<PAGE>
As filed with the Securities and Exchange Commission on July 17, 1998
Registration No. 333-52745
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 1 TO FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
NEW AMERICA NETWORK, INC.
(Exact name of registrant as specified in its charter)
---------------------------
Delaware 6531 23-1916759
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
---------------------------
572 U.S. Route 130
Hightstown, NJ 08520
(609) 448-4700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------------
Gerald C. Finn
Chief Executive Officer
572 U.S. Route 130
Hightstown, NJ 08520
(609) 448-4700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
With copies to:
Alan S. Pearce, Esq. Alan E. Davis, Esq.
Robinson Silverman Pearce Aronsohn & Berman LLP Hal W. Mandel, Esq.
1290 Avenue of the Americas Greenbaum, Rowe, Smith,
New York, New York 10104 Ravin, Davis & Himmel LLP
Phone (212) 541-2000 99 Wood Avenue South
Iselin, NJ 08830
Phone (732) 549-5600
Approximate date of commencement of the proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------------------- ---------------- ------------------------- -------------------------- ------------------
Title of Each Class of Securities Amount To Be Proposed Maximum Proposed Maximum Amount of
To Be Registered Registered Offering Price Per Share Aggregate Offering Price Registration Fee
- ----------------------------------------- ---------------- ------------------------- -------------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 12,005,185 $.01 $40,017 (1) $13.00 (1)
Common Stock, par value $.01 per share 19,101,403(2) $2.00 $38,202,806 $11,577 (3)
Rights 17,101,403 --(4) --(4) --(4)
========================================= ================ ========================= ========================== ==================
</TABLE>
(1) Computed based on one-third of the of par value of the Common Stock in
accordance with Rule 457(f)(2) of the Securities Act of 1933, as amended.
The fee was paid with the initial filing of the Registration Statement on
May 15, 1998.
(2) Of such shares of Common Stock, (i) 17,101,403 of such shares are
reserved for issuance pursuant to the exercise of Rights, and to the
extent such Rights are not exercised, for issuance in connection with the
Concurrent Offering, and (ii) 2,000,000 of such Shares are reserved for
issuance in the Concurrent Offering.
(3) Of such fee $11,562 was paid with the initial filing of the Registration
Statement on May 15, 1998.
(4) Pursuant to Rule 457(g), no separate registration fee is required with
respect to the Rights.
---------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the Commission,
acting pursuant to such Section 8(a), may determine.
==============================================================================
<PAGE>
EXPLANATORY NOTE
This Registration Statement on Form S-1 of New America Network, Inc.,
a Delaware corporation ("NAI Delaware"), contains a Prospectus for New America
International, Inc., a Maryland corporation ("NAI Maryland"). Prior to the
effectiveness of this Registration Statement, NAI Delaware will be merged with
and into NAI Maryland (the "Reincorporation Merger"), and NAI Maryland will be
the surviving corporation. The information in the Prospectus contained herein,
reflects the Reincorporation Merger and describes the registrant as it will
exist after the Reincorporation Merger. Part II of this Registration Statement
reflects information regarding the Registrant after the Reincorporation
Merger.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 17, 1998
PROSPECTUS
New America International, Inc.
12,005,185 Shares of Common Stock and
Rights to Purchase 17,101,403 Shares of Common Stock
This Prospectus is being furnished in connection with (i) the
distribution (the "Distribution") by Kranzco Realty Trust, a Maryland real
estate investment trust ("Kranzco"), of an aggregate of 12,005,185 shares of
common stock, par value $.01 per share ("NAI Shares"), of New America
International, Inc., a Maryland corporation ("NAI"), to the holders of (a)
outstanding common shares of beneficial interest, par value $.01 per share, of
Kranzco (the "Kranzco Common Shares") and (b) outstanding Series B-1 and
Series B-2 preferred shares of beneficial interest, par value $.01 per share,
of Kranzco (the "Kranzco Series B Preferred Shares"), (ii) the distribution by
NAI of rights (the "Rights") to subscribe for purchase an aggregate of
17,101,403 NAI Shares (the "Basic Subscription Privilege"), at a price of $2
per NAI Share (the "Subscription Price"), to the holders of NAI Shares,
including the Kranzco shareholders who receive NAI Shares in the Distribution,
(the distribution of the Rights and the offer and sale of the underlying NAI
Shares (the "Underlying Shares") is referred to herein as the "Rights
Offering"), and (iii) the concurrent offering (the "Concurrent Offering") by
NAI of those Underlying Shares that are not otherwise subscribed for pursuant
to the Rights Offering ("Excess Shares"), first, to officers, directors and
trustees of NAI and Kranzco (the "Executive Group"), and then, to NAI's Broker
Members (as defined herein) and to certain of the principals, shareholders,
partners, officers, managers and licensed real estate agents of NAI's Broker
Members in the United States (the "Broker Member Group"). See "The
Distribution."
An investment in the NAI Shares involves various risks. See "Risk
Factors" beginning on Page 19 for a discussion of material risks that should
be considered in connection with an investment in the NAI Shares.
It is expected that the Distribution and Rights Offering will be made
on ______, 1998 (the "Distribution Effective Date"). The Distribution will be
made on the basis of one NAI Share for each Kranzco Common Share held by
Kranzco shareholders on _______, 1998 (the "Distribution Record Date"), and
one NAI Share for each Kranzco Common Share into which the Kranzco Series B
Preferred Shares held by Kranzco shareholders on the Distribution Record Date
are convertible (a "Kranzco Common Share Equivalent"). NAI will not receive
any proceeds from the Distribution.
Prior to the Distribution and Rights Offering, there has been no
public market for the NAI Shares. Although the NAI Shares will be eligible for
quotation and trading on the OTC Bulletin Board after the Distribution, the
NAI Shares are not currently quoted on the OTC Bulletin Board or listed on any
national securities exchange or approved for quotation on any quotation
system, and there can be no assurance that a public market for the NAI Shares
will develop or provide liquidity. Stockholders of NAI who do not exercise all
of their Rights will own less of a percentage equity ownership and voting
interest in NAI after the Rights Offering, the Concurrent Offering and the
Distribution. In addition, stockholders of NAI who do exercise all of their
rights may own less of a percentage
(continued on next page)
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
<PAGE>
(continued from cover)
equity ownership and voting interest in NAI if any Additional Shares (as
defined below) are purchased in the Concurrent Offering. There is no minimum
number of NAI Shares required to be sold as a condition to the consummation of
the Rights Offering or the Concurrent Offering. Gerald C. Finn and Jeffrey M.
Finn, individually, and as trustee of a trust for the benefit of Jeffrey M.
Finn (collectively, the "Finns"), have advised NAI that they intend to
exercise Rights to purchase an aggregate of 500,000 NAI Shares and Kranzco has
advised NAI that it intends to exercise such number of Rights to purchase NAI
Shares that would result in Kranzco owning approximately 9.8% of the issued
and outstanding NAI Shares, before the issuance of any Additional Shares.
The Rights Offering will be made on the basis of one Right for each
NAI Share held by the NAI stockholders, including the Kranzco shareholders who
receive NAI Shares in the Distribution, on the Distribution Effective Date.
Each Right will entitle its holder (a "Holder") to purchase one NAI Share. A
Holder who validly exercises all of such Holder's Rights available as part of
the Basic Subscription Privilege will also be entitled to purchase a pro rata
portion of any Underlying Shares that are not otherwise subscribed for
pursuant to the exercise of Basic Subscription Privileges (the
"Oversubscription Privilege"). Concurrently with the Rights Offering, NAI is
offering the right to purchase any Excess Shares, first, to the Executive
Group (the "Executive Group Subscription Privilege"), and then, to the Broker
Member Group (the "Broker Member Group Subscription Privilege;" together with
the Executive Group Subscription Privilege, the "Concurrent Privileges"). NAI
has authorized an additional 2,000,000 NAI Shares ("Additional Shares") for
issuance to the Broker Member Group in order to ensure that the Broker Member
Group will in the aggregate have the right to purchase a minimum of 2,000,000
NAI Shares, to the extent that the number of Excess Shares is not sufficient
to satisfy the Broker Member Group Subscription Privilege. There is no
assurance that any Excess Shares will be available for sale to the Executive
Group or the Broker Member Group. Although there will be a minimum of
2,000,000 Additional Shares available for subscription by the Broker Member
Group, there is no assurance that any member of the Broker Member Group will
receive all the Additional Shares for which such member subscribes. See "The
Rights Offering" and "Plan of Distribution."
The Rights and the Concurrent Privileges will expire at 5:00 p.m.,
New York Time, on _________ __, 1998, unless extended by NAI (such date, as it
may be extended on one or more occasions, is referred to herein as the
"Expiration Date"). In no event will the Expiration Date be extended beyond
___________, 1998. If NAI elects to extend the term of the Rights and the
Concurrent Privileges, it will issue a press release to such effect not later
than the first Business Day following the most recently announced Expiration
Date. Funds provided in payment of the Subscription Price will be held by
First Union National Bank, as the Subscription Agent, until the closing which
will occur promptly following the Expiration Date. The exercise of Rights and
the Concurrent Privileges is irrevocable once made, and no interest will be
paid to Holders exercising their Rights.
No payment need be made by, or will be accepted from, Kranzco
shareholders for the NAI Shares to be received by them in the Distribution or
from NAI stockholders for the Rights to be received by them in the Rights
Offering. Furthermore, Kranzco shareholders will not be required to surrender
or exchange Kranzco Common Shares, in order to receive NAI Shares.
----------------------------
THE RIGHTS MAY NOT BE EXERCISED BY A RESIDENT OF THE STATE OF CALIFORNIA
UNLESS SUCH RESIDENT IS A "QUALIFIED PURCHASER" AS SUCH TERM IS DEFINED
HEREIN. SEE "THE RIGHTS OFFERING."
----------------------------
THE RIGHTS MAY NOT BE EXERCISED BY RESIDENTS OF THE STATE OF NORTH DAKOTA
UNLESS SUCH RESIDENTS ARE HOLDERS OF NAI SHARES. SEE "THE RIGHTS OFFERING."
----------------------------
NAI BROKER MEMBERS AND THE PRINCIPALS, SHAREHOLDERS, PARTNERS, OFFICERS,
MANAGERS AND LICENSED REAL ESTATE BROKERS OF NAI'S BROKER MEMBERS WHO ARE
RESIDENTS OF THE STATE OF CALIFORNIA (OTHER THAN QUALIFIED PURCHASERS),
FLORIDA, MARYLAND, NORTH DAKOTA, SOUTH DAKOTA AND TEXAS ARE NOT ELIGIBLE TO
PARTICIPATE IN THE CONCURRENT OFFERING. SEE "THE CONCURRENT OFFERING."
----------------------------
<PAGE>
AVAILABLE INFORMATION
NAI has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (herein, together with all
amendments and exhibits thereto referred to as the "Registration Statement"),
of which this Prospectus forms a part, under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the NAI Shares offered
pursuant to this Prospectus. This Prospectus contains summaries of the
material terms of the documents referred to herein and therein, but does not
contain all of the information set forth in the Registration Statement
pursuant to the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement. The Registration
Statement as well as reports and other information filed by NAI can be
inspected without charge and copied at prescribed rates at the public
reference facilities maintained by the Commission at the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at its Regional Offices located as follows: Chicago Regional Office, Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511; and
New York Regional Office, Seven World Trade Center, Suite 1300, New York, New
York 10048. The Commission maintains a web site that contains reports, proxy,
and information statements and other information regarding registrants that
file electronically with the Commission. The web site is located at
http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any
contract or other document that is filed as an exhibit to the Registration
Statement are not necessarily complete, and each such statement is qualified
in its entirety by reference to the full text of such contract or document.
Upon consummation of the Distribution, NAI will be required to file
reports and other information with the Commission pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In addition to
applicable legal requirements, if any, holders of NAI Shares will receive
annual reports containing audited financial statements with a report thereon
by NAI's independent public accountants.
-2-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise stated, this Prospectus assumes that all
Underlying Shares and Additional Shares are purchased in the Rights Offering
and the Concurrent Offering, as the case may be. Unless the context otherwise
requires, all references in this Prospectus to: (i) "NAI" shall mean New
America International, Inc., a Maryland corporation which is the
successor-by-merger to New America Network, Inc., a Delaware corporation ("NAI
Delaware"), and, where applicable, "NAI" shall also refer to NAI Delaware,
(ii) "NAI Shares" shall mean NAI's common stock, par value $.01 per share.
Unless otherwise indicated, the information contained in this Prospectus
assumes that the Exchange Offer (defined below) was consummated immediately
prior to the Distribution and the Rights Offering.
NAI
New America International, Inc. ("NAI") operates a network (the
"Network") of independently owned, licensed real estate brokers ("Broker
Members") throughout the United States and, more recently, abroad. NAI,
directly and through its Broker Members, provides commercial real estate
brokerage services to local, regional, national and international businesses
("Clients"). NAI has approximately 130 affiliated Broker Members, which employ
approximately 2,600 agents, operating in approximately 300 markets, including
North, Central and South America and Western Europe. NAI believes it is
represented in more North American market areas than any national commercial
real estate brokerage company. Unlike other real estate broker networks, in
addition to managing real estate transactions generated by its Broker Members,
NAI generates its own source of real estate transactions for its Broker
Members and actively manages and tracks those transactions on behalf of
Clients. In order to increase the portfolio of services marketed to Clients
and Broker Members, NAI has entered into several alliance agreements with
entities ("Alliance Members") which provide real estate related services which
complement NAI's brokerage capabilities, including sealed-bid sales, real
estate auctions, real estate financing and appraisal services. As of June 30,
1998, the Network had an inventory of approximately 1,683 assignments to buy,
sell or lease real property (approximately 77% of which are exclusive to NAI),
with a transaction value of approximately $927 million, and which would
generate fees to NAI of approximately $6.8 million, if consummated. There is
no assurance that such inventory will result in any revenues to NAI.
NAI earns revenues primarily from the sharing of brokerage
commissions with Broker Members who earn commissions from the acquisition,
disposition or leasing of real property assigned to them by NAI (approximately
$2,686,000 or 46% of NAI's net revenues for fiscal year 1997). NAI also earns
revenues from (i) the sharing of brokerage commissions with Broker Members who
earn commissions from the acquisition and/or disposition or leasing of real
estate referred to them by other Broker Members (approximately $1,063,000 or
18% of NAI's net revenues for fiscal year 1997), (ii) the sharing of fees
received from Alliance Members in sealed-bid sales, auction transactions and
other real estate-related services (approximately $170,000 or 3% of NAI's net
revenues for fiscal year 1997), and (iii) the collection of annual membership
fees paid by Broker Members and Alliance Members (approximately $1,282,000 or
22% of NAI's net revenues for fiscal year 1997). See "NAI Business."
NAI began forming the Network in 1978 in order to meet the growing
real estate needs of large national and international corporations in multiple
markets. NAI meets the multiple market needs of its Clients and its Broker
Members by combining local representation with the management and control
capabilities of its centralized Corporate Services Department. NAI's Corporate
Services Department is
-3-
<PAGE>
responsible for establishing and developing relationships with Clients in
order to generate assignments for the Network and its Broker Members.
Currently, NAI has 13 staff members in its Corporate Services Department
serving over 100 Clients. These Clients include retail chains (such as
Woolworth Corp.), international companies (such as International Paper
Company), service businesses (such as Roadway Services, Inc.), and other
larger owners of real estate (such as the United States Postal Service, a new
Client of NAI). NAI's Clients are often involved in real estate transactions
in multiple markets. In addition, NAI has an Investment Sales Department which
specializes in the acquisition and disposition of real estate for Clients who
are seeking to acquire, or currently own, real estate for investment purposes.
See "Business--The Network," "--Corporate Services Department" and
"--Investment Sales."
NAI maintains a proprietary information sharing and research
intranet, in order to efficiently and effectively coordinate with its Broker
Members to meet its Clients' needs. NAI's information systems consist of a
transaction management system and a central database information system. NAI's
computerized transaction management system allows Broker Members, the
Corporate Services Department and Clients to manage and track the progress of
transactions assigned to Broker Members, including those generated by its
Broker Members. NAI's databases include, among other things, real estate
market data, demographic information, Broker Member profiles, Broker Member
listings, transaction histories, Client relationship information and Client
profiles. See "Business--NAI Technology and Information Services."
NAI's objective is to increase profitability by continuing to grow
its brokerage business, increase its international coverage, expand its
Corporate Services and Investment Sales Departments and to further develop its
non-brokerage real estate-related services, including sealed-bid sales and
real estate auctions, and to acquire or develop additional real estate-related
services (collectively, "Real Estate-Related Services"). To the extent funds
are available from the proceeds of the Rights Offering and the Concurrent
Offering referred to below, NAI's strategy will be to (i) expand NAI's
Corporate Services Department and Investment Sales Department to generate
business from additional Clients and in new markets, (ii) invest in or acquire
brokerage firms (including certain of those owned by Broker Members) and firms
which provide Real Estate-Related Services, (iii) train and support Broker
Members to generate additional business for the Network; (iv) continue to
expand the Network into international markets, (v) generate additional revenue
by providing brokerage and Real Estate-Related Services to Kranzco, (vi)
expand and enhance NAI's real estate technology and information services,
(vii) opportunistically acquire and develop real estate for its own account
and (viii) utilize Real Estate-Related Services to create and develop
relationships with Clients.
NAI's management team has extensive experience in the real estate
brokerage industry. Gerald C. Finn, founder and Chief Executive Officer of
NAI, has over 25 years experience in the real estate industry. Jeffrey M.
Finn, Gerald Finn's son and President, Chief Operating Officer and Treasurer
of NAI, has over 10 years experience in the commercial real estate services
industry.
NAI Delaware, the predecessor by merger to NAI, was incorporated
under the laws of the State of Delaware on February 5, 1974. On ________,
1998, NAI Delaware was merged (referred to herein as the "Reincorporation
Merger") with and into its wholly-owned subsidiary, NAI, a corporation formed
under the laws of the State of Maryland. The executive offices of NAI are
located at 572 Route 130, Hightstown, New Jersey 08520 and its telephone
number is (609) 448-4700.
-4-
<PAGE>
Prior Related Transactions
On ____________, 1998, Kranzco, a self-administered and self-managed
Maryland real estate investment trust (a "REIT"), consummated an exchange
offer (the "Exchange Offer"), pursuant to which Kranzco acquired 80% of the
outstanding shares of common stock of NAI in exchange for an aggregate of
$8,000,000 of Kranzco ___% Callable Convertible Subordinated Notes Due 2008
(the "Notes"). Immediately following the consummation of the Exchange Offer,
NAI, a Delaware corporation, was merged with and into a wholly-owned
subsidiary incorporated in the state of Maryland, in order to reincorporate in
Maryland for corporate reasons, as well as to reduce certain franchise taxes
which are payable by NAI. The Reincorporation Merger resulted in each share of
NAI in the Delaware corporation being converted into 1.318087 shares of NAI,
the Maryland corporation.
In connection with the Exchange Offer, on ______________, 1998,
Kranzco, NAI, and the Finns entered into an Exchange Agreement (the "Exchange
Agreement") which set forth certain terms and conditions of the Exchange
Offer. Upon consummation of the Distribution, NAI and Kranzco entered into an
Intercompany Agreement which provides for certain rights of first opportunity
and first notification which the companies have granted each other and also
provides for the provision of certain consulting services by Kranzco to NAI.
The Exchange Offer and the other transactions contemplated by the Exchange
Agreement, together with the Rights Offering, Concurrent Offering, and the
Reincorporation Merger are generally referred to herein as the "Related
Transactions." See "Related Transactions."
In connection with the Related Transactions, NAI Delaware (i) adopted
a management incentive plan which provides for the issuance of 1,700,000 NAI
Shares, which may be awarded in the form of options, share appreciation
rights, reload options, restricted share awards, performance-based awards, and
share purchase awards (80% of the NAI Shares will be reserved for officers,
employees or consultants of NAI who are not also employees of Kranzco and 20%
of the NAI Shares will be reserved for officers, employees or consultants of
NAI who are also employees of Kranzco); (ii) adopted an employee incentive
compensation plan pursuant to which certain employees of NAI would be entitled
to aggregate incentive compensation payable in up to 8,500,000 NAI Shares
issuable over 10 years; (iii) granted options to purchase an aggregate of
3,536,853 NAI Shares to officers, directors, employees and consultants of NAI
pursuant to a new employee stock option plan; and (iv) granted options to
purchase an aggregate of 60,000 NAI Shares to directors and trustees of NAI
and Kranzco. See "Management--NAI 1998 Management Incentive Plan," "--NAI 1998
Employee Incentive Compensation Plan," "--NAI 1998 Stock Option Plan," "The
Exchange Agreement" and "Related Transactions." NAI assumed the foregoing
plans and options grants as the successor-by-merger of NAI Delaware in the
Reincorporation Merger.
Reasons for the Exchange Offer and Subsequent Distribution
Kranzco is a self-administered and self-managed equity REIT engaged
in the business of owning, managing, operating, leasing, acquiring and
expanding neighborhood and community shopping centers and, to a lesser extent,
free-standing retail properties. Kranzco is limited in its activities by the
investment limitations imposed by Federal income tax laws applicable to REITs,
which (i) limit the amount of income that a REIT can realize from certain
services that are not customarily furnished or rendered in connection with the
rental of real property in a particular geographic area, and (ii) limit
Kranzco's ownership in corporations other than REITs and qualified REIT
subsidiaries (a) to 10% of the outstanding voting securities of such
corporation, and (b) in that the value of any one corporation's securities
cannot exceed 5% of the value of Kranzco's total assets. Kranzco believes that
significant opportunities are available to investors in entities which provide
brokerage and Real Estate-Related Services, own properties other than
-5-
<PAGE>
neighborhood and community shopping centers, and which are not limited in
their activities by the investment limitations imposed by Federal income tax
laws applicable to REITs. Accordingly, in light of the limitations on
investments imposed on REITs, Kranzco believes that effecting the Exchange
Offer, the Distribution, the Rights Offering and the Concurrent Offering, and
establishing an intercompany relationship between Kranzco and NAI will yield
significant benefits to Kranzco and its shareholders similar to those which
may be obtained by investors who are not so limited, while preserving
Kranzco's REIT status. For Kranzco, these benefits include:
o increased opportunities to acquire retail properties which
become available for sale through the Network, which might
not otherwise be available to Kranzco;
o greater access to a diverse range of tenants, in order to
re-tenant vacant space owned by Kranzco, including access to
non-retail tenants looking for space appropriate for office,
warehouse or other non-retail uses;
o the ability to enter into agreements with NAI to have NAI
develop new shopping centers or re-develop distressed
shopping centers for sale to Kranzco;
o the ability to enter into new geographic areas with the
assistance of NAI's real estate professionals;
o NAI disseminating Kranzco's acquisition criteria to Broker
Members through the Network, in order to create additional
opportunities to purchase retail properties;
o increased opportunities to purchase additional retail
properties which are included in portfolios with non-retail
properties, utilizing NAI to purchase the non-retail
properties or find a purchaser for the non-retail
properties;
o access to NAI's sophisticated, real estate oriented computer
network, which includes information on real estate
transactions, market conditions and demographics;
o the ability to purchase Real Estate-Related Services at
competitive prices;
o the ability to own an equity interest in a company which owns
real estate and provides Real Estate-Related Services which
Kranzco, as a REIT, could not directly own or provide; and
o access to local property managers where Kranzco may own
retail properties, and the opportunity for Kranzco to manage
retail properties owned by NAI.
NAI operates a network of independently owned, licensed real estate
Broker Members throughout the United States and, more recently, abroad, to
provide commercial real estate services to regional, national and
international Clients. NAI believes that a strategic relationship between
companies which provide real estate brokerage and services, such as NAI, and
companies which own and operate real estate, such as Kranzco, would provide
significant benefits and opportunities. For NAI, the benefits of entering into
the strategic relationship and consummating the Related Transactions (and
under certain circumstances, to the extent proceeds are available through the
Rights Offering and the Concurrent Offering) include:
o the opportunity as a public company, to raise additional
capital through the Rights Offering and the Concurrent
Offering and, to the extent possible, future equity and debt
offerings;
o the ability to expand its Corporate Services Department,
Investment Sales Department and Broker Services Department;
o the ability to invest in or acquire Broker Members or other
real estate service firms in order to strengthen the Network;
o access to new transactions by providing real estate brokerage
services to Kranzco through NAI's Network;
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o the ability to accelerate the development of information
services and technology infrastructure to more efficiently
deliver services;
o the opportunity to offer to Kranzco Real Estate-Related
Services which NAI may develop;
o the opportunity to further develop existing Real Estate-
Related Services and to acquire or develop businesses that
provide Real Estate-Related Services;
o the ability to accelerate Network growth in international
markets;
o providing Broker Members the opportunity to manage selected
Kranzco shopping centers;
o the opportunity to enter into agreements with Kranzco to have
NAI develop new shopping centers or re-develop distressed
shopping centers for sale to Kranzco; and
o expansion of its business through access to the real estate
expertise of Kranzco's management.
In the past Kranzco and NAI have worked together in a mutually
beneficial relationship. In December 1997, NAI's Investment Sales Department
assisted Kranzco in arranging for the acquisition of five shopping centers,
aggregating approximately 650,000 square feet of gross leasable area ("GLA"),
for approximately $44 million. NAI's Investment Sales Department initiated
this opportunity, and assisted Kranzco in acquiring the properties. Kranzco's
acquisition of such properties generated $100,000 in fee income to NAI.
Kranzco and NAI expect that the Intercompany Agreement will set forth a
framework for a mutually beneficial relationship in the future. See "Related
Transactions--The Intercompany Agreement."
The Distribution
<TABLE>
<S> <C>
Distributing Company..................................... Kranzco Realty Trust
Distributed Company ..................................... New America International, Inc., a Maryland
corporation.
Distribution Agent....................................... The Distribution Agent is First Union National
Bank, 1525 West W.T. Harris Boulevard, 3C3,
Charlotte, North Carolina 28262-1153, telephone:
(800) 829-8432.
Distribution Record Date................................. ____________, 1998
Distribution Effective Date.............................. ____________, 1998
Manner of Effecting the Distribution Kranzco will distribute 12,005,185 NAI Shares,
which represents approximately 70.2% of the
outstanding NAI Shares, to holders of Kranzco
Common Shares and Kranzco Common Share
Equivalents, on the basis of one NAI Share for
each Kranzco Common Share and one NAI Share
for each Kranzco Common Share Equivalent held
on the Distribution Record Date. See "The
Distribution."
</TABLE>
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<TABLE>
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Results of the Distribution.............................. Upon the consummation of the Distribution, NAI
will be an independent public company which will
continue to conduct its business of providing real
estate brokerage and related services to Clients.
Kranzco will own approximately 9.8% of the
outstanding NAI Shares, Kranzco shareholders will
own approximately 70.2% of the outstanding NAI
Shares and the persons who owned NAI Shares
prior to the Exchange Offer will own an aggregate
of approximately 20% of the NAI Shares.
Federal Income Tax Consequences
of the Distribution...................................... A Kranzco shareholder will be treated as receiving
a distribution from Kranzco in an amount equal to
the fair market value of the NAI Shares received
by such shareholder. Depending on a Kranzco
shareholder's adjusted tax basis in his or her
Kranzco Common Shares or Kranzco Common
Share Equivalents and the amount of Kranzco's
current and accumulated earnings and profits, the
Distribution will result in ordinary income, return
of capital, capital gain or a combination thereof.
Management projects that for a typical Kranzco
common shareholder, the Distribution likely will
result in an increase in the shareholder's return of
capital and capital gain, but this result cannot be
assured. See "Certain United States Federal Tax
Considerations--Federal Income Taxation of the
Distribution."
The Rights Offering
Rights................................................... Simultaneously with the Distribution, NAI will
distribute to holders of NAI Shares, including the
Kranzco shareholders who receive NAI Shares in
the Distribution, Rights to purchase an aggregate
of 17,101,403 NAI Shares, on the basis of one
Right for each NAI Share held by NAI
Stockholders. The exercise of Rights is
irrevocable once made, and no Underlying Shares
will be issued until the closing of the Rights
Offering. The Finns have advised NAI that they
intend to exercise Rights to purchase an aggregate
of 500,000 NAI Shares and Kranzco has advised
NAI that it intends to exercise such number of
Rights to purchase NAI Shares that would result in
Kranzco owning approximately 9.8% of the issued
</TABLE>
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<TABLE>
<S> <C>
and outstanding NAI Shares, before the issuance of
any Additional Shares.
Rights Record Date....................................... ______________, 1998, the "Rights Record Date"
is the same date as the Distribution Effective Date.
The Rights will also be distributed on the Rights
Record Date.
Basic Subscription Privilege............................. Holders are entitled to purchase at the Subscription
Price one NAI Share for each Right held. See
"The Rights Offering--The Rights" and
"--Subscription Privileges--Basic Subscription
Privilege."
Oversubscription Privilege............................... Each Holder who elects to exercise his or her
Basic Subscription Privilege may also subscribe at
the Subscription Price for Underlying Shares, if
any, remaining unissued after satisfaction of all
subscriptions pursuant to the Basic Subscription
Privilege. If an insufficient number of Underlying
Shares is available to satisfy fully all elections to
exercise the Oversubscription Privilege, the
available Underlying Shares will be allocated on a
pro rata basis among Holders who exercise their
Oversubscription Privilege based on the respective
numbers of Underlying Shares subscribed for by
such Holders pursuant to the Basic Subscription
Privilege. See "The Rights Offering--Subscription
Privileges" and "Plan of Distribution."
Subscription Price....................................... $2.00 in cash per NAI Share.
Transferability of Rights................................ The Rights are transferable. The Basic
Subscription Privilege and the Oversubscription
Privilege are only transferable together, and any
transfer of a Right will be deemed a transfer of
both the Basic Subscription Privilege and the
Oversubscription Privilege. See "The Rights
Offering-- Method of Transferring Rights."
Although the Rights are transferable, NAI does not
intend to list the Rights on any national securities
exchange or automated quotation system.
Accordingly, a market for the Rights may not
develop and the Rights may be a highly illiquid
security. Although the Rights and NAI Shares will
be eligible for quotation and trading on the OTC
Bulletin Board after the Distribution, the NAI
Shares are not currently quoted on the OTC
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Bulletin Board or listed on any national securities
exchange or approved for quotation on any quotation system,
and there can be no assurance that a public market
for the NAI Shares will develop or provide liquidity.
See "Risk Factors--Arbitrary Determination of Offering
Price; Absence of Prior Market; Trading Prices."
Expiration Date.......................................... _______, 1998, unless extended by NAI from time
to time, provided that the Expiration Date shall not
be later than ________, 1998, unless the Board of
Directors of NAI (the "Board") determines that a
material event has occurred which necessitates one
or more further extensions of the Rights in order to
permit adequate disclosure of information
concerning such event to Holders. See "The
Rights Offering-- Expiration Date." If NAI elects
to extend the term of the Rights, it will issue a
press release to such effect not later than the first
Business Day following the most recently
announced Expiration Date. If NAI elects to
extend the term of the Rights Offering by more
than 14 calendar days, it will, in addition, cause
written notice of such extension to be promptly
sent to all Holders of record on the Rights Record
Date. After the Expiration Date, the Rights will
become void and have no value.
Subscription Agent....................................... First Union National Bank
Federal Income Tax Consequences
of the Rights Offering................................... Holders of NAI Shares (including Kranzco
shareholders who receive NAI Shares in the
Distribution) will not recognize taxable income for
Federal income tax purposes in connection with the
receipt of the Rights. See "Certain United States
Federal Tax Considerations - Federal Income
Taxation of the Rights Offering."
The Concurrent Offering
Executive Group Subscription
Privilege................................................ Concurrently with the Rights Offering, NAI is
offering to officers, directors and trustees of NAI
and Kranzco (the "Executive Group") the right to
purchase any remaining Excess Shares, at the
Subscription Price, after the Basic Subscription
Privileges and Oversubscription Privileges have
</TABLE>
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<TABLE>
<S> <C>
been fulfilled. If the number of Excess Shares is
not sufficient to satisfy all subscriptions pursuant to
the Executive Group Subscription Privilege, such
Excess Shares will be allocated pro rata (subject to
the elimination of fractional shares) among those
exercising the Executive Group Subscription
Privilege, in proportion to the number of NAI
Shares requested pursuant to the Executive Group
Subscription Privilege. See "The Concurrent
Offering--Subscription Privileges" and "Plan of
Distribution."
Broker Member
Subscription Privilege................................... Also concurrently with the Rights Offering, NAI is
offering to certain of the principals, shareholders,
partners, officers, managers and licensed real
estate agents of NAI's Broker Members in the
United States (the "Broker Member Group") the
right to purchase any remaining Excess Shares, at
the Subscription Price, after the Basic Subscription
Privileges, Oversubscription Privileges and
Executive Group Subscription Privileges have been
fulfilled. NAI has authorized 2,000,000 Additional
Shares for issuance to the Broker Member Group
in order to ensure that the Broker Member Group
will in the aggregate have the right to purchase a
minimum of 2,000,000 NAI Shares, to the extent
that the number of Excess Shares is not sufficient
to satisfy the Broker Member Group Subscription
Privilege. If, after fulfillment of the Executive
Group Subscription Privilege, the number of
Excess Shares and Additional Shares is not
sufficient to satisfy all subscriptions pursuant to the
Broker Member Group Subscription Privilege,
such Excess Shares and Additional Shares will be
allocated pro rata (subject to the elimination of
fractional shares) among those exercising the
Broker Member Group Subscription Privilege, in
proportion to the number of NAI Shares requested
pursuant to the Broker Member Group
Subscription Privilege. See "The Concurrent
Offering--Subscription Privileges" and "Plan of
Distribution."
</TABLE>
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<TABLE>
<S> <C>
Guaranteed Additional Shares
for Broker Members....................................... NAI has authorized 2,000,000 Additional Shares
for issuance to the Broker Member Group in order
to ensure that the Broker Member Group will in
the aggregate have the right to purchase a
minimum of 2,000,000 NAI Shares.
Subscription Price....................................... $2.00 in cash per NAI Share.
Non-transferability of Executive Group
and Broker Member Group
Subscription Privileges.................................. The right to purchase Excess Shares pursuant to
the Executive Group Subscription Privilege and the
right to purchase Excess Shares or Additional
Shares pursuant to the Broker Member Group
Subscription Privilege is not transferable.
Expiration Date.......................................... The Executive Group Subscription Privilege and
the Broker Member Group Subscription Privilege
shall expire on the Expiration Date of the Rights.
See "The Rights Offering-- Expiration Date." If
NAI extends the term of the Executive Group
Subscription Privilege and the Broker Member
Group Subscription Privilege due to an extension
of the Rights Offering, it will issue a press release
to such effect not later than the first Business Day
following the most recently announced Expiration
Date. After the Expiration Date, the Executive
Group Subscription Privilege and the Broker
Member Group Subscription Privilege will become
void.
Subscription Agent....................................... First Union National Bank
Federal Income Tax Consequences
of the Rights Offering................................... To the extent Underlying Shares are not purchased
by NAI Stockholders in the Rights Offering, the
remaining Excess Shares, will be subject to
purchase first, pursuant to the Management
Subscription Privilege and second, pursuant to the
Broker Member Group Subscription Privilege.
Although not entirely clear, the right to purchase
Excess Shares, as well as Additional Shares,
pursuant to the Concurrent Privileges will be
treated for Federal income tax purpose as non-
qualified stock options. As such, there are no
Federal income tax consequences at the time the
Excess Shares or Additional Shares are offered
</TABLE>
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<S> <C>
pursuant to the Concurrent Privileges. Upon
exercise of a Right, the holder must report as
ordinary income an amount equal to the excess, if
any, of the fair market value of the NAI Shares on
the date of exercise over the exercise price
paid to acquire such shares. NAI will be allowed a
tax deduction in like amount. The tax basis of NAI
Shares acquired through exercise of the Concurrent
Privileges will equal the price paid therefor and
the holding period of such NAI Shares will begin on the
date of exercise. Gain or loss on the sale of such
NAI Shares will be classified as capital gain or
loss taxable in the manner discussed in "Certain United
States Federal Tax Considerations--Federal Income
Taxation of the Rights Offering--Sale of the Rights."
General
NAI Shares Outstanding after the Rights
Offering and the Concurrent Offering..................... 36,202,806 NAI Shares will be outstanding after the
Rights Offering and the Concurrent Offering based
on 17,101,403 NAI Shares outstanding on
the Distribution Effective Date, assuming all of
the Rights are exercised and all Additional
Shares are purchased.
Closing of Rights Offer and Concurrent
Offering and Issuance of Shares.......................... The closing will occur and certificates representing
Underlying Shares , Excess Shares and Additional
Shares will be delivered to subscribers as soon as
practicable after the closing date and after all
prorations have been effected. See "The Rights
Offering-- Subscription Privileges" and "The
Concurrent Offering--Concurrent Privileges." No
Underlying Shares, Excess Shares or Additional
Shares will be issued until the closing. Funds
delivered to the Subscription Agent for the exercise
of Subscription Privileges and the Concurrent
Privileges will be held in escrow by the
Subscription Agent until the closing. No interest
will be paid on funds held by the Subscription
Agent in respect of the Subscription Privileges and
the Concurrent Privileges. Any excess funds
submitted in connection with the Oversubscription
Privilege or the Concurrent Privileges, will be
returned as soon as practicable following the
</TABLE>
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<S> <C>
closing of the Rights Offering and the Concurrent
Offering.
Trading Market........................................... There is currently no public market for the NAI
Shares or Rights. The NAI Shares and Rights will
be eligible for quotation and trading on the OTC
Bulletin Board after the Distribution and Rights
Offering. There can be no assurance that a public
market for the NAI Shares or Rights will develop
or provide liquidity. See "Risk Factors--Arbitrary
Determination of Offering Price; Absence of Prior
Market; Trading Prices." There will be no trading
market for the Concurrent Privileges.
Use of Proceeds.......................................... NAI will not receive any proceeds from the
Distribution. The net proceeds to be received by
NAI from the Rights Offering and the Concurrent
Offering depends on the number of Rights
exercised and the number of Underlying Shares or
Additional Shares purchased in the Concurrent
Offering, as the case may be. If all Rights are
exercised and all of the Additional Shares are
purchased, NAI expects the net proceeds available
to it from the Rights Offering and the Concurrent
Offering to be approximately $38,000,000. After
paying the expenses of the Rights Offering, the
Concurrent Offering and the Related Transactions,
the proceeds from the Rights Offering and the
Concurrent Offering will be used to (i) repay
$202,000 principal amount of indebtedness
incurred in connection with the repurchase of
101,000 shares of Series A Preferred Stock of NAI
for an aggregate repurchase price of $202,000, (ii)
repay approximately $715,000 of indebtedness
(which includes approximately $72,000 of accrued
interest), (iii) grow NAI's Corporate Services
Department and Investment Sales Department, and
(iv) strategically acquire and develop Real Estate-
Related Services. The balance of any proceeds
will be invested in short-term commercial paper at
a rate of approximately 5.5% per annum until used
for general corporate and working capital purposes
and to opportunistically acquire real estate.
Although the Finns have advised NAI that they intend
to exercise Rights to purchase an aggregate of
500,000 NAI Shares and Kranzco has advised NAI that
it intends to exercise such number of
</TABLE>
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<S> <C>
Rights to purchase NAI Shares that would result in
Kranzco owning approximately 9.8% of the issued and
outstanding NAI Shares (before the issuance of any
Additional Shares), NAI does not have a written
commitment from any other person to purchase any of
the Underlying Shares or Additional Shares pursuant
to the Rights Offering or the Concurrent Offering, as the
case may be. In addition, no minimum amount of
proceeds is required for NAI to consummate the
Rights Offering or the Concurrent Offering.
Accordingly, no assurances can be given as to the
amount of gross proceeds that NAI will realize from
the Rights Offering and the Concurrent Offering. See
"Risk Factors--No Commitments to Purchase and No
Minimum Size of Rights Offering or Concurrent
Offering" and "Use of Proceeds."
Dividend Policy......................................... NAI has not paid any dividends on the outstanding
NAI Shares to date. The payment of dividends, if
any, in the future is with the discretion of the
Board and will depend on NAI's earnings, its
capital requirements and financial condition. It is
the present intention of the Board to retain all
earnings, if any, for use in NAI's business
operation and, accordingly, the Board does not
expect to declare or pay any cash dividends in the
foreseeable future, except as may be required by
any outstanding shares of preferred stock of NAI.
Risk Factors............................................ Prospective investors should consider the material
risks discussed under "Risk Factors," including
risks which may arise out of general economic
conditions; interest rate levels; financial market
performance; the transactional nature of NAI's
business; the consolidation of the commercial real
estate brokerage industry and the resulting
increased competition for Broker Members and
Clients; the potential impact of government
regulations on sharing brokerage commissions,
franchises, and environmental issues; potential
conflicts of interest between NAI and Kranzco; no
experience or limited experience in certain areas in
which NAI intends to expand its business; the
absence of a public market for the NAI Shares;
NAI's limited financial resources and lack of future
funding commitments; dependence on key
employees; risk of limited growth; risks related to
</TABLE>
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<TABLE>
<S> <C>
the intercompany agreement; potential conflicts of
interest; historic lack of dividends; potential
dilution; the institution of anti-takeover
measures; anti-takeover effect of certain
provisions of Maryland law and of NAI's charter
and bylaws; no commitments to purchase
Underlying Shares, Excess Shares or Additional Shares;
no minimum amount of proceeds required to
consummate the Rights Offering or Concurrent
Offering; and the possible extension of the expiration
date of the Rights Offering and the Concurrent Offering.
</TABLE>
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Summary Financial and Operating
Data (In thousands, except ratio, property and per share data )
The following sets forth summary financial, operating and other
data on a historical basis for NAI. Also set forth below are summary pro forma
financial, operating and other data for NAI at and for the nine months ended
March 31, 1998 and the year ended June 30, 1997. The pro forma balance sheet
data as of March 31, 1998 has been prepared as if the Exchange Offer and the
Distribution had occurred on March 31, 1998. The pro forma operating and other
data for the nine months ended March 31, 1998 have been prepared as if the
consummation of the Exchange Offer and the Distribution had occurred on July
1, 1996. The pro forma operating and other data for the year ended June 30,
1997 have been prepared as if the foregoing transactions had occurred on July
1, 1996. The pro forma financial and operating data do not give effect to the
Rights Offering and the Concurrent Offering, and are not necessarily
indicative of what the actual financial position or results of operations of
NAI would have been as of the date or for the periods indicated, nor do they
purport to represent the results of operations or financial position for
future periods. This data should be read in conjunction with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended March 31, Year Ended June 30,
------------------------------------ --------------------------------------
Pro Forma Historical Pro Forma Historical
--------- ---------------------- --------- -------------------------
1998 1998 1997 1997 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
OPERATING DATA: (unaudited) (unaudited) (unaudited)(unaudited)
Revenue:
<S> <C> <C> <C> <C> <C> <C> <C>
Commissions.............................. $ 2,836 $ 2,836 $ 2,910 $ 4,001 $ 4,001 $ 4,124 $ 4,371
License fees............................. 1,128 1,128 923 1,282 1,282 1,373 1,158
Other.................................... 474 474 563 618 618 523 470
Interest................................. 0 0 0 0 0 0 0
------- ------- ------- -------- ------- -------- -------
Total revenue............................ 4,438 4,438 4,396 5,901 5,901 6,020 5,999
------- ------- ------- -------- ------- -------- -------
Costs and expenses:
Commission expense....................... 602 602 788 1,143 1,143 1,782 1,485
Sales and marketing...................... 277 277 194 321 321 285 324
Compensation and benefits................ 1,832 1,832 1,911 2,528 2,528 2,438 1,981
Operating expense........................ 1,953 1,578 1,187 2,144 1,644 1,475 1,336
Depreciation and amortization............ 40 40 37 52 52 56 45
Interest, net............................ 47 47 47 60 60 48 46
------- ------- ------- -------- ------- -------- -------
Total costs and expenses................. 4,751 4,376 4,164 6,248 5,748 6,084 5,217
------- ------- ------- -------- ------- -------- -------
Income (loss) from operations............ (313) 62 232 (347) 153 (64) 782
---- ------- ------ -------- ------- -------- -------
Other expenses:
Equity in loss of affiliate.............. 12 12 15 25 25 5 0
Loss on sale of real estate.............. 0 0 0 0 0 0 65
------- ------- ------ -------- ------- -------- -------
Total other expenses..................... 12 12 15 25 25 5 65
------- ------- ------ -------- ------- -------- -------
Income (loss) from continuing operations
before income taxes...................... (325) 50 217 (372) 128 (69) 717
---- ----
Income taxes............................. 5 5 0 0 0 0 35
------- ------- ------ -------- ------- -------- -------
Income (loss) from continuing operations. (330) 45 217 (372) 128 (69) 682
---- ----
Loss from discontinued operations........ 0 0 162 0 223 128 392
------- ------- ------ -------- ------- -------- -------
Net income (loss)........................ (330) 45 55 (372) (95) (197) 290
---- ----
Preferred share distributions............ 0 7 8 0 11 13 15
------- ------- ------ -------- ------- -------- ------
Net income (loss) available to common
shareholders........................... $ (330) $ 38 $ 47 $ (372) $ (106) $ (210) $ 275
======= ======= ======= ======== ======= ======== =======
Net income (loss) per share.............. $ (0.02) $ 0.00 $ 0.00 $ (0.02) $ (0.01) $ (0.02) $ 0.02
======= ======= ======= ======== ======= ======== =======
Other data (unaudited):
Cash flows provided by (used in)
Operating.................................. (1) 189 313 (1) 233 158 593
Investing.................................. (1) (41) (196) (1) (260) (277) (260)
Financing.................................. (1) 11 (8) (1) 13 (7) (156)
Common shares outstanding.................. 17,101 12,974 12,888 16,965 12,871 12,863 12,782
Weighted average shares outstanding........ 17,075 12,954 12,888 16,981 12,883 12,860 12,648
Ratio of EBITDA to fixed charges(2)........ (2.74) 1.46 3.27 (2.32) 1.95 0.30 7.62
EBITDA(2).................................. $ (238) $ 137 $ 301 $ (260) $ 240 $ 35 $ 808
Balance sheet data (1995 unaudited):
Total assets............................... $ 1,829 $ 1,829 $ 1,807 $ 1,689 $ 1,732 $ 1,649
Total debt................................. $ 643 $ 643 $ 550 $ 575 $ 496 $ 441
Shareholders deficit....................... $(1,026) $(1,026) $ (983) $(1,090) $ (1,008) $ (837)
</TABLE>
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(1) Pro forma information relating to cash flows from operating, investing
and financing activities has not been included because management
believes that the information would not be meaningful due to the number
of assumptions required in order to calculate this information.
(2) For purposes of these computations, EBITDA consists of income before
interest expense, taxes, depreciation and amortization. Fixed charges
include interest expense, depreciation and amortization, and preferred
share distributions. Management believes that EBITDA provides additional
information about the Company's ability to meet its future debt service,
capital expenditures and working capital requirements. EBITDA is not a
measure of financial performance under GAAP and should not be considered
an alternative either to net income as an indicator of NAI's performance
or to cash flows as a measure of its liquidity. EBITDA as disclosed by
other Companies may not be comparable to the Company's calculation of
EBITDA.
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<PAGE>
RISK FACTORS
This Prospectus includes certain statements that may be deemed to be
"forward-looking statements." All statements, other than statements of
historical facts, included in this Prospectus that address activities, events
or developments that NAI expects, believes or anticipates will or may occur in
the future, including such matters as future capital expenditures, the
acquisition or development of real estate or Real Estate- Related Services
(including the amount and nature thereof), the consolidation and expansion
trends of the commercial real estate brokerage industry, business strategies,
expansion and growth of NAI's operations and other such matters are
forward-looking statements. Such statements are based on assumptions and
expectations which may not be realized and are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of
which might not even be anticipated. Prospective investors are cautioned that
any such statements are not guarantees of future performance and that actual
results or developments may differ materially from those anticipated in the
forward-looking statements. Risks and other factors that might cause
differences, some of which could be material, include, but are not limited to:
general economic conditions; interest rate levels; financial market
performance; the transactional nature of NAI's business; the consolidation of
the commercial real estate brokerage industry and the resulting increased
competition for Broker Members and Clients; the potential impact of government
regulations on sharing brokerage commissions, franchises, and environmental
issues; potential conflicts of interest between NAI and Kranzco; no experience
or limited experience in certain areas in which NAI intends to expand its
business; the absence of a public market for the NAI Shares; NAI's limited
financial resources and lack of future funding commitments; dependence on key
employees; risk of limited growth; risks related to the intercompany
agreement; potential conflicts of interest; historic lack of dividends;
potential dilution; the institution of anti-takeover measures; anti-takeover
effect of certain provisions of Maryland law and of NAI's charter and bylaws;
no commitments to purchase Underlying Shares, Excess Shares or Additional
Shares; and no minimum amount of proceeds required to consummate the Rights
Offering or the Concurrent Offering; and the possible extension of the
expiration date of the Rights Offering and the Concurrent Offering.
An investment in the NAI Shares involves various risks. Before
purchasing NAI Shares offered hereby, prospective investors should give
special consideration to the information set forth below, in addition to the
information set forth elsewhere in this Prospectus.
History of Losses and Limited Profits; Substantial Accumulated Earnings Deficit
NAI has reported net losses in the fiscal years ended June 30, 1997
and 1996 of $105,445 and $209,580, respectively. See "Selected Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operation" for a discussion of such losses. NAI has a substantial
accumulated earnings deficit which was $3,479,000 as of March 31, 1998.
Dilution
Purchasers of Underlying Shares, Excess Shares and Additional Shares
in the Rights Offering and the Concurrent Offering will suffer immediate and
substantial dilution of (i) $2.01 or 100% assuming that an aggregate of
930,378 Underlying Shares, Excess Shares and Additional Shares are purchased
in the Rights Offering and the Concurrent Offering (the "Minimum NAI Shares"),
(ii) $1.34 or 67% assuming that an aggregate of 10,000,000 Underlying Shares,
Excess Shares and Additional Shares are purchased in the Rights Offering and
the Concurrent Offering (the "Moderate NAI Shares"), and (iii) $1.00 or 50%
assuming that an aggregate of 19,101,403 Underlying Shares and Additional
Shares are purchased in the Rights Offering and the Concurrent Offering (the
"Maximum NAI Shares"). See "Dilution."
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<PAGE>
NAI Stockholders who do not exercise their Basic Subscription
Privilege in full will realize a dilution in their percentage voting interest
and ownership interest in future net earnings, if any, of NAI to the extent
that rights are exercised by other Holders. In addition, even NAI Stockholders
who exercise their Basic Subscription Privilege in full will realize a
dilution in their percentage voting interest and ownership interest in future
net earnings, if any, of NAI if any Additional Shares are issued pursuant to
the Broker Member Group Subscription Privilege.
No Commitments to Purchase and No Minimum Size of Rights Offering or
Concurrent Offering
NAI does not have a written commitment from any person to purchase
any of the Underlying Shares pursuant to the Rights Offering or to purchase
any Excess Shares or Additional Shares pursuant to the Concurrent Offering.
The Finns have advised NAI that they intend to exercise Rights to purchase an
aggregate of 500,000 NAI Shares and Kranzco has advised NAI that it intends to
exercise such number of Rights to purchase NAI Shares that would result in
Kranzco owning approximately 9.8% of the issued and outstanding NAI Shares,
before the issuance of any Additional Shares. In addition, no minimum amount
of proceeds is required for NAI to consummate the Rights Offering or the
Concurrent Offering. Accordingly, no assurances can be given as to the amount
of gross proceeds that NAI will realize from the Rights Offering or the
Concurrent Offering. NAI may not be able to achieve all the benefits it would
otherwise anticipate from the strategic relationship with Kranzco and the
Related Transactions if less than all of the Underlying Shares and Additional
Shares are sold. See "The Rights Offering," "The Concurrent Offering," and
"Plan of Distribution."
Certain Proceeds to Affiliates; Benefits to Insiders
Approximately $441,235 of the proceeds of the Rights Offering and the
Concurrent Offering will be used to repay principal indebtedness owed by NAI
and its subsidiaries to Gerald C. Finn, a director and officer of NAI, and
Norma J. Finn, an officer of NAI, which bears interest at rates ranging from
10% to 12%. See "Use of Proceeds" for a description of such indebtedness.
In connection with the Related Transactions, NAI has entered into
employment agreements with each of Gerald C. Finn and Jeffrey M. Finn. See
"Management--Employment Agreements." In addition, in connection with the
Related Transactions, certain officers and directors of NAI will receive
options to purchase NAI Shares under the NAI 1998 Stock Option Plan, and will
be eligible to participate in the NAI 1998 Bonus Compensation Plan and the NAI
1998 Incentive Plan. See "Management--1998 Incentive Plan" and "--1998 Stock
Option Plan."
Limited Financial Resources; No Future Funding Commitments
NAI initially will rely primarily on its revenues and the proceeds of
the Rights Offering and the Concurrent Offering in order to finance its future
growth. NAI has not received any commitment with respect to any additional
funding from any third party (including Kranzco). Kranzco is not obligated to
provide any funds to NAI in the future or to assist NAI in obtaining
additional financing. If NAI is unable to obtain funding in the future, it may
not be able to pursue its growth strategy based on acquisitions and
development, which may have an adverse impact on the business, condition and
prospects of NAI.
Competition; Ability to Retain Broker Members and Attract Additional Broker
Members
NAI primarily seeks business from corporations, individual
owner/investors and national and international organizations with real estate
requirements in multiple market areas. NAI faces competition for clients from
(i) local and regional Commercial Real Estate Brokers, (ii) national
broker-owned companies with global alliances, and (iii) national/global
networks. Some of NAI's competitors include
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CB Commercial Real Estate Services Group, Inc.; Colliers International
Property Consultants; Cushman & Wakefield, Inc.; Grubb & Ellis Company;
Insignia Financial Group, Inc.; Trammell Crow Company. Certain of NAI's
competitors are better known and are larger, more established companies with
substantial capabilities. Consequently, NAI may be at a disadvantage in
competing with these companies in a number of markets.
NAI's ability to earn revenues is directly related to its ability to
attract and retain successful, independently owned, commercial and industrial,
licensed real estate brokers ("Commercial Real Estate Brokers") in a
substantial number of market areas as Broker Members. The number of Broker
Members in different market areas, and their strength and reputation in their
own local markets, may directly affect the anticipated volume of commissions
generated by the Network, as well as NAI's ability to obtain exclusive
assignments from a national client base. NAI is presently competing for Broker
Members with cooperative commercial broker networks, as well as large national
and regional commercial real estate brokerage firms. There has been a
consolidation of Commercial Real Estate Brokers, which are better known and
have greater resources than NAI, that are actively seeking to acquire other
real estate brokerage and service companies. Certain of NAI's competitors,
such as CB Commercial and Grubb & Ellis are attempting to grow their
businesses through acquisitions and through entering into affiliation
agreements with independent Commercial Real Estate Brokers. To the extent
these companies are successful in acquiring or entering into affiliation
agreements with independent Commercial Real Estate Brokers, there may be a
negative impact on NAI's ability to attract and retain qualified Commercial
Real Estate Brokers to join the Network as Broker Members.
In addition, approximately 60% of NAI's Broker Members are party to a
Membership Agreement which permits Broker Members to terminate the Membership
Agreement upon 45 days prior notice. Accordingly, there can be no assurance
that in light of the increased competition to retain or acquire Commercial
Real Estate Brokers, that Broker Members will not terminate, or renew their
Membership Agreements.
Collection of Fees from Broker Members
Under its standard agreement with Broker Members, NAI is entitled to
receive a predetermined percentage of any brokerage commission earned from the
acquisition, disposition or leasing of real estate covered by such agreement.
Although NAI believes that it has established sufficient controls to monitor
transactions among Broker Members and the failure of a Broker Member to pay
any such commission will cause a termination of such Broker Member's
membership in the Network, no assurance can be given that NAI will be able to
collect all commissions due it by Broker Members. Substantially all of the
revenues earned by NAI, other than the payment of the Membership Fees, are
earned by sharing in commissions with Broker Members in 47 states. Most states
permit licensed real estate brokers to enter into commission sharing
agreements with licensed real estate brokers from other jurisdictions,
however, some states impose certain requirements with respect to entering into
such agreements. While NAI believes it is in compliance with substantially all
of such requirements, to the extent NAI has violated any such state law
requirements it may not be able to enforce its Membership Agreement and may be
subject to civil liability and criminal penalties. See "Business--Membership
Agreements and Fees" and "Business--Government Regulation--State Laws
Governing Real Estate Brokers."
Effect of Increase in Membership Fees
While NAI believes that its current schedule of Membership Fees will
not have a substantial effect on the number of new Broker Members or
membership renewals by existing Broker Members, no assurance can be given that
increases in the Membership Fees for new Broker Members, as well as increases
in Membership Fees for renewals by existing Broker Members, will not have an
adverse effect
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on the number of new Broker Members or membership renewals. See
"Business--Broker Members--Membership Agreements and Fees" and "Risk
Factors--Competition; Ability to Retain Broker Members and Attract Additional
Broker Members."
Dependence on Key Employees
NAI is dependent upon the experience and abilities of its founder and
Chief Executive Officer, Mr. Gerald C. Finn, and its current President and
Chief Operating Officer, Mr. Jeffrey Finn, both of whom are subject to
three-year employment agreements. However, although the employment agreements
contain certain non-competition provisions in the case that either Mr. G. Finn
and/or Mr. J. Finn leaves his employment with NAI, there is no assurance that
either Mr. G. Finn or Mr. J. Finn will continue as executives of NAI, or that
if they leave such employment with NAI, that the non-competition provisions of
the employment agreements will be enforceable. Messrs. G. Finn and J. Finn are
both directors and large stockholders and are involved in all aspects of NAI's
business. The loss of either Mr. G. Finn's or Mr. J. Finn's services would be
detrimental to the continued development of NAI and would adversely affect the
conduct of NAI's business. NAI does not maintain key-man life insurance on the
lives of Mr. G. Finn or Mr. J. Finn. See "Business" and "Management,"
"Principal Stockholders" and "Use of Proceeds."
Adverse Changes in Economic Conditions
Substantially all of the revenues earned by NAI, other than the
payment of annual membership fees ("Membership Fees") by Broker Members and
Alliance Members, are earned by sharing in commissions generated by the
Network. The commissions generated by the Network are based upon the number
and value of transactions in which NAI and its Broker Members participate. The
real estate market is subject to volatility and is effected by general
economic conditions. Periods of economic slowdown or recession, rising
interest rates or declining demand for real estate may adversely affect NAI's
business. Such economic conditions could result in a general decline in rents
and property prices, which in turn would adversely affect revenues from
brokerage commissions derived from property sales and leases. Accordingly, the
amount of revenues received by NAI may be subject to substantial variation
from year to year and prior revenues may bear no relationship to future
revenues. See "Business--Broker Members" and "--Competition; Ability to Retain
Broker Members and Attract Additional Broker Members."
Board Discretion in Use of Proceeds
NAI may change the specific use or allocation of the net proceeds
from the Rights Offering and Concurrent Offering, except that in all events
NAI will repay $202,000 principal amount of indebtedness incurred in
connection with the repurchase of 101,000 shares of Series A Preferred Stock
of NAI for an aggregate repurchase price of $202,000, and will repay
approximately $643,000 aggregate principal amount of indebtedness of NAI
described above. See "Use of Proceeds." Management of NAI will have broad
discretion to change the allocation of the net proceeds among expanding NAI's
Corporate Services Department and Investment Sales Department, strategically
acquiring and developing Real Estate-Related Services and the opportunistic
acquisition of real estate; any change in the allocation of the net proceeds
will depend on, among other things, the opportunities which are available to
NAI. See "-- Risks of Limited Growth; Acquisition Risks."
Risk of Limited Growth; Acquisition Risks
NAI's growth strategy is to increase profitability by continuing to
enlarge the Network by attracting and retaining Broker Members or by investing
in or acquiring affiliated brokerage firms and by continuing to expand into
Real Estate-Related Services by the acquisition of Real Estate-Related Service
companies
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and the development of Real Estate-Related Services. Accordingly, a
significant component of the growth of NAI may be through the acquisition of
Commercial Real Estate Brokers or companies which perform Real Estate-Related
Services. There can be no assurance that suitable acquisition opportunities
will be available to NAI or its affiliates or that NAI or its affiliates will
not overpay for acquisitions or that such acquisitions will be efficiently and
adequately integrated. There may be significant competition for targeted
acquisitions. Some of the companies in which NAI or its affiliates acquire an
interest may have little or no operating histories, may have historical
operating losses, and have competitors that are larger and more well
capitalized. Certain of the acquisitions of NAI or its affiliates may be
involved in sectors that are subject to increasing competition. As a result,
the costs incurred to acquire or reposition companies may be significant and
may not be recovered. Furthermore, there can be no assurance that acquisitions
will not be dilutive to NAI's earnings.
Limited Experience in Certain Areas
NAI anticipates expanding the scope of its business beyond its
current focus on real estate brokerage transactions to the broader delivery of
its Real Estate-Related Services. NAI is not currently engaged in any
negotiations to provide for the acquisition or development of such Real
Estate-Related Services, and there is no assurance that NAI will be able to
acquire, develop or provide additional Real Estate-Related Services in the
future.
Potential Impact of Franchise Laws
The offer and sale of franchises is subject to a trade regulation
rule promulgated by the Federal Trade Commission ("FTC") entitled "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures" (the "Franchise Rule") that requires a franchisor to provide
pre-sale disclosure to a prospective franchisee prior to the sale of a
franchise subject to the Franchise Rule. NAI believes that by offering and
selling memberships to its Broker Members it may have been offering a
"franchise," as defined by the Franchise Rule, but that the sale of such
memberships is a "fractional franchise" exempt from compliance with the
requirements of the Franchise Rule. See the section entitled
"Business--Government Regulation--Laws Relating to Franchising," below, as to
the conditions for meeting the "fractional franchise" exemption and the basis
for NAI's belief that it meets such conditions.
The offer and sale of franchises is also subject to certain state
franchise sales laws and state business opportunity laws (collectively, "State
Laws"). In addition, many states have laws that regulate certain substantive
aspects of the franchisor-franchisee relationship, including termination or
non-renewal of franchise agreements. NAI believes that by offering and selling
memberships to its Broker Members it may have been offering a "franchise," as
defined by the State Laws.
While NAI believes that it is exempt from the requirements of many of
the State Laws in states in which it has entered into Member Agreements, NAI
believes that there are approximately six (6) states with a State Law in which
NAI has entered into Membership Agreements for which NAI may not be exempt,
may have failed to comply with the filing or registration and disclosure
provisions of such State Law, and for which it may be subject to certain
sanctions or potential liability. Additionally, there is no assurance that the
exemptions from compliance with the Federal Rule and the State Laws in states
which NAI believes there are exemptions on which NAI is relying, have been, or
will continue to be, available. Any sanctions or potential liability would
include that NAI may be subject to civil penalties imposed by state regulatory
agencies, and legal actions by existing Members for rescission of existing
Membership Agreements, restitution, and damages as a result of any violation
of such law. NAI believes that, if any state regulatory agencies, or any of
the Members, in such states sought such remedies and any such action were
successful, its potential liability could be to refund certain fees. While NAI
believes that it has strong defenses to any
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alleged violation of any State Law, there can be no assurance that a court
would not take the position that NAI should have complied with such laws in
connection with those transactions.
NAI has also recently entered into several Membership Agreements with
Members in foreign countries. NAI believes that it either is not subject to,
or would be exempt from, such laws. If NAI were subject to, or were not exempt
from, such laws, it could be subject to actions by regulatory agencies and
legal actions by existing Members, and subject to fines, penalties, and
damages.
Real Estate Investment Risks
To the extent funds are available, NAI intends to strategically
acquire real property. Investments in real estate are subject to the risks
incident to the ownership and operation of real estate generally. The yields
available from equity investments in real estate depend on the amount of
income generated and expenses incurred. A commercial property's revenues and
value may be adversely affected by a number of factors, including the
national, state and local economic climate and real estate conditions (such as
oversupply of or reduced demand for space and changes in market rental rates);
the perceptions of prospective tenants of the safety, convenience and
attractiveness of the properties; the ability of the owner to provide adequate
management, maintenance and insurance; the ability to collect on a timely
basis all rent from tenants; the expense of periodically renovating, repairing
and reletting spaces; and increasing operating costs (including real estate
taxes and utilities) which may not be passed through to tenants. Certain
significant expenditures associated with investments in real estate (such as
mortgage payments, real estate taxes, insurance and maintenance costs) are
generally not reduced when circumstances cause a reduction in rental revenues
from the property. If a property is mortgaged to secure the payment of
indebtedness and if the owner is unable to meet its mortgage payments, a loss
could be sustained as a result of foreclosure on the property or the exercise
of other remedies by the mortgagee. In addition, real estate values and income
from properties are also affected by such factors as compliance with laws,
including tax laws, interest rate levels and the availability of financing.
Also, the rentable square feet of commercial property available for lease is
often affected by market conditions and may therefore fluctuate over time.
Furthermore, equity real estate investments are relatively illiquid.
Real Estate Development Risks
NAI may engage in the selective development and construction of real
estate properties. Risks associated with development and construction
activities include the risks that development opportunities may be abandoned
after expending resources to determine feasibility; construction costs of a
project may exceed original estimates; occupancy rates and rents at a newly
completed property may not be sufficient to make the property profitable;
financing may not be available on favorable terms for development of a
property; and construction and lease-up may not be completed on schedule,
resulting in increased debt service expense and construction costs.
Development activities are also subject to risks relating to the inability to
obtain, or delays in obtaining, all necessary zoning, land-use, building,
occupancy and other required governmental permits and authorizations. In
addition, new development activities, regardless of whether they are
ultimately successful, typically require a substantial portion of management's
time and attention.
Environmental Concerns
Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real property may
be liable for the costs of removal or remediation of certain hazardous or
toxic substances on, under or in such property. Such laws often impose such
liability whether or not the owner or operator knew of, or was responsible
for, the presence of such hazardous or
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toxic substances, and the liability under certain such laws may be strict and
joint and several unless the harm is divisible and there is a reasonable basis
for allocating responsibility. The costs of any required remediation or
removal of such substances may be substantial and the owner's or operator's
liability therefor as to any property is generally not limited under such
laws, ordinances and regulations and could exceed the value of the property
and/or the aggregate assets of the owner or operator. The presence of
hazardous or toxic substances, or the failure to properly remediate property
affected by such substances, may adversely affect the market value of the
affected property, as well as the owner's ability to sell or lease such
property or to obtain financing using such property as collateral.
Risks of Intercompany Agreement; Restrictions on NAI's Opportunities
NAI and Kranzco have entered into an Intercompany Agreement to
provide both Kranzco and NAI with first opportunity rights or notification
rights with respect to certain business opportunities. See "Related
Transactions--Intercompany Agreement." While the Intercompany Agreement grants
NAI certain notification rights with respect to providing certain brokerage
and Real Estate-Related Services to Kranzco, Kranzco is not required to enter
into an agreement to purchase such services from NAI. Accordingly, there is no
assurance that the Intercompany Agreement will result in any revenues to NAI,
or that the benefits anticipated therefrom will be realized. The Intercompany
Agreement also provides Kranzco with certain first opportunity/notification
rights with respect to retail properties for sale which NAI is aware of
through the Network or otherwise; however, there is no assurance that Kranzco
will purchase such properties. Accordingly, the benefit to NAI of increased
revenue from transactions with Kranzco may not be realized.
The Intercompany Agreement restricts NAI's opportunities in certain
instances. Although NAI does not currently invest in real estate, it may
determine to acquire properties in the future. Under the Intercompany
Agreement, NAI has agreed not to acquire or make investments in retail
properties unless it has notified Kranzco of the acquisition or investment
opportunity, and Kranzco has determined not to pursue such acquisition or
investment. In addition, the Intercompany Agreement provides that NAI may not
enter into any type of strategic relationship with any other REIT or real
estate investment or operating type entity without the prior written consent
of Kranzco. NAI, however, is permitted under the Intercompany Agreement to
solicit assignments from other REITs or real estate investment or operating
type entities with respect to the purchase, sale or lease of real estate, or
the provision of Real Estate- Related Services, subject to Kranzco's first
opportunity rights. See "Related Transactions--Intercompany Agreement." The
restrictions imposed by the Intercompany Agreement may prohibit NAI from
pursuing business opportunities which it believes may be beneficial.
Potential Conflicts of Interest
Kranzco and NAI have several common members on its Board of Trustees
and Board of Directors, as the case may be, and have certain common executive
officers. Kranzco and NAI intend to operate in a relationship governed by the
Intercompany Agreement. In their relationship with Kranzco as a Client of NAI,
Kranzco and NAI may have conflicting views on the manner in which services and
opportunities are provided to Kranzco by NAI, or the manner in which
opportunities are provided to NAI by Kranzco, pursuant to the Intercompany
Agreement, and in the enforcement of the Intercompany Agreement. As a result,
the trustees and executives of Kranzco (who serve in similar capacities at
NAI) may well be presented with several decisions which provide them the
opportunity to benefit Kranzco to the detriment of NAI or benefit NAI to the
detriment of Kranzco. Such potential conflicts of interest will be present in
all of the numerous transactions between Kranzco and NAI. There is a risk that
the common management and members of the Boards of NAI and Kranzco will lead
to conflicts of interest in connection with transactions between the two
companies and opportunities presented to each of the companies. Although, the
Intercompany Agreement attempts to minimize the conflicts which may arise due
to the common
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management and Board membership, there is no assurance that it will
successfully cover all conflicts, or that such conflicts may not negatively
affect one or both companies. See "Related Transactions--The Intercompany
Agreement" for a description of the relationship between Kranzco and NAI and
the Intercompany Agreement.
It is intended that each of Gerald C. Finn, Co-Chairman and
Chief Executive Officer of NAI, and Jeffrey M. Finn, President and Chief
Operating Officer of NAI, will be required to spend all of his respective
business time working for NAI. However, Mr. Finn is a nominee to the Board of
Trustees of Kranzco, and will also owe a duty to the shareholders of Kranzco.
In addition, pursuant to the Intercompany Agreement, Norman M. Kranzdorf
serves as the Co-Chairman of NAI, Robert H. Dennis will serve as the Chief
Financial Officer of NAI, and Michael Kranzdorf serves as the Chief
Information Officer of NAI, in each case for a period of three years. Each of
Messrs. N. Kranzdorf, Dennis and M. Kranzdorf are also officers of Kranzco,
and will devote a majority of their time to Kranzco. Although each of Messrs.
N. Kranzdorf, Dennis, and M. Kranzdorf is committed to the success of NAI they
are also committed to the success of Kranzco, and none of Messrs. N.
Kranzdorf, Dennis, and M. Kranzdorf is committed to spending a particular
amount of time on NAI's or Kranzco's affairs, nor will any of them devote his
full time to NAI or Kranzco.
Arbitrary Determination of Offering Price
The Subscription Price of the NAI Shares issuable upon exercise of
the Rights and the Concurrent Privileges was determined by NAI and Kranzco
based on various factors, but does not necessarily bear any direct
relationship to established value criteria such as assets, earnings or book
value. In determining the offering price, NAI and Kranzco considered such
factors as NAI's limited financial resources, NAI's development since its
organization, the nature and risks of the real estate brokerage industry, the
amount of dilution to investors in NAI, the pricing and comparison of similar
types of companies, the prospects for the real estate brokerage industry, and
the general condition of the securities markets and the potential
opportunities available to NAI if the Rights Offering and the Concurrent
Offering are fully subscribed.
Absence of Prior Market; Trading Prices
There is currently no public market for NAI Shares or the Rights. The
NAI Shares and the Rights will be eligible for quotation and trading on the
OTC Bulletin Board after the Distribution, however, there can be no assurance
that a public market for the NAI Shares will develop or provide liquidity. If
a trading market develops, there can be no assurance as to the prices at which
trading in the NAI Shares will occur.
The prices at which NAI Shares and the Rights trade will be
determined by the marketplace and may be influenced by many factors,
including, among others, the performance and prospects of NAI and its
affiliates, the depth and liquidity of the market for NAI Shares, investor
perception of NAI and its affiliates, the sectors in which they operate,
economic conditions in general, NAI's dividend policy, and general financial
and other market conditions. In addition, financial markets have experienced
extreme price and volume fluctuations that have affected the market price of
many stocks and that, at times, could be viewed as unrelated or
disproportionate to the operating performance of such companies. Such
fluctuations have also affected the share prices of many newly public issuers.
Such volatility and other factors may materially adversely affect the market
price of NAI Shares and the Rights.
While the Rights are transferable, NAI does not intend to list the
Rights on any national securities exchange or automated quotation system.
Accordingly, the Rights may be highly illiquid securities and it is unlikely
that a trading market will develop for the Rights. The Concurrent Privileges
are not transferable.
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Risk of Low Priced Securities
The Commission has adopted rules which generally define a "penny
stock" as equity securities priced at under $5.00 per share which are not
listed for trading on the Nasdaq Stock Market or a national securities
exchange (unless the issuer has a net worth of $2 million and has been in
business for more than three years). The NAI Shares may not be considered a
"penny stock" if the proceeds of the Rights Offering and the Concurrent
Offering exceed approximately $3,026,000. In the event that the NAI Shares are
characterized in the future as penny stock, broker-dealers dealing in the NAI
Shares will be subject to the disclosure rules for transactions involving
penny stocks which require the broker-dealer, among other things, to (i)
determine the suitability of purchasers of the NAI Shares, and obtain the
written consent of purchasers to purchase such NAI Shares prior to the
transaction, (ii) provide customers with required risk disclosure documents,
disclose quotation and compensation information and provide monthly price
information and other required information, and (iii) disclose the best
(inside) bid and offer prices for such NAI Shares and the price at which the
broker-dealer last purchased or sold the NAI Shares. The additional burdens
imposed upon broker-dealers may discourage them from effecting transactions in
penny stocks, which usually reduces the liquidity of such securities.
No Dividends
NAI has not paid any dividends on the outstanding NAI Shares to date.
The payment of dividends, if any, in the future is with the discretion of the
Board and will depend on NAI's earnings, its capital requirements and
financial condition. It is the present intention of the Board to retain all
earnings, if any, for use in NAI's business operation and, accordingly, the
Board does not expect to declare or pay any cash dividends in the foreseeable
future, except as may be required by any outstanding shares of preferred stock
of NAI.
Institution of Anti-takeover Measures; Anti-takeover Effect of Certain
Provisions of Maryland Law and of NAI's Charter and Bylaws
Certain provisions of NAI Maryland's charter (the "Charter") and
bylaws (the "Bylaws") could have the effect of discouraging a third party from
pursuing a non-negotiated takeover of NAI or could delay, defer or prevent a
transaction or a change in control of NAI that might involve a premium price
for the NAI Shares or otherwise be in the best interests of NAI Stockholders.
Staggered Board. NAI's Board of Directors is divided into
three classes of directors. The initial terms of the first, second and third
classes will expire in 1999, 2000 and 2001, respectively. Beginning in 1999,
directors of each class will be chosen for three-year terms upon the
expiration of their current terms and each year one class of directors will be
elected by the stockholders. The staggered terms of directors may reduce the
possibility of a tender offer or an attempt to change control of NAI even
though a tender offer or change in control might be in the best interest of
the stockholders. See "Certain Provisions of Maryland Law and of NAI's Charter
and Bylaws -- Classification of the Board of Directors."
Blank Check Stock. The Charter authorizes the Board of
Directors to cause NAI to issue additional authorized but unissued shares of
NAI common stock and to classify or reclassify any unissued shares of stock of
NAI in one or more classes or series of stock and to set the preferences,
rights and other terms of such classified or unclassified shares. See
"Description of Securities -- Common Stock" and "-- Preferred Stock" and "--
Power to Issue Additional Shares of Common Stock and Preferred Stock."
Although the Board of Directors has no such intention at the present time, it
could establish a series of NAI Preferred Stock that could, depending on the
terms of such series, delay, defer or prevent a transaction or a change in
control of NAI that might involve a premium price for the NAI Shares or
otherwise be in the best interest of the stockholders.
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Maryland Business Combination Law. Under the Maryland
General Corporation Law, as amended (the "MGCL"), certain "business
combinations" (including certain issuances of equity securities) between a
Maryland corporation and any person who beneficially owns ten percent or more
of the voting power of the corporation's shares (an "Interested Stockholder")
or an affiliate thereof are prohibited for five years after the most recent
date on which the Interested Stockholder becomes an Interested Stockholder.
Thereafter, any such business combination must be approved by two
super-majority stockholder votes unless, among other conditions, the
corporation's common stockholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Stockholder for its common
shares. These provisions of the MGCL do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. The business combination provisions of the MGCL may
have the effect of delaying, deferring or preventing a transaction or a change
in control of NAI that might involve a premium price for the NAI Shares or
otherwise be in the best interest of the stockholders. See "Certain Provisions
of Maryland Law and of NAI's Charter and Bylaws - Business Combinations."
Control Share Acquisitions. The MGCL provides that "control
shares" of a Maryland corporation acquired in a "control share acquisition"
have no voting rights except to the extent approved by a vote of two-thirds of
the votes entitled to be cast on the matter, excluding shares of stock owned
by the acquiror, by officers or by directors who are employees of the
corporation.
The control share acquisition statute does not apply (a) to
shares acquired in a merger, consolidation or share exchange if the
corporation is a party to the transaction or (b) to acquisitions approved or
exempted by the charter or bylaws of the corporation.
The Bylaws of NAI contain a provision exempting from the
control share acquisition statute any and all acquisitions by any person of
NAI's shares of stock. There can be no assurance that such provision will not
be amended or eliminated at any time in the future. If such provision is
amended or eliminated, the control share acquisition provisions of the MGCL
could have the effect of delaying, deferring or preventing a transaction or a
change in control of NAI that might involve a premium price for the NAI Shares
or otherwise be in the best interest of the stockholders. See "Certain
Provisions of Maryland Law and of NAI's Charter and Bylaws - Control Share
Acquisitions."
Other Provisions. The Charter and Bylaws of NAI also
contain other provisions that may delay, defer or prevent a transaction or a
change in control of NAI that might involve a premium price for the NAI Shares
or otherwise be in the best interest of the stockholders. See "Certain
Provisions of Maryland Law and of NAI's Charter and Bylaws -- Removal of
Directors" and "-- Advance Notice of Director Nominations and New Business."
Possible Extension of Expiration Date
NAI has reserved the right to extend the Expiration Date for the
Rights Offering and the Concurrent Offering to as late as __________ __, 1998.
Funds deposited in payment of the Subscription Price for Underlying Shares,
Excess Shares or Additional Shares may not be withdrawn and no interest will
be paid thereon. See "The Rights Offering--Expiration Date" and "The
Concurrent Offering--Expiration Date."
-28-
<PAGE>
USE OF PROCEEDS
The net proceeds to be received from the Rights Offering and the
Concurrent Offering depend on the number of Rights exercised and the number of
Excess Shares and Additional Shares purchased. If all Rights are exercised and
all Additional Shares are purchased, NAI expects the net proceeds available to
it from the Rights Offering and the Concurrent Offering to be approximately
$38,000,000. After paying the expenses of the Rights Offering, the Concurrent
Offering and the Related Transactions, the proceeds from the Rights Offering
and the Concurrent Offering, will in the following order of priority, be used
to (i) repay $202,000 principal amount of indebtedness incurred in connection
with the repurchase of 101,000 shares of Series A Preferred Stock of NAI for
an aggregate repurchase price of $202,000, (ii) repay approximately $715,000
of indebtedness (which includes approximately $72,000 of accrued interest)
described below, (iii) expand NAI's Corporate Services Department and
Investment Sales Department, and (iv) strategically acquire and develop Real
Estate-Related Services. The balance of any proceeds will be invested in
short-term commercial paper at a rate of approximately 5.5% per annum until
used for general corporate and working capital purposes and to
opportunistically acquire real estate.
A portion of the proceeds of the Rights Offering and the Concurrent
Offering will be used to repay (i) a 12% demand note, dated April 21, 1988,
with an outstanding principal balance of $110,500, issued by NAI to The
Building Center, Inc., an entity owned by Gerald and Norma Finn, (ii) two 10%
demand notes, dated August 12, 1994 and May 16, 1997, respectively, issued by
NAI to Gerald and Norma Finn, with outstanding principal balances of $35,000
and $50,000, respectively, (iii) a 12% demand note, dated April 24, 1988,
issued by NAI to Gerald and Norma Finn, with an outstanding principal balance
of $145,000, (iv) three 10% demand notes, dated August 6, 1993, September 14,
1993, and November 9, 1993, respectively, issued by REALQuest, Inc., a
wholly-owned subsidiary of NAI, to Gerald and Norma Finn, with outstanding
principal balances of $10,000, $20,000 and $10,000, respectively, (v) a 12%
demand note, dated April 24, 1991, issued by NAI to Gerald and Norma Finn,
with an outstanding principal balance of $58,235, (vi) a loan by Gerald Finn
and Norma Finn dated December 8, 1993, in the principal amount of $2,500,
(vii) $6,666.74 aggregate principal amount outstanding under a demand
Promissory Note, dated April 29, 1996, issued by NAI to First Washington State
Bank ("FWSB"), which bears interest at a variable rate equaling FWSB's prime
rate plus one percent (8.5% as of June 30, 1998), (viii) $100,000 aggregate
principal amount outstanding under a Promissory Note, dated October 2, 1997,
issued by NAI to FWSB pursuant to a Line of Credit (the "Line of Credit"), due
October 2, 1998, which bears interest at a variable rate equaling FWSB's prime
rate plus one percent (8.5% as of June 30, 1998), and (ix) $95,000 aggregate
principal amount outstanding pursuant to a Promissory Note dated December 2,
1997, issued by NAI to FWSB pursuant to a term loan due November 2002, which
bears interest at a variable rate equaling FWSB's prime rate plus one percent
(8.5% as of June 30, 1998). The proceeds from the Term Loan and the Line of
Credit were used for general corporate and working capital purposes.
In the event that all of the Underlying Shares, Excess Shares and
Additional Shares are not purchased, NAI has assumed a minimum number of
Underlying Shares, Excess Shares and Additional Shares being purchased (an
aggregate of 930,378 NAI Shares) ("Minimum NAI Shares") and a moderate number
of Underlying Shares, Excess Shares and Additional Shares being purchased (an
aggregate of 10,000,000 NAI Shares) ("Moderate NAI Shares"). The Minimum NAI
Shares were estimated by NAI to be the minimum amount of Underlying Shares to
be purchased primarily by NAI, Kranzco and the officers and directors of both
Kranzco and NAI. The Moderate NAI Shares were estimated by NAI to approximate
the mid-point between the Minimum NAI Shares and the Maximum NAI Shares being
purchased. The sale of the Minimum NAI Shares will result in gross proceeds to
NAI of $1,860,756 and 18,031,781 NAI Shares being outstanding. The sale of the
Moderate NAI Shares will result in gross proceeds to NAI of $20,000,000 and
27,101,403 NAI Shares being outstanding.
-29-
<PAGE>
The below table sets forth the use of the proceeds of the Rights
Offering and the Concurrent Offering, assuming the Minimum NAI Shares,
Moderate NAI Shares and Maximum NAI Shares are sold:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Use of Proceeds Assuming
- --------------------------------------------------------------------------------------------------------------------
Minimum Number of Moderate Number of Maximum Number
NAI Shares NAI Shares NAI Shares
(930,378 Shares) (10,000,000 Shares) (19,101,403 Shares)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Repayment of $ 202,000 23% $202,000 1% $ 202,000 .5%
Indebtedness related to
the Repurchase of
Series
A Preferred Stock
- --------------------------------------------------------------------------------------------------------------------
Repayment of $ 658,756(1) 77% $715,000 4% $ 715,000 2%
Indebtedness (including
accrued interest of
approximately $72,000)
- --------------------------------------------------------------------------------------------------------------------
Expansion of NAI's $ 0 0% $2,000,000 10.5% $ 2,000,000 5.4%
Corporate Services
Department and
Investment Sales
Department
- --------------------------------------------------------------------------------------------------------------------
Acquisition and $ 0 0% $13,305,000 70% $ 27,446,860 74%
Development of Real
Estate-Related Services
- --------------------------------------------------------------------------------------------------------------------
Opportunistic $ 0 0% $0 0% $ 1,910,140 5%
Acquisition of Real
Estate
- --------------------------------------------------------------------------------------------------------------------
General corporate and $ 0 0% $2,778,000 14.5% $ 4,928,806 13.1%
working capital
purposes
- --------------------------------------------------------------------------------------------------------------------
Total Net Proceeds: $ 860,756 100% $19,000,000 100% $ 37,202,806 100%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) $56,244 of the remaining indebtedness will be paid from NAI's cash on hand.
NAI does not have a written commitment from any person to purchase
any of the Underlying Shares pursuant to the Rights Offering or Excess Shares
or Additional Shares in the Concurrent Offering. The Finns have advised NAI
that they intend to exercise Rights to purchase an aggregate of 500,000 NAI
Shares and Kranzco has advised NAI that it intends to exercise such number of
Rights to purchase NAI Shares that would result in Kranzco owning
approximately 9.8% of the issued and outstanding NAI Shares, before the
issuance of any Additional Shares. Accordingly, no assurances can be given as
to the amount of gross proceeds that NAI will realize from the Rights Offering
and the
-30-
<PAGE>
Concurrent Offering. No minimum amount of proceeds is required for NAI
to consummate the Rights Offering or the Concurrent Offering. See "Risk
Factors--No Commitments to Purchase and No Minimum Size of Rights Offering or
Concurrent Offering."
NAI may change the specific use or allocation of the net proceeds
from the Rights Offering and Concurrent Offering, except that in all events
NAI will use at least $202,000 to repurchase 101,000 shares of Series A
Preferred Stock of NAI for an aggregate repurchase price of $202,000, and will
repay approximately $715,000 of indebtedness (which includes $72,000 of
accrued interest) of NAI described above. Management of NAI will have broad
discretion to change the allocation of the net proceeds among expanding NAI's
Corporate Services Department and Investment Sales Department, strategically
acquiring and developing Real Estate-Related Services and the opportunistic
acquisition of real estate; any change in the allocation of the net proceeds
will depend upon, among other things, the opportunities which are available to
NAI.
Pending such uses, the net proceeds may be invested in short-term
income-producing investments such as investment grade commercial paper,
government and government agency securities, money market funds that invest in
government securities, certificates of deposit and interest-bearing bank
accounts.
NAI will not receive any proceeds from the Distribution.
DIVIDEND POLICY
NAI has not paid any dividends on the outstanding NAI Shares to date.
The payment of dividends, if any, in the future is with the discretion of the
Board and will depend on NAI's earnings, its capital requirements and
financial condition. It is the present intention of the Board to retain all
earnings, if any, for use in NAI's business operation and, accordingly, the
Board does not expect to declare or pay any cash dividends in the foreseeable
future, except as may be required by any outstanding shares of preferred stock
of NAI.
-31-
<PAGE>
DILUTION
At March 31, 1998, NAI had a net tangible book value of $(1,026,123),
or $(0.08) per outstanding common share. Without taking into account any other
change in such net tangible book value after March 31, 1998, other than to
give effect to the recapitalization of NAI (through the Reincorporation
Merger) at a conversion rate of 1.318087 per common share outstanding, the
Rights Offering, the Concurrent Offering and the net proceeds therefrom, the
net tangible book value of NAI at March 31, 1998 would have been as follows
given the range of the number of Underlying Shares, Excess Shares and
Additional Shares purchased:
Net Tangible
Book Value Per Share
---------- ---------
Minimum number of Underlying Shares,
Excess Shares and Additional Shares
purchased (930,378 NAI Shares) $ (166,123) $(.01)
Moderate number of Underlying Shares,
Excess Shares and Additional Shares
purchased (10,000,000 NAI Shares) $17,973,877 $.66
Maximum number of Underlying Shares,
Excess Shares and Additional Shares
purchased (19,101,403 NAI Shares) $36,176,690 $1.00
This amount represents an immediate increase in net tangible book value per
NAI Share and an immediate dilution in net tangible book value per NAI Share
to new investors as illustrated in the following table:
<TABLE>
<CAPTION>
Minimum Moderate Maximum
------- -------- -------
<S> <C> <C> <C>
Subscription price per NAI Share in the
Rights Offering and the Concurrent
Offering $2.00 $2.00 $2.00
Net tangible book value per NAI Share
before the Rights Offering and the
Concurrent Offering(1) $(.08) $(.08) $(.08)
Increase in net tangible book value per NAI
Share attributable to the Rights Offering
and the Concurrent Offering(2)
$.07 $.74 $1.08
---- ---- -----
Net tangible book value per NAI Share
after the Rights Offering and the
Concurrent Offering(2) $(.01) $.66 $1.00
------ ---- -----
Dilution in net tangible book value per NAI
Share to new investors(3) $2.01 $1.34 $1.00
===== ===== =====
(1) Net tangible book value per NAI share before the Rights Offering and the
Concurrent Offering is determined by dividing the net tangible book value of
NAI (total assets of $1,828,817 less total liabilities and redeemable
convertible preferred shares of $2,854,940) by the number of outstanding NAI
Shares.
(2) Based on a subscription price of $2.00 per NAI Share and estimated
transaction costs of $1,000,000.
(3) Dilution is determined by subtracting net tangible book value per NAI
Share after the Rights Offering and the Concurrent Offering from the
subscription price of $2.00 per NAI Share.
-32-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of NAI (i) as of
March 31, 1998 and (ii) as adjusted to give effect to the consummation of the
Exchange Offer, the subsequent Distribution, the Rights Offering and the
Concurrent Offering and assuming all of the Underlying Shares and Additional
Shares are purchased. See "Use of Proceeds."
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 1998
--------------------
(In thousands)
Actual As adjusted(1)
------ --------------
<S> <C> <C>
Debt:
Stockholders loans..................................................... $ 441 $ 0
Long-term debt......................................................... 75 0
------- -------
Total debt........................................... 516 0
------- -------
Convertible Preferred Stock; $0.01 par value per share;
101,000 shares issued and outstanding; (0 as adjusted) 202 0
------- -------
Stockholders' equity (deficit):
Common stock, $.01 par value; 200,000,000 authorized,
12,974,414 shares issued and outstanding; (36,202,812
as adjusted) ..................................................... 134(2) 362
Capital in excess of par value......................................... 2,553(2) 39,245(3)(4)
Retained earnings (deficit)............................................ (3,479) (3,479)
------- -------
(792) 36,128
Treasury stock, at cost(2)............................................. (234) 0(3)
------- -------
Total stockholders' equity (deficit)................. (1,026) 36,128
------- -------
Total capitalization................................. $ (308) $36,128
======== =======
</TABLE>
(1) The following table presents the capitalization of NAI, as adjusted to
give effect to the consummation of the Exchange Offer, the subsequent
Distribution, the Rights Offering and the Concurrent Offering and assuming the
purchase of (a) a minimum number of Underlying Shares, Excess Shares and
Additional Shares (an aggregate of 930,000 NAI Shares) and (b) a moderate
number of Underlying Shares, Excess Shares and Additional Shares (an aggregate
of 10,000,000 NAI Shares):
<TABLE>
<CAPTION>
As Adjusted
----------------------------------
(In thousands)
(a) (b)
<S> <C> <C>
Total debt............................................ $ 0 $ 0
Convertible preferred stock........................... $ 0 $ 0
Common stock.......................................... $ 180 $ 271
Capital in excess of par value........................ $ 3,133(3)(4) $ 21,182(3)(4)
Retained earnings (deficit)........................... $ (3,479) $ (3,479)
Treasury stock........................................ $ 0(3) $ 0(3)
Total capitalization............................. $ (166) $ 17,974
NAI Shares outstanding................................ 18,032 27,101
</TABLE>
(2) Includes 434,675 NAI Shares issued and held in treasury stock as of March
31, 1998.
(3) Represents the retirement of 434,675 NAI Shares of treasury stock valued
at $233,868 as adjusted.
(4) Includes approximately $1,000,000 of transaction costs reflected as a
reduction of equity.
-33-
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except ratio, property data and per share data)
The following sets forth selected financial, operating and other data
on an historical basis for NAI. Also set forth below are selected pro forma
financial, operating and other data for NAI at and for the nine months ended
March 31, 1998 and the year ended June 30, 1997. The pro forma balance sheet
data as of March 31, 1998 has been prepared as if the Exchange Offer and the
Distribution had occurred on March 31, 1998. The pro forma operating and other
data for the nine months ended March 31, 1998 have been prepared as if the
consummation of the Exchange Offer and the Distribution had occurred on July
1, 1997. The pro forma operating and other data for the year ended June 30,
1997 have been prepared as if the foregoing transactions had occurred on July
1, 1996. The pro forma financial and operating data do not give effect to the
Rights Offering and the Concurrent Offering, and are not necessarily
indicative of what the actual financial position or results of operations of
NAI would have been as of the date or for the periods indicated, nor do they
purport to represent the results of operations or financial position for
future periods. This data should be read in conjunction with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended March 31, Year Ended June 30,
-------------------------------- -----------------------------------------------------------
Pro Forma Historical Pro Forma Historical
----------- --------------- ------------ ----------------------------------------------
1998 1998 1997 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ---- ----
OPERATING DATA: (un- (un- (un- (un- (un- (un-
audited) audited) audited) audited audited) audited)
Revenue:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commissions................. $ 2,836 $ 2,836 $ 2,910 $ 4,001 $ 4,001 $ 4,124 $ 4,371 $ 2,312 $ 2,563
License fees................ 1,128 1,128 923 1,282 1,282 1,373 1,158 1,081 1,007
Other....................... 474 474 563 618 618 523 470 427 384
Interest.................... 0 0 0 0 0 0 0 0 0
----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenue............... 4,438 4,438 4,396 5,901 5,901 6,020 5,999 3,820 3,954
----- ----- ----- ----- ----- ----- ----- ----- -----
Costs and expenses:
Commission expense.......... 602 602 788 1,143 1,143 1,782 1,485 839 790
Sales and marketing......... 277 277 194 321 321 285 324 274 283
Compensation and benefits... 1,832 1,832 1,911 2,528 2,528 2,438 1,981 1,895 1,648
Operating expense........... 1,953 1,578 1,187 2,144 1,644 1,475 1,336 1,161 1,018
Depreciation and
amortization.............. 40 40 37 52 52 56 45 53 152
Interest, net............... 47 47 47 60 60 48 46 37 43
------- ----- ----- ----- ----- ------ ----- ----- -----
Total costs and expenses.... 4,751 4,376 4,164 6,248 5,748 6,084 5,217 4,259 3,934
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss)from operations (313) 62 232 (347) 153 (64) 782 (439) 20
----- -- --- ----- --- --- --- ----- -----
Other expenses:
Equity in loss of affiliate. 12 12 15 25 25 5 0 0 0
Loss on sale of real estate. 0 0 0 0 0 0 65 0 0
- - - - - - -- - -
Total other expenses........ 12 12 15 25 25 5 65 0 0
-- -- -- -- -- - -- - -
Income (loss)from continuing
operations before income
taxes..................... (325) 50 217 (372) 128 (69) 717 (439) 20
Income taxes................ 5 5 0 0 0 0 35 0 0
- - - - - - -- - -
Income (loss)from
continuing operations..... (330) 45 217 (372) 128 (69) 682 (439) 20
Loss from discontinued
operations................ 7 0 162 0 223 128 392 0 0
- - --- - --- --- --- - -
Net income (loss)........... (330) 45 55 (372) (95) (197) 290 (439) 20
Preferred share
distributions............. 0 7 8 0 11 13 15 0 0
- - - - -- -- -- - -
Net income (loss) available
to common shareholders.... $ (330) $ 38 $ 47 $ (372) $ (106) $ (210) $ 275 $ (439) $ 20
======= ======== ======== ======= ====== ====== ====== ====== =====
Net income (loss) per share. $ (0.02) $ 0.00 $ 0.00 $ (0.02) $(0.01) $(0.02) $ 0.02 $(0.03) $0.00
======= ======== ======== ======= ====== ====== ====== ====== =====
Other data (unaudited):
Cash flows provided by (used in)
Operating..................... (1) 189 313 (1) 233 158 593 10 141
Investing..................... (1) (41) (196) (1) (260) (277) (260) (113) (241)
Financing..................... (1) 11 (8) (1) 13 (7) (156) 48 (73)
Common shares outstanding..... 17,101 12,974 12,888 16,965 12,871 12,863 12,782 12,523 12,655
Weighted average shares
outstanding................... 17,075 12,954 12,888 16,981 12,883 12,860 12,648 12,589 12,652
Ratio of EBITDA to fixed
charges....................... (2.74) 1.46 3.27 (2.32) 1.95 0.30 7.62 (3.88) 1.10
EBITDA........................ $ (238) $137 $301 $ (260) $240 $35 $808 $(349) $ 215
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
Balance sheet data (1995 unaudited):
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total assets.................. $ 1,829 $ 1,829 $ 1,807 $ 1,689 $ 1,732 $1,649 $ 1,177 $1,447
Total debt.................... $ 643 $ 643 $ 550 $ 575 $ 496 $ 441 $ 482 $ 358
Shareholders' deficit......... $(1,026) $ (1,026) $ (983) $(1,090) $(1,008) $ (837)$(1,176) $ (44)
</TABLE>
- -----------------------------------
(1) Pro forma information relating to cash flows from operating, investing
and financing activities has not been included because management
believes that the information would not be meaningful due to the number
of assumptions required in order to calculate this information.
(2) For purposes of these computations, EBITDA consists of income before
interest expense, taxes, depreciation and amortization. Fixed charges
include interest expense, depreciation and amortization, and preferred
share distributions. Management believes that EBITDA provides additional
information about the Company's ability to meet its future debt service,
capital expenditures and working capital requirements. EBITDA is not a
measure of financial performance under GAAP and should not be considered
an alternative either to net income as an indicator of NAI's performance
or to cash flows as a measure of its liquidity. EBITDA as disclosed by
other Companies may not be comparable to the Company's calculation of
EBITDA.
-35-
<PAGE>
NEW AMERICA NETWORK, INC PRO FORMA
CONDENSED FINANCIAL INFORMATION
The accompanying financial statements present the unaudited pro
forma condensed Balance Sheet of NAI as of March 31, 1998, the unaudited pro
forma condensed Statements of Operations of NAI for the nine months ended
March 31, 1998 and for the year ended June 30, 1997, in each case after giving
effect to the Exchange Offer and the subsequent Distribution (the
"Transactions").
The unaudited pro forma combined condensed Balance Sheet as of March
31, 1998 is presented as if the Transactions had occurred on March 31, 1998.
The unaudited pro forma condensed Statements of Operations for the nine months
ended March 31, 1998 and for the year ended June 30, 1997 are presented as if
the Transactions had occurred on July 1, 1996. However, the unaudited pro
forma combined condensed Balance Sheet as of March 31, 1998 and the unaudited
pro forma condensed Statements of Operations for the nine months ended March
31, 1998 and for the year ended June 30, 1997 do not reflect the impact of the
Rights Offering or the Concurrent Offering.
Preparation of the pro forma financial information was based on
assumptions deemed appropriate by the management of NAI. The assumptions give
effect to the Transactions in accordance with generally accepted accounting
principles. The pro forma financial information is unaudited and is not
necessarily indicative of the results which actually would have occurred if
the transactions had been consummated at the beginning of the periods
presented, nor does it purport to represent the future financial position and
results of operations for future periods. The pro forma information should be
read in conjunction with the historical financial statements of NAI included
in this Prospectus.
-36-
<PAGE>
NEW AMERICA NETWORK, INC. AND SUBSIDIARIES
PRO FORMA BALANCE SHEET
As of March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
March 31,
Historical Reincorporation Merger(A) 1998
---------- ------------------------- ----
<S> <C> <C> <C>
Assets:
Current assets:
Cash.............................................. $ 220 $ 0 $ 220
Accounts receivable............................... 787 0 787
Commissions receivable............................ 637 0 637
Notes and other receivables....................... 6 0 6
Other current assets.............................. 20 0 20
----------- ---------- -------
Total current assets.............................. 1,670 0 1,670
----------- ---------- -------
Property and equipment (net)........................... 156 0 156
Other assets........................................... 3 0 3
----------- ---------- -------
Total assets...................................... $ 1,829 $ 0 $ 1,829
=========== ========== =======
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable and accrued expenses............. $ 1,016 $ 0 $ 1,016
Accrued interest.................................. 72 0 72
Current portion of long-term debt................. 127 0 127
Stockholder loans................................. 441 0 441
Deferred revenue.................................. 922 0 922
----------- ---------- -------
Total current liabilities......................... 2,578 0 2,578
----------- ---------- -------
Long-term debt......................................... 75 0 75
-- ---------- -------
Total liabilities................................. 2,653 0 2,653
----------- ---------- -------
Redeemable convertible preferred stock................. 202 0 202
----------- ---------- -------
Stockholders' equity:
Preferred stock................................... 0 0 0
Common stock...................................... 134 0 134
Additional paid-in capital........................ 2,553 (234)(E) 2,319
Accumulated deficit............................... (3,479) 0 (3,479)
Treasury stock, at cost........................... (234) 234(E) 0
----------- ---------- --------
Total stockholders' equity........................ (1,026) 0 (1,026)
----------- ---------- --------
Total liabilities, redeemable convertible preferred
stock and stockholders' equity $ 1,829 $ 0 $ 1,829
=========== ========== =======
</TABLE>
The accompanying notes and management's assumption are an integral
part of this statement.
-37-
<PAGE>
NOTES AND MANAGEMENT'S ASSUMPTIONS TO NAI'S PRO FORMA BALANCE SHEET
as of March 31, 1998
A) The pro forma balance sheet does not reflect the receipt of proceeds of the
Rights Offering and Concurrent Offering; because there is no standing
underwriters the proceeds of such offerings cannot be determined at that time.
The following supplemental adjusted pro forma information reflects the impact
of proceeds of the Rights Offering and Concurrent Offering based on three
different scenarios relating to the number of Underlying Shares, Excess Shares
and Additional Shares issued, as described in (B), (C), (D) and (E) below.
Adjusted Pro Forma Condensed Consolidating Balance Sheet
<TABLE>
<CAPTION>
Historical Adjusted Pro Forma March 31, 1998
---------------------------------------
(Maximum) (Moderate) (Minimum)
<S> <C> <C> <C> <C>
Total assets (B), (D) $ 1,829 $ 38,113 $ 19,912 $ 1,772
--------- ---------- -------- ---------
Total liabilities (C) 2,653 1,938 1,938 1,938
Redeemable convertible preferred stock (D) 202 - - -
Stockholders' equity (E) (1,026) 36,175 17,974 (166)
-------- ---------- -------- --------
Total liabilities, redeemable convertible
preferred stock and stockholders' equity $ 1,829 $ 38,113 $ 19,912 $ 1,772
========= ========== ======== =========
<CAPTION>
B) To reflect the recapitalization of NAI
shares (through the Reincorporation Merger)
and reflect the Rights Offering and the
Concurrent Offering, net of costs, at
maximum, moderate and minimum levels. Maximum Moderate Minimum
------- -------- -------
<S> <C> <C> <C>
12,974 12,974 12,974
Recapitalization factor 1.318087 1.318087 1.318087
NAI Shares outstanding after recapitalization 17,101 17,101 17,101
To reflect the Rights Offering and the
Concurrent Offering, net of costs:
Underlying Shares and Additional Shares issued 19,101 10,000 930
Subscription price per NAI Share $ 2.00 $ 2.00 $ 2.00
-------- -------- ---------
Gross proceeds from the Rights Offering
and the Concurrent Offering $ 38,202 $ 20,000 $ 1,860
Less: Offering costs $ 1,000 $ 1,000 $ 1,000
-------- -------- ---------
Net proceeds from the Rights Offering
and the Concurrent Offering $ 37,202 $ 19,000 $ 860
C) To reflect use of proceeds to pay down
outstanding notes, loans payable and
accrued interest.
Accrued Interest $ 72 $ 72 $ 72
Current Portion of Long-Term Debt 127 127 127
Stockholder Loans 441 441 441
Long-term Debt 75 75 75
-------- -------- ---------
Total debt repaid $ 715 $ 715 $ 715
======== ======== =========
D) To reflect the settlement of the liabilities
associated with the redemption of the redeemable
convertible preferred shares. $ 202 $ 202 $ 202
E) To reflect the retirement of the Treasury Stock.
</TABLE>
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<PAGE>
NEW AMERICA NETWORK, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the Nine Months Ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
March 31,
Historical Reincorporation Merger(A) 1998
---------- ------------------------- ---------
<S> <C> <C> <C>
Revenue:
Commissions....................................... $ 2,836 $ 0 $ 2,836
License fees...................................... 1,128 0 1,128
Other............................................. 474 0 474
Interest income................................... 0 0 0
- - -
Total revenue..................................... 4,438 0 4,438
----------- ---------- -----------
Costs and expenses:
Commission expense................................ 602 0 602
Sales and marketing............................... 277 0 277
Compensation and benefits......................... 1,832 0 1,832
Operating expense................................. 1,578 375 (B) 1,953
Depreciation and amortization..................... 40 0 40
Interest, net..................................... 47 0 47
----------- ---------- -----------
Total costs and expenses.......................... 4,376 375 4,751
----------- ---------- -----------
Income (loss) from operations.......................... 62 (375) (313)
Other expenses:
Loss in investment in NAIS............................. 12 0 12
----------- ---------- -----------
Total other expense............................... 12 0 12
----------- ---------- -----------
Income taxes........................................... 5 0 5
----------- ---------- -----------
Net income (loss)...................................... 45 (375) (330)
Preferred share distributions.......................... 7 (7) (E) 0
----------- ---------- -----------
Net income (loss) available to common shareholders..... $ 38 $ (368) $ (330)
=========== ========= ==========
Basic and diluted earnings per common share............ $ 0.00 $ (0.02)
=========== ==========
Basic and diluted earnings per recapitalized common share $ 0.00 $ (0.02)
=========== ==========
Weighted average number of
common shares outstanding............................ 12,954
Weighted average number of common
shares and equivalents outstanding................... 13,080
After recapitalization
Weighted average number of
common shares outstanding............................ 17,075 17,075
Weighted average number of common shares and
equivalents outstanding.............................. 17,201 17,201
</TABLE>
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<PAGE>
NEW AMERICA NETWORK, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the Year Ending June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
June,
Historical Reincorporation Merger(A) 30 1997
---------- ------------------------- ---------
<S> <C> <C> <C>
Revenue:
Commissions....................................... $ 4,001 $ 0 $ 4,001
License fees...................................... 1,282 0 1,282
Other............................................. 618 0 618
Interest income................................... 0 0 0
----------- ---------- -----------
Total revenue..................................... 5,901 0 5,901
----------- ---------- -----------
Costs and expenses:
Commission expense................................ 1,143 0 1,143
Sales and marketing............................... 321 0 321
Compensation and benefits......................... 2,528 0 2,528
Operating expenses................................ 1,644 500 (B) 2,144
Depreciation and amortization..................... 52 0 52
Interest, net..................................... 60 0 60
----------- ---------- -----------
Total costs and expenses.......................... 5,748 500 6,248
----------- ---------- -----------
Income from operations................................. 153 (500) (347)
Other expenses:
Loss in investment in NAIS............................. 25 0 25
----------- ---------- -----------
Total other expenses.............................. 25 0 25
----------- ---------- -----------
Income taxes........................................... 0 0 0
----------- ---------- -----------
Net income (loss)...................................... 128 (500) (372)
Distributions on preferred shares...................... 11 (11) (E) 0
----------- ---------- -----------
Net income (loss) available to common shareholders..... $ 117 $ (489) $ (372)
=========== ========= ===========
Basic and diluted earnings per common share............ $ 0.01 $ (0.02)
=========== ==========
Basic and diluted earnings per recapitalized common share $ 0.01 $ (0.02)
=========== ===========
Weighted average number of
common shares outstanding............................ 12,883
Weighted average number of common
shares and equivalents outstanding.................. 13,035
After recapitalization
- ----------------------
Weighted average number of
common shares outstanding............................ 16,981 16,981
Weighted average number of common shares and
equivalents outstanding.............................. 17,133 17,133
</TABLE>
The accompanying notes and management's assumptions are an integral
part of this statement.
-40-
<PAGE>
Footnotes to NAI's Pro Forma Consolidated Statements of Operations for the
year ended June 30, 1997 and the Nine Months ended March 31, 1998.
The Loss from Discontinued Operations is eliminated for purposes of the Pro
Forma Consolidated Statements of Operations for the year ended June 30, 1997.
A) The pro forma balance sheet does not reflect the receipt of proceeds of the
Rights Offering and Concurrent Offering; because there is no standby
underwriter the proceeds of such offerings cannot be determined at that time.
The following supplemental adjusted pro forma information reflects the impact
of proceeds of the Rights Offering and Concurrent Offering based on three
different scenarios relating to the number of Underlying Shares, Excess Shares
and Additional Shares issued, as described in (B), (C), (D) and (E) below.
