<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 0-21467
-------
FIRST PRIORITY GROUP, INC
(Exact name of small business issuer as specified in its charter)
New York 11-2750412
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
51 East Bethpage Road
Plainview, New York 11803
(Address of principal executive offices)
(516) 694-1010
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
State the number of shares outstanding of each of the issuer's classes
of common equity, as of May 6, 1998: 8,231,800 shares of common stock
Transitional Small Business Format (check one)
Yes / / No /X/
<PAGE>
Part I Financial Information
Item 1. Financial Statements
THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
2
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1998
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $4,289,841
Accounts receivable, less allowance for
doubtful accounts of $15,500 1,694,781
Inventories 70,888
Prepaid expenses and other current assets 90,776
-----------
Total current assets 6,146,286
-----------
Property and equipment, net of accumulated
depreciation of $290,551 523,302
Security deposits and other non-current assets 27,738
-----------
Total assets $6,697,326
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $976,193
Accrued expenses and other current liabilities 780,239
-----------
Total current liabilities 1,756,432
Shareholders' equity:
Common stock, $.015 par value, authorized
20,000,000 shares; issued 8,498,467 shares 127,477
Additional paid-in capital 7,638,237
Deficit (2,734,820)
-----------
5,030,894
Less common stock held in treasury, at
cost, 266,667 shares (90,000)
-----------
Total shareholders' equity 4,940,894
-----------
Total liabilities and shareholders' equity $6,697,326
===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
Revenue from operations $4,017,501 $3,679,290
Costs of revenue (principally charges incurred
at repair facilities for services) 3,358,992 3,078,238
----------- -----------
Gross profit 658,509 601,052
Operating expenses 978,284 617,330
----------- -----------
Loss from operations (319,775) (16,278)
----------- -----------
Other income (expense):
Interest and other income 51,350 4,955
Other expenses (6,771) -
----------- -----------
Total other income 44,579 4,955
----------- -----------
Loss from continuing operations (275,196) (11,323)
=========== ===========
Discontinued operations (Note 3):
Loss from operations of discontinued division
(no income tax benefit) - (341,735)
----------- -----------
Net income (loss) ($275,196) ($353,058)
=========== ===========
Basic and diluted loss per share:
Continuing operations ($0.03) ($0.00)
Discontinued operations - (0.06)
----------- -----------
Net loss ($0.03) ($0.06)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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FIRST PRIORITY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($275,196) ($353,058)
----------- -----------
Adjustments to reconcile net loss
to net cash provided by (used in) operating
activities:
Depreciation and amortization 32,661 13,975
Changes in assets and liabilities
Accounts receivable (90,515) (152,971)
Inventories (9,246) (267,863)
Prepaid expenses and other current assets 48,500 (23,395)
Security deposit and other non-current assets 13,590 15,917
Accounts payable and accrued
expenses 114,836 839,754
----------- -----------
Total adjustments 109,826 425,417
----------- -----------
Net cash provided by (used in) operating
activities (165,370) 72,359
----------- -----------
Cash flows from investing activities,
additions to property and equipment (98,653) (235,369)
----------- -----------
Cash flows from financing activities:
Proceeds from note receivable in connection -
with the exercise of warrants 100,000
Proceeds from issuance of common stock 1,000,000 -
----------- -----------
Net cash provided by financing activities 1,100,000 -
----------- -----------
Net increase (decrease) in cash and cash equivalents 835,977 (163,010)
Cash and cash equivalents at beginning of period 3,453,864 683,503
----------- -----------
Cash and cash equivalents at end of period $4,289,841 $520,493
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. UNAUDITED FINANCIAL STATEMENTS
The information contained in the condensed consolidated financial
statements for the period ended March 31, 1998 is unaudited, but includes all
adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for these periods.
The financial statements and notes are presented as permitted by Form
10-QSB, and do not contain certain information included in the Company's annual
statements and notes. These financial statements should be read in conjunction
with the Company's annual financial statement as reported in its most recent
annual report on Form 10-KSB.
2. BUSINESS OF THE COMPANY
The Company, a New York corporation formed on June 28, 1985, is engaged in
automotive fleet management and administration of automotive repairs for
businesses, insurance companies and members of affinity groups.
The Company's office is located at 51 East Bethpage Road, Plainview, New
York 11803 and its telephone number is (516) 694-1010.
3. DISCONTINUED OPERATIONS
In September 1996, the Company's FPG Direct division began to market
consumer goods through direct mailing efforts to credit card customers of major
oil companies and retail department stores. During the second quarter of 1997,
the Company decided to discontinue its FPG Direct division. While the division
has not participated in any new promotions since June 1997, it is continuing to
pay vendors, collect receivables, and return surplus inventory. The Company does
not expect to incur any additional losses during the remaining phase out period.
