required to qualify or otherwise be authorized to do
business as a foreign corporation therein. The copies of EXTECH's Certificate of
Incorporation, as amended to date (certified by the Secretary of the State of
Delaware) and By-Laws, as amended to date (certified by its Secretary), which
have been delivered to the Shareholders, are true and complete copies of those
documents as in effect on the date hereof.
4.2 Capitalization. The authorized capital stock of EXTECH consists of Ten
Million (10,000,000) shares of Common Stock, $.01 par value, of which Five
Million Five Hundred Ninety- One Thousand Three Hundred Sixty-Seven (5,591,367)
shares are issued and outstanding. All of such issued and outstanding shares of
Common Stock are duly authorized, validly issued, fully paid and nonassessable.
The EXTECH Shares to be issued and delivered to the Shareholders as contemplated
by Article II hereof will be duly and validly authorized and, when so issued and
delivered, will be duly and validly issued, fully paid and nonassessable.
4.3 Consents. Except as set forth on Schedule 4.3 attached hereto, no consent of
any Body or other Person is required to be received by or on the part of EXTECH
to enable it to enter into and carry out this Agreement and the transactions
contemplated hereby.
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4.4 Corporate Authority; Binding Nature of Agreement. EXTECH has the corporate
power to enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of EXTECH and, except for Stockholder Approval, no other corporate
proceedings on the part of EXTECH are necessary to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement constitutes the valid and binding obligation of EXTECH
and is enforceable in accordance with its terms.
4.5 SEC Report. EXTECH has previously delivered to the Shareholders a true and
complete copy, including exhibits, of its Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997 (the "SEC Report"), such report being the
only report filed by EXTECH with the SEC since January 1, 1998. The SEC Report
does not contain any untrue statement of a material fact, or fail to state any
material fact required to be stated therein or necessary to make the statements
made therein not materially misleading.
4.6 No Breach. Neither the execution and delivery of this Agreement nor
compliance by EXTECH with any of the provisions hereof nor the consummation of
the transactions contemplated hereby, will:
(a) violate or conflict with any provision of the Certificate of
Incorporation or By- Laws of EXTECH;
(b) violate, or alone or with notice or the passage of time, or both,
result in the breach or termination of, or otherwise give any party the right to
terminate, or declare a Default under, the terms of any Contract to which EXTECH
is a party or by which it may be bound, the violation, breach or termination of
which, or Default under which, would have a Material Adverse Effect;
(c) result in the creation of any Lien upon any of the assets of EXTECH;
(d) violate any judgment, order, injunction, decree or award against, or
binding upon, EXTECH or upon any of its assets; or
(e) subject to the accuracy of the representations made by the Shareholders
in Article VI hereof, violate any law or regulation of any jurisdiction relating
to EXTECH, the violation of which would have a Material Adverse Effect.
4.7 Actions Since the Balance Sheet Date. Except as otherwise expressly provided
or set forth in, or required by, this Agreement, or as set forth in the SEC
Report or Schedule 4.7 attached hereto, since the EXTECH Balance Sheet Date,
EXTECH has not (i) incurred any material Liability, (ii) made any wage or salary
increases or granted any bonuses; (iii) mortgaged, pledged or subjected to any
Lien any of its assets, or permitted any of its assets to be subjected to any
,
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Lien; (iv) sold assigned or transferred any of its assets, except in the
ordinary and usual course of business consistent with past practice; (v) changed
its accounting methods, principles or practices; (vi) revalued any of its
assets, including, without limitation, writing down the value of inventory or
writing off notes or accounts receivable; (vii) incurred any damage, destruction
or loss (whether or not covered by insurance) adversely affecting its assets or
business which has had or could be reasonably expected to have a Material
Adverse Effect; (viii) cancelled any indebtedness or waived or released any
right or claim which has had or could be reasonably expected to have a Material
Adverse Effect; (ix) incurred any material adverse change in employee relations;
(x) amended, cancelled or terminated any Contract or Permit or entered into any
Contract or Permit which is not in the ordinary course of business consistent
with past practice; (xi) increased or changed its assumptions underlying, or
methods of calculating, any doubtful account contingency or other reserves;
(xii) paid, discharged or satisfied any Liabilities other than the payment,
discharge or satisfaction in the ordinary course of business of Liabilities set
forth or reserved for on the EXTECH Balance Sheet or incurred in the ordinary
course of business; (xiii) made any capital expenditure, entered into any lease
or incurred any obligation to make any capital expenditure; (xiv) failed to pay
or satisfy when due any Liability; (xv) failed to carry on its business in the
ordinary course, consistent with the past practices, so as to reasonably keep
available the services of its employees, and to preserve its assets and business
and the goodwill of its suppliers, customers, distributors and others having
business relations with it; (xvi) disposed of or allowed the lapse of any
Proprietary Rights or disclosed to any person any Proprietary Rights not
theretofore a matter of public knowledge; or (xvii) other than this Agreement or
the transactions contemplated hereby, entered into any transaction or course of
conduct not in the ordinary and usual course of business and consistent with
past practice..
4.8 Adverse Developments. Since the EXTECH Balance Sheet Date, there has been no
material adverse change in the assets, business, operations (financial or
otherwise), or prospects of EXTECH, there has been no act or omission on the
part of EXTECH or others which would form the basis for the assertion against
EXTECH of any material Liability, no other event has occurred which could be
reasonably expected to have a Material Adverse Effect and, except as set forth
in the SEC Report or set forth in Schedule 4.8 attached hereto, EXTECH does not
know of any development or threatened development of a nature which could be
reasonably expected to have a Material Adverse Effect.
4.9 Taxes. All taxes, including, without limitation, income, property, sales,
use, utility, franchise, capital stock, excise, value added, employees'
withholding, social security and unemployment taxes imposed by the United
States, any state, locality or any foreign country, or by any other taxing
authority, which have or may become due or payable by EXTECH, and all interest
and penalties thereon, whether disputed or not, have been paid in full or
adequately provided for by reserves shown in its Books and Records; all deposits
required by law to be made by EXTECH or with respect to estimated income,
franchise and employees' withholding taxes have been duly made; and all tax
returns, including estimated tax returns, required to be filed have been duly
and timely filed. No extension of time for the assessment of deficiencies for
any year is in effect. No deficiency notice is proposed, or to the knowledge of
EXTECH, threatened against EXTECH.
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4.10 Ownership of Assets; Interest in Assets. EXTECH owns outright or
indirectly, and has good and marketable title to, directly or indirectly, all of
its respective assets (including all assets reflected in the EXTECH Balance
Sheet, except as the same may have been disposed of in the ordinary and usual
course of business consistent with past practice since the EXTECH Balance Sheet
Date), free and clear of all Liens. The assets of EXTECH are sufficient to
permit it to conduct its business as now conducted. There are no Contracts with
any Person with respect to the acquisition of any of the assets of EXTECH or any
rights or interests therein.
4.11 Insurance. Schedule 4.11 attached hereto sets forth a true and complete
list and brief description of all policies of fire, liability and other forms of
insurance held by EXTECH. Except as set forth in Schedule 4.11, such policies
are valid, outstanding and enforceable policies, as to which premiums have been
paid currently, are with reputable insurers believed by EXTECH to be financially
sound and are consistent with the practices of similar concerns engaged in
substantially similar operations as those currently conducted by EXTECH. Except
as set forth in Schedule 4.11, there exists no state of facts, and no event has
occurred, which might reasonably (i) form the basis for any claim against EXTECH
not fully covered by insurance for liability on account of any express or
implied warranty or tortious omission or commission, or (ii) result in any
material increase in insurance premiums.
4.12 Litigation; Compliance with Law. Except as described in the SEC Report or
Schedule 4.12 attached hereto, there are no Actions relating to EXTECH or any of
its assets or business pending or, to the knowledge of EXTECH, threatened, or
any order, injunction, award or decree outstanding, against EXTECH or against or
relating to any of its assets or business; and there exists no basis for any
such Action which would have a Material Adverse Effect. EXTECH is not in
violation of any law, regulation, ordinance, order, injunction, decree, award,
or other requirement of any governmental or other regulatory body, court or
arbitrator relating to its assets or business, the violation of which would have
a Material Adverse Effect.
4.13 Real Property. The SEC Report sets forth a brief description of all real
properties which are leased to EXTECH and the terms of the respective leases,
including the identity of the lessor, the rental rate and other charges, and the
term of the lease. EXTECH does not own outright the fee simple title in and to
any real property. The real property leases described in Schedule 4.13 that
relate to the leased properties described therein are in full force and effect
and all amounts payable thereunder have been paid. All uses of such real
properties by EXTECH conform in all material respects to the terms of the leases
relating thereto and conform in all material respects to all applicable building
and zoning ordinances, laws and regulations. None of such leases may be expected
to result in the expenditure of material sums for the restoration of the
premises upon the expiration of their respective terms.
4.14 Agreements and Obligations; Performance. Except as listed and briefly
described in Schedule 4.14 attached hereto (the "Listed Agreements") or listed
in the SEC Report, EXTECH is not a party to, or bound by, any: (i) Contract
which involves aggregate payments or receipts in excess of $5,000 that cannot be
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terminated at will without penalty or premium or any continuing Liability; (ii)
Contract of any kind with any officer, director or shareholder of EXTECH; (iii)
Contract which is violation of applicable law; (iv) Contract for the purchase,
sale or lease of any materials, products, supplies or services which contains,
or which commits or will commit it for, a fixed term; (v) Contract of employment
not terminable at will without penalty or premium or any continuing Liability;
(vi) deferred compensation, bonus or incentive plan or Contract not cancelable
at will without penalty or premium or any continuing obligation or liability;
(vii) management or consulting Contract not terminable at will without penalty
or premium or any continuing Liability; (viii) except as set forth in Schedule
4.13, lease for real or personal property; (ix) license or royalty Contract; (x)
Contract relating to indebtedness for borrowed money; (xi) union or other
collective bargaining Contract; (xii) Contract which, by its terms, requires the
consent of any party thereto to the consummation of the transactions
contemplated hereby; (xiii) Contract containing covenants limiting the freedom
of EXTECH or any officer or employee thereof to engage or compete in any line of
business or with any Person in any geographical area; (xiv) Contract or option
relating to the acquisition or sale of any business; (xv) voting agreement or
similar Contract; (xvi) option for the purchase of any asset, tangible or
intangible; or (xvii) franchise, license or advertising Contract; (xviii)
Contract with the United States government, any state, local or foreign
government or any agency or department thereof; (xix) other Contract which
materially affects any of its assets or business, whether directly or
indirectly, or which was entered into other than in the ordinary and usual
course of business consistent with past practice. A true and correct copy of
each of the written Listed Agreements has been delivered, or made available, to
the Shareholders. EXTECH has in all material respects performed all obligations
required to be performed by it to date under all of the Listed Agreements, is
not in Default under any of the Listed Agreements and has received no notice of
any dispute, Default or alleged Default thereunder which has not heretofore been
cured or which notice has not heretofore been withdrawn. EXTECH does not know of
any Default under any of the Listed Agreements by any other party thereto or by
any other Person bound thereunder.
4.15 Condition of Assets. Except as set forth on Schedule 4.15 attached hereto,
all machinery, equipment, vehicles and other assets used by EXTECH in the
conduct of its business are in good operating condition, ordinary wear and tear
excepted.
4.16 Permits and Licenses. Schedule 4.16 attached hereto sets forth a true and
complete list of all Permits from all Bodies held by EXTECH. EXTECH has all
Permits of all Bodies required to carry on its business as presently conducted
and to offer and sell its products and services; all such Permits are in full
force and effect, and, to the knowledge of EXTECH, no suspension or cancellation
of any of such Permits is threatened; and EXTECH is in compliance in all
material respects with all requirements, standards and procedures of the Bodies
which have issued such Permits. Except as set forth on Schedule 4.16, no notice
to, declaration, filing or registration with, or Permit from, any Body or any
other Person is required to be made or obtained by EXTECH in connection with the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.
4.17 Occupational Heath and Safety and Environmental Matters. The operations of
EXTECH's business do not require, and EXTECH does not have, any Permits from any
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Bodies relating to occupational health and safety or environmental matters to
lawfully conduct its business. There is no litigation, investigation or other
proceeding pending or, to the knowledge of EXTECH, threatened or known to be
contemplated by any Body in respect of or relating to EXTECH's business or the
assets of EXTECH with respect to occupational health and safety or environmental
matters. All operations of EXTECH's business have been conducted in compliance
with all, and EXTECH is not liable in any respect for any violation of any,
applicable federal, state or local laws or regulations pertaining to
occupational health and safety and environmental matters, including, without
limitation, those relating to the emission, discharge, storage, release or
disposal of Materials of Environmental Concern into ambient air, surface water,
ground water or land surface or subsurface strata or otherwise relating to the
manufacture, processing, distribution, use, handling, disposal or transport of
Materials of Environmental Concern. EXTECH has not received any notice of a
possible claim or citation against or in respect of any real property leased by
EXTECH, or with regard to its assets or business, relating to occupational
health and safety or environmental matters and EXTECH is not aware of any basis
for any such Action.
4.18 Intellectual Property. Schedule 4.18 sets forth a true and complete list
and brief description of all Proprietary Rights which are owned by EXTECH or in
which, or with regard to which, it has any right or interest (including, without
limitation, each application number, serial number or registration number, the
class of goods or services covered and the expiration date for each country in
which Intellectual Property has been registered). Except as set forth on
Schedule 4.18, no other Person has any proprietary or other interest in any such
Proprietary Rights and EXTECH is not a party to or bound by any Contract
requiring the payment to any Person of any royalty. EXTECH is not infringing
upon any Proprietary Rights or otherwise is violating the rights of any third
party with respect thereto, and no proceedings have been instituted, and no
claim has been received by EXTECH, and EXTECH is not aware of any claim,
alleging any such violation. There are no pending applications with regard to
any Proprietary Right. EXTECH has taken all reasonable and prudent steps to
protect the Proprietary Rights from infringement by any other Person. No other
Person (i) has the right to use any Trademark of EXTECH either in identical form
or in such near resemblance thereto as to be likely, when applied to the goods
or services of any such Person, to cause confusion with such Trademarks or to
cause a mistake or to deceive, (ii) has notified EXTECH that it is claiming any
ownership of or right to use any Proprietary Rights, or (iii) to the best of
EXTECH's knowledge, is infringing upon any Proprietary Rights in any way.
4.19 Compensation Information. Schedule 4.19 attached hereto contains a true and
complete list of the names and current salary rates of, bonus commitments to,
and other compensatory arrangements with, all officers and other persons
employed and/or retained by EXTECH.
4.20 Employee Benefit Plans.
(a) Schedules 4.20 (a), (b) and (c) attached hereto list all of the
"pension" and "welfare" benefit plans (within the respective meanings of
sections 3(2) and 3(1) of ERISA), maintained by EXTECH, or to which it makes
employer contributions with respect to its employees, a complete and correct
copy of each of which has been delivered to the Shareholders. There are no
vested and unfunded benefits under any such plans.
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(b) All of the pension and profit sharing plans maintained by EXTECH
(herein collectively referred to as the "Pension Plans") are listed in Schedule
4.20(a). Each of the Pension Plans has received a favorable determination letter
as to its qualification under section 401(a) of the Code (including, but not
limited to, amendments made by ERISA), nothing has occurred with respect to any
such Pension Plan which would cause the loss of such qualification, and EXTECH
has delivered to the Shareholders true and correct copies of all such
determination letters.
(c) All of the pension plans not maintained by EXTECH but to which it makes
employer contributions with respect to its employees (herein collectively
referred to as the "Other Pension Plans") are listed in Schedule 4.20(b). Each
of the Other Pension Plans is a "multiemployer plan" (within the meaning of
section 3(37) of ERISA), but EXTECH is not a "substantial employer" (within the
meaning of section 4001(a)(2) of ERISA) with respect to any of the Other Pension
Plans.
(d) All contributions required by law or required under the Pension Plans
with respect to plan years ended prior to the Closing Date have been made by
EXTECH. With regard to the current plan year of each of the Other Pension Plans,
all contributions required to meet the employer contribution obligations of
EXTECH, under section 412 of the Code, Part 3 of Title I(B) of ERISA, such Other
Pension Plan or any applicable collective bargaining agreement, with respect to
that portion of the current plan year ending on the Closing Date, shall have
been made on or prior to the Closing Date by EXTECH.
(e) No Pension Plan or related trust has terminated, and no "reportable
event" (within the meaning of section 4043(b) of ERISA) has occurred with
respect to any of the Pension Plans or the participation of EXTECH in any of the
Other Pension Plans, other than the transactions contemplated by this Agreement,
since the effective date of ERISA.
(f) None of the Pension Plans which are subject to the provisions of
section 412 of the Code or Part 3 of Title I(B) of ERISA or their related trusts
has incurred any "accumulated funding deficiency" (within the meanings of
section 412(a) of the Code and section 302 of ERISA) since the effective date of
ERISA.
(g) EXTECH has not incurred any Liability (except for required premium
payments, which premium payments have been made for plan years ended prior to
the Closing Date, to the Pension Benefit Guaranty Corporation), with respect to
the Pension Plans.
(h) All of the welfare plans maintained by EXTECH or to which it makes
employer contributions with respect to its employees (herein collectively
referred to as the "Welfare Plans" and together with the Pension Plans and Other
Pension Plans, the "Pension and Welfare Plans")) are listed in Schedule 4.20(c).
There are no Actions pending or, to the knowledge of EXTECH, threatened, and
EXTECH does not have any knowledge of any facts which could give rise to any
Actions against any of the Pension Plans, or (with respect to the participation
of EXTECH therein) against any of the Other Pension Plans or Welfare Plans, or
against EXTECH with respect thereto.
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(i) EXTECH has satisfied in all material respects all reporting and
disclosure requirements applicable to it under ERISA, and the Department of
Labor and Internal Revenue Service regulations promulgated thereunder, with
respect to all of the Pension and Welfare Plans, and EXTECH has delivered to the
Shareholders true and complete copies of the most recently filed and disclosed
Forms EBS-1, Forms 5500 and 5500-C (with exhibits), 1976 "ERISA Notices" and
summary plan description for the Pension and Welfare Plans.
(j) None of the Pension and Welfare Plans or any of their related trusts,
or EXTECH, or any trustee, administrator or other "party in interest" or
"disqualified person" (within the meaning of section 3(14) of ERISA or section
4975(e)(2) of the Code, respectively) with respect to the Pension or Welfare
Plans, has engaged in any "prohibited transaction" (within the meaning of
section 408 of ERISA or section 4975(c)(23) or (d) of the Code), with respect to
the participation of EXTECH therein, which could subject any of the Pension or
Welfare Plans or related trusts, or any trustee, administrator or other
fiduciary of any Plan, or EXTECH, or any other party dealing with the Pension or
Welfare Plans, to the penalties or excise tax imposed on prohibited transactions
by section 502(i) of ERISA or section 4975 of the Code.
(k) The Trustees of each of the Pension Plans have completed their required
annual accountings for the most recent plan years, such accountings accurately
reflect the financial positions of the Pension Plans as at such date, and true
and complete copies of the Trustees' reports or schedules of such accountings
have been delivered to the Shareholders.
4.21 Brokers. EXTECH has not engaged, consented to, or authorized any broker,
finder, investment banker or other third party to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement.
4.22 Employment Relations. (a) EXTECH is in compliance with all Federal, state
and other applicable laws, rules and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and has not engaged in any unfair labor practice which, in any of the foregoing
cases, could have a Material Adverse Effect; (b) there is not pending, or, to
the knowledge of EXTECH, threatened, any unfair labor practice charge or
complaint against EXTECH by or before the National Labor Relations Board or any
comparable state agency or authority; (c) there is no labor strike, dispute,
slowdown or stoppage pending or, to the knowledge of EXTECH, threatened against
or involving EXTECH; (d) EXTECH is not aware of any union organization effort
respecting the employees of EXTECH; (e) no grievance which might have a Material
Adverse Effect on EXTECH or on the conduct of its business, nor any arbitration
proceeding arising out of or under any collective bargaining agreement, is
pending and no claim therefor has been asserted; (f) no litigation, arbitration,
administrative proceeding or governmental investigation is now pending, and, to
the knowledge of EXTECH, no Person has made any claim or has threatened
litigation, arbitration, administrative proceeding or governmental investigation
against, arising out of any law relating to discrimination against employees or
employment practices; (g) no collective bargaining agreement is currently being
negotiated by EXTECH; and (h) EXTECH has not experienced any material labor
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difficulties during the last three (3) years. There has not been, and EXTECH
does not anticipate, any material adverse change in relations with employees of
EXTECH as a result of the announcement of the transactions contemplated by this
Agreement.
4.23 Payments. EXTECH has not, directly or indirectly, paid or delivered any
fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other Person, in the United States or any other country, which is
illegal under any federal, state or local laws of the United States (including,
without limitation, the U.S. Foreign Corrupt Practices Act).
4.24 Books and Records. EXTECH has made and kept (and given the Shareholders
access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of its business. EXTECH has not
engaged in any material transaction, maintained any bank account or used any
corporate funds in connection with its business except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of EXTECH.
4.25 Americans with Disabilities Act Compliance. All facilities owned, leased or
used by EXTECH (collectively "Facilities") have been constructed and maintained
in full compliance with the ADA. EXTECH has not received any notice to the
effect, or otherwise been advised, that any such Facilities are not in
compliance with the ADA. EXTECH has no reason to anticipate that any existing
circumstances at any of the Facilities are likely to result in violation of the
ADA.
4.26 Proxy Statement. The Proxy Statement (excluding information to be furnished
by the Shareholders or any DCAP Entity to EXTECH for inclusion therein), when
furnished to the Company's stockholders, and at all times to and including the
time of the stockholders' meeting convened for the purpose of obtaining
Stockholder Approval, will not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein
contained not misleading.
4.27 Untrue or Omitted Facts. No representation, warranty or statement by EXTECH
in this Agreement contains any untrue statement of a material fact, or omits to
state a fact necessary in order to make such representations, warranties or
statements not materially misleading. Without limiting the generality of the
foregoing, there is no fact known to EXTECH that has had, or which may be
reasonably expected to have, a Material Adverse Effect that has not been
disclosed in this Agreement.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Shareholder Covenants. The Shareholders, jointly and severally, hereby
covenant that, from and after the date hereof and until the Closing or earlier
termination of this Agreement:
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(a) Access. The Shareholders shall cause the DCAP Entities to afford to the
officers, attorneys, accountants and other authorized representatives of EXTECH
free and full access, during regular business hours and upon reasonable notice,
to all of their Books and Records, personnel and properties so that EXTECH, at
its own expense, may have full opportunity to make such review, examination and
investigation as EXTECH may desire of the DCAP Entities and the DCAP Business.
The Shareholders will cause the employees, accountants, attorneys and other
agents and representatives of the DCAP Entities to cooperate fully with said
review, examination and investigation and to make full disclosure to EXTECH and
its representatives of all material facts affecting the DCAP Business. The
Shareholders acknowledge and agree that no review, examination or investigation
heretofore or hereafter undertaken by EXTECH or its representatives shall limit
or affect any representation or warranty made by the Shareholders in, or
otherwise relieve the Shareholders from any liability under, this Agreement.
(b) Conduct of Business. The Shareholders shall cause the DCAP Entities to
conduct their business only in the ordinary and usual course and make no change
in any of its business practices and policies without the prior written consent
of EXTECH. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Closing, the
Shareholders shall not cause or permit any DCAP Entity, without the prior
written consent of EXTECH, to:
(i) amend its Certificate of Incorporation, By-Laws or other
organizational document;
(ii) enter into, adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock
purchase, pension, retirement, deferred compensation, employment, severance
or other employee benefit Contract, trust, plan, fund or other arrangement
for the benefit or welfare of any director, officer, manager or employee,
or (except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the DCAP Entity)
increase in any manner the compensation or fringe benefits of any director,
officer, manager or employee or pay any benefit not required by any plan
and arrangement as in effect as of the date hereof;
(iii) acquire, sell, lease or dispose of any assets outside the
ordinary course of business consistent with past practice or any assets
which in the aggregate are material to the DCAP Entity;
(iv) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof;
(v) take any other action outside the ordinary course of business
consistent with past practice; or
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(vi) adopt any resolution, or enter into or amend any Contract, with
respect to any of the foregoing.
(c) Insurance. The Shareholders shall cause the DCAP Entities to maintain
in force the insurance policies listed in Schedule 4.11, except to the extent
that they may be replaced with equivalent policies at the same or lower rates.
If, in EXTECH's opinion, additional coverage is necessary to keep adequately
insured the DCAP Entities' properties, the Shareholders shall cause the DCAP
Entities to obtain (to the extent available) such additional insurance, at
EXTECH's expense, from financially sound and reputable insurers for a period
ending no sooner than the close of business on the Closing Date; provided that,
if the Closing shall fail to occur, the Shareholders shall cause the DCAP
Entities to promptly cancel such policies for additional insurance and return to
EXTECH any refunds of premiums paid by EXTECH on account thereof.
(d) Liabilities. The Shareholders shall not cause or permit any DCAP Entity
to incur any Liability, except for those incurred in the ordinary and usual
course of its business consistent with past practice, without the prior written
consent of EXTECH; nor shall the Shareholders cause or permit any DCAP Entity to
pay any Liability other than: (i) the foregoing Liabilities; (ii) Liabilities
set forth in the Balance Sheet; (iii) Liabilities arising after the Balance
Sheet Date in the ordinary and usual course of business consistent with past
practice; and (iv) Liabilities with respect to which the DCAP Entity shall have
received the prior written consent of EXTECH.
(e) Preservation of Business. The Shareholders shall cause the DCAP
Entities to use their best efforts to preserve intact their business
organization and keep available the services of their present officers,
managers, employees and consultants, maintain good relationships with customers
and suppliers and preserve their goodwill.
(f) No Breach.
(i) The Shareholders will each (A) use his best efforts to assure that
all of his representations and warranties contained herein are true and
correct as of the Closing as if repeated at and as of such time, that no
Default shall occur with respect to any of his covenants, representations
or warranties contained herein that has not been cured by the Closing and
that all conditions to EXTECH's obligation to enter into and complete the
Closing are satisfied in a timely manner; (B) not voluntarily take any
action or do anything which will cause a Default respecting such covenants,
representations or warranties or would impede the satisfaction of such
conditions; and (C) promptly notify EXTECH of any event or fact which
represents or is likely to cause such a Default or result in such an
impediment.
(ii) Without limiting the generality of the foregoing, each of the
Shareholders agrees to use his best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
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Agreement, including, without limitation, taking such actions as reasonably
may be required to have the Proxy Statement cleared by the SEC as promptly
as practicable after filing.
(g) Consents. Promptly following the execution of this Agreement, each of
the Shareholders will use his best efforts, and will cause the DCAP Entities to
use their best efforts, to obtain consents of all Bodies and other Persons
necessary for the consummation of the transactions contemplated by this
Agreement.
(h) Unaudited Financial Statements. The Shareholders will cause the DCAP
Entities to provide EXTECH with such unaudited financial statements of, and
other financial information with respect to, the DCAP Entities up to and
including the Closing Date as EXTECH may reasonably request.
(i) No Negotiations. For so long as this Agreement shall remain in effect,
neither of the Shareholders will, nor will either of them cause or permit any
DCAP Entity to, directly or indirectly, (a) solicit or initiate discussions or
engage in negotiations with any Person ("Potential Offeror") (whether such
negotiations are initiated by them or otherwise), other than EXTECH, with
respect to the possible acquisition, financing or change of control of any DCAP
Entity, whether by way of merger, acquisition of stock, acquisition of assets,
or otherwise (a "Potential Transaction"); (b) provide any information with
respect to any DCAP Entity or any of their respective businesses or assets to
any Person, other than EXTECH, in connection with a Potential Transaction; (c)
enter into any Contract with any Person, other than EXTECH, concerning or
relating to a Potential Transaction; or (d) act in any way in response to a
Potential Transaction. If the Shareholders, the DCAP Entities, or any of them
receives any unsolicited offer or proposal to enter into negotiations relating
to a Potential Transaction, they shall immediately notify EXTECH of such fact
and shall return any such written offer to such Potential Offeror.
5.2 EXTECH Covenants. EXTECH hereby covenants that, from and after the date
hereof and until the Closing or earlier termination of this Agreement:
(a) Access. EXTECH shall afford to the officers, attorneys, accountants and
other authorized representatives of the Shareholders free and full access,
during regular business hours and upon reasonable notice, to all of its Books
and Records, personnel and properties so that the Shareholders, at their own
expense, may have full opportunity to make such review, examination and
investigation as they may desire of EXTECH and its business. EXTECH will cause
its employees, accountants, attorneys and other agents and representatives to
cooperate fully with said review, examination and investigation and to make full
disclosure to the Shareholders and their representatives of all material facts
affecting its business. EXTECH acknowledges and agrees that no review,
examination or investigation heretofore or hereafter undertaken by the
Shareholders or their representatives shall limit or affect any representation
or warranty made by EXTECH in, or otherwise relieve EXTECH from any liability
under, this Agreement.
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(b) Conduct of Business. EXTECH will conduct its business only in the
ordinary and usual course and make no change in any of its business practices
and policies without the prior written consent of the Shareholders except that
EXTECH may, without such consent, take such actions with regard to its
subsidiary, IAH, Inc. ("IAH"), and/or the International Airport Hotel,
including, without limitation, the settlement of the pending lawsuit between the
Puerto Rico Ports Authority and IAH (unless the settlement provides for the
payment of monetary damages by IAH) and the sale, lease or other disposition of
the assets of IAH as it, in its sole discretion, deems necessary or proper.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Closing, EXTECH will not,
without the prior written consent of the Shareholders:
(i) amend its Certificate of Incorporation or By-Laws (except that it
may amend it By-Laws to adopt provisions that are contemplated herein to be
included as an amendment to EXTECH's Certificate of Incorporation and
subject to Stockholder Approval);
(ii) enter into, adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock
purchase, pension, retirement, deferred compensation, employment, severance
or other employee benefit Contract, trust, plan, fund or other arrangement
for the benefit or welfare of any director, officer or employee, or (except
for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not result in a material increase
in benefits or compensation expense to EXTECH) increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof;
(iii) acquire, sell, lease or dispose of any assets outside the
ordinary course of business consistent with past practice or any assets
which in the aggregate are material to EXTECH;
(iv) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof;
(v) take any other action outside the ordinary course of business
consistent with past practice; or
(vi) adopt any resolution, or enter into or amend any Contract, with
respect to any of the foregoing.
(c) Preservation of Business. Except as provided for in Section 5.2(b)
hereof, EXTECH will use its best efforts to preserve intact its business
organization and keep available the services of its present officers, employees
and consultants, maintain good relationships with customers and suppliers and
preserve its goodwill.
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(d) No Breach.
(i) EXTECH will (A) use its best efforts to assure that all of its
representations and warranties contained herein are true and correct as of
the Closing as if repeated at and as of such time, that no Default shall
occur with respect to any of its covenants, representations or warranties
contained herein that has not been cured by the Closing and that all
conditions to the Shareholders' obligation to enter into and complete the
Closing are satisfied in a timely manner; (B) not voluntarily take any
action or do anything which will cause a Default respecting such covenants,
representations or warranties or would impede the satisfaction of such
conditions; and (C) promptly notify the Shareholders of any event or fact
which represents or is likely to cause such a Default or result in such an
impediment.
(ii) Without limiting the generality of the foregoing, EXTECH agrees
to use its best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including,
without limitation, taking such actions as reasonably may be required to
have the Proxy Statement cleared by the SEC as promptly as practicable
after filing.
(e) Consents; Proxy Statement. Promptly following the execution of this
Agreement, EXTECH will use its best efforts to obtain consents of all Bodies and
other Persons necessary for the consummation of the transactions contemplated by
this Agreement. EXTECH will furnish the Shareholders with a copy of the Proxy
Statement for their review and comment at least two (2) days prior to the filing
thereof with the SEC.
ARTICLE VI
ACQUISITION OF SHARES
6.1 Investment Intent; Qualification as Purchaser.
(a) Certilman, Haft and each Shareholder represents and warrants that the
particular EXTECH Shares and Sterling Foster Shares to be acquired pursuant to
the terms hereof are being acquired for his own account, for investment purposes
and not with a view to the distribution thereof. Certilman, Haft and each
Shareholder each agrees that he will not sell, assign, transfer, encumber or
otherwise dispose of any of the particular EXTECH Shares or Sterling Foster
Shares unless (i) a registration statement under the Securities Act with respect
thereto is in effect and the prospectus included therein meets the requirements
of Section 10 of the Securities Act, or (ii) EXTECH has received a written
opinion of its counsel that, after an investigation of the relevant facts, such
counsel is of the opinion that such proposed sale, assignment, transfer,
encumbrance or disposition does not require registration under the Securities
Act.
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(b) Certilman, Haft and each Shareholder understands that none of the
EXTECH Shares or Sterling Foster Shares are being registered under the
Securities Act and must be held indefinitely unless they are subsequently
registered thereunder or an exemption from such registration is available.
(c) Certilman, Haft and each Shareholder represents and warrants that he
and his purchaser representative, if any, have reviewed the SEC Report.
Certilman, Haft and each Shareholder represents and warrants further that (i) he
is either an "accredited investor," as such term is defined in Rule 501(a)
promulgated by the SEC under the Securities Act, or that he, alone or with his
purchaser representative, if any, has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
the acquisition of the particular EXTECH Shares and Sterling Foster Shares
contemplated hereby; (ii) he is able to bear the economic risk of an investment
in the particular EXTECH Shares and Sterling Foster Shares, including, without
limitation, the risk of the loss of part or all of his investment and the
inability to sell or transfer the particular EXTECH Shares and Sterling Foster
Shares for an indefinite period of time; (iii) he has adequate means of
providing for current needs and contingencies and has no need for liquidity in
his investment in the particular EXTECH Shares and Sterling Foster Shares; and
(iv) he does not have an overall commitment to investments which are not readily
marketable that is excessive in proportion to his net worth and an investment in
the particular EXTECH Shares and Sterling Foster Shares will not cause such
overall commitment to become excessive. Certilman, Haft and each Shareholder
will execute and deliver to EXTECH such documents as EXTECH may reasonably
request in order to confirm the accuracy of the foregoing.
6.2 Restrictive Legend. The EXTECH Shares and Sterling Foster Shares to be
issued or transferred, as the case may be, to Certilman, Haft and the
Shareholders may not be sold, assigned, transferred, encumbered or disposed of
unless they are registered under the Securities Act or unless an exemption from
such registration is available. Accordingly, the following restrictive legend
will be placed on any instrument, certificate or other document evidencing the
EXTECH Shares and Sterling Foster Shares:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. These shares have been
acquired for investment and not for distribution or resale. They may
not be sold, assigned, mortgaged, pledged, hypothecated or otherwise
transferred or disposed of without an effective registration
statement for such shares under the Securities Act of 1933, as
amended or an opinion of counsel for the Company that registration is
not required under such Act. The shares represented by this
certificate are held subject to the terms and conditions of a certain
Agreement, dated May __, 1998, among the Company, Morton L.
Certilman, Jay M. Haft, Kevin Lang and Abraham Weinzimer, a copy of
which is available at the offices of the Company."
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6.3 Certain Risk Factors. Certilman, Haft and each of the Shareholders
acknowledges that there are significant risks relating to the acquisition of the
EXTECH Shares and Sterling Foster Shares including, without limitation, as a
result of the matters described in the SEC Report.
ARTICLE VII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF EXTECH TO CLOSE
The obligation of EXTECH to consummate the transactions contemplated hereby
is subject to the fulfillment, prior to or at the Closing, of each of the
following conditions, any one or more of which may be waived by EXTECH (except
when the fulfillment of such condition is a requirement of law):
7.1 Representations and Warranties. All representations and warranties of the
Shareholders contained in this Agreement and in any written statement (including
financial statements), exhibit, certificate, schedule or other document
delivered pursuant hereto or in connection with the transactions contemplated
hereby shall be true and correct in all material respects (except to the extent
that any such representation and warranty is already qualified as to
materiality, in which case such representation and warranty shall be true and
correct without further qualification) as at the Closing Date, as if made at the
Closing and as of the Closing Date.
7.2 Covenants. Each of the Shareholders shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by him prior to or at the Closing.
7.3 Certificate. EXTECH shall have received a certificate, dated the Closing
Date, signed by each of the Shareholders, as to the satisfaction of the
conditions contained in Sections 7.1 and 7.2 hereof.
7.4 Shares; Purchase Price. The Shareholders shall have tendered to EXTECH the
Shares and their respective EXTECH Additional Shares Purchase Price in
accordance with the provisions of Sections 2.3.2 and 2.4.1 hereof, respectively.
7.5 Sterling Foster Purchases. The Sterling Foster Purchases shall have occurred
concurrently with the Closing as contemplated by Section 2.4.2 hereof.
7.6 Stockholder Approval. Stockholder Approval shall have occurred.
7.7 DCAP Financial Statements. EXTECH shall have received such historical
audited and unaudited financial statements for the DCAP Entities as are required
by the rules and regulations of the SEC to be included by EXTECH in a Current
Report on Form 8-K with regard to the transactions contemplated hereby,
including, without limitation, with respect to the audited financial statements,
EXTECH CORPORATION
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an unqualified report thereon by certified public accountants who are
"independent" within the meaning ascribed to such term in Regulation S-X,
promulgated by the SEC.
7.8 Employment Agreements. Each of the Shareholders shall have executed and
tendered to EXTECH an employment agreement in, or substantially in, the form
attached hereto as Exhibit 7.8 (the "Employment Agreement").
7.9 Restrictive Covenant Agreements. Each of the Shareholders shall have
executed and tendered to EXTECH a restrictive covenant agreement in, or
substantially in, the form attached hereto as Exhibit 7.9 (the "Restrictive
Covenant Agreement").
7.10 Fairness Opinion. EXTECH shall have received an opinion from an investment
banking firm satisfactory to it to the effect that the transactions contemplated
hereby are fair, from a financial viewpoint, to the stockholders of EXTECH.
7.11 Cold Comfort Letter. EXTECH shall have received a "cold comfort" letter
from Deutsch Marin & Company, dated the Closing Date, in form and substance
reasonably satisfactory to EXTECH (the "Cold Comfort Letter").
7.12 Closing Notes; Closing Pledge Agreements. The Shareholders shall have
executed and tendered to EXTECH the Closing Notes and the Closing Pledge
Agreements.
7.13 Opinions of Counsel. EXTECH shall have received an opinion of counsel,
dated the Closing Date, from (a) Ruskin Moscou, Evans & Faltischek, P.C.,
counsel to the Shareholders and the DCAP Entities, with respect to the
representations and warranties set forth in Sections 3.1, 3.4 and 3.21 hereof
and (b) Harold L. Kestenbaum, P.C. in, or substantially in, the form attached
hereto as Exhibit 7.13 (collectively, the "DCAP Opinions").
7.14 Buy Out Agreement. Each of the Shareholders shall have executed and
tendered to EXTECH a death buy out agreement in, or substantially in, the form
attached hereto as Exhibit 7.14 (the "Buy Out Agreement").
7.15 Size of Boards; Election as Members. The size of the Board of Directors of
each of the Affiliated Companies shall have been fixed at four (4) and Certilman
and Haft shall have been elected as members thereof.
7.16 No Actions. No Action shall have been instituted and be continuing before a
court or before or by Body, or shall have been threatened and be unresolved, to
restrain or prevent, or obtain any material amount of damages in respect of, the
carrying out of the transactions contemplated hereby, or which might materially
affect the right of EXTECH to own the Shares after the Closing Date, or which
might have a materially adverse effect thereon.
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7.17 Consents; Licenses and Permits. The Shareholders and EXTECH shall have
obtained all consents, licenses and other Permits of Bodies and other Persons
necessary for the performance by each of them of all of their respective
obligations under this Agreement, including, without limitation, the transfer of
the Shares as contemplated hereby, and such other agreements, consents and
waivers, if any, including, without limitation, the Required Waivers, to prevent
the occurrence of a Default under any Contract to which any DCAP Entity or
either Shareholder is a party or is otherwise bound or to otherwise confirm the
representations set forth in Section 3.21 hereof without qualification.
7.18 Sections 4(2) and 4(1) Compliance. Each of the Shareholders shall have
delivered to EXTECH evidence reasonably satisfactory to EXTECH that his
representations set forth in Article VI hereof are true and correct.
7.19 Actions. All actions necessary to authorize the execution, delivery and
performance of this Agreement by the Shareholders and the consummation of the
transactions contemplated hereby shall have been duly and validly taken and the
Shareholders shall have full power and right to consummate the transactions
contemplated by this Agreement.
7.20 Additional Documents. The Shareholders shall have delivered all such
certified resolutions, certificates and documents with respect to the DCAP
Entities and the transactions contemplated hereby as EXTECH or its counsel may
have reasonably requested.
Notwithstanding the provisions of Sections 7.4, 7.16 and 7.17 hereof, in
the event of the institution of an Action with respect to one or more of the
DCAP Entities and/or the failure to obtain any consent, license or other Permit
of any Body or other Person with respect to one or more of the DCAP Entities,
then, subject to the other conditions hereof, EXTECH shall be obligated to
consummate the transactions contemplated hereby if the Shareholders notify it
that they are willing to exclude the affected DCAP Entity or DCAP Entities from
the purchase and sale contemplated hereby. In such event, the number of EXTECH
Acquisition Shares shall not be reduced; however, at the Closing, the
Shareholders and EXTECH shall enter into an agreement with respect to the
excluded DCAP Entity or DCAP Entities containing substantially the terms
provided for in Schedule 8 attached hereto.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE SHAREHOLDERS TO CLOSE
The obligation of the Shareholders to consummate the transactions
contemplated hereby is subject to the fulfillment, prior to or at the Closing,
of each of the following conditions, any one or more of which may be waived by
the Shareholders (except when the fulfillment of such condition is a requirement
of law):
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8.1 Representations and Warranties. All representations and warranties of EXTECH
contained in this Agreement and in any written statement (including financial
statements), exhibit, certificate, schedule or other document delivered pursuant
hereto or in connection with the transactions contemplated hereby shall be true
and correct in all material respects (except to the extent that any such
representation and warranty is already qualified as to materiality, in which
case such representation and warranty shall be true and correct without further
qualification) as at the Closing Date, as if made at the Closing and as of the
Closing Date.
8.2 Covenants. EXTECH shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing.
8.3 Certificate. The Shareholders shall have received a certificate, dated the
Closing Date, signed by the Chairman of the Board or President of EXTECH, as to
the satisfaction of the conditions contained in Sections 8.1 and 8.2 hereof.
8.4 EXTECH Shares. EXTECH shall have tendered to the Shareholders certificates
evidencing the respective EXTECH Acquisition Shares and EXTECH Additional Shares
in accordance with the provisions of Section 2.3.2 and 2.4.1 hereof,
respectively.
8.5 Sterling Foster Purchases. The Sterling Foster Purchases shall have occurred
concurrently with the Closing as contemplated by Section 2.4.2 hereof.
8.6 Stockholder Approval. Stockholder Approval shall have occurred with regard
to the matters set forth as (i), (ii)(a) and (iii) under the definition thereof.
8.7 Employment Agreements; Stock Option Agreements. EXTECH shall have executed
and tendered to the Shareholders the Employment Agreements and stock option
agreements in, or substantially in, the forms attached hereto as Exhibits 7.8
and 8.7 (the "Stock Option Agreements"), respectively.
8.8 Certilman and Haft Purchases. Certilman and Haft shall have acquired their
respective EXTECH Additional Shares in accordance with the provisions of Section
2.4.1 hereof.
8.9 Closing Loans. EXTECH shall have tendered to the Shareholders the Closing
Loans in accordance with the provisions of Section 2.5.2 hereof.
8.10 Size of Board and Committees; Election as Directors and Members. The size
of the Board of Directors of EXTECH and any Audit and Finance Committees thereof
shall have been fixed at four (4) and the Shareholders shall have been elected
as members thereof.
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8.11 Tax Opinion. The Shareholders shall have received an opinion of tax counsel
or other tax advisor to the effect that the receipt of the EXTECH Acquisition
Shares is not a taxable event to the Shareholders by reason of the provisions of
Section 351 of the Code.
8.12 Opinion of Counsel. The Shareholders shall have received an opinion of
counsel, dated the Closing Date, from Certilman Balin Adler & Hyman, LLP with
respect to the representations and warranties set forth in Sections 4.1, 4.4 and
4.6 hereof (the "EXTECH Opinion").
8.13 Buy Out Agreement. EXTECH shall have executed and tendered to the
Shareholders the Buy Out Agreement in, or substantially in, the form attached
hereto as Exhibit 7.14.
8.14 No Actions. No Action shall have been instituted and be continuing before a
court or before or by a Body, or shall have been threatened and be unresolved,
to restrain or prevent, or obtain any material amount of damages in respect of,
the carrying out of the transactions contemplated hereby, or which might
materially affect the right of the Shareholders to own their EXTECH Shares after
the Closing Date, or which might have a materially adverse effect thereon.
8.15 Consents; Licenses and Permits. The Shareholders and EXTECH shall have
obtained all consents, licenses and other Permits of Bodies and other Persons
necessary for the performance by them of all of their respective obligations
under this Agreement, including, without limitation, the issuance of the
respective EXTECH Shares to the Shareholders as contemplated hereby, and such
other consents, if any, to prevent the occurrence of a Default under any
Contract to which EXTECH is a party or is otherwise bound.
8.16 Corporate Actions. All actions necessary to authorize the execution,
delivery and performance of this Agreement by EXTECH and the consummation of the
transactions contemplated hereby shall have been duly and validly taken and
EXTECH shall have full power and right to consummate the transactions
contemplated by this Agreement.
8.17 Additional Documents. EXTECH shall have delivered all such certified
resolutions, certificates and documents with respect to EXTECH and the
transactions contemplated hereby as the Shareholders or their counsel may have
reasonably requested.
Notwithstanding the provisions of Sections 8.14 and 8.15 hereof, in the
event of the institution of an Action with respect to one or more of the DCAP
Entities and/or the failure to obtain any consent, license or other Permit of
any Body or other Person with respect to one or more of the DCAP Entities, then,
subject to the other conditions hereof, the Shareholders shall be obligated to
consummate the transactions contemplated hereby if EXTECH notifies them that it
is willing to exclude the affected DCAP Entity or DCAP Entities from the
purchase and sale contemplated hereby. In such event, the number of EXTECH
Acquisition Shares shall not be reduced; however, at the Closing, the
Shareholders and EXTECH shall enter into an agreement with respect to the
excluded DCAP Entity or DCAP Entities containing substantially the terms
provided for in Schedule 8 attached hereto.
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ARTICLE IX
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF CERTILMAN AND HAFT TO CLOSE
The obligation of Certilman and Haft to consummate the transactions
contemplated hereby is subject to the fulfillment, prior to at the Closing, of
each of the following conditions, any one or more of which may be waived by
Certilman and Haft (except when the fulfillment of such condition is a
requirement of law):
9.1 Shares/EXTECH Acquisition Shares. EXTECH shall have acquired the Shares in
consideration for the issuance of the EXTECH Acquisition Shares in accordance
with the provisions of Sections 2.1 and 2.2 hereof.
9.2 Sterling Foster Purchases. The Sterling Foster Purchases shall have occurred
concurrently with the Closing as contemplated by Section 2.4.2 hereof.
9.3 Stockholder Approval. Stockholder Approval shall have occurred.
9.4 EXTECH Additional Shares. EXTECH shall have tendered to Certilman and Haft
certificates evidencing their respective EXTECH Additional Shares in accordance
with the provisions of Section 2.4.1 hereof.
9.5 Shareholder Purchases. The Shareholders shall have acquired their respective
EXTECH Additional Shares in accordance with the provisions of Section 2.4.1
hereof.
9.6 Employment Agreements; Stock Option Agreements. EXTECH shall have executed
and tendered to Certilman and Haft Employment Agreements and Stock Option
Agreements in, or substantially in, the forms attached hereto as Exhibits 7.8
and 8.7, respectively.