Pro Forma Statement of Operations for the nine months ended March 31, 1998
<TABLE>
<CAPTION>
Historical Pro Forma March 31, 1998
---------- ------------------------------------------------
(Maximum) (Moderate) (Minimum)
<S> <C> <C> <C> <C>
Total revenue (C) $ 4,438 $ 5,676 $ 5,057 $ 4,438
Total costs and expenses (B), (D) 4,376 4,704 4,704 4,704
--------- ---------- -------- ---------
Income (loss) from operations 62 972 353 (266)
Total other expense 12 12 12 12
Income taxes 5 5 5 5
--------- ---------- -------- ---------
Net income (loss) 45 955 336 (283)
Preferred share distributions (E) 7 - - -
--------- ---------- -------- ---------
Net income (loss) available for common shareholders $ 38 $ 955 $ 336 $ (283)
--------- ---------- -------- --------
Basic and diluted earnings per common share 0.00
Basic and diluted earnings per recapitalized
common share 0.00 0.03 0.01 (0.02)
Pro Forma Statement of Operations for the
year ended June 30, 1997
Historical Pro Forma June 30, 1998
------------- ------------------------------------------------
(Maximum) (Moderate) (Minimum)
Total revenue (C) $ 5,901 $ 7,551 $ 6,726 $ 5,901
Total costs and expenses (B), (D) 5,748 6,188 6,188 6,188
--------- ---------- -------- ---------
Income (loss) from operations 153 1,363 538 (287)
Total other expense 25 25 25 25
Income taxes - - -
--------- ---------- -------- ---------
Net income (loss) 128 1,338 513 (312)
Preferred share distributions (E) 11 - - -
--------- ---------- -------- ---------
Net income (loss) available for common shareholders $ 117 $ 1,338 $ 513 $ (312)
--------- ---------- -------- --------
Basic and diluted earnings per common share 0.00
Basic and diluted earnings per
recapitalized common share 0.00 0.04 0.02 (0.02)
</TABLE>
-41-
<PAGE>
Footnotes to NAI's Pro Forma Consolidated Statements of Operations for the
year ended June 30, 1997 and the Nine Months ended
March 31, 1998. (Continued)
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1997
-------------- -------------
<S> <C> <C>
B) To reflect fees and costs payable under the Intercompany Agreement. $ 375 $ 500
C) To reflect the interest earned on an investment contract for the net
proceeds:
<CAPTION>
Invested
Cash Rate Interest Earned
<S> <C> <C> <C> <C>
Maximum proceeds $ 30,000 5.50% $1,238 $1,650
Moderate proceeds 15,000 5.50% $ 619 $ 825
Minimum proceeds 0 5.50% 0 0
<CAPTION>
D) To reflect the reduction of interest on the pay down of outstanding notes
and loans payable.
Debt Repaid Interest Saved
<S> <C> <C> <C>
$ 643 $ 47 $ 60
E) To reflect the elimination of preferred share distributions in connection
with the redemption of the redeemable convertible preferred shares. $ 7 $ 11
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
New America Network, Inc., which conducts business as New America
International, operates a network of independently owned, licensed real estate
brokers throughout the United States and abroad. NAI, directly and through its
Broker Members, provides commercial real estate brokerage and other real
estate- related services to local, regional, national and international
businesses. Unlike other real estate broker networks, in addition to managing
real estate transactions generated by its brokers, NAI generates its own
source of real estate transactions for its brokers and actively manages and
tracks those transactions on behalf of its Clients. In order to increase the
portfolio of services marketed to Clients and Broker Members, NAI has entered
into several alliance agreements with entities which provide real
estate-related services which complement NAI's brokerage capabilities,
including sealed-bid sales, real estate auctions, real estate financing and
appraisals.
NAI earns revenue primarily from the sharing of brokerage commissions
with Broker Members who earn commissions from the acquisition, disposition or
leasing of real property assigned to them by NAI. Revenue from brokerage
commissions is largely transactional in nature and subject to economic cycles.
However, NAI's geographic coverage, number of transactions and continuing
client base tend to minimize the impact of economic cycles on annual revenue.
NAI also earns revenue from (i) the sharing of brokerage commissions with
Broker Members who earn commissions from the acquisition and/or disposition or
leasing of real estate referred to them by other Broker Members, (ii) the
sharing of fees received from Alliance Members in sealed-bid sales, auction
transactions and other Real Estate-Related Services and (iii) the collection
of annual membership fees paid by Broker Members and Alliance Members
("License fees"). Other revenues of NAI include primarily (i) marketing fees
for Broker Members, which is generally calculated as a percentage of the
Broker Members' License fees, and (ii) convention and meeting revenue. A major
expense to NAI is the commission expense which is a direct function of gross
commission revenue levels. In numerous instances, NAI collects a gross
commission and must subsequently pay the Broker Member their respective
portion of the gross commission. Other operating expenses of NAI includes
professional fees, advertising and promotion expenses, rental expenses and
various other general and administrative costs incurred by NAI in their day to
day operations.
Liquidity and Capital Resources
At March 31, 1998 NAI had approximately $220,000 of cash on hand.
NAI had loans outstanding of $643,000 at March 31, 1998. Of this
amount, $441,000 was due to related parties with interest rates ranging from
10% to 12%. These loans are due on demand. In addition, NAI had a bank loan
outstanding of $6,666 which requires monthly payments of principal of $3,333
with interest at the bank's prime rate (8.5% at March 31, 1998) plus 1%. NAI
also had a bank loan outstanding of $95,000 which requires monthly payments of
principal and interest of $1,667 with interest at the bank's prime rate (8.5%
at March 31, 1998) plus 1%. This loan matures in November 2002. NAI also has a
$100,000 line of credit with First Washington State Bank which expires October
2, 1998. Interest on any outstanding borrowings is at the bank's prime rate
(8.5% at March 31, 1998) plus 1%. This line was fully utilized at March 31,
1998.
Assuming all of the Underlying Shares and Additional Shares are
purchased in the Rights Offering and in the Concurrent Offering, NAI expects
to receive proceeds of approximately $38,000,000. Management will use such
proceeds in the following order of priority: (i) pay the expenses of the
Rights Offering, the Concurrent Offering and the Related Transactions, (ii)
repay $202,000 principal amount of indebtedness
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<PAGE>
incurred in connection with the repurchase of shares of Series A Preferred
Stock of NAI for an aggregate repurchase price of $202,000 indebtedness, (iii)
repay outstanding indebtedness, (iv) expand NAI's Corporate Services
Department and Investment Sales Department, and (v) acquire and develop Real
Estate-Related Services. See "Use of Proceeds." The balance of any proceeds
will be invested in short-term commercial paper at a rate of approximately
5.5% per annum until used for general corporate and working capital purposes
and to opportunistically acquire real estate. In the event that the full
proceeds of $38,000,000 is not received, management will use any proceeds
received in the above order.
Management believes it has adequate access to capital to continue to
meet its short-term requirements and objectives, including its needs over the
next 12 months. NAI's short-term needs will be met from the proceeds of the
Rights Offering and the Concurrent Offering and cash flow from operations.
NAI has established a Year 2000 compliance review process to assess
the impact of the Year 2000 on the company's business, operations and
financial condition. The process encompasses internal information technology
systems, office mechanical operation systems and the potential impact from
Broker Members and vendors. Management believes that NAI has no material
exposure to the Year 2000 issues at this time.
Commitments
In connection with a lease on NAI's corporate headquarters, NAI pays
an annual rent of $102,000, plus the payment of maintenance expenses. In
addition, pursuant to the Intercompany Agreement, NAI will be obligated to pay
an annual consulting services fee of $500,000, payable in equal monthly
installments of $41,666.
Results of Operations
Nine months ended March 31, 1998 versus the nine months ended March
-------------------------------------------------------------------
31, 1997
- --------
Net income for common shareholders decreased $9,000, or 19%, from
$47,000 for the nine months ended March 31, 1997 to $38,000 for the same
period in 1998. This decrease is due to a combination of factors as described
below.
Revenue from commissions decreased $74,000, or 3%, from $2,910,000
for the nine months ended March 31, 1997 to $2,836,000 for the same period in
1998. This decrease is due to a decrease in broker to broker commissions which
is primarily the result of a lower dollar value of transactions in the broker
to broker area.
License fees increased $205,000, or 22%, from $923,000 for the nine
months ended March 31, 1997 to $1,128,000 for the same period in 1998. The
increase was due to an increase in the number of international broker members
(which resulted in approximately $125,000 of additional fees) and increased
revenue from existing membership renewals (which increased approximately 5%
per annum over prior year's fees).
Other revenue decreased $89,000, or 16%, from $563,000 for the nine
months ended March 31, 1997 to $474,000 for the nine months ended March 31,
1998. The decrease was due to a one time change in NAI's meeting and events
calendar in 1998 in which NAI did not hold one of its major meetings, the
National Council Symposium.
Commission expense decreased $186,000, or 24%, from $788,000 for the
nine months ended March 31, 1997 to $602,000 for the nine months ended March
31, 1998. NAI's commission expense is proportionately less on a Network to
Broker transaction than on a Broker to Broker transaction. Because a greater
percentage
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<PAGE>
of NAI's 1998 revenue was generated from its Network to Broker business than
in 1997, the total commission expense decreased.
Sales and marketing expenses increased $83,000, or 43%, from $194,000
for the nine months ended March 31, 1997 to $277,000 for the nine months ended
March 31, 1998. This increase was due primarily to increased costs of NAI's
annual convention and meetings, which was offset by a decrease in costs as a
result of NAI not holding its National Council Symposium in 1998.
Compensation and benefits decreased $79,000, or 4%, from $1,911,000
for the nine months ended March 31, 1997 to $1,832,000 for the nine months
ended March 31, 1998. This decrease was due primarily to the streamlining and
consolidation of staffing.
Other operating expenses increased $391,000, or 33%, from $1,187,000
for the nine months ended March 31, 1997 to $1,578,000 for the nine months
ended March 31, 1998. This increase was due to an increase in public relations
and advertising relating to the change in the corporate trade name from New
America Network, Inc. to New America International, Inc.
NAI had a loss from operations of discontinued businesses of $162,000
for the nine months ending March 31, 1997. NAI discontinued its New America
Financial Services ("NAFS") division which provided a wide array of financial
services. These services are currently provided by Alliance members. NAI had
no such loss for the same period in 1998.
Year ended June 30, 1997 versus the year ended June 30, 1996
------------------------------------------------------------
Net income (loss) for common shareholders increased $104,000, or 50%,
from a loss of ($210,000) in 1996 to a loss of ($106,000) in 1997. This
increase is due to a combination of factors as described below.
Revenue from commissions decreased $123,000, or 3%, from $4,124,000
for the year ended June 30, 1996 to $4,001,000 for the year ended June 30,
1997. The decrease was primarily due to a decrease in broker to broker
transactions.
License fees decreased $91,000, or 7%, from $1,373,000 for the year
ended June 30, 1996 to $1,282,000 for the year ended June 30, 1997. The
decrease was due to the discontinuance of the property management services in
early fiscal 1997. Fees were recognized for the property management services
for the entire fiscal 1996 year.
Other revenue increased $95,000, or 18%, from $523,000 for the year
ended June 30, 1996 to $618,000 for the year ended June 30, 1997. The increase
was primarily due to a new contract in 1997 in which NAI was paid $42,000 for
the use of their Real Estate Planning Guide on the internet. The residual
increase was due to a general increase in marketing assessments.
Commission expense decreased $639,000, or 36%, from $1,782,000 for
the year ended June 30, 1996 to $1,143,000 for the year ended June 30, 1997.
The decrease was primarily due to a decrease in sealed bid transactions.
Sales and marketing expenses increased $36,000, or 13%, from $285,000
for the year ended June 30, 1996 to $321,000 for the year ended June 30, 1997.
This increase was due to increased costs of conventions and meetings.
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<PAGE>
Compensation and benefits increased $90,000, or 4%, from $2,438,000
for the year ended June 30, 1996 to $2,528,000 for the year ended June 30,
1997. This increase was due to the addition of personnel in the Corporate
Services and Brokerage Services areas.
Other operating expenses increased $169,000, or 11%, from $1,475,000
for the year ended June 30, 1996 to $1,644,000 for the year ended June 30,
1997. This increase was due to an increase in public relations and advertising
relating to changing the corporate trade name from New America Network, Inc.
to New America International, Inc.
The loss from operations of discontinued businesses increased
$95,000, or 74%, from $128,000 for the year ended June 30, 1996 to $223,000
for the year ended June 30, 1997. This loss represents the effect of the
discontinuance of NAFS in each respective year.
Preferred share distributions decreased $2,000, or 15%, from $13,000
for the year ended June 30, 1996 to $11,000 for the year ended June 30, 1997.
This decrease was due to a redemption of 25,000 shares of NAI's preferred
stock for $50,000.
Year ended June 30, 1996 versus the year ended June 30, 1995
------------------------------------------------------------
Net income (loss) for common shareholders decreased $485,000 from
income of $275,000 in 1995 to a loss of ($210,000) in 1996. This decrease is
due to a combination of factors as described below.
Revenue from commissions decreased $247,000, or 6%, from $4,371,000
for the year ended June 30, 1995 to $4,124,000 for the year ended June 30,
1996. The decrease was primarily due to a decrease in the Network to Broker
commissions. In 1995, there were two major Network to Broker deals which
totaled approximately $439,000. While these fees were not similarly earned in
1996, the decrease was partially offset by an increase in sealed bids and
broker to broker commissions.
License fees increased $215,000, or 19%, from $1,158,000 for the year
ended June 30, 1995 to $1,373,000 for the year ended June 30, 1996. The
increase was primarily due to the fees earned by the property management
services ($166,000) which was a new service provided in 1996.
Other revenue increased $53,000, or 11%, from $470,000 for the year
ended June 30, 1995 to $523,000 for the year ended June 30, 1996. The increase
was primarily due to marketing assessment fees which were initiated in
mid-year in 1995 with a full year of revenues recognized in 1996.
Commission expense increased $297,000, or 20%, from $1,485,000 for
the year ended June 30, 1995 to $1,782,000 for the year ended June 30, 1996.
The increase was primarily due to an increase in sealed bid sales in fiscal
year 1996.
Sales and marketing expenses decreased $39,000, or 12%, from $324,000
for the year ended June 30, 1995 to $285,000 for the year ended June 30, 1996.
This decrease was due to NAI eliminating its regional meetings in 1996 and
thereby incurring no costs with respect to these meetings.
Compensation and benefits increased $457,000, or 23%, from $1,981,000
for the year ended June 30, 1995 to $2,438,000 for the year ended June 30,
1996. This increase was due to an increase in personnel in the Northeast and
Southeast brokerage services regions, Corporate Services, Property Management
and Headquarters staff.
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<PAGE>
Other operating expenses increased $139,000, or 10%, from $1,336,000
for the year ended June 30, 1995 to $1,475,000 for the year ended June 30,
1996. This increase was primarily due to an increase in travel expenses for
newly hired regional staff as well as an increase in advertising and
promotional expenses.
The loss from operations of discontinued businesses decreased
$264,000, or 67%, from $392,000 for the year ended June 30, 1995 to $128,000
for the year ended June 30, 1996. This decrease was due to NAI recording a
loss of approximately $245,000 in 1995 related to the discontinuance of
RealQuest, Inc., a wholly-owned subsidiary of NAI. NAI recorded a loss of
approximately $147,000 and $128,000 for the discontinuance of NAFS for the
years ended June 30, 1995 and 1996, respectively.
Preferred share distributions decreased $2,000, or 16%, from $15,000
for the year ended June 30, 1995 to $13,000 for the year ended June 30, 1996.
This decrease was due to a redemption of 25,000 shares of NAI's preferred
stock for $50,000.
Inflation
Most of NAI's revenue is derived from commissions on the sale or lease of
commercial property and therefore is protected from inflation since an
increase in the sales prices or lease rates would generate additional revenue.
The majority of the license agreements signed by the Broker Members have fee
increases built in for the term of the agreements which are based on fixed
increases or increases over the Consumer Price Index. These two factors help
decrease NAI's exposure to inflation.
BUSINESS
General Description
NAI operates a Network of independently owned, licensed real estate
Broker Members throughout the United States and, more recently, abroad. NAI,
directly and through its Broker Members, provides commercial real estate
brokerage services to local, regional, national and international Clients. NAI
has approximately 130 affiliated Broker Members, which employ approximately
2,600 agents, operating in approximately 300 markets, including North, Central
and South America and Western Europe. NAI believes it is represented in more
North American market areas than any national commercial real estate brokerage
company. Unlike other real estate broker networks, in addition to managing
real estate transactions generated by its Broker Members, NAI generates its
own source of real estate transactions for its Broker Members and actively
manages and tracks those transactions on behalf of Clients. In order to
increase the portfolio of services marketed to Clients and Broker Members, NAI
has entered into several alliance agreements with Alliance Members which
provide real estate related services which complement NAI's brokerage
capabilities, including sealed-bid sales, real estate auctions, real estate
financing and appraisal services. As of June 30, 1998, the Network had an
inventory of approximately 1,683 assignments to buy, sell or lease real
property (approximately 77% of which are exclusive to NAI), with a transaction
value of approximately $927 million, and which would generate fees to NAI of
approximately $6.8 million, if consummated. There is no assurance that such
inventory will result in any revenues to NAI.
NAI earns revenues primarily from the sharing of brokerage
commissions with Broker Members who earn commissions from the acquisition,
disposition or leasing of real property assigned to them by NAI (approximately
$2,686,000 or 46% of NAI's net revenues for fiscal year 1997). NAI also earns
revenues from (i) the sharing of brokerage commissions with Broker Members who
earn commissions from the acquisition and/or disposition or leasing of real
estate referred to them by other Broker Members (approximately $1,063,000 or
18% of NAI's net revenues for fiscal year 1997), (ii) the sharing of fees
received from Alliance Members in sealed-bid sales, auction transactions and
other Real Estate-Related Services (approximately $170,000 or 3% of NAI's net
revenues for fiscal year 1997), and (iii) the collection of annual membership
fees paid by Broker Members and Alliance Members (approximately $1,282,000 or
22% of NAI's net revenues for fiscal year 1997).
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<PAGE>
NAI began forming the Network in 1978 in order to meet the growing
real estate needs of large national and international corporations in multiple
markets. NAI meets the multiple market needs of its Clients and its Broker
Members by combining local representation with the management and control
capabilities of its centralized Corporate Services Department. NAI's Corporate
Services Department is responsible for establishing and developing
relationships with Clients in order to generate assignments for the Network
and its Broker Members. Currently, NAI has 13 staff members in its Corporate
Services Department serving over 100 Clients. These Clients include retail
chains (such as Woolworth Corp.), international companies (such as
International Paper Company), service businesses (such as Roadway Services,
Inc.), and other larger owners of real estate (such as the United States
Postal Service, a new Client of NAI). NAI's Clients are often involved in real
estate transactions in multiple markets. In addition, NAI has an Investment
Sales Department which specializes in the acquisition and disposition of real
estate for Clients who are seeking to acquire, or currently own, real estate
for investment purposes. See "--Corporate Services Department" and
"--Investment Sales."
NAI maintains a proprietary information sharing and research
intranet, in order to efficiently and effectively coordinate with its Broker
Members to meet its Clients' needs. NAI's information systems consist of a
transaction management system and a central database information system. NAI's
computerized transaction management system allows Broker Members, the
Corporate Services Department and Clients to manage and track the progress of
transactions assigned to Broker Members, including those generated by its
Broker Members. NAI's databases include, among other things, real estate
market data, demographic information, Broker Member profiles, Broker Member
listings, transaction histories, Client relationship information and Client
profiles. See "--NAI Technology and Information Services."
NAI's objective is to increase profitability by continuing to grow
its brokerage business, increase its international coverage, expand its
Corporate Services and Investment Sales Departments and to further develop its
non-brokerage Real Estate-Related Services, including sealed-bid sales and
real estate auctions, and to acquire or develop additional Real Estate-Related
Services. To the extent funds are available from the proceeds of the Rights
Offering and the Concurrent Offering referred to below, NAI's strategy will be
to (i) expand NAI's Corporate Services Department and Investment Sales
Department to generate business from additional Clients and in new markets,
(ii) invest in or acquire brokerage firms (including certain of those owned by
Broker Members) and firms which provide Real Estate-Related Services, (iii)
train and support Broker Members to generate additional business for the
Network; (iv) continue to expand the Network into international markets, (v)
generate additional revenue by providing brokerage and Real Estate-Related
Services to Kranzco, (vi) expand and enhance NAI's real estate technology and
information services, (vii) opportunistically acquire and develop real estate
for its own account and (viii) utilize Real Estate-Related Services to create
and develop relationships with Clients.
The Network
NAI began forming the Network in 1978 on the premise that local
commercial real estate brokers could not efficiently service the needs of
national and international businesses due to the extremely local nature of the
commercial real estate market. Previously, local commercial brokers could only
assist a business with respect to its needs in a limited market area; however,
large national and international corporations need real estate services in
multiple market areas. NAI's affiliated Network of Broker Members throughout
the United States enables NAI to simultaneously provide real estate services
to businesses with multiple requirements in a number of market areas. NAI,
with approximately 130 Broker Members in 46 states and 10 countries, provides
real estate services to its Clients throughout the United States and, more
recently, abroad. See "--Competition" and "Risk Factor--Competition; Ability
to Retain Broker Members and Attract Additional Broker Members."
By agreeing to dispose of or acquire its real estate through the
Network, a Client can utilize one large brokerage network to simultaneously
execute numerous real estate transactions in different markets. Clients avoid
the time-consuming tasks of interviewing, establishing relationships with, and
negotiating with, different commercial
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<PAGE>
real estate brokers, and minimize time spent managing the status and progress
of each transaction in multiple market areas.
Through the use of the Network's facilities and the individual
marketing know-how of the Broker Members, a seller or lessor can quickly
establish whether there is a strong demand for its property, while a purchaser
or lessee can immediately determine which properties being offered across the
country meet its requirements. To facilitate this process, NAI maintains
computerized information on potential lessors and lessees, types of properties
sought or available for sale in numerous markets, preferred locations, rental
rates, price and mortgage financing requirements and other relevant
information.
Broker Members
NAI established the Network as a nationally recognized marketer of
real estate services, by obtaining quality Broker Members in major
metropolitan areas and smaller cities throughout the United States, as well as
more recently in foreign countries. NAI selects its Broker Members based upon
a number of factors including (a) the Broker Member's reputation in the
industry, (b) the sales volume of the Broker Member in its local market, (c)
the Broker Member's ability and desire to work with NAI and NAI's stated
method of operations, (d) the professionalism of the sales associates as
evidenced by industry designations and memberships and (e) the Broker Member's
performance in interviews performed by NAI. As of June 30, 1998, NAI had
approximately 130 Broker Members in 46 states and 10 foreign countries.
Approximately 80 of the Network's Broker Members have been with NAI for 5
years or longer.
In order to ensure that the Network's standards for Broker Members
are consistently maintained, NAI has established a Broker Services Department.
The Broker Services Department, which consists of 11 members, focuses on
training Brokers to (i) develop and fulfill business on behalf of NAI, (ii)
adhere to NAI systems and processes, (iii) use the Network and its computer
tracking systems in order to manage real estate transactions assigned to them
through the Network and for their own internal use, (iv) effectively utilize
NAI's national and international identity, and (v) meet the needs of NAI's
Clients. After a Broker Member becomes a member of the Network, NAI performs
periodic reviews to determine whether such Broker Member is maintaining the
standards set forth in its Membership Agreement. In the past, NAI has replaced
certain Broker Members who have not met their obligations under the Membership
Agreements. NAI intends to continue this practice so that the Network can
continue to provide high quality service to its Clients.
Membership Agreements and Fees
Each Broker Member executes an agreement ("Membership Agreement")
which defines the legal relationship between NAI and the Broker Member,
including the Broker Member's obligations, the services to be provided by the
Network and the compensation to be paid for such services by the Broker Member
(including an annual membership fee and co-brokerage commission arrangements).
Under the terms of the Membership Agreement, the majority of Broker Members,
in most instances, obtain an exclusive territory and a license to use NAI's
service marks including "New America," "New America International," "NAI" and
the "NAI Globe" logo. Territories in the United States range in size from
single cities to several counties (sometimes in more than one state), or
statewide depending on the demographics of the area. International territories
range in size from single cities to, under certain circumstances, an entire
country.
In certain market areas, NAI has selected more than one Broker
Member. All such Broker Members are designated as "Specialty Members" as each
specializes in one or more types of real estate (i.e., Retail, Industrial or
Office). This practice was instituted to address situations in which no
individual commercial broker could be identified in a particular market area
meeting NAI's qualifications as a full service broker. It also reflects NAI's
recognition that in certain market areas the Network and its Clients could
best be served by Specialty Members.
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Over the past 18 months NAI has been transitioning Broker Members to
a new form of Membership Agreement. The old form, which typically provided for
a three year term, permitted members to terminate the Membership Agreement at
any time upon 45 days notice. The new form of Membership Agreement, which
includes stronger identity and performance standards as well as increased
licensing fees, does not allow early termination of the Membership Agreement
except for cause. NAI may terminate such agreements for specified causes upon
forty-five (45) days written notice to a Broker Member. Approximately 60% of
the Broker Members have executed the new form of Membership Agreement.
Each Broker Member pays NAI an annual membership fee ("Membership
Fee"), which varies depending upon the population level of a Broker Member's
exclusive territory. Each Broker Member is also required to pay an annual
marketing assessment equal to 15% of its Membership Fee. NAI has agreed to
spend a minimum of 3.5% of the total annual Membership Fees it receives on
marketing activities annually. NAI earns most of its revenue from the
co-brokerage provisions contained in the Membership Agreement. NAI's share of
any brokerage commission earned from such services ranges from 10% to 50%
depending on NAI's involvement in the transaction. Of NAI's net revenues for
fiscal year 1997, approximately $2,686,000 or 46% were earned through the
sharing of brokerage commissions with Broker Members who earn commissions from
the acquisition, disposition or leasing of real property assigned to them by
NAI, approximately $1,063,000 or 18% of NAI's net revenues were earned through
the sharing of brokerage commissions with Broker Members who earn commissions
from the acquisition and/or disposition or leasing of real estate referred to
them by other Broker Members, and approximately $1,282,000 or 22% of NAI's net
revenues were earned through the collection of annual membership fees paid by
Broker Members and Alliance Members.
NAI's percentage of the Broker Member compensation may be decreased
in instances where the Network Client was introduced to the Network by a
Broker Member or where an assignment was originally identified by a Broker
Member. In those instances, the Broker Member who made the introduction or
identified the listing may be entitled to a portion of the commission.
Broker Services Group
NAI believes that in addition to obtaining assignments and Clients
for Broker Members, the Network creates a framework within which Broker
Members can assist each other in their own businesses. In order to strengthen
the relationship among Broker Members, NAI conducts annual international
conventions and regional meetings on various aspects of utilizing the Network
and structuring transactions for all Broker Members. Also, the Network
maintains a Broker Member Advisory Council consisting of 24 Broker Members,
which offers advice to NAI regarding ways in which to improve the Network and
the services offered by it.
Additional publications, advertising, promotional materials and
public relations enhance NAI's image and reputation. NAI membership and
participation is maintained in industry trade associations including the
International Council of Shopping Centers ("ICSC"), International Association
of Corporate Real Estate Executives ("NACORE"), Industrial Development
Research Council ("IDRC") and other similar groups.
To further increase the Network's capabilities to service Clients,
NAI has established five Specialty Councils addressing various issues peculiar
to industrial, office, retail, land and investment properties. Each Specialty
Council is made up of Broker Members and/or sales persons associated with such
Broker Members who specialize in those areas. Through the personal
relationships which are established, NAI believes that council members gain a
greater recognition of each other's capabilities, local market knowledge and
general expertise.
Corporate Services Department
NAI's Corporate Services Department is responsible for establishing
and developing relationships with existing and potential Clients in order to
generate assignments for the Network and its Broker Members. NAI
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employs persons with backgrounds in business and finance ("Corporate Service
Executives") to solicit and secure from existing and potential Clients,
exclusive assignments to acquire, dispose of or lease commercial real estate.
The current trend of downsizing corporate real estate departments has
increased the need for Corporate Services Executives, who can assist corporate
real estate departments with multiple transactions. The Corporate Services
Department assists Clients in managing multiple transactions through NAI's
technology and information systems, which facilitate up-to-date electronic
and/or written reports which are regularly sent to Clients and Broker Members.
See "--NAI Technology and Information Systems."
NAI's Corporate Services Department has ongoing relationships with
more than 100 Clients, including the Hertz Corporation, Pepsi-Cola, Airborne
Express, and the International Paper Company. Substantially all NAI- generated
assignments from its Clients are exclusive to NAI and many assignments
referred from one Broker Member to another Broker Member are also exclusive to
the initiating Broker Member. These assignments include acquisitions,
dispositions, buy-outs, sales, leases and auctions of office, industrial and
retail properties. Assignments are obtained in NAI's name and then directed to
the Broker Members for execution. In certain circumstances the assignment,
although secured by NAI, is placed directly with the Broker Member. Resulting
commissions are shared with NAI as prescribed in the Broker Members Membership
Agreement. See "Business--Membership Agreements and Fees". In some instances,
NAI will structure a partner relationship with a Broker Member pursuant to
which the Broker Member will act as a Corporate Service Executive with respect
to a Network Client. This typically occurs when a Broker Member has a
significant relationship with a Client with national and international real
estate needs. As of June 30, 1998, NAI employed 13 staff members for its
Corporate Services Department. Currently, the majority of the Clients of the
Corporate Service Department are located in the eastern and north central
United States; however, upon consummation of the Exchange Offer, the
Distribution, the Rights Offering and the Concurrent Offering, NAI intends to
retain additional Corporate Service Executives to solicit Clients from
throughout the United States and abroad.
Investment Sales
In order to increase transactions generated for the Network, NAI has
established an Investment Sales Department, consisting of two real estate
professionals, which specializes in the acquisition and disposition of real
estate for Clients who are seeking to acquire, or who currently own, real
estate for investment purposes, rather than for the investor's business use. A
specific target of the Investment Sales Department is the identification and
sale of properties to REITs, as well as insurance companies or pension funds
which may be interested in the acquisition of real estate investments for
their portfolios.
The Investment Sales Department works with Broker Members to assist
them in pursuing investment opportunities which the Department has identified.
The Investment Sales Department also works closely with the members of NAI's
Specialty Council for Investment Sales to stimulate Broker-to-Broker
investment referrals and to obtain sources of financing for investment
transactions.
The Investment Sales Department has previously assisted Kranzco in
pursuing Kranzco's strategy of acquiring shopping centers. In December 1997,
Kranzco acquired five shopping centers, aggregating approximately 650,000
square feet of GLA, for approximately $44 million. NAI's Investment Sales
Department initiated this opportunity, and assisted Kranzco in acquiring the
properties. Kranzco's acquisition of such properties generated $100,000 in fee
income to NAI.
During the calendar year ended December 31, 1997, the Network
consummated 20 investment real estate transactions with a transaction value of
approximately $100,000,000, which resulted in approximately $400,000 of
revenues to NAI (which for financial purposes are reported as commissions).
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Real Estate-Related Services
NAI is in the process of widening its focus from a transactional core
to include more Real Estate-Related Services. These services include real
estate auctions and sealed-bid sales, real estate tax, valuation and appraisal
services, real estate information services (providing sales and marketing data
and demographic information), lease audits (review of leases for tenants in
order to ensure no overpayments were made), loan sales (purchases of defaulted
mortgages), and senior citizen housing (an investment specialty focusing on
facilities for the growing population of senior citizens). In order to expand
into Real Estate-Related Services, NAI has entered into several agreements
with Alliance Members pursuant to which certain Real Estate-Related Services
are provided by Alliance Members to Broker Members and Clients. To date, the
only Real Estate-Related Services which have generated significant revenues,
in addition to the membership fees paid by Alliance Members, for NAI have
related to national auctions and international sealed-bid sales. See "Business
- -- Accelerated Marketing Programs" below.
Each Alliance Member pays NAI an annual membership fee (an "Alliance
Membership Fee"), which varies depending upon the market opportunity and the
NAI Services to be provided. Of NAI's net revenues for calendar year 1997,
approximately $475,000 of NAI's net revenues were earned through the sharing
of fees received from Alliance Members in the sealed-bid sales and auction
transactions (which for financial purposes are reported as commissions) and
approximately $25,000 of NAI's net revenues were earned through the collection
of annual membership fees paid by Alliance Members (which for financial
purposes are reported as license fees). Other Real Estate-Related Services
which have not as yet provided significant revenues to NAI have been
strategically implemented in order to provide a full range of services which
may fulfill the real estate related needs of Clients. These services include
lease auditing, appraisal services; and real estate information services.
Accelerated Marketing Program
Through its Accelerated Marketing Program, NAI markets commercial
real estate properties for disposition through alternative vehicles for real
estate sales, such as sealed-bid sales and auctions. In 1994, NAI entered into
agreements with Terra Marketing and Terra Marketing, East (collectively,
"Terra"), an Alliance Member and specialist in international sealed-bid sales.
In the sealed-bid process, Terra puts together a portfolio of commercial and
industrial properties for sale. NAI and its Broker Members may assist Terra in
creating the portfolio of properties. The properties may be in varied
locations and have different owners. Terra then markets these properties to
possible purchasers through a brochure. Purchasers interested in any property
may request additional due diligence materials for a small fee. NAI Broker
Members provide sales support by providing site tours and providing useful
local information for those purchasers interested in visiting the site. The
winning bids are selected by the seller of the property and Terra, together.
For the calendar year ended December 31, 1997, NAI and Terra produced
sealed-bid sales resulted in the sale of approximately 19 properties with
approximately $421,000 of revenues to NAI (which for financial purposes are
reported as commissions) and an additional $2,500,000 of revenues to Terra,
participating Broker Members and other brokers. Fees earned in sealed-bid
sales are paid by Terra to NAI and its Broker Members.
In 1989, NAI entered into an alliance agreement with Michael Fox
International, Inc., a specialist in national auction services ("Fox"). NAI
and local Broker Members work with Fox to provide and assist in auction sales.
NAI and Fox worked together on 15 auctions in the calendar year ended December
31, 1997. In the calendar year ended December 31, 1997, auction sales resulted
in approximately $50,000 of revenues to NAI and an additional $500,000 of
revenues to Fox, participating Broker Members and other brokers. Fees earned
in auction sales are paid by Fox to NAI and its Broker Members.
NAI Technology and Information Services
NAI has invested substantially in technology to create advanced
systems to deliver services to its Clients and Broker Members, as well as to
efficiently manage its operations. NAI believes that technology is important
to
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the continued growth of NAI's business and the real estate brokerage industry
generally. NAI continually refines its proprietary intranet in order to
efficiently manage and track assignments, and communicate with Broker Members
and Clients.
NAI's central information sharing and research intranet consists of
two proprietary software programs. REALTrac(TM), a transaction management
system, allows Broker Members, the Corporate Services Department and the
Investment Sales Department, to efficiently and effectively manage and track
the progress of transactions assigned to Broker Members. REALTrac(TM) allows
NAI staff to easily track multiple Client assignments, and produce portfolio
activity reports. REALNet(TM), NAI's central database information system,
includes, among other things, Broker Member profiles, Broker Member listings,
transaction histories, Client relationship information and Client profiles.
NAI maintains both public-access and secure, limited-access web sites
in order to provide computer access to NAI's Broker Members and Clients, as
well as the general public. Broker Members access REALTrac(TM) and REALNet(TM)
through www.members.naiweb.com, a secure, web-based system.
www.members.naiweb.com also hosts discussion groups; a site to post property
listings to NAI's internet site, www.naiweb.com; NAI's Marketing Resource
Center where Broker Members can download marketing presentations; current
press releases; and the "Market Maker" system which promotes Broker-to-Broker
opportunities. www.clients.naiweb is a secure site which has been designed to
allow Clients to log into NAI's information network and get immediate updates
on the status of any assignments which such Client has placed with the
Network. The information contained in this site is fed directly from the NAI
REALTrac(TM) system. This site also allows Clients to contact NAI staff that
is working on their assignments. NAI's website, www.naiweb.com, is a public
site which conveys NAI's image in the marketplace, houses interactive versions
of NAI's marketing materials, and NAI's annual Real Estate Planning Guide, a
comprehensive, market-by-market commercial real estate analysis of over 140
real estate markets. Additionally, this site maintains a global property
listings database with over 1,500 active commercial property listings which
are posted by Broker Members.
NAI provides Broker Members and Clients with key demographic, mapping
and site modeling services through its New America Information Services
division ("NAIS"), previously operated as a joint venture which has been
terminated. NAIS annually licenses demographic databases from national
information providers. The information contained in these databases is then
used to produce custom demographic reports and sophisticated mapping services.
Competition
NAI primarily seeks business from corporations, individual
owner/investors and national and international organizations with real estate
requirements in multiple market areas. NAI faces competition for clients on a
local, regional and national basis from national broker-owned companies with
global alliances, and national/global networks, as well as local and regional
commercial brokerage firms. Some of NAI's largest competitors include CB
Commercial Real Estate Services Group, Inc.; Cushman & Wakefield, Inc.; Grubb
& Ellis Company; and Trammel Crow Company. However, NAI believes that it is in
more North American market areas than any of these competitors. Real estate
broker networks with which NAI competes include Colliers International; Oncor
International; and The Commercial Network. NAI distinguishes itself from other
real estate broker networks by generating its own source of real estate
transactions for its Broker Members and actively managing those transactions,
and does not simply facilitate an exchange of transactions generated solely by
network members, as is the case in other broker networks.
NAI's ability to earn revenues is directly related to its ability to
attract and retain successful, independently owned, commercial and industrial,
licensed real estate brokers ("Commercial Real Estate Brokers") in a
substantial number of market areas as Broker Members. The number of brokers in
different market areas and their strength and reputation in their own local
markets may directly affect the anticipated volume of commissions generated
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through the Network, as well as NAI's ability to obtain exclusive assignments
from a national client base. NAI is presently competing for Broker Members
with cooperative commercial broker networks, as well as large national and
regional commercial real estate brokerages. There has been a consolidation of
real estate brokerage and service companies, which are better known and have
greater resources than NAI that are actively seeking to acquire other real
estate brokerage and service companies. Certain of NAI's competitors, such as
CB Commercial and Grubb & Ellis, are attempting to grow their businesses
through acquisitions, as well as by entering into affiliation agreements with
independent Commercial Real Estate Brokers. To the extent these companies are
successful in acquiring or entering into affiliation agreements with
independent Commercial Real Estate Brokers, there may be a negative impact on
NAI's ability to attract and retain qualified Commercial Real Estate Brokers
as part of the Network as Broker Members. However, approximately 80 Broker
Members have been members of the Network for 5 years or longer. See "Risk
Factors - Competition; Ability to Retain Broker Members and Attract Additional
Broker Members."
In addition, approximately 40% of NAI's Broker Members are party to a
Membership Agreement which permits Broker Members to terminate the Agreement
upon 45 days prior notice. Certain Broker Members may not view the Related
Transactions as favorable to them. Accordingly, there can be no assurance that
in light of the increased competition to retain or acquire Commercial Real
Estate Brokers, that Broker Members will not terminate, or renew, their
Membership Agreements. See "Risk Factors - competition; ability to Retain
Broker Members and Attract Additional Broker Members."
Government Regulation
State Laws Governing Real Estate Brokers
Most states permit licensed real estate brokers to enter into
commission sharing agreements with licensed real estate brokers from other
jurisdictions. However, some states impose certain requirements with respect
to entering into such agreements. For example some states allow only the local
broker to conduct negotiations. Other states require a written commission
sharing agreement to be filed with the state real estate commission. Still
other states do not permit the out-of-state broker to conduct brokerage
activities within the state. NAI presently has real estate brokerage licenses
in New Jersey, Florida, New York, and Pennsylvania. See "Certain
Transactions." NAI presently shares commissions with brokers in 48
jurisdictions, including states in which it has a license. NAI does not
believe that it provides brokerage services or conducts negotiations in those
states in which it shares commissions. In certain instances, NAI has not filed
written fee sharing agreements with state real estate commissions. To the
extent NAI has potentially violated any state law with respect to commission
sharing, it may not be able to enforce its Membership Agreement and may be
subject to civil liability or criminal penalties.
Laws Related to Franchising
The offer and sale of franchises is subject to federal law and
certain state laws. NAI believes that it is exempt from compliance with the
Federal Trade Commission's ("FTC") trade regulation rule entitled "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures" (the "Franchise Rule"). The Franchise Rule requires a franchisor to
provide pre-sale disclosure to a prospective franchisee prior to the sale of a
franchise subject to the Franchise Rule. Many states have franchise sales laws
that require a franchisor, prior to the offer or sale of a franchise in the
state, to comply with registration or filing requirements, and, prior to the
sale of a franchise, to provide a prospective franchisee with a current
franchise offering circular. Certain other states have business opportunity
laws that apply to some franchise agreements that also may require a seller to
comply with applicable registration or filing requirements and to provide
pre-sale disclosure. State franchise sales laws and business opportunity laws
are described below as "State Laws." In addition, many states have laws that
regulate certain substantive aspects of the franchisor-franchisee
relationship, including termination or non-renewal of franchise agreements.
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NAI believes that by offering and selling memberships to its Broker
Members it may have been offering a "franchise," as defined by the Franchise
Rule, but that the offer and sale of such memberships are a "fractional
franchise" and are exempt from compliance with the requirements of the
Franchise Rule. As defined in the Franchise Rule, a "fractional franchise" is
a commercial arrangement which meets the following two conditions: (a) the
franchisee or any of its current directors or executive officers has more than
2 years of prior management experience at any time in the past in the business
represented by the franchise and (b) the parties anticipated or should have
anticipated, at the time they entered into their agreement, that the sales of
the franchisee arising from the proposed relationship would represent no more
than 20% of the total dollar volume of the franchisee's projected gross sales
within at least one year after the franchisee commences selling the goods or
services under the parties' agreement.
NAI believes that it is exempt from compliance with the Franchise
Rule, since (a) its Broker Members and their directors or executive officers
typically had more than 2 years' experience as Commercial Real Estate Brokers
at the time they entered into their agreements with NAI and (b) at the time a
Broker Member entered into its Membership Agreement, neither NAI nor the
Broker Member anticipated or should have anticipated that the sales proceeds
of any Broker Member arising from membership in NAI would represent 20% or
more of its sales.
As of the date of the Prospectus, NAI has neither prepared nor
distributed a franchise disclosure document ("Franchise Disclosure Document").
NAI believes that it is exempt from the requirements of many of the State Laws
in states in which it has entered into Member Agreements, based on various
exemptions, including, without limitation, applicable state "fractional
franchise" exemptions (or the functional equivalent), exemptions in connection
with the licensing of a registered trademark, or sophisticated purchaser
exemptions. However, NAI appears to have been subject to certain requirements
(e.g., registration or disclosure requirements) under State Laws in certain
other states in which it has agreements with Broker Members. In some states,
although no exemptions may have been available, past violations by NAI of
claims under those State Laws would be time barred.
NAI believes that there are approximately six (6) states with a State
Law in which NAI has entered into Membership Agreements for which NAI may not
be exempt, may have failed to comply with the filing or registration and
disclosure provisions of such State Law, and for which it may be subject to
certain sanctions or potential liability. Such sanctions or potential
liability would include that NAI may be subject to civil penalties imposed by
state regulatory agencies, and legal actions by existing Broker Members for
rescission of existing Broker Membership Agreements, restitution, and damages
as a result of any violation of such law. NAI believes that, if any state
regulatory agencies or any of the Broker Members in such states sought such
remedies and any such actions were successful, its potential liability could
be to refund certain payments made to NAI. NAI believes that it has strong
defenses to any alleged violation of any State Law. Notwithstanding, the
applicability of such laws is uncertain as applied to NAI's Membership
Agreements, and there can be no assurance that a court would not take the
position that NAI should have complied with such laws in connection with those
transactions. In the future NAI intends to comply with State Laws, where
necessary, by preparation and delivery to prospective Members of a Franchise
Disclosure Document, and registering or filing with necessary state
authorities, and/or by complying with available exemptions.
NAI has also recently entered into several Membership Agreements with
Members in foreign countries. NAI believes that it either is not subject to,
or would be exempt from, such laws. If NAI were subject to, or were not exempt
from, such laws, it could be subject to actions by regulatory agencies and
legal actions by existing Members, and subject to fines, penalties, and
damages. NAI intends to comply with such laws in the future.
Trademarks
NAI has a registered servicemark on the principal register with the
United States Patent and Trademark Office for the logo design eagle and the
initials "NAI" and the name "New America."
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Legal Proceedings
There is no material litigation pending, or to its knowledge,
threatened against NAI or its properties.
Property
NAI leases approximately 8,100 square feet of office space as its
corporate headquarters located at Route 130 and Maple Stream Road, Hightstown,
New Jersey. The landlord, The Building Center, Inc., is wholly owned by Gerald
C. Finn and his wife. See "Certain Transactions." The lease provides for an
annual rental of $102,000 plus the payment of maintenance expenses. The
initial lease, which expired on August 31, 1989, has been extended by an
Extension of Lease Agreement, dated April 15, 1998, which provides for a one
year term with automatic one year renewals, unless either party gives 90 days
written notice.
RELATED TRANSACTIONS
The Exchange Agreement
On _________, 1998, Kranzco, NAI and the Finns entered into the
Exchange Agreement in connection with the Exchange Offer, which included
certain representations, warranties and indemnities. In the Exchange Agreement
the Finns agreed not to sell or transfer, directly or indirectly, any NAI
Shares, Notes or any Kranzco Common Shares issuable upon conversion of the
Notes held by the Finns for a period of three years from the closing of the
Exchange Offer. The Finns also agreed, with certain exceptions, not to convert
the Notes into Kranzco Common Shares until three years from the date of
issuance. NAI also agreed that if the Related Transactions are consummated,
all costs and expenses incurred by all parties in connection with the Related
Transactions will be paid by NAI.
In the Exchange Agreement NAI agreed to indemnify and hold harmless
Kranzco and its affiliates (each an "indemnified person") from and against,
any Losses (as defined in the Exchange Agreement) incurred by such indemnified
person by reason of or arising out of or in connection with the failure of NAI
to comply with (i) any Laws (as defined therein) relating to real estate
brokers or (ii) any federal or state franchise Laws.
Intercompany Agreement
Immediately following the Distribution, Kranzco and NAI will enter
into an Intercompany Agreement which provides for the manner in which NAI and
Kranzco expect to create opportunities for each other and for reducing
potential conflicts of interest.
Kranzco Right of First Opportunity; Notification Right
The Intercompany Agreement provides that, if any REIT Opportunity (as
defined below) becomes available to NAI in which NAI is acting, intends to act
or will act as principal or participate for its own account (a "Principal REIT
Opportunity"), NAI will first offer such Principal REIT Opportunity to
Kranzco. If Kranzco rejects a Principal REIT Opportunity, or accepts such
Principal REIT Opportunity but thereafter provides, or is required by the
provisions of the Intercompany Agreement to provide, written notice to NAI
that it is no longer pursuing such Principal REIT Opportunity, NAI is, for a
period of one year thereafter, entitled to consummate the Principal REIT
Opportunity or provide any other person or entity the right to consummate such
Principal REIT Opportunity at a price, and on terms and conditions, that are
not more favorable to NAI in any material respect than the price and terms and
conditions made available to Kranzco relating to such Principal REIT
Opportunity. A Principal REIT Opportunity does not include the receipt of any
commissions in cash or in kind (including an equity interest in a REIT
Opportunity) in connection with NAI serving as a broker or intermediary in
connection with the sale or lease of retail real estate. "REIT Opportunity"
means any opportunity, principally within the United States, to (i) acquire,
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develop, lease, sell or make any investment in retail real estate, real estate
mortgages, real estate derivatives, or entities that invest exclusively in or
have a substantial portion of their assets in any of the foregoing, so long as
such investment would be consistent with the requirements of the Code and
regulations relating to Kranzco's status as a REIT; or (ii) make any
REIT-Qualified Investment. "REIT-Qualified Investment" means an investment, at
least 95% of the gross income from which would qualify under the 95% gross
income test set forth in section 856(c)(2) of the Code (or could be structured
so to qualify) and the ownership of which would not cause Kranzco to violate
the asset limitations set forth in section 856(c)(4) of the Code (or could be
structured not to cause Kranzco to violate the section 856(c)(4) limitations)
and which otherwise meets the federal income tax requirements applicable to
REITs, or (ii) any other investments which may be structured in a manner so as
to be REIT-Qualified Investments, as determined by Kranzco. Kranzco may from
time to time provide written notice to NAI specifying certain criteria,
reasonably acceptable to NAI, for a REIT Opportunity in addition to the
criteria specified above in this definition of REIT Opportunity. Any such
written notice from Kranzco may be canceled by written notice given by Kranzco
at any time or, with NAI's consent, which shall not be unreasonably withheld,
modified by Kranzco by written notice at any time. The definition of REIT
Opportunity will be modified as appropriate from time to time in accordance
with any such written notices sent by Kranzco and reasonably acceptable to
NAI. A Principal REIT Opportunity does not include the receipt of any
commissions in cash or in kind (including an equity interest in a REIT
Opportunity) in connection with NAI serving as a broker or intermediary in
connection with the sale or lease of retail real estate.
The Intercompany Agreement also provides that NAI will immediately
notify Kranzco in writing of any REIT Opportunity that becomes available or
known to NAI (through its Broker Members or otherwise) and which is not a
Principal REIT Opportunity and which in the reasonable opinion of NAI meets
the acquisition and investment criteria of Kranzco (which will be provided to
NAI by Kranzco from time to time) (a "Non-Principal REIT Opportunity"). In the
event Kranzco determines to pursue such Non-Principal REIT Opportunity, NAI
shall use good faith efforts to cause its Broker Members to assist Kranzco in
considering and consummating such Non- Principal REIT Opportunity. In the
event Kranzco consummates a transaction that constitutes a Non-Principal REIT
Opportunity, Kranzco will pay NAI a fee to be mutually agreed to by NAI and
Kranzco.
In addition, if NAI develops or becomes aware of any acquisition or
investment opportunity with respect to real estate (other than a REIT
Opportunity) in which NAI intends to or has the opportunity to act as
principal or participate in for its own account, and NAI is not interested in
pursuing such opportunity, or the opportunity is otherwise unavailable to NAI,
NAI will immediately notify Kranzco in writing of such opportunity with such
writing to contain a description of all material terms concerning such
opportunity and be delivered to Kranzco with a copy of any written material or
information in NAI's possession regarding such opportunity.
NAI will also, without any additional consideration, (i) disseminate
acquisition and investment criteria provided by Kranzco to its Broker Members,
(ii) disseminate information regarding space available for lease from Kranzco
(including tenant criteria) to its Broker Members, (iii) provide Kranzco
reasonable access to NAI personnel, NAI Broker Members and NAI's computer data
bases (other than confidential client information), (iv) cooperate with
Kranzco to develop new shopping centers or re-develop distressed shopping
centers for sale to Kranzco in a mutually agreeable manner, (v) provide
Kranzco access to local property managers within areas in which Kranzco owns
retail properties and (vi) disseminate such other materials and information
regarding Kranzco and its properties as Kranzco may reasonably request.
Limitation on Strategic Alliance
NAI has agreed not to enter into, without the consent of Kranzco, any
type of strategic relationship with any other REIT or real estate investment
or operations type entity, including, without limitation, any equity
investment by any other REIT or real estate investment or operations type
entity in NAI (other than as a result of a purchase of NAI Shares in the
public market), any equity investment by NAI in any other REIT or real estate
investment or operations type entity, entering into any agreements which
provide such entities with rights of first
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opportunity or contain cooperation provisions of the type or relating to the
matters contained in the Intercompany Agreement (other than with respect to
consulting arrangements). Notwithstanding the foregoing, NAI shall be
permitted to solicit assignments from other REITs or real estate investment or
operations type entities with respect to the purchase or sale of real estate
or the provision of Real Estate Related Services, subject to Kranzco's rights
of first opportunity and notification.
NAI Right of First Opportunity for Services Opportunity
The Intercompany Agreement provides that if Kranzco requires Services
(as defined below) (a "Services Opportunity"), Kranzco shall engage in
discussions with NAI regarding such Services Opportunity prior to retaining
another service provider to perform such Services unless, in the reasonable
judgment of Kranzco, offering such Services Opportunity to NAI would be
detrimental to Kranzco. Notwithstanding the foregoing, (i) Kranzco shall have
no obligation to retain NAI to perform any Services for Kranzco and (ii) any
Services provided by NAI to Kranzco shall (a) be at market rates and (b) on
terms and conditions as attractive as the best available for comparable
services offered by NAI or, to the extent within NAI's control, any broker
member or affiliated member of NAI to third parties. "Services" means real
estate brokerage services, local management and other maintenance services,
and certain other Real Estate-Related Services then provided by NAI, including
sealed-bid sales, due diligence and real estate auctions.
The Intercompany Agreement also provides that in the event Kranzco
desires to purchase any retail real estate based upon an opportunity provided
to Kranzco by someone other than NAI (a "Purchase Opportunity"), Kranzco will
notify NAI of such Purchase Opportunity and will use its good faith efforts to
cause the broker for such Purchase Opportunity to share any brokerage
commissions for such Purchase Opportunity with NAI in accordance with industry
practice; provided, however, Kranzco is not required to comply with the
foregoing if the Purchase Opportunity is based upon an exclusive brokerage
arrangement or, if in the reasonable judgment of Kranzco, compliance with the
foregoing would be detrimental to the relationship between Kranzco and such
broker or would impede, inhibit or slow down the proposed transaction. In
connection with a Purchase Opportunity in which NAI will be sharing in the
brokerage commission, NAI agrees to perform, without any consideration, any
due diligence services requested by Kranzco.
In addition, in the event NAI desires to offer to Kranzco tenants any
Services currently provided by NAI (a "Tenant Services Opportunity"), NAI
shall notify Kranzco in writing of such Tenant Services Opportunity. Promptly
following the receipt of such notice, Kranzco has agreed to provide NAI with a
list of the mailing addresses of its tenants solely for purpose of NAI
soliciting such tenant with respect to such Tenant Services Opportunity. If
NAI notifies Kranzco of a Tenant Services Opportunity, Kranzco shall not for a
period of six months after NAI notifies Kranzco of a Tenant Services
Opportunity provide a list of the mailing addresses of its tenants to a
competitor of NAI with respect to such Tenant Services Opportunity.
Certain Employee Matters
NAI and Kranzco have agreed to make reasonable and ongoing efforts to
ensure that members of management of each of NAI and Kranzco are given
appropriate salary, bonus and options and other compensation as may be
reasonably necessary to incentivize management to enhance value to
shareholders of both NAI and Kranzco. The NAI Board and the Kranzco Board will
direct each of their compensation committees to take into consideration the
objective set forth in the previous sentence in establishing compensation
levels and performance criteria for management of NAI and Kranzco. In order to
further this objective, NAI will grant to selected directors, officers,
employees and consultants of Kranzco and NAI five-year options to purchase an
aggregate of 1,378,800 NAI Shares at a price of $2.00 per NAI Share.
NAI and Kranzco also agreed to use their best efforts to cause, for a
period of three years from the date of the Intercompany Agreement, (i) Norman
Kranzdorf to serve as NAI's Co-Chairman, (ii) Robert Dennis to serve
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as NAI's Chief Financial Officer, and (iii) Michael Kranzdorf to serve as
NAI'S Chief Information Officer. NAI acknowledged in the Intercompany
Agreement that Norman Kranzdorf, Robert Dennis and Michael Kranzdorf, as
officers of Kranzco, will have a primary responsibility to Kranzco and that
none of such individuals are committed to devoting a specific amount of time
to NAI's affairs.
Consulting Services
Pursuant to the terms of the Intercompany Agreement, Kranzco has
agreed to provide NAI with such consulting services relating to management
administrative, corporate, accounting, financial, legal, equity offering,
insurance, tax, data processing, human resources and operational matters as
NAI shall from time to time reasonably request. In consideration for Kranzco
entering into the Intercompany Agreement and providing such consulting and
administrative services, NAI has agreed, during the term of the Intercompany
Agreement or until such earlier date as the consulting arrangement is
terminated in accordance with its terms, to pay Kranzco an annual fee of
$500,000, payable in equal monthly installments on the first day of each
month. NAI may terminate the consulting arrangement at any time after the
fifth anniversary of the date of the Intercompany Agreement, by providing
Kranzco 90 days prior written notice of its intention to terminate such
consulting arrangement.
REIT Compliance
Nothing in the Intercompany Agreement obligates any party to take any
action that could cause Kranzco to lose its qualification as a REIT under the
Code.
Cooperation in Equity Offerings
The Intercompany Agreement also provides that, if either Kranzco or
NAI desires to engage in a public or private offering of its debt or equity
securities, the other party shall cooperate and provide such information and
personnel as is reasonably required in connection with such offering.
Term
The Intercompany Agreement has a term of ten years and may be
terminated by a party only if the other party or any affiliate of such other
party is in default of the Intercompany Agreement or any other agreement
entered into by the parties thereto or any of their controlled affiliates, if
such default is material and remains uncured for fifteen days after receipt of
notice thereof.
THE DISTRIBUTION
Background and Reasons for the Distribution
Kranzco is a self-administered and self-managed equity REIT engaged
in the business of owning, managing, operating, leasing, acquiring and
expanding neighborhood and community shopping centers and, to a lesser extent,
free-standing retail properties. Kranzco is limited in its activities by the
investment limitations imposed by Federal income tax laws applicable to REITs,
which (i) limit the amount of income that a REIT can realize from certain
services that are not customarily furnished or rendered in connection with the
rental of real property in a particular geographic area, and (ii) limit
Kranzco's ownership in corporations other than REITs and qualified REIT
subsidiaries (a) to 10% of the outstanding voting securities of such
corporation, and (b) in that the value of any one corporation's securities
cannot exceed 5% of the value of Kranzco's total assets. Kranzco believes that
significant opportunities are available to investors in entities which provide
brokerage and Real Estate-Related Services, own properties other than
neighborhood and community shopping centers, and which are not limited in
their activities by the investment limitations imposed by Federal income tax
laws applicable to REITs. Accordingly, in light of the limitations on
investments imposed on REITs, Kranzco believes that effecting the Exchange
Offer, the
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Distribution, the Rights Offering and the Concurrent Offering, and
establishing an intercompany relationship between Kranzco and NAI will yield
significant benefits to Kranzco and its shareholders similar to those which
may be obtained by investors who are not so limited, while preserving
Kranzco's REIT status. For Kranzco, these benefits include:
o increased opportunities to acquire retail properties which
become available for sale through the Network, which might
not otherwise be available to Kranzco;
o greater access to a diverse range of tenants, in order to
re-tenant vacant space owned by Kranzco, including access to
non-retail tenants looking for space appropriate for office,
warehouse or other non-retail uses;
o the ability to enter into agreements with NAI to have NAI
develop new shopping centers or redevelop distressed
shopping centers for sale to Kranzco;
o the ability to enter into new geographic areas with the
assistance of NAI's real estate professionals;
o NAI disseminating Kranzco's acquisition criteria to Broker
Members through the Network, in order to create additional
opportunities to purchase retail properties;
o increased opportunities to purchase additional retail
properties which are included in portfolios with non-retail
properties, utilizing NAI to purchase the non-retail
properties or find a purchaser for the non-retail
properties;
o access to NAI's sophisticated, real estate oriented computer
network, which includes information on real estate
transactions, market conditions and demographics;
o the ability to purchase Real Estate-Related Services at
competitive prices;
o the ability to own an equity interest in a company which
owns real estate and provides Real Estate- Related Services
which Kranzco, as a REIT, could not directly own or provide;
and
o access to local property managers where Kranzco may own
retail properties, and the opportunity for Kranzco to manage
retail properties owned by NAI.
NAI operates a network of independently owned, licensed real estate
Broker Members throughout the United States and, more recently, abroad, to
provide commercial real estate services to regional, national and
international Clients. NAI believes that a strategic relationship between
companies which provide real estate brokerage and services, such as NAI, and
companies which own and operate real estate, such as Kranzco, would provide
significant benefits and opportunities. For NAI, the benefits of entering into
the strategic relationship and consummating the Related Transactions (and
under certain circumstances, to the extent proceeds are available through the
Rights Offering and the Concurrent Offering) include:
o the opportunity as a public company, to raise additional
capital through the Rights Offering and the Concurrent
Offering and, to the extent possible, future equity and debt
offerings;
o the ability to expand its Corporate Services Department,
Investment Sales Department and Broker Services Department;
o the ability to invest in or acquire Broker Members or other
real estate service firms in order to strengthen the Network;
o access to new transactions by providing real estate brokerage
services to Kranzco through NAI's Network;
o the ability to accelerate the development of information
services and technology infrastructure to more efficiently
deliver services;
o the opportunity to offer to Kranzco Real Estate-Related
Services which NAI may develop;
o
the opportunity to further develop existing Real
Estate-Related Services and to acquire or develop businesses
that provide Real Estate-Related Services;
o the ability to accelerate Network growth in international
markets;
o providing Broker Members the opportunity to manage selected
Kranzco shopping centers;
o the opportunity to enter into agreements with Kranzco to
have NAI develop new shopping centers or re-develop
distressed shopping centers for sale to Kranzco; and
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o expansion of its business through access to the real estate
expertise of Kranzco's management.
In the past Kranzco and NAI have worked together in a mutually
beneficial relationship. In December 1997, NAI's Investment Sales Department
assisted Kranzco in arranging for the acquisition of five shopping centers,
aggregating approximately 650,000 square feet of GLA, for approximately $44
million. NAI's Investment Sales Department initiated this opportunity, and
assisted Kranzco in acquiring the properties. Kranzco's acquisition of such
properties generated $100,000 in fee income to NAI. Kranzco and NAI expect
that the Intercompany Agreement will set forth a framework for a mutually
beneficial relationship in the future. See "Related Transactions--The
Intercompany Agreement."
A small number of REITs, operating under tax provisions that no
longer are available, have shares that are "paired" or "stapled" with shares
of a related operating company. The NAI Shares and Kranzco Common Shares are
not, and will not be, paired or stapled in any manner and may be owned and
transferred separately and independently of each other. However, shareholders
who own NAI Shares and Kranzco Common Shares will in effect have the economic
equivalent of a paired investment in NAI and Kranzco.
The Kranzco Board recognized in its planning that the Distribution
would result in a transaction taxable to Kranzco stockholders (based on
Kranzco's current and accumulated earnings and profits) and possibly to
Kranzco depending on the fair market value of the NAI Shares on the
Distribution Effective Date. Upon review of this and other relevant factors,
the Kranzco Board concluded that the benefits of the Distribution would more
than offset any negative tax consequences of the Distribution. See "Certain
United States Federal Tax Considerations--Material Federal Income Tax
Consequences of the Distribution."
Since the Distribution will be effected on the same day that Kranzco
acquires the NAI Shares, Kranzco believes that no gain or loss will be
recognized by it in connection with the Distribution because the fair market
value of the NAI Shares should be equal to their tax basis.
Distribution Agent
The Distribution Agent is First Union National Bank, 1525 West W.T.
Harris Boulevard, 3C3, Charlotte, North Carolina 28262-1153, telephone: (800)
829-8432.
Manner of Effecting the Distribution
Kranzco will effect the Distribution on the Distribution Effective
Date by delivering 12,005,185 NAI Shares, which represents approximately 70.2%
of the outstanding NAI Shares, to the Distribution Agent for distribution to
the holders of the outstanding Kranzco Common Shares and Kranzco Common Share
Equivalents as of the close of business on the Distribution Record Date. The
Distribution will be made on the basis of one NAI Share for each Kranzco
Common Share and one NAI Share for each Kranzco Common Share Equivalent held
as of the close of business on the Distribution Record Date. The NAI Shares
will be fully paid and nonassessable, and the holders thereof will not be
entitled to preemptive rights. See "Description of Securities." It is expected
that certificates representing NAI Shares will be mailed to holders of Kranzco
Common Shares and Kranzco Series B Preferred Shares as soon as practicable
after the Distribution Effective Date.
HOLDERS OF KRANZCO COMMON SHARES SHOULD NOT SEND CERTIFICATES TO NAI,
KRANZCO OR THE DISTRIBUTION AGENT. THE DISTRIBUTION AGENT WILL MAIL THE STOCK
CERTIFICATES REPRESENTING NAI SHARES AS SOON AS PRACTICABLE AFTER THE
DISTRIBUTION EFFECTIVE DATE. KRANZCO SHARE CERTIFICATES WILL CONTINUE TO
REPRESENT KRANZCO COMMON SHARES AND SERIES B PREFERRED SHARES AFTER THE
DISTRIBUTION IN THE SAME AMOUNT SHOWN ON THE CERTIFICATES.
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No holder of Kranzco Common Shares will be required to pay any cash
or other consideration for the NAI Shares to be received in the Distribution
or to surrender or exchange Kranzco Common Shares or to take any other action
in order to receive NAI Shares pursuant to the Distribution.
Results of the Distribution
Upon the consummation of the Distribution, NAI will be an independent
public company which will continue to conduct its business of providing real
estate brokerage and related services to Clients. Kranzco will own
approximately 9.8% of the outstanding NAI Shares, Kranzco shareholders will
own approximately 70.2% of the outstanding NAI Shares and the persons who
owned NAI Shares prior to the Exchange Offer will own an aggregate of
approximately 20% of the NAI Shares. Although the NAI Shares will be eligible
for quotation and trading on the OTC Bulletin Board after the Distribution,
the NAI Shares are not currently quoted on the OTC Bulletin Board or listed on
any national securities exchange or approved for quotation on any quotation
system, and there can be no assurance that a public market for the NAI Shares
will develop or provide liquidity. See "Risk Factors--Arbitrary Determination
of Offering Price" and "--Absence of Prior Market; Trading Prices."
THE RIGHTS OFFERING
The Rights
NAI is distributing, to the record holders of outstanding NAI Shares
as of __________ __, 1998 (the "Rights Record Date"), including holders of
Kranzco Common Shares and Kranzco Common Share Equivalents who receive NAI
Shares in the Distribution, at no cost to them, transferable Rights to
purchase additional NAI Shares at a Subscription Price of $2.00 per NAI Share.
NAI will distribute one Right for each NAI Share held on the Rights Record
Date. Each Right will entitle its Holder to purchase one NAI Share. The Rights
to purchase NAI Shares pursuant to the Basic Subscription Privilege and the
Oversubscription Privilege will be evidenced by transferable subscription
certificates (the "Subscription Certificates"). An aggregate of 17,101,403
Underlying Shares will be sold if all Rights are exercised. The Finns have
advised NAI that they intend to exercise Rights to purchase an aggregate of
500,000 NAI Shares and Kranzco has advised NAI that it intends to exercise
such number of Rights to purchase NAI Shares that would result in Kranzco
owning approximately 9.8% of the issued and outstanding NAI Shares, before the
issuance of any Additional Shares. To the extent Underlying Shares are not
purchased in the Rights Offering such unsubscribed shares will be offered to
the Executive Group and the Broker Member Group in the Concurrent Offering. In
order to ensure that the Broker Member Group will have the right to purchase
NAI Shares, NAI has authorized an additional 2,000,000 NAI Shares for issuance
pursuant to the Broker Member Group Subscription Privilege. There is no
minimum number of Underlying Shares required to be sold as a condition to the
consummation of the Rights Offering or the Concurrent Offering.
Subscription Privileges
Basic Subscription Privilege. Each Right will entitle the Holder
thereof to receive, upon payment of the Subscription Price, one NAI Share.
Certificates representing NAI Shares purchased pursuant to the Basic
Subscription Privilege will be delivered to subscribers as soon as practicable
after the closing date, irrespective of whether the Subscription Privilege is
exercised immediately prior to the Expiration Date or earlier. Holders
exercising their Subscription Privilege will not be stockholders of record
with respect to the shares issuable pursuant to such Subscription Privilege
until the closing of the Rights Offering, which is anticipated to occur five
Business Days after the Expiration Date. The term "Business Day" shall mean
any day, other than a Saturday or Sunday, that is neither a legal holiday nor
a day on which banking institutions in New York City are authorized or
required by law, regulation or executive order to close.
Oversubscription Privilege. Subject to the allocation described
below, each Right also carries the right to subscribe at the Subscription
Price for any Underlying Shares not subscribed for through the exercise of
Basic
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Subscription Privileges by other Holders. If the remaining Underlying Shares
are not sufficient to satisfy all subscriptions pursuant to the
Oversubscription Privilege, such Underlying Shares will be allocated pro rata
(subject to the elimination of fractional shares) among those Holders
exercising the Oversubscription Privilege, in proportion, not to the number of
shares requested pursuant to the Oversubscription Privilege, but to the number
of shares each Holder exercising the Oversubscription Privilege subscribed for
pursuant to the Basic Subscription Privilege; provided, however, that if such
pro rata allocation results in any Holder being allocated a greater number of
Underlying Shares than such Holder subscribed for pursuant to the exercise of
such holder's Oversubscription Privilege, then such Holder will be allocated
only such number of Underlying Shares as such Holder subscribed for and the
remaining Underlying Shares will be allocated among all other Holders
exercising the Oversubscription Privilege. Only beneficial holders who
exercise the Basic Subscription privilege in full will be entitled to exercise
the Oversubscription Privilege. Certificates representing the Underlying
Shares purchased pursuant to the Oversubscription Privilege will be delivered
to subscribers as soon as practicable after the closing date and after all
prorations have been effected.
The Basic Subscription Privilege and the Oversubscription Privilege
are referred to herein as the "Subscription Privileges."
Limitation on Exercise of Rights
The Rights may not be exercised by residents of the state of North
Dakota unless such residents are holders of NAI Shares. The Rights may not be
exercised by residents of the state of California unless such residents are
"qualified purchasers" under the laws of the state of California, and the
resident makes a representation that such resident is purchasing the
Underlying Shares for his or her own account (or trust account, if such
resident is a trustee) for investment and not with a view to or for sale in
connection with any distribution of the Underlying Shares (the "California
Representation"). A "qualified purchaser", under California law, includes:
(i) any person who purchases $150,000 or more of the securities offered in the
transaction, provided each such person meets either one of the following, or
who the issuer reasonably believes comes within either of the following: (x)
such person, or such person's professional advisor, has the capacity to
protect such person's own interests in connection with the transaction, where
by reason of their business or financial experience or the business or
financial experience of their professional advisors who are unaffiliated with
and who are not compensated by the issuer or any affiliate or selling agent of
the issuer, directly or indirectly, could be reasonably assumed to have the
capacity to protect their own interests in connection with the transaction; or
(y) the investment (including mandatory assessments) does not exceed 10% of
such person's net worth or joint net worth with that person's spouse;
(ii) any person who comes within one of the categories of an "accredited
investor" (as defined below) in Rule 501(a) of Regulation D promulgated under
the Securities Act;
(iii) any entity in which all of the equity owners are persons representing
any organization described in Section 501(c)(3) of the Internal Revenue Code,
which has total assets (including endowment, annuity and life income funds) of
not less than $5,000,000 according to its most recent audited financial
statement;
(iv) any corporation which has a net worth on a consolidated basis according
to its most recent audited financial statement of not less than $14,000,000,
provided that, if the securities being acquired pursuant to an exemption under
this subsection are common stock of a corporation or securities exchangeable
for or convertible into common stock of a corporation, (x) the holders of less
than 25% of the outstanding shares of such common stock have addresses in this
state according to the records of the issuer of such common stock; or (y) such
securities will not represent more than 5% of the total number of outstanding
shares of common stock of the issuer assuming the exchange or conversion of
all securities exchangeable for or convertible into common stock provided,
however, that the foregoing limitations with respect to transactions in common
shares or securities convertible into common shares
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shall not apply to a transaction in which such securities are offered pro rata
to the holders of the outstanding common shares or which is approved by the
holders of 75% or more of the outstanding common shares;
(v) a bank, savings and loan association, trust company, insurance company,
investment company registered under the Investment Company Act of 1940,
pension or profit-sharing trust or other institutional investor or
governmental agency or instrumentality that the commissioner may designate by
rule, whether the purchaser is acting for itself or as trustee;
(vi) to any corporation with outstanding shares registered under Section 12 of
the Exchange Act or any wholly owned subsidiary of such a corporation that
after the offer and sale will own directly or indirectly 100% of the
outstanding capital stock of the issuer;
(vii) a self-employed individual retirement plan, or an individual retirement
account if the investment decisions made on behalf of the trust, plan, or
account are made solely by persons who are qualified purchasers;
(viii) an organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership,
each with total assets in excess of five million dollars ($5,000,000)
according to its most recent audited financial statements;
(ix) a natural person who, either individually or jointly with the person's
spouse, (y) has a minimum net worth of two hundred fifty thousand dollars
($250,000) and had, during the immediately preceding tax year, gross income in
excess of one hundred thousand dollars ($100,000) and reasonably expects gross
income in excess of one hundred thousand dollars ($100,000) during the current
tax year or (z) has a minimum net worth of five hundred thousand dollars
($500,000) ("net worth" shall be determined exclusive of home, home
furnishings, and automobile; other assets included in the computation of net
worth may be valued at fair market value); and (x) each natural person
specified above, by reason of his or her business or financial experience, or
the business or financial experience of his or her professional advisor, who
is unaffiliated with and who is not compensated, directly or indirectly, by
the issuer or any affiliate or selling agent of the issuer, can be reasonably
assumed to have the capacity to protect his or her interests in connection
with the transaction (the amount of the investment of each natural person
shall not exceed 10% of the net worth, as determined above, of that natural
person).
A corporation, partnership, or other organization specifically formed
for the purpose of acquiring the securities offered by the issuer in reliance
upon this exemption may be a qualified purchaser if each of the equity owners
of the corporation, partnership, or other organization is a qualified
purchaser.
An "Accredited Investor" includes, any bank as defined in Section
3(a)(2) of the Securities Act or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; any broker dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance
company as defined in Section 2(13) of the Securities Act; any investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of such Act; any Small
Business Investment Company licenced by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of 1958; any
plan established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess of
$5,000,000; any employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision is made by
a plan fiduciary, as defined in Section 3(21) of such Act, which is either a
bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000, or if a self-directed plan, with investment decisions made
solely by persons that are accredited investors; any private business
development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940; any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the
securities offered, with total
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assets in excess of $5,000,000; any director, executive officer, or general
partner of the issuer of the securities being offered or sold, or any
director, executive officer, or general partner of that issuer; any natural
person whose individual net worth, or joint net worth with that person's
spouse, at the time of his purchase exceeds $1,000,000; any natural person who
had an individual income in excess of $200,000 in each of the two most recent
years or joint income with that person's spouse in excess of $300,000 in each
of those years and has a reasonable expectation of reaching the same income
level in the current year; any trust with total assets in excess of
$5,000,000, not formed for the specific purpose acquiring the securities
offered, whose purchase is directed by a sophisticated person as described in
Rule 506(b)(2)(ii); and any entity in which all of the equity owners are
accredited investors.
Expiration Date
The Rights will expire at 5:00 p.m., New York time, on __________ __,
1998 unless extended by NAI from time to time. Notwithstanding the foregoing,
the Expiration Date in no event shall be later than __________ __, 1998 [90
days after the launch of the Rights Offering]. After the Expiration Date,
unexercised Rights will be null and void. NAI will not be obligated to honor
any purported exercise of Rights received by the Subscription Agent after the
Expiration Date, regardless of when the documents relating to such exercise
were sent, except pursuant to the Guaranteed Delivery Procedures described
below.
Exercise of Rights
Rights may be exercised by delivering to the Subscription Agent, on
or prior to 5:00 p.m., New York time, on the Expiration Date, the properly
completed and executed Subscription Certificate evidencing such Rights with
any required signatures guaranteed, together with payment in full of any
Underlying Shares being subscribed for pursuant to the Subscription Privileges
(except as permitted pursuant to clause (iii) of the next sentence). Such
payment in full must be by: (i) check or bank draft drawn upon a U.S. bank or
postal telegraphic or express money order payable to First Union National
Bank, as Subscription Agent; or (ii) wire transfer of funds to the account
maintained by the Subscription Agent for such purpose; or (iii) in such other
manner as NAI may approve in writing in the case of persons acquiring
Underlying Shares at an aggregate Subscription Price of $500,000 or more,
provided in each case that the full amount of such Subscription Price is
received by the Subscription Agent in currently available funds within five
Business Days following the Expiration Date (the payment method under (iii)
being an "Approved Payment Method"). Payment of the Subscription Price will be
deemed to have been received by the Subscription Agent only upon (a) clearance
of any uncertified check, (b) receipt by the Subscription Agent of any
certified check or bank draft drawn upon a United States bank or of any
postal, telegraphic or express money order, (c) receipt of good funds in the
Subscription Agent's account designated above, or (d) receipt of good funds by
the Subscription Agent through an Approved Payment Method.
If paying by uncertified personal check, please note that the funds
paid thereby may take at least five business days to clear. Accordingly,
Holders who wish to pay the Subscription Price by means of uncertified
personal check are urged to make payment sufficiently in advance of the
Expiration Date to ensure that such payment is received and clears by such
date and are urged to consider payment by means of certified or cashier's
check, money order or wire transfer of funds.
-65-
<PAGE>
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
<TABLE>
<S> <C>
- ---------------------------------------------------------- ------------------------------------------------------
By Regular Mail: By Overnight Courier:
First Union National Bank First Union National Bank
1525 West W.T. Harris Boulevard, 3C3 1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
Telephone: (800) 829-8432 Telephone: (800) 829-8432
- ---------------------------------------------------------- ------------------------------------------------------
New York Drop: Facsimile Transmission:
First Union National Bank (704) 590-7628
40 Broad Street - 5th Floor, Suite 550 Confirm by Telephone:
New York, New York 10004 (800) 829-8432
- ---------------------------------------------------------- ------------------------------------------------------
</TABLE>
Funds received in payment of the Subscription Price for the
Underlying Shares subscribed for pursuant to the Oversubscription Privilege
will be held in a segregated account pending issuance of such Underlying
Shares. If a Holder exercising an Oversubscription Privilege is allocated less
than all of the Underlying Shares that such Holder wished to subscribe for,
the excess funds paid by such Holder in respect of the Subscription Price for
shares not issued shall be returned by mail without interest or deduction as
soon as practicable after the closing date.
A holder who holds NAI Shares for the account of others, such as a
broker, a trustee or a depository for securities, should notify the respective
beneficial owners of such shares as soon as possible to ascertain such
beneficial owner's intentions and to obtain instructions with respect to the
Rights. If the beneficial owner so instructs, the record Holder of such Rights
should complete the Subscription Certificate and submit it to the Subscription
Agent with the proper payment. In addition, the beneficial owner of NAI Shares
or Rights held through such a holder of record should contact the Holder and
request the Holder to effect transactions in accordance with the beneficial
owner's instructions.
Unless a Subscription Certificate (i) provides that the NAI Shares to
be issued pursuant to the exercise of Right represented thereby are to be
delivered to the Holder or (ii) is submitted for the account of an Eligible
Guarantor Institution (as defined below), signatures on such Subscription
Certificate must be guaranteed by an Eligible Guarantor Institution.
If either the number of Underlying Shares being subscribed for
pursuant to the Basic Subscription Privilege is not specified on the
Subscription Certificate, or the amount delivered is not enough to pay the
Subscription Price for all Underlying Shares stated to be subscribed for, the
number of Underlying Shares subscribed for will be assumed to be the maximum
amount that could be subscribed for upon payment of such amount. If the number
of Underlying Shares being subscribed for is not specified, or payment of the
Subscription Price for the indicated number of Rights that are being exercised
exceeds the required Subscription Price, the payment will be applied, until
depleted, to subscribe for Underlying Shares in the following order: (i) to
subscribe for the number of Underlying Shares indicated, if any, pursuant to
the Basic Subscription Privilege, (ii) to subscribe for Underlying Shares
until the Basic Subscription Privilege has been fully exercised with respect
to all of the Rights represented by the Subscription Certificate; and (iii) to
subscribe for additional Underlying Shares pursuant to the Oversubscription
Privilege (subject to any applicable proration).
The Instructions included in the Subscription Certificates should be
read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES
TO NAI.
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<PAGE>
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF
THE SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND
RISK OF THE RIGHTS HOLDER, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO
5:00 P.M., NEW YORK TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL
CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, THE RIGHTS HOLDER IS
STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR
CASHIERS CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
The closing of the Rights Offering will occur promptly after the
Expiration Date. If the closing of the Rights Offering does not occur promptly
upon the Expiration Date, all amounts paid by holders of Rights as payment of
the Subscription Price will be promptly refunded.
All questions concerning the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by NAI, whose
determinations will be final and binding. NAI, in its sole discretion, may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported
exercise of any Right. Subscriptions will not be deemed to have been received
or accepted until all irregularities have been waived or cured within such
time as NAI determines in its sole discretion.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus or the
Instructions or the Notice of Guaranteed Delivery should be directed to the
Subscription Agent, telephone number (800) 829-8432.
Late Delivery of Subscription Certificates
If a Holder wishes to exercise Rights, but time will not permit such
Holder to cause the Subscription Certificates evidencing such Rights to reach
the Subscription Agent on or prior to the Expiration Date, such Rights may
nevertheless be exercised if all of the following conditions (the "Guaranteed
Delivery Procedures") are met:
(i) such Holder has caused payment in full of the
Subscription Price for each Underlying Share being subscribed for
pursuant to Subscription Certificate to be delivered to the
Subscription Agent on or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the
Expiration Date, a guaranteed notice (a "Notice of Guaranteed
Delivery"), substantially in the form provided with the Instructions
as to Use of New America International, Inc. Subscription
Certificates (the "Instructions") distributed with the Subscription
Certificates, from an "Eligible Guarantor Institution" (as defined in
Rule 17Ad-15 under the Exchange Act), stating the name of the
exercising Holder, the number of Rights represented by the
Subscription Certificate(s) held by such exercising Holder, the
number of Underlying Shares being subscribed for pursuant to the
Subscription Privileges and guaranteeing the delivery to the
Subscription Agent of any Subscription Certificate(s) evidencing such
Rights within three Business Days following the date of the Notice of
Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate(s),
with any required signatures guaranteed, is received by the
Subscription Agent within three Business Days following the date of
the Notice of Guaranteed Delivery relating thereto. The Notice of
Guaranteed Delivery may be delivered to the Subscription Agent in the
same manner as Subscription Certificates at the addresses set forth
above, or may be transmitted to the Subscription Agent by facsimile
transmission (telecopy number (704) 590-7598).
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<PAGE>
Additional copies of the form of Notice of Guaranteed Delivery are
available upon request from the Subscription Agent, whose address and
telephone number are set forth under "Subscription Agent" below.
No Revocation
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION
PRIVILEGE OR THE OVERSUBSCRIPTION PRIVILEGE SUCH EXERCISE MAY NOT BE REVOKED.
Method of Transferring Rights
The Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the accompanying instructions. A portion of the Rights
evidenced by a single Subscription Certificate may be transferred by
delivering to the Subscription Agent a Subscription Certificate properly
endorsed for transfer, with instructions to register such portion of the
Rights evidenced thereby in the name of the transferee and to issue a new
Subscription Certificate to the transferee evidencing such transferred
Rights). In such event, a new Subscription Certificate evidencing the balance
of the Rights will be issued to the Holder or, if the Holder so instructs, to
an additional transferee.
Holders wishing to transfer all or a portion of their Rights should
allow a sufficient amount of time prior to the Expiration Date for (i) the
transfer instruction to be received and processed by the Subscription Agent,
(ii) a new Subscription Certificate to be issued and transmitted to the
transferee or transferees with respect to the transferred Rights, and to the
transferor with respect to retained Rights, if any, and (iii) the Rights
evidenced by such new Subscription Certificates to be exercised or sold by the
recipients thereof. If time does not permit a transferee of a Right who wishes
to exercise its Right to deliver its Subscription Certificate to the
Subscription Agent on or before the Expiration Date, such transferee should
make use of the Guaranteed Delivery procedure described under "The Rights
Offering -- Exercise of Rights." Neither NAI nor the Subscription Agent shall
have any liability to a transferee or transferor or Rights if Subscription
Certificates or new Subscription Certificates are not received in time for
exercise or sale prior to the Expiration Date.
All commissions, fees and other expenses (including brokerage
commissions and transfer taxes) incurred in connection with the purchase, sale
or exercise of Rights will be for the account of the transferor or subscriber
of the Rights, and none of such commissions, fees or expenses will be paid by
NAI or the Subscription Agent.
Subscription Agent
NAI has appointed First Union National Bank as Subscription Agent for
the Rights Offering. Any questions or requests for additional copies of this
Prospectus or the Notice of Guaranteed Delivery may be directed to the
Subscription Agent at the telephone number and address below. The Subscription
Agent's address, which is the address to which the Subscription Certificates
and payment of the Subscription Price should be delivered, as well as the
address to which Notice of Guaranteed Delivery must be delivered, and the
Subscription Agent's telephone number and facsimile number, are:
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<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------- --------------------------------------------------------
By Regular Mail: By Overnight Courier:
First Union National Bank First Union National Bank
1525 West W.T. Harris Boulevard, 3C3 1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
Telephone: (800) 829-8432 Telephone: (800) 829-8432
- -------------------------------------------------------- --------------------------------------------------------
New York Drop: Facsimile Transmission:
First Union National Bank (704) 590-7628
40 Broad Street - 5th Floor, Suite 550 Confirm by Telephone:
New York, New York 10004 (800) 829-8432
- -------------------------------------------------------- --------------------------------------------------------
</TABLE>
NAI will pay the fees and expenses of the Subscription Agent, and
will also agree to indemnify it from any liability which it may incur in
connection with the Rights Offering.
THE CONCURRENT OFFERING
The Concurrent Privileges
Executive Group Subscription Privilege. Simultaneously with the
Rights Offering, NAI is offering to the Executive Group the right to purchase
any Underlying Shares that are not otherwise subscribed for pursuant to the
Rights Offering ("Excess Shares"), at the Subscription Price, after the Basic
Subscription Privileges and Oversubscription Privileges have been fulfilled.
If the number of Excess Shares is not sufficient to satisfy all subscriptions
pursuant to the Executive Group Subscription Privilege, such Excess Shares
will be allocated pro rata (subject to the elimination of fractional shares)
among those exercising the Executive Group Subscription Privilege, in
proportion to the number of NAI Shares requested pursuant to the Executive
Group Subscription Privilege. There is no assurance that any Excess Shares
will be available for purchase by the Executive Group pursuant to the
Executive Group Subscription Privilege.
Broker Member Group Subscription Privilege. Simultaneously with the
Rights Offering, NAI is offering to the Broker Member Group, the right to
purchase any Excess Shares, at the Subscription Price, after the Executive
Group Subscription Privileges have been fulfilled. NAI has authorized an
additional 2,000,000 Additional Shares in order to ensure that the Broker
Member Group will have the right to purchase an aggregate of 2,000,000 NAI
Shares. If, after fulfillment of the Executive Group Subscription Privilege,
the number of Excess Shares and Additional Shares is not sufficient to satisfy
all subscriptions pursuant to the Broker Member Group Subscription Privilege,
such Excess Shares and Additional Shares will be allocated pro rata (subject
to the elimination of fractional shares) among those exercising the Broker
Member Group Subscription Privilege, in proportion to the number of NAI Shares
requested pursuant to the Broker Member Group Subscription Privilege. There is
no assurance that any person subscribing pursuant to the Broker Member Group
Subscription Privilege will receive all of the NAI Shares for which such
person subscribes.
The Executive Group Subscription Privilege will be evidenced by
non-transferable subscription forms (the "Executive Group Subscription Form").
The Broker Member Group Subscription Privilege will be evidenced by
non-transferable subscription forms (the "Broker Member Subscription Form,"
together with the Executive Group Subscription Form, a "Subscription Form").
The Executive Group Subscription Privilege and the Broker Member Group
Subscription Privilege are collectively referred to herein as the "Concurrent
Privileges." Certificates representing the Excess Shares or Additional Shares,
as the case may be, purchased pursuant to the Executive Group Subscription
Privilege or the Broker Member Group Subscription Privilege will be delivered
to subscribers as soon as practicable after the closing date and after all
prorations have been effected. See "Plan of Distribution."
-69-
<PAGE>
Expiration Date
The Concurrent Privileges will expire at 5:00 p.m., New York time, on
the Expiration Date for the Rights, currently __________ __, 1998 unless
extended by NAI from time to time. Notwithstanding the foregoing, the
Expiration Date in no event shall be later than __________ __, 1998 [90 days
after the launch of the Concurrent Offering]. After the Expiration Date,
unexercised Concurrent Privileges will be null and void. NAI will not be
obligated to honor any purported exercise of the Concurrent Privileges
received by the Subscription Agent after the Expiration Date, regardless of
when the documents relating to such exercise were sent.
Limitations on Subscriptions by Certain Broker Members
NAI's Broker Members and the principals, shareholders, partners,
officers, managers and licensed real estate agents of NAI's Broker Members in
the states of California (other than "qualified purchasers" under the laws of
the state of California who make the California Representation), Florida,
Maryland, North Dakota, South Dakota and Texas are not eligible to participate
in the Concurrent Offering. In addition, in connection with the securities
laws of other states, NAI reserves the right to limit, in its sole discretion,
the number of Shares offered or sold in any state; accordingly, members of the
Broker Member Group in such other states may receive none, or a proportionally
lower number of Shares than other Broker Members.
Exercise of Concurrent Privileges
The Concurrent Privileges may be exercised by delivering to the
Subscription Agent, on or prior to 5:00 p.m., New York time, on the Expiration
Date, the properly completed and executed Subscription Form, evidencing such
Concurrent Privilege, together with payment in full of any Excess Shares or
Additional Shares, as the case may be, pursuant to the Concurrent Privileges
(except as permitted pursuant to clause (iii) of the next sentence). Such
payment in full must be by: (i) check or bank draft drawn upon a U.S. bank or
postal telegraphic or express money order payable to First Union National
Bank, as Subscription Agent; or (ii) wire transfer of funds to the account
maintained by the Subscription Agent for such purpose; or (iii) any Approved
Payment Method. Payment of the Subscription Price will be deemed to have been
received by the Subscription Agent only upon (a) clearance of any uncertified
check, (b) receipt by the Subscription Agent of any certified check or bank
draft drawn upon a United States bank or of any postal, telegraphic or express
money order, (c) receipt of good funds in the Subscription Agent's account
designated above, or (d) receipt of good funds by the Subscription Agent
through an Approved Payment Method.
If paying by uncertified personal check, please note that the funds
paid thereby may take at least five business days to clear. Accordingly,
persons who wish to pay the Subscription Price by means of uncertified
personal check are urged to make payment sufficiently in advance of the
Expiration Date to ensure that such payment is received and clears by such
date and are urged to consider payment by means of certified or cashier's
check, money order or wire transfer of funds.
The address to which the Subscription Forms, and payment of the
Subscription Price should be delivered is:
<TABLE>
<S> <C>
- --------------------------------------------------------- -------------------------------------------------------
By Regular Mail: By Overnight Courier:
First Union National Bank First Union National Bank
1525 West W.T. Harris Boulevard, 3C3 1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
Telephone: (800) 829-8432 Telephone: (800) 829-8432
- --------------------------------------------------------- -------------------------------------------------------
</TABLE>
-70-
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------ ----------------------------------------------------
New York Drop: Facsimile Transmission:
First Union National Bank (704) 590-7628
40 Broad Street - 5th Floor, Suite 550 Confirm by Telephone:
New York, New York 10004 (800) 829-8432
- ------------------------------------------------------------ ----------------------------------------------------
</TABLE>
Funds received in payment of the Subscription Price for the Excess
Shares and/or Additional Shares subscribed for pursuant to the Concurrent
Privileges will be held in a segregated account pending issuance of such
Excess Shares or Additional Shares, as the case may be. If a person exercising
a Concurrent Privilege is allocated less than all of the Excess Shares or
Additional Shares, as the case may be, that such Holder wished to subscribe
for, the excess funds paid by such Holder in respect of the Subscription Price
for shares not issued shall be returned by mail without interest or deduction
as soon as practicable after the closing date.
If either the number of Excess Shares being subscribed for pursuant
to the Concurrent Privileges is not specified on the Subscription Form, or the
amount delivered is not enough to pay the Subscription Price for all Excess
Shares stated to be subscribed for, the number of Excess Shares subscribed for
will be assumed to be the maximum amount that could be subscribed for upon
payment of the amount delivered with the Subscription Form. If the number of
Excess Shares or Additional Shares, as the case may be, being subscribed for
is not specified, or payment of the Subscription Price for the indicated
number of Excess Shares or Additional Shares exceeds the required Subscription
Price, the payment will be applied, until depleted, to subscribe for Excess
Shares or Additional Shares, as the case may be.
The Instructions included in the Subscription Forms should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION FORMS TO NAI.
THE METHOD OF DELIVERY OF SUBSCRIPTION FORMS AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE HOLDER OF SUCH SUBSCRIPTION FORMS, BUT IF SENT BY MAIL IT IS
RECOMMENDED THAT SUCH CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER
OF DAYS BE ALLOWED TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE
OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK TIME, ON THE EXPIRATION DATE. BECAUSE
UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, THE
SUBSCRIBER IS STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF
CERTIFIED OR CASHIERS CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
If the closing of the Rights Offering does not occur promptly after
the Expiration Date, all amounts paid by members of the Broker Member Group
and the Executive Group as payment of the Subscription Price will be promptly
refunded.
All questions concerning the timeliness, validity, form and
eligibility of any exercise of Concurrent Privileges will be determined by
NAI, whose determinations will be final and binding. NAI, in its sole
discretion, may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as it may determine, or reject
the purported exercise of any Concurrent Privileges. Subscriptions will not be
deemed to have been received or accepted until all irregularities have been
waived or cured within such time as NAI determines in its sole discretion.
Any questions or requests for assistance concerning the method of
exercising Concurrent Privileges or requests for additional copies of this
Prospectus should be directed to the Subscription Agent, telephone number
(800) 829-8432.
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<PAGE>
No Revocation
ONCE A MEMBER OF THE EXECUTIVE GROUP OR BROKER MEMBER GROUP HAS
EXERCISED THE EXECUTIVE GROUP SUBSCRIPTION PRIVILEGE OR THE BROKER MEMBER
GROUP SUBSCRIPTION PRIVILEGE, AS THE CASE MAY BE, SUCH EXERCISE MAY NOT BE
REVOKED.
Non Transferability of Concurrent Privileges
THE EXECUTIVE GROUP SUBSCRIPTION FORM AND THE BROKER MEMBER GROUP
SUBSCRIPTION FORM ARE NOT TRANSFERABLE.
Subscription Agent
NAI has appointed First Union National Bank as Subscription Agent for
the Concurrent Offering. Any questions or requests for additional copies of
this Prospectus may be directed to the Subscription Agent at the telephone
number and address below. The Subscription Agent's address, which is the
address to which the Subscription Forms and payment of the Subscription Price
should be delivered, and the Subscription Agent's telephone number and
facsimile number, are:
<TABLE>
<S> <C>
- ------------------------------------------------------------- --------------------------------------------------
By Regular Mail: By Overnight Courier:
First Union National Bank First Union National Bank
1525 West W.T. Harris Boulevard, 3C3 1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
Telephone: (800) 829-8432 Telephone: (800) 829-8432
- ------------------------------------------------------------- --------------------------------------------------
New York Drop: Facsimile Transmission:
First Union National Bank (704) 590-7628
40 Broad Street - 5th Floor, Suite 550 Confirm by Telephone:
New York, New York 10004 (800) 829-8432
- ------------------------------------------------------------- --------------------------------------------------
</TABLE>
NAI will pay the fees and expenses of the Subscription Agent, and
will also agree to indemnify it from any liability which it may incur in
connection with the Concurrent Offering.
MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS
The following general discussion summarizes certain of the material
U.S. federal income tax aspects of the Rights Offering, the Concurrent
Offering and the Distribution. This discussion is a summary for general
information only and does not consider all aspects of U.S. federal income tax
that may be relevant to an NAI stockholder or a Kranzco shareholder in light
of such stockholder's or shareholder's personal circumstances.
This discussion is limited to the U.S. federal income tax
consequences relevant to (i) a NAI Stockholder receiving Rights, (ii) a
Kranzco shareholder receiving NAI Shares in the Distribution or (iii) a member
of the Executive Group or Broker Member Group acquiring Excess Shares or
Additional Shares pursuant to the Concurrent Offering, and, in each case, who
is (i) a citizen or resident (as defined in Section 7701(b)(1) of the Code) of
the United States, (ii) treated as a domestic corporation or a domestic
partnership, or (iii) an estate or trust other than a "foreign estate" or
"foreign trust" as defined in Section 7701(a)(31) of the Code (a "U.S.
Holder"). This discussion does not address the tax consequences to a holder
that is not a U.S. Holder. This discussion is limited to (i) NAI Stockholders
who hold NAI Shares, and will hold the Rights and any NAI Shares acquired upon
the
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<PAGE>
exercise of Rights as capital assets within the meaning of Section 1221 of the
Code, and (ii) Kranzco shareholders who hold Kranzco Common Shares and Kranzco
Common Share Equivalents as capital assets within the meaning of Section 1221
of the Code. This discussion also does not address the U.S. federal income tax
consequences to NAI Stockholders or Kranzco shareholders subject to special
treatment under the U.S. federal income tax laws, such as dealers in
securities or foreign currency, tax-exempt entities, banks, thrift
institutions, insurance companies or other financial institutions, persons
that hold Kranzco Common Shares and Kranzco Common Share Equivalents or the
Rights or NAI Shares acquired by exercising Rights as part of a "straddle," a
"hedge" against currency risk or a "conversion transaction," persons that have
a "functional currency" other than the U.S. dollar, and investors in
pass-through entities. Moreover, the effect of any applicable state, local or
foreign tax laws is not discussed.
This discussion is based on the Code, existing and proposed
regulations thereunder, and current administrative rulings and court
decisions. All the foregoing is subject to change, possibly on a retroactive
basis, and any such change could affect the continuing validity of this
discussion.
EACH NAI STOCKHOLDER, KRANZCO SHAREHOLDER, AND PARTICIPANT IN THE
CONCURRENT OFFERING IS STRONGLY URGED TO CONSULT ITS OWN TAX ADVISOR
CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF
ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO ITS PARTICULAR SITUATIONS.
THE CONTENTS OF THIS PROSPECTUS ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS OR
TAX ADVICE. EACH NAI STOCKHOLDER, KRANZCO SHAREHOLDER, AND PARTICIPANT IN THE
CONCURRENT OFFERING SHOULD CONSULT ITS OWN ATTORNEY, BUSINESS ADVISOR AND/OR
TAX ADVISOR AS TO LEGAL, BUSINESS OR TAX ADVICE.
Federal Income Taxation of the Rights Offering
Distribution of the Rights
Holders of NAI Shares will not recognize taxable income for
federal income tax purposes in connection with the receipt of the Rights.
Stockholder Basis and Holding Period of the Rights
Except as provided in the following sentence, the basis of
the Rights received by a NAI Stockholder as a distribution with respect to
such stockholder's NAI Shares will be zero. If, however, either (i) the fair
market value of the Rights on the date that the Rights are distributed is 15%
or more of the fair market value of the NAI Shares with respect to which they
are received, or (ii) the stockholder properly elects, in his or her federal
income tax return for the taxable year in which the Rights are received, to
allocate basis, then part of his or her basis in NAI Shares will be allocated
between the NAI Shares and the Rights in proportion to the fair market value
of each on the date of the Rights Offering.
The holding period of a stockholder with respect to the
Rights received as a distribution on such stockholder's NAI Shares will
include the stockholder's holding period for the NAI Shares with respect to
which the Rights were issued.
Sale of the Rights
A NAI Stockholder who sells the Rights received in the
Rights Offering prior to exercise will recognize gain or loss equal to the
difference between the amount realized on the sale and such stockholder's
adjusted basis (if any) in the Rights sold. Such gain or loss will be capital
gain or loss if gain or loss from a sale of NAI Shares held by such
stockholder would be characterized as capital gain or loss at the time of such
sale.
-73-
<PAGE>
Generally such capital gain or loss will be classified as
short-term if the stockholder's holding period in the Rights is one year or
less and long-term if the stockholder's holding period in the Rights is more
than one year. In general, under current law, net long-term capital gains are
subject to a maximum marginal tax rate of 28% for individuals, estates and
trusts if the holding period is more than one year but not more than 18
months, and a maximum marginal tax rate of 20% if the holding period is more
than 18 months. Net short term capital gains are taxed at the same rates as
ordinary income. An individual may deduct only $3,000 of net capital losses
(net of capital gains) each year.
Lapse of the Rights
NAI Stockholders who allow the Rights received by them to
lapse will not recognize any gain or loss, and no adjustment will be made to
the basis of the NAI Shares, if any, owned by such stockholders.
Exercise of the Rights, Basis and Holding Period of Shares
NAI Stockholders will not recognize any gain or loss upon
the exercise of Rights. The basis of the NAI Shares acquired through exercise
of the Rights will be equal to the sum of the price paid therefor and the
stockholder's basis in such Rights (if any).
A NAI Stockholder's holding period for the NAI Shares
acquired through exercise of the Rights will begin on the date the Rights are
exercised.
Sale of Shares
The sale of NAI Shares acquired through exercise of the
Rights will result in the recognition of gain or loss to the NAI Stockholder
in an amount equal to the difference between the amount realized on the sale
and the stockholder's adjusted basis in the NAI Shares. Gain or loss on the
sale of such NAI Shares will be classified capital gain or loss taxable in the
manner discussed above in "Sale of the Rights."
Backup Withholding
A U.S. Holder of Rights or NAI Shares may be subject to
"backup withholding" at a rate of 31% with respect to certain "reportable
payments," including dividend payments and, under certain circumstances,
proceeds from the disposition of Rights or NAI Shares. These backup
withholding rules apply if the U.S. Holder, among other things, (i) fails to
furnish a social security number or other taxpayer identification number
("TIN") certified under penalties of perjury within a reasonable time after
the request therefor, (ii) furnishes an incorrect TIN, (iii) fails to report
properly interest or dividends, or (iv) under certain circumstances, fails to
provide a certified statement, signed under penalties of perjury, that the TIN
furnished is the correct number and that such U.S. Holder is not subject to
backup withholding. A U.S. Holder who does not provide NAI with its correct
TIN also may be subject to penalties. Any amount withheld from a payment to a
U.S. Holder under the backup withholding rules is creditable against the U.S.
Holder's federal income tax liability, provided the required information is
furnished to the Service. Backup withholding will not apply, however, with
respect to payments made to certain holders, including corporations and
tax-exempt organizations, provided their exemption from backup withholding is
properly established.
NAI will report to the U.S. Holders of Rights or NAI Shares and to
the Service the amount of any "reportable payments" for each calendar year and
the amount of tax withheld, if any, with respect to such payments.
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Federal Income Taxation of the Distribution
Tax Consequences to Kranzco
To the extent the fair market value of the NAI Shares
distributed in the Distribution to Kranzco Shareholders exceeds Kranzco's tax
basis in such shares, gain will be recognized by Kranzco. Since the
Distribution will be effected on the same day that Kranzco acquires the NAI
Shares (in an arm's length transaction), Kranzco believes that no gain or loss
will be recognized by it in connection with the Distribution because the fair
market value of the NAI Shares should be equal to their tax basis. Assuming
Kranzco qualifies as a REIT and has a dividends paid deduction for
distributions to its shareholders at least equal to its REIT taxable income
(as computed before taking into account the dividends paid deduction), no REIT
level tax will be incurred on account of the Distribution. In the unlikely
event Kranzco recognizes gain in connection with the Distribution, it is
believed that any such gain will not cause Kranzco to fail to meet any of the
income tests that a REIT must satisfy or to incur any significant tax
liabilities.
Tax Consequences to Kranzco Shareholders
The Kranzco Distribution. The distribution of NAI Shares
will be taxable to Kranzco Shareholders to the same extent as any other
distribution made by Kranzco to its shareholders. Thus, so long as Kranzco
qualifies for taxation as a REIT, distributions with respect to its shares of
beneficial interest (the "Kranzco Shares"), including the Distribution, made
out of current or accumulated earnings and profits allocable thereto (and not
designated as capital gain dividends) will be includible by the shareholders
as ordinary income for Federal income tax purposes. For this purpose, the
current and accumulated earnings and profits of Kranzco will be allocated
first to distributions with respect to Series A-1 Preferred Shares, Series B
Preferred Shares, Series C Preferred Shares, Series D Preferred Shares and
then to distributions with respect to Kranzco Common Shares. None of these
distributions will be eligible for the dividends received deduction for
corporate shareholders. Distributions that are designated as capital gain
dividends will be taxed as long-term capital gains (to the extent they do not
exceed Kranzco's actual net capital gain for the taxable year) without regard
to the period for which the shareholder has held his shares. For a U.S.
shareholder who is an individual or an estate or trust, such capital gain
dividends generally will be taxable at the 28% rate applicable to mid-term
capital gain (i.e., gains from the sale of capital assets held for more than
one year but not more than 18 months) except to the extent Kranzco designates
the capital gain dividend as a 20% rate distribution or a 25% rate
distribution, as the case may be, based on certain IRS guidelines. Corporate
shareholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income.
Effective for Kranzco's taxable years beginning on and after January
1, 1998, if Kranzco elects to retain and pay income tax on any net long term
capital gain, domestic shareholders of Kranzco would include in their income
as long term capital gain their proportionate share of such net long term
capital gain. A domestic shareholder would also receive a refundable tax
credit for such shareholder's proportionate share of the tax paid by Kranzco
on such retained capital gains and an increase in its basis in the shares of
Kranzco in an amount equal to the shareholder's includible capital gains less
its share of the tax deemed paid.
Distributions in excess of current or accumulated earnings and
profits will not be taxable to a shareholder to the extent that they do not
exceed the adjusted basis of the shareholder's Kranzco Shares. Shareholders
will be required to reduce the tax basis of their Kranzco Shares by the amount
of such distributions until such basis has been reduced to zero, after which
such distributions will be taxable as capital gain (ordinary income in the
case of a shareholder who holds his Kranzco Shares as a dealer). The tax basis
as so reduced will be used in computing the capital gain or loss, if any,
realized upon sale of the Kranzco Shares. Any loss upon a sale or exchange of
Kranzco Shares by a shareholder who held such Kranzco Shares for six months or
less (after applying certain holding period rules) will generally be treated
as a long-term capital loss to the extent such shareholder previously received
capital gain distributions with respect to such Kranzco Shares.
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Management projects that for a typical Kranzco common shareholder,
the Distribution likely will result in an increase in the shareholder's return
of capital and capital gain, but this result cannot be assured.
Shareholders may not include in their individual Federal income tax
returns any net operating losses or capital losses of Kranzco. In addition,
any distribution declared by Kranzco in October, November or December of any
year payable to a shareholder of record on a specified date in any such month
shall be treated as both paid by Kranzco and received by the shareholder on
December 31 of such year, provided that the distribution is actually paid by
Kranzco no later than January 31 of the following year. Kranzco may be
required to withhold a portion of capital gain distributions to any
shareholders who fail to certify their non-foreign status to Kranzco.
Basis and Holding Period of NAI Shares. A Kranzco
shareholder's basis in the NAI Shares received in the Distribution will equal
the fair market value of such NAI Shares, at the time of the Distribution. A
Kranzco shareholder's holding period for such NAI Shares will begin on the
date of the Distribution.
Sale or Exchange of NAI Shares. Upon the sale or exchange of
NAI Shares to or with a person other than NAI, a U.S. Holder will recognize
capital gain or loss equal to the difference between the amount realized on
such sale or exchange and the holder's adjusted tax basis in such shares. Any
capital gain or loss recognized by an individual, estate or trust will
generally be treated as mid-term capital gain or loss, taxable at a maximum
rate of 28%, if the holder held such shares for more than one year but not
more than 18 months, or as net adjusted capital gain or loss, taxable at a
maximum rate of 20%, if the holder held such shares for more than 18 months.
Backup Withholding
A noncorporate U.S. Holder of Kranzco Shares who is not otherwise
exempt from backup withholding may be subject to backup withholding at the
rate of 31% with respect to distributions paid on, or the proceeds of a sale,
exchange or redemption of, the Kranzco Shares. Generally, backup withholding
applies only when the taxpayer (i) fails to furnish or certify his correct
taxpayer identification number to the payor in the manner requested, (ii) is
notified by the IRS that he has failed to report payments of interest or
dividends properly, or (iii) under certain circumstances, fails to certify
that he has not been notified by the IRS that he is subject to backup
withholding for failure to report interest or dividend payments. Any amounts
withheld under the backup withholding rules from a payment to a U.S. Holder
will be allowed as a credit against the holder's federal income tax liability
or as a refund, provided that the required information is furnished to the
IRS. Holders should consult their own tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining any applicable exemption.
Federal Income Taxation of the Concurrent Offering
To the extent Underlying Shares are not purchased by NAI Stockholders
in the Rights Offering, the remaining Excess Shares, will be subject to
purchase first, pursuant to the Executive Group Subscription Privilege and
second, pursuant to the Broker Member Group Subscription Privilege. NAI
believes that the Concurrent Privileges are being granted in connection with
services rendered or to be rendered by the recipients and that the grant of
the right to purchase Excess Shares, as well as Additional Shares, pursuant to
the Concurrent Privileges will be treated for Federal income tax purpose as
non-qualified stock options. As such, there are no Federal income tax
consequences at the time the Excess Shares or Additional Shares are offered
pursuant to the Concurrent Privileges. Upon exercise of the Concurrent
Privileges, the holder would recognize as ordinary income an amount equal to
the excess, if any, of the fair market value of the NAI Shares on the date of
exercise over the exercise price paid to acquire such shares. Withholding
taxes may be withheld by NAI in connection with the recognition of such
ordinary income. NAI would be allowed a tax deduction in like amount. The tax
basis of NAI Shares acquired through exercise of the Concurrent Privileges
will equal the price paid therefor and the holding period of such NAI
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Shares would begin on the date of exercise. Gain or loss on the sale of such
NAI Shares would be classified as capital gain or loss taxable in the manner
discussed in "--Federal Income Taxation of the Rights Offering--Sale of the
Rights."
To the extent that any Concurrent Privileges are determined to be not
granted in connection with services rendered or be rendered to NAI, the tax
consequences of the grant of the right to purchase Excess Shares and
Additional Shares, as well as the exercise of the Concurrent Privileges are
unclear and recipients could be taxed at the date of grant based on the fair
market value of such Concurrent Privileges. Recipients of the Concurrent
Privileges should consult with their own tax advisors concerning the tax
treatment of the Concurrent Privileges.
MANAGEMENT
Directors and Executive Officers
NAI's Board of Directors consists of eight members who are divided
into three classes as noted below. Class I consists of two directors whose
terms will expire at the 1999 Annual Meetings of Shareholders. Classes II and
III each consist of three directors whose terms will expire at the 2000 and
the 2001 Annual Meetings of Shareholders, respectively. The names and ages of
the directors and executive officers of NAI and the positions held by them are
set forth in the following table:
<TABLE>
<CAPTION>
Name Age Position Term Expires
---- --- -------- ------------
<S> <C> <C> <C>
Gerald C. Finn 67 Co-Chairman of the Board, Chief Executive 2001
Officer and Director
Jeffrey M. Finn 35 President, Chief Operating Officer and 2000
Treasurer and Director
Norman M. Kranzdorf 67 Co-Chairman and Director 2001
Robert H. Dennis 51 Chief Financial Officer and Director 1999
Michael Kranzdorf 37 Chief Information Officer and Director 2000
Joseph Grossman 64 Director 1999
Peter O. Hanson 64 Director 2001
Bernard J. Korman 66 Director 2000
Norma J. Finn 65 Secretary
</TABLE>
Gerald C. Finn, NAI's principal founder, has served as the Chief
Executive Officer and a Director of NAI since 1974. He also served as NAI's
President from 1974 until 1995. He was elected as Chairman of the Board in May
1990 and became Co-Chairman of the Board upon consummation of the Exchange
Offer and the Reincorporation Merger. Prior to his association with NAI, Mr.
Finn was an active real estate broker and developer for his own account and
for the account of various entities in which he had an equity interest. He is
a licensed real estate broker and a member of NACORE, ICSC and IDRC, and is a
founding member of the Wharton School Real Estate Center.
Jeffrey M. Finn, the son of Gerald C. Finn, has been employed full
time by NAI since January, 1984, and has served as Chief Operating Officer and
President since September 1995, as Treasurer of NAI since December 1987 and
has served as an Executive Vice President of NAI from 1992 to 1995. He has
worked in various
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capacities including brokerage and corporate services, as well as Investment
Sales prior to becoming Vice President- Marketing in 1988. Mr. Finn is a
graduate of Boston University's School of Management and is a licensed Real
Estate Salesperson in the State of New Jersey. Mr. Finn is a member of the
ICSC, IDRC, NACORE and the Wharton Real Estate Center Advisory Board.
Norman M. Kranzdorf became the Co-Chairman of the Board of Directors
of NAI upon consummation of the Reincorporation Merger. Mr. Kranzdorf, a
co-founder of Kranzco, has been a trustee and the President and Chief
Executive Officer of Kranzco since its organization in June 1992. Mr.
Kranzdorf was the President of Kranzco Realty, Inc., a general commercial real
estate management and brokerage company ("Kranzco Realty"), from 1979, when he
founded Kranzco Realty, to 1992. He served as President of Amterre
Development, Inc. ("Amterre") from 1972 to 1981. Amterre, the successor to
Food Fair Properties, Inc., owned and operated over 50 shopping centers, as
well as other single-tenant retail properties, on the Eastern seaboard. Mr.
Kranzdorf was also an officer and director of Kranzco Management, Inc., a
general commercial real estate manager and brokerage company and a
wholly-owned subsidiary of Kranzco Realty, from 1980, when it was founded, to
1992. He is a member of the Board of Governors of NAREIT and a former trustee
of the ICSC.
Robert H. Dennis became the Chief Financial Officer of NAI and a
member of the Board of Directors of NAI upon consummation of the Exchange
Offer and the Reincorporation Merger. Mr. Dennis has been a trustee of Kranzco
since June 1994 and the Chief Financial Officer and Treasurer of Kranzco since
its organization in June 1992. Prior thereto he was the Chief Financial
Officer and Assistant Secretary of Kranzco Realty from 1981 to 1992.
Michael Kranzdorf became the Chief Information Officer of NAI and a
member of the Board of Directors of NAI upon consummation of the Exchange
Offer and the Reincorporation Merger. Mr. Kranzdorf was named Director of
Information Systems at Kranzco Realty Trust in 1994 and was elected a Vice
President of Kranzco in June 1996. He has been with Kranzco since 1987 as a
programmer and designer. Mr. Kranzdorf received his B.S. from Tufts University
and his M.S. from the University of Colorado, both in Electrical Engineering.
Prior to joining Kranzco, he held positions at Texas Instruments, the
University of Colorado and owned a consulting and publishing company in
Boulder, Colorado. Mr. Kranzdorf is a member of the ICSC and serves on the
Research Committee, and he has recently accepted the first Chairmanship of
NAREIT's Technology Committee.
Joseph Grossman has served as a Director of NAI since March 1983. Mr.
Grossman has been an independent real estate developer since 1961 and has
developed shopping centers and industrial, residential and recreational
properties for his own account. Mr. Grossman is also one of the founding
members of the Tinton Falls State Bank and is a member of its advisory board.
Peter O. Hanson has been a member of the Board since June 1990. Mr
Hanson is Chairman of James E. Hanson, Inc., a broker member of NAI. Mr.
Hanson has been active in Commercial/Industrial Brokerage and Development
since 1959. A very active member of The Society of Industrial and Office
Realtors ("SIOR"), Mr. Hanson has served that organization as a leader at the
state, regional and national level. He was SIOR's International President in
1985. In addition, Mr. Hanson has been an active member of NAI's Advisory
Board and has served as Chairman of such Board. Mr. Hanson is a member of the
Board of Trustees of Meridian Trust and Meridian Industrial Trust. Other civic
and industry groups have benefitted from his participation and leadership. A
1955 graduate of Colgate University (B.A. - Sociology), Mr. Hanson also was a
captain in the United States Air Force.
Bernard J. Korman became a member of the Board of Directors of NAI
upon consummation of the Exchange Offer and the Reincorporation Merger. Mr.
Korman is Chairman of Graduate Health System, Inc., a non-profit organization,
and NutraMax Products, Inc., a consumer healthcare products company. Mr.
Korman served as President and Chief Executive Officer of MEDIQ Incorporated
from 1981 to 1995 and as chairman of PCI
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Services, Inc. from 1992 to 1996. Mr. Korman currently is a director of The
Pep Boys, Inc., Today's Man, Inc., The New America High Income Fund, Inc.,
InnoServ Technologies, Inc., Omega Healthcare Investors, Inc., Omega
Worldwide, Inc. and Kranzco.
Norma J. Finn has served as the Secretary of NAI since NAI's
inception in 1974. Ms. Finn attended the University of Delaware and has served
as secretary and a board member of a number of real estate development
corporations. She has been active in numerous charitable activities including
being President of Contact of Mercer County N.J. and on the national board of
Contact, and the board of the Delaware Valley United Fund.
Officers of NAI are elected by the Board and hold office until their
successors are chosen and qualified or until their death, resignation or
removal.
Director Compensation
It is NAI's policy to pay non-employee directors of NAI fees of $500
per meeting, as well as reimbursements for expenses incurred in attending
meetings of the Board. However, in lieu of paying outstanding directors' fees,
in January 1998, NAI issued 5,000 NAI Shares to each of Matthew Arnold, Joseph
Grossman, Peter Hanson, Robert McMenamin and Marc Shegoski, the then
non-employee directors of NAI. Such non-employee directors were owed accrued
director fees as follows: Matthew Arnold, $5,500 for 11 meetings; Joseph
Grossman, $5,000 for 10 meetings; Peter Hanson, $6,500 for 13 meetings; Robert
McMenamin $2,000 for 4 meetings; and Marc Shegoski $4,000 for 8 meetings.
In fiscal year 1997, there were two meetings of the Board of
Directors of NAI; each director attended both of the meetings, other than Mr.
Matthew Arnold, then a director of NAI Delaware, and Mr. Joseph Grossman, who
each attended one meeting.
Executive Compensation
The following table sets forth certain information with respect to
the cash and other compensation paid or accrued by NAI for services rendered
by Gerald Finn, NAI's Chief Executive Officer, and NAI's four other most
highly compensated executive officers whose salary and bonus exceeded $100,000
(collectively, the "Named Executives"), during the fiscal year ended June 30,
1997.
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Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation(1) Compensation
---------------------------------------- ---------------
Name & Principal Position Year Salary Bonus Restricted
---------------------------------------- Stock Awards($)
($) ($) ---------------
<S> <C> <C> <C> <C>
Gerald C. Finn 1997 $125,000 - $7,500(2)
Chairman and Chief
Executive Officer
Jeffrey M. Finn 1997 $110,000 $20,000 $2,250(2)
President, Chief
Operating Officer and
Treasurer
</TABLE>
- ---------------------
(1) The total value of all perquisites and other personal benefits
received by each individual was less than the lesser of $50,000 or
ten percent of the total salary of and bonus paid or accrued by NAI
for services rendered by each officer during the fiscal year.
(2) Reflects grant of 25,000 restricted NAI Shares and 7,500 restricted
NAI Shares to Gerald C. Finn and Jeffrey M. Finn, respectively. Such
NAI Shares were granted in NAI's fiscal year 1998 with respect to
performance in fiscal year 1997, pursuant to a Restricted Stock
Agreement. Such NAI Shares were valued at $.30 per NAI Share, the
value of the NAI Shares as determined by the Board of Directors. See
"Management--Restricted Stock Agreements."
Employment Agreements
NAI has entered into employment agreements with Messrs. G. Finn and
J. Finn (the "Senior Executives"), pursuant to which Mr. G. Finn serves as the
Co-Chairman of the Board of NAI and Mr. J. Finn serves as its President. Each
of the employment agreements with the Senior Executives have a term of 3
years, which is automatically extended for successive one-year periods unless
either the Senior Executive or NAI gives prior notice not to extend the
employment agreement, as specified in the agreement. Each of the employment
agreements provides for annual compensation of $175,000 to each of Messrs. G.
Finn and J. Finn for the first year of the term. After the first year of each
employment agreement, salary and bonus for the Senior Executives will be
determined by the Compensation Committee. Pursuant to the employment
agreements, each of the Senior Executives is also entitled to incentive
compensation to be determined by the Compensation Committee.
In the event that either of the Senior Executives is fired without
"cause," such Senior Executive shall be entitled to the lesser of two times
(i) the individual's annual base compensation or (ii) the individual's annual
base compensation remaining due under the terms of his employment agreement;
provided, however, that the Senior Executive shall not be entitled to any such
severance payment if he has received a payment upon a change in control as
described below. The employment agreements also contain certain provisions
relating to non-competition and confidentiality.
Each employment agreement provides that upon a change in control and
so long as such individual is an employee of NAI immediately prior to such a
change in control, (a) the individual shall receive a lump sum severance
payment equal to two times the individual's annual compensation during the
calendar year preceding the calendar year during which the change in control
has occurred, (b) restricted NAI Shares then owned by the
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individual shall immediately vest and no longer be subject to repurchase or
other forfeiture restrictions, (c) NAI will continue to provide life,
accident, medical and dental insurance to the individual for the period of 18
months after the change in control, and (d) in the event the individual holds
any options to purchase NAI Shares on the date of the change in control, such
individual shall be entitled to receive an amount equal to, generally, the
number of options to purchase NAI Shares then owned by the individual
multiplied by the amount, if any, that (i) the exercise price of the options
or the closing price of the NAI Shares on the date of the change in control,
whichever is less, exceeds (i) the average closing price of the NAI Shares
during the sixth month prior to the date of the change in control. If the
closing price of the NAI Shares as of the date of the change in control is
greater than the exercise price of such option then the individual can retain
the option or receive in exchange therefor cash equal to the number of shares
underlying the options multiplied by the amount by which the closing share
value exceeds the exercise price of the options. Each Employment Agreement
provides that, to the extent that any of the foregoing benefits granted to
such individual would cause him to be liable for excise tax liabilities, the
benefits available to him shall be reduced to an amount which would not
require the payment of any such excise tax, but only if doing so yields a
greater after tax amount to such individual.
Restricted Stock Agreements
In the past, NAI has granted restricted NAI Shares to certain persons
providing services to NAI, including employees and Broker Members (each, a
"grantee"). Each grantee of restricted NAI Shares executed a form of
Restricted Stock Agreement, which contains certain representations and
warranties made by NAI and the grantee, and sets forth the terms and
conditions of the grant, including the limited conditions under which the
grantee may transfer the restricted NAI Shares. The Restricted Stock Agreement
also provides NAI with an option for a period of three years following the
date of grant to repurchase the restricted NAI Shares if the grantee's
services to NAI are terminated (a "Termination"). NAI may repurchase
restricted NAI Shares, for a period of 90 days after the date of Termination,
at the following prices: $.10 per NAI Share for a termination during the first
year after the date of grant of the restricted NAI Shares; $.20 per NAI Share
for a termination during the year after the second anniversary of the date of
grant of the restricted NAI Shares; and $.30 per NAI Share for a termination
during the year after the third anniversary of the date of grant of the
restricted NAI Shares. In connection with the Exchange Offer, NAI agreed to
eliminate the repurchase option with respect to all restricted NAI Shares
owned by NAI Stockholders after the consummation of the Exchange Offer, if
such NAI Stockholder tendered at least 80% of his or her restricted NAI
Shares. The release of any or all of the preceding restrictions could cause
the holders of restricted NAI Shares to immediately recognize ordinary income
in an amount equal to the excess of the fair market value of such NAI Shares
at the time the restrictions are released over any amounts paid to acquire
such NAI Shares. In addition, withholding taxes will be payable to NAI (or
withheld by NAI from amounts otherwise due such holders) in connection with
any such recognition of income. Holders of restricted NAI Shares are urged to
consult their tax advisors concerning the federal, state and local tax
consequences of the release of any restrictions on their NAI Shares.
NAI 1998 Incentive Plan
General. In connection with the Exchange Offer and the
Reincorporation Merger, NAI adopted the NAI 1998 Incentive Plan (the "1998
Plan"). The purpose of the 1998 Plan is to align the interests of certain of
NAI's directors, officers and other employees and consultants with those of
the shareholders and to enable NAI to attract, compensate and retain selected
individuals to serve as directors, officers and employees and consultants who
will contribute to NAI's success and provide such individuals with appropriate
incentives and rewards for their performance.
Awards to directors, officers and other employees and consultants
under the 1998 Plan may take the form of share options ("Options"), including
corresponding share appreciation rights ("SARs") and reload options,
restricted share awards, share purchase awards and performance based awards.
The maximum number of NAI
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Shares that may be the subject of awards under the 1998 Plan is 1,700,000 NAI
Shares, or approximately 4.7% of the NAI Shares outstanding as of June 30,
1998, assuming the Related Transactions had occurred.
NAI Share Authorization. NAI Shares covered by any unexercised
portions of terminated Options, NAI Shares forfeited by participants and NAI
Shares subject to any awards which are otherwise surrendered by a participant
without receiving any payment or other benefit with respect thereto may again
be subject to new awards under the 1998 Plan. In the event the purchase price
of an Option is paid in whole or in part through the delivery of NAI Shares,
the number of NAI Shares issuable in connection with the exercise of the
Option shall not again be available for the grant of awards under the 1998
Plan. NAI Shares subject to Options, or portions thereof, which have been
surrendered in connection with the exercise of SARs, are not again available
for the grant of awards under the 1998 Plan. The NAI Shares to be issued or
delivered under the 1998 Plan are authorized and unissued shares, or issued
NAI Shares that have been reacquired by NAI.
Incentive Plan Administration. The 1998 Plan will be administered by
a committee of two or more non-employee directors (the "Committee"), which
will initially consist of Messrs. Bernard J. Korman and Joseph Grossman. The
Committee will determine the directors, officers, employees and consultants
who will be eligible for and granted awards, determine the amount and type of
awards, establish rules and guidelines relating to the 1998 Plan, establish,
modify and terminate the terms and conditions of awards and take such other
action as may be necessary for the proper administration of the 1998 Plan. All
directors, employees and certain consultants are currently eligible to
participate in the 1998 Plan. Eighty percent of the NAI Shares which may be
the subject of awards under the 1998 Plan are reserved for employees of NAI
who are not also employees of Kranzco, and 20% of the NAI Shares which may be
the subject of awards under the 1998 Plan are reserved for employees and
consultants of NAI who are also employees of Kranzco.
Options. "Incentive Options" meeting the requirements of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), and
"Nonqualified Options" that do not meet such requirements are both available
for grant under the 1998 Plan. The term of each Option will be determined by
the Committee, but no Option will be exercisable more than five years after
the date of grant. Options may also be subject to restrictions on exercise,
such as exercise in periodic installments, as determined by the Committee. The
exercise price for both Incentive Options and Nonqualified Options must be at
least equal to 100% of the fair market value of the NAI Shares on the date of
grant. The exercise price can be paid in cash, or if approved by the
Committee, by tendering (actually or constructively) NAI Shares owned by a
participant.
Incentive Options are not transferable except by will or the laws of
descent and distribution and may be exercised only by the participant (or his
guardian or legal representative) during his or her lifetime, except as
provided below. With the Committee's consent, Nonqualified Options may be
transferable to family members and entities for the benefit of the participant
or his family members. If a participant's employment with NAI or service as a
director terminates for any reason (other than death or disability), any
unexercised or unexpired Options held by the participant (or its permitted
transferee) will be deemed canceled and terminated on the date of such
termination, unless the Committee decides to extend the term of such Options
for a period not exceeding three months. If a participant dies while employed
by NAI, including an employee who is also a director, any unexercised or
unexpired Options will, to the extent exercisable on the date of death, be
exercisable by the holder or by the participant's estate or by any person who
acquired such Options by bequest or inheritance, at any time generally within
one year after such death. If a participant becomes totally disabled and his
employment terminates as a result of such disability, including an employee
who is also a director, the holder or the participant (or his guardian or
legal representative) will have the unqualified right to exercise any
unexercised and unexpired Options held by the participant (or its permitted
transferee) generally for one year after such termination.
NAI Share Appreciation Rights. The 1998 Plan provides that SARs may
be granted in conjunction with a grant of Options. Each SAR must be associated
with a specific Option and must be granted at the time of grant of
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such Option. A SAR is exercisable only to the extent the related Option is
exercisable. Upon the exercise of a SAR, the recipient is entitled to receive
from NAI, without the payment of any cash (except for any applicable
withholding taxes), up to, but no more than, an amount in cash or NAI Shares
equal to the excess of (A) the fair market value of one NAI Share on the date
of such exercise over (B) the exercise price of any related Option, times the
number of NAI Shares in respect of which such SAR shall have been exercised.
Upon the exercise of a SAR, the related share Option, or the portion thereof
in respect of which such SAR is exercised, will terminate. Upon the exercise
of an Option granted in tandem with a SAR, such tandem SAR will terminate.
Reload Options. The Committee may grant, concurrently with the award
of any Option (each an "Underlying Option") to such participants, one or more
reload options (each a "Reload Option") to purchase for cash or, if
permissible under the Underlying Option, NAI Shares, a number of NAI Shares
equal to the number of NAI Shares delivered (or deemed delivered) by the
participant to NAI to exercise the Underlying Option. Although an Underlying
Option may be an Incentive Option, a Reload Option is not intended to qualify
as an Incentive Option. A Reload Option may be granted in connection with the
exercise of an Option that is itself a Reload Option. Each Reload Option will
have the same expiration date as the Underlying Option and an exercise price
equal to the fair market value of the NAI Shares on the date of grant of the
Reload Option. A Reload Option is exercisable immediately.
Reload Options permit a participant to retain, through the term of
the original Option, his or her economic interest in the sum of the NAI Shares
covered by such Options as well as the already-owned NAI Shares that could be
used to exercise such Option, by granting options on the number of NAI Shares
used to pay the exercise price of the original Option and subsequent Reload
Options. In this way, Reload Options provide a participant with the
opportunity to build up ownership of NAI Shares covered by an original Option
earlier during the Option term rather than through a single exercise at or
near the end of the Option term.
Restricted NAI Shares. NAI may award restricted NAI Shares to a
participant. Such a grant gives a participant the right to receive NAI Shares
subject to a risk of forfeiture based upon certain conditions. The forfeiture
restrictions on the NAI Shares may be based upon performance standards, length
of service or other criteria as the Committee may determine. Until all
restrictions are satisfied, lapsed or waived, NAI will maintain custody over
the restricted NAI Shares but the participant will be able to vote the NAI
Shares and will be entitled to an amount equal to all distributions, if any,
paid with respect to the NAI Shares, as provided by the Committee. During such
restrictive period, the restricted NAI Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered. Upon termination of employment,
the participant generally forfeits the right to the NAI Shares to the extent
the applicable performance standards, length of service requirements, or other
measurement criteria have not been met.
NAI Share Purchase Awards. The 1998 Plan also permits the grant of
share purchase awards to participants. Participants who are granted a share
purchase award are provided with a share purchase loan to enable them to pay
the purchase price for the NAI Shares acquired pursuant to the award. The
terms of each share purchase loan will be determined by the Committee. The
purchase price of NAI Shares acquired with a share purchase loan is the fair
market value on the date of the award. The 1998 Plan provides that some or all
of the share purchase loan can be forgiven under terms determined by the
Committee. At the end of the loan term, the remainder of the share purchase
loan will be due and payable. The interest rate, if any, on a share purchase
loan will be determined by the Committee. NAI Share purchase loans may be
recourse or nonrecourse under terms determined by the Committee.
If a participant's employment with NAI is terminated for any reason,
the balance of the purchase loans to such participant will be immediately due
and payable; provided, however, if a participant's employment terminates by
reason of death, disability, by NAI without "cause" or in the event of a
charge in control, the balance of such
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participant's purchase loans may be forgiven in whole or in part as of the
date of such occurrence at the discretion of the Committee.
Performance-Based Awards. Certain Awards granted under the 1998
Incentive Plan may be granted in a manner such that the Awards qualify as
"performance-based compensation"(as such term is used in Section 162(m) of the
Code and the regulations thereunder) and thus be exempt from the deduction
limitation imposed by Section 162(m) of the Code ("Performance-Based Awards").
In general, to qualify as a Performance Based Award, among other things, the
Committee must be comprised solely of two or more "outside directors." The
Committee shall have complete discretion in determining the number, amount and
timing of awards granted to each participant. Such Performance-Based Awards
may take the form of, without limitation, cash, Shares or any combination
thereof. The Committee shall set performance goals at its discretion which,
depending on the extent to which they are met, will determine the number
and/or value of such Performance-Based Awards that will be paid out to the
participants, and may attach to such Performance-Based Awards one or more
restrictions. The maximum cash amount of Performance-Based Awards to be
awarded to any employee during any fiscal year shall be $1,000,000.
The Committee may use the following performance measures, among
others, (either individually or in any combination) to set performance targets
with respect to Awards intended to qualify as Performance-Based Awards: net
sales; pretax income before allocation of corporate overhead and bonus;
budget; earnings per share; net income; division, group or corporate financial
goals; return on stockholders' equity; return on assets; attainment of
strategic and operational initiatives; appreciation in and/or maintenance of
the price of the NAI Shares or any other publicly-traded securities of NAI;
market share; gross profits; earnings before taxes; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization;
economic value-added models; comparisons with various stock market indices;
and/or reductions in costs.
Antidilution Provisions. The number of NAI Shares authorized to be
issued under the 1998 Plan and subject to outstanding awards (and the grant or
exercise price thereof) may be adjusted to prevent dilution or enlargement of
rights in the event of any dividend or other distribution, recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of NAI Shares or other
securities, the issuance of warrants or other rights to purchase NAI Shares or
other securities, or other similar capitalization change.
Certain Federal Income Tax Consequences of the 1998 Plan. The
following is a brief summary of the principal federal income tax consequences
of awards under the 1998 Plan. The summary is based upon current federal
income tax laws and interpretations thereof, all of which are subject to
change at any time, possibly with retroactive effect. The summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign tax consequences.
A participant is not subject to federal income tax either at the time
of grant or at the time of exercise of an Incentive Option. However, upon
exercise, the difference between the fair market value of the NAI Shares and
the exercise price is an includible item subject to the possible application
of the alternative minimum tax. If a participant does not dispose of NAI
Shares acquired through the exercise of an Incentive Option in a
"disqualifying disposition" (i.e., no disposition occurs within two years from
the date of grant of the share option nor within one year of the transfer of
the NAI Shares to the participant), then the participant will be taxed only
upon the gain, if any, from the sale of such NAI Shares, and such gain will be
taxable as gain from the sale of a capital asset.
NAI will not be allowed any tax deduction on the exercise of an
Incentive Option or, if the above holding period requirements are met, on the
sale of the underlying NAI Shares. If there is a disqualifying disposition
(i.e., one of the holding period requirements is not met), the participant
will be treated as receiving compensation subject to ordinary income tax in
the year of the disqualifying disposition and NAI will be entitled to a
deduction for com pensation expense in an amount equal to the amount included
in income by the participant. The participant generally
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will be required to include in income an amount equal to the difference
between the fair market value of the NAI Shares at the time of exercise and
the exercise price. Any appreciation in value after the time of exercise will
be taxed as capital gain and will not result in any deduction by NAI.
If Nonqualified Options are granted to a participant, there are no
federal income tax consequences at the time of grant. Upon exercise of the
Option, the participant must report as ordinary income an amount equal to the
difference between the exercise price and the fair market value of the NAI
Shares on the date of exercise. NAI will be allowed a tax deduction in like
amount. Any appreciation in value after the time of exercise will be taxed as
capital gain and will not result in any deduction by NAI.
No income will be realized by a participant in connection with the
grant of any SAR. The participant must include in ordinary income the amount
of cash received and the fair market value on the exercise date of any NAI
Shares received upon the exercise of a SAR. NAI will be entitled to a
deduction equal to the amount included in such participant's income by reason
of the exercise of any SAR.
The receipt of a Reload Option by a holder of an Incentive Option or
a Nonqualified Option (including a Reload Option) who pays the exercise price
in full or in part with previously acquired NAI Shares should not affect the
tax treatment of the exercise of such Incentive or Nonqualified Option
(including the amount of ordinary income, if any, recognized upon exercise). A
participant will not be subject to tax at the time a Reload Option is granted
(except for any income recognized upon the exercise of a Nonqualified Option
at the time of grant of the Reload Option). A Reload Option will constitute a
Nonqualified Option for federal income tax purposes and will be taxed as such
in the manner set forth above.
A grant of restricted NAI Shares does not constitute a taxable event
for either a participant or NAI. However, the participant will be subject to
tax, at ordinary income rates, when the NAI Shares are no longer subject to a
substantial risk of forfeiture or they become transferable. NAI will be
entitled to take a commensurate deduction at that time.
A participant may elect to recognize taxable ordinary income at the
time restricted NAI Shares are awarded in an amount equal to the fair market
value of the NAI Shares at the time of grant, determined without regard to any
forfeiture restrictions. If such an election is made, NAI will be entitled to
a deduction at that time in the same amount. Future appreciation on the NAI
Shares will be taxed at the capital gains rate when the NAI Shares are sold.
However, if, after making such an election, the NAI Shares are forfeited, the
participant will be unable to claim a deduction.
In general, a participant who receives a share purchase award incurs
no tax liability and NAI does not receive any deduction at the time NAI Shares
are acquired through a share purchase award. However, as the share purchase
loan is forgiven, the participant will be required to recognize income in an
amount equal to the forgiven portion of the loan. NAI will be entitled to take
a commensurate deduction at such time.
Applicable withholding taxes may be withheld in connection with any
award under the 1998 Plan. In that regard, the Committee has the discretion to
allow a participant to satisfy its withholding tax obligations with NAI
Shares.
Change in Control. Depending on the terms of a particular award as
determined by the Committee, upon the occurrence of a change in control of
NAI, all options and related SARs may become immediately exercisable, the
restricted NAI Shares may fully vest and share purchase loans may be forgiven
in full.
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Termination, Amendment and ERISA Status. The 1998 Plan will terminate
by its terms and without any action by the Board on May 27, 2008. No awards
may be made after that date. Awards outstanding on such date will remain valid
in accordance with their terms.
The Committee may amend or alter the terms of awards under the 1998
Plan, including to provide for the forgiveness in whole or in part of share
purchase loans, the release of the NAI Shares securing such loans or the
termination or modification of the vesting or performance provisions of the
grants of restricted NAI Shares but no such action shall in any way impair the
rights of a participant under any award without such participant's consent.
The Committee may amend or terminate the 1998 Plan. No such
amendments or termination of the 1998 Plan shall in any way impair the rights
of a participant under any award previously granted without such participant's
consent. In addition, any amendment or termination will be subject to
shareholder approval if approval is required by Federal or state law or
regulation or rule of any stock exchange or quotation system on which the NAI
Shares are listed or quoted.
The 1998 Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1976, as amended ("ERISA").
NAI 1998 Employee Bonus Compensation Plan
General. In connection with the Exchange Offer and the
Reincorporation Merger, NAI adopted the NAI 1998 Employee Bonus Compensation
Plan (the "Bonus Compensation Plan"). The purpose of the Bonus Compensation
Plan is to compensate outstanding performance by employees of NAI and to
enable NAI to attract, compensate and retain selected individuals to serve as
employees who will contribute to NAI's success and provide such individuals
with appropriate incentives and rewards for their performance.
Awards to employees under the Bonus Compensation Plan are in the form
of grants of NAI Shares. The maximum number of NAI Shares that may be the
subject of awards under the Bonus Compensation Plan is 8,500,000 NAI Shares
(the "Award Shares"), assuming all of the Rights are exercised, or
approximately 23.5% of the NAI Shares outstanding as of June 30, 1998,
assuming the Related Transactions had occurred. If less than all of the Rights
are exercised, the number of NAI Shares available under the Bonus Compensation
Plan will be decreased by 25% of the amount by which 34,000,000 NAI Shares
exceeds the number of NAI Shares outstanding after the Rights are exercised.
The NAI Shares to be issued or delivered under the Bonus Compensation Plan are
authorized and unissued shares, or issued NAI Shares that have been reacquired
by NAI.
NAI Share Award Formula. Subject to the maximum number of NAI Shares
remaining available under the Bonus Compensation Plan each year there shall be
available for award under the Bonus Compensation Plan, a number of NAI Shares
equal to the product of 6.25% times NAI's pre-tax net income for such year,
adjusted to exclude any deduction for the payment of the consulting fee to
Kranzco under the Intercompany Agreement ("Annual Award Shares").
Bonus Compensation Plan Administration. The Board will make grants of
the Annual Award Shares within 6 months after the end of the fiscal year with
respect to which such Award Shares become available for grant based on the
recommendation of the Chief Executive Officer and the President of NAI. All
employees are currently eligible to participate in the Bonus Compensation
Plan. The selection of employees who participate in the Bonus Compensation
Plan will be determined solely at the discretion of the Board based on the
recommendation of the Chief Executive Officer and President of NAI.
Antidilution Provisions. The number of NAI Shares authorized to be
issued under the Bonus Compensation Plan and subject to outstanding awards may
be adjusted to prevent dilution or enlargement of rights in the event of
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any dividend or other distribution, recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of NAI Shares or other securities, the
issuance of warrants or other rights to purchase NAI Shares or other
securities, or other similar capitalization change.
Certain Federal Income Tax Consequences of the Bonus Compensation
Plan. The following is a brief summary of the principal federal income tax
consequences of awards under the Bonus Compensation Plan. The summary is based
upon current federal income tax laws and interpretations thereof, all of which
are subject to change at any time, possibly with retroactive effect. The
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences.
A grant of Award Shares constitutes a taxable event for a
participant. The fair market value of the Award Shares on the date of grant is
reportable by the participant as income taxable at ordinary income rates, and
will be subject to applicable federal, state and local withholding taxes at
the time of grant. In that regard, the Board has the discretion to allow a
participant to satisfy its withholding tax obligations with NAI Shares. NAI
will be entitled to take a deduction at the time of grant equal to the amount
of taxable income reportable by the participant.
Termination, Amendment and ERISA Status. The employees will first be
eligible for Award Shares under the Bonus Compensation Plan with respect to
NAI's fiscal year ended June 30, 1999. The last year employees of NAI will be
eligible for Award Shares under the Bonus Compensation Plan will be with
respect to NAI's fiscal year ended June 30, 2009.
The Board may amend or terminate the Bonus Compensation Plan;
however, the Bonus Compensation Plan may not be amended without the consent of
80% of the Board, including the consent of either Jeffrey M. Finn or Gerald C.
Finn. No such amendments or termination of the Bonus Compensation Plan shall
in any way impair the rights of a participant under any award previously
granted without such participant's consent. In addition, any amendment or
termination will be subject to shareholder approval if approval is required by
Federal or state law or regulation or rule of any stock exchange or quotation
system on which the NAI Shares are listed or quoted.
The Bonus Compensation Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1976, as amended.
NAI 1998 Stock Option Plan
General. In connection with the Exchange Offer and the
Reincorporation Merger, NAI adopted the NAI 1998 Stock Option Plan (the
"Option Plan"). The purpose of the Option Plan is to align the interests of
NAI's directors, officers, employees and consultants with those of the
shareholders and to enable NAI to attract, compensate and retain selected
individuals to serve as directors, officers, employees and consultants who
will contribute to NAI's success and provide such individuals with appropriate
incentives and rewards for their performance.
Awards to directors, officers, employees and consultants under the
Option Plan are in the form of share Options. The maximum number of NAI Shares
that may be the subject of awards under the Option Plan is 3,536,853 NAI
Shares, or approximately 9.8% of the NAI Shares outstanding as of June 30,
1998, assuming the Related Transactions had occurred. Options to purchase all
NAI Shares issuable under such plan were granted upon consummation of the
Reincorporation Merger.
Stock Option Plan Administration. The Option Plan will be
administered by a committee of two or more non-employee directors (the "Option
Plan Committee"), which will initially consist of Messrs. Joseph Grossman and
Bernard Korman. The Option Plan Committee will determine the directors,
officers, employees and consultants
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who will be eligible for and granted awards, determine the amount and type of
awards, establish rules and guidelines relating to the Option Plan, establish,
modify and terminate the terms and conditions of awards and take such other
action as may be necessary for the proper administration of the Option Plan.
All directors, officers, employees and certain consultants are currently
eligible to participate in the Option Plan.
Options. It is intended that all of the Options granted under the
Option Plan will be "Nonqualified Options" that do not meet the requirements
of Section 422 of the Code. The exercise price can be paid in cash, or if
approved by the Option Plan Committee, by tendering (actually or
constructively) NAI Shares owned by a participant.
With the Option Plan Committee's consent, Nonqualified Options may be
transferable to family members and entities for the benefit of the participant
or his family members. If a participant's employment with NAI or service as a
director or consultant terminates for any reason (other than death or
disability), any unexercised or unexpired Options held by the participant (or
its permitted transferee) will be deemed canceled and terminated on the date
of such termination, unless the Option Plan Committee decides to extend the
term of such Options for a period not exceeding three months. If a participant
dies while employed by NAI, including an employee who is also a director, any
unexercised or unexpired Options will, to the extent exercisable on the date
of death, be exercisable by the holder or by the participant's estate or by
any person who acquired such Options by bequest or inheritance, at any time
generally within one year after such death. If a participant becomes totally
disabled and his employment terminates as a result of such disability,
including an employee who is also a director, the holder or the participant
(or his guardian or legal representative) will have the unqualified right to
exercise any unexercised and unexpired Options held by the participant (or its
permitted transferee) generally for one year after such termination.
Options Outstanding Under the Option Plan. Upon the consummation of
the Reincorporation Merger, there will be outstanding five-year Nonqualified
Options to purchase 3,536,853 NAI Shares under the Option Plan at an exercise
price of $2 per NAI Share. Directors of NAI hold five-year Options to purchase
an aggregate of 1,016,150 NAI Shares under the Option Plan at an exercise
price of $2 per NAI Share. In addition, each of Gerald C. Finn and Jeffrey M.
Finn was granted a five-year Option under the Option Plan to purchase
1,547,049 and 611,004 NAI Shares, respectively, at an exercise price of $2 per
NAI Share; the exercise price of each such Option will automatically increase
$.12 each year during which such Option remains outstanding and unexercised.
Antidilution Provisions. The number of NAI Shares authorized to be
issued under the Option Plan and subject to outstanding awards (and the grant
or exercise price thereof) may be adjusted to prevent dilution or enlargement
of rights in the event of any dividend or other distribution,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of NAI
Shares or other securities, the issuance of warrants or other rights to
purchase NAI Shares or other securities, or other similar capitalization
change.
Certain Federal Income Tax Consequences of the Option Plan. The
following is a brief summary of the principal federal income tax consequences
of awards under the Option Plan. The summary is based upon current federal
income tax laws and interpretations thereof, all of which are subject to
change at any time, possibly with retroactive effect. The summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign tax consequences.
For Nonqualified Options, there are no federal income tax
consequences at the time of grant. Upon exercise of the Option, the
participant must report as ordinary income an amount equal to the difference
between the exercise price and the fair market value of the NAI Shares on the
date of exercise. NAI will be allowed a tax deduction in like amount. Any
appreciation in value after the time of exercise will be taxed as capital gain
and will not result in any deduction by NAI.
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Applicable withholding taxes may be withheld in connection with the
exercise of any Nonqualified Option, under the Option Plan. In that regard,
the Option Plan Committee has the discretion to allow a participant to satisfy
its withholding tax obligations with NAI Shares.
Termination, Amendment and ERISA Status. The Option Plan will
terminate by its terms and without any action by the Board on May 27, 2008. No
awards may be made after that date. Awards outstanding on such date will
remain valid in accordance with their terms.
The Option Plan Committee may amend or alter the terms of awards
under the Option Plan but no such action shall in any way impair the rights of
a participant under any award without such participant's consent.
The Option Plan Committee may amend or terminate the Option Plan. No
such amendments or termination of the Option Plan shall in any way impair the
rights of a participant under any award previously granted without such
participant's consent. In addition, any amendment or termination will be
subject to shareholder approval if approval is required by Federal or state
law or regulation or rule of any stock exchange or quotation system on which
the NAI Shares are listed or quoted.
The Option Plan is not subject to the provisions of ERISA.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding
beneficial ownership of NAI Shares as of June 30, 1998 of: (i) Named Executive
Officers, (ii) NAI's executive officers and directors as a group, and (iii)
all persons known by NAI to be the beneficial owner of more than 5.0% of the
outstanding NAI Shares immediately prior to the Distribution, the Rights
Offering and the Concurrent Offering, and after giving effect to the
Distribution, the Rights Offering, the Concurrent Offering and the other
Related Transactions. Unless otherwise noted, the information contained in
this table, including the footnotes hereto, assumes that the Reincorporation
Merger occurred on June 30, 1998, and each NAI Delaware Share was converted
into 1.318087 NAI Maryland Shares. See "Management."
<TABLE>
<CAPTION>
Number of NAI Shares Percent of Class
-------------------- ----------------
After
Before Distribution, Before Distribution, After Distribution,
Distribution, Rights Rights Offering Rights Offering and Rights Offering
Offering and and Concurrent Concurrent and Concurrent
Name and Address Concurrent Offering (1) Offering (2) Offering (3) Offering (3)
- ---------------- ----------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gerald C. Finn(4) 4,318,179(5) 4,718,179(5) 20.9% 11.9%
Jeffrey M. Finn(4) 1,588,462(6) 1,688,462(6) 7.7 4.2
Norman M. Kranzdorf(7) 400,050(8) 835,972(9) 3.0 2.1
Robert H. Dennis(7) 74,100(10) 110,890(11) 0.4 0.3
Joseph Grossman(4) 25,782(12) 41,564(12) 0.1 0.1
Peter O. Hanson(4) 78,211(13) 146,422(13) 0.4 0.4
Bernard J. Korman(4) 14,500(14) 124,478(15) 0.3 0.3
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Michael Kranzdorf(7) 7,500(16) 57,232(17) 0.2 0.1
Kranzco Realty Trust(7) 13,681,122 3,351,875 8.1 8.4
Executive Officers & Directors
as a group (9) persons 5,979,549 7,177,965 30.3 18.0
</TABLE>
(1) The numbers in this column reflect NAI Share ownership assuming
the Reincorporation Merger has occurred. The actual number of NAI Delaware
Shares beneficially owned by each person on June 30, 1998, was as follows:
Gerald Finn, 9,563,390 NAI Shares; Jeffrey Finn, 2,759,522 NAI Shares; Norman
M. Kranzdorf, no NAI Shares; Robert H. Dennis, no NAI Shares; Joseph Grossman,
59,867 NAI Shares; Bernard J. Korman, no NAI Shares; Michael Kranzdorf, no NAI
Shares; Peter O. Hanson, 258,750 NAI Shares; Kranzco Realty Trust, no NAI
Shares; and Estate of John McMenamin, 535,597 NAI Shares.
(2) The numbers in this column represent NAI Shares beneficially
owned by each such person, plus any NAI Shares which such person may acquire
pursuant to the Basic Subscription Privilege.
(3) Each beneficial owner's percentage ownership is determined
assuming (i) that all NAI Shares issuable upon exercise of the Rights will be
exercised, except that (x) Gerald Finn only exercises rights to purchase
400,000 NAI Shares, (y) Jeffrey Finn only exercises rights to purchase 100,000
NAI Shares and (z) Kranzco only exercises rights to purchase 1,675,937 NAI
Shares in order to maintain approximately a 9.8% ownership interest in the
outstanding NAI Shares; (ii) that all of the Additional Shares are purchased
in the Concurrent Offering, (iii) all other convertible securities, options or
warrants held by such person (but not those held by any other person) and
which are exercisable within 60 days of June 30, 1998 have been exercised and
(iii) that each person who was an NAI Stockholder prior to the Exchange Offer
tendered 80% of his or her NAI Shares in the Exchange Offer.
(4) The address of all of the executive officers and directors of
NAI, who are not employees of Kranzco, is 572 Route 130, Hightstown, New
Jersey 08520, telephone (609) 448-4700.
(5) Includes (i) 3,944 NAI Shares owned by the Building Center, Inc.,
a corporation owned by Gerald and Norma Finn, (ii) 1,797,049 NAI Shares
issuable upon the exercise of options to purchase NAI Shares, (iii) 42,838 NAI
Shares owned by Mr. Finn's spouse and (iv) 527,235 NAI held in trust for Mr.
J. Finn, of which, in the future, Mr. G. Finn may be entitled to receive
certain NAI Shares. Does not include (i) 44,156 NAI Shares owned by Mr. G.
Finn's children, or (ii) 4,943 NAI Shares held by Mr. G. Finn as collateral
for a loan to a stockholder of NAI; Mr. Finn disclaims beneficial ownership of
such NAI Shares.
(6) Includes (i) 11,863 NAI Shares held in trust for Mr. Finn's minor
children, (ii) 4,591 NAI Shares owned by Brooktree Swim & Tennis Club, Inc., a
corporation owned by Mr. J. Finn and his spouse, (iii) 861,004 NAI Shares
issuable upon the exercise of options to purchase NAI Shares; and (iv) 527,235
NAI Shares held in a trust for the benefit of Mr. J. Finn, of which Mr. J.
Finn is trustee.
(7) The address of Kranzco Realty Trust is 128 Fayette Street,
Conshohocken, Pennsylvania 19428, and the address of executive officers and
directors of NAI who are also employees of Kranzco is c/o Kranzco Realty Trust
at such address.
(8) Includes 400,050 NAI Shares issuable upon options to purchase NAI
Shares.
(9) Includes (i) 14,640 NAI Shares owned by Mr. Kranzdorf's spouse,
(ii) 36,000 NAI Shares owned by Mrs. Kranzdorf as trustee for the benefit of
Michael Kranzdorf and Betty Kranzdorf, (iii) 400,050 NAI Shares issuable upon
the exercise of options to purchase NAI Shares. See "Management."
(10) Includes 74,100 NAI Shares issuable upon options to purchase NAI
Shares.
(11) Includes (i) 200 NAI Shares owned by Mr. Dennis' spouse, and
(ii) 74,100 NAI Shares issuable upon the exercise of options to purchase NAI
Shares.
(12) Includes 10,000 NAI Shares issuable upon the exercise of options
to purchase NAI Shares.
(13) Includes (i) 236 NAI Shares owned by Mr. Hanson's spouse, (ii)
4,350 NAI Shares and 1,648 NAI Shares owned by James E. Hanson, Inc. and
Property Investors Associates, entities owned by Mr. Hanson, and (iii) 10,000
NAI Shares issuable upon the exercise of options to purchase NAI Shares.
(14) Includes 14,500 NAI Shares issuable upon options to purchase NAI
Shares.
(15) Includes (i) 3,900 NAI Shares owned by Mr. Korman's spouse, and
(ii) 14,500 NAI Shares issuable upon the exercise of options to purchase NAI
Shares.
(16) Includes 7,500 NAI Shares issuable upon options to purchase NAI
Shares.
(17) Includes (i) 7,500 NAI Shares issuable upon the exercise of
options to purchase NAI Shares, and (ii) 18,000 NAI Shares held in trust for
Mr. M. Kranzdorf. See note 6.
Registration Rights
Kranzco and NAI entered into a Registration Rights Agreement which
provides that at any time after the earlier of the date (i) one year from the
consummation of the Exchange Offer or (ii) that Kranzco determines, in its
sole discretion, that Kranzco is, or will in the future be, required to sell
the NAI Shares owned by it in order to maintain its status as a REIT, NAI
will, upon a written request of Kranzco, register any NAI Shares owned by
Kranzco in a Registration Statement under the Securities Act (the "Demand
Rights"). NAI has agreed to use all reasonable best efforts to keep such
Registration Statement effective for a period of two years commencing on the
effective date of the Registration Statement (or a shorter period if all the
NAI Shares owned by Kranzco have been sold or may be sold without any volume
limitations pursuant to Rule 144 under the Securities Act prior to the
expiration of such two year period). The Registration Rights Agreement
provides Kranzco with two Demand Rights, as well as piggyback Registration
Rights.
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CERTAIN RELATED PARTY TRANSACTIONS
NAI currently leases space for its corporate offices in Hightstown,
New Jersey from The Building Center, Inc., a New Jersey corporation (the
"Building Center"), which is wholly owned by Gerald C. Finn and his wife,
Norma Finn. The lease provides for an annual rental of $102,000 plus the
payment of maintenance expenses. See "Business--Property." NAI believes that
the terms of this lease are at or below the fair market rental for comparable
facilities in the area.
NAI and its subsidiaries owe a director and officer of NAI, Gerald
and Norma Finn, and an entity owned by them, an aggregate principal of
$441,235. Such indebtedness bears interest at rates ranging from 10% to 12%. A
portion of the proceeds of the Rights Offering and the Concurrent Offering
will be used to repay such indebtedness. See "Use of Proceeds" for a
description of such indebtedness.
Gerald C. Finn is the licensed broker of record on the New Jersey
Real Estate Broker's License held by NAI upon which NAI's reciprocal real
estate broker's licenses in Pennsylvania and New York are based. Mr. Finn's
sister, Susan Finn, is the licensed broker of record on the Florida Real
Estate Broker's License held by NAI.
Peter O. Hanson, a director of NAI is the owner of James E. Hanson,
Inc., a Broker Member of the Network. In the fiscal year ended June 30, 1998,
James E. Hanson, Inc., paid to NAI approximately $90,000 in fees for services
and assignments received through the Network.
In connection with the Exchange Offer, Kranzco, NAI and the Finns
entered into an Exchange Agreement and have agreed to enter into certain
related transactions. In addition, immediately following the Distribution, NAI
and Kranzco intend to enter into the Intercompany Agreement. See "The Exchange
Agreement" and "Related Transactions." In addition, in the calendar year ended
December 31, 1997, with the assistance of NAI's Investment Sales Department,
Kranzco purchased certain retail properties. See "Business--Investment Sales."
It is NAI's policy that material transactions and loans with
affiliated parties shall be on terms that are no less favorable than those
that can be obtained from unaffiliated third parties. Any forgiveness of loans
must be approved by a majority of NAI's independent directors who do not have
an interest in the transactions and who have access, at NAI's expense, to
NAI's or independent counsel.
All ongoing transactions have been ratified by a majority of the
issuer's independent directors who do not have an interest in the transactions
and who had access, at the issuer's expense, to its counsel or independent
counsel.
DESCRIPTION OF SECURITIES
The following summary of the terms of the stock of NAI does not
purport to be complete and is subject to and qualified in its entirety by
reference to NAI's Charter and NAI's Bylaws, copies of which are exhibits to
the Registration Statement of which this Prospectus is a part. See "Available
Information." This description reviews the securities of NAI rather than NAI
Delaware, because after the Exchange Offer is consummated, the Reincorporation
Merger will be effected and all NAI Delaware Shares will be converted into NAI
Shares.
General
The Charter provides that NAI may issue up to 200,000,000 shares of
common stock, $.01 par value per share (referred to herein as the "NAI
Shares"). As of June 30, 1997, after giving effect to the Reincorporation
Merger, there were 17,101,403 NAI Shares issued and outstanding, and 229
holders of record of such NAI Shares. Under Maryland law, stockholders
generally are not liable for the corporation's debts or obligations.
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Common Stock
All NAI Shares offered hereby will be duly authorized, fully paid and
nonassessable. Subject to the preferential rights of any other class or series
of stock, holders of NAI Shares are entitled to receive dividends on such NAI
Shares if, as and when authorized and declared by the Board of Directors of
NAI out of assets legally available therefor and to share ratably in the
assets of NAI legally available for distribution to its stockholders in the
event of its liquidation, dissolution or winding up after payment of or
adequate provision for all known debts and liabilities of NAI.
Each outstanding NAI Share entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of
directors and, except as provided with respect to any other class or series of
stock, the holders of such shares will possess the exclusive voting power.
There is no cumulative voting in the election of directors, which means that
the holders of a majority of the outstanding NAI Shares can elect all of the
directors then standing for election and the holders of the remaining shares
will not be able to elect any directors.
Holders of NAI Shares have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights and have no preemptive rights to
subscribe for any securities of NAI. NAI Shares will have equal dividend,
liquidation and other rights.
Under the Maryland General Corporation Law (the "MGCL"), a Maryland
corporation generally cannot dissolve, amend its charter, merge, sell all or
substantially all of its assets, engage in a share exchange or engage in
similar transactions outside the ordinary course of business unless approved
by the affirmative vote of stockholders holding at least two thirds of the
shares entitled to vote on the matter unless a lesser percentage (but not less
than a majority of all of the votes entitled to be cast on the matter) is set
forth in the corporation's charter. The charter of NAI provides for approval
of (i) a consolidation, (ii) a share exchange, (iii) a merger in which NAI is
the successor, and (iv) amendments to the charter (except for amendments to
the sections of the charter relating to the classification and removal of
directors) by the affirmative vote of stockholders holding at least a majority
of the shares entitled to vote on the matter.
The charter authorizes the Board of Directors to reclassify any
unissued shares of stock into other classes or series of stock and to
establish the number of shares in each class or series and to set the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms or
conditions of redemption for each such class or series.
Preferred Stock
The charter authorizes the Board of Directors to classify any
unissued shares of Preferred Stock and to reclassify any previously classified
but unissued shares of any series, as authorized by the Board of Directors.
Prior to issuance of shares of each class or series, the Board is required by
the MGCL and the charter of NAI to set, subject to the provisions of the
charter regarding the restrictions on transfer of stock, the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption for each such series. Thus, the Board could authorize the issuance
of shares of Preferred Stock with terms and conditions which could have the
effect of delaying, deferring or preventing a transaction or a change in
control of NAI that might involve a premium price for holders of NAI Shares or
otherwise be in their best interest.
Power to Issue Additional Shares of Common Stock and Preferred Stock
NAI believes that the power of the Board of Directors to issue
additional authorized but unissued NAI Shares and to classify or reclassify
unissued shares of stock and thereafter to cause NAI to issue such classified
or reclassified shares of stock will provide NAI with increased flexibility in
structuring possible future financings and acquisitions and
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in meeting other needs which might arise. The additional classes or series, as
well as the NAI Shares, will be available for issuance without further action
by NAI's stockholders, unless such action is required by applicable law or the
rules of any stock exchange or automated quotation system on which NAI's
securities may be listed or traded. Although the Board of Directors has no
intention at the present time of doing so, it could authorize NAI to issue a
class or series that could, depending upon the terms of such class or series,
delay, defer or prevent a transaction or a change in control of NAI that might
involve a premium price for holders of NAI Shares or otherwise be in their
best interest. In addition, the issuance of a class or series of preferred
stock with voting or conversion rights may adversely affect the voting power
of common stockholders.
Rights to Purchase NAI Shares
Each NAI Share issued in the Distribution will be accompanied by a
Right to purchase one additional NAI Share. The Rights are exercisable for 45
days from the date of the Distribution at a Subscription Price of $2.00 per
share. See "The Rights Offering."
Transfer Agent and Registrar
The transfer agent and registrar for the NAI Shares and Rights will
be First Union National Bank.
Series A Preferred Stock
On July 15, 1998 NAI entered into a letter agreement with the holder
of the 101,000 outstanding shares of Series A Preferred Stock of NAI Delaware
pursuant to which NAI redeemed all of the outstanding shares of Series A
Preferred Stock with a promissory note in the principal amount of $202,000,
due November 12, 1998. A portion of the proceeds of the Rights Offering and
the Concurrent Offering will be used to repay such note. See "Use of
Proceeds."
CERTAIN PROVISIONS OF MARYLAND LAW AND
OF NAI'S CHARTER AND BYLAWS
The following summary of certain provisions of Maryland law and of the Charter
and Bylaws of NAI does not purport to be complete and is subject to and
qualified in its entirety by reference to Maryland law and to the Charter and
Bylaws, copies of which are exhibits to the Registration Statement of which
this Prospectus is a part. See "Available Information."
Classification of the Board of Directors
The Bylaws provide that the number of directors of NAI may be
established by the Board of Directors but may not be fewer than the minimum
number required by the MGCL (which is three, unless the corporation has less
than three stockholders) nor more than 15. Any vacancy will be filled, at any
regular meeting or at any special meeting called for that purpose, by a
majority of the remaining directors, except that a vacancy resulting from an
increase in the number of directors must be filled by a majority of the entire
Board of Directors.
Pursuant to the Charter, the Board of Directors is divided into three
classes of directors. The initial terms of the Class I, Class II and Class III
directors will expire in 1999, 2000 and 2001, respectively. Beginning in 1999,
directors of each class will be chosen for three-year terms upon the
expiration of their current terms and each year one class of directors will be
elected by the stockholders. NAI believes that classification of the Board of
Directors will help to assure the continuity and stability of NAI's business
strategies and policies as determined by the Board of Directors. Holders of
NAI Shares will have no right to cumulative voting in the election of
directors. Consequently,
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at each annual meeting of stockholders, the holders of a majority of the NAI
Shares will be able to elect all of the successors of the class of directors
whose terms expire at that meeting.
The classified board provision could have the effect of making the
replacement of incumbent directors more time consuming and difficult. At least
two annual meetings of stockholders, instead of one, will generally be
required to effect a change in a majority of the Board of Directors. Thus, the
classified board provision could increase the likelihood that incumbent
directors will retain their positions. The staggered terms of directors may
delay, defer or prevent a tender offer or an attempt to change control of NAI,
even though a tender offer or change in control might be in the best interest
of the stockholders.
Removal of Directors
The Charter provides that a director may be removed only for cause
(as defined in the Charter) and only by the affirmative vote of at least
two-thirds of the votes entitled to be cast in the election of directors. This
provision, when coupled with the provision in the Bylaws authorizing the Board
of Directors to fill vacant directorships, precludes stockholders from
removing incumbent directors except upon the existence of cause for removal
and a substantial affirmative vote and filling the vacancies created by such
removal with their own nominees.
Business Combinations
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns ten percent or more of the
voting power of the corporation's shares or an affiliate of the corporation
who, at any time within the two-year period prior to the date in question, was
the beneficial owner of ten percent or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate of such an Interested Stockholder are prohibited for five
years after the most recent date on which the Interested Stockholder becomes
an Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of such corporation and approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by
holders of outstanding shares of voting stock of the corporation and (b)
two-thirds of the votes entitled to be cast by holders of voting stock of the
corporation other than shares held by the Interested Stockholder with whom (or
with whose affiliate) the business combination is to be effected, unless,
among other conditions, the corporation's common stockholders receive a
minimum price (as defined in the MGCL) for their shares and the consideration
is received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. These provisions of the MGCL do not apply,
however, to business combinations that are approved or exempted by the board
of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder. Each of Kranzco, Gerald Finn,
Jeffrey Finn and Norman Kranzdorf may beneficially own more than ten percent
of NAI's voting shares and would, therefore, be subject to the business
combination provision of the MGCL. However, pursuant to the statute, NAI has
exempted any business combinations involving Kranzco and, consequently, the
five-year prohibition and the super-majority vote requirements will not apply
to business combinations between it and NAI. As a result, Kranzco, may be able
to enter into business combinations with NAI that may not be in the best
interest of its stockholders without compliance by NAI with the super-majority
vote requirements and the other provisions of the statute.
Control Share Acquisitions
The MGCL provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on
the matter, excluding shares of stock owned by the acquiror, by officers or by
directors who are employees of the corporation. "Control Shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquiror or in respect of which the acquiror is
able to exercise or direct the exercise of voting power (except
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solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of
voting power: (i) one-fifth or more but less than one-third, (ii) one-third or
more but less than a majority, or (iii) a majority or more of all voting
power. Control shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained stockholder
approval. A "control share acquisition" means the acquisition of control
shares, subject to certain exceptions.
A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions (including an undertaking
to pay expenses), may compel the board of directors of the corporation to call
a special meeting of stockholders to be held within 50 days of demand to
consider the voting rights of the shares. If no request for a meeting is made,
the corporation may itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then, subject to certain conditions and limitations, the corporation
may redeem any or all of the control shares (except those for which voting
rights have previously been approved) for fair value determined, without
regard to the absence of voting rights for the control shares, as of the date
of the last control share acquisition by the acquiror or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share paid by the acquiror in the
control share acquisition.
The control share acquisition statute does not apply (a) to shares
acquired in a merger, consolidation or share exchange if the corporation is a
party to the transaction or (b) to acquisitions approved or exempted by the
charter or bylaws of the corporation.
The Bylaws contain a provision exempting from the control share
acquisition statute any and all acquisitions by any person of NAI's shares of
stock. There can be no assurance that such provision will not be amended or
eliminated at any time in the future.
Dissolution of NAI
The dissolution of NAI must be approved by the affirmative vote of
the holders of not less than two thirds of all of the votes entitled to be
cast on the matter.
Advance Notice of Director Nominations and New Business
The Bylaws provide that (a) with respect to an annual meeting of
stockholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by stockholders may be made only
(i) pursuant to NAI's notice of the meeting, (ii) by the Board of Directors or
(iii) by a stockholder who is entitled to vote at the meeting and has complied
with the advance notice procedures set forth in the Bylaws and (b) with
respect to special meetings of stockholders, only the business specified in
NAI's notice of meeting may be brought before the meeting of stockholders and
nominations of persons for election to the Board of Directors may be made only
(i) pursuant to NAI's notice of the meeting, (ii) by the Board of Directors or
(iii) provided that the Board of Directors has determined that directors shall
be elected at such meeting, by a stockholder who is entitled to vote at the
meeting and has complied with the advance notice provisions set forth in the
Bylaws.
Anti-takeover Effect of Certain Provisions of Maryland Law and of the Charter
and Bylaws
The business combination provisions (with respect to stockholders
other than Kranzco, Gerald Finn, Jeffrey Finn and Norman Kranzdorf) and, if
the applicable provision in the Bylaws is rescinded, the control share
acquisition
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provisions of the MGCL, the provisions of the Charter on classification of the
Board of Directors and removal of directors and the advance notice provisions
of the Bylaws could delay, defer or prevent a transaction or a change in
control of NAI that might involve a premium price for holders of NAI Shares or
otherwise be in their best interest.
SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial number of NAI Shares, or the perception
that such sales could occur, could adversely affect prevailing market prices
for the NAI Shares. In addition, any such sale or perception could make it
more difficult for NAI to sell equity securities or equity related securities
in the future at a time and price that NAI deems appropriate. Upon
consummation of the Distribution, Rights Offering and the Concurrent Offering,
assuming all of the Rights are exercised and all the Additional Shares are
purchased in the Concurrent Offering, NAI will have a total of 36,202,806 NAI
Shares outstanding, of which the 31,064,306 NAI Shares offered in connection
with the Distribution and Rights Offering will be eligible for immediate sale
in the public market without restriction, unless they are held by "affiliates"
of NAI within the meaning of Rule 144 under the Securities Act. In addition,
there will be outstanding 5,088,815 NAI Shares which will be "restricted"
securities within the meaning of Rule 144 under the Securities Act.
Substantially all of such NAI Shares will be eligible for resale in accordance
with the provisions of Rule 144 immediately upon consummation of the
Distribution. Additionally, NAI has granted options to (i) certain officers,
directors, employees and consultants of NAI to purchase an aggregate of
3,536,853 NAI Shares and (ii) certain directors and trustees of NAI and
Kranzco to purchase 60,000 NAI Shares. NAI has also reserved for issuance (i)
up to 1,700,000 NAI Shares for issuance pursuant to the 1998 Plan, (ii) up to
8,500,000 NAI Shares for issuance pursuant to the Bonus Compensation Plan. See
"Principal Shareholders," "Description of Capital Stock," "Management," and
"Plan of Distribution." Gerald Finn and Jeffrey Finn have agreed not to sell
or transfer, directly or indirectly, any NAI Shares held by the Finns for a
period of three years from the closing of the Exchange Offer.
In general, under Rule 144 as currently in effect, if one year has
elapsed since the later of the date of acquisition of restricted shares from
NAI or any "affiliate" of NAI, as that term is defined under the Securities
Act, the acquiror or subsequent holder thereof is entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1.0%
of the then outstanding NAI Shares or the average weekly trading volume of the
NAI Shares during the four calendar weeks preceding the date on which notice
of the sale is filed with the Commission. Sales under Rule 144 also are
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about NAI. If two years have
elapsed since the date of acquisition of restricted shares from NAI or from
any "affiliate" of NAI, and the acquiror or subsequent holder thereof is
deemed not to have been an "affiliate" of NAI at any time during the three
months preceding a sale, such person would be entitled to sell such shares in
the public market under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, public information requirements or notice
requirements.
No prediction can be made as to the effect, if any, that future sales
of shares, or the availability of shares for future sale, will have on the
market price prevailing from time to time. Sales of substantial amounts of NAI
Shares, or the perception that such sales could occur, may affect adversely
prevailing market prices of the NAI Shares.
PLAN OF DISTRIBUTION
The NAI Shares being issued in the Distribution, are being
distributed by Kranzco directly to the holders of Kranzco Common Shares and
Kranzco Common Share Equivalents on the Distribution Record Date, on the basis
of one NAI Share for each Kranzco Common Share and for each Kranzco Common
Share Equivalent on the Distribution Record Date. NAI intends to distribute
Rights and copies of this Prospectus to stockholders of record on the Rights
Record Date promptly following the effective date of the Registration
Statement of which this prospectus forms a part.
In connection with the Concurrent Offering, NAI intends to distribute
Subscription Forms and copies of this Prospectus, to the members of the
Executive Group and the Broker Member Group, promptly following the effective
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date of the Registration Statement of which this prospectus forms a part. NAI
will determine in its sole discretion whether any person is a member of the
Executive Group or the Broker Member Group. Any determinations by NAI as to
the members of the Executive Group or Broker Group is final.
Holders of Rights who desire to subscribe for the purchase of NAI
Shares in the Rights Offering are urged to complete, date and sign the
Subscription Certificate and return it to the Subscription Agent on or before
the Expiration Date, together with payment in full for the subscribed for NAI
Shares should be directed to the Subscription Agent. There is no assurance
that any Underlying Shares will be available for purchase pursuant to the
Oversubscription Privilege.
Members of the Executive Group and the Broker Member Group who desire
to subscribe for the purchase of NAI Shares in the Concurrent Offering are
urged to complete, date and sign the applicable Subscription Form and return
it to the Subscription Agent on or before the Expiration Date, together with
payment in full for the subscribed for NAI Shares should be directed to the
Subscription Agent. There is no assurance that any Excess Shares will be
available for purchase pursuant to the Executive Group Subscription Privilege
or the Broker Member Group Subscription Privilege, or that any member of the
Broker Member Group will be able to purchase all of the Additional Shares
subscribed for pursuant to the Broker Member Group Subscription Privilege.
Certain employees, officers or directors of NAI may solicit responses
from holders of Subscription Certificates and Subscription Forms, but such
individuals will not receive any commissions or compensation for such services
other than their normal employment compensation.
EXPERTS
The consolidated financial statements of NAI included in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, to the extent and for the periods indicated in their reports, and
are included herein in reliance upon the authority of said firm as experts in
giving said report.
LEGAL MATTERS
The validity of the Rights and the NAI Shares offered hereby will be
passed upon for NAI by Ballard Spahr Andrews & Ingersoll, LLP, Baltimore,
Maryland. Certain matters of law will be passed upon for NAI by Robinson
Silverman Pearce Aronsohn & Berman LLP, New York, New York.
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INDEX TO NEW AMERICA NETWORK, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1997 AND 1996
TOGETHER WITH AUDITORS' REPORT
Page
----
Index to Financial Statements......................................... F-1
Report of Independent Public Accountants.............................. F-2
Consolidated Balance Sheets........................................... F-3
Consolidated Statements of Operations................................. F-4
Consolidated Statements of Stockholders' Deficit...................... F-5
Consolidated Statements of Cash Flows................................. F-6
Notes to Consolidated Financial Statements............................ F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of New America Network, Inc.:
We have audited the accompanying consolidated balance sheets of New America
Network, Inc. as of June 30, 1997 and 1996, and the related consolidated
statements of operations, stockholders' deficit and cash flows for each of the
three years in the period ended June 30, 1997. These 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of New
America Network, Inc. as of June 30, 1997 and 1996, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended June 30, 1997 in conformity with generally accepted accounting
principles.
Philadelphia, Pa.,
May 8, 1998
F-2
<PAGE>
NEW AMERICA NETWORK, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30
March 31, ----------------------------------------
1998 1997 1996
---------------------- -------------------- -----------------
(unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 220,246 $ 61,506 $ 75,085
Accounts receivable (net of allowance of $20,000 and
$7,439 at June 30, 1997 and 1996) 787,408 576,924 716,378
Commissions receivable 636,541 856,194 726,941
Notes and other receivables 6,299 16,829 19,566
Other current assets 19,588 20,456 20,062
------------ ------------ ------------
Total current assets 1,670,082 1,531,909 1,558,032
------------ ------------ ------------
PROPERTY AND EQUIPMENT, net 156,353 155,083 170,375
OTHER ASSETS, net 2,382 1,987 3,895
------------ ------------ ------------
Total assets $ 1,828,817 $ 1,688,979 $ 1,732,302
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,015,718 $ 1,051,859 $ 985,216
Accrued interest 71,887 127,495 95,193
Current portion of long-term debt 126,667 133,333 43,334
Stockholder loans 441,235 441,235 419,083
Deferred revenue 922,433 773,023 862,506
------------ ------------ ------------
Total current liabilities 2,577,940 2,526,945 2,405,332
------------ ------------ ------------
LONG-TERM DEBT 75,000 -- 33,333
------------ ------------ ------------
Total liabilities 2,652,940 2,526,945 2,438,665
------------ ------------ ------------
REDEEMABLE CONVERTIBLE PREFERRED
STOCK 202,000 252,000 302,000
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 8,
9 and 10)
STOCKHOLDERS' DEFICIT:
Common stock 134,091 132,939 132,687
Additional paid-in capital 2,552,779 2,526,969 2,498,604
Accumulated deficit (3,479,125) (3,517,206) (3,411,761)
Treasury stock, at cost (233,868) (232,668) (227,893)
-------------- ------------ ------------
Total stockholders' deficit (1,026,123) (1,089,966) (1,008,363)
---------------- ------------ ------------
Total liabilities, redeemable
convertible preferred $ 1,828,817 $ 1,688,979 $ 1,732,302
stock and stockholders' deficit ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
NEW AMERICA NETWORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Nine Months For the Year Ended
Ended March 31 June 30
------------------------------------- -------------------------------------------------
1998 1997 1997 1996 1995
-------------------- --------------- --------------- --------------- ---------------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE:
Commissions $ 2,836,365 $ 2,910,147 $ 4,001,168 $ 4,124,139 $ 4,370,999
License fees 1,127,575 923,100 1,281,861 1,373,418 1,157,960
Other 473,998 562,593 617,587 522,399 469,741
------------- ------------- ------------- ------------- -------------
Total revenue 4,437,938 4,395,840 5,900,616 6,019,956 5,998,700
------------- ------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Commission expense 602,534 788,193 1,142,575 1,782,292 1,485,024
Sales and marketing 276,860 193,809 321,379 284,963 323,619
Compensation and benefits 1,831,783 1,911,151 2,527,676 2,437,395 1,980,962
Other operating 1,578,222 1,186,953 1,644,040 1,475,091 1,336,179
Depreciation 39,789 36,874 52,518 56,321 44,779
Interest, net 46,906 46,678 59,639 48,035 45,811
------------- ------------- ------------- ------------- -------------
Total costs and expenses 4,376,094 4,163,658 5,747,827 6,084,097 5,216,374
------------- ------------- ------------- ------------- -------------
Income (loss) from operations 61,844 232,182 152,789 (64,141) 782,326
------------- ------------- ------------- ------------- -------------
OTHER EXPENSES:
Equity in loss of affiliate 11,603 14,866 24,863 4,763 --
Loss on sale of real estate -- -- -- -- 65,323
------------- ------------- ------------- ------------- -------------
Total other expenses 11,603 14,866 24,863 4,763 65,323
------------- ------------- ------------- ------------- -------------
Income (loss) from continuing
operations before income taxes 50,241 217,316 127,926 (68,904) 717,003
INCOME TAXES 5,600 -- -- -- 35,000
------------- ------------- ------------- ------------- -------------
Income (loss) from continuing
operations 44,641 217,316 127,926 (68,904) 682,003
LOSS FROM OPERATIONS OF
DISCONTINUED BUSINESSES,
net of tax (Note 7) -- 161,938 222,791 128,096 392,412
------------- ------------- ------------- ------------- -------------
NET INCOME (LOSS) 44,641 55,378 (94,865) (197,000) 289,591
Preferred share distributions 6,560 7,935 10,580 12,580 14,580
------------- ------------- ------------- ------------- -------------
NET INCOME (LOSS) AVAILABLE $ 38,081 $ 47,443 $ (105,445) $ (209,580) $ 275,011
TO COMMON SHAREHOLDERS ============= ============= ============= ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
NEW AMERICA NETWORK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Stock Additional
---------------------------- Paid-In Accumulated Treasury
Shares Par Value Capital Deficit Stock Total
------------- ------------- ---------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1994* .............. 12,523,120 $128,286 $2,349,943 $(3,477,192) $(177,893) $(1,176,856)
Stock issued ........................ 358,970 3,590 80,850 84,440
Amortization of deferred compensation 30,169 30,169
Distributions on preferred stock .... (14,580) (14,580)
Treasury stock purchase ............. (100,000) (50,000) (50,000)
Net income .......................... 289,591 289,591
------------ ------- --------- ---------- -------- ----------
BALANCE, JUNE 30, 1995 .............. 12,782,090 131,876 2,460,962 (3,202,181) (227,893) (837,236)
Stock issued ........................ 81,110 811 811
Amortization of deferred compensation 37,642 37,642
Distributions on preferred stock .... (12,580) (12,580)
Net loss ............................ (197,000) (197,000)
------------ ------- --------- ---------- -------- ----------
BALANCE, JUNE 30, 1996 .............. 12,863,200 132,687 2,498,604 (3,411,761) (227,893) (1,008,363)
Stock issued ........................ 25,170 252 252
Amortization of deferred compensation 28,365 28,365
Distributions on preferred stock .... (10,580) (10,580)
Treasury stock purchase ............. (17,125) (4,775) (4,775)
Net loss ............................ (94,865) (94,865)
------------ ------- --------- ---------- -------- ----------
BALANCE, JUNE 30, 1997 .............. 12,871,245 132,939 2,526,969 (3,517,206) (232,668) (1,089,966)
Stock issued* ....................... 115,169 1,152 13,250 14,402
Amortization of deferred
compensation* ....................... 12,560 12,560
Distributions on preferred stock* ... (6,560) (6,560)
Treasury stock purchase* ............ (12,000) (1,200) (1,200)
Net income* ......................... 44,641 44,641
------------ ------- --------- ---------- -------- ----------
BALANCE, MARCH 31, 1998* ............ 12,974,414 $134,091 $2,552,779 $(3,479,125) $(233,868) $(1,026,123)
============ ======= ========= ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
*Unaudited
F-5
<PAGE>
NEW AMERICA NETWORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months For the Year Ended
Ended March 31 June 30
------------------------------------- -------------------------------------------------
1998 1997 1997 1996 1995
-------------------- --------------- --------------- --------------- ---------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 44,641 $ 55,378 $ (94,865) $ (197,000) $ 289,591
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities
Discontinued operations -- 161,938 222,791 128,096 392,412
Equity in loss of affiliate 11,603 14,866 24,863 4,763 --
Depreciation 39,789 36,874 52,518 56,321 44,779
Amortization of deferred
compensation 26,962 22,092 28,617 38,453 114,609
Loss on sale of real estate -- -- -- -- 65,323
Changes in assets and liabilities-
(Increase) decrease in-
Accounts receivable (210,484) 92,074 139,454 (82,409) (113,832)
Commissions receivable 219,653 (98,337) (129,253) (25,464) (412,959)
Notes and other receivables 10,530 (2,627) 2,737 (23,479) (3,567)
Other current assets (10,735) (5,074) (25,257) 14,021 (8,084)
Other assets (395) -- 1,908 (4,140) 388
Increase (decrease) in-
Accounts payable and
accrued expenses (91,749) 33,746 98,945 225,660 14,566
Deferred revenue 149,410 1,983 (89,483) 23,416 209,684
--------- --------- --------- --------- ---------
Net cash provided by
operating activities 189,225 312,913 232,975 158,238 592,910
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Costs incurred by
discontinued operations -- (161,938) (222,791) (128,096) (392,412)
Proceeds from sale of real
estate -- -- -- -- 75,000
Disposal of property and
equipment -- -- -- -- 57,706
Purchase of property and
equipment (41,059) (33,602) (37,226) (149,060) --
--------- --------- --------- --------- ---------
Net cash used in investing
activities (41,059) (195,540) (260,017) (277,156) (259,706)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Distributions paid on
preferred stock (6,560) (7,935) (10,580) (12,580) (14,580)
Treasury stock purchase (1,200) (4,775) (4,775) -- (50,000)
Redemption of redeemable
convertible preferred
stock (50,000) (50,000) (50,000) (50,000) (50,000)
Loan proceeds 100,000 99,999 150,000 110,531 2,105
Repayment of long-term debt (31,666) (45,675) (71,182) (55,365) (43,345)
--------- --------- --------- --------- ---------
Net cash provided by
(used in) financing
activities 10,574 (8,386) 13,463 (7,414) (155,820)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH 158,740 108,987 (13,579) (126,332) 177,384
CASH, BEGINNING OF PERIOD 61,506 75,085 75,085 201,417 24,033
--------- --------- --------- --------- ---------
CASH, END OF PERIOD $ 220,246 $ 184,072 $ 61,506 $ 75,085 $ 201,417
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
NEW AMERICA NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. ORGANIZATION AND OPERATIONS:
New America Network, Inc. (the "Company") is a Delaware corporation, which has
developed a network of independently owned licensed real estate brokers to
provide commercial real estate brokerage and other real estate-related services.
The Company services national and international businesses which own or use real
estate throughout the United States and, to a lesser extent, abroad. The Company
provides brokerage and real estate services to institutional owners, lenders and
large corporations.
The financial statements as of March 31, 1998 and for the nine-month periods
ended March 31, 1998 and 1997 are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the unaudited
periods have been included. The results for the interim periods are not
necessarily indicative of the results for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Use of 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 these estimates.
Statements of Cash Flows
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents for purposes of the statements of
cash flows. Cash paid for interest was $27,337, $16,799 and $15,937 for the
years ended June 30, 1997, 1996 and 1995, respectively, and $102,514 (unaudited)
and $16,491 (unaudited) for the nine month periods ended March 31, 1998 and
1997, respectively.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share ("SFAS") No. 128. SFAS No. 128 establishes standards for
computing and presenting earnings per share ("EPS") and applies to entities with
publicly held common stock or potential common stock. This statement simplifies
the standards for computing EPS previously found in APB Opinion No. 15,
"Earnings per Share," and makes them comparable to international EPS standards.
F-7
<PAGE>
Basic EPS is based on the weighted average number of common shares outstanding.
The weighted average number of shares outstanding used in the Basic EPS
computations was 12,883,549, 12,860,322 and 12,648,300 for the years ended June
30, 1997, 1996 and 1995, respectively, and 12,954,181 (unaudited) and 12,887,632
(unaudited) for the nine-month periods ended March 31, 1998 and 1997,
respectively.
The Diluted EPS computations have been adjusted to give effect to common share
equivalents; specifically, redeemable convertible preferred stock outstanding.
The weighted average number of shares outstanding used in the Diluted EPS
computations was 13,034,549, 13,036,322 and 12,849,300 for the years ended June
30, 1997, 1996 and 1995, respectively, and 13,080,181 (unaudited) and 13,038,632
(unaudited) for the nine-month periods ended March 31, 1998 and 1997,
respectively.
The Company's per common share data is as follows:
<TABLE>
<CAPTION>
March 31, March 31, June 30, June 30, June 30,
1998 1997 1997 1996 1995
----------- ----------- ---------- ---------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations $ -- $ .01 $ (.01) $ (.01) $ .05
Discontinued operations -- (.01) (.02) (.01) (.03)
---------------- ----------------- ---------------- ---------------- --------------
Basic and diluted net income (loss) $ -- $ -- $ (.01) $ (.02) $ .02
================ ================= ================ ================ ==============
</TABLE>
Property and Equipment
Property and equipment are stated at cost. Major renewals and betterments are
capitalized while replacements, maintenance and repairs that do not improve or
extend the life of the asset are expensed. As assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts, and any gain or loss is reflected.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows:
<TABLE>
<CAPTION>
June 30
Useful March 31, ---------------------------------------
Life 1998 1997 1996
------------------- ------------------- ------------------- ------------------
(unaudited)
<S> <C> <C> <C> <C>
Office equipment 7 years $ 135,614 $ 128,219 $ 128,912
Leasehold improvements 7 years 13,626 13,626 13,626
Computer equipment 3 years 185,342 151,679 127,508
------------------- ------------------- ------------------
334,582 293,524 270,046
Less - Accumulated depreciation (178,229) (138,441) (99,671)
------------------- ------------------- ------------------
Property and equipment, net $ 156,353 $ 155,083 $ 170,375
=================== =================== ==================
</TABLE>
F-8
<PAGE>
Investments
The Company accounts for its 50% investment in NAIS on the equity method. The
Company has a net (deficit) investment in NAIS of ($24,626) and $8,680 at June
30, 1997 and 1996, respectively, and is included in other current assets. The
joint venture was dissolved in February 1998.
The Company's share of NAIS' loss was $24,863, $4,763 and $0 for the years ended
June 30, 1997, 1996 and 1995, respectively.
Revenue Recognition and Deferred Revenue
License fees received from the Company's member broker firms are deferred and
recognized ratably over the term of the marketing service agreement, generally
over one to three years. Commissions from real estate sales brokered by the
Company are recognized at the time of the transfer of title. Commissions from
other network transactions are primarily recognized as they are earned. Such
commissions may be collected in installments over several years.
3. INDEBTEDNESS:
Notes Payable
The Company had available a $100,000 line of credit from First Washington Bank
which expired on October 2, 1997. The line was secured by a second mortgage on
the Company's office building. Borrowings against this line were $100,000 and $0
as of June 30, 1997 and 1996, respectively. Interest was payable quarterly on
this line at a rate of prime plus 1%. This line was repaid on October 2, 1997.
On October 2, 1997, the Company entered into a $100,000 line of credit with
First Washington State Bank. The line is secured by a second mortgage on the
Company's office building and borrowings under the line bear interest at prime
plus 1% (8.5% (unaudited) at March 31, 1998) with a maturity date of October
1998. The Company had no outstanding borrowings against this line of credit at
June 30, 1997 and 1996, respectively, and $100,000 (unaudited) outstanding at
March 31, 1998.
The Company has a commercial installment loan in the amount of $80,000 from
First Washington Bank which is secured by equipment and personally guaranteed by
the Chief Executive Officer of the Company. The interest rate on this loan is
prime plus 1% which was 8.5% and 8.3% at June 30, 1997 and 1996, respectively,
and 8.5% (unaudited) at March 31, 1998. The outstanding principal balance on
this loan totaled $33,333 and $76,667 as of June 30, 1997 and 1996,
respectively. At March 31, 1998 principal of $6,666 was outstanding under this
loan. Principal and interest payments of $3,333 are due monthly with all
outstanding principal and interest due in full at the loan maturity date of May
1998.
At June 30, 1997, all outstanding indebtedness was payable within one year.
On December 2, 1997, the Company received $100,000 of proceeds from a term loan
with First Washington State Bank. The loan bears interest at the prime rate plus
1% (8.5% (unaudited) at March 31, 1998), with monthly principal payments of
$1,667 and a maturity date of November 2002. The loan is secured by a second
mortgage on the Company's office building and personally guaranteed by the Chief
Executive Officer of the Company. At March 31, 1998, principal of $95,000 was
outstanding under this loan, with remaining principal payments of $6,667 due in
fiscal year 1998, $19,992 due in fiscal years 1999 through 2002 and $8,365 due
thereafter.
F-9
<PAGE>
Stockholder Loans
The Company had loans outstanding of $441,235 and $419,083 as of June 30, 1997
and June 30, 1996, respectively, from certain of its stockholders. These amounts
are due on demand and interest is payable at rates ranging from 10% to 12%.
During the years ended June 30, 1997 and 1996, the Company incurred interest of
$41,588 and $41,369 on these borrowings, respectively.
4. RELATED PARTY TRANSACTIONS:
The Company rents office space in Hightstown, New Jersey, under the terms of an
operating lease from an affiliate owned by two officers of the Company. The
minimum annual rent under the lease is $102,000 and the lease expires in April
1999. The lease automatically renews for successive one-year periods and either
party may terminate the lease on 90 days written notice. During fiscal 1997,
1996 and 1995 the Company paid $102,000 in rent expense.
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
The Company issued 201,000 shares of Series A Redeemable Convertible Preferred
Stock ("Series A Preferred Stock"), par value $ .01 per share in April 1994 for
$402,000. The Series A Preferred Stock has a distribution rate of 4 percent of
the Exchange Price ($2.00). The distributions are payable in arrears on July 1,
October 1, January 1 and April 1.
The holders of shares of the Series A Preferred Stock are able to convert all or
part of such shares into shares of Common Stock of the Company equal to the
lesser of $2.00 or the average NASDAQ bid price per share, as defined. Upon such
conversion, the holder of shares of Series A Preferred Stock will also receive a
warrant to purchase, for one year, shares of common stock equal to one share of
common stock for every ten shares of Series A Preferred Stock converted at a
purchase price of $1 per share. No shares of Series A Preferred Stock have been
converted through June 30, 1997.
The Company is required to redeem in five consecutive annual installments of at
least 25,000 shares on October 1, 1994 through 1998, with all remaining shares
being redeemed on or before September 30, 1999. The Company has redeemed 75,000
shares through June 30, 1997 for a total value of $150,000. The Company paid
distributions of $10,580, $12,580 and $14,580 for the years ended June 30, 1997,
1996 and 1995, respectively.
6. STOCKHOLDERS' DEFICIT:
Common Stock
The Company had 200,000,000 shares of common stock, $.01 par value per share
authorized as of June 30, 1997 and 1996. The Company had 13,293,920 shares of
common stock issued and 12,871,245 shares outstanding as of June 30, 1997. The
Company had 13,268,750 shares of common stock issued and 12,863,200 shares
outstanding as of June 30, 1996. The Company had 13,409,089 (unaudited) shares
of common stock issued and 12,974,414 (unaudited) shares outstanding as of March
31, 1998.
Treasury Stock
The Company repurchases common stock at a weighted average stock price at
management's discretion. At June 30, 1997 and 1996, the Company had 422,675
shares of treasury stock valued at $232,668 and 405,550 shares of treasury stock
valued at $227,893, respectively. At March 31, 1998, the Company had 434,675
(unaudited) shares of treasury stock valued at $233,868 (unaudited).
F-10
<PAGE>
7. INCOME TAXES:
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes",
which adopts an asset and liability approach for financial accounting and
reporting for income taxes.
The Company files a consolidated federal tax return and state tax returns on a
separate company basis. At June 30, 1997, the Company had federal net operating
loss carryforwards of approximately $2,620,000 for application against future
taxable income.
The components of income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
For the Nine Months For the Year Ended
Ended March 31 June 30
------------------------------------- -------------------------------------------------
1998 1997 1997 1996 1995
-------------------- --------------- --------------- --------------- ---------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Current:
Federal $ -- $ -- $ -- $ -- $ --
State 5,600 -- -- -- --
-------- --------- --------- --------- ---------
5,600 -- -- -- --
-------- --------- --------- --------- ---------
Deferred:
Federal (7,140) (42,332) (56,444) 112,808 (61,028)
State -- -- -- -- 35,000
-------- --------- --------- --------- ---------
(7,140) (42,332) (56,444) 112,808 (26,028)
-------- --------- --------- --------- ---------
Valuation Allowance 7,140 42,332 56,444 (112,808) 61,028
-------- --------- --------- --------- ---------
$ 5,600 $ -- $ -- $ -- $ 35,000
======== ========= ========= ========= =========
</TABLE>
The reported provision for income taxes differs from that computed by
multiplying pre-tax income by the applicable statutory federal income tax rate
due primarily to state income taxes and the utilization of net operating loss
carryforwards.
F-11
<PAGE>
The components of the net deferred tax asset (liability) are as follows:
<TABLE>
<CAPTION>
June 30
March 31, ------------------------------------
1998 1997 1996
-------------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Net operating loss carryfowards $ 984,552 $ 1,012,048 $ 993,201
Other accruals and reserves (204,115) (232,313) (269,910)
---------------- ---------------- --------------
780,437 779,735 723,291
----------------- ---------------- --------------
Valuation allowance (780,437) (779,735) (723,291)
-------------- --------------- ---------------
Net $ - $ - $ -
==================== ====================== ==================
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company has
established a valuation allowance for the entire net deferred tax.
8. DISCONTINUED OPERATIONS:
During 1995 and 1997, the Company adopted plans to discontinue operations of
RealQuest, Inc. ("RealQuest") and New America Financial Services ("NAFS"),
respectively. Accordingly, the operating results of RealQuest and NAFS have been
segregated from continuing operations and reported as a separate line item on
the statement of operations for all periods presented.
Operating results from these discontinued operations are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------- ----------------
<S> <C> <C> <C>
Total revenue $ 9,530 $ 26,250 $ 129,055
Costs and expenses:
Cost of services -- -- (44,177)
Operating expenses (232,321) (154,346) (477,290)
------------------- ------------------- ----------------
Loss from operations of
discontinued businesses $ $ (222,791) $ (128,096) (392,412)
=================== =================== ================
</TABLE>
No deferred tax benefit was recorded for these discontinued operations due to
the net operating loss carryforwards.
9. SEVERANCE AGREEMENT:
On August 15, 1994, the Company entered into a severance agreement with an
employee. The Company agreed to pay the employee one year's full salary at the
higher of the employee's salary at the time of the agreement or at
F-12
<PAGE>
the time of termination. This employee terminated on June 28, 1996, but
remained as an independent contractor until November 25, 1996, at which time
severance payments began. Payments aggregating $100,000 are to be made over a
two-year period and are included in accrued expenses.
10. COMMITMENTS AND CONTINGENCIES:
All full-time employees over the age of 21 and who have completed one full year
of employment are eligible to participate in the Company's 401K plan. The
Company contributes to the plan at its own discretion. For the years ended June
30, 1997, 1996 and 1995 the Company's contribution to the plan amounted to
$7,000, $7,089 and $8,277, respectively.
In the normal course of business, there are various claims which have been
brought or asserted against the Company. After consultation with legal counsel,
in management's opinion such actions or claims will not have a material adverse
effect on the Company's financial position or results of operations.
11. SUBSEQUENT EVENTS:
In March 1998, the Company signed a letter of intent to enter into a strategic
alliance with Kranzco Realty Trust ("Kranzco") that will recapitalize the
Company as a public company. The transaction is subject to certain conditions.
Under the terms of the agreement, Kranzco will conduct an exchange offer for 80%
of the outstanding common stock of the Company for $8,000,000 of Kranzco
convertible subordinated notes, convertible into common shares of beneficial
interest of Kranzco at $20 per share.
In connection with this transaction, the Company has agreed to effect a
reincorporation merger by merging into New America International, Inc., a
Maryland corporation and a wholly-owned subsidiary of the Company ("NAI
Maryland"). Upon the consummation of such merger, each share of the Company will
be converted into 1.316172 shares of NAI Maryland.
Kranzco is expected to spin off approximately 88% of its shares of the Company,
estimated to be approximately 12,000,000 shares or 70.2% of all outstanding
shares of the Company, to Kranzco's shareholders on a one-for-one basis. After
the spin off, the Company will issue rights to acquire additional shares of
common stock of the Company, at $2 per share, to all of its stockholders on a
one-for-one basis, exercisable for 45 days.
F-13
<PAGE>
==============================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY NAI. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE
SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUM STANCES, CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------------------
SUMMARY TABLE OF CONTENTS
Page
Available Information......................................... 2
Prospectus Summary............................................ 3
Risk Factors.................................................. 19
Use of Proceeds............................................... 28
Dividend Policy............................................... 31
Dilution...................................................... 32
Capitalization................................................ 33
Selected Financial and Operating Data........................ 34
New America Network, Inc. Pro Forma Condensed
Financial Information....................................... 36
Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 43
Business...................................................... 47
Related Transactions.......................................... 56
The Distribution.............................................. 59
The Rights Offering........................................... 62
The Concurrent Offering....................................... 69
Material United States Federal Tax Considerations............. 72
Management.................................................... 77
Principal Stockholders........................................ 89
Certain Related Party Transactions............................ 91
Description of Securities..................................... 91
Certain Provisions of Maryland Law and of
NAI's Charter and Bylaws.................................... 93
Shares Eligible for Future Sale............................... 96
Plan of Distribution.......................................... 96
Experts....................................................... 97
Legal Matters................................................. 97
Index to Financial Statements................................. F-1
---------------------------
==============================================================================
==============================================================================
NEW AMERICA
INTERNATIONAL, INC.
Common Stock
Rights to Purchase Common Stock
------------------
PROSPECTUS
------------------
, 1998
==============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the approximate amount of the fees
and expenses payable by the Registrant in connection with the issuance and
distribution of the Common Stock.
SEC Registration Fee...................................$ 11,575
Blue Sky Fees and Expenses................................100,000
Printing and Mailing Fees.................................200,000
Counsel Fees and Expenses.................................500,000
Accountant's Fees and Expenses.............................75,000
Transfer Agent and Registrar Fees..........................25,000
Miscellaneous..............................................88,425
Total.........................................$1,000,000
==========
- --------------------
* Estimate
Item 14. Indemnification of Directors and Officers
The MGCL permits a Maryland corporation to include in its charter a provision
limiting the liability of its directors and officers to the corporation and
its stockholders for money damages except for liability resulting from (a)
actual receipt of an improper benefit or profit in money, property or services
or (b) active and deliberate dishonesty established by a final judgment as
being material to the cause of action. The charter of NAI contains such a
provision which eliminates such liability to the maximum extent permitted by
Maryland law.
The charter of NAI authorizes it, to the maximum extent permitted
by Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer or (b) any individual who, while a
director of NAI and at the request of NAI, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner
or trustee of such corporation, real estate investment trust, partnership,
joint venture, trust, employee benefit plan or other enterprise from and
against any claim or liability to which such person may become subject or
which such person may incur by reason of his or her status as a present or
former director or officer of NAI. The Bylaws of NAI obligate it, to the
maximum extent permitted by Maryland law, to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer who is made a party to the proceeding by
reason of his service in that capacity or (b) any individual who, while a
director of NAI and at the request of NAI, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner
or trustee of such corporation, real estate investment trust, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is
made a party to the proceeding by reason of his service in that capacity. The
charter and Bylaws also permit NAI to indemnify and advance expenses to any
person who served a predecessor of NAI in any of the capacities described
above and to any employee or agent of NAI or a predecessor of NAI.
II-1
<PAGE>
The MGCL requires a corporation (unless its charter provides
otherwise, which NAI's charter does not) to indemnify a director or officer
who has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their
service in those or other capacities unless it is established that (a) the act
or omission of the director or officer was material to the matter giving rise
to the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, under the
MGCL, a Maryland corporation may not indemnify for an adverse judgment in a
suit by or in the right of the corporation or for a judgment of liability on
the basis that personal benefit was improperly received, unless in either case
a court orders indemnification and then only for expenses. In addition, the
MGCL permits a corporation to advance reasonable expenses to a director or
officer upon the corporation's receipt of (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the corporation and (b) a written
undertaking by him or on his behalf to repay the amount paid or reimbursed by
the corporation if it shall ultimately be determined that the standard of
conduct was not met.
Item 15. Recent Sales of Unregistered Securities
On August 1, 1994, the Board of Directors awarded 29 employees an
aggregate of 47,095 shares of Common Stock as bonus compensation for services
performed. The Board of Directors also awarded a consultant of the Registrant
1,875 shares of Common Stock as a performance bonus.
On October 17, 1994, the Board of Directors awarded a consultant of
the Registrant 100,000 shares of Common Stock as a performance bonus.
On March 6, 1995, Joseph Grossman, Peter O. Hanson and Marc Shegoski,
members of the Board of Directors purchased 5,000, 50,000 and 10,000 shares of
Common Stock, respectively, at a price of $.50 per share.
On June 5, 1995, the Board of Directors awarded Matthew Arnold,
Derrick Mashore, David Blanchard and Jeffrey Finn, senior level employees of
the Registrant, 30,000, 50,000, 45,000 and 20,000 shares of Common Stock as
bonus compensation for services performed.
On July 10, 1995, the Board of Directors awarded 34 employees an
aggregate of 60,157 shares of Common Stock as bonus compensation for services
performed. The Board of Directors also awarded a consultant of the Registrant
6,875 shares of Common Stock as a performance bonus.
On July 27, 1995, the Board of Directors awarded 53 Broker Members an
aggregate of 14,078 shares of Common Stock as a bonus.
On July 9, 1996, the Board of Directors awarded 38 employees an
aggregate of 25,170 shares of Common Stock as bonus compensation.
On July 28, 1997, the Board of Directors awarded 34 employees an
aggregate of 89,669 shares of Common Stock as bonus compensation for services
permed. The Board also awarded a consultant of the Registrant 500 shares of
Common Stock as a performance bonus.
II-2
<PAGE>
On January 14, 1997, the Board of Directors awarded each of Matthew
Arnold, Joseph Grossman, Peter O. Hanson, Robert McMenamin and Marc Shegoski,
the non-employees directors of the Registrant, 5,000 shares of Common Stock
for their service on the Board.
The transactions listed above were made in reliance upon the
exemption from registration provisions under the Securities Act of 1933, as
amended, contained in Section 4(2) thereof.
Item 16. Exhibits and Financial Statement Schedules
(i) Exhibits.
2.1 Form of Exchange Agreement, among Kranzco Realty Trust, Gerald Finn,
Jeffrey Finn, and a trust for the benefit of Jeffrey Finn.
3.1 Amended and Restated Articles of Incorporation of the Registrant
(Delaware).
3.2 Amended and Restated Bylaws of the Registrant (Delaware).
3.3 Proposed Articles of Incorporation of the Registrant (Maryland).
3.4 Proposed Bylaws of the Registrant (Maryland).
4.1 Form of Common Stock Certificate.
4.2 Form of Subscription Certificate.
4.3 Executive Group Subscription Form.
4.4 Broker Member Group Subscription Form.
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
8.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman, LLP regarding
tax matters.
10.1 Form of Restricted Stock Agreement between New America Network, Inc.
and selected employees.*
10.2 Form of Employment Agreement with Gerald Finn.
10.3 Form of Employment Agreement with Jeffrey Finn.
10.4 Lease dated August 15, 1984 between New America Network, Inc. and The
Building Center.
10.5 Amendment dated April 15, 1998 to Lease Agreement between New America
Network, Inc. and The Building Center, Inc.
10.6 New America International, Inc. 1998 Incentive Plan.
10.7 New America International, Inc. 1998 Bonus Compensation Plan.
II-3
<PAGE>
10.8 New America International, Inc. 1998 Stock Option Plan.
10.9 Business Loan Agreement dated October 2, 1997 between New America
Network, Inc. and First Washington State Bank.
10.10 Promissory Note dated October 2, 1997, by New America Network,
Inc., as Borrower, payable to First Washington State Bank
Main-Windsor, as Lender.
10.11 Commercial Guaranty, dated October 2, 1997, by Gerald C. Finn, as
Guarantor, on behalf of New America Network, Inc., as Borrower, in
favor of First Washington State Bank Main-Windsor, as Lender.
10.12 Commercial Guaranty, dated October 2, 1997, by Norma Finn, as
Guarantor, on behalf of New America Network, Inc., as Borrower, in
favor of First Washington State Bank Main-Windsor, as Lender.
10.13 Commercial Security Agreement in the principal amount of $100,000,
dated October 2, 1997, between New America Network, Inc., as
Borrower, and First Washington State Bank Main-Windsor, as Lender.
10.14 Mortgage, dated October 2, 1997, between the Building Center, Inc.,
as Grantor, and First Washington State Bank, as Lender.
10.15 Business Loan Agreement, dated November 25, 1997, between New
America Network, Inc., as Borrower and First Washington State Bank,
as Lender.
10.16 Promissory Note dated November 25, 1997, by New America Network,
Inc., as Borrower, payable to First Washington State Bank
Main-Windsor, as Lender.
10.17 Commercial Security Agreement in the principal amount of $100,000,
dated November 25, 1997, between New America Network, Inc., as
Borrower, and First Washington State Bank Main-Windsor, as Lender.
10.18 Mortgage, dated November 25, 1997 between the Building Center, Inc.,
as Grantor, and First Washington State Bank, as Lender.
10.19 Form of Intercompany Agreement between Kranzco Realty Trust and the
Registrant.
21.1 List of Subsidiaries of Registrant.
23.1 Consent of Ballard Spahr Andrews & Ingersoll LLP (included in Exhibit
5.1).
23.2 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP (contained
in Exhibit 8.1).
23.3 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included on Signature Page).+
27.1 Financial Data Schedule.+
- -----------------------
+ Filed with Registration Statement on Form S-1 (File No. 333-52743)
filed with SEC on May 15, 1998.
II-4
<PAGE>
(ii) Financial Statement Schedules.
None.
All other schedules have been omitted because they are not required
or not material or because the required information is included in the
financial statements included elsewhere herein.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-5
<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4) For purposes of determining any liability under the Act,
the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part
of this registration statement as of the time it was declared
effective.
(5) For the purpose of determining any liability under the
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Hightstown, State of New Jersey, on the 17th day of July, 1998.
New America International, Inc.
By /s/Gerald Finn
----------------------------------
Gerald Finn
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/Gerald Finn Chief Executive Officer; July 17, 1998
- ------------------------ Chairman (Principal Executive
Gerald Finn Officer)
/s/Jeffrey Finn President; Chief Operating Offering July 17, 1998
- ------------------------ and Director
Jeffrey Finn
* Director July 17, 1998
- ------------------------
Matthew Arnold
* Director July 17, 1998
- ------------------------
Joseph Grossman
* Director July 17, 1998
- ------------------------
Peter Hanson
* Director July 17, 1998
- ------------------------
Robert McMenamin
* Director July 17, 1998
- ------------------------
Marc Shegoski
/s/Margaret B. Smith Controller (Principal Financial July 17, 1998
- ------------------------ Officer)
Margaret B. Smith
By /s/Gerald C. Finn
- ------------------------
Gerald C. Finn
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
EXCHANGE AGREEMENT
among
KRANZCO REALTY TRUST,
NEW AMERICA NETWORK, INC.,
GERALD C. FINN,
JEFFREY M. FINN
and
JEFFREY M. FINN, AS TRUSTEE OF THE
GRANTOR RETAINED ANNUITY TRUST OF
GERALD C. FINN U/A DTD. MAY 12, 1998
Dated as of ____________, 1998
<PAGE>
TABLE OF CONTENTS
Article Page
- ------- ----
1. Exchange Offer; Tendering of Shares; Closing.......................... 2
1.2. Tendering of Shares........................................... 2
1.3. Closing ..................................................... 2
2. Representations and Warranties of NAI and the Sellers................. 2
2.1. Organization and Good Standing................................ 2
2.2. Capitalization of NAI; Ownership of Seller Shares............. 3
2.3. Organization and Good Standing of Subsidiaries................ 3
2.4. Options ..................................................... 4
2.5. Authority of NAI and the Sellers.............................. 4
2.6. Consents and Approvals; No Violations......................... 4
2.7. Assets and Liabilities........................................ 5
2.8. Insurance..................................................... 5
2.9. Owned and Leased Real Property................................ 5
2.10. Contracts; Debt Instruments................................... 5
2.11. Absence of Certain Changes or Events.......................... 5
2.12. Financial Statements, Undisclosed Liabilities................. 6
2.13. Books and Records............................................. 6
2.14. Taxes......................................................... 6
2.15. Related Party Transactions.................................... 7
2.16. Litigation.................................................... 7
2.17. Compliance with Applicable Law................................ 7
2.18. No Brokers, Finders or Investment Bankers..................... 8
2.19. Absence of Changes in Benefit Plans; ERISA Compliance......... 8
2.20. Employees & Employee Policies................................. 8
2.21. Broker Members, Brokerage and Other Services.................. 8
2.22. Environmental Representations................................. 9
2.23. Intellectual Property Representations......................... 9
2.24. Access to Records............................................. 9
2.25. Responses from Buyer.......................................... 9
2.26. No Representation Regarding Investment........................ 9
2.27. Private Company; Prior Offerings.............................. 10
2.28. Informed Investment Decisions................................. 10
2.29. Receipt of Buyer Registration Statements...................... 10
3. Representations and Warranties of the Buyer........................... 10
3.1. Organization and Good Standing................................ 10
3.2. Capitalization of the Buyer................................... 10
3.3. Authority of the Buyer........................................ 11
3.4. Consents and Approvals; No Violations......................... 11
3.5. Buyer Common Shares........................................... 11
3.6. No Brokers, Finders or Investment Bankers..................... 11
3.7. SEC Filings................................................... 12
-i-
<PAGE>
Article Page
- ------- ----
4. Covenants............................................................. 12
4.1. Other Transaction Proposals................................... 12
4.2. Conduct of Businesses......................................... 13
4.3. Filings; Other Action......................................... 14
4.4. Inspection of Records; Opportunity to Ask Questions........... 15
4.5. Publicity..................................................... 15
4.6. Listing Application........................................... 15
4.7. Further Action................................................ 15
4.8. Sale of Securities of NAI and the Buyer....................... 15
4.9. Expenses...................................................... 16
5. Conditions............................................................ 16
5.1. Conditions to Each Party's Obligation to Consummate the
Exchange Offer................................................ 16
5.2. Conditions to Obligations of the Buyer to Consummate the
Exchange Offer................................................ 17
5.3. Conditions to Obligation of NAI and the Sellers to Consummate
the Exchange Offer............................................ 18
6. Termination........................................................... 19
6.1. Termination by Mutual Consent................................. 19
6.2. Termination by the Sellers, NAI or the Buyer.................. 19
6.3. Termination by the Sellers or NAI............................. 19
6.4. Termination by the Buyer...................................... 20
6.5. Effect of Termination and Abandonment......................... 20
6.6. Extension; Waiver............................................. 20
7. Indemnification....................................................... 21
7.1. By the Sellers................................................ 21
7.2. By the Buyer.................................................. 22
7.3. By NAI........................................................ 23
7.4. Limitation on Indemnification................................. 24
7.5. Escrow........................................................ 24
8. General Provisions.................................................... 25
8.1. Survival...................................................... 25
8.2. Notices....................................................... 25
8.3. Assignment; Binding Effect; Benefit........................... 26
8.4. Entire Agreement.............................................. 26
8.5. Amendment..................................................... 26
8.6. Governing Law................................................. 26
8.7. Counterparts.................................................. 27
8.8. Headings...................................................... 27
8.9. Interpretation................................................ 27
8.10. Waivers....................................................... 27
-ii-
<PAGE>
Article Page
- ------- ----
8.11. Incorporation................................................. 27
8.12. Severability.................................................. 27
8.13. Enforcement of Agreement...................................... 27
8.14. Non-Recourse.................................................. 27
Exhibit A Unanimous Written Consent of Shareholders of NAI
Exhibit B-1 Gerald Finn Employment Agreement
Exhibit B-2 Jeffrey Finn Employment Agreement
Exhibit C Escrow Agreement
-iii-
<PAGE>
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (this "Agreement"), dated as of ____________,
1998, among Kranzco Realty Trust, a Maryland real estate investment trust (the
"Buyer"), New America Network, Inc., a Delaware corporation, which conducts
business under the name New America International ("NAI"), Gerald C. Finn ("G.
Finn"), Jeffrey M. Finn, ("J. Finn" and together with G. Finn, the "Finns")
and Jeffrey M. Finn, as Trustee of the Grantor Retained Annuity Trust of
Gerald C. Finn u/a dtd. May12, 1998, the "Trust", and together with the Finns,
the "Sellers").
RECITALS
WHEREAS, the Buyer desires to exchange $8,000,000 of ten-year
convertible subordinated notes of the Buyer (the "Buyer Notes") for 80% of the
issued and outstanding shares of common stock, par value $.01 per share, of
NAI ("NAI Common Stock") pursuant to an exchange offer (the "Exchange Offer")
to be conducted in accordance with a prospectus included as part of a
Registration Statement on Form S-4 (the "Exchange Offer Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act");
WHEREAS, subject to the terms and conditions of this Agreement, the
Buyer will conduct the Exchange Offer in accordance with the Exchange Offer
Registration Statement;
WHEREAS, the Sellers own an aggregate of 10,082,997 shares of NAI
Common Stock, representing 77.7% of the issued and outstanding shares of NAI
Common Stock;
WHEREAS, in connection with the Exchange Offer, on March 20, 1998,
the Buyer, NAI and the Finns entered into a letter of intent (the "Letter of
Intent"), pursuant to which, subject to the terms and conditions of this
Agreement, the Sellers agreed, among other things, (i) to tender 80% of their
shares of NAI Common Stock to the Buyer in the Exchange Offer, (ii) in the
event that less than 80% of all of the issued and outstanding shares of NAI
Common Stock are tendered to the Buyer in connection with the Exchange Offer,
to tender such additional number of their shares of NAI Common Stock such that
at least 80% of all of the issued and outstanding shares of NAI Common Stock
are tendered to the Buyer in connection with the Exchange Offer (provided that
in no event shall the Sellers be required to tender more than 90% of the
shares of NAI Common Stock owned by the Sellers) and (iii) make certain
representations and warranties to the Buyer in respect of NAI and the
information contained in the Exchange Offer Registration Statement and the
Distribution Registration Statement (as defined below) relating to NAI;
WHEREAS, the parties hereto desire to enter into this Agreement in
order to formalize the matters agreed to in the Letter of Intent and certain
other matters; and
WHEREAS, immediately following the consummation of the Exchange
Offer, (i) NAI intends to reincorporate as a Maryland corporation, through the
merger of NAI with and into a wholly-owned subsidiary of NAI, (ii) the Buyer
intends to distribute 70.2% of the issued and outstanding shares of NAI Common
Stock to its shareholders (the "Distribution") and (iii) immediately following
the Distribution, NAI intends to distribute to its shareholders (including the
shareholders of the Buyer who receive NAI Common Stock as part of the
Distribution) rights ("Rights") to purchase one share of NAI Common Stock at a
price of $2.00 per share, each as more fully described in the prospectus
included as part of a Registration Statement on Form S-1 (the "Distribution
Registration Statement") under the Securities Act;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
1. Exchange Offer; Tendering of Shares; Closing
1.1. Exchange Offer. Subject to the terms and conditions of this
Agreement, the Buyer agrees to conduct the Exchange Offer in accordance with
the Exchange Offer Registration Statement.