9.7 No Actions. No Action shall have been instituted and be continuing before a
court or before or by a Body, or shall have been threatened and be unresolved,
to restrain or prevent, or obtain any material amount of damages in respect of,
the carrying out of the transactions contemplated hereby or which might
materially affect the right of Certilman and Haft to own their respective EXTECH
Additional Shares after the Closing Date, or which might have a materially
adverse effect thereon.
9.8 Corporate Actions. All actions necessary to authorize the execution,
delivery and performance of this Agreement by EXTECH and the consummation of the
transactions contemplated hereby shall have been duly and validly taken and
EXTECH shall have full power and right to consummate the transactions
contemplated by this Agreement.
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9.9 Additional Documents. EXTECH shall have delivered all such certified
resolutions, certificates and documents with respect to EXTECH and the
transactions contemplated hereby as Certilman and Haft or their counsel may have
reasonably requested.
ARTICLE X
CLOSING
10.1 Time and Location. The closing (the "Closing") provided for herein shall
take place at the offices of Certilman Balin Adler & Hyman, LLP, 90 Merrick
Avenue, East Meadow, New York 11554 at 10:00 A.M. on the business day following
Stockholder Approval or, if, as of such date, any party shall not be obligated
to close and shall not have waived such closing condition(s), subject to the
provisions of Article XIII hereof, on the business day after such later date as
such party or parties shall be obligated to close or shall have waived such
closing condition(s), or at such time and place as may be mutually agreed to by
the parties. Such date is referred to in this Agreement as the "Closing Date."
10.2 Items to be Delivered by the Shareholders. At the Closing, the Shareholders
will deliver or cause to be delivered to EXTECH:
(a) the certificate required by Section 7.3 hereof;
(b) certificates representing the Shares, duly endorsed or accompanied by
stock powers duly executed, together with evidence satisfactory to EXTECH of the
Shareholders' payment of all transfer taxes with respect thereto;
(c) the EXTECH Additional Shares Purchase Price for their EXTECH Additional
Shares;
(d) their respective Employment Agreements and Stock Option Agreements;
(e) their respective Restrictive Covenant Agreements;
(f) the Cold Comfort Letter;
(g) their respective Closing Notes;
(h) their respective Closing Pledge Agreements;
(i) the DCAP Opinions; and
(j) such other certified resolutions, documents and certificates as are
required to be delivered by the Shareholders pursuant to the provisions of this
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Agreement or which otherwise confirm that all of the conditions precedent to the
obligation of EXTECH and/or Certilman and Haft to close have been satisfied.
10.3 Items to be Delivered by EXTECH. At the Closing, EXTECH will deliver or
cause to be delivered to the Shareholders or Certilman and Haft (and/or their
designee(s)), as the case may be:
(a) the certificate required by Section 8.3 hereof;
(b) certificates representing the EXTECH Shares;
(c) the Employment Agreements and Stock Option Agreements for Certilman,
Haft and the Shareholders;
(d) the Closing Loans;
(e) the Closing Pledge Agreements;
(f) the EXTECH Opinion; and
(g) such other certified resolutions, documents and certificates as are
required to be delivered by EXTECH pursuant to the provisions of this Agreement
or otherwise confirm that all of the conditions precedent to the obligation of
the Shareholders and/or Certilman and Haft to close have been satisfied.
10.4 Items to be Delivered by Certilman and Haft. At the Closing, Certilman and
Haft will deliver or cause to be delivered to EXTECH or the Shareholders, as the
case may be:
(a) the EXTECH Additional Shares Purchase Price for their EXTECH Additional
Shares; and
(b) their respective Employment Agreements and Stock Option Agreements.
ARTICLE XI
POST-CLOSING MATTERS
11.1 Further Assurances. On and after the Closing Date, the parties shall take
all such further actions and execute and deliver all such further instruments
and documents as may be necessary or appropriate to carry out the transactions
contemplated by this Agreement.
11.2 Agreement as to Voting. Each of Certilman, Haft and the Shareholders agree
that, during the eight (8) year period following the Closing, (i) he will vote
his respective shares of stock of EXTECH in favor of the others as a director of
EXTECH provided that the particular person in whose favor the vote would be
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remains in the employ of EXTECH, (ii) in the event Certilman or Haft dies or
otherwise ceases to serve as a director of EXTECH, the Shareholders will vote
their respective shares of stock of EXTECH in favor of the designee of the
survivor of Certilman or Haft (or, in the case of a reason other than death, the
one remaining as a director), (iii) in the event Lang or Weinzimer dies or
otherwise ceases to serve as a director of EXTECH, Certilman and Haft will vote
their respective shares of stock of EXTECH in favor of the designee of the
survivor of Lang or Weinzimer (or, in the case of a reason other than death, the
one remaining as a director) and (iv) he will not vote his shares to (a)
increase the size of the Board of Directors of EXTECH or (b) amend the
Certificate of Incorporation or By-Laws of EXTECH, in each case without the
written approval of the others. In the event of the death or other cessation of
directorship of Certilman, Haft or either Shareholder during such period, unless
the Board vacancy is otherwise filled as provided for above, EXTECH will
promptly call a special meeting of stockholders to fill such vacancy.
11.3 Sales of EXTECH Shares. From time to time after the Closing and during any
time as any promissory note issued pursuant to either Shareholder's Employment
Agreement is outstanding, the particular Shareholder shall sell, as soon as
possible, the maximum number of shares of Common Stock of EXTECH that may be
permitted to be sold pursuant to any registration statement filed by EXTECH on
their behalf and/or pursuant to Rule 144, promulgated under the Securities Act,
and to use the proceeds thereof to satisfy in full his obligations thereunder.
Until the foregoing notes, the Additional Shares Notes and the Closing Loan
Notes have been satisfied in full, neither Shareholder shall sell or otherwise
dispose of any of his EXTECH Shares for less than Fair Market Value without the
prior written consent of EXTECH (which consent shall require the approval of the
Board of Directors of EXTECH) .
ARTICLE XII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
12.1 Survival. The parties agree that their respective representations and
warranties contained in this Agreement shall survive the Closing for a period of
two (2) years, except that the representations and warranties set forth in
Sections 3.1 (with respect to the valid existence and good standing of the DCAP
Entities), 3.2, 4.1 (with respect to the valid existence and good standing of
EXTECH) and 4.2 shall be of an indefinite duration and the representations and
warranties set forth in Sections 3.9 and 4.9 shall survive until the expiration
of the applicable statute of limitations period.
12.2 Indemnification.
12.2.1 General Indemnification Obligation of the Shareholders. From and
after the Closing, the Shareholders, jointly and severally, will reimburse,
indemnify and hold harmless EXTECH or any DCAP Entity, as the case may be (in
each case, an "Indemnified EXTECH Party"), against and in respect of:
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(a) any and all damages, losses, deficiencies, liabilities, costs and
expenses incurred or suffered by any Indemnified EXTECH Party that result
from, relate to or arise out of:
(i) any misrepresentation, breach of warranty or nonfulfillment
of any agreement or covenant on the part of either Shareholder under
this Agreement, or from any misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to
EXTECH pursuant hereto or in connection with the negotiation,
execution or performance of this Agreement; and
(ii) any untrue statement or omission of a material fact in the
Proxy Statement which was based upon information furnished by either
Shareholder individually or on behalf of any DCAP Entity.
(b) any and all Actions, assessments, audits, fines, judgments, costs
and other expenses (including, without limitation, reasonable legal fees)
incident to any of the foregoing or to the enforcement of this Section
12.2.1.
12.2.2 General Indemnification Obligation of EXTECH. From and after the
Closing, EXTECH will reimburse, indemnify and hold harmless the Shareholders
against and in respect of:
(a) any and all damages, losses, deficiencies, liabilities, costs and
expenses incurred or suffered by the Shareholders that result from, relate
to or arise out of:
(i) any misrepresentation, breach of warranty or non-fulfillment
of any agreement or covenant on the part of EXTECH under this
Agreement, or from any misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to
the Shareholders pursuant hereto or in connection with the
negotiation, execution or performance of this Agreement; and
(ii) any untrue statement or omission of a material fact in the
Proxy Statement except to the extent based upon information furnished
by either Shareholder individually or on behalf of any DCAP Entity.
(b) any and all Actions, assessments, audits, fines, judgments, costs
and other expenses (including, without limitation, reasonable legal fees)
incident to any of the foregoing or to the enforcement of this Section
12.2.2.
12.2.3 Method of Asserting Claims, Etc.
(a) In the event that any claim or demand for which either Shareholder
would be liable to an Indemnified EXTECH Party hereunder is asserted
against or sought to be collected from an Indemnified EXTECH Party by a
third party, EXTECH shall notify the Shareholders of such claim or demand,
specifying the nature of such claim or demand and the amount or the
estimated
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amount thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such claim and demand) (the "Claim
Notice"). The Shareholders shall thereupon, at their sole cost and expense,
defend the Indemnified EXTECH Party against such claim or demand with
counsel reasonably satisfactory to EXTECH.
(b) The Shareholders shall not, without the prior written consent of
the Indemnified EXTECH Party, consent to the entry of any judgment against
the Indemnified EXTECH Party or enter into any settlement or compromise
which does not include, as an unconditional term thereof (i.e., there being
no requirement that the Indemnified EXTECH Party pay any amount of money or
give any other consideration), the giving by the claimant or plaintiff to
the Indemnified EXTECH Party of a release, in form and substance
satisfactory to the Indemnified EXTECH Party, as the case may be, from all
liability in respect of such claim or litigation. If any Indemnified EXTECH
Party desires to participate in, but not control, any such defense or
settlement, it may do so at its sole cost and expense. If, in the
reasonable opinion of the Indemnified EXTECH Party, any such claim or
demand or the litigation or resolution of any such claim or demand involves
an issue or matter which could have a materially adverse effect on the
business, operations, assets, properties or prospects of the Indemnified
EXTECH Party or its affiliates, then the Indemnified EXTECH Party shall
have the right to control the defense or settlement of any such claim or
demand and its costs and expenses shall be included as part of the
indemnification obligation of the Shareholders hereunder; provided,
however, that the Indemnified EXTECH Party shall not settle any such claim
or demand without the prior written consent of the Shareholders, which
consent shall not be unreasonably withheld or delayed. If the Indemnified
EXTECH Party should elect to exercise such right, the Shareholders shall
have the right to participate in, but not control, the defense or
settlement of such claim or demand at their sole cost and expense.
(c) Notwithstanding anything hereinabove to the contrary, the
Indemnified EXTECH Party shall have the right to employ separate counsel
(including local counsel), and the Shareholders shall bear the reasonable
fees, costs and expenses of such separate counsel (and local counsel) if
(i) the use of counsel chosen by the Shareholders to represent the
Indemnified EXTECH Party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any
such action include both the Indemnified EXTECH Party and the Shareholders
and the Indemnified EXTECH Party shall have reasonably concluded that there
may be legal defenses available to it which are different from or
additional to those available to the Shareholders, (iii) the Shareholders
shall not have employed counsel reasonably satisfactory to the Indemnified
EXTECH Party to represent the Indemnified EXTECH Party within a reasonable
time after notice of the institution of such action or (iv) the
Shareholders shall authorize the Indemnified EXTECH Party to employ
separate counsel at the expense of the Shareholders.
(d) In the event EXTECH should have a claim against the Shareholders
hereunder that does not involve a claim or demand being asserted against or
sought to be collected from it by a third party, EXTECH shall send a Claim
Notice with respect to such claim to the Shareholders. If the Shareholders
dispute their liability with respect to such claim or demand, such dispute
shall be resolved in accordance with Section 12.3 hereof; if the
Shareholders do not notify EXTECH,
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within twenty (20) days from receipt of the Claim Notice, that they dispute
such claim, the amount of such claim shall be conclusively deemed a
liability of the Shareholders hereunder.
(e) All claims for indemnification by the Shareholders under this
Agreement shall be asserted and resolved under the procedures set forth
hereinabove by substituting in the appropriate place "the Shareholders" for
"the Indemnified EXTECH Party" or "EXTECH", as the case may be, and
"EXTECH" for "the Shareholders".
12.2.4 Limitations.
(a) Notwithstanding anything herein to the contrary, as to matters
which are subject to indemnification pursuant to this Section 12.2, neither
the Shareholders, on the one hand, nor EXTECH, on the other hand, shall be
liable unless and until the aggregate claims, liabilities, losses, costs
and expenses to the Indemnified EXTECH Parties or the Shareholders, as the
case may be, resulting from such otherwise indemnifiable matters shall
exceed a cumulative aggregate of Twenty- Five Thousand Dollars ($25,000)
(the "Indemnification Threshold") and then shall only be liable for the
excess above the Indemnification Threshold. For purposes of this section
only, in determining whether there was any failure to disclose, breach or
failure of observance or performance or any untruth or incorrect statement
with regard to any representation, warranty, covenant, agreement or
commitment, the terms "material" and "materially," as used in such
representations, warranties, covenants, agreements and commitments, shall
be deemed deleted therefrom.
(b) The total indemnification to which the Indemnified EXTECH Parties
shall be entitled under this Section 12.2 (exclusive of legal fees and
expenses) shall be limited to an amount not to exceed Nine Hundred Fifty
Thousand Dollars ($950,000).
(c) At the option of EXTECH, any indemnification obligation of EXTECH
under this Agreement may be satisfied in whole or in part through the
issuance of additional shares of EXTECH Common Stock to the Shareholders
having an aggregate Fair Market Value equal to such indemnification amount.
(d) At the option of the Shareholders, any indemnification obligation
of the Shareholders under this Agreement may be satisfied in whole or in
part through the redelivery to EXTECH of any of the EXTECH Shares or the
delivery to EXTECH of any other shares of Common Stock of EXTECH
(including, without limitation, the Sterling Foster Shares), in each case
having an aggregate Fair Market Value equal to such indemnification amount.
12.3 Arbitration.
(a) All disputes under this Article XII shall be settled by binding
arbitration pursuant to the rules of the American Arbitration Association.
Arbitration may be commenced at any time by any party hereto giving written
notice to each other party to a dispute of its demand for arbitration, which
demand shall set forth the name and address of its arbitrator. Within twenty
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(20) days of such notice, the other party shall select its arbitrator and so
notify the demanding party. Within twenty (20) days thereafter, the two
arbitrators so selected shall select the third arbitrator. In default of either
side naming its arbitrator as aforesaid or in default of the selection of the
third arbitrator as aforesaid, the American Arbitration Association shall
designate such arbitrator upon the application of either party. The arbitration
proceeding shall take place at a mutually agreeable location in Nassau County or
such other location as agreed to by the parties. The dispute shall be heard by
the arbitrators within thirty (30) days after selection of the third arbitrator.
The decision of the arbitrators shall be rendered within thirty (30) days after
the hearing. Each party shall pay its own expenses of arbitration and the
expenses of the arbitrators shall be equally shared; provided, however, that if,
in the opinion of the majority of the arbitrators, any claim for indemnification
or any defense or objection thereto was unreasonable, the arbitrators may
assess, as part of their award, all or any part of the arbitration expenses of
the other party (including reasonable attorneys' fees) and of the arbitrators
and the arbitration proceeding against the party raising such unreasonable
claim, defense or objection.
(b) To the extent that arbitration may not be legally permitted hereunder
and the parties to any dispute hereunder may not at the time of such dispute
mutually agree to submit such dispute to arbitration, any party may commence a
civil Action in a court of appropriate jurisdiction to resolve disputes
hereunder.
(c) The decision of a majority of the arbitrators shall be final, binding
and conclusive, shall be specifically enforceable, and judgment may be entered
upon it in accordance with applicable law in the appropriate court in the State
of New York with no right of appeal therefrom.
12.4 Other Rights and Remedies Not Affected. The indemnification rights of the
parties under this Article XII are independent of and in addition to such rights
and remedies as the parties may have at law or in equity or otherwise for any
misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party hereto, including without limitation
the right to seek specific performance, rescission or restitution, none of which
rights or remedies shall be affected or diminished hereby.
ARTICLE XIII
TERMINATION AND WAIVER
13.1 Termination. Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated and the transactions provided for herein
abandoned at any time prior to the Closing:
(a) By mutual consent of the Board of Directors of EXTECH and the
Shareholders;
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(b) By EXTECH if any of the conditions set forth in Article VII hereof
shall not have been fulfilled on or prior to the four month anniversary of the
date hereof, or shall have become incapable of fulfillment, in each case except
as such shall have been the result, directly or indirectly, of any action or
inaction by EXTECH, and shall not have been waived; or
(c) By the Shareholders, if any of the conditions set forth in Article VIII
hereof shall not have been fulfilled on or prior to the four month anniversary
of the date hereof, or shall have become incapable of fulfillment, in each case
except as such shall have been the result, directly or indirectly, of any action
or inaction by either Shareholder, and shall not have been waived.
If this Agreement is terminated as described above, this Agreement shall be
of no further force and effect, without any liability or obligation on the part
of any of the parties except for any liability which may arise pursuant to
Section 15.2 hereof or as a result of a party's willful failure to consummate
the transactions contemplated hereby or for any breach of any representation,
warranty or covenant.
13.2 Waiver. Any condition to the performance of the parties which legally may
be waived on or prior to the Closing Date may be waived at any time by the party
entitled to the benefit thereof by action taken or authorized by an instrument
in writing executed by the relevant party or parties. The failure of any party
at any time or times to require performance of any provision hereof shall in no
manner affect the right of such party at a later time to enforce the same. No
waiver by any party of the breach of any term, covenant, representation or
warranty contained in this Agreement as a condition to such party's obligations
hereunder shall release or affect any Liability resulting from such breach, and
no waiver of any nature, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such condition or of any breach of any other term, covenant,
representation or warranty of this Agreement.
ARTICLE XIV
DEFINED TERMS
14.1 Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Action" shall mean any action, claim, suit, demand, litigation,
governmental or other proceeding, labor dispute, arbitral action, governmental
audit, inquiry, investigation, criminal prosecution, investigation or unfair
labor practice charge or complaint.
"Acquisition Purchase Price" shall have the meaning ascribed to it in
Section 2.3.1 hereof.
"ADA" shall mean the Americans with Disabilities Act of 1990.
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"Additional Shares Notes" shall have the meaning ascribed to it in Section
2.4.1(b) hereof.
"Additional Shares Pledge Agreement" shall have the meaning ascribed to it
in Section 2.4.1(b) hereof.
"Auto Club" shall have the meaning ascribed to it in the Recitals hereof.
"Body" shall mean a federal, state, local, and foreign governmental or
other regulatory body.
"Books and Records" shall mean all books, ledgers, files, reports, plans,
drawings, records and lists, including, without limitation, all computer
programs and other software, of every kind relating to an entity's business,
operations, assets, liabilities, personnel, customers and suppliers.
"Buy Out Agreement" shall have the meaning ascribed to it in Section 7.14
hereof.
"Claim Notice" shall have the meaning ascribed to it in Section 12.2.3(a)
hereof.
"Closing" shall have the meaning ascribed to it in Section 10.1 hereof.
"Closing Date" shall have the meaning ascribed to it in Section 10.1
hereof.
"Closing Loans" shall have the meaning ascribed to it in Section 2.5.2
hereof.
"Closing Loan Notes" shall have the meaning ascribed to it in Section 2.5.2
hereof.
"Closing Notes" shall have the meaning ascribed to it in Section 2.4.1(b)
hereof.
"Closing Pledge Agreements" shall have the meaning ascribed to it in
Section 2.5.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Cold Comfort Letter" shall have the meaning ascribed to it in Section 7.11
hereof.
"Contract" shall mean any agreement, contract, note, lease, evidence of
indebtedness, purchase order, letter of credit, indenture, security or pledge
agreement, franchise agreement, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation, commitment, course of dealing or
practice, understanding or arrangement, whether written or oral, to which a
particular Person is a party or is otherwise bound.
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"Copyrights" shall mean registered copyrights, copyright applications and
unregistered copyrights.
"DCAP Balance Sheet" shall mean the combined balance sheet of the DCAP
Entities as of the DCAP Balance Sheet Date which is included as part of the DCAP
Financial Statements.
"DCAP Balance Sheet Date" shall mean December 31, 1997.
"DCAP Business" shall have the meaning set forth in the preamble hereof.
"DCAP Financial Statements" shall mean the combined financial statements of
the DCAP Entities and separate financial statements of each DCAP Entity, in each
case as of the Balance Sheet Date and for the year ended December 31, 1997,
attached hereto as Schedule 3.5.
"DCAP Opinions" shall have the meaning ascribed to it in Section 7.13
hereof.
"Default" shall mean any breach, default and/or other violation, and/or the
occurrence of any event that with or without the passage of time or the giving
of notice or both would constitute a breach, default or other violation, under,
or give any Person the right to accelerate, terminate or renegotiate, any
Contract.
"Derivative Securities" shall have the meaning ascribed to it in Section
3.2 hereof.
"Employment Agreement" shall have the meaning ascribed to it in Section 7.8
hereof.
"ERISA" shall have the meaning ascribed to it in Section 3.20(a) hereof.
"ERISA Notice" shall have the meaning ascribed to it in Section 3.20(i)
hereof.
"EXTECH Acquisition Shares" shall have the meaning ascribed to it in
Section 2.3.1 hereof.
"EXTECH Management Additional Shares" shall have the meaning ascribed to it
in Section 2.4.1 hereof.
"EXTECH Additional Shares Purchase Price" shall have the meaning ascribed
to it in Section 2.4.1 hereof.
"EXTECH Balance Sheet" shall mean the consolidated balance sheet of EXTECH
as of the EXTECH Balance Sheet Date which is included as part of the SEC Report.
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"EXTECH Balance Sheet Date" shall mean September 30, 1997.
"EXTECH Opinion" shall have the meaning ascribed to it in Section 8.12
hereof.
"EXTECH Shares" shall have the meaning ascribed to it in Section 2.4.1
hereof.
"Facilities" shall have the meaning ascribed to it in Section 3.27 hereof.
"Fair Market Value," when used with regard to EXTECH Common Stock, shall
mean Twenty-Five Cents ($.25) per share, subject to adjustment for stock splits,
reverse stock splits, stock dividends and like recapitalizations.
"IAH" shall have the meaning ascribed to it in Section 5.2 hereof.
"Indemnified EXTECH Party" shall have the meaning ascribed to it in Section
12.2.1 hereof.
"Information" shall have the meaning ascribed to it in Section 15.2 hereof.
"Initial Pledge Agreement" shall have the meaning ascribed to it in Section
2.5.1 hereof.
"Insurance Brokerage" shall have the meaning ascribed to it in the Recitals
hereof.
"Liability" shall mean any direct or indirect liability, obligation,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether accrued, absolute,
contingent, matured, unmatured or otherwise.
"Lien" shall mean any claim, lien, pledge, option, charge, restriction,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Listed Agreements" shall mean those Contracts described on Schedule 3.14.
"Material Adverse Effect" shall mean any material adverse effect on the
business, properties, operations, assets, liabilities, condition (financial or
otherwise), or prospects of EXTECH, on the one hand, or the DCAP Entities, taken
as a whole, on the other hand.
"Materials of Environmental Concern" shall mean pollutants, contaminants,
hazardous or noxious or toxic materials or wastes.
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"950,000 Additional Shares" shall have the meaning ascribed to it in
Section 2.4.1(b) hereof.
"$114,000 Loan" shall have the meaning ascribed to it in Section 2.5.3(a)
hereof.
"$114,000 Note" shall have the meaning ascribed to it in Section 2.5.3(a)
hereof.
"Other Pension Plans" shall have the meaning ascribed to it in Section
3.20(c) hereof.
"Patents" shall mean all patents, patent applications, registered designs
and registered design applications.
"Pension Plans" shall have the meaning ascribed to it in Section 3.20(b)
hereof.
"Pension and Welfare Plans" shall have the meaning ascribed to it in
Section 3.20(h) hereof.
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any and all Bodies.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a limited liability
partnership, a trust, an unincorporated organization and a government or other
department or agency thereof.
"Potential Offer" shall have the meaning ascribed to it in Section 5.1
hereof.
"Potential Transaction" shall have the meaning ascribed to it in Section
5.1 hereof.
"Premium Finance" shall have the meaning ascribed to it in the Recitals
hereof.
"Proprietary Rights" shall mean Copyrights, Patents, Trademarks, other
technology rights and licenses, computer software (including, without
limitation, any source or object codes thereof or documentation relating
thereto), trade secrets, franchises, inventions, designs, specifications, plans,
drawings, data bases, know-how, domain names, world wide web addresses and other
intellectual property rights used or under development.
"Proxy Statement" shall mean the proxy statement prepared by EXTECH in
connection with its seeking to obtain Stockholder Approval.
"Restrictive Covenant Agreement" shall have the meaning ascribed to it in
Section 7.9 hereof.
EXTECH CORPORATION
50
<PAGE>
"Required Waivers" shall have the meaning ascribed to it in Section 3.21(b)
hereof.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Report" shall have the meaning ascribed to it in Section 4.5 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sterling Foster" shall have the meaning ascribed to it in Section 2.4.2
hereof.
"Sterling Foster Purchase" shall have the meaning ascribed to it in Section
2.4.2 hereof.
"Sterling Foster Shares" shall have the meaning ascribed to it in Section
2.4.2 hereof.
"Stockholder Approval" shall mean approval by the stockholders of EXTECH of
(i) this Agreement and the transactions contemplated hereby, if required by
applicable law or otherwise sought by EXTECH; (ii) an amendment to the
Certificate of Incorporation of EXTECH pursuant to which (a) the number of
authorized shares of Common Stock of EXTECH is increased to at least 20,000,000,
(b) in the event the number of directors in office is less than four (4), then,
any action taken by the Board of Directors shall require the approval of all of
the directors then in office, and (c) no action required or permitted to be
taken at any annual or special meeting of stockholders of EXTECH may be taken
without a meeting, except upon the written consent of the holders of one hundred
percent (100%) of the shares of capital stock of the Company entitled to vote on
such action, unless such action has been authorized by the Board of Directors,
in which event such action may be taken by the written consent of the holders of
not less than a majority of the shares of capital stock entitled to vote on such
action; and (iii) an amendment to EXTECH's Amended and Restated 1990 Stock
Option Plan pursuant to which the number of shares of Common Stock authorized to
be issued thereunder is increased to at least 500,000 or the adoption of a new
stock option plan by EXTECH that provides for, among other things, the
authorization of at least 500,000 shares of Common Stock to be issued
thereunder.
"$311,000 Loan" shall have the meaning ascribed to it in Section 2.5.1
hereof.
"$311,000 Note" shall have the meaning ascribed to it in 2.5.1 hereof.
"$325,000 Loan" shall have the meaning ascribed to it in Section 2.5.3
hereof.
"$325,000 Note" shall have the meaning ascribed to it in Section 2.5.3
hereof.
"Tax Preparation" shall have the meaning ascribed to it in the Recitals
hereof.
EXTECH CORPORATION
51
<PAGE>
"Tax Services" shall mean DCAP Income Tax Services LLC.
"Trademarks" shall mean registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Voting Trust Agreement" shall have the meaning ascribed to it in Section
2.4.2 hereof.
"Welfare Plans" shall have the meaning ascribed to it in Section 3.20(h)
hereof.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Expenses. Each of the parties shall bear its or his own expenses in
connection herewith.
15.2 Confidential Information. All information that a disclosing party furnishes
in connection with the transactions contemplated hereby (the "Information") will
be kept confidential, will be used solely in connection with the contemplated
transactions and will not, without prior written consent of the disclosing
party, be used or disclosed, directly or indirectly, in any manner whatsoever,
in whole or in part.
Notwithstanding anything hereinabove to the contrary, the obligations
imposed upon the parties herein shall not apply to Information:
(a) which is publicly available prior to the date hereof; or
(b) which hereafter becomes available to the public through no wrongful act
of the receiving party; or
(c) which was in the possession of the receiving party prior to the
commencement of negotiations between the parties with regard to the transactions
contemplated hereby and not subject to an existing agreement of confidence
between the parties; or
(d) which is received from a third party without restriction, not in
violation of an agreement of confidence and without breach of this Agreement;
(e) which is independently developed by the receiving party; or
(f) which is disclosed pursuant to a requirement or request of a government
agency, arbitrator or court.
EXTECH CORPORATION
52
<PAGE>
Upon the request of a disclosing party, which may be made at any time
following any termination of this Agreement in accordance with the terms hereof,
the receiving party will redeliver to the disclosing party any and all written
Information furnished to the receiving party and will not retain any copies
thereof.
15.3 Equitable Relief. The parties agree that the remedy at law for any breach
or threatened breach of the provisions of Section 15.2 will be inadequate and
the aggrieved party shall be entitled to injunctive relief to compel the
breaching party to perform or refrain from action required or prohibited
thereunder.
15.4 Publicity. Neither EXTECH, or the one hand, nor the Shareholders, directly
or through any DCAP Entity on the other hand, will issue any report, statement,
release or other public announcement pertaining to the matters contemplated by
this Agreement without the prior written consent of the other. Notwithstanding
the foregoing, EXTECH is permitted to make any disclosures or public
announcements of the transactions contemplated hereby and/or the terms thereof
without the prior written consent and approval of the Shareholders if it shall
determine that such disclosure is required in order for EXTECH to comply with
applicable securities laws and regulations.
15.5 Entire Agreement. This Agreement, including the schedules and exhibits
attached hereto, which are a part hereof, constitutes the entire agreement of
the parties with respect to the subject matter hereof. The representations,
warranties, covenants and agreements set forth in this Agreement and in the
financial statements, schedules or exhibits delivered pursuant hereto constitute
all the representations, warranties, covenants and agreements of the parties and
upon which the parties have relied, shall not be deemed waived or otherwise
affected by any investigation made by any party hereto and, except as may be
specifically provided herein, no change, modification, amendment, addition or
termination of this Agreement or any part thereof shall be valid unless in
writing and signed by or on behalf of the party to be charged therewith.
15.6 Notices. Any and all notices or other communications or deliveries required
or permitted to be given or made pursuant to any of the provisions of this
Agreement shall be deemed to have been duly given or made for all purposes when
in writing and hand delivered or sent by certified or registered mail, return
receipt requested and postage prepaid, overnight mail, nationally recognized
overnight courier or telecopier as follows:
If to EXTECH:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Morton L. Certilman, President
Telecopier Number: (516) 296-7111
EXTECH CORPORATION
53
<PAGE>
With a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred Skolnik, Esq.
Telecopier Number: (516) 296-7111
If to either Shareholder:
c/o DCAP
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier: (516) 735-7379
With a copy to:
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
Attention: William A. Ubert, Esq.
Telecopier: (516) 663-6643
or at such other address as any party may specify by notice given to the other
party in accordance with this Section 15.6.
15.7 Choice of Law; Severability. This Agreement shall be governed by, and
interpreted and construed in accordance with, the laws of the State of New York,
excluding choice of law principles thereof. In the event any clause, section or
part of this Agreement shall be held or declared to be void, illegal or invalid
for any reason, all other clauses, sections or parts of this Agreement which can
be effected without such void, illegal or invalid clause, section or part shall
nevertheless continue in full force and effect.
15.8 Successors and Assigns; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns; provided, however, that neither Shareholder nor EXTECH may assign any
of its rights or delegate any of its duties under this Agreement without the
prior written consent of the other, except that EXTECH shall have the right to
assign any or all of its rights hereunder to a wholly-owned subsidiary thereof.
15.9 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
EXTECH CORPORATION
54
<PAGE>
15.10 Facsimile Signatures. Signatures hereon which are transmitted via
facsimile shall be deemed original signatures.
15.11 Representation by Counsel; Interpretation. Each party acknowledges that he
or it has been represented by counsel in connection with this Agreement and the
transactions contemplated hereby. Accordingly, any rule or law or any legal
decision that would require the interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and is
expressly waived by the parties. The provisions of this Agreement shall be
interpreted in a reasonable manner to give effect to the intent of the parties
hereto.
15.12 Headings; Gender. The headings, captions and/or use of a particular gender
under sections of this Agreement are for convenience of reference only and do
not in any way modify, interpret or construe the intent of the parties or affect
any of the provisions of this Agreement.
EXTECH CORPORATION
55
<PAGE>
WITNESS the execution of this Agreement as of the date first above written.
EXTECH CORPORATION
By:/s/ Morton L. Certilman
Morton L. Certilman, President
/s/ Morton L. Certilman
Morton L. Certilman
/s/ Jay M. Haft
Jay M. Haft
/s/ Kevin Lang
Kevin Lang
/s/ Abraham Weinzimer
Abraham Weinzimer
Agreed to:
DEALERS CHOICE AUTOMOTIVE
PLANNING INC.
By:/s/ Kevin Lang
Kevin Lang, President
EXTECH CORPORATION
<PAGE>
<TABLE>
Schedule A
<CAPTION>
Number of Common
Shares of Company
Owned by each
Name and Address of Company Shareholder Business
- - --------------------------- ----------- --------
<S> <C> <C>
Dealers Choice Automotive Planning 50 Insurance Brokerage and performs administrative
Inc. duties including processing applications,
2545 Hempstead Turnpike claims, advertising and accounting
East Meadow, NY 11554
A DCAP Brokerage, Inc. 37.5 Insurance Brokerage and Tax Preparation
167-10A Hillside Avenue
Jamaica, NY 11432
DCAP Management Corp. 50 Franchisor
2545 Hempstead Turnpike
East Meadow, NY 11554
Payments Inc. 50 Premium finance
2545 Hempstead Turnpike
East Meadow, NY 11554
Diversified Coverage Asset Planning 50 Insurance Brokerage and Tax Preparation
Inc.
28 Main Street
Hempstead, NY 11550
Intandem Corporation 50 Auto Club
2545 Hempstead Turnpike
East Meadow, NY 11554
Fulton Street, Inc. 50 Insurance Brokerage and Tax Preparation
483 Hudson Avenue
Brooklyn , NY 11201
FASK Agency Inc. 50 dormant, holds lease on Fulton Street, Inc.
483 Hudson Avenue
Brooklyn , NY 11201
DCAP Jackson Heights, Inc. 50 Insurance Brokerage
c/o DCAP
2545 Hempstead Turnpike
East Meadow, NY 11554
</TABLE>
EXTECH CORPORATION
<PAGE>
<TABLE>
Schedule B
<CAPTION>
Percentage of
Outstanding Common
Shares of Joint Venture Number of Common
Owned by the Shares of Joint Venture
Name and Address of Shareholders Owned by each
Joint Venture Collectively Shareholder Business
- - ------------- ------------ ----------- --------
<S> <C> <C> <C>
DCAP Flushing, Inc. 66.7 25 Insurance Brokerage
159-03 Northern Blvd.
Flushing, NY 11358
DCAP Hicksville, Inc. 66.7 25 Insurance Brokerage
418 South Broadway
Hicksville, NY 11801
DCAP Manhattan Inc. 50 25 Insurance Brokerage
90 Worth Street
New York, NY 10128
MC DCAP, Inc. 50 25 Insurance Brokerage
89-13 37th Avenue
Jackson Heights, NY
11372
DCAP Huntington, Inc. 50 25 Insurance Brokerage
809 Jericho Turnpike
Huntington Station, NY
11746
A DCAP Services, Inc. 50 25 Insurance Brokerage
1980 Tremont Avenue
Bronx, NY 10462
DCAP Medford Inc. 50 25 Insurance Brokerage
2852A Route 112
Medford, NY 11763
DCAP Bayshore, Inc. 50 25 Insurance Brokerage
709 North Broadway
Amityville, NY 11701
The Manhattan Agency Inc. 50 25 Insurance Brokerage
667 Amsterdam Avenue Tax Preparation
New York, NY 10025
DCAP Agency, Inc. 50 25 Insurance Brokerage
100 East 96th Street
New York, NY 10128
DCAP White Plains Inc. 50 25 Insurance Brokerage
200 Hamilton Avenue
White Plains, NY 10601
AAA DCAP Agency, Inc. 50 25 Insurance Brokerage
6KA Mall Walk
Yonkers, NY 10704
The Yonkers Agency Ltd. 50 25 Insurance Brokerage
6KA Mall Walk
Yonkers, NY 10704
DCAP Peekskill, Inc. 50 25 Insurance Brokerage
1045 Parl Street
Peekskill, NY 10566
DCAP Ridgewood, Inc. 50 25 Insurance Brokerage
59-30 Myrtle Avenue Tax Preparation
Ridgewood, NY 11385
DCAP East Meadow, Inc. 50 25 Insurance Brokerage
1905 Hempstead Turnpike
East Meadow, NY 11554
DCAP Garden City Park Inc. 50 25 Insurance Brokerage
2226 Jericho Turnpike
Garden City Park, NY 11040
DCAP Oceanside, Inc. 50 25 Insurance Brokerage
3214 Long Beach Road
Oceanside, NY 11572
DCAP Hari, Inc. 50 25 Insurance Brokerage
2048 Victory Blvd.
Staten Island, NY 10314
DCAP Woodhaven, Inc. 50 25 Insurance Brokerage
86-56 Woodhaven Blvd. Tax Preparation
Woodhaven, NY 11421
The Bronx Agency Inc. 50 25 Insurance Brokerage
3434 Boston Road
Bronx, NY 10469
The White Plains Agency Inc. 50 25 Insurance Brokerage
200 Hamilton Avenue
White Plains, NY 10601
DCAP Woodside Inc. 50 25 Insurance Brokerage
60-15 Woodside Avenue
Woodside, NY 11377
DCAP Seaford, Inc. 50 25 Insurance Brokerage
3789 Merrick Road
Seaford, NY 11783
DCAP Brentwood Inc. 50 25 Insurance Brokerage
776 Suffolk Avenue
Brentwood, NY 11717
DCAP Freeport, Inc. 50 25 Insurance Brokerage
17-19 West Sunrise
Highway
Freeport, NY 11520
DCAP Queens Agency Inc. 50 25 Insurance Brokerage
120-01 Liberty Avenue
Richmond Hill, NY 11419
DCAP Bayside, Inc. 50 25 Insurance Brokerage
43-04A Bell Blvd.
Bayside, NY 11361
AADCAP Greenbrook Inc. 50 25 Insurance Brokerage
119-131 Rte. 22 East
Greenbrook, NJ 08812
DCAP Income Tax 50 Tax Preparation
Services LLC
c/o DCAP
2545 Hempstead Turnpike
East Meadow, NY 11554
</TABLE>
EXTECH CORPORATION
<PAGE>
February 25, 1999
$114,000
PROMISSORY NOTE
FOR VALUE RECEIVED, KEVIN LANG (the "Maker"), having an address as
indicated under his name, hereby promises to pay to the order of DCAP GROUP,
INC. (formerly EXTECH Corporation), a Delaware corporation (the "Payee"), at 90
Merrick Avenue, East Meadow, New York or at such other place as the holder
hereof may from time to time designate in writing, in immediately available New
York funds, the principal sum of ONE HUNDRED FOURTEEN THOUSAND DOLLARS
($114,000), together with interest on the outstanding principal balance from the
date hereof at the rate of six percent (6%) per annum. The principal amount of
this Note, together with accrued interest thereon, shall be payable in six (6)
equal annual installments of principal and interest, commencing on April 15,
2001 and continuing on the first day of April of each subsequent year through
April 15, 2006, in such annual amount as shall be necessary to self- amortize
this Note by April 15, 2006; provided, however, that the amounts due under this
Note shall be payable sooner to the extent of any proceeds received by the Maker
from the sale or other disposition of any shares of Common Stock of the Payee on
or after the date hereof (the proceeds being immediately payable to the Payee).
The payment of all amounts due under this Note is secured by a pledge
of 570,000 shares of Common Stock of the Payee owned by the Maker pursuant to a
Pledge Agreement of even date between the Maker and the Payee (the "Pledge
Agreement").
In the event (a) the Maker shall (i) fail to make any payment due
hereunder and such failure shall continue unremedied for a period of ten (10)
days following the date of written notice of default; (ii) admit in writing his
inability to pay his debts as they mature; (iii) make a general assignment for
the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file
a voluntary petition in bankruptcy or a petition or an answer seeking an
arrangement with creditors; (vi) take advantage of any bankruptcy, insolvency or
readjustment of debt law or statute or file an answer admitting the material
allegations of a petition filed against him in any proceeding under any such
law; or (vii) have entered against him a court order approving a petition filed
against him under the Federal Bankruptcy Act; or (b) there shall be a breach of
any representation, warranty, covenant or other agreement set forth in the
Pledge Agreement and such breach shall continue unremedied for a period of
fifteen (15) days following the date of written notice thereof, then and in each
and every such event (an "Event of Default"), the Payee may, by written notice
to the Maker, declare the entire unpaid principal amount of this Note then
outstanding plus accrued interest to be forthwith due and payable whereupon the
same shall become forthwith due and payable.
The Maker may prepay the principal amount of this Note, in whole or in
part, from time to time, without premium or penalty, provided that the Maker
pays all interest accrued with regard to
<PAGE>
the principal prepaid to the date of prepayment.
If the Maker shall fail to pay when due, whether by acceleration or
otherwise, all or any portion of the principal amount hereof, any such unpaid
amount shall bear interest for each day from the date it was so due until paid
in full at the rate of sixteen percent (16%) per annum, payable on demand.
Notwithstanding anything to the contrary contained in this Note, the
rate of interest payable on this Note shall never exceed the maximum rate of
interest permitted under applicable law.
This Note may not be waived, changed, modified or discharged orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of any agent or attorneys for collection upon default or
maturity, the Maker agrees to pay, in addition to all other amounts due and
payable hereunder, all reasonable costs and expenses of collection or attempting
to collect this Note, including reasonable attorneys' fees.
The Maker and any endorsers hereof, for themselves and their respective
representatives, successors and assigns, expressly (a) waive presentment,
protest, notice of dishonor, notice of non-payment, notice of maturity, notice
of protest, diligence in collection, and the benefit of any applicable
exemptions, including, but not limited to, exemptions claimed under insolvency
laws, and (b) consent that the Payee may release or surrender, exchange or
substitute any property or other collateral or security now held or which may
hereafter be held as security for the payment of this Note, and/or may release
any guarantor, and/or may extend the time for payment and/or otherwise modify
the terms of payment of any part or the whole of the debt evidenced hereby.
Any notice, demand or request relating to any matter set forth herein
shall be in writing and shall be deemed effective when hand delivered, when
mailed, postage prepaid, by registered or certified mail, return receipt
requested, or by a nationally recognized overnight mail or courier service, or
when sent by facsimile transmission (with transmission confirmation) to any
party hereto at its address stated herein or at such other address of which it
shall have notified the party giving such notice in writing as aforesaid.
The Payee shall be entitled to assign all or any portion of its right,
title and interest in and to this Note at its sole discretion without notice to
the Maker, provided that the Maker shall continue to make payments required
hereunder to the Payee until he has received notice of change of payee for
payments as provided herein.
Notwithstanding any other provision of this Note, all payments made
hereunder shall be
2
<PAGE>
applied first to payment of sums payable hereunder other than interest and
principal, secondly, interest on the principal balance outstanding hereunder
from time to time, and thirdly to principal.
The Maker acknowledges and agrees that the obligations under this Note
are unconditional and are not subject to any defense, counterclaim, or right of
offset or setoff.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, excluding conflict of law principles thereof.
The Maker acknowledges that he has been represented by counsel in
connection with this Note. Accordingly, any rule or law or any legal decision
that would require the interpretation of any claimed ambiguities in this Note
against the party that drafted it has no application and is expressly waived by
the Maker. The provisions of this Note shall be interpreted in a reasonable
manner to give effect to the intent of the Maker and the Payee.
/s/ Kevin Lang
--------------
Kevin Lang
Address: 2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
3
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
On February 25, 1999 before me personally came Kevin Lang to
me known, and known to be the individual described in, and who executed the
foregoing Note, and duly acknowledged to me that he executed the same.
Notary Public
4
<PAGE>
PLEDGE AGREEMENT, dated February 25, 1999, by and between
KEVIN LANG (the "Pledgor") and DCAP GROUP, INC. (formerly EXTECH Corporation), a
Delaware corporation (the "Pledgee").
WHEREAS, simultaneously herewith, the Pledgor is purchasing
from the Pledgee four hundred seventy-five thousand (475,000) shares of Common
Stock of the Pledgee and, in partial consideration therefor, is executing and
delivering to the Pledgee a Promissory Note of even date in the principal amount
of One Hundred Fourteen Thousand Dollars ($114,000) (the "Note").
WHEREAS, the Pledgee desires, and the Pledgor is willing, to
secure performance of the Note.
WHEREAS, certain capitalized terms used herein are defined in
Section 8 hereof.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLEDGE. The Pledgor hereby grants to the Pledgee, as security for
the performance by the Pledgor of all of his obligations under the Note (the
"Obligations"), a valid and binding first security interest in the Collateral
(as hereinafter defined). The Pledgor has delivered simultaneously herewith to
the Pledgee, and the Pledgee hereby acknowledges receipt of, a certificate
evidencing the Pledged Shares registered in the name of the Pledgor (the
"Pledged Certificate"), accompanied by appropriate stock powers endorsed by the
Pledgor (the "Stock Powers").
2. TERM. This Agreement shall continue in effect until terminated in
accordance with Section 7 hereof.
3. SHARE RIGHTS; CASH DIVIDENDS.
(a) In the event of any change in the Pledged Shares during
the term of this Agreement by reason of any stock dividend, stock split-up,
reverse split, recapitalization, combination, reclassification, exchange of
shares, merger, consolidation or the like, all new, substituted, or additional
stock, or other securities, issued by reason of any such change (the "Adjusted
Shares") (the Pledged Shares and the Adjusted Shares are hereinafter referred to
collectively as the "Shares") shall be retained by or delivered to, as the case
may be, and held by the Pledgee under the terms of this Agreement in the same
manner as the Pledged Shares originally pledged hereunder.
(b) Unless and until the occurrence of a Default (as
hereinafter defined), the Pledgor shall have the right to vote the Shares. Upon
the occurrence of a Default, the Shares shall be registered in the name of the
Pledgee and the Pledgee shall have all incidents of ownership thereof.
(c) Provided that no Default has occurred, any and all cash
dividends paid in respect of the Shares shall be paid to the Pledgor; provided,
however, that, in any event, any extraordinary distributions made in respect of
the Shares shall be retained by the Pledgee and held by it in accordance with
the terms hereof.
K:\WPDOC\CORP\EXTECH\DCAP\CLOSING\Pledge\LANG114.299
1
<PAGE>
4. REPRESENTATIONS. The Pledgor hereby represents and warrants to the
Pledgee that:
(a) The Pledgor is the sole record and beneficial owner of the
Pledged Shares, free and clear of all liens, pledges, security interests,
encumbrances, restrictions, subscriptions, hypothecations, charges and claims of
any kind whatsoever.
(b) No consents of governmental and other regulatory agencies,
foreign or domestic, or of other parties are required to be received by or on
the part of the Pledgor to enable him to enter into and carry out this Agreement
and the transactions contemplated hereby.
(c) The Pledgor has the power to enter into this Agreement and
to carry out his obligations hereunder. This Agreement constitutes the valid and
binding obligation of the Pledgor, and is enforceable in accordance with its
terms.
(d) Neither the execution and delivery of this Agreement nor
compliance by the Pledgor with any of the provisions hereof nor the consummation
of the transactions contemplated hereby will violate or, alone or with notice or
the passage of time, result in the material breach or termination of, or
otherwise give any contracting party the right to terminate, or declare a
default under, the terms of any agreement, understanding or arrangement to which
the Pledgor is a party or by which he or his assets or properties may be bound.
5. COVENANTS.
(a) The Pledgor hereby covenants that from and after the date
hereof and until the Obligations shall have been satisfied in full:
(i) The Pledgor will not grant, create, incur, assume
or suffer to exist any Lien
in the Collateral (except for the Lien created hereby).
(ii) The Pledgor will defend the Pledgee's right,
title, and security interest in and to the Collateral against the claims of any
person, firm, corporation or other entity.
(iii) The Pledgor shall at any time and from time to
time, upon the written request of the Pledgee, execute and deliver such other
instruments and documents and do such further acts and things as the Pledgee
may reasonably request in order to effect the purposes of this Agreement.
(b) The Pledgee's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise, shall be to deal with it in the same
manner as the Pledgee deals with similar securities and property for its own
account.