1.2. Tendering of Shares. The Sellers hereby agree that each of them
will tender 80% of his shares of NAI Common Stock in the Exchange Offer;
provided, however, that in the event that less than 80% of the issued and
outstanding shares of NAI Common Stock are tendered to the Buyer in connection
with the Exchange Offer, the Sellers shall tender such additional number of
their own shares of NAI Common Stock such that at least 80% of the issued and
outstanding shares of NAI Common Stock are tendered to the Buyer in connection
with the Exchange Offer; provided further, however, that in no event shall the
Sellers be required to tender more than 90% of the shares of NAI Common Stock
owned by the Sellers.
1.3. Closing. Subject to the terms and conditions of this Agreement
and the Exchange Offer Registration Statement, the closing of the Exchange
Offer (the "Closing") shall take place at the offices of Robinson Silverman
Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New York,
as promptly as practicable following the Expiration Date (as defined in the
Exchange Offer Registration Statement) and in accordance with the Exchange
Offer Registration Statement. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date".
ARTICLE 2
2. Representations and Warranties of NAI and the Sellers. NAI and
the Sellers, jointly and severally, represent and warrant to the Buyer as
follows:
2.1. Organization and Good Standing. NAI is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own,
operate, lease and encumber its properties and assets and to carry on its
business as it is now being conducted. NAI is licensed and qualified to do
business as a foreign corporation and is in good standing in all the states,
countries and jurisdictions listed on Schedule 2.1 hereto, which is a true,
complete and correct list of all of the states, countries and jurisdictions in
which NAI is required to be licensed and qualified to do business as a foreign
corporation or in which it owns or leases property other than any state,
country or jurisdiction where the failure to be so licensed or qualified would
not have a material adverse effect on the condition (financial or otherwise),
business, prospects, properties, net worth or results of operations of NAI and
its subsidiaries taken as a whole. NAI and the Sellers have delivered
to Buyer true, complete and correct copies of the Certificate of Incorporation
of NAI and its Bylaws, in each case, as amended and/or restated.
2.2. Capitalization of NAI; Ownership of Seller Shares. The
authorized stock of NAI consists of 20,000,000 shares of NAI Common Stock and
1,000,000 shares of preferred stock ("NAI Preferred Stock") of which 201,000
shares have been designated as Series A Redeemable Convertible Preferred Stock
("NAI Series A Preferred Stock"). As of the date hereof, there are 12,974,414
shares of NAI Common Stock issued and outstanding and there are no shares of
NAI Series A Preferred Stock are issued and outstanding.
-2-
<PAGE>
All of the issued and outstanding shares of NAI Common Stock are owned
beneficially and of record by the shareholders of NAI, and to the best of the
Sellers' knowledge after due inquiry, are free of any liens, claims, actions,
rights of first refusal or other encumbrances. All such shares have been duly
authorized and are validly issued, fully paid and nonassessable and are free of
preemptive rights with no personal liability attaching to the ownership thereof.
There are no notations on the share certificates or in the stock records as to
any liens, claims, actions or rights of first refusal or other encumbrances. NAI
also has 534,675 shares of treasury stock (the "NAI Treasury Stock"). Set forth
as Schedule 2.2 is a true, complete and correct listing of each shareholder of
NAI, the number of shares owned by each such shareholder and the dates of
issuance of all such shares.
G. Finn is the record and beneficial owner of 7,385,890 shares of NAI
Common Stock (excluding shares of NAI Common Stock owned by the Trust), J.
Finn is the record and beneficial owner of 697,107 shares of NAI Common Stock
(excluding shares of NAI Common Stock owned by the Trust) and the Trust is the
record and beneficial owner of 2,000,000 shares of NAI Common Stock
(collectively, the "Seller Shares"). The Seller Shares are, and as of the
closing of the Exchange Offer will be, free and clear of any liens, claims,
actions, rights of first refusal and other circumstances.
2.3. Organization and Good Standing of Subsidiaries. (a) Each
Subsidiary (as defined below) of NAI (an "NAI Subsidiary") is a corporation
duly organized, validly existing and in good standing under the laws of its
state of jurisdiction and has all requisite corporate power and authority to
own, operate, lease and encumber its properties and assets and to carry on its
business as it is now being conducted. Each NAI Subsidiary is licensed and
qualified to do business and is in good standing in all the states, countries
and jurisdictions listed on Schedule 2.3(a) hereto, which is a true, complete
and correct list of all of the states, countries and jurisdictions in which
each NAI Subsidiary is required to be licensed and qualified to do business or
in which it owns or leases property other than any state, country or
jurisdiction where the failure to be so licensed or qualified would not have a
material adverse effect on the condition (financial or otherwise), business,
prospects, properties, net worth or results of operations of such NAI
Subsidiary, taken as a whole. NAI and the Sellers have delivered to the Buyer
true, complete and correct copies of the Articles of Incorporation and Bylaws,
in each case, as amended and/or restated for each NAI Subsidiary.
(b) Each NAI Subsidiary is wholly-owned by NAI and the ownership
interest of NAI in each NAI Subsidiary, is free of any liens, claims or other
encumbrances. All shares of each NAI Subsidiary have been duly authorized and
are validly issued, fully paid and nonassessable and are free of preemptive
rights with no personal liability attaching to the ownership thereof. Set forth
on Schedule 2.3(b) is a true, complete and correct listing of each NAI
Subsidiary. "Subsidiary" of any Person means any corporation, partnership,
limited liability company, joint venture or other legal entity of which such
Person (either directly or through or together with another Subsidiary of such
Person) owns any of the capital stock or other equity interests of such
corporation, partnership, limited liability company, joint
venture or other legal entity. As used herein, "Person" means an individual,
corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity.
2.4. Options. Except as set forth as Schedule 2.4, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which NAI or any NAI
Subsidiary is a party or by which such entity is bound, obligating NAI or any
NAI Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of stock, voting securities or other ownership
interest of NAI or any NAI Subsidiary or obligating NAI or any NAI Subsidiary
to issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking (other than to
NAI or an NAI Subsidiary).
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2.5. Authority of NAI and the Sellers. NAI and the Sellers have all
requisite power (corporate, in the case of NAI, and trust, in the case of the
Trust) and authority to execute and deliver this Agreement, the other
documents set forth as Schedule 2.5 and any other documents contemplated by
this Agreement or such documents or the transactions contemplated thereby (the
"Transaction Documents"), to consummate the transactions contemplated by the
Transaction Documents and to take all other actions required to be taken by
them pursuant to the provisions hereof and thereof. The execution, delivery
and performance by NAI and the Sellers and the consummation by NAI and the
Sellers of the transactions contemplated by the Transaction Documents, have
been approved by all requisite corporate action of NAI and trust action on the
part of the Trust, and no other corporate or trust proceedings on the part of
NAI or the Trust, as the case may be, are necessary to authorize the
execution, delivery and performance of the Transaction Documents. The
Transaction Documents have been duly and validly executed and delivered by NAI
and the Sellers, as the case may be, and constitute valid and binding
agreements of NAI and the Sellers, as the case may be, enforceable against NAI
and the Sellers in accordance with their respective terms.
2.6. Consents and Approvals; No Violations. Except as set forth in
Schedule 2.6 hereto, no filing or registration with, and no consent,
authorization, declaration or approval of, any governmental body, court,
arbitration board, tribunal or authority ("Governmental Entity"), or any third
party, is necessary for the execution, delivery and performance by NAI or the
Sellers of the Transaction Documents or the consummation of the transactions
contemplated thereby. The execution, delivery and performance by NAI and the
Sellers of the Transaction Documents and the transactions contemplated
thereby, will not (i) constitute any violation or breach of any provision of
the charter or By-laws of NAI or any NAI Subsidiary or the trust agreement of
the Trust, or (ii) constitute any violation or breach of any provision of, or
constitute a default (or an event which, with the giving of notice or the
passage of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any liens, pledges,
mortgages, deeds of trust, security interests, claims against title, charges,
options or other encumbrances ("Encumbrances") upon any of the assets of NAI,
any NAI Subsidiary or the Sellers under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions under (A) the Certificate of Incorporation or the By-laws of NAI or
the comparable charter or organizational documents or partnership or similar
agreement (as the case may be) of any NAI Subsidiary, each as amended or
supplemented to the date of this Agreement, or (B) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement,
lease or other agreement, license, franchise, permit, concession, contract, or
other instrument, or other obligation to which NAI, any NAI Subsidiary or the
Sellers is a party, or by which NAI, any NAI Subsidiary, the Sellers or any of
their properties is bound or affected, or (iii) conflict with or constitute
any violation of any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to NAI, any NAI Subsidiary or the Sellers.
2.7. Assets and Liabilities. NAI and each NAI Subsidiary has good and
valid title to all assets used in their respective businesses, free and clear
of any Encumbrances. The assets reflected on the balance sheet being delivered
pursuant to Section 2.12 hereto constitute all of the assets used in, and are
sufficient for, the operation of NAI's business as it is presently conducted.
2.8. Insurance. NAI and the Sellers acknowledge that NAI and each NAI
Subsidiary has adequate insurance coverage for their respective assets.
Schedule 2.8 is a true, complete and correct listing of all property and
casualty policies in effect for NAI and its Subsidiaries and copies of all
such property and casualty policies have been delivered to the Buyer. All such
policies are in full force and effect and no notice of cancellation,
threatened cancellation, default or non-compliance has been received with
respect thereto.
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2.9. Owned and Leased Real Property. Neither NAI nor any NAI
Subsidiary owns any real property. Set forth on Schedule 2.9 is a true, complete
and accurate list of all leases of real property under which NAI or any NAI
Subsidiary is either the lessor or lessee. To the best knowledge of the Sellers,
each such lease is the legal, valid and binding obligation of the lessor and
lessee thereof, enforceable in accordance with its terms. True, complete and
correct copies of all leases have been delivered to the Buyer.
2.10. Contracts; Debt Instruments. Neither NAI, any NAI Subsidiary
nor the Sellers has received a written notice that NAI or any NAI Subsidiary
is in violation of or in default under (nor to the best knowledge of NAI and
the Sellers does there exist any condition which upon the passage of time or
the giving of notice or both would cause such a violation of or default under)
any loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other contract, agreement, arrangement
or understanding, to which it is a party or by which it or any of its
properties or assets is bound, except as set forth in Schedule 2.10(a) hereto,
nor to the best knowledge of NAI and the Sellers does such a violation or
default exist, except to the extent that such violation or default,
individually or in the aggregate, would not have a material adverse effect on
the business, assets, properties, financial condition or results of operations
of NAI and the NAI subsidiaries taken as a whole (an "NAI Material Adverse
Effect"). Set forth on Schedule 2.10(b) is a true, complete and correct list
of all contracts and agreements to which NAI or any NAI Subsidiary is a party
which are not set forth on another Schedule hereto. NAI and the Sellers have
delivered to the Buyer true, correct and complete copies of the contracts and
agreements listed on Schedule 2.10(c).
Set forth as Schedule 2.10(d) is a true, complete and correct list of
each loan or credit agreement, note, bond, mortgage, indenture and any other
agreement and instrument pursuant to which any indebtedness of NAI or any NAI
Subsidiary is outstanding or may be incurred. Neither NAI nor any NAI
Subsidiary is in default under any such loan or credit agreement, note, bond,
mortgage, indenture or any other agreement.
2.11. Absence of Certain Changes or Events. Since the date of the
most recent audited financial statements ("NAI Financial Statement Date") NAI
and the NAI Subsidiaries have conducted their business only in the ordinary
course (including the acquisition of properties and issuance of securities)
and there has not been (a) any material adverse change in the business,
financial condition, or results of operations or prospects of NAI and the NAI
Subsidiaries taken as a whole (an "NAI Material Adverse Change"), nor has
there been any occurrence or circumstance that with the passage of time would
reasonably be expected to result in an NAI Material Adverse Change, (b) any
split, combination or reclassification of any of NAI's shares of Common Stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, or giving the right to acquire by
exchange or exercise, shares of its Common Stock or any issuance of an ownership
interest in, any NAI Subsidiary, (c) any damage, destruction or loss, whether or
not covered by insurance, that has or would have an NAI Material Adverse Effect,
(d) any change in accounting methods, principles or practices by NAI or any NAI
Subsidiary materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles ("GAAP") or (e) any amendment of any employment, consulting,
severance, retention or any other agreement between NAI or any NAI Subsidiary
and any officer of NAI or any NAI Subsidiary, true, complete and correct copies
of which agreements and amendments thereof are listed on Schedule 2.11 hereto,
or (f) any redemption of the shares of NAI's capital stock other than the
redemption of the outstanding NAI Series A Preferred Stock for $202,000. There
is no employment or severance contract, or other agreement requiring payments,
or cancellation of indebtedness to which NAI or an NAI Subsidiary is a party or
other obligation required to be made or satisfied by NAI or any NAI Subsidiary
upon a change of control or otherwise as a result of the execution of the
Transaction Documents or the consummation of any of the transactions
contemplated by the Transactions Documents.
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2.12. Financial Statements, Undisclosed Liabilities. The consolidated
financial statements of NAI for the last three fiscal years ended June 30,
1997 and six months ended December 31, 1997 have been prepared in accordance
with GAAP, applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly presented, in accordance
with the applicable requirements of GAAP. Neither NAI nor any of the NAI
Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth
on a consolidated balance sheet of NAI or in the notes thereto) other than as
set forth in such financial statements. The Sellers and NAI have delivered to
the Buyer copies of all financial statements of NAI and its Subsidiaries for
the three fiscal years ended June 30, 1995, 1996, 1997 and the six months
ended December 31, 1997.
2.13. Books and Records. The books of account and all other financial
records of NAI and each NAI Subsidiary are true, complete and correct in all
material respects, have been maintained in accordance with good business
practices, and are accurately reflected in all material respects in the
financial statements delivered by NAI. The minute books and other records of
NAI and each NAI Subsidiary have been made available to the Buyer, contain
accurate records of all meetings and accurately reflect in all material
respects all other actions of the shareholders, the directors and any
committees.
2.14. Taxes. Except as set forth in Schedule 2.14, NAI and each NAI
Subsidiary has timely filed all federal, state, local and foreign tax returns
required to be filed by it (after giving effect to any filing extension
properly granted by a Governmental Entity having authority to do so) through the
date hereof and such returns are complete, accurate and comply with all
applicable laws and NAI and each NAI Subsidiary has timely paid all Taxes (as
defined below) required to be paid by them. True, correct and complete copies of
all federal, state, local and foreign tax returns filed by NAI and each NAI
Subsidiary and all communications relating thereto have been delivered to the
Buyer. There are no claims or assessments for the collection of any taxes from
NAI or any NAI Subsidiary, which have been asserted, are pending, or, to the
knowledge of the Sellers and NAI, threatened. There are no audits relating to
Taxes of NAI or any NAI Subsidiary pending, or, to the knowledge of the Sellers
and NAI, threatened. The most recent audited financial statements reflect an
adequate reserve for all material Taxes payable by NAI and each NAI Subsidiary
for all taxable periods and portions thereof through the date of such financial
statements. Neither NAI nor any NAI Subsidiary has incurred any liability for
Taxes other than in the ordinary course of business. No event has occurred, and
no condition or circumstance exists, which presents a risk that any Tax
described in the preceding sentence will be imposed upon NAI or any NAI
Subsidiary. To the best knowledge of NAI and the Sellers, no deficiencies for
any Taxes have been proposed, asserted or assessed against NAI or any NAI
Subsidiary, and no requests for waivers of the time to assess any such Taxes are
pending. As used in this Agreement, "Taxes" shall include all federal, state,
local and foreign income, property, withholding, sales, franchise, employment,
excise and other taxes, tariffs or governmental charges of any nature
whatsoever, together with penalties, interest or additions to Tax with respect
thereto. No outstanding waivers or comparable consents regarding the application
of the statute of limitations with respect to any Taxes or tax returns has been
given by or on behalf of NAI. No federal, state, local or foreign audits or
other administrative proceedings or court proceedings ("Audits") exist or have
been initiated with regard to any Taxes or tax returns of NAI and NAI has not
received any written notice that such an Audit is pending or threatened with
respect to any Taxes due from or with respect to NAI or any tax return filed by
or with respect to NAI. NAI has not filed a consent pursuant to Section 341(f)
of the Internal Revenue Code of 1986 (the "Code") (or any predecessor provision)
or agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset, as such term is defined in Section 341(f)(4) of the Code,
owned by NAI. NAI has no liability for Taxes of any person pursuant to Treasury
Regulation ss.1.1502-6 (or any similar provision of state, local or foreign law)
and NAI is not a party to any tax sharing agreement. NAI is not a party to any
contract, agreement or other arrangement which could result in the payment of
amounts that could be nondeductible by reason of Section 280G of the Code.
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2.15. Related Party Transactions. Set forth on Schedule 2.15 hereto
is a true, complete and correct list of all arrangements, agreements and
contracts entered into by NAI or any NAI Subsidiary with (a) any consultant,
(b) any person who is an officer, director, employee, Affiliate or shareholder
of NAI or any NAI Subsidiary, any relative of any of the foregoing or any
entity of which any of the foregoing is an Affiliate or shareholder, officer,
director or employee. "Affiliate" shall have the same meaning as such term is
defined in Rule 405 promulgated under the Securities Act.
2.16. Litigation. There are no actions, suits or proceedings pending,
or to the best knowledge of the Sellers and NAI, threatened in writing against
or affecting NAI or any NAI Subsidiary, at law or in equity, that individually
or in the aggregate, could reasonably be expected to (i) have an NAI Material
Adverse Effect, or (ii) prevent the consummation of any of the transactions
contemplated by the Transaction Documents, nor are there any orders,
injunctions, judgements or decrees of any court, arbitrator or other
Governmental Entity, to which NAI and any NAI Subsidiary is or has been a
party or by which NAI and any NAI Subsidiary's properties are, or have been,
bound or which, insofar as reasonably can be foreseen in the future would
have, any such effect.
2.17. Compliance with Applicable Law. (a) Except as set forth on
Schedule 2.17(a), neither NAI nor any NAI Subsidiary is in violation of any
order of any Governmental Entity, or any law, ordinance, governmental rule or
regulation ("Laws") to which NAI or any NAI Subsidiary is subject, except for
such violations that, individually or in the aggregate would not have an NAI
Material Adverse Effect.
(b) Neither NAI nor any NAI Subsidiary has either prepared or
distributed a franchise disclosure document. Except as set forth on Schedule
2.17(b), NAI has not offered a franchise as that term is defined by the
federal and state franchise laws. Except as set forth on Schedule 2.17 (b),
NAI is exempt from and has not violated any federal or state franchise laws.
2.18. No Brokers, Finders or Investment Bankers. Neither NAI, nor any
of its officers or directors, or the Sellers, has employed any broker or
finder or investment banker or incurred any liability which remains
unsatisfied for any brokerage or finder's fee or commission or similar
payments in connection with this Agreement and the transactions contemplated
hereby.
2.19. Absence of Changes in Benefit Plans; ERISA Compliance. Except
as set forth on Schedule 2.19, there has not been any adoption of any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other
employee benefit plan, arrangement or understanding (whether or not legally
binding) providing benefits to any current or former employee, officer or
director of NAI, any NAI Subsidiary, or any person Affiliated with NAI under
Section 414(b), (c), (m) or (o) of the Code (collectively, "NAI Benefit
Plans").
All NAI Benefit Plans, including any such plan that is an "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), are in compliance in all material
respects with all applicable requirements of law, including but not limited to
ERISA and the Code and neither NAI nor any NAI Subsidiary has any material
liabilities or obligations with respect to any such NAI Benefit Plan, whether
accrued, contingent or otherwise. The execution of, and performance of the
transactions contemplated by the Transaction Documents will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any NAI Benefit Plan, policy, arrangement or agreement or any
trust or loan that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in
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benefit or obligation to fund benefits with respect to any employee or director.
There are no severance agreements or severance policies applicable to employees
of NAI or any NAI Subsidiary.
2.20. Employees & Employee Policies. Set forth as Schedule 2.20(a) is
a true, complete and correct list of each employee and such employee's
position and salary as of the date hereof. A copy of each employee handbook of
NAI currently in effect has previously been made available to the Buyer. Such
handbook fairly and accurately summarizes all material employee policies,
vacation policies and payroll practices of NAI and each NAI Subsidiary.
2.21. Broker Members, Brokerage and Other Services. Set forth as
Schedule 2.21(a) is a true, complete and correct list of each real estate
broker that is a member of the NAI network (the "Broker Member") and each
agreement between NAI and a Broker Member (the "Broker Member Agreement"). The
Sellers and NAI have delivered to the Buyer true, correct and complete copies
of the Broker Member Agreements. To the best of the Sellers' and NAI's
knowledge after due inquiry, each Broker Member is licensed as a real estate
broker in each jurisdiction where such Broker Member is required to be
licensed. Each Broker Member Agreement is in full force and effect and no
party to any Broker Member Agreement has given notice of termination or its
intent to terminate any Broker Member Agreement. Except as listed on Schedule
2.21(b) hereto, (i) each Broker Member is current in the payment of license
transactional fees due NAI and, as of the date hereof, there are no
commissions due any Broker Member by NAI or any NAI Subsidiary. Set forth on
Schedule 2.21(c) is a true, complete and correct listing of each assignment in
progress. Set forth on Schedule 2.21(d) is a true, complete and correct
listing of all corporate and institutional clients and true, complete and
correct copies of all contracts with corporate and institutional clients still
in effect has been provided to the Buyer. Set forth on Schedule 2.21(e) is a
true, complete listing of all ancillary services contracts, and true, complete
and correct copies of all ancillary services contracts have been delivered to
the Buyer.
2.22. Environmental Representations. None of NAI or any NAI
Subsidiaries or, to the best of NAI's and the Sellers' knowledge after due
inquiry, any other person has caused or permitted (a) the unlawful presence of
any hazardous substances, hazardous materials, toxic substances or waste
materials (collectively, "Hazardous Materials") on any of the properties of NAI
or any NAI Subsidiary (the "NAI Properties"), or (b) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the NAI Properties as a result of any
construction on or operation and use of such properties, which presence or
occurrence would, individually or in the aggregate, have an NAI Material Adverse
Effect; and in connection with the construction on or operation and use of the
NAI Properties, NAI and the NAI Subsidiaries have not failed to comply in any
material respect with all applicable local, state and federal environmental
laws, regulations, ordinances and administrative and judicial orders relating to
the generation, recycling, reuse, sale, storage, handling, transport and
disposal of any Hazardous Materials, except to the extent such failure to
comply, individually or in the aggregate, would not have an NAI Material Adverse
Effect.
2.23. Intellectual Property Representations. NAI and each NAI
Subsidiary has valid, legal rights to use, all trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights,
whether or not registered (collectively, the "Intellectual Property Rights"),
which are necessary to, or used in, their respective businesses. Neither NAI
nor any NAI Subsidiary is a defendant in any claim, suit, action or proceeding
relating to their respective businesses which involves a claim of infringement
of any trademarks or service marks. Neither the Sellers nor NAI has any
knowledge of any existing infringement by another person of any of the
Intellectual Property Rights belonging to NAI or any NAI Subsidiary. Neither
the Sellers nor NAI has received notice of the infringement by NAI or any NAI
Subsidiary of any
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infringement of any Intellectual Property Rights of a third party. Set forth on
Schedule 2.23 is a true, complete and correct list of all Intellectual Property
Rights of NAI or any NAI Subsidiary.
2.24. Access to Records. NAI and the Sellers have been afforded full
and complete access to all information and other materials relating to the
Buyer and its affiliates and the properties, business, financial condition and
operations of the Buyer and any other matters, relating to the Buyer or the
Transaction Documents and the transactions contemplated thereby which NAI or
the Sellers have requested, or deemed necessary in evaluating the merits and
risks of acquiring the Buyer Notes and the Buyer Common Shares (as defined
herein), and have been afforded the opportunity to obtain any additional
information necessary to verify the accuracy of any information provided. NAI
and the Sellers acknowledge that they have received copies of the documents
filed by the Buyer with the Securities and Exchange Commission (the "SEC") as
set forth on Schedule 2.24 (the "SEC Documents").
2.25. Responses from Buyer. The Sellers have had the opportunity to
ask and have answered any questions concerning the financial condition,
business or operations or any other matter with respect to the Buyer and its
affiliates or with respect to the merits and risks of an acquisition of the
Buyer Notes or the Buyer Common Shares, and NAI and the Sellers have received
complete and satisfactory answers to all such questions.
2.26. No Representation Regarding Investment. No representation to
NAI or the Sellers has been made with respect to any tax or economic benefits
to be derived from an investment in the Buyer Notes or the Buyer Common Shares
or as to any other matter. NAI and the Sellers are relying solely upon their
own knowledge and upon the advice of their personal advisors with respect to
the tax, economic and other aspects of an investment in the Buyer Notes or the
Buyer Common Shares issuable upon conversion of the Notes.
2.27. Private Company; Prior Offerings. NAI is not now, nor has it
ever been, subject to section 12 or 15 of the Securities Exchange Act of 1934,
as amended. Each offer and issuance of securities by NAI has been pursuant to
a valid exemption from registration under the Securities Act, and applicable
state securities laws and have been conducted in compliance with all federal
and state securities laws. The NAI Common Stock has never been traded on an
"established securities market" within the meaning of Section 453(k)(2) of the
Code.
2.28. Informed Investment Decisions. The Sellers have carefully
reviewed and understand the SEC Documents and other information provided by
the Buyer and they have such knowledge and experience in financial, business
and real estate matters that they are capable of evaluating the merits and
risks of an acquisition of the Buyer Notes and the Buyer Common Shares and of
making an informed investment decision. NAI and the Sellers have retained
their own counsel, accountant and/or other advisors as to the legal, tax and
related matters concerning the acquisition of the Buyer Notes and the Buyer
Common Shares.
2.29. Receipt of Buyer Registration Statements. Sellers have received
and reviewed copies of the Exchange Offer Registration Statement and the
Distribution Registration Statement (collectively, the "Registration
Statements"). Such Registration Statements do not contain an untrue statement
of a material fact relating to NAI or any NAI Subsidiary or their respective
officers, directors or stockholders or omit to state any material fact
relating to NAI or any NAI Subsidiary or their respective officers, directors
or stockholders required to be stated herein, or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
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ARTICLE 3
3. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers as follows:
3.1. Organization and Good Standing. (i) The Buyer is a real estate
investment trust duly formed and existing by virtue of the laws of the State
of Maryland and is in good standing with the State Department of Assessment
and Taxation of Maryland ("SDAT") and (ii) the Buyer has all requisite trust
power to own and operate, lease and encumber its properties and assets and to
carry on its business as it is now being conducted.
3.2. Capitalization of the Buyer. The authorized shares of beneficial
interest of the Buyer consist of 100,000,000 shares of beneficial interest. As
of December 31, 1997, the Buyer had issued and outstanding 222,750 Series C
cumulative redeemable preferred shares of beneficial interest; 11,155 Series A-1
increasing rate cumulative convertible preferred shares of beneficial interest;
1,183,331 Series B cumulative convertible preferred shares of beneficial
interest; 1,800,000 Series D cumulative convertible preferred shares of
beneficial interest; and 10,415,427 common shares of beneficial interest. All of
the issued and outstanding shares of beneficial interest of the Buyer have been
duly authorized and are validly issued, fully paid and nonassessable. Except as
set forth on Schedule 3.2 hereto, as of the date hereof, there are no
outstanding options or warrants to purchase shares of beneficial interest of the
Seller.
3.3. Authority of the Buyer. The Buyer has all requisite trust power
and authority to execute and deliver this Agreement and the other Transactions
Documents and to consummate the transactions contemplated by this Agreement
and the other Transaction Documents and to take all other actions required to
be taken by it pursuant to the provisions hereof and thereof. The execution,
delivery and performance by the Buyer of this Agreement and the other
Transaction Documents and the consummation by the Buyer of the transactions
contemplated by this Agreement and the other Transaction Documents have been
duly and validly authorized and approved by all requisite trust action of the
Buyer and no other trust proceedings on the part of the Buyer are necessary to
authorize the execution, delivery and performance of this Agreement and the
other Transaction Documents or to consummate the transactions contemplated
thereby. This Agreement and the other Transaction Documents have been duly and
validly executed and delivered by the Buyer and constitute valid and binding
agreements of the Buyer enforceable against the Buyer in accordance with their
terms.
3.4. Consents and Approvals; No Violations. Except for applicable
requirements of state Blue Sky laws, if any, and as set forth in Schedule 3.4
hereto, no filing or registration with, and no consent, authorization,
declaration or approval of, any Governmental Entity, or any third party, is
necessary for the execution, delivery and performance by the Buyer of this
Agreement or the other Transaction Documents or the consummation of the
transactions contemplated by this Agreement and the other Transaction
Documents. Neither the execution, delivery and performance by the Buyer of
this Agreement or the other Transaction Documents nor the consummation by the
Buyer of the transactions contemplated by this Agreement or the other
Transaction Documents will (i) conflict with or constitute any violation or
breach of any provision of the Declaration of Trust of the Buyer, (ii)
conflict with or constitute any violation or breach of any provision of, or
constitute a default (or an event which, with the giving of notice or the
passage of time or both) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any Encumbrances upon any of the properties of the
Buyer under, or result in being declared void, voidable or without further
binding effect, any of the terms, conditions or provisions of any agreement,
or any license, franchise, permit, concession, lease, contract, or other
instrument, or other obligation to which the Buyer is a party, or by which the
Buyer or any of its
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properties is bound or affected or (iii) conflict with or constitute any
violation of any judgment, order, decree, statute, law, ordinance rule or
regulation applicable to the Buyer.
3.5. Buyer Common Shares. The Buyer has reserved for issuance a
sufficient number of Common Shares of the Buyer (the "Buyer Common Shares") to
satisfy its obligations to issue common shares of the Buyer upon the
conversion of the Buyer Notes. The Buyer Common Shares to be issued upon
conversion of the Buyer Notes will be validly issued, fully paid and
non-assessable shares at the time so issued. There are no preemptive rights
with respect to the Buyer Common Shares.
3.6. No Brokers, Finders or Investment Bankers. Neither the Buyer,
nor any of its officers or directors has employed any broker or finder or
investment banker or incurred any liability which remains unsatisfied for any
brokerage or finder's fee or commission or similar payments in connection with
this Agreement and the transactions contemplated hereby.
3.7. SEC Filings. As of the date hereof, the Buyer has filed timely
all reports and any definitive proxy or information statements required to be
filed by the Seller with the Securities and Exchange Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act.
3.8. Access to Records. The Buyer has been afforded full and complete
access to all information and other materials relating to NAI and the
business, financial condition and operations of NAI and any other matters,
relating to NAI or the Transaction Documents and the transactions contemplated
thereby which the Buyer has requested, or deemed necessary in evaluating the
merits and risks of acquiring the NAI Common Stock, and has been afforded the
opportunity to obtain any additional information necessary to verify the
accuracy of any information provided.
3.9. Responses from NAI. The Buyer has had the opportunity to ask and
have answered any questions concerning the financial condition, business or
operations or any other matter with respect to NAI or with respect to the
merits and risks of an acquisition of the NAI Common Stock, and the Buyer has
received complete and satisfactory answers to all such questions.
3.10. No Representation Regarding Investment. Except as set forth in
this Agreement, no representation to the Buyer has been made with respect to
any tax or economic benefits to be derived from an investment in the NAI
Common Stock or as to any other matter. The Buyer is relying solely upon its
own knowledge and upon the advice of its personal advisors with respect to the
tax, economic and other aspects of an investment in the NAI Common Stock.
ARTICLE 4
4. Covenants.
4.1. Other Transaction Proposals. Unless and until this Agreement
shall have been terminated in accordance with its terms, neither NAI nor the
Sellers shall, nor shall NAI permit any of its subsidiaries or Affiliates, or
any of its or their respective officers, directors or employees, or any
investment banker, financial advisor, attorney, accountant for, or other
representative of, retained by them to, (a) solicit, initiate, encourage
(including by way of furnishing information) or facilitate, any inquiry or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any acquisition or purchase of 10% or more of the assets of, or any 5% or
greater equity interest in, NAI or any of its subsidiaries or any tender offer
(including a self tender offer) or exchange offer, merger, consolidation,
business combination, sale of
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10% or more of the assets, sale of securities, recapitalization, liquidation,
dissolution or similar transaction involving NAI or any of its subsidiaries or
any other transaction the consummation of which would or could reasonably be
expected to impede, interfere with, prevent or materially delay any of the
transactions contemplated by the Transaction Documents, the Exchange Offer
Registration Statement or the Distribution Registration Statement (the "Proposed
Transactions") or materially dilute the benefits to the Buyer of such
transactions (any "Other Transaction Proposal") or agree to or endorse any Other
Transaction Proposal, (b) propose, or enter into or participate in any
discussions or negotiations regarding any of the foregoing, furnish to any other
person any information with respect to its business, properties or assets or any
of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing set forth in subsection (a) above or
this subsection (b), or (c) sell, transfer or encumber any real property
investments or partnership or joint venture interests of NAI or enter into any
agreement to do so. The preceding sentence shall not prohibit (i) furnishing
information pursuant to an appropriate confidentiality letter concerning NAI and
its businesses, properties or assets to a third party who has made any bona fide
Other Transaction Proposal after the date hereof which is not as a result of a
breach of this Section 4.1, (ii) engaging in discussions or negotiations with
such a third party who has made any bona fide Other Transaction Proposal after
the date hereof which is not as a result of a breach of this Section 4.1, or
(iii) taking and disclosing to its stockholders a position with respect to any
bona fide Other Transaction Proposal which is not as a result of a breach of
Section 4.1, but in each case referred to in the foregoing clauses (i) through
(iii) only after the Board of Directors of NAI concludes in good faith following
consultation with, and receipt of an opinion of, outside counsel that such
action is necessary for the Board of NAI to comply with its fiduciary
obligations under applicable law. If NAI receives notice from a third party of
any Other Transaction Proposal after the date hereof, then NAI shall immediately
inform the Buyer of the receipt thereof, and provide a general summary of such
proposal, and shall keep the Buyer informed of the status of any such proposal
and any response to such proposal. Nothing in this Section 4.1 shall (x) permit
NAI or the Sellers to terminate this Agreement (except as specifically provided
in Article 6 hereof), (y) permit NAI or the Sellers to enter into any agreement
with respect to any Other Transaction Proposal during the term of this Agreement
(it being agreed that during the term of this Agreement, neither NAI, the NAI
Subsidiaries nor the Sellers shall enter into any agreement with any person that
provides for, or in any way facilitates, any Other Transaction Proposal), or (z)
affect any other obligation of any party under this Agreement.
4.2. Conduct of Businesses.
(i) Prior to the Closing, unless the other party has consented in
writing thereto, the Buyer, NAI and the Sellers (with respect to NAI):
(a) Shall use their reasonable best efforts, and shall cause
each of their respective Subsidiaries to use their reasonable best
efforts, to preserve intact their business organizations and goodwill
and keep available the services of their respective officers and
employees;
(b) Shall promptly notify the other of any material emergency
or other material change in the condition (financial or otherwise),
business, properties, assets, liabilities, prospects or the normal
course of their businesses or in the operation of their properties, any
material complaints, investigations or hearings (or communications
indicating that the same may be contemplated) of or before any
Governmental Entity, or the breach in any material respect of any
representation or warranty contained herein; and
(c) Shall promptly deliver to the other true and correct copies
of any report, statement or schedule filed with the SEC subsequent to
the date of this Agreement.
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(ii) Prior to the Closing Date, unless the Buyer has consented in
writing thereto, NAI and each of the NAI Subsidiaries shall, and the Sellers
shall cause NAI and each of the NAI Subsidiaries to:
(a) Conduct their operations according to their usual, regular
and ordinary course in substantially the same manner as heretofore
conducted;
(b) Not amend their Certificate of Incorporation or Bylaws or
other organizational documents, in each case as amended, supplemented
and/or restated to the date hereof;
(c) Not (i) issue any shares of their capital stock, effect any
stock split, reverse stock split, stock dividend, recapitalization or
other similar transaction, (ii) grant, confer or award any option,
warrant, conversion right or other right not existing on the date
hereof to acquire any shares of their capital stock, (iii) increase any
compensation or enter into or amend any employment agreement with any
of its present or future officers or directors, or (iv) adopt any new
employee benefit plan (including any stock option, stock benefit or
stock purchase plan) or amend any existing employee benefit plan in any
material respect, except for changes which are less favorable to
participants in such plans;
(d) Not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock, or (ii) directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or capital stock of any of the
NAI Subsidiaries, or make any commitment for any such action except for
the redemption of the NAI Preferred Stock in accordance with its terms;
and
(e) Not sell, lease or otherwise dispose of (i) any of its
capital stock of or other interests in the NAI Subsidiaries or (ii)
except in the ordinary course of business, any of its other assets
which are material, individually or in the aggregate;
(f) Not make any loans, advances or capital contributions to, or
investments in, any other Person in excess of $1,000;
(g) Not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent audited consolidated
financial statements (or the notes thereto) of NAI delivered to the
Buyer in accordance with Section 2.12 hereof or incurred in the
ordinary course of business consistent with past practice;
(h) Not enter into any commitment, contract or agreement which
may result in total payments or liability by or to it in excess of
$10,000, other than broker membership agreements or affiliate member
agreements entered into in the ordinary course of business; and
(i) Not enter into any commitment, contract or agreement with
any officer, director, consultant or affiliate of NAI or any of the NAI
Subsidiaries.
(iii) Prior to the Closing Date, unless the Sellers have consented in
writing thereto, the Buyer shall not effect any stock split, reverse stock
split, recapitalization or other similar transactions.
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4.3. Filings; Other Action. Subject to the terms and conditions
herein provided, each of the parties hereto shall: (a) use all reasonable best
efforts to cooperate with one another in (i) determining which filings are
required to be made prior to the Closing Date with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Closing Date from, Governmental Entities in connection with the execution and
delivery of this Agreement and the consummation of the Proposed Transactions and
(ii) timely making all such filings and timely seeking all such consents,
approvals, permits or authorizations; (b) use all reasonable best efforts to
obtain in writing any consents required from third parties in form reasonably
satisfactory to NAI, the Sellers and the Buyer necessary to effectuate the
Proposed Transactions, and (c) use all reasonable best efforts to take, or cause
to be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the Proposed
Transactions. If, at any time after the Closing Date, any further action is
necessary or desirable to carry out the purpose of this Agreement, the proper
officers and directors of NAI, the Buyer and the Sellers shall take all such
necessary action.
4.4. Inspection of Records; Opportunity to Ask Questions. From the
date hereof to the Closing, NAI shall allow all designated officers,
attorneys, accountants and other representatives of the Buyer access at all
reasonable times to the records and files, correspondence, audits and
properties, as well as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to the business and
affairs, of NAI and the NAI Subsidiaries. NAI and the Sellers will continue to
cause the managerial employees, counsel, regular independent certified public
accountants and consultants of NAI and each of the NAI Subsidiaries to be
available upon reasonable notice to answer questions of the Buyer and its duly
authorized representatives. Any investigation carried out by the Buyer or its
authorized representatives shall not affect or mitigate NAI's or the Sellers'
covenants, representations and warranties in this Agreement, which shall
continue in full force and effect.
4.5. Publicity. The Buyer and NAI shall, subject to their legal
obligations (including requirements of stock exchanges and other similar
regulatory bodies) consult with each other before issuing any press release or
making any other public statement, or making any disclosure to any third
party, with respect to the Proposed Transactions, and shall not issue any such
press release, make any such public statement, or make any such disclosure,
without the prior written consent of the other party which consent shall not
be unreasonably withheld. It is further agreed that in determining whether or
not a press release or other public statement or disclosure should be issued
or made and its contents, the overriding concerns shall be that the Buyer is a
public company and its obligations as a result thereof and all issues shall be
resolved with that in mind.
4.6. Listing Application. The Buyer shall promptly prepare and submit
to the NYSE a supplemental listing application covering the Buyer Common
Shares, and shall use its reasonable efforts to obtain, prior to the Closing
Date, approval for the listing of such Buyer Common Shares, subject to
official notice of issuance.
4.7. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Closing Date by the other party of each of the
conditions of performance set forth herein or the waiver thereof, perform such
further acts and execute such documents as may reasonably be required to
effect the Proposed Transactions.
4.8. Sale of Securities of NAI and the Buyer. The Sellers shall not
sell or transfer, directly or indirectly, any shares of NAI Common Stock, any
Buyer Notes, any Buyer Common Shares or any Rights held by the Sellers,
directly or indirectly, for a period of three years from the Closing Date,
except that (i) the Finns may transfer shares of NAI Common Stock, Buyer Notes
(other than Buyer Notes held in Escrow
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pursuant to Section 7.5 hereof), and Buyer Common Shares to members of their
immediate family (subject to such transferees agreeing to be bound by this
Agreement) and (ii) the Trust may transfer shares of NAI Common Stock, Buyer
Notes (other than Buyer Notes held in escrow pursuant to Section 7.5 herein),
and Buyer Common Shares to the Finns). The Buyer Common Shares, the Buyer Notes
and the NAI Common Stock shall bear restrictive legends to the effect of the
foregoing.
4.9. Expenses. If the Proposed Transactions are consummated, all
costs and expenses incurred by all parties in connection with the Proposed
Transactions shall be paid by NAI, including, without limitation, the filing
fee in connection with the filing of the Exchange Offer Registration Statement
with the SEC, accounting fees, attorneys' fees and the expenses incurred in
connection with printing and mailing the Exchange Offer Registration
Statement.
4.10. Reincorporation Merger. On the date hereof, the Sellers have
entered into a nonunanimous written consent (the "Written Consent") of the
shareholders of NAI, in the form attached hereto as Exhibit A, authorizing,
among other things, the merger of NAI with and into New America International,
Inc., a Maryland corporation and a wholly-owned subsidiary of NAI. The Finns
agree that they will not take any action to modify, revoke, rescind or in any
other way affect the Written Consent and the transactions authorized therein
without the written consent of the Buyer.
4.11. Board of Directors of NAI. The Buyer and the Sellers agree that
immediately following the consummation of the Exchange Offer, the Board of
Directors of NAI shall be reconstituted to consist of Gerald C. Finn, Jeffrey
M. Finn, Joseph Grossman, Norman M. Kranzdorf, Robert H. Dennis, Michael
Kranzdorf, Peter O. Hanson and Bernard J. Korman.
4.12. Restriction on Convertibility of the Buyer Notes.
Notwithstanding the fact that the Buyer Notes, by their terms, become
convertible into Buyer Common Shares two years after the Closing Date, the
Sellers agree that they will not convert the Buyer Notes issued to them into
Buyer Common Shares until a date at least three years after the Closing Date;
provided, however, that in the event that (i) the Buyer, in accordance with the
terms of the Buyer Notes, sends out a notice of redemption relating to the Buyer
Notes prior to a date three years after the Closing or (ii) there is a Change in
Control or an Event of Default (each as defined in the Exchange Offer
Registration Statement), then the Sellers may convert the Buyer Notes issued to
them, in accordance with the terms of the Buyer Notes, prior to a date three
years after the Closing but in no event prior to the date one year after the
date of issuance of the Buyer Notes.
ARTICLE 5
5. Conditions.
5.1. Conditions to Each Party's Obligation to Consummate the Exchange
Offer. The respective obligation of each party to consummate the Exchange
Offer shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) Neither of the parties hereto shall be subject to any
order or injunction of a court of competent jurisdiction which prohibits the
consummation of the Proposed Transactions. In the event any such order or
injunction shall have been issued, each party agrees to use its reasonable
best efforts to have any such injunction lifted.
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(b) The Exchange Offer Registration Statement and the
Distribution Registration Statement shall have become effective and all
necessary state securities law or "Blue Sky" permits or approvals required to
carry out the Proposed Transactions shall have been obtained and no stop order
with respect to any of the foregoing shall be in effect.
(c) 10,379,531 shares of NAI Common Stock, representing 80%
of the total number of issued and outstanding shares of NAI Common Stock have
been validly tendered and not withdrawn prior to the Expiration Date pursuant
to the Exchange Offer Registration Statement.
(d) The Buyer shall have obtained the approval for the
listing of the Buyer Common Shares on the NYSE, subject to official notice of
issuance.
(e) All consents, authorizations, orders and approvals of
(or filings or registrations with) any Governmental Entity or third parties
required in connection with the Proposed Transactions shall have been obtained
or made.
(f) Each party shall have delivered all such documents or
certificates and disclosed such information as the other party may reasonably
request.
5.2. Conditions to Obligations of the Buyer to Consummate the
Exchange Offer. The obligation of the Buyer to consummate the Exchange Offer
shall be subject to the fulfillment at or prior to the Closing of the
following conditions, unless waived by the Buyer:
(a) NAI and the Sellers shall have performed their agreements
contained in this Agreement required to be performed on or prior to the
Closing and the representations and warranties of NAI and the Sellers
contained in this Agreement (without giving effect to any materiality
qualifications or exceptions contained therein) shall be true and
correct in all material respects as of the Closing Date as if made on
the Closing Date, and the Buyer shall have received a certificate of
the President or a Vice President of NAI and of each of the Sellers,
dated the Closing Date, certifying to such effect;
(b) NAI and the Finns shall have entered into employment
agreements (the "Employment Agreements"), substantially in the form of
Exhibits B-1 and B-2 hereto.
(c) The Sellers and an escrow agent shall have entered into an
Escrow Agreement (the "Escrow Agreement"), substantially in the form of
Exhibit C hereto, and the principal amount of $800,000 of the Buyer
Notes issued to G. Finn and the principal amount of $200,000 of the
Buyer Notes issued to J. Finn shall be deposited with the escrow agent
pursuant to the Escrow Agreement.
(d) The Buyer shall have received evidence in writing that
Matthew Arnold, Robert McMenamin, and Marc Shegoski have resigned from
the Board of Directors of NAI, effective as of the Closing Date.
(e) The Buyer shall have received the opinion of Greenbaum,
Rowe, Smith, Ravin, Davis & Himmel LLP, dated the Closing Date, to the
effect set forth in Sections 2.1 (except with respect to foreign
qualification for which no opinion need be given), 2.2, 2.3 (except
with respect to foreign qualification for which no opinion need be
given), 2.5, 2.6, 2.17 (except with respect to laws governing brokerage
commissions and franchise laws as to which no opinion need be given),
2.27 and 2.29, subject to customary assumptions, limitations and
qualifications.
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(f) Any waiver or consent of the holders of the NAI Preferred
Stock required in connection with the Proposed Transactions shall have
been obtained.
(g) From the date of this Agreement through the Closing, there
shall not have occurred any change in the financial condition,
business, operations or prospects of NAI and the NAI Subsidiaries,
taken as a whole, that would have or would be reasonably likely to have
an NAI Material Adverse Effect.
(h) Norma Finn shall have entered into a letter agreement
pursuant to which she has agreed not to convert the Buyer Notes issued
to her until a date at least three years following the Closing Date;
provided, however, that in the event that (i) the Buyer, in accordance
with the terms of the Buyer Notes, sends out a notice of redemption
relating to the Buyer Notes prior to a date three years after the
Closing or (ii) there is a Change of Control or an Event of Default
(each as defined in the Exchange Offer Registration Statement), then
Norma Finn may convert the Buyer Notes issued to her, in accordance
with the terms of the Buyer Notes, prior to a date three years after
the Closing but in no event prior to the date one year after the date
of issuance of the Buyer Notes..
5.3. Conditions to Obligation of NAI and the Sellers to Consummate
the Exchange Offer. The obligations of NAI and the Sellers to consummate the
Exchange Offer shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions, unless waived by the Sellers:
(a) The Buyer shall have performed its agreements contained
in this Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of the Buyer contained in
this Agreement (without giving effect to any materiality
qualifications or exceptions contained therein) shall be true and
correct in all material respects as of the Closing Date as if made on
the Closing Date, and NAI and the Sellers shall have received a
certificate of the President or a Vice President of the Buyer, dated
the Closing Date, certifying to such effect.
(b) NAI shall have received the opinion of Robinson
Silverman Pearce Aronsohn & Berman LLP or Ballard Andrews & Ingersoll
LLP, dated the Closing Date, substantially to the effect set forth in
Sections 3.1, 3.2, 3.3 and 3.4, subject to customary assumptions,
limitations and qualifications.
(c) NAI and the Finns shall have entered into the Employment
Agreements.
(d) From the date of this Agreement through the Closing,
there shall have not occurred any material adverse change in the
financial condition, business, operations or prospects of the Buyer
and its subsidiaries taken as a whole; provided, however, that any
change in the stock price of the Buyer will not constitute a material
adverse change under this Section 5.3(d).
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ARTICLE 6
6. Termination.
6.1. Termination by Mutual Consent. This Agreement and the Exchange
Offer may be terminated at any time prior to the Closing Date, by the mutual
written consent of the Buyer and NAI.
6.2. Termination by the Sellers, NAI or the Buyer. This Agreement may
be terminated and the Exchange Offer may be terminated by action of the
Sellers, the Board of Directors of NAI or the Board of Trustees of the Buyer
if (a) the Exchange Offer shall not have been consummated by December 31,
1998, or (b) a United States federal or state court of competent jurisdiction
or other Governmental Entity shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and non-appealable,
provided, that the party seeking to terminate this Agreement pursuant to this
clause (b) shall have used all reasonable efforts to remove such order,
decree, ruling or injunction; and provided, in the case of a termination
pursuant to clause (a) above, that the terminating party shall not have
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the
failure referred to in said clause.
6.3. Termination by the Sellers or NAI. This Agreement may be
terminated and the Exchange Offer may be terminated at any time prior to the
Closing Date, by action of the Sellers or the Board of Directors of NAI, if
(a) in the exercise of its good faith judgment following consultation with,
and receipt of an opinion of, outside counsel that such action is necessary
for the Board of Directors of NAI to comply with its fiduciary duties to its
shareholders imposed by law, the Board of Directors of NAI determines that
such termination is required by reason of any Other Transaction Proposal being
made, or (b) there has been a breach by the Buyer of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to materially impair the Buyer's ability to consummate the transactions
contemplated by the Transaction Documents, which breach is not curable by
December 31, 1998, (c) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of the Buyer,
which breach is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by NAI or the Sellers to the Buyer, (d)
the consideration being offered in the Exchange Offer for each share of NAI
Common Stock is reduced below $.7707 of the Buyer Notes, without the consent
of the Sellers, or (e) after the date hereof: (i) any domestic or
international event or act or occurrence has materially disrupted, or in the
opinion of the Sellers will in the immediate future materially disrupt, the
securities markets; (ii) a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange or the
American Stock Exchange or in the over-the-counter market; (iii) a banking
moratorium shall have been declared either by Federal or New York State
authorities; (iv) there shall have occurred any outbreak or material
escalation of hostilities or other calamity or crises the effect of which on
the financial markets of the United States or on the United States is such as
to make it, in the judgment of the Sellers, impracticable to consummate the
Proposed Transactions; or (v) any restriction materially adversely affecting
the Proposed Transactions which was not in effect on the date hereof shall
have become effective. Notwithstanding the foregoing, any termination pursuant
to this Section 6.3(a) shall only be effective if, simultaneously with such
termination, all sums that NAI and the Sellers are required to pay to the
Buyer pursuant to Section 6.5 have been paid.
6.4. Termination by the Buyer. This Agreement may be terminated and
the Exchange Offer may be terminated at any time prior to the Closing Date, by
action of the Board of Trustees of the Buyer, if (a) after the date hereof:
(i) any domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the Buyer will in the immediate future
materially disrupt, the securities markets; (ii) a
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general suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market; (iii) a banking moratorium shall have been
declared either by Federal or New York State authorities; (iv) there shall
have occurred any outbreak or material escalation of hostilities or other
calamity or crises the effect of which on the financial markets of the United
States or on the United States is such as to make it, in the judgment of the
Buyer, impracticable to consummate the Proposed Transactions; or (v) any
restriction materially adversely affecting the Proposed Transactions which was
not in effect on the date hereof shall have become effective; (b) there has
been a breach by NAI or the Sellers of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have an NAI Material Adverse Effect or, materially impair NAI's or the
Seller's ability to consummate the transaction contemplated by the Transaction
Documents, which breach is not curable by December 31, 1998, or (c) there has
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of NAI or the Sellers which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by the Buyer to NAI and the Sellers.
6.5. Effect of Termination and Abandonment.
(a) If an election is made to terminate this Agreement pursuant to
Section 6.3(a), 6.4(b) or 6.4(c), (i) NAI and the Sellers shall immediately
reimburse the Buyer for the Buyer's costs and expenses, including, without
limitation, legal and accounting fees, printing and filing fees, incurred in
connection with its due diligence and negotiation and efforts to enter into
this Agreement, prepare, file and process the Registration Statements and
consummate transactions contemplated hereby and thereby and (ii) if NAI and
the Sellers consummate any Other Transaction Proposal relating to in excess of
10% of NAI's assets or outstanding capital stock within 180 days of December
31, 1998 or at any time thereafter pursuant to a definitive agreement entered
into within such 180-day period, NAI and the Sellers shall immediately pay in
cash to the Buyer a termination fee of $1,000,000.
(b) If an election is made to terminate this Agreement pursuant to
Section 6.3(b) 6.3(c) or 6.3(d), the Buyer shall immediately reimburse NAI and
the Sellers for up to $100,000 of their costs and expenses, including, without
limitation, legal and accounting fees, incurred in connection with its due
diligence, negotiation and efforts to enter into this Agreement, prepare, file
and process the Registration Statements and consummate the transactions
contemplated hereby and thereby.
(c) In the event of termination of this Agreement and the
termination of the Exchange Offer pursuant to this Article 6, all obligations of
the parties hereto shall terminate, except the obligations of the parties
pursuant to this Section 6.5 and except for the provisions of Sections 8.3, 8.4,
8.5, 8.6, 8.7, 8.9, 8.10, 8.12, 8.13, and 8.14.
6.6. Extension; Waiver. At any time prior to the Closing Date, any
party hereto, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto or
(c) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE 7
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7. Indemnification.
7.1. By the Sellers. The Sellers and, in the event the transactions
contemplated by this Agreement are not consummated, NAI, jointly and
severally, agree to indemnify and hold harmless the Buyer and its respective
Affiliates, and their respective shareholders, partners, trustees, directors,
officers, employees, agents, successors and assigns (each an "indemnified
person") from and against, and to reimburse any such indemnified person when
incurred with respect to, any loss, damage, liability claim, cost and expense,
including reasonable attorneys' fees ("Losses") incurred by such indemnified
person by reason of or arising out of or in connection with (i) the breach of
any representation or warranty made by or on behalf of NAI or any Seller
contained in this Agreement, any other Transaction Document or any exhibit
hereto or thereto or in any schedule or certificate furnished or to be
furnished to the Buyer pursuant to or in connection with this Agreement, any
other Transaction Document or any of the transactions hereby contemplated;
(ii) the failure of NAI or any Seller to perform any agreement required by
this Agreement or any other Transaction Document to be performed by such
Person; and (iii) the allegation by any third party of the existence of any
state of facts which if it existed would constitute a breach of any
representation or warranty made by or on behalf of NAI or any Seller contained
in this Agreement, any other Transaction Document or any exhibit hereto or
thereto or in any schedule or certificate furnished or to be furnished to the
Buyer pursuant to or in connection with this Agreement any other Transaction
Document or any of the transactions hereby contemplated.
Each indemnified person agrees to give prompt notice to the Sellers
of any claim by any third party for which such indemnified party may request
indemnification under this Section 7.1 (except any failure or delay to give
such notice shall not relieve any Seller of its obligations hereunder unless
and only to the extent, if at all, any such Person has been irrevocably
prejudiced directly by reason of such failure or delay).
If (a) any such third party claim shall be a claim solely for
monetary damages, (b) the entire amount of such claim shall not be subject to
the limitations on indemnification set forth in Section 7.4 hereof, and (c)
the Sellers shall agree in writing within ten business days after receipt of
notice of such claim that they are required, pursuant to this Section 7.1, to
indemnify for the full amount of such claim, then the Sellers shall be
entitled to control the contest, defense, settlement or compromise of any such
claim (including the engagement of counsel in connection therewith), at their
own cost and expense, including the cost and expense of attorneys' fees in
connection with such contest, defense, settlement or compromise and each
indemnified person shall have the right to participate in the contest,
defense, settlement or compromise of any such claim at its cost and expense,
including the cost and expense of attorneys' fees in connection with such
participation; provided, however, that, the Sellers shall not settle or
compromise any such claim without the prior written consent of the indemnified
persons, unless the sole relief provided is monetary damages that are paid in
full by the Sellers and such settlement includes an unconditional release of
the indemnified persons of all liabilities in respect of such claims.
If such claim shall not be solely a claim for monetary damages and/or
such claim shall be subject, in whole or in part, to the limitations on
indemnification set forth in Section 7.4, but the Sellers shall agree in
writing within ten business days after receipt of notice of such claim that
they are required, pursuant to this Section 7.1 (but subject to the
limitations set forth in Section 7.4), to indemnify each indemnified person
for the full amount of such claim, then the contest, defense, settlement and
compromise of such claim shall be controlled jointly by the Sellers, on the
one hand, and the indemnified persons, on the other hand (and any counsel
engaged in connection therewith shall be acceptable to both such groups), at
the cost and expense of the Sellers, including the cost and expense of
attorneys' fees in connection with such contest, defense, settlement or
compromise, and such claim shall not be settled or compromised unless the
indemnified persons, on the one hand, and the Sellers, on the other hand,
jointly approve such settlement or compromise.
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If such claim shall not be a claim for monetary damages or the Sellers
do not agree in writing within ten business days after receipt of notice of such
claim that the Sellers are required, pursuant to this Section 7.1, to indemnify
the indemnified persons for the full amount of such claim, then the indemnified
persons shall control the contest, defense, settlement or compromise of any such
claim (including the engagement of counsel in connection therewith), at the
Sellers' cost and expense, including the cost and expense of attorneys' fees in
connection with such contest, defense, settlement or compromise, and the Sellers
shall have the right to participate in the contest, defense, settlement or
compromise of any such claim at their own cost and expense, including the cost
and expense of attorneys' fees in connection with such participation; provided,
however, that the indemnified persons shall diligently defend any such claim and
shall not settle or compromise any such claim without the prior written consent
of the Sellers, which consent shall not be unreasonably withheld.
7.2. By the Buyer. The Buyer agrees to indemnify and hold harmless
the Sellers and their respective Affiliates, and their respective
shareholders, partners, directors, officers, employees, agents, successors and
assigns (each an "indemnified person") from and against, and to reimburse any
such indemnified person when incurred with respect to, any and all Losses
incurred by such indemnified person by reason of or arising out of or in
connection with (i) the breach of any representation or warranty made by or on
behalf of the Buyer contained in this Agreement, any other Transaction
Document or any exhibit hereto or thereto or in any schedule or certificate
furnished or to be furnished to the Sellers pursuant to or in connection with
this Agreement, any other Transaction Document or any of the transactions
hereby contemplated, (ii) the failure of the Buyer to perform any agreement
required by this Agreement or any other Transaction Document to be performed
by it, and (iii) the allegation by any third party of the existence of any or
state of facts which if it existed would constitute a breach of any
representation or warranty made by or on behalf of the Buyer contained in this
Agreement, any other Transaction Document or any exhibit hereto or in any
schedule or certificate furnished or to be furnished to the Sellers pursuant
to or in connection with this Agreement, any other Transaction Document or any
of the transactions hereby contemplated.
Each indemnified person agrees to give prompt notice to the Buyer of
any claim by any third party for which such indemnified party may request
indemnification under this Section 7.2 (except any failure or delay to give
such notice shall not relieve the Buyer of its obligations hereunder unless
and only to the extent, if at all, that the Buyer has been irrevocably
prejudiced directly by reason of such failure or delay).
If (a) any such third party claim shall be solely for monetary
damages and (b) the Buyer shall agree in writing within ten business days
after receipt of notice of such claim that it is required, pursuant to this
Section 7.2, to indemnify for the full amount of such claim, then the Buyer
shall be entitled to control the contest, defense, settlement or compromise of
any such claim (including the engagement of counsel in connection therewith),
at its own cost and expense, including the cost and expense of attorneys' fees
in connection with such contest, defense, settlement or compromise and each
indemnified person shall have the right to participate in the contest,
defense, settlement or compromise of any such claim at its own cost and
expense, including the cost and expense of attorneys' fees in connection with
such participation; provided, however, that, the Buyer shall not settle or
compromise any such claim without the prior written consent of the indemnified
persons, unless the sole relief provided is monetary damages that are paid in
full by the Buyer and such settlement includes an unconditional release of the
indemnified persons of all liabilities in respect of such claims.
If such claim shall not be solely a claim for monetary damages, but
the Buyer shall agree in writing within ten business days after receipt of
notice of such claim that it is required, pursuant to this Section 7.2, to
indemnify each indemnified person for the full amount of such claim, then the
contest, defense, settlement and compromise of such claim shall be controlled
jointly by the Buyer, on the one hand, and the indemnified
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person, on the other hand (and any counsel engaged in connection therewith
shall be acceptable to both such groups), at the cost and expense of the
Buyer, including the cost and expense of attorneys' fees in connection with
such contest, defense, settlement or compromise, and such claim shall not be
settled or compromised unless the indemnified persons, on the one hand, and
the Buyer, on the other hand, jointly approve such settlement or compromise.
If such claim shall not be a claim for monetary damages or the Buyer
does not agree in writing within ten business days after receipt of notice of
such claim that it is required, pursuant to this Section 7.2 to indemnify the
indemnified persons for the full amount of such claim, then the indemnified
persons shall control the contest, defense, settlement or compromise of any
such claim (including the engagement of counsel in connection therewith), at
the Buyer's cost and expense, including the cost and expense of attorneys'
fees in connection with such contest, defense, settlement or compromise, and
the Buyer shall have the right to participate in the contest, defense,
settlement or compromise of any such claim at their own cost and expense,
including the cost and expense of attorneys' fees in connection with such
participation; provided, however, that the indemnified persons shall
diligently defend any such claim and shall not settle or compromise any such
claim without the prior written consent of the Buyer, which consent shall not
be unreasonably withheld.
7.3. By NAI. NAI agrees to indemnify and hold harmless the Buyer and
its respective Affiliates, and their respective shareholders, partners,
trustees, directors, officers, employees, agents, successors and assigns (each
an "indemnified person") from and against, and to reimburse any such
indemnified person when incurred with respect to, any Losses incurred by such
indemnified person by reason of or arising out of or in connection with the
failure of NAI to comply with (i) any Laws relating to real estate brokers or
(ii) any federal or state franchise Laws.
Each indemnified person agrees to give prompt notice to NAI of any
claim by any third party for which such indemnified party may request
indemnification under this Section 7.3 (except any failure or delay to give
such notice shall not relieve NAI of its obligations hereunder unless and only
to the extent, if at all, any such Person has been irrevocably prejudiced
directly by reason of such failure or delay).
If (a) any such third party claim shall be a claim solely for
monetary damages and (b) NAI shall agree in writing within ten business days
after receipt of notice of such claim that they are required, pursuant to this
Section 7.3, to indemnify for the full amount of such claim, then NAI shall be
entitled to control the contest, defense, settlement or compromise of any such
claim (including the engagement of counsel in connection therewith), at their
own cost and expense, including the cost and expense of attorneys' fees in
connection with such contest, defense, settlement or compromise and each
indemnified person shall have the right to participate in the contest,
defense, settlement or compromise of any such claim at its cost and expense,
including the cost and expense of attorneys' fees in connection with such
participation; provided, however, that, NAI shall not settle or compromise any
such claim without the prior written consent of the indemnified persons,
unless the sole relief provided is monetary damages that are paid in full by
NAI and such settlement includes an unconditional release of the indemnified
persons of all liabilities in respect of such claims.
If such claim shall not be a claim solely for monetary damages or NAI
does not agree in writing within ten business days after receipt of notice of
such claim that NAI is required, pursuant to this Section 7.3, to indemnify
the indemnified persons for the full amount of such claim, then the
indemnified persons shall control the contest, defense, settlement or
compromise of any such claim (including the engagement of counsel in
connection therewith), at NAI's cost and expense, including the cost and
expense of attorneys' fees in connection with such contest, defense,
settlement or compromise, and NAI shall have the right to participate in the
contest, defense, settlement or compromise of any such claim at its own cost
and expense,
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including the cost and expense of attorneys' fees in connection with such
participation; provided, however, that the indemnified persons shall
diligently defend any such claim and shall not settle or compromise any such
claim without the prior written consent of NAI, which consent shall not be
unreasonably withheld.
7.4. Limitation on Indemnification(s). Except as set forth in the
proviso to this sentence, neither the Sellers, on the one hand, nor the Buyer,
on the other hand, shall be required to pay any amounts pursuant to clause (i)
or (iii) of Section 7.1, or pursuant to clause (i) or (iii) of Section 7.2
hereof (as the case may be) unless and until the aggregate of all Losses
(other than those hereinafter referred to in the proviso to this sentence)
incurred by all persons indemnified by such indemnifying parties under such
clauses exceeds $80,000, in which event such indemnifying parties shall be
liable, dollar-for-dollar, for the full amount of such Losses; provided that,
notwithstanding the foregoing, the Sellers shall in all events be obligated to
indemnify on a dollar-for-dollar basis from and against all Losses arising out
of or in connection with the breach or alleged breach of the representations
and warranties made in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.16, 2.18,
2.19, 2.27 and 2.29 and the Buyer shall be obligated to indemnify on a
dollar-for-dollar basis from and against all Losses arising out of or in
connection with the breach or alleged breach of the representations and
warranties made in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6 and 3.7. In no event
shall the Sellers be liable to the Buyer for any Losses for which a claim is
made against the Sellers under Section 7.1(i) or 7.1(iii) (other than those
arising out of or in connection with the breach or alleged breach of the
representations and warranties made in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6,
2.14, 2.16, 2.18, 2.19, 2.27 and 2.29) in excess of $1,000,000.
7.5. Escrow. In order to secure the obligations of the Seller to
indemnify the Buyer pursuant to this Article 7, on the Closing Date, G. Finn
and J. Finn are depositing with the escrow agent under the Escrow Agreement
$800,000 principal amount of Buyer Notes and $200,000 principal amount of
Buyer Notes, respectively. In any instance in which the Buyer has a claim for
indemnity under this Article 7, the Buyer agrees that it will make a demand
and a reasonable effort under the circumstances (which shall not require the
Buyer to institute any suit or other action) to collect such claim against the
funds, to the extent of such funds, then held under the Escrow Agreement,
prior to making any claim against the Sellers with respect to such claim
unless the claim exceeds the amount of such funds.
ARTICLE 8
8. General Provisions.
8.1. Survival. All statements, certifications, indemnifications,
representations and warranties made hereby by the parties to this Agreement,
and their respective covenants, agreements and obligations to be performed
pursuant to the terms hereof, shall survive the Closing, notwithstanding any
examination by or on behalf of any party hereto, notwithstanding any notice of
a breach or of a failure to perform not waived in writing and notwithstanding
the consummation of the transactions hereby contemplated with knowledge of
such breach or failure, and (except with respect to those made in Sections
2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.16, 2.18, 2.19, 2.27, 2.29, 3.1, 3.2, 3.3,
3.4, 3.5, 3.6 and 3.7 which shall survive without limitation, and those
contained in Section 2.14, which shall survive until the expiration of the
statute of limitations on the tax matters discussed therein) the
representations and warranties made hereby by the parties shall terminate on
the second anniversary of the Closing Date, except to the extent a party gives
written notice to the other parties of any breach thereof on or before such
date, and then only with respect to the matters described in such notice;
provided, however, that nothing herein contained shall modify or be construed
to modify in any respect whatsoever any covenant, agreement or obligation to
be performed by any party pursuant to the provisions of this Agreement.
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8.2. Notices. Any notice required to be given hereunder shall be in
writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery
or certified or registered mail (return receipt requested and first-class
postage prepaid) and addressed as follows:
If to the Buyer:
Mr. Norman Kranzdorf, President
Kranzco Realty Trust
128 Fayette Street
Conshohocken, Pennsylvania 19428
Facsimile: (610) 941-9193
With a copy to:
Alan S. Pearce, Esq.
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile: (212) 541-4630
If to the Sellers or, prior to the Closing Date, NAI:
Mr. Gerald Finn, Chief Executive Officer
New America Network, Inc.
572 U.S. Route 130
Hightstown, New Jersey 08520
Facsimile: (609) 448-8126
With a copy to:
Hal W. Mandel, Esq..
Greenbaum, Rowe, Smith,
Ravin, Davis & Himmel LLP
Metro Corporate Campus One
99 Wood Avenue South
Iselin, New Jersey 08830
Facsimile: (732) 549-1881
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so delivered.
8.3. Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this
Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or
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their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
8.4. Entire Agreement. This Agreement, the Exhibits and the Schedules
and any documents delivered by the parties in connection herewith constitute
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings among the parties
with respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
8.5. Amendment. This Agreement may be amended by the parties hereto.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
rules of conflict of laws. Each of NAI and the Sellers hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America located in the
State of New York (the "New York Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in such courts),
waives any objection to the laying of venue of any such litigation in the New
York Courts and agrees not to plead or claim in any New York Court that such
litigation brought therein has been brought in an inconvenient forum.
8.7. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
8.8. Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
8.9. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
8.11. Incorporation. All Schedules and Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
8.12. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
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8.13. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any New York
Court, this being in addition to any other remedy to which they are entitled
at law or in equity.
8.14. Non-Recourse. This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of the Buyer by the undersigned in his capacity as a
trustee or officer of the Buyer, which has been formed as a Maryland real
estate investment trust pursuant to an Amended and Restated Declaration of
Trust of Kranzco, dated as of June 17, 1992, as amended and restated, and not
individually, and neither the trustees, officers nor shareholders of the Buyer
shall be personally bound or have any personal liability hereunder. NAI and
the Sellers shall look solely to the assets of the Buyer for satisfaction of
any liability of the Buyer with respect to this Agreement. NAI and the Sellers
will not seek recourse or commence any action against any of the shareholders
of the Buyer or any of their personal assets, and will not commence any action
for money judgments against any of the trustees or officers of the Buyer or
seek recourse against any of their personal assets, for the performance or
payment of any obligation of the Buyer hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
KRANZCO REALTY TRUST
By: ____________________________________
Name:
Title:
NEW AMERICA NETWORK, INC.
By: ____________________________________
Name:
Title:
____________________________________
Gerald C. Finn
____________________________________
Jeffrey M. Finn
____________________________________
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Jeffrey M. Finn, as trustee of the Grantor
Retained Annuity Trust of Gerald C. Finn
u/a dtd. May 12, 1998
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RESTATED
ARTICLES OF INCORPORATION
OF
NEW AMERICA NETWORK, INC.
KNOW ALL MEN BY THESE PRESENTS:
THAT, these Restated Articles of Incorporation of New America
Network, Inc., formerly New America Development Corporation (the
"Corporation"), have been executed on behalf of the Corporation by its
President and Secretary pursuant to Section 245 of the Delaware General
Corporation Law and pursuant to resolutions of the board of directors of the
Corporation dated July 11, 1983. In accordance with the provisions of Sections
245 and 242 of the Delaware General Corporation Law, these Restated Articles
of Incorporation were presented to the shareholders of the Corporation at a
special combined meeting of the board of directors and of the shareholders,
held July 11, 1983, and were unanimously approved and adopted thereby. This
Corporation was originally incorporated on February 5, 1974 under the name of
New America Development Corporation and the name of the Corporation was
charged to New America Network, Inc. pursuant to an amendment to the Articles
of Incorporation filed May 27, 1983. These Articles restate, integrate and
further amend the provisions of the original Articles of Incorporation as
heretofore amended, and these Amend and Restated Articles supersede the
original Articles of Incorporation and all amendments and supplements thereto.
ARTICLE ONE
Name: The corporate name of the corporation shall be NEW AMERICA
NETWORK, INC.
ARTICLE TWO
Address: The address of its registered office in the State of
Delaware is No. 100 West Tenth Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE THREE
Purpose: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
<PAGE>
ARTICLE FOUR
Capital Stock: The total number of shares of stock which the
corporation shall have authority to issue is Six Million (6,000,000), of which
stock Five Million (5,000,000) shares of the par value of One Cent ($.01)
each, amounting in the aggregate to Fifty Thousand Dollars ($50,000.00), shall
be Common Stock and of which One Million (1,000,000) shares of the par value
of One Cent ($.01) each, amounting in the aggregate to Ten Thousand Dollars
($10,000.00) shall be Preferred Stock.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof are as follows:
A. VOTING RIGHTS. Each issued and outstanding share of Common Stock
shall entitle the holder thereof to full voting power. Except as any provision
of law may otherwise require, no share of Preferred Stock shall entitle the
holder thereof to any voting power, to participate in any meeting of
shareholders, or to have notice of any meeting of shareholders.
B. LIQUIDATION RIGHTS. Each issued and outstanding share of Preferred
Stock shall entitle the holder thereof to preference on the declaration and
payment of dividends, and to preference in the distribution of the net assets
of the corporation in the event of any liquidation, dissolution or winding up
of the affairs of the corporation. Authority is hereby granted to the board of
directors of the corporation to divide the shares of Preferred Stock into
series and to fix, by resolution or resolutions, the designations and relative
powers, preferences, rights, qualifications, limitations and restrictions of
the authorized shares of stock and series thereof of the corporation, which
are not fixed by this certificate of incorporation of the corporation.
C. RESTRICTIONS. The board of directors may cause any stock issued by
the corporation to be issued subject to such lawful restrictions,
qualifications, limitations or special rights may be created by provisions in
the bylaws of the corporation or in the minutes of any properly convened
meeting of the board of directors; provided, however, that notice of such
special restrictions, qualifications, limitations or special rights must
appear on the certificate evidencing ownership of such stock.
ARTICLE FIVE
Existence: The corporation is to have perpetual existence.
ARTICLE SIX
Bylaws: In furtherance and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized to make, alter
or repeal the bylaws of the corporation.
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ARTICLE SEVEN
Meetings: Meetings of stockholders may be held within or without the
State of Delaware, as the bylaws may provide. The books of the corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the board of directors or in the bylaws of the corporation. Elections of
directors need not be by written ballot unless the bylaws of the corporation
shall so provide.
ARTICLE EIGHT
Amendments: The corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
ARTICLE NINE
Sale of Assets: Whenever the board of directors at any meeting
thereof, by a majority vote of the whole board, determines that it is in the
best interests of the corporation, and in the usual and regular course of its
business, the corporation may sell, lease, exchange, or otherwise dispose of
all, or substantially all, of its property and assets, including its good will
and its corporate franchises, upon such terms and conditions and for such
consideration as the board of directors shall deem expedient; provided,
however, that the sale, lease, exchange or disposal of all or substantially
all of the property and assets of the corporation, with or without its
goodwill, if not in the usual and regular course of its business shall be
authorized or ratified by the affirmative vote of the holders of at least a
majority of the capital stock then issued and outstanding, such vote to be
taken at a meeting of shareholders duly called for that purpose as provided by
the statutes of the State of Delaware.
ARTICLE TEN
Records: The bylaws shall determine whether and to what extent the
accounts and books of the corporation, or any of them, shall be open to the
inspection of the stockholders; no stockholder shall have any right of
inspecting any account, or book, or document of this corporation, except as
conferred by the law or the bylaws, or by resolution of the stockholders.
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<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands and seals this 25
day of July, 1983.
ATTEST
/s/ Gerald C. Finn
-------------------------
Gerald C. Finn, President
/s/ Ronald Boyce
- -------------------------
Ronald Boyce, Secretary
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<PAGE>
STATE OF NEW JERSEY )
)
COUNTY OF MERCER )
I, Margaret A. Romanow, a notary public, hereby certify that on the
25th day of July, 1983, personally appeared before me Gerald C. Finn, who,
being by me first duly sworn, declared that he is the President of New America
Network, Inc. and that he executed the foregoing Restated Articles of
Incorporation on behalf of such Corporation and that the statements contained
therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 25th
day of 1983.
My commission expires:
/s/ Margaret A. Romanow
------------------------------
Notary Public
STATE OF NEW JERSEY )
)
COUNTY OF MERCER )
I, Margaret A. Romanow, a notary public, hereby certify that on the
25th day of July, 1983, personally appeared before me Ronald Boyce, who, being
by me first duly sworn declared that he is the Secretary of New America
Network, Inc. and that he executed the foregoing Restated Articles of
Incorporation on behalf of such Corporation and that the statements contained
therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 25th
day of 1983.
My commission expires:
/s/ Margaret A. Romanow
------------------------------
Notary Public
-5-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
NEW AMERICA NETWORK, INC.
We, the undersigned Senior Vice-President and Secretary,
respectively, of New America Network, Inc., a Delaware corporation, hereby
certify as follows:
1. Article "Four" of the Restated Certificate of
Incorporation filed with the office of the Secretary of State of Delaware on
August 2, 1983 is amended by amending the first sentence thereof to read in
its entirety as set forth in Exhibit A hereto.
2. The amendment to the Restated Certificate of
Incorporation effected by this Certificate has been duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law
of the State of Delaware.
3. The capital of the Corporation will not be reduced under
or by reason of this Certificate of Amendment.
July 19, 1985
/s/ Matthew C. Arnold
-----------------------------------
Matthew C. Arnold
Senior Vice-President
/s/ Ron Boyce
-----------------------------------
Ron Boyce
Secretary
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<PAGE>
EXHIBIT A
"ARTICLE FOUR"
Capital Stock: The total number of shares of stock which the
corporation shall have authority to issue is 21 Million (21,000,000), of which
stock 20 Million (20,000,000) shares of the par value of One Cent ($.01) each,
amounting in the aggregate to Two Hundred Thousand Dollars ($200,000.00),
shall be Common Stock and of which One Million (1,000,000) shares of the par
value of One Cent ($.01) each, amounting in the aggregate to Ten Thousand
Dollars ($10,000.00) shall be Preferred Stock.
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<PAGE>
STATE OF NEW JERSEY )
) ss.:
COUNTY OF MERCER )
BE IT REMEMBERED that on this day of July 19, 1985,
personally came before me, Margaret A. Romanow, a Notary Public in and for the
county and state aforesaid, Matthew C. Arnold, Senior Vice-President of the
Company described in the foregoing Certificate, known to me personally to be
such, and acknowledged the said Certificate to be his act and deed and that
the facts therein stated are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of
office the day and year aforesaid.
/s/ Margaret A. Romanow
-----------------------------------
-8-
<PAGE>
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CERTIFICATE OF INCORPORATION
NEW AMERICA NETWORK INC. a corporation organized under the laws of
Delaware, the Certificate of Incorporation of which was filed in the office of
the Secretary of State on the 2nd day of February, 1974 and thereafter
forfeited pursuant to section 136(c) of the General Corporation Law of
Delaware, now desiring to procure revival of its Certificate of Incorporation,
hereby certifies as follows:
1. The name of the corporation is NEW AMERICA NETWORK INC.
2. Its registered office in the State of Delaware is located at
Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of
New Castle and the name of its registered agent at such address is THE
CORPORATION TRUST COMPANY.
3. The date when revival of the Certificate of Incorporation of this
corporation is to commence is the 1st day of March, 1991, the same being prior
to the date of the forfeiture of the Certificate of Incorporation. Revival of
the Certificate of Incorporation is to be perpetual.
4. This corporation was duly organized under the laws of Delaware and
carried on the business authorized by its Certificate of Incorporation until
the 1st day of March, 1991, at which time its Certificate of Incorporation
became forfeited pursuant to section 136(c) of the General Corporation Law of
Delaware and this Certificate for Renewal and Revival is filed by authority of
the duly elected directors of the corporation in accordance with the laws of
Delaware.
IN WITNESS WHEREOF, said NEW AMERICA NETWORK INC. in compliance with
Section 312 of the General Corporation Law of Delaware has caused this
Certificate to be signed by MATTHEW C. ARNOLD, its last and acting Vice
President, and attested by Margaret B. Smith, its last and acting Ass't.
Secretary this 6th day of August, 1991.
-----------------------------------
By /s/ Matthew C. Arnold
---------------------------------
Last and Acting Vice President
ATTEST:
By /s/ Margaret B. Smith
---------------------------------
Last and Acting Ass't. Secretary
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<PAGE>
Exhibit 3.1
NEW AMERICA NETWORK INC.
CERTIFICATE OF DESIGNATIONS
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
We, Gerald C. Finn and Matthew C. Arnold, the President
and Secretary, respectively, of New America Network Inc. a
corporation organized and existing under the General Corporation
Law of the State of Delaware (the "Corporation"), DO HEREBY
CERTIFY:
That at a meeting of the Board of Directors of the
Corporation, duly called and held, the following resolution was adopted,
creating a series of 201,000 shares of preferred stock designated as Series A
Redeemable Convertible Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of the Corporation by Article Fourth of the Corporation's
Restated Certificate of Incorporation, as amended, and pursuant to the
provisions of Section 151 of the Delaware Corporation Law, a Series of
preferred stock of the Corporation be, and it hereby is, created out of the
authorized but unissued shares of the capital stock of the Corporation, such
Series to be designated Series A Redeemable Convertible Preferred Stock (the
"Series A Preferred Stock"), to consist of 201,000 shares, of which the
preferences and other rights, and the qualifications, limitations or
restrictions thereof, shall be (in addition to those set forth in the
Corporation's Certificate of Incorporation, as amended) as follows:
1. Certain Definitions. Unless the context otherwise
requires, the terms defined in this paragraph 1 shall have, for all purposes
of this resolution, the meanings herein specified.
Common Stock. The term "Common Stock" shall mean all shares
now or hereafter authorized of the Corporation's presently authorized class of
Common Stock, par value of $.01 per share, which has the right (subject always
to prior rights of any class of series of Preferred Stock) to participate in
the distribution of the assets and earnings of the Corporation without limit
as to per share amount.
<PAGE>
Issue Date. The term "Issue Date" shall mean, as to any
share of Series A Preferred Stock, the date such share is issued by the
Corporation to any holder thereof.
Junior Stock. The term "Junior Stock" shall mean any class
or series of stock, including any Common Stock, of the Corporation not
entitled to receive any dividends in any dividend period unless all dividends
required to have been paid or declared and set apart for payment on the Series
A Preferred Stock shall have been so paid or declared and set apart for
payment, and not entitled to receive any assets upon liquidation, dissolution
or winding up of the affairs of the Corporation until the Series A Preferred
Stock shall have received the entire amount to which such stock is entitled
upon such liquidation, dissolution or winding up.
Exchange Price. The term "Exchange Price" shall mean
$2.00 per share.
2. Dividends. The Series A Preferred Stock shall entitle the
holder of record thereof as of any record date therefor to receive, when and
as declared by the Board of Directors, out of any funds legally available
therefor, cash dividends on an annual compounded basis equal to 4% of the
Exchange Price per annum, such dividends to be payable quarterly in arrears on
each July 1, October 1, January 1, and April 1, commencing on July 1, 1994.
If the dividends on the Series A Preferred Stock for any
dividend period shall not have been declared upon or paid or set apart in full
for the Series A Preferred Stock for any quarterly period, the aggregate
deficiency shall be cumulative, and shall be fully paid or set apart for
payment before any dividends shall be paid upon or set apart for payment for
any class of Junior Stock of the Corporation. No dividends shall be paid upon,
or declared and set apart for, any shares of Series A Preferred Stock or any
shares of any other class or series of stock of the Corporation if the Board
of Directors of the Corporation shall have failed to declare and pay in full
all accumulative dividends required to be paid to the holders of all
outstanding shares of the Series A Preferred Stock for all past quarterly
periods.
For each quarterly period, the Board of Directors shall
declare, to the extent legally permissible, the dividend to which holders of
shares of Series A Preferred Stock are entitled, including all accumulated
dividends. In the event that full dividends are not paid or made available to
the holders of all outstanding shares of Series A Preferred Stock, and funds
available shall be insufficient to permit payment in full to all such holders
of the preferential amounts to which they are then entitled, the entire amount
available for payment of dividends
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<PAGE>
shall be distributed among the holders of the Series A Preferred Stock ratably
in proportion of the full amount to which they would otherwise be respectively
entitled.
3. Distributions Upon Liquidation, Dissolution or Winding
Up. In the event of any voluntary or involuntary liquidation, dissolution or
other winding up of the affairs of the Corporation, before any distribution or
payment shall be made to the holders of Junior Stock, the holders of the
Series A Preferred Stock shall be entitled to be paid the Exchange Price per
share with respect to all outstanding Series A Preferred Stock owned by them,
plus any declared and unpaid dividends thereon. Such amount shall be paid in
cash or in property taken at its fair value, or both, at the election of the
Board of Directors. If such payment shall have been made in full to the
holders of the Series A Preferred Stock, the remaining assets and funds of the
Corporation shall be distributed among the holders of Junior Stock, according
to their respective shares. If, upon any such liquidation, dissolution or
other winding up of the affairs of he Corporation, the net assets of the
Corporation distributable among the holders of all outstanding shares of the
Series A Preferred Stock shall be insufficient to permit the payment in full
of such holder of the preferential amounts to which they are entitled, then
the entire net assets of the Corporation shall be distributed among the
holders of the Series A Preferred Stock ratably in proportion to the full
amounts to which they would otherwise be respectively entitled. Neither the
consolidation or merger of the Corporation into or with another corporation or
corporations, nor the sale, lease or transfer of all or substantially all of
the assets of the Corporation to another corporation or corporations shall be
deemed a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this paragraph 3.
4. Conversion Rights.
(a) Optional Conversion. A holder of shares of
Series A Preferred Stock may convert on or after July 1, 1994 all or part of
such shares into shares of the Common Stock of the Corporation equal to the
Exchange Price per share multiplied by the total number of Series A Preferred
Stock so converted divided by the lessor of $2.00 or the average NASDAQ bid
price for the thirty day period previous to the date of conversion election.
Upon such conversion, the holder of shares of Series A Preferred Stock shall
also receive a warrant to purchase, for a period of one (1) year after the
Conversion Date, as hereinafter defined, the number of shares of Common Stock
equal to one (1) share of Common Stock for every ten (10) shares of Series A
Preferred Stock so converted (the "Warrant") at the purchase price in lawful
money of the United States of America to the order of the Corporation of $1.00
per whole share of Common Stock, subject to adjustment (the "Warrant Price").
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<PAGE>
The Corporation shall not be obligated to issue to any such
holder certificates evidencing the shares of Common Stock and Warrants issuable
upon such conversion unless certificates evidencing the shares of Series A
Preferred Stock are delivered to the Corporation or its transfer agent, or
unless such holder provides to the Corporation or its transfer agent reasonable
assurances as to the loss, theft or destruction of such certificates and agrees
with respect thereto to indemnify the Corporation and its transfer agent, and if
requested, provides such bond as may be reasonably requested by the Company and
its transfer agent. The holder of any shares of Series A Preferred Stock may
exercise the conversion right specified in this subparagraph (a) by (i)
delivering to the Corporation a conversion notice in writing setting forth the
number of shares of Series A Preferred Stock to be converted, (ii) surrendering
to the Corporation or any conversion agent of the Corporation the certificate or
certificates for the shares of Series A Preferred Stock to be converted, (iii)
furnishing appropriate endorsements and transfer documents if required by the
Corporation or by the registration or conversion agent and (iv) paying any
transfer or similar tax if required. Such date is referred to herein as the
"Conversion Date." The person in whose name the certificate or certificates for
Common Stock and Warrants are to be issued shall be deemed to have become a
holder of record of such Common Stock and Warrants on the applicable Conversion
Date. Upon a surrender of shares of Series A Preferred Stock that are converted
in part, the Corporation or its transfer agent shall issue to the holder a new
certificate representing the unconverted portion of the shares of Series A
Preferred Stock surrendered.
(b) Fractional Interests. The Corporation shall
not issue fractional shares of Common Stock or Warrants upon conversion of
shares of Series A Preferred Stock. Instead the Corporation shall pay a cash
adjustment in respect to such fractional interest equal to that fractional
interest of the Current Market Price. The "Current Market Price" at any date
shall mean the price per share of Common Stock on such date determined by the
Board of Directors as provided below. The Current Market Price per share shall
be deemed to be the higher of (i) book value per share, or (ii) fair value per
share as determined by an investment banking firm of nationally recognized
standing selected by the Board of Directors, irrespective of any accounting
treatment; provided, however, that if the Common Stock of the Corporation
shall be traded on a national securities exchange or on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), then
the Current Market Price shall be the average of the daily closing prices per
share of Common Stock for 30 consecutive business days ending no more than 15
business days before the day in question (as adjusted for any stock dividend,
split, combination or reclassification that took during such 30 business day
period). The closing price for each day shall be the last reported sales price
or, in case no
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<PAGE>
such reported sales take place on such day, the average of the last reported
bid and asked prices, in either case on the principal national securities
exchange on which the Common Stock is listed, or if not listed on any national
securities exchange, in the National Market System, or if not so quoted, the
average of the highest bid and the lowest asked prices quoted on NASDAQ.
(c) Treasury Stock. For the purposes of
paragraph 4, the sale or other disposition of any Common Stock of the
Corporation theretofore held in its treasury shall be deemed to be an issuance
thereof.
(d) Taxes. The Corporation shall pay all
documentary, stamp, transfer or other transactional taxes attributable to the
issuance or delivery of shares of Common Stock and Warrants upon conversion of
any Series A Preferred Stock; provided that the Corporation shall not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such Series A
Preferred Stock in a name other than that of the holder of the Series A
Preferred Stock in respect of which such shares are being issued.
(e) Reserve Shares. The Corporation shall
reserve at all times so long as any Series A Preferred Stock remains
outstanding, free from preemptive rights, out of either or both of its
treasury stock or its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the Series A Preferred Stock,
sufficient shares of Common Stock to provide for the conversion of all
outstanding Series A Preferred Stock and exercise of the Warrants.
(f) Governmental Approvals. If any shares of
Common Stock to be reserved for the purpose of conversion of Series A
Preferred Stock and exercise of the Warrants require registration with or
approval of any governmental authority under any Federal or state law before
such shares may be validly issued or delivered upon conversion or exercise,
then the Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration or approval, as the case may be. If, and
so long as, any Common Stock into which the Series A Preferred Stock is then
convertible is listed on any national securities exchange, the Corporation
will, if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon conversion or exercise.
(g) Valid Issue. All shares of Common Stock
which may be issued upon conversion of the Series A Preferred Stock and
exercise of the Warrants will upon issuance by the Corporation, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with
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<PAGE>
respect to the issuance thereof and the Corporation shall take no action which
will cause a contrary result.
(h) Certain Distributions. In the event the
Corporation shall declare a cash dividend or other distribution upon its
Common Stock payable otherwise than out of retained earnings or net profits or
shall distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), or other securities of others, evidences of
indebtedness issued by the Corporation or others, other assets (other than
cash) or any options, warrants or other rights to purchase any of the
foregoing, then each share of Series A Preferred Stock then outstanding shall,
unless it shall receive such distribution pursuant to paragraph 2, upon
conversion after the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such dividend or
distribution (or if none if fixed, after the date such dividend or
distribution is made), receive (in addition to the shares of Common Stock
deliverable upon such conversion), the dividend or distribution (or, at the
option of the Corporation at the time of such dividend or distribution as
determined by the Board of Directors) which would have been paid, or
distributed with respect to such shares had it been converted immediately
prior to such record date (or if none, the date of such dividend or
distribution).
5. Redemption Rights.
(a) Mandatory Redemption.
(i) The outstanding shares of Series A
Preferred Stock are subject to the mandatory redemption by the Corporation at
the Exchange Price per share, plus the amount of all unpaid cumulative
compounded dividends on such Series A Preferred Stock, from funds legally
available for such purposes under the Delaware Corporation Law, in five
consecutive annual amounts of at least 25,000 shares on the 1st of October in
1994, through 1998, with all remaining shares being redeemed on or before
September 30, 1999.
(ii) The consolidation or merger of the
Corporation into or with another corporation or corporations, or the sale,
lease or transfer of all or a substantial part of the assets of the
Corporation to another corporation or corporations ("Sale of Business") shall
be deemed events which trigger a mandatory redemption by the Corporation of
all outstanding shares of Series A Preferred Stock. If a Sale of Business
occurs, the Series A Preferred Stock, shall be redeemed in the amounts and
with the preferences and priorities as if a liquidation occurred in accordance
with the provisions of Section 3.
(iii) The Corporation shall deposit with a
bank or trust company, having capital in surplus of at least Five
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<PAGE>
Million Dollars ($5,000,000.00) in trust to be applied to the redemption in
any redemption year, or as of the effective date of a Sale of Business,
amounts sufficient to redeem the Series A Preferred Stock. After the date of
such deposit all rights of holders of such shares as stockholders of the
Corporation shall cease and terminate, except the right to receive from such
bank or trust company monies so deposited in trust but without interest. Any
monies unclaimed at the end of the six (6) years from the date of such deposit
shall be repaid to the Corporation; after such repayment the holders of such
shares shall look only to the Corporation for payment of the redemption price,
without interest.
(b) Optional Redemption by Company. The
Corporation shall have the right to optionally redeem the Series A Preferred
Stock prior to a mandatory redemption date at an amount equal to the Exchange
Price. Any optional redemptions by the Corporation for an amount less than the
Exchange Price shall be pro-rata among the holders of the Series A Preferred
Stock.
(c) Redemption Procedures. All mandatory
redemptions of the Series A Preferred Stock shall be pro-rata among the
holders of such shares. Thirty (30) days prior to the date fixed for
redemption of the Series A Preferred Stock, or any part thereof, a notice
specifying the time and place thereof shall be given by mail to the holders of
record of the shares of Series A Preferred Stock selected for redemption at
their respective addresses as the same shall appear on the stock books of the
Corporation, but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the proceedings for
redemption. Any notice which was mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether or not the holder
receives the notice. Upon such redemption date, or upon such earlier date as
the Board of Directors shall designate for payment of the redemption price
(unless the Corporation shall default in the payment of the redemption price
as set forth in such notice), the holders of shares of Series A Preferred
Stock, selected for redemption and to whom notice has been duly given shall
cease to be stockholders with respect to such shares and shall have no
interest in or claim against the Corporation by virtue thereof except the
right to receive the monies payable upon such redemption from the Corporation
or otherwise, without interest thereon, upon surrender (and endorsement, if
required by the Corporation) of the certificates, and the shares represented
thereby shall no longer be deemed to be outstanding. Upon redemption of shares
of Series A Preferred Stock in the manner set out herein, or upon the purchase
of the Series A Preferred Stock by the Corporation, the Series A Preferred
Stock so acquired by the Corporation shall be cancelled and shall not be
reissued.
-7-
<PAGE>
6. Voting Rights -- Non Voting Stock. Except as otherwise
provided by the Delaware Corporation Law, the Series A Preferred Stock shall
have no right or power to vote on any question or in any proceeding or to be
represented at or to receive notice of any meeting of the stockholders.
7. Two-Thirds Vote to Change Rights, Preferences, and
Powers. So long as any shares of Series A Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote at a meeting (the notice
of which shall state the general character of the matters to be submitted
thereat), or the written consent with or without a meeting of the holders of
at least two-thirds (66 2/3) of the then outstanding shares of the Series A
Preferred Stock:
(i) increase the authorized amount of
Series A Preferred Stock; or authorize or create, or
increase the authorized amount of, any additional class of
stock ranking prior to or on a parity with the Series A
Preferred Stock as to dividends or assets; or authorized or
create, or increase the authorized amount of, any class or
stock or obligations convertible into or evidencing the
right to purchase any class of stock ranking prior to or on
a parity with the Series A Preferred Stock as to dividends
or assets; or
(ii) authorized or create, or increase the
authorized amount of, any stock of the Corporation, other
than Common Stock, which has the right to participate in the
distribution of the assets and earnings of the Corporation
without limit as to per share amount; or
(iii) amend, alter or repeal any of the
provisions of the Certificate of Incorporation or any of the
rights, preferences or powers of the outstanding Series A
Preferred Stock fixed herein or determined by the Board of
Directors for any shares of Series A Preferred Stock as
herein authorized; so as adversely to affect the rights,
preferences or powers of the Series A Preferred Stock or its
holders; or
(iv) sell, lease or convey all, or
substantially all, of the property or business of the
Corporation; or
(v) merge or consolidate with or into any
other corporation or corporations, unless the corporation
surviving or resulting from such merger or consolidation
will have after such merger or consolidation no class of
stock either authorized or outstanding ranking prior to or
on a parity with the
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<PAGE>
Series A Preferred Stock as to dividends or assets with the
same rights, preferences and powers as the Series A
Preferred Stock, and unless each holder of Series A
Preferred Stock at the time of such merger or consolidation
and in connection therewith shall continue to hold (in the
case of a merger in which the Corporation is the surviving
corporation) his shares of Series A Preferred Stock, or (in
the case of a consolidation or a merger of the Corporation
into some other corporation) shall receive the same number
of shares of Series A Preferred Stock, with the same rights,
preferences and powers, os such resulting Corporation; or
(vi) amend or repeal any of the provisions of
this paragraph 7.
8. Other Rights. Except as provided in the Exchange
Agreement to be entered into by and between the Corporation and the holders of
the Series A Preferred Stock to be effective as of April 1, 1994, and except
as may otherwise be required by law, the shares of Series A Preferred Stock
shall not have any preferences or relative, participating, optional or other
special rights, other than those specifically set forth in this resolution (as
such resolution may be amended from time to time), the Exchange Agreement and
in the Certificate of Incorporation of the Corporation, as amended, and the
shares of Series A Preferred Stock shall have no preemptive or subscription
rights other than as set forth in the Exchange Agreement.
9. Headings of Subdivisions. The headings of the various
subdivisions hereof are for conveniences of reference only and shall not
affect the interpretation of any of the provisions hereto.
10. Severability of Provisions. If any right, preference or
limitation of the Series A Preferred Stock set forth in this resolution (as
such resolution may be amended from time to time) is invalid, unlawful or
incapable to being enforced by reason of any rule of law or public policy, all
other rights, preferences and limitations set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set forth
shall be deemed dependent upon any other such right, preference or limitation
unless so expressed herein.
11. Remedies. The holders of the Series A Preferred Stock
shall be granted the rights of specific performance, injunctive relief and any
other remedies that may be otherwise available at law or in equity to enforce
the provisions of this
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<PAGE>
Certificate of Designation. The provisions of this Certificate of Designation
are to be literally construed in interpreting the preferences granted to the
Series A Preferred Stock hereunder.
12. Stated Value. The stated value of the Series A Preferred
Stock shall be $2.00 per share for legal purposes.
IN WITNESS WHEREOF, we have executed this Certificate of
Designations and do affirm the foregoing as true under the penalties of
perjury this 5th day of April, 1994.
NEW AMERICAN NETWORK INC.
/s/ Gerald C. Finn
-----------------------------
Gerald C. Finn - President
By:/s/ Matthew G. Arnold
-----------------------------
Matthew G. Arnold - Secretary
Attest:/s/
-------------------
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<PAGE>
BY-LAWS
OF
NEW AMERICA NETWORK, INC.
(A Delaware Corporation)
ARTICLE I
OFFICES
SECTION 1.1. Principal Office. The principal office of the
Corporation shall be located in the Town of Hightstown, County of Mercer,
State of New Jersey (USA) or such other location as the Board of Directors
may designate.
SECTION 1.2. Other Offices. 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 SHAREHOLDERS
SECTION 2.1. Place of Meetings. All meetings of shareholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
SECTION 2.2. Annual Meetings. The annual meeting of shareholders
shall be held at such time on such day, other than a legal holiday, in the
third month next succeeding the month in which the fiscal year of the
Corporation ends, as the Board of Directors in each such year determines.
<PAGE>
At the annual meeting, the shareholders entitled to vote for the election of
Directors shall elect, by a plurality vote, a Board of Directors and transact
such other business as may properly come before the meeting.
SECTION 2.3. Special Meeting. Special meetings of shareholders, for
any purpose or purposes, may be called by the President and shall be called
promptly by the President at the written request of a majority of the entire
Board of Directors or the holders of record of at least twenty five (25%)
percent of the issued and outstanding shares of the Common Stock of the
Corporation. Any such request shall state the purposes of the proposed
meeting. At any special meeting of shareholders, only such business may be
transacted as is related to the purpose or purposes set forth in the notice of
such meeting.
SECTION 2.4. Fixing Record Date. For the purpose of determining the
shareholders qualified or entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to or dissent
from any proposal without a meeting, or for the purpose of determining
shareholders qualified or entitled to receive payment of any dividend or the
allotment of any rights, or from any other proper purpose, the Board of
Directors shall fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall be not more than fifty (50) nor
less than ten (10) days before the date of such meeting. If no record date is
fixed by the Board, the record date for any such purpose shall be ten (10)
days before the date of such meeting or action. When such determination of
qualified or entitled shareholders has been made as provided above, such
determination shall also apply to any adjourned meeting, except where transfer
of stock to a new holder has been entered on
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the transfer books of the Corporation after the original meeting was adjourned
and at least ten (10) days before the date of such adjourned meeting.
SECTION 2.5. Notice of Meeting. Written notice of every meeting of
shareholders, stating the place, date and hour thereof and, in the case of a
special meeting of shareholders, the purpose or purposes thereof and the
person or persons by whom or at whose direction such meeting has been called
and such notice is being issued, shall be given not less than ten (10) nor
more than fifty (50) days before the date of the meeting, either personally or
by mail, by or at the direction of the President, the Secretary or the persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed delivered when deposited in
the United States mail, with postage prepaid, addressed to the shareholder at
his address as it appears on the record of shareholders, or if he shall have
filed with the Secretary a written request that notices to him be mailed to
some other address, then directed to him at such other address. Unless the
Board of Directors shall fix a new record date for an adjourned meeting,
notice of such adjourned meeting need not be given if the time and place to
which the meeting shall be adjourned were announced at the meeting at which
the adjournment is taken. Nothing herein contained shall preclude the
shareholders from waiving notice as provided in Section 4.1 hereof.
SECTION 2.6. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote,
represented in person or by proxy, shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of
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shareholders; provided, however, that when a specified item of business is
required to be voted on by a class or classes, representatives of a majority
of the shares of such class or classes shall constitute a quorum for the
transaction of such specified item of business. Unless otherwise required by
law the vote of a majority of the shares present at the time of a vote, if a
quorum is or has been present, shall be the act of the shareholders. When a
quorum is once present to organize a meeting, it is not broken by the
subsequent withdrawal of any shareholder and those remaining may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum. If, however, such quorum shall not
be present or represented at any meeting of shareholders, the shareholders
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 transacted which might have been transacted at the meeting
as originally noticed. Notwithstanding the foregoing, if after any such
adjournment the Board of Director shall fix a new record date for the
adjourned meeting, a notice of such adjourned meeting shall be given as
provided in Section 2.5 of these By-Laws, but such notice may be waived as
provided in Section 4.1 hereof.
SECTION 2.8. Voting. At all meetings of shareholders voting may be
via voice; however, any qualified voter may demand a stock vote, whereupon
such vote shall be taken by ballot and the secretary shall record the name
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of the shareholder voting, the number of shares voted, and, if such vote shall
be by proxy, the name of the proxy holder.
SECTION 2.9. Proxies. Every proxy shall be executed in writing by the
shareholders giving the same or by his duly authorized attorney-in-fact and
delivered to the secretary of the meeting prior to or during the roll call, or
be returned to the Corporation with the signed consent to action without a
meeting. No proxy shall be valid after the expiration of eleven (11) months
from the date thereof, unless otherwise provided in the proxy. Every proxy
shall be revocable, until voted, at the pleasure of the shareholder executing
it, except in those cases where an irrevocable proxy permitted by law is
given.
SECTION 2.10. Unanimous Written Consents. Whenever a vote of
shareholders at a meeting thereof is required or permitted to be taken in
connection with any corporate action, the meeting and the vote of shareholders
may be dispensed with if all of the shareholders 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.
SECTION 2.11. Inspectors. The Board may, in advance of any meeting of
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his
ability. The inspectors shall determine the number of shares outstanding and
the voting power of each, the number of shares represented
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at the meeting, the existence of a quorum, the validity and effect of proxies,
and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count
and tabulate all votes, ballots or consents, determine the result and do such
acts as are proper to conduct the election or vote with fairness to all
shareholders. On request of the chairman of the meeting or any shareholder
entitled to vote thereat, the inspectors shall make a report in writing of any
challenge, request or matter determined by them and shall execute a
certificate of any fact found by them. No Director or candidate for the office
of Director shall act as an inspector of an election of Directors. Inspectors
need not be shareholders.
ARTICLE III
DIRECTORS
SECTION 3.1. Number. The number of Directors of the Corporation which
shall constitute the entire Board of Directors shall be fixed from time to
time by a vote of a majority of the entire Board and shall be not less than
three (3) nor more than nine (9) members. The Board of Directors shall consist
of seven (7) members until such number of Directors is changed by the Board of
Directors.
SECTION 3.2. Qualifications. Election and Tenure. Directors shall
be at least eighteen (18) years of age but need not be residents of the
State of Delaware. Directors need not be shareholders of the Corporation.
Except as otherwise provide in these By-Laws, Directors shall be elected at
the annual meeting of shareholders, and each Director so elected shall hold
office until the third subsequent annual meeting of shareholders and until
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his successor has been elected and has qualified. Notwithstanding anything to
the contrary contained herein, the tenure of Directors elected pursuant to
these By-Laws shall be set so that not more than thirty three and one third
(33-1/3%) percent of the terms of the Directors shall expire in any one year.
SECTION 3.3. Resignation and Removal. A Director may resign at any
time by giving written notice to the Board, the President, or the Secretary of
the Corporation. Unless otherwise specified in the notice, the resignation
shall take effect upon receipt thereof by the Board or such office, and the
acceptance of the resignation shall not be necessary to make it effective. Any
Director may be removed at any time, with or without cause, as provided by
law.
SECTION 3.4. Newly Created Directorships and Vacancies. Newly created
Directorships resulting from an increase in the number of Directors and
vacancies occurring in the Board of Directors for any reason whatsoever,
except the removal of Directors without cause, shall be filled by vote of the
Board. If the number of Directors then in office is less than a quorum, such
newly created Directorships and vacancies may be filled by a vote of a
majority of the Directors then in office. Any Director elected to fill a
vacancy resulting from an increase in the number of Directors shall be elected
until the next meeting of shareholders at which the election of Directors is
in the regular course of business, and until his successor has been elected
and qualified. A Director elected to fill a vacancy caused by resignation,
death or removal shall be elected to hold office for the unexpired term of his
predecessor.
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SECTION 3.5. Powers and Duties. Subject to the applicable provision
of law, these By-Laws or the Certificate of Incorporation, but in furtherance
and not in limitation of any rights herein conferred, the Board of Directors
shall have the control and management of the business and affairs of the
Corporation and shall exercise all such powers of the Corporation and do all
such lawful acts and things as may be exercised by the Corporation.
SECTION 3.6. Place of Meetings. All meetings of the Board of
Directors may be held either within or without the State of Delaware.
SECTION 3.7. Annual Meetings. An annual meeting of the Board of
Directors shall be held immediately following the annual meeting of the
stockholders, and no notice of such meeting to the newly elected Directors
shall be necessary in order legally to constitute the meeting, provided a
quorum shall be present, or the Directors may meet at such time and place as
shall be fixed by the written consent of all of such Directors.
SECTION 3.8. Regular Meetings. Regular meeting of the Board of
Directors may be held upon such notice or without notice, and at such time
and at such place as shall from time to time be determined by the Board.
SECTION 3.9. Special Meetings. Special meetings of the Board of
Directors may be called by the President and shall be called promptly by the
President or the Secretary upon the written request of any two (2) Directors
specifying the special purpose thereof, on not less than two (2) days notice
to each Director. Such request shall state the date, time and place of the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
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SECTION 3.10. Notice of Meetings. Notice of each special meeting of
the Board (and of each regular meeting for which notice shall be required)
shall be given by the President, the Secretary or an Assistant Secretary and
shall state the place, date and time of the meeting. Notice of each such
meeting shall be given orally or shall be mailed to each Director at his
residence or usual place of business. If notice of less than one week is
given, it shall be oral, whether by telephone or in person, or sent by courier
serve or electronic means. If mailed, the notice shall be given when deposited
in the United States mail, postage prepaid. Notice of any meeting need not be
given to any Director who shall submit, either before or after the meeting, a
signed waiver of notice or who shall attend such meeting without protesting,
prior to or at its commencement, the lack of notice to him. Notice of any
adjourned meeting, including the place, date and time of the new meeting,
shall be given to all Directors not present at the time of the adjournment, as
well as to the other Directors unless the place, date and time of the new
meeting is announced at the adjourned meeting.
SECTION 3.11. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of
Directors, unless otherwise provided by any applicable provision of law, by
these By-Laws, or by the Certificate of Incorporation. Each Director shall
have one (1) vote, and the act of a majority of the Directors present at the
time of the vote, if a quorum is present at such time, shall be the act of the
Board of Directors, unless otherwise provided by any applicable provision of
law, by these By-Laws or by the Certificate of Incorporation.
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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, until a
quorum shall be present.
SECTION 3.12. Books and Records. The Directors may keep the books of
the Corporation, except such as are required by law to be kept within the
state, outside of the State of Delaware, at such place or places as they may
from time to time determine.
SECTION 3.13. Action Without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be
taken without a meeting of all members of the Board or the committee, as the
case may be, if all of the members of the Board consent in writing to the
adoption of a resolution authorizing the action. Any such resolution and the
written consents thereto by the members of the Board or committee shall be
filed with the minutes of the proceedings of the Board or committee.
SECTION 3.15. Telephone Participation. Any one or more members of the
Board, or any committee of the Board, may participate in a meeting of the
Board or committee by means of a conference telephone call or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
SECTION 3.16. Committees of the Board. The Board, by resolution
adopted by a majority of the entire Board, may designate from among its
members an executive committee and other committee. Each committee (including
the members thereof) shall serve at the pleasure of the Board and shall keep
minutes of its meetings and report the same at the Board.
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SECTION 3.17. Authority of Committees; Duties of Directors. Except as
otherwise provided by law, each such committee, to the extent provided in the
resolution establishing it, shall have and may exercise all the authority of
the Board with respect to all matters. The designation of any committee and
the delegation of authority thereto shall not alone relieve any Director of
his duty to the Corporation.
SECTION 3.18. Compensation. No compensation shall he paid to
Directors, as such, for their services, but by resolution of the Board a fixed
sum and expenses for actual attendance at each regular or special meeting of
the Board may be authorized. Nothing herein contained shall be construed to
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 3.19. Presumption of Assent. A Director of the Corporation
who is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting.
ARTICLE IV
WAIVER
SECTION 4.1. Waiver. Whenever a notice is required to be given by
any provision of law, by these By-Laws, or by the Certificate of
Incorporation, a waiver thereof in writing, whether before or after the
time stated therein, shall be deemed equivalent to such notice. In
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addition, any shareholder attending a meeting of shareholders in person or by
proxy without protesting prior to the conclusion of the meeting the lack of
notice thereof to him, and any Director attending a meeting of the Board of
Directors without protesting prior to the meeting or at its commencement such
lack of notice, shall be conclusively deemed to have waived notice of such
meeting.
ARTICLE V
OFFICERS
SECTION 5.1. Executive Officers. The executive officers of the
Corporation shall be a President, one or more Vice Presidents, a Treasurer and
a Secretary. Any person may hold two or more of such offices, except that the
same shall not be both President and Vice President or President and
Secretary. The executive officers of the Corporation shall be elected annually
(and from time to time by the Board of Directors, as vacancies occur), at the
annual meeting of the Board of Directors following the meeting of shareholders
at which the Board of Directors was elected.
SECTION 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including additional Vice Presidents and one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers, as it shall at any time or from time to time deem necessary or
advisable.
SECTION 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the business and affairs of the Corporation as
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may be provided in these By-Laws, or, to the extent not so provided, as may
be prescribed by the Board of Directors.
SECTION 5.4. Tenure and Removal. The officers of the Corporation
shall be elected or appointed to hold office until their respective successors
are elected or appointed. All officers shall hold office at the pleasure of
the Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
SECTION 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or
without cause, or any other reason, shall be filled by the Board of
Directors.
SECTION 5.6. Compensation. The salaries and other compensation of
all officers and agents of the Corporation shall be fixed by or in the
manner prescribed by the Board of Directors.
SECTION 5.7. President. The President shall be the chief
administrator and executive officer of the Corporation. The President shall
preside at all meetings of the shareholders and the Directors. The President
shall have general and active management of the business and affairs of the
Corporation and be responsible for its day-to-day operations, subject to the
control of the Board of Directors, and shall see to it that all orders and
resolutions of the Board of Directors are carried into effect.
SECTION 5.8. Vice Presidents. The Vice President or, if there shall
be more than one, each Vice President, shall have such powers and shall
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perform such duties as may from time to time be assigned to him by the
Board of Directors.
SECTION 5.9. Secretary. The Secretary shall attend all meetings of
the shareholders and all meetings of the Board of Directors and shall record
all proceedings taken at such meeting in a book to be kept for that purpose;
he shall see that all notices of meetings of shareholders and special meetings
of the Board of Directors are duly given in accordance with the provisions of
these By-Laws or as required by law; he shall be the custodian of the records
and of the corporate seal or seals of the Corporation; he, or an Assistant
Secretary, shall have authority to affix the corporate seal or seals of the
Corporation to all documents, the execution of which, on behalf of the
Corporation, under its seal, is duly authorized, and when so affixed it may be
attested by his signature or the signature of such Assistant-Secretary; and in
general he shall perform all duties incident to the office of the Secretary of
a Corporation, or such other duties as the Board of Directors may from time to
time prescribe. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
SECTION 5.10. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to
the credit of the Corporation, all moneys and valuable effects in such banks,
trust companies, or other depositories as shall from time to time be selected
by the Board of Directors. He shall keep full and accurate accounts of
receipts and disbursements in books belonging to the
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Corporation; he shall render to the President and to each member of the Board
of Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general,
he shall perform all of the duties incident to the office of Treasurer of a
Corporation, and such other duties as the Board of Directors may from time to
time prescribe.
SECTION 5.11. Other Officers. The Board of Directors may also elect
or may delegate to the President the power to appoint such other officers as
it may at any time or time to time deem advisable, and any officers so elected
or appointed shall have such authority and perform such duties as the Board of
Directors or the President, if he shall have appointed them, may from time to
time prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND SHAREHOLDERS
SECTION 6.1. Form and Signature. The shares of the Corporation shall
be represented by certificates signed by the President or by any Vice
President and the Secretary or an Assistant Secretary, if any, or the
Treasurer or an Assistant Treasurer, if any, and shall bear the seal of the
Corporation or a facsimile thereof; provided, however, that where any such
certificate is countersigned by a transfer agent or is registered by a
registrar (other than the Corporation or one of its employees), the signatures
of the Chairman of the Board, the President, Secretary or Assistant Secretary
upon such certificates may be facsimiles, engraved or printed. In case any
officer who shall have signed such certificates shall have ceased to be such
officer before such certificates shall be issued,
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they may nevertheless be issued by the Corporation with the same effect as if
such officers were still in office at the date of their issue. Each
certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which
such certificate represents and (d) the par value, if any, of each share
represented by such certificate.
SECTION 6.2. Registered Shareholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares of stock to receive dividends or other distributions,
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 of stock, and shall not
be bound to recognize any equitable or legal claim to or interest in such
shares on the part of any other person.
SECTION 6.3. Transfer of Shares.
6.3.1 Transfers of shares of stock of the Corporation shall be made
on the stock records of the Corporation only upon authorization by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk separately designated by the Board, and on surrender of the
certificate or certificates for such shares properly endorsed or accompanied
by a duly executed stock transfer power and then payment of all taxes thereon.
6.3.2 The Corporation shall be entitled to treat the holder of record
of any share as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in
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such share on the part of any other person whether or not it shall have
express or other notice thereof, except as expressly provided by the laws of
Delaware.
SECTION 6.4. Restrictions of Stock. The Board of Directors may
restrict the transfer of any stock issued by giving the Corporation or any
shareholder "first right of refusal to purchase" the stock, by making the
stock redeemable or by otherwise restricting the transfer of the stock under
such terms and in such manner as the Directors may deem necessary and as are
not inconsistent with the Certificate of Incorporation or the laws of the
State of Delaware. Any stock whose transfer is so restricted must carry a
stamped legend on the face of the certificate setting out the restriction and
where such restriction may be found in the records of the Corporation.
SECTION 6.5. Lost or Destroyed Certificates. 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 to be lost or destroyed. When authorizing
such issue of a new certificate or certificates the Board may, in its
discretion and as a condition precedent to the issuance thereof, require 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
give the Corporation a bond in such sum and with such surety or sureties 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.
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ARTICLE VII
GENERAL PROVISIONS
Section 7.1 Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or
special meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument binding upon the Corporation to determine
what, if any, dividends or distributions shall be declared and paid or made.
SECTION 7.2. Checks, etc. All checks or demands for money and notes
or other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such office or offices or other person or persons as may
from time to time be designated by the Board of Directors.
SECTION 7.3. Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or otherwise reproduced.
SECTION 7.4. Fiscal Year. The fiscal year of the Corporation shall
be determined by the Board of Directors.
SECTION 7.5. General and Special Bank Accounts. The Board may
authorize from time to time the opening and keeping of general and special
bank accounts with such banks, trust companies or other depositories as the
Board may designate or as may be designated by any officer or officers of the
Corporation to whom such power of such banks, trust companies or other
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depositories as the Board may designate or as may be designated by any office
or officers of the Corporation to whom such power of designation may be
delegated by the Board from time to time. The Board may make such special
rules and regulations with respect to such bank accounts, not inconsistent
with the provisions of these By-Laws, as it may deem expedient.
SECTION 7.6. Execution of Instruments. All corporate instruments and
documents shall be signed or countersigned, executed, verified or acknowledged
by such officer or officers or other person or persons as the Board of
Directors may from time to time designate.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHER PERSONS
SECTION 8.1. Power to Indemnify--Third Party Actions. The Corporation
shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation). This power to
indemnify shall arise only by reason of the fact that the person is or was a
Director, officer, employee or is or was serving at the request of the
Corporation as a Director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise. The Corporation shall
have the power to indemnify against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such
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action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, if he had
no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he
had reasonable cause to believe that his conduct was unlawful.
SECTION 8.2. Power to Indemnify--Actions Brought in the Right of the
Corporation. The Corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise.
The Corporation shall have the power to indemnify against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation. No indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct
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in the performance of his duty to the Corporation unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication or liability but in view of
all circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which such court shall deem proper.
SECTION 8.3. Right to Indemnification. To the extent that a Director,
officer, employee or agent of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 8.1 and 8.2, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
SECTION 8.4. Determination of Entitlement to Indemnification. Any
indemnification under Sections 8.1 and 8.2 (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the Director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 8.1 and 8.2. Such
determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested Directors so directs, by
independent legal counsel in a written opinion, or (3) by the shareholders.
SECTION 8.5. Advancement of Expenses. Expenses incurred in
defending a civil or criminal action, suit or proceeding may be paid by the
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Corporation in advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in Section 8.4 upon receipt of
an undertaking by or on behalf of the Director, officer, employee or agent to
repay such amount unless it shall ultimately be determined that he is entitled
to be indemnified by the Corporation as authorized in this Article.
SECTION 8.6. Savings Clause. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-law, agreement, vote of shareholders
or disinterested Directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a Director, officer,
employee or agent and shall inure to the benefit of the heirs and legal
representatives of such a person.
SECTION 8.7. Insurance. The Corporation shall have power to 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 the Corporation as a Director, officer, employee or agent 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 this Article.
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ARTICLE IX
ADOPTION AND AMENDMENTS
SECTION 9.1. Power to Amend. These By-Laws may be ratified, amended
or repealed and any new By-Laws may be adopted by a majority of the entire
Board of Directors at any duly held meeting.
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NEW AMERICA INTERNATIONAL, INC.
ARTICLES OF INCORPORATION
THIS IS TO CERTIFY THAT:
ARTICLE I
INCORPORATOR
The undersigned, James L. Galante, whose address is c/o
Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, Baltimore,
Maryland 21202, being at least 18 years of age, does hereby form a corporation
under the general laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is:
New America International, Inc.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are to
engage in any lawful act or activity for which corporations may be organized
under the general laws of the State of Maryland as now or hereafter in force.
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in
the State of Maryland is c/o Ballard Spahr Andrews & Ingersoll, LLP, 300 East
Lombard Street, Baltimore, Maryland 21202, Attention: James J. Hanks, Jr. The
name of the resident agent of the Corporation in the
<PAGE>
State of Maryland is James J. Hanks, Jr., whose post address is c/o Ballard
Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland
21202. The resident agent is a citizen of and resides in the State of Maryland.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 5.1 Number and Classification of Directors. The
business and affairs of the Corporation shall be managed under the direction of
the Board of Directors. The number of directors of the Corporation initially
shall be eight, which number may be increased or decreased pursuant to the
Bylaws, but shall never be less than the minimum number required by the Maryland
General Corporation Law. The names of the directors who shall serve until their
successors are duly elected and qualify and the class of directors to which each
is assigned are:
Name Class
---- -----
Robert H. Dennis I
Joseph Grossman I
Michael Kranzdorf II
Jeffrey M. Finn II
Bernard J. Korman II
Gerald C. Finn III
Norman M. Kranzdorf III
Peter O. Hanson III
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These directors may increase the number of directors and may fill any vacancy,
whether resulting from an increase in the number of directors or otherwise, on
the Board of Directors in the manner provided in the Bylaws.
The directors (other than any director elected solely by
holders of one or more classes or series of Preferred Stock) shall be
classified, with respect to the terms for which they severally hold office,
into three classes, the Class I directors to hold office initially for a term
expiring at the annual meeting of stockholders in 1999, the Class II directors
to hold office initially for a term expiring at the annual meeting of
stockholders in 2000 and the Class III directors to hold office initially for
a term expiring at the annual meeting of stockholders in 2001, with the
members of each class to hold office until their successors are duly elected
and qualify. At each annual meeting of the stockholders, the successors to the
class of directors whose term expires at such meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election.
Section 5.2 Mergers, Consolidations and Share Exchanges.
Notwithstanding any provision of law permitting or requiring such action to be
taken or approved by the affirmative vote of the holders of shares entitled to
cast a greater number of votes, a consolidation or share exchange or a merger
in which the Corporation is the successor need be approved only by the
affirmative vote of holders of shares entitled to cast a majority of all the
votes entitled to be cast on the matter.
Section 5.3 Authorization by Board of Stock Issuance. The
Board of Directors may authorize the issuance from time to time of shares of
stock of the Corporation of any class or series, whether now or hereafter
authorized, or securities or rights convertible into shares of its stock of
any class or series, whether now or hereafter authorized, for such
consideration as the
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Board of Directors may deem advisable (or without consideration in the case of
a stock split or stock dividend), subject to such restrictions or limitations,
if any, as may be set forth in the charter or the Bylaws.
Section 5.4 Preemptive Rights. Except as may be provided by
contract or by the Board of Directors in setting the terms of classified or
reclassified shares of stock pursuant to Section 6.2, no holder of shares of
stock of the Corporation shall, as such holder, have any preemptive right to
purchase or subscribe for any additional shares of stock of the Corporation or
any other security of the Corporation which it may issue or sell.
Section 5.5 Removal of Directors. Subject to the rights of
holders of one or more classes or series of stock to nominate, elect or remove
one or more directors, any director, or the entire Board of Directors, may be
removed, but only for cause and then only by the affirmative vote of the
holders of at least two thirds of the votes entitled to be cast generally in
the election of directors. For the purpose of this Section 5.5, "cause" shall
mean, with respect to any particular director, conviction of a felony or a
final judgment of a court of competent jurisdiction holding that such director
caused demonstrable, material harm to the Corporation through bad faith or
active and deliberate dishonesty.
Section 5.6 Transactions Between the Corporation and its
Directors, Officers, Employees and Agents. Subject to any express restrictions
in this charter or adopted by the Directors in the Bylaws or by resolution,
the Corporation may enter into any contract or transaction of any kind
(including, without limitation, for the purchase or sale of property or for
any type of services, including those in connection with underwriting the
offer or sale of securities of the Corporation) with any person or entity,
including any stockholder, director, officer, employee or agent of the
Corporation or any person or entity affiliated with a
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<PAGE>
stockholder, director, officer, employee or agent of the Corporation, whether
or not any of them has a financial interest in such transaction.
Section 5.7 Ambiguity. In case of any ambiguity in any
provision of this charter, the Board of Directors of the Corporation shall
have the power to determine the application of such provision with respect to
any situation based on the facts known to the Board and such determination
shall be final and conclusive.
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ARTICLE VI
STOCK
Section 6.1 Authorized Shares. The Corporation has authority
to issue 200,000,000 shares of Common Stock, $.01 par value per share ("Common
Stock"). The aggregate par value of all authorized shares of stock having par
value is $2,000,000. If shares of one class of stock are classified or
reclassified into shares of another class of stock pursuant to this Article
VI, the number of authorized shares of the former class shall be automatically
decreased and the number of shares of the latter class shall be automatically
increased, in each case by the number of shares so classified or reclassified,
so that the aggregate number of shares of stock of all classes that the
Corporation has authority to issue shall not be more than the total number of
shares of stock set forth in the first sentence of this paragraph.
Section 6.2 Common Stock. Each share of Common Stock shall entitle the
holder thereof to one vote.
Section 6.3 Power to Classify or Reclassify Unissued Shares of Stock. The
Board of Directors may classify or reclassify any unissued shares of stock of
any class or series from time to time, in one or more classes or series of
stock.
Section 6.4 Classified or Reclassified Shares. Prior to issuance of
classified or reclassified shares of any class or series, the Board of Directors
by resolution shall: (a) designate that class or series to distinguish it from
all other classes and series of stock of the Corporation; (b) specify the number
of shares to be included in the class or series; (c) set or change, subject to
the provisions of Article VII and subject to the express terms of any class or
series of stock of the Corporation outstanding at the time, the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms and
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<PAGE>
conditions of redemption for each class or series; and (d) cause the Corporation
to file articles supplementary with the State Department of Assessments and
Taxation of Maryland ("SDAT"). Any of the terms of any class or series of stock
set or changed pursuant to clause (c) of this Section 6.4 may be made dependent
upon facts or events ascertainable outside the charter (including determinations
by the Board of Directors or other facts or events within the control of the
Corporation) and may vary among holders thereof, provided that the manner in
which such facts, events or variations shall operate upon the terms of such
class or series of stock is clearly and expressly set forth in the articles
supplementary filed with the SDAT.
Section 6.5 Charter and Bylaws. All persons who shall acquire stock in
the Corporation shall acquire the same subject to the provisions of the
charter and the Bylaws.
ARTICLE VII
INDEMNIFICATION AND ADVANCE OF EXPENSES
The Corporation shall have the power, to the maximum extent permitted by
Maryland law in effect from time to time, to obligate itself to indemnify, and
to pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to, (a) any individual who is a present or former director or officer
of the Corporation or (b) any individual who, while a director of the
Corporation and at the request of the Corporation, serves or has served as a
director, officer, partner, trustee, manager or member of another corporation,
partnership, joint venture, trust, employee benefit plan, limited liability
company or any other enterprise from and against any claim or liability to which
such person may become subject or which such person may incur by reason of his
status as a present or former director or officer of the Corporation. The
Corporation shall have the power, with the approval of the Board of Directors,
to provide such indemnification and
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<PAGE>
advancement of expenses to a person who served a predecessor of the Corporation
in any of the capacities described in (a) or (b) above and to any employee or
agent of the Corporation or a predecessor of the Corporation.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right from time to time to make any amendment
to its charter, now or hereafter authorized by law, including any amendment
altering the terms or contract rights, as expressly set forth in this charter,
of any shares of outstanding stock. All rights and powers conferred by the
charter on stockholders, directors and officers are granted subject to this
reservation. Except as set forth in the following sentence, any amendment to the
charter shall be valid only if approved by the affirmative vote of a majority of
all the votes entitled to be cast on the matter. Any amendment to Section 5.1,
Section 5.5 or this sentence of the charter or any amendment to the charter
providing that the stockholders of the Corporation may approve an action by a
lesser percentage of votes than that required by law shall be valid only if
approved by the affirmative vote of two thirds of all the votes entitled to be
cast on the matter.
ARTICLE IX
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time to time
permits limitation of the liability of directors and officers of a
corporation, no director or officer of the Corporation shall be liable to the
Corporation or its stockholders for money damages. Neither the amendment nor
repeal of this Article IX, nor the adoption or amendment of any other
provision of the charter or Bylaws inconsistent with this Article IX, shall
apply to or affect in any respect the applicability of the
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<PAGE>
preceding sentence with respect to any act or failure to act which occurred
prior to such amendment, repeal or adoption.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge the same to be my act on this _____ day of ____________, 1998.
-------------------------------
James L. Galante
Incorporator
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<PAGE>
NEW AMERICA INTERNATIONAL, INC.
BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place or places as the Board of Directors may
designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices at such places 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. PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders for the
election of directors and the transaction of any business within the powers of
the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of October in each year.
Section 3. SPECIAL MEETINGS. The chairman of the board, president, chief
executive officer or Board of Directors may call special meetings of the
stockholders. Special meetings of stockholders shall also be called by the
secretary of the Corporation upon the written request of the holders of shares
entitled to cast not less than a majority of all the votes entitled to be cast
at such meeting. Such request shall state the purpose of such meeting and the
matters proposed to be acted on at such meeting. The secretary shall inform
such stockholders of the reasonably estimated cost of preparing and mailing
notice of the meeting and, upon payment to the Corporation by such stockholders
of such costs, the secretary shall give notice to each stockholder entitled to
notice of the meeting.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time
and place of the meeting and, in the case of a special meeting or as otherwise
may be required by any statute, the purpose for which the meeting is called,
either by mail or by presenting it to such stockholder personally or by leaving
it at his residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to the
stockholder at his post office address as it appears on the records of the
Corporation, with postage thereon prepaid.
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<PAGE>
Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of stockholders, the chairman
of the board, if there be one, shall conduct the meeting or, in the case of
vacancy in office or absence of the chairman of the board, one of the following
officers present shall conduct the meeting in the order stated: the vice
chairman of the board, if there be one, the president, the vice presidents in
their order of rank and seniority, or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman, and the
secretary, or, in his absence, an assistant secretary, or in the absence of
both the secretary and assistant secretaries, a person appointed by the
chairman shall act as secretary.
Section 7. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the stockholders,
the stockholders entitled to vote at such meeting, present in person or by
proxy, shall have the power to adjourn the meeting from time to time to a date
not more than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient
to elect a director. Each share may be voted for as many individuals as there
are directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called
and at which a quorum is present shall be sufficient to approve any other
matter which may properly come before the meeting, unless more than a majority
of the votes cast is required by statute or by the charter of the Corporation.
Unless otherwise provided in the charter, each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of stockholders.
Section 9. PROXIES. A stockholder may cast the votes entitled to be cast
by the shares of the stock owned of record by him either in person or by proxy
executed in writing by the stockholder or by his duly authorized agent. Such
proxy shall be filed with the secretary of the Corporation before or at the
time of the meeting. No proxy shall be valid after eleven months from the date
of its execution, unless otherwise provided in the proxy.
Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Corporation
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such
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<PAGE>
bylaw, resolution or agreement, in which case such person may vote such stock.
Any director or other fiduciary may vote stock registered in his name as such
fiduciary, either in person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding
shares at any given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Notwithstanding any other provision of the charter of the Corporation or
these Bylaws, Title 3, Subtitle 7 of the Corporations and Associations Article
of the Annotated Code of Maryland (or any successor statute) shall not apply to
any acquisition by any person of shares of stock of the Corporation. This
section may be repealed, in whole or in part, at any time, whether before or
after an acquisition of control shares and, upon such repeal, may, to the
extent provided by any successor bylaw, apply to any prior or subsequent
control share acquisition.
Section 11. INSPECTORS. At any meeting of stockholders, the
chairman of the meeting may appoint one or more persons as inspectors for such
meeting. Such inspectors shall ascertain and report the number of shares
represented at the meeting based upon their determination of the validity and
effect of proxies, count all votes, report the results and perform such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be prima
facie evidence thereof.
Section 12. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS.
(a) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders
(i) pursuant to the Corporation's notice of meeting, (ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record both at the time of giving of
notice provided for in this Section 12(a) and at the time of the
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annual meeting, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 12(a).
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a)(1) of this Section 12, the stockholder must have given timely notice
thereof in writing to the secretary of the Corporation and such other business
must otherwise be a proper matter for action by stockholders. To be timely, a
stockholder's notice shall be delivered to the secretary at the principal
executive offices of the Corporation not later than the close of business on
the 60th day nor earlier than the close of business on the 90th day prior to
the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from such anniversary date or
if the Corporation has not previously held an annual meeting, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of
such meeting is first made by the Corporation. In no event shall the public
announcement of a postponement or adjournment of an annual meeting to a later
date or time commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (i) as to
each person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (ii) as
to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made, (x) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (y) the number of shares of each class of stock of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 12 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement by the Corporation naming all of the nominees for director
or specifying the size of the increased Board of Directors at least 70 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 12(a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth
day following the day on which such public announcement is first made by the
Corporation.
(b) Special Meetings of Stockholders. Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be
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made at a special meeting of stockholders at which directors are to be elected
(i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction
of the Board of Directors or (iii) provided that the Board of Directors has
determined that directors shall be elected at such special meeting, by any
stockholder of the Corporation who is a stockholder of record both at the time
of giving of notice provided for in this Section 12(b) and at the time of the
special meeting, who is entitled to vote at the meeting and who complied with
the notice procedures set forth in this Section 12(b). In the event the
Corporation calls a special meeting of stockholders for the purpose of electing
one or more directors to the Board of Directors, any such stockholder may
nominate a person or persons (as the case may be) for election to such position
as specified in the Corporation's notice of meeting, if the stockholder's notice
containing the information required by paragraph (a)(2) of this Section 12 shall
be delivered to the secretary at the principal executive offices of the
Corporation not earlier than the close of business on the 90th day prior to such
special meeting and not later than the close of business on the later of the
60th day prior to such special meeting or the tenth day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of a postponement or
adjournment of a special meeting to a later date or time commence a new time
period for the giving of a stockholder's notice as described above.
(c) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this Section 12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 12. The chairman of the meeting shall
have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this Section 12 and, if any
proposed nomination or business is not in compliance with this Section 12, to
declare that such nomination or proposal shall be disregarded.
(2) For purposes of this Section 12, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 12, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 12. Nothing in this Section 12 shall be
deemed to affect any right of a stockholder to request inclusion of a proposal
in, nor the right of the Corporation to omit a proposal from, the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 13. VOTING BY BALLOT. Voting on any question or in any election
may be viva voce unless the presiding officer shall order or any stockholder
shall demand that voting be by ballot.
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ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or
at any special meeting called for that purpose, a majority of the entire Board
of Directors may establish, increase or decrease the number of directors,
provided that the number thereof shall never be less than the minimum number
required by the Maryland General Corporation Law, nor more than 15, and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of directors.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of
Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. The
Board of Directors may provide, by resolution, the time and place, either
within or without the State of Maryland, for the holding of regular meetings of
the Board of Directors without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the board, president or
by a majority of the directors then in office. The person or persons authorized
to call special meetings of the Board of Directors may fix any place, either
within or without the State of Maryland, as the place for holding any special
meeting of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile
transmission, United States mail or courier to each director at his business or
residence address. Notice by personal delivery, by telephone or a facsimile
transmission shall be given at least two days prior to the meeting. Notice by
mail shall be given at least five days prior to the meeting and shall be deemed
to be given when deposited in the United States mail properly addressed, with
postage thereon prepaid. Telephone notice shall be deemed to be given when the
director is personally given such notice in a telephone call to which he is a
party. Facsimile transmission notice shall be deemed to be given upon
completion of the transmission of the message to the number given to the
Corporation by the director and receipt of a completed answer-back indicating
receipt. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Board of Directors need be stated in
the notice, unless specifically required by statute or these Bylaws.
Section 6. QUORUM. A majority of the directors shall constitute a quorum
for transaction of business at any meeting of the Board of Directors, provided
that, if less than a majority of such directors are present at said meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to the charter
of the Corporation or these Bylaws, the vote of a majority of a particular
group of directors is required for action, a quorum must also include a
majority of such group.
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<PAGE>
The directors present at a meeting which has been duly called and convened
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum.
Section 7. VOTING. The action of the majority of the directors present
at a meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute.
Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person
at the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.
Section 10. VACANCIES. If for any reason any or all the directors cease
to be directors, such event shall not terminate the Corporation or affect these
Bylaws or the powers of the remaining directors hereunder (even if fewer than
three directors remain). Any vacancy on the Board of Directors for any cause
other than an increase in the number of directors shall be filled by a majority
of the remaining directors, even if such majority is less than a quorum. Any
vacancy in the number of directors created by an increase in the number of
directors may be filled by a majority vote of the entire Board of Directors.
Any individual so elected as director shall hold office until the next annual
meeting of stockholders and until his successor is elected and qualifies.
Section 11. COMPENSATION. Directors shall not receive any stated salary
for their services as directors but, by resolution of the Board of Directors,
may receive compensation per year and/or per meeting and/or per visit to real
property or other facilities owned or leased by the Corporation and for any
service or activity they performed or engaged in as directors. Directors may be
reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Board of Directors or of any committee thereof and for
their expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as directors; but nothing
herein contained shall be construed to preclude any directors from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 12. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings
and loan association, or other institution with whom moneys or stock have been
deposited.
Section 13. SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
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Section 14. RELIANCE. Each director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors
or officers of the Corporation, regardless of whether such counsel or expert
may also be a director.
Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
The directors shall have no responsibility to devote their full time to the
affairs of the Corporation. Any director or officer, employee or agent of the
Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may
appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees, composed of one or more directors,
to serve at the pleasure of the Board of Directors.
Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board of Directors. A
majority of the members of the committee shall constitute a quorum for the
transaction of business at any meeting of the committee. The act of a majority
of the committee members present at a meeting shall be the act of such
committee. The Board of Directors may designate a chairman of any committee,
and such chairman or any two members of any committee (if there are at least
two members of the Committee) may fix the time and place of its meeting unless
the Board shall otherwise provide. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint another director to act in the place of such
absent member. Each committee shall keep minutes of its proceedings.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting
can hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a
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meeting, if a consent in writing to such action is signed by each member of the
committee and such written consent is filed with the minutes of proceedings of
such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a chief executive officer, a president, a secretary and a treasurer and
may include a chairman or cochairmen of the board, a vice chairman of the
board, one or more vice presidents, a chief operating officer, a chief
financial officer, one or more assistant secretaries and one or more assistant
treasurers. In addition, the Board of Directors may from time to time appoint
such other officers with such powers and duties as they shall deem necessary or
desirable. The officers of the Corporation shall be elected annually by the
Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of stockholders, except that one or more of the co-chairmen
of the board, the chief executive officer may appoint one or more vice
presidents, assistant secretaries and assistant treasurers. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Each officer shall hold office until his
successor is elected and qualifies or until his death, resignation or removal
in the manner hereinafter provided. Any two or more offices except president
and vice president may be held by the same person. In its discretion, the Board
of Directors may leave unfilled any office except that of president, treasurer
and secretary. Election of an officer or agent shall not of itself create
contract rights between the Corporation and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Any officer of the Corporation may resign at any time by giving
written notice of his resignation to the Board of Directors, the chairman of
the board, the president or the secretary. Any resignation shall take effect at
any time subsequent to the time specified therein or, if the time when it shall
become effective is not specified therein, immediately upon its receipt. The
acceptance of a resignation shall not be necessary to make it effective unless
otherwise stated in the resignation. Such resignation shall be without
prejudice to the contract rights, if any, of the Corporation.
Section 3. VACANCIES. A vacancy in any office may be filled by the Board
of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate
a chief executive officer. In the absence of such designation, the chairman of
the board shall be the chief executive officer of the Corporation. The chief
executive officer shall have general responsibility for implementation of the
policies of the Corporation, as determined by the Board of Directors, and for
the
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management of the business and affairs of the Corporation. He may execute any
deed, mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the Board of Directors or by
these Bylaws to some other officer or agent of the Corporation or shall be
required by law to be otherwise executed.
Section 5. CHIEF OPERATING OFFICER. The Board of Directors may designate
a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may designate
a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall designate
a chairman or co-chairmen of the board. The chairman of the board shall preside
over the meetings of the Board of Directors and of the stockholders at which he
shall be present and shall in general oversee all of the business and affairs
of the Corporation. The Chairman of the Board may execute any deed, mortgage,
bond, contract or other instrument, except in cases where the execution thereof
shall be expressly delegated by the directors or these Bylaws to some other
officer of the Corporation or shall be required by law to be otherwise
executed. The chairman of the board shall perform such other duties as may be
assigned to him or them by the Board of Directors. If there are co-chairmen of
the board each shall have all of the powers and responsibilities of the
chairman of the board as set forth in these Bylaws.
Section 8. PRESIDENT. The president, in conjunction with the chief
executive officer, shall in general supervise and control all of the business
and affairs of the Corporation. In the absence of a designation of a chief
operating officer by the Board of Directors, the president shall be the chief
operating officer. He may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law to be otherwise executed;
and in general shall perform all duties incident to the office of president and
such other duties as may be prescribed by the Board of Directors and the chief
executive officer from time to time.
Section 9. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at
the time of their election or, in the absence of any designation, then in the
order of their election) shall perform the duties of the president and when so
acting shall have all the powers of and be subject to all the restrictions upon
the president; and shall perform such other duties as from time to time may be
assigned to him by the chairman of the board, by the president or by the Board
of Directors. The Board of Directors may designate one or more vice presidents
as executive vice president or as vice president for particular areas of
responsibility.
Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal
of the
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Corporation; (d) keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder; (e) have general
charge of the share transfer books of the Corporation; and (f) in general
perform such other duties as from time to time may be assigned to him by the
chief executive officer, the president or by the Board of Directors.
Section 11. TREASURER. The treasurer shall have the custody of the funds
and securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging 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. In the absence of a designation of a chief financial officer by the
Board of Directors, the treasurer shall be the chief financial officer of the
Corporation.
The treasurer 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 Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account of all his transactions as treasurer and of the financial condition of
the Corporation.
If required by the Board of Directors, the treasurer shall give the
Corporation a bond 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, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer,
respectively, or by the chairman of the board, the co-chairmen of the board,
the chief executive officer, the chief operating officer, the president or the
Board of Directors. The assistant treasurers shall, if required by the Board of
Directors, give bonds for the faithful performance of their duties in such sums
and with such surety or sureties as shall be satisfactory to the Board of
Directors.
Section 13. SALARIES. Thesalaries and other compensation of the officers
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary or other compensation by reason of the
fact that he is also a director.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer
or agent to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be general
or confined to specific instances. Any agreement, deed, mortgage, lease or
other document executed by one or more of the directors or by an authorized
person shall be valid and binding upon the Board of Directors and upon the
Corporation when authorized or ratified by action of the Board of Directors.
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<PAGE>
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name
of the Corporation shall be signed by such officer or agent of the Corporation
in such manner as shall from time to time be determined by the Board of
Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
designate.
ARTICLE VII
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile. Certificates
shall be consecutively numbered; and if the Corporation shall, from time to
time, issue several classes of stock, each class may have its own number
series. A certificate is valid and may be issued whether or not an officer who
signed it is still an officer when it is issued. Each certificate representing
shares which are restricted as to their transferability or voting powers, which
are preferred or limited as to their dividends or as to their allocable portion
of the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been set and the
authority of the Board of Directors to set the relative rights and preferences
of subsequent series. In lieu of such statement or summary, the certificate may
state that the Corporation will furnish a full statement of such information to
any stockholder upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the certificate shall
contain a full statement of the restriction or state that the Corporation will
furnish information about the restrictions to the stockholder on request and
without charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or the transfer
agent of the Corporation of a stock certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to
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or interest in such share or 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 the State of Maryland.
Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the charter of the Corporation and all of
the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board
of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or the owner's
legal representative to advertise the same in such manner as he shall require
and/or to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise as a result of the issuance of a new
certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board
of Directors may set, in advance, a record date for the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
determining stockholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days and, in the case of a meeting of stockholders, not less
than ten days, before the date on which the meeting or particular action
requiring such determination of stockholders of record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not longer
than 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the stock transfer books are not closed for
the determination of stockholders, (a) the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of stockholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the directors,
declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except when (i) the determination has
been made through the closing of the transfer books and the stated period of
closing has expired or (ii) the meeting is adjourned to a date more than 120
days after the record date fixed for the original meeting, in either of which
case a new record date shall be determined as set forth herein.
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Section 5. STOCK LEDGER. The Corporation shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors
may issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any
other provision of the charter or these Bylaws, the Board of Directors may
issue units consisting of different securities of the Corporation. Any security
issued in a unit shall have the same characteristics as any identical
securities issued by the Corporation, except that the Board of Directors may
provide that for a specified period securities of the Corporation issued in
such unit may be transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix the
fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the charter of the
Corporation. Dividends and other distributions may be paid in cash, property
or stock of the Corporation, subject to the provisions of law and the charter.
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other
distributions, for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors shall determine to be in the
best interest of the Corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the Board of
Directors may from time to time adopt, amend, revise or terminate any policy or
policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.
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<PAGE>
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption of a
seal by the Corporation. The seal shall contain the name of the Corporation and
the year of its incorporation and the words "Incorporated Maryland." The Board
of Directors may authorize one or more duplicate seals and provide for the
custody thereof.
Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the
word "(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf of the Corporation.
ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to (a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity or (b) any individual who, while a director of the Corporation
and at the request of the Corporation, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner
or trustee of such corporation, real estate investment trust, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is made
a party to the proceeding by reason of his service in that capacity. The
Corporation may, with the approval of its Board of Directors, provide such
indemnification and advance for expenses to a person who served a predecessor
of the Corporation in any of the capacities described in (a) or (b) above and
to any employee or agent of the Corporation or a predecessor of the
Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
ARTICLE XIII
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WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of the
Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any meeting need be set forth in the waiver of notice, unless specifically
required by statute. The attendance of any person at any meeting shall
constitute a waiver of notice of such meeting, except where such person attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.
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<PAGE>
NUMBER SHARES
N
NEW AMERICA INTERNATIONAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
COMMON STOCK SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 64187Q 10 3
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY-PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE PER
SHARE, OF
NEW AMERICA INTERNATIONAL, INC. (the "Corporation"), transferable in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be subject to all of the provisions of the charter of the Corporation (the
"Charter"), the Bylaws of the Corporation, and all amendments thereof and
thereto, copies of which are available at the headquarters of the Corporation,
and to all of which the holder by acceptance hereof assents. This certificate is
not valid unless countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ NORMA FINN /s/ JEFFREY FINN
- -------------------------- ------------------
SECRETARY PRESIDENT
[SEAL]
<PAGE>
The Corporation will furnish to any stockholder, on request and
without charge, a full statement of the information required by Section
2-211(b) of the Corporations and Associations Article of the Annotated Code of
Maryland with respect to the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends and
other distributions, qualifications, and terms and conditions of redemption of
the stock of each class which the Corporation has authority to issue and, if
the Corporation is authorized to issue any preferred or special class in
series (i) the differences in the relative rights and preferences between the
shares for each series to the extent set, and (ii) the authority of the Board
of Directors to set such rights and preferences of subsequent series. The
foregoing summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the charter of the Corporation (the
"Charter"), a copy of which will be sent without charge to each stockholder
who so requests. Such request must be made to the Secretary of the Corporation
at its principal office or to the Transfer Agent.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT--_________ Custodian_______
(Cust) (Minor)
under Uniform Gifts to Minors
Act_______________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _________________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------
| |
|-----------------------------|
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
__________________________________________________________________________Shares
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<PAGE>
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________Attorney to transfer the
said stock on the books of the within-named Corporation with full power of
substitution in the premises.
Dated_________________________________
Notice:________________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED ____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM,
PURSUANT TO S.E.C. RULE 17 Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN,
MUTILATED OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF
INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
-3-
<PAGE>
-------- --------
| NUMBER | | RIGHTS |
| NAIR | | |
-------- --------
THIS SUBSCRIPTION CERTIFICATE WILL BE VALUELESS
IF NOT RECEIVED BY THE SUBSCRIPTION AGENT 5:00 P.M., EASTERN STANDARD TIME
ON , 1998
STOCK SUBSCRIPTION CERTIFICATE
NEW AMERICA INTERNATIONAL, INC.
CUSIP 64187Q 11 1
THIS RIGHTS CERTIFICATE IS TRANSFERABLE AND MAY BE COMBINED OR DIVIDED (BUT
ONLY INTO SUBSCRIPTION CERTIFICATES EVIDENCING A WHOLE NUMBER OF RIGHTS) AT
THE OFFICE OF THE SUBSCRIPTION AGENT.
Rights holders should be aware that if they choose to exercise or transfer
less than all of the rights evidenced hereby, they may not receive a new
rights certificate in sufficient time to exercise the remaining rights
evidenced thereby, neither the Company nor the subscription agent shall have
any liability to a transferee or transferor of rights if subscription
certificates are not received in time for exercise or sale prior to the
expiration date.
The terms and conditions of this rights offering are set forth in the
Prospectus relating to shares of Common Stock, $.01 par value per share
("Shares"), of New America International, Inc. (the "Company") dated
, 1998 (the "Prospectus") and are incorporated herein by reference.
Copies of the Prospectus are available upon request from the Company and
First Union National Bank (the "Subscription Agent"). Capitalized terms used
herein without definition shall have the meanings set forth in the
Prospectus.
- -----------------------------------------------------------------------------
SUBSCRIPTION PRICE: $2.00 PER SHARE
REGISTERED HOLDER:
- -----------------------------------------------------------------------------
The rights represented by this Subscription Certificate, in whole or in part,
may be exercised by duly completing Sections 1 and 2 or may be transferred or
sold through a bank or broker by duly completing Section 3. Before
exercising or selling Rights, Rights holders are urged to read carefully and
-1-
<PAGE>
in its entirety the Prospectus, copies of which are available from the
Company and the Subscription Agent.
IMPORTANT - Complete the appropriate SECTION and, if applicable, delivery
instructions, and SIGN on reverse side. Subject to the provisions of the
Prospectus, if the instructions of the registered holder hereof are
insufficient to delineate the proper action to be taken with respect to all
of the Rights evidenced hereby, such action as is clearly delineated in such
holder's instructions will be taken and such holder will be delivered a new
Subscription Certificate evidencing the remaining Rights to which such holder
is entitled.
The registered holder of Rights whose name is set forth herein, or assigns,
is entitled to subscribe for one share of Common Stock of the Company at a
Subscription Price of $2.00 per Share (the "Subscription Price") for each
Right evidenced hereby under the terms and subject to the conditions set
forth in the Prospectus. Payment of the full Subscription Price for all
Shares subscribed for pursuant to the exercise of Rights must accompany this
properly completed and duly executed Rights Certificate, payable in United
States currency by personal check, cashier's check, bank draft or money order
drawn on a bank located in the United States, payable to "First Union
National Bank, as Subscription Agent". PLEASE WRITE YOUR RIGHTS CERTIFICATE
NUMBER, SET FORTH ABOVE, ON YOUR CHECK, BANK DRAFT, MONEY ORDER OR NOTICE OF
GUARANTEED DELIVERY.
Dated: NEW AMERICA INTERNATIONAL, INC.
COUNTERSIGNED: BY: /s/JEFFREY FINN
FIRST UNION NATIONAL BANK --------------------
SUBSCRIPTION AGENT President
[SEAL]
BY BY: /s/NORMA FINN
-------------------
AUTHORIZED OFFICER Secretary
-2-
<PAGE>
[REVERSE SIDE OF CERTIFICATE]
NEW AMERICA INTERNATIONAL, INC.
The Rights may not be exercised by a resident of the state of California
unless such resident is a "qualified purchaser" and makes the California
representations set forth on the instructions to the Subscription
Certificate. See Section 2 of the Subscription Certificate and the
instructions.
The Rights may not be exercised by a resident of the state of North Dakota
unless such resident is a holder of Shares, and makes the representation to
that effect. See Section 2 of the Subscription Certificate.
INSTRUCTIONS: To exercise all or part of the Rights evidenced by this
Subscription Certificate, please complete Sections 1 and 2. To exercise part
of the Rights evidenced by this Subscription Certificate, please complete
Sections 1, 2 and 3. To transfer all or part of the Rights evidenced by this
Subscription Certificate, please complete Section 3. In order to have the
Subscription Agent deliver Subscription Certificates or Shares issued upon
the exercise of Rights issued to another person or delivered to an address
other than the one listed on the face of this Subscription Certificate,
please complete Section 3 and obtain the required signature guarantee by a
medallion institution.
ANY EXERCISE, TRANSFER OR SALE OF RIGHTS EVIDENCED HEREBY IS IRREVOCABLE.
Section 1 - EXERCISE AND SUBSCRIPTION: The undersigned hereby exercises
Rights to subscribe for shares of Common Stock as indicated below, on the
terms and subject to the conditions specified in the Prospectus, receipt of
which is hereby acknowledged.
(Please print all information clearly and legibly)
(i) IF YOU WISH TO EXERCISE ALL OF YOUR RIGHTS:
(a) In subscribe for my full entitlement of Shares:
____________________________________ X $2.00 = $______________________
(Number of shares - whole number only)
(b) I subscribe for additional Shares pursuant to my Oversubscription
Privilege:
____________________________________ X $2.00 = $______________________
(Number of shares - whole number only)
TOTAL SUBSCRIPTION PRICE: $_________________________
-3-
<PAGE>
(Total number of Shares subscribed for
pursuant to both the Basic Subscription
Privilege and the Oversubscription
Privilege, times the Subscription Price
of $2.00 per share)
Method of Payment (check one)
[ ] Check, Bank Draft or Money Order Payable to First Union National Bank,
as Subscription Agent
[ ] Wire Transfer Directly to the Escrow Account Maintained by First Union
National Bank, as Subscription Agent, at First Union National Bank, ABA
ROUTING # 0530-00219, for Credit G/L Account # 465946, Further credit:
NAI RIGHTS OFFERING, Attn: Mike Klotz (704) 590-7408
(ii) IF YOU DO NOT WISH TO EXERCISE ALL OF YOUR RIGHTS:
(a) I subscribe for only
______________________________________ X $2.00 = $______________________
(Number of shares - whole number only)
TOTAL SUBSCRIPTION PRICE:
$_________________________ (Total number
of Shares subscribed for pursuant to the
Basic Subscription Privilege, times the
Subscription Price of $2.00 per share)
Method of Payment (check one)
[ ] Check, Bank Draft or Money Order Payable to First Union National Bank,
as Subscription Agent
[ ] Wire Transfer Directly to the Escrow Account Maintained by First Union
National Bank, as Subscription Agent, at First Union National Bank, ABA
ROUTING # 0530-00219, for Credit G/L Account # 465946, Further credit:
NAI RIGHTS OFFERING, Attn: Mike Klotz (704) 590-7408
In order to deliver you a new Subscription Certificate evidencing
any unexercised Rights, please check one:
[ ] Deliver to me a new Subscription Certificate evidencing
the remaining Rights to which I am entitled.
[ ] Deliver a new Subscription Certificate evidencing the
remaining Rights in accordance with my Section 2
instructions below. (Please include any required
signature guarantee).
SECTION 2-HOLDER REPRESENTATIONS. If you wish to exercise all or a
part of your Rights, you must complete the Section 2.
A. Are you a resident of the State of California? [ ] Yes [ ] No
If you answered "yes" please fill out Section 2 C.
-4-
<PAGE>
B. Are you a resident of the State of North Dakota? [ ] Yes [ ] No
If you answered "yes" please fill out Section 2 D.
C. California Residents: Do you hereby make the California
Representations set forth on the instructions? [ ] Yes [ ] No
D. North Dakota Residents: Are you a holder of Common Stock of the
Company? [ ] Yes [ ] No
Section 3 - TRANSFER OF RIGHTS-CHECK ONE: (A) [ ] TO TRANSFER SOME OR ALL OF
THE RIGHTS REPRESENTED BY THIS SUBSCRIPTION CERTIFICATE, OR (B) [ ] TO
EXERCISE OR SELL RIGHTS THROUGH YOUR BANK OR BROKER: For value received,
Rights represented by this Subscription Certificate (and not exercised by the
Holder on Section 1 above) are hereby assigned to (please print name(s) and
address(es) and Taxpayer Identification or Social Security Number(s) of
transferees in full):
Name:________________________________________________________________________
Address:_____________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
Taxpayer Identification or Social Security Number ___________________________
SECTION 4-SPECIAL INSTRUCTIONS [ ] CHECK HERE FOR SPECIAL ISSUANCE, OR
DELIVERY INSTRUCTIONS. Unless otherwise indicated below, the Subscription
Agent is hereby authorized to issue and deliver any Subscription Certificate
and Certificates for Common Stock to the undersigned at the address appearing
on the face of this Subscription Certificate. If this form is completed, the
Holder's signature must be guaranteed by a medallion guarantor.
Name:________________________________________________________________________
Address:_____________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
Taxpayer Identification or Social Security Number ___________________________
IMPORTANT
RIGHTS HOLDER SIGN HERE
_____________________________________________________________________________
(Signature(s) of Holder(s) exactly as appears on the
face of this Certificate)
Dated:___________, 1998
SIGNATURE GUARANTEE (to be executed if Section 3 is completed)
The undersigned, an eligible guarantor institution pursuant to Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as amended, and a
participant in a Securities Transfer Association recognized signature
-5-
<PAGE>
program, does hereby guarantee that the signature of the Holder hereinabove
is genuine.
Dated:___________, 1998
_______________________________________________
Firm Name
_______________________________________________
Authorized Signature
_______________________________________________
Name and Title
_______________________________________________
Address
_______________________________________________
_______________________________________________
_______________________________________________
Area Code and Telephone Number
-6-
<PAGE>
Exhibit 4.3
[Front of Executive Group Subscription Form]
label with name and address and
executive group form number
Executive Group Subscription Form
IN ORDER TO SUBSCRIBE FOR SHARES THIS FORM MUST BE COMPLETED AND
RETURNED TO THE SUBSCRIPTION AGENT, ALONG WITH PAYMENT FOR SUCH SHARES,
ON OR PRIOR TO -----------, 1998.
THIS SUBSCRIPTION FORM IS NOT TRANSFERABLE
Dear Executive Group Member:
This Executive Group Subscription Form is being sent to you by New
America International, Inc., a Maryland corporation ("NAI" or the "Company"),
in connection with a public offering of shares of common stock, par value
$.01 per share (the "Shares") of the Company, as described in the enclosed
Prospectus dated ------ ---, 1998 (the "Prospectus"), NAI is distributing to
its shareholders Rights to purchase an aggregate of 17,101,403 Shares at a
subscription price of $2.00 per share (the "Subscription Price"). In connection
with this Rights Offering and in recognition of services rendered and to be
rendered by the Executive Group to NAI, NAI is giving officers, directors and
trustees of NAI and Kranzco Realty Trust the right to subscribe for any
Shares which are not purchased pursuant to the Rights Offering ("Excess
Shares"). You may elect to subscribe for as many Shares being offered as you
desire. However, if the number of Excess Shares is not sufficient to satisfy
all subscriptions pursuant to the Executive Group Subscription Privilege,
such Excess Shares will be allocated pro rata (subject to the elimination of
fractional shares) among those exercising the Executive Group Subscription
Privilege, in proportion to the number of NAI Shares requested pursuant to the
Executive Group Subscription Privilege. There is no assurance that you will
receive any Shares for which you subscribe.
In order to subscribe for Shares in connection with this offering, please
complete the Subscription Section on the reverse side of this Form and submit
it to the Subscription Agent along with payment for the Shares. The terms and
conditions of this offering of Shares is set forth in the accompanying
Prospectus, which is incorporated herein by reference. If you are allocated
none of, or less than all of, the Shares of which you subscribed, the
excess funds paid by you for Shares not issued shall be returned by mail
without interest or deduction as soon as practicable after the closing date.
If you have any questions about completing this Subscription Form please
call the Subscription Agent at (800) 829-8432.
NEW AMERICA INTERNATIONAL, INC.
By--------------------------
Jeffrey M. Finn, President
<PAGE>
MEMBERS OF THE EXECUTIVE GROUP WHO ARE RESIDENTS OF THE STATE OF CALIFORNIA
(OTHER THAN "QUALIFIED PURCHASERS"), FLORIDA, MARYLAND, NORTH DAKOTA,
SOUTH DAKOTA AND TEXAS ARE NOT ELIGIBLE TO PARTICIPATE IN THE CONCURRENT
OFFERING. SEE ENCLOSED INSTRUCTIONS FOR A DEFINITION OF "QUALIFIED
PURCHASER."
<PAGE>
[Back of Executive Group Subscription Form]
PLEASE WRITE YOUR EXECUTIVE GROUP FORM NUMBER WHICH IS LISTED ON THE
LOWER LEFT CORNER OF THE LABEL INCLUDED ON THE FRONT OF THIS FORM, IN
YOUR CHECK, BANK DRAFT, OR MONEY ORDER.
DETAILS OF SUBSCRIPTION -- PLEASE PRINT ALL INFORMATION CLEARLY AND LEGIBLY
- -----------------------
I WISH TO SUBSCRIBE FOR THE NUMBER OF SHARES LISTED BELOW:
- ----------------------------------X $2.00 = $----------------------------------
(Number of shares - whole number only) (Amount of Subscription Price)
HOLDER REPRESENTATIONS -- If you wish to purchase NAI Shares you must complete
this section.
1. Check the box if you are not a resident of Florida, Maryland, North Dakota,
South Dakota or Texas
/ / -residents of these states are not eligible to participate in "The
Concurrent Offering."
2. Are you a resident of California? / / Yes / / No
If you answered "yes" please fill out number 3.
3. California Residents: Do you hereby make the California Representations
that you are a "Qualified Purchaser" as set forth in the Instructions
enclosed herewith? / / Yes / / No
FORM OF PAYMENT
- ---------------
The completed Subscription Form and payment in full for the
Subscription Price, payable in United States currency by personal check,
cashier's check, bank draft or money order drawn on a bank located in the
United States, payable to "First Union National Bank, as Subscription
Agent" should be mailed or delivered to the Subscription Agent as follows:
By Regular Mail: By Overnight Courier:
First Union National Bank First Union National Bank
1525 West W.T. Harris Boulevard, 3C3 1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
Telephone: (800) 829-8432 Telephone: (800) 829-8432
New York Drop: Facsimile Transmission:
(704) 590-7628
First Union National Bank
40 Broad Street - 5th Floor, Suite 5500
New York, New York 10004
If paying by uncertified personal check, please note that the funds paid thereby
may take at least five business days to clear. Accordingly, persons who wish
to pay the Subscription Price by means of uncertified personal check are urged
to make payment sufficiently in advance of the Expiration Date to ensure that
such payment is received and clears by such date and are urged to consider
payment by means of certified or cashier's check, money order or wire
transfer of funds.
Payment may also be made by wire transfer directly to the Excrow Account
maintained by First Union National Bank, as Subscription Agent, at First
Union National Bank, ABA ROUTING # 0530-00219, for Credit G/L Account
#465946, Further credit: NAI RIGHTS OFFERING, Attn: Mike Klotz (704) 590-7408.
Check here if payment will be made by wire transfer: / /
<PAGE>
GENERAL
- -------
Delivery other than as set forth above will not constitute a valid delivery,
I acknowledge that I have received the Prospectus and that I am a member of
the Executive Group. I hereby irrevocably subscribe for the number of Shares
indicated above on the terms and conditions set forth in this Prospectus.
I understand that in order to subscribe for Shares I must properly complete
and duly execute this Subscription form and deliver this Subscription Form
together with payment of the full Subscription Price to the Subscription Agent.
SIGNATURE OF
SUBSCRIBER:-------------------------------------
TELEPHONE NUMBER: ( )-----------------(daytime)
AREA CODE
TELEPHONE NUMBER: ( )-----------------(evening)
AREA CODE
Address for delivery of Shares if other than as shown on front:--------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -------------------------------------------------------------
<PAGE>
[Front of Broker Member Subscription Form]
label with name and address and
broker member group form number
Broker Member Group Subscription Form
IN ORDER TO SUBSCRIBE FOR SHARES THIS FORM MUST BE COMPLETED AND
RETURNED TO THE SUBSCRIPTION AGENT, ALONG WITH PAYMENT FOR SUCH SHARES,
ON OR PRIOR TO ___________, 1998.
THIS SUBSCRIPTION FORM IS NOT TRANSFERABLE
Dear Broker Member:
This Broker Member Group Subscription Form is being sent to you by New
America International, Inc., a Maryland corporation ("NAI" or the "Company"), in
connection with a public offering of shares of common stock, par value $.01 per
share (the "Shares") of the Company, as described in the enclosed Prospectus
dated ________ __, 1998 (the "Prospectus"). NAI is distributing to its
stockholders Rights to purchase an aggregate of 17,101,403 Shares at a
subscription price of $2.00 per share (the "Subscription Price"). In connection
with the Rights Offering, NAI is giving certain members of the Broker Member
Group (as defined in the Prospectus) the right to subscribe for any Shares which
are not purchased pursuant to the Rights Offering ("Excess Shares").
NAI recognizes the important role of its Broker Members in the business of
NAI, and has determined to include the Broker Members in NAI's public Offering
of Shares. Accordingly, in recognition of services rendered and to be rendered
by Broker Members to NAI, NAI is offering the principals, shareholders,
partners, officers, managers and licensed real estate agents of NAI's Broker
Members (the "Broker Member Group") the right to subscribe for any Excess Shares
that are not otherwise subscribed for by NAI's stockholders or the Executive
Group. In order to ensure that NAI's Broker Member Group will be able to
subscribe for Shares, NAI has authorized an additional 2,000,000 Shares
("Additional Shares") for issuance exclusively to the Broker Member Group.
Accordingly, the Broker Member Group has the right, in aggregate to purchase a
minimum of 2,000,000 Shares.
You may elect to subscribe for as many Shares being offered as you desire.
However, if the number of Excess Shares and Additional Shares is not sufficient
to satisfy all subscriptions pursuant to the Broker Member Group Subscription
Privilege, such Excess Shares and Additional Shares will be allocated pro rata
(subject to the elimination of fractional shares) among those exercising the
Broker Member Group Subscription Privilege, in proportion to the number of NAI
Shares requested pursuant to the Broker Member Group Subscription Privilege.
There is no assurance that you will receive all the Shares for which you
subscribe. In addition, in connection with the state securities laws, NAI
reserves the right to limit, in its sole discretion, the number of Shares
offered or sold in any state; accordingly, members of the Broker Member Group in
such states may receive none, or a proportionally lower number of Shares than
other Broker Members.
<PAGE>
In order to subscribe for Shares in connection with the offering, please
complete the Subscription Section on the reverse side of this Form and submit it
to the Subscription Agent along with payment for the Shares for which you
subscribed. The terms and conditions of the offering of Shares is set forth in
the accompanying Propectus, which is incorporated herein by reference. If you
are allocated none of, or less than all of, the Shares for which you subscribed,
the excess funds paid by you for Shares not issued to you shall be returned by
mail without interest or deduction as soon as practicable after the closing
date.
If you have any questions about completing this Subscription Form please
call the Subscription Agent at (800) 829-8432.
NEW AMERICA INTERNATIONAL, INC.
BY___________________________
Jeffrey M. Finn, President
-----------------
NAI BROKER MEMBERS AND THE PRINCIPALS, SHAREHOLDERS, PARTNERS, OFFICERS,
MANAGERS AND LICENSED REAL ESTATE BROKERS OF NAI'S BROKER MEMBERS WHO ARE
RESIDENTS OF THE STATE OF CALIFORNIA (OTHER THAN "QUALIFIED PURCHASERS"),
FLORIDA, MARYLAND, NORTH DAKOTA, SOUTH DAKOTA AND TEXAS ARE NOT ELIGIBLE TO
PARTICIPATE IN THE CONCURRENT OFFERING. SEE ENCLOSED INSTRUCTIONS FOR A
DEFINITION OF "QUALIFIED PURCHASER."
-----------------
<PAGE>
[Back of Broker Member Subscription Form]
PLEASE WRITE YOUR BROKER MEMBER GROUP FORM NUMBER WHICH IS LISTED ON THE LOWER
LEFT CORNER OF THE LABEL INCLUDED ON THE FRONT OF THIS FORM, IN YOUR CHECK, BANK
DRAFT, OR MONEY ORDER.
DETAILS OF SUBSCRIPTION -- PLEASE PRINT ALL INFORMATION CLEARLY AND LEGIBLY
I WISH TO SUBSCRIBE FOR THE NUMBER OF SHARES LISTED BELOW:
X $2.00 = $
-------------------------------------- ------------------------------
(Number of shares - whole number only) (Amount of Subscription Price)
HOLDER REPRESENTATIONS - If you wish to purchase NAI Shares you must complete
this section.
1. Check the box if you are not a resident of Florida, Maryland, North Dakota,
South Dakota or Texas
/ / -residents of these states are not eligible to participate in "The
Concurrent Offering."
2. Are you a resident of California? / / Yes / / No
If you answered "yes" please fill out number 3.
3. California Residents: Do you hereby make the California Representations
that you are a "Qualified Purchaser" as set forth in the Instructions
enclosed herewith? / / Yes / / No
FORM OF PAYMENT
The completed Subscription Form and payment in full for the Subscription Price,
payable in United States currency by personal check, cashier's check, bank draft
or money order drawn on a bank located in the United States, payable to "First
Union National Bank, as Subscription Agent" should be mailed or delivered to the
Subscription Agent as follows:
By Regular Mail: By Overnight Courier:
First Union National Bank First Union National Bank
1525 West W.T. Harris Boulevard, 3C3 1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
Telephone: (800) 829-8432 Telephone: (800) 829-8432
New York Drop: Facsimile Transmission:
First Union National Bank (704) 590-7628
40 Broad Street - 5th Floor, Suite 550
New York, New York 10004
If paying by uncertified personal check, please note that the funds paid thereby
may take at least five business days to clear. Accordingly, persons who wish to
pay the Subscription Price by means of uncertified personal check are urged to
make payment sufficiently in advance of the Expiration Date to ensure that such
payment is received and clears by such date and are urged to consider payment by
means of certified or cashier's check, money order or wire transfer of funds.
Payment may also be made by wire transfer directly to the Escrow Account
maintained by First Union
<PAGE>
National Bank, as Subscription Agent, at First Union National Bank, ABA ROUTING
# 0530-00219, for Credit G/L Account # 465946, Further credit: NAI RIGHTS
OFFERING, Attn: Mike Klotz (704) 590-7408. Check here if payment will be made by
wire transfer: / /
GENERAL
Delivery other than as set forth above will not constitute a valid
delivery.
I acknowledge that I have received the Prospectus and that I am a member of
the Broker Member Group. I hereby irrevocably subscribe for the number of Shares
indicated above on the terms and conditions set forth in this Prospectus.
I understand that in order to subscribe for Shares I must properly complete
and duly execute this Subscription form and deliver this Subscription Form
together with payment of the full Subscription Price to the Subscription Agent.
SIGNATURE OF
SUBSCRIBER: _______________________________
TELEPHONE NUMBER: ( ) _____________________ (daytime)
AREA CODE
TELEPHONE NUMBER: ( ) _____________________ (evening)
AREA CODE
Address for delivery of Shares if other than as shown on front: _____________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
<PAGE>
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]
FILE NUMBER
865374
July 16, 1998
New America Network, Inc.
572 U.S. Route 130
Hightstown, New Jersey 08520
Re: New America Network, Inc.:
Registration Statement on Form S-1
(Registration No. 333-52745)
-----------------------------------
Ladies and Gentlemen:
We have served as Maryland counsel to New America
International, Inc., a Maryland corporation (the "Company"), in connection
with certain matters of Maryland law arising out of the registration of (a)
12,005,185 shares (the "Distribution Shares") of Common Stock, $.01 par value
per share ("Common Stock"), of the Company, to be distributed by Kranzco
Realty Trust, a Maryland real estate investment trust ("Kranzco"), to the
holders of (i) outstanding Common Shares of Beneficial Interest, par value
$.01 per share, of Kranzco and (ii) outstanding Series B-1 and Series B-2
Preferred Shares of Beneficial Interest, par value $.01 per share, of Kranzco;
(b) 17,101,403 rights (the "Rights"), each to purchase one share of Common
Stock at a price of $2.00 per share, to be distributed by the Company to the
holders of shares of Common Stock (including Kranzco shareholders who receive
shares of Common stock in the Distribution; (c) 17,101,403 shares ("Rights
Shares") of Common Stock issuable upon exercise of the Rights and (d) up to
2,000,000 shares (the "Concurrent Shares" and, together with the Distribution
Shares and the Rights Shares, the "Shares") which may be issuable in the
Concurrent Offering (as defined in the Registration Statement). Capitalized
terms used but not defined herein shall have the meanings given to them in the
above-referenced Registration Statement, as amended (the "Registration
<PAGE>
New America Network, Inc.
July 16, 1998
Page 2
Statement"), under the Securities Act of 1933, as amended (the "1933 Act").
In connection with our representation of the Company, and as
a basis for the opinion hereinafter set forth, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
1. The Registration Statement in the form in which it was
transmitted to the Securities and Exchange Commission (the "Commission"),
including the related form of Prospectus (the "Prospectus") included therein;
2. The charter of the Company (the "Charter"), certified as
of a recent date by the State Department of Assessments and Taxation of
Maryland (the "SDAT");
3. The Bylaws of the Company, certified as of a
recent date by its Secretary;
4. Resolutions adopted by the Board of Directors, or a duly
authorized committee thereof, relating to the authorization of the sale,
issuance and registration of the Distribution Shares, the Rights, the Rights
Shares and the Concurrent Shares (the "Resolutions"), certified as of a recent
date by the Secretary of the Company;
5. The form of certificates evidencing the Rights
(the "Rights Certificate") attached as an Exhibit to the
Registration Statement;
6. The form of certificate representing shares of Common
Stock (the "Share Certificate") attached as an Exhibit to the Registration
Statement;
7. A certificate of the SDAT, as of a recent date, as to the
good standing of the Company;
<PAGE>
New America Network, Inc.
July 16, 1998
Page 3
8. A certificate executed by the Secretary of the Company,
dated the date hereof; and
9. Such other documents and matters as we have deemed
necessary or appropriate to express the opinion set forth in this letter,
subject to the assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed,
and so far as is known to us there are no facts inconsistent with, the
following:
1. Each of the parties (other than the Company) executing
any of the Documents has duly and validly executed and delivered each of the
Documents to which such party is a signatory, and such party's obligations set
forth therein are legal, valid and binding and are enforceable in accordance
with all stated terms.
2. Each individual executing any of the Documents on behalf
of a party (other than the Company) is duly authorized to do so.
3. Each individual executing any of the Documents, whether
on behalf of such individual or another person, is legally competent to do so.
4. All Documents submitted to us as originals are authentic.
The form and content of any Documents submitted to us as unexecuted drafts do
not differ in any respect relevant to this opinion from such Documents as
executed and delivered. All Documents submitted to us as certified or
photostatic copies conform to the original documents. All signatures on all
such Documents are genuine. All public records reviewed or relied upon by us
or on our behalf are true and complete. All statements and information
contained in the Documents are true and complete, however, we have not relied
upon such statements and information to the extent that they constitute
matters of Maryland law as to which we express an opinion herein. There has
been no modification or amendment to any provision of any of the
<PAGE>
New America Network, Inc.
July 16, 1998
Page 4
Documents and there has been no waiver of any provision of any of the
Documents, by action or conduct of the parties or otherwise.
5. All shares of stock of New America Network, Inc., a
Delaware corporation, issued and outstanding immediately prior to the Exchange
Offer are duly authorized, validly issued, fully paid and nonassessable.
The phrase "known to us" is limited to the actual knowledge,
without independent inquiry, of the lawyers at our firm who have performed
legal services in connection with the issuance of this opinion.
Based upon the foregoing, and subject to the assumptions,
limitations and qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and
validly existing under and by virtue of the laws of the State of Maryland and
is in good standing with the SDAT.
2. The Distribution Shares have been duly authorized and,
upon issuance and delivery of the Conversion Shares in the form of the Share
Certificate in accordance with the resolutions, such Distribution Shares will
be validly issued, fully paid and nonassessable.
3. When the Rights Certificates are executed by the Company
and delivered as described in the Prospectus and the Company accepts from an
authorized holder of a Rights Certificate the consideration for the Rights
Shares and a duly executed subscription agreement, the Rights will be binding
obligations of the Company, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other laws relating to or affecting the enforcement of creditors' rights by
general principles of equity, whether applied in law or in equity, or by the
doctrine of commercial reasonableness.
4. The Rights Shares have been duly authorized and, upon
issuance on exercise of the Rights in accordance with the terms of the Rights
and delivery of the Rights Shares in the form of the Share Certificate, such
Rights Shares will be (assuming that upon any such issuance the total number
of shares of Common Stock issued and outstanding will not exceed the total
number of
<PAGE>
New America Network, Inc.
July 16, 1998
Page 5
shares of Common Stock that the Company is then authorized to issue under the
Charter) validly issued, fully paid and nonassessable.
5. The Concurrent Shares have been duly authorized and, upon
issuance in the manner described in the Registration Statement and the
Resolutions, such Concurrent Shares will be (assuming that upon any such
issuance the total number of shares of Common Stock issued and outstanding
will not exceed the total number of shares of Common Stock that the Company is
then authorized to issue under the Charter) validly issued, fully paid and
nonassessable.
The foregoing opinion is limited to the substantive laws of
the State of Maryland and we do not express any opinion herein concerning any
other law. We express no opinion as to compliance with the securities (or
"blue sky") laws of the State of Maryland.
We assume no obligation to supplement this opinion if any
applicable law changes after the date hereof or if we become aware of any fact
that might change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for your submission
to the Commission as an exhibit to the Registration Statement and,
accordingly, may not be relied upon by, quoted in any manner to, or delivered
to any other person or entity without, in each instance, our prior written
consent.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the use of the name of our firm
in the section entitled "Legal Matters" in the Registration Statement. In
giving this consent, we do not admit that we are within the category of
persons whose consent is required by Section 7 of the 1933 Act.
We further consent to the use of this opinion as an exhibit
to the Company's applications to the Securities Commissioners of various
states of the United States in
<PAGE>
New America Network, Inc.
July 15, 1998
Page 6
connection with the registration or qualification of the Rights
and/or the Shares.
Very truly yours,
/s/ Ballard Spahr
Andrews & Ingersoll LLP
<PAGE>
[ROBINSON SILVERMAN PEARCE ARONSOHN & BERMAN LLP LETTERHEAD]
July 16, 1998
New America Network, Inc.
572 U.S. Route 130
Hightstown, New Jersey 08520
Ladies and Gentlemen:
We have acted as United States counsel to New America Network, Inc., its
subsidiaries and affiliates ('NAI') in connection with (i) the distribution by
Kranzco Realty Trust ('KRT') to its shareholders of approximately 70.2% of the
outstanding stock of NAI, (ii) the distribution by NAI to its stockholders of
rights to acquire additional shares of NAI, and (iii) the offer by NAI to
certain executives and broker members of NAI of the right to purchase shares of
NAI, all as more fully described in NAI's Registration Statement on Form S-1
(Registration Number 333-52745), as amended (the 'Registration Statement').
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of the Registration Statement and such corporate records,
agreements, documents and other instruments, and such certificates or comparable
documents of public officials and of officers and representatives of NAI and
KRT, and have made such inquiries of such officers and representatives, as we
have deemed relevant and necessary as a basis for the opinions hereinafter set
forth.
In such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and to all questions of fact material to this opinion that have not been
independently established, we have relied upon certificates of officers and
representatives of NAI and KRT and upon the representations, warranties and
covenants of NAI and KRT.
Based on the foregoing, and subject to the qualifications stated herein, we
are of the opinion that:
The statements under the caption 'Material United States Federal Tax
Considerations' in the Registration Statement, subject to the limitations set
forth therein, fairly summarize in all material respects the information
described therein.
<PAGE>
New America Network, Inc.
July 16, 1998
Page 2
The opinion herein is limited to the federal income tax laws of the United
States, and we express no opinion as to the effect on the matters covered by
this opiniion of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the aforesaid Registration Statement and to
the use of our name therein. We hereby further consent to the use of this
opinion as an exhibit to filings with the securities commissioners of various
states of the United States as required by the securities laws of such states.
This opinion is rendered solely for your benefit in connection with the
transactions described above. This opinion may not be used or relied upon by any
other person and may not be disclosed, quoted, filed with a governmental agency
or otherwise referred to without our prior written consent except as noted
above.
Very truly yours,
/s/ Robinson Silverman Pearce
Aronsohn & Berman LLP
-----------------------------
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July ___, 1998, between NEW AMERICA
INTERNATIONAL, INC., a Maryland corporation with offices at 572 U.S. Route 130,
Hightstown, New Jersey 08520 (the "Company"), and GERALD C. FINN, an individual
residing at 141 Corson Avenue, Trenton, New Jersey 08619 (the "Executive").
RECITALS:
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Duties. (a) During the term of the Executive's employment
hereunder, the Executive shall serve and the Company shall employ the Executive
as Co-Chairman of the Board of Directors (the "Board") and Chief Executive
Officer to perform such services for the Company consistent with those of a
Co-Chairman of the Board and Chief Executive Officer as may be assigned to the
Executive by the Board. The Executive hereby accepts such employment and agrees
to perform such services.
Without limiting the generality of the foregoing language,
Executive's duties and responsibilities shall include, without limitation,
directing the day-to-day operations of the Company in accordance with its
business plan; establishing and implementing appropriate financial control
systems and procedures for the Company and coordinating the preparation of an
annual audit to be performed by an accounting firm acceptable to the Board;
directing the marketing efforts of the Company, including the preparation of
marketing materials and participation in presentations to prospective clients,
including foreign and domestic institutions and individuals; ensuring that the
Company is in compliance with all federal, state and local laws, rules and
regulations to which it is subject, including supervising the preparation of all
applicable tax returns by an accounting firm acceptable to the Board; directing
the activities of the Company's personnel, with complete discretion over
resource allocation, hiring and termination of officers and employees, subject
to consultation with the President of the Company and/or the Board with respect
to the hiring of senior executives and compensation levels, provided same are in
compliance with the Company's business plan (including staffing requirements)
and the annual budget of the Company as approved by the Board; coordinating the
preparation of the Company's annual budgets and quarterly financial statements,
including
<PAGE>
comparisons to the budgets; and such other executive and administrative duties
for the Company as may be determined by the Board, provided such duties will be
consistent with Executive's position and will not conflict with Executive's
primary responsibility for the operation of the Company's business affairs.
(b) The Executive shall devote all of his time,
attention and energies during business hours to the performance of his duties
hereunder. The Executive shall not participate or engage in any business
activity or venture other than with or for the Company, except as provided for
in Section 8(d) herein. Notwithstanding the foregoing, Executive shall be
permitted to serve as a member of the Board of Trustees of Kranzco Realty Trust
("Kranzco").
(c) The Executive shall cooperate with the
Company, including taking such medical examinations as the Company shall deem
reasonably necessary, if the Company shall desire to obtain medical, disability
"key man" or other life insurance with respect to the Executive.
(d) The Executive shall undertake such
reasonable business travel as may be necessary to perform said duties (for
which the Executive shall be reimbursed pursuant to Section 4 below for costs
and expenses incurred in connection therewith).
2. Employment Term. This Agreement shall commence on _______,
1998 and shall continue in effect through _______, 2001 (the "Term"), except as
otherwise set forth herein. The Term shall be automatically extended for
successive one-year periods ("Renewal Term(s)") unless either the Executive or
the Company gives the other party prior notice not to extend the Term of this
Agreement. Such notice shall be in writing and shall be provided to the other
party between thirty (30) and sixty (60) days prior to the end of the Term or
any Renewal Term(s).
3. Compensation. For all services rendered by the Executive
pursuant to this Agreement:
(a) The Company shall pay to the Executive,
for so long as the Executive is employed under this Agreement, a base salary
(the "Base Compensation") at the annual rate of $175,000 for the period from
_________, 1998 through ______, 1999. For the remainder of the Term, and any
Renewal Term(s), Executive's Base Compensation shall be as determined by the
Compensation Committee of the Board of Directors of the Company in its sole and
reasonable discretion.
All such Base Compensation shall be paid bi-weekly
or at such other regular intervals, not less frequently than monthly, as the
Company may establish from time to time for executive officers of the Company.
(b) In addition to the compensation set forth
in subsection 3(a) hereof, Executive may receive incentive compensation, if
any, as determined in the sole discretion of the Compensation Committee of the
Board of Directors of the Company.
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<PAGE>
(c) In addition to the compensation set forth
in subsection 3(a) hereof and, if any, in subsection 3(b) hereof, Executive
shall be eligible to participate in any incentive plans generally offered to
senior executives of the Company, including (i) the Company's 1998 Incentive
Plan; (ii) the Company's 1998 Employee Bonus Compensation Plan; and (iii) the
Company's 1998 Stock Option Plan.
4. Expenses. The Company shall reimburse the Executive for
all reasonable out-of-pocket expenses actually and necessarily incurred by him
in the conduct of the business of the Company upon presentment by the Executive
of reasonable substantiation thereof to the Company.
5. Benefits. The Executive shall be entitled to such paid
vacation time each year and such other medical benefits as are afforded from
time to time to senior executives of the Company. The Company shall also provide
Executive with any life, accident, medical, dental, disability, or other
insurance and benefits as are provided to the Company's other senior executives
on substantially similar terms.
6. Earlier Termination.
(a) If the Executive shall die during the
term of this Agreement, this Agreement shall be deemed to have been terminated
as of the date of the Executive's death, and the Company shall pay to the legal
representative of the Executive's estate all Base Compensation due hereunder
prorated through the last day of the month during which the Executive shall have
died.
(b) If the Executive shall fail, because of
illness or incapacity, to render the services contemplated by this Agreement for
six consecutive months or for shorter periods aggregating nine months during the
term of this Agreement, the Company may determine (as set forth in subsection
(d) below) that the Executive has become disabled. If within thirty (30) days
after the date on which written notice of such determination is given to the
Executive, the Executive shall not have returned to the continuing full-time
performance of his duties hereunder, this Agreement and the employment of the
Executive hereunder shall be deemed terminated and the Company shall pay to the
Executive all Base Compensation due hereunder prorated through the last day of
the month during which such termination shall occur.
(c) The Company, by written notice to the
Executive specifying the reason therefor, may terminate this Agreement for Cause
as determined pursuant to subsection (d) below. As used herein, "Cause" shall be
defined as actions or inactions by the Executive which constitute gross
negligence, gross misconduct, willful misconduct, dishonest conduct,
malfeasance, misfeasance or nonfeasance, criminal conduct, fraud, a material
breach of any duties, responsibilities or obligations hereunder, or habitual
abuse of drugs or alcohol or conviction by a court, arbitration panel or other
tribunal of competent jurisdiction, found liable for or confessed to any act of
larceny, embezzlement, conversion or any act involving the misappropriation of
funds in the course of his employment hereunder. In the event that the
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<PAGE>
Executive is terminated for Cause, the Executive shall be paid the Executive's
full Base Compensation through the date of termination at the rate in effect at
the time notice of termination is given to the Executive and the Company shall
thereafter have no further obligations to the Executive under this Agreement.
(d) A determination of disability or Cause
shall be made in the reasonable and sole discretion of the Compensation
Committee of the Board of Directors of the Company.
(e) If the Executive shall be terminated
without Cause, such Executive shall be reimbursed for all reasonable expenses
incurred by him in the conduct of the Company's business as set forth in Section
4 hereof up to the date the notice of termination is given by the Company and an
amount equal to any unpaid portion of his then annual Base Compensation prorated
through the date the notice of termination is given plus the lesser of (i) two
times his then annual Base Compensation or (ii) the amount of his then annual
Base Compensation for the remaining portion of the stated term of this Agreement
(or any later termination date if this Agreement is extended pursuant to Section
2 hereof). However, Executive shall not be entitled to any such payment pursuant
to this subsection (e) of Section 6 if he has received a payment upon a "change
in control" as described in Section 7 below.
7. Severance Benefits Upon A Change Of Control.
In the event that the Executive is an employee of the Company
at the moment immediately prior to a Change in Control of the Company (as
defined below), the Executive shall be entitled to receive all benefits
described in this Section 7 and the provisions of this Section 7 shall survive
such termination.
7.1 "Change In Control" Defined. For purposes
of this Agreement, a "Change in Control of the Company" shall be deemed to occur
if:
(i) there shall have occurred a change
in control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof,
whether or not the Company is then subject to such reporting requirement,
provided, however, that there shall not be deemed to be a Change in Control of
the Company if: (a) immediately prior to the occurrence of what would otherwise
be a Change in Control of the Company, the Executive is the other party to the
transaction (a "Control of the Company Event") that would otherwise result in a
Change in Control of the Company; (b) immediately prior to the occurrence of
what would otherwise be a Change in Control of the Company, the Executive is an
executive officer, trustee, director or more than 5% equity holder of the other
party to the Control of the Company Event or of any entity, directly or
indirectly, controlling such other party; or (c) the occurrence of what would
otherwise be a Change in Control of the Company or a Control of the Company
Event, is any of the transactions contemplated by the Exchange Agreement, dated
_________, 1998, by and among Kranzco,
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<PAGE>
New America Network, Inc. ("NAI Delaware"), Executive, Jeffrey M. Finn and
Jeffrey M. Finn, as Trustee of the Grantor Retained Annuity Trust of Gerald C.
Finn u/a dtd. May 12, 1998 including, without limitation, the acquisition by
Kranzco of 80% of the outstanding shares of common stock of NAI Delaware, the
merger of NAI Delaware into the Company, and the subsequent distribution by
Kranzco of 70.2% of the outstanding shares of common stock of the Company.
(ii) the Company merges or consolidates
with, or sells all or substantially all of its assets to, another company (each,
a "Transaction"), provided, however, that a Transaction shall not be deemed to
result in a Change in Control of the Company if (a) immediately prior thereto
the circumstances in (i)(a), (i)(b) or (i)(c) above exist, or (b) (1) the
shareholders of the Company, immediately before such Transaction own, directly
or indirectly, immediately following such Transaction in excess of fifty percent
(50%) of the combined voting power of the outstanding voting securities of the
corporation or other entity resulting from such Transaction (the "Surviving
Corporation") in substantially the same proportion as their ownership of the
voting securities of the Company immediately before such Transaction and (2) the
individuals who were members of the Company's Board of Directors immediately
prior to the execution of the agreement providing for such Transaction
constitute at least a majority of the members of the board of directors or the
board of trustees, as the case may be, of the Surviving Corporation, or of a
corporation or other entity beneficially directly or indirectly owning a
majority of the outstanding voting securities of the Surviving Corporation; or
(iii) the Company acquires assets of another
company or a subsidiary of the Company merges or consolidates with another
company (each, an "Other Transaction") and (a) the shareholders of the Company,
immediately before such Other Transaction own, directly or indirectly,
immediately following such Other Transaction, 50% or less of the combined voting
power of the outstanding voting securities of the corporation or other entity
resulting from such Other Transaction (the "Other Surviving Corporation") or (b)
the individuals who were members of the Company's Board of Directors immediately
prior to the execution of the agreement providing for such Other Transaction
constitute less than a majority of the members of the board of directors or the
board of trustees, as the case may be, of the Other Surviving Corporation, or of
a corporation or other entity beneficially directly or indirectly owning a
majority of the outstanding voting securities of the Other Surviving
Corporation, provided, however, that an Other Transaction shall not be deemed to
result in a Change in Control of the Company if immediately prior thereto the
circumstances in (i)(a), (i)(b) or (i)(c) above exist.
7.2 Compensation Upon A Change In Control. If
the Executive is an employee of the Company at the moment immediately prior to a
Change in Control of the Company, the Executive shall be entitled to receive the
compensation set forth below.
(a) The Company shall pay to the
Executive, not later than the third business day following the date of any
Change in Control of the Company, a lump sum severance payment (the "Severance
Payment") equal to two (2) times the Base Amount (as
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<PAGE>
defined below). For purposes of this Section 7.2(a), the Base Amount shall mean
the Executive's then Annual Compensation (as defined below) during the calendar
year period preceding the calendar year in which the Change in Control of the
Company occurs. For purposes of determining Annual Compensation in the preceding
sentence, there shall be included (i) all Base Compensation and bonuses paid or
payable to the Executive by the Company with respect to the preceding calendar
year, (ii) all grants of restricted shares of common stock, par value $.01 per
share, of the Company (the "Shares"), if any, with respect to such preceding
calendar year, which Shares shall be valued based on their date of grant Fair
Market Value (as defined in Section 10.2 of the Company's 1998 Incentive Plan or
any other plan or agreement pursuant to which they are issued), and (iii) the
fair market value of any other property or rights given or awarded to the
Executive by the Company with respect to such preceding calendar year.
(b) Any Shares now or hereafter issued
to the Executive pursuant to any restricted Share grant shall vest immediately
prior to the date of a Change in Control of the Company and no longer be subject
to repurchase or any other forfeiture restrictions.
(c) The Company shall maintain in full
force and effect for the Executive's continued benefit for 18 months following a
Change in Control of the Company, all life, accident, medical and dental
insurance benefit plans and programs or arrangements in which the Executive was
entitled to participate immediately prior to the date of a Change in Control of
the Company; provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred, the
Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans
and programs. At the end of the period of coverage, the Executive shall have the
option to have assigned to him at no cost to the Executive and with no
apportionment of prepaid premiums, any assignable insurance policy owned by the
Company and relating specifically to the Executive.
(d) (i) The Executive shall be
entitled to receive additional compensation in the form of cash equal to, on the
date of a Change in Control of the Company and with respect to each Option to
purchase Shares held by the Executive whether or not such Option has vested or
is exercisable on such date (an "Option"), the number of Shares underlying the
Option, multiplied by the amount, if any, that the exercise price of the Option
or the Closing Share Value (as defined below), whichever is less, exceeds the
Initial Share Value (as defined below).
(ii) With respect to each Option,
in the event that the Closing Share Value is greater than the exercise price of
such Option, then the Executive can (1) retain the Option, or (2) forfeit the
Option and receive, in exchange therefor, a cash payment equal to the number of
Shares underlying the Option multiplied by the amount that the Closing Share
Value exceeds the exercise price of the Option.
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<PAGE>
(iii) For purposes of this
subsection (d), the "Initial Share Value" of an Option shall mean the average of
the Closing Prices of the Shares for the period commencing on the 180th day
prior to the date of the Change in Control of the Company and ending on the
150th day prior to the date of the Change in Control of the Company, and the
"Closing Share Value" shall mean the Closing Price of the Shares on the date of
the Change in Control of the Company. For purposes of this subsection (d), the
"Closing Price" of a Share on any date shall mean the last sale price, regular
way, or, in case no such sale takes place on such date, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Shares are
listed or admitted to trading or, if the Shares are not listed or admitted to
trading on any national securities exchange, the last quoted price, or if not so
quoted, the average of the highest bid and lowest ask prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer used,
the principal other automated quotation system that may then be in use or, if
the Shares are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making the
market in the Shares as such person is selected from time to time by the Board
of Directors of the Company or, if there are no professional market makers
making a market in the Shares, then the value as determined in good faith
judgement of the Board of Directors of the Company.
(e) The Executive shall not be
required to mitigate the amount of any payment provided for in this Section 7.2
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 7.2 be reduced by any compensation earned
by him as the result of employment by another employer or by retirement benefits
after the date of termination, or otherwise, except as specifically provided in
this Section 7.2.
7.3. Scale-Back. To the extent any benefits to
be granted to the Executive hereunder constitute a "parachute payment" (within
the meaning of Section 280G(b)(2) of the Code), and the Executive would
otherwise be liable for an excise tax pursuant to Code Section 4999, there shall
be a reduction in the benefits payable or available to the Executive hereunder
such that the total parachute payments will be less than three (3) times the
Executive's "base amount" (within the meaning of Section 280G(b)(3) of the Code)
with the result that the excise tax under Code Section 4999 will not be payable;
provided, however, that such reduction shall occur only if the Executive shall
realize a greater after tax economic benefit by making such reduction than if no
reduction was made.
7.4. Expenses. The Company shall pay or
reimburse the Executive, as the case may be, for all legal fees and related
expenses (including the costs of experts, evidence and counsel) paid by the
Executive as a result of (i) the Executive seeking to obtain or enforce any
right or benefit provided by this Agreement, or (ii) any action taken by the
Company against the Executive in enforcing the Company's rights hereunder;
provided, however, that the Company shall reimburse the legal fees and related
expenses described in this subsection 7.4
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<PAGE>
only if and when a final judgement has been rendered in favor of the Executive
and all appeals related to any such action have been exhausted.
8. Protection of Confidential Information;
Non-Competition.
(a) The Executive acknowledges that (i) the
Company will suffer substantial damage which will be difficult to compute if the
Executive violates any of the provisions of this Section 8, and (ii) the
provisions of this Agreement are reasonable and necessary for the protection of
the business of the Company.
(b) The Executive agrees that he will not at
any time, either during the term of this Agreement or thereafter, divulge to any
person, firm or corporation any material information obtained or learned by him
during the course of his employment with the Company with regard to the
operational, financial, business or other affairs of the Company, or its
respective officers or director, except: (i) in the course of performing his
duties hereunder; (ii) with the Board's express written consent; (iii) to the
extent that any such information is in the public domain other than as a result
of the Executive's breach of any of his obligations hereunder; or (iv) where
required to be disclosed by court order, subpoena or other government process.
In the event that the Executive shall be required to make disclosure pursuant to
the provisions of clause (iv) of the preceding sentence, Executive promptly, but
in no event more than forty-eight (48) hours after learning of such court order,
subpoena, or other government process, shall notify the Company, by personal
delivery or by facsimile, confirmed by mail, and, at the Company's expense,
Executive shall: (x) take all steps reasonably requested by the Company at the
Company's expense, to defend against the enforcement of such subpoena, court
order or other government process and (y) permit the Company to intervene and
participate with counsel of its choice in any proceeding relating to the
enforcement thereof.
(c) Upon termination of his employment with
the Company, or any time the Company may so request, the Executive will promptly
deliver to the Company all memoranda, notes, records, reports, manuals,
drawings, blueprints, software and other documents (and all copies thereof)
relating to the business of the Company and all property associated therewith,
which he may then possess or have under his control.
(d) During the term of this Agreement and for
a period of two (2) years thereafter, the Executive shall not, and he agrees not
to, without the prior written permission of the Board of Directors of the
Company, directly or indirectly, in the United States, its territories or
possessions, or in any country where the Company currently has operations: (i)
enter into the employ of or render any services to any person, firm or
corporation engaged in any business competitive to the Company; (ii) engage, for
his own account, in any business competitive to the Company; (iii) become
associated with or interested, as an individual, partner, shareholder, owner,
creditor, director, officer, principal, agent, employee, director, consultant,
advisor or in any other relationship or capacity, in any business competitive to
the Company; (iv) employ or retain, or have or cause any other person or entity
to employ or retain, any person who was employed or retained by the Company or
any of its affiliates while the Executive was
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employed by the Company; (v) solicit, interfere with, or endeavor to entice away
from the Company or any of its affiliates any of their respective customers or
sources of supply; or (vi) solicit, induce or entice, or cause any other Person
to solicit, induce or entice to leave the employ of the Company any Person who
was retained by the Company to perform any services therefor. However, nothing
in this Agreement shall preclude the Executive from investing his personal
assets in the securities of any corporation or other business entity which is
engaged in a competitive business if (x) such securities are traded on a
national securities exchange or in the over-the-counter market, or (y) such
investments are solely passive in nature such that the Executive does not,
through such investment, have any right to participate in, manage or conduct the
affairs of such corporation or entity, and (z) if each such investment amounts
to the lesser of (1) five percent (5%) or less of the beneficial ownership, at
any one time, of such securities or equity of such corporation or entity, and
(2) one million dollars ($1,000,000). Notwithstanding any language herein to the
contrary, the restrictions set forth in this Section 8(d)(i), (ii), (iii) and
(iv) shall: (a) in the event that the Executive's employment with the Company is
terminated by the Company without "Cause" pursuant to Section 6(e) above upon a
"Change in Control" of the Company (as defined in Section 7.1 above), remain in
effect for a period of one year after the date the Executive is so terminated;
(b) in the event that the Executive's employment with the Company is terminated
by the Company without "Cause" pursuant to Section 6(e) above and a "Change in
Control" has not occurred, only remain in effect for a period beginning on the
date the Executive is so terminated and ending on the earlier to occur of (i)
six months after the date the Executive is so terminated; or (ii) the date the
Term of this Agreement or any Renewal Term expires; or (c) in the event the
Company gives the Executive notice pursuant to Section 2 above that the Company
does not intend to extend the Term of this Agreement, only remain in effect
until the Term of this Agreement or any Renewal Term expires.
(e) If the Executive commits a breach of any
of the provisions of subsection (b), (c) or (d) above, the Company shall
have the right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed by the Executive that the services being
rendered hereunder to the Company are of a special, unique and
extraordinary character and that any such breach or threatened breach
will cause irreparable injury to the Company and that money damages will
not provide an adequate remedy to the Company. The Company shall also
have the right and remedy to require Executive to account for and pay
over to the Company all compensation, profits, monies, accruals,
increments or other benefits (collectively "Benefits") derived or
received by Executive as the result of any transactions constituting a
breach of any of the provisions of subsection 8(b), (c) or (d) hereof,
and Executive hereby agrees to account for and pay over such Benefits to
the Company. Each of the rights and remedies enumerated in this
subsection (e) shall be independent of the other, and shall be severally
enforceable, and 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 equity.
(f) If any provision of subsection (b), (c)
or (d) is held to be unenforceable because of the scope, duration or
area of its applicability, the tribunal making such determination shall
have the power to modify such scope, duration, or area, or all of them,
and
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such provision or provisions shall then be applicable in such modified form to
the maximum extent permitted by law. If it shall be judicially determined that
the Executive shall have violated any covenant contained in Section 8 hereof,
the duration of such covenant so violated shall be automatically extended for a
period of two (2) years from the date on which the Executive permanently ceases
such violation.
9. Governing Law; Arbitration. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New Jersey, without regard to New Jersey's conflicts of law principles. Any
dispute or controversy arising under this Agreement, or out of the
interpretation hereof, or based upon the breach hereof, shall be resolved by
arbitration held at the offices of the American Arbitration Association in the
City of Trenton in accordance with the rules and regulations of such association
prevailing at the time of the demand for arbitration by either party hereto, and
the decision of the arbitrator or arbitrators shall be final and binding upon
both parties hereto, provided, however, that the arbitrator or arbitrators shall
only have the power and authority to interpret, and not to modify or amend, the
terms and provisions hereof. Judgment upon an award rendered by the arbitrator
or arbitrators may be entered in any court having jurisdiction thereof.
Notwithstanding anything contained in this Section 9, either party shall have
the right to seek preliminary injunctive relief in any court in the State of New
Jersey in aid of, and pending the final decision in, the arbitration proceeding.
10. Entire Agreement. This Agreement sets forth the entire
agreement of the parties and is intended to supersede all prior employment
negotiations, understandings and agree ments. No provision of this Agreement may
be waived or changed, except by a writing signed by the party to be charged with
such waiver or change.
11. Successors; Binding Agreement. This Agreement shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
12. Notices. All notices provided for in this Agreement shall
be in writing, and shall be deemed to have been duly given when delivered
personally to the party to receive the same, when given by telex, telegram or
mailgram, or when mailed first class postage prepaid, by registered or certified
mail, return receipt requested, addressed to the party to receive the same at
his or its address above set forth, or such other address as the party to
receive the same shall have specified by written notice given in the manner
provided for in this Section 12. All notices shall be deemed to have been given
as of the date of personal delivery, transmittal or mailing thereof.
13. Severability. If any provision in this Agreement is
determined to be invalid, it shall not affect the validity or enforceability of
any of the other remaining provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
NEW AMERICA INTERNATIONAL, INC.,
By:
---------------------------
Name: Jeffrey M. Finn
Title: President
----------------------------
GERALD C. FINN
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EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July ___, 1998, between NEW AMERICA
INTERNATIONAL, INC., a Maryland corporation with offices at 572 U.S. Route 130,
Hightstown, New Jersey 08520 (the "Company"), and JEFFREY M. FINN, an individual
residing at 15 Red Cedar Drive, Trenton, New Jersey 08690 (the "Executive").
RECITALS:
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Duties. (a) During the term of the Executive's employment
hereunder, the Executive shall serve and the Company shall employ the Executive
as President and Chief Operating Officer to perform such services for the
Company consistent with those of a President and Chief Operating Officer as may
be assigned to the Executive by the Chief Executive Officer, a Co-Chairman of
the Board of Directors (the "Board") or the Board. The Executive hereby accepts
such employment and agrees to perform such services.
Without limiting the generality of the foregoing language,
Executive's duties and responsibilities shall include, without limitation,
directing the day-to-day operations of the Company in accordance with its
business plan; establishing and implementing appropriate financial control
systems and procedures for the Company and coordinating the preparation of an
annual audit to be performed by an accounting firm acceptable to the Board;
directing the marketing efforts of the Company, including the preparation of
marketing materials and participation in presentations to prospective clients,
including foreign and domestic institutions and individuals; ensuring that the
Company is in compliance with all federal, state and local laws, rules and
regulations to which it is subject, including supervising the preparation of all
applicable tax returns by an accounting firm acceptable to the Board; directing
the activities of the Company's personnel, with complete discretion over
resource allocation, hiring and termination of officers and employees, subject
to consultation with the Chief Executive Officer, a Co-Chairman of the Board
and/or the Board with respect to the hiring of senior executives and
compensation levels, provided same are in compliance with the Company's business
plan (including staffing requirements) and the annual budget of the Company as
approved by the Chief Executive Officer, a Co-Chairman of the Board and/or the
Board; coordinating the
<PAGE>
preparation of the Company's annual budgets and quarterly financial statements,
including comparisons to the budgets; and such other executive and
administrative duties for the Company as may be determined by the Chief
Executive Officer, a Co-Chairman of the Board and/or the Board, provided such
duties will be consistent with Executive's position and will not conflict with
Executive's primary responsibility for the operation of the Company's business
affairs.
(b) The Executive shall devote all of his time,
attention and energies during business hours to the performance of his duties
hereunder. The Executive shall not participate or engage in any business
activity or venture other than with or for the Company, except as provided for
in Section 8(d) herein.
(c) The Executive shall cooperate with the Company,
including taking such medical examinations as the Company shall deem reasonably
necessary, if the Company shall desire to obtain medical, disability "key man"
or other life insurance with respect to the Executive.
(d) The Executive shall undertake such reasonable
business travel as may be necessary to perform said duties (for which the
Executive shall be reimbursed pursuant to Section 4 below for costs and expenses
incurred in connection therewith).
2. Employment Term. This Agreement shall commence on _______,
1998 and shall continue in effect through _______, 2001 (the "Term"), except as
otherwise set forth herein. The Term shall be automatically extended for
successive one-year periods ("Renewal Term(s)") unless either the Executive or
the Company gives the other party prior notice not to extend the Term of this
Agreement. Such notice shall be in writing and shall be provided to the other
party between thirty (30) and sixty (60) days prior to the end of the Term or
any Renewal Term(s).
3. Compensation. For all services rendered by the Executive
pursuant to this Agreement:
(a) The Company shall pay to the Executive, for
so long as the Executive is employed under this Agreement, a base salary (the
"Base Compensation") at the annual rate of $175,000 for the period from
_________, 1998 through ______, 1999. For the remainder of the Term, and any
Renewal Term(s), Executive's Base Compensation shall be as determined by the
Compensation Committee of the Board of Directors of the Company in its sole and
reasonable discretion.
All such Base Compensation shall be paid bi-weekly
or at such other regular intervals, not less frequently than monthly, as the
Company may establish from time to time for executive officers of the Company.
(b) In addition to the compensation set forth in
subsection 3(a) hereof, Executive may receive incentive compensation, if any, as
determined in the sole discretion of the Compensation Committee of the Board of
Directors of the Company.
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(c) In addition to the compensation set forth in
subsection 3(a) hereof and, if any, in subsection 3(b) hereof, Executive shall
be eligible to participate in any incentive plans generally offered to senior
executives of the Company, including (i) the Company's 1998 Incentive Plan; (ii)
the Company's 1998 Employee Bonus Compensation Plan; and (iii) the Company's
1998 Stock Option Plan.
4. Expenses. The Company shall reimburse the Executive for
all reasonable out-of-pocket expenses actually and necessarily incurred by him
in the conduct of the business of the Company upon presentment by the Executive
of reasonable substantiation thereof to the Company.
5. Benefits. The Executive shall be entitled to such paid
vacation time each year and such other medical benefits as are afforded from
time to time to senior executives of the Company. The Company shall also provide
Executive with any life, accident, medical, dental, disability, or other
insurance and benefits as are provided to the Company's other senior executives
on substantially similar terms.
6. Earlier Termination.
(a) If the Executive shall die during the term of
this Agreement, this Agreement shall be deemed to have been terminated as of the
date of the Executive's death, and the Company shall pay to the legal
representative of the Executive's estate all Base Compensation due hereunder
prorated through the last day of the month during which the Executive shall have
died.
(b) If the Executive shall fail, because of illness
or incapacity, to render the services contemplated by this Agreement for six
consecutive months or for shorter periods aggregating nine months during the
term of this Agreement, the Company may determine (as set forth in subsection
(d) below) that the Executive has become disabled. If within thirty (30) days
after the date on which written notice of such determination is given to the
Executive, the Executive shall not have returned to the continuing full-time
performance of his duties hereunder, this Agreement and the employment of the
Executive hereunder shall be deemed terminated and the Company shall pay to the
Executive all Base Compensation due hereunder prorated through the last day of
the month during which such termination shall occur.
(c) The Company, by written notice to the Executive
specifying the reason therefor, may terminate this Agreement for Cause as
determined pursuant to subsection (d) below. As used herein, "Cause" shall be
defined as actions or inactions by the Executive which constitute gross
negligence, gross misconduct, willful misconduct, dishonest conduct,
malfeasance, misfeasance or nonfeasance, criminal conduct, fraud, a material
breach of any duties, responsibilities or obligations hereunder, or habitual
abuse of drugs or alcohol or conviction by a court, arbitration panel or other
tribunal of competent jurisdiction, found liable for or confessed to any act of
larceny, embezzlement, conversion or any act involving the misappropriation of
funds in the course of his employment hereunder. In the event that the
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Executive is terminated for Cause, the Executive shall be paid the Executive's
full Base Compensation through the date of termination at the rate in effect at
the time notice of termination is given to the Executive and the Company shall
thereafter have no further obligations to the Executive under this Agreement.
(d) A determination of disability or Cause shall be
made in the reasonable and sole discretion of the Compensation Committee of the
Board of Directors of the Company.
(e) If the Executive shall be terminated without
Cause, such Executive shall be reimbursed for all reasonable expenses incurred
by him in the conduct of the Company's business as set forth in Section 4 hereof
up to the date the notice of termination is given by the Company and an amount
equal to any unpaid portion of his then annual Base Compensation prorated
through the date the notice of termination is given plus the lesser of (i) two
times his then annual Base Compensation or (ii) the amount of his then annual
Base Compensation for the remaining portion of the stated term of this Agreement
(or any later termination date if this Agreement is extended pursuant to Section
2 hereof). However, Executive shall not be entitled to any such payment pursuant
to this subsection (e) of Section 6 if he has received a payment upon a "change
in control" as described in Section 7 below.
7. Severance Benefits Upon A Change Of Control.
In the event that the Executive is an employee of the Company
at the moment immediately prior to a Change in Control of the Company (as
defined below), the Executive shall be entitled to receive all benefits
described in this Section 7 and the provisions of this Section 7 shall survive
such termination.
7.1 "Change In Control" Defined. For purposes of
this Agreement, a "Change in Control of the Company" shall be deemed to occur
if:
(i) there shall have occurred a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof,
whether or not the Company is then subject to such reporting requirement,
provided, however, that there shall not be deemed to be a Change in Control of
the Company if: (a) immediately prior to the occurrence of what would otherwise
be a Change in Control of the Company, the Executive is the other party to the
transaction (a "Control of the Company Event") that would otherwise result in a
Change in Control of the Company; (b) immediately prior to the occurrence of
what would otherwise be a Change in Control of the Company, the Executive is an
executive officer, trustee, director or more than 5% equity holder of the other
party to the Control of the Company Event or of any entity, directly or
indirectly, controlling such other party; or (c) the occurrence of what would
otherwise be a Change in Control of the Company or a Control of the Company
Event, is any of the transactions contemplated by the Exchange Agreement, dated
______, 1998, by and among Kranzco Realty
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Trust ("Kranzco"), New America Network, Inc. ("NAI Delaware"), Gerald C. Finn,
Executive, and Jeffrey M. Finn, as Trustee of the Grantor Retained Annuity Trust
of Gerald C. Finn u/a dtd. May 12, 1998 including, without limitation, the
acquisition by Kranzco of 80% of the outstanding shares of common stock of NAI
Delaware, the merger of NAI Delaware into the Company, and the subsequent
distribution by Kranzco of 70.2% of the outstanding shares of common stock of
the Company.
(ii) the Company merges or consolidates
with, or sells all or substantially all of its assets to, another company (each,
a "Transaction"), provided, however, that a Transaction shall not be deemed to
result in a Change in Control of the Company if (a) immediately prior thereto
the circumstances in (i)(a), (i)(b) or (i)(c) above exist, or (b) (1) the
shareholders of the Company, immediately before such Transaction own, directly
or indirectly, immediately following such Transaction in excess of fifty percent
(50%) of the combined voting power of the outstanding voting securities of the
corporation or other entity resulting from such Transaction (the "Surviving
Corporation") in substantially the same proportion as their ownership of the
voting securities of the Company immediately before such Transaction and (2) the
individuals who were members of the Company's Board of Directors immediately
prior to the execution of the agreement providing for such Transaction
constitute at least a majority of the members of the board of directors or the
board of trustees, as the case may be, of the Surviving Corporation, or of a
corporation or other entity beneficially directly or indirectly owning a
majority of the outstanding voting securities of the Surviving Corporation; or
(iii) the Company acquires assets of
another company or a subsidiary of the Company merges or consolidates with
another company (each, an "Other Transaction") and (a) the shareholders of the
Company, immediately before such Other Transaction own, directly or indirectly,
immediately following such Other Transaction, 50% or less of the combined voting
power of the outstanding voting securities of the corporation or other entity
resulting from such Other Transaction (the "Other Surviving Corporation") or (b)
the individuals who were members of the Company's Board of Directors immediately
prior to the execution of the agreement providing for such Other Transaction
constitute less than a majority of the members of the board of directors or the
board of trustees, as the case may be, of the Other Surviving Corporation, or of
a corporation or other entity beneficially directly or indirectly owning a
majority of the outstanding voting securities of the Other Surviving
Corporation, provided, however, that an Other Transaction shall not be deemed to
result in a Change in Control of the Company if immediately prior thereto the
circumstances in (i)(a), (i)(b) or (i)(c) above exist.
7.2 Compensation Upon A Change In Control. If the
Executive is an employee of the Company at the moment immediately prior to a
Change in Control of the Company, the Executive shall be entitled to receive the
compensation set forth below.
(a) The Company shall pay to the Executive,
not later than the third business day following the date of any Change in
Control of the Company, a lump sum severance payment (the "Severance Payment")
equal to two (2) times the Base Amount (as
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defined below). For purposes of this Section 7.2(a), the Base Amount shall mean
the Executive's then Annual Compensation (as defined below) during the calendar
year period preceding the calendar year in which the Change in Control of the
Company occurs. For purposes of determining Annual Compensation in the preceding
sentence, there shall be included (i) all Base Compensation and bonuses paid or
payable to the Executive by the Company with respect to the preceding calendar
year, (ii) all grants of restricted shares of common stock, par value $.01 per
share, of the Company (the "Shares"), if any, with respect to such preceding
calendar year, which Shares shall be valued based on their date of grant Fair
Market Value (as defined in Section 10.2 of the Company's 1998 Incentive Plan or
any other plan or agreement pursuant to which they are issued), and (iii) the
fair market value of any other property or rights given or awarded to the
Executive by the Company with respect to such preceding calendar year.