2
<PAGE>
6. DEFAULT. (a) In the event that the Pledgor fails to pay to the
Pledgee any Obligation when due or there shall otherwise occur an Event of
Default (as defined in the Note) ("Default"), the Pledgee shall have all of the
rights and remedies afforded to secured parties with respect to the Collateral
as set forth in the Code as well as all other rights and remedies granted in the
Note and this Agreement. Without limiting the generality of the foregoing, the
Pledgee, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, upon such terms and conditions and at such prices as it
may deem advisable, for cash or on credit or for future delivery without
assumption of any credit risk. The Pledgee shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold. The
Pledgee shall apply any proceeds from time to time held by it and the net
proceeds of any such sale or other disposition, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Pledgee hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of counsel to the
Pledgee, to the satisfaction in whole or in part of the Obligations, in such
order as the Pledgee may elect and only after such application and after the
payment by the Pledgee of any other amount required by any provision of law,
including, without limitation, Section 9-504 (1)(c) of the Code, need the
Pledgee account for the surplus, if any, to the Pledgor. To the extent permitted
by applicable law, the Pledgor waives all claims, damages and demands he may
acquire against the Pledgee arising out of the lawful exercise by it of any
rights hereunder. Neither the Pledgee nor any of its respective directors,
officers, employees or agents shall be liable for failure to sell or otherwise
dispose of the Collateral or for any delay in doing so. If any notice of a
proposed sale or other disposition of the Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least ten (10)
days before such sale or other disposition. In any event, notice of a proposed
sale or other disposition shall be given at least ten (10) days before such sale
or other disposition to the Pledgor and Abraham Weinzimer. The Pledgor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all of the Obligations and
any and all costs and expenses of every kind incurred by the Pledgee with
respect to the collection of such deficiency, including, without limitation, all
reasonable fees and disbursements of any attorneys employed by the Pledgee.
The Pledgor recognizes that the Pledgee may be unable to
effect a public sale of any or all the Collateral by reason of certain
restrictions contained in the Securities Act of 1933, as amended, and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale
3
<PAGE>
and agrees that any such private sale under such circumstances shall not be
evidence that it has been made in other than a commercially reasonable manner.
The Pledgor agrees to use his best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this section valid and binding
and in compliance with any and all other applicable requirements of law.
(b) The rights of the Pledgee hereunder shall not be
conditioned or contingent upon the pursuit by the Pledgee of any right or remedy
against the Pledgor, any other person which may be or become liable in respect
of all or any part of the Obligations or against any collateral security
therefor, guarantee therefor or right of offset with respect thereto. Neither
the Pledgee nor any of its affiliates or representatives shall be liable for any
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so, nor shall the Pledgee be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Pledgor or any
other person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
7. TERMINATION OF AGREEMENT; PARTIAL RELEASE. (a) Upon (i) the
Pledgor's satisfaction of the Obligations in full (at which time the Pledgee
shall redeliver the Pledged Certificate and accompanying Stock Powers to the
Pledgor), or (ii) the conclusion of the actions contemplated by Section 6
hereof, this Agreement shall thereupon terminate.
(b) Provided that no Default has occurred and is continuing,
for each one dollar ($1.00) of principal amount of the Note, together with
accrued interest thereon, that is paid to the Pledgee, five (5) Pledged Shares
shall be released from the pledge created hereby and redelivered to the Pledgor.
8. DEFINED TERMS. The following terms shall have the following
meanings:
(a) "Code" means the Uniform Commercial Code from time to time
in effect in the State of New York.
(b) "Collateral" means the Pledged Shares and all Proceeds.
(c) "Pledged Shares" means five hundred seventy thousand
(570,000) shares of Common Stock of the Pledgee, together with any and all
shares, stock certificates, options or rights of any nature whatsoever that may
be issued or granted to the Pledgor with regard thereto, in substitution or
replacement thereof, as a conversion thereof, in exchange therefor or otherwise
in respect thereof.
(d) "Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the Code on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from the Pledged
Shares, collections thereon and distributions with respect thereto.
4
<PAGE>
9. MISCELLANEOUS.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
(b) This Agreement contains the entire agreement and
understanding between the parties in respect of the subject matter hereof, and
cannot be modified, changed, discharged or terminated except by an instrument in
writing, signed by the party against whom enforcement of any modification,
change, discharge or termination is sought.
(c) A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any other breach of the
same or any other term or condition.
(d) This Agreement will be construed and governed in
accordance with the laws of the State of New York, excluding choice of law rules
thereof.
(e) All notices or other communications required or permitted
hereunder shall be sufficiently given if delivered by hand, or sent by certified
mail, return receipt requested, postage prepaid, facsimile transmission or
overnight mail or courier, addressed as follows:
If to the Pledgor:
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
with a copy to:
Weil & Kestenbaum
42-40 Bell Boulevard
Bayside, New York 11361
Attention: Alan Kestenbaum, Esq.
Telecopier Number: (718) 281-0850
If to the Pledgee:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Chairman of the Board
Telecopier Number: (516) 296-7111
5
<PAGE>
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred Skolnik, Esq.
Telecopier Number: (516) 296-7111
(f) The Pledgor waives any and all notice of the extension or
modification of the terms of the Note.
(g) In the event that the Collateral or any portion thereof is
released to the Pledgor and any payments of, or proceeds of any security for,
the Obligations, or any part thereof, are subsequently invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then the Pledgor shall redeliver the
Collateral and Stock Powers to the Pledgee and, until so redelivered, shall hold
the Collateral and Stock Powers as agent of, and in trust for, the Pledgee.
(h) If any provision hereof is declared to be invalid and
unenforceable, then, to the fullest extent permitted by law, the other
provisions hereof shall remain in full force and effect and shall be liberally
construed in favor of the Pledgee in order to carry out the intentions of the
parties hereto as nearly as may be possible.
(i) Each party acknowledges that he or it has been represented
by counsel in connection with this Agreement. Accordingly, any rule or law or
any legal decision that would require the interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived by the parties. The provisions of this
Agreement shall be interpreted in a reasonable manner to give effect to the
intent of the parties hereto.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
/s/ Kevin Lang
------------------------------
Kevin Lang
DCAP GROUP, INC.
By: /s/ Morton L. Certilman
------------------------------
Morton L. Certilman,
Chairman of the Board
7
February 25, 1999
$112,500
PROMISSORY NOTE
FOR VALUE RECEIVED, KEVIN LANG (the "Maker"), having an address as
indicated under his name, hereby promises to pay to the order of DCAP GROUP,
INC. (formerly EXTECH Corporation), a Delaware corporation (the "Payee"), at its
offices at 90 Merrick Avenue, East Meadow, New York 11554 or at such other place
as the holder hereof may from time to time designate in writing, in immediately
available New York funds, the principal sum of ONE HUNDRED TWELVE THOUSAND FIVE
HUNDRED DOLLARS ($112,500), together with interest on the outstanding principal
balance from the date hereof at the rate of six percent (6%) per annum. The
principal amount of this Note, together with accrued interest thereon, shall be
payable in six (6) equal annual installments of principal and interest,
commencing on April 15, 2001 and continuing on the first day of April of each
subsequent year through April 15, 2006, in such annual amount as shall be
necessary to self-amortize this Note by April 15, 2006; provided, however, that
the amounts due under this Note shall be payable sooner to the extent of any
proceeds received by the Maker from the sale or other disposition of any shares
of Common Stock of the Payee on or after the date hereof (the proceeds being
immediately payable to the Payee).
The Maker may pay any or all amounts due hereunder by delivery to the
Payee of certificates representing shares of Common Stock of the Payee duly
endorsed by the Maker or accompanied by stock powers duly executed by the Maker,
together with evidence of the payment of all transfer taxes in connection
therewith and a written notice that it is making payment under this Note by such
delivery. Any such shares of Common Stock of the Payee so delivered shall be
valued at the greater of (a) twenty-five cents ($.25) per share, subject to
adjustment for stock splits, reverse stock splits, stock dividends and like
recapitalizations that take effect after the date hereof or (b) the average
Market Price (as hereinafter defined) of the Payee's shares of Common Stock
during the twenty (20) trading days immediately preceding the date of delivery
of the shares. As used herein, the term "Market Price" shall mean the closing
selling price or, if not available, the mean of the closing bid and asked
prices, or, if not available, the mean of the highest bid and lowest asked
prices, of the shares of Common Stock of the Payee as reported by a national
securities exchange or The Nasdaq Stock Market ("Nasdaq") or, if the Payee's
shares of Common Stock are not listed on a national securities exchange or
Nasdaq, as reported by the NASD OTC Electronic Bulletin Board (the "Bulletin
Board'), or if the Payee's shares of Common Stock are not listed on the Bulletin
Board, as reported by the National Quotation Bureau, LLC, or other similar
organization if such organization is no longer reporting such information, as
the case may be.
The payment of all amounts due under this Note is secured by a pledge
of 450,000 shares of the Payee owned by the Maker pursuant to a Pledge Agreement
of even date between the Maker and the Payee (the "Pledge Agreement").
<PAGE>
In the event (a) the Maker shall (i) fail to make any payment due
hereunder and such failure shall continue unremedied for a period of ten (10)
days following the date of written notice of default; (ii) admit in writing his
inability to pay his debts as they mature; (iii) make a general assignment for
the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file
a voluntary petition in bankruptcy or a petition or an answer seeking an
arrangement with creditors; (vi) take advantage of any bankruptcy, insolvency or
readjustment of debt law or statute or file an answer admitting the material
allegations of a petition filed against him in any proceeding under any such
law; or (vii) have entered against him a court order approving a petition filed
against him under the Federal Bankruptcy Act; or (b) there shall be a breach of
any representation, warranty, covenant or other agreement set forth in the
Pledge Agreement and such breach shall continue unremedied for a period of
fifteen (15) days following the date of written notice thereof, then and in each
and every such event (an "Event of Default"), the Payee may, by written notice
to the Maker, declare the entire unpaid principal amount of this Note then
outstanding plus accrued interest to be forthwith due and payable whereupon the
same shall become forthwith due and payable.
The Maker may prepay the principal amount of this Note, in whole or in
part, from time to time, without premium or penalty, provided that the Maker
pays all interest accrued with regard to the principal prepaid to the date of
prepayment.
If the Maker shall fail to pay when due, whether by acceleration or
otherwise, all or any portion of the principal amount hereof, any such unpaid
amount shall bear interest for each day from the date it was so due until paid
in full at the rate of sixteen percent (16%) per annum, payable on demand.
Notwithstanding anything to the contrary contained in this Note, if an
Event of Default shall occur and any suit is brought hereunder, then any
judgment obtained in such suit may be enforced solely against the Collateral (as
such term is defined in the Pledge Agreement). Nothing contained in this
paragraph, however, shall be deemed to constitute a release or impairment of any
of the Payee's rights under the Pledge Agreement or the security interest
granted therein.
Notwithstanding anything to the contrary contained in this Note, the
rate of interest payable on this Note shall never exceed the maximum rate of
interest permitted under applicable law.
This Note may not be waived, changed, modified or discharged orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of any agent or attorneys for collection upon default or
maturity, the Maker agrees to pay, in addition to all other amounts due and
payable hereunder, all reasonable costs and expenses of collection or attempting
to collect this Note, including reasonable attorneys' fees.
2
<PAGE>
The Maker and any endorsers hereof, for themselves and their respective
representatives, successors and assigns, expressly (a) waive presentment,
protest, notice of dishonor, notice of non-payment, notice of maturity, notice
of protest, diligence in collection, and the benefit of any applicable
exemptions, including, but not limited to, exemptions claimed under insolvency
laws, and (b) consent that the Payee may release or surrender, exchange or
substitute any property or other collateral or security now held or which may
hereafter be held as security for the payment of this Note, and/or may release
any guarantor, and/or may extend the time for payment and/or otherwise modify
the terms of payment of any part or the whole of the debt evidenced hereby.
Any notice, demand or request relating to any matter set forth herein
shall be in writing and shall be deemed effective when hand delivered, when
mailed, postage prepaid, by registered or certified mail, return receipt
requested, or by a nationally recognized overnight mail or courier service, or
when sent by facsimile transmission (with transmission confirmation) to any
party hereto at its address stated herein or at such other address of which he
or it shall have notified the party giving such notice in writing as aforesaid.
The Payee shall be entitled to assign all or any portion of its right,
title and interest in and to this Note at its sole discretion without notice to
the Maker, provided that the Maker shall continue to make payments required
hereunder to the Payee until he has received notice of change of payee for
payments as provided herein.
Notwithstanding any other provision of this Note, all payments made
hereunder shall be applied first to payment of sums payable hereunder other than
interest and principal, secondly, interest on the principal balance outstanding
hereunder from time to time, and thirdly to principal.
The Maker acknowledges and agrees that the obligations under this Note
are unconditional and are not subject to any defense, counterclaim, or right of
offset or setoff.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, excluding conflict of law principles thereof.
The Maker acknowledges that he has been represented by counsel in
connection with this Note. Accordingly, any rule or law or any legal decision
that would require the interpretation of any claimed ambiguities in this Note
against the party that drafted it has no application and is expressly waived by
the Maker. The provisions of this Note shall be interpreted in a reasonable
manner to give effect to the intent of the Maker and the Payee.
/s/ Kevin Lang
--------------
Kevin Lang
Address: 2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
3
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
On February 25, 1999 before me personally came Kevin Lang to
me known, and known to be the individual described in, and who executed the
foregoing Note, and duly acknowledged to me that he executed the same.
Notary Public
4
<PAGE>
PLEDGE AGREEMENT, dated February 25, 1999, by and between
KEVIN LANG (the "Pledgor") and DCAP GROUP, INC. (formerly EXTECH Corporation), a
Delaware corporation (the "Pledgee").
WHEREAS, simultaneously herewith, the Pledgee is loaning to
the Pledgor the sum of One Hundred Twelve Thousand Five Hundred Dollars
($112,500) (the "Loan") and the Pledgor is executing and delivering to the
Pledgee a Promissory Note of even date in such principal amount (the "Note").
WHEREAS, the proceeds of the Loan are being used by the
Pledgor to purchase the Pledged Shares (as hereinafter defined).
WHEREAS, the Pledgee desires, and the Pledgor is willing, to
secure performance of the Note.
WHEREAS, certain capitalized terms used herein are defined in
Section 8 hereof.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLEDGE. The Pledgor hereby grants to the Pledgee, as security for
the performance by the Pledgor of all of his obligations under the Note (the
"Obligations"), a valid and binding first security interest in the Collateral
(as hereinafter defined). The Pledgor has delivered simultaneously herewith to
the Pledgee, and the Pledgee hereby acknowledges receipt of, a certificate
evidencing the Pledged Shares registered in the name of the Pledgor (the
"Pledged Certificate"), accompanied by appropriate stock powers endorsed by the
Pledgor (the "Stock Powers").
2. TERM. This Agreement shall continue in effect until terminated in
accordance with Section 7 hereof.
3. SHARE RIGHTS; CASH DIVIDENDS.
(a) In the event of any change in the Pledged Shares during
the term of this Agreement by reason of any stock dividend, stock split-up,
reverse split, recapitalization, combination, reclassification, exchange of
shares, merger, consolidation or the like, all new, substituted, or additional
stock, or other securities, issued by reason of any such change (the "Adjusted
Shares") (the Pledged Shares and the Adjusted Shares are hereinafter referred to
collectively as the "Shares") shall be retained by or delivered to, as the case
may be, and held by the Pledgee under the terms of this Agreement in the same
manner as the Pledged Shares originally pledged hereunder.
(b) Unless and until the occurrence of a Default (as
hereinafter defined), the Pledgor shall have the right to vote the Shares. Upon
the occurrence of a Default, the Shares shall be registered in the name of the
Pledgee and the Pledgee shall have all incidents of ownership thereof.
1
<PAGE>
(c) Provided that no Default has occurred, any and all cash
dividends paid in respect of the Shares shall be paid to the Pledgor; provided,
however, that, in any event, any extraordinary distributions made in respect of
the Shares shall be retained by the Pledgee and held by it in accordance with
the terms hereof.
4. REPRESENTATIONS. The Pledgor hereby represents and warrants to the
Pledgee that:
(a) The Pledgor is the sole record and beneficial owner of the
Pledged Shares, free and clear of all liens, pledges, security interests,
encumbrances, restrictions, subscriptions, hypothecations, charges and claims of
any kind whatsoever.
(b) No consents of governmental and other regulatory agencies,
foreign or domestic, or of other parties are required to be received by or on
the part of the Pledgor to enable him to enter into and carry out this Agreement
and the transactions contemplated hereby.
(c) The Pledgor has the power to enter into this Agreement and
to carry out his obligations hereunder. This Agreement constitutes the valid and
binding obligation of the Pledgor, and is enforceable in accordance with its
terms.
(d) Neither the execution and delivery of this Agreement nor
compliance by the Pledgor with any of the provisions hereof nor the consummation
of the transactions contemplated hereby will violate or, alone or with notice or
the passage of time, result in the material breach or termination of, or
otherwise give any contracting party the right to terminate, or declare a
default under, the terms of any agreement, understanding or arrangement to which
the Pledgor is a party or by which he or his assets or properties may be bound.
5. COVENANTS.
(a) The Pledgor hereby covenants that from and after the date
hereof and until the Obligations shall have been satisfied in full:
(i) The Pledgor will not grant, create, incur, assume
or suffer to exist any Lien
in the Collateral (except for the Lien created hereby).
(ii) The Pledgor will defend the Pledgee's right,
title, and security interest in and to the Collateral against the claims of any
person, firm, corporation or other entity.
(iii) The Pledgor shall at any time and from time to
time, upon the written request of the Pledgee, execute and deliver such other
instruments and documents and do such further acts and things as the Pledgee
may reasonably request in order to effect the purposes of this Agreement.
2
<PAGE>
(b) The Pledgee's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise, shall be to deal with it in the same
manner as the Pledgee deals with similar securities and property for its own
account.
6. DEFAULT. (a) In the event that the Pledgor fails to pay to the
Pledgee any Obligation when due or there shall otherwise occur an Event of
Default (as defined in the Note) ("Default"), the Pledgee shall have all of the
rights and remedies afforded to secured parties with respect to the Collateral
as set forth in the Code as well as all other rights and remedies granted in the
Note and this Agreement. Without limiting the generality of the foregoing, the
Pledgee, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, upon such terms and conditions and at such prices as it
may deem advisable, for cash or on credit or for future delivery without
assumption of any credit risk. The Pledgee shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold. The
Pledgee shall apply any proceeds from time to time held by it and the net
proceeds of any such sale or other disposition, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Pledgee hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of counsel to the
Pledgee, to the satisfaction in whole or in part of the Obligations, in such
order as the Pledgee may elect and only after such application and after the
payment by the Pledgee of any other amount required by any provision of law,
including, without limitation, Section 9-504 (1)(c) of the Code, need the
Pledgee account for the surplus, if any, to the Pledgor. To the extent permitted
by applicable law, the Pledgor waives all claims, damages and demands he may
acquire against the Pledgee arising out of the lawful exercise by it of any
rights hereunder. Neither the Pledgee nor any of its respective directors,
officers, employees or agents shall be liable for failure to sell or otherwise
dispose of the Collateral or for any delay in doing so. If any notice of a
proposed sale or other disposition of the Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least ten (10)
days before such sale or other disposition. In any event, notice of a proposed
sale or other disposition shall be given at least ten (10) days before such sale
or other disposition to the Pledgor and Abraham Weinzimer.
The Pledgor recognizes that the Pledgee may be unable to
effect a public sale of any or all the Collateral by reason of certain
restrictions contained in the Securities Act of 1933, as amended, and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges and agrees that any such
3
<PAGE>
private sale may result in prices and other terms less favorable than if such
sale were a public sale and agrees that any such private sale under such
circumstances shall not be evidence that it has been made in other than a
commercially reasonable manner.
The Pledgor agrees to use his best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this section valid and binding
and in compliance with any and all other applicable requirements of law.
(b) The rights of the Pledgee hereunder shall not be
conditioned or contingent upon the pursuit by the Pledgee of any right or remedy
against the Pledgor, any other person which may be or become liable in respect
of all or any part of the Obligations or against any collateral security
therefor, guarantee therefor or right of offset with respect thereto. Neither
the Pledgee nor any of its affiliates or representatives shall be liable for any
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so, nor shall the Pledgee be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Pledgor or any
other person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
7. TERMINATION OF AGREEMENT. Upon (i) the Pledgor's satisfaction of the
Obligations in full (at which time the Pledgee shall redeliver the Pledged
Certificate and accompanying Stock Powers to the Pledgor), or (ii) the
conclusion of the actions contemplated by Section 6 hereof, this Agreement shall
thereupon terminate.
8. DEFINED TERMS. The following terms shall have the following
meanings:
(a) "Code" means the Uniform Commercial Code from time to time
in effect in the State of New York.
(b) "Collateral" means the Pledged Shares and all Proceeds.
(c) "Pledged Shares" means four hundred fifty thousand
(450,000) shares of Common Stock of the Pledgee, together with any and all
shares, stock certificates, options or rights of any nature whatsoever that may
be issued or granted to the Pledgor with regard thereto, in substitution or
replacement thereof, as a conversion thereof, in exchange therefor or otherwise
in respect thereof.
(d) "Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the Code on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from the Pledged
Shares, collections thereon and distributions with respect thereto.
9. MISCELLANEOUS.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
4
<PAGE>
(b) This Agreement contains the entire agreement and
understanding between the parties in respect of the subject matter hereof, and
cannot be modified, changed, discharged or terminated except by an instrument in
writing, signed by the party against whom enforcement of any modification,
change, discharge or termination is sought.
(c) A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any other breach of the
same or any other term or condition.
(d) This Agreement will be construed and governed in
accordance with the laws of the State of New York, excluding choice of law rules
thereof.
(e) All notices or other communications required or permitted
hereunder shall be sufficiently given if delivered by hand, or sent by certified
mail, return receipt requested, postage prepaid, facsimile transmission or
overnight mail or courier, addressed as follows:
If to the Pledgor:
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
with a copy to:
Weil & Kestenbaum
42-40 Bell Boulevard
Bayside, New York 11361
Attention: Alan Kestenbaum, Esq.
Telecopier Number: (718) 281-0850
If to the Pledgee:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Chairman of the Board
Telecopier Number: (516) 296-7111
5
<PAGE>
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred Skolnik, Esq.
Telecopier Number: (516) 296-7111
(f) The Pledgor waives any and all notice of the extension or
modification of the terms of the Note.
(g) In the event that the Collateral or any portion thereof is
released to the Pledgor and any payments of, or proceeds of any security for,
the Obligations, or any part thereof, are subsequently invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then the Pledgor shall redeliver the
Collateral and Stock Powers to the Pledgee and, until so redelivered, shall hold
the Collateral and Stock Powers as agent of, and in trust for, the Pledgee.
(h) If any provision hereof is declared to be invalid and
unenforceable, then, to the fullest extent permitted by law, the other
provisions hereof shall remain in full force and effect and shall be liberally
construed in favor of the Pledgee in order to carry out the intentions of the
parties hereto as nearly as may be possible.
(i) Each party acknowledges that he or it has been represented
by counsel in connection with this Agreement. Accordingly, any rule or law or
any legal decision that would require the interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived by the parties. The provisions of this
Agreement shall be interpreted in a reasonable manner to give effect to the
intent of the parties hereto.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
/s/ Kevin Lang
--------------------------------
Kevin Lang
DCAP GROUP, INC.
By:/s/Morton L. Certilman
-----------------------------
Morton L. Certilman,
Chairman of the Board
7
February 25, 1999
$114,000
PROMISSORY NOTE
FOR VALUE RECEIVED, ABRAHAM WEINZIMER (the "Maker"), having an address
as indicated under his name, hereby promises to pay to the order of DCAP GROUP,
INC. (formerly EXTECH Corporation), a Delaware corporation (the "Payee"), at 90
Merrick Avenue, East Meadow, New York or at such other place as the holder
hereof may from time to time designate in writing, in immediately available New
York funds, the principal sum of ONE HUNDRED FOURTEEN THOUSAND DOLLARS
($114,000), together with interest on the outstanding principal balance from the
date hereof at the rate of six percent (6%) per annum. The principal amount of
this Note, together with accrued interest thereon, shall be payable in six (6)
equal annual installments of principal and interest, commencing on April 15,
2001 and continuing on the first day of April of each subsequent year through
April 15, 2006, in such annual amount as shall be necessary to self- amortize
this Note by April 15, 2006; provided, however, that the amounts due under this
Note shall be payable sooner to the extent of any proceeds received by the Maker
from the sale or other disposition of any shares of Common Stock of the Payee on
or after the date hereof (the proceeds being immediately payable to the Payee).
The payment of all amounts due under this Note is secured by a pledge
of 570,000 shares of Common Stock of the Payee owned by the Maker pursuant to a
Pledge Agreement of even date between the Maker and the Payee (the "Pledge
Agreement").
In the event (a) the Maker shall (i) fail to make any payment due
hereunder and such failure shall continue unremedied for a period of ten (10)
days following the date of written notice of default; (ii) admit in writing his
inability to pay his debts as they mature; (iii) make a general assignment for
the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file
a voluntary petition in bankruptcy or a petition or an answer seeking an
arrangement with creditors; (vi) take advantage of any bankruptcy, insolvency or
readjustment of debt law or statute or file an answer admitting the material
allegations of a petition filed against him in any proceeding under any such
law; or (vii) have entered against him a court order approving a petition filed
against him under the Federal Bankruptcy Act; or (b) there shall be a breach of
any representation, warranty, covenant or other agreement set forth in the
Pledge Agreement and such breach shall continue unremedied for a period of
fifteen (15) days following the date of written notice thereof, then and in each
and every such event (an "Event of Default"), the Payee may, by written notice
to the Maker, declare the entire unpaid principal amount of this Note then
outstanding plus accrued interest to be forthwith due and payable whereupon the
same shall become forthwith due and payable.
The Maker may prepay the principal amount of this Note, in whole or in
part, from time to time, without premium or penalty, provided that the Maker
pays all interest accrued with regard to
<PAGE>
the principal prepaid to the date of prepayment.
If the Maker shall fail to pay when due, whether by acceleration or
otherwise, all or any portion of the principal amount hereof, any such unpaid
amount shall bear interest for each day from the date it was so due until paid
in full at the rate of sixteen percent (16%) per annum, payable on demand.
Notwithstanding anything to the contrary contained in this Note, the
rate of interest payable on this Note shall never exceed the maximum rate of
interest permitted under applicable law.
This Note may not be waived, changed, modified or discharged orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of any agent or attorneys for collection upon default or
maturity, the Maker agrees to pay, in addition to all other amounts due and
payable hereunder, all reasonable costs and expenses of collection or attempting
to collect this Note, including reasonable attorneys' fees.
The Maker and any endorsers hereof, for themselves and their respective
representatives, successors and assigns, expressly (a) waive presentment,
protest, notice of dishonor, notice of non-payment, notice of maturity, notice
of protest, diligence in collection, and the benefit of any applicable
exemptions, including, but not limited to, exemptions claimed under insolvency
laws, and (b) consent that the Payee may release or surrender, exchange or
substitute any property or other collateral or security now held or which may
hereafter be held as security for the payment of this Note, and/or may release
any guarantor, and/or may extend the time for payment and/or otherwise modify
the terms of payment of any part or the whole of the debt evidenced hereby.
Any notice, demand or request relating to any matter set forth herein
shall be in writing and shall be deemed effective when hand delivered, when
mailed, postage prepaid, by registered or certified mail, return receipt
requested, or by a nationally recognized overnight mail or courier service, or
when sent by facsimile transmission (with transmission confirmation) to any
party hereto at its address stated herein or at such other address of which it
shall have notified the party giving such notice in writing as aforesaid.
The Payee shall be entitled to assign all or any portion of its right,
title and interest in and to this Note at its sole discretion without notice to
the Maker, provided that the Maker shall continue to make payments required
hereunder to the Payee until he has received notice of change of payee for
payments as provided herein.
Notwithstanding any other provision of this Note, all payments made
hereunder shall be
2
<PAGE>
applied first to payment of sums payable hereunder other than interest and
principal, secondly, interest on the principal balance outstanding hereunder
from time to time, and thirdly to principal.
The Maker acknowledges and agrees that the obligations under this Note
are unconditional and are not subject to any defense, counterclaim, or right of
offset or setoff.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, excluding conflict of law principles thereof.
The Maker acknowledges that he has been represented by counsel in
connection with this Note. Accordingly, any rule or law or any legal decision
that would require the interpretation of any claimed ambiguities in this Note
against the party that drafted it has no application and is expressly waived by
the Maker. The provisions of this Note shall be interpreted in a reasonable
manner to give effect to the intent of the Maker and the Payee.
/s/ Abraham Weinzimer
---------------------
Abraham Weinzimer
Address: 2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
3
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
On February 25, 1999 before me personally came Abraham
Weinzimer to me known, and known to be the individual described in, and who
executed the foregoing Note, and duly acknowledged to me that he executed the
same.
Notary Public
4
PLEDGE AGREEMENT, dated February 25, 1999, by and between
ABRAHAM WEINZIMER (the "Pledgor") and DCAP GROUP, INC. (formerly EXTECH
Corporation), a Delaware corporation (the "Pledgee").
WHEREAS, simultaneously herewith, the Pledgor is purchasing
from the Pledgee four hundred seventy-five thousand (475,000) shares of Common
Stock of the Pledgee and, in partial consideration therefor, is executing and
delivering to the Pledgee a Promissory Note of even date in the principal amount
of One Hundred Fourteen Thousand Dollars ($114,000) (the "Note").
WHEREAS, the Pledgee desires, and the Pledgor is willing, to
secure performance of the Note.
WHEREAS, certain capitalized terms used herein are defined in
Section 8 hereof.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLEDGE. The Pledgor hereby grants to the Pledgee, as security for
the performance by the Pledgor of all of his obligations under the Note (the
"Obligations"), a valid and binding first security interest in the Collateral
(as hereinafter defined). The Pledgor has delivered simultaneously herewith to
the Pledgee, and the Pledgee hereby acknowledges receipt of, a certificate
evidencing the Pledged Shares registered in the name of the Pledgor (the
"Pledged Certificate"), accompanied by appropriate stock powers endorsed by the
Pledgor (the "Stock Powers").
2. TERM. This Agreement shall continue in effect until terminated in
accordance with Section 7 hereof.
3. SHARE RIGHTS; CASH DIVIDENDS.
(a) In the event of any change in the Pledged Shares during
the term of this Agreement by reason of any stock dividend, stock split-up,
reverse split, recapitalization, combination, reclassification, exchange of
shares, merger, consolidation or the like, all new, substituted, or additional
stock, or other securities, issued by reason of any such change (the "Adjusted
Shares") (the Pledged Shares and the Adjusted Shares are hereinafter referred to
collectively as the "Shares") shall be retained by or delivered to, as the case
may be, and held by the Pledgee under the terms of this Agreement in the same
manner as the Pledged Shares originally pledged hereunder.
(b) Unless and until the occurrence of a Default (as
hereinafter defined), the Pledgor shall have the right to vote the Shares. Upon
the occurrence of a Default, the Shares shall be registered in the name of the
Pledgee and the Pledgee shall have all incidents of ownership thereof.
(c) Provided that no Default has occurred, any and all cash
dividends paid in respect of the Shares shall be paid to the Pledgor; provided,
however, that, in any event, any extraordinary distributions made in respect of
the Shares shall be retained by the Pledgee and held by it in accordance with
the terms hereof.
K:\WPDOC\CORP\EXTECH\DCAP\CLOSING\Pledge\Weinzimer114.299
1
<PAGE>
4. REPRESENTATIONS. The Pledgor hereby represents and warrants to the
Pledgee that:
(a) The Pledgor is the sole record and beneficial owner of the
Pledged Shares, free and clear of all liens, pledges, security interests,
encumbrances, restrictions, subscriptions, hypothecations, charges and claims of
any kind whatsoever.
(b) No consents of governmental and other regulatory agencies,
foreign or domestic, or of other parties are required to be received by or on
the part of the Pledgor to enable him to enter into and carry out this Agreement
and the transactions contemplated hereby.
(c) The Pledgor has the power to enter into this Agreement and
to carry out his obligations hereunder. This Agreement constitutes the valid and
binding obligation of the Pledgor, and is enforceable in accordance with its
terms.
(d) Neither the execution and delivery of this Agreement nor
compliance by the Pledgor with any of the provisions hereof nor the consummation
of the transactions contemplated hereby will violate or, alone or with notice or
the passage of time, result in the material breach or termination of, or
otherwise give any contracting party the right to terminate, or declare a
default under, the terms of any agreement, understanding or arrangement to which
the Pledgor is a party or by which he or his assets or properties may be bound.
5. COVENANTS.
(a) The Pledgor hereby covenants that from and after the date
hereof and until the Obligations shall have been satisfied in full:
(i) The Pledgor will not grant, create, incur, assume
or suffer to exist any Lien in the Collateral (except for the Lien created
hereby).
(ii) The Pledgor will defend the Pledgee's right,
title, and security interest in and to the Collateral against the claims of any
person, firm, corporation or other entity.
(iii) The Pledgor shall at any time and from time to
time, upon the written request of the Pledgee, execute and deliver such other
instruments and documents and do such further acts and things as the Pledgee
may reasonably request in order to effect the purposes of this Agreement.
(b) The Pledgee's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise, shall be to deal with it in the same
manner as the Pledgee deals with similar securities and property for its own
account.
2
<PAGE>
6. DEFAULT. (a) In the event that the Pledgor fails to pay to the
Pledgee any Obligation when due or there shall otherwise occur an Event of
Default (as defined in the Note) ("Default"), the Pledgee shall have all of the
rights and remedies afforded to secured parties with respect to the Collateral
as set forth in the Code as well as all other rights and remedies granted in the
Note and this Agreement. Without limiting the generality of the foregoing, the
Pledgee, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, upon such terms and conditions and at such prices as it
may deem advisable, for cash or on credit or for future delivery without
assumption of any credit risk. The Pledgee shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold. The
Pledgee shall apply any proceeds from time to time held by it and the net
proceeds of any such sale or other disposition, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Pledgee hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of counsel to the
Pledgee, to the satisfaction in whole or in part of the Obligations, in such
order as the Pledgee may elect and only after such application and after the
payment by the Pledgee of any other amount required by any provision of law,
including, without limitation, Section 9-504 (1)(c) of the Code, need the
Pledgee account for the surplus, if any, to the Pledgor. To the extent permitted
by applicable law, the Pledgor waives all claims, damages and demands he may
acquire against the Pledgee arising out of the lawful exercise by it of any
rights hereunder. Neither the Pledgee nor any of its respective directors,
officers, employees or agents shall be liable for failure to sell or otherwise
dispose of the Collateral or for any delay in doing so. If any notice of a
proposed sale or other disposition of the Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least ten (10)
days before such sale or other disposition. In any event, notice of a proposed
sale or other disposition shall be given at least ten (10) days before such sale
or other disposition to the Pledgor and Kevin Lang. The Pledgor shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay all of the Obligations and any and all
costs and expenses of every kind incurred by the Pledgee with respect to the
collection of such deficiency, including, without limitation, all reasonable
fees and disbursements of any attorneys employed by the Pledgee.
The Pledgor recognizes that the Pledgee may be unable to
effect a public sale of any or all the Collateral by reason of certain
restrictions contained in the Securities Act of 1933, as amended, and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale
3
<PAGE>
and agrees that any such private sale under such circumstances shall not be
evidence that it has been made in other than a commercially reasonable manner.
The Pledgor agrees to use his best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this section valid and binding
and in compliance with any and all other applicable requirements of law.
(b) The rights of the Pledgee hereunder shall not be
conditioned or contingent upon the pursuit by the Pledgee of any right or remedy
against the Pledgor, any other person which may be or become liable in respect
of all or any part of the Obligations or against any collateral security
therefor, guarantee therefor or right of offset with respect thereto. Neither
the Pledgee nor any of its affiliates or representatives shall be liable for any
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so, nor shall the Pledgee be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Pledgor or any
other person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
7. TERMINATION OF AGREEMENT; PARTIAL RELEASE. (a) Upon (i) the
Pledgor's satisfaction of the Obligations in full (at which time the Pledgee
shall redeliver the Pledged Certificate and accompanying Stock Powers to the
Pledgor), or (ii) the conclusion of the actions contemplated by Section 6
hereof, this Agreement shall thereupon terminate.
(b) Provided that no Default has occurred and is continuing,
for each one dollar ($1.00) of principal amount of the Note, together with
accrued interest thereon, that is paid to the Pledgee, five (5) Pledged Shares
shall be released from the pledge created hereby and redelivered to the Pledgor.
8. DEFINED TERMS. The following terms shall have the following
meanings:
(a) "Code" means the Uniform Commercial Code from time to time
in effect in the State of New York.
(b) "Collateral" means the Pledged Shares and all Proceeds.
(c) "Pledged Shares" means five hundred seventy thousand
(570,000) shares of Common Stock of the Pledgee, together with any and all
shares, stock certificates, options or rights of any nature whatsoever that may
be issued or granted to the Pledgor with regard thereto, in substitution or
replacement thereof, as a conversion thereof, in exchange therefor or otherwise
in respect thereof.
(d) "Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the Code on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from the Pledged
Shares, collections thereon and distributions with respect thereto.
4
<PAGE>
9. MISCELLANEOUS.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
(b) This Agreement contains the entire agreement and
understanding between the parties in respect of the subject matter hereof, and
cannot be modified, changed, discharged or terminated except by an instrument in
writing, signed by the party against whom enforcement of any modification,
change, discharge or termination is sought.
(c) A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any other breach of the
same or any other term or condition.
(d) This Agreement will be construed and governed in
accordance with the laws of the State of New York, excluding choice of law rules
thereof.
(e) All notices or other communications required or permitted
hereunder shall be sufficiently given if delivered by hand, or sent by certified
mail, return receipt requested, postage prepaid, facsimile transmission or
overnight mail or courier, addressed as follows:
If to the Pledgor:
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
with a copy to:
Weil & Kestenbaum
42-40 Bell Boulevard
Bayside, New York 11361
Attention: Alan Kestenbaum, Esq.
Telecopier Number: (718) 281-0850
If to the Pledgee:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Chairman of the Board
Telecopier Number: (516) 296-7111
5
<PAGE>
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred Skolnik, Esq.
Telecopier Number: (516) 296-7111
(f) The Pledgor waives any and all notice of the extension or
modification of the terms of the Note.
(g) In the event that the Collateral or any portion thereof is
released to the Pledgor and any payments of, or proceeds of any security for,
the Obligations, or any part thereof, are subsequently invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then the Pledgor shall redeliver the
Collateral and Stock Powers to the Pledgee and, until so redelivered, shall hold
the Collateral and Stock Powers as agent of, and in trust for, the Pledgee.
(h) If any provision hereof is declared to be invalid and
unenforceable, then, to the fullest extent permitted by law, the other
provisions hereof shall remain in full force and effect and shall be liberally
construed in favor of the Pledgee in order to carry out the intentions of the
parties hereto as nearly as may be possible.
(i) Each party acknowledges that he or it has been represented
by counsel in connection with this Agreement. Accordingly, any rule or law or
any legal decision that would require the interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived by the parties. The provisions of this
Agreement shall be interpreted in a reasonable manner to give effect to the
intent of the parties hereto.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
/s/ Abraham Weinzimer
------------------------------
Abraham Weinzimer
DCAP GROUP, INC.
By:/s/Morton L. Certilman
---------------------------
Morton L. Certilman,
Chairman of the Board
7
<PAGE>
February 25, 1999
$112,500
PROMISSORY NOTE
FOR VALUE RECEIVED, ABRAHAM WEINZIMER (the "Maker"), having an address
as indicated under his name, hereby promises to pay to the order of DCAP GROUP,
INC. (formerly EXTECH Corporation), a Delaware corporation (the "Payee"), at its
offices at 90 Merrick Avenue, East Meadow, New York 11554 or at such other place
as the holder hereof may from time to time designate in writing, in immediately
available New York funds, the principal sum of ONE HUNDRED TWELVE THOUSAND FIVE
HUNDRED DOLLARS ($112,500), together with interest on the outstanding principal
balance from the date hereof at the rate of six percent (6%) per annum. The
principal amount of this Note, together with accrued interest thereon, shall be
payable in six (6) equal annual installments of principal and interest,
commencing on April 15, 2001 and continuing on the first day of April of each
subsequent year through April 15, 2006, in such annual amount as shall be
necessary to self-amortize this Note by April 15, 2006; provided, however, that
the amounts due under this Note shall be payable sooner to the extent of any
proceeds received by the Maker from the sale or other disposition of any shares
of Common Stock of the Payee on or after the date hereof (the proceeds being
immediately payable to the Payee).
The Maker may pay any or all amounts due hereunder by delivery to the
Payee of certificates representing shares of Common Stock of the Payee duly
endorsed by the Maker or accompanied by stock powers duly executed by the Maker,
together with evidence of the payment of all transfer taxes in connection
therewith and a written notice that it is making payment under this Note by such
delivery. Any such shares of Common Stock of the Payee so delivered shall be
valued at the greater of (a) twenty-five cents ($.25) per share, subject to
adjustment for stock splits, reverse stock splits, stock dividends and like
recapitalizations that take effect after the date hereof or (b) the average
Market Price (as hereinafter defined) of the Payee's shares of Common Stock
during the twenty (20) trading days immediately preceding the date of delivery
of the shares. As used herein, the term "Market Price" shall mean the closing
selling price or, if not available, the mean of the closing bid and asked
prices, or, if not available, the mean of the highest bid and lowest asked
prices, of the shares of Common Stock of the Payee as reported by a national
securities exchange or The Nasdaq Stock Market ("Nasdaq") or, if the Payee's
shares of Common Stock are not listed on a national securities exchange or
Nasdaq, as reported by the NASD OTC Electronic Bulletin Board (the "Bulletin
Board'), or if the Payee's shares of Common Stock are not listed on the Bulletin
Board, as reported by the National Quotation Bureau, LLC, or other similar
organization if such organization is no longer reporting such information, as
the case may be.
The payment of all amounts due under this Note is secured by a pledge
of 450,000 shares of the Payee owned by the Maker pursuant to a Pledge Agreement
of even date between the Maker and the Payee (the "Pledge Agreement").
<PAGE>
In the event (a) the Maker shall (i) fail to make any payment due
hereunder and such failure shall continue unremedied for a period of ten (10)
days following the date of written notice of default; (ii) admit in writing his
inability to pay his debts as they mature; (iii) make a general assignment for
the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file
a voluntary petition in bankruptcy or a petition or an answer seeking an
arrangement with creditors; (vi) take advantage of any bankruptcy, insolvency or
readjustment of debt law or statute or file an answer admitting the material
allegations of a petition filed against him in any proceeding under any such
law; or (vii) have entered against him a court order approving a petition filed
against him under the Federal Bankruptcy Act; or (b) there shall be a breach of
any representation, warranty, covenant or other agreement set forth in the
Pledge Agreement and such breach shall continue unremedied for a period of
fifteen (15) days following the date of written notice thereof, then and in each
and every such event (an "Event of Default"), the Payee may, by written notice
to the Maker, declare the entire unpaid principal amount of this Note then
outstanding plus accrued interest to be forthwith due and payable whereupon the
same shall become forthwith due and payable.
The Maker may prepay the principal amount of this Note, in whole or in
part, from time to time, without premium or penalty, provided that the Maker
pays all interest accrued with regard to the principal prepaid to the date of
prepayment.
If the Maker shall fail to pay when due, whether by acceleration or
otherwise, all or any portion of the principal amount hereof, any such unpaid
amount shall bear interest for each day from the date it was so due until paid
in full at the rate of sixteen percent (16%) per annum, payable on demand.
Notwithstanding anything to the contrary contained in this Note, if an
Event of Default shall occur and any suit is brought hereunder, then any
judgment obtained in such suit may be enforced solely against the Collateral (as
such term is defined in the Pledge Agreement). Nothing contained in this
paragraph, however, shall be deemed to constitute a release or impairment of any
of the Payee's rights under the Pledge Agreement or the security interest
granted therein.
Notwithstanding anything to the contrary contained in this Note, the
rate of interest payable on this Note shall never exceed the maximum rate of
interest permitted under applicable law.
This Note may not be waived, changed, modified or discharged orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of any agent or attorneys for collection upon default or
maturity, the Maker agrees to pay, in addition to all other amounts due and
payable hereunder, all reasonable costs and expenses of collection or attempting
to collect this Note, including reasonable attorneys' fees.
2
<PAGE>
The Maker and any endorsers hereof, for themselves and their respective
representatives, successors and assigns, expressly (a) waive presentment,
protest, notice of dishonor, notice of non-payment, notice of maturity, notice
of protest, diligence in collection, and the benefit of any applicable
exemptions, including, but not limited to, exemptions claimed under insolvency
laws, and (b) consent that the Payee may release or surrender, exchange or
substitute any property or other collateral or security now held or which may
hereafter be held as security for the payment of this Note, and/or may release
any guarantor, and/or may extend the time for payment and/or otherwise modify
the terms of payment of any part or the whole of the debt evidenced hereby.
Any notice, demand or request relating to any matter set forth herein
shall be in writing and shall be deemed effective when hand delivered, when
mailed, postage prepaid, by registered or certified mail, return receipt
requested, or by a nationally recognized overnight mail or courier service, or
when sent by facsimile transmission (with transmission confirmation) to any
party hereto at its address stated herein or at such other address of which he
or it shall have notified the party giving such notice in writing as aforesaid.
The Payee shall be entitled to assign all or any portion of its right,
title and interest in and to this Note at its sole discretion without notice to
the Maker, provided that the Maker shall continue to make payments required
hereunder to the Payee until he has received notice of change of payee for
payments as provided herein.
Notwithstanding any other provision of this Note, all payments made
hereunder shall be applied first to payment of sums payable hereunder other than
interest and principal, secondly, interest on the principal balance outstanding
hereunder from time to time, and thirdly to principal.
The Maker acknowledges and agrees that the obligations under this Note
are unconditional and are not subject to any defense, counterclaim, or right of
offset or setoff.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, excluding conflict of law principles thereof.
The Maker acknowledges that he has been represented by counsel in
connection with this Note. Accordingly, any rule or law or any legal decision
that would require the interpretation of any claimed ambiguities in this Note
against the party that drafted it has no application and is expressly waived by
the Maker. The provisions of this Note shall be interpreted in a reasonable
manner to give effect to the intent of the Maker and the Payee.
/s/ Abraham Weinzimer
---------------------
Abraham Weinzimer
Address: 2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
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ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
On February 25, 1999 before me personally came Abraham
Weinzimer to me known, and known to be the individual described in, and who
executed the foregoing Note, and duly acknowledged to me that he executed the
same.
Notary Public
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PLEDGE AGREEMENT, dated February 25, 1999, by and between
ABRAHAM WEINZIMER (the "Pledgor") and DCAP GROUP, INC. (formerly EXTECH
Corporation), a Delaware corporation (the "Pledgee").
WHEREAS, simultaneously herewith, the Pledgee is loaning to
the Pledgor the sum of One Hundred Twelve Thousand Five Hundred Dollars
($112,500) (the "Loan") and the Pledgor is executing and delivering to the
Pledgee a Promissory Note of even date in such principal amount (the "Note").
WHEREAS, the proceeds of the Loan are being used by the
Pledgor to purchase the Pledged Shares (as hereinafter defined).
WHEREAS, the Pledgee desires, and the Pledgor is willing, to
secure performance of the Note.
WHEREAS, certain capitalized terms used herein are defined in
Section 8 hereof.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLEDGE. The Pledgor hereby grants to the Pledgee, as security for
the performance by the Pledgor of all of his obligations under the Note (the
"Obligations"), a valid and binding first security interest in the Collateral
(as hereinafter defined). The Pledgor has delivered simultaneously herewith to
the Pledgee, and the Pledgee hereby acknowledges receipt of, a certificate
evidencing the Pledged Shares registered in the name of the Pledgor (the
"Pledged Certificate"), accompanied by appropriate stock powers endorsed by the
Pledgor (the "Stock Powers").
2. TERM. This Agreement shall continue in effect until terminated in
accordance with Section 7 hereof.
3. SHARE RIGHTS; CASH DIVIDENDS.
(a) In the event of any change in the Pledged Shares during
the term of this Agreement by reason of any stock dividend, stock split-up,
reverse split, recapitalization, combination, reclassification, exchange of
shares, merger, consolidation or the like, all new, substituted, or additional
stock, or other securities, issued by reason of any such change (the "Adjusted
Shares") (the Pledged Shares and the Adjusted Shares are hereinafter referred to
collectively as the "Shares") shall be retained by or delivered to, as the case
may be, and held by the Pledgee under the terms of this Agreement in the same
manner as the Pledged Shares originally pledged hereunder.
(b) Unless and until the occurrence of a Default (as
hereinafter defined), the Pledgor shall have the right to vote the Shares. Upon
the occurrence of a Default, the Shares shall be registered in the name of the
Pledgee and the Pledgee shall have all incidents of ownership thereof.
K:\WPDOC\CORP\EXTECH\DCAP\CLOSING\Pledge\Weinzimer112.299
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<PAGE>
(c) Provided that no Default has occurred, any and all cash
dividends paid in respect of the Shares shall be paid to the Pledgor; provided,
however, that, in any event, any extraordinary distributions made in respect of
the Shares shall be retained by the Pledgee and held by it in accordance with
the terms hereof.
4. REPRESENTATIONS. The Pledgor hereby represents and warrants to the
Pledgee that:
(a) The Pledgor is the sole record and beneficial owner of the
Pledged Shares, free and clear of all liens, pledges, security interests,
encumbrances, restrictions, subscriptions, hypothecations, charges and claims of
any kind whatsoever.
(b) No consents of governmental and other regulatory agencies,
foreign or domestic, or of other parties are required to be received by or on
the part of the Pledgor to enable him to enter into and carry out this Agreement
and the transactions contemplated hereby.
(c) The Pledgor has the power to enter into this Agreement and
to carry out his obligations hereunder. This Agreement constitutes the valid and
binding obligation of the Pledgor, and is enforceable in accordance with its
terms.
(d) Neither the execution and delivery of this Agreement nor
compliance by the Pledgor with any of the provisions hereof nor the consummation
of the transactions contemplated hereby will violate or, alone or with notice or
the passage of time, result in the material breach or termination of, or
otherwise give any contracting party the right to terminate, or declare a
default under, the terms of any agreement, understanding or arrangement to which
the Pledgor is a party or by which he or his assets or properties may be bound.
5. COVENANTS.
(a) The Pledgor hereby covenants that from and after the date
hereof and until the Obligations shall have been satisfied in full:
(i) The Pledgor will not grant, create, incur, assume
or suffer to exist any Lien
in the Collateral (except for the Lien created hereby).
(ii) The Pledgor will defend the Pledgee's right,
title, and security interest in and to the Collateral against the claims of any
person, firm, corporation or other entity.
(iii) The Pledgor shall at any time and from time to
time, upon the written request of the Pledgee, execute and deliver such other
instruments and documents and do such further acts and things as the Pledgee
may reasonably request in order to effect the purposes of this Agreement.
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<PAGE>
(b) The Pledgee's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise, shall be to deal with it in the same
manner as the Pledgee deals with similar securities and property for its own
account.
6. DEFAULT. (a) In the event that the Pledgor fails to pay to the
Pledgee any Obligation when due or there shall otherwise occur an Event of
Default (as defined in the Note) ("Default"), the Pledgee shall have all of the
rights and remedies afforded to secured parties with respect to the Collateral
as set forth in the Code as well as all other rights and remedies granted in the
Note and this Agreement. Without limiting the generality of the foregoing, the
Pledgee, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, upon such terms and conditions and at such prices as it
may deem advisable, for cash or on credit or for future delivery without
assumption of any credit risk. The Pledgee shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold. The
Pledgee shall apply any proceeds from time to time held by it and the net
proceeds of any such sale or other disposition, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Pledgee hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of counsel to the
Pledgee, to the satisfaction in whole or in part of the Obligations, in such
order as the Pledgee may elect and only after such application and after the
payment by the Pledgee of any other amount required by any provision of law,
including, without limitation, Section 9-504 (1)(c) of the Code, need the
Pledgee account for the surplus, if any, to the Pledgor. To the extent permitted
by applicable law, the Pledgor waives all claims, damages and demands he may
acquire against the Pledgee arising out of the lawful exercise by it of any
rights hereunder. Neither the Pledgee nor any of its respective directors,
officers, employees or agents shall be liable for failure to sell or otherwise
dispose of the Collateral or for any delay in doing so. If any notice of a
proposed sale or other disposition of the Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least ten (10)
days before such sale or other disposition. In any event, notice of a proposed
sale or other disposition shall be given at least ten (10) days before such sale
or other disposition to the Pledgor and Kevin Lang.
The Pledgor recognizes that the Pledgee may be unable to
effect a public sale of any or all the Collateral by reason of certain
restrictions contained in the Securities Act of 1933, as amended, and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges and agrees that any such
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<PAGE>
private sale may result in prices and other terms less favorable than if such
sale were a public sale and agrees that any such private sale under such
circumstances shall not be evidence that it has been made in other than a
commercially reasonable manner.
The Pledgor agrees to use his best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this section valid and binding
and in compliance with any and all other applicable requirements of law.
(b) The rights of the Pledgee hereunder shall not be
conditioned or contingent upon the pursuit by the Pledgee of any right or remedy
against the Pledgor, any other person which may be or become liable in respect
of all or any part of the Obligations or against any collateral security
therefor, guarantee therefor or right of offset with respect thereto. Neither
the Pledgee nor any of its affiliates or representatives shall be liable for any
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so, nor shall the Pledgee be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Pledgor or any
other person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
7. TERMINATION OF AGREEMENT. Upon (i) the Pledgor's satisfaction of the
Obligations in full (at which time the Pledgee shall redeliver the Pledged
Certificate and accompanying Stock Powers to the Pledgor), or (ii) the
conclusion of the actions contemplated by Section 6 hereof, this Agreement shall
thereupon terminate.
8. DEFINED TERMS. The following terms shall have the following
meanings:
(a) "Code" means the Uniform Commercial Code from time to time
in effect in the State of New York.
(b) "Collateral" means the Pledged Shares and all Proceeds.
(c) "Pledged Shares" means four hundred fifty thousand
(450,000) shares of Common Stock of the Pledgee, together with any and all
shares, stock certificates, options or rights of any nature whatsoever that may
be issued or granted to the Pledgor with regard thereto, in substitution or
replacement thereof, as a conversion thereof, in exchange therefor or otherwise
in respect thereof.
(d) "Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the Code on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from the Pledged
Shares, collections thereon and distributions with respect thereto.
9. MISCELLANEOUS.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
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<PAGE>
(b) This Agreement contains the entire agreement and
understanding between the parties in respect of the subject matter hereof, and
cannot be modified, changed, discharged or terminated except by an instrument in
writing, signed by the party against whom enforcement of any modification,
change, discharge or termination is sought.
(c) A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any other breach of the
same or any other term or condition.
(d) This Agreement will be construed and governed in
accordance with the laws of the State of New York, excluding choice of law rules
thereof.
(e) All notices or other communications required or permitted
hereunder shall be sufficiently given if delivered by hand, or sent by certified
mail, return receipt requested, postage prepaid, facsimile transmission or
overnight mail or courier, addressed as follows:
If to the Pledgor:
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
with a copy to:
Weil & Kestenbaum
42-40 Bell Boulevard
Bayside, New York 11361
Attention: Alan Kestenbaum, Esq.
Telecopier Number: (718) 281-0850
If to the Pledgee:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Chairman of the Board
Telecopier Number: (516) 296-7111
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<PAGE>
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred Skolnik, Esq.
Telecopier Number: (516) 296-7111
(f) The Pledgor waives any and all notice of the extension or
modification of the terms of the Note.
(g) In the event that the Collateral or any portion thereof is
released to the Pledgor and any payments of, or proceeds of any security for,
the Obligations, or any part thereof, are subsequently invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then the Pledgor shall redeliver the
Collateral and Stock Powers to the Pledgee and, until so redelivered, shall hold
the Collateral and Stock Powers as agent of, and in trust for, the Pledgee.
(h) If any provision hereof is declared to be invalid and
unenforceable, then, to the fullest extent permitted by law, the other
provisions hereof shall remain in full force and effect and shall be liberally
construed in favor of the Pledgee in order to carry out the intentions of the
parties hereto as nearly as may be possible.
(i) Each party acknowledges that he or it has been represented
by counsel in connection with this Agreement. Accordingly, any rule or law or
any legal decision that would require the interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived by the parties. The provisions of this
Agreement shall be interpreted in a reasonable manner to give effect to the
intent of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
/s/ Abraham Weinzimer
------------------------------
Abraham Weinzimer
DCAP GROUP, INC.
By:/s/ Morton L. Certilman
---------------------------
Morton L. Certilman,
Chairman of the Board
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<PAGE>
EMPLOYMENT AGREEMENT, dated as of February 25, 1999, by and
between DCAP GROUP, INC. (formerly EXTECH Corporation), a Delaware corporation
(the "Company"), and MORTON L. CERTILMAN (the "Employee").
RECITALS
WHEREAS, the Company and the Employee desire to enter into an
employment agreement which will set forth the terms and conditions upon which
the Employee shall be employed by the Company and upon which the Company shall
compensate the Employee.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants hereinafter set forth, the parties hereto have agreed, and do
hereby agree, as follows:
1. EMPLOYMENT; TERM
1.1 (a) The Company will employ the Employee in its business,
and the Employee will work for the Company therein, as its Chairman of the Board
and Chairman of the Company's Audit Committee and Finance Committee for a term
commencing as of the date hereof and terminating on the fifth anniversary of the
date hereof (the "Fifth Anniversary Date") (the "Initial Term"), except that the
term of this Agreement shall continue for an additional three (3) years (the
"Extended Term") unless, at least ninety (90) days prior to the Fifth
Anniversary Date, the Company, by vote of at least seventy-five percent (75%)
of all of the members of its Board of Directors (including, for purposes of
determining the number of members of the Board, the Employee, if a member),
notifies the Employee of its desire not to extend the term of this Agreement
(the "Non-Extension Notice"). The term of this Agreement, as it may be extended,
is hereinafter referred to as the "Employment Period".
(b) The Employee's employment may be terminated by
the Company at any time during the Employment Period upon written notice for
"cause". The Company agrees that it will not terminate the Employee's employment
for "cause" unless a majority of all of the members of its Board of Directors
(including, for purposes of determining the number of members of the Board, the
Employee, if a member) shall have approved such action. The Company agrees that
it will not terminate the Employee's employement other than for "cause" unless
at least seventy-five percent (75%) of all of the members of the Board of
Directors (including, for purposes of determining the number of members of the
Board, the Employee, if a member) shall have approved such action. As used in
this Agreement, "cause" shall mean the Employee's commission of any act in the
performance of his duties constituting common law fraud, a felony or other gross
malfeasance of duty, the Employee's commission of any act involving moral
turpitude, any material misrepresentation by the Employee (including, without
limitation, a breach of any representation set forth in Paragraph 13.1 hereof),
any breach of any material covenant on the Employee's part herein set forth, or
the Employee's engagement in misconduct which is materially injurious to the
Company or its subsidiaries.
1.2 Unless sooner terminated as provided for in this
Agreement, at the end of the Employment Period (the "Expiration Date"), the
Employee's employment with the Company shall terminate. Upon termination of the
Employee's employment with the Company for any reason whatsoever, he shall be
deemed to have resigned his positions as an officer and director of the Company
and as an employee, officer and director of each of the Company's subsidiaries.
<PAGE>
2. DUTIES
2.1 During the Employment Period, the Employee shall serve as
the Company's Chairman of the Board and Chairman of the Company's Audit
Committee and Finance Committee, and shall perform duties of an executive
character consisting of administrative and managerial responsibilities on behalf
of the Company and such further duties of an executive character as shall, from
time to time, be delegated or assigned to him by the Board of Directors of the
Company consistent with the Employee's position.
3. DEVOTION OF TIME
3.1 During the Employment Period, the Employee need only
perform such part-time services as are reasonably necessary for him to fulfill
his responsibilities hereunder as Chairman of the Board; shall devote his best
efforts, energy and skill to the services of the Company and the promotion of
its interests; and shall not take part in activities detrimental to the best
interests of the Company.
4. COMPENSATION
4.1 For all services to be rendered by the Employee during the
Employment Period and in consideration of the Employee's representations and
covenants set forth in this Agreement, the Employee shall be entitled to receive
from the Company compensation as set forth herein.
4.2 During the Employment Period, the Employee shall be
entitled to receive a salary at the rate of $125,000 per annum. The Employee
shall be entitled to such additional compensation as shall be determined from
time to time by the Board of Directors of the Company in its sole discretion.
All amounts due hereunder shall be payable in accordance with the Company's
standard payroll practices.
5. REIMBURSEMENT OF EXPENSES
5.1 The Company shall pay directly, or reimburse the Employee
for, all reasonable and necessary expenses and disbursements incurred by the
Employee for and on behalf of the Company in the performance of his duties
during the Employment Period, including, without limitation, reasonable and
necessary expenses incurred by the Employee for and on behalf of the Company in
the performance of his duties during the Employment Period for (a) client
entertainment and the use of a cellular telephone and beeper, and (b) food,
lodging and transportation if he is required to perform any of his duties away
from his primary place of residence.
5.2 The Employee shall submit to the Company, not less than
once in each calendar month, reports of such expenses and other disbursements in
form normally used by the Company and receipts with respect thereto and the
Company's obligations under Paragraph 5.1 hereof shall be subject to compliance
therewith.
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<PAGE>
6. DISABILITY; INSURANCE
6.1 If, during the Employment Period, the Employee, in the
opinion of a majority of all of the members of the Board of Directors of the
Company (excluding the Employee), as confirmed by competent medical evidence,
shall become physically or mentally incapacitated to perform his duties for the
Company hereunder ("Disabled") for a continuous period, then for the first six
(6) months of such period he shall receive his full salary. In no event,
however, shall the Employee be entitled to receive any payments under this
Paragraph 6.1 beyond the expiration or termination date of this Agreement.
Effective with the date of his resumption of full employment, the Employee shall
be re-entitled to receive his full salary. If such illness or other incapacity
shall endure for a continuous period of at least nine (9) months or for at least
two hundred fifty (250) business days during any eighteen (18) month period, the
Company shall have the right, by written notice, to terminate the Employee's
employment hereunder as of a date (not less than thirty (30) days after the date
of the sending of such notice) to be specified in such notice. The Employee
agrees to submit himself for appropriate medical examination to a physician of
the Company's designation as necessary for purposes of this Paragraph 6.1.
6.2 The obligations of the Company under this Paragraph 6 may
be satisfied, in whole or in part, by payments to the Employee under disability
insurance provided by the Company.
6.3 Notwithstanding the foregoing, in the event, at the time
of any apparent incapacity, the Company has in effect a disability policy with
respect to the Employee (or, if not with respect to the Employee, then with
respect to any executive officer of the Company), the Employee shall be
considered Disabled for purposes of Paragraph 6.1 only if he is (or the
executive officer, had he had the apparent incapacity, would be) considered
disabled for purposes of the policy.
7. RESTRICTIVE COVENANTS
7.1 The services of the Employee are unique and extraordinary
and essential to the business of the Company, especially since the Employee
shall have access to the Company's customer lists, trade secrets and other
privileged and confidential information essential to the Company's business.
Therefore, the Employee agrees that, if the term of his employment hereunder
shall expire or his employment shall at any time terminate for any reason
whatsoever, with or without cause, the Employee will not at any time within two
(2) years after such expiration or termination (the "Restrictive Covenant
Period"), without the prior written consent of the Company (which consent shall
require the approval of the Board of Directors of the Company), directly or
indirectly, anywhere within five (5) miles of the location of any office of the
Company or any franchisee thereof at the date of expiration or termination,
whether individually or as a principal, officer, employee, partner, member,
manager, director, agent of, or consultant or independent contractor to, any
entity, (i) engage or participate in a business which, as of such expiration or
termination date, is similar to or competitive with, directly or indirectly,
that of the Company and shall not make any investments in any such similar or
competitive entity, except that the foregoing shall not restrict the Employee
from acquiring up to one percent (1%) of the outstanding voting stock of any
entity whose securities are listed on a stock exchange or Nasdaq; (ii) cause or
seek to persuade
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any director, officer, employee, customer, client, account, agent or supplier
of, or consultant or independent contractor to, the Company, or others with whom
the Company has a business relationship (collectively "Business Associates"), to
discontinue or materially modify the status, employment or relationship of such
person or entity with the Company, or to become employed in any activity similar
to or competitive with the activities of the Company; (iii) cause or seek to
persuade any prospective customer, client, account or other Business Associate
of the Company (which at or about the date of cessation of the Employee's
employment with the Company was then actively being solicited by the Company) to
determine not to enter into a business relationship with the Company or to
materially modify its contemplated business relationship; (iv) hire, retain or
associate in a business relationship with, directly or indirectly, any director,
officer or employee of the Company; or (v) solicit or cause or authorize to be
solicited, or accept, for or on behalf of him or any third party, any business
from, or the entering into of a business relationship with, (a) others who are,
or were within one (l) year prior to the cessation of his employment with the
Company, a customer, client, account or other Business Associate of the Company,
or (b) any prospective customer, client, account or other Business Associate of
the Company which at or about the date of such cessation was then actively being
solicited by the Company. The foregoing restrictions set forth in this Paragraph
7.1 shall apply likewise during the Employment Period. Notwithstanding the
foregoing, (x) in the event the Employee is entitled to receive the Severance
Amount (as hereinafter defined) or his employment is terminated by the Company
without cause, then the obligations under this Paragraph 7.1 shall terminate in
the event the Company defaults in its obligation to make any payments provided
for in Paragraph 11.2 or 11.3 hereof and such default continues for a period of
twenty (20) days following receipt by the Company of written notice thereof from
the Employee; and (y) the provisions of this Paragraph 7.1 shall cease to apply
in the event (I) this Agreement is terminated pursuant to the provisions of
Paragraph 11.1(a) hereof or (II) (A) the term of this Agreement is extended for
the Extended Term; (B) prior to the expiration of the Extended Term (the
"Extended Expiration Date"), the Employee is not offered by the Company a
further two (2) year extension of the term of this Agreement at an annual base
salary at least equal to his annual base salary in effect at the Extended
Expiration Date and otherwise substantially upon the terms set forth herein; (C)
prior to the Extended Expiration Date, the Employee's employment with the
Company is not terminated in accordance with the provisions of Paragraph 11.1(b)
hereof and he does not voluntarily terminate his employment with the Company;
and (D) the Employee's employment with the Company terminates on the Extended
Expiration Date.
7.2 The Employee agrees to disclose promptly in writing to the
Board of Directors of the Company all ideas, processes, methods, devices,
business concepts, inventions, improvements, discoveries, know-how and other
creative achievements (hereinafter referred to collectively as "discoveries"),
whether or not the same or any part thereof is capable of being patented,
trademarked, copyrighted, or otherwise protected, which the Employee, while
employed by the Company, conceives, makes, develops, acquires or reduces to
practice, whether acting alone or with others and whether during or after usual
working hours, and which are related to the Company's business or interests, or
are used or usable by the Company, or arise out of or in connection with the
duties performed by the Employee. The Employee hereby transfers and assigns to
the Company all right, title and interest in and to such discoveries (whether
conceived, made, developed, acquired or
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reduced to practice on or prior to the date hereof or hereafter during his
employment with the Company), including any and all domestic and foreign
copyrights and patent and trademark rights therein and any renewals thereof. On
request of the Company, the Employee will, without any additional compensation,
from time to time during, and after the expiration or termination of, the
Employment Period, execute such further instruments (including, without
limitation, applications for copyrights, patents, trademarks and assignments
thereof) and do all such other acts and things as may be deemed necessary or
desirable by the Company to protect and/or enforce its right in respect of such
discoveries. All expenses of filing or prosecuting any patent, trademark or
copyright application shall be borne by the Company, but the Employee shall
cooperate in filing and/or prosecuting any such application.
7.3 (a) The Employee represents that he has been informed that
it is the policy of the Company to maintain as secret all confidential
information relating to the Company, including, without limitation, any and all
knowledge or information with respect to secret or confidential methods,
processes, plans, materials, customer lists or data, or with respect to any
other confidential or secret aspect of the Company's activities, and further
acknowledges that such confidential information is of great value to the
Company. The Employee recognizes that, by reason of his employment with the
Company, he will acquire confidential information as aforesaid. The Employee
confirms that it is reasonably necessary to protect the Company's goodwill, and,
accordingly, hereby agrees that he will not, directly or indirectly (except
where authorized by the Board of Directors of the Company), at any time during
the term of this Agreement or thereafter divulge to any person, firm or other
entity, or use, or cause or authorize any person, firm or other entity to use,
any such confidential information.
(b) The Employee agrees that he will not, at any
time, remove from the Company's premises any drawings, notebooks, software, data
or other confidential information relating to the business and procedures
heretofore or hereafter acquired, developed and/or used by the Company, except
where necessary in the fulfillment of his duties hereunder.
(c) The Employee agrees that, upon the
expiration or termination of this Agreement for any reason whatsoever, he shall
promptly deliver to the Company any and all drawings, notebooks, software, data
and other documents and material, including all copies thereof, in his
possession or under his control relating to any confidential information or
discoveries, or which is otherwise the property of the Company.
(d) For purposes hereof, the term "confidential
information" shall mean all information given to the Employee, directly or
indirectly, by the Company and all other information relating to the Company
otherwise acquired by the Employee during the course of his employment with the
Company (whether on or prior to the date hereof or hereafter), other than
information which (i) was in the public domain at the time furnished to, or
acquired by, the Employee, or (ii) thereafter enters the public domain other
than through disclosure, directly or indirectly, by the Employee or others in
violation of an agreement of confidentiality or nondisclosure.
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7.4 For purposes of this Paragraph 7, the term "Company" shall
mean and include any and all subsidiaries and affiliated entities of the Company
in existence from time to time.
8. VACATIONS
8.1 The Employee shall be entitled to an aggregate of four (4)
weeks vacation time for each twelve (12) month period during the Employment
Period commencing on the date hereof (the foregoing not being intended to limit
the provisions of Paragraph 3.1 hereof and the part-time nature of the
Employee's services), the time and duration thereof to be determined by mutual
agreement between the Employee and the Company.
9. PARTICIPATION IN EMPLOYEE BENEFIT PLANS; STOCK OPTIONS
9.1 The Employee shall be accorded the right to participate in
and receive benefits under and in accordance with the provisions of any pension,
profit sharing, insurance, medical and dental insurance or reimbursement (with
family coverage) or other plan or program of the Company either in existence as
of the date hereof or hereafter adopted for the benefit generally of its
executive employees.
9.2 Concurrently with the execution hereof, pursuant to the
Company's 1998 Stock Option Plan and a Stock Option Agreement of even date, the
Company is granting to the Employee the right and option to purchase up to
225,000 Common Shares of the Company upon the following terms: (a) an expiration
date of five (5) years from the date hereof; (b) an exercise price equal to
$2.69 per share; and (c) vesting to the extent of one-half thereof on each of
the first and second anniversaries of the date hereof (the "Option").
10. SERVICE AS OFFICER OF SUBSIDIARY; SERVICE AS DIRECTOR
10.1 During the Employment Period, the Employee shall, if
elected or appointed, serve as (a) President of IAH, Inc., and (b) a director of
the Company and/or any subsidiaries of the Company in existence or hereafter
created or acquired, in each case without any additional compensation for such
services.
11. EARLIER TERMINATION; PAYMENT FOLLOWING TERMINATION
11.1 The Employee's employment hereunder shall automatically
terminate upon his death and may terminate at the option of the Company in the
event of:
(a) the Employee's incapacity, as provided for
in Paragraph 6.l hereof; or
(b) "cause", as provided for in Paragraph 1.1
hereof.
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Upon the termination of the Employee's employment, the Employment Period shall
be considered to have ended.
11.2 In the event of the following:
(a) the Company timely sends the Non-Extension
Notice to the Employee in accordance with the provisions of Paragraph 1.1
hereof;
(b) prior to the Fifth Anniversary Date, the
Employee's employment with the Company is not terminated in accordance with the
provisions of Paragraph 11 hereof and he does not voluntarily terminate his
employment with the Company; and
(c) the Employee's employment with the Company
terminates on the Fifth Anniversary Date, then, the Company shall continue to
pay to the Employee his then annual base salary for a period of two (2) years
following the Fifth Anniversary Date (the "Severance Amount"). The Severance
Amount shall be payable in a manner consistent with the payment to the Employee
theretofore of his salary.
11.3 In the event of the termination of the Employee's
employment by the Company during the Employment Period without cause, as
liquidated damages, the Employee shall be entitled to receive an amount equal to
all compensation that he would have been entitled to receive for the remainder
of the Employment Period pursuant to Paragraph 4 hereof as if his employment had
not been terminated (the "Post-Termination Payments"). The Post-Termination
Payments shall be made in a manner consistent with the payment to the Employee
theretofore of his salary as if he had remained in the employ of the Company. In
the event the notice of termination of employment is given (a) prior to the
ninetieth (90th) day prior to the Fifth Anniversary Date or (b) subsequent to
such ninetieth (90th) day but after the date of any Non-Extension Notice timely
given, then, instead of any obligation to pay the Employee any amount with
regard to the Extended Term, the Employee shall be entitled to receive the
Severance Amount, payable, as provided for in Paragraph 11.2 hereof, following
the expiration of the Post-Termination Payments.
11.4 The Employee shall not be required to mitigate any
damages he may incur for any termination of employment by the Company without
cause by seeking other employment; however, any amounts paid or payable to the
Employee from other employment or other services shall reduce on a
dollar-for-dollar basis any amount otherwise payable to him pursuant to
Paragraph 11 hereof.
12. INJUNCTIVE RELIEF; REMEDIES
12.1 The Employee acknowledges and agrees that, in the event he
shall violate or threaten to violate any of the restrictions of Paragraph 3
(with regard to the last clause thereof) or
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7 hereof, the Company will be without an adequate remedy at law and will
therefore be entitled to enforce such restrictions by temporary or permanent
injunctive or mandatory relief in any court of competent jurisdiction without
the necessity of proving damages.
12.2 The Employee agrees further that the Company shall have the
following additional rights and remedies:
(i) The right and remedy to require the Employee to
account for and pay over to the Company all profits derived or received by him
as the result of any transactions constituting a breach of any of the provisions
of Paragraph 7.1, and the Employee hereby agrees to account for and pay over
such profits to the Company; and
(ii) The right to recover attorneys' fees incurred in
any action or proceeding in which it seeks to enforce its rights under Paragraph
7 hereof and is successful on any grounds.
12.3 Each of the rights and remedies enumerated above shall be
independent of the other, and shall be severally enforceable, and all of such
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity.
12.4 The parties hereto intend to and hereby confer jurisdiction
to enforce the covenants contained in Paragraph 7.1 upon the courts of any
jurisdiction within the geographical scope of such covenants (a "Jurisdiction").
In the event that the courts of any one or more of such Jurisdictions shall hold
such covenants unenforceable by reason of the breadth of their scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other Jurisdiction, as to breaches of such covenants in such other
respective Jurisdictions, the above covenants as they relate to each
Jurisdiction being, for this purpose, severable into diverse and independent
covenants.
13. NO RESTRICTIONS
13.l The Employee hereby represents that neither the execution
of this Agreement nor his performance hereunder will (a) violate, conflict with
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
the terms, conditions or provisions of any contract, agreement or other
instrument or obligation to which the Employee is a party, or by which he may be
bound, or (b) violate any order, judgment, writ, injunction or decree applicable
to the Employee. In the event of a breach hereof, in addition to the Company's
right to terminate this Agreement, the Employee shall indemnify the Company and
hold it harmless from and against any and all claims, losses, liabilities, costs
and expenses (including reasonable attorneys' fees) incurred or suffered in
connection with or as a result of the Company's entering into this Agreement or
employing the Employee hereunder.
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14. ARBITRATION
14.1 Except with regard to Paragraph 12.1 hereof and any other
matters that are not a proper subject of arbitration, all disputes between the
parties hereto concerning the performance, breach, construction or
interpretation of this Agreement or any portion thereof, or in any manner
arising out of this Agreement or the performance thereof, shall be submitted to
binding arbitration, in accordance with the rules of the American Arbitration
Association, which arbitration shall be carried out in the manner hereinafter
set forth.
14.2 Within twenty (20) days after written notice by one party
to the other of its demand for arbitration, which demand shall set forth the
name and address of its arbitrator, the other party shall select its arbitrator
and so notify the demanding party. Within twenty (20) days thereafter, the two
arbitrators so selected shall select the third arbitrator. The decision of any
two (2) arbitrators shall be binding upon the parties. In default of either side
naming its arbitrator as aforesaid or in default of the selection of the said
third arbitrator as aforesaid, the American Arbitration Association shall
designate such arbitrator upon the application of either party. The arbitration
proceeding shall take place at a mutually agreeable location in Nassau County,
New York or such other location as agreed to by the parties.
14.3 A party who files a notice of demand for arbitration must
assert in the demand all claims then known to that party on which arbitration is
permitted to be demanded. When a party fails to include a claim through
oversight, inadvertence or excusable neglect, or when a claim has matured or
been acquired subsequently, the arbitrators may permit amendment. A demand for
arbitration shall be made within a reasonable time after the claim has arisen,
and in no event shall it be made after the date when institution of legal or
equitable proceedings based on such claim would be barred by the applicable
statute of limitations.
14.4 The award rendered by the arbitrators shall be final,
binding and conclusive, shall be specifically enforceable, and judgment may be
entered upon it in accordance with applicable law in the appropriate court in
the State of New York, with no right of appeal therefrom.
14.5 Each party shall pay its or his own expenses of
arbitration, and the expenses of the arbitrators and the arbitration proceeding
shall be equally shared; provided, however, that, if, in the opinion of a
majority of the arbitrators, any claim or defense was unreasonable, the
arbitrators may assess, as part of their award, all or any part of the
arbitration expenses of the other party (including reasonable attorneys' fees)
and of the arbitrators and the arbitration proceeding against the party raising
such unreasonable claim or defense; provided, further, that, if the arbitration
proceeding relates to the issue of "cause" for termination of employment, (a)
if, in the opinion of a majority of the arbitrators, "cause" existed, the
arbitrators shall assess, as part of their award, all of the arbitration
expenses of the Company (including reasonable attorneys' fees) and of the
arbitrators and the arbitration proceeding against the Employee or (b) if, in
the opinion of a majority of the arbitrators, "cause" did not exist, the
arbitrators shall assess, as part of their award, all of the arbitration
expenses of the Employee (including reasonable attorneys' fees) and of the
arbitrators and
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the arbitration proceeding against the Company.
15. ASSIGNMENT
15.1 This Agreement, as it relates to the employment of the
Employee, is a personal contract and the rights and interests of the Employee
hereunder may not be sold, transferred, assigned, pledged or hypothecated.
16. NOTICES
16.1 Any notice required or permitted to be given pursuant to
this Agreement shall be deemed to have been duly given when delivered by hand or
sent by certified or registered mail, return receipt requested and postage
prepaid, overnight mail or courier or telecopier as follows:
If to the Employee:
90 Merrick Avenue
East Meadow, New York 11554
Telecopier Number: (516) 296-7111
If to the Company:
90 Merrick Avenue
East Meadow, New York 11554
Attention: President
Telecopier Number: (516) 296-7111
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred S. Skolnik, Esq.
Telecopier Number: (516) 296-7111
or at such other address as any party shall designate by notice to the other
party given in accordance with this Paragraph 16.1.
17. GOVERNING LAW
17.1 This Agreement shall be governed by, and construed
and enforced in
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accordance with, the laws of the State of New York applicable to agreements made
and to be performed entirely in New York.
18. WAIVER OF BREACH; PARTIAL INVALIDITY
18.1 The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach. If any provision, or part thereof, of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and not in any way affect or render invalid or unenforceable
any other provisions of this Agreement, and this Agreement shall be carried out
as if such invalid or unenforceable provision, or part thereof, had been
reformed, and any court of competent jurisdiction or arbitrators, as the case
may be, are authorized to so reform such invalid or unenforceable provision, or
part thereof, so that it would be valid, legal and enforceable to the fullest
extent permitted by applicable law.
19. ENTIRE AGREEMENT
19.1 This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and there are no
representations, warranties or commitments except as set forth herein. This
Agreement supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
subject matter hereof. This Agreement may be amended, and any provision hereof
waived, only by a writing executed by the party sought to be charged. No
amendment or waiver on the part of the Company shall be valid unless approved by
its Board of Directors.
20. COUNTERPARTS
20.1 This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
21. FACSIMILE SIGNATURES
21.1 Signatures hereon which are transmitted via facsimile shall
be deemed original signatures.
22. REPRESENTATION BY COUNSEL; INTERPRETATION
22.1 The Employee acknowledges that he has been represented by
counsel in connection with this Agreement. Accordingly, any rule or law or any
legal decision that would require the interpretation of any claimed ambiguities
in this Agreement against the party that drafted it has no application and is
expressly waived by the Employee. The provisions of this Agreement
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shall be interpreted in a reasonable manner to give effect to the intent of the
parties hereto.
23. HEADINGS
23.1 The headings and captions under sections and paragraphs of
this Agreement are for convenience of reference only and do not in any way
modify, interpret or construe the intent of the parties or affect any of the
provisions of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year above written.
DCAP GROUP, INC.
By:/s/ Kevin Lang
-----------------
Kevin Lang, President
/s/ Morton L. Certilman
---------------------------
Morton L. Certilman
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EMPLOYMENT AGREEMENT, dated as of February 25, 1999, by and
between DCAP GROUP, INC. (formerly EXTECH Corporation), a Delaware corporation
(the "Company"), and JAY M. HAFT (the "Employee").
RECITALS
WHEREAS, the Company and the Employee desire to enter into an
employment agreement which will set forth the terms and conditions upon which
the Employee shall be employed by the Company and upon which the Company shall
compensate the Employee.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants hereinafter set forth, the parties hereto have agreed, and do
hereby agree, as follows:
1. EMPLOYMENT; TERM
1.1 (a) The Company will employ the Employee in its business,
and the Employee will work for the Company therein, as its Vice Chairman of the
Board and Vice Chairman of the Company's Audit Committee and Finance Committee
for a term commencing as of the date hereof and terminating on the fifth
anniversary of the date hereof (the "Fifth Anniversary Date") (the "Initial
Term"), except that the term of this Agreement shall continue for an additional
three (3) years (the "Extended Term") unless, at least ninety (90) days prior to
the Fifth Anniversary Date, the Company, by vote of at least seventy-five
percent (75%) of all of the members of its Board of Directors (including, for
purposes of determining the number of members of the Board, the Employee, if a
member), notifies the Employee of its desire not to extend the term of this
Agreement (the "Non-Extension Notice"). The term of this Agreement, as it may be
extended, is hereinafter referred to as the "Employment Period".
(b) The Employee's employment may be terminated by
the Company at any time during the Employment Period upon written notice for
"cause". The Company agrees that it will not terminate the Employee's employment
for "cause" unless a majority of all of the members of its Board of Directors
(including, for purposes of determining the number of members of the Board, the
Employee, if a member) shall have approved such action. The Company agrees that
it will not terminate the Employee's employement other than for "cause" unless
at least seventy-five percent (75%) of all of the members of the Board of
Directors (including, for purposes of determining the number of members of the
Board, the Employee, if a member) shall have approved such action. As used in
this Agreement, "cause" shall mean the Employee's commission of any act in the
performance of his duties constituting common law fraud, a felony or other gross
malfeasance of duty, the Employee's commission of any act involving moral
turpitude, any material misrepresentation by the Employee (including, without
limitation, a breach of any representation set forth in Paragraph 13.1 hereof),
any breach of any material covenant on the Employee's part herein set forth, or
the Employee's engagement in misconduct which is materially injurious to the
Company or its subsidiaries.
1.2 Unless sooner terminated as provided for in this
Agreement, at the end of the Employment Period (the "Expiration Date"), the
Employee's employment with the Company shall terminate. Upon termination of the
Employee's employment with the Company for any reason whatsoever, he shall be
deemed to have resigned his positions as an officer and director of the Company
and as an employee, officer and director of each of the Company's subsidiaries.
<PAGE>
2. DUTIES
2.1 During the Employment Period, the Employee shall serve as
the Company's Vice Chairman of the Board and Vice Chairman of the Company's
Audit Committee and Finance Committee, and shall perform duties of an executive
character consisting of administrative and managerial responsibilities on behalf
of the Company and such further duties of an executive character as shall, from
time to time, be delegated or assigned to him by the Board of Directors of the
Company consistent with the Employee's position.
3. DEVOTION OF TIME
3.1 During the Employment Period, the Employee need only
perform such part-time services as are reasonably necessary for him to fulfill
his responsibilities hereunder as Vice Chairman of the Board; shall devote his
best efforts, energy and skill to the services of the Company and the promotion
of its interests; and shall not take part in activities detrimental to the best
interests of the Company.
4. COMPENSATION
4.1 For all services to be rendered by the Employee during the
Employment Period and in consideration of the Employee's representations and
covenants set forth in this Agreement, the Employee shall be entitled to receive
from the Company compensation as set forth herein.
4.2 During the Employment Period, the Employee shall be
entitled to receive a salary at the rate of $22,500 per annum. The Employee
shall be entitled to such additional compensation as shall be determined from
time to time by the Board of Directors of the Company in its sole discretion.
All amounts due hereunder shall be payable in accordance with the Company's
standard payroll practices.
5. REIMBURSEMENT OF EXPENSES
5.1 The Company shall pay directly, or reimburse the Employee
for, all reasonable and necessary expenses and disbursements incurred by the
Employee for and on behalf of the Company in the performance of his duties
during the Employment Period, including, without limitation, reasonable and
necessary expenses incurred by the Employee for and on behalf of the Company in
the performance of his duties during the Employment Period for (a) client
entertainment and the use of a cellular telephone and beeper, and (b) food,
lodging and transportation if he is required to perform any of his duties away
from his primary place of residence.
5.2 The Employee shall submit to the Company, not less than
once in each calendar month, reports of such expenses and other disbursements in
form normally used by the
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Company and receipts with respect thereto and the Company's obligations under
Paragraph 5.1 hereof shall be subject to compliance therewith.
6. DISABILITY; INSURANCE
6.1 If, during the Employment Period, the Employee, in the
opinion of a majority of all of the members of the Board of Directors of the
Company (excluding the Employee), as confirmed by competent medical evidence,
shall become physically or mentally incapacitated to perform his duties for the
Company hereunder ("Disabled") for a continuous period, then for the first six
(6) months of such period he shall receive his full salary. In no event,
however, shall the Employee be entitled to receive any payments under this
Paragraph 6.1 beyond the expiration or termination date of this Agreement.
Effective with the date of his resumption of full employment, the Employee shall
be re-entitled to receive his full salary. If such illness or other incapacity
shall endure for a continuous period of at least nine (9) months or for at least
two hundred fifty (250) business days during any eighteen (18) month period, the
Company shall have the right, by written notice, to terminate the Employee's
employment hereunder as of a date (not less than thirty (30) days after the date
of the sending of such notice) to be specified in such notice. The Employee
agrees to submit himself for appropriate medical examination to a physician of
the Company's designation as necessary for purposes of this Paragraph 6.1.
6.2 The obligations of the Company under this Paragraph 6 may
be satisfied, in whole or in part, by payments to the Employee under disability
insurance provided by the Company.
6.3 Notwithstanding the foregoing, in the event, at the time
of any apparent incapacity, the Company has in effect a disability policy with
respect to the Employee (or, if not with respect to the Employee, then with
respect to any executive officer of the Company), the Employee shall be
considered Disabled for purposes of Paragraph 6.1 only if he is (or the
executive officer, had he had the apparent incapacity, would be) considered
disabled for purposes of the policy.
7. RESTRICTIVE COVENANTS
7.1 The services of the Employee are unique and extraordinary
and essential to the business of the Company, especially since the Employee
shall have access to the Company's customer lists, trade secrets and other
privileged and confidential information essential to the Company's business.
Therefore, the Employee agrees that, if the term of his employment hereunder
shall expire or his employment shall at any time terminate for any reason
whatsoever, with or without cause, the Employee will not at any time within two
(2) years after such expiration or termination (the "Restrictive Covenant
Period"), without the prior written consent of the Company (which consent shall
require the approval of the Board of Directors of the Company), directly or
indirectly, anywhere within five (5) miles of the location of any office of the
Company or any franchisee thereof at the date of expiration or termination,
whether individually or as a principal, officer, employee, partner, member,
manager, director, agent of, or consultant or independent contractor to, any
entity, (i) engage or participate in a business which, as of such expiration or
termination date, is similar to or competitive with, directly or indirectly,
that of the Company and
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shall not make any investments in any such similar or competitive entity, except
that the foregoing shall not restrict the Employee from acquiring up to one
percent (1%) of the outstanding voting stock of any entity whose securities are
listed on a stock exchange or Nasdaq; (ii) cause or seek to persuade any
director, officer, employee, customer, client, account, agent or supplier of, or
consultant or independent contractor to, the Company, or others with whom the
Company has a business relationship (collectively "Business Associates"), to
discontinue or materially modify the status, employment or relationship of such
person or entity with the Company, or to become employed in any activity similar
to or competitive with the activities of the Company; (iii) cause or seek to
persuade any prospective customer, client, account or other Business Associate
of the Company (which at or about the date of cessation of the Employee's
employment with the Company was then actively being solicited by the Company) to
determine not to enter into a business relationship with the Company or to
materially modify its contemplated business relationship; (iv) hire, retain or
associate in a business relationship with, directly or indirectly, any director,
officer or employee of the Company; or (v) solicit or cause or authorize to be
solicited, or accept, for or on behalf of him or any third party, any business
from, or the entering into of a business relationship with, (a) others who are,
or were within one (l) year prior to the cessation of his employment with the
Company, a customer, client, account or other Business Associate of the Company,
or (b) any prospective customer, client, account or other Business Associate of
the Company which at or about the date of such cessation was then actively being
solicited by the Company. The foregoing restrictions set forth in this Paragraph
7.1 shall apply likewise during the Employment Period. Notwithstanding the
foregoing, (x) in the event the Employee is entitled to receive the Severance
Amount (as hereinafter defined) or his employment is terminated by the Company
without cause, then the obligations under this Paragraph 7.1 shall terminate in
the event the Company defaults in its obligation to make any payments provided
for in Paragraph 11.2 or 11.3 hereof and such default continues for a period of
twenty (20) days following receipt by the Company of written notice thereof from
the Employee; and (y) the provisions of this Paragraph 7.1 shall cease to apply
in the event (I) this Agreement is terminated pursuant to the provisions of
Paragraph 11.1(a) hereof or (II) (A) the term of this Agreement is extended for
the Extended Term; (B) prior to the expiration of the Extended Term (the
"Extended Expiration Date"), the Employee is not offered by the Company a
further two (2) year extension of the term of this Agreement at an annual base
salary at least equal to his annual base salary in effect at the Extended
Expiration Date and otherwise substantially upon the terms set forth herein; (C)
prior to the Extended Expiration Date, the Employee's employment with the
Company is not terminated in accordance with the provisions of Paragraph 11.1(b)
hereof and he does not voluntarily terminate his employment with the Company;
and (D) the Employee's employment with the Company terminates on the Extended
Expiration Date.
7.2 The Employee agrees to disclose promptly in writing to the
Board of Directors of the Company all ideas, processes, methods, devices,
business concepts, inventions, improvements, discoveries, know-how and other
creative achievements (hereinafter referred to collectively as "discoveries"),
whether or not the same or any part thereof is capable of being patented,
trademarked, copyrighted, or otherwise protected, which the Employee, while
employed by the Company, conceives, makes, develops, acquires or reduces to
practice, whether acting alone or with others and whether during or after usual
working hours, and which are related to the Company's business or
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interests, or are used or usable by the Company, or arise out of or in
connection with the duties performed by the Employee. The Employee hereby
transfers and assigns to the Company all right, title and interest in and to
such discoveries (whether conceived, made, developed, acquired or reduced to
practice on or prior to the date hereof or hereafter during his employment with
the Company), including any and all domestic and foreign copyrights and patent
and trademark rights therein and any renewals thereof. On request of the
Company, the Employee will, without any additional compensation, from time to
time during, and after the expiration or termination of, the Employment Period,
execute such further instruments (including, without limitation, applications
for copyrights, patents, trademarks and assignments thereof) and do all such
other acts and things as may be deemed necessary or desirable by the Company to
protect and/or enforce its right in respect of such discoveries. All expenses of
filing or prosecuting any patent, trademark or copyright application shall be
borne by the Company, but the Employee shall cooperate in filing and/or
prosecuting any such application.
7.3 (a) The Employee represents that he has been informed that
it is the policy of the Company to maintain as secret all confidential
information relating to the Company, including, without limitation, any and all
knowledge or information with respect to secret or confidential methods,
processes, plans, materials, customer lists or data, or with respect to any
other confidential or secret aspect of the Company's activities, and further
acknowledges that such confidential information is of great value to the
Company. The Employee recognizes that, by reason of his employment with the
Company, he will acquire confidential information as aforesaid. The Employee
confirms that it is reasonably necessary to protect the Company's goodwill, and,
accordingly, hereby agrees that he will not, directly or indirectly (except
where authorized by the Board of Directors of the Company), at any time during
the term of this Agreement or thereafter divulge to any person, firm or other
entity, or use, or cause or authorize any person, firm or other entity to use,
any such confidential information.
(b) The Employee agrees that he will not, at any
time, remove from the Company's premises any drawings, notebooks, software, data
or other confidential information relating to the business and procedures
heretofore or hereafter acquired, developed and/or used by the Company, except
where necessary in the fulfillment of his duties hereunder.
(c) The Employee agrees that, upon the
expiration or termination of this Agreement for any reason whatsoever, he shall
promptly deliver to the Company any and all drawings, notebooks, software, data
and other documents and material, including all copies thereof, in his
possession or under his control relating to any confidential information or
discoveries, or which is otherwise the property of the Company.
(d) For purposes hereof, the term "confidential
information" shall mean all information given to the Employee, directly or
indirectly, by the Company and all other information relating to the Company
otherwise acquired by the Employee during the course of his employment with the
Company (whether on or prior to the date hereof or hereafter), other than
information which (i) was in the public domain at the time furnished to, or
acquired by, the
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Employee, or (ii) thereafter enters the public domain other than through
disclosure, directly or indirectly, by the Employee or others in violation of an
agreement of confidentiality or nondisclosure.
7.4 For purposes of this Paragraph 7, the term "Company" shall
mean and include any and all subsidiaries and affiliated entities of the Company
in existence from time to time.
8. VACATIONS
8.1 The Employee shall be entitled to an aggregate of four (4)
weeks vacation time for each twelve (12) month period during the Employment
Period commencing on the date hereof (the foregoing not being intended to limit
the provisions of Paragraph 3.1 hereof and the part-time nature of the
Employee's services), the time and duration thereof to be determined by mutual
agreement between the Employee and the Company.
9. PARTICIPATION IN EMPLOYEE BENEFIT PLANS; STOCK OPTIONS
9.1 The Employee shall be accorded the right to participate in
and receive benefits under and in accordance with the provisions of any pension,
profit sharing, insurance, medical and dental insurance or reimbursement (with
family coverage) or other plan or program of the Company either in existence as
of the date hereof or hereafter adopted for the benefit generally of its
executive employees.
9.2 Concurrently with the execution hereof, pursuant to the
Company's 1998 Stock Option Plan and a Stock Option Agreement of even date, the
Company is granting to the Employee the right and option to purchase up to
225,000 Common Shares of the Company upon the following terms: (a) an expiration
date of five (5) years from the date hereof; (b) an exercise price equal to
$2.69 per share; and (c) vesting to the extent of one-half thereof on each of
the first and second anniversaries of the date hereof (the "Option").
10. SERVICE AS DIRECTOR
10.1 During the Employment Period, the Employee shall, if
elected or appointed, serve as a director of the Company and/or any subsidiaries
of the Company in existence or hereafter created or acquired, in each case
without any additional compensation for such services.
11. EARLIER TERMINATION; PAYMENT FOLLOWING TERMINATION
11.1 The Employee's employment hereunder shall automatically
terminate upon his death and may terminate at the option of the Company in the
event of:
(a) the Employee's incapacity, as provided for
in Paragraph 6.l hereof; or
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(b) "cause", as provided for in Paragraph 1.1
hereof.