(b) Any Shares now or hereafter issued to
the Executive pursuant to any restricted Share grant shall vest immediately
prior to the date of a Change in Control of the Company and no longer be subject
to repurchase or any other forfeiture restrictions.
(c) The Company shall maintain in full
force and effect for the Executive's continued benefit for 18 months following a
Change in Control of the Company, all life, accident, medical and dental
insurance benefit plans and programs or arrangements in which the Executive was
entitled to participate immediately prior to the date of a Change in Control of
the Company; provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred, the
Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans
and programs. At the end of the period of coverage, the Executive shall have the
option to have assigned to him at no cost to the Executive and with no
apportionment of prepaid premiums, any assignable insurance policy owned by the
Company and relating specifically to the Executive.
(d) (i) The Executive shall be entitled
to receive additional compensation in the form of cash equal to, on the date of
a Change in Control of the Company and with respect to each Option to purchase
Shares held by the Executive whether or not such Option has vested or is
exercisable on such date (an "Option"), the number of Shares underlying the
Option, multiplied by the amount, if any, that the exercise price of the Option
or the Closing Share Value (as defined below), whichever is less, exceeds the
Initial Share Value (as defined below).
(ii) With respect to each Option,
in the event that the Closing Share Value is greater than the exercise price of
such Option, then the Executive can (1) retain the Option, or (2) forfeit the
Option and receive, in exchange therefor, a cash payment equal to the number of
Shares underlying the Option multiplied by the amount that the Closing Share
Value exceeds the exercise price of the Option.
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(iii) For purposes of this
subsection (d), the "Initial Share Value" of an Option shall mean the average of
the Closing Prices of the Shares for the period commencing on the 180th day
prior to the date of the Change in Control of the Company and ending on the
150th day prior to the date of the Change in Control of the Company, and the
"Closing Share Value" shall mean the Closing Price of the Shares on the date of
the Change in Control of the Company. For purposes of this subsection (d), the
"Closing Price" of a Share on any date shall mean the last sale price, regular
way, or, in case no such sale takes place on such date, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Shares are
listed or admitted to trading or, if the Shares are not listed or admitted to
trading on any national securities exchange, the last quoted price, or if not so
quoted, the average of the highest bid and lowest ask prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer used,
the principal other automated quotation system that may then be in use or, if
the Shares are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making the
market in the Shares as such person is selected from time to time by the Board
of Directors of the Company or, if there are no professional market makers
making a market in the Shares, then the value as determined in good faith
judgement of the Board of Directors of the Company.
(e) The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 7.2 by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 7.2 be reduced by any compensation earned by him as
the result of employment by another employer or by retirement benefits after the
date of termination, or otherwise, except as specifically provided in this
Section 7.2.
7.3. Scale-Back. To the extent any benefits to be
granted to the Executive hereunder constitute a "parachute payment" (within the
meaning of Section 280G(b)(2) of the Code), and the Executive would otherwise be
liable for an excise tax pursuant to Code Section 4999, there shall be a
reduction in the benefits payable or available to the Executive hereunder such
that the total parachute payments will be less than three (3) times the
Executive's "base amount" (within the meaning of Section 280G(b)(3) of the Code)
with the result that the excise tax under Code Section 4999 will not be payable;
provided, however, that such reduction shall occur only if the Executive shall
realize a greater after tax economic benefit by making such reduction than if no
reduction was made.
7.4. Expenses. The Company shall pay or reimburse
the Executive, as the case may be, for all legal fees and related expenses
(including the costs of experts, evidence and counsel) paid by the Executive as
a result of (i) the Executive seeking to obtain or enforce any right or benefit
provided by this Agreement, or (ii) any action taken by the Company against the
Executive in enforcing the Company's rights hereunder; provided, however, that
the Company shall reimburse the legal fees and related expenses described in
this subsection 7.4
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only if and when a final judgement has been rendered in favor of the Executive
and all appeals related to any such action have been exhausted.
8. Protection of Confidential Information;
Non-Competition.
(a) The Executive acknowledges that (i) the Company
will suffer substantial damage which will be difficult to compute if the
Executive violates any of the provisions of this Section 8, and (ii) the
provisions of this Agreement are reasonable and necessary for the protection of
the business of the Company.
(b) The Executive agrees that he will not at any
time, either during the term of this Agreement or thereafter, divulge to any
person, firm or corporation any material information obtained or learned by him
during the course of his employment with the Company with regard to the
operational, financial, business or other affairs of the Company, or its
respective officers or director, except: (i) in the course of performing his
duties hereunder; (ii) with the Board's express written consent; (iii) to the
extent that any such information is in the public domain other than as a result
of the Executive's breach of any of his obligations hereunder; or (iv) where
required to be disclosed by court order, subpoena or other government process.
In the event that the Executive shall be required to make disclosure pursuant to
the provisions of clause (iv) of the preceding sentence, Executive promptly, but
in no event more than forty-eight (48) hours after learning of such court order,
subpoena, or other government process, shall notify the Company, by personal
delivery or by facsimile, confirmed by mail, and, at the Company's expense,
Executive shall: (x) take all steps reasonably requested by the Company at the
Company's expense, to defend against the enforcement of such subpoena, court
order or other government process and (y) permit the Company to intervene and
participate with counsel of its choice in any proceeding relating to the
enforcement thereof.
(c) Upon termination of his employment with the
Company, or any time the Company may so request, the Executive will promptly
deliver to the Company all memoranda, notes, records, reports, manuals,
drawings, blueprints, software and other documents (and all copies thereof)
relating to the business of the Company and all property associated therewith,
which he may then possess or have under his control.
(d) During the term of this Agreement and for a
period of two (2) years thereafter, the Executive shall not, and he agrees not
to, without the prior written permission of the Board of Directors of the
Company, directly or indirectly, in the United States, its territories or
possessions, or in any country where the Company currently has operations: (i)
enter into the employ of or render any services to any person, firm or
corporation engaged in any business competitive to the Company; (ii) engage, for
his own account, in any business competitive to the Company; (iii) become
associated with or interested, as an individual, partner, shareholder, owner,
creditor, director, officer, principal, agent, employee, director, consultant,
advisor or in any other relationship or capacity, in any business competitive to
the Company; (iv) employ or retain, or have or cause any other person or entity
to employ or retain, any person who was employed or retained by the Company or
any of its affiliates while the Executive was
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employed by the Company; (v) solicit, interfere with, or endeavor to entice away
from the Company or any of its affiliates any of their respective customers or
sources of supply; or (vi) solicit, induce or entice, or cause any other Person
to solicit, induce or entice to leave the employ of the Company any Person who
was retained by the Company to perform any services therefor. However, nothing
in this Agreement shall preclude the Executive from investing his personal
assets in the securities of any corporation or other business entity which is
engaged in a competitive business if (x) such securities are traded on a
national securities exchange or in the over-the-counter market, or (y) such
investments are solely passive in nature such that the Executive does not,
through such investment, have any right to participate in, manage or conduct the
affairs of such corporation or entity, and (z) if each such investment amounts
to the lesser of (1) five percent (5%) or less of the beneficial ownership, at
any one time, of such securities or equity of such corporation or entity, and
(2) one million dollars ($1,000,000). Notwithstanding any language herein to the
contrary, the restrictions set forth in this Section 8(d)(i), (ii), (iii) and
(iv) shall: (a) in the event that the Executive's employment with the Company is
terminated by the Company without "Cause" pursuant to Section 6(e) above upon a
"Change in Control" of the Company (as defined in Section 7.1 above), remain in
effect for a period of one year after the date the Executive is so terminated;
(b) in the event that the Executive's employment with the Company is terminated
by the Company without "Cause" pursuant to Section 6(e) above and a "Change in
Control" has not occurred, only remain in effect for a period beginning on the
date the Executive is so terminated and ending on the earlier to occur of (i)
six months after the date the Executive is so terminated; or (ii) the date the
Term of this Agreement or any Renewal Term expires; or (c) in the event the
Company gives the Executive notice pursuant to Section 2 above that the Company
does not intend to extend the Term of this Agreement, only remain in effect
until the Term of this Agreement or any Renewal Term expires.
(e) If the Executive commits a breach of any of
the provisions of subsection (b), (c) or (d) above, the Company shall have the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed by the
Executive that the services being rendered hereunder to the Company are of a
special, unique and extraordinary character and that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. The Company shall
also have the right and remedy to require Executive to account for and pay over
to the Company all compensation, profits, monies, accruals, increments or other
benefits (collectively "Benefits") derived or received by Executive as the
result of any transactions constituting a breach of any of the provisions of
subsection 8(b), (c) or (d) hereof, and Executive hereby agrees to account for
and pay over such Benefits to the Company. Each of the rights and remedies
enumerated in this subsection (e) shall be independent of the other, and shall
be severally enforceable, and 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 equity.
(f) If any provision of subsection (b), (c) or (d)
is held to be unenforceable because of the scope, duration or area of its
applicability, the tribunal making such determination shall have the power to
modify such scope, duration, or area, or all of them, and
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such provision or provisions shall then be applicable in such modified form to
the maximum extent permitted by law. If it shall be judicially determined that
the Executive shall have violated any covenant contained in Section 8 hereof,
the duration of such covenant so violated shall be automatically extended for a
period of two (2) years from the date on which the Executive permanently ceases
such violation.
9. Governing Law; Arbitration. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New Jersey, without regard to New Jersey's conflicts of law principles. Any
dispute or controversy arising under this Agreement, or out of the
interpretation hereof, or based upon the breach hereof, shall be resolved by
arbitration held at the offices of the American Arbitration Association in the
City of Trenton in accordance with the rules and regulations of such association
prevailing at the time of the demand for arbitration by either party hereto, and
the decision of the arbitrator or arbitrators shall be final and binding upon
both parties hereto, provided, however, that the arbitrator or arbitrators shall
only have the power and authority to interpret, and not to modify or amend, the
terms and provisions hereof. Judgment upon an award rendered by the arbitrator
or arbitrators may be entered in any court having jurisdiction thereof.
Notwithstanding anything contained in this Section 9, either party shall have
the right to seek preliminary injunctive relief in any court in the State of New
Jersey in aid of, and pending the final decision in, the arbitration proceeding.
10. Entire Agreement. This Agreement sets forth the entire
agreement of the parties and is intended to supersede all prior employment
negotiations, understandings and agree ments. No provision of this Agreement may
be waived or changed, except by a writing signed by the party to be charged with
such waiver or change.
11. Successors; Binding Agreement. This Agreement shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
12. Notices. All notices provided for in this Agreement shall
be in writing, and shall be deemed to have been duly given when delivered
personally to the party to receive the same, when given by telex, telegram or
mailgram, or when mailed first class postage prepaid, by registered or certified
mail, return receipt requested, addressed to the party to receive the same at
his or its address above set forth, or such other address as the party to
receive the same shall have specified by written notice given in the manner
provided for in this Section 12. All notices shall be deemed to have been given
as of the date of personal delivery, transmittal or mailing thereof.
13. Severability. If any provision in this Agreement is
determined to be invalid, it shall not affect the validity or enforceability of
any of the other remaining provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
NEW AMERICA INTERNATIONAL, INC.,
By:
-----------------------------
Name: Gerald C. Finn
Title: Chief Executive Officer
----------------------------
JEFFREY M. FINN
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<PAGE>
Exhibit 10.4
Parties THIS LEASE, dated the 15th day of August 1984
Between THE BUILDING CENTER, INC., having its
principal place of business at Route 130 & Maple
Stream Road, East Windsor, New Jersey 08520
hereinafter referred to as the Landlord, and NEW
AMERICA NETWORK, and/or its affiliates, having its
principal place of business at Route 130 & Maple
Stream Rd., East Windsor, New Jersey 08520
hereinafter referred to as the Tenant,
WITNESSETH: That the Landlord hereby demises and
leases unto the Tenant, and the Tenant hereby hires
and takes from the Landlord for the term and upon
the rentals hereinafter specified, the premises
described as follows, situated in the Towhsnip of
East Windsor, County of Mercer and State of New
Jersey being a portion of a building located at
Route 130 & Maple Stream Road, and, being more
particularly knows and described at Building #4.
Premises
Term The term of this demise shall be for Five
(5) years beginning September 1, 1984 and ending
August 31, 1989. The rent for the demised terms
shall be Two Hundred Twenty-eight Thousand Dollars
----------- ($228,000.00), which shall accrue at
the yearly rate of
September 1, 1984 through August 31, 1987
(@ $42,000.00/year $126,000.00
September 1, 1987 through August 31, 1988
$48,000.00
September 1, 1988 through August 31, 1989
$ 54,000.00
The said rent is to be payable monthly
in advance on the first day of each calendar month
for the term hereof, in installments as follows:
Payment of Rent $3,500.00 per month, on the 1st. day of each and
every month from September 1, 1984 through August
31, 1987. $4,000.00 per month on the 1st. day of
each and every month from September 1, 1987 through
August 31, 1988. $4,500.00 per month on the 1st.
day of each and every month from September 1, 1988
through August 31, 1989. at the office of The
Building Center, Inc. Route 130 & Maple Stream Rd.,
East Windsor, or as may be otherwise directed by
the Landlord in writing.
THE ABOVE LETTING IS UPON THE FOLLOWING CONDITIONS
Peaceful
Possession First. --The Landlord covenants that, the Tenant,
on paying the said rental and performing the
covenants
<PAGE>
and conditions in this Lease contained, shall and
may peaceably and quietly have, hold and enjoy the
demised premises for the term aforesaid.
Second. --The Tenant convents and agrees to use the
demised premises as a business office Purpose and
agrees not to use or permit the premises to be used
for any other purpose without the prior written
consent of the Landlord endorsed hereon.
Default in Payment of Rent Third. --The Tenant shall, without any previous
demand therefor, pay to the Landlord, or its
agent, the said rent at the times and in the
manner above provided. In the event of the
Abandonment of non-payment of said rent, or any installment
Premises thereof, at the times and in the manner above
provided, and if the same shall remain in default
Re-entry and for ten days after becoming due, or if the Tenant
Reletting by shall be dispossessed for non-payment of rent,
Landlord or if the leased premises shall be deserted or
vacated, the Landlord or its agents shall have
Tenant Liable the right to and may enter the said premises as
Deficiency the agent of the Tenant, either by force or
otherwise, without being liable for any
Lien of Landlord prosecution of damages therefor, and may relet
Secure the premises as the agent of the Tenant, and
receive the rent therefor, upon such terms as shall
be satisfactory to the Landlord, and all rights
of the Tenant to repossess the premises under
Performance this lease shall be forfeited. Such re-entry by
Attorney's Fees the Landlord shall not operate to release the
Tenant from any rent to be paid or covenants to be
performed hereunder during the full term of this
lease. For the purpose of reletting, the Landlord
shall be authorized to make such repairs or
alterations in or to the leased premises as may be
necessary to place the same in good order and
condition. The Tenant shall be liable to the
Landlord for the cost of such repairs or
alterations, and all expenses of such reletting. If
the sum realized or to be realized from the
reletting is insufficient to satisfy the monthly or
term rent provided in this lease, the Landlord, at
its option, may require the Tenant to pay such
deficiency month by month, or may hold the Tenant
in advance for the entire deficiency to be realized
during the term of the reletting. The Tenant shall
not be entitled to any surplus accruing as a result
of the reletting.
The Landlord is hereby granted a lien, in addition
to any statutory lien or right to distrain that may
exist, on all personal property of the Tenant in or
upon the demised premises, to secure payment of the
rent and performance of the covenants and
conditions of this lease. The Landlord shall have
the right, as agent of
-2-
<PAGE>
the Tenant, to take possession of any furniture,
fixtures or other personal property of the Tenant
found in or about the premises, and sell the same
at public or private sale and to apply the proceeds
thereof to the payment of any monies becoming due
under this lease, the Tenant hereby waiving the
benefit of all laws exempting property from
execution, levy and sale on distress or judgment.
The Tenant agrees to pay, as additional rent, all
attorney's fees and other expenses incurred by the
Landlord in enforcing any of the obligations under
this lease.
Sub-letting and Fourth -- The Tenant shall not sub-let the demised
Assignment premises nor any portion thereof, nor shall this
lease be assigned by the Tenant without the prior
Condition of written consent of the Landlord endorsed hereon.
Premises, Repairs
Fifth -- The Tenant has examined the demised
premises, and accepts them in their present
condition (except as otherwise expressly provided
Condition of herein) and without any representations on the
Premises, part of the Landlord or its agents as to the
Repairs present or future condition of the said premises.
The Tenant shall keep the demised premises in
Alterations and good condition, and shall redecorate, paint
Improvements and renovate the said premises as may be necessary
to keep them in repair and good appearance. The
Sanitation, Tenant shall quit and surrender the premises at
Inflammable the end of the demised term in as good condition
Materials as the reasonable use thereof will permit. The
Tenant shall not make any alterations, additions,
Sidewalks or improvements to said premises without the
prior written consent of the Landlord. All
erections, alterations, additions, and _________ in
character, which may be made upon the premises
either by the Landlord or the Tenant, except
furniture or movable trade fixtures installed at
the expense of the Tenant, shall be the property of
the Landlord and shall remain upon and be
surrendered with the premises as a part thereof at
the termination of this Lease, without compensation
to the Tenant. The Tenant further agrees to keep
said premises and all parts thereof in a clean and
sanitary condition and free from trash, inflammable
material and other objectionable matter. If this
lease covers premises, all or a part of which are
on the ground floor, the Tenant further agrees to
keep the sidewalks in front of such ground floor
portion of the demised premises clean and free of
obstructions, snow and ice.
Mechanics' Sixth -- In the event that any mechanics' lien is
Liens filed against the premises as a result of
alterations, additions or improvements made by
the Tenant, the
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<PAGE>
Landlord, at its option, after thirty days' notice
to the Tenant, may terminate this lease and may pay
the said lien, without inquiring into the validity
thereof, and the Tenant shall forthwith reimburse
the Landlord the total expense incurred by the
Landlord in discharging the said lien, as
additional rent hereunder.
Glass Seventh -- The Tenant agrees to replace at the
Tenant's expense any and all glass which may become
broken in and on the demised premises. Plate glass
and mirrors, if any, shall be insured by the Tenant
at their full insurable value in a company
satisfactory to the Landlord. Said policy shall be
of the full premium type, and shall be deposited
with the Landlord or its agent.
Liability of Eighth -- The Landlord shall not be responsible
Landlord for the loss of or damage to property, or injury to
persons, occurring in or about the demised
premises, by reason of any existing or future
condition, defect, matter or thing in said demised
premises or the property of which the premises are
a part, or for the acts, omissions or negligence of
other persons or tenants in and about the said
property. The Tenant agrees to indemnify and save
the Landlord harmless from all claims and liability
for losses of or damage to property, or injuries to
persons occurring in or about the demised premises.
Services and Ninth - Utilities and services furnished to the
Utilities demised premises for the benefit of the Tenant
shall be provided and paid for as follows: water
by the ; gas by the ;
electricity by the ; heat by the ;
refrigeration by the ; hot water by the .
See #29 below
The Landlord shall not be liable for any
interruption or delay in any of the above services
for any reason.
Right to Inspect Tenth -- The Landlord, or its agents, shall have
and Exhibit the right to enter the demised premises at
reasonable hours in the day or night to examine the
same, or to run telephone or other wires, or to
make such repairs, additions or alterations as it
shall deem necessary for the safety, preservation
or restoration of the improvements, or for the
safety or convenience of the occupants or users
thereof (there being no obligation, however, on the
part of the Landlord to make any such repairs,
additions or alterations), or to exhibit the same
to prospective purchasers and put upon the
-4-
<PAGE>
premises a suitable "For Sale" sign. For three
months prior to the expiration of the demised term,
the Landlord, or its agents, may similarly exhibit
the premises to prospective tenants, and may place
the usual "To Let" signs thereon.
Damage by Fire, Eleventh -- In the event of the destruction of the
Explosion, The demised premises or the building containing the
Elements or said premises by fire, explosion, the elements or
Otherwise otherwise during the term hereby created, or
previous thereto, or such partial destruction
thereof as to render the premises wholly
untenantable or unfit for occupancy, or should the
demised premises be so badly injured that the same
cannot be repaired within ninety days from the
happening of such injury, then and in such case the
term hereby created shall, at the option of the
Landlord, cause and become null and void from the
date of such damage or destruction, and the Tenant
shall immediately surrender said premises and all
the Tenant's interest therein to the Landlord, and
shall pay rent only to the time of such surrender,
in which event the Landlord may re-enter and
re-possess the premises thus discharged from this
lease and may remove all parties therefrom. Should
the demised premises be rendered untenantable and
unfit for occupancy, but yet be repairable within
ninety days from the happening of said injury, the
Landlord may enter and repair the same with
reasonable speed, and the rent shall not accrue
after said injury or while repairs are being made,
but shall recommence immediately after said repairs
shall be completed. But if the premises shall be so
slightly injured as not to be rendered untenantable
and unfit for occupancy, then the Landlord agrees
to repair the same with reasonable promptness and
in that case the rent accrued and accruing shall
not cease or determine. The Tenant shall
immediately notify the Landlord in case of fire or
other damage to the premises.
Observation of Twelfth -- The Tenant agrees to observe and
Laws; Ordinances, comply with all laws, ordinances, rules and
Rules and regulations of the Federal, State, County and
Regulations Municipal authorities applicable to the business to
be conducted by the Tenant in the demised premises.
The Tenant agrees not to do or permit anything to
be done in said premises, or keep anything therein,
which will increase the rate of fire insurance
premiums on the improvements or any part thereof,
or on property kept therein, or which will obstruct
or interfere with the rights of other tenants, or
conflict with the regulations of the Fire
Department or with any insurance policy upon said
improvements or any part thereof. In the event of
any increase in insurance premiums resulting from
the
-5-
<PAGE>
Tenant's occupancy of the premises, or from any act
or omission on the part of the Tenant, the Tenant
agrees to pay said increase in insurance premiums
on the improvements or contents thereof as
additional rent.
Signs Thirteenth -- No sign, advertisement or notice
shall be affixed to or placed upon any part of the
demised premises by the Tenant, except in such
manner, and of such size, design and color as shall
be approved in advance in writing by the Landlord.
Subordination to Fourteenth -- This lease is subject and is hereby
Mortgages and subordinated to all present and future mortgages,
Deeds of Trust deeds of trust and other encumbrances affecting the
demised premises or the property of which said
premises are a part. The Tenant agrees to execute,
at no expense to the Landlord, any instrument which
may be deemed necessary or desirable by the
Landlord to further effect the subordination of
this lease to any such mortgage, deed of trust or
encumbrance.
Sale of Premises Fifteenth -- In the event of the sale by the
Landlord of the demised premises, or the property
of which said premises are a part, the Landlord or
the purchaser may terminate this lease on the
thirtieth day of April in any year upon giving the
Tenant notice of such termination prior to the
first day of January in the same year.
Rules and Sixteenth -- The rules and regulations regarding
Regulations of the demised premises, affixed to this lease, if
Landlord any, as well as any other and further reasonable
rules and regulations which shall be made by the
Landlord, shall be observed by the Tenant and by
the Tenant's employees, agents and customers. The
Landlord reserves the right to rescind any
presently existing rules applicable to the demised
premises, and to make such other and further
reasonable rules and regulations as, in its
judgment, may from time to time be desirable for
the safety, care and cleanliness of the premises,
and for the preservation of good order therein,
which rules, when so made and notice thereof given
to the Tenant, shall have the same force and effect
as if originally made a part of this lease. Such
other and further rules shall not, however, be
inconsistent with the proper and rightful enjoyment
by the Tenant of the demised premises.
Violation of Seventeenth -- In case of violation by the Tenant
Covenants, of any of the covenants, agreements and conditions
of this
-6-
<PAGE>
Forfeiture of lease, or of the rules and regulations now or
Lease, Re-entry hereafter to be reasonably established by the
by Landlord Landlord, and upon failure to discontinue such
violation within ten days after notice thereof
given to the Tenant, this lease shall thenceforth,
at the option of the Landlord, become null and
Non-Waiver void, and the Landlord may re-enter without
of Breach further notice or demand. The rent in such case
shall become due, be apportioned and paid on and up
to the day of such re-entry, and the Tenant shall
be liable for all loss or damage resulting from
such violation as aforesaid. No waiver by the
Landlord of any violation or breach of condition by
the Tenant shall constitute or be construed as a
waiver of any other violation or breach of
condition, nor shall lapse of time after breach of
condition by the Tenant before the Landlord shall
exercise its option under this paragraph operate to
defeat the right of the Landlord to declare this
lease null and void and to re-enter upon the
demised premises after the said breach or
violation.
Notices Eighteenth -- All notices and demands, legal or
otherwise, incidental to this lease, or the
occupation of the demised premises, shall be in
writing. If the Landlord or its agent desires to
give or serve upon the Tenant any notice or demand,
it shall be sufficient to send a copy thereof by
registered mail, addressed to the Tenant at the
demised premises, or to leave a copy thereof with a
person of suitable age found on the premises, or to
post a copy thereof upon the door to said
premises. Notices from the Tenant to the Landlord
shall be sent by registered mail or delivered to
the Landlord at the place hereinbefore designated
for the payment of rent, or to such party or place
as the Landlord may from time to time designate in
writing.
Bankruptcy, Nineteenth -- It is further agreed that if at
Insolvency, any time during the term of this lease the Tenant
Assignment for shall make any assignment for the benefit of
Benefit of creditors, or be decreed insolvent or bankrupt
Creditors according to law, or if a receiver shall be
appointed for the Tenant, then the Landlord may, at
its option, terminate this lease, exercise of such
option to be evidenced by notice to that effect
served upon the assignee, receiver, trustee or
other person in charge of the liquidation of the
property of the Tenant or the Tenant's estate, but
such termination shall not release or discharge any
payment of rent payable hereunder and then accrued,
or any liability then accrued by reason of any
agreement or covenant herein contained on the part
of the Tenant, or the Tenant's legal
representatives.
-7-
<PAGE>
Holding Over Twentieth -- In the event that the Tenant shall
by Tenant remain in the demised premises after the
expiration of the term of this lease without having
executed a new written lease with the Landlord,
such holding over shall not constitute a renewal or
extension of this lease. The Landlord may, at its
option, elect to treat the Tenant as one who has
not removed at the end of his term, and thereupon
be entitled to all the remedies against the Tenant
provided by law in that situation, or the Landlord
may elect, at its option, to construe such holding
over as a tenancy from month to month, subject to
all the terms and conditions of this lease, except
as to duration thereof, and in that event the
Tenant shall pay monthly rent in advance at the
rate provided herein as effective during the last
month of the demised term.
Eminent Domain, Twenty-first -- If the property or any part thereof
Condemnation wherein the demised premises are located shall
be taken by public or quasi-public authority under
any power of eminent domain or condemnation, this
lease, at the option of the Landlord, shall
forthwith terminate and the Tenant shall have no
claim or interest in or to any award of damages for
such taking.
Security Twenty-second -- The Tenant has this day deposited
with the Landlord the sum of $---------- as
security for the full and faithful performance by
the Tenant of all the terms, covenants and
conditions of this lease upon the Tenant's part to
be performed, which said sum shall be returned to
the Tenant after the time fixed as the expiration
of the term herein, provided the Tenant has fully
and faithfully carried out all of said terms,
covenants and conditions on Tenant's part to be
performed. In the event of a bona fide sale,
subject to this lease, the Landlord shall have the
right to transfer the security to the vendee for
the benefit of the Tenant and the Landlord shall be
considered released by the Tenant from all
liability for the return of such security; and the
Tenant agrees to look to the new Landlord solely
for the return of the said security, and it is
agreed that this shall apply to every transfer or
assignment made of the security to a new Landlord.
The security deposited under this lease shall not
be mortgaged, assigned or encumbered by the Tenant
without the written consent of the Landlord.
Arbitration Twenty-third -- Any dispute arising under this
lease shall be settled by arbitration. Then
Landlord and Tenant shall each choose an
arbitrator, and the two arbitrators thus chosen
shall select a third arbitrator. The findings and
award of the three
-8-
<PAGE>
arbitrators thus chosen shall be final and binding
on the parties hereto.
Delivery of Twenty-fourth -- No rights are to be conferred
Lease upon the Tenant until this lease has been signed
by the Landlord, and an executed copy of the lease
has been delivered to the Tenant.
Lease Provisions Twenty-fifth -- The foregoing rights and remedies
Not Exclusive are not intended to be exclusive but as additional
to all rights, and remedies the Landlord would
otherwise have by law.
Lease Binding Twenty-sixth -- All of the terms, covenants and
on Heirs, conditions of this lease shall inure to the
Successors, Etc. benefit of and be binding upon the respective
heirs, executors, administrators, successors and
assigns of the parties hereto. However, in the
event of the death of the Tenant, if an individual,
the Landlord may, at its option, terminate this
lease by notifying the executor or administrator of
the Tenant at the demised premises.
Twenty-seventh -- This lease and the obligation of
Tenant to pay rent hereunder and perform all of the
other covenants and agreements hereunder on part of
Tenant to be performed shall in nowise be affected,
impaired or excused because Landlord is unable to
supply or is delayed in supplying any service
expressly or impliedly to be supplied or is unable
to make, or is delayed in making any repairs,
additions, alterations or decorations or is unable
to supply or is delayed in supplying any equipment
or fixtures if Landlord is prevented or delayed
from so doing by reason of governmental preemption
in connection with the National Emergency declared
by the President of the United States or in
connection with any rule, order or regulation of
any department or subdivision thereof of any
governmental agency or by reason of the conditions
of supply and demand which have been or are
affected by the war.
Twenty-eighth -- This instrument may not be changed
orally.
Twenty-ninth: Utilities shall be provided for by
the Landlord, including electricity, gas, water,
sewer, garbage collection, parking lot maintenance
etc., to the extent of Six Thousand Dollars
($6,000.00) per year. Any costs for the provision
of these services in excess of said amount shall be
borne by the Tenant, after an accounting has been
made to the Tenant by the
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<PAGE>
Landlord justifying the expenditure of said Six
Thousand Dollars ($6,000.00).
IN WITNESS WHEREOF, the said Parties have hereunto set their
hands and seals the day and year first above written.
The Building Center, Inc.
/s/ Gerald C. Finn
----------------------------------(SEAL)
Witness: Gerald C. Finn, Landlord Pres.
[Signature illegible]
- ----------------------------- ----------------------------------
New America Network
[Signature illegible]
- ----------------------------- By /s/ Matthew C. Arnold (SEAL)
----------------------------------
Matthew C. Arnold, V.P., Tenant
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<PAGE>
GUARANTY
In consideration of the execution of the within lease by the
Landlord, at the request of the undersigned and in reliance of this guaranty,
the undersigned hereby guarantees unto the Landlord, its successors and
assigns, the prompt payment of all rent and the performance of all of the
terms, covenants and conditions provided in said lease, hereby waiving all
notice of default, and consenting to any extensions of time or changes in the
manner of payment or performance of any of the terms and conditions of the
said lease the Landlord may grant the Tenant, and further consenting to the
assignment and the successive assignments of the said lease, and any
modifications thereof, including the sub-letting and changing of the use of
the demised premises, all without notice to the undersigned. The undersigned
agrees to pay the Landlord all expenses incurred in enforcing the obligations
of the Tenant under the within lease and in enforcing this guaranty.
Witness:-------------------- ------------------------------(SEAL)
-------------------- ------------------------------(SEAL)
Date:-----------------------
LEASE
===========================================================================
Landlord
to
Tenant
===========================================================================
Premises leased:
From:-----------------------------
To:-------------------------------
ASSIGNMENT AND ACCEPTANCE OF ASSIGNMENT
For value received the undersigned Tenant hereby assigns all of said
Tenant's right, title and interest in and to the within lease from and after
- -------------------- unto--------------------------- heirs,
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<PAGE>
successors, and assigns, the demised premises to be used and occupied for
- ------------------------------------------------- and for no other purpose, it
being expressly agreed that this assignment shall not in any manner relieve
the undersigned assignor from liability upon any of the covenants of this
lease.
Witness:------------------------- --------------------------------(SEAL)
------------------------- --------------------------------(SEAL)
Date:---------------------------
In consideration of the above assignment and the written consent of
the Landlord thereto, the undersigned assignee, hereby assumes and agrees from
and after ------------------------ to make all payments and to perform all
covenants and conditions provided in the within lease by the Tenant therein to
be made and performed.
Witness:------------------------- --------------------------------(SEAL)
------------------------- --------------------------------(SEAL)
Date:---------------------------
CONSENT TO ASSIGNMENT
The undersigned Landlord hereby consents to the assignment of the
within lease to ------------------------------------------ on the express
conditions that the original Tenant -------------------------------------
- -----------------------------------------------------------, the assignor,
herein, shall remain liable for the prompt payment of the rent and the
performance of the covenants provided in the said lease by the Tenant to be
made and performed, and that no further assignment of said lease or
sub-letting of any part of the premises thereby
-12-
<PAGE>
demised shall be made without the prior written consent of the undersigned
Landlord.
--------------------------------------
Landlord
Date:--------------------------- By------------------------------------
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<PAGE>
Exhibit 10.5
<PAGE>
EXTENSION OF LEASE
THIS AGREEMENT dated this 15th day of April, 1998, by and between
The Building Center, Inc. ("Landloard"), a New Jersey corporation
with its principal offices at Route 130 and Maple Stream Road, East
Windsor, New Jersey 08520 and New America Network, Inc. ("Tenant")
a Delaware corporation with its principal offices at Route 130 and
Maple Stream Road, East Windsor, New Jersey 08520.
WHEREAS, the parties executed a Lease dated August 15, 1984 as
amended by the Letter Agreement dated December 30, 1995 (as so
amended, the "Lease") by which Landlord demised and leased unto
Tenant the premises described as follows:
Situated in the Township of East Windsor, County of Mercer and
State of New Jersey being a portion of a building located at
Route 130 and Maple Stream Road and being more particularly
known and described as Building #4 (the "Premises").
A copy of the Lease is attached hereto as Exhibit A;
WHEREAS, the term of the Lease expired on August 31, 1989 and
the parties have continued their relationship on a month-to-month
basis in accordance with the terms of the Lease;
WHEREAS, the parties now desire to formally renew the term of
the Lease in accordance with the terms of the Lease and this
Agreement.
Now THEREFORE, in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the
parties hereto agree as follows:
1. Landlord shall demise the Premises to Tenant for an additional
period of one (1) year commencing upon the date of this Agreement
and terminating on April 15, 1999. The Lease shall automatically be
renewed for successive one year periods, provided, however, that
either party may terminate the Lease on ninety (90) days written
notice to the other party.
2. The rent for each one year period shall be $102,000, payable
monthly on the first day of each calendar month in the amount of
$8,500 per month.
<PAGE>
3. This extension is granted on the conditions that:
a. Tenant has paid all rents and other charges required by the
provisions of the Lease or as mutually agreed by the parties for
all periods up to and including the date of this Agreement;
b. Tenant shall pay all rents and other charges required by
the Lease and by this Agreement during the entire period of the
extension of the Lease as the charges become due;
Tenant shall comply with all other terms and conditions of
the Lease, which are to remain in full force and effect, and not be
modified, altered or amended in any manner except as provided in
this Agreement.
4. Nothing in this Agreement shall operate to discharge or release
Tenant or the legal representatives or assigns of Tenant from the
duty and obligation to promptly perform each of the terms and
conditions contained in the Lease attached hereto as Exhibit A.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ATTEST:
THE BUILDING CENTER, INC.
____________________ By: _________________________
NEW AMERICA NETWORK, INC.
____________________ By: _________________________
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1998 INCENTIVE PLAN
NEW AMERICA NETWORK, INC.
(a Delaware corporation)
the predecessor-in-interest to
NEW AMERICA INTERNATIONAL, INC.
(a Maryland corporation)
adopted
May 28, 1998
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TABLE OF CONTENTS
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ARTICLE 1.
PURPOSE OF THE PLAN......................................................................................1
1.1. Purpose. ....................................................................................1
ARTICLE 2.
SHARES SUBJECT TO AWARDS.................................................................................2
2.1. Number of Shares................................................................................2
2.2. Shares Subject to Terminated Awards.............................................................2
2.3. Character of Shares.............................................................................2
2.4. Limitations on Grants to Individual Participant.................................................3
ARTICLE 3.\
ELIGIBILITY AND ADMINISTRATION...........................................................................3
3.1. Participants....................................................................................3
3.2. Awards to Participants..........................................................................3
3.3. Administration..................................................................................3
ARTICLE 4.
PERFORMANCE-BASED AWARDS.................................................................................4
ARTICLE 5.
OPTIONS..................................................................................................6
5.1. Grant of Options................................................................................6
5.2. Option Price....................................................................................6
5.3. Other Provisions................................................................................6
ARTICLE 6.
STOCK APPRECIATION RIGHTS................................................................................7
6.1. Grant and Exercise..............................................................................7
6.2. Terms and Conditions............................................................................7
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ARTICLE 7.
RELOAD OPTIONS...........................................................................................8
7.1. Authorization of Reload Options.................................................................8
7.2. Reload Option Amendment.........................................................................8
7.3. Reload Option Price.............................................................................8
7.4. Term and Exercise...............................................................................9
7.5. Termination of Employment.......................................................................9
7.6. Applicability of Other Sections.................................................................9
ARTICLE 8.
STOCK PURCHASE AWARDS....................................................................................9
8.1. Grant of Stock Purchase Award...................................................................9
8.2. Terms of Purchase Loans.........................................................................9
8.3. Security for Loans.............................................................................10
8.4. Termination of Employment......................................................................10
8.5. Restrictions on Transfer.......................................................................11
ARTICLE 9.
RESTRICTED STOCK AWARDS..................................................................................11
9.1. Restricted Stock Awards.........................................................................11
9.2. Terms of Restricted Shares......................................................................12
ARTICLE 10.
GENERALLY APPLICABLE PROVISIONS.........................................................................13
10.1. Option Period..................................................................................13
10.2. Fair Market Value..............................................................................13
10.3. Exercise of Options............................................................................13
10.4. Transferability................................................................................14
10.5. Termination of Employment......................................................................14
10.6. Death .........................................................................................15
10.7. Disability ...................................................................................15
10.8. Amendment and Modification of the Plan.........................................................15
ARTICLE 11.
ADJUSTMENTS.............................................................................................15
11.1. Adjustments ...................................................................................15
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ARTICLE 12.
CHANGE IN CONTROL.......................................................................................16
12.1. Change in Control..............................................................................16
ARTICLE 13.
MISCELLANEOUS...........................................................................................17
13.1. Tax Withholding................................................................................17
13.2. Right of Discharge Reserved....................................................................17
13.3. Nature of Payments.............................................................................17
13.4. Severability...................................................................................18
13.5. Gender and Number..............................................................................18
13.6. Tenure ........................................................................................18
13.7. Unfunded Plan..................................................................................18
13.8. Compliance with Rule 16b-3.....................................................................18
13.9. Governing Law..................................................................................19
13.10. Effectiveness and Termination of Plan..........................................................19
13.11. Captions ......................................................................................19
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NEW AMERICA NETWORK, INC.
1998 INCENTIVE PLAN
NEW AMERICA NETWORK, INC., a Delaware corporation (the
"Company"), and the predecessor-in-interest to New America International, Inc.,
a Maryland corporation, hereby establishes and adopts the following 1998
Incentive Plan (the "Plan").
RECITALS
WHEREAS, the Company desires to encourage high levels of
performance by those individuals who are key to the success of the Company, to
attract new individuals who are highly motivated and who will contribute to the
success of the Company and to encourage such individuals to remain as directors,
officers, employees and consultants of the Company and its subsidiaries by
increasing their proprietary interest in the Company's growth and success.
WHEREAS, to attain these ends, the Company has formulated the
Plan embodied herein to authorize the granting of performance-based awards and
incentive awards through grants of cash, stock options ("Options"), Stock
Appreciation Rights (hereafter defined), Stock Purchase Awards (hereafter
defined) and Restricted Stock Awards (hereafter defined), to those individuals
whose judgment, initiative and efforts are responsible for the success of the
Company.
NOW, THEREFORE, the Company hereby constitutes, establishes
and adopts the following Plan and agrees to the following provisions:
ARTICLE 1.
PURPOSE OF THE PLAN
1.1. Purpose. The purpose of the Plan is to assist the
Company in attracting and retaining selected individuals to serve as directors,
officers, employees and consultants of the Company who will contribute to the
Company's success, and to achieve long-term objectives which will inure to the
benefit of all shareholders of the Company, through the receipt of monetary
payments and through the additional incentive inherent in the ownership of
common stock of the Company (the "Shares"). Further, the Plan is intended to
assist the Company in aligning the interests of its directors, officers,
employees and consultants to those of its shareholders.
Options granted under the Plan will be either "incentive stock
options," intended to qualify as such under the provisions of Section 422 of the
Internal Revenue Code of 1986, as from time to time amended (the "Code"), or
"nonqualified stock options." For purposes of the Plan, the term "subsidiary"
shall mean "subsidiary corporation," as such term is defined in Section 424(f)
of
<PAGE>
the Code, and "affiliate" shall have the meaning set forth in Rule 12b-2 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). For purposes
of the Plan, the term "Award" shall include a grant of cash, an Option, Stock
Appreciation Rights, a Stock Purchase Award, a Restricted Stock Award, or any
other award made under the terms of the Plan.
ARTICLE 2.
SHARES SUBJECT TO AWARDS
2.1. Number of Shares. Subject to the adjustment provisions
of Section 11.1 hereof, the aggregate number of Shares which may be issued under
Awards under the Plan, whether pursuant to Performance-Based Awards, Options,
Stock Appreciation Rights, Stock Purchase Awards or Restricted Stock Awards
shall not exceed 1,700,000. Approximately 80% of the Shares under the Plan are
reserved for employees, directors, officers and consultants of the Company who
are not also employees, directors, officers and consultants of Kranzco Realty
Trust. No Options to purchase fractional Shares shall be granted or issued under
the Plan. The Committee (as defined in Section 3.3(a)) shall determine whether
cash or other property shall be issued or paid in lieu of fractional shares or
whether such fractional shares or any rights hereto shall be forfeited or
otherwise eliminated. For purposes of this Section 2.1, the Shares that shall be
counted toward such limitation shall include all Shares:
(a) issued or issuable pursuant to Options and
Stock Appreciation Rights that have been or may be exercised;
(b) issued or issuable pursuant to
Performance-Based Awards and Stock Purchase Awards; and
(c) issued as, or subject to issuance as a
Restricted Stock Award.
2.2. Shares Subject to Terminated Awards. The Shares
covered by any unexercised portions of terminated Options granted under Articles
5 and 7, Shares forfeited as provided in Section 9.2(a) and Shares subject to
any Awards which are otherwise surrendered by the Participant (as defined in
Section 3.1) without receiving any payment or other benefit with respect thereto
may again be subject to new Awards under the Plan. In the event the purchase
price of an Option is paid in whole or in part through the delivery of Shares,
the number of Shares issuable in connection with the exercise of the Option
shall not again be available for the grant of Awards under the Plan. Shares
subject to Options, or portions thereof, which have been surrendered in
connection with the exercise of Stock Appreciation Rights shall not again be
available for the grant of Awards under the Plan.
2.3. Character of Shares. Shares delivered under the Plan
may be authorized and unissued Shares or Shares acquired by the Company, or
both.
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2.4. Limitations on Grants to Individual Participant.
Subject to adjustments pursuant to the provisions of Section 11.1 hereof, the
maximum number of Shares with respect to which Awards may be granted hereunder
to any employee during any fiscal year shall be 250,000 Shares (the
"Limitation"). If an Option is cancelled, the cancelled Option shall continue to
be counted toward the Limitation for the year granted. An Option (or a Stock
Appreciation Right) that is repriced during any fiscal year is treated as the
cancellation of the Option (or a Stock Appreciation Right) and a grant of a new
Option (or a Stock Appreciation Right) for purposes of the Limitation for that
fiscal year.
ARTICLE 3.
ELIGIBILITY AND ADMINISTRATION
3.1. Participants. Participants will consist of such
directors, officers, employees and consultants of the Company and its
subsidiaries as the Committee in its sole discretion determines to be
responsible for the success and further growth and profitability of the Company
and whom the Committee may designate from time to time to receive benefits under
the Plan. The Committee shall consider such factors as it deems pertinent in
selecting Participants and in determining the type and amount of their
respective benefits.
3.2. Awards to Participants. (a) Participants who receive
Options under Articles 5 and 7 (including Stock Appreciation Rights under
Article 6) ("Optionees"), Performance-Based Awards under Article 4, Stock
Purchase Awards under Article 8 or Restricted Stock Awards under Article 9 (in
each case a Participant) shall consist of such directors, officers, employees
and consultants of the Company or any of its subsidiaries or affiliates as the
Committee shall select from time to time. The Committee's designation of a
Participant in any year shall not require the Committee to designate such person
to receive Awards or grants in any other year. The designation of a Participant
to receive Awards or grants under one portion of the Plan shall not require the
Committee to include such Participant under other portions of the Plan.
(b) No Option which is intended to qualify as an
"incentive stock option" may be granted to any employee or Director who, at the
time of such grant, owns, directly or in directly (within the meaning of
Sections 422(b)(6) and 424(d) of the Code), shares possessing more than ten
percent (10%) of the total combined voting power of all classes of shares of the
Company or any of its subsidiaries or affiliates, unless at the time of such
grant, (i) the option price is fixed at not less than 110% of the Fair Market
Value (as defined below) of the Shares subject to such Option, determined on the
date of the grant, and (ii) the exercise of such Option is prohibited by its
terms after the expiration of five (5) years from the date such Option is
granted.
3.3. Administration. (a) The Plan shall be administered
by a committee (the "Committee") appointed by the Board of Directors of the
Company consisting of not fewer than two
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Directors of the Company (the directors of the Company being hereinafter
referred to as the "Directors"). The Directors may remove from, add members to,
or fill vacancies in the Committee. Unless otherwise determined by the
Directors, each member of the Committee will be a "non-employee director" within
the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act and an
"outside director" within the meaning of Section 162(m)(4)(C)(i) of the Code and
the regulations thereunder.
(b) Any Award to a member of the Committee shall be
on terms consistent with Awards made to other Directors who are not members of
the Committee, except where the Award is approved or ratified by the Board of
Directors of the Company (excluding persons who are also members of the
Committee).
(c) The Committee is authorized, subject to the
provisions of the Plan, to establish such rules and regulations as it may deem
appropriate for the conduct of meetings and proper administration of the Plan.
All actions of the Committee shall be taken by majority vote of its members.
(d) Subject to the provisions of the Plan, the
Committee shall have authority, in its sole discretion, to make such
determinations and interpretations of the provisions of the Plan and, subject to
the requirements of applicable law, including Rule 16b-3 of the Exchange Act, to
prescribe, amend, and rescind rules and regulations relating to it as it may
deem necessary or advisable. All decisions made by the Committee pursuant to the
provisions of the Plan shall be final, conclusive and binding on all persons,
including the Company, its shareholders, Directors, employees and Participants.
(e) No member of the Board, no member of the
Committee and no employee of the Company shall be liable for any act or failure
to act hereunder, by any other member or employee or by any agent to whom duties
in connection with the administration of this Plan have been delegated or,
except circumstances involving bad faith, gross negligence or fraud by such
person, for any act or failure to act by the member or employee.
ARTICLE 4.
PERFORMANCE-BASED AWARDS
4.1. General. (a) Certain Awards granted under the Plan may
be granted in a manner such that the Awards qualify as "performance-based
compensation"(as such term is used in Section 162(m) of the Code and the
regulations thereunder) and thus be exempt from the deduction limitation imposed
by Section 162(m) of the Code ("Performance-Based Awards"). Awards shall only
qualify as Performance-Based Awards if, among other things, at the time of grant
the Committee is comprised solely of two or more "outside directors" (as such
term is used in Section 162(m) of the Code and the regulations thereunder).
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(b) Performance-Based Awards may be granted to
Participants at any time and from time to time, as shall be determined by the
Committee. The Committee shall have complete discretion in determining the
number, amount and timing of awards granted to each Participant. Such
Performance-Based Awards may take the form of, without limitation, cash, Shares
or any combination thereof.
(c) The Committee shall set performance goals at
its discretion which, depending on the extent to which they are met, will
determine the number and/or value of such Performance-Based Awards that will be
paid out to the Participants, and may attach to such Performance-Based Awards
one or more restrictions. The maximum amount of Performance-Based Awards to be
awarded to any employee during any fiscal year shall be $1,000,000.
4.2. Stock Options and Stock Appreciation Rights. Stock
Options and Stock Appreciation Rights granted under the Plan with an exercise
price at or above the fair market value of the Shares on the date of grant
should qualify as Performance-Based Awards.
4.3. Other Awards. Either the granting or vesting of
Performance-Based Awards granted under the Plan shall be subject to the
achievement of a performance target or targets, as determined by the Committee
in its sole discretion, based on one or more of the performance measures
specified in Section 4.4 below. With respect to such Performance-Based Awards:
(1) the Committee shall establish in writing (x)
the objective performance-based goals
applicable to a given period and (y) the
individual employees or class of employees
to which such performance-based goals apply
no later than 90 days after the commencement
of such period (but in no event after 25
percent of such period has elapsed);
(2) no Performance-Based Awards shall be payable
to or vest with respect to, as the case may
be, any Participant for a given period until
the Committee certifies in writing that the
objective performance goals (and any other
material terms) applicable to such period
have been satisfied; and
(3) after the establishment of a performance
goal, the Committee shall not revise such
performance goal or increase the amount of
compensation payable thereunder (as
determined in accordance with Section 162(m)
of the Code) upon the attainment of such
performance goal.
4.4. Performance Measures. The Committee may use the
following performance measures (either individually or in any combination) to
set performance targets with respect to Awards intended to qualify as
Performance-Based Awards: net sales; pretax income before
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allocation of corporate overhead and bonus; budget; earnings per share; net
income; division, group or corporate financial goals; return on stockholders'
equity; return on assets; attainment of strategic and operational initiatives;
appreciation in and/or maintenance of the price of the Common Stock or any other
publicly-traded securities of the Company; market share; gross profits; earnings
before taxes; earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization; economic value-added models; comparisons
with various stock market indices; and/or reductions in costs.
ARTICLE 5.
OPTIONS
5.1. Grant of Options. (a) The Committee shall determine,
within the limitations of the Plan, the Directors, officers, employees and
consultants of the Company and its subsidiaries and affiliates to whom Options
are to be granted under the Plan, the number of Shares that may be purchased
under each such Option and the option price, and shall designate such Options at
the time of the grant as either "incentive stock options" or "nonqualified stock
options;" provided, however, that Options granted to employees of an affiliate
(that is not also a subsidiary) or to non-employees of the Company may only be
"nonqualified stock options."
(b) All Options granted pursuant to this Article 5
and Article 7 herein shall be authorized by the Committee and shall be evidenced
in writing by stock option agreements ("Stock Option Agreements") in such form
and containing such terms and conditions as the Committee shall determine which
are not inconsistent with the provisions of the Plan, and, with respect to any
Stock Option Agreement granting Options which are intended to qualify as
"incentive stock options," are not inconsistent with Section 422 of the Code.
Granting of an Option pursuant to the Plan shall impose no obligation on the
recipient to exercise such option. Any individual who is granted an Option
pursuant to this Article 5 and Article 7 herein may hold more than one Option
granted pursuant to such Articles at the same time and may hold both "incentive
stock options" and "nonqualified stock options" at the same time. To the extent
that any Option does not qualify as an "incentive stock option" (whether because
of its provisions, the time or manner of its exercise or otherwise) such Option
or the portion thereof which does not so qualify shall constitute a separate
"nonqualified stock option."
5.2. Option Price. Subject to Section 3.2(b), the option
price per each Share purchasable under any "incentive stock option" granted
pursuant to this Article 5 and any "non qualified stock option" granted pursuant
to this Plan shall not be less than 100% of the Fair Market Value of such Share
on the date of the grant of such Option.
5.3. Other Provisions. Options granted pursuant to this
Article 5 shall be made in accordance with the terms and provision of Article 10
hereof and any other applicable terms and provisions of the Plan.
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ARTICLE 6.
STOCK APPRECIATION RIGHTS
6.1. Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Option granted under the Plan
provided such rights are granted at the time of the grant of such Option. A
"Stock Appreciation Right" is a right to receive cash or Shares, as provided in
this Article 6, in lieu of the purchase of a Share under a related Option. A
Stock Appreciation Right or applicable portion thereof shall terminate and no
longer be exercisable upon the termination or exercise of the related Option,
and a Stock Appreciation Right granted with respect to less than the full number
of Shares covered by a related Option shall not be reduced until, and then only
to the extent that, the exercise or termination of the related Option exceeds
the number of Shares not covered by the Stock Appreciation Rights. Stock
Appreciation Rights may be exercised by the holder thereof (the "Holder"), in
accordance with Section 6.2, by giving written notice thereof to the Company and
surrendering the applicable portion of the related Option. Upon giving such
notice and surrender, the Holder shall be entitled to receive an amount
determined in the manner prescribed in Section 6.2. Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Rights have been exercised.
6.2. Terms and Conditions. Stock Appreciation Rights shall
be subject to such terms and conditions, not inconsistent with the provisions of
the Plan, as shall be determined from time to time by the Committee, including
the following:
(a) Stock Appreciation Rights shall be exercisable
only at such time or times and to the extent that the Options to which
they relate shall be exercisable in accordance with the provisions of
the Plan.
(b) Upon the exercise of Stock Appreciation Rights,
a Holder shall be entitled to receive up to, but no more than, an
amount in cash or whole Shares equal to the excess of the then Fair
Market Value of one Share over the option price per Share specified in
the related Option multiplied by the number of Shares in respect of
which the Stock Appreciation Right shall have been exercised. The
Holder shall specify in his written notice of exercise, whether payment
shall be made in cash or in whole Shares. Each Stock Appre ciation
Right may be exercised only at the time and so long as a related
Option, if any, would be exercisable or as otherwise permitted by
applicable law.
(c) Upon the exercise of Stock Appreciation Rights,
the Option or part thereof to which such Stock Appreciation Rights are
related shall be deemed to have been exercised for the purpose of the
limitation of the number of Shares to be issued under the Plan, as set
forth in Section 2.1 of the Plan.
(d) With respect to Stock Appreciation Rights
granted in connection with an Option that is intended to be an
"incentive stock option," the following shall apply:
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(i) No Stock Appreciation Rights shall
be transferable by a Holder
otherwise than by will or by the
laws of descent and distribution,
and Stock Appreciation Rights shall
be exercisable, during the Holder's
lifetime, only by the Holder.
(ii) Stock Appreciation Rights granted in
connection with an Option may be
exercised only when the Fair Market
Value of the Shares subject to the
Option exceeds the option price at
which Shares can be acquired
pursuant to the Option.
ARTICLE 7.
RELOAD OPTIONS
7.1. Authorization of Reload Options. Concurrently with the
award of any Option (such Option hereinafter referred to as the "Underlying
Option") to any Participant in the Plan, the Committee may grant one or more
reload options (each, a "Reload Option") to such Participant to purchase for
cash or Shares a number of Shares as specified below. A Reload Option shall be
exercisable for an amount of Shares equal to (i) the number of Shares delivered
by the Participant to the Company to exercise the Underlying Option, and (ii) to
the extent authorized by the Committee, the number of Shares used to satisfy any
tax withholding requirement incident to the exercise of the Underlying Option,
subject to the availability of Shares under the Plan at the time of such
exercise. Any Reload Option may provide for the grant, when exercised, of
subsequent Reload Options to the extent and upon such terms and conditions
consistent with this Article 7, as the Committee in its sole discretion shall
specify at or after the time of grant of such Reload Option. The grant of a
Reload Option will become effective upon the exercise of an Underlying Option or
Reload Option by the Optionee by delivering to the Company Shares owned by the
Optionee in payment of the exercise price and/or tax withholding obligations.
Notwithstanding the fact that the Underlying Option may be an "incentive stock
option," a Reload Option is not intended to qualify as an "incentive stock
option" under Section 422 of the Code.
7.2. Reload Option Amendment. Each Share Option Agreement
shall state whether the Committee has authorized Reload Options with respect to
the Underlying Option. Upon the exercise of an Underlying Option or other Reload
Option, the Reload Option will be evidenced by an amendment to the underlying
Share Option Agreement.
7.3. Reload Option Price. The option price per Share
payable upon the exercise of a Reload Option shall be the Fair Market Value of a
Share on the date the grant of the Reload Option becomes effective.
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7.4. Term and Exercise. Each Reload Option is fully
exercisable immediately upon its grant. The term of each Reload Option shall be
equal to the remaining option term of the Underlying Option.
7.5. Termination of Employment. No additional Reload
Options shall be granted to Participants when Options and/or Reload Options are
exercised pursuant to the terms of this Plan following termination of the
Participant's employment unless the Committee, in its sole discretion, shall
determine otherwise.
7.6. Applicability of Other Sections. Except as otherwise
provided in this Article 7, the provisions of Article 10 applicable to Options
shall apply equally to Reload Options.
ARTICLE 8.
STOCK PURCHASE AWARDS
8.1. Grant of Stock Purchase Award. The term "Stock
Purchase Award" means the right to purchase Shares and to pay for such Shares
through a loan made by the Company to the Participant (a "Purchase Loan") as set
forth in this Article 8.
8.2. Terms of Purchase Loans.
(a) Purchase Loan. Each Purchase Loan shall be
evidenced by a promissory note. The term of the Purchase Loan shall be for a
period of years, as determined by the Committee, and the proceeds of the
Purchase Loan shall be used exclusively by the Participant for purchase of
Shares from the Company at a purchase price equal to the Fair Market Value on
the date of the Stock Purchase Award.
(b) Interest on Purchase Loan. A Purchase Loan
shall be non-interest bearing or shall bear interest at whatever rate the
Committee shall determine (but not in excess of the maximum rate permissible
under applicable law), payable in a manner and at such times as the Committee
shall determine. Those terms and provisions as the Committee shall determine
shall be incorporated into the promissory note evidencing the Purchase Loan.
(c) Forgiveness of Purchase Loan. Subject to
Section 8.4 hereof, the Company may forgive the repayment of up to 100% of the
principal amount of the Purchase Loan, subject to such terms and conditions as
the Committee shall determine and set forth in the promissory note evidencing
the Purchase Loan. A Participant's Purchase Loan can be prepaid at any time, and
from time to time, without penalty.
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8.3. Security for Loans.
(a) Stock Power and Pledge. Purchase Loans
granted to Participants shall be secured by a pledge of the Shares acquired
pursuant to the Stock Purchase Award. Such pledge shall be evidenced by a pledge
agreement (the "Pledge Agreement") containing such terms and conditions as the
Committee shall determine. The share certificates for the Shares purchased by a
Participant pursuant to a Stock Purchase Award shall be issued in the
Participant's name, but shall be held by the Company as security for repayment
of the Participant's Purchase Loan together with a stock power executed in blank
by the Participant (the execution and delivery of which by the Participant shall
be a condition to the issuance of the Stock Purchase Award). The Participant
shall be entitled to exercise all rights applicable to such Shares, including,
but not limited to, the right to vote such Shares and the right to receive
dividends and other distributions made with respect to such Shares. When the
Purchase Loan and any accrued but unpaid interest thereon has been repaid or
otherwise satisfied in full, the Company shall deliver to the Participant the
share certificates for the Shares purchased by a Participant under the Stock
Purchase Award. Purchase Loans shall be recourse or non-recourse with respect to
a Participant, as determined by the Committee.
(b) Release and Delivery of Stock Certificates
During the Term of the Purchase Loan. The Company shall release and deliver to
each Participant certificates for Shares purchased by a Participant pursuant to
a Stock Purchase Award, in such amounts and on such terms and conditions as the
Committee shall determine, which shall be set forth in the Pledge Agreement.
(c) Release and Delivery of Stock Certificates
Upon Repayment of the Purchase Loan. The Company shall release and deliver to
each Participant certificates for the Shares purchased by the Participant under
the Stock Purchase Award and then held by the Company, provided the Participant
has paid or otherwise satisfied in full the balance of the Purchase Loan and any
accrued but unpaid interest thereon. In the event the balance of the Purchase
Loan is not repaid, forgiven or otherwise satisfied within ninety (90) days
after (i) the date repayment of the Purchase Loan is due (whether in accordance
with its term, by reason of acceleration or otherwise), or (ii) such longer time
as the Committee, in its discretion, shall provide for repayment or
satisfaction, the Company shall retain those Shares then held by the Company in
accordance with the Pledge Agreement.
(d) Recourse Purchase Loans. Notwithstanding
Sections 8.3(a), (b) and (c) above, in the case of a recourse Purchase Loan, the
Committee may make a Purchase Loan on such terms as it determines, including
without limitation, not requiring a pledge of the acquired Shares.
8.4. Termination of Employment.
(a) Termination of Employment by Death,
Disability or by the Company Without Cause; Change in Control. In the event of
a Participant's termination of employment by reason of death, "disability" or by
the Company without "cause", or in the event of a "change in
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control", the Committee shall have the right (but shall not be required) to
forgive the remaining unpaid amount (principal and interest) of the Purchase
Loan in whole or in part as of the date of such occurrence. "Change in Control",
"disability" and "cause" shall have the respective meanings as set forth in the
promissory note evidencing the Purchase Loan.
(b) Termination of Employment. Subject to
Section 8.4(a) above, in the event of a Participant's termination of employment
for any reason, the Participant shall repay to the Company the entire balance of
the Purchase Loan and any accrued but unpaid interest thereon, which amounts
shall become immediately due and payable.
8.5. Restrictions on Transfer. No Award of Shares purchased
through such an Award and pledged to the Company as collateral security for the
Participant's Purchase Loan (and accrued but unpaid interest thereon) may be
otherwise pledged, sold, assigned or transferred (other than by will or by the
laws of descent and distribution).
ARTICLE 9.
RESTRICTED STOCK AWARDS
9.1. Restricted Stock Awards. (a) A grant of Shares made
pursuant to this Article 9 is referred to as a "Restricted Stock Award." The
Committee may grant to any Participant an amount of Shares in such manner, and
subject to such terms and conditions relating to vesting, forfeitability and
restrictions on delivery and transfer (whether based on performance standards,
periods of service or otherwise) as the Committee shall establish (such Shares,
"Restricted Shares"). The terms of any Restricted Stock Award granted under this
Plan shall be set forth in a written agreement (a "Restricted Stock Agreement")
which shall contain provisions determined by the Committee and not inconsistent
with this Plan. The provisions of Restricted Stock Awards need not be the same
for each Participant receiving such Awards.
(b) Issuance of Restricted Shares. As soon as
practicable after the date of grant of a Restricted Stock Award by the
Committee, the Company shall cause to be transferred on the books of the
Company, Shares registered in the name of the Company, as nominee for the
Participant, evidencing the Restricted Shares covered by the Award, but subject
to forfeiture to the Company retroactive to the date of grant, if a Restricted
Stock Agreement delivered to the Participant by the Company with respect to the
Restricted Shares covered by the Award is not duly executed by the Participant
and timely returned to the Company. All Restricted Shares covered by Awards
under this Article 9 shall be subject to the restrictions, terms and conditions
contained in the Plan and the Restricted Stock Agreement entered into by and
between the Company and the Participant. Until the lapse or release of all
restrictions applicable to an Award of Restricted Shares, the share certificates
representing such Restricted Shares shall be held in custody by the Company or
its designee.
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(c) Shareholder Rights. Beginning on the date of
grant of the Restricted Stock Award and subject to execution of the Restricted
Stock Agreement as provided in Sections 9.1(a) and (b), the Participant shall
become a shareholder of the Company with respect to all Shares subject to the
Restricted Stock Agreement and shall have all of the rights of a shareholder,
including, but not limited to, the right to vote such Shares and the right to
receive distributions made with respect to such Shares; provided, however, that
any Shares distributed as a dividend or otherwise with respect to any Restricted
Shares as to which the restrictions have not yet lapsed shall be subject to the
same restrictions as such Restricted Shares and shall be represented by book
entry and held as prescribed in Section 9.1(b).
(d) Restriction on Transferability. None of the
Restricted Shares may be assigned or transferred (other than by will or the laws
of descent and distribution), pledged or sold prior to lapse or release of the
restrictions applicable thereto.
(e) Delivery of Shares Upon Release of
Restrictions. Upon expiration or earlier termination of the forfeiture period
without a forfeiture and the satisfaction of or release from any other
conditions prescribed by the Committee, the restrictions applicable to the
Restricted Shares shall lapse. As promptly as administratively feasible
thereafter, subject to the requirements of Section 13.1, the Company shall
deliver to the Participant or, in case of the Participant's death, to the
Participant's beneficiary, one or more stock certificates for the appropriate
number of Shares, free of all such restrictions, except for any restrictions
that may be imposed by law.
9.2. Terms of Restricted Shares.
(a) Forfeiture of Restricted Shares. Subject to
Section 9.2(b), all Restricted Shares shall be forfeited and returned to the
Company and all rights of the Participant with respect to such Restricted Shares
shall terminate unless the Participant continues in the service of the Company
as an employee until the expiration of the forfeiture period for such Restricted
Shares and satisfies any and all other conditions set forth in the Restricted
Stock Agreement. The Committee in its sole discretion, shall determine the
forfeiture period (which may, but need not, lapse in installments) and any other
terms and conditions applicable with respect to any Restricted Stock Award.
(b) Waiver of Forfeiture Period. Notwithstanding
anything contained in this Article 9 to the contrary, the Committee may, in its
sole discretion, waive the forfeiture period and any other conditions set forth
in any Restricted Stock Agreement under appropriate circumstances (including the
death, disability or retirement of the Participant or a material change in
circumstances arising after the date of an Award) and subject to such terms and
conditions (including forfeiture of a proportionate number of the Restricted
Shares) as the Committee shall deem appropriate.
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<PAGE>
ARTICLE 10.
GENERALLY APPLICABLE PROVISIONS
10.1. Option Period. Subject to Section 3.2(b), the period
for which an Option is exercisable shall not exceed five years from the date
such Option is granted. After the Option is granted, the option period may not
be reduced.
10.2. Fair Market Value. If the Shares are listed or
admitted to trading on a securities exchange registered under the Exchange Act,
the "Fair Market Value" of a Share as of a specified date shall mean the average
of the high and low price of the shares for the day immediately preceding the
date as of which Fair Market Value is being determined (or if there was no
reported sale on such date, on the last preceding date on which any reported
sale occurred) reported on the principal securities exchange on which the Shares
are listed or admitted to trading. If the Shares are not listed or admitted to
trading on any such exchange but are listed as a national market security on the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ"), traded in the over-the-counter market or listed or traded on any
similar system then in use, the Fair Market Value of a Share shall be the
average of the high and low sales price for the day immediately preceding the
date as of which the Fair Market Value is being determined (or if there was no
reported sale on such date, on the last preceding date on which any reported
sale occurred) reported on such system. If the Shares are not listed or admitted
to trading on any such exchange, are not listed as a national market security on
NASDAQ and are not traded in the over-the-counter market or listed or traded on
any similar system then in use, but are quoted on NASDAQ or any similar system
then in use, the Fair Market Value of a Share shall be the average of the
closing high bid and low asked quotations on such system for the Shares on the
date in question. If the Shares are not publicly traded, Fair Market Value shall
be determined by the Committee in its sole discretion using appropriate
criteria. An Option shall be considered granted on the date the Committee acts
to grant the Option or such later date as the Committee shall specify.
10.3. Exercise of Options. Options granted under the Plan
shall be exercised by the Optionee (or by a Permitted Assignee) thereof (or by
his or her executors, administrators, guardian or legal representative, as
provided in Sections 10.6 and 10.7 hereof) as to all or part of the Shares
covered thereby, by the giving of written notice of exercise to the Company,
specifying the number of Shares to be purchased, accompanied by payment of the
full purchase price for the Shares being purchased. Full payment of such
purchase price shall be made within five (5) business days following the date of
exercise and shall be made (i) in cash or by certified check or bank check, (ii)
with the consent of the Committee, by delivery of a promissory note in favor of
the Company upon such terms and conditions as determined by the Committee, (iii)
with the consent of Committee, by tendering previously acquired Shares (valued
at its Fair Market Value, as determined by the Committee as of the date of
tender), or (iv) with the consent of the Committee, any combination of (i), (ii)
and (iii). In connection with a tender of previously acquired Shares pursuant to
clause (iii) above, the Committee, in its sole discretion, may permit the
Optionee to constructively exchange Shares already owned by the Optionee in lieu
of actually tendering such Shares to the Company,
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<PAGE>
provided that adequate documentation concerning the ownership of the Shares to
be constructively tendered is furnished in form satisfactory to the Committee.
The notice of exercise, accompanied by such payment, shall be delivered to the
Company at its principal business office or such other office as the Committee
may from time to time direct, and shall be in such form, containing such further
provisions consistent with the provisions of the Plan, as the Committee may from
time to time prescribe. In no event may any Option granted hereunder be
exercised for a fraction of a Share. The Company shall effect the transfer of
Shares purchased pursuant to an Option as soon as practicable, and, within a
reasonable time thereafter, such transfer shall be evidenced on the books of the
Company. No person exercising an Option shall have any of the rights of a
shareholder subject to an Option until certificates for such Shares shall have
been issued following the exercise of such Option. No adjustment shall be made
for cash dividends or other rights for which the record date is prior to the
date of such issuance.
10.4. Transferability. No Option that is intended to qualify
as an "incentive stock option" under Section 422 of the Code shall be assignable
or transferable by the Optionee, other than by will or the laws of descent and
distribution, and such Option may be exercised during the life of the Optionee
only by the Optionee or his guardian or legal representative. "Nonqualified
stock options" and any Stock Appreciation Rights granted in tandem therewith are
transferrable (together and not separately) by the Optionee or Holder, as the
case may be, to any one or more of the following persons (each, a "Permitted
Assignee"): (i) the spouse, parent, issue, spouse of issue, or issue of spouse
("issue" shall include all descendants whether natural or adopted) of such
Optionee or Holder, as the case may be; (ii) a trust for the benefit of one or
more of those persons described in clause (i) above or for the benefit of such
Optionee or Holder, as the case may be, or for the benefit of any such persons
and such Optionee or Holder, as the case may be; or (iii) an entity in which the
Optionee or Holder or any Permitted Assignee thereof is a beneficial owner;
provided, however, that such Permitted Assignee shall be bound by all of the
terms and conditions of this Plan and shall execute an agreement satisfactory to
the Company evidencing such obligation; provided further, however, that any
transfer by a Optionee or Holder who is not then a Director of the Company to
any Permitted Assignee shall be subject to the prior consent of the Committee;
and provided further, however, that such Optionee or Holder shall remain bound
by the terms and conditions of this Plan. The Company shall cooperate with a
Optionee's Permitted Assignee and the Company's transfer agent in effectuating
any transfer permitted pursuant to this Section 10.4.
10.5. Termination of Employment. In the event of the
termination of employment of a Optionee or the separation from service of a
consultant or Director (who is an Optionee) for any reason (other than death or
disability as provided below), any Option(s) held by such Optionee (or its
Permitted Assignee) under this Plan and not previously exercised or expired
shall be deemed cancelled and terminated on the day of such termination or
separation, unless the Committee decides, in its sole discretion, to extend the
term of the Option for a period not to exceed three months after the date of
such termination or separation, provided, however, that in no instance may the
term of the Option, as so extended, exceed the maximum term set forth in Section
3.2(b)(ii) or 10.1 above.
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<PAGE>
10.6. Death. In the event a Optionee dies while employed or
engaged as a consultant by, or during such Optionee's term as a Director of, the
Company or any of its subsidiaries or affiliates, any Option(s) held by such
Optionee (or its Permitted Assignee) and not previously expired or exercised
shall, to the extent exercisable on the date of death, be exercisable by the
estate of such Optionee or by any person who acquired such Option by bequest or
inheritance, or by the Permitted Assignee at any time within one year after the
death of the Optionee, unless earlier terminated pursuant to its terms,
provided, however, that if the term of such Option would expire by its terms
within six months after the Optionee's death, the term of such Option shall be
extended until six months after the Optionee's death, provided further, however,
that in no instance may the term of the Option, as so extended, exceed the
maximum term set forth in Section 3.2(b)(ii) or 10.1 above.
10.7. Disability. In the event of the termination of
employment or engagement as a consultant or expiration of such Optionee's term
as a Director, of an Optionee due to total disability, the Optionee, or his
guardian or legal representative, or a Permitted Assignee shall have the
unqualified right to exercise any Option(s) which have not been previously
exercised or expired and which the Optionee was eligible to exercise as of the
first date of total disability (as determined by the Committee), at any time
within one (1) year after such termination or separation or unless earlier
terminated pursuant to its terms, provided, however, that if the term of such
Option would expire by its terms within six (6) months after such termination or
separation, the term of such Option shall be extended until six months after
such termination or separation, provided further, however, that in no instance
may the term of the Option, as so extended, exceed the maximum term set forth in
Section 3.2(b)(ii) or 10.1 above. The term "total disability" shall, for
purposes of this Plan, be defined in the same manner as such term is defined in
Section 22(e)(3) of the Code.
10.8. Amendment and Modification of the Plan. The
Compensation Committee of the Board of Directors of the Company may, from time
to time, alter, amend, suspend or terminate the Plan as it shall deem advisable,
subject to any requirement for shareholder approval imposed by applicable law or
any rule of any stock exchange or quotation system on which Shares are listed or
quoted; provided that such Compensation Committee may not amend the Plan,
without the approval of the Company's shareholders, to increase the number of
Shares that may be the subject of Options under the Plan (except for adjustments
pursuant to Article 11 hereof). In addition, no amendments to, or termination
of, the Plan shall in any way impair the rights of a Participant (or a Permitted
Assignee thereof) under any Award previously granted without such Participant's
(or Permitted Assignee's) consent.
ARTICLE 11.
ADJUSTMENTS
11.1. Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other prop-
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erty), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities, the issuance of warrants or other rights to
purchase Shares or other securities, or other similar corporate transaction or
event affects the Shares with respect to which Options have been or may be
issued under the Plan, such that an adjustment is determined by the Committee to
be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as the Committee may deem equitable, adjust any
or all of (i) the number and type of Shares that thereafter may be made the
subject of Options, (ii) the number and type of Shares subject to outstanding
Options and Stock Appreciation Rights, and (iii) the grant or exercise price
with respect to any Option, or, if deemed appropriate, make provision for a cash
payment to the holder of any outstanding Option; provided, in each case, that
with respect to "incentive stock options," no such adjustment shall be
authorized to the extent that such adjustment would cause such options to
violate Section 422(b) of the Code or any successor provision; and pro vided
further, that the number of Shares subject to any Option denominated in Shares
shall always be a whole number. In the event of any reorganization, merger,
consolidation, split-up, spin-off, or other business combination involving the
Company (collectively, a "Reorganization"), the Compensation Committee of the
Board of Directors or the Board of Directors may cause any Award outstanding as
of the effective date of the Reorganization to be cancelled in consideration of
a cash payment or alternate Award made to the holder of such cancelled Award
equal in value to the fair market value of such cancelled Award. The
determination of fair market value shall be made by the Compensation Committee
of the Board of Directors or the Board of Directors, as the case may be, in
their sole discretion.
ARTICLE 12.
CHANGE IN CONTROL
12.1. Change in Control. (a) The terms of any Award may
provide in the Stock Option Agreement, Restricted Stock Agreement, Purchase Loan
or other document evidencing the Award, that upon a "Change in Control" of the
Company (i) Options (and Stock Appreciation Rights) accelerate and become fully
exercisable, (ii) restrictions on Restricted Stock lapse and the Shares become
fully vested, (iii) Purchase Loans are forgiven in whole or in part, and (iv)
such other additional benefits as the Committee deems appropriate shall apply.
For purposes of this Plan, a "Change in Control" shall mean an event as
described in the applicable documents evidencing the Award or such other event
as determined in the sole discretion of the Board of Directors of the Company.
(b) The Committee, in its discretion, may determine
that, upon the occurrence of a Change in Control of the Company, each Option and
Stock Appreciation Right outstanding hereunder shall terminate within a
specified number of days after notice to the Participant or Holder, and such
Participant or Holder shall receive, with respect to each Share subject to such
Option or Stock Appreciation Right, an amount equal to the excess of the Fair
Market Value
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<PAGE>
of such Shares immediately prior to the occurrence of such Change in Control
over the exercise price per share of such Option or Stock Appreciation Right;
such amount to be payable in cash, in one or more kinds of property (including
the property, if any, payable in the transaction) or in a combination thereof,
as the Committee, in its discretion, shall determine.
ARTICLE 13.
MISCELLANEOUS
13.1. Tax Withholding. All payments or distributions made
pursuant to the Plan to a Participant (or a Permitted Assignee thereof) shall be
net of any applicable federal, state and local withholding taxes arising as a
result of the grant of any Award, exercise of an Option or Stock Appreciation
Rights or any other event occurring pursuant to this Plan. The Company shall
have the right to withhold from such Participant (or a Permitted Assignee
thereof) such withholding taxes as may be required by law, or to otherwise
require the Participant (or a Permitted Assignee thereof) to pay such
withholding taxes. If the Participant (or a Permitted Assignee thereof) shall
fail to make such tax payments as are required, the Company or its subsidiaries
or affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to such Participant or
to take such other action as may be necessary to satisfy such withholding
obligations. In satisfaction of the requirement to pay withholding taxes, the
Participant (or Permitted Assignee) make a written election, which may be
accepted or rejected in the discretion of the Committee, to have withheld a
portion of the Shares then issuable to the Participant (or Permitted Assignee)
pursuant to the Plan having an aggregate Fair Market Value equal to the
withholding taxes.
13.2. Right of Discharge Reserved. Nothing in the Plan nor
the grant of an Award hereunder shall confer upon any employee, Director or
other individual the right to continue in the employment or service of the
Company or any subsidiary or affiliate of the Company or affect any right that
the Company or any subsidiary or affiliate of the Company may have to terminate
the em ployment or service of (or to demote or to exclude from future Options
under the Plan) any such employee, Director or other individual at any time for
any reason. Except as specifically provided by the Committee, the Company shall
not be liable for the loss of existing or potential profit from an Award granted
in the event of termination of an employment or other relationship even if the
termination is in violation of an obligation of the Company or any subsidiary or
affiliate of the Company to the employee or Director.
13.3. Nature of Payments. All Awards made pursuant to the
Plan are in consideration of services performed for the Company or any
subsidiary or affiliate of the Company. Any income or gain realized pursuant to
Awards under the Plan and any Stock Appreciation Rights constitutes a special
incentive payment to the Participant or Holder and shall not be taken into
account, to the extent permissible under applicable law, as compensation for
purposes of any of the employee benefit plans of the Company or any subsidiary
or affiliate of the Company except as may
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be determined by the Committee or by the Directors or directors of the
applicable subsidiary or affiliate of the Company.
13.4. Severability. If any provision of the Plan shall be
held unlawful or otherwise invalid or unenforceable in whole or in part, such
unlawfulness, invalidity or unenforceability shall not affect any other
provision of the Plan or part thereof, each of which remain in full force and
effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or
unenforceable, such unlawfulness, invalidity or unenforceability shall not
prevent any other payment or benefit from being made or provided under the Plan,
and if the making of any payment in full or the provision of any other benefit
required under the Plan in full would be unlawful or otherwise invalid or
unenforceable, then such unlawfulness, invalidity or unenforceability shall not
prevent such payment or benefit from being made or provided in part, to the
extent that it would not be unlawful, invalid or unenforceable, and the maximum
payment or benefit that would not be unlawful, invalid or unenforceable shall be
made or provided under the Plan.
13.5. Gender and Number. In order to shorten and to improve
the understandability of the Plan document by eliminating the repeated usage of
such phrases as "his or her" and any mas culine terminology herein shall also
include the feminine, and the definition of any term herein in the singular
shall also include the plural except when otherwise indicated by the context.
13.6. Tenure. A Participant's right, if any, to continue to
serve the Company as a director, officer, employee, or otherwise, shall not be
enlarged or otherwise affected by his or her designation as a Participant under
the Plan.
13.7. Unfunded Plan. Participants shall have no right,
title, or interest whatsoever in or to any investments which the Company may
make to aid it in meeting its obligations under the Plan. Nothing contained in
the Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Company and any Participant, beneficiary, legal representative or any other
person. To the extent that any person acquires a right to receive payments from
the Company under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company. All payments to be made hereunder
shall be paid from the general funds of the Company and no special or separate
fund shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan. The Plan is
not intended to be subject to the Employee Retirement Income Security Act of
1974, as amended.
13.8. Compliance with Rule 16b-3. With respect to persons
subject to Section 16 of the Exchange Act, transactions under the Plan are
intended to comply with all applicable conditions or Rule 16b-3 (or its
successors) promulgated under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
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<PAGE>
13.9. Governing Law. The Plan and all determinations made
and actions taken thereunder, to the extent not otherwise governed by the Code
or the laws of the United States, shall be governed by the laws of the State of
Maryland and construed accordingly.
13.10. Effectiveness and Termination of Plan. The Plan shall
become effective upon the reincorporation merger (the "Merger") of New America
Network, Inc., a Delaware corporation with and into New America International,
Inc., a Maryland corporation. Notwithstanding any recapitalization that may
occur in connection with the Merger, there will be no change in the number of
Shares issuable pursuant to the Plan. Awards may be granted under the Plan at
any time and from time to time on or prior to May 27, 2008, on which date the
Plan will expire except as to Options, Awards and related Stock Appreciation
Rights then outstanding under the Plan. Such outstanding Awards and Stock
Appreciation Rights shall remain in effect until they have been exercised or
terminated, or have expired.
13.11. Captions. The captions in this Plan are for
convenience of reference only, and are not intended to narrow, limit or affect
the substance or interpretation of the provisions contained herein.
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<PAGE>
Exhibit 10.7
- -----------------------------------------------------------------------------
1998 BONUS COMPENSATION PLAN
NEW AMERICA NETWORK, INC.
(a Delaware corporation)
the predecessor-in-interest to
NEW AMERICA INTERNATIONAL, INC.
(a Maryland corporation)
adopted
May 28, 1998
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. PURPOSE OF THE PLAN........................................ -1-
1.1. Purpose. ................................................. -1-
ARTICLE 2. SHARES SUBJECT TO AWARDS................................... -2-
2.1. Number of Shares........................................... -2-
2.2. Character of Shares........................................ -2-
ARTICLE 3. ELIGIBILITY AND ADMINISTRATION............................. -2-
3.1. Participants............................................... -2-
3.2. Administration............................................. -2-
ARTICLE 4. STOCK AWARDS............................................... -3-
4.1. Stock Awards............................................... -3-
ARTICLE 5. ADJUSTMENTS................................................ -4-
5.1. Adjustments................................................ -4-
ARTICLE 6. CHANGE IN CONTROL.......................................... -4-
6.1. Change in Control.......................................... -4-
ARTICLE 7. MISCELLANEOUS.............................................. -6-
7.1. Tax Withholding............................................ -6-
7.2. Right of Discharge Reserved................................ -6-
7.3. Nature of Payments......................................... -6-
7.4. Severability............................................... -6-
7.5. Gender and Number.......................................... -7-
7.6. Tenure..................................................... -7-
7.7. Unfunded Plan.............................................. -7-
7.8. Compliance with Rule 16b-3................................. -7-
7.9. Governing Law.............................................. -7-
7.10. Termination of the Plan.................................... -7-
7.11. Amendment of the Plan...................................... -8-
7.12. Captions................................................... -8-
i
<PAGE>
NEW AMERICA NETWORK, INC.
1998 BONUS COMPENSATION PLAN
NEW AMERICA NETWORK, INC., a Delaware corporation (the
"Company"), and the predecessor-in-interest to NEW AMERICA INTERNATIONAL, INC.,
a Maryland corporation, hereby establishes and adopts the following 1998 Bonus
Compensation Plan (the "Plan").
RECITALS
WHEREAS, the Company desires to encourage high levels of
performance by those individuals who are key to the success of the Company, to
attract new individuals who are highly motivated and who will contribute to the
success of the Company and to encourage such individuals to remain as employees
of the Company and its subsidiaries by increasing their proprietary interest in
the Company's growth and success.
WHEREAS, to attain these ends, the Company has formulated the
Plan embodied herein to authorize the granting of Stock Awards (hereafter
defined) to those individuals whose judgment, initiative and efforts are
responsible for the success of the Company.
NOW, THEREFORE, the Company hereby constitutes, establishes
and adopts the following Plan and agrees to the following provisions:
ARTICLE 1.
PURPOSE OF THE PLAN
1.1. Purpose. The purpose of the Plan is to assist the Company
in attracting and retaining selected individuals to serve as employees of the
Company who will contribute to the Company's success, and to achieve long-term
objectives which will inure to the benefit of all shareholders of the Company,
through the incentive inherent in the ownership of common stock of the Company
(the "Shares"). Further, the Plan is intended to assist the Company in aligning
the interests of its directors, officers and employees to those of its
shareholders.
For purposes of the Plan, the term "subsidiary" shall mean
"subsidiary corporation," as such term is defined in Section 424(f) of the Code,
and "affiliate" shall have the meaning set forth in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). For purposes of the Plan,
the term "Award" shall mean a Stock Award made under the terms of the Plan.
<PAGE>
ARTICLE 2.
SHARES SUBJECT TO AWARDS
2.1. Number of Shares. Subject to the adjustment provisions of
Section 5.1 hereof, the aggregate number of Shares which may be issued under
Awards under the Plan, shall not exceed 8,500,000 shares. If less than all of
the rights to purchase an aggregate of 17,101,403 Shares at a subscription price
of $2.00 per Share pursuant to an offering by the Company (the "Rights") are
exercised, the number of Shares available as incentive compensation will be
decreased by 25% of the amount by which 34 million Shares exceeds the number of
Shares outstanding after the Rights are exercised. The Shares to be issued or
delivered under the Plan are authorized and unissued shares, or issued Shares
that have been reacquired by the Company. The Committee (as defined in Section
3.2(a)) shall determine whether cash or other property shall be issued or paid
in lieu of fractional shares or whether such fractional shares or any rights
hereto shall be forfeited or otherwise eliminated. For purposes of this Section
2.1, the Shares that shall be counted toward such limitation shall include all
Shares issued or issuable pursuant to Stock Awards.
2.2. Character of Shares. Shares delivered under the Plan
may be authorized and unissued Shares or Shares acquired by the Company,
or both.
ARTICLE 3.
ELIGIBILITY AND ADMINISTRATION
3.1. Participants. Participants will consist of such employees
of the Company and its subsidiaries as the Chief Executive Officer and the
President of the Company, in their sole discretion, determine to be responsible
for the success and further growth and profitability of the Company and whom
they may designate from time to time to receive benefits under the Plan. The
Chief Executive Officer and the President shall consider such factors as they
deem pertinent in selecting Participants and in determining the type and amount
of their respective benefits. The designation of a Participant in any year shall
not require the Chief Executive Officer and the President to designate such
person to receive Awards or grants in any other year. Notwithstanding the
foregoing, no Stock Award shall be made to any individual who, at the time of
grant, is not an employee of the Company in good standing.
3.2. Administration. (a) The Plan shall be administered by a
committee (the "Committee") consisting of the full Board of Directors of the
Company (the directors of the Company being hereinafter referred to as the
"Directors"). The Directors may remove from, add members to, or fill vacancies
in the Committee.
(b) The Committee is authorized, subject to the
provisions of the Plan, to establish such rules and regulations as it may deem
appropriate for the conduct of meetings and proper administration of the Plan.
All actions of the Committee shall be taken by majority vote of its members.
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(c) Subject to the provisions of the Plan, the
Committee shall have authority, in its sole discretion, to make such
determinations and interpretations of the provisions of the Plan and, subject to
the requirements of applicable law, including Rule 16b-3 of the Exchange Act, to
prescribe, amend, and rescind rules and regulations relating to it as it may
deem necessary or advisable. All decisions made by the Committee pursuant to the
provisions of the Plan shall be final, conclusive and binding on all persons,
including the Company, its shareholders, Directors, employees and Participants.
(d) No member of the Board, no member of the
Committee and no employee of the Company shall be liable for any act or failure
to act hereunder, by any other member or employee or by any agent to whom duties
in connection with the administration of this Plan have been delegated or,
except circumstances involving bad faith, gross negligence or fraud by such
person, for any act or failure to act by the member or employee.
ARTICLE 4.
STOCK AWARDS
4.1. Stock Awards. (a) A grant of Shares made pursuant to this
Article 4 is referred to as a "Stock Award." Each year there shall be available
for award under the Incentive Compensation Plan, a number of Shares equal to the
product of 6.25% times the Company's income from continuing operations before
income taxes (as presented in the Company's audited financial statements) for
such year, adjusted to exclude any deduction for the payment of the Consulting
Fee (as defined below) (the "Annual Award Shares"). The Committee will make
grants of the Annual Award Shares among eligible Participants as recommended by
the Chief Executive Officer and the President within six (6) months after the
end of the fiscal year with respect to which such Award Shares become available
for grant. All employees are currently eligible to participate in the Plan. The
"Consulting Fee" means any fee paid to Kranzco Realty Trust for consulting
services which Kranzco Realty Trust provides to the Company pursuant to an
intercompany agreement to be entered into between Kranzco and the Company.
(b) Issuance of Shares. As soon as practicable
after the date of grant of a Stock Award by the Committee, the Company shall
cause to be transferred on the books of the Company, Shares registered in the
name of the Participant, evidencing the Shares covered by the Award. All Shares
covered by Awards under this Article 4 shall be subject to the restrictions,
terms and conditions contained in the Plan.
(c) Shareholder Rights. Beginning on the date of
grant of the Stock Award the Participant shall become a shareholder of the
Company with respect to all Shares granted pursuant to such Stock Award and
shall have all of the rights of a shareholder, including, but not limited to,
the right to vote such Shares and the right to receive distributions made with
respect to such Shares.
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ARTICLE 5.
ADJUSTMENTS
5.1. Adjustments. (a) In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of
Shares, other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities, the issuance
of warrants or other rights to purchase Shares or other securities, or other
similar corporate transaction or event affects the Shares under the Plan, such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
the Committee may deem equitable, adjust any or all of the number and type of
Shares, and provided further, that the number of Shares shall always be a whole
number. In the event of any reorganization, merger, consolidation, split-up,
spin-off, or other business combination involving the Company (collectively, a
"Reorganization"), the Compensation Committee of the Board of Directors or the
Board of Directors may cause any Award outstanding as of the effective date of
the Reorganization to be cancelled in consideration of a cash payment or
alternate Award made to the holder of such cancelled Award equal in value to the
fair market value of such cancelled Award. The determination of fair market
value shall be made by the Compensation Committee of the Board of Directors or
the Board of Directors, as the case may be, in their sole discretion.
ARTICLE 6.
CHANGE IN CONTROL
6.1. Change in Control. Notwithstanding any other provision of
this Plan, if there is a Change in Control of the Company (as defined below),
the Committee, in its discretion, may take such actions as it deems appropriate.
(a) Definition. For purposes of this Section 6.1,
(i) if there is an employment agreement between the Participant and the Company
or any of its subsidiaries in effect, "Change in Control" shall have the same
definition as the definition contained in such agreement, or (ii) if "Change in
Control" is not defined is such employment agreement, or if there is no
employment agreement between the Participant and the Company or any of its
subsidiaries in effect, a Change in Control shall be deemed to have occurred
upon any of the following events:
(1) A change in control of the direction and
administration of the Company's business of a nature that
would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange
Act; provided, however, that there shall not be deemed to be a
"change in control" of the Company if immediately prior to the
occurrence of what would otherwise be a "change in control" of
the Company (a) the Executive is the other party to the
transaction (a "Control Event") that would otherwise result in
a "change in control"
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of the Company or (b) the Executive is an executive officer,
trustee, director or more than 5% equity holder of the other
party to the Control Event or of any entity, directly or
indirectly, controlling such other party, or
(2) During any period of two (2) consecutive years,
the individuals who at the beginning of such period constitute
the Company's Board of Directors or any individuals who would
be "Continuing Directors" (as hereinafter defined) cease for
any reason to constitute at least a majority thereof; or
(3) The Company's Board of Directors or its
stockholders shall approve a sale of all or substantially all
of the assets of the Company, and such transaction shall have
been consummated; or
(4) The Company's Board of Directors or its
stockholders shall approve any merger, consolidation, or like
business combination or reorganization of the Company, the
consummation of which would result in the occurrence of any
event described in Section 6.1(a)(2) above, and such
transaction shall have been consummated.
Notwithstanding the foregoing, any spin-off of a division or subsidiary of the
Company to its shareholder shall not constitute a Change in Control of the
Company.
For purposes of this Section 6.1(a), "Continuing Directors" shall mean the
Directors of the Company in office on the date hereof (the "Effective Date") and
any successor to any such director and any additional director who after the
date of such effectiveness (i) was nominated or selected by a majority of the
Continuing Directors in office at the time of his nomination or selection and
(ii) is not an "affiliate" or "associate" (as defined in Regulation 12B under
the Exchange Act) at the time of his nomination or selection of any person who
is the beneficial owner, directly or indirectly, of securities representing ten
percent (10%) or more of the combined voting power of the Company's outstanding
securities then ordinarily entitled to vote for the election of Directors.
ARTICLE 7.
MISCELLANEOUS
7.1. Tax Withholding. All Stock Awards, payments or
distributions made pursuant to the Plan to a Participant shall be net of any
applicable federal, state and local withholding taxes arising as a result of the
grant of any Award or any other event occurring pursuant to this Plan. The
Company shall have the right to withhold from such Participant such withholding
taxes as may be required by law, or to otherwise require the Participant to pay
such withholding taxes. If the Participant shall fail to make such tax payments
as are required, the Company or its subsidiaries or affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to such Participant or to take such other
action as may be necessary to satisfy such withholding obligations, including
without limitation, withholding Shares
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otherwise to be issued pursuant to a Stock Award. In satisfaction of the
requirement to pay withholding taxes, the Participant (or Permitted Assignee)
make a written election, which may be accepted or rejected in the discretion of
the Committee, to have withheld a portion of the Shares then issuable to the
Participant (or Permitted Assignee) pursuant to the Plan having an aggregate
Fair Market Value equal to the withholding taxes.
7.2. Right of Discharge Reserved. Nothing in the Plan nor the
grant of an Award hereunder shall confer upon any employee the right to continue
in the employment or service of the Company or any subsidiary or affiliate of
the Company or affect any right that the Company or any subsidiary or affiliate
of the Company may have to terminate the employment or service of any such
employee at any time for any reason. Except as specifically provided by the
Committee, the Company shall not be liable for the loss of existing or potential
profit from an Award granted in the event of termination of an employment or
other relationship even if the termination is in violation of an obligation of
the Company or any subsidiary or affiliate of the Company to the employee.
7.3. Nature of Payments. All Awards made pursuant to the Plan
are in consideration of services performed for the Company or any subsidiary or
affiliate of the Company. Any income or gain realized pursuant to Awards under
the Plan constitutes a special incentive payment to the Participant and shall
not be taken into account, to the extent permissible under appli cable law, as
compensation for purposes of any of the employee benefit plans of the Company or
any subsidiary or affiliate of the Company except as may be determined by the
Committee or by the Directors or directors of the applicable subsidiary or
affiliate of the Company.
7.4. Severability. If any provision of the Plan shall be held
unlawful or otherwise invalid or unenforceable in whole or in part, such
unlawfulness, invalidity or unenforceability shall not affect any other
provision of the Plan or part thereof, each of which remain in full force and
effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or
unenforceable, such unlawfulness, invalidity or unenforceability shall not
prevent any other payment or benefit from being made or provided under the Plan,
and if the making of any payment in full or the provision of any other benefit
required under the Plan in full would be unlawful or otherwise invalid or
unenforceable, then such unlawfulness, invalidity or unenforceability shall not
prevent such payment or benefit from being made or provided in part, to the
extent that it would not be unlawful, invalid or unenforceable, and the maximum
payment or benefit that would not be unlawful, invalid or unenforceable shall be
made or provided under the Plan.
7.5. Gender and Number. In order to shorten and to improve the
understandability of the Plan document by eliminating the repeated usage of such
phrases as "his or her" and any mas culine terminology herein shall also include
the feminine, and the definition of any term herein in the singular shall also
include the plural except when otherwise indicated by the context.
7.6. Tenure. A Participant's right, if any, to continue to
serve the Company as a director, officer, employee, or otherwise, shall not be
enlarged or otherwise affected by his or her designation as a Participant under
the Plan.
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7.7. Unfunded Plan. Participants shall have no right, title,
or interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations under the Plan. Nothing contained in the Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company and
any Participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not intended to
be subject to the Employee Retirement Income Security Act of 1974, as amended.
7.8. Compliance with Rule 16b-3. With respect to persons
subject to Section 16 of the Exchange Act, transactions under the Plan are
intended to comply with all applicable conditions or Rule 16b-3 (or its
successors) promulgated under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
7.9. Governing Law. The Plan and all determinations made and
actions taken thereunder, to the extent not otherwise governed by the Code or
the laws of the United States, shall be governed by the laws of the State of
Maryland and construed accordingly.
7.10. Effectiveness and Termination of the Plan. The Plan
shall become effective upon the reincorporation merger (the "Merger") of New
America Network, Inc., a Delaware corporation with and into New America
International, Inc., a Maryland corporation. Notwithstanding any
recapitalization that may occur in connection with the Merger, there will be no
change in the number of Shares issuable pursuant to the Plan. Awards may be
granted under the Plan at any time and from time to time on or prior to the
termination of the Plan. The Plan shall terminated upon the earliest of (i) the
date upon which at least eighty percent (80%) of the Board of Directors votes to
terminate the Plan and either Gerald C. Finn or Jeffrey M. Finn, for so long as
either is employed by the Company, consents to such termination, and (ii) ten
years after the effective date of the Plan. Awards outstanding upon termination
shall remain in effect until they have been exercised or terminated, or have
expired.
7.11. Amendment of the Plan. The Plan may be amended from time
to time upon the approval of at least eighty percent (80%) of the Board of
Directors and the consent of either Gerald C. Finn or Jeffrey M. Finn, for so
long as either is employed by the Company.
7.12. Captions. The captions in this Plan are for convenience
of reference only, and are not intended to narrow, limit or affect the substance
or interpretation of the provisions contained herein.
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1998 STOCK OPTION PLAN
NEW AMERICA NETWORK, INC.
(a Delaware corporation)
the predecessor-in-interest to
NEW AMERICA INTERNATIONAL, INC.
(a Maryland corporation)
adopted
May 28, 1998
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<PAGE>
TABLE OF CONTENTS
ARTICLE 1. PURPOSE OF THE PLAN.........................................1
1.1. Purpose. ..................................................1
ARTICLE 2. SHARES SUBJECT TO AWARDS....................................2
2.1. Number of Shares............................................2
2.2. Shares Subject to Terminated Awards.........................2
2.3. Character of Shares.........................................2
2.4. Limitations on Grants to Individual Participant.............2
ARTICLE 3. ELIGIBILITY AND ADMINISTRATION..............................3
3.1. Participants................................................3
3.2. Awards to Participants......................................3
3.3. Administration..............................................3
ARTICLE 4. OPTIONS.....................................................4
4.1. Grant of Options............................................4
4.2. Option Price................................................5
4.3. Other Provisions............................................5
ARTICLE 5. GENERALLY APPLICABLE PROVISIONS.............................5
5.1. Option Period...............................................5
5.2. Fair Market Value...........................................5
5.3. Exercise of Options.........................................6
5.4. Transferability.............................................6
5.5. Termination of Employment...................................7
5.6. Death.......................................................7
5.7. Disability..................................................7
5.8. Amendment and Modification of the Plan......................7
ARTICLE 6. ADJUSTMENTS.................................................8
6.1. Adjustments.................................................8
ARTICLE 7. CHANGE IN CONTROL...........................................9
7.1. Change in Control...........................................9
ARTICLE 8. MISCELLANEOUS...............................................9
8.1. Tax Withholding.............................................9
8.2. Right of Discharge Reserved.................................9
8.3. Nature of Payments.........................................10
8.4. Severability...............................................10
8.5. Gender and Number..........................................10
8.6. Tenure.....................................................10
8.7. Unfunded Plan..............................................10
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8.8. Compliance with Rule 16b-3.................................11
8.9. Governing Law..............................................11
8.10. Effectiveness and Termination of Plan......................11
8.11. Captions...................................................11
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NEW AMERICA NETWORK, INC.
1998 STOCK OPTION PLAN
NEW AMERICA NETWORK, INC., a Delaware corporation (the "Company"),
and the predecessor-in-interest to NEW AMERICA INTERNATIONAL, INC., a Maryland
corporation, hereby establishes and adopts the following 1998 Stock Option Plan
(the "Plan").
RECITALS
WHEREAS, the Company desires to encourage high levels of performance
by those individuals who are key to the success of the Company, to attract new
individuals who are highly motivated and who will contribute to the success of
the Company and to encourage such individuals to remain as directors, officers,
employees and consultants of the Company and its subsidiaries by increasing
their proprietary interest in the Company's growth and success.
WHEREAS, to attain these ends, the Company has formulated the Plan
embodied herein to authorize the granting of incentive awards through grants of
stock options ("Options") to those individuals whose judgment, initiative and
efforts are responsible for the success of the Company.
NOW, THEREFORE, the Company hereby constitutes, establishes and
adopts the following Plan and agrees to the following provisions:
ARTICLE 1.
PURPOSE OF THE PLAN
1.1. Purpose. The purpose of the Plan is to assist the Company in
attracting and retaining selected individuals to serve as directors, officers,
employees and consultants of the Company who will contribute to the Company's
success, and to achieve long-term objectives which will inure to the benefit of
all shareholders of the Company, through the receipt of monetary payments and
through the additional incentive inherent in the ownership of common stock of
the Company (the "Shares"). Further, the Plan is intended to assist the Company
in aligning the interests of its directors, officers, employees and consultants
to those of its shareholders.
Options granted under the Plan will be either "incentive stock
options," intended to qualify as such under the provisions of Section 422 of the
Internal Revenue Code of 1986, as from time to time amended (the "Code"), or
"nonqualified stock options." For purposes of the Plan, the term "subsidiary"
shall mean "subsidiary corporation," as such term is defined in Section 424(f)
of the Code, and "affiliate" shall have the meaning set forth in Rule 12b-2 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For
purposes of the Plan, the term "Award" shall mean a grant of an Option, or any
other award made under the terms of the Plan.
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ARTICLE 2.
SHARES SUBJECT TO AWARDS
2.1. Number of Shares. Subject to the adjustment provisions of
Section 6.1 hereof, the aggregate number of Shares which may be issued under
Awards under the Plan shall not exceed 3,536,853. No Options to purchase
fractional Shares shall be granted or issued under the Plan. The Committee (as
defined in Section 3.3(a)) shall determine whether cash or other property shall
be issued or paid in lieu of fractional shares or whether such fractional shares
or any rights hereto shall be forfeited or otherwise eliminated. For purposes of
this Section 2.1, the Shares that shall be counted toward such limitation shall
include all Shares issued or issuable pursuant to Options that have been or may
be exercised.
2.2. Shares Subject to Terminated Awards. The Shares covered by
any unexercised portions of terminated Options granted under Article 4 and
Shares subject to any Awards which are otherwise surrendered by the Participant
(as defined in Section 3.1) without receiving any payment or other benefit with
respect thereto may again be subject to new Awards under the Plan. In the event
the purchase price of an Option is paid in whole or in part through the delivery
of Shares, the number of Shares issuable in connection with the exercise of the
Option shall not again be available for the grant of Awards under the Plan.
Shares subject to Options, shall not again be available for the grant of Awards
under the Plan.
2.3. Character of Shares. Shares delivered under the Plan may be
authorized and unissued Shares or Shares acquired by the Company, or both.
2.4. Limitations on Grants to Individual Participant. Subject to
adjustments pursuant to the provisions of Section 6.1 hereof, the maximum number
of Shares with respect to which Awards may be granted hereunder to any employee
during any fiscal year shall be 2,000,000 Shares (the "Limitation"). If an
Option is cancelled, the cancelled Option shall continue to be counted toward
the Limitation for the year granted. An Option that is repriced during any
fiscal year is treated as the cancellation of the Option and a grant of a new
Option for purposes of the Limitation for that fiscal year.
ARTICLE 3.
ELIGIBILITY AND ADMINISTRATION
3.1. Participants. Participants will consist of such directors,
officers, employees and consultants of the Company and its subsidiaries as the
Committee in its sole discretion determines to be responsible for the success
and further growth and profitability of the Company and whom the Committee may
designate from time to time to receive benefits under the Plan. The Committee
shall consider such factors as it deems pertinent in selecting Participants and
in determining the type and amount of their respective benefits.
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3.2. Awards to Participants. (a) Participants who receive
Options under Article 4 (in each case a Participant) shall consist of such
directors, officers, employees and consultants of the Company or any of its
subsidiaries or affiliates as the Committee shall select from time to time.
The Committee's designation of a Participant in any year shall not require the
Committee to designate such person to receive Awards or grants in any other
year. The designation of a Participant to receive Awards or grants under one
portion of the Plan shall not require the Committee to include such
Participant under other portions of the Plan.
(b) No Option which is intended to qualify as an "incentive
stock option" may be granted to any employee or Director who, at the time of
such grant, owns, directly or indirectly (within the meaning of Sections
422(b)(6) and 424(d) of the Code), shares possessing more than ten percent (10%)
of the total combined voting power of all classes of shares of the Company or
any of its subsidiaries or affiliates, unless at the time of such grant, (i) the
option price is fixed at not less than 110% of the Fair Market Value (as defined
in Section 5.2) of the Shares subject to such Option, determined on the date of
the grant, and (ii) the exercise of such Option is prohibited by its terms after
the expiration of five (5) years from the date such Option is granted.
3.3. Administration. (a) The Plan shall be administered by a
committee (the "Committee") appointed by the Board of Directors of the Company
consisting of not fewer than two Directors of the Company (the directors of
the Company being hereinafter referred to as the "Directors"). The Directors
may remove from, add members to, or fill vacancies in the Committee. Unless
otherwise determined by the Directors, each member of the Committee will be a
"non-employee director" within the meaning of Rule 16b-3 (or any successor
rule) of the Exchange Act and an "outside director" within the meaning of
Section 162(m)(4)(C)(i) of the Code and the regulations thereunder.
(b) Any Award to a member of the Committee shall be on terms
consistent with Awards made to other Directors who are not members of the
Committee, except where the Award is approved or ratified by the Board of
Directors of the Company (excluding persons who are also members of the
Committee).
(c) The Committee is authorized, subject to the provisions of
the Plan, to establish such rules and regulations as it may deem appropriate for
the conduct of meetings and proper administration of the Plan. All actions of
the Committee shall be taken by majority vote of its members.
(d) Subject to the provisions of the Plan, the Committee shall
have authority, in its sole discretion, to make such determinations and
interpretations of the provisions of the Plan and, subject to the requirements
of applicable law, including Rule 16b-3 of the Exchange Act, to prescribe,
amend, and rescind rules and regulations relating to it as it may deem necessary
or advisable. All decisions made by the Committee pursuant to the provisions of
the Plan shall be final, conclusive and binding on all persons, including the
Company, its shareholders, Directors, employees and Participants.
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Committee and no employee of the Company shall be liable for
any act or failure to act hereunder, by any other member or employee or by any
agent to whom duties in connection with the administration of this Plan have
been delegated or, except circumstances involving bad faith, gross negligence or
fraud by such person, for any act or failure to act by the member or employee.
ARTICLE 4.
OPTIONS
4.1. Grant of Options. (a) The Committee shall determine,
within the limitations of the Plan, the Directors, officers, employees and
consultants of the Company and its subsidiaries and affiliates to whom Options
are to be granted under the Plan, the number of Shares that may be purchased
under each such Option and the option price, and shall designate such Options
at the time of the grant as either "incentive stock options" or "nonqualified
stock options;" provided, however, that Options granted to employees of an
affiliate (that is not also a subsidiary) or to non-employees of the Company
may only be "nonqualified stock options."
(b) All Options granted pursuant to this Article 4 herein shall be
authorized by the Committee and shall be evidenced in writing by stock option
agreements ("Stock Option Agreements") in such form and containing such terms
and conditions as the Committee shall determine which are not inconsistent with
the provisions of the Plan, and, with respect to any Stock Option Agreement
granting Options which are intended to qualify as "incentive stock options," are
not inconsistent with Section 422 of the Code. Granting of an Option pursuant to
the Plan shall impose no obligation on the recipient to exercise such option.
Any individual who is granted an Option pursuant to this Article 4 herein may
hold more than one Option granted pursuant to such Articles at the same time and
may hold both "incentive stock options" and "nonqualified stock options" at the
same time. To the extent that any Option does not qualify as an "incentive stock
option" (whether because of its provisions, the time or manner of its exercise
or otherwise) such Option or the portion thereof which does not so qualify shall
constitute a separate "nonqualified stock option."