Upon the termination of the Employee's employment, the Employment Period shall
be considered to have ended.
11.2 In the event of the following:
(a) the Company timely sends the Non-Extension
Notice to the Employee in accordance with the provisions of Paragraph 1.1
hereof;
(b) prior to the Fifth Anniversary Date, the
Employee's employment with the Company is not terminated in accordance with the
provisions of Paragraph 11 hereof and he does not voluntarily terminate his
employment with the Company; and
(c) the Employee's employment with the Company
terminates on the Fifth Anniversary Date,
then, the Company shall continue to pay to the Employee his then annual base
salary for a period of two (2) years following the Fifth Anniversary Date (the
"Severance Amount"). The Severance Amount shall be payable in a manner
consistent with the payment to the Employee theretofore of his salary.
11.3 In the event of the termination of the Employee's
employment by the Company during the Employment Period without cause, as
liquidated damages, the Employee shall be entitled to receive an amount equal to
all compensation that he would have been entitled to receive for the remainder
of the Employment Period pursuant to Paragraph 4 hereof as if his employment had
not been terminated (the "Post-Termination Payments"). The Post-Termination
Payments shall be made in a manner consistent with the payment to the Employee
theretofore of his salary as if he had remained in the employ of the Company. In
the event the notice of termination of employment is given (a) prior to the
ninetieth (90th) day prior to the Fifth Anniversary Date or (b) subsequent to
such ninetieth (90th) day but after the date of any Non-Extension Notice timely
given, then, instead of any obligation to pay the Employee any amount with
regard to the Extended Term, the Employee shall be entitled to receive the
Severance Amount, payable, as provided for in Paragraph 11.2 hereof, following
the expiration of the Post-Termination Payments.
11.4 The Employee shall not be required to mitigate any
damages he may incur for any termination of employment by the Company without
cause by seeking other employment; however, any amounts paid or payable to the
Employee from other employment or other services shall reduce on a
dollar-for-dollar basis any amount otherwise payable to him pursuant to
Paragraph 11 hereof.
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12. INJUNCTIVE RELIEF; REMEDIES
12.1 The Employee acknowledges and agrees that, in the event he
shall violate or threaten to violate any of the restrictions of Paragraph 3
(with regard to the last clause thereof) or 7 hereof, the Company will be
without an adequate remedy at law and will therefore be entitled to enforce such
restrictions by temporary or permanent injunctive or mandatory relief in any
court of competent jurisdiction without the necessity of proving damages.
12.2 The Employee agrees further that the Company shall have the
following additional rights and remedies:
(i) The right and remedy to require the Employee to
account for and pay over to the Company all profits derived or received by him
as the result of any transactions constituting a breach of any of the provisions
of Paragraph 7.1, and the Employee hereby agrees to account for and pay over
such profits to the Company; and
(ii) The right to recover attorneys' fees incurred in
any action or proceeding in which it seeks to enforce its rights under Paragraph
7 hereof and is successful on any grounds.
12.3 Each of the rights and remedies enumerated above shall be
independent of the other, and shall be severally enforceable, and all of such
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity.
12.4 The parties hereto intend to and hereby confer jurisdiction
to enforce the covenants contained in Paragraph 7.1 upon the courts of any
jurisdiction within the geographical scope of such covenants (a "Jurisdiction").
In the event that the courts of any one or more of such Jurisdictions shall hold
such covenants unenforceable by reason of the breadth of their scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other Jurisdiction, as to breaches of such covenants in such other
respective Jurisdictions, the above covenants as they relate to each
Jurisdiction being, for this purpose, severable into diverse and independent
covenants.
13. NO RESTRICTIONS
13.l The Employee hereby represents that neither the execution
of this Agreement nor his performance hereunder will (a) violate, conflict with
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
the terms, conditions or provisions of any contract, agreement or other
instrument or obligation to which the Employee is a party, or by which he may be
bound, or (b) violate any order, judgment, writ, injunction or decree applicable
to the Employee. In the event of a breach hereof, in addition to the Company's
right to terminate this Agreement, the Employee shall indemnify the Company and
hold it harmless from and against any and all claims, losses, liabilities,
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costs and expenses (including reasonable attorneys' fees) incurred or suffered
in connection with or as a result of the Company's entering into this Agreement
or employing the Employee hereunder.
14. ARBITRATION
14.1 Except with regard to Paragraph 12.1 hereof and any other
matters that are not a proper subject of arbitration, all disputes between the
parties hereto concerning the performance, breach, construction or
interpretation of this Agreement or any portion thereof, or in any manner
arising out of this Agreement or the performance thereof, shall be submitted to
binding arbitration, in accordance with the rules of the American Arbitration
Association, which arbitration shall be carried out in the manner hereinafter
set forth.
14.2 Within twenty (20) days after written notice by one party
to the other of its demand for arbitration, which demand shall set forth the
name and address of its arbitrator, the other party shall select its arbitrator
and so notify the demanding party. Within twenty (20) days thereafter, the two
arbitrators so selected shall select the third arbitrator. The decision of any
two (2) arbitrators shall be binding upon the parties. In default of either side
naming its arbitrator as aforesaid or in default of the selection of the said
third arbitrator as aforesaid, the American Arbitration Association shall
designate such arbitrator upon the application of either party. The arbitration
proceeding shall take place at a mutually agreeable location in Nassau County,
New York or such other location as agreed to by the parties.
14.3 A party who files a notice of demand for arbitration must
assert in the demand all claims then known to that party on which arbitration is
permitted to be demanded. When a party fails to include a claim through
oversight, inadvertence or excusable neglect, or when a claim has matured or
been acquired subsequently, the arbitrators may permit amendment. A demand for
arbitration shall be made within a reasonable time after the claim has arisen,
and in no event shall it be made after the date when institution of legal or
equitable proceedings based on such claim would be barred by the applicable
statute of limitations.
14.4 The award rendered by the arbitrators shall be final,
binding and conclusive, shall be specifically enforceable, and judgment may be
entered upon it in accordance with applicable law in the appropriate court in
the State of New York, with no right of appeal therefrom.
14.5 Each party shall pay its or his own expenses of
arbitration, and the expenses of the arbitrators and the arbitration proceeding
shall be equally shared; provided, however, that, if, in the opinion of a
majority of the arbitrators, any claim or defense was unreasonable, the
arbitrators may assess, as part of their award, all or any part of the
arbitration expenses of the other party (including reasonable attorneys' fees)
and of the arbitrators and the arbitration proceeding against the party raising
such unreasonable claim or defense; provided, further, that, if the arbitration
proceeding relates to the issue of "cause" for termination of employment, (a)
if, in the opinion of a majority of the arbitrators, "cause" existed, the
arbitrators shall assess, as part of their award, all of the arbitration
expenses of the Company (including reasonable attorneys' fees) and of the
arbitrators
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and the arbitration proceeding against the Employee or (b) if, in the opinion of
a majority of the arbitrators, "cause" did not exist, the arbitrators shall
assess, as part of their award, all of the arbitration expenses of the Employee
(including reasonable attorneys' fees) and of the arbitrators and the
arbitration proceeding against the Company.
15. ASSIGNMENT
15.1 This Agreement, as it relates to the employment of the
Employee, is a personal contract and the rights and interests of the Employee
hereunder may not be sold, transferred, assigned, pledged or hypothecated.
16. NOTICES
16.1 Any notice required or permitted to be given pursuant to
this Agreement shall be deemed to have been duly given when delivered by hand or
sent by certified or registered mail, return receipt requested and postage
prepaid, overnight mail or courier or telecopier as follows:
If to the Employee:
1001 Brickell Bay Drive
9th Floor
Miami, Florida 33131
Telecopier Number: (305) 373-0056
If to the Company:
90 Merrick Avenue
East Meadow, New York 11554
Attention: President
Telecopier Number: (516) 296-7111
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred S. Skolnik, Esq.
Telecopier Number: (516) 296-7111
or at such other address as any party shall designate by notice to the other
party given in accordance with this Paragraph 16.1.
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17. GOVERNING LAW
17.1 This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York applicable to
agreements made and to be performed entirely in New York.
18. WAIVER OF BREACH; PARTIAL INVALIDITY
18.1 The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach. If any provision, or part thereof, of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and not in any way affect or render invalid or unenforceable
any other provisions of this Agreement, and this Agreement shall be carried out
as if such invalid or unenforceable provision, or part thereof, had been
reformed, and any court of competent jurisdiction or arbitrators, as the case
may be, are authorized to so reform such invalid or unenforceable provision, or
part thereof, so that it would be valid, legal and enforceable to the fullest
extent permitted by applicable law.
19. ENTIRE AGREEMENT
19.1 This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and there are no
representations, warranties or commitments except as set forth herein. This
Agreement supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
subject matter hereof. This Agreement may be amended, and any provision hereof
waived, only by a writing executed by the party sought to be charged. No
amendment or waiver on the part of the Company shall be valid unless approved by
its Board of Directors.
20. COUNTERPARTS
20.1 This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
21. FACSIMILE SIGNATURES
21.1 Signatures hereon which are transmitted via facsimile shall
be deemed original signatures.
22. REPRESENTATION BY COUNSEL; INTERPRETATION
22.1 The Employee acknowledges that he has been
represented by counsel in
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connection with this Agreement. Accordingly, any rule or law or any legal
decision that would require the interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and is
expressly waived by the Employee. The provisions of this Agreement shall be
interpreted in a reasonable manner to give effect to the intent of the parties
hereto.
23. HEADINGS
23.1 The headings and captions under sections and paragraphs of
this Agreement are for convenience of reference only and do not in any way
modify, interpret or construe the intent of the parties or affect any of the
provisions of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year above written.
DCAP GROUP, INC.
By:/s/ Kevin Lang
-----------------
Kevin Lang, President
/s/ Jay M. Haft
---------------------------
Jay M. Haft
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EMPLOYMENT AGREEMENT, dated as of February 25, 1999, by and
between DCAP GROUP, INC. (formerly EXTECH Corporation), a Delaware corporation
(the "Company"), and KEVIN LANG (the "Employee").
RECITALS
WHEREAS, the Company and the Employee desire to enter into an
employment agreement which will set forth the terms and conditions upon which
the Employee shall be employed by the Company and upon which the Company shall
compensate the Employee.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants hereinafter set forth, the parties hereto have agreed, and do
hereby agree, as follows:
1. EMPLOYMENT; TERM
1.1 (a) The Company will employ the Employee in its business,
and the Employee will work for the Company therein, as its President for a term
commencing as of the date hereof and terminating on the fifth anniversary of the
date hereof (the "Fifth Anniversary Date") (the "Initial Term"), except that the
term of this Agreement shall continue for an additional three (3) years (the
"Extended Term") unless, at least ninety (90) days prior to the Fifth
Anniversary Date, the Company, by vote of at least seventy-five percent (75%) of
all of the members of its Board of Directors (including, for purposes of
determining the number of members of the Board, the Employee, if a member),
notifies the Employee of its desire not to extend the term of this Agreement
(the "Non-Extension Notice"). The term of this Agreement, as it may be extended,
is hereinafter referred to as the "Employment Period".
(b) The Employee's employment may be terminated by
the Company at any time during the Employment Period upon written notice for
"cause". The Company agrees that it will not terminate the Employee's employment
for "cause" unless a majority of all of the members of its Board of Directors
(including, for purposes of determining the number of members of the Board, the
Employee, if a member) shall have approved such action. The Company agrees that
it will not terminate the Employee's employement other than for "cause" unless
at least seventy-five percent (75%) of all of the members of the Board of
Directors (including, for purposes of determining the number of members of the
Board, the Employee, if a member) shall have approved such action. As used in
this Agreement, "cause" shall mean the Employee's commission of any act in the
performance of his duties constituting common law fraud, a felony or other gross
malfeasance of duty, the Employee's commission of any act involving moral
turpitude, any material misrepresentation by the Employee (including, without
limitation, a breach of any representation set forth in Paragraph 13.1 hereof),
any breach of any material covenant on the Employee's part herein set forth, or
the Employee's engagement in misconduct which is materially injurious to the
Company or its subsidiaries.
1.2 Unless sooner terminated as provided for in this
Agreement, at the end of the Employment Period (the "Expiration Date"), the
Employee's employment with the Company shall terminate. Upon termination of the
Employee's employment with the Company for any reason whatsoever, he shall be
deemed to have resigned his positions as an officer and director of the Company
and as an employee, officer and director of each of the Company's subsidiaries.
<PAGE>
2. DUTIES
2.1 During the Employment Period, the Employee shall serve as
the Company's President and shall perform duties of an executive character
consisting of administrative and managerial responsibilities on behalf of the
Company and such further duties of an executive character as shall, from time to
time, be delegated or assigned to him by the Board of Directors of the Company
consistent with the Employee's position.
3. DEVOTION OF TIME
3.1 During the Employment Period, the Employee shall expend
all of his working time for the Company; shall devote his best efforts, energy
and skill to the services of the Company and the promotion of its interests; and
shall not take part in activities detrimental to the best interests of the
Company.
4. COMPENSATION; LOANS
4.1 For all services to be rendered by the Employee during the
Employment Period and in consideration of the Employee's representations and
covenants set forth in this Agreement, the Employee shall be entitled to receive
from the Company compensation as set forth herein. The Employee acknowledges and
agrees that, notwithstanding the provisions of this Agreement, his compensation
hereunder is subject to reduction as provided for in a certain Agreement, dated
as of May 8, 1998, by and among the Company and the Employee, among others (the
"Acquisition Agreement"), and a certain letter agreement of even date between
the Company and the Employee, with regard to particular Joint Ventures with
respect to which the provisions of Schedule 8 to the Acquisition Agreement are
applicable.
4.2 During the Employment Period, the Employee shall be
entitled to receive a salary at the rate of $250,000 per annum. The Employee
shall be entitled to such additional compensation as shall be determined from
time to time by the Board of Directors of the Company in its sole discretion.
All amounts due hereunder shall be payable in accordance with the Company's
standard payroll practices.
4.3 From time to time during each of the five (5) twelve (12)
month periods of the Initial Term, within ten (10) days following receipt of
written request from the Employee, the Company will loan to the Employee up to
$20,000 (up to $100,000 in the aggregate) (collectively, the "Loans"); provided,
however, that the Company's obligation to make each such Loan shall be subject
to the condition that, at the time the particular Loan is to be made, the
Employee is in the employ of the Company. Each Loan will be evidenced by a
promissory note of the Employee in the principal amount thereof (collectively,
the "Notes") that will provide for, among other things, the following:
(i) interest at a rate per annum equal to the
"prime rate" (as reported in the Wall Street Journal) in effect as of the date
each Loan is made; and
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(ii) payment of the principal amount thereof,
together with accrued interest thereon, in four (4) equal annual installments
commencing one (1) year from the date of each Loan and continuing on the
anniversary day of the date thereof of each subsequent year, in such annual
amount as shall be necessary to self-amortize the Note at the end of such four
(4) year period (provided, however, that no payments shall be due later than the
seventh anniversary of the date hereof), subject to acceleration to the extent
the Employee receives any proceeds from the sale or other disposition of any
shares of Common Stock of the Company;
The Notes shall be in, or substantially in, the form of
Exhibit 4.3(a) attached hereto.
The repayment of all amounts due under each Note shall be
secured by the pledge by the Employee, pursuant to a pledge agreement that will
be entered into at the time of each Loan (the "Pledge Agreement"), of five (5)
Common Shares of the Company for each one dollar ($1) loaned.
The Pledge Agreement shall be in, or substantially in, the
form of Exhibit 4.3(b) attached hereto.
4.4 In the event Pre-Tax Net Income (as hereinafter defined)
for any fiscal year falling entirely within the Employment Period (but not
before the fiscal year ending December 31, 2000 and not after the fiscal year
ending December 31, 2005) is at least $100,000, the Employee shall be entitled
to receive a bonus in the amount of $37,500 (a "Bonus").
4.5 For purposes hereof, the term "Pre-Tax Net Income" for any
particular fiscal year shall mean the consolidated net income before all taxes
of the Company for such fiscal year determined in accordance with generally
accepted accounting principles consistently applied, as audited and reported
upon by the Company's then independent certified public accountants.
4.6 Any Bonus payable pursuant to the provisions hereof shall
be paid on April 15 following the particular fiscal year.
4.7 Notwithstanding anything herein to the contrary, (a) the
Company shall not be obligated to pay any Bonus to the Employee for a particular
fiscal year if, at the time the particular Bonus would be otherwise payable, no
amounts are payable by the Employee to the Company pursuant to his Additional
Shares Note (as such term is defined in the Acquisition Agreement), and (b) if
any amounts are then payable by the Employee pursuant to his Additional Shares
Note, (i) the amount of the Bonus shall not exceed the amount then payable
pursuant to his Additional Shares Note; and (ii) the Company may offset against
the Bonus any amount then payable by the Employee pursuant to his Additional
Shares Note.
5. AUTOMOBILE ALLOWANCE; REIMBURSEMENT OF EXPENSES
5.1 The Employee shall be entitled to the use of a
Company-leased automobile (the "Company Car") during the Employment Period for
business purposes. In no event shall the Company's lease obligations with
respect to the Company Car exceed $1,200 per month. The
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Company shall be responsible for all insurance premiums with respect to the
Company Car (not to exceed $3,000 per year) as well as all expenses for
gasoline, maintenance and repairs with respect thereto. The Employee
acknowledges and agrees that under no circumstances shall the foregoing
provisions create any implication that the Company shall be liable for, or that
the Employee shall be entitled to reimbursement with respect to, any other
insurance premiums, including, without limitation, any life insurance premiums
or premiums with respect to any insurance for any automobile other than the
Company Car, or with respect to any country club or similar membership. The
Employee acknowledges and agrees further that, until sold or otherwise disposed
of, the Company-owned boat shall be used by the Employee solely for business
purposes.
5.2 The Company shall pay directly, or reimburse the Employee
for, all other reasonable and necessary expenses and disbursements incurred by
the Employee for and on behalf of the Company in the performance of his duties
during the Employment Period, including, without limitation, reasonable and
necessary expenses incurred by the Employee for and on behalf of the Company in
the performance of his duties during the Employment Period for (a) client
entertainment and the use of a cellular telephone and beeper, and (b) food,
lodging and transportation if he is required to perform any of his duties away
from his primary place of residence.
5.3 The Employee shall submit to the Company, not less than
once in each calendar month, reports of such expenses and other disbursements in
form normally used by the Company and receipts with respect thereto and the
Company's obligations under Paragraphs 5.1 and 5.2 hereof shall be subject to
compliance therewith.
6. DISABILITY; INSURANCE
6.1 If, during the Employment Period, the Employee, in the
opinion of a majority of all of the members of the Board of Directors of the
Company (excluding the Employee), as confirmed by competent medical evidence,
shall become physically or mentally incapacitated to perform his duties for the
Company hereunder ("Disabled") for a continuous period, then for the first six
(6) months of such period he shall receive his full salary. In no event,
however, shall the Employee be entitled to receive any payments under this
Paragraph 6.1 beyond the expiration or termination date of this Agreement.
Effective with the date of his resumption of full employment, the Employee shall
be re-entitled to receive his full salary. If such illness or other incapacity
shall endure for a continuous period of at least nine (9) months or for at least
two hundred fifty (250) business days during any eighteen (18) month period, the
Company shall have the right, by written notice, to terminate the Employee's
employment hereunder as of a date (not less than thirty (30) days after the date
of the sending of such notice) to be specified in such notice. The Employee
agrees to submit himself for appropriate medical examination to a physician of
the Company's designation as necessary for purposes of this Paragraph 6.1.
6.2 The obligations of the Company under this Paragraph 6 may
be satisfied, in whole or in part, by payments to the Employee under disability
insurance provided by the Company.
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6.3 Notwithstanding the foregoing, in the event, at the time
of any apparent incapacity, the Company has in effect a disability policy with
respect to the Employee (or, if not with respect to the Employee, then with
respect to any executive officer of the Company), the Employee shall be
considered Disabled for purposes of Paragraph 6.1 only if he is (or the
executive officer, had he had the apparent incapacity, would be) considered
disabled for purposes of the policy.
6.4 The Company agrees to obtain a disability insurance policy
on behalf of the Employee (subject to the Employee's satisfying any requirements
therefor) and maintain such policy in effect during the Employment Period. In no
event shall the Company be liable for premiums in excess of $6,500 per annum
with respect thereto.
7. RESTRICTIVE COVENANTS
7.1 The services of the Employee are unique and extraordinary
and essential to the business of the Company, especially since the Employee
shall have access to the Company's customer lists, trade secrets and other
privileged and confidential information essential to the Company's business.
Therefore, the Employee agrees that, if the term of his employment hereunder
shall expire or his employment shall at any time terminate for any reason
whatsoever, with or without cause, the Employee will not at any time within two
(2) years after such expiration or termination (the "Restrictive Covenant
Period"), without the prior written consent of the Company (which consent shall
require the approval of the Board of Directors of the Company), directly or
indirectly, anywhere within five (5) miles of the location of any office of the
Company or any franchisee thereof at the date of expiration or termination,
whether individually or as a principal, officer, employee, partner, member,
manager, director, agent of, or consultant or independent contractor to, any
entity, (i) engage or participate in a business which, as of such expiration or
termination date, is similar to or competitive with, directly or indirectly,
that of the Company and shall not make any investments in any such similar or
competitive entity, except that the foregoing shall not restrict the Employee
from acquiring up to one percent (1%) of the outstanding voting stock of any
entity whose securities are listed on a stock exchange or Nasdaq; (ii) cause or
seek to persuade any director, officer, employee, customer, client, account,
agent or supplier of, or consultant or independent contractor to, the Company,
or others with whom the Company has a business relationship (collectively
"Business Associates"), to discontinue or materially modify the status,
employment or relationship of such person or entity with the Company, or to
become employed in any activity similar to or competitive with the activities of
the Company; (iii) cause or seek to persuade any prospective customer, client,
account or other Business Associate of the Company (which at or about the date
of cessation of the Employee's employment with the Company was then actively
being solicited by the Company) to determine not to enter into a business
relationship with the Company or to materially modify its contemplated business
relationship; (iv) hire, retain or associate in a business relationship with,
directly or indirectly, any director, officer or employee of the Company; or (v)
solicit or cause or authorize to be solicited, or accept, for or on behalf of
him or any third party, any business from, or the entering into of a business
relationship with, (a) others who are, or were within one (l) year prior to the
cessation of his employment with the Company, a customer, client, account or
other Business Associate of the Company, or (b) any prospective
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customer, client, account or other Business Associate of the Company which at or
about the date of such cessation was then actively being solicited by the
Company. The foregoing restrictions set forth in this Paragraph 7.1 shall apply
likewise during the Employment Period. Notwithstanding the foregoing, (x) in the
event the Employee is entitled to receive the Severance Amount (as hereinafter
defined) or his employment is terminated by the Company without cause, then the
obligations under this Paragraph 7.1 shall terminate in the event the Company
defaults in its obligation to make any payments provided for in Paragraph 11.2
or 11.3 hereof and such default continues for a period of twenty (20) days
following receipt by the Company of written notice thereof from the Employee;
and (y) the provisions of this Paragraph 7.1 shall cease to apply in the event
(I) this Agreement is terminated pursuant to the provisions of Paragraph 11.1(a)
hereof or (II) (A) the term of this Agreement is extended for the Extended Term;
(B) prior to the expiration of the Extended Term (the "Extended Expiration
Date"), the Employee is not offered by the Company a further two (2) year
extension of the term of this Agreement at an annual base salary at least equal
to his annual base salary in effect at the Extended Expiration Date and
otherwise substantially upon the terms set forth herein (except for any loans
and bonuses provided for herein); (C) prior to the Extended Expiration Date, the
Employee's employment with the Company is not terminated in accordance with the
provisions of Paragraph 11.1(b) hereof and he does not voluntarily terminate his
employment with the Company; and (D) the Employee's employment with the Company
terminates on the Extended Expiration Date.
7.2 The Employee agrees to disclose promptly in writing to the
Board of Directors of the Company all ideas, processes, methods, devices,
business concepts, inventions, improvements, discoveries, know-how and other
creative achievements (hereinafter referred to collectively as "discoveries"),
whether or not the same or any part thereof is capable of being patented,
trademarked, copyrighted, or otherwise protected, which the Employee, while
employed by the Company, conceives, makes, develops, acquires or reduces to
practice, whether acting alone or with others and whether during or after usual
working hours, and which are related to the Company's business or interests, or
are used or usable by the Company, or arise out of or in connection with the
duties performed by the Employee. The Employee hereby transfers and assigns to
the Company all right, title and interest in and to such discoveries (whether
conceived, made, developed, acquired or reduced to practice on or prior to the
date hereof or hereafter during his employment with the Company), including any
and all domestic and foreign copyrights and patent and trademark rights therein
and any renewals thereof. On request of the Company, the Employee will, without
any additional compensation, from time to time during, and after the expiration
or termination of, the Employment Period, execute such further instruments
(including, without limitation, applications for copyrights, patents, trademarks
and assignments thereof) and do all such other acts and things as may be deemed
necessary or desirable by the Company to protect and/or enforce its right in
respect of such discoveries. All expenses of filing or prosecuting any patent,
trademark or copyright application shall be borne by the Company, but the
Employee shall cooperate in filing and/or prosecuting any such application.
7.3 (a) The Employee represents that he has been informed that
it is the policy of the Company to maintain as secret all confidential
information relating to the Company,
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including, without limitation, any and all knowledge or information with respect
to secret or confidential methods, processes, plans, materials, customer lists
or data, or with respect to any other confidential or secret aspect of the
Company's activities, and further acknowledges that such confidential
information is of great value to the Company. The Employee recognizes that, by
reason of his employment with the Company, he will acquire confidential
information as aforesaid. The Employee confirms that it is reasonably necessary
to protect the Company's goodwill, and, accordingly, hereby agrees that he will
not, directly or indirectly (except where authorized by the Board of Directors
of the Company), at any time during the term of this Agreement or thereafter
divulge to any person, firm or other entity, or use, or cause or authorize any
person, firm or other entity to use, any such confidential information.
(b) The Employee agrees that he will not, at any
time, remove from the Company's premises any drawings, notebooks, software, data
or other confidential information relating to the business and procedures
heretofore or hereafter acquired, developed and/or used by the Company, except
where necessary in the fulfillment of his duties hereunder.
(c) The Employee agrees that, upon the
expiration or termination of this Agreement for any reason whatsoever, he shall
promptly deliver to the Company any and all drawings, notebooks, software, data
and other documents and material, including all copies thereof, in his
possession or under his control relating to any confidential information or
discoveries, or which is otherwise the property of the Company.
(d) For purposes hereof, the term "confidential
information" shall mean all information given to the Employee, directly or
indirectly, by the Company and all other information relating to the Company
otherwise acquired by the Employee during the course of his employment with the
Company (whether on or prior to the date hereof or hereafter), other than
information which (i) was in the public domain at the time furnished to, or
acquired by, the Employee, or (ii) thereafter enters the public domain other
than through disclosure, directly or indirectly, by the Employee or others in
violation of an agreement of confidentiality or nondisclosure.
7.4 For purposes of this Paragraph 7, the term "Company" shall
mean and include any and all subsidiaries and affiliated entities of the Company
in existence from time to time.
8. VACATIONS
8.1 The Employee shall be entitled to an aggregate of four (4)
weeks vacation time for each twelve (12) month period during the Employment
Period commencing on the date hereof, the time and duration thereof to be
determined by mutual agreement between the Employee and the Company.
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9. PARTICIPATION IN EMPLOYEE BENEFIT PLANS; STOCK OPTIONS
9.1 The Employee shall be accorded the right to participate in
and receive benefits under and in accordance with the provisions of any pension,
profit sharing, insurance, medical and dental insurance or reimbursement (with
family coverage) or other plan or program of the Company either in existence as
of the date hereof or hereafter adopted for the benefit generally of its
executive employees.
9.2 Concurrently with the execution hereof, pursuant to the
Company's 1998 Stock Option Plan and a Stock Option Agreement of even date, the
Company is granting to the Employee the right and option to purchase up to
200,000 Common Shares of the Company upon the following terms: (a) an expiration
date of five (5) years from the date hereof; (b) an exercise price equal to
$2.69 per share; and (c) vesting to the extent of one-half thereof on each of
the first and second anniversaries of the date hereof (the "Option").
10. SERVICE AS OFFICER OF SUBSIDIARIES; SERVICE AS DIRECTOR
10.1 During the Employment Period, the Employee shall, if
elected or appointed, serve as (a) an officer of any subsidiaries of the Company
in existence or hereafter created or acquired and (b) a director of the Company
and/or any such subsidiaries of the Company, in each case without any additional
compensation for such services.
11. EARLIER TERMINATION; PAYMENT FOLLOWING TERMINATION
11.1 The Employee's employment hereunder shall automatically
terminate upon his death and may terminate at the option of the Company in the
event of:
(a) the Employee's incapacity, as provided for
in Paragraph 6.l hereof; or
(b) "cause", as provided for in Paragraph 1.1 hereof.
Upon the termination of the Employee's employment, the Employment Period shall
be considered to have ended.
11.2 In the event of the following:
(a) the Company timely sends the Non-Extension
Notice to the Employee in accordance with the provisions of Paragraph 1.1
hereof;
(b) prior to the Fifth Anniversary Date, the
Employee's employment with the Company is not terminated in accordance with the
provisions of Paragraph 11 hereof and he does not voluntarily terminate his
employment with the Company; and
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(c) the Employee's employment with the Company
terminates on the Fifth Anniversary Date, then, the Company shall continue to
pay to the Employee his then annual base salary for a period of two (2) years
following the Fifth Anniversary Date (the "Severance Amount"). The Severance
Amount shall be payable in a manner consistent with the payment to the Employee
theretofore of his salary.
11.3 In the event of the termination of the Employee's
employment by the Company during the Employment Period without cause, as
liquidated damages, the Employee shall be entitled to receive an amount equal to
all compensation that he would have been entitled to receive for the remainder
of the Employment Period pursuant to Paragraph 4 hereof as if his employment had
not been terminated (the "Post-Termination Payments"). The Post-Termination
Payments shall be made in a manner consistent with the payment to the Employee
theretofore of his salary as if he had remained in the employ of the Company. In
the event the notice of termination of employment is given (a) prior to the
ninetieth (90th) day prior to the Fifth Anniversary Date or (b) subsequent to
such ninetieth (90th) day but after the date of any Non-Extension Notice timely
given, then, instead of any obligation to pay the Employee any amount with
regard to the Extended Term, the Employee shall be entitled to receive the
Severance Amount, payable, as provided for in Paragraph 11.2 hereof, following
the expiration of the Post-Termination Payments.
11.4 The Employee shall not be required to mitigate any
damages he may incur for any termination of employment by the Company without
cause by seeking other employment; however, any amounts paid or payable to the
Employee from other employment or other services shall reduce on a
dollar-for-dollar basis any amount otherwise payable to him pursuant to
Paragraph 11 hereof.
12. INJUNCTIVE RELIEF; REMEDIES
12.1 The Employee acknowledges and agrees that, in the event he
shall violate or threaten to violate any of the restrictions of Paragraph 3
(with regard to the last clause thereof) or 7 hereof, the Company will be
without an adequate remedy at law and will therefore be entitled to enforce such
restrictions by temporary or permanent injunctive or mandatory relief in any
court of competent jurisdiction without the necessity of proving damages.
12.2 The Employee agrees further that the Company shall have the
following additional rights and remedies:
(i) The right and remedy to require the Employee to
account for and pay over to the Company all profits derived or received by him
as the result of any transactions constituting a breach of any of the provisions
of Paragraph 7.1, and the Employee hereby agrees to account for and pay over
such profits to the Company; and
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(ii) The right to recover attorneys' fees incurred in
any action or proceeding in which it seeks to enforce its rights under Paragraph
7 hereof and is successful on any grounds.
12.3 Each of the rights and remedies enumerated above shall be
independent of the other, and shall be severally enforceable, and all of such
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity.
12.4 The parties hereto intend to and hereby confer jurisdiction
to enforce the covenants contained in Paragraph 7.1 upon the courts of any
jurisdiction within the geographical scope of such covenants (a "Jurisdiction").
In the event that the courts of any one or more of such Jurisdictions shall hold
such covenants unenforceable by reason of the breadth of their scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other Jurisdiction, as to breaches of such covenants in such other
respective Jurisdictions, the above covenants as they relate to each
Jurisdiction being, for this purpose, severable into diverse and independent
covenants.
13. NO RESTRICTIONS
13.l The Employee hereby represents that neither the execution
of this Agreement nor his performance hereunder will (a) violate, conflict with
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
the terms, conditions or provisions of any contract, agreement or other
instrument or obligation to which the Employee is a party, or by which he may be
bound, or (b) violate any order, judgment, writ, injunction or decree applicable
to the Employee. In the event of a breach hereof, in addition to the Company's
right to terminate this Agreement, the Employee shall indemnify the Company and
hold it harmless from and against any and all claims, losses, liabilities, costs
and expenses (including reasonable attorneys' fees) incurred or suffered in
connection with or as a result of the Company's entering into this Agreement or
employing the Employee hereunder.
14. ARBITRATION
14.1 Except with regard to Paragraph 12.1 hereof and any other
matters that are not a proper subject of arbitration, all disputes between the
parties hereto concerning the performance, breach, construction or
interpretation of this Agreement or any portion thereof, or in any manner
arising out of this Agreement or the performance thereof, shall be submitted to
binding arbitration, in accordance with the rules of the American Arbitration
Association, which arbitration shall be carried out in the manner hereinafter
set forth.
14.2 Within twenty (20) days after written notice by one party
to the other of its demand for arbitration, which demand shall set forth the
name and address of its arbitrator, the other party shall select its arbitrator
and so notify the demanding party. Within twenty (20) days thereafter, the two
arbitrators so selected shall select the third arbitrator. The decision of any
two (2) arbitrators shall be binding upon the parties. In default of either side
naming its arbitrator as
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aforesaid or in default of the selection of the said third arbitrator as
aforesaid, the American Arbitration Association shall designate such arbitrator
upon the application of either party. The arbitration proceeding shall take
place at a mutually agreeable location in Nassau County, New York or such other
location as agreed to by the parties.
14.3 A party who files a notice of demand for arbitration must
assert in the demand all claims then known to that party on which arbitration is
permitted to be demanded. When a party fails to include a claim through
oversight, inadvertence or excusable neglect, or when a claim has matured or
been acquired subsequently, the arbitrators may permit amendment. A demand for
arbitration shall be made within a reasonable time after the claim has arisen,
and in no event shall it be made after the date when institution of legal or
equitable proceedings based on such claim would be barred by the applicable
statute of limitations.
14.4 The award rendered by the arbitrators shall be final,
binding and conclusive, shall be specifically enforceable, and judgment may be
entered upon it in accordance with applicable law in the appropriate court in
the State of New York, with no right of appeal therefrom.
14.5 Each party shall pay its or his own expenses of
arbitration, and the expenses of the arbitrators and the arbitration proceeding
shall be equally shared; provided, however, that, if, in the opinion of a
majority of the arbitrators, any claim or defense was unreasonable, the
arbitrators may assess, as part of their award, all or any part of the
arbitration expenses of the other party (including reasonable attorneys' fees)
and of the arbitrators and the arbitration proceeding against the party raising
such unreasonable claim or defense; provided, further, that, if the arbitration
proceeding relates to the issue of "cause" for termination of employment, (a)
if, in the opinion of a majority of the arbitrators, "cause" existed, the
arbitrators shall assess, as part of their award, all of the arbitration
expenses of the Company (including reasonable attorneys' fees) and of the
arbitrators and the arbitration proceeding against the Employee or (b) if, in
the opinion of a majority of the arbitrators, "cause" did not exist, the
arbitrators shall assess, as part of their award, all of the arbitration
expenses of the Employee (including reasonable attorneys' fees) and of the
arbitrators and the arbitration proceeding against the Company.
15. ASSIGNMENT
15.1 This Agreement, as it relates to the employment of the
Employee, is a personal contract and the rights and interests of the Employee
hereunder may not be sold, transferred, assigned, pledged or hypothecated.
16. NOTICES
16.1 Any notice required or permitted to be given pursuant to
this Agreement shall be deemed to have been duly given when delivered by hand or
sent by certified or registered mail, return receipt requested and postage
prepaid, overnight mail or courier or telecopier as follows:
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If to the Employee:
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
with a copy to:
Weil & Kestenbaum
42-40 Bell Boulevard
Bayside, New York 11361
Attention: Alan Kestenbaum, Esq.
Telecopier Number: (718) 281-0850
If to the Company:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Chairman of the Board
Telecopier Number: (516) 296-7111
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred S. Skolnik, Esq.
Telecopier Number: (516) 296-7111
or at such other address as any party shall designate by notice to the other
party given in accordance with this Paragraph 16.1.
17. GOVERNING LAW
17.1 This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York applicable to
agreements made and to be performed entirely in New York.
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18. WAIVER OF BREACH; PARTIAL INVALIDITY
18.1 The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach. If any provision, or part thereof, of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and not in any way affect or render invalid or unenforceable
any other provisions of this Agreement, and this Agreement shall be carried out
as if such invalid or unenforceable provision, or part thereof, had been
reformed, and any court of competent jurisdiction or arbitrators, as the case
may be, are authorized to so reform such invalid or unenforceable provision, or
part thereof, so that it would be valid, legal and enforceable to the fullest
extent permitted by applicable law.
19. ENTIRE AGREEMENT
19.1 This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and there are no
representations, warranties or commitments except as set forth herein. This
Agreement supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
subject matter hereof. This Agreement may be amended, and any provision hereof
waived, only by a writing executed by the party sought to be charged. No
amendment or waiver on the part of the Company shall be valid unless approved by
its Board of Directors.
20. COUNTERPARTS
20.1 This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
21. FACSIMILE SIGNATURES
21.1 Signatures hereon which are transmitted via facsimile shall
be deemed original signatures.
22. REPRESENTATION BY COUNSEL; INTERPRETATION
22.1 The Employee acknowledges that he has been represented by
counsel in connection with this Agreement. Accordingly, any rule or law or any
legal decision that would require the interpretation of any claimed ambiguities
in this Agreement against the party that drafted it has no application and is
expressly waived by the Employee. The provisions of this Agreement shall be
interpreted in a reasonable manner to give effect to the intent of the parties
hereto.
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23. HEADINGS
23.1 The headings and captions under sections and paragraphs of
this Agreement are for convenience of reference only and do not in any way
modify, interpret or construe the intent of the parties or affect any of the
provisions of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year above written.
DCAP GROUP, INC.
By:/s/ Morton L. Certilman
--------------------------
Morton L. Certilman, Chairman of the Board
/s/ Kevin Lang
-------------------------------------
Kevin Lang
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EXHIBIT 4.3(a)
-------------, ----
$-----------
PROMISSORY NOTE
FOR VALUE RECEIVED, KEVIN LANG (the "Maker"), having an address as
indicated under his name, hereby promises to pay to the order of DCAP GROUP,
INC. (formerly EXTECH Corporation), a Delaware corporation (the "Payee"), at 90
Merrick Avenue, East Meadow, New York or at such other place as the holder
hereof may from time to time designate in writing, in immediately available New
York funds, the principal sum of _____________________ THOUSAND DOLLARS
($________), together with interest on the outstanding principal balance from
the date hereof at the rate of ___ percent (__%) per annum [Wall Street Journal
prime rate at time of execution]. The principal amount of this Note, together
with accrued interest thereon, shall be payable in four (4) equal annual
installments commencing one (1) year from the date hereof and continuing on the
anniversary day of the date hereof of each subsequent year, in such annual
amount as shall be necessary to self-amortize this Note at the end of such four
(4) year period [if this Note is dated later than three (3) years after February
25, 1999, then the payment terms shall be amended so that any payment that would
be otherwise due after seven (7) years from February 25, 1999 shall be due on
such seventh anniversary date]; provided, however, that the amounts due under
this Note shall be payable sooner to the extent of any proceeds received by the
Maker from the sale or other disposition of any shares of Common Stock of the
Payee on or after the date hereof (the proceeds being immediately payable to the
Payee).
The payment of all amounts due under this Note is secured by a pledge
of ________ shares of Common Stock of the Payee [five times the principal amount
of this Note] owned by the Maker pursuant to a Pledge Agreement of even date
between the Maker and the Payee (the "Pledge Agreement").
In the event (a) the Maker shall (i) fail to make any payment due
hereunder and such failure shall continue unremedied for a period of ten (10)
days following the date of written notice of default; (ii) admit in writing his
inability to pay his debts as they mature; (iii) make a general assignment for
the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file
a voluntary petition in bankruptcy or a petition or an answer seeking an
arrangement with creditors; (vi) take advantage of any bankruptcy, insolvency or
readjustment of debt law or statute or file an answer admitting the material
allegations of a petition filed against him in any proceeding under any such
law; or (vii) have entered against him a court order approving a petition filed
against him under the Federal Bankruptcy Act; or (b) there shall be a breach of
any representation, warranty, covenant or other agreement set forth in the
Pledge Agreement or that certain Employment Agreement dated
<PAGE>
February 25, 1999 between the Maker and the Payee and such breach shall continue
unremedied for a period of fifteen (15) days following the date of written
notice thereof, then and in each and every such event, the Payee may, by written
notice to the Maker, declare the entire unpaid principal amount of this Note
then outstanding plus accrued interest to be forthwith due and payable whereupon
the same shall become forthwith due and payable.
The Maker may prepay the principal amount of this Note, in whole or in
part, from time to time, without premium or penalty, provided that the Maker
pays all interest accrued with regard to the principal prepaid to the date of
prepayment.
If the Maker shall fail to pay when due, whether by acceleration or
otherwise, all or any portion of the principal amount hereof, any such unpaid
amount shall bear interest for each day from the date it was so due until paid
in full at the rate of sixteen percent (16%) per annum, payable on demand.
Notwithstanding anything to the contrary contained in this Note, the
rate of interest payable on this Note shall never exceed the maximum rate of
interest permitted under applicable law.
This Note may not be waived, changed, modified or discharged orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of any agent or attorneys for collection upon default or
maturity, the Maker agrees to pay, in addition to all other amounts due and
payable hereunder, all reasonable costs and expenses of collection or attempting
to collect this Note, including reasonable attorneys' fees.
The Maker and any endorsers hereof, for themselves and their respective
representatives, successors and assigns, expressly (a) waive presentment,
protest, notice of dishonor, notice of non-payment, notice of maturity, notice
of protest, diligence in collection, and the benefit of any applicable
exemptions, including, but not limited to, exemptions claimed under insolvency
laws, and (b) consent that the Payee may release or surrender, exchange or
substitute any property or other collateral or security now held or which may
hereafter be held as security for the payment of this Note, and/or may release
any guarantor, and/or may extend the time for payment and/or otherwise modify
the terms of payment of any part or the whole of the debt evidenced hereby.
Any notice, demand or request relating to any matter set forth herein
shall be in writing and shall be deemed effective when hand delivered, when
mailed, postage prepaid, by registered or certified mail, return receipt
requested, or by a nationally recognized overnight mail or courier
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service, or when sent by facsimile transmission (with transmission confirmation)
to any party hereto at its address stated herein or at such other address of
which it shall have notified the party giving such notice in writing as
aforesaid.
The Payee shall be entitled to assign all or any portion of its right,
title and interest in and to this Note at its sole discretion without notice to
the Maker, provided that the Maker shall continue to make payments required
hereunder to the Payee until he has received notice of change of payee for
payments as provided herein.
Notwithstanding any other provision of this Note, all payments made
hereunder shall be applied first to payment of sums payable hereunder other than
interest and principal, secondly, interest on the principal balance outstanding
hereunder from time to time, and thirdly to principal.
The Maker acknowledges and agrees that the obligations under this Note
are unconditional and are not subject to any defense, counterclaim, or right of
offset or setoff.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, excluding conflict of law principles thereof.
The Maker acknowledges that he has been represented by counsel in
connection with this Note. Accordingly, any rule or law or any legal decision
that would require the interpretation of any claimed ambiguities in this Note
against the party that drafted it has no application and is expressly waived by
the Maker. The provisions of this Note shall be interpreted in a reasonable
manner to give effect to the intent of the Maker and the Payee.
Kevin Lang
Address: 2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
3
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
On ____________, ____ before me personally came Kevin Lang to
me known, and known to be the individual described in, and who executed the
foregoing Note, and duly acknowledged to me that he executed the same.
Notary Public
4
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EXHIBIT 4.3(b)
PLEDGE AGREEMENT, dated ____________, ____, by and between
KEVIN LANG (the "Pledgor") and DCAP GROUP, INC. (formerly EXTECH Corporation), a
Delaware corporation (the "Pledgee").
WHEREAS, simultaneously herewith, the Pledgee is loaning to
the Pledgor the amount of ___________ Thousand Dollars ($________) and the
Pledgor is executing and delivering to the Pledgee a Promissory Note in such
principal amount (the "Note").
WHEREAS, the Pledgee desires, and the Pledgor is willing, to
secure performance of the Note.
WHEREAS, certain capitalized terms used herein are defined in
Section 8 hereof.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLEDGE. The Pledgor hereby grants to the Pledgee, as security for the
performance by the Pledgor of all of his obligations under the Note (the
"Obligations"), a valid and binding first security interest in the Collateral
(as hereinafter defined). The Pledgor has delivered simultaneously herewith to
the Pledgee, and the Pledgee hereby acknowledges receipt of, a certificate
evidencing the Pledged Shares registered in the name of the Pledgor (the
"Pledged Certificate"), accompanied by appropriate stock powers endorsed by the
Pledgor (the "Stock Powers").
2. TERM. This Agreement shall continue in effect until terminated in accordance
with Section 7 hereof.
3. SHARE RIGHTS; CASH DIVIDENDS.
(a) In the event of any change in the Pledged Shares during the term of
this Agreement by reason of any stock dividend, stock split-up, reverse split,
recapitalization, combination, reclassification, exchange of shares, merger,
consolidation or the like, all new, substituted, or additional stock, or other
securities, issued by reason of any such change (the "Adjusted Shares") (the
Pledged Shares and the Adjusted Shares are hereinafter referred to collectively
as the "Shares") shall be retained by or delivered to, as the case may be, and
held by the Pledgee under the terms of this Agreement in the same manner as the
Pledged Shares originally pledged hereunder.
(b) Unless and until the occurrence of a Default (as hereinafter
defined), the Pledgor shall have the right to vote the Shares. Upon the
occurrence of a Default, the Shares shall be registered in the name of the
Pledgee and the Pledgee shall have all incidents of ownership thereof.
(c) Provided that no Default has occurred, any and all cash dividends
paid in respect of the Shares shall be paid to the Pledgor; provided, however,
that, in any event, any extraordinary
<PAGE>
distributions made in respect of the Shares shall be retained by the Pledgee and
held by it in accordance with the terms hereof.
4. REPRESENTATIONS. The Pledgor hereby represents and warrants to the Pledgee
that:
(a) The Pledgor is the sole record and beneficial owner of the Pledged
Shares, free and clear of all liens, pledges, security interests, encumbrances,
restrictions, subscriptions, hypothecations, charges and claims of any kind
whatsoever (collectively, "Liens").
(b) No consents of governmental and other regulatory agencies, foreign
or domestic, or of other parties are required to be received by or on the part
of the Pledgor to enable him to enter into and carry out this Agreement and the
transactions contemplated hereby.
(c) The Pledgor has the power to enter into this Agreement and to carry
out his obligations hereunder. This Agreement constitutes the valid and binding
obligation of the Pledgor, and is enforceable in accordance with its terms.
(d) Neither the execution and delivery of this Agreement nor compliance
by the Pledgor with any of the provisions hereof nor the consummation of the
transactions contemplated hereby will violate or, alone or with notice or the
passage of time, result in the material breach or termination of, or otherwise
give any contracting party the right to terminate, or declare a default under,
the terms of any agreement, understanding or arrangement to which the Pledgor is
a party or by which he or his assets or properties may be bound.
5. COVENANTS.
(a) The Pledgor hereby covenants that from and after the date hereof
and until the Obligations shall have been satisfied in full:
(i) The Pledgor will not grant, create, incur, assume or
suffer to exist any Lien in the Collateral (except for the Lien created hereby).