4.2. Option Price. Subject to Section 3.2(b), the option
price per each Share purchasable under any "incentive stock option" and any
"nonqualified stock option" granted pursuant to this Article 4 herein shall
not be less than 100% of the Fair Market Value of such Share on the date of
the grant of such Option.
4.3. Other Provisions. Options granted pursuant to this
Article 4 shall be made in accordance with the terms and provision of Article
5 hereof and any other applicable terms and provisions of the Plan.
ARTICLE 5.
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GENERALLY APPLICABLE PROVISIONS
5.1 Option Period. Subject Section 3.2(b), the period for
which an Option is exercisable shall not exceed five years from the date such
Option is granted. After the Option is granted, the option period may not be
reduced.
5.2. Fair Market Value. Ifthe Shares are listed or admitted
to trading on a securities exchange registered under the Exchange Act, the "Fair
Market Value" of a Share as of a specified date shall mean the average of the
high and low price of the shares for the day immediately preceding the date as
of which Fair Market Value is being determined (or if there was no reported sale
on such date, on the last preceding date on which any reported sale occurred)
reported on the principal securities exchange on which the Shares are listed or
admitted to trading. If the Shares are not listed or admitted to trading on any
such exchange but are listed as a national market security on the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"),
traded in the over-the-counter market or listed or traded on any similar system
then in use, the Fair Market Value of a Share shall be the average of the high
and low sales price for the day immediately preceding the date as of which the
Fair Market Value is being determined (or if there was no reported sale on such
date, on the last preceding date on which any reported sale occurred) reported
on such system. If the Shares are not listed or admitted to trading on any such
exchange, are not listed as a national market security on NASDAQ and are not
traded in the over-the-counter market or listed or traded on any similar system
then in use, but are quoted on NASDAQ or any similar system then in use, the
Fair Market Value of a Share shall be the average of the closing high bid and
low asked quotations on such system for the Shares on the date in question. If
the Shares are not publicly traded, Fair Market Value shall be determined by the
Committee in its sole discretion using appropriate criteria. An Option shall be
considered granted on the date the Committee acts to grant the Option or such
later date as the Committee shall specify.
5.3. Exercise of Options. Options granted under the Plan
shall be exercised by the Optionee (or by a Permitted Assignee) thereof (or by
his or her executors, administrators, guardian or legal representative, as
provided in Sections 5.6 and 5.7 hereof) as to all or part of the Shares
covered thereby, by the giving of written notice of exercise to the Company,
specifying the number of Shares to be purchased, accompanied by payment of the
full purchase price for the Shares being purchased. Full payment of such
purchase price shall be made within five (5) business days following the date
of exercise and shall be made (i) in cash or by certified check or bank check,
(ii) with the consent of the Committee, by delivery of a promissory note in
favor of the Company upon such terms and conditions as determined by the
Committee, (iii) with the consent of Committee, by tendering previously
acquired Shares (valued at its Fair Market Value, as determined by the
Committee as of the date of tender), or (iv) with the consent of the
Committee, any combination of (i), (ii) and (iii). In connection with a tender
of previously acquired Shares pursuant to clause (iii) above, the Committee,
in its sole discretion, may permit the Optionee to constructively exchange
Shares already owned by the Optionee in lieu of actually tendering such Shares
to the Company, provided that adequate documentation concerning the ownership
of the Shares to be constructively tendered is furnished in form satisfactory
to the Committee. The notice of exercise, accompanied by such payment, shall
be delivered to the Company at its principal business office or such other
office as the Committee may from time to time direct, and shall be in such
form, containing such
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further provisions consistent with the provisions of the Plan, as the Committee
may from time to time prescribe. In no event may any Option granted hereunder be
exercised for a fraction of a Share. The Company shall effect the transfer of
Shares purchased pursuant to an Option as soon as practicable, and, within a
reasonable time thereafter, such transfer shall be evidenced on the books of the
Company. No person exercising an Option shall have any of the rights of a
shareholder subject to an Option until certificates for such Shares shall have
been issued following the exercise of such Option. No adjustment shall be made
for cash dividends or other rights for which the record date is prior to the
date of such issuance.
5.4. Transferability. No Option that is intended to qualify
as an "incentive stock option" under Section 422 of the Code shall be
assignable or transferable by the Optionee, other than by will or the laws of
descent and distribution, and such Option may be exercised during the life of
the Optionee only by the Optionee or his guardian or legal representative.
"Nonqualified stock options" granted in tandem therewith are transferrable
(together and not separately) by the Optionee or Holder, as the case may be,
to any one or more of the following persons (each, a "Permitted Assignee"):
(i) the spouse, parent, issue, spouse of issue, or issue of spouse ("issue"
shall include all descendants whether natural or adopted) of such Optionee or
Holder, as the case may be; (ii) a trust for the benefit of one or more of
those persons described in clause (i) above or for the benefit of such
Optionee or Holder, as the case may be, or for the benefit of any such persons
and such Optionee or Holder, as the case may be; or (iii) an entity in which
the Optionee or Holder or any Permitted Assignee thereof is a beneficial
owner; provided, however, that such Permitted Assignee shall be bound by all
of the terms and conditions of this Plan and shall execute an agreement
satisfactory to the Company evidencing such obligation; provided further,
however, that any transfer by a Optionee or Holder who is not then a Director
of the Company to any Permitted Assignee shall be subject to the prior consent
of the Committee; and provided further, however, that such Optionee or Holder
shall remain bound by the terms and conditions of this Plan. The Company shall
cooperate with a Optionee's Permitted Assignee and the Company's transfer
agent in effectuating any transfer permitted pursuant to this Section 5.4.
5.5. Termination of Employment. In the event of the
termination of employment of a Optionee or the separation from service of a
consultant or Director (who is an Optionee) for any reason (other than death
or disability as provided below), any Option(s) held by such Optionee (or its
Permitted Assignee) under this Plan and not previously exercised or expired
shall be deemed cancelled and terminated on the day of such termination or
separation, unless the Committee decides, in its sole discretion, to extend
the term of the Option for a period not to exceed three months after the date
of such termination or separation, provided, however, that in no instance may
the term of the Option, as so extended, exceed the maximum term set forth in
Section 3.2(b)(ii) or 5.1 above.
5.6. Death. In the event a Optionee dies while employed by,
or engaged as a consultant or as a Director of, the Company or any of its
subsidiaries or affiliates, during such Optionee's term, any Option(s) held by
such Optionee (or its Permitted Assignee) and not previously expired or
exercised shall, to the extent exercisable on the date of death, be
exercisable by the estate of such Optionee or by any person who acquired such
Option by bequest or inheritance, or by the Permitted Assignee at any time
within one year after the death of the Optionee, unless earlier terminated
pursuant to its terms, provided, however, that if the term of such Option
would expire by
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<PAGE>
its terms within six months after the Optionee's death, the term of such
Option shall be extended until six months after the Optionee's death, provided
further, however, that in no instance may the term of the Option, as so
extended, exceed the maximum term set forth in Section 3.2(b)(ii) or 7.1
above.
5.7. Disability. In the event of the termination of
employment, or engagement as a consultant or expiration of such Optionee's
term as a Director, of an Optionee due to total disability, the Optionee, or
his guardian or legal representative, or a Permitted Assignee shall have the
unqualified right to exercise any Option(s) which have not been previously
exercised or expired and which the Optionee was eligible to exercise as of the
first date of total disability (as determined by the Committee), at any time
within one (1) year after such termination or separation or unless earlier
terminated pursuant to its terms, provided, however, that if the term of such
Option would expire by its terms within six (6) months after such termination
or separation, the term of such Option shall be extended until six months
after such termination or separation, provided further, however, that in no
instance may the term of the Option, as so extended, exceed the maximum term
set forth in Section 3.2(b)(ii) or 5.1 above. The term "total disability"
shall, for purposes of this Plan, be defined in the same manner as such term
is defined in Section 22(e)(3) of the Code.
5.8. Amendment and Modification of the Plan. The
Compensation Committee of the Board of Directors of the Company may, from time
to time, alter, amend, suspend or terminate the Plan as it shalldeem advisable,
subject to any requirement for shareholder approval imposed by applicable law or
any rule of any stock exchange or quotation system on which Shares are listed or
quoted; provided that such Compensation Committee may not amend the Plan,
without the approval of the Company's shareholders, to increase the number of
Shares that may be the subject of Options under the Plan (except for adjustments
pursuant to Article 6 hereof). In addition, no amendments to, or termination of,
the Plan shall in any way impair the rights of a Participant (or a Permitted
Assignee thereof) under any Award previously granted without such Participant's
(or Permitted Assignee's) consent.
ARTICLE 6.
ADJUSTMENTS
6.1. Adjustments. (a) In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of
cash, Shares, other securities, or other prop erty), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, or exchange of Shares or other securities,
the issuance of warrants or other rights to purchase Shares or other
securities, or other similar corporate transaction or event affects the Shares
with respect to which Options have been or may be issued under the Plan, such
that an adjustment is determined by the Committee to be appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall, in
such manner as the Committee may deem equitable, adjust any or all of (i) the
number and type of Shares that thereafter may be made the subject of Options,
(ii) the number and type of Shares subject to outstanding Options, and (iii)
the grant or exercise price with respect
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<PAGE>
to any Option, or, if deemed appropriate, make provision for a cash payment to
the holder of any outstanding Option; provided, in each case, that with respect
to "incentive stock options," no such adjustment shall be authorized to the
extent that such adjustment would cause such options to violate Section 422(b)
of the Code or any successor provision; and provided further, that the number of
Shares subject to any Option denominated in Shares shall always be a whole
number. In the event of any reorganization, merger, consolidation, split-up,
spin-off, or other business combination involving the Company (collectively, a
"Reorganization"), the Compensation Committee of the Board of Directors or the
Board of Directors may cause any Award outstanding as of the effective date of
the Reorganization to be cancelled in consideration of a cash payment or
alternate Award made to the holder of such cancelled Award equal in value to the
fair market value of such cancelled Award. The determination of fair market
value shall be made by the Compensation Committee of the Board of Directors or
the Board of Directors, as the case may be, in their sole discretion.
ARTICLE 7.
CHANGE IN CONTROL
7.1. Change in Control. (a) The terms of any Award may
provide in the Stock Option Agreement evidencing the Award, that upon a
"Change in Control" of the Company, Options accelerate and become fully
exercisable. For purposes of this Plan, a "Change in Control" shall mean an
event as described in the applicable documents evidencing the Award or such
other event as determined in the sole discretion of the Board of Directors of
the Company.
(b) The Committee, in its discretion, may determine
that, upon the occurrence of a Change in Control of the Company, each Option
outstanding hereunder shall terminate within a specified number of days after
notice to the Participant or Holder, and such Participant or Holder shall
receive, with respect to each Share subject to such Option, an amount equal to
the excess of the Fair Market Value of such Shares immediately prior to the
occurrence of such Change in Control over the exercise price per share of such
Option; such amount to be payable in cash, in one or more kinds of property
(including the property, if any, payable in the transaction) or in a combination
thereof, as the Committee, in its discretion, shall determine.
ARTICLE 8.
MISCELLANEOUS
8.1. Tax Withholding. All payments or distributions made
pursuant to the Plan to a Participant (or a Permitted Assignee thereof) shall
be net of any applicable federal, state and local withholding taxes arising as
a result of the grant of any Award, exercise of an Option or any other event
occurring pursuant to this Plan. The Company shall have the right to withhold
from such Participant (or a Permitted Assignee thereof) such withholding taxes
as may be required by law, or to otherwise require the Participant (or a
Permitted Assignee thereof) to pay such withholding taxes. If the Participant
(or a Permitted Assignee thereof) shall fail to make such tax payments as are
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<PAGE>
required, the Company or its subsidiaries or affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to such Participant or to take such other action as may
be necessary to satisfy such withholding obligations. In satisfaction of the
requirement to pay withholding taxes, the Participant (or Permitted Assignee)
make a written election, which may be accepted or rejected in the discretion
of the Committee, to have withheld a portion of the Shares then issuable to
the Participant (or Permitted Assignee) pursuant to the Plan having an
aggregate Fair Market Value equal to the withholding taxes.
8.2. Right of Discharge Reserved. Nothing in the Plan nor
the grant of an Award hereunder shall confer upon any employee, Director or
other individual the right to continue in the employment or service of the
Company or any subsidiary or affiliate of the Company or affect any right that
the Company or any subsidiary or affiliate of the Company may have to
terminate the em ployment or service of (or to demote or to exclude from
future Options under the Plan) any such employee, Director or other individual
at any time for any reason. Except as specifically provided by the Committee,
the Company shall not be liable for the loss of existing or potential profit
from an Award granted in the event of termination of an employment or other
relationship even if the termination is in violation of an obligation of the
Company or any subsidiary or affiliate of the Company to the employee or
Director.
8.3. Nature of Payments. All Awards made pursuant to the
Plan are in consideration of services performed for the Company or any
subsidiary or affiliate of the Company. Any income or gain realized pursuant
to Awards under the Plan constitutes a special incentive payment to the
Participant or Holder and shall not be taken into account, to the extent
permissible under applicable law, as compensation for purposes of any of the
employee benefit plans of the Company or any subsidiary or affiliate of the
Company except as may be determined by the Committee or by the Directors or
directors of the applicable subsidiary or affiliate of the Company.
8.4. Severability. If any provision of the Plan shall be
held unlawful or otherwise invalid or unenforceable in whole or in part, such
unlawfulness, invalidity or unenforceability shall not affect any other
provision of the Plan or part thereof, each of which remain in full force and
effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or
unenforceable, such unlawfulness, invalidity or unenforceability shall not
prevent any other payment or benefit from being made or provided under the
Plan, and if the making of any payment in full or the provision of any other
benefit required under the Plan in full would be unlawful or otherwise invalid
or unenforceable, then such unlawfulness, invalidity or unenforceability shall
not prevent such payment or benefit from being made or provided in part, to
the extent that it would not be unlawful, invalid or unenforceable, and the
maximum payment or benefit that would not be unlawful, invalid or
unenforceable shall be made or provided under the Plan.
8.5. Gender and Number. In order to shorten and to improve
the understandability of the Plan document by eliminating the repeated usage
of such phrases as "his or her" and any mas culine terminology herein shall
also include the feminine, and the definition of any term herein in the
singular shall also include the plural except when otherwise indicated by the
context.
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<PAGE>
8.6. Tenure. A Participant's right, if any, to continue to
serve the Company as a director, officer, employee, or otherwise, shall not be
enlarged or otherwise affected by his or her designation as a Participant
under the Plan.
8.7. Unfunded Plan. Participants shall have no right, title,
or interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations under the Plan. Nothing contained in the
Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between
the Company and any Participant, beneficiary, legal representative or any
other person. To the extent that any person acquires a right to receive
payments from the Company under the Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company. All payments to be
made hereunder shall be paid from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets
shall be made to assure payment of such amounts except as expressly set forth
in the Plan. The Plan is not intended to be subject to the Employee Retirement
Income Security Act of 1974, as amended.
8.8. Compliance with Rule 16b-3. With respect to persons
subject to Section 16 of the Exchange Act, transactions under the Plan are
intended to comply with all applicable conditions or Rule 16b-3 (or its
successors) promulgated under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Committee.
8.9. Governing Law. The Plan and all determinations made and
actions taken thereunder, to the extent not otherwise governed by the Code or
the laws of the United States, shall be governed by the laws of the State of
Maryland and construed accordingly.
8.10. Effectiveness and Termination of Plan. The Plan shall
become effective upon the reincorporation merger (the "Merger") of New America
Network, Inc., a Delaware corporation with and into New America International,
Inc., a Maryland corporation. Notwithstanding any recapitalization that may
occur in connection with the Merger, there will be no change in the number of
Shares issuable pursuant to the Plan. Awards may be granted under the Plan at
any time and from time to time on or prior to May 27, 2008, on which date the
Plan will expire except as to Options then outstanding under the Plan. Such
outstanding Awards shall remain in effect until they have been exercised or
terminated, or have expired.
8.11. Captions. The captions in this Plan are for
convenience of reference only, and are not intended to narrow, limit or affect
the substance or interpretation of the provisions contained herein.
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<PAGE>
Exhibit 10.9
BUSINESS LOAN AGREEMENT
- ---------------------------------------------------------
Principal Loan Date Maturity Loan No.
$100,000.00 10-02-1997 10-02-1998 1500025465
- ---------------------------------------------------------
Call Collateral Account Officer Initials
0700 207
- ---------------------------------------------------------
- --------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------
Borrower: New America Network Inc. Lender: FIRST WASHINGTON STATE BANK
572 Rt 130 MAIN - WINDSOR
Hightstown, NJ 08520 Rt 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
==========================================================================
THIS BUSINESS LOAN AGREEMENT between New America Network, Inc. ("Borrower")
and FIRST WASHINGTON STATE BANK ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any
exhibit or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that:
(a) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) The granting, reviewing, or extending of any Loan by Lender at
all times shall be subject to Lender's sole judgment and discretion; and (c)
all such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of October 2, 1997, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Business Loan Agreement,
as this Business Loan Agreement may be amended or modified from time
<PAGE>
to time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
Borrower. The word "Borrower" means New America Network, Inc. The
word "Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Collateral. The world "Collateral" means and includes without
limitation all property and assets granted as collateral security for
a Loan, whether real or personal property, whether granted directly
or indirectly, whether granted now or in the future, and whether
granted in the form of a security interest, mortgage, deed of trust,
assignment, pledge, chattel mortgage, chattel trust, factor's liens,
equipment trust, conditional sale, trust receipt, lien, charge, lien
or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation
each and all of the persons or entities granting a Security Interest
in any Collateral for the Indebtedness, including without limitation
all Borrowers granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as
well as all claims by Lender against Borrower, or any one or more of
them; whether now or hereafter existing, voluntary or involuntary,
due or not due, absolute or contingent, liquidated or unliquidated;
whether Borrower may be liable individually or jointly with others;
whether Borrower may be obligated as a guarantor, surety, or
otherwise; whether recovery upon such indebtedness may be or
hereafter may become barred by any statute of limitations; and
whether such Indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word "Lender" means FIRST WASHINGTON STATE BANK, its
successors and assigns.
<PAGE>
Loan. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial accommodations
from Lender to Borrower, whether now or hereafter existing, and
however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit
or schedule attached to this Agreement from time to time.
Note. The word "Note" means and includes without limitation
Borrower's promissory note or notes, if any, evidencing Borrower's
Loan obligations in favor of Lender, as well as any substitute,
replacement or refinancing note or notes therefor.
Permitted Liens. The words "Permitted Liens" means: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender;
(b) liens for taxes, assessments, or similar charges either not yet
due or being contested in good faith; (c) liens of materialmen,
mechanics, warehousemen, or carriers, or other like liens arising in
the ordinary course of business and securing obligations which are
not yet delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by
Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred
under the paragraph of this Agreement titled "Indebtedness and
Liens"; (e) liens and security interests which, as of the date of
this Agreement, have been disclosed to and approved by the Lender in
writing; and (f) those liens and security interests which in the
aggregate constitute an immaterial and insignificant monetary amount
with respect to the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deed of trust, and all other instruments,
agreements and documents, whether now or hereafter existing, executed
in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
Security Interest. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the
form of a lien charge, mortgage, deed of trust, assignment, pledge,
chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt lien or title retention contract,
lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law,
contract, or otherwise.
<PAGE>
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory
to Lender the following documents for the Loan: (a) the Note, (b)
Security Agreements granting to Lender security interests in the
Collateral, (c) Financing Statements perfecting Lender's Security
Interests; (d) evidence of insurance as required below; and (e) any
other documents required under this Agreement or by Lender or its
counsel, including without limitation any guaranties described below.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note
and the Related Documents, and such other authorizations and other
documents and instruments as Lender or its counsel, in their sole
discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.
Representations and Warranties. The representations and warranties
set forth in this Agreement, in the Related Documents, and in any
document or certificate delivered to Lender under this Agreement are
true and correct.
No Event of Default. There shall not exist at the time of any advance
a condition which would constitute an Event of Default under this
Agreement. _________ disbursement of Loan proceeds, as of the date of
any renewal, extension or modification of any Loan, and at all times
any indebtedness exists:
Organization. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
New Jersey and is validly existing and in good standing in all states
in which Borrower is doing business. Borrower has the full power and
authority to own its properties and to transact the businesses in
which it is presently engaged or presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would
have a material adverse effect on its businesses or financial
condition.
Authorization. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly
<PAGE>
authorized by all necessary action by Borrower; do not require the
consent or approval of any other person, regulatory authority or
governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles
of incorporation or organization, or bylaws, or any agreement or
other instrument binding upon Borrower or (b) any law, governmental
regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied
to Lender truly and completely disclosed Borrower's financial
condition as of the date of the statement, and there has been no
material adverse change in Borrower's financial condition subsequent
to the date of the most recent financial statement supplied to
Lender. Borrower has no material contingent obligations except as
disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective
terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for
taxes not presently due and payable, Borrower owns and has good title
to all of Borrower's properties free and clear of all Security
Interests, and has not executed any security documents or financing
statements relating to such properties. All of Borrower's properties
are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the
last five (5) years.
Hazardous Substances The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used
in this Agreement, shall have the same meanings as set forth in the
"CERCLA," "SARI," the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., the New Jersey Industrial Site,
Recovery Act, NJSA Section 13:1K-6 ("ISRA"), the New Jersey Spill
Compensation and Control Act, NJSA 58:10-23.11 et seq., or other
applicable state or Federal laws, rules, or regulations adopted
pursuant to any of the foregoing. Except as disclosed to and
acknowledged by Lender in writing, Borrower represents and warrants
that: (a) During the period of Borrower's ownership of the
properties, there has been no use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, about, or from any of the
properties, (b) Borrower has no knowledge of, or reason to believe
that there has been (i) any use, generation, manufacture, storage,
treatment, disposal, release, or threatened release of any hazardous
waste or substance on, under, about or from the properties by any
<PAGE>
prior owners or occupants of any of the properties, or (ii) any
actual or threatened litigation or claims of any kind by any person
relating to such matters (c) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the properties
shall use, generate, manufacture, store, treat, dispose of, or
release any, hazardous waste or substance on, under about or from any
of the properties; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws,
regulations, and ordinances, including without limitations those
laws, regulations and ordinances described above. Borrower authorizes
Lender and its agents to enter upon the properties to make such
inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense
and for Lender's purposes only and shall not be construed to create
any responsibility or liability on the part of Lender to Borrower or
to any other person. The representations and warranties contained
herein are based on Borrower's due diligence in investigating the
properties for hazardous waste and hazardous substances. Borrower
hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Borrower becomes liable for
cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims,
losses, liabilities, damages, penalties, and expenses which Lender
may directly or indirectly sustain or suffer resulting from a breach
of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened
release occurring prior to Borrower's ownership or interest in the
properties, whether or not the same was or should have been known to
Borrower. The provisions of this section of the Agreement, including
the obligation to indemnify, shall survive the payment of the
indebtedness and the termination or expiration of this Agreement and
shall not be affected by Lender's acquisition of any interest in any
of the properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for
unpaid taxes) against Borrower is pending or threatened, and no other
event has occurred which may materially adversely affect Borrower's
financial condition or properties, other than litigation, claims, or
other events, if any, that have been disclosed to and acknowledged by
Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and
reports of Borrower that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
been paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for
which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
<PAGE>
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or
indirectly securing repayment of Borrower's Loan and Note, that would
be prior or that may in any way be superior to Lender's Security
Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and all of the Related Documents are binding upon Borrower as well as
upon Borrower's successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which
Borrower may have any liability complies in all material respects
with all applicable requirements of law and regulations, and (i) no
Reportable Event nor Prohibited Transaction (as defined in ERISA) has
occurred with respect to any such plan, (ii) Borrower has not
withdrawn from any such plan or initiated steps to do so, (iii) no
steps have been taken to terminate any such plan, and (iv) there are
no unfunded liabilities other than those previously disclosed to
Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more
than one place of business, is located at 572 Rt 130, Hightstown, NJ
08520. Unless Borrower has designated otherwise in writing this
location is also the office or offices where Borrower keeps its
records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and
all information hereafter furnished by or on behalf of Borrower to
Lender will be, true and accurate in every material respect on the
date as of which such information is dated or certified; and none of
such information is or will be incomplete by omitting to state any
material fact necessary to make such information not misleading.
Survival of Representations and Warranties. Borrower understands and
agrees that Lender, without independent investigation, is relying
upon the above representations and warranties in extending Loan
Advances to Borrower. Borrower further agrees that the foregoing
representations and warranties shall be continuing in nature and
shall remain in full force and effect until such time as Borrower's
indebtedness shall be paid in full, or until this Agreement shall be
terminated in the manner provided above, whichever is the last to
occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will:
<PAGE>
Litigation. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all
existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or
any Guarantor which could materially affect the financial condition
of Borrower or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent
basis, and permit Lender to examine and audit Borrower's books and
records at all reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but
in no event later than ninety (90) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year
ended, prepared by Borrower. All financial reports required to be
provided under this Agreement shall be prepared in accordance with
generally accepted accounting principles, applied on a consistent
basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables
and payables, inventory schedules, budgets, forecasts, tax returns,
and other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with
respect to Borrower's properties and operations, in form, amounts,
coverages and with insurance companies reasonably acceptable to
Lender. Borrower, upon request of Lender, will deliver to Lender from
time to time the policies or certificates of Insurance in form
satisfactory to Lender, including stipulations that coverages will
not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each Insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Borrower or
any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest for the Loans,
Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following:
(a) the name of the insurer; (b) the risks insured; (c) the amount of
the policy; (d) the properties insured; (e) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration date of
the policy. In addition, upon request of Lender (however not more
often than annually), Borrower will have an independent appraiser
<PAGE>
satisfactory to Lender determine, as applicable, the actual cash
value or replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish
executed guaranties of the Loans in favor of Lender, executed by the
guarantors named below, on Lender's forms, and in the amounts and
under the conditions spelled out in those guaranties.
Guarantors Amounts
Gerald C. Finn Unlimited
Norma Finn Unlimited
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and
any other party and notify Lender immediately in writing of any
default in connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its books
adequate reserves with respect to such contested assessment, tax,
charge, levy, lien or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish
to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate
governmental official to deliver to Lender at any time a written
statement of any assessments, taxes, charges, levies, liens and
claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents
in a timely manner, and promptly notify Lender if Borrower learns of
the occurrence of any event which constitutes an Event of Default
under this Agreement or under any of the Related Documents.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender
<PAGE>
of any change in executive and management personnel; conduct its
business affairs in a reasonable and prudent manner and in compliance
with all applicable federal, state and municipal laws, ordinances,
rules and regulations respecting its properties, charters, businesses
and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding
standards and other requirements of ERISA and other laws applicable
to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable
time to inspect any and all Collateral for the Loan or Loans and
Borrower's other properties and to examine or audit Borrower's books,
accounts, and records and to make copies and memoranda of Borrower's
books, accounts and records. If Borrower now or at any time hereafter
maintains any records (including without limitation computer
generated records and computer software programs for the generation
of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free
access to such records at all reasonable times and to provide Lender
with copies of any records it may request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement
are true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of
Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity where
damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection
with any environmental activity whether or not there is damage to the
environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.
<PAGE>
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed
money, including capital leases, (b) except as allowed as a Permitted
Lien, sell, transfer, mortgage, assign, pledge, lease, grant a
security interest in, or encumber any of Borrower's assets, or (c)
sell with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than
dividends payable in its stock) provided, however that
notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the
payment of dividends, if Borrower is a "Subchapter S Corporation" (as
defined in the Internal Revenue Code of 1986, as amended), Borrower
may pay cash dividends on its stock to its shareholders from time to
time in amounts necessary to enable the shareholders to pay income
taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their
status as Shareholders of a Subchapter S Corporation because of their
ownership of shares of stock of Borrower, or (d) purchase or retire
any of Borrower's outstanding shares or alter or amend Borrower's
capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, or (c) incur any obligation as surety or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds
if: (a) Borrower or any Guarantor is in default under the terms of this
Agreement or any of the Related Documents or any other agreement that Borrower
or any Guarantor has with Lender; (b) Borrower or any Guarantor becomes
insolvent, files a petition in bankruptcy or similar proceedings, or is
adjudged a bankrupt; (c) there occurs a material adverse change in Borrower's
financial condition, in the financial condition of any Guarantor, or in the
value of any Collateral securing any Loan; (d) any Guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the
Loan or any other loan with Lender; or (e) Lender in good faith deems itself
insecure, even though no Event of Default shall have occurred.
<PAGE>
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all
accounts Borrower may open in the future, excluding however all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement.
Default of Indebtedness. Failure of Borrower to make any payment when
due on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or
to perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
Sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of
the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force or effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as
a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
<PAGE>
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower or Grantor, as the case
may be, as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding, and if Borrower
or Grantor gives Lender written notice of the creditor or forfeiture
proceeding and furnishes reserves or a surety bond for the creditor
or forfeiture proceeding satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness. Lender, at its
option, may, but shall not be required to, permit the Guarantor's
estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
Change in Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is implied.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness,
is curable and if Borrower or Grantor, as the case may be, has not
been given a notice of a similar default within the preceding twelve
(12) months, it may be cured (and no Event of Default will have
occurred) if Borrower or Grantor, as the case may be, after receiving
written notice from Lender demanding cure of such default: (a) cures
the default within thirty (30) days; or (b) if the cure requires more
than thirty (30) days, immediately initiates steps which Lender deems
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option,
all indebtedness immediately will become due and payable, all without notice
of any kind to Borrower, except that in the case of an Event of Default of the
type described in the "Insolvency" subsection above, such acceleration shall
be automatic and not optional. In addition, Lender shall have all the rights
and remedies provided in the Related Documents or available at law, in equity,
or otherwise. Except as may be prohibited by
<PAGE>
applicable law, all of Lender's rights and remedies shall be cumulative and
may be exercised singularly or concurrently. Election by Lender to pursue any
remedy shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Borrower or of any
Grantor shall not affect Lender's right to declare a default and to exercise
its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or
bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of New Jersey. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction
of the courts of Mercer County, the State of New Jersey. Lender and
Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower
against the other. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower
under this Agreement shall be joint and several, and all references
to Borrower shall mean each and every Borrower. This means that each
of the persons signing below is responsible for all obligations in
this Agreement.
Consent to Loan Participation. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers,
whether related or unrelated to Lender. Lender may provide, without
any limitation whatsoever, to any one or more purchasers, or
potential purchasers, any information or knowledge Lender may have
about Borrower or about any other matter relating to the Loan, and
Borrower hereby waives any rights to privacy it may have with respect
to such matters. Borrower additionally waives any and all notices of
sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that
the purchasers of any such participation interests will be considered
as the absolute owners of such interests in the Loans and will have
all the rights granted under the participation agreement or
agreements governing the sale of such participation interests.
Borrower further waives all rights of offset or counterclaim that it
may have now or
<PAGE>
later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such
purchaser may enforce Borrower's obligation under the Loans
irrespective of the failure or insolvency of any holder of any
interest in the Loans. Borrower further agrees that the purchaser of
any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may
have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of
Lender's expenses, including without limitation attorneys' fees,
incurred in connection with the preparation, execution, enforcement,
modification and collection of this Agreement or in connection with
the Loans made pursuant to this Agreement. Lender may pay someone
else to help collect the Loans and to enforce this Agreement, and
Borrower will pay that amount. This includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys'
fees for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay
any court costs, in addition to all other sums provided by law.
Notices. All notices required to be given under this Agreement shall
be given in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the
address shown above. Any party may change its address for notices
under this Agreement by giving formal written notice to the other
parties, specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, if there
is more than one Borrower, notice to any Borrower will constitute
notice to all Borrowers. For notice purposes, Borrower will keep
Lender informed at all times of Borrower's current address(es).
No Joint Venture or Partnership. The relationship of Borrower and
Lender created by this Agreement is strictly that of debtor creditor,
and nothing contained in this Agreement or in any of the Related
Documents shall be deemed or construed to create a partnership or
joint venture between Borrower and Lender.
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any
person or circumstance, such finding shall not render that provision
invalid or unenforceable as to any other persons or circumstances. If
feasible, any such offending provision shall be deemed to be modified
to be within the limits of enforceability or validity; however, if
the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects
shall remain valid and enforceable.
<PAGE>
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used herein shall include all subsidiaries and
affiliates of Borrower. Notwithstanding the foregoing however, under
no circumstances shall this Agreement be construed to require Lender
to make any Loan or other financial accommodation to any subsidiary
or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or
on behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent
of Lender.
Survival. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
Waiver. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any
right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Agreement shall not prejudice
or constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations
of Borrower or of any Grantor as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is
required, and in all cases such consent may be granted or withheld in
the sole discretion of Lender.
<PAGE>
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
OCTOBER 2, 1997.
BORROWER:
New America Network, Inc.
By:________________________________ By:________________________________
Gerald C. Finn, President Norma Finn, Secretary
LENDER:
FIRST WASHINGTON STATE BANK
By:________________________________
Authorized Office
<PAGE>
PROMISSORY NOTE
---------------------------------------------------------
Principal Loan Date Maturity Loan No.
$100,000.00 10-02-1997 10-02-1998 1500025465
---------------------------------------------------------
Call Collateral Account Officer Initials
0700 207
---------------------------------------------------------
- --------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------
Borrower: New America Network, Inc. Lender: FIRST WASHINGTON STATE BANK
572 Rt. 130 MAIN - WINDSOR
Hightstown, NJ 08520 Rt 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
===========================================================================
Principal Amount: $100,000.00 Initial Rate: 9.500%
Date of Note: October 2, 1997
PROMISE TO PAY. New America Network, Inc. ("Borrower") promises to
pay to FIRST WASHINGTON STATE BANK ("Lender"), or order, in lawful
money of the United States of America, the principal amount of One
Hundred Thousand & 00/100 Dollars ($100,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from
the date of each advance until repayment of each advance. Borrower
also promises to pay all applicable fees and expenses.
PAYMENT. Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on October 2,
1998. In addition, Borrower will pay regular monthly payments of
accrued unpaid interest beginning November 2, 1997, and all
subsequent interest payments are due on the same day of each month
after that. Interest on this Note is computed on a 365/365 simple
interest basis; that is, by applying the ratio of the annual interest
rate over the number of days in a year, multiplied by the outstanding
principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and
<PAGE>
any remaining amount to any unpaid collection costs and the late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to
change from time to time based on changes in an index which is
Lender's Prime Rate (the "Index"). This is the rate of interest
announced from time to time by Lender as its "Prime Rate" or "Prime
Lending Rate". This rate of interest is determined from time to time
by Lender as a means of pricing some loans to its customers, and it
is neither tied to any external rate of interest or index nor does it
necessarily reflect the lowest rate of interest actually charged by
Lender to any particular class or category of customers of Lender.
Lender will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more
often than each day. The index currently is 8.500% per annum. The
interest rate to be applied to the unpaid principal balance of this
Note will be at a rate of 1.000 percentage point over the Index,
resulting in an initial rate of 9.500% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid
finance charges are earned fully as of the date of the loan and will
not be subject to refund upon early payment (whether voluntary or as
a result of default), except as otherwise required by law. Except for
the foregoing, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment when due. (b) Borrower breaks
any promise Borrower has made to Lender, or Borrower fails to comply
with or to perform when due any other term, obligation, covenant, or
condition contained in this Note or any agreement related to this
Note, or in any other agreement or loan Borrower has with Lender. (c)
Borrower defaults under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any
of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related
Documents. (d) Any representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf is false or misleading in
any material respect either now or at the time made or furnished. (e)
Borrower becomes insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any
creditor tries to take any of Borrowers property on or in which
Lender has a lien or security interest. This includes a garnishment
of or
<PAGE>
levy on any of Borrower's accounts with Lender. (g) Any guarantor
dies or any of the other events described in this default section
occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness
is impaired. (i) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if
Borrower has not been given a notice of a breach of the same
provision of this Note within the preceding twelve (12) months, if
may be cured (and no event of default will have occurred) if
Borrower, after receiving written notice from Lender demanding cure
of such default: (a) cures the default within thirty (30) days; or
(b) if the cure requires more than thirty (30) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes
all reasonable and necessary steps sufficient to produce compliance
as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest
immediately due, without notice, and then Borrower will pay that
amount. Lender may hire or pay someone else to help collect this Note
if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay
any court costs, in addition to all other sums provided by law. This
Note has been delivered to Lender and accepted by Lender in the State
of New Jersey. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Mercer County,
the State of New Jersey. Lender and Borrower hereby waive the right
to any jury trial in any action, proceeding, or counterclaim brought
by either Lender or Borrower against the other. This Note shall be
governed by and construed in accordance with the laws of the State of
New Jersey.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $28.00 if
Borrower makes a payment on Borrower's loan and the check or
preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory
security interest in, and hereby assigns, conveys, delivers, pledges,
and transfers to Lender all Borrower's right, title and interest in
and to, Borrower's account with Lender (whether checking, savings, or
some other account), including without limitation all accounts held
jointly with someone else and all accounts Borrower may open in the
future, excluding, however, all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be
<PAGE>
prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on
this Note against any and all such accounts.
COLLATERAL. This Note is secured by second mortgage on premises
located at 572 Rt 130, Hightstown, New Jersey together with all
business assets.
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances under this Note may be requested only in writing by Borrower
or by an authorized person. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to
Lender's office shown above. The following party or parties are
authorized to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice
of revocation of their authority: Gerald C. Finn, President; and
Norma Finn, Secretary. Borrower agrees to be liable for all sums
either: (a) advanced in accordance with the instructions of an
authorized person or (b) credited to any of Borrower's accounts with
Lender. The unpaid principal balance owing on this Note at any time
may be evidenced by endorsements on this Note or by Lender's internal
records including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement
that Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Note; (b)
Borrower or any guarantor ceases doing business or is insolvent; (c)
any guarantor seeks, claims or otherwise attempts to limit, modify or
revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note
for purposes other than those authorized by Lender; or (e) Lender in
good faith deems itself insecure under this Note or any other
agreement between Lender and Borrower.
PRIOR NOTE. The Line of Credit Master Note from Borrower to Lender
dated October 2, 1996 in the original principal amount of
$100,000.00.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees or endorses this Note, to the
extent allowed by law, waive presentment, demand for payment, protest
and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs
this Note, whether as maker guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree
that Lender may renew or extend (repeatedly and for any length of
time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in
the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or
<PAGE>
notice to anyone other than the party with whom the modification is
made.
<PAGE>
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
NOTE.
BORROWER:
New America Network, Inc.
By:__________________________ By:__________________________
Gerald C. Finn, President Norma Finn, Secretary
<PAGE>
COMMERCIAL GUARANTY
---------------------------------------------------------
Principal Loan Date Maturity Loan No.
---------------------------------------------------------
Call Collateral Account Officer Initials
0700 207
---------------------------------------------------------
- ----------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ----------------------------------------------------------------
Borrower: New America Network, Inc. Lender: FIRST WASHINGTON STATE BANK
572 Rt 130 MAIN - WINDSOR
Hightstown, NJ 08520 Rt 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
Guarantor: Gerald C. Finn
141 Corson Ave.
Trenton, NJ 08619
===========================================================================
AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, Gerald C.
Finn ("Guarantor") absolutely and unconditionally guarantees and promises to
pay to FIRST WASHINGTON STATE BANK ("Lender") or its order, in legal tender of
the United States of America, the Indebtedness (as that term is defined below)
of New America Network, Inc. ("Borrower") to Lender on the terms and
conditions set forth in this Guaranty. Under this Guaranty, the liability of
Guarantor is unlimited and the obligations of Guarantor are continuing.
DEFINITIONS. The following words shall have the following meanings when
used in this Guaranty:
Borrower. The word "Borrower" means New America Network, Inc.
Guarantor. The word "Guarantor" means Gerald C. Finn.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor
for the benefit of Lender dated October 2, 1997.
Indebtedness. The word "Indebtedness" is used in its most
comprehensive sense and means and includes any and all of Borrower's
liabilities, obligations, debts, and indebtedness to Lender, now
<PAGE>
existing or hereinafter incurred or created, including, without
limitation, all loans, advances, interest, costs, debts, overdraft
Indebtedness, credit card indebtedness, lease obligations, other
obligations, and liabilities of Borrower, or any of them, and any
present or future judgments against Borrower, or any of them; and
whether any such Indebtedness is voluntarily or involuntarily
incurred, due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined; whether Borrower may be
liable individually or joint with others, or primarily or
secondarily, or as guarantor or surety; whether recovery on the
Indebtedness may be or may become barred or unenforceable against
Borrower for any reason whatsoever; and whether the Indebtedness
arises from transactions which may be voidable on account of infancy,
insanity, ultra vires, or otherwise.
Lender. The word "Lender" means FIRST WASHINGTON STATE BANK, its
successors and assigns.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing, excluded
in connection with the Indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open
and continuous for so long as this Guaranty remains in force. Guarantor
intends to guarantee at all times the performance and prompt payment when due,
whether at maturity or earlier by reason of acceleration or otherwise, of all
Indebtedness. Accordingly, no payments made upon the Indebtedness will
discharge or diminish the continuing liability of Guarantor in connection with
any remaining portions of the Indebtedness or any of the Indebtedness which
subsequently arises or is thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor
or to Borrower, and will continue in full force until all Indebtedness
incurred or contracted before receipt by Lender of any notice of revocation
shall have been fully and finally paid and satisfied and all other obligations
of Guarantor under this Guaranty shall have been performed in full. If
Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing.
Guarantor's written notice of revocation must be mailed to Lender, by
certified mail, at the address of Lender listed above or such other place as
Lender may designate in writing. Written revocation of this Guaranty will
apply only to advances or new Indebtedness created after actual receipt by
Lender of Guarantor's written revocation. For this purpose and without
limitation, the term "new Indebtedness" does not include Indebtedness which at
the time of notice of revocation is contingent, unliquidated, undetermined or
not due and which later becomes absolute, liquidated, determined or due. This
Guaranty will continue to bind Guarantor for all Indebtedness incurred by
Borrower or committed by
<PAGE>
Lender prior to receipt of Guarantor's written notice of revocation, including
any extensions, renewals, substitutions or modification of the Indebtedness.
All renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty
and, specifically will not be considered to be new Indebtedness. This Guaranty
shall bind the estate of Guarantor as to Indebtedness created both before and
after the death or incapacity of Guarantor, regardless of Lender's actual
notice of Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty of
the Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors
shall not affect the liability of any remaining Guarantors under this
Guaranty. It is anticipated that fluctuations may occur in the aggregate
amount of Indebtedness covered by this Guaranty, and it is specifically
acknowledged and agreed by Guarantor that reductions in the amount of
Indebtedness, even to zero dollars ($0.00), prior to written revocation of
this Guaranty by Guarantor shall not constitute a termination of this
Guaranty. This Guaranty is binding upon Guarantor and Guarantor's heirs,
successors and assigns so long as any of the guaranteed Indebtedness remains
unpaid and even though the Indebtedness guaranteed may from time to time be
zero dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof, without notice or demand and without
lessening Guarantor's liability under this Guaranty, from time to time: (a)
prior to revocation as set forth above, to make one or more additional secured
or unsecured loans to Borrower, to lease equipment or other goods to Borrower,
or otherwise to extend additional credit to Borrower; (b) to alter,
compromise, renew, extend, accelerate or otherwise change one or more times
the time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the
original loan term; (c) to take and hold security for the payment of this
Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail
or decide not to perfect, and release any such security, with or without the
substitution of new collateral; (d) to release, substitute, agree not to sue,
or deal with any one or more of Borrower's sureties, endorsers, or other
guarantors on any terms or in any manner Lender may choose; (e) to determine
how, when and what application of payments and credits shall be made on the
Indebtedness; (f) to apply such security and direct the order or manner or
sale thereof, including without limitation, any nonjudicial sale permitted by
the terms of the controlling security agreement or deed of trust, as Lender in
its discretion may determine; (g) to sell, transfer, assign, or grant
participations in all or any part of the Indebtedness; and (h) to assign or
transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lender that (a) no representations or agreements of any kind
<PAGE>
have been made to Guarantor which would limit or qualify in any way the terms
of this Guaranty; (b) this Guaranty is executed at Borrower's request and not
at the request of Lender; (c) Guarantor has full power, right and authority to
enter into this Guaranty; (d) the provisions of this Guaranty do not conflict
with or result in a default under any agreement or other instrument binding
upon Guarantor and do not result in a violation of any law, regulation, court
decree or order applicable to Guarantor; (e) Guarantor has not and will not,
without the prior written consent of Lender, sell, lease, assign, encumber,
hypothecate, transfer, or otherwise dispose of all or substantially all of
Guarantor's assets, or any interest therein; (f) upon Lender's request,
Guarantor will provide to Lender financial and credit information in form
acceptable to Lender, and all such financial information which currently has
been, and all future financial information which will be provided to Lender is
and will be true and correct in all material respects and fairly present the
financial condition of Guarantor as of the dates the financial information is
provided; (g) no material adverse change has occurred in Guarantor's financial
condition since the date of the most recent financial statements provided to
Lender and no event has occurred which may materially adversely affect
Guarantor's financial condition; (h) no litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid taxes)
against Guarantor is pending or threatened; (i) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (j)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition.
Guarantor agrees to keep adequately informed from such means of any facts,
events, or circumstances which might in any way affect Guarantor's risks under
this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort to payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any ________ private
sale of personal property security held by Lender from Borrower or to comply
with any other applicable provisions of the Uniform Commercial Code; (f) to
pursue any other remedy within Lender's power; or (g) to commit any act or
omission of any kind, or at any time, with respect to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective
<PAGE>
successors, any claim or right to payment Guarantor may now have or hereafter
have or acquire against Borrower, by subrogation or otherwise, so that at no
time shall Guarantor be or become a "creditor" of Borrower within the meaning
of 11 U.S.C. section 547(b), or any successor provision of the Federal
bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
"one action" or "anti-deficiency" law or any other law which may prevent
Lender from bringing any action, including a claim for deficiency, against
Guarantor, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale; (b)
any election of remedies by Lender which destroys or otherwise adversely
affects Guarantor's subrogation rights or Guarantor's rights to proceed
against Borrower for reimbursement, including without limitation, any loss of
rights Guarantor may suffer by reason of any law limiting, qualifying, or
discharging the Indebtedness; (c) any disability or other defense of Borrower,
of any other guarantor, or of any other person, or by reason of the cessation
of Borrower's liability from any cause whatsoever, other than payment in full
in legal tender, of the Indebtedness; (d) any right to claim discharge of the
Indebtedness on the basis of unjustified impairment of any collateral for the
Indebtedness; (e) any statute of limitations, if at any time any action or
suit brought by Lender against Guarantor is commenced there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable
statute of limitations; or (f) any defenses given to guarantors at law or in
equity other than actual payment and performance of the Indebtedness. If
payment is made by Borrower, whether voluntarily or otherwise, or by any third
party, on the Indebtedness and thereafter Lender is forced to remit the amount
of that payment of Borrower's trustee in bankruptcy or to any similar person
under any federal or state bankruptcy law or law for the relief of debtors,
the Indebtedness shall be considered unpaid for the purpose of enforcement of
this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of
setoff, counterclaim, counter demand, recoupment or similar right, whether
such claim, demand or right may be asserted by the Borrower, the Guarantor, or
both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's full
knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by
law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender
by law, Lender shall have, with respect to Guarantor's obligations to Lender
under this Guaranty and to the extent permitted by law, a contractual
possessory security interest in and a right of setoff
<PAGE>
against, and Guarantor hereby assigns, conveys, delivers, pledges, and
transfers to Lender all of Guarantor's right, title and interest in and to,
all deposits, moneys, securities and other property of Guarantor now or
hereafter in the possession of or on deposit with Lender, whether held in a
general or special account or deposit, whether held jointly with someone else,
or whether held for safekeeping or otherwise, excluding however all IRA,
Keogh, and trust accounts. Every such security interest and right of setoff
may be exercised without demand upon or notice to Guarantor. No security
interest or right of setoff shall be deemed to have been waived by any act or
conduct on the part of Lender or by any neglect to exercise such right of
setoff or to enforce such security interest or by any delay in so doing. Every
right of setoff and security interest shall continue in full force and effect
until such right of setoff or security interest is specifically waived or
released by an instrument in writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets
of Borrower, through bankruptcy, by an assignment for the benefit of
creditors, by voluntary liquidation, or otherwise, the assets of Borrower
applicable to the payment of the claims of both Lender and Guarantor shall be
paid to Lender and shall be first applied by Lender to the Indebtedness of
Borrower to Lender. Guarantor does hereby assign to Lender all claims which it
may have or acquire against Borrower or against any assignee or trustee in
bankruptcy of Borrower; provided however, that such assignment shall be
effective only for the purpose of assuring to Lender full payment in legal
tender of the Indebtedness. If Lender so requests, any notes or credit
agreements now or hereafter evidencing any debts or obligations of Borrower to
Guarantor shall be marked with a legend that the same are subject to this
Guaranty and shall be delivered to Lender.
FURTHER ASSURANCES. Guarantor agrees, and Lender hereby is authorized, in the
name of Guarantor, from time to time to execute and file financing statements
and continuation statements and to execute such other documents and to take
such other actions as Lender deems necessary or appropriate to perfect,
preserve and enforce its rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Guaranty:
Amendments. This Guaranty, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Guaranty. No alteration of or
amendment to this Guaranty shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by
the alteration or amendment.
<PAGE>
Applicable Law. This Guaranty has been delivered to Lender and
accepted by Lender in the State of New Jersey. If there is a lawsuit,
Guarantor agrees upon Lender's request to submit to the jurisdiction
of the courts of Mercer County, State of New Jersey. Lender and
Guarantor hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Guarantor
against the other. This Guaranty shall be governed by and construed
in accordance with the laws of the State of New Jersey.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Guaranty. Lender may pay someone else to help enforce this Guaranty,
and Guarantor shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender's attorneys' fees and legal
expenses whether or not there is a lawsuit, including attorneys' fees
and legal expenses for bankruptcy proceedings (and including efforts
to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services. Guarantor also
shall pay all court costs and such additional fees as may be directed
by the court.
Notices. All notices required to be given by either party to the
other under this Guaranty shall be in writing, may be sent by
telefacsimile (unless otherwise required by law), and, except for
revocation notices by Guarantor, shall be effective when actually
delivered or when deposited with a nationally recognized overnight
courier, or when deposited in the United States mail, first class
postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above or to such other addresses as either
party may designate to the other in writing. All revocation notices
by Guarantor shall be in writing and shall be effective only upon
delivery to Lender as provided above in the section titled "DURATION
OF GUARANTY." If there is more than one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice
purposes, Guarantor agrees to keep Lender informed at all times of
Guarantor's current address.
Interpretation. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall
be deemed to have been used in the plural where the context and
construction so require; and where there is more than one Borrower
named in this Guaranty or when this Guaranty is executed by more than
one Guarantor, the words "Borrower" and "Guarantor" respectively
shall mean all and any one or more of them. The words "Guarantor,"
"Borrower," and "Lender" include the heirs, successors, assigns, and
transferees of each of them. Caption headings in this Guaranty are
for convenience purposes only and are not to be used to interpret or
define the provisions of this Guaranty. If a court of competent
jurisdiction finds any provision of this Guaranty to be invalid or
unenforceable as to any person or circumstance, such finding shall
not render that provision invalid or unenforceable as to any other
persons
<PAGE>
or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of
Borrower or Guarantor are corporations or partnerships, it is not
necessary for Lender to inquire into the powers of Borrower or
Guarantor or of the officers, directors, partners, or agents acting
or purporting to act on their behalf, and any Indebtedness made or
created in reliance upon the professed exercise of such powers shall
be guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under
this Guaranty unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any
right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Guaranty shall not prejudice
or constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Guaranty. No prior waiver by Lender, nor any course of dealing
between Lender and Guarantor, shall constitute a waiver of any of
Lender's rights or of any of Guarantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Guaranty, the granting of such consent by Lender in any instance
shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS
GUARANTY IS DATED OCTOBER 2, 1997.
GUARANTOR:
x________________________________
Gerald C. Finn
<PAGE>
INDIVIDUAL ACKNOWLEDGMENT
STATE OF _______________ )
) ss
COUNTY OF ______________ )
BE IT REMEMBERED that on this ____ day of _________,
19__, before me, the undersigned authority, personally appeared Gerald C. Finn
who, I am satisfied, is the person named in the foregoing instrument, and I
having first made known to him or her the contents thereof, he or she
acknowledged that he or she signed, sealed and delivered the same as his or her
voluntary act and deed. All of which is hereby certified.
-----------------------------------
[Notary Public]
<PAGE>
INDIVIDUAL ACKNOWLEDGMENT
STATE OF _______________ )
) ss
COUNTY OF ______________ )
BE IT REMEMBERED that on this ____ day of _________,
19__, before me, the undersigned authority, personally appeared Norma Finn who,
I am satisfied, is the person named in the foregoing instrument, and I having
first made known to him or her the contents thereof, he or she acknowledged that
he or she signed, sealed and delivered the same as his or her voluntary act and
deed. All of which is hereby certified.
-----------------------------------
[Notary Public]
<PAGE>
COMMERCIAL GUARANTY
---------------------------------------------------------
Principal Loan Date Maturity Loan No.
---------------------------------------------------------
Call Collateral Account Officer Initials
0700 207
---------------------------------------------------------
- ----------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ----------------------------------------------------------------
Borrower: New America Network, Inc. Lender: FIRST WASHINGTON STATE BANK
572 Rt 130 MAIN - WINDSOR
Hightstown, NJ 08520 Rt 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
Guarantor: Norma Finn
141 Corson Ave.
Trenton, NJ 08619
===========================================================================
AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, Gerald C.
Finn ("Guarantor") absolutely and unconditionally guarantees and promises to pay
to FIRST WASHINGTON STATE BANK ("Lender") or its order, in legal tender of the
United States of America, the Indebtedness (as that term is defined below) of
New America Network, Inc. ("Borrower") to Lender on the terms and conditions set
forth in this Guaranty. Under this Guaranty, the liability of Guarantor is
unlimited and the obligations of Guarantor are continuing.
DEFINITIONS. The following words shall have the following meanings when
used in this Guaranty:
Borrower. The word "Borrower" means New America Network, Inc.
Guarantor. The word "Guarantor" means Gerald C. Finn.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor
for the benefit of Lender dated October 2, 1997.
Indebtedness. The word "Indebtedness" is used in its most
comprehensive sense and means and includes any and all of Borrower's
liabilities, obligations, debts, and indebtedness to Lender, now
<PAGE>
existing or hereinafter incurred or created, including, without
limitation, all loans, advances, interest, costs, debts, overdraft
Indebtedness, credit card indebtedness, lease obligations, other
obligations, and liabilities of Borrower, or any of them, and any
present or future judgments against Borrower, or any of them; and
whether any such Indebtedness is voluntarily or involuntarily incurred,
due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined; whether Borrower may be liable individually
or joint with others, or primarily or secondarily, or as guarantor or
surety; whether recovery on the Indebtedness may be or may become
barred or unenforceable against Borrower for any reason whatsoever; and
whether the Indebtedness arises from transactions which may be voidable
on account of infancy, insanity, ultra vires, or otherwise.
Lender. The word "Lender" means FIRST WASHINGTON STATE BANK, its
successors and assigns.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, excluded in connection
with the Indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as this Guaranty remains in force. Guarantor intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of all Indebtedness.
Accordingly, no payments made upon the Indebtedness will discharge or diminish
the continuing liability of Guarantor in connection with any remaining portions
of the Indebtedness or any of the Indebtedness which subsequently arises or is
thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be mailed to Lender, by certified mail, at the address
of Lender listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new Indebtedness"
does not include Indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to bind
Guarantor for all Indebtedness incurred by Borrower or committed by
<PAGE>
Lender prior to receipt of Guarantor's written notice of revocation, including
any extensions, renewals, substitutions or modification of the Indebtedness. All
renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. This Guaranty shall
bind the estate of Guarantor as to Indebtedness created both before and after
the death or incapacity of Guarantor, regardless of Lender's actual notice of
Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty of
the Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors shall
not affect the liability of any remaining Guarantors under this Guaranty. It is
anticipated that fluctuations may occur in the aggregate amount of Indebtedness
covered by this Guaranty, and it is specifically acknowledged and agreed by
Guarantor that reductions in the amount of Indebtedness, even to zero dollars
($0.00), prior to written revocation of this Guaranty by Guarantor shall not
constitute a termination of this Guaranty. This Guaranty is binding upon
Guarantor and Guarantor's heirs, successors and assigns so long as any of the
guaranteed Indebtedness remains unpaid and even though the Indebtedness
guaranteed may from time to time be zero dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate or otherwise change one or more times the time for
payment or other terms of the Indebtedness or any part of the Indebtedness,
including increases and decreases of the rate of interest on the Indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (d) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (e) to determine how, when and what application
of payments and credits shall be made on the Indebtedness; (f) to apply such
security and direct the order or manner or sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of the
Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lender that (a) no representations or agreements of any kind
<PAGE>
have been made to Guarantor which would limit or qualify in any way the terms of
this Guaranty; (b) this Guaranty is executed at Borrower's request and not at
the request of Lender; (c) Guarantor has full power, right and authority to
enter into this Guaranty; (d) the provisions of this Guaranty do not conflict
with or result in a default under any agreement or other instrument binding upon
Guarantor and do not result in a violation of any law, regulation, court decree
or order applicable to Guarantor; (e) Guarantor has not and will not, without
the prior written consent of Lender, sell, lease, assign, encumber, hypothecate,
transfer, or otherwise dispose of all or substantially all of Guarantor's
assets, or any interest therein; (f) upon Lender's request, Guarantor will
provide to Lender financial and credit information in form acceptable to Lender,
and all such financial information which currently has been, and all future
financial information which will be provided to Lender is and will be true and
correct in all material respects and fairly present the financial condition of
Guarantor as of the dates the financial information is provided; (g) no material
adverse change has occurred in Guarantor's financial condition since the date of
the most recent financial statements provided to Lender and no event has
occurred which may materially adversely affect Guarantor's financial condition;
(h) no litigation, claim, investigation, administrative proceeding or similar
action (including those for unpaid taxes) against Guarantor is pending or
threatened; (i) Lender has made no representation to Guarantor as to the
creditworthiness of Borrower; and (j) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis information regarding
Borrower's financial condition. Guarantor agrees to keep adequately informed
from such means of any facts, events, or circumstances which might in any way
affect Guarantor's risks under this Guaranty, and Guarantor further agrees that,
absent a request for information, Lender shall have no obligation to disclose to
Guarantor any information or documents acquired by Lender in the course of its
relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort to payment or to proceed directly
or at once against any person, including Borrower or any other guarantor; (d) to
proceed directly against or exhaust any ________ private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (f) to pursue any other
remedy within Lender's power; or (g) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective
<PAGE>
successors, any claim or right to payment Guarantor may now have or hereafter
have or acquire against Borrower, by subrogation or otherwise, so that at no
time shall Guarantor be or become a "creditor" of Borrower within the meaning of
11 U.S.C. section 547(b), or any successor provision of the Federal bankruptcy
laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
"one action" or "anti-deficiency" law or any other law which may prevent Lender
from bringing any action, including a claim for deficiency, against Guarantor,
before or after Lender's commencement or completion of any foreclosure action,
either judicially or by exercise of a power of sale; (b) any election of
remedies by Lender which destroys or otherwise adversely affects Guarantor's
subrogation rights or Guarantor's rights to proceed against Borrower for
reimbursement, including without limitation, any loss of rights Guarantor may
suffer by reason of any law limiting, qualifying, or discharging the
Indebtedness; (c) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal tender,
of the Indebtedness; (d) any right to claim discharge of the Indebtedness on the
basis of unjustified impairment of any collateral for the Indebtedness; (e) any
statute of limitations, if at any time any action or suit brought by Lender
against Guarantor is commenced there is outstanding Indebtedness of Borrower to
Lender which is not barred by any applicable statute of limitations; or (f) any
defenses given to guarantors at law or in equity other than actual payment and
performance of the Indebtedness. If payment is made by Borrower, whether
voluntarily or otherwise, or by any third party, on the Indebtedness and
thereafter Lender is forced to remit the amount of that payment of Borrower's
trustee in bankruptcy or to any similar person under any federal or state
bankruptcy law or law for the relief of debtors, the Indebtedness shall be
considered unpaid for the purpose of enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff
<PAGE>
against, and Guarantor hereby assigns, conveys, delivers, pledges, and transfers
to Lender all of Guarantor's right, title and interest in and to, all deposits,
moneys, securities and other property of Guarantor now or hereafter in the
possession of or on deposit with Lender, whether held in a general or special
account or deposit, whether held jointly with someone else, or whether held for
safekeeping or otherwise, excluding however all IRA, Keogh, and trust accounts.
Every such security interest and right of setoff may be exercised without demand
upon or notice to Guarantor. No security interest or right of setoff shall be
deemed to have been waived by any act or conduct on the part of Lender or by any
neglect to exercise such right of setoff or to enforce such security interest or
by any delay in so doing. Every right of setoff and security interest shall
continue in full force and effect until such right of setoff or security
interest is specifically waived or released by an instrument in writing executed
by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
FURTHER ASSURANCES. Guarantor agrees, and Lender hereby is authorized, in the
name of Guarantor, from time to time to execute and file financing statements
and continuation statements and to execute such other documents and to take such
other actions as Lender deems necessary or appropriate to perfect, preserve and
enforce its rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Guaranty:
Amendments. This Guaranty, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Guaranty. No alteration of or amendment
to this Guaranty shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
<PAGE>
Applicable Law. This Guaranty has been delivered to Lender and accepted
by Lender in the State of New Jersey. If there is a lawsuit, Guarantor
agrees upon Lender's request to submit to the jurisdiction of the
courts of Mercer County, State of New Jersey. Lender and Guarantor
hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Guarantor against the other.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of New Jersey.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Guaranty. Lender may pay someone else to help enforce this Guaranty,
and Guarantor shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender's attorneys' fees and legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court
costs and such additional fees as may be directed by the court.
Notices. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile
(unless otherwise required by law), and, except for revocation notices
by Guarantor, shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier, or when
deposited in the United States mail, first class postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above or to such other addresses as either party may designate to
the other in writing. All revocation notices by Guarantor shall be in
writing and shall be effective only upon delivery to Lender as provided
above in the section titled "DURATION OF GUARANTY." If there is more
than one Guarantor, notice to any Guarantor will constitute notice to
all Guarantors. For notice purposes, Guarantor agrees to keep Lender
informed at all times of Guarantor's current address.
Interpretation. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall
be deemed to have been used in the plural where the context and
construction so require; and where there is more than one Borrower
named in this Guaranty or when this Guaranty is executed by more than
one Guarantor, the words "Borrower" and "Guarantor" respectively shall
mean all and any one or more of them. The words "Guarantor,"
"Borrower," and "Lender" include the heirs, successors, assigns, and
transferees of each of them. Caption headings in this Guaranty are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Guaranty. If a court of competent jurisdiction
finds any provision of this Guaranty to be invalid or unenforceable as
to any person or circumstance, such finding shall not render that
provision invalid or unenforceable as to any other persons
<PAGE>
or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of
Borrower or Guarantor are corporations or partnerships, it is not
necessary for Lender to inquire into the powers of Borrower or
Guarantor or of the officers, directors, partners, or agents acting or
purporting to act on their behalf, and any Indebtedness made or created
in reliance upon the professed exercise of such powers shall be
guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Guaranty shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this Guaranty.
No prior waiver by Lender, nor any course of dealing between Lender and
Guarantor, shall constitute a waiver of any of Lender's rights or of
any of Guarantor's obligations as to any future transactions. Whenever
the consent of Lender is required under this Guaranty, the granting of
such consent by Lender in any instance shall not constitute continuing
consent to subsequent instances where such consent is required and in
all cases such consent may be granted or withheld in the sole
discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED OCTOBER 2, 1997.
GUARANTOR:
x________________________________
Norma Finn
<PAGE>
INDIVIDUAL ACKNOWLEDGMENT
STATE OF _______________ )
) ss
COUNTY OF ______________ )
BE IT REMEMBERED that on this ____ day of _________,
19__, before me, the undersigned authority, personally appeared Gerald C. Finn
who, I am satisfied, is the person named in the foregoing instrument, and I
having first made known to him or her the contents thereof, he or she
acknowledged that he or she signed, sealed and delivered the same as his or her
voluntary act and deed. All of which is hereby certified.
-----------------------------------
[Notary Public]
<PAGE>
INDIVIDUAL ACKNOWLEDGMENT
STATE OF _______________ )
) ss
COUNTY OF ______________ )
BE IT REMEMBERED that on this ____ day of _________,
19__, before me, the undersigned authority, personally appeared Norma Finn who,
I am satisfied, is the person named in the foregoing instrument, and I having
first made known to him or her the contents thereof, he or she acknowledged that
he or she signed, sealed and delivered the same as his or her voluntary act and
deed. All of which is hereby certified.
-----------------------------------
[Notary Public]
<PAGE>
COMMERCIAL SECURITY AGREEMENT
- -----------------------------------------------------------
Principal Loan Date Maturity Loan No.
$100,000.00 10-02-1997 10-02-1998 15000245465
- -----------------------------------------------------------
Call Collateral Account Officer Initials
0700 207
- -----------------------------------------------------------
- -----------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -----------------------------------------------------------------------------
Borrower: New America Network, Inc. Lender: FIRST WASHINGTON STATE BANK
572 Rt. 130 MAIN - WINDSOR
Hightstown, NJ 08520 Rt 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
==============================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between New America Network
Inc. (referred to below as "Grantor"); and FIRST WASHINGTON STATE BANK (referred
to below as "Lender"). For valuable consideration, Grantor grants to Lender a
security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Commercial Security Agreement from time to time.
Collateral. The word "Collateral" includes all the following described
property of Grantor, whether now owned or hereafter acquired, whether
now existing or hereafter arising, and wherever located:
All inventory, chattel paper, accounts, equipment,
general intangibles and fixtures
<PAGE>
In addition, the word "Collateral" includes all the following, whether
now owned or hereafter acquired, whether now existing or hereafter
arising and wherever located:
(a) All attachments, accessions, accessories, tools,
parts, supplies, increases, and additions to and all
replacements of and substitutions for any property
described above.
(b) All products and produce of any of the property
described in this Collateral section.
(c) All accounts, general intangibles, instruments,
rents, monies, payments, and all other rights, arising
out of a sale, lease, or other disposition of any of the
property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the
sale, destruction, loss, or other disposition of any of
the property described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form
of a writing, photograph, microfilm, microfiche, or
electronic media, together with all of Grantor's right,
title, and interest in and to all computer software
required to utilize, create, maintain, and process any
such records or data on electronic media.
Fixtures are and will be located on the following described real
estate:
Lot 43.01, Block 58.12, East Windsor Township, Mercer
County, New Jersey. The record owner of the real
property is The Building Center, Inc., P.O. Box 782
Hightstown, NJ 08520
Event of Default. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "Events of Default."
Grantor. The word "Grantor" means New America Network, Inc., its
successors and assigns.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Indebtedness. The word "Indebtedness" means the Indebtedness evidenced
by the Note, including all principal and interest, together with all
other Indebtedness and costs and expenses for which Grantor is
responsible under this Agreement or under any of the Related Documents.
In addition, the word "Indebtedness" includes all other obligations,
debts and liabilities, plus interest thereon, of Grantor,
<PAGE>
or any one or more of them, to Lender, as well as all claims by Lender
against Grantor, or any one of them, whether existing now or later;
whether they are voluntary or involuntary, due or not due, direct or
indirect, absolute or contingent, liquidated or unliquidated; whether
Grantor may be liable individually or jointly with others; whether
Grantor may be obligated as guarantor, surety, accommodation party or
otherwise; whether recovery upon such Indebtedness may be or hereafter
may become otherwise unenforceable.
Lender. The word "Lender" means FIRST WASHINGTON STATE BANK, its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated October
2, 1997, in the principal amount of $100,000.00 from New America
Network, Inc. to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and substitutions
for the note or credit agreement.
Related documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as
follows:
Perfection of Security Interest. Grantor agrees to execute such
financing statements and to take whatever other actions are requested
by Lender to perfect and continue Lender's security interest in the
Collateral. Upon request of Lender, Grantor will deliver to Lender any
and all of the documents evidencing or constituting the Collateral, and
Grantor will note Lender's interest upon any and all chattel paper if
not delivered to Lender for possession by Lender. Grantor hereby
appoints Lender as its irrevocable attorney-in-fact for the purpose of
executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time,
and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or of
this Agreement for use as a financing statement. Grantor will
<PAGE>
reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. This is a continuing Security Agreement and will continue in
effect even though all or any part of the Indebtedness is paid in full
and even though for a period of time Grantor may not be indebted to
Lender.
No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do
not prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral
have authority and capacity to contract and are in fact obligated as
they appear to be on the Collateral. At the time any account becomes
subject to a security interest in favor of Lender, the account shall be
a good and valid account representing an undisputed, bona fide
Indebtedness incurred by the account debtor, for merchandise held
subject to delivery instructions or theretofore shipped or delivered
pursuant to a contract of sale, or for services theretofore performed
by Grantor with or for the account debtor; there shall be no setoffs or
counterclaims against any such account; and no agreement under which
any deductions or discounts may be claimed shall have been made with
the account debtor except those disclosed to Lender in writing.
Location of the Collateral. Grantor, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of real
properties and Collateral locations relating to Grantor's operations,
including without limitation the following: (a) all real property owned
or being purchased by Grantor; (b) all real property being rented or
leased by Grantor; (c) all storage facilities owned, rented, leased, or
being used by Grantor; and (d) ????????? ??? properties where
Collateral is or may be located. Except in the ordinary course of its
business, Grantor shall ???????????
Removal of Collateral. Grantor shall keep the Collateral (or to the
extent the Collateral consists of intangible property such as accounts,
the records concerning the Collateral) at Grantor's address shown
above, or at such other locations as are acceptable to Lender. Some or
all of the Collateral mag be located at the real property described
above. Except in the ordinary course of its business, including the
sales of inventory, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of Lender. To the
extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit
<PAGE>
any action which would require application for certificates of title
for the vehicles outside the State of New Jersey, without the prior
written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business,
Grantor shall not sell, offer to sell, or otherwise transfer or dispose
of the Collateral. While Grantor is not in default under this
Agreement, Grantor may sell inventory, but only in the ordinary course
of its business and only to buyers who qualify as a buyer in the
ordinary course of business. A sale in the ordinary course of Grantor's
business does not include a transfer in partial or total satisfaction
of a debt or any bulk sale. Grantor shall not pledge, mortgage,
encumber or otherwise permit the Collateral to be subject to any lien,
security interest, encumbrance, or charge, other than the security
interest provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if junior in
right to the security interests granted under this Agreement. Unless
waived by Lender, all proceeds from any disposition of the Collateral
(for whatever reason) shall be held in trust for Lender and shall not
be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other
disposition. Upon receipt Grantor shall immediately deliver any such
proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing
statement covering any of the Collateral is on file in any public
office other than those which reflect the security interest created by
this Agreement or to which Lender has specifically consented. Grantor
shall defend Lender's rights in the Collateral against the claims and
demands of all other persons.
Collateral Schedules and Locations. As often as Lender shall require,
and insofar as the Collateral consists of accounts and general
intangibles, Grantor shall deliver to Lender schedules of such
Collateral, including such information as Lender may require, including
without limitation names and addresses of account debtors and agings of
accounts and general intangibles. Insofar as the Collateral consists of
inventory and equipment, Grantor shall deliver to Lender, as often as
Lender shall require, such lists, descriptions, and designations of
such Collateral as Lender may require to identify the nature, extent,
and location of such Collateral. Such information shall be submitted
for Grantor and each of its subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not
commit or permit damage to or destruction of the Collateral or any part
of the Collateral. Lender and its designated representatives and agents
shall have the right at all reasonable times to examine,
<PAGE>
inspect, and audit the Collateral wherever located. Grantor shall
immediately notify Lender of all cases involving the return, rejection,
repossession, loss or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect
to the Collateral; and generally of all happenings and events affecting
the Collateral or the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents. Grantor may
withhold any such payment or may elect to contest any lien if Grantor
is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral is
not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as
an additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to the
ownership, production, disposition, or use of the Collateral. Grantor
may contest in good faith any such law, ordinance or regulation and
withhold compliance during any proceeding, including appropriate
appeals, so long as Lender's interest in the Collateral, in Lender's
opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used for the generation, manufacture,
storage, transportation, treatment, disposal, release or threatened
release of any hazardous waste or substance, as those terms are defined
in the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., the New Jersey
Industrial Site Recovery Act, NJSA Section 13:1K-6 ("ISRA"), the New
Jersey Spill Compensation and Control Act, NJSA 58:10-23.11, et seq.,
or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. The terms "hazardous waste"
and "hazardous substance" shall also include, without limitation,
<PAGE>
petroleum and petroleum by-products or any fraction thereof and
asbestos. The representations and warranties contained herein are based
on Grantor's due diligence in investigating the Collateral for
hazardous wastes and substances. Grantor hereby (a) releases and waives
any future claims against Lender for indemnity or contribution in the
event Grantor becomes liable for cleanup or other costs under any such
laws, and (b) agrees to indemnify and hold harmless Lender against any
and all claims and losses resulting from a breach of this provision of
this Agreement. This obligation to indemnify shall survive the payment
of the Indebtedness and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as Lender may
require with respect to the Collateral, in form, amounts, coverages and
basis reasonably acceptable to Lender and issued by a company or
companies reasonably acceptable to Lender. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or dimished without
at least ten (10) days' prior written notice to Lender and not
including any disclaimer of the insurer's liability for failure to give
such a notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Grantor or any other person. In
connection with all policies covering assets in which Lender holds or
is offered a security interest, Grantor will provide Lender with such
loss payable or other endorsements as lender may require. If Grantor at
any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if it so chooses
"single interest insurance," which will cover only Lender's interest in
the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender
of any loss or damage to the Collateral. Lender may make proof of loss
if Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed
Collateral, Lender shall, upon satisfactory proof of expenditure, pay
or reimburse Grantor from the proceeds for the reasonable cost of
repair or restoration. If Lender does not consent to repair or
replacement of the Collateral, Lender shall retain a sufficient amount
of the proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed within
six (6) months after their receipt and which Grantor has not committed
to the repair or restoration of the Collateral shall be used to prepay
the Indebtedness.
<PAGE>
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender
to be sufficient to produce, at least fifteen (15) days before the
premium due date, amounts at least equal to the insurance premiums to
be paid. If fifteen (15) days before payment is due, the reserve funds
are insufficient, Grantor shall upon demand pay any deficiency to
Lender. The reserve funds shall be held by Lender as a general deposit
and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by
Grantor as they become due. Lender does not hold the reserve funds in
trust for Grantor, and Lender is not the agent of Grantor for payment
of the insurance premiums required to be paid by Grantor. The
responsibility for the payment of premiums shall remain Grantor's sole
responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following:
(a) the name of the insurer; (b) the risks insured; (c) the amount of
the policy; (d) the property insured; (e) the then current value on the
basis of which insurance has been obtained and the manner of
determining that value; and (f) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the
Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to
???????????? parties, nor to protect, preserve or maintain any security interest
given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may
(but shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
<PAGE>
limitation all taxes, liens, security interests, encumbrances, and other claims,
at any time levied or placed on the Collateral. Lender also may (but shall not
be obligated to ) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when
due on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any
other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents or in any other agreement
between Lender and Grantor.
Default in Favor of Third Parties. Should Borrower or any Grantor
default under any loan, extension or credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement,
the Note or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral documents to create a valid and perfected security
interest or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Grantor.
<PAGE>
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of
Grantor's deposit accounts with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Grantor as to the
validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written
notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion,
as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor
dies or becomes incompetent. Lender, at its option, may, but shall not
be required to, permit the Guarantor's estate to assume unconditionally
the obligations arising under the guaranty in a manner satisfactory to
Lender, and, in doing so, cure the Event of Default.
Adverse Change. A material adverse change occurs in Grantor's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Grantor has not been given a prior notice of a breach of
the same provision of this Agreement, it may be cured (and no Event of
Default will have occurred) if Grantor, after Lender sends written
notice demanding cure of such default, (a) cures the default within
thirty (30) days; or (b), if the cure requires more than thirty (30)
days, immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the New Jersey Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to
pay, immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender
all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may
require Grantor to assemble the Collateral and make it available to
<PAGE>
Lender at a place to be designated by Lender. Lender also shall have
full power to enter upon the property of Grantor to take possession of
and remove the Collateral. If the Collateral contains other goods not
covered by this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in
its own name or that of Grantor. Lender may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor reasonable notice of the
time after which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of reasonable notice
shall be met if such notice is given at least ten (10) days before the
time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling
the Collateral, shall become a part of the Indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the appointment
of a receiver: (a) Lender may have a receiver appointed as a matter of
right, (b) the receiver may be an employee of Lender and may serve
without bond, and (c) all fees of the receiver and his or her attorney
shall become part of the Indebtedness secured by this Agreement and
shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from
the Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine.
Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or
similar property, Lender may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then
due. For these purposes, Lender may, on behalf of and in the name of
Grantor, receive, open and dispose of mail addressed to Grantor; change
any address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title, instruments
and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors
and obligors on any Collateral to make payments directly to Lender.
<PAGE>
Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and remedies
it may have available at law, in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement,
after Grantor's failure to perform, shall not affect Lender's right to
declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of New Jersey. If there is a lawsuit,
Grantor agrees upon Lender's request to submit to the jurisdiction of
the courts of the State of New Jersey. Lender and Grantor hereby waive
the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Grantor against the other. This Agreement
shall be governed by construed in accordance with the laws of the State
of New Jersey.
??????????? legal expenses, incurred in connection with the enforcement
of this Agreement. Lender may pay someone else to help enforce this
Agreement, and Grantor shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's attorneys' fees and
legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and including
efforts to modify or vacate any automatic stay or injunction), appeals,
and any anticipated post-judgment collection services. Grantor also
shall pay all court costs and such additional fees as may be directed
by the court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor
under this Agreement shall be joint and several, and all references to
<PAGE>
Grantor shall mean each and every Grantor. This means that each of the
persons signing below is responsible for all obligations in this
Agreement.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, if there is more
than one Grantor, notice to any Grantor will constitute notice to all
Grantors. For notice purposes, Grantor will keep Lender informed at all
times of Grantor's current address(es).
No Joint Venture or Partnership. The relationship of Grantor and Lender
created by this Agreement is strictly that of debtor-creditor, and
nothing contained in this Agreement or in any of the Related Documents
shall be deemed or construed to create a partnership or joint venture
between Grantor and Lender.
Power of Attorney. Grantor hereby appoints Lender as its true and
lawful attorney-in-fact, irrevocably, with full power of substitution
to do the following: (a) to demand, collect, receive, receipt for, sue
and recover all sums of money or other property which may now or
hereafter become due, owing or payable from the Collateral; (b) to
execute, sign and endorse any and all claims, instruments, receipts,
checks, drafts or warrants issued in payment for the Collateral; (c) to
settle or compromise any and all claims arising under the Collateral,
and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to file any claim or
claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary
or advisable. This power is given as security for the Indebtedness, and
the authority hereby conferred is and shall be irrevocable and shall
remain in full force and effect until renounced by Lender.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and all
other provisions of this Agreement in all other respects shall remain
valid and enforceable.
<PAGE>
Successor Interests. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights
or of any of Grantor's obligations as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in
the sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS
DATED OCTOBER 2, 1997.
GRANTOR:
New America Network, Inc.
By: By:
---------------------------- ---------------------------
Gerald C. Finn, President Norma Finn, Secretary
<PAGE>
RECORDATION REQUESTED BY:
FIRST WASHINGTON STATE BANK
Rt. 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
WHEN RECORDED MAIL TO:
FIRST WASHINGTON STATE BANK
Rt. 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
SEND TAX NOTICES TO:
FIRST WASHINGTON STATE BANK
Rt. 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
SPACE ABOVE THIS LINE IS FOR RECORDER'S USE ONLY
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This Mortgage prepared by: X____________________________________
Name of Signer: James C. Hasemann
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MORTGAGE
THIS MORTGAGE IS DATED OCTOBER 2, 1997, between The Building Center, Inc.,
whose address is PO Box 782, Hightstown, NJ 08520 (referred to below as
"Grantor"); and FIRST WASHINGTON STATE BANK, whose address is Rt 130 & Main
Street, P.O. Box 500, Windsor, NJ 08561 (referred to below as "Lender").
GRANT OF MORTGAGE. For valuable consideration, Grantor mortgages and conveys
to Lender all of Grantor's right, title, and interest in and to the following
described real property, together with all existing or subsequently erected or
affixed buildings, Improvements and fixtures; all easements, rights of way,
and appurtenances; all water, water rights, watercourses and ditch rights
(including stock in utilities with ditch or irrigation rights); and all other
rights, royalties, and profits relating to the real property, including
without limitation all minerals, oil, gas, geothermal and similar matters,
located in Mercer County, State of New Jersey (the "Real Property"):
Lot 43.01, Block 58.12, East Windsor Township, Mercer County, New Jersey
<PAGE>
The Real Property or its address is commonly known as 572 Rt 130, Hightstown,
NJ 08520.
Grantor presently assigns to Lender all of Grantor's right, title, and
interest in and to all leases of the Property and all Rents from the Property.
In addition, Grantor grants to Lender a Uniform Commercial Code security
interest in the Personal Property and Rents.
DEFINITIONS. The following words shall have the following meanings when used
in this Mortgage. Terms not otherwise defined in this Mortgage shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Borrower. The word "Borrower" means each and every person or entity
signing the Note, including without limitation New America Network,
Inc.
Existing Indebtedness. The words "Existing Indebtedness" mean the
Indebtedness described below in the Existing Indebtedness section of
this Mortgage.
Grantor. The word "Grantor" means any and all persons and entities
executing this Mortgage, including without limitation all Grantors
named above. The Grantor is the mortgagor under this Mortgage. Any
Grantor who signs this Mortgage, but does not sign the Note, is
signing this Mortgage only to grant and convey that Grantor's
interest in the Real Property and to grant a security interest in
Grantor's interest in the Rents and Personal Property to Lender and
is not personally liable under the Note except as otherwise provided
by contract or law.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Improvements. The word "Improvements" means and includes without
limitation all existing and future improvements, buildings,
structures, mobile homes affixed on the Real Property, facilities,
additions, replacements and other construction on the Real Property.
Indebtedness. The word "Indebtedness" means all principal and
interest payable under the Note and any amounts expended or advanced
by Lender to discharge obligations of Grantor or expenses incurred by
Lender to enforce obligations of Grantor under this Mortgage,
together with interest on such amounts as provided in this Mortgage.
In addition to the Note, the word "Indebtedness" includes all
obligations, debts and liabilities, plus interest thereon, of
Borrower to Lender, or any one or more of them, as well as all claims
by Lender against Borrower, or any one or more of them, whether now
existing or hereafter arising, whether related or unrelated to the
purpose of the Note, whether voluntary or otherwise, whether due or
not due, absolute
<PAGE>
or contingent, liquidated or unliquidated and whether Borrower may be
liable individually or jointly with others, whether obligated as
guarantor or otherwise, and whether recovery upon such Indebtedness
may be or hereafter may become barred by any statute of limitations,
and whether such Indebtedness may be or hereafter may become
otherwise unenforceable. Specifically, without limitation, this
Mortgage secures a revolving line of credit under which Lender may
make advances to Borrower so long as Borrower complies with all the
terms of the Note. The lien of this Mortgage shall not exceed at any
one time the principal amount of $100,000.00, plus accrued interest,
payments made by Lender for taxes and insurance, and any other
payments made by Lender as provided for in this Mortgage.
Lender. The word "Lender" means FIRST WASHINGTON STATE BANK, its
successors and assigns. The Lender is the mortgagee under this
Mortgage.
Mortgage. The word "Mortgage" means this Mortgage between Grantor and
Lender, and includes without limitation all assignments and security
interest provisions relating to the Personal Property and Rents.
Note. The word "Note" means the promissory note or credit agreement
dated October 2, 1997, in the original principal amount of $100,000.00
from Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and
substitutions for the promissory note or agreement. NOTICE TO
GRANTOR: THE NOTE CONTAINS A VARIABLE INTEREST RATE.
Personal Property. The words "Personal Property" mean all equipment,
fixtures, and other articles of personal property now or hereafter
owned by Grantor, and now or hereafter attached or affixed to the
Real Property; together with all accessions, parts, and additions to,
all replacements of and all substitutions for, any of such property;
and together with all proceeds (including without limitation all
insurance proceeds and refunds of premiums) from any sale or other
disposition of the Property.
Property. The word "Property" means collectively the Real Property
and the Personal Property.
Real Property. The words "Real Property" mean the property, interests
and rights described above in the "Grant of Mortgage" section.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing, executed
in connection with the Indebtedness.
<PAGE>
Rents. The word "Rents" means al present and future rents, revenues,
income, issues, royalties, profits, and other benefits derived from
the Property.
THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN
THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (1) PAYMENT OF THE
Indebtedness AND (2) PERFORMANCE OF ALL OBLIGATIONS OF GRANTOR UNDER THIS
MORTGAGE AND THE RELATED DOCUMENTS. THIS MORTGAGE IS GIVEN AND ACCEPTED ON THE
FOLLOWING TERMS:
GRANTOR'S WAIVERS: Grantor waives all rights or defenses arising by reason of
any "one action" or anti deficiency "law", or any other law which deficiency,
before or after Lender's commencement or completion of any foreclosure action,
either judicially or by exercise of a power of sale.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (a) this
Mortgage is executed at Borrower's request and not at the request of Lender;
(b) Grantor has the full power, right, and authority to enter into this
Mortgage and to hypothecate the Property; (c) the provisions of this Mortgage
do not conflict with, or result in a default under any agreement or other
instrument binding upon Grantor and do not result in a violation of any law,
regulation, court decree or order applicable to Grantor; (d) Grantor has
established adequate means of obtaining from Borrower on a continuing basis
information about Borrower's financial condition; and (e) Lender has made no
representation to Grantor about Borrower (including without limitation the
creditworthiness of Borrower).
PAYMENT AND PERFORMANCE. Except as otherwise provided in this Mortgage,
Borrower shall pay to Lender all Indebtedness secured by this Mortgage as it
becomes due, and Borrower and Grantor shall strictly perform all their
respective obligations under this Mortgage.
POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor and Borrower agree
that Grantor's possession and use of the Property shall be governed by the
following provisions:
Possession and Use. Until in default, Grantor may remain in
possession and control of and operate and manage the Property and
collect the Rents from the Property.
Duty to Maintain. Grantor shall maintain the Property in tenantable
condition and promptly perform all repairs, replacements, and
maintenance necessary to preserve its value.
Hazardous Substances. The terms "hazardous waste," "hazardous
substance," disposal," "release," and "threatened release," as used in
this Mortgage, shall have the same meanings as set forth in the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, 42 U.S.C. Section 9061, et seq. ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-
499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 42
<PAGE>
U.S.C. Section 6901, et seq., the New Jersey Industrial Site Recovery
Act, NJSA Section 13:1K-6 ("ISRA"), the New Jersey Spill Compensation
and Control Act, NJSA 58:10-23.11, et seq., or other applicable state
or Federal laws, rules, or regulations adopted pursuant to any of the
foregoing. The terms "hazardous waste" and "hazardous substance"
shall also include, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos. Grantor represents
and warrants to Lender that: (a) During the period of Grantor's
ownership of the Property, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under,
about or from the Property; (b) Grantor has no knowledge of, or
reason to believe that there has been, except as previously disclosed
to and acknowledged by Lender in writing, (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened
release of any hazardous waste or substance on, under, about or from
the Property by any prior owners or occupants of the Property or (ii)
any actual or threatened litigation or claims of any kind by any
person relating to such matters; and (c) Except as previously
disclosed to and acknowledged by Lender in writing, (i) neither
Grantor nor any tenant, contractor, agent or other authorized user of
the Property shall use, generate, manufacture, store, treat, dispose
of, or release any hazardous waste or substance on, under, about or
from the Property and (ii) any such activity shall be conducted in
compliance with all applicable federal, state, and local laws,
regulations and ordinances, including without limitation those laws,
regulations, and ordinances described above. Grantor authorizes
Lender and its agents to enter upon the Property to make such
inspections and tests, at Grantor's expense, as Lender may deem
appropriate to determine compliance of the Property with this section
of the Mortgage. Any inspections or tests made by Lender shall be for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Grantor or to
any other person. The representations and warranties contained herein
are based on Grantor's due diligence in investigating the Property
for hazardous waste and hazardous substances. Grantor hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section
of the Mortgage or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release
occurring prior to Grantor's ownership or interest in the Property,
whether or not the same was or should have been known to Grantor. The
provisions of this section of the Mortgage, including the obligation
to indemnify, shall survive the payment of the Indebtedness and the
satisfaction and reconveyance of the lien of this Mortgage and shall
not be affected by Lender's acquisition of any interest in the
Property, whether by foreclosure or otherwise.
<PAGE>
Nuisance, Waste. Grantor shall not cause, conduct or permit any
nuisance nor commit, permit, or suffer any stripping of or waste on
or to the Property or any portion of the Property. Without limiting
the generality of the foregoing, Grantor will not remove, or grant to
any other party the right to remove,any timber, minerals (including
oil and gas), soil, gravel or rock products without the prior written
consent of Lender.
Removal of Improvements. Grantor shall not demolish or remove any
Improvements from the Real Property without the prior written consent
of Lender. As a condition to the removal of any Improvements, Lender
may require Grantor to make arrangements satisfactory to Lender to
replace such Improvements with Improvements of at least equal value.
Lender's Right to Enter. Lender and its agents and representatives
may enter upon the Real Property at all reasonable times to attend to
Lender's interests and to inspect the Property for purposes of
Grantor's compliance with the terms and conditions of this Mortgage.
Compliance with Governmental Requirements. Grantor shall promptly
comply with all laws, ordinances, and regulations, now or hereafter
in effect, of all governmental authorities applicable to the use or
occupancy of the Property, including without limitation, the
Americans With Disabilities Act. Grantor may contest in good faith
any such law, ordinance, or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Grantor has
notified Lender in writing prior to doing so and so long as, in
Lender's sole opinion, Lender's interests, in the Property are not
jeopardized. Lender may require Grantor to post adequate security or
a surely bond, reasonably satisfactory to Lender, to protect Lender's
interest.
Duty to Protect. Grantor agrees neither to abandon nor leave
unattended the Property. Grantor shall do all other acts, in addition
to those acts set forth above in this section, which from the
character and use of the Property are reasonably necessary to protect
and preserve the Property.
DUE ON SALE - CONSENT BY LENDER. Lender may, at its option, declare
immediately due and payable all sums secured by this Mortgage upon the sale or
transfer, without the Lender's prior written consent, of all or any part of
the Real Property, or any interest in the Real Property. A "sale or transfer"
means the conveyance of Real Property or any right, title or interest therein;
whether legal, beneficial or equitable; whether voluntary or involuntary;
whether by outright sale, deed, installment sale contract, land contract,
contract for deed, leasehold interest with a term greater than three (3)
years, lease-option contract, or by sale, assignment, or transfer of any
beneficial interest in or to any land trust holding title to the Real
Property, or by any other method of conveyance of Real Property Interest. If
any Grantor is a corporation, partnership or limited liability company,
transfer also includes any change in ownership of more than twenty-five
percent (25%) of the voting stock, partnership interests
<PAGE>
or limited liability company interests, as the case may be, of Grantor.
However, this option shall not be exercised by Lender if such exercise is
prohibited by federal law or by New Jersey law.
TAXES AND LIENS. The following provisions relating to the taxes and liens
on the Property are a part of this Mortgage.
Payment. Grantor shall pay when due (and in all events prior to
delinquency) all taxes, payroll taxes, special taxes, assessments,
water charges and sewer service charges levied against or on account
of the Property, and shall pay when due all claims for work done on
or for services rendered or material furnished to the Property.
Grantor shall maintain the Property free of all liens having priority
over or equal to the interest of Lender under this Mortgage, except
for the lien of taxes and assessments not due, except for the
Existing Indebtedness referred to below, and except as otherwise
provided in the following paragraph.
Right to Contest. Grantor may withhold payment of any tax,
assessment, or claim in connection with a good faith dispute over the
obligation to pay, so long as Lender's interest in the Property is
not jeopardized. If a lien arises or is filed as a result of
nonpayment, Grantor shall within fifteen (15) days after the lien
arises or, if a lien is filed, within fifteen (15) days after Grantor
has notice of the filing, secure the discharge of the lien, or if
requested by Lender, deposit with Lender cash or a sufficient
corporate surety bond or other security satisfactory to Lender in an
amount sufficient to discharge the lien plus any costs and attorneys'
fees or other charges that could accrue as a result of a foreclosure
or sale under the lien. In any contest, Grantor shall defend itself
and Lender and shall satisfy any adverse judgment before enforcement
against the Property. Grantor shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings.
Evidence of Payment. Grantor shall upon demand furnish to Lender
satisfactory evidence of payment of the taxes or assessments and
shall authorize the appropriate governmental official to deliver to
Lender at any time a written statement of the taxes and assessments
against the Property.
Notice of Construction. Grantor shall notify Lender at least fifteen
(15) days before any work is commenced, any services are furnished,
or any materials are supplied to the Property, if any construction
lien could be asserted on account of the work, services, or
materials. Grantor will upon request of Lender furnish to Lender
advance assurances satisfactory to Lender that Grantor can and will
pay the cost of such Improvements.
No Claim for Credit For Taxes. Grantor or Borrower will not make
deduction from or claim credit on the principal or interest secured by
this Mortgage by reason of any governmental taxes, assessments or
<PAGE>
charges. Grantor or Borrower will not claim any deduction from the
taxable value of the Property by reason of this Mortgage.
PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring
the Property are a part of this Mortgage.
Maintenance of Insurance. Grantor shall procure and maintain policies
of fire insurance with standard extended coverage endorsements on a
coinsurance clause, and with a standard mortgagee clause in favor of
Lender. Grantor shall also procure and maintain comprehensive general
liability insurance in such coverage amounts as Lender may request
with Lender being named as additional insureds in such liability
insurance policies. Additionally, Grantor shall maintain such other
insurance, including but not limited to hazard, business interruption
and boiler insurance as Lender may require. Policies shall be written
by such insurance companies and in such form as may be reasonably
acceptable to Lender. Grantor shall deliver to Lender certificates of
coverage from each insurer containing a stipulation that coverage
will not be cancelled or diminished without a minimum of ten (10)
day's prior written notice to Lender and not containing any
disclaimer of the Insurer's liability for failure to give such
notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in
any way by any act, omission or default of Grantor or any other
person. Should the Real Property at any time become located in an
area designated by the Director of the Federal Emergency Management
Agency as a special flood hazard area, Grantor agrees to obtain and
maintain Federal Flood Insurance for the full unpaid principal
balance of the loan, up to the maximum policy limits set under the
National Flood Insurance Program, or as otherwise required by Lender,
and to maintain such insurance for the term of the loan.
Application of Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Property. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty.
Whether nor not Lender's security is impaired, Lender may, at its
election, apply the proceeds to the reduction of the Indebtedness,
payment of any lien affecting the Property, or the restoration and
repair of the Property. If Lender elects to apply the proceeds to
restoration and repair, Grantor shall repair or replace the damaged
or destroyed Improvements in a manner satisfactory to Lender. Lender
shall, upon satisfactory proof of such expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or
restoration if Grantor is not in default hereunder. Any proceeds
which have not been disbursed within 180 days after their receipt and
which Lender has not committed to the repair or restoration of the
Property shall be used first to pay any amount owing to Lender under
this Mortgage, then to repay accrued interest, and the remainder, if
any, shall be applied to the principal balance of the Indebtedness.
If Lender holds any proceeds after payment in full of the
Indebtedness, such proceeds shall be paid to Grantor.
<PAGE>
Unexpired Insurance at Sale. Any unexpired insurance shall inure to
the benefit of, and pass to, the purchaser of the Property covered by
this Mortgage at any trustee's sale or other sale held under the
provisions of this Mortgage, or at any foreclosure sale of such
Property.
Compliance with Existing Indebtedness. During the period in which any
Existing Indebtedness described below is in effect, compliance with
the insurance provisions contained in the instrument evidencing such
Existing Indebtedness shall constitute compliance with the insurance
provisions under this Mortgage, to the extent compliance with the
terms of this Mortgage would constitute a duplication of insurance
requirement. If any proceeds from the insurance become payable on
loss, the provisions in this Mortgage for division of proceeds shall
apply only to that portion of the proceeds not payable to the holder
of the Existing Indebtedness.
Grantor's Report on Insurance. Upon request of Lender, however, not
more than once a year, Grantor shall furnish to Lender a report on
each existing policy of insurance showing: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured, the then current replacement value of such
property, and the manner of determining that value; and (e) the
expiration date of the policy. Grantor shall, upon request of Lender,
have an independent appraiser satisfactory to Lender determine the
cash value replacement cost of the Property.
EXPENDITURES BY LENDER. If Grantor fails to comply with any provision of this
Mortgage, including any obligation to maintain Existing Indebtedness in good
standing as required below, or if any action or proceeding is commenced that
would materially affect Lender's interests in the Property, Lender on
Grantor's behalf may, but shall not be required to, take any action that
Lender deems appropriate. Any amount that Lender expends in so doing will bear
interest at the rate provided for in the Note from the date incurred or paid
by Lender to the date of repayment by Grantor. All such expenses, at Lender's
option, will (a) be payable on demand, (b) be added to the balance of the Note
and be apportioned among and be payable with any installment payments to
become due during either (i) the term of any applicable insurance policy or
(ii) the remaining term of the Note, or (c) be treated as a balloon payment
which will be due and payable at the Note's maturity. This Mortgage also will
secure payment of these amounts. The rights provided for in this paragraph
shall be in addition to any other rights or remedies to which Lender may be
entitled on account of the default. Any such action by Lender shall not be
construed as curing the default so as to bar Lender from any remedy that it
otherwise would have had.
WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership
of the Property are a part of this Mortgage.
Title. Grantor warrants that: (a) Grantor holds good and marketable
title of record to the Property in fee simple, free and clear of all
<PAGE>
liens and encumbrances other than those set forth in the Real
Property description or in the Existing Indebtedness section below or
in any title insurance policy, title report, or final title opinion
issued in favor of, and accepted by, Lender in connection with this
Mortgage, and (b) Grantor has the full right, power, and authority to
execute and deliver this Mortgage to Lender.
Defense of Title. Subject to the exception in the paragraph above,
Grantor warrants and will forever defend the title to the Property
against the lawful claims of all persons. In the event any action or
proceeding is commenced that questions Grantor's title or the
interest of Lender under this Mortgage, Grantor shall defend the
action at Grantor's expense. Grantor may be the nominal party in such
proceeding, but Lender shall be entitled to participate in the
proceeding and to be represented in the proceeding by counsel of
Lender's own choice, and Grantor will deliver, or cause to be
delivered, to Lender such instruments as Lender may request from time
to time to permit such participation.
Compliance With Laws. Grantor warrants that the Property and
Grantor's use of the Property complies with all existing applicable
laws, ordinances, and regulations of governmental authorities.
EXISTING Indebtedness. The following provisions concerning existing
Indebtedness (the "Existing Indebtedness") are a part of this Mortgage.
Existing Lien. The lien of this Mortgage securing the Indebtedness
may be secondary and inferior to an existing lien. Grantor expressly
covenants and agrees to pay, or see to the payment of, the Existing
Indebtedness and to prevent any default on such Indebtedness, any
detail under the instruments evidencing such Indebtedness, or any
default under any security documents for such Indebtedness.
Default. If the payment of any installment of principal or any
interest on the Existing Indebtedness is not made within the time
required by the note evidencing such Indebtedness, or should a
default occur under the instrument securing such Indebtedness and not
be cured during any applicable grace period therein, then, at the
option of Lender, the Indebtedness secured by this Mortgage shall
become immediately due and payable, and this Mortgage shall be in
default.
No Modification. Grantor shall not enter into any agreement with the
holder of any mortgage, deed of trust, or other security agreement
which has priority over this Mortgage by which that agreement is
modified, amended, extended, or renewed without the prior written
consent of Lender. Grantor shall neither request nor accept any
future advances under any such security agreement without the prior
consent of Lender.
CONDEMNATION. The following provisions relating to condemnation of the
Property are a part of this Mortgage.
<PAGE>
Application of Net Proceeds. If all or any part of the Property is
condemned by eminent domain proceedings or by any proceeding or
purchase in lieu of condemnation, Lender may at its election require
that all or any portion of the net proceeds of the award be applied
to the Indebtedness or the repair or restoration of the Property. The
net proceeds of the award shall mean the award after payment of all
reasonable costs, expenses and attorneys' fees incurred by Lender in
connection with the condemnation.
Proceedings. If any proceeding in condemnation is filed, Grantor
shall promptly notify Lender in writing, and Grantor shall promptly
take such steps as may be necessary to defend the action and obtain
the award. Grantor may be the nominal party in such proceeding, but
Lender shall be entitled to participate in the proceeding and to be
represented in the proceeding by counsel of its own choice, and
Grantor will deliver or cause to be delivered to Lender such
instruments as may be requested by it from time to time to permit
such participation.
IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The
following provisions relating to governmental taxes, fees and charges are a
part of this Mortgage.
Current Taxes, Fees and Charges. Upon request by Lender, Grantor
shall execute such documents in addition to this Mortgage and take
whatever other action is requested by Lender to perfect and continue
Lender's lien on the Real Property. Grantor shall reimburse Lender
for all taxes, as described below, together with all expenses
incurred in recording, perfecting or continuing this Mortgage,
including without limitation all taxes, fees, documentary stamps, and
other charges for recording or registering this Mortgage.
Taxes. The following shall constitute taxes to which this section
applies: (a) a specific tax upon this type of Mortgage or upon all or
any part of the Indebtedness secured by this Mortgage; (b) a specific
tax on Borrower which Borrower is authorized or required to deduct
from payments on the Indebtedness secured by this type of Mortgage;
(c) a tax on this type of Mortgage chargeable against the Lender or
the holder of the Note; and (d) a specific tax on all or any portion
of the Indebtedness or on payments or principal and interest made by
Borrower.
Subsequent Taxes. If any tax to which this section applies is enacted
subsequent to the date of this Mortgage, this event shall have the
same effect as an Event of Default (as defined below), and Lender may
exercise any or all of its available remedies for an Event of Default
as provided below unless Grantor either (a) pays the tax before it
becomes delinquent, or (b) contests the tax as provided above in the
Taxes and Lien section and deposits with Lender cash or a sufficient
corporate surety bond or other security satisfactory to Lender.
<PAGE>
SECURITY AGREEMENT, FINANCING STATEMENTS. The following provisions
relating to this Mortgage as a security agreement are a part of this
Mortgage.
Security Agreement. This instrument shall constitute a security
agreement to the extent any of the Property constitutes fixtures or
other personal property, and Lender shall have all the rights of a
secured party under the Uniform Commercial Code as amended from time
to time. ???? perfect and continue Lender's security interest in the
Rents and Personal Property. In addition to recording this Mortgage
in the real property records, Lender may, at any time and without
further authorization from Grantor, file executed counterparts,
copies or reproductions of this Mortgage as a financing statement.
Grantor shall reimburse Lender for all expenses incurred in
perfecting or continuing this security interest. Upon default,
Grantor shall assemble the Personal Property in manner and at a place
reasonably convenient to Grantor and Lender and make it available to
Lender within three (3) days after receipt of written demand from
Lender.
Addresses. The mailing addresses of Grantor (debtor) and Lender
(secured party), from which information concerning the security
interest granted by this Mortgage may be obtained (each as required
by the Uniform Commercial Code), are as stated on the first page of
this Mortgage.
FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to
further assurances and attorney-in-fact are a part of this Mortgage.
Further Assurances. At any time, and from time to time, upon request
of Lender, Grantor will make, execute and deliver, or will cause to
be made, executed or delivered, to Lender or to Lender's designee,
and when requested by Lender, cause to be filed, recorded, refiled,
or rerecorded, as the case may be, at such times and in such offices
and places as Lender may deem appropriate, any and all such
mortgages, deeds of trust, security deeds, security agreements,
financing statements, continuation statements, instruments of further
assurance, certificates, and other documents as may, in the sole
opinion of Lender be necessary or desirable in order to effectuate,
complete, perfect, continue, or preserve (a) the obligations of
Grantor and Borrower under the Note, this Mortgage, and the Related
Documents, and (b) the liens and security interests created by this
Mortgage on the Property, whether now owned or hereafter acquired by
Grantor. Unless prohibited by law or agreed to the contrary by Lender
in writing, Grantor shall reimburse Lender for all costs and expenses
incurred in connection with the matters referred to in this
paragraph.
Attorney-In-Fact. If Grantor fails to do any of the things referred
to in the preceding paragraph, Lender may do so for and in the name
of Grantor and at Grantor's expense. For such purposes, Grantor
hereby irrevocably appoints Lender as Grantor's attorney-in-fact for
the purpose of making, executing, delivering, filing, recording, and
doing all other things as may be necessary or desirable, in Lender's
sole
<PAGE>
opinion, to accomplish the matters referred to in the preceding
paragraph.
FULL PERFORMANCE. If Borrower pays all the Indebtedness when due, nd otherwise
performs all the obligations imposed upon Grantor under this Mortgage, Lender
shall execute and deliver to Grantor a suitable satisfaction of this Mortgage
and suitable statements of termination of any financing statement on file
evidencing Lender's security interest in the Rents and the Personal property.
Grantor will pay, if permitted by applicable law, any reasonable termination
fee as determined by lender from time to time.
DEFAULT. Each of the following, at the option of Lender, shall constitute
an event of default ("Event of Default") under this Mortgage:
Default on Indebtedness. Failure of Borrower to make any payment when
due on the Indebtedness.
Default on Other Payments. Failure of Grantor within the time
required by this Mortgage to make any payment for taxes or insurance,
or any other payment necessary to prevent filing of or to effect
discharge of any lien.
Compliance Default. Failure of Grantor or Borrower to comply with any
other term, obligation, covenant or condition contained in this
Mortgage, the Note or in any of the Related Documents.
Default in Favor of Third Parties. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
or any Grantor's property or Borrower's ability to repay the Note or
Borrower's or Grantor's ability to perform their respective
obligations under this Mortgage or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor or Borrower under this
Mortgage, the Note or the Related Documents is false or misleading in
any material respect, either now or at the time made or furnished.
Defective Collateralization. This Mortgage or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral documents to create a valid and perfected security
interest or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor or Borrower's
existence as a going business, the insolvency of Grantor or Borrower,
the appointment of a receiver for any part of Grantor of Borrower's
property, any assignment for the benefit of creditors, and type of
creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor or Borrower.
<PAGE>
Foreclosure, Forfeiture, etc. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by
any governmental agency against any of the Property. However, this
subsection shall not apply in the event of a good faith dispute by
Grantor as to the validity or reasonableness of the claim which is
the basis of the foreclosure or forfeiture proceeding, provided that
Grantor gives Lender written notice of such claim and furnishes
reserves or a surety bond for the claim satisfactory to Lender.
Breach of Other Agreement. Any breach by Grantor or Borrower under
the terms of any other agreement between Grantor or Borrower and
Lender that is not remedied within any grace period provided therein,
including without limitation any agreement concerning any
Indebtedness or other obligation of Grantor or Borrower to Lender,
whether existing now or later.
Existing Indebtedness. A default shall occur under any Existing
Indebtedness or under any Instrument on the Property securing any
Existing Indebtedness, or commencement of any suit or other action to
foreclose any existing lien on the Property.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness. Lender, at its
option, any, but shall not be required to, permit the Guarantor's
estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Insecurity. Lender in good faith deems itself insecure.
Right to Cure. If such a failure is curable and if Grantor or
Borrower has not been given a notice of a breach of the same
provision of this Mortgage within the preceding twelve (12) months,
it may be cured (and no Event of Default will have occurred) if
Grantor or Borrower, after Lender sends written notice demanding cure
of such failure: (a) cures the failure within thirty (30) days; or
(b) if the cure requires more than thirty (30) days, immediately
initiates steps sufficient to cure the failure and thereafter
continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default
and at any time thereafter, Lender, at its option, may exercise any one or
more of the following rights and remedies, in addition to any other rights or
remedies provided by law:
<PAGE>
Accelerate Indebtedness. Lender shall have the right at its option
without notice to Borrower to declare the entire Indebtedness
immediately due and payable, including any prepayment penalty which
Borrower would be required to pay.
UCC Remedies. With respect to all or any part of the Personal
Property, Lender shall have all the rights and remedies of a secured
party under the Uniform Commercial Code.