(ii) The Pledgor will defend the Pledgee's right, title, and
security interest in and to the Collateral against the claims of any person,
firm, corporation or other entity.
(iii) The Pledgor shall at any time and from time to time,
upon the written request of the Pledgee, execute and deliver such other
instruments and documents and do such further acts and things as the Pledgee may
reasonably request in order to effect the purposes of this Agreement.
(b) The Pledgee's sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession, under Section
9-207 of the Code or otherwise, shall be to deal with it in the same manner as
the Pledgee deals with similar securities and property for its own account.
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6. DEFAULT.
(a) In the event that the Pledgor fails to pay to the Pledgee any
Obligation when due or there shall otherwise occur an Event of Default (as
defined in the Note) ("Default"), the Pledgee shall have all of the rights and
remedies afforded to secured parties with respect to the Collateral as set forth
in the Code as well as all other rights and remedies granted in the Note and
this Agreement. Without limiting the generality of the foregoing, the Pledgee,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, upon such terms and conditions and at such prices as it
may deem advisable, for cash or on credit or for future delivery without
assumption of any credit risk. The Pledgee shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold. The
Pledgee shall apply any proceeds from time to time held by it and the net
proceeds of any such sale or other disposition, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Pledgee hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of counsel to the
Pledgee, to the satisfaction in whole or in part of the Obligations, in such
order as the Pledgee may elect and only after such application and after the
payment by the Pledgee of any other amount required by any provision of law,
including, without limitation, Section 9-504 (1)(c) of the Code, need the
Pledgee account for the surplus, if any, to the Pledgor. To the extent permitted
by applicable law, the Pledgor waives all claims, damages and demands he may
acquire against the Pledgee arising out of the lawful exercise by it of any
rights hereunder. Neither the Pledgee nor any of its respective directors,
officers, employees or agents shall be liable for failure to sell or otherwise
dispose of the Collateral or for any delay in doing so. If any notice of a
proposed sale or other disposition of the Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least ten (10)
days before such sale or other disposition. In any event, notice of a proposed
sale or other disposition shall be given at least ten (10) days before such sale
or other disposition to the Pledgor and Abraham Weinzimer. The Pledgor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all of the Obligations and
any and all costs and expenses of every kind incurred by the Pledgee with
respect to the collection of such deficiency, including, without limitation, all
reasonable fees and disbursements of any attorneys employed by the Pledgee.
The Pledgor recognizes that the Pledgee may be unable to
effect a public sale of any or all the Collateral by reason of certain
restrictions contained in the Securities Act of 1933, as amended, and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a
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view to the distribution or resale thereof. The Pledgor acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
than if such sale were a public sale and agrees that any such private sale under
such circumstances shall not be evidence that it has been made in other than a
commercially reasonable manner.
The Pledgor agrees to use his best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this section valid and binding
and in compliance with any and all other applicable requirements of law.
(b) The rights of the Pledgee hereunder shall not be conditioned or
contingent upon the pursuit by the Pledgee of any right or remedy against the
Pledgor, any other person which may be or become liable in respect of all or any
part of the Obligations or against any collateral security therefor, guarantee
therefor or right of offset with respect thereto. Neither the Pledgee nor any of
its affiliates or representatives shall be liable for any failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so, nor shall the Pledgee be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or any other person or
to take any other action whatsoever with regard to the Collateral or any part
thereof.
7. TERMINATION OF AGREEMENT. Upon (i) the Pledgor's satisfaction of the
Obligations in full (at which time the Pledgee shall redeliver the Pledged
Certificate and accompanying Stock Powers to the Pledgor), or (ii) the
conclusion of the actions contemplated by Section 6 hereof, this Agreement shall
thereupon terminate.
8. DEFINED TERMS. The following terms shall have the following meanings:
(a) "Code" means the Uniform Commercial Code from time to time in
effect in the State of New York.
(b) "Collateral" means the Pledged Shares and all Proceeds.
(c) "Pledged Shares" means _____________ thousand (________) shares of
Common Stock of the Pledgee [five times the principal amount of the Note],
together with any and all shares, stock certificates, options or rights of any
nature whatsoever that may be issued or granted to the Pledgor with regard
thereto, in substitution or replacement thereof, as a conversion thereof, in
exchange therefor or otherwise in respect thereof.
(d) "Proceeds" means all "proceeds" as such term is defined in Section
9-306(1) of the Code on the date hereof and, in any event, shall include,
without limitation, all dividends or other income from the Pledged Shares,
collections thereon and distributions with respect thereto.
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9. MISCELLANEOUS.
(a) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective legal representatives, successors and
assigns.
(b) This Agreement contains the entire agreement and understanding
between the parties in respect of the subject matter hereof, and cannot be
modified, changed, discharged or terminated except by an instrument in writing,
signed by the party against whom enforcement of any modification, change,
discharge or termination is sought.
(c) A waiver of the breach of any term or condition of this Agreement
shall not be deemed to constitute a waiver of any other breach of the same or
any other term or condition.
(d) This Agreement will be construed and governed in accordance with
the laws of the State of New York, excluding choice of law rules thereof.
(e) All notices or other communications required or permitted hereunder
shall be sufficiently given if delivered by hand, or sent by certified mail,
return receipt requested, postage prepaid, facsimile transmission or overnight
mail or courier, addressed as follows:
If to the Pledgor:
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
with a copy to:
Weil & Kestenbaum
42-40 Bell Boulevard
Bayside, New York 11361
Attention: Alan Kestenbaum, Esq.
Telecopier Number: (718) 281-0850
If to the Pledgee:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Chairman of the Board
Telecopier Number: (516) 296-7111
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with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred Skolnik, Esq.
Telecopier Number: (516) 296-7111
(f) The Pledgor waives any and all notice of the extension or
modification of the terms of the Note.
(g) In the event that the Collateral or any portion thereof is released
to the Pledgor and any payments of, or proceeds of any security for, the
Obligations, or any part thereof, are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then the Pledgor shall redeliver the Collateral
and Stock Powers to the Pledgee and, until so redelivered, shall hold the
Collateral and Stock Powers as agent of, and in trust for, the Pledgee.
(h) If any provision hereof is declared to be invalid and
unenforceable, then, to the fullest extent permitted by law, the other
provisions hereof shall remain in full force and effect and shall be liberally
construed in favor of the Pledgee in order to carry out the intentions of the
parties hereto as nearly as may be possible.
(i) Each party acknowledges that he or it has been represented by
counsel in connection with this Agreement. Accordingly, any rule or law or any
legal decision that would require the interpretation of any claimed ambiguities
in this Agreement against the party that drafted it has no application and is
expressly waived by the parties. The provisions of this Agreement shall be
interpreted in a reasonable manner to give effect to the intent of the parties
hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Kevin Lang
DCAP GROUP, INC.
By:
Morton L. Certilman,
Chairman of the Board
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EMPLOYMENT AGREEMENT, dated as of February 25, 1999, by and
between DCAP GROUP, INC. (formerly EXTECH Corporation), a Delaware corporation
(the "Company"), and ABRAHAM WEINZIMER (the "Employee").
RECITALS
WHEREAS, the Company and the Employee desire to enter into an
employment agreement which will set forth the terms and conditions upon which
the Employee shall be employed by the Company and upon which the Company shall
compensate the Employee.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants hereinafter set forth, the parties hereto have agreed, and do
hereby agree, as follows:
1. EMPLOYMENT; TERM
1.1 (a) The Company will employ the Employee in its business,
and the Employee will work for the Company therein, as its Executive Vice
President for a term commencing as of the date hereof and terminating on the
fifth anniversary of the date hereof (the "Fifth Anniversary Date") (the
"Initial Term"), except that the term of this Agreement shall continue for an
additional three (3) years (the "Extended Term") unless, at least ninety (90)
days prior to the Fifth Anniversary Date, the Company, by vote of at least
seventy-five percent (75%) of all of the members of its Board of Directors
(including, for purposes of determining the number of members of the Board, the
Employee, if a member), notifies the Employee of its desire not to extend the
term of this Agreement (the "Non-Extension Notice"). The term of this Agreement,
as it may be extended, is hereinafter referred to as the "Employment Period".
(b) The Employee's employment may be terminated by
the Company at any time during the Employment Period upon written notice for
"cause". The Company agrees that it will not terminate the Employee's employment
for "cause" unless a majority of all of the members of its Board of Directors
(including, for purposes of determining the number of members of the Board, the
Employee, if a member) shall have approved such action. The Company agrees that
it will not terminate the Employee's employement other than for "cause" unless
at least seventy-five percent (75%) of all of the members of the Board of
Directors (including, for purposes of determining the number of members of the
Board, the Employee, if a member) shall have approved such action. As used in
this Agreement, "cause" shall mean the Employee's commission of any act in the
performance of his duties constituting common law fraud, a felony or other gross
malfeasance of duty, the Employee's commission of any act involving moral
turpitude, any material misrepresentation by the Employee (including, without
limitation, a breach of any representation set forth in Paragraph 13.1 hereof),
any breach of any material covenant on the Employee's part herein set forth, or
the Employee's engagement in misconduct which is materially injurious to the
Company or its subsidiaries.
1.2 Unless sooner terminated as provided for in this
Agreement, at the end of the Employment Period (the "Expiration Date"), the
Employee's employment with the Company shall terminate. Upon termination of the
Employee's employment with the Company for any reason whatsoever, he shall be
deemed to have resigned his positions as an officer and director of the Company
and as an employee, officer and director of each of the Company's subsidiaries.
<PAGE>
2. DUTIES
2.1 During the Employment Period, the Employee shall serve as
the Company's Executive Vice President and shall perform duties of an executive
character consisting of administrative and managerial responsibilities on behalf
of the Company and such further duties of an executive character as shall, from
time to time, be delegated or assigned to him by the Board of Directors of the
Company consistent with the Employee's position.
3. DEVOTION OF TIME
3.1 During the Employment Period, the Employee shall expend
all of his working time for the Company; shall devote his best efforts, energy
and skill to the services of the Company and the promotion of its interests; and
shall not take part in activities detrimental to the best interests of the
Company.
4. COMPENSATION; LOANS
4.1 For all services to be rendered by the Employee during the
Employment Period and in consideration of the Employee's representations and
covenants set forth in this Agreement, the Employee shall be entitled to receive
from the Company compensation as set forth herein. The Employee acknowledges and
agrees that, notwithstanding the provisions of this Agreement, his compensation
hereunder is subject to reduction as provided for in a certain Agreement, dated
as of May 8, 1998, by and among the Company and the Employee, among others (the
"Acquisition Agreement"), and a certain letter agreement of even date between
the Company and the Employee, with regard to particular Joint Ventures with
respect to which the provisions of Schedule 8 to the Acquisition Agreement are
applicable.
4.2 During the Employment Period, the Employee shall be
entitled to receive a salary at the rate of $250,000 per annum. The Employee
shall be entitled to such additional compensation as shall be determined from
time to time by the Board of Directors of the Company in its sole discretion.
All amounts due hereunder shall be payable in accordance with the Company's
standard payroll practices.
4.3 From time to time during each of the five (5) twelve (12)
month periods of the Initial Term, within ten (10) days following receipt of
written request from the Employee, the Company will loan to the Employee up to
$20,000 (up to $100,000 in the aggregate) (collectively, the "Loans"); provided,
however, that the Company's obligation to make each such Loan shall be subject
to the condition that, at the time the particular Loan is to be made, the
Employee is in the employ of the Company. Each Loan will be evidenced by a
promissory note of the Employee in the principal amount thereof (collectively,
the "Notes") that will provide for, among other things, the following:
(i) interest at a rate per annum equal to the
"prime rate" (as reported in the Wall Street Journal) in effect as of the date
each Loan is made; and
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(ii) payment of the principal amount thereof,
together with accrued interest thereon, in four (4) equal annual installments
commencing one (1) year from the date of each Loan and continuing on the
anniversary day of the date thereof of each subsequent year, in such annual
amount as shall be necessary to self-amortize the Note at the end of such four
(4) year period (provided, however, that no payments shall be due later than the
seventh anniversary of the date hereof), subject to acceleration to the extent
the Employee receives any proceeds from the sale or other disposition of any
shares of Common Stock of the Company;
The Notes shall be in, or substantially in, the form of
Exhibit 4.3(a) attached hereto.
The repayment of all amounts due under each Note shall be
secured by the pledge by the Employee, pursuant to a pledge agreement that will
be entered into at the time of each Loan (the "Pledge Agreement"), of five (5)
Common Shares of the Company for each one dollar ($1) loaned.
The Pledge Agreement shall be in, or substantially in, the
form of Exhibit 4.3(b) attached hereto.
4.4 In the event Pre-Tax Net Income (as hereinafter defined)
for any fiscal year falling entirely within the Employment Period (but not
before the fiscal year ending December 31, 2000 and not after the fiscal year
ending December 31, 2005) is at least $100,000, the Employee shall be entitled
to receive a bonus in the amount of $37,500 (a "Bonus").
4.5 For purposes hereof, the term "Pre-Tax Net Income" for any
particular fiscal year shall mean the consolidated net income before all taxes
of the Company for such fiscal year determined in accordance with generally
accepted accounting principles consistently applied, as audited and reported
upon by the Company's then independent certified public accountants.
4.6 Any Bonus payable pursuant to the provisions hereof shall
be paid on April 15 following the particular fiscal year.
4.7 Notwithstanding anything herein to the contrary, (a) the
Company shall not be obligated to pay any Bonus to the Employee for a particular
fiscal year if, at the time the particular Bonus would be otherwise payable, no
amounts are payable by the Employee to the Company pursuant to his Additional
Shares Note (as such term is defined in the Acquisition Agreement), and (b) if
any amounts are then payable by the Employee pursuant to his Additional Shares
Note, (i) the amount of the Bonus shall not exceed the amount then payable
pursuant to his Additional Shares Note; and (ii) the Company may offset against
the Bonus any amount then payable by the Employee pursuant to his Additional
Shares Note.
5. AUTOMOBILE ALLOWANCE; REIMBURSEMENT OF EXPENSES
5.1 The Employee shall be entitled to the use of a
Company-leased automobile (the "Company Car") during the Employment Period for
business purposes. In no event shall the Company's lease obligations with
respect to the Company Car exceed $1,200 per month. The
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Company shall be responsible for all insurance premiums with respect to the
Company Car (not to exceed $3,000 per year) as well as all expenses for
gasoline, maintenance and repairs with respect thereto. The Employee
acknowledges and agrees that under no circumstances shall the foregoing
provisions create any implication that the Company shall be liable for, or that
the Employee shall be entitled to reimbursement with respect to, any other
insurance premiums, including, without limitation, any life insurance premiums
or premiums with respect to any insurance for any automobile other than the
Company Car, or with respect to any country club or similar membership. The
Employee acknowledges and agrees further that, until sold or otherwise disposed
of, the Company-owned boat shall be used by the Employee solely for business
purposes.
5.2 The Company shall pay directly, or reimburse the Employee
for, all other reasonable and necessary expenses and disbursements incurred by
the Employee for and on behalf of the Company in the performance of his duties
during the Employment Period, including, without limitation, reasonable and
necessary expenses incurred by the Employee for and on behalf of the Company in
the performance of his duties during the Employment Period for (a) client
entertainment and the use of a cellular telephone and beeper, and (b) food,
lodging and transportation if he is required to perform any of his duties away
from his primary place of residence.
5.3 The Employee shall submit to the Company, not less than
once in each calendar month, reports of such expenses and other disbursements in
form normally used by the Company and receipts with respect thereto and the
Company's obligations under Paragraphs 5.1 and 5.2 hereof shall be subject to
compliance therewith.
6. DISABILITY; INSURANCE
6.1 If, during the Employment Period, the Employee, in the
opinion of a majority of all of the members of the Board of Directors of the
Company (excluding the Employee), as confirmed by competent medical evidence,
shall become physically or mentally incapacitated to perform his duties for the
Company hereunder ("Disabled") for a continuous period, then for the first six
(6) months of such period he shall receive his full salary. In no event,
however, shall the Employee be entitled to receive any payments under this
Paragraph 6.1 beyond the expiration or termination date of this Agreement.
Effective with the date of his resumption of full employment, the Employee shall
be re-entitled to receive his full salary. If such illness or other incapacity
shall endure for a continuous period of at least nine (9) months or for at least
two hundred fifty (250) business days during any eighteen (18) month period, the
Company shall have the right, by written notice, to terminate the Employee's
employment hereunder as of a date (not less than thirty (30) days after the date
of the sending of such notice) to be specified in such notice. The Employee
agrees to submit himself for appropriate medical examination to a physician of
the Company's designation as necessary for purposes of this Paragraph 6.1.
6.2 The obligations of the Company under this Paragraph 6 may
be satisfied, in whole or in part, by payments to the Employee under disability
insurance provided by the Company.
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6.3 Notwithstanding the foregoing, in the event, at the time
of any apparent incapacity, the Company has in effect a disability policy with
respect to the Employee (or, if not with respect to the Employee, then with
respect to any executive officer of the Company), the Employee shall be
considered Disabled for purposes of Paragraph 6.1 only if he is (or the
executive officer, had he had the apparent incapacity, would be) considered
disabled for purposes of the policy.
6.4 The Company agrees to obtain a disability insurance policy
on behalf of the Employee (subject to the Employee's satisfying any requirements
therefor) and maintain such policy in effect during the Employment Period. In no
event shall the Company be liable for premiums in excess of $6,500 per annum
with respect thereto.
7. RESTRICTIVE COVENANTS
7.1 The services of the Employee are unique and extraordinary
and essential to the business of the Company, especially since the Employee
shall have access to the Company's customer lists, trade secrets and other
privileged and confidential information essential to the Company's business.
Therefore, the Employee agrees that, if the term of his employment hereunder
shall expire or his employment shall at any time terminate for any reason
whatsoever, with or without cause, the Employee will not at any time within two
(2) years after such expiration or termination (the "Restrictive Covenant
Period"), without the prior written consent of the Company (which consent shall
require the approval of the Board of Directors of the Company), directly or
indirectly, anywhere within five (5) miles of the location of any office of the
Company or any franchisee thereof at the date of expiration or termination,
whether individually or as a principal, officer, employee, partner, member,
manager, director, agent of, or consultant or independent contractor to, any
entity, (i) engage or participate in a business which, as of such expiration or
termination date, is similar to or competitive with, directly or indirectly,
that of the Company and shall not make any investments in any such similar or
competitive entity, except that the foregoing shall not restrict the Employee
from acquiring up to one percent (1%) of the outstanding voting stock of any
entity whose securities are listed on a stock exchange or Nasdaq; (ii) cause or
seek to persuade any director, officer, employee, customer, client, account,
agent or supplier of, or consultant or independent contractor to, the Company,
or others with whom the Company has a business relationship (collectively
"Business Associates"), to discontinue or materially modify the status,
employment or relationship of such person or entity with the Company, or to
become employed in any activity similar to or competitive with the activities of
the Company; (iii) cause or seek to persuade any prospective customer, client,
account or other Business Associate of the Company (which at or about the date
of cessation of the Employee's employment with the Company was then actively
being solicited by the Company) to determine not to enter into a business
relationship with the Company or to materially modify its contemplated business
relationship; (iv) hire, retain or associate in a business relationship with,
directly or indirectly, any director, officer or employee of the Company; or (v)
solicit or cause or authorize to be solicited, or accept, for or on behalf of
him or any third party, any business from, or the entering into of a business
relationship with, (a) others who are, or were within one (l) year prior to the
cessation of his employment with the Company, a customer, client, account or
other Business Associate of the Company, or (b) any prospective
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customer, client, account or other Business Associate of the Company which at or
about the date of such cessation was then actively being solicited by the
Company. The foregoing restrictions set forth in this Paragraph 7.1 shall apply
likewise during the Employment Period. Notwithstanding the foregoing, (x) in the
event the Employee is entitled to receive the Severance Amount (as hereinafter
defined) or his employment is terminated by the Company without cause, then the
obligations under this Paragraph 7.1 shall terminate in the event the Company
defaults in its obligation to make any payments provided for in Paragraph 11.2
or 11.3 hereof and such default continues for a period of twenty (20) days
following receipt by the Company of written notice thereof from the Employee;
and (y) the provisions of this Paragraph 7.1 shall cease to apply in the event
(I) this Agreement is terminated pursuant to the provisions of Paragraph 11.1(a)
hereof or (II) (A) the term of this Agreement is extended for the Extended Term;
(B) prior to the expiration of the Extended Term (the "Extended Expiration
Date"), the Employee is not offered by the Company a further two (2) year
extension of the term of this Agreement at an annual base salary at least equal
to his annual base salary in effect at the Extended Expiration Date and
otherwise substantially upon the terms set forth herein (except for any loans
and bonuses provided for herein); (C) prior to the Extended Expiration Date, the
Employee's employment with the Company is not terminated in accordance with the
provisions of Paragraph 11.1(b) hereof and he does not voluntarily terminate his
employment with the Company; and (D) the Employee's employment with the Company
terminates on the Extended Expiration Date.
7.2 The Employee agrees to disclose promptly in writing to the
Board of Directors of the Company all ideas, processes, methods, devices,
business concepts, inventions, improvements, discoveries, know-how and other
creative achievements (hereinafter referred to collectively as "discoveries"),
whether or not the same or any part thereof is capable of being patented,
trademarked, copyrighted, or otherwise protected, which the Employee, while
employed by the Company, conceives, makes, develops, acquires or reduces to
practice, whether acting alone or with others and whether during or after usual
working hours, and which are related to the Company's business or interests, or
are used or usable by the Company, or arise out of or in connection with the
duties performed by the Employee. The Employee hereby transfers and assigns to
the Company all right, title and interest in and to such discoveries (whether
conceived, made, developed, acquired or reduced to practice on or prior to the
date hereof or hereafter during his employment with the Company), including any
and all domestic and foreign copyrights and patent and trademark rights therein
and any renewals thereof. On request of the Company, the Employee will, without
any additional compensation, from time to time during, and after the expiration
or termination of, the Employment Period, execute such further instruments
(including, without limitation, applications for copyrights, patents, trademarks
and assignments thereof) and do all such other acts and things as may be deemed
necessary or desirable by the Company to protect and/or enforce its right in
respect of such discoveries. All expenses of filing or prosecuting any patent,
trademark or copyright application shall be borne by the Company, but the
Employee shall cooperate in filing and/or prosecuting any such application.
7.3 (a) The Employee represents that he has been informed that
it is the policy of the Company to maintain as secret all confidential
information relating to the Company,
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including, without limitation, any and all knowledge or information with respect
to secret or confidential methods, processes, plans, materials, customer lists
or data, or with respect to any other confidential or secret aspect of the
Company's activities, and further acknowledges that such confidential
information is of great value to the Company. The Employee recognizes that, by
reason of his employment with the Company, he will acquire confidential
information as aforesaid. The Employee confirms that it is reasonably necessary
to protect the Company's goodwill, and, accordingly, hereby agrees that he will
not, directly or indirectly (except where authorized by the Board of Directors
of the Company), at any time during the term of this Agreement or thereafter
divulge to any person, firm or other entity, or use, or cause or authorize any
person, firm or other entity to use, any such confidential information.
(b) The Employee agrees that he will not, at any
time, remove from the Company's premises any drawings, notebooks, software, data
or other confidential information relating to the business and procedures
heretofore or hereafter acquired, developed and/or used by the Company, except
where necessary in the fulfillment of his duties hereunder.
(c) The Employee agrees that, upon the
expiration or termination of this Agreement for any reason whatsoever, he shall
promptly deliver to the Company any and all drawings, notebooks, software, data
and other documents and material, including all copies thereof, in his
possession or under his control relating to any confidential information or
discoveries, or which is otherwise the property of the Company.
(d) For purposes hereof, the term "confidential
information" shall mean all information given to the Employee, directly or
indirectly, by the Company and all other information relating to the Company
otherwise acquired by the Employee during the course of his employment with the
Company (whether on or prior to the date hereof or hereafter), other than
information which (i) was in the public domain at the time furnished to, or
acquired by, the Employee, or (ii) thereafter enters the public domain other
than through disclosure, directly or indirectly, by the Employee or others in
violation of an agreement of confidentiality or nondisclosure.
7.4 For purposes of this Paragraph 7, the term "Company" shall
mean and include any and all subsidiaries and affiliated entities of the Company
in existence from time to time.
8. VACATIONS
8.1 The Employee shall be entitled to an aggregate of four (4)
weeks vacation time for each twelve (12) month period during the Employment
Period commencing on the date hereof, the time and duration thereof to be
determined by mutual agreement between the Employee and the Company.
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9. PARTICIPATION IN EMPLOYEE BENEFIT PLANS; STOCK OPTIONS
9.1 The Employee shall be accorded the right to participate in
and receive benefits under and in accordance with the provisions of any pension,
profit sharing, insurance, medical and dental insurance or reimbursement (with
family coverage) or other plan or program of the Company either in existence as
of the date hereof or hereafter adopted for the benefit generally of its
executive employees.
9.2 Concurrently with the execution hereof, pursuant to the
Company's 1998 Stock Option Plan and a Stock Option Agreement of even date, the
Company is granting to the Employee the right and option to purchase up to
200,000 Common Shares of the Company upon the following terms: (a) an expiration
date of five (5) years from the date hereof; (b) an exercise price equal to
$2.69 per share; and (c) vesting to the extent of one-half thereof on each of
the first and second anniversaries of the date hereof (the "Option").
10. SERVICE AS OFFICER OF SUBSIDIARIES; SERVICE AS DIRECTOR
10.1 During the Employment Period, the Employee shall, if
elected or appointed, serve as (a) an officer of any subsidiaries of the Company
in existence or hereafter created or acquired and (b) a director of the Company
and/or any such subsidiaries of the Company, in each case without any additional
compensation for such services.
11. EARLIER TERMINATION; PAYMENT FOLLOWING TERMINATION
11.1 The Employee's employment hereunder shall automatically
terminate upon his death and may terminate at the option of the Company in the
event of:
(a) the Employee's incapacity, as provided for
in Paragraph 6.l hereof; or
(b) "cause", as provided for in Paragraph 1.1
hereof.
Upon the termination of the Employee's employment, the Employment Period shall
be considered to have ended.
11.2 In the event of the following:
(a) the Company timely sends the Non-Extension
Notice to the Employee in accordance with the provisions of Paragraph 1.1
hereof;
(b) prior to the Fifth Anniversary Date, the
Employee's employment with the Company is not terminated in accordance with the
provisions of Paragraph 11 hereof and he does not voluntarily terminate his
employment with the Company; and
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(c) the Employee's employment with the Company
terminates on the Fifth Anniversary Date,
then, the Company shall continue to pay to the Employee his then annual base
salary for a period of two (2) years following the Fifth Anniversary Date (the
"Severance Amount"). The Severance Amount shall be payable in a manner
consistent with the payment to the Employee theretofore of his salary.
11.3 In the event of the termination of the Employee's
employment by the Company during the Employment Period without cause, as
liquidated damages, the Employee shall be entitled to receive an amount equal to
all compensation that he would have been entitled to receive for the remainder
of the Employment Period pursuant to Paragraph 4 hereof as if his employment had
not been terminated (the "Post-Termination Payments"). The Post-Termination
Payments shall be made in a manner consistent with the payment to the Employee
theretofore of his salary as if he had remained in the employ of the Company. In
the event the notice of termination of employment is given (a) prior to the
ninetieth (90th) day prior to the Fifth Anniversary Date or (b) subsequent to
such ninetieth (90th) day but after the date of any Non-Extension Notice timely
given, then, instead of any obligation to pay the Employee any amount with
regard to the Extended Term, the Employee shall be entitled to receive the
Severance Amount, payable, as provided for in Paragraph 11.2 hereof, following
the expiration of the Post-Termination Payments.
11.4 The Employee shall not be required to mitigate any
damages he may incur for any termination of employment by the Company without
cause by seeking other employment; however, any amounts paid or payable to the
Employee from other employment or other services shall reduce on a
dollar-for-dollar basis any amount otherwise payable to him pursuant to
Paragraph 11 hereof.
12. INJUNCTIVE RELIEF; REMEDIES
12.1 The Employee acknowledges and agrees that, in the event he
shall violate or threaten to violate any of the restrictions of Paragraph 3
(with regard to the last clause thereof) or 7 hereof, the Company will be
without an adequate remedy at law and will therefore be entitled to enforce such
restrictions by temporary or permanent injunctive or mandatory relief in any
court of competent jurisdiction without the necessity of proving damages.
12.2 The Employee agrees further that the Company shall have the
following additional rights and remedies:
(i) The right and remedy to require the Employee to
account for and pay over to the Company all profits derived or received by him
as the result of any transactions constituting a breach of any of the provisions
of Paragraph 7.1, and the Employee hereby agrees to account for and pay over
such profits to the Company; and
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(ii) The right to recover attorneys' fees incurred in
any action or proceeding in which it seeks to enforce its rights under Paragraph
7 hereof and is successful on any grounds.
12.3 Each of the rights and remedies enumerated above shall be
independent of the other, and shall be severally enforceable, and all of such
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity.
12.4 The parties hereto intend to and hereby confer jurisdiction
to enforce the covenants contained in Paragraph 7.1 upon the courts of any
jurisdiction within the geographical scope of such covenants (a "Jurisdiction").
In the event that the courts of any one or more of such Jurisdictions shall hold
such covenants unenforceable by reason of the breadth of their scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other Jurisdiction, as to breaches of such covenants in such other
respective Jurisdictions, the above covenants as they relate to each
Jurisdiction being, for this purpose, severable into diverse and independent
covenants.
13. NO RESTRICTIONS
13.l The Employee hereby represents that neither the execution
of this Agreement nor his performance hereunder will (a) violate, conflict with
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
the terms, conditions or provisions of any contract, agreement or other
instrument or obligation to which the Employee is a party, or by which he may be
bound, or (b) violate any order, judgment, writ, injunction or decree applicable
to the Employee. In the event of a breach hereof, in addition to the Company's
right to terminate this Agreement, the Employee shall indemnify the Company and
hold it harmless from and against any and all claims, losses, liabilities, costs
and expenses (including reasonable attorneys' fees) incurred or suffered in
connection with or as a result of the Company's entering into this Agreement or
employing the Employee hereunder.
14. ARBITRATION
14.1 Except with regard to Paragraph 12.1 hereof and any other
matters that are not a proper subject of arbitration, all disputes between the
parties hereto concerning the performance, breach, construction or
interpretation of this Agreement or any portion thereof, or in any manner
arising out of this Agreement or the performance thereof, shall be submitted to
binding arbitration, in accordance with the rules of the American Arbitration
Association, which arbitration shall be carried out in the manner hereinafter
set forth.
14.2 Within twenty (20) days after written notice by one party
to the other of its demand for arbitration, which demand shall set forth the
name and address of its arbitrator, the other party shall select its arbitrator
and so notify the demanding party. Within twenty (20) days thereafter, the two
arbitrators so selected shall select the third arbitrator. The decision of any
two (2) arbitrators shall be binding upon the parties. In default of either side
naming its arbitrator as
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aforesaid or in default of the selection of the said third arbitrator as
aforesaid, the American Arbitration Association shall designate such arbitrator
upon the application of either party. The arbitration proceeding shall take
place at a mutually agreeable location in Nassau County, New York or such other
location as agreed to by the parties.
14.3 A party who files a notice of demand for arbitration must
assert in the demand all claims then known to that party on which arbitration is
permitted to be demanded. When a party fails to include a claim through
oversight, inadvertence or excusable neglect, or when a claim has matured or
been acquired subsequently, the arbitrators may permit amendment. A demand for
arbitration shall be made within a reasonable time after the claim has arisen,
and in no event shall it be made after the date when institution of legal or
equitable proceedings based on such claim would be barred by the applicable
statute of limitations.
14.4 The award rendered by the arbitrators shall be final,
binding and conclusive, shall be specifically enforceable, and judgment may be
entered upon it in accordance with applicable law in the appropriate court in
the State of New York, with no right of appeal therefrom.
14.5 Each party shall pay its or his own expenses of
arbitration, and the expenses of the arbitrators and the arbitration proceeding
shall be equally shared; provided, however, that, if, in the opinion of a
majority of the arbitrators, any claim or defense was unreasonable, the
arbitrators may assess, as part of their award, all or any part of the
arbitration expenses of the other party (including reasonable attorneys' fees)
and of the arbitrators and the arbitration proceeding against the party raising
such unreasonable claim or defense; provided, further, that, if the arbitration
proceeding relates to the issue of "cause" for termination of employment, (a)
if, in the opinion of a majority of the arbitrators, "cause" existed, the
arbitrators shall assess, as part of their award, all of the arbitration
expenses of the Company (including reasonable attorneys' fees) and of the
arbitrators and the arbitration proceeding against the Employee or (b) if, in
the opinion of a majority of the arbitrators, "cause" did not exist, the
arbitrators shall assess, as part of their award, all of the arbitration
expenses of the Employee (including reasonable attorneys' fees) and of the
arbitrators and the arbitration proceeding against the Company.
15. ASSIGNMENT
15.1 This Agreement, as it relates to the employment of the
Employee, is a personal contract and the rights and interests of the Employee
hereunder may not be sold, transferred, assigned, pledged or hypothecated.
16. NOTICES
16.1 Any notice required or permitted to be given pursuant to
this Agreement shall be deemed to have been duly given when delivered by hand or
sent by certified or registered mail, return receipt requested and postage
prepaid, overnight mail or courier or telecopier as follows:
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If to the Employee:
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
with a copy to:
Weil & Kestenbaum
42-40 Bell Boulevard
Bayside, New York 11361
Attention: Alan Kestenbaum, Esq.
Telecopier Number: (718) 281-0850
If to the Company:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Chairman of the Board
Telecopier Number: (516) 296-7111
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred S. Skolnik, Esq.
Telecopier Number: (516) 296-7111
or at such other address as any party shall designate by notice to the other
party given in accordance with this Paragraph 16.1.
17. GOVERNING LAW
17.1 This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York applicable to
agreements made and to be performed entirely in New York.
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<PAGE>
18. WAIVER OF BREACH; PARTIAL INVALIDITY
18.1 The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach. If any provision, or part thereof, of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and not in any way affect or render invalid or unenforceable
any other provisions of this Agreement, and this Agreement shall be carried out
as if such invalid or unenforceable provision, or part thereof, had been
reformed, and any court of competent jurisdiction or arbitrators, as the case
may be, are authorized to so reform such invalid or unenforceable provision, or
part thereof, so that it would be valid, legal and enforceable to the fullest
extent permitted by applicable law.
19. ENTIRE AGREEMENT
19.1 This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and there are no
representations, warranties or commitments except as set forth herein. This
Agreement supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
subject matter hereof. This Agreement may be amended, and any provision hereof
waived, only by a writing executed by the party sought to be charged. No
amendment or waiver on the part of the Company shall be valid unless approved by
its Board of Directors.
20. COUNTERPARTS
20.1 This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
21. FACSIMILE SIGNATURES
21.1 Signatures hereon which are transmitted via facsimile shall
be deemed original signatures.
22. REPRESENTATION BY COUNSEL; INTERPRETATION
22.1 The Employee acknowledges that he has been represented by
counsel in connection with this Agreement. Accordingly, any rule or law or any
legal decision that would require the interpretation of any claimed ambiguities
in this Agreement against the party that drafted it has no application and is
expressly waived by the Employee. The provisions of this Agreement shall be
interpreted in a reasonable manner to give effect to the intent of the parties
hereto.
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<PAGE>
23. HEADINGS
23.1 The headings and captions under sections and paragraphs of
this Agreement are for convenience of reference only and do not in any way
modify, interpret or construe the intent of the parties or affect any of the
provisions of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year above written.
DCAP GROUP, INC.
By: /s/ Morton L. Certilman
---------------------------
Morton L. Certilman, Chairman of the Board
/s/ Abraham Weinzimer
-------------------------------------
Abraham Weinzimer
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<PAGE>
EXHIBIT 4.3(a)
-------------, ----
$-----------
PROMISSORY NOTE
FOR VALUE RECEIVED, ABRAHAM WEINZIMER (the "Maker"), having an address
as indicated under his name, hereby promises to pay to the order of DCAP GROUP,
INC. (formerly EXTECH Corporation), a Delaware corporation (the "Payee"), at 90
Merrick Avenue, East Meadow, New York or at such other place as the holder
hereof may from time to time designate in writing, in immediately available New
York funds, the principal sum of _____________________ THOUSAND DOLLARS
($________), together with interest on the outstanding principal balance from
the date hereof at the rate of ___ percent (__%) per annum [Wall Street Journal
prime rate at time of execution]. The principal amount of this Note, together
with accrued interest thereon, shall be payable in four (4) equal annual
installments commencing one (1) year from the date hereof and continuing on the
anniversary day of the date hereof of each subsequent year, in such annual
amount as shall be necessary to self-amortize this Note at the end of such four
(4) year period [if this Note is dated later than three (3) years after February
25, 1999, then the payment terms shall be amended so that any payment that would
be otherwise due after seven (7) years from February 25, 1999 shall be due on
such seventh anniversary date]; provided, however, that the amounts due under
this Note shall be payable sooner to the extent of any proceeds received by the
Maker from the sale or other disposition of any shares of Common Stock of the
Payee on or after the date hereof (the proceeds being immediately payable to the
Payee).
The payment of all amounts due under this Note is secured by a pledge
of ________ shares of Common Stock of the Payee [five times the principal amount
of this Note] owned by the Maker pursuant to a Pledge Agreement of even date
between the Maker and the Payee (the "Pledge Agreement").
In the event (a) the Maker shall (i) fail to make any payment due
hereunder and such failure shall continue unremedied for a period of ten (10)
days following the date of written notice of default; (ii) admit in writing his
inability to pay his debts as they mature; (iii) make a general assignment for
the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file
a voluntary petition in bankruptcy or a petition or an answer seeking an
arrangement with creditors; (vi) take advantage of any bankruptcy, insolvency or
readjustment of debt law or statute or file an answer admitting the material
allegations of a petition filed against him in any proceeding under any such
law; or (vii) have entered against him a court order approving a petition filed
against him under the Federal Bankruptcy Act; or (b) there shall be a breach of
any representation, warranty, covenant or other agreement set forth in the
Pledge Agreement or that certain Employment Agreement dated
<PAGE>
February 25, 1999 between the Maker and the Payee and such breach shall continue
unremedied for a period of fifteen (15) days following the date of written
notice thereof, then and in each and every such event, the Payee may, by written
notice to the Maker, declare the entire unpaid principal amount of this Note
then outstanding plus accrued interest to be forthwith due and payable whereupon
the same shall become forthwith due and payable.
The Maker may prepay the principal amount of this Note, in whole or in
part, from time to time, without premium or penalty, provided that the Maker
pays all interest accrued with regard to the principal prepaid to the date of
prepayment.
If the Maker shall fail to pay when due, whether by acceleration or
otherwise, all or any portion of the principal amount hereof, any such unpaid
amount shall bear interest for each day from the date it was so due until paid
in full at the rate of sixteen percent (16%) per annum, payable on demand.
Notwithstanding anything to the contrary contained in this Note, the
rate of interest payable on this Note shall never exceed the maximum rate of
interest permitted under applicable law.
This Note may not be waived, changed, modified or discharged orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of any agent or attorneys for collection upon default or
maturity, the Maker agrees to pay, in addition to all other amounts due and
payable hereunder, all reasonable costs and expenses of collection or attempting
to collect this Note, including reasonable attorneys' fees.
The Maker and any endorsers hereof, for themselves and their respective
representatives, successors and assigns, expressly (a) waive presentment,
protest, notice of dishonor, notice of non-payment, notice of maturity, notice
of protest, diligence in collection, and the benefit of any applicable
exemptions, including, but not limited to, exemptions claimed under insolvency
laws, and (b) consent that the Payee may release or surrender, exchange or
substitute any property or other collateral or security now held or which may
hereafter be held as security for the payment of this Note, and/or may release
any guarantor, and/or may extend the time for payment and/or otherwise modify
the terms of payment of any part or the whole of the debt evidenced hereby.
Any notice, demand or request relating to any matter set forth herein
shall be in writing and shall be deemed effective when hand delivered, when
mailed, postage prepaid, by registered or certified mail, return receipt
requested, or by a nationally recognized overnight mail or courier
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<PAGE>
service, or when sent by facsimile transmission (with transmission confirmation)
to any party hereto at its address stated herein or at such other address of
which it shall have notified the party giving such notice in writing as
aforesaid.
The Payee shall be entitled to assign all or any portion of its right,
title and interest in and to this Note at its sole discretion without notice to
the Maker, provided that the Maker shall continue to make payments required
hereunder to the Payee until he has received notice of change of payee for
payments as provided herein.
Notwithstanding any other provision of this Note, all payments made
hereunder shall be applied first to payment of sums payable hereunder other than
interest and principal, secondly, interest on the principal balance outstanding
hereunder from time to time, and thirdly to principal.
The Maker acknowledges and agrees that the obligations under this Note
are unconditional and are not subject to any defense, counterclaim, or right of
offset or setoff.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, excluding conflict of law principles thereof.
The Maker acknowledges that he has been represented by counsel in
connection with this Note. Accordingly, any rule or law or any legal decision
that would require the interpretation of any claimed ambiguities in this Note
against the party that drafted it has no application and is expressly waived by
the Maker. The provisions of this Note shall be interpreted in a reasonable
manner to give effect to the intent of the Maker and the Payee.
Abraham Weinzimer
Address: 2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
3
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
On ____________, ____ before me personally came Abraham
Weinzimer to me known, and known to be the individual described in, and who
executed the foregoing Note, and duly acknowledged to me that he executed the
same.
Notary Public
4
<PAGE>
EXHIBIT 4.3(b)
PLEDGE AGREEMENT, dated ____________, ____, by and between
ABRAHAM WEINZIMER (the "Pledgor") and DCAP GROUP, INC. (formerly EXTECH
Corporation), a Delaware corporation (the "Pledgee").
WHEREAS, simultaneously herewith, the Pledgee is loaning to
the Pledgor the amount of ___________ Thousand Dollars ($________) and the
Pledgor is executing and delivering to the Pledgee a Promissory Note in such
principal amount (the "Note").
WHEREAS, the Pledgee desires, and the Pledgor is willing, to
secure performance of the Note.
WHEREAS, certain capitalized terms used herein are defined in
Section 8 hereof.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLEDGE. The Pledgor hereby grants to the Pledgee, as security for the
performance by the Pledgor of all of his obligations under the Note (the
"Obligations"), a valid and binding first security interest in the Collateral
(as hereinafter defined). The Pledgor has delivered simultaneously herewith to
the Pledgee, and the Pledgee hereby acknowledges receipt of, a certificate
evidencing the Pledged Shares registered in the name of the Pledgor (the
"Pledged Certificate"), accompanied by appropriate stock powers endorsed by the
Pledgor (the "Stock Powers").
2. TERM. This Agreement shall continue in effect until terminated in accordance
with Section 7 hereof.
3. SHARE RIGHTS; CASH DIVIDENDS.
(a) In the event of any change in the Pledged Shares during the term of
this Agreement by reason of any stock dividend, stock split-up, reverse split,
recapitalization, combination, reclassification, exchange of shares, merger,
consolidation or the like, all new, substituted, or additional stock, or other
securities, issued by reason of any such change (the "Adjusted Shares") (the
Pledged Shares and the Adjusted Shares are hereinafter referred to collectively
as the "Shares") shall be retained by or delivered to, as the case may be, and
held by the Pledgee under the terms of this Agreement in the same manner as the
Pledged Shares originally pledged hereunder.
(b) Unless and until the occurrence of a Default (as hereinafter
defined), the Pledgor shall have the right to vote the Shares. Upon the
occurrence of a Default, the Shares shall be registered in the name of the
Pledgee and the Pledgee shall have all incidents of ownership thereof.
(c) Provided that no Default has occurred, any and all cash dividends
paid in respect of the Shares shall be paid to the Pledgor; provided, however,
that, in any event, any extraordinary
<PAGE>
distributions made in respect of the Shares shall be retained by the Pledgee and
held by it in accordance with the terms hereof.
4. REPRESENTATIONS. The Pledgor hereby represents and warrants to the Pledgee
that:
(a) The Pledgor is the sole record and beneficial owner of the Pledged
Shares, free and clear of all liens, pledges, security interests, encumbrances,
restrictions, subscriptions, hypothecations, charges and claims of any kind
whatsoever (collectively, "Liens").
(b) No consents of governmental and other regulatory agencies, foreign
or domestic, or of other parties are required to be received by or on the part
of the Pledgor to enable him to enter into and carry out this Agreement and the
transactions contemplated hereby.
(c) The Pledgor has the power to enter into this Agreement and to carry
out his obligations hereunder. This Agreement constitutes the valid and binding
obligation of the Pledgor, and is enforceable in accordance with its terms.
(d) Neither the execution and delivery of this Agreement nor compliance
by the Pledgor with any of the provisions hereof nor the consummation of the
transactions contemplated hereby will violate or, alone or with notice or the
passage of time, result in the material breach or termination of, or otherwise
give any contracting party the right to terminate, or declare a default under,
the terms of any agreement, understanding or arrangement to which the Pledgor is
a party or by which he or his assets or properties may be bound.
5. COVENANTS.
(a) The Pledgor hereby covenants that from and after the date hereof
and until the Obligations shall have been satisfied in full:
(i) The Pledgor will not grant, create, incur, assume or
suffer to exist any Lien in the Collateral (except for the Lien created hereby).
(ii) The Pledgor will defend the Pledgee's right, title, and
security interest in and to the Collateral against the claims of any person,
firm, corporation or other entity.
(iii) The Pledgor shall at any time and from time to time,
upon the written request of the Pledgee, execute and deliver such other
instruments and documents and do such further acts and things as the Pledgee may
reasonably request in order to effect the purposes of this Agreement.
(b) The Pledgee's sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession, under Section
9-207 of the Code or otherwise, shall be to deal with it in the same manner as
the Pledgee deals with similar securities and property for its own account.
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<PAGE>
6. DEFAULT.
(a) In the event that the Pledgor fails to pay to the Pledgee any
Obligation when due or there shall otherwise occur an Event of Default (as
defined in the Note) ("Default"), the Pledgee shall have all of the rights and
remedies afforded to secured parties with respect to the Collateral as set forth
in the Code as well as all other rights and remedies granted in the Note and
this Agreement. Without limiting the generality of the foregoing, the Pledgee,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, upon such terms and conditions and at such prices as it
may deem advisable, for cash or on credit or for future delivery without
assumption of any credit risk. The Pledgee shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold. The
Pledgee shall apply any proceeds from time to time held by it and the net
proceeds of any such sale or other disposition, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Pledgee hereunder, including, without
4limitation, reasonable attorneys' fees and disbursements of counsel to the
Pledgee, to the satisfaction in whole or in part of the Obligations, in such
order as the Pledgee may elect and only after such application and after the
payment by the Pledgee of any other amount required by any provision of law,
including, without limitation, Section 9-504 (1)(c) of the Code, need the
Pledgee account for the surplus, if any, to the Pledgor. To the extent permitted
by applicable law, the Pledgor waives all claims, damages and demands he may
acquire against the Pledgee arising out of the lawful exercise by it of any
rights hereunder. Neither the Pledgee nor any of its respective directors,
officers, employees or agents shall be liable for failure to sell or otherwise
dispose of the Collateral or for any delay in doing so. If any notice of a
proposed sale or other disposition of the Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least ten (10)
days before such sale or other disposition. In any event, notice of a proposed
sale or other disposition shall be given at least ten (10) days before such sale
or other disposition to the Pledgor and Kevin Lang. The Pledgor shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay all of the Obligations and any and all
costs and expenses of every kind incurred by the Pledgee with respect to the
collection of such deficiency, including, without limitation, all reasonable
fees and disbursements of any attorneys employed by the Pledgee.
The Pledgor recognizes that the Pledgee may be unable to
effect a public sale of any or all the Collateral by reason of certain
restrictions contained in the Securities Act of 1933, as amended, and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a
3
<PAGE>
view to the distribution or resale thereof. The Pledgor acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
than if such sale were a public sale and agrees that any such private sale under
such circumstances shall not be evidence that it has been made in other than a
commercially reasonable manner.
The Pledgor agrees to use his best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this section valid and binding
and in compliance with any and all other applicable requirements of law.
(b) The rights of the Pledgee hereunder shall not be conditioned or
contingent upon the pursuit by the Pledgee of any right or remedy against the
Pledgor, any other person which may be or become liable in respect of all or any
part of the Obligations or against any collateral security therefor, guarantee
therefor or right of offset with respect thereto. Neither the Pledgee nor any of
its affiliates or representatives shall be liable for any failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so, nor shall the Pledgee be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or any other person or
to take any other action whatsoever with regard to the Collateral or any part
thereof.
7. TERMINATION OF AGREEMENT. Upon (i) the Pledgor's satisfaction of the
Obligations in full (at which time the Pledgee shall redeliver the Pledged
Certificate and accompanying Stock Powers to the Pledgor), or (ii) the
conclusion of the actions contemplated by Section 6 hereof, this Agreement shall
thereupon terminate.
8. DEFINED TERMS. The following terms shall have the following meanings:
(a) "Code" means the Uniform Commercial Code from time to time in
effect in the State of New York.
(b) "Collateral" means the Pledged Shares and all Proceeds.
(c) "Pledged Shares" means _____________ thousand (________) shares of
Common Stock of the Pledgee [five times the principal amount of the Note],
together with any and all shares, stock certificates, options or rights of any
nature whatsoever that may be issued or granted to the Pledgor with regard
thereto, in substitution or replacement thereof, as a conversion thereof, in
exchange therefor or otherwise in respect thereof.
(d) "Proceeds" means all "proceeds" as such term is defined in Section
9-306(1) of the Code on the date hereof and, in any event, shall include,
without limitation, all dividends or other income from the Pledged Shares,
collections thereon and distributions with respect thereto.
4
<PAGE>
8. MISCELLANEOUS.
(a) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective legal representatives, successors and
assigns.
(b) This Agreement contains the entire agreement and understanding
between the parties in respect of the subject matter hereof, and cannot be
modified, changed, discharged or terminated except by an instrument in writing,
signed by the party against whom enforcement of any modification, change,
discharge or termination is sought.
(c) A waiver of the breach of any term or condition of this Agreement
shall not be deemed to constitute a waiver of any other breach of the same or
any other term or condition.
(d) This Agreement will be construed and governed in accordance with
the laws of the State of New York, excluding choice of law rules thereof.
(e) All notices or other communications required or permitted hereunder
shall be sufficiently given if delivered by hand, or sent by certified mail,
return receipt requested, postage prepaid, facsimile transmission or overnight
mail or courier, addressed as follows:
If to the Pledgor:
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Telecopier Number: (516) 735-7379
with a copy to:
Weil & Kestenbaum
42-40 Bell Boulevard
Bayside, New York 11361
Attention: Alan Kestenbaum, Esq.
Telecopier Number: (718) 281-0850
If to the Pledgee:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Chairman of the Board
Telecopier Number: (516) 296-7111
5
<PAGE>
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred Skolnik, Esq.
Telecopier Number: (516) 296-7111
(f) The Pledgor waives any and all notice of the extension or
modification of the terms of the Note.
(g) In the event that the Collateral or any portion thereof is released
to the Pledgor and any payments of, or proceeds of any security for, the
Obligations, or any part thereof, are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then the Pledgor shall redeliver the Collateral
and Stock Powers to the Pledgee and, until so redelivered, shall hold the
Collateral and Stock Powers as agent of, and in trust for, the Pledgee.
(h) If any provision hereof is declared to be invalid and
unenforceable, then, to the fullest extent permitted by law, the other
provisions hereof shall remain in full force and effect and shall be liberally
construed in favor of the Pledgee in order to carry out the intentions of the
parties hereto as nearly as may be possible.
(i) Each party acknowledges that he or it has been represented by
counsel in connection with this Agreement. Accordingly, any rule or law or any
legal decision that would require the interpretation of any claimed ambiguities
in this Agreement against the party that drafted it has no application and is
expressly waived by the parties. The provisions of this Agreement shall be
interpreted in a reasonable manner to give effect to the intent of the parties
hereto.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Abraham Weinzimer
DCAP GROUP, INC.
By:
--------------------------
Morton L. Certilman,
Chairman of the Board
7
<PAGE>
STOCK OPTION AGREEMENT, dated as of February 25, 1999, between
DCAP GROUP, INC. (formerly EXTECH Corporation), a Delaware corporation (the
"Company"), and MORTON L. CERTILMAN (the "Optionee").
WHEREAS, simultaneously herewith, the Company is entering into
an Employment Agreement with the Optionee pursuant to which the Optionee is to
perform certain employment duties and services for the Company; and
WHEREAS, the Company desires to provide to the Optionee an
additional incentive to promote the success of the Company.
NOW, THEREFORE, in consideration of the foregoing, the Company
hereby grants to the Optionee the right and option to purchase Common Shares of
the Company under and pursuant to the terms and conditions of the Company's 1998
Stock Option Plan (the "Plan") and upon the following terms and conditions:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option (the "Option") to purchase up to Two Hundred Twenty-Five Thousand
(225,000) Common Shares of the Company (the "Option Shares") during the
following periods:
(a) All or any part of One Hundred Twelve Thousand Five
Hundred (112,500) Common Shares may be purchased during the period commencing on
the first anniversary of the date hereof and terminating at 5:00 P.M. on the
fifth anniversary of the date hereof (the "Expiration Date").
(b) All or any part of an additional One Hundred Twelve
Thousand Five Hundred (112,500) Common Shares may be purchased during the period
commencing on the second anniversary of the date hereof and terminating at 5:00
P.M. on the Expiration Date.
2. NATURE OF OPTION. The Option to purchase the initial Thirty-Seven
Thousand One Hundred Seventy-Four (37,174) Option Shares commencing in each of
2000 and 2001 is intended to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, relating to "incentive stock
options." The remaining Option to purchase Option Shares is not intended to meet
such requirements.
3. EXERCISE PRICE. The exercise price of each of the Option Shares
shall be Two Dollars Sixty-Nine Cents ($2.69) (the "Option Price").
4. EXERCISE OF OPTIONS. The Option shall be exercised in accordance
with the provisions of the Plan. As soon as practicable after the receipt of
notice of exercise and payment of the Option Price as provided for in the Plan,
the Company shall tender to the Optionee a certificate issued in the Optionee's
name evidencing the number of Option Shares covered thereby.
<PAGE>
5. TRANSFERABILITY. The Option shall not be transferable other than by
will or the laws of descent and distribution and, during the Optionee's
lifetime, shall not be exercisable by any person other than the Optionee.
6. INCORPORATION BY REFERENCE. The terms and conditions of the Plan are
hereby incorporated by reference and made a part hereof.
7. NOTICES. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and delivered personally or sent by facsimile
transmission, overnight mail or courier or registered or certified mail, return
receipt requested, postage prepaid, addressed to the Company at 90 Merrick
Avenue, East Meadow, New York 11554, Attention: President (fax number: (516)
296-7111), and to the Optionee at the address set forth below or to such other
address as either party may hereafter designate in writing to the other party in
accordance with the provisions hereof. Notices shall be deemed to have been
given on the date of mailing or transmission, except notices of change of
address, which shall be deemed to have been given when received.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
9. ENTIRE AGREEMENT. This Agreement, together with the Plan, contains
the entire understanding of the parties hereto with respect to the subject
matter hereof and may be modified only by an instrument executed by the party
sought to be charged. No amendment on the part of the Company shall be valid
unless approved by its Board of Directors.
10. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, excluding choice of law
rules thereof.
11. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
12. FACSIMILE SIGNATURES. Signatures hereon which are transmitted via
facsimile shall be deemed original signatures.
13. REPRESENTATION BY COUNSEL; INTERPRETATION. The Optionee
acknowledges that he has been represented by counsel in connection with this
Agreement. Accordingly, any rule or law or any legal decision that would require
the interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived by the
Optionee. The provisions of this Agreement shall be interpreted in a reasonable
manner to give effect to the intent of the parties hereto.
14. HEADINGS. The headings and captions under sections and paragraphs
of this
2
<PAGE>
Agreement are for convenience of reference only and do not in any way modify,
interpret or construe the intent of the parties or affect any of the provisions
of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
DCAP GROUP, INC.
By: /s/ Kevin Lang
----------------------------
Kevin Lang, President
/s/ Morton L. Certilman
--------------------------------
Morton L. Certilman
90 Merrick Avenue
East Meadow, New York 11554
Address
(516) 296-7111
Fax Number
3
<PAGE>
STOCK OPTION AGREEMENT, dated as of February 25, 1999, between
DCAP GROUP, INC. (formerly EXTECH Corporation), a Delaware corporation (the
"Company"), and JAY M. HAFT (the "Optionee").
WHEREAS, simultaneously herewith, the Company is entering into
an Employment Agreement with the Optionee pursuant to which the Optionee is to
perform certain employment duties and services for the Company; and
WHEREAS, the Company desires to provide to the Optionee an
additional incentive to promote the success of the Company.
NOW, THEREFORE, in consideration of the foregoing, the Company
hereby grants to the Optionee the right and option to purchase Common Shares of
the Company under and pursuant to the terms and conditions of the Company's 1998
Stock Option Plan (the "Plan") and upon the following terms and conditions:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option (the "Option") to purchase up to Two Hundred Twenty-Five Thousand
(225,000) Common Shares of the Company (the "Option Shares") during the
following periods:
(a) All or any part of One Hundred Twelve Thousand Five
Hundred (112,500) Common Shares may be purchased during the period commencing on
the first anniversary of the date hereof and terminating at 5:00 P.M. on the
fifth anniversary of the date hereof (the "Expiration Date").
(b) All or any part of an additional One Hundred Twelve
Thousand Five Hundred (112,500) Common Shares may be purchased during the period
commencing on the second anniversary of the date hereof and terminating at 5:00
P.M. on the Expiration Date.
2. NATURE OF OPTION. The Option to purchase the initial Thirty-Seven
Thousand One Hundred Seventy-Four (37,174) Option Shares commencing in each of
2000 and 2001 is intended to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, relating to "incentive stock
options." The remaining Option to purchase Option Shares is not intended to meet
such requirements.
3. EXERCISE PRICE. The exercise price of each of the Option Shares
shall be Two Dollars Sixty-Nine Cents ($2.69) (the "Option Price").
4. EXERCISE OF OPTIONS. The Option shall be exercised in accordance
with the provisions of the Plan. As soon as practicable after the receipt of
notice of exercise and payment of the Option Price as provided for in the Plan,
the Company shall tender to the Optionee a certificate issued in the Optionee's
name evidencing the number of Option Shares covered thereby.
<PAGE>
5. TRANSFERABILITY. The Option shall not be transferable other than by
will or the laws of descent and distribution and, during the Optionee's
lifetime, shall not be exercisable by any person other than the Optionee.
6. INCORPORATION BY REFERENCE. The terms and conditions of the Plan are
hereby incorporated by reference and made a part hereof.
7. NOTICES. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and delivered personally or sent by facsimile
transmission, overnight mail or courier or registered or certified mail, return
receipt requested, postage prepaid, addressed to the Company at 90 Merrick
Avenue, East Meadow, New York 11554, Attention: President (fax number: (516)
296-7111), and to the Optionee at the address set forth below or to such other
address as either party may hereafter designate in writing to the other party in
accordance with the provisions hereof. Notices shall be deemed to have been
given on the date of mailing or transmission, except notices of change of
address, which shall be deemed to have been given when received.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
9. ENTIRE AGREEMENT. This Agreement, together with the Plan, contains
the entire understanding of the parties hereto with respect to the subject
matter hereof and may be modified only by an instrument executed by the party
sought to be charged. No amendment on the part of the Company shall be valid
unless approved by its Board of Directors.
10. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, excluding choice of law
rules thereof.
11. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
12. FACSIMILE SIGNATURES. Signatures hereon which are transmitted via
facsimile shall be deemed original signatures.
13. REPRESENTATION BY COUNSEL; INTERPRETATION. The Optionee
acknowledges that he has been represented by counsel in connection with this
Agreement. Accordingly, any rule or law or any legal decision that would require
the interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived by the
Optionee. The provisions of this Agreement shall be interpreted in a reasonable
manner to give effect to the intent of the parties hereto.
14. HEADINGS. The headings and captions under sections and paragraphs
of this
2
<PAGE>
Agreement are for convenience of reference only and do not in any way modify,
interpret or construe the intent of the parties or affect any of the provisions
of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
DCAP GROUP, INC.
By: /s/ Kevin Lang
-----------------------------
Kevin Lang, President
/s/ Jay M. Haft
---------------------------------
Jay M. Haft
1001 Brickell Bay Drive
9th Floor
Miami, Florida 33131
Address
(305) 373-0056
Fax Number
3
<PAGE>
STOCK OPTION AGREEMENT, dated as of February 25, 1999, between
DCAP GROUP, INC. (formerly EXTECH Corporation), a Delaware corporation (the
"Company"), and KEVIN LANG (the "Optionee").
WHEREAS, simultaneously herewith, the Company is entering into
an Employment Agreement with the Optionee pursuant to which the Optionee is to
perform certain employment duties and services for the Company; and
WHEREAS, the Company desires to provide to the Optionee an
additional incentive to promote the success of the Company.
NOW, THEREFORE, in consideration of the foregoing, the Company
hereby grants to the Optionee the right and option to purchase Common Shares of
the Company under and pursuant to the terms and conditions of the Company's 1998
Stock Option Plan (the "Plan") and upon the following terms and conditions:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option (the "Option") to purchase up to Two Hundred Thousand (200,000)
Common Shares of the Company (the "Option Shares") during the following periods:
(a) All or any part of One Hundred Thousand (100,000) Common
Shares may be purchased during the period commencing on the first anniversary of
the date hereof and terminating at 5:00 P.M. on the fifth anniversary of the
date hereof (the "Expiration Date").
(b) All or any part of an additional One Hundred Thousand
(100,000) Common Shares may be purchased during the period commencing on the
second anniversary of the date hereof and terminating at 5:00 P.M. on the
Expiration Date.
2. NATURE OF OPTION. The Option to purchase the initial Thirty-Seven
Thousand One Hundred Seventy-Four (37,174) Option Shares commencing in each of
2000 and 2001 is intended to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, relating to "incentive stock
options." The remaining Option to purchase Option Shares is not intended to meet
such requirements.
3. EXERCISE PRICE. The exercise price of each of the Option Shares
shall be Two Dollars Sixty-Nine Cents ($2.69) (the "Option Price").
4. EXERCISE OF OPTIONS. The Option shall be exercised in accordance
with the provisions of the Plan. As soon as practicable after the receipt of
notice of exercise and payment of the Option Price as provided for in the Plan,
the Company shall tender to the Optionee a certificate issued in the Optionee's
name evidencing the number of Option Shares covered thereby.
5. TRANSFERABILITY. The Option shall not be transferable other than
by will or
<PAGE>
the laws of descent and distribution and, during the Optionee's lifetime, shall
not be exercisable by any person other than the Optionee.
6. INCORPORATION BY REFERENCE. The terms and conditions of the Plan are
hereby incorporated by reference and made a part hereof.
7. NOTICES. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and delivered personally or sent by facsimile
transmission, overnight mail or courier or registered or certified mail, return
receipt requested, postage prepaid, addressed to the Company at 90 Merrick
Avenue, East Meadow, New York 11554, Attention: Chairman of the Board (fax
number: (516) 296-7111), and to the Optionee at the address set forth below or
to such other address as either party may hereafter designate in writing to the
other party in accordance with the provisions hereof. Notices shall be deemed to
have been given on the date of mailing or transmission, except notices of change
of address, which shall be deemed to have been given when received.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
9. ENTIRE AGREEMENT. This Agreement, together with the Plan, contains
the entire understanding of the parties hereto with respect to the subject
matter hereof and may be modified only by an instrument executed by the party
sought to be charged. No amendment on the part of the Company shall be valid
unless approved by its Board of Directors.
10. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, excluding choice of law
rules thereof.
11. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
12. FACSIMILE SIGNATURES. Signatures hereon which are transmitted via
facsimile shall be deemed original signatures.
13. REPRESENTATION BY COUNSEL; INTERPRETATION. The Optionee
acknowledges that he has been represented by counsel in connection with this
Agreement. Accordingly, any rule or law or any legal decision that would require
the interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived by the
Optionee. The provisions of this Agreement shall be interpreted in a reasonable
manner to give effect to the intent of the parties hereto.
14. HEADINGS. The headings and captions under sections and paragraphs
of this Agreement are for convenience of reference only and do not in any way
modify, interpret or construe
2
<PAGE>
the intent of the parties or affect any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
DCAP GROUP, INC.
By:/s/ Morton L. Certilman
-------------------------------
Morton L. Certilman
Chairman of the Board
/s/ Kevin Lang
--------------
Kevin Lang
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Address
(516) 735-7379
Fax Number
K:\WPDOC\CORP\EXTECH\DCAP\CLOSING\Agreements\Stock Options\Lang.299
3
<PAGE>
STOCK OPTION AGREEMENT, dated as of February 25, 1999, between
DCAP GROUP, INC. (formerly EXTECH Corporation), a Delaware corporation (the
"Company"), and ABRAHAM WEINZIMER (the "Optionee").
WHEREAS, simultaneously herewith, the Company is entering into
an Employment Agreement with the Optionee pursuant to which the Optionee is to
perform certain employment duties and services for the Company; and
WHEREAS, the Company desires to provide to the Optionee an
additional incentive to promote the success of the Company.
NOW, THEREFORE, in consideration of the foregoing, the Company
hereby grants to the Optionee the right and option to purchase Common Shares of
the Company under and pursuant to the terms and conditions of the Company's 1998
Stock Option Plan (the "Plan") and upon the following terms and conditions:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option (the "Option") to purchase up to Two Hundred Thousand (200,000)
Common Shares of the Company (the "Option Shares") during the following periods:
(a) All or any part of One Hundred Thousand (100,000) Common
Shares may be purchased during the period commencing on the first anniversary of
the date hereof and terminating at 5:00 P.M. on the fifth anniversary of the
date hereof (the "Expiration Date").
(b) All or any part of an additional One Hundred Thousand
(100,000) Common Shares may be purchased during the period commencing on the
second anniversary of the date hereof and terminating at 5:00 P.M. on the
Expiration Date.
2. NATURE OF OPTION. The Option to purchase the initial Thirty-Seven
Thousand One Hundred Seventy-Four (37,174) Option Shares commencing in each of
2000 and 2001 is intended to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, relating to "incentive stock
options." The remaining Option to purchase Option Shares is not intended to meet
such requirements.
3. EXERCISE PRICE. The exercise price of each of the Option Shares
shall be Two Dollars Sixty-Nine Cents ($2.69) (the "Option Price").
4. EXERCISE OF OPTIONS. The Option shall be exercised in accordance
with the provisions of the Plan. As soon as practicable after the receipt of
notice of exercise and payment of the Option Price as provided for in the Plan,
the Company shall tender to the Optionee a certificate issued in the Optionee's
name evidencing the number of Option Shares covered thereby.
5. TRANSFERABILITY. The Option shall not be transferable other than
by will or
<PAGE>
the laws of descent and distribution and, during the Optionee's lifetime, shall
not be exercisable by any person other than the Optionee.
6. INCORPORATION BY REFERENCE. The terms and conditions of the Plan are
hereby incorporated by reference and made a part hereof.
7. NOTICES. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and delivered personally or sent by facsimile
transmission, overnight mail or courier or registered or certified mail, return
receipt requested, postage prepaid, addressed to the Company at 90 Merrick
Avenue, East Meadow, New York 11554, Attention: Chairman of the Board (fax
number: (516) 296-7111), and to the Optionee at the address set forth below or
to such other address as either party may hereafter designate in writing to the
other party in accordance with the provisions hereof. Notices shall be deemed to
have been given on the date of mailing or transmission, except notices of change
of address, which shall be deemed to have been given when received.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
9. ENTIRE AGREEMENT. This Agreement, together with the Plan, contains
the entire understanding of the parties hereto with respect to the subject
matter hereof and may be modified only by an instrument executed by the party
sought to be charged. No amendment on the part of the Company shall be valid
unless approved by its Board of Directors.
10. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, excluding choice of law
rules thereof.
11. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
12. FACSIMILE SIGNATURES. Signatures hereon which are transmitted via
facsimile shall be deemed original signatures.
13. REPRESENTATION BY COUNSEL; INTERPRETATION. The Optionee
acknowledges that he has been represented by counsel in connection with this
Agreement. Accordingly, any rule or law or any legal decision that would require
the interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived by the
Optionee. The provisions of this Agreement shall be interpreted in a reasonable
manner to give effect to the intent of the parties hereto.
14. HEADINGS. The headings and captions under sections and paragraphs
of this Agreement are for convenience of reference only and do not in any way
modify, interpret or construe
2
<PAGE>
the intent of the parties or affect any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
DCAP GROUP, INC.
By:/s/ Morton L. Certilman
--------------------------------
Morton L. Certilman
Chairman of the Board
/s/ Abraham Weinzimer
Abraham Weinzimer
c/o Dealers Choice Automotive Planning Inc.
2545 Hempstead Turnpike
Suite 100
East Meadow, New York 11554
Address
(516) 735-7379
Fax Number
K:\WPDOC\CORP\EXTECH\DCAP\CLOSING\Agreements\Stock Options\Weinzimer.299
3
<PAGE>
SUBSCRIPTION AGREEMENT, dated as of October 2, 1998 (the "Agreement"),
by and between EXTECH CORPORATION, a Delaware corporation ("EXTECH" or the
"Company"), and EAGLE INSURANCE COMPANY, a New Jersey domiciled insurance
company (the "Subscriber").
RECITALS:
The Company is a party to an Agreement, dated as of May 8, 1998, with
Morton L. Certilman ("Certilman"), Jay M. Haft ("Haft"), Kevin Lang ("Lang") and
Abraham Weinzimer ("Weinzimer") (as amended, the "DCAP Agreement"), pursuant to
which, subject to the terms and conditions thereof, the Company has agreed to
purchase from Lang and Weinzimer, and Lang and Weinzimer have agreed to sell to
the Company, all of the outstanding shares of capital stock of Dealers Choice
Automotive Planning Inc., ("DCAP") and certain other related entities as well as
certain of the outstanding capital stock and membership interests in certain
other related entities (collectively, the "Related DCAP Entities").
The consummation of the DCAP Agreement is subject to, among other
things, approval by the stockholders of the Company of an amendment to the
Certificate of Incorporation of the Company pursuant to which the number of
authorized shares of Common Stock, $.01 par value, of the Company ("Common
Shares") is increased from 10,000,000 to at least 20,000,000 (the "Authorized
Share Increase").
In connection with the consummation of the DCAP Agreement, the Company
desires to obtain additional financing by selling to the Subscriber 1,486,893
Common Shares (the "Shares") at a price of $0.67 per Share (the "Offering").
The Subscriber is a wholly-owned subsidiary of The Robert Plan
Corporation ("Robert Plan").
Stockholder approval of the Authorized Share Increase is necessary to
consummate this Offering, The consummation of this Offering is contemplated to
take place concurrently with the consummation of the DCAP Agreement (the "DCAP
Closing").
Capitalized terms used in this Agreement will have the meanings given
such terms in Article XIV hereof or elsewhere in the text of this Agreement, and
variants and derivatives of such terms shall have correlative meanings,
NOW, THEREFORE, in consideration of the recitals and the respective
representations, warranties and agreements herein contained and intending to be
legally bound hereby, the parties hereby agree as follows;
<PAGE>
ARTICLE I
SUBSCRIPTION FOR SHARES
1.1 Subscription. Upon and subject to the terms and conditions of this
Agreement, the Subscriber hereby subscribes for and agrees to purchase from the
Company, and the Company hereby agrees to issue and sell to the Subscriber, the
Shares at the Closing.
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Shares (the "Purchase Price)
shall be sixty-seven cents ($0.67) per Share or an aggregate of nine hundred
ninety-six thousand two hundred eighteen dollars and thirty-one cents
($996,218.3 1).
2.2 Payment of Purchase Price. The Purchase Price shall be paid at the Closing
by the wire transfer by the Subscriber of immediately available funds to an
account designated by the Company against delivery by the Company of a
certificate representing the Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SUBSCRIBER
The Subscriber makes the following representations and warranties to EXTECH:
3.1 Valid Existence. The Subscriber is a corporation validly existing under and
in compliance with the laws of the State of New Jersey.
3.2 Consents. No consent of any Body or other Person is required to be received
by or on the part of the Subscriber to enable it to enter into and carry out
this Agreement and the transactions contemplated hereby.
3.3 Authority; Binding Nature of Agreement. The Subscriber has the corporate
power to enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Subscriber and no other corporate proceedings on the part of
the Subscriber are necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement constitutes the valid and binding obligation of the Subscriber and is
enforceable in accordance with its terms.
- 2 -
<PAGE>
3.4 No Breach Neither the execution and delivery of this Agreement, nor
compliance by the Subscriber with any of the provisions hereof nor the
consummation of the transactions contemplated hereby will:
(a) violate or conflict with any provision of the
Certificate of Incorporation or By- Laws of the Subscriber;
(b) violate or, alone or with notice or the passage of time,
or both, result in the breach or termination of, or otherwise
give any party the right to terminate, or declare a default
under, the terms of any Contract to which the Subscriber is a
party or by which it may be bound;
(c) violate any judgment, order, injunction, decree or award
against, or binding upon, the Subscriber or upon any of its
assets; or
(d) violate any law or regulation of any jurisdiction
relating to the Subscriber.
3.5 Legal Proceedings. No event set forth in paragraph (f) of Item 401 of
Regulation S-K (Involvement in Certain Legal Proceedings), promulgated by the
SEC, or paragraph (d) of Item 401 of Regulation S-B (Involvement in Certain
Legal Proceedings), promulgated by the SEC, has occurred during the past five
years with respect to either the Subscriber, Robert Plan or Robert Wallach.
3.6 Brokers. The Subscriber has not engaged, consented to, or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with the
transactions contemplated by this Agreement.
3.7 Proxy Statement. The information to be furnished by the Subscriber for
inclusion in the Proxy Statement, when furnished, and at all times to and
including the time of the stockholders' meeting convened for the purpose of
obtaining Stockholder Approval, will not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein contained not misleading.
3.8 SEC Reports. The Subscriber hereby represents that the Company has furnished
to it a copy of the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997 and Quarterly Reports on Form 10-QSB for the periods
ended March 31, 1998 and June 30, 1998 (the "SEC Reports"). The Subscriber
represents further that it has been furnished with all information regarding the
Company, including, without limitation, regarding the DCAP Agreement, which it
has requested or desired to know; that all other documents which could be
reasonably provided, including, without limitation, a copy of the DCAP
Agreement, have been made available for its inspection and review; and that it
has been afforded the opportunity to ask questions of and receive answers from
duly authorized officers and/or other representatives of the Company concerning
the terms and conditions of the Offering, and any additional information which
it has requested.
3.9 DCAP Agreement. The Subscriber hereby represents that the Company has
furnished to it a copy of the DCAP Agreement and all of the Schedules and
Exhibits thereto, which are listed in the Table of Contents to the DCAP
Agreement, and that the Subscriber has reviewed such items.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EXTECH
Subject to Section 15.17 hereof, EXTECH makes the following
representations and warranties to the Subscriber:
4.1 Valid Existence; Qualification. (a) EXTECH is a corporation validly existing
and in good standing under the laws of the State of Delaware. EXTECH has the
power to carry on its business as now conducted and to own its assets now owned.
EXTECH is qualified to do business in the State of New York, is not required to
qualify in any other jurisdiction in order to own its assets now owned or to
carry on its business as now conducted, and there has not been any claim by any
other jurisdiction to the effect that EXTECH is required to qualify or otherwise
be authorized to do business as a foreign corporation therein.
(b) Each of EXTECH's subsidiaries is duly organized,
validly existing and in good standing in its jurisdiction of incorporation and
is duly qualified as a foreign corporation and authorized to do business in all
other jurisdictions in which the nature of its business or property requires
such qualification. Each of such subsidiaries has the power to own its
properties and to carry on its business as now conducted and as proposed to be
conducted.
4.2 Capitalization. (a) The authorized capital stock of EXTECH consists solely
of ten million (10,000,000) Common Shares of which 5,591,367 shares are issued
and outstanding. Immediately following the DCAP Closing and the issuance of the
Shares, except as provided for on Schedule 4.2 hereto, the authorized capital
stock of EXTECH will consist of at least 20,000,000 Common Shares of which
approximately 11,780,260 Common Shares will be issued and outstanding.
(b) Options, Etc. Except as set forth on Schedule 4.2 or in the SEC Reports
or as contemplated by the DCAP Agreement, there are no outstanding rights
(either pre-emptive or other) or options to subscribe for or purchase from
EXTECH, or any warrants or other agreements providing for or requiring the
issuance or purchase by EXTECH of, any of its capital stock or any securities
convertible into or exchangeable, for, or exercisable into, any of its capital
stock or any voting trusts, proxies or agreements relating to the voting of the
EXTECH's capital stock.
4.3 Consents. Except (a) as set forth in Schedule 4.3 hereto, (b) for the
consent of Lang and Weinzimer pursuant to the DCAP Agreement to the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby (the "DCAP Consent"), and (c) for the Stockholder Approvals,
the execution, delivery and performance by EXTECH of this Agreement, the DCAP
Agreement and of each Related Agreement, and the issuance and sale of the Shares
hereunder, do not and will not require the approval or consent of, or any filing
with, any governmental authority or agency or any other Person.
4.4 Authority; Binding Nature of Agreement. EXTECH has the corporate power to
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance by EXTECH of this Agreement, the DCAP
Agreement and each agreement, instrument, or other document to be executed in
connection herewith or therewith (the "Related Agreements") and the
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consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of EXTECH and, except for Stockholder
Approval, no other corporate proceedings on the part of EXTECH are necessary to
authorize the execution, delivery and performance by EXTECH of this Agreement
and the consummation of the transactions contemplated hereby. Each of this
Agreement, the DCAP Agreement and each other Related Agreement constitutes the
valid and binding obligation of EXTECH and is enforceable against it in
accordance with its terms.
4.5 SEC Reports. EXTECH has previously delivered to the Subscriber true and
complete copies, including exhibits, of the SEC Reports. The SEC Reports do not
contain any untrue statement of material fact, or fail to state any material
fact required to be stated therein or necessary to make the statements made
therein not materially misleading.
4.6 No Breach. Neither the execution, delivery or performance by EXTECH of this
Agreement, the DCAP Agreement or any other Related Agreement, nor compliance by
EXTECH with any of the provisions hereof nor the consummation of the
transactions contemplated hereby or thereby will:
(a) violate or conflict with any provisions of the Certificate of
Incorporation or By-Laws of EXTECH;
(b) violate, or alone or with notice or the passage of time, or both,
result in the breach or termination of, or otherwise give any party the right to
terminate, or declare a default under, the terms of any Contract, license or
permit to which EXTECH is a party or by which it may be bound, the violation,
breach or termination of which, or default under which, would have a Material
Adverse Effect;
(c) violate any judgment, order, injunction, decree or award against, or
binding upon, EXTECH or upon any of its assets;
(d) subject to the accuracy of the representations made by the Subscriber
in Article V hereof and by Lang and Weinzimer in Article VI of the DCAP
Agreement, violate any law or regulation of any jurisdiction relating to EXTECH,
the violation of which would have a Material Adverse Effect; or
(e) result in the creation of any Lien upon any of the assets of EXTECH or
any of EXTECH's subsidiaries, the creation of which would have a Material
Adverse Effect.
4.7 DCAP Agreement. EXTECH has in all material respects performed all its
obligations required to be performed by it to date under the DCAP Agreement,
substantially in the manner provided in the DCAP Agreement, without any waiver
or excusal of the performance or nonperformance of any such obligation, and is
not in default under the DCAP Agreement (nor, to EXTECH's Knowledge has any
event occurred which with the passage of time or notice, or both, would
constitute such a default). To EXTECH's Knowledge, (a) each of the
representations and warranties of Lang and Weinzimer made pursuant to the DCAP
Agreement was true and correct in
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all material respects when made and is true and correct in all material respects
as of the date hereof, and (b) each of Lang or Weinzimer and DCAP has performed,
and complied with, in all material respects their respective covenants and
agreements to be performed, or complied with, on or prior to the date hereof.
EXTECH has received no notice of any dispute, default or alleged default or
breach of any representation or warranty under the DCAP Agreement.
4.8 Brokers. EXTECH has not engaged, consented to, or authorized any broker,
finder, investment banker or other third party to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement.
4.9 Proxy Statement. The Proxy Statement (excluding information to be furnished
by the Subscriber for inclusion therein), when furnished to the Company's
stockholders, and at all times to and including the time of the stockholders'
meeting convened for the purpose of obtaining Stockholder Approval, will not
contain any untrue statement of a material fact with regard to the Authorized
Share Increase proposal or omit to state any material fact with respect thereto
necessary to make the statements therein contained not misleading.
4.10 Subsidiaries. Except as set forth on Schedule 4.10 hereto or in the SEC
Reports, EXTECH does not have any subsidiaries and does not own or hold of
record and/or beneficially own or hold, directly or through a subsidiary, any
shares of any class of the capital of any corporation or any legal or beneficial
ownership interest in any general or limited partnership, limited liability
company, business trust or joint venture or in any other unincorporated trade or
business enterprise. The capital stock or other equity interest for each of such
Subsidiaries is wholly owned directly or indirectly by EXTECH, free and clear of
any Lien.
4.11 Absence of Certain Developments. Except for entering into this
Agreement and the DCAP Agreement, except as disclosed on Schedule 4.11 hereof,
since June 30, 1998, neither EXTECH nor any of its subsidiaries has, whether or
not in the ordinary course of business:
(a) issued any capital stock or other equity interest or any right, options
or warrants with respect thereto;
(b) declared, set aside, paid to a reserve fund or made any payment or
distribution of cash or other property to its stockholders or equity holders
with respect to any class of its capital stock or other equity interest (other
than dividends paid by EXTECH's subsidiaries to EXTECH) or purchased or redeemed
any shares of its capital stock or other equity interests;
(c) suffered any substantial loss to any of its material assets;
(d) suffered damage, destruction or other casualty loss, or forfeiture of,
any property or assets, whether or not covered by insurance, which has had or
may reasonably be expected to have a Material Adverse Effect;
(e) mortgaged or pledged all or any substantial part of its properties or
assets, tangible or intangible, or subjected them to any Lien, except Liens for
current property taxes not yet due and payable;
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(vi) entered into any agreement or arrangement granting any rights to
purchase or lease all or any substantial part of its assets, properties or
rights or requiring the consent of any Person to the transfer, assignment or
lease of any such assets, properties or rights; or
(vii) entered into any agreement or understanding to do any of the
foregoing.
4.12 Liens. Neither EXTECH nor any of its subsidiaries has Liens upon any of its
properties other than the Liens which are listed on Schedule 4.12 hereto and
Liens on personal property created in connection with equipment leases,
installment purchase contracts, conditional sales contracts, purchase money
mortgages and the like to secure Indebtedness incurred to acquire property not
exceeding $50,000 in the aggregate.
4.13 Indebtedness to and from Officers, Directors and Others. Except as set
forth on Schedule 4.13 hereto, neither EXTECH nor any of its subsidiaries is
indebted to any shareholder, director, officer, partner, manager, employee or
consultant of EXTECH or any of its Subsidiaries or to any affiliate of EXTECH or
any of its subsidiaries except for amounts due as normal salaries, wages or
reimbursement of ordinary business expenses or routine employee advances for
expenses, which business expenses and employee advances do not exceed $25,000 in
the aggregate for all such shareholders, directors, officers, partners,
managers, employees and consultants and not exceeding $10,000 for any such
Person. Except as set forth on Schedule 4.13, no shareholder, director, officer,
partner, manager, employee or consultant of EXTECH or any of its subsidiaries
nor any affiliate of EXTECH or any of its subsidiaries is now indebted to EXTECH
or any subsidiary except for ordinary business expense advances.
4.14 Tax Returns. Each of EXTECH and its subsidiaries has filed all Tax returns
and reports which are required to be filed with any foreign, federal, state or
local governmental authority or agency and has paid all Taxes which have become
due, and made adequate provision for the payment of all Taxes that will become
due, under applicable foreign, federal, state or local governmental law or
regulations with respect to the periods in respect of which such returns and
reports were filed, and all assessments of Taxes. EXTECH and its management
knows of no additional assessments since the date of such returns and reports.
Each of EXTECH and its subsidiaries has made adequate provisions for all current
Taxes.
4.15 Solvency. Each of EXTECH and its subsidiaries is solvent and has tangible
and intangible assets having a fair value in excess of the amount required to
pay its probable liabilities on its existing debts as they become absolute and
matured, after giving effect to the transactions contemplated hereunder and
under the DCAP Agreement and each of the other Related Agreements.
4.16 Title to Assets. Each of EXTECH and its subsidiaries owns all of its
respective assets, and has good and marketable title with respect thereto, free
and clear of all Liens other than those disclosed on Schedule 4.16.
4.17 Material Contracts and Obligations.
(a) Attached hereto as Schedule 4.17 is a true, complete and accurate
list of all Contracts substantially restricting EXTECH or any of its
subsidiaries from engaging in the insurance business or competing in such
business with any Person or in any geographical area, or from using or
disclosing any information in its possession (other than routine supplier
and customer
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confidentiality agreements that have been entered into by EXTECH or its
Subsidiaries which are in writing or have been orally agreed to by EXTECH or any
such Subsidiary.)
(b) Except as set forth on Schedule 4.17(b) hereto, all Contracts
required to be disclosed to the Subscriber pursuant to this Section 4.17
are valid, binding and in full force and effect as to EXTECH or its
Subsidiaries, and neither EXTECH nor, to the Company's knowledge, any other
party thereto, is in material breach or violation of, or material default
under, nor is there any reasonable basis for a claim of such breach or
violation by EXTECH or such default by EXTECH or its Subsidiaries under,
the terms of any such Contract, and no event has occurred which constitutes
or, with the lapse of time or the giving of notice or both, would
constitute, such a material breach, violation or default by EXTECH or its
Subsidiaries thereunder. EXTECH has furnished to the Subscriber a true and
complete copy of all Contracts required to be disclosed pursuant to this
Section 4.17, including all amendments thereto listed on Schedule 4.17.
4.18 Necessary Property; Condition of Property. The properties and assets owned,
leased by or licensed to EXTECH and each of its subsidiaries, if applicable,
constitute all of the real and personal properties, tangible and intangible,
which are necessary, used or useful in the conduct of its business in the manner
and to the extent presently conducted or as presently contemplated to be
conducted. No other material real or personal properties are required for the
conduct of the business of EXTECH or any of its subsidiaries as presently or
proposed to be conducted by them.
4.19. Necessary Licenses and Permits. Except as set forth on Schedule 4.19,
EXTECH and each of its Subsidiaries, if applicable, has all licenses, permits,
consents, concessions and other authorizations of governmental, regulatory or
administrative agencies or authorities, whether foreign, federal, provincial,
state, or local (collectively OPermitsO), required to own and lease its
properties and assets and to conduct its business as now or proposed to be
conducted by them except where the failure to have such Permits would not have a
Material Adverse Effect. Schedule 4.19 hereto sets forth a list of each material
license, permit, consent, concession, or other authorization so required or used
by EXTECH or any of its subsidiaries in the conduct of its business, as now or
proposed to be conducted. Except as specified in Schedule 4.19 hereto, no
registrations, filings, applications, notices, transfers, consents, approvals,
audits, qualifications, waivers or other action of any kind is required by
virtue of the execution and delivery of this Agreement, the DCAP Agreement or
any other Related Agreement, or of the consummation of the transactions
contemplated hereby, including without limitation the issuance of the Shares,
(a) to avoid the loss of any Permit listed in Schedule 4.19 or any asset,
property or right pursuant to the terms thereof, or the violation or breach of
any law applicable thereto or (b) to enable EXTECH or any of its subsidiaries to
hold and enjoy the same after the Closing Date in the conduct of its business as
now or proposed to be conducted by them.
4.20 Compliance with Law. Except as disclosed pursuant to the DCAP Agreement,
EXTECH and each of its subsidiaries is in compliance with all applicable laws,
regulations, orders, judgments, decrees, permits, licenses, franchises and
authorizations, except where the failure to so comply would not have a Material
Adverse Effect. Except as may be set forth on Schedule 4.20 hereto or disclosed
pursuant to the DCAP Agreement, neither EXTECH nor any of its subsidiaries, if
applicable, is in default under, or in violation of, or has violated (and not
cured) any law (including, without limitation, laws relating to the issuance or
sale of securities, antitrust, zoning and building codes and ordinances,
occupational safety, the protection of the environment, transportation, storage
or disposal of hazardous waste, anti-pollution and air and water quality laws),
or any
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licenses, franchises, permits, authorizations or concessions granted by, or any
judgment, decree, writ, injunction or order of, any governmental or regulatory
authority, applicable to its business or any of its properties or assets, except
where such defaults and violations would not, in the aggregate, have a Material
Adverse Effect. Neither EXTECH nor any of its subsidiaries has received any
notification alleging any violations of any of the foregoing within the last
five years with respect to which adequate corrective action has not been taken.
4.21 Environmental Compliance.
(a) (i) Neither EXTECH nor any of its subsidiaries has generated,
used, transported, treated, stored, released or disposed of, and has not
suffered or permitted anyone else to generate, use, transport, treat,
store, release or dispose of any "Hazardous Substance" (as hereinafter
defined) in violation of any "Environmental Laws" (as hereinafter defined);
(ii) there has not been any generation, use, transportation, treatment,
storage, release or disposal of any Hazardous Substance resulting from the
conduct of EXTECH or any of its subsidiaries or the use of any property or
facility by EXTECH or any of its subsidiaries or, to the best of the
Company's knowledge, any nearby or adjacent properties or facilities, which
has created or might reasonably be expected to create any liability on the
part of EXTECH or any of its subsidiaries under the Environmental Laws or
which would require reporting to or notification by EXTECH or any of its
subsidiaries to any governmental entity; (iii) no asbestos which is or has
some reasonable likelihood of becoming friable or polychlorinated biphenyl
or underground storage tank is contained in or located at any facility
owned, leased or used by EXTECH or any of its subsidiaries; and (iv) any
Hazardous Substance handled or dealt with in any way in connection with the
business of EXTECH or any of its subsidiaries, whether before or during the
ownership of EXTECH or any of its subsidiaries, has been and is being
handled or dealt with in all respects in compliance with the Environmental
Laws in effect at the time such activities were being conducted.
(b) For purposes of this Agreement, the term "Hazardous Substance"
shall mean (but shall not be limited to) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable
Environmental Laws as "hazardous substances," "hazardous materials"
"hazardous wastes" or "toxic substances," or any other formulation intended
to define, list or classify substances by reason of deleterious properties
such as ignitability, corrosivity, reactivity, radioactivity,
carcinogenicity, reproductive toxicity or "EP toxicity," and petroleum and
drilling fluids, produced waters and other wastes associated with the
exploration, development, or production of crude oil, natural gas or
geothermal energy, asbestos, polychlorinated biphenyls and urea
formaldehyde.
(c) For purposes of this Agreement, the term "Environmental Laws"
shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Resources Conservation and Recovery
Act of 1976, as amended, and distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances and any applicable
statutes, regulations, rules, orders in council, ordinances, codes,
licenses, permits, orders, approvals, plans, authorizations, concessions,
and similar items of all governmental authorities and all applicable
judicial, administrative and regulatory decrees, judgments and orders, any
of which relate to the protection of human health or the environment from
the effects of Hazardous Substances, including, but not limited to, those
pertaining to reporting, licensing, permitting, investigating and
remediating emissions, discharges, releases or threatened releases of
Hazardous Substances into the air, surface
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water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
4.22 Litigation. Except as set forth on Schedule 4.22 hereto or disclosed
pursuant to the DCAP Agreement, there is no suit, claim, action, proceeding or
investigation pending or, to the Company's knowledge, threatened against EXTECH
or any of its subsidiaries or any of their respective assets or properties,
including each Employee Benefit Plan at law or in equity or before any
governmental authority or instrumentality or before any arbitrator of any kind
nor to the Company's knowledge, has there occurred any event or does there exist
any condition on the basis of which any litigation, proceeding or investigation
might properly be instituted.
4.23 No Material Adverse Changes. Except as set forth on Schedule 4.23 hereto
and for continuing losses, since June 30, 1998, no Material Adverse Effect has
occurred, and EXTECH has no knowledge of any occurrence or development which
might reasonably be expected to result in any such Material Adverse Effect.
4.24 Corporate Documents, Books and Records. Complete and correct copies of the
certificate or articles of incorporation and by-laws, and of all amendments
thereto, of EXTECH and each of its subsidiaries have been made available for
review by the Subscriber, and no changes in said documents will be made on or
before the Closing Date other than as contemplated hereby or by the DCAP
Agreement or as disclosed to, and concurred to in writing by Subscriber. The
minute books of EXTECH and each of its subsidiaries contain accurate records of
all meetings and consents in lieu of meetings of the Board (and its committees)
and shareholders of each corporation since incorporation. Except as reflected in
such minute books or as set forth on Schedule 4.24 hereto, there are no minutes
of meetings or consents in lieu of meetings of the Board (or its committees) or
of the shareholders of EXTECH or any of its subsidiaries. The books and records
of EXTECH and each of its subsidiaries accurately reflect the transactions to
which EXTECH and each of its subsidiaries is a party or by which its properties
are subject or bound, and such books and records have been properly kept and
maintained in all material respects.
4.25 Disclosure. No representation, warranty or statement made in this
Agreement, any Related Agreement, or any agreement, certificate, statement or
document furnished by or on behalf of EXTECH or any of its subsidiaries in
connection with the issuance of the Shares contains or will contain any untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
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ARTICLE V
ACQUISITION OF SHARES
5.1 Investment Intent; Qualification as Purchaser.
(a) The Subscriber represents and warrants that the Shares to be
acquired pursuant to the terms hereof are being acquired for its own
account, for investment purposes and not with a view to the distribution
thereof. The Subscriber agrees that it will not sell, assign, transfer,
encumber or otherwise dispose of any of the Shares unless (i) a
registration statement under the Securities Act with respect to the Shares
is in effect and the prospectus included therein meets the requirements of
Section 10 of the Securities Act, or (ii) pursuant to an exemption from
registration under the Securities Act. In the event, Subscriber relies on
such an exemption, upon written request of EXTECH, prior to any disposition
of any Shares, Subscriber shall provide to EXTECH a written opinion of its
counsel that, after an investigation of the relevant facts, such counsel is
of the opinion that such proposed sale, assignment, transfer, encumbrance
or disposition does not require registration under the Securities Act.
(b) The Subscriber understands and acknowledges that the Shares are
not being registered under the Securities Act and must be hold indefinitely
unless they are subsequently registered thereunder or an exemption from
such registration is available.
(c) The Subscriber represents and warrants that (i) it is an
"accredited investor," as such term is defined in Rule 501(a) promulgated
by the SEC under the Securities Act, and has such knowledge and experience
in financial and business matters that it is capable of evaluating the
merits and risks of the acquisition of the Shares contemplated hereby; (ii)
it is able to bear the economic risk of an investment in the Shares,
including, without limitation, the risk of the loss of part or all of its
investment and the inability to sell or transfer the Shares for an
indefinite period of time; (iii) it has adequate means of providing for
current needs and contingencies and has no need for liquidity in its
investment in the Shares; and (iv) it does not have an overall commitment
to investments which are not readily marketable that is excessive in
proportion to its net worth and an investment in the Shares will not cause
such overall commitment to become excessive. The Subscriber will execute
and deliver to EXTECH such documents as EXTECH may reasonably request in
order to confirm the accuracy of the foregoing.
5.2 Restrictive Legend. The Shares to be issued to the Subscriber may not be
sold, assigned, transferred, encumbered or disposed of unless they are
registered under the Securities Act or unless an exemption from such
registration is available. Accordingly, the following restrictive legend will be
placed on any instrument, certificate or other document evidencing the Shares:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. These shares have been
acquired for investment and not for distribution or resale. They may
not be sold, assigned, mortgaged, pledged, hypothecated or otherwise
transferred or disposed of without an effective registration statement
for such shares under the Securities Act of 1933, as amended or an
opinion of counsel for the Company that registration is not required
under such Act."