Lender in Possession. Upon acceleration of the Indebtedness or
abandonment of the Property, Lender (in person, by agent or by
judicially appointed receiver) shall be entitled to enter upon, take
possession of an manage the Property and to collect the Rents,
including those past due. Any Rents collected by Lender or the
receiver shall be applied first to payment of the costs of management
of the Property and collection of Rents, including but not limited to
receiver's fees, premiums on the receiver's bonds and reasonable
attorneys' fees and then to the other Indebtedness secured by this
Mortgage.
Appoint Receiver. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Property, with
the power to protect and preserve the Property, to operate the
Property preceding foreclosure or sale, and to collect the Rents from
the Property and apply the proceed, over and above the cost of the
receivership, against the Indebtedness. The receiver may serve
without bond if permitted by law. Lender's right to the appointment
of a receiver shall exist whether or not the apparent value of the
Property exceeds the Indebtedness by a substantial amount. Employment
by lender shall not disqualify a person from serving as a receiver.
Judicial Foreclosure. Lender may obtain a judicial decree foreclosing
Grantor's interest in all or any part of the Property.
Nonjudicial Sale. If permitted by applicable law, Lender may
foreclose Grantor's interest in all or in any part of the Personal
Property or the Real Property by nonjudicial sale.
Tenancy at Sufferance. If Grantor remains in possession of the
Property after the Property is sold as provided above or Lender
otherwise becomes entitled to possession of the Property upon default
of Grantor, Grantor shall become a tenant at sufference of Lender or
the purchaser of the Property and shall at Lender's ???? either (a)
pay a reasonable rental for the use of the Property or (b) vacate the
Property immediately upon the demand of the Lender.
Other Remedies. Lender shall have all other rights and remedies
provided in this Mortgage or the Note or available at law or in
equity.
Sale of the Property. To the extent permitted by applicable law,
Grantor or Borrower hereby waive any and all right to have the
<PAGE>
property marshalled. In exercising its rights and remedies, Lender
shall be free to sell all or any part of the Property together or
separately, in one sale or by separate sales. Lender shall be
entitled to bid at any public sale on all or any portion of the
Property.
Notice of Sale. Lender shall give Grantor reasonable notice of the
time and place of any public sale of the Personal Property or of the
time after which any private sale or other intended disposition of
the Personal Property is to be made. Reasonable notice shall mean
notice given at least ten (10) days before the time of the sale or
disposition.
Waiver; Election of Remedies. A waiver by any party of a breach of a
provision of this Mortgage shall not constitute a waiver of or
prejudice the party's rights otherwise to demand strict compliance
with that provision or any other provision. Election by Lender to
pursue any remedy shall not exclude pursuit of any other remedy, and
an election to make expenditures or take action to perform an
obligation of Grantor or Borrower under this Mortgage after failure
of Grantor or Borrower to perform shall not affect Lender's right to
declare a default and exercise its remedies under this Mortgage.
Attorneys' Fees; Expenses. If Lender institutes any suit or action to
enforce any of the terms of this Mortgage, Lender shall be entitled
to recover such sum as the court may adjudge reasonable as attorneys'
fees at trial and on any appeal. Whether or not any court action is
involved, all reasonable expenses incurred by Lender that in Lender's
opinion are necessary at any time for the protection of its interest
or the enforcement of its rights shall become a part of the
Indebtedness payable on demand and shall bear interest from the date
of expenditure until repaid at the rate provided for in the Note.
Expenses covered by this paragraph include, without limitation,
however subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals and any anticipated post-judgment collection
services, the cost of searching records, obtaining title reports
(including foreclosure reports), surveyors' reports, and appraisal
fees, and title insurance, to the extent permitted by applicable law.
Borrower also will pay any court costs, in addition to all other sums
provided by law.
NOTICES TO GRANTOR AND OTHER PARTIES. Any notice under this Mortgage,
including without limitation any notice of default and any notice of sale to
Grantor, shall be in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered, or when
deposited with a nationally recognized overnight courier, or, if mailed, shall
be deemed effective when deposited in the United States mail first class,
certified or registered mail, postage prepaid, directed to the addresses shown
near the beginning of this Mortgage. Any party may change
<PAGE>
its address for notices under this Mortgage by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change the
party's address. All copies of notices of foreclosure from the holder of any
lien which has priority over this Mortgage shall be sent to Lender's address,
as shown near the beginning of this Mortgage. For notice purposes, Grantor
agrees to keep Lender informed at all times of Grantor's current address.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Mortgage:
Amendments. This Mortgage, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Mortgage. No alteration of or
amendment to this Mortgage shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by
the alteration or amendment.
Annual Reports. If the Property is used for purposes other than
Grantor's residence, Grantor shall furnish to Lender, upon request, a
certified statement of net operating income received from the
Property during Grantor's previous fiscal year in such form and
detail as Lender shall require. "Net operating income" shall mean all
cash receipts from the Property less all cash expenditures made in
connection with the operation of the Property.
Applicable Law. This Mortgage has been delivered to Lender and
accepted by Lender in the State of New Jersey. This Mortgage shall be
governed by and construed in accordance with the laws of the State of
New Jersey.
Caption Headings. Caption headings in this Mortgage are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Mortgage.
Merger. There shall be no merger of the interest or estate created by
this Mortgage with any other interest or estate in the Property at
any time held by or for the benefit of Lender in any capacity,
without the written consent of Lender.
Multiple Parties; Corporate Authority. All obligations of Grantor and
Borrower under this Mortgage shall be joint and several, and all
references to Grantor shall mean each and every Grantor, and all
references to Borrower shall mean each and every Borrower. This means
that each of the persons signing below is responsible for all
obligations in this Mortgage.
No Joint Venture or Partnership. The relationship of Grantor,
Borrower and Lender created by this Mortgage is strictly that of
debtor-creditor, and nothing contained in this Mortgage or in any of
the Related Documents shall be deemed or construed to create a
partnership or joint venture between Grantor, Borrower and Lender.
<PAGE>
Severability. If a court of competent jurisdiction finds any
provision of this Mortgage to be invalid or unenforceable as to any
person or circumstance, such finding shall not render that provision
invalid or unenforceable as to any other persons or circumstances. If
feasible, any such offending provision shall be deemed to be modified
to be within the limits of enforceability or validity; however, if
the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Mortgage in all other respects shall
remain valid and enforceable.
Successors and Assigns. Subject to the limitations stated in this
Mortgage on transfer of Grantor's interest, this Mortgage shall be
binding upon and inure to the benefit of the parties, their
successors and assigns. If ownership of the Property becomes vested
in a person other than Grantor, Lender, without notice to Grantor,
may deal with Grantor's successors with reference to this Mortgage
and the Indebtedness by way of forbearance or extension without
releasing Grantor from the obligations of this Mortgage or liability
under the Indebtedness.
Time is of the Essence. Time is of the essence in the performance of
this Mortgage.
Waivers and Consents. Lender shall not be deemed to have waived any
rights under this Mortgage (or under the Related Documents) unless
such waiver is in writing and signed by Lender. No delay or omission
on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by any party of a
provision of this Mortgage shall not constitute a waiver of or
prejudice the party's right otherwise to demand strict compliance
with that provision or any other provision. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor or
Borrower, shall constitute a waiver of any of Lender's rights or any
of Grantor or Borrower's obligations as to any future transactions.
Whenever consent by Lender is required in this Mortgage, the granting
of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is
required.
GRANTOR ACKNOWLEDGES HAVING REAL ALL THE PROVISIONS OF THIS MORTGAGE, AND
GRANTOR AGREES TO ITS TERMS. GRANTOR ACKNOWLEDGES RECEIPT, WITHOUT CHARGE,
OF A TRUE AND CORRECT COPY OF THIS MORTGAGE.
GRANTOR:
The Building Center, Inc.
By:_________________________ By:___________________________
Gerald C. Finn, President Norma Finn, Secretary
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF _______________ )
) ss
COUNTY OF ______________ )
BE IT REMEMBERED that on this ____ day of _________,
19__, me, the subscribers, personally appeared Gerald C. Finn and Norma Finn of
The Building Center, Inc. who, I am satisfied, are the persons who signed the
within instrument, and they acknowledged that they signed, sealed with the
corporate seal and delivered the same as such officers aforesaid, and that the
within instrument is the voluntary act and deed of such corporation, made by
virtue of a resolution of its Board of Directors.
-----------------------------------
[Notary Public]
<PAGE>
BUSINESS LOAN AGREEMENT
---------------------------------------------------------
Principal Loan Date Maturity Loan No.
$100,000.00 11-25-1997 11-25-2002 1500025467
---------------------------------------------------------
Call Collateral Account Officer Initials
0700 207
---------------------------------------------------------
- --------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------
Borrower: New America Network, Inc. Lender: FIRST WASHINGTON STATEBANK
572 Rt. 130 MAIN - WINDSOR
Highstown, NJ 08520 Rt 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
==========================================================================
THIS BUSINESS LOAN AGREEMENT between New America Network, Inc. ("Borrower")
and FIRST WASHINGTON STATE BANK ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may by described on any
exhibit or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that:
(a) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties and agreements, as set forth in this
Agreement; (b) the granting, renewing, or extending of any Loan by Lender at
all times shall be subject to Lender's sole judgement and discretion; and (c)
all such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of November 25, 1997, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Business Loan Agreement,
as this Business Loan Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
<PAGE>
Borrower. The word "Borrower" means New America Network, Inc. The
word "Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
Collateral. The word "Collateral" means and includes without
limitation all property and assets granted as collateral security for
a Loan, whether real or personal property, whether granted directly
or indirectly, whether granted now or in the future, and whether
granted in the form of a security interest, mortgage, deed of trust,
assignment, pledge, chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien, charge, lien
or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever,
whether created by law, contract or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Act of
1974, as amended.
Event of Default. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation
each and all of the persons or entities granting a Security Interest
in any Collateral for the Indebtedness, including without limitation
all Borrowers granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as
well as all claims by Lender against Borrower, or any one or more of
them; whether now or hereafter existing, voluntary or involuntary,
due or not due, absolute or contingent, liquidated or unliquidated;
whether Borrower may be liable individually or jointly with others;
whether Borrower may by obligated as a guarantor, surety, or
otherwise; whether recovery upon such Indebtedness may be or
hereafter may become barred by any statute of limitations; and
whether such Indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word "Lender" means FIRST WASHINGTON STATE BANK, its
successors and assigns.
Loan. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial accommodations
<PAGE>
from Lender to Borrower, whether now or hereafter existing, and
however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit
or schedule attached to this Agreement from time to time.
Note. The word "Note" means and includes without limitation the
Borrower's promissory note or notes, if any, evidencing Borrower's
Loan obligations in favor of Lender, as well as any substitute,
replacement or refinancing note or notes hereby.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and
security interests securing indebtedness owed by Borrower to Lender;
(b) liens for taxes, assessments, or similar charges either not yet
due or being contested in good faith; (c) liens of materialmen,
mechanics, warehousemen, or carriers, or other like liens arising in
the ordinary course of business and securing obligations which are
not yet delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by
Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred
under the paragraph of this Agreement titled "Indebtedness and
Liens"; (e) liens and security interests which, as of the date of
this Agreement, have been disclosed to and approved by the Lender in
writing; and (f) those liens and security interests which is the
aggregate constitute an immaterial and insignificant monetary amount
with respect to the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing, executed
in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
Security Interest. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the
form of lien, charge, mortgage, deed of trust, assignment, pledge,
chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract,
lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law,
contract or otherwise.
SARA. The word "SARA" means Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
<PAGE>
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory
to Lender the following documents for the Loan: (a) the Note, (b)
Security Agreements granting to Lender security interests in the
Collateral; (c) Financing Statements perfecting Lender's Security
Interests; (d) evidence of insurance as required below; and (e) any
other documents required under this Agreement or by Lender or its
counsel, including without limitation any guaranties described below.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of Agreement, the Note and the
Related Documents, and such other authorizations and other documents
and instruments as Lender or its counsel, in their sole discretion,
may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Documents.
Representations and Warranties. The representations and warranties
set forth in this Agreement, in the related Documents, and in any
document or certificate delivered to Lender under this Agreement are
true and correct.
No Event of Default. There shall not exist at the time of any advance
a condition which would constitute an Event of Default under this
Agreement.
_____________________________________________ [illegible]
disbursement of Loan proceeds, as of the date of any renewal,
extension or modification of any Loan, and at all times any
Indebtedness exists:
Organization. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
New Jersey and is validly existing and in good standing in all states
in which Borrower is doing business. Borrower has the full power and
authority to own its properties and to transact the businesses in
which it is presently engaged or presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would
have a material adverse effect on its business or financial
condition.
Authorization. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly
authorized by all necessary action by Borrower; do not require the
consent or approval of any other person, regulatory authority or
<PAGE>
governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles
of incorporation or organization, or bylaws, or any agreement or
other instrument binding upon Borrower or (b) any law, governmental
regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied
to Lender truly and completely disclosed Borrower's financial
condition as of the date of the statement, and there has been no
material adverse change in Borrower's financial condition subsequent
to the date of the most recent financial statement supplied to
Lender. Borrower has no material contingent obligations except as
disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective
terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for
taxes not presently due and payable, Borrower owns and has good title
to all of Borrower's properties free and clear of all Security
Interests, and has not executed any security documents or financing
statements relating to such properties. All of Borrower's properties
are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the
last five (5) years.
Hazardous Substances. The terms "hazardous substance," "disposal,"
"release," and "threatened release," as used in this Agreement, shall
have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq., the New Jersey Industrial Site Recovery Act, NJSA
Section 13:1K-6 ("ISRA"), the New Jersey Spill Compensation and
Control Act, NJSA 58:10-23.11, et seq., or other applicable state or
Federal laws, rules or regulations adopted pursuant to any of the
foregoing. Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (a) During the period
of Borrower's ownership of the properties, there has been no use,
generation, manufacture, storage, treatment, disposal, release or
threatened release of any hazardous waste or substance by any person
on, under, about or from any of the properties. (b) Borrower has no
knowledge of, or reason to believe that there has been (i) any use,
generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under,
about or from the properties by any prior owners or occupants of any
of the properties, or (ii) any actual or threatened litigation or
claims of any kind by any person relating to such matters. (c)
<PAGE>
Neither Borrower nor any tenant, contractor, agent or other
authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste
or substance on, under, about or from any of the properties; and any
such activity shall be conducted in compliance with all applicable
federal, state, and local laws, regulations, and ordinances,
including without limitation those laws, regulations and ordinances
describe above. Borrower authorizes Lender and its agents to enter
upon the properties to make such inspections and tests as Lender may
appropriate to determine compliance of the properties with this
section of the Agreement. Any inspections or tests made by Lender
shall be at Borrower's expense and for Lender's purposes only and
shall not be construed to create any responsibility or liability on
the part of Lender to Borrower or to any person. The representations
and warranties contained herein are based on Borrower's due diligence
in investigating the properties for hazardous waste and hazardous
substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower
becomes liable for cleanup or other costs under any such laws, and
(b) agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a
breach of this section of the Agreement or as a consequence of any
use, generation, manufacture, storage, disposal, release or
threatened release occurring prior to Borrower's ownership or
interest in the properties, whether or not the same was or should
have been known to Borrower. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the
payment of the Indebtedness and the termination or expiration of this
Agreement and shall not be affected by Lender's acquisition of any
interest in any of the properties, whether by foreclosure or
otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for
unpaid taxes) against Borrower is pending or threatened, and no other
event has occurred which may materially adversely affect Borrower's
financial condition or properties, other than litigation, claims, or
other events, if any, that have been disclosed to and acknowledged by
Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and
reports of Borrower that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
been paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for
which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or
indirectly securing repayment of Borrower's Loan and Note, that would
be prior or
<PAGE>
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and all of the Related Documents are binding upon Borrower as well as
upon Borrower's successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which
Borrower may have any liability complies in all material respects
with all applicable requirements of law and regulations, and (i) no
Reportable Event nor Prohibited Transaction (as defined in ERISA) has
occurred with respect to any such plan, (ii) Borrower has not
withdrawn from any such plan or initiated steps to do so, (iii) no
steps have been taken to terminate any such plan, and (iv) there are
no unfunded liabilities other than those previously disclosed to
Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more
than one place of business, is located at 572 Rt. 130, Hightstown, NJ
08520. Unless Borrower has designated otherwise in writing this
location is also the office or offices where Borrower keeps its
records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and
all information hereafter furnished by or on behalf of Borrower to
Lender will be, true and accurate in every material respect on the
date as of which such information is dated or certified; and none of
such information is or will be incomplete by omitting to state any
material fact necessary to make such information not misleading.
Survival of Representations and Warranties. Borrower understands and
agrees that Lender, without independent investigation, is relying
upon the above representations and warranties in making the above
referenced Loan to Borrower. Borrower further agrees that the
foregoing representations and warranties shall be continuing in
nature and shall remain in full force and effect until such time as
Borrower's Indebtedness shall be paid in full, or until this
Agreement shall be terminated in the manner provided above, whichever
is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that,
while this Agreement is in effect, Borrower will:
<PAGE>
Litigation. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all
existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or
any Guarantor which could materially affect the financial condition
of Borrower or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent
basis, and permit Lender to examine and audit Borrower's books and
records at all reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but
in no event later than ninety (90) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year
ended, prepared by Borrower. All financial reports required to be
provided under this Agreement shall be prepared in accordance with
generally accepted accounting principles, applied on a consistent
basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables
and payables, inventory schedules, budgets, forecasts, tax returns,
and other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with
respect to Borrower's properties and operations, in form, amounts,
coverages and with insurance companies reasonably acceptable to
Lender. Borrower, upon request of Lender, will deliver to Lender from
time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will
not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Borrower or
any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest for the Loans,
Borrower will provide Lender with such loss payment or other
endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following:
(a) the name of the insurer; (b) the risks insured; (c) the amount of
the policy; (d) the properties insured; (e) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration date of
the policy. In addition, upon request of Lender (however not more
often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash
value
<PAGE>
or replacement cost of any Collateral. The cost of such appraisal
shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish
executed guaranties of the Loans in favor of Lender, executed by the
guarantor named below, on Lender's forms, and in the amounts and
under the conditions spelled out in those guaranties.
Guarantors Amounts
---------- -------
Gerald C. Finn Unlimited
Norma Finn Unlimited
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and
any other party and notify Lender immediately in writing of any
default in connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (Borrower shall have established on its books
adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish
to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate
governmental official to deliver to Lender at any time a written
statement of any assessments, taxes, charges, levies, liens and
claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents
in a timely manner, and promptly notify Lender if Borrower learns of
the occurrence of any event which constitutes an Event of Default
under this Agreement or under any of the Related Documents.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender
<PAGE>
of any change in executive and management personnel; conduct its
business affairs in a reasonable and prudent manner and in compliance
with all applicable federal, state and municipal laws, ordinances,
rules and regulations respecting its properties, charters, businesses
and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding
standards and other requirements of ERISA and other laws applicable
to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable
time to inspect any and all Collateral for the Loan or Loans and
Borrower's other properties and to examine or audit Borrower's books,
accounts, and records and to make copies and memoranda of Borrower's
books, accounts, and records. If Borrower now or at any time
hereafter maintains and records (including without limitation
computer generated records and computer software programs for the
generation of such records) in the possession of a third party,
Borrower, upon request of Lender, shall notify such party to permit
Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at
Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement
are true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of
Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity when
damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional of
unintentional action or omission on Borrower's part in connection
with any environmental activity whether or not there is damage to the
environmental and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.
<PAGE>
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed
money, including capital leases, (b) except as allowed as a Permitted
Lien, sell, transfer, mortgage, assign, pledge, lease, grant a
security interest in, or encumber any of Borrower's assets, or (c)
sell with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than
dividends payable in its stock), provided, however that
notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the
payment of dividends, if Borrower is a "Subchapter S Corporation" (as
defined in the Internal Revenue Code of 1986, as amended), Borrower
may pay cash dividends on its stock to its shareholders from time to
time in amounts necessary to enable the shareholders to pay income
taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their
status as Shareholders of a Subchapter S Corporation because of their
ownership of shares of stock of Borrower, or (d) purchase or retire
any of Borrower's outstanding shares or alter or amend Borrower's
capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, or (c) incur any obligation as surely or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds
if: (a) Borrower or any Guarantor is in default under the terms of this
Agreement or any of the Related Documents or any other agreement that Borrower
or any Guarantor has with Lender; (b) Borrower or any Guarantor becomes
insolvent, files a petition in bankruptcy or similar proceedings, or is
adjudged a bankrupt; (c) there occurs a material adverse change in Borrower's
financial condition, in the financial condition of any Guarantor, or in the
value of any Collateral securing any Loan; (d) any Guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the
Loan or any other loan with Lender; or (e) Lender in good faith deems itself
insecure, even though no Event of Default have occurred.
<PAGE>
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all
accounts Borrower may open in the future, excluding however all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when
due on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or
to perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
________ Favor of Third Parties. Should Borrower or any Grantor
default under any loan extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of
the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or threatened, or becomes false or
misleading at any time thereafter.
Defective Collaterization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as
a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against Borrower.
<PAGE>
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower or Grantor, as the case
may be, as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding, and if Borrower
or Grantor gives Lender written notice of the creditor or forfeiture
proceeding and furnishes reserves or a surely bond for the creditor
or forfeiture proceeding satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness. Lender, at its
option, may, but shall not be required to, permit the Guarantor's
estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
Change in Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness,
is curable and if Borrower or Grantor, as the case may be, has not
been given a notice of a similar default within the preceding twelve
(12) months, it may be cured (and no Event of Default will have
occurred) if Borrower or Grantor, as the case may be, after receiving
written notice from Lender demanding cure of such default: (a) cures
the default within thirty (30) days; or (b) if the cure requires more
than thirty (30) days, immediately initiates steps which Lender deems
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate and, at Lender's
option, all indebtedness immediately will become due and payable, all without
notice of any kind to Borrower, except that in the case of an Event of Default
of the type described in the "Insolvency" subsection above, such acceleration
shall be automatic and not optional. In addition,
<PAGE>
Lender shall have all the rights and remedies provided in the Related
Documents or available at law, in equity, or otherwise. Except as may be
prohibited by applicable law, all of Lender's rights and remedies shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
Borrower or of any Grantor shall not affect Lender's right to declare a
default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or
bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of New Jersey. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction
of the courts of Mercer County, the State of New Jersey. Lender and
Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower
against the other. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower
under this Agreement shall be joint and several, and all references
to Borrower shall mean each and every Borrower. This means that each
of the persons signing below is responsible for all obligations in
this Agreement.
Consent to Loan Participation. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers,
whether related or unrelated to Lender. Lender may provide, without
any limitation whatsoever, to any one or more purchasers, or
potential purchasers, any information or knowledge Lender may have
about Borrower or about any other matter relating to the Loan, and
Borrower hereby waives any rights to privacy it may have with respect
to such matters. Borrower additionally waives any and all notices of
sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that
the purchasers of any such participation interests will be considered
as the absolute owners of such interests in the Loans and will have
all the rights granted under the participation agreement or
agreements
<PAGE>
governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or
later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such
purchaser may enforce Borrower's obligation under the Loans
irrespective of the failure or insolvency of any holder of any
interest in the Loans. Borrower further agrees that the purchaser of
any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may
have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of
Lender's expenses, including without limitation, attorneys' fees
incurred in connection with the preparation, execution, enforcement,
modification and collection of this Agreement or in connection with
the Loans made pursuant to this Agreement. Lender may pay someone
else to help collect the Loans and to enforce this Agreement, and
Borrower will pay that amount. This includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys'
fees for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any
anticipated postjudgment collection services. Borrower also will pay
any court costs, in addition to all other sums provided by law.
Notices. All notices required to be given under this Agreement shall
be given in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the
address shown above. Any party may change its address for notices
under this Agreement by giving formal written notice to the other
parties, specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, if there
is more than one Borrower, notice to any Borrower will constitute
notice to all Borrowers. For notice purposes, Borrower will keep
Lender informed at all times of Borrower's current address(es).
No Joint Venture or Partnership. The relationship of Borrower and
Lender created by this Agreement is strictly that of debtor-creditor,
and nothing contained in this Agreement or in any of the Related
Documents shall be deemed or construed to create a partnership or
joint venture between Borrower and Lender.
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any
person or circumstance, such finding shall not render that provision
invalid or unenforceable as to any other persons or circumstances. If
feasible, any such offending provision shall be deemed to be modified
to be within the limits of enforceability or validity; however, if
the offending provision cannot be so modified, it shall be stricken
and
<PAGE>
all other provisions of this Agreement in all other respects shall
remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation, any representation, warranty or covenant, the
word "Borrower" as used herein shall include all subsidiaries and
affiliates of Borrower. Notwithstanding the foregoing however, under
no circumstances shall this Agreement be construed to require Lender
to make any Loan or other financial accommodation to any subsidiary
or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or
on behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent
of Lender.
Survival. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
Waiver. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any
right shall operate as a wavier of such right or any other right. A
waiver by Lender of a provision of this Agreement shall not prejudice
or constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations
of Borrower or of any Grantor as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is
required, and in all cases such consent may be granted or withheld in
the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
NOVEMBER 25, 1997.
BORROWER:
<PAGE>
New America Network, Inc.
By: /s/ Gerald C. Finn By: /s/ Norma Finn
--------------------------- ----------------------------
Gerald C. Finn, President Norma Finn, Secretary
LENDER;
FIRST WASHINGTON STATE BANK
By:----------------------------
Authorized Officer
<PAGE>
PROMISSORY NOTE
---------------------------------------------------------
Principal Loan Date Maturity Loan No.
$100,000.00 11-25-1997 11-25-2002 1500025467
---------------------------------------------------------
Call Collateral Account Officer Initials
0700 207
---------------------------------------------------------
- --------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------
Borrower: New America Network, Inc. Lender: FIRST WASHINGTON STATE BANK
572 Rt. 130 MAIN - WINDSOR
Highstown, NJ 08520 Rt 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
==========================================================================
Principal Amount: Initial Rate: Date of Note:
$100,000.00 9.500% November 25, 1997
PROMISE TO PAY. New America Network, Inc. ("Borrower") promises to pay to
FIRST WASHINGTON STATE BANK ("Lender"), or order, in lawful money of the
United States of America, the principal amount of One Hundred Thousand &
00/100 Dollars ($100,000.00), together with interest on the unpaid principal
balance from November 25, 1997, until paid in full, together with all
applicable fees and expenses.
PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan in 59 principal payments of $1,666.66 each and one
final principal and interest payment of $1,680.51. Borrower's first principal
payment is due December 25, 1997, and all subsequent principal payments are
due on the same day of each month after that. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of each payment
date. Borrower's first interest payment is due December 25, 1997, and all
subsequent interest payments are due on the same day of each month after that.
Borrower's final payment due November 25, 2002, will be for all principal,
accrued interest, and all other applicable fees and expenses, if any, not yet
paid. Interest on this Note is computed on a 365/365 simple interest basis;
that is, by applying the ratio of the annual interest rate over the number of
days in a year, multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding. Borrower will
pay Lender at Lender's address shown above or at such other place as Lender
may designate in writing. Unless otherwise agreed or required by applicable
law, payments will be applied first to accrued unpaid interest, then to
principal, and any remaining amount to any unpaid collection costs and late
charges.
<PAGE>
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate
(the "Index"). This is the rate of interest announced from time to time by
Lender as its "Prime Rate" or "Prime Lending Rate." This rate of interest is
determined from time to time by Lender as a means of pricing some loans to its
customers, and it is neither tied to any external rate of interest or index
nor does it necessarily reflect the lowest rate of interest actually charged
by Lender to any particular class or category of customers of Lender. Lender
will tell Borrower the current index rate upon Borrower's request. Borrower
understands that lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. The Index
currently is a 8.500% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 1.000 percentage point
over the Index, resulting in an initial rate of 9.500% per annum. NOTICE:
Under no circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default),
except as otherwise required by law. Except for the foregoing, Borrower may
pay without penalty all or a portion of the amount owed earlier than it is
due. Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments under the
payment schedule. Rather, they will reduce the principal balance due and may
result in Borrower making fewer payments.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d)
Any representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower make an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of or levy on any of Borrower's
accounts with Lender. (g) Any guarantor dies or any of the other events
described in this default section occurs with respect to any guarantor of this
Note. (h) A material adverse change occurs in Borrower's financial condition,
or Lender believes the prospect of payment or
<PAGE>
performance of the indebtedness is impaired. (i) Lender in good faith
deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within thirty
(30) days; or (b) if the cure requires more than thirty (30) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then borrower will pay that amount. Lender may hire or pay someone
else to help collect this Note if Borrower does not pay. Borrower also will
pay Lender that amount. This includes, subject to any limits under applicable
law, Lender's attorneys' fees and Lender's legal expenses whether or not there
is a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
If not prohibited by applicable law, Borrower also will pay any court costs,
in addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of New Jersey. If there is a
lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction
of the courts of Mercer County, the State of New Jersey. Lender and Borrower
hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Borrower against the other. This Note
shall be governed by and construed in accordance with the laws of the State of
New Jersey.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $28.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all
accounts Borrower may open in the future, excluding however all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts.
COLLATERAL. This Note is secured by a third mortgage on premises located at
572 Rt 130, Hightstown, New Jersey together with all business assets.
<PAGE>
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Note without losing them. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of
dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan, or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All
such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the modification
is made.
===========================================================================
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
NOTE.
BORROWER:
New America Network, Inc.
By:____________________________ By:___________________________
Gerald C. Finn, President Norma Finn, Secretary
<PAGE>
COMMERCIAL SECURITY AGREEMENT
-------------------------------------------------------------
Principal Loan Date Maturity Loan No.
$100,000.00 11-25-1997 11-25-2002 1500025467
-------------------------------------------------------------
Call Collateral Account Officer Initials
0700 207
-------------------------------------------------------------
- --------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------
Borrower: New America Network, Inc. Lender: FIRST WASHINGTON STATE BANK
572 Rt 130 MAIN - WINDSOR
Highstown, NJ 08520 Rt 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
==========================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between New America
Network, Inc. (referred to below as "Grantor"); and FIRST WASHINGTON STATE
BANK (referred to below as "Lender"). For valuable consideration, Grantor
grants to Lender a security interest in the Collateral to secure the
Indebtedness and agrees that Lender shall have the rights slated in this
Agreement with respect to the Collateral, in addition to all other rights
which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Commercial Security Agreement.
Collateral. The word "Collateral" means the following described
property of Grantor, whether now owned or hereafter acquired, whether
now existing or hereafter arising, and wherever located:
All Inventory, chattel paper, accounts, equipment, general
intangibles and fixtures
In addition, the word "Collateral" includes all the following,
whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
<PAGE>
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements
of and substitutions for any property described above.
(b) All products and produce of any of the property
described in this Collateral section.
(c) All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of a
sale, lease, or other disposition of any of the properly
described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the
sale, destruction, loss, or other disposition of any of the
property described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form of
a writing, photograph, microfilm, microfiche, or electronic
media, together with all of Grantor's right title, and
interest in and to all computer software required to
utilize, create, maintain, and process any such records or
data on electronic media.
Fixtures are and will be located on the following described real
estate.
Lot 43.01, Block 58.12, East Windsor Township, Mercer
County, New Jersey. The record owner of the real property is
The Building Center, Inc., PO Box 782 Hightstown, NJ 08520
Event of Default. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "Events of Default."
Grantor. The word "Grantor" means New America Network, Inc., its
successors and assigns.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness
evidenced by the Note, including all principal and interest, together
with all other indebtedness and costs and expenses for which Grantor
is responsible under this Agreement or under any of the Related
Documents. In addition, the word "Indebtedness" includes all other
obligations, debts and liabilities, plus interest thereon, of
Grantor, or any one or more of them, to Lender, as well as all claims
by Lender against Grantor, or any one or more of them, whether
existing now or later; whether they are voluntary or involuntary, due
or not due, direct or indirect, absolute or contingent, liquidated or
unliquidated; whether Grantor may be liable individually or jointly
<PAGE>
with others; whether Grantor may be obligated as guarantor, surety,
accommodation party or otherwise; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may
become otherwise unenforceable.
Lender. The word "Lender" means FIRST WASHINGTON STATE BANK, its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated
November 25, 1997, in the principal amount of $100,000.00 from new
America Network, Inc. to Lender, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of
and substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing, executed
in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all accounts Grantor
may open in the future, excluding,however, all IRA and Keogh accounts, and all
trust accounts for which the grant of a security interest would be prohibited
by law. Grantor authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as
follows:
Perfection of Security Interest. Grantor agrees to execute such
financing statements and to take whatever other actions are requested
by Lender to perfect and continue Lender's security interest in the
Collateral. Upon request of Lender, Grantor will deliver to Lender
any and all of the documents evidencing or constituting the
Collateral, and Grantor will note Lender's interest upon any and all
chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-in-fact
for the purpose of executing any documents necessary to perfect or to
continue the security interest granted in this Agreement. Lender may
at any time, and without further authorization from Grantor, file a
carbon, photographic or other reproduction of any financing statement
or of this Agreement for use as a financing statement. Grantor will
reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
<PAGE>
Grantor's name including any change to the assumed business names of
Grantor. This is continuing Security Agreement and will continue in
effect even though all or any part of the Indebtedness is paid in
full and even though for a period of time Grantor may not be indebted
to Lender.
No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is
a party, and its certificate or articles of incorporation and bylaws
do not prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists
of accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies
with applicable laws concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated
on the Collateral have authority and capacity to contract and are in
fact obligated as they appear to be on the Collateral. At the time
any account becomes subject to a security interest in favor of
Lender, the account shall be a good and valid account representing an
undisputed, bona fide indebtedness incurred by the account debtor,
for merchandise held subject to delivery instructions or theretofore
shipped or delivered pursuant to a contract of sale, or for services
theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counterclaims against any such account;
and no agreement under which any deductions or discounts may be
claimed shall have been made with the account debtor except those
disclosed to Lender in writing.
Location of the Collateral. Grantor, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of real
properties and Collateral locations relating to Grantor's operations,
including without limitation the following: (a) all real property
owned or being purchased by Grantor; (b) all real property being
rented or leased by Grantor; (c) all storage facilities owned,
rented, leased, or being used by Grantor; and (d) all other
properties when Collateral is or may be ?. Except in the ordinary
course of its business, Grantor shall not (the rest of this sentence
is not clear) parties, nor to protect, preserve or maintain any
security interest given to secure the indebtedness.
Removal of Collateral. Grantor shall keep the Collateral (or to the
extent the Collateral consists of intangible properly such as
accounts, the records concerning the Collateral) at Grantor's address
shown above, or at such other locations as are acceptable to Lender.
Some or all of the Collateral may be located at the real property
described above. Except in the ordinary course of its business,
including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written
consent of Lender. to the extent that the Collateral consists of
vehicles, or other tilted property, Grantor shall not take or permit
any action which would require application for certificates of title
<PAGE>
for the vehicles outside the State of New Jersey, without the prior
written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or
accounts collected int he ordinary course of Grantor's business,
Grantor shall not sell, offer to sell, or otherwise transfer or
dispose of the Collateral. Which Grantor is not in default under this
Agreement, Grantor may sell inventory, but only in the ordinary
course of its business and only to buyers who qualify as a buyer in
the ordinary course of business. A sale in the ordinary course of
Grantor's business does not include a transfer in partial or total
satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject
to any lien, security interest, encumbrance, or charge, other than
the security interest provided for in this Agreement, without the
prior written consent of Lender. this includes security of the
Collateral (for whatever to the security interests granted under this
Agreement, without the prior written consent of Lender. This includes
security interests even if junior in right to the security interests
granted under this Agreement. Unless waived by Lender, all proceeds
from any disposition of the Collateral (for whatever to the security
interests granted under this Agreement. Unless waived by lender, all
proceeds from any disposition of the Collateral (for whatever reason)
shall be held in trust for Lender and shall to be commingled with any
other funds; provided however, this requirement shall not constitute
consent by Lender to any ____________________________________. Upon
receipt Grantor shall immediately deliver any such proceeds to lender.
Title. Grantor represents and warrants to lender that it holds good
and marketable life to the Collateral, free and clear of all liens
and encumbrances except for the lien of this Agreement. No financing
statement covering any of the Collateral is on file in any public
office other than those which reflect the security interest created
by this Agreement or to which lender has specially consented. Grantor
shall defend Lender's rights in the Collateral against the claims and
demands of all other persons.
Collateral Schedules and Locations. As often as Lender shall require,
and insofar as the Collateral consists of accountants and general
intangibles, Grantor shall deliver to Lender schedules of such
Collateral, including such information as Lender may require,
including without limitation names and addresses of account debtors
and agings of accounts and general intangibles. Insofar as the
Collateral consists of inventory and equipment, Grantor shall deliver
to lender, as often as Lender shall require, such lists,
descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such
Collateral. Such information shall be submitted for Grantor and each
of its subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not
<PAGE>
commit or permit damage to or destruction of the Collateral or any
part of the Collateral. Lender and its designated representatives and
agents shall have the right at all reasonable times to examine,
inspect, and audit the Collateral wherever located. Grantor shall
immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of
any request for credit or adjustment or of any other dispute arising
with respect to the Collateral; and generally of all happenings and
events affecting the Collateral or the value or the amount of the
Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note or notes evidencing the
indebtedness, or upon any of the other Related Documents. Grantor may
withhold any such payment or may elect to contest any lien if Grantor
is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral
is not jeopardized in Lender's sole opinion. If the Collateral is
subject to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to lender in an amount adequate
to provide for the discharge of the line plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender
as an additional obligee under any surety bond furnished in the
contest proceedings.
Compliance With Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, nor or hereafter in effect, applicable to
the ownership, production, disposition, or use of the Collateral.
Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral,
in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used for the generation,
manufacture, storage, transportation, treatment, disposal, release or
threatened release of any hazardous waste or substance, as those terms
are defined in the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. Section 9501, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation
Act, NJSA Section 13:1K-6 ("ISRA"), the New Jersey Spill Compensation
U.S.C. Section 6901, et seq., the New Jersey Industrial Site Recovery
Act, NJSA Section 13:1K-6 ("ISRA"), the New Jersey Spill Compensation
and Control Act, NJSA 58:23.11, et seq., or other applicable state or
<PAGE>
Federal laws, rules, or regulations adopted pursuant to any of the
foregoing. The terms "hazardous waste" and "hazardous substance"
shall also include, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos. The representations
and warranties contained herein are based on Grantor's due diligence
in investigating the Collateral for hazardous wastes and substances.
Grantor hereby (a) refuses and waives any future claims against
Lender for indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any such laws, and (b) agrees
to indemnify and hold harmless Lender against any and all claims and
losses resulting from a breach of this provision of this Agreement.
This obligation to indemnity shall survive the payment of the
indebtedness and the satisfactory of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as Lender may
require with respect tot he Collateral, in form, amounts, coverages
and basis reasonably acceptable to Lender and issued by a company or
companies reasonably acceptable to Lender. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to lender, including
stipulations that coverages will not be cancelled or diminished
without at least ten (10) days' prior written notice to lender and
not including any disclaimer of the insurer's liability for failure
to give such a notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Grantor or any
other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will
provide Lender with such loss payable or other endorsements as Lender
may require. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not
be obligated required. If Grantor at any time fails to obtain or
maintain any insurance as required under this Agreement may (but
shall not be obligated to) obtain such insurance as Lender deems
appropriate, including if it so chooses "single interest insurance,"
which will cover only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify
Lender of any loss or damage to the Collateral. Lender may make proof
of loss if Grantor fails to do so within fifteen (15) days of the
casualty. All proceeds of any insurance on the Collateral, including
accrued proceeds thereon, shall be held by Lender as part of the
Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory
proof of expenditure, pay or reimburse Grantor from the proceeds for
the reasonable cost of repair or restoration. If Lender does not
consent to repair or replacement of the Collateral, Lender shall
retain a sufficient amount of the proceeds to pay all of the
indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their
receipt and which Grantor
<PAGE>
has not committed to the repair or restoration of the Collateral shall
be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with
Lender reserves for payment of insurance premiums, which reserves
shall be created by monthly payments from Grantor of a sum estimated
by Lender to be sufficient to produce, at least fifteen (15) days
before the premium due date, amounts at least equal to the insurance
premiums to be paid. If fifteen (15) days before payment is due, the
reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a
general deposit and shall constitute a non-interest-bearing account
which Lender may satisfy by payment of the insurance premiums
required to be paid by Grantor as they become due. Lender does not
hold the reserve funds in trust for Grantor, and Lender is not the
agent of Grantor for payment of the insurance premiums required to be
paid by Grantor. The responsibility for the payment of premiums shall
remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as lender may reasonable request including the following:
(a) the name of the insurer; (b) the risks insured; (c) the amount of
the policy; (d) the property insured; (e) the then current value on
the basis of which insurance has been obtained and the manner of
determining that value; and (f) the expiration date of the policy. In
addition, Grantor shall request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender
determined, as applicable, the cash value or replacement cost of the
Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to
possession and beneficial use shall not apply to any Collateral where
possession of the Collateral by Lender is required by law to perfect Lender's
security interest in such Collateral. Until otherwise notified by Lender,
Grantor may collect any of the Collateral consisting of accounts. At any time
and even though no Event of Default exists, lender may exercise its right to
collect the accounts and to notify account debtors to make payments directly
to Lender for application to the indebtedness. If Lender at any time has
possession of any Collateral, whether before or after an Event of Default,
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if lender takes such action for that purpose as
Grantor shall request or as Lender, in Lender's sole discretion, shall deem
appropriate under the circumstances, but failure to honor any request by
Grantor shall not of itself be deemed to _________________________________
shall to be required to take any steps necessary to preserve any rights in the
Collateral against prior parties,
<PAGE>
nor to protect, preserve or maintain any security interest given to secure
the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by Grantor.
All such expenses shall become a part of the Indebtedness and, at Lender's
option, will (a) be payable on demand, (b) be added to the balance of the Note
and be apportioned among and be payable with any installment payments to
become due during either (i) the term of any applicable insurance policy or
(ii) the remaining term of the Note, or (c) be treated as a balloon payment
which will be due and payable at the Note's maturity. This Agreement also will
secure payment of these amounts. Such right shall be in addition to all other
rights and remedies to which Lender may be entitled upon the occurrence of an
Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when
due on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any
other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents or in any other
agreement between Lender and Grantor.
Default in Favor of Third Parties. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of
the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement,
the Note or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral documents to create a valid and perfected security
interest or lien) at any time and for any reason.
<PAGE>
Insolvency. The dissolution or termination of Grantor's existence as
a going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by
any governmental agency against the Collateral or any other
collateral securing the Indebtedness. This includes a garnishment of
any of Grantor's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Grantor
as to the validity or reasonableness of the claim which is the basis
of the creditor or forfeiture proceeding and if Grantor gives Lender
written notice of the creditor or forfeiture proceeding and deposits
with Lender monies or a surety bond for the creditor or forfeiture
proceeding in an amount determined by Lender, in its sole discretion,
as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor
dies or becomes incompetent. Lender, at its option, may, but shall
not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a
manner satisfactory to Lender, and, in doing so, cure the Event of
Default.
Adverse Change. A material adverse change occurs in Grantor's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness,
is curable and if Grantor has not been given a prior notice of a
breach of the same provision of this Agreement, it may be cured (and
no Event of Default will have occurred) if Grantor, after Lender
sends written notice demanding cure of such default, (a) cures the
default within thirty (30) days; or (b), if the cure requires more
than thirty (30) days, immediately initiates steps which Lender deems
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the New Jersey Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following
rights and remedies:
<PAGE>
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to
pay, immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender
all of any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may
require Grantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender. Lender also shall have
full power to enter upon the property of Grantor to take possession
of and remove the Collateral. If the Collateral contains other goods
not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes
reasonable efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof
in its own name or that of Grantor. Lender may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor reasonable notice of the
time after which any private sale or any other intended disposition
of the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days
before the time of the sale or disposition. All expenses relating to
the disposition of the Collateral, including without limitation the
expenses or retaking, holding, insuring, preparing for sale and
selling the Collateral, shall become a part of the Indebtedness
secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the
appointment of a receiver: (a) Lender may have a receiver appointed
as a matter of right, (b) the receiver may be an employee of Lender
and may serve without bond, and (c) all fees of the receiver and his
or her attorney shall become part of the Indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from
the Collateral. Lender may at any time in its discretion transfer any
collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine.
Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, chooses in action, or
similar property, Lender may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Collateral
<PAGE>
as Lender may determine, whether or not Indebtedness or Collateral is
then due. For these purposes, Lender may, on behalf of and in the
name of Grantor, receive, open and dispose of mail addressed to
Grantor; change any address to which mail and payments are to be
sent; and endorse notes, checks, drafts, money orders, documents of
title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may
notify account debtors and obligors on any Collateral to make
payments directly to Lender.
Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and
remedies it may have available at law, in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Grantor
under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its
remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. Any alteration of or
amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or
bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of New Jersey. If there is a lawsuit,
Grantor agrees upon Lender's request to submit to the jurisdiction of
the courts of the State of New Jersey. Lender and Grantor hereby
waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Grantor against the other.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and legal
expenses, incurred in connection with the enforcement of this
Agreement. Lender may pay someone else to help enforce this
Agreement, and Grantor shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's attorneys' fees and
legal expenses whether or not there is a lawsuit, including
attorneys'
<PAGE>
fees and legal expenses for bankruptcy proceedings (and including
efforts to modify or vacate any automatic stay or injunction),
appeals and any anticipated post-judgment collection services.
Grantor also shall pay all court costs and such additional fees as
may be directed by the court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor
under this Agreement shall be joint and several, and all references
to Grantor shall mean each and every Grantor. This means that each of
the person signing below is responsible for all obligations in this
Agreement.
Notices. All notices required to be given under this Agreement shall
be given in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the
address shown above. Any party may change is address for notice under
this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, if there is more
than _______ Grantor, notice to any Grantor will constitute notice to
all Grantors. For notice purposes, Grantor will keep Lender informed
at all times of Grantor's current address(es).
No Joint Venture or Partnership. The relationship of Grantor and
Lender created by this Agreement is strictly that of debtor-creditor,
and nothing contained in this Agreement or in any of the Related
Documents shall be deemed or construed to create a partnership or
joint venture between Grantor and Lender.
Power of Attorney. Grantor hereby appoints Lender as its true and
lawful attorney-in-fact, irrevocably, with full power of substitution
to do the following: (a) to demand, collect, receive, receipt for,
sue and recover all sums of money or other properly which may now or
hereafter become due, owing or payable from the Collateral; (b) to
execute, sign and endorse any and all claims, instruments, receipts,
checks, drafts or warrants issued in payment for the Collateral; (c)
to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and
deliver its release and settlement for the claim; and (d) to file any
claim or claims or to take any action or institute or take part in
any proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary
or advisable. This power is given as security for the indebtedness,
and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
<PAGE>
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any
person or circumstance, such finding shall not rendered that
provision invalid or unenforceable as to any other person or
circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or
validity; however, if the offending provision cannot be so modified,
it shall be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
Successor interests. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding and inure
to the benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of the Lender in exercising
any right shall operate as a waiver of such right or any other right.
A waiver by Lender of a provision of this Agreement shall not
prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by lender, nor any course of
dealing between Lender and Grantor, shall constitute a waiver of any
of Lender's rights or of any of Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required under
this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS
DATED NOVEMBER 25, 1997.
GRANTOR:
New America Network, Inc.
By:___________________________ By:____________________________
Gerald C. Finn, President Norma Finn, Secretary
<PAGE>
RECORDATION REQUESTED BY:
FIRST WASHINGTON STATE BANK
Rt 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
WHEN RECORDED MAIL TO:
FIRST WASHINGTON STATE BANK
Rt. 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
SEND TAX NOTICES TO:
FIRST WASHINGTON STATE BANK
Rt. 130 & Main Street
P.O. Box 500
Windsor, NJ 08561
SPACE ABOVE THIS LINE IS FOR RECORDER'S
USE ONLY
- -------------------------------------------------------------------------------
This Mortgage prepared by: X_________________________________________________
Name of Signer: James C. Hasemann
- -------------------------------------------------------------------------------
MORTGAGE
THIS MORTGAGE IS DATED NOVEMBER 25, 1997, between The Building Center, Inc.,
whose address is PO Box 782, Hightstown, NJ 08520 (referred to below as
"Grantor"); and FIRST WASHINGTON STATE BANK, whose address is Rt 130 & Main
Street, P.O. Box 500, Windsor, NJ 08561 (referred to below as "Lender").
GRANT OF MORTGAGE. For valuable consideration, Grantor mortgages and conveys
to Lender all of Grantor's right, title, and interest in and to the following
described real property, together with all existing or subsequently erected or
affixed buildings, improvements and fixtures; all easements, rights of way,
and appurtenances; all water, water rights, watercourses and ditch rights
(including stock in utilities with ditch or irrigation rights); and all other
rights, royalties, and profits relating to the real property, including
without limitation, all materials, oil, gas, geothermal and similar matters,
located in Mercer County, State of New Jersey (the "Real Property"):
Lot 43.01, Block 58.12, East Windsor Township, Mercer County, New
Jersey
<PAGE>
The Real Property or its address is commonly known as 572 Rt 130, Hightstown,
NJ 08520.
Grantor presently assigns to Lender all of Grantor's right, title, and
interest in and to all leases of the Property and all Rents from the Property.
In addition, Grantor grants to Lender a Uniform Commercial Code security
interest in the Personal Property and Rents.
Definitions. The following words shall have the following meanings when used
in this Mortgage. Terms not otherwise defined in this Mortgage shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Borrower. The word "Borrower" means each and every person or entity
signing the Note, including without limitation New America Network,
Inc.
Existing Indebtedness. The words "Existing Indebtedness" mean the
indebtedness described below in the Existing Indebtedness section of
this Mortgage.
Grantor. The word "Grantor" means any and all persons and entities
executing this Mortgage, including without limitation all Grantors
named above. The Grantor is the mortgagor under this Mortgage. Any
Grantor who signs this Mortgage, but does not sign the Note, is
signing this Mortgage only to grant and convey that Grantor's
interest in the Real Property and to grant a security interest in
Grantor's interest in the Rents and Personal Property to Lender and
is not personally liable under the Note except as otherwise provided
by contract or law.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Improvements. The word "Improvements" means and includes without
limitation all existing and future improvements, buildings,
structures, mobile homes affixed on the Real Property, facilities,
additions, replacements and other construction of the Real Property.
Indebtedness. The word "Indebtedness" means all principal and
interest payable under the Note and any amounts expended or advanced
by Lender to discharge obligations of Grantor or expenses incurred by
Lender to enforce obligations of Grantor under this Mortgage,
together with interest on such amounts as provided in this Mortgage.
In addition to the Note, the work "Indebtedness" includes all
obligations, debts and liabilities, plus interest thereon, of
Borrower to Lender, or any one or more of them, as well as all claims
by Lender against Borrower, or any one or more of them, whether now
existing or hereafter arising, whether related or unrelated to the
purpose of the Note, whether voluntary or otherwise, whether due or
not due, absolute
<PAGE>
or contingent, liquidated or unliquidated and whether Borrower may be
liable individually or jointly with others, whether obligated as
guarantor or otherwise, and whether recovery upon such Indebtedness
may be or hereafter may become barred by any statute of limitations,
and whether such indebtedness may be or hereafter may become
otherwise unenforceable.
Lender. The word "Lender" means FIRST WASHINGTON STATE BANK, its
successors and assigns. The Lender is the mortgagee under this
Mortgage.
Mortgage. The word "Mortgage means this Mortgage between Grantor and
Lender, and includes without limitation all assignments and security
interest provisions relating to the Personal Property and Rents.
Note. The word "Note" means the promissory note or credit agreement
dated November 25, 1997, in the original principal amount of
$100,000.00 from Borrower to Lender, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of,
and substitutions for the promissory note or agreement. NOTICE TO
GRANTOR: THE NOTE CONTAINS A VARIABLE INTEREST RATE.
Personal Property. The words "Personal Property" means all equipment,
fixtures, and other articles of personal property now or hereafter
owned by Grantor, and now or hereafter attached or affixed to the
Real Property; together with all accessions, parts, and additions to,
all replacements of and all substitutions for, any of such property;
and together with all proceeds (including without limitation all
insurance proceeds and refunds of premiums) from any sale or other
disposition of the Property.
Property. The word "Property" means collectively the Real Property
and the Personal Property.
Real Property. The words "Real Property" mean the property, interests
and rights described above in the"Grant of Mortgage" section.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing, executed
in connection with the indebtedness.
Rents. The word "Rents" means all present and future rents, revenues,
income, issues, royalties, profiles, and other benefits derived from
the Property.
THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN
THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (1) PAYMENT OF THE
INDEBTEDNESS AND (2) PERFORMANCE OF ALL OBLIGATIONS OF GRANTOR UNDER THIS
<PAGE>
MORTGAGE AND THE RELATED DOCUMENTS. THIS MORTGAGE IS GIVEN AND ACCEPTED ON
THE FOLLOWING TERMS:
GRANTOR'S WAIVERS. Grantor waives all rights or defenses arising by reason of
any "one action" or "anti-deficiency" law, or any other law which may prevent
Lender from bringing any action against Grantor, including a claim for
deficiency to the extent Lender is otherwise entitled to a claim for
deficiency, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (a) this
Mortgage is executed at Borrower's request and not at the request of Lender;
(b) Grantor has the full power, right, and authority to enter into this
Mortgage and to hypothecate the Property; (c) the provisions of ? do not
conflict with or result in a default under any agreement or other instrument
binding upon Grantor and do not result in a violation of any law, regulation,
court decree or order applicable to Grantor; (d) Grantor has established
adequate means of obtaining from Borrower on a continuing basis information
about Borrower's financial condition; and (e) Lender has made no
representation to Grantor about Borrower (including without limitation the
creditworthiness of Borrower).
PAYMENT AND PERFORMANCE. Except as otherwise provided in this Mortgage,
Borrower shall pay to Lender all Indebtedness secured by this Mortgage as it
becomes due, and Borrower and Grantor shall strictly perform all their
respective obligations under this Mortgage.
POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor and Borrower agree
that Grantor's possession and use of the Property shall be governed by the
following provisions:
Possession and Use. Until in default, Grantor may remain in
possession and control of and operate and manage the Property and
collect the Rents from the Property.
Duty to Maintain. Grantor shall maintain the Property in tenantable
condition and promptly perform all repairs, replacements, and
maintenance necessary to preserve its value.
Hazardous Substances. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used
in this Mortgage, shall have the same meanings as set forth in the
Comprehensive Environmental Response, Compensation, and Liability Act
of _____ as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
Superfund Amendments and Reauthorization Act of ____, Pub. L. No.
99,499 ("SARA"), the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., the New Jersey Industrial Site
Recovery Act, NJSA Section 13:1K-6 ("ISRA"), the New Jersey Spill
Compensation and Control Act, NJSA 58:10-23,11, et seq., or other
applicable state or Federal laws, rules, or regulations adopted
pursuant to any of the foregoing. The terms "hazardous waste" and
"hazardous substance"
<PAGE>
shall also include, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos. Grantor represents
and warrants to Lender that: (a) During the period of Grantor's
ownership of the Property, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under,
about or from the Property; (b) Grantor has no knowledge of, or
reason to believe that there has been, except as previously disclosed
to and acknowledged by Lender in writing, (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened
release of any hazardous waste or substance on, under, about or from
the Property by any prior owners or occupants of the Property or (ii)
any actual or threatened litigation or claims of any kind by any
person relating to such matters; and (c) except as previously
disclosed to and acknowledged by Lender in writing, (i) neither
Grantor nor any tenant, contractor, agent or other authorized user of
the property shall use, generate, manufacture, store, treat, dispose
of, or release any hazardous waste or substance on, under, about or
from the Property and (ii) any such activity shall be conducted in
compliance with all applicable federal, state, and local laws,
regulations and ordinances, including without limitation those laws,
regulations, and ordinances described above. Grantor authorizes
Lender and its agents to enter upon the Property to make such
inspections and tests, at Grantor's expense, as Lender may deem
appropriate to determine compliance of the Property with this section
of the Mortgage. Any inspections or tests made by lender shall be for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Grantor or to
any other person. The representations and warranties contained herein
are based on Grantor's due diligence in investigating the Property
for hazardous waste and hazardous substances. Grantor hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section
of the Mortgage or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release
occurring prior to Grantor's ownership or interest in the Property,
whether or not the same was or should have been known to Grantor. The
provisions of this section of the Mortgage, including the obligation
to indemnify, shall survive the payment of the Indebtedness and the
satisfaction and reconveyance of the lien of this Mortgage and shall
not be affected by Lender's acquisition of any interest in the
Property, whether by foreclosure or otherwise.
Nuisance, Waste. Grantor shall not cause, conduct or permit any
nuisance nor commit, permit, or suffer any stripping of or waste on
or to the Property or any portion of the Property. Without limiting
the generality of the foregoing, Grantor will not remove, or grant to
any other party the right to remove, any timber, minerals (including
oil
<PAGE>
and gas), soil, gravel or rock products without the prior written
consent of Lender.
Removal of Improvements. Grantor shall not demolish or remove any
Improvements from the Real Property without the prior written consent
of Lender. As a condition to the removal of any improvements, Lender
may require Grantor to make arrangements satisfactory to Lender to
replace such Improvements with improvements of at least equal value.
Lender's Right to Enter. Lender and its agents and representatives
may enter upon the Real Property at all reasonable times to attend to
Lender's Interests and to inspect the Property for purposes of
Grantor's compliance with the terms and conditions of this Mortgage.
Compliance with Governmental Requirements. Grantor shall promptly
comply with all laws, ordinances, and regulations, now or hereafter
in effect, of all governmental authorities applicable to the use or
occupancy of the Property, including without limitation, the
Americans With Disabilities Act. Grantor may contest in good faith
any such law, ordinance, or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Grantor has
notified Lender in writing prior to doing so and so long as, in
Lender's sole opinion, Lender's interests in the property are not
jeopardized. Lender may require Grantor to post adequate security or
a surely bond, reasonably satisfactory to Lender, to protect Lender's
interest.
Duty to Protect. Grantor agrees neither to abandon nor leave
unattended the Property. Grantor shall do all other acts, in addition
to those acts set forth above in this section, which from the
character and use of the Property are reasonably necessary to protect
and preserve the Property.
DUE ON SALE - CONSENT BY LENDER. Lender may, at its option, declare
immediately due and payable all sums secured by this Mortgage upon the sale or
transfer, without the Lender's prior written consent, of all or any part of
the Real property, or any interest in the Real Property. A "sale or transfer"
means the conveyance of Real Property or any right, title or interest therein;
whether legal, beneficial or equitable; whether voluntary or involuntary;
whether by outright sale, deed, installment sale contract, land contract,
contract for deed, leasehold interest with a term greater than three (3)
years, lease-option contract, or by sale, assignment, or transfer of any
beneficial interest in or to any land trust holding title to the Real
Property, or by any other method of conveyance of Real Property Interest. If
any Grantor is a corporation, partnership or limited liability company,
transfer also includes any change in ownership of more than twenty-five
percent (25%) of the voting stock, partnership interests or limited liability
company interests as the case may be, of Grantor. However, this option shall
not be exercised by Lender if such exercises is prohibited by federal law or
by New Jersey law.
<PAGE>
TAXES AND LIENS. The following provisions relating to the taxes and liens
on the Property are a part of this Mortgage.
Payment. Grantor shall pay when due (and in all events prior to
delinquency) all taxes, payroll taxes, special taxes, assessments,
water charges and sewer service charges levied against or on account
of the Property, and shall pay when due all claims for work done on
or for services rendered or material furnished to the Property.
Grantor shall maintain the Property free of all liens having priority
over or equal to the interest of Lender under this Mortgage, except
for the lien of taxes and assessments not due, except for the
Existing Indebtedness referred to below, and except as otherwise
provided in their following paragraph.
Right to Contest. Grantor may withhold payment of any tax assessment,
or claim in connection with a good faith dispute over the obligation
to pay, so long as Lender's interest in the Property is not
jeopardized. If a lien arises or is filled as a result of nonpayment,
Grantor shall within fifteen (15) days after the lien arises or, if a
lien is filed, within fifteen (15) days after Grantor has notice of
the filing, secure the discharge of the lien, or if requested by
Lender, deposit with Lender cash or a sufficient corporation surety
bond or other security satisfactory to Lender in an amount sufficient
to discharge the lien plus any costs and attorneys' fees or other
charges that could accrue as a result of a foreclosure or sale under
the lien. In any contest, Grantor shall defend itself and Lender and
shall satisfy any adverse judgment before enforcement against the
Property, Grantor shall name Lender as an additional obligee under
any surety bond furnished in the contest proceedings.
Evidence of Payment. Grantor shall upon demand furnish to Lender
satisfactory evidence of payment of the taxes or assessments and
shall authorize the appropriate governmental official to deliver to
Lender at any time a written statement of the taxes and assessments
against the Property.
Notice of Construction. Grantor shall notify Lender at least fifteen
(15) days before any work is commenced, any services are furnished,
or any materials are supplied to the Property, if any construction
lien could be asserted on account of the work, services, or
materials. Grantor will upon request of Lender furnish to Lender
advance assurances satisfactory to Lender that Grantor can and will
pay the cost of such improvements.
No Claim For Credit For Taxes. Grantor or Borrower will not make
deduction from or claim credit on the principal or interest secured
by this Mortgage by reason of any governmental taxes, assessments or
charges. Grantor or Borrower will not claim any deduction from the
taxable value of the Property by reason of this Mortgage.
PROPERTY DAMAGE INSURANCE. The following provisions relating to Insuring
the Property are a part of this Mortgage.
<PAGE>
Maintenance of Insurance. Grantor shall procure and maintain policies
of fire insurance with standard extended coverage endorsements on a
replacement basis for the full insurable value covering all
Improvements on the Real Property in an amount sufficient to avoid
application of any coinsurance clause, and with a standard mortgagee
clause in favor of Lender. Grantor shall also procure and maintain
comprehensive general liability insurance in such coverage amounts as
Lender may request with Lender being named as additional insureds in
such liability insurance policies. Additionally, Grantor shall
maintain such other insurance, including but not limited to hazard,
business interruption and boiler insurance as Lender may require.
Policies shall be written by such insurance companies and in such
form as may be reasonable acceptable to Lender.
Grantor shall deliver to Lender certificates of coverage from each
insurer containing a stipulation that coverage will not be cancelled
or diminished without a minimum of ten (10) days' prior written
notice to Lender and not containing any disclaimer of the insurer's
liability for failure to give such notice. Each insurance policy also
shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or
default of Grantor or any other person. Should the Real Property at
any time become located in an area designated by the Director of the
Federal Emergency Management Agency as a special flood hazard area,
Grantor agrees to obtain and maintain Federal Flood Insurance for the
full unpaid principal balance of the loan, up to the maximum policy
limits set under the National Flood Insurance Program, or as
otherwise required by Lender, and to maintain such insurance for the
term of the loan.
Application of Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Property. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty.
Whether or not Lender's security is impaired, Lender may, at its
election, apply the proceeds to the reduction of the Indebtedness,
payment of any lien affecting the Property, or the restoration and
repair of the Property. If Lender elects to apply the proceeds to
restoration and repair, Grantor shall repair or replace the damaged
or destroyed improvements in a manner satisfactory to Lender. Lender
shall, upon satisfactory proof of such expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or
restoration if Grantor is not in default hereunder. Any proceeds
which have not been disbursed within 180 days after their receipt and
which Lender has not committed to the repair or restoration of the
Property shall be used first to pay any amount owing to Lender under
this Mortgage, then to prepay accrued interest, and the remainder, if
any, shall be applied to the principal balance of the Indebtedness.
If Lender holds any proceeds after payment in full of the
Indebtedness, such proceeds shall be paid to Grantor.
Unexpired Insurance at Sale. Any unexpired insurance shall inure to
the benefit of, and pass to, the purchaser of the Property covered by
this Mortgage at any trustee's sale or other sale held under the
<PAGE>
provisions of this Mortgage, or at any foreclosure sale of such
Property.
Compliance with Existing Indebtedness. During the period in which any
Existing Indebtedness described below is in effect, compliance with
the insurance provisions contained in the instrument evidencing such
Existing Indebtedness shall constitute compliance with the insurance
provisions under this Mortgage, to the extent compliance with the
terms of this Mortgage would constitute a duplication of insurance
requirement. If any proceeds from the Insurance become payable on
loss, the provisions in this Mortgage for division of proceeds shall
apply only to that portion of the proceeds not payable to the holder
of the Existing Indebtedness.
Grantor's Report on Insurance. Upon request of Lender, however, not
more than once a year, Grantor shall furnish to Lender a report on
each existing policy of insurance showing: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured, the then current replacement value of such
property, and the manner of determining that value; and (e) the
expiration date of the policy. Grantor shall, upon request of Lender,
have an independent appraiser satisfactory to Lender determine the
cash value replacement cost of the Property.
EXPENDITURES BY LENDER. If Grantor fails to comply with any provisions of this
Mortgage, including any obligation to maintain Existing Indebtedness in good
standing as required below, or if any action or proceeding is commenced that
would materially affect Lender's interests in the Property, Lender on
Grantor's behalf may, but shall not be required to, take any action that
Lender deems appropriate. Any amount that Lender expends in so doing will bear
interest at the rate provided for in the Note from the date incurred or paid
by lender to the date of repayment by Grantor. All such expenses, at Lender's
option, will (a) be payable on demand, (b) be added to the balance of the Note
and be apportioned among and be payable with any installment payments to
become due during either (i) the term of any applicable insurance policy or
(ii) the remaining term of the Note, or (c) be treated as a balloon payment
which will be due and payable at the Note's maturity. This Mortgage also will
secure payment of these amounts. The rights provided for in this paragraph
shall be in addition to any other rights or any remedies to which Lender may
be entitled on account of the default. Any such action by Lender shall not be
construed as curing the default so as to bar Lender from any remedy that it
otherwise would have had.
WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership
of the Property are a part of this Mortgage.
Title. Grantor warrants that: (a) Grantor holds good and marketable
title of record to the Property in fee simple, free and clear of all
liens and encumbrances other than those set forth in the Real
Property description or in the Existing Indebtedness section below or
in any title insurance policy, title report, or final title opinion
issued in
<PAGE>
favor of, and accepted by, Lender in connection with this Mortgage,
and (b) Grantor has the full right, power, and authority to execute
and deliver this Mortgage to Lender.
Defense of Title. Subject to the exception in the paragraph above,
Grantor warrants and will forever defend the title to the Property
against the lawful claims of all persons. In the event any action or
proceeding is commenced that questions Grantor's title or the
interest of Lender under this Mortgage, Grantor shall defend the
action at Grantor's expense. Grantor may be the nominal party in such
proceeding, but Lender shall be entitled to participate in the
proceeding and to be represented in the proceeding by counsel of
Lender's own choice, and Grantor will deliver, or cause to be
delivered, to Lender such instruments as Lender may request from time
to time to permit such participation.
Compliance with Laws. Grantor warrants that the Property and
Grantor's use of the Property complies with all existing applicable
laws, ordinances, and regulations of governmental authorities.
EXISTING INDEBTEDNESS. The following provisions concerning existing
indebtedness (the "Existing Indebtedness") are a part of this Mortgage.
Existing Lien. The lien of this Mortgage securing the Indebtedness
amy be secondary and inferior to an existing lien. Grantor expressly
covenants and agrees to pay, or see to the payment of, the Existing
Indebtedness and to prevent any default on such indebtedness, any
default under the instruments evidencing such indebtedness, or any
default under any security documents for such indebtedness.
Default. If the payment of any installment of principal or any
interest on the Existing Indebtedness is not made within the time
required by the note evidencing such indebtedness, or should a
default occur under the instrument securing such indebtedness and not
be ? during any applicable grace period therein, then, at the option
of Lender, the Indebtedness secured by this Mortgage shall become
immediately due and payable, and this Mortgage shall be in default.
No Modification. Grantor shall not enter into any agreement with the
holder of any mortgage, deed of trust, or other security agreement
which has priority over this Mortgage by which that agreement is
modified, amended, extended, or renewed without the prior written
consent of Lender. Grantor shall neither request nor accept any
future advances under any such security agreement without the prior
written consent of Lender.
CONDEMNATION. The following provisions relating to condemnation of the
Property are a part of this Mortgage.
Application of Net Proceeds. If all or any part of the Property is
condemned by eminent domain proceedings or by any proceeding or
purchase in lieu of condemnation, Lender may at its election require
<PAGE>
that all or any portion of the net proceeds of the award be applied
to the Indebtedness or the repair or restoration of the Property. The
net proceeds of the award shall mean the award after payment of all
reasonable costs, expenses, and attorneys' fees incurred by Lender in
connection with the condemnation.
Proceedings. If any proceeding in condemnation is filed, Grantor
shall promptly notify Lender in writing, and Grantor shall promptly
take such steps as may be necessary to defend the action and obtain
the award. Grantor may be the nominal party in such proceeding, but
Lender shall be entitled to participate in the proceeding and to be
represented in the proceeding by counsel of its own choice, and
Grantor will deliver or cause to be delivered to Lender such
instruments as may be requested by it from time to time to permit
such participation.
IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The
following provisions relating to governmental taxes, fees and charges are a
part of this Mortgage:
Current Taxes, Fees and Charges. Upon request by Lender, Grantor
shall execute such documents in addition to this Mortgage and take
whatever other action is requested by Lender to perfect and continue
Lender's lien on the Real Property. Grantor shall reimburse Lender
for all taxes, as described below, together with all expenses
incurred in recording, perfecting or continuing this Mortgage,
including without limitation all taxes, fees, documentary stamps, and
other charges for recording or registering this Mortgage.
Taxes. The following shall constitute taxes to which this section
applies: (a) a specific tax upon this type of Mortgage or upon all or
any part of the Indebtedness secured by this type of Mortgage; (b) a
specific tax on Borrower which Borrower is authorized or required to
deduct from payments on the Indebtedness secured by this type of
Mortgage; (c) a tax on this type of Mortgage chargeable against the
Lender or the holder of the Note; and (d) a specific tax on all or
any portion of he Indebtedness or on payments or principal and
interest made by Borrower.
Subsequent Taxes. If any tax to which this section applies is enacted
subsequent to the date of this Mortgage, this event shall have the
same effect as an Event of Default (as defined below), and Lender may
exercise any or all of its available remedies for an Event of Default
as provided below unless Grantor either (a) pays the tax before it
becomes delinquent, or (b) contests the tax as provided above in the
Taxes and Liens section and deposits with Lender cash or a sufficient
corporate surety bond or other security satisfactory to Lender.
SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions
relating to this Mortgage as a security agreement are a part of this
Mortgage.
<PAGE>
Security Agreement. This instrument shall constitute a security
agreement to the extent any of the Property constitutes fixtures or
other personal property, and Lender shall have all of the rights of a
secured party under the Uniform Commercial Code as amended from time
to time.
Security Interest. Upon request by Lender, Grantor shall execute
financing statements and take whatever other action is requested by
Lender to perfect and continue Lender's security interest in the
Rents and Personal Property. In addition to recording this Mortgage
in the real property records, Lender may, at any time and without
further authorization from Grantor, file executed counterparts,
copies or reproductions of this Mortgage as a financing statement.
Grantor shall reimburse Lender for all expenses incurred in
perfecting or continuing this security interest. Upon default,
Grantor shall assemble the Personal Property in a manner and at a
place reasonably convenient to Grantor and Lender and make it
available to Lender within three (3) days after receipt of written
demand from Lender.
Addresses. The mailing addresses of Grantor (debtor) and Lender
(secured party), from which information concerning the security
interest granted by this Mortgage may be obtained (each as required
by the Uniform Commercial Code), are as slated on the first page of
this Mortgage.
FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to
further assurances and attorney-in-fact are a part of this Mortgage.
Further Assurances. At any time, and from time to time, upon request
of lender, Grantor will make, execute and deliver, or will cause to
be made, executed or delivered, to Lender or to Lender's designee,
and when requested by Lender, cause to be filed, recorded, refiled,
or rerecorded, as the case may be, at such times and in such offices
and places as Lender may deem appropriate, any and all such
mortgages, deeds of trust, security deeds, security agreements,
financing statements, continuation statements, instruments of further
assurance, certificates, and other documents as may, in the sole
opinion of Lender, be necessary or desirable in order to effectuate,
complete, perfect, continue, or preserve (a) the obligations of
Grantor and Borrower under the Note, this Mortgage, and the Related
Documents, and (b) the liens and security interests created by this
Mortgage on the Property, whether now owned or hereafter acquired by
Grantor. Unless prohibited by law or agreed to the contrary by Lender
in writing, Grantor shall reimburse Lender for all costs and expenses
incurred in connection with the matters referred to in this
paragraph.
Attorney-in-fact. If Grantor fails to do any of the things referred
to in the preceding paragraph, Lender may do so for and in the name
of Grantor and at Grantor's expense. For such purposes, Grantor
hereby irrevocably appoints Lender as Grantor's attorney-in-fact for
the purpose of making, executing, delivering, filing, recording, and
doing all other things as may be necessary or desirable, in Lender's
sole
<PAGE>
opinion, to accomplish the matters referred to in the preceding
paragraph.
FULL PERFORMANCE. If Borrower pays all the indebtedness when due, and
otherwise performs all the obligations imposed upon Grantor under this
Mortgage, Lender shall execute and deliver to Grantor a suitable satisfaction
of this Mortgage and suitable statements of termination of any financing
statement on file evidencing Lender's security interest in the Rents and the
Personal Property. Grantor will pay, if permitted by applicable law, any
reasonable termination fee as determined by Lender from time to time.
DEFAULT. Each of the following, at the option of Lender, shall constitute
an event of default ("Event of Default") under this Mortgage:
Default on Indebtedness. Failure of Borrower to make any payment when
due on the Indebtedness.
Default on Other Payments. Failure of Grantor within the time
required by this Mortgage to make any payment for taxes or insurance,
or any other payment necessary to prevent filling of or to effect
discharge of any lien.
Compliance Default. Failure of Grantor or Borrower to comply with any
other term, obligation, covenant or condition contained in this
Mortgage, the Note or in any of the Related Documents.
Default in Favor of Third parties. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
or any Grantor's property or Borrower's ability to repay the Note or
Borrower's or Grantor's ability to perform their respective
obligations under this Mortgage or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor or Borrower under this
Mortgage, the Note or the Related Documents is false or misleading in
any material respect, either now or at the time made or furnished.
Defective Collateralization. This Mortgage or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral documents to create a valid and perfected security
interest or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor or Borrower's
existence as a going business, the insolvency of Grantor or Borrower,
the appointment of a receiver for any part of Grantor or Borrower's
property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor or Borrower.
<PAGE>
Foreclosure, Forfeiture, etc. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by
any governmental agency against any of the Property. However, this
subsection shall not apply in the event of a good faith dispute by
Grantor as to the validity or reasonableness of the claim which is
the basis of the foreclosure or forfeiture proceeding, provided that
Grantor gives Lender written notice of such claim and furnishes
reserves or a surety bond for the claim satisfactory to Lender.
Breach of Other Agreement. Any breach by Grantor or Borrower under
the terms of any other agreement between Grantor or Borrower and
Lender that is not remedied within any grace period provided therein,
including without limitation any agreement concerning any
indebtedness or other obligation of Grantor or Borrower to Lender,
whether existing now or later.
Existing Indebtedness. A default shall occur under any Existing
Indebtedness or under any instrument on the Property securing any
Existing Indebtedness, or commencement of any suit or other action to
foreclose any existing lien on the Property.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness. Lender, at its
option, may, but shall not be required to, permit the Guarantor's
estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Insecurity. Lender in good faith deems itself insecure.
Right to Cure. If such a failure is curable and if Grantor or
Borrower has not been given a notice of a breach of the same
provision of this Mortgage within the preceding twelve (12) months,
it may be cured (and no Event of Default will have occurred) if
Grantor or Borrower, after Lender sends written notice demanding cure
of such failure: (a) cures the failure within thirty (30) days; or
(b) if the cure requires more than thirty (30) days, immediately
initiates steps sufficient to cure the failure and thereafter
continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default
and at any time thereafter, Lender, at its option, may exercise any one or
more of the following rights and remedies, in addition to any other rights or
remedies provided by law:
<PAGE>
Accelerate Indebtedness. Lender shall have the right at its option
without notice to Borrower to declare the entire indebtedness
immediately due and payable, including any prepayment penalty which
Borrower would be required to pay.
UCC Remedies. With respect to all or any part of the Personal
Property, Lender shall have all the rights and remedies of a secured
party under the Uniform Commercial Code.
Lender in Possession. Upon acceleration of the Indebtedness or
abandonment of the Property, Lender (in person, by agent or by
judicially appointed receiver) shall be entitled to enter upon, take
possession of and manage the Property and to collect the Rents,
including those past due. Any Rents collected by Lender or the
receiver shall be applied first to payment of the costs of management
of the Property and collection of Rents, including but not limited to
receiver's fees, premiums on the receiver's bonds and reasonable
attorneys' fees and then to the other indebtedness secured by this
Mortgage.
Appoint Receiver. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Property, with
the power to protect and preserve the Property, to operate the
Property preceding foreclosure or sale, and to collect the Rents from
the Property and apply the proceeds, over and above the cost of the
receivership, against the Indebtedness. The receiver may serve
without bond if permitted by law. Lender's right to the appointment
of a receiver shall exist whether or not the apparent value of the
Property exceeds the Indebtedness by a substantial amount. Employment
by Lender shall not disqualify a person from serving as a receiver.
Judicial Foreclosure. Lender may obtain a judicial decree foreclosing
Grantor's interest in all or any part of the Property.
Nonjudicial Sale. If permitted by applicable law, Lender may
foreclose Grantor's interest in all or in any part of the Personal
Property or the Real Property by nonjudicial sale.
Tenancy at Sufferance. If Grantor remains in possession of the
Property after the Property is sold as provided above or Lender
otherwise becomes entitled to possession of the Property upon default
of Grantor, Grantor shall become a tenant at sufferance of Lender or
the purchaser of the Property and shall, at Lender's option either
(a) pay a reasonable rental for the use of the Property, or (b)
vacate the Property immediately upon the demand of Lender.
Other Remedies. Lender shall have all other rights and remedies
provided in this Mortgage or the note or available at law or in
equity.
Sale of the Property. To the extent permitted by applicable law,
Grantor or Borrower hereby waive any and all right to have the
<PAGE>
property marshalled. In exercising its rights and remedies, Lender
shall be free to sell all or any part of the Property together or
separately, in one sale or by separate sales. Lender shall be
entitled to bid at any public sale on all or any portion of the
Property.
Notice of Sale. Lender shall give Grantor reasonable notice of the
time and place of any public sale of the Personal Property or of the
time after which any private sale or other intended disposition of
the Personal Property is to be made. Reasonable notice shall mean
notice given at least ten (10) days before the time of the sale or
disposition.
Waiver; Election of Remedies. A waiver by any party of a breach of a
provision of this Mortgage shall not constitute a waiver of or
prejudice the party's rights otherwise to demand strict compliance
with that provision or any other provision. Election by Lender to
pursue any remedy shall not exclude pursuit of any other remedy, and
an election to make expenditures or take action to perform an
obligation of Grantor or Borrower under this Mortgage after failure
of Grantor or Borrower to perform shall not affect Lender's right to
declare a default and exercise its remedies under this Mortgage.
Attorney's Fees; Expenses. If Lender instituted any suit or action to
enforce any of the terms of this Mortgage, Lender shall be entitled
to recover such sum as the court may adjudge reasonable as attorney's
fees at trial and on any appeal. Whether or not any court action is
involved, all reasonable expenses incurred by Lender that in Lender's
opinion are necessary at any time or the protection of its interest
or the enforcement of its rights shall become a part of the
Indebtedness payable on demand and shall bear interest from the date
of expenditure until repaid at the rate provided for in the Note.
Expenses covered in this paragraph include, without limitation,
however subject to any limits under applicable law, Lender's
attorney' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay of
injunction), appeals and any anticipated postjudgment collection
services, the cost of searching records, obtaining title reports
(including foreclosure reports), surveyor's reports, and appraisal
fees, and title insurance, to the extent permitted by applicable law.
Borrower also will pay any court costs, in addition to all other sums
provided by law.
NOTICES TO GRANTOR AND OTHER PARTIES. Any notice under this Mortgage,
including without limitation any notice of default and any notice of sale to
Grantor, shall be in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered, or when
deposited with a nationally recognized overnight courier, or, if mailed, shall
be deemed effective when deposited in the United States mail first class
certified or registered mail, postage prepaid, directed to the addresses shown
near the beginning of this Mortgage. Any party may change its address for
notices under this Mortgage by giving written formal notice
<PAGE>
to the other parties, specifying that the purpose of the notice is to change
the party's address. All copies of notices of foreclosure for the holder of
any lien which has priority over this Mortgage shall be sent to Lender's
address, as shown near the beginning of this Mortgage. For notice purposes,
Grantor agrees to keep Lender informed at all times of Grantor's current
address.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Mortgage:
Amendments. This Mortgage, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Mortgage. No alteration or amendment
to this Mortgage shall be effective unless given in writing and
signed by the party or parties sought to be charges or bound by the
alteration of the amendment.
Annual Reports. If the Property is used for purposes other than
Grantor's residence, Grantor shall furnish to Lender, upon request, a
certified statement of net operating income received for the Property
during Grantor's previous fiscal year in such form and detail as
Lender shall require. "Net operating income" shall mean all cash
receipts from the Property less all cash expenditures made in
connection with the operation of the Property.
Applicable Law. This Mortgage has been delivered to Lender and
accepted by Lender in the State of New Jersey. This Mortgage shall be
governed by and construed in accordance with the laws of the State of
New Jersey.
Caption Headings. Caption headings in this Mortgage are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Mortgage.
Merger. There shall be no merger of the interest or estate created by
this Mortgage with any other interest or estate in the Property at
any time held by or for the benefit of Lender in any capacity,
without the written consent of Lender.
Multiple Parties; Corporate Authority. All obligations of Grantor and
Borrower under this Mortgage shall be joint and several, and all
references to Grantor shall mean each and every Grantor, and all
references to Borrower shall mean each and every Borrower. This means
that each of the persons signing below is responsible for all
obligations in this Mortgage.
No Joint Venture or Partnership. The relationship of Grantor,
Borrower and Lender created by this Mortgage is strictly that of
debtor-creditor, and nothing contained in this Mortgage or in any of
the Related Documents shall be deemed or construed to create a
partnership or joint venture between Grantor, Borrower and Lender.
<PAGE>
Severability. If a court of complement jurisdiction finds any
provision of this Mortgage to be invalid or unenforceable as to any
person or circumstance, such findings shall not render that provision
invalid or unenforceable as to any other persons or circumstances. If
feasible, any such offending provision shall be deemed to be modified
to be within the limits of enforceability or validity; however, if
the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Mortgage in all other respects shall
remain valid and enforceable.
Successors and Assigns. Subject to the limitations stated in this
Mortgage on transfer of Grantor's interest, this Mortgage shall be
binding upon and inure to the benefit of the parties, their
successors and assigns. If ownership of the Property becomes vested
in a person other than Grantor, Lender, without notice to Grantor,
may deal with Grantor's successors with reference to this Mortgage
and the Indebtedness by way of forbearance or extension without
releasing Grantor from the obligations of this Mortgage or liability
under the Indebtedness.
Time is of the Essence. Time is of the essence in the performance of
this Mortgage.
Waivers and Consents. Lender shall not be deemed to have waived any
rights under this Mortgage (or under the Related Documents (unless
such waiver is in writing and signed by Lender. No delay or omission
on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by any party of a
provision of this Mortgage shall not constitute a waiver of or
prejudice the party's right otherwise to demand strict compliance
with that provision or any other provision. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor or
Borrower, shall constitute a waiver of any of Lender's rights or any
of Grantor's or Borrower's obligations as to any future transactions.
Whenever consent by Lender is required in this Mortgage, the granting
of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is
required.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND
GRANTOR AGREES TO ITS TERMS. GRANTOR ACKNOWLEDGES RECEIPT, WITHOUT CHARGE,
OF A TRUE AND CORRECT COPY OF THIS MORTGAGE.
GRANTOR:
The Building Center, Inc.
By: __________________________ By: ________________________________
Gerald C. Finn, President Norma Finn, Secretary
<PAGE>
INTERCOMPANY AGREEMENT
THIS INTERCOMPANY AGREEMENT (the "Agreement") is made and entered
into as of the ___ day of ______, 1998, by and between Kranzco Realty Trust, a
Maryland real estate investment trust ('Kranzco"), and New America
International, Inc., a Maryland corporation, which conducts business under the
name New America International (together with its subsidiaries and affiliated
entities "NAI").
W I T N E S S E T H:
WHEREAS, Kranzco is a real estate investment trust (a "REIT") under
sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code") primarily engaged in the business of owning, managing, operating,
leasing, acquiring and expanding neighborhood and community shopping centers;
WHEREAS, NAI, among other things, operates a network (the "NAI
Network") of independently owned, licensed real estate brokers throughout the
United States;
WHEREAS, Kranzco may in certain circumstances determine that it is
prevented from pursuing, or is limited in the manner in which it pursues,
various business opportunities due to its status as a REIT; and
WHEREAS, it is the objective of the parties hereto that to the extent
of their common interests, each party will provide the other with a right of
first opportunity or notification with respect to certain business
opportunities made to each of them, as more fully described herein;
NOW, THEREFORE, in consideration of the premises and mutual
undertakings herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the
parties hereto, the undersigned parties hereby agree as follows:
1. Definitions. Except as may be otherwise herein expressly provided,
the following terms and phrases shall have the meanings set forth below:
(a) "REIT Opportunity" means any opportunity, principally
within the United States, to (i) acquire, develop, lease, sell or make any
investment in retail real estate, real estate mortgages, real estate
derivatives, or entities that invest exclusively in or have a substantial
portion of their assets in any of the foregoing, so long as such investment
would be consistent with the requirements of the Code and regulations relating
to Kranzco's status as a REIT; or (ii)
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make any REIT-Qualified Investment. "REIT-Qualified Investment" means an
investment, at least 95% of the gross income from which would qualify under
the 95% gross income test set forth in section 856(c)(2) of the Code (or could
be structured so to qualify) and the ownership of which would not cause
Kranzco to violate the asset limitations set forth in section 856(c)(4) of the
Code (or could be structured not to cause Kranzco to violate the section
856(c)(4) limitations) and which otherwise meets the federal income tax
requirements applicable to REITs, or (ii) any other investments which may be
structured in a manner so as to be REIT-Qualified Investments, as determined
by Kranzco. Kranzco shall have the right from time to time to provide written
notice to NAI specifying certain criteria, reasonably acceptable to NAI, for a
REIT Opportunity in addition to the criteria specified above in this
definition of REIT Opportunity. Any such written notice from Kranzco may be
canceled by written notice given by Kranzco at any time or, with NAI's
consent, which shall not be unreasonably withheld, modified by Kranzco by
written notice at any time. The definition of REIT Opportunity shall be
modified as appropriate from time to time in accordance with any such written
notices sent by Kranzco and reasonably acceptable to NAI.
(b) "Services" means real estate brokerage services, local
management and other maintenance services, and certain other real estate
related services then provided by NAI, including sealed bid sales, due
diligence, real estate auctions and trade barter.
2. Kranzco Right of First Opportunity; Notification Right.
(a) Right of First Opportunity.
(i) During the term of this Agreement, if any REIT
Opportunity becomes available to NAI in which NAI is acting, intends to act or
will act as principal or participate for its own account (a "Principal REIT
Opportunity"), NAI shall first offer such Principal REIT Opportunity to Kranzco.
The offer shall be made by written notice (the "NAI Notice") from NAI to
Kranzco, which NAI Notice shall contain a detailed description of the material
terms and conditions of the Principal REIT Opportunity. Kranzco shall have ten
days (the "Ten-Day Period") from the date of receipt of the NAI Notice to notify
NAI in writing that it has accepted or rejected the Principal REIT Opportunity.
If Kranzco does not respond by the end of the Ten-Day Period, Kranzco shall be
deemed to have rejected the Principal REIT Opportunity. If Kranzco accepts a
Principal REIT Opportunity, but subsequently decides not to pursue such
opportunity, or for any other reason fails to consummate the Principal REIT
Opportunity, Kranzco shall immediately provide written notice that it is no
longer pursuing such Principal REIT Opportunity to NAI. A Principal REIT
Opportunity shall not include the receipt of any commissions in cash or in kind
(including an equity interest in a REIT Opportunity) in connection with NAI
serving as a broker or intermediary in connection with the sale or lease of
retail real estate.
(ii) If Kranzco rejects a Principal REIT
Opportunity, or accepts such
Principal REIT Opportunity but thereafter provides, or is required by the
provisions hereof to
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provide, written notice to NAI that it is no longer pursuing such Principal
REIT Opportunity, NAI shall, for a period of one year after the Kranzco
Withdrawal Date (as hereinafter defined), be entitled to consummate the
Principal REIT Opportunity or provide any other person or entity the right to
consummate such Principal REIT Opportunity (A) at a price, and on terms and
conditions, that are not more favorable to NAI in any material respect than
the price and terms and conditions set forth in the NAI Notice relating to
such Principal REIT Opportunity (in the case of price, a change of 10% or more
shall be deemed to be material) or (B) if Kranzco, at any time after the NAI
Notice, negotiated a different price, terms or conditions with a third party
where such Principal REIT Opportunity is derived from, or made available by, a
third party and such different price, terms or conditions were communicated to
NAI, then at a price, and on terms and conditions, that are not more favorable
to NAI in any material respect, than, the price and terms and conditions
negotiated by Kranzco with such third party. If NAI does not enter into a
binding agreement to consummate the Principal REIT Opportunity within such
one-year period, or if the price and terms and conditions are more favorable
to NAI in any material respect than the price and terms and conditions set
forth in the NAI Notice (or, if applicable, than the price and terms and
conditions negotiated by Kranzco with a third party subsequent to the NAI
Notice), NAI shall again be required to comply with the procedures set forth
above in Section 2(a)(i) if it desires to consummate such Principal REIT
Opportunity. Kranzco Withdrawal Date means any one of the following dates, as
applicable: (A) the date that Kranzco notifies NAI that Kranzco has rejected
the Principal REIT Opportunity, (B) if Kranzco does not respond to NAI
regarding the Principal REIT Opportunity, the expiration date of the Ten-Day
Period, or (C) if Kranzco accepts the Principal REIT Opportunity but
subsequently ceases to pursue the opportunity, the earlier of (i) 30 days
after the date on which Kranzco ceases to pursue the Principal REIT
Opportunity, (ii) the date of receipt by NAI of written notice from Kranzco
that Kranzco is no longer pursuing the Principal REIT Opportunity or (iii)
notice from NAI, without objection within 15 days from Kranzco, that NAI
asserts Kranzco is not pursuing the Principal REIT Opportunity.
(iii) NAI agrees to use good faith efforts to
assist Kranzco in structuring and consummating any Principal REIT Opportunity
which Kranzco is considering or has accepted on terms determined by Kranzco
(including without limitation structuring such opportunity as a "REIT-Qualified
Investment").
(b) Notification of Certain Non-Principal REIT
Opportunities. In addition to the right of first opportunity provided in
Section 2(a) hereof with respect to Principal REIT Opportunities, during the
term of this Agreement NAI shall notify Kranzco in writing of any REIT
Opportunity that becomes available or known to NAI (through its broker members
or otherwise) and which is not a Principal REIT Opportunity and which in the
reasonable opinion of NAI meets the acquisition and investment criteria of
Kranzco (provided to NAI by Kranzco from time to time) (a "Non-Principal REIT
Opportunity"). In the event Kranzco determines to pursue such Non-Principal
REIT Opportunity, NAI shall use good-faith efforts to cause its broker members
to, assist Kranzco in considering and consummating such Non- Principal REIT
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Opportunity. In the event Kranzco consummates a transaction that constitutes a
Non-Principal REIT Opportunity, Kranzco shall pay NAI a fee to be mutually
agreed to by NAI and Kranzco.
(c) Notification Right of Other Investment Opportunities. In
the event that NAI develops or becomes aware of any acquisition or investment
opportunity with respect to real estate during the term of this Agreement
(other than a REIT Opportunity) in which NAI intends to or has the opportunity
to act as principal or participate in for its own account, and NAI is not
interested in pursuing such opportunity, or the opportunity is otherwise
unavailable to NAI, NAI shall immediately notify Kranzco in writing of such
opportunity with such writing to contain a description of all material terms
concerning such opportunity and be delivered to Kranzco with a copy of any
written material or information in NAI's possession regarding such
opportunity.
(d) Other Obligations of NAI with respect to the Kranzco
Right of First Opportunity. In furtherance of providing REIT Opportunities for
Kranzco and the resulting rights of first opportunity granted to it hereunder,
NAI, without any additional consideration, shall (i) disseminate acquisition
and investment criteria provided by Kranzco to NAI's broker members, (ii)
disseminate information regarding space available for lease from Kranzco
(including tenant criteria) to its broker members, (iii) provide Kranzco
reasonable access to NAI personnel, NAI broker members and NAI's computer data
bases (other than confidential client information), (iv) cooperate with
Kranzco to develop new shopping centers or re-develop distressed shopping
centers for sale to Kranzco in a mutually agreeable manner, (v) provide
Kranzco access to local property managers within areas in which Kranzco owns
retail properties and (vi) disseminate such other materials and information
regarding Kranzco and its properties as Kranzco may reasonably request.
(e) Limitation on Strategic Alliance. Without the consent of
Kranzco, NAI shall not enter into any type of strategic relationship with any
other REIT or real estate investment or operations type entity, including,
without limitation, any equity investment by any other REIT or real estate
investment or operations type entity in NAI (other than as a result of a
purchase of Common Stock of NAI in the public market), any equity investment
by NAI in any other REIT or real estate investment or operations type entity,
entering into any agreements which provide such entities with rights of first
opportunity or contains cooperation provisions of the type or relating to the
matters contained in this Agreement (other than with respect to consulting
arrangements). Notwithstanding the foregoing, NAI shall be permitted to
solicit assignments from other REITs or real estate investment or operations
type entities with respect to the purchase or sale of real estate or the
provision of real estate related services, subject to Kranzco's rights of
first opportunity and notification contained in this Section 2.
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3. NAI Opportunity to Provide Services.
(a) During the term of this Agreement, if Kranzco requires
Services (a "Services Opportunity"), Kranzco shall engage in discussions with
NAI regarding such Services Opportunity prior to retaining another service
provider to perform such Services unless, in the reasonable judgment of
Kranzco, offering such Services Opportunity to NAI in accordance with this
Section 3(a) would be detrimental to Kranzco. Notwithstanding the foregoing,
(1) Kranzco shall have no obligation to retain NAI to perform any Services for
Kranzco and (2) any Services provided by NAI to Kranzco shall (i) be at market
rates and (ii) on terms and conditions as attractive as the best available for
comparable services offered by NAI or any broker member or affiliated member
(to the extent within NAI's control) of NAI to third parties.
(b) In the event Kranzco desires to purchase any retail real
estate based upon an opportunity provided to Kranzco by someone other than NAI
(a "Purchase Opportunity"), Kranzco shall notify NAI of such Purchase
Opportunity and shall use good-faith efforts to cause the broker for such
Purchase Opportunity to share any brokerage commissions for such Purchase
Opportunity with NAI in accordance with industry practice; provided, however,
Kranzco shall not be required to comply with this Section 3(b) if the Purchase
Opportunity is based upon an exclusive brokerage arrangement or, if in the
reasonable judgment of Kranzco, compliance with this Section 3(b) would be
detrimental to the relationship between Kranzco and such broker or would
impede, inhibit or slow down the proposed transaction. In connection with a
Purchase Opportunity in which NAI will be sharing in the brokerage commission,
NAI agrees to perform, without any consideration, any due diligence services
requested by Kranzco.
(c) In the event NAI desires to offer to Kranzco tenants any
Services currently provided by NAI, (a "Tenant Services Opportunity"), NAI
shall notify Kranzco in writing of such Tenant Services Opportunity. Promptly
following the receipt of such notice, Kranzco shall provide NAI with a list of
the mailing addresses of its tenants solely for purpose of NAI soliciting such
Tenant Services Opportunity. If NAI notifies Kranzco of a Tenant Services
Opportunity, Kranzco shall not for a period of six months after NAI notifies
Kranzco of a Tenant Services Opportunity provide a list of the mailing
addresses of its tenants to a competitor of NAI with respect to such Tenant
Services Opportunity.
4. General Terms and Conditions for Rights of First
Opportunity/Notification Rights.
(a) Unless waived or unless agreed upon in connection with a
REIT Opportunity or opportunity to perform Services, each party shall bear its
own expenses with respect to any opportunity to which this Agreement is
applicable, and each party agrees that it shall not be entitled to any
compensation from the other party with respect to any such opportunity.
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(b) A party shall not be required to comply with the right
of first opportunity and notification requirements set forth in this Agreement
during any period in which the other party or any Controlled Affiliate (as
hereinafter defined) of such other party is in default of this Agreement or
any other agreement entered into by the parties hereto or any of their
Controlled Affiliates, if such default is material and remains uncured for
fifteen days after receipt of notice thereof. A "Controlled Affiliate" of a
party means any entity controlled by, controlling or under common control with
such party, but shall not include NAI member brokers not owned by NAI.
(c) Any opportunity which is offered to and accepted by
Kranzco under this Agreement may be entered into by or on behalf of Kranzco or
by any designee which is a Controlled Affiliate of Kranzco. Any opportunity
which is offered to and accepted by NAI under this Agreement may be entered
into by or on behalf of NAI or by any designee which is a Controlled Affiliate
of NAI.
(d) All right of first opportunity and notification rights
set forth in this Agreement shall be subordinated to any third party consent
and confidentiality requirements; no party shall be required to comply with
the first opportunity and notification rights set forth in this Agreement if
such compliance would violate any third party requirements.
(e) While it is the intention of the parties to align their
businesses in accordance with the terms of this Agreement, each party shall
act independently in its own best interests, and neither party shall be
considered a partner or agent of the other party or to owe any fiduciary or
other common law duties to the other party.
5. Certain Employee Matters.
(a) NAI and Kranzco shall make reasonable and ongoing
efforts to ensure that members of management of each of NAI and Kranzco are
given appropriate salary, bonus options and other compensation as may be
reasonably necessary to incentivize management to enhance value to
shareholders of both NAI and Kranzco. The Board of Directors of NAI and the
Board of Trustees of Kranzco shall direct each of their compensation
committees to take into consideration the objective set forth in the previous
sentence in establishing compensation levels and performance criteria for
management of NAI and Kranzco.
(b) In furtherance of the objective set forth in Section
5(a) hereof, NAI will grant to each director, officer, employee and consultant
of NAI set forth on Schedule I, five-year options to purchase the number of
shares of Common Stock of NAI (set forth opposite his or her name on Schedule
I hereto) at a price of $2.00 per share, in accordance with the 1998 NAI Stock
Option Plan. In addition, NAI will grant to each of three persons listed on
Schedule II, five-year options to purchase 10,000 NAI Shares at an exercise
price of $2.00 per share.
(c) In connection with the transaction contemplated by this
Agreement, NAI and Kranzco agree to use their best efforts to cause, for a
period of three years from the date of
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this Agreement, (i) Norman Kranzdorf (President and Chief Executive Officer of
Kranzco) to serve as NAI's Co-Chairman, (ii) Robert Dennis (Chief Financial
Officer of Kranzco) to serve as NAI's Chief Financial Officer, and (iii)
Michael Kranzdorf (Vice President of Kranzco) to serve as NAI'S Chief
Information Officer. NAI hereby acknowledges that Norman Kranzdorf, Robert
Dennis and Michael Kranzdorf, as officers of Kranzco, will have a primary
responsibility to Kranzco and that none of such individuals are committed to
devoting a specific amount of time to NAI's affairs.
6. Consulting Services.
(a) During the term of this Agreement, Kranzco shall provide
NAI with such consulting services relating to management, administrative,
corporate, accounting, financial, legal, equity offerings, insurance, tax,
data processing, human resources and operational matters as NAI shall from
time to time reasonably request; provided, however, that NAI may terminate the
consulting arrangements provided for in this Section 6(a), such terminations
to be effective any time on or after the fifth anniversary of the date of this
Agreement, by providing Kranzco 90 days prior written notice of its intention
to terminate such consulting arrangement,
(b) In consideration for Kranzco entering into this
Agreement, and providing the consulting services set forth in Section 6(a),
NAI shall, during the terms of this Agreement (or until such earlier date as
the consulting agreement is terminated pursuant to Section 6(a) hereof), pay
Kranzco an annual fee of $500,000, payable in equal monthly installments on
the first day of each month.
7. Cooperation in Equity Offerings. If either Kranzco or NAI shall
desire to engage in a public or private offering of its debt or equity
securities (the "Issuing Party"), then such Issuing Party shall give notice to
the other party and such other party shall cooperate with the Issuing Party in
connection with such offering and shall provide such information and personnel
as is reasonably required in connection with such offering, including, without
limitation, making available the personnel and information necessary to permit
the Issuing Party to (i) prepare any required disclosure documents, (ii)
prepare any required filings with the Securities and Exchange Commission or
other regulatory agencies and (iii) obtain any required consents.
8. General Cooperation. Kranzco and NAI hereby agree that it is in
the best interest of both entities and their shareholders that they cooperate
to the fullest extent possible in the conduct of their respective operations
with the goal of enhancing value to their respective shareholders.
9. Confidentiality. The parties hereto acknowledge that the terms and
conditions of any proposed or consummated REIT Opportunity and opportunity to
perform Services are confidential in nature and will not disclose any
information relating thereto or the fact that the other party is considering
such opportunity, except as otherwise permitted by this Agreement.
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10. Specific Performance. Each party hereto hereby acknowledges that
the obligations undertaken by it pursuant to this Agreement are unique and
that the other party hereto would likely have no adequate remedy at law if
such party shall fail to perform its obligations hereunder, and such party
therefore confirms that the other party's right to specific performance of the
terms of this Agreement is essential to protect the rights and interests of
the other party. Accordingly, in addition to any other remedies that a party
hereto may have at law or in equity, such party shall have the right to have
all obligations, covenants, agreements and other provisions of this Agreement
specifically performed by the other party hereto and the right to obtain a
temporary restraining order or a temporary or permanent injunction to secure
specific performance and to prevent a breach or threatened breach of this
Agreement by the other party hereto. Each party submits to the jurisdiction of
the courts of the State of Maryland for this purpose.
11. Affiliates. Each party hereto shall cause all entities that are
under its control to comply with the terms hereof.
12. Term. The term of this Agreement shall commence as of the date
first written above and shall terminate on ________, 2008. Notwithstanding the
foregoing, a party hereto may terminate this Agreement if the other party or
any Controlled Affiliate of such other party is in default of this Agreement
or any other agreement entered into by the parties hereto or any of their
Controlled Affiliates, if such default is material and remains uncured for
fifteen days after receipt of notice thereof.
13. Miscellaneous.
(a) Notices. Notices shall be sent to the parties at the
following addresses:
If to Kranzco:
Mr. Norman Kranzdorf, President
Kranzco Realty Trust
128 Fayette Street
Conshohocken, Pennsylvania 19428
Facsimile: (610) 941-9193
If to NAI (including any of its subsidiaries and affiliated
entities):
Mr. Gerald Finn, Chief Executive Officer
New America International, Inc.
572 U.S. Route 130
Hightstown, New Jersey 08520
Facsimile: (609) 448-8126
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Notices may be sent be certified mail, return receipt requested,
Federal Express or comparable overnight delivery service, or facsimile. Notice
will be deemed received on the fourth business day following deposit in U.S.
mail and on the first business day following deposit with Federal Express or
other delivery service, or transmission by facsimile. Any party to this
Agreement may change its address for notice by giving written notice to the
other party at the address and in accordance with the procedures provided
above.
(b) Reasonable and Necessary Restrictions. Each of the
parties hereto hereby acknowledges and agrees that the restrictions,
prohibitions and other provisions of this Agreement are reasonable, fair and
equitable in scope, term and duration, are necessary to protect the legitimate
business interests of the parties hereto and are a material inducement to the
parties hereto to enter into the transactions described in and contemplated by
the recitals hereto. Each party hereto covenants that it will not sue to
challenge the enforceability of this Agreement or raise any equitable defense
to its enforcement.
(c) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the
express written consent of each of the parties hereto. Notwithstanding the
foregoing, this Agreement may be assigned without the consent of any party
hereto in connection with any merger, consolidation, reorganization or other
combination of a party with or into another entity where such party is not the
surviving entity.
(d) Amendments; Waivers. No termination, cancellation,
modification, amendment, deletion, addition or other change in this Agreement,
or any provision hereof, or waiver of any right or remedy herein provided,
shall be effective for any purpose unless such change or waiver is
specifically set forth in a writing signed by the party or parties to be bound
thereby. The waiver of any right or remedy with respect to any occurrence on
one occasion shall not be deemed a waiver of such right or remedy with respect
to such occurrence on any other occasion.
(e) Choice of Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by the laws of the
State of Maryland, without regard to the principles of choice of law thereof.
(f) Severability. In the event that one or more of the terms
or provisions of this Agreement or the application thereof to any person(s) or
in any circumstance(s) shall, for any reason and to any extent be found by a
court of competent jurisdiction to be invalid, illegal or unenforceable, such
court shall have the power, and hereby is directed, to substitute for or limit
such invalid term(s), provision(s) or application(s) and to enforce such
substituted or limited terms or provisions, or the application thereof.
Subject to the foregoing, the invalidity, illegality or enforceability of any
one or more of the terms or provisions of this Agreement, as the same may be
amended from time to time, shall not affect the validity, legality or
enforceability of any other term or provision hereof.
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(g) Entire Agreement; No Third-Party Beneficiaries. This
Agreement (i) constitutes the entire agreement and supersedes all prior
agreements, understandings, negotiations and discussions, whether written or
oral, between the parties hereto with respect to the subject matter hereof, so
that no such external or separate agreement relating to the subject matter of
this Agreement shall have any effect or be binding, unless the same is
referred to specifically in this Agreement or is executed by the parties after
the date hereof; and (ii) is not intended to confer upon any other person any
rights or remedies hereunder, and shall not be enforceable by any party not a
signatory to this Agreement.
(h) Gender; Number. As the context requires, any word used
herein in the singular shall extend to and include the plural, any word used
in the plural shall extend to and include the singular and any word used in
any gender or the neuter shall extend to and include each other gender or be
neutral.
(i) Headings. The headings of the sections hereof are
inserted for convenience of reference only and are not intended to be a part
of or affect the meaning or interpretation of this Agreement or of any term or
provision hereof.
(j) Counterparts. This Agreement may be executed in two or
more counterparts, each of which together shall be deemed to be an original
and all of which together shall be deemed to constitute one and the same
agreement.
(k) Non-Recourse. This Agreement and all documents,
agreements, understandings and arrangements relating hereto have been entered
into or executed on behalf of Kranzco by the undersigned in his capacity as a
trustee or officer of Kranzco, which has been formed as a Maryland real estate
investment trust pursuant to an Amended and Restated Declaration of Trust of
Kranzco, dated as of June 17, 1992, as amended and restated, and not
individually, and neither the trustees, officers nor shareholders of Kranzco
shall be personally bound or have any personal liability hereunder. NAI shall
look solely to the assets of Kranzco for satisfaction of any liability of
Kranzco with respect to this Agreement. NAI will not seek recourse or commence
any action against any of the shareholders of Kranzco or any of their personal
assets, and will not commence any action for money judgments against any of
the trustees or officers of Kranzco or seek recourse against any of their
personal assets, for the performance or payment of any obligation of Kranzco
hereunder.
14. REIT Compliance. Notwithstanding anything in this Agreement to
the contrary, no party to this Agreement shall (i) be obligated to take any
action or inaction, or (ii) take or cause to be taken any action or inaction
that could cause Kranzco to lose its qualification as a REIT under the Code.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by one of its duly authorized corporate officers, as
of the date first above written.
KRANZCO REALTY TRUST
By:
-----------------------------
Name:
Title:
NEW AMERICA INTERNATIONAL, INC.
By:
-----------------------------
Name:
Title:
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NEW AMERICA NETWORK, INC.'s SUBSIDIARIES:
SUBSIDIARY JURISDICTION OF INCORPORATION
------------ -------------------------------
1. REALQuest, Inc. New Jersey
2. New America Management, Inc. New Jersey
3. New America International, Inc. New Jersey
<PAGE>
EXHIBIT 23.3
CONSENT OF ARTHUR ANDERSEN LLP
RELATING TO KRANZCO REALTY TRUST
AND NEW AMERICA NETWORK, INC.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated May 8, 1998 on the consolidated financial statements of New America
Network, Inc. (and to all references to our Firm) included in or made part of
this Registration Statement on Form S-1 of New America Network, Inc.
/s/ Arthur Andersen LLP
July 17, 1998