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5.3 Certain Risk Factors. The Subscriber acknowledges that there are significant
risks relating to the acquisition of the Shares including, without limitation,
as a result of the matters described in the SEC Reports and the risks relating
to the operation of DCAP and its related entities.
ARTICLE VI
PROXY STATEMENT
6.1 Subscriber Information. At the request of the Company, the Subscriber shall
furnish to the Company in a timely manner any and all information with respect
to itself, Robert Plan and Robert Wallach as shall be necessary for the
completion of the Proxy Statement in accordance with the requirements of the
proxy rules promulgated under the Exchange Act.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION OF EXTECH TO CLOSE
The obligation of EXTECH to consummate the transactions contemplated
hereby is subject to the fulfillment, prior to or at the Closing, of each of the
following conditions, any one or more of which may be waived by EXTECH (except
when the fulfillment of such condition is a requirement of law):
7.1 Representations and Warranties. All representations and warranties of the
Subscriber contained in this Agreement shall be true and correct in all material
respects as at the Closing Date, as if made at the Closing and as of the Closing
Date.
7.2 Performance of Obligations. The Subscriber shall have performed or complied
with in all material respects its agreements, covenants and undertakings
hereunder and under each Related Agreement to be performed or complied with on
or prior to the Closing Date. 7.3 Certificate. EXTECH shall have received a
certificate, dated the Closing Date, signed by an executive officer of the
Subscriber, as to the satisfaction of the conditions contained in Sections 7.1,
7.2 and 7.8 hereof.
7.3 Certificate. EXTECH shall have received a certificate, dated the Closing
Date, signed by an executive officer of the Subscriber, as to the satisfaction
of the conditions contained in Sections 7.1, 7.2 and 7.8 hereof.
7.4 Purchase Price. The Subscriber shall have tendered to EXTECH the Purchase
Price in accordance with the provisions of Section 2.2 hereof.
7.5 Stockholder Approval. Stockholder Approval shall have occurred.
7.6 DCAP Consent. EXTECH shall have obtained the DCAP Consent.
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7.7 DCAP Closing. The DCAP Closing shall have occurred concurrently with the
Closing.
7.8 No Actions. No Action shall have been instituted and be continuing before a
court or before or by a Body, or shall have been threatened and be unresolved,
to restrain or prevent, or obtain any material amount of damages in respect of,
the carrying out of the transactions contemplated hereby or which might have a
materially adverse effect thereon.
7.9. Related Agreements. This Agreement and each of the Related Agreements shall
have been executed and delivered in a form provided for herein, and each of the
Related Agreements shall be in full force and effect and no term or condition
thereof shall have been amended, modified or waived except with the prior
written consent of EXTECH.
7.10 Secretary's Certificate. EXTECH shall have received from the Subscriber
copies certified by the Secretary thereof to be true and complete as of the
Closing Date, of the records of all corporate action taken to authorize the
execution, delivery and performance of this Agreement and each of the Related
Agreements to which the Subscriber is a party.
7.11 Incumbency Certificate. EXTECH shall have received from the Subscriber an
incumbency certificate, dated the Closing Date, signed by a duly authorized
officer thereof and giving the name and bearing a specimen signature of each
individual who shall be authorized to sign, in the name and on behalf of the
Subscriber, this Agreement and each of the Related Agreements to which the
Subscriber is or is to become a party, and to give notices and to take other
action on behalf of the Subscriber under each of such documents.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE SUBSCRIBER TO CLOSE
The obligation of the Subscriber to consummate the transactions
contemplated hereby is subject to the fulfillment, prior to or at the Closing,
of each of the following conditions, any one or more of which may be waived by
the Subscriber (except when the fulfillment of such condition is a requirement
of law):
8.1 Representations and Warranties. All representations and warranties of EXTECH
contained in this Agreement shall be true and correct in all material respects
as at the Closing Date, as if made at the Closing and as of the Closing Date.
8.2 Performance of Obligations. EXTECH shall have performed or complied with in
all material respects its agreements, covenants and undertakings hereunder and
under each Related Agreement to be performed or complied with on or prior to the
Closing Date.
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8.3 Certificate. The Subscriber shall have received a certificate, dated the
Closing Date, signed by the Chairman of the Board or President of EXTECH, as to
the satisfaction of the conditions contained in Sections 8.1, 8.2, 8.5, 8.6,
8.7, 8.8, 8.9 and 8.15 hereof.
8.4 Shares. EXTECH shall have tendered to the Subscriber a certificate
evidencing the Shares.
8.5 Stockholder Approval. Stockholder Approval shall have occurred.
8.6 Size of Board: Election as Director. The size of the Board of Directors of
EXTECH shall have been increased to five (5) and the nominee designated by the
Subscriber (which nominee shall be Robert Wallach) shall have been elected as a
member thereof.
8.7 DCAP Consent. EXTECH shall have obtained the DCAP Consent.
8.8 DCAP Closing. The DCAP Closing shall have occurred concurrently with the
Closing, and the issued and outstanding shares of EXTECH beneficially owned,
directly or indirectly, by Lang, Weinzimer, Morton L. Certilman and Jay M. Haft,
after giving effect to the DCAP Closing, shall be substantially as set forth on
Schedule 8.8 attached hereto.
8.9 No Actions. No Action shall have been instituted and be continuing before a
court or before or by a Body, or shall have been threatened and be unresolved,
to restrain or prevent, or obtain any material amount of damages in respect of,
the carrying out of the transactions contemplated hereby, or which might
materially affect the right of the Subscriber to own the Shares after the
Closing Date, or which might have a materially adverse effect thereon.
8.10 Related Agreements. This Agreement, the DCAP Agreement and each of the
Related Agreements shall have been executed and delivered in a form provided for
herein, and each of the Related Agreements shall be in full force and effect and
no term or condition thereof shall have been amended, modified or waived except
with the prior written consent of Subscriber.
8.11 Charter. The Subscriber shall have received from EXTECH (a) a copy of
EXTECHOs Certificate or Articles of Incorporation, certified by the Secretary of
the Company to be true and complete as of a date no more than five days prior to
the Closing Date, (b) a copy, certified by the Secretary of EXTECH to be true
and complete as of the Closing Date, of the by-laws thereof; and (c) a
certificate, dated not more than five days prior to the date hereof, of the
relevant governmental authority or other appropriate official of each
jurisdiction in which EXTECH is incorporated or qualified to do business, as to
EXTECH's corporate good standing in such jurisdiction or qualification to do
business, as the case may be.
8.12 Secretary's Certificate. The Subscriber shall have received from EXTECH
copies certified by the Secretary thereof to be true and complete as of the
Closing Date, of the records of all corporate action taken to authorize the
execution, delivery and performance of this Agreement, the DCAP Agreement and
each of the Related Agreements to which EXTECH is a party.
8.13 Incumbency Certificate. The Subscriber shall have received from EXTECH an
incumbency certificate, dated the Closing Date, signed by a duly authorized
officer thereof and giving the name and bearing a specimen signature of each
individual who shall be authorized to sign,
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in the name and on behalf of EXTECH, this Agreement, the DCAP Agreement and each
of the Related Agreements to which EXTECH is or is to become a party, and to
give notices and to take other action on behalf of EXTECH under each of such
documents.
8.14 Agreements. The Subscriber shall have received copies of the DCAP
Agreement, each Related Agreement, each other agreement, instrument, certificate
or other document executed in connection with the DCAP Agreement or any such
Related Agreement and all amendments, modifications or supplements thereto,
certified to the Subscriber's reasonable satisfaction to be true and accurate
copies thereof; provided that to the extent Subscriber shall have received a
certified copy of any of the foregoing prior to the Closing, EXTECH may, in lieu
of delivering an additional copy, certify in writing to the Subscriber that the
certified copy thereof previously delivered to the Subscriber represents a true
and correct copy thereof as of the Closing Date.
8.15 Amendment of DCAP Agreement, Etc. EXTECH shall not have agreed to any
amendment to or modification of, nor shall have granted any waiver or failed to
enforce any of its rights pursuant to any provision of the DCAP Agreement or the
other Related Agreements to which DCAP is a party or executed in connection with
the DCAP Agreement, which amendment, modification, waiver or failure to enforce
shall have (a) materially increased the consideration payable by EXTECH pursuant
to the DCAP Agreement, (b) materially reduced the obligations of Lang or
Weinzimer under the DCAP Agreement, (c) materially limited or restricted any
representation or warranty or eliminated any material representation and
warranty, of Lang or Weinzimer pursuant to the DCAP Agreement, (d) materially
increased the obligations of EXTECH under, or added any material obligation of
EXTECH with respect to, the DCAP Agreement, or (e) materially adversely affected
the value of the Shares.
ARTICLE IX
CLOSING
9.1 Time and Location. The closing (the "Closing") provided for herein shall
take place at the offices of Certilman Balin Adler & Hyman, LLP, 90 Merrick
Avenue, East Meadow, New York 11554, upon or no more than two (2) business days
following the DCAP Closing or, if, as of such date, any party shall not be
obligated to close and shall not have waived such closing condition(s), subject
to the provisions of Article XII hereof, on the business day after such later
date as such party or parties shall be obligated to close or shall have waived
such closing condition(s), or at such time and place as may be mutually agreed
to by the parties. Such date is referred to in this Agreement as the "Closing
Date."
9.2 Items to be Delivered by the Subscriber. At the Closing, the Subscriber will
deliver to EXTECH:
(a) the certificate required by Section 7.3 hereof; and
(b) the Purchase Price for the Shares.
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9.3 Items to be Delivered by EXTECH. At the Closing, EXTECH will deliver to the
Subscriber:
(a) the certificate required by Section 8.3 hereof; and
(b) the certificate representing the Shares.
ARTICLE X
PRE-CLOSING COVENANTS
EXTECH covenants that, following the date hereof and through the
Closing Date, except as contemplated hereby (including, without limitation, as
set forth in the schedules hereto), EXTECH will comply, and will cause each of
its subsidiaries to comply, with the following.
10.1 Corporate Existence; Subsidiaries; Maintenance of Properties. Each of
EXTECH and its subsidiaries will preserve and keep in full force and effect its
corporate existence, rights and franchises. EXTECH and its subsidiaries will not
engage in any business other than those presently conducted or now contemplated
by such Persons and those businesses substantially similar to the business now
conducted or now contemplated. Each of EXTECH and its subsidiaries will maintain
all of its properties used or useful in the conduct of its business in good
condition, repair and working order (normal wear and tear excepted) and cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of EXTECH may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section 10.1 shall prevent EXTECH or any of its subsidiaries from discontinuing
the operation and maintenance of any of such properties if such discontinuance
is, in the judgment of EXTECH, desirable in the conduct of such Person's
business and does not cause a Material Adverse Effect.
10.2 Taxes. Each of EXTECH and its subsidiaries will pay and discharge, or cause
to be paid and discharged, before the same shall become overdue, all Taxes,
assessments and other governmental charges imposed upon EXTECH and its
subsidiaries and their respective real properties, sales and activities, or any
part thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies, which if unpaid might by law become a Lien or
charge upon any of their properties; provided, however, that any such Tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if EXTECH or any of its subsidiaries shall have set aside on its books
adequate reserves with respect thereto; and provided, further, that EXTECH and
its subsidiaries will pay or cause to be paid all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of foreclosure on any
lien which may have attached as security therefor.
10.3 Compliance with Laws, Contracts, Licenses and Permits. Each of EXTECH and
its subsidiaries will (a) comply in all material respects with all applicable
laws and regulations wherever its business is conducted, (b) comply with the
provisions of its certificate or articles of incorporation and by-laws, (c)
comply in all material respects with all agreements and instruments by which it
or any of its properties may be bound (including, without limitation, the DCAP
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Agreement and the other Related Agreements), (d) comply with all applicable
decrees, orders, and judgments and (e) comply in all material respects with all
required approvals, permits and licenses.
10.4 Distributions. Neither EXTECH nor any of its subsidiaries shall make any
Distribution.
10.5 Transactions with Affiliates. Except as set forth on Schedule 10.5, neither
EXTECH nor any of its Subsidiaries will engage in any transaction with any
affiliate, except on terms which, in the aggregate, are not less favorable to
EXTECH than could be obtained by EXTECH from a third party in an arms-length
transaction, and the terms of any such transaction shall be disclosed to the
Subscriber.
10.6 Joint Ventures. Neither EXTECH nor any or its subsidiaries will enter into
any joint venture or partnership.
10.7 Loans and Advances. Neither EXTECH nor any of its subsidiaries shall
make loans or cash advances to any director, officer, partner, employee or
affiliate other than cash advances for meals, lodging and other expenses in
connection with business-related travel which exceed $25,000 in the aggregate
outstanding at any one time for all loans and advances or exceed $10,000 to any
one Person, except that EXTECH may make loans to purchase the Sterling Foster
Shares (as such term is defined in the DCAP Agreement).
10.8 Restrictions on Indebtedness. Neither EXTECH nor any of its
subsidiaries will create, incur, assume, guarantee or be or remain liable,
contingently or otherwise, with respect to any Indebtedness other than the
following ("Permitted Indebtedness"):
(a) Indebtedness reflected in the SEC Reports;
(b) Indebtedness of DCAP and/or any Related DCAP Entity; and
(c) any other Indebtedness of EXTECH which does not at any time exceed
$100,000 in the aggregate.
10.9 Additional SEC Reports. Promptly upon their filing with the SEC or mailing
to stockholders, EXTECH shall deliver to the Subscriber copies of all filings,
forms, material correspondence, registration statements, proxies, prospectuses
and all amendments, modifications or supplements thereto filed with the SEC or
delivered to EXTECH's stockholders, including without limitation drafts,
supplements, amendments and the final form of the Proxy Statement.
10.10 Issuance of Equity. EXTECH shall not, and shall not permit any of its
subsidiaries to, issue any shares of its capital stock or any options, warrants
or other rights exercisable or exchangeable for, convertible into or which
otherwise entitle the holder thereof to acquire, capital stock of EXTECH.
10.11 Sale of Assets. EXTECH shall not agree or permit any of its Subsidiaries
to sell any of its assets or properties, except in the ordinary course of
business.
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10.12 Merger or Consolidation. EXTECH shall not authorize or effect, or permit
any of its subsidiaries to authorize or effect, the merger, combination,
consolidation or similar transaction among EXTECH and/or any such subsidiary, on
the one hand, and any other Person, on the other hand.
10.13 Liquidation. EXTECH shall not authorize or effect, or permit any of its
subsidiaries to authorize or effect, the liquidation (whether complete or
partial), dissolution or winding up of EXTECH or any such subsidiary.
ARTICLE XI
POST-CLOSING MATTERS
11.1Further Assurances. On and after the Closing Date, the parties shall take
all such further actions and execute and deliver all such further instruments
and documents as may be necessary or appropriate to carry out the transactions
contemplated by this Agreement.
11.2Nominee to Board of Directors. During the five (5) year period following the
Closing, provided that the Subscriber remains the beneficial owner of at least
one million (1,000,000) Common Shares (subject to adjustment for stock
dividends, stock splits, reverse stock splits, recapitalizations,
reclassifications and similar events affecting the number of issued and
outstanding Common Shares of the Company which occurs or are effective after the
Closing), the Company shall nominate as a director thereof one (1) person
designated by the Subscriber (which designee shall be Robert Wallach).
ARTICLE XII
SURVIVAL OF REPRESENTATIONS
12.1 Survival. The parties agree that their respective representations and
warranties contained in this Agreement shall survive the Closing for a period of
one (1) year.
ARTICLE XIII
TERMINATION AND WAIVER
13.1 Termination. Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated and the transactions provided for herein
abandoned at any time prior to the Closing:
(a) By mutual consent of EXTECH and the Subscriber;
(b) By EXTECH if any of the conditions set forth in Article VII hereof
shall not have been fulfilled on or prior to December 31, 1998, or shall
have become incapable of fulfillment and shall not have been waived; or
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(c) By the Subscriber if any of the conditions set forth in Article
VIII hereof shall not have been fulfilled on or prior to December 31, 1998,
or shall have become incapable of fulfillment, and shall not have been
waived.
If this Agreement is terminated as described above, this Agreement
shall be of no further force and effect, without any liability or obligation on
the part of any of the parties except for any liability which may arise pursuant
to Section 15.2 hereof or as a result of a party's willful failure to consummate
the transactions contemplated hereby or for any breach of any representation,
warranty or covenant.
13.2 Waiver. Any condition to the performance of the parties which legally may
be waived on or prior to the Closing Date may be waived at any time by the patty
entitled to the benefit thereof by action taken or authorized by an instrument
in writing executed by the relevant party or parties. The failure of any party
at any time or times to require performance of any provision hereof shall in no
manner affect the right of such party at a later time to enforce the same. No
waiver by any party of the breach of any term, representation or warranty
contained in this Agreement as a condition to such party's obligations hereunder
shall release or affect any liability resulting from such breach, and no waiver
of any nature, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further or continuing waiver of any such
condition or of any breach of any other term, representation or warranty of this
Agreement.
ARTICLE XIV
DEFINED TERMS
14.1 Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Action" shall mean any action, claim, suit, demand, litigation,
governmental or other proceeding, arbitral action, or governmental inquiry
or investigation hereof.
"Authorized Share Increase" shall have the meaning ascribed to it in
the Recitals.
"Body" shall mean a federal, state, local, and foreign governmental or
other regulatory body, including, without limitation, one that has
jurisdiction over insurance matters.
"Closing" shall have the meaning ascribed to it in Section 9.1 hereof.
"Closing Date" shall have the meaning ascribed to it in Section 9.1
hereof.
"Common Shares" shall have the meaning ascribed to it in the Recitals
hereof.
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"Company" shall have the meaning ascribed to it in the Recitals
hereof.
"Contract" shall mean any agreement, contract, instrument, obligation,
commitment, understanding or arrangement, whether written or oral, to which
a particular Person is a party or is otherwise bound.
"DCAP" shall have the meaning ascribed to it in the Recitals hereof.
"DCAP Agreement" shall have the meaning ascribed to it in the Recitals
hereof.
"DCAP Closing" shall have the meaning ascribed to it in the Recitals
hereof.
"DCAP Consent" shall have the meaning ascribed to it in Section 4.3.
"Distribution" means (a) the declaration or payment of any dividend of
cash or property in respect of any shares of any class of EXTECHOs or any
of its SubsidiariesO Capital Stock or other equity securities; (b) the
purchase, redemption or other retirement of any shares of any class of
EXTECHOs or any of its SubsidiariesO Capital Stock or other equity
securities, directly or indirectly or otherwise; or (c) any other
distribution on or in respect of any shares of any class of EXTECHOs or any
of its SubsidiariesO Capital Stock or other equity securities.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of *3(3) of ERISA maintained or contributed to by EXTECH or any
ERISA Affiliate, other than a Multiemployer Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"EXTECH's Knowledge" means the actual and not imputed or inferred
knowledge of the Company based solely upon (a) the representations and
warranties of Lang and Weinzimer pursuant to Article III of the DCAP
Agreement as to facts, matters, circumstances and conditions arising on or
prior to the DCAP Closing, and (b) facts, matters, circumstances and
conditions of which Company shall have received written notice or which are
actually known or have been specifically brought to the attention of
Certilman or Haft (the "Subject Officers"); provided that, notwithstanding
anything to the contrary contained herein or in any agreement, certificate,
instrument or other document executed or delivered in connection with this
Agreement, except as set forth in this definition, (x) no knowledge of DCAP
or its officers, agents, employees, directors or representatives or any
person other than the Subject Officers shall be imputed to or deemed to be
known by the Company as to facts, matters and circumstances and conditions
described in subsection (a) of this definition, and (y) the Company shall
not be deemed to have knowledge of any fact, matter, circumstance or
condition existing or arising prior to the DCAP Closing, whether or not
continuing after the DCAP Closing, except to the extent set forth in
subsection (b) of this definition.
"Indebtedness" means all obligations, contingent and otherwise, which
in accordance with GAAP should be classified on the obligor's balance sheet
as liabilities, or to which reference should be made by footnotes thereto,
including without limitation, in any event and whether or not so
classified: (i) all debt and similar monetary obligations, whether direct
or indirect; (ii) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other
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encumbrance existing on property owned or acquired subject thereto, whether
or not the liability secured thereby shall have been assumed; (iii) all
guaranties, endorsements and other contingent obligations whether direct or
indirect in respect of Indebtedness or performance of others, including any
obligation to supply funds to or in any manner to invest in, directly or
indirectly, the debtor, to purchase Indebtedness, or to assure the owner of
Indebtedness against loss, through an agreement to purchase goods, supplies
or services for the purpose of enabling the debtor to make payment of the
Indebtedness held by such owner or otherwise, and (iv) obligations to
reimburse issuers of any letters of credit.
"Information" shall have the meaning ascribed to it in Section 15.2
hereof.
"Lien" means (a) any encumbrance, mortgage, pledge, lien, charge or
other security interest of any kind upon any property or assets of any
character, or upon the income or profits therefrom; (b) any acquisition of
or agreement to have an option to acquire any property or assets upon
conditional sale or other title retention agreement, device or arrangement
(including a capitalized lease); or (c) any sale, assignment, pledge or
other transfer for security of any accounts, general intangibles or chattel
paper, with or without recourse.
"Material Adverse Effect" shall mean any material adverse effect on
the business, operations or financial condition of EXTECH and its
subsidiaries taken as a whole.
"Offering" shall have the meaning ascribed to it in the Recitals
hereof.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a limited liability
partnership, a trust, an unincorporated organization and a government or
other department or agency thereof.
"Proxy Statement" shall mean the proxy statement prepared by EXTECH in
connection with its seeking to obtain Stockholder Approval.
"Purchase Price" shall have the meaning ascribed to it in Section 2.1
hereof.
"Related Agreements" shall have the meaning ascribed to it in Section
4.4.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Reports" shall have the meaning ascribed to it in Section 3.8
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall have the meaning ascribed to it in the Recitals hereof.
"Stockholder Approvals" shall mean each of (a) the approval by the
stockholders of EXTECH of the Authorized Share Increase, and (b) the
"Stockholder Approval" as defined in the DCAP Agreement.
"Subscriber" shall have the meaning ascribed to it in the Recitals
hereof.
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"Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any Person controlled by the former Person, whether as a result of the
ownership of a majority of the latter Person's voting equity interests or
otherwise as the result of the power or right to direct the management of
such latter Person or to elect the Board of Directors or managers of such
latter Person.
"Taxes" means (A) all net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, or other taxes of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority (domestic or foreign)
upon EXTECH with respect to all periods or portions thereof ending on or
before the date hereof and/or (B) any liability of EXTECH for the payment
of any amounts of the type described in the immediately preceding clause
(A) as a result of being a member of an affiliated or combined group.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Expenses. Each of the parties shall bear its or his own expenses in
connection herewith.
15.2 Confidential Information. All information that a disclosing party furnishes
in connection with the transactions contemplated hereby (the "Information") will
be kept confidential, will be used solely in connection with the contemplated
transactions and will not, without prior written consent of the disclosing
party, be used or disclosed, directly or indirectly, in any manner whatsoever,
in whole or in part.
Notwithstanding anything herein above to the contrary, the obligations
imposed upon the parties herein shall not apply to Information:
(a) which is publicly available prior to the date hereof; or
(b) which hereafter becomes available to the public through no
wrongful act of the receiving party; or
(c) which was in the possession of the receiving party prior to the
commencement of negotiations between the parties with regard to the
transactions contemplated hereby and not subject to an existing agreement
of confidence between the parties; or
(d) which is received from a third party without restriction, not in
violation of an agreement of confidence and without breach of this
Agreement;
(e) which is independently developed by the receiving party; or
(f) which is disclosed pursuant to a requirement or request of a
government agency, arbitrator or court.
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Upon the request of a disclosing party, which may be made at any time
following any termination of this Agreement in accordance with the terms hereof,
the receiving party will redeliver to the disclosing party any and all written
Information furnished to the receiving party and will not retain any copies
thereof.
15.3 Equitable Relief. The parties agree that the remedy at law for any breach
or threatened breach of the provisions of Section 15.2 will be inadequate and
the aggrieved party shall be entitled to injunctive relief to compel the
breaching party to perform or refrain from action required or prohibited
thereunder.
15.4 Publicity. Neither EXTECH nor the Subscriber will issue any report,
statement, release or other public announcement pertaining to the matters
contemplated by this Agreement, or otherwise disclose this Agreement or the
terms hereof, without the prior written consent of the other. Notwithstanding
the foregoing, either party is permitted to make any disclosures or public
announcements of the transactions contemplated hereby and/or the terms hereof
without the prior written consent and approval of the other if it shall
determine that such disclosure is required in order to comply with applicable
securities or insurance laws and regulations. In such event, the disclosing
party shall furnish to the other party a copy of the disclosure document
promptly following the filing or other disclosure thereof.
15.5 Entire Agreement. This Agreement, including the schedules attached hereto,
which are a part hereof, constitutes the entire agreement of the parties with
respect to the subject matter hereof. No change, modification, amendment,
addition or termination of this Agreement or any part thereof shall be valid
unless in writing and signed by or on behalf of the party to be charged
therewith.
15.6 Notices. Any and all notices or other communications or deliveries required
or permitted to be given or made pursuant to any of the provisions of this
Agreement shall be deemed to have been duly given or made for all purposes when
in writing and hand delivered or sent by certified or registered mail, return
receipt requested and postage prepaid, overnight mail, nationally recognized
overnight courier or telecopier as follows:
if to EXTECH:
90 Merrick Avenue
East Meadow, New York 11554
Attention: Morton L. Certilman, President
Telecopier Number: (516) 296-7111
With a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred Skolnik, Esq.
Telecopier Number: ( 516) 296-7111
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If to the Subscriber:
c/o The Robert Plan Corporation
999 Stewart Avenue
Bethpage, New York 11714
Attn: Jasper J. Jackson, Esq.
Telecopier Number: (516) 393-4561
With a copy to:
Edwards & Angell, LLP
750 Lexington Avenue
New York, NY 10022
Attn: Geoffrey Etherington III, Esq.
Telecopier Number: 212-308-4844
or at such other address as any party may specify by notice given to the other
party in accordance with this Section 15.6.
15.7 Choice of Law; Severability. This Agreement shall be governed by, and
interpreted and construed in accordance with, the laws of the State of New York,
excluding choice of law principles thereof. In the event any clause, section or
part of this Agreement shall be held or declared to be void, illegal or invalid
for any reason, all other clauses, sections or parts of this Agreement which can
be effected without such void, illegal or invalid clause, section or part shall
nevertheless continue in full force and effect.
15.8 Successors and Assigns; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns; provided, however, that neither the Subscriber nor EXTECH may assign
any of its rights or delegate any of its duties under this Agreement without the
prior written consent of the other.
15.9 Counterparts. This Agreement maybe executed in one or more counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
15.10 Facsimile Signatures. Signatures hereon which are transmitted via
facsimile shall be deemed original signatures.
15.11 Headings; Gender. The headings, captions and/or use of a particular gender
under sections of this Agreement are for convenience of reference only and do
not in any way modify, interpret or construe the intent of the parties or affect
any of the provisions of this Agreement.
15.12 Consent to Jurisdiction. EXTECH and the Subscriber hereby agree to submit
to the exclusive jurisdiction of the courts of the State of New York and to the
courts to which an appeal
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of the decisions of such courts may be taken, and consents that service of
process with respect to all courts in and of the State of New York may be made
by registered mail to it at the address set forth in Section 15.6 above.
15.13 Remedies. (a) The rights and remedies provided by this Agreement are
cumulative and the use of any one right or remedy by any party shall not
preclude or waive its right to use any or all other remedies. Said rights and
remedies are given in addition to any other rights the parties may have at law
or in equity.
(b) Without limitation of the foregoing, the parties hereto agree that
irreparable harm would occur in the event that any of the agreements and
provisions this Agreement were not performed fully by the parties hereto in
accordance with their specific terms or were otherwise breached, and that
money damages are an inadequate remedy for breach of the Agreement because
of the difficulty of ascertaining and quantifying the amount of damage that
will be suffered by the parties hereto in the event that this Agreement is
not performed in accordance with its terms or is otherwise breached. It is
accordingly hereby agreed that the parties hereto shall be entitled to an
injunction or injunctions to restrain, enjoin and prevent breaches of this
Agreement by the other parties and to enforce specifically such terms and
provisions of this Agreement, such remedy being in addition to and not in
lieu of, any other rights and remedies to which the other parties are
entitled to at law or in equity.
(c) Except where a time period is otherwise specified, no delay on the
part of any party in the exercise of any right, power, privilege or remedy
hereunder shall operate as a waiver thereof, nor shall any exercise or
partial exercise of any such right, power, privilege or remedy preclude any
further exercise thereof or the exercise of any right, power, privilege or
remedy.
15.14 Arbitration. Any controversy, dispute or claim arising out of or in
connection with or relating to this Agreement, or the breach, termination or
validity hereof or any transaction contemplated hereby (any such controversy,
dispute or claim being referred to as a "Dispute") shall be finally settled by
arbitration conducted expeditiously in accordance with the Commercial
Arbitration Rules then in force (the "AAA Rules") of the American Arbitration
Association (the "AAA"). There shall be a panel of three arbitrators who shall
be appointed pursuant to AAA procedure, in each case, within fifteen (15)
business days of receipt of the demand for arbitration by the respondent(s) in
any such proceeding. Each of the arbitrators shall be an attorney with no less
than fifteen (15) years' experience in the practice of business law (preferably
with experience in the acquisition and financing of businesses such as those
engaged in by EXTECH and the Subsidiaries at the time such Dispute arises) who
shall not have performed any legal services for any of the parties or person
controlled by any of the parties for a period of 5 years prior to the date the
demand for arbitration is received by the respondent(s). The sites for an
arbitration pursuant to this Section shall be Nassau County, New York. A final
award shall be rendered as soon as reasonably possible and, in any event, within
ninety (90) days of the appointment of the panel of arbitrators; provided,
however, that if the arbitrators determine by majority vote that fairness so
requires, such ninety (90) day period may be extended by no more than sixty (60)
additional days. The parties agree that the arbitrators shall have the right and
power to shorten the length of any notice periods or other time periods provided
in the AAA Rules and to implement Expedited Procedures under the AAA Rules in
order to ensure that the arbitration process is completed within the time frames
provided herein. The arbitration decision or award shall be reasoned and in
writing. Judgment on the decision or
- 25 -
<PAGE>
award rendered by the arbitrators may be entered and specifically enforced in
any court having jurisdiction thereof. Notwithstanding the provisions of Section
15.7, any arbitration held pursuant to the provisions of this Section shall be
governed by the Federal Arbitration Act. All arbitrations commenced pursuant to
this Agreement, or any other agreements and transactions incident hereto while
any other arbitration hereunder shall be in progress, shall be consolidated and
heard by the initially constituted panel of arbitrators.
15.15 Waiver of Jury Trial.
WITHOUT LIMITATION OF THE PROVISIONS OF SECTION 15.14, EACH OF THE PARTIES
HERETO HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY
IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH OR ANY MATTER
ARISING UNDER, OUT OF OR RELATING TO, THIS AGREEMENT (AS THIS AGREEMENT MAY
HEREAFTER BE AMENDED) OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
15.16 No Third Party Beneficiary. There are no third party beneficiaries of this
Agreement, including without limitation Lang, Wenzimer and DCAP and no Person
other than EXTECH, the Subscriber, and their respective permitted successors and
assigns shall be entitled to rely upon the provisions hereof.
15.17 EXTECH's Knowledge. Notwithstanding anything to the contrary contained in
Article IV hereof, the Company's representations and warranties set forth in
Article IV with respect to DCAP, the DCAP Agreement, Lang, Weinzimer or the
business, financial condition or operations of DCAP shall be limited to EXTECH's
Knowledge and the Company shall not be liable for any inaccuracy in or
incompleteness of any such representation and warranty if based on EXTECH's
Knowledge as of the date when such representation and warranty was made such
representation and warranty was true and correct in all material respects.
- 26 -
<PAGE>
WITNESS the execution of this Agreement as of the date first above written.
EXTECH CORPORATION
By:/s/ Morton L. Certilman
--------------------------
Morton L. Certilman, President
EAGLE INSURANCE COMPANY
By: /s/ Robert M. Wallach
-------------------------
Name: Robert M. Wallach
Title: Vice President
- 27 -
<PAGE>
SCHEDULE 8.8
Stockholder # of Shares
Kevin Lang 2,575,000
Abraham Weinzimer 2,575,000
Morton L. Certilman 1,486,893
Jay M. Haft 1,580,393
- 28 -
<PAGE>
ROBERT PLAN
January 8, 1999
EXTECH CORPORATION
Corporate Headquarters
90 Merrick Avenue
East Meadow, N.Y 11554
Gentlemen:
Reference is made to that certain Subscription Agreement, dated as of
October 2, 1998, by and between EXTECH Corporation and Eagle Insurance Company
(the "Agreement").
Each of the parties to the Agreement hereby agrees that paragraphs (b)
and (c) of Section 13.1 of the Agreement are amended to substitute "February 28,
1999" for "December 31, 1998."
Except as amended hereby, the provisions of the Agreement, as amended,
shall continue in full force and effect.
In consideration of the Eagle Insurance Company's ("Eagle") agreement
to extend the above referenced Subscription Agreement, EXTECH, DCAP Insurance
("DCAP") and Eagle hereby mutually agree as follows:
1. Notwithstanding anything to the contrary in any of the
existing agreements, contracts, instruments or other documents to, from, between
or among Eagle and/or any of its subsidiaries, DCAP and EXTECH, the parties
hereto agree that certain Letter Agreement Section 3, dated as of August 4, 1998
by and between EXTECH, DCAP and The Robert Plan Corporation is now mandatory in
that DCAP must produce a minimum of $1 million in personal automobile and
homeowners insurance written premiums per month for Eagle, Newark, Lion and GSA
Insurance Companies in New York and New Jersey.
2. The premium volume associated with the transaction
currently being discussed by and between DCAP, The Robert Plan corporation and
American International Group (AIG Specialty Auto) for mainlining the DCAP
business to AIG paper will not be credited towards the mandatory premium volume
referred to in Section 1 hereinabove.
3. To the extent that the Eagle, Newark, Lion and GSA
Insurance Companies are not now satisfied with the quality of the personal
automobile and homeowners insurance business currently produced by DCAP in their
behalf, DCAP agrees to work with and cooperate with the officials and
representatives of the Eagle, Newark, Lion and GSA Insurance Companies to
upgrade the quality of the aforementioned book of business to the satisfaction
of the said officials and representatives.
<PAGE>
4. Disputes.
(a) Notwithstanding anything to the contrary
contained in other documents, in the event
of any dispute relating to the rights of any
party hereto, such dispute shall not be
resolved by arbitration.
(b) EACH OF THE PARTIES HERETO VOLUNTARILY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY
ACTION OR OTHER PROCEEDING BROUGHT IN
CONNECTION WITH THIS LETTER AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY.
(c) Each of the parties hereto irrevocably and
unconditionally:
(i) submits for itself and its property
in any legal actions or proceeding
relating to this letter agreement,
or for recognition and enforcement
of any judgment in respect thereof,
to the non-exclusive general
jurisdiction of the courts of the
state of New York and of the United
States of America sitting in or for
Nassau County, New York and the
appellate courts thereof; and
(ii) Consents that any such action or
proceeding may be brought in such
courts and waives any objection that
it may now or hereafter have to
venue of any such action or
proceeding in any court and agrees
not to plead or claim the same.
5. Miscellaneous.
(a) This letter agreement shall be governed by
and construed under the laws of the State of
New York.
(b) This letter agreement may be executed in
multiple counterparts, each of, which shall
be deemed an original hereof, and all of,
which shall constitute one and the same
document.
(c) This letter agreement shall be binding upon
and shall inure to the benefit of the
respective successors and assigns of the
parties hereto and is intended to benefit
the respective subsidiaries of The Robert
Plan Corporation which are parties to the
other agreements and documents between the
parties.
<PAGE>
6. Irrespective of any provisions of this letter agreement, it
is understood and agreed as follows:
(a) All of the terms and conditions of the
letter agreement of August 4, 1998, not
specifically modified herein, shall remain
in full force and effect.
(b) The provisions of Paragraph 1 above, are
specifically contingent upon the following:
(i) The $1,000,000 minimum per month
shall be calculated on an average of
any three (3) consecutive months
period;
(ii) Such provision shall only be in
effect if DCAP and all insurance
stores owned by it in whole or in
part are averaging annual premiums
at the rate of $20,000,000 per year
during the three (3) months period
referred to above;
(iii) Such provision shall be conditioned
upon the commission rates and
insurance rates available to DCAP
within the Robert Plan Insurance
System being competitive on average
with other insurance companies doing
business with DCAP;
(iv) Such provision shall be subject to
reasonable acceptance by the Robert
Plan Insurance System of customers
produced by DCAP.
7. In the event DCAP shall fail to produce a minimum of
$1,000,000 in written premiums, as referred to in paragraph 1 herein, and Robert
Plan Insurance System, Eagle, Newark, Lion and GSA have met the conditions set
forth above, the Robert Plan shall have the right, upon 120 days written notice,
to terminate all agency agreements then in effect between any of its companies
and DCAP.
Please indicate your agreement to the foregoing by executing this
letter agreement and returning it to the undersigned.
Sincerely,
Eagle Insurance Company
By:/s/ Robert M. Wallach
------------------------
Robert M. Wallach
Vice President
<PAGE>
READ AND AGREED:
EXTECH CORPORATION
By: /s/ Morton L. Certilman
Title: President
Date: 1/15/99
DCAP INSURANCE
By: /s/ Abraham Weinzimer
Title: Vice President
Date: 1/15/99
<PAGE>
SECOND AMENDMENT TO SUBSCRIPTION AGREEMENT, dated as of February 24, 1999
by and between EXTECH CORPORATION, a Delaware corporation ("EXTECH" or the
"Company"), and EAGLE INSURANCE COMPANY, a New Jersey domiciled insurance
company (the "Subscriber"), amending a Subscription Agreement dated as of
October 2, 1998 between the EXTECH and the Subscriber, as amended by a letter
agreement dated as of January 8, 1999 among EXTECH, the Subscriber and DCAP
Insurance, a true and correct copy of which is attached hereto as Exhibit A (the
"Subscription Agreement" and the Subscription Agreement, as amended hereby being
herein referred to as the "Amended Agreement").
RECITALS:
The Company is a party to a letter of intent with Aegis Capital Corp.
("Aegis") dated as of January 14, 1999, a copy of which is attached hereto as
Exhibit B (as amended, modified, supplemented or restated from time to time, the
"Aegis Letter of Intent"), pursuant to which Aegis intends to privately place
certain securities of EXTECH on the terms and conditions specified therein.
In consideration of (i) the Subscriber's consent to the placement of
EXTECH's securities contemplated by the Aegis Letter of Intent and (ii) the
consummation of the transactions contemplated by the Subscription Agreement, the
parties hereto have agreed to amend the Subscription Agreement on the terms and
conditions set forth below.
Capitalized terms used in this Amendment which are undefined herein
will have the meanings given such terms in the Subscription Agreement. All
references in the Subscription Agreement to the "Agreement" shall be deemed
references to the Amended Agreement.
NOW, THEREFORE, in consideration of the recitals and the respective
representations, warranties and agreements herein contained and intending to be
legally bound hereby, the parties hereby agree as follows;
ARTICLE I
AEGIS PLACEMENT
1.1 Dilution Protection. So long as the Offering is consummated, in the event
EXTECH issues any Common Shares or securities convertible into or exchangeable
for, or which otherwise entitle the holder thereof to acquire Common Shares
("Convertible Securities"), for a price per Common Share less than $.67 (an
"Applicable Aegis Issue Price"), pursuant to the Aegis Letter of Intent or
definitive documentation relating to the placement contemplated thereby (the
"Aegis Documents" and each such issuance being herein called an "Aegis
Placement"), upon the consummation of any such Aegis Placement, EXTECH shall
issue to the Subscriber for no additional consideration such number of
additional Common Shares (such issuance together with any issuance of Common
Shares to the Subscriber pursuant to Section 3.1 being herein called a "Dilution
Issuance") so that when such additional Common Shares are aggregated with all
Common Shares issued to the Subscriber under the Amended Agreement whether
pursuant to the Closing or previous Dilution Issuances, the
<PAGE>
price per Common Share (the "Adjusted Purchase Price"), determined by dividing
the Purchase Price by such aggregate Common Shares, shall equal such Applicable
Aegis Issue Price.
1.2 Dilution Issuance. EXTECH shall deliver to the Subscriber a certificate
evidencing the Common Shares to be issued pursuant to each Dilution Issuance.
The Common Shares issued pursuant to each Dilution Issuance shall be duly and
validly issued, fully paid and nonassessable and shall be deemed to have been
issued for a price per Common Share equal to the Applicable Aegis Issue Price or
Applicable Market Price (as defined in Section 3.1) relating to such Dilution
Issuance.
1.3 Aegis Placement. EXTECH shall provide copies to the Subscriber and its
counsel of all definitive instruments, agreements, private placement memoranda
or other definitive offering materials, financial data or other documents
provided to Aegis or to prospective investors pursuant to the Aegis Placement
upon their delivery to Aegis or distribution to such prospective investors.
1.4 Applicable Aegis Issue Price; Applicable Market Price. In determining the
Applicable Aegis Issue Price or Applicable Market Price, no portion of any unit
purchase price shall be allocated to any warrants comprising a portion of such
unit.
ARTICLE II
ADDITIONAL INVESTMENT
2.1 Option to Purchase Securities. EXTECH hereby agrees that, in the event the
Offering is consummated and EXTECH undertakes the Aegis Placement, the
Subscriber or its permitted assigns shall have the right (the "Option") to
acquire up to $500,000 of the units or other securities offered by EXTECH
pursuant to, and upon the terms and provisions specified in, the Aegis
Documents. EXTECH agrees that it will not undertake the Aegis Placement unless
the Option is provided for therein. EXTECH shall pay no commission to Aegis in
connection with the sale of the Units or other securities to the Subscriber or
its permitted assigns pursuant to any Option exercise. The Subscriber shall not
be required to pay directly any of the expenses of, or commissions or other fees
to, Aegis. The Option shall be exercisable during the twenty day period
following the delivery to the Subscriber of the definitive Aegis Documents and
shall be exercised by the execution and delivery by the Subscriber to EXTECH or
Aegis (as provided for in the Aegis Documents) of any and all subscription
documents and the required subscription price. In the event of the exercise of
the Option, the Subscriber or its permitted assigns shall have all the rights
and obligations of a subscriber for Units or other securities pursuant to the
Aegis Placement. The Subscriber acknowledges and agrees that the Option may be
exercised only as part of the Aegis Placement, and the Subscriber shall not be
entitled to acquire any securities pursuant to the provisions of this Section
2.1 if the Aegis Placement is not consummated. EXTECH will not grant any
investor in the Aegis Placement any right to acquire securities of EXTECH on
terms more favorable to it than offered to the Subscriber.
- 2 -
<PAGE>
ARTICLE III
ISSUANCES PURSUANT TO PRICE PROTECTION
3.1 Effect of Investor Dilution Issuances. So long as the Offering is
consummated, in the event EXTECH issues additional Common Shares to investors
that shall have acquired Common Shares or Convertible Securities through an
Aegis Placement in the circumstances described in Section 3 of the Aegis Letter
of Intent or any similar provision of the Aegis Documents (such issuance being
herein referred to as an "Investor Dilution Issuance") and if the price per
Common Share (an "Applicable Market Price") which causes such Investor Dilution
Issuance is less than the lesser of $.67 or the then effective Adjusted Purchase
Price, if any, EXTECH shall issue to the Subscriber for no additional
consideration such number of additional Common Shares so that when such
additional Common Shares are aggregated with all Common Shares issued to the
Subscriber under the Amended Agreement whether pursuant to the Closing or
previous Dilution Issuances, the price per Common Share, determined by dividing
the Purchase Price by such aggregate Common Shares, shall equal such Applicable
Market Price and the Adjusted Purchase Price shall be deemed equal to the
Applicable Market Price.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.1 Choice of Law; Severability. This Amendment shall be governed by, and
interpreted and construed in accordance with, the laws of the State of New York,
excluding choice of law principles thereof. In the event any clause, section or
part of this Amendment shall be held or declared to be void, illegal or invalid
for any reason, all other clauses, sections or parts of this Amendment which can
be effected without such void, illegal or invalid clause, section or part shall
nevertheless continue in full force and effect
4.2 Successors and Assigns; No Assignment. This Amendment shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Amendment may not be assigned by either party without
the written consent of the other, except that the Subscriber shall be entitled
to assign the Option to any entity (other than a natural person) that is a
subsidiary or affiliate of the Subscriber, or to Robert Wallach or William
Wallach, provided that the assignee meets the suitability requirements for a
purchase of Units, as provided for in the Aegis Documents.
4.3 Counterparts. This Amendment maybe executed in one or more counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
4.4 Headings; Gender. The headings, captions and/or use of a particular gender
under sections of this Amendment are for convenience of reference only and do
not in any way modify, interpret or construe the intent of the parties or affect
any of the provisions of this Agreement.
- 3 -
<PAGE>
4.5 Amendment. Except as amended hereby, the provisions of the Subscription
Agreement shall continue in full force and effect.
WITNESS the execution of this Agreement as of the date first above
written.
EXTECH CORPORATION
By:/s/ Morton L. Certilman
--------------------------
Morton L. Certilman, President
EAGLE INSURANCE COMPANY
By:/s/ P. Nezamoodeen
---------------------
Name: P. Nezamoodeen
Title:Vice President and Secretary
- 4 -
<PAGE>
Exhibit 21
Name of Subsidiary State of Incorporation
A DCAP Brokerage, Inc. New York
A DCAP Services, Inc.(1) New York
AAA DCAP Agency, Inc.(1) New York
AADCAP Greenbrook Inc.(1) New York
DCAP Agency, Inc.(1) New York
DCAP Bayside, Inc.(1) New York
DCAP Brentwood Inc.(1) New York
DCAP East Meadow, Inc.(1) New York
DCAP Flushing, Inc.(2) New York
DCAP Freeport, Inc.(1) New York
DCAP Garden City Park Inc. New York
DCAP Hari, Inc.(1) New York
DCAP Hicksville, Inc.(2) New York
DCAP Management Corp. New York
DCAP Manhattan Inc.(1) New York
DCAP Peekskill, Inc. New York
DCAP Queens Agency Inc.(1) New York
DCAP Ridgewood, Inc.(1) New York
DCAP Seaford, Inc.(1) New York
DCAP White Plains Inc. New York
DCAP Woodhaven, Inc.(1) New York
DCAP Woodside Inc.(1) New York
Dealers Choice Automotive Planning Inc. New York
Diversified Coverage Asset Planning Inc. New York
FASK Agency Inc. New York
Fulton Street Agency, Inc. New York
Intandem Corporation New York
International Airport Hotel, Inc. Delaware
MC DCAP, Inc.(1) New York
Payments Inc. New York
The Bronx Agency Inc.(1) New York
The Manhattan Agency Inc.(1) New York
The White Plains Agency, Inc. New York
The Yonkers Agency Ltd.(1) New York
- - -------------------
(1) Company owns 50% of outstanding Common Stock.
(2) Company owns 66.7% of outstanding Common Stock.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
statements and is qualified in its entirety be reference to such financial
statements
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<EXCHANGE-RATE> 1
<CASH> 353431
<SECURITIES> 0
<RECEIVABLES> 923478
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1419502
<PP&E> 535510
<DEPRECIATION> 432902
<TOTAL-ASSETS> 1562110
<CURRENT-LIABILITIES> 354912
<BONDS> 0
0
0
<COMMON> 55914
<OTHER-SE> 1150724
<TOTAL-LIABILITY-AND-EQUITY> 1562110
<SALES> 0
<TOTAL-REVENUES> 1031033
<CGS> 0
<TOTAL-COSTS> 1138284
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (107251)
<INCOME-TAX> 4330
<INCOME-CONTINUING> (111581)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (111581)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