4. RESULTS OF OPERATIONS
The unaudited results of operations for the three months ended March 31,
1998 are not necessarily indicative of the results to be expected for the full
year.
5. EARNINGS PER SHARE
Basic earnings per share is computed by dividing earnings by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share reflects the potential dilution that could occur if common stock
equivalents, such as
6
<PAGE>
stock options and warrants, were exercised. During the three month periods ended
March 31, 1998 and 1997, there was no dilutive effect from stock options and
warrants.
Weighted average number of shares were 8,092,911 and 5,883,883 in the three
months ended March 31, 1998 and March 31, 1997, respectively.
6. ISSUANCE OF COMMON STOCK
In December 1997 the Company issued a Notice of Redemption to the holders of
the warrants issued as part of the August 1997 private placement. In January
1998 the remaining warrant holder from the August 1997 private placement,
exercised its right to purchase 500,000 additional shares of common stock at
$2.00, permitting the Company to raise an additional $1,000,000.
7. SUBSEQUENT EVENTS
On March 8, 1998, the Company signed a letter of intent to acquire
substantially all of the assets owned by an individual doing business as Body
Shop Video's Business Development Group for $1,000,000 cash and $1,000,000 of
the Company's common stock. The completion of this potential acquisition is
subject to satisfactory due diligence.
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7
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Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
Automotive Management
Revenues from services of the automotive management operations were
$4,017,501, as compared to $3,679,290 for the three months ended March 31, 1997,
representing an increase of $338,211, or 9.2%. The increased revenues reflect
the Company's continued success in increasing the amount of business it is
conducting with continuing customers, as well adding new customers to its base
of business. The direct cost of services related to such revenue (principally
charges from automotive repair facilities) was $3,358,992 and $3,078,238 for the
three month periods ended March 31, 1998 and 1997, respectively, resulting in an
increase of $280,754 or 9.1%. The gross profit percentage for the three months
ended March 31, 1998 and March 31, 1997 was stable at 16.4% and 16.3%,
respectively.
Total operating expenses were $978,284 for the three months ended March 31,
1998, as compared to $617,330 for the three months ended March 31, 1997,
representing an increase of $360,954, or 58.5%. The increase in operating
expenses is primarily attributable to increased payroll and related expenses
specifically associated with hiring additional staff for the anticipated growth
of the Affinity and Direct Appraisal and Repair Programs ("DARP") business
groups, the development of an information technology department, as well as
increases in other general and administrative expenses required to service the
Company's group automotive management operations. The Company relocated its
corporate headquarters in April 1997, more than doubling the Company's office
space. As a result, rent and utility expenses more than doubled. These
expenditures have positioned the Company for rapid growth in new business areas.
Interest and other income was $51,350 for the three months ended March 31,
1998, as compared to $4,955 for the same period in 1997, representing an
increase of $46,395. The increase is primarily attributable to larger average
cash balances available during 1998 which have been invested in short-term cash
equivalents.
As a result of the foregoing, the net loss from continuing operations for
the three months ended March 31, 1998 was $275,196 ($.03 per share) as compared
to a net loss of $24,521 ($.00 per share) for the comparable three months in
1997.
FPG Direct (Discontinued operations)
The Company, prior to September 1996, conducted business in automotive fleet
management and related operations ("Automotive Management"). In September of
1996, the Company commenced a new line of business, under the name FPG Direct.
FPG Direct marketed consumer goods to the credit card base of customers of oil
companies and retail department stores through direct mailing efforts throughout
the United States.
8
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This division posted no results that affected the Condensed Consolidated
Statements of Operations for the period ended March 31, 1998. Discontinued
operations resulted in a loss of $341,731 for the three months ended March 31,
1997 ($.06 per share). Returns and sales for this division have been continuing
in a decreasing manner, however accruals previously recorded for FPG Direct have
accounted for these anticipated transactions. Inventories are being decreased
through returns to manufacturers and suppliers. It is anticipated that all
inventory will be returned by September 1, 1998.
Liquidity and Capital Resources
As of March 31, 1998, the Company had cash and cash equivalents of
$4,289,841 and working capital was $4,389,854. The Company's operating
activities used $165,370 of cash in the first quarter of 1998 as compared to the
first quarter of 1997 where operating activities generated $72,359 of cash. As
discussed above, the Company has experienced large increases in its operating
costs in order to accommodate the anticipated growth of the Company as it
explores and enters into new business.
The Company believes that its present cash position will enable the Company
to continue to support its operations for the short and longer term.
Forward Looking Statements - Cautionary Factors
Except for the historical information and statements contained in this
Report, the matters and items set forth in this Report are forward looking
statements that involve uncertainties and risks some of which are discussed at
appropriate points in the Report and are detailed in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1997.
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Company held the Annual Meeting of Share holders on March 23, 1998. The
following matters were voted upon at the meeting:
1. The following slate of nominees stood for election to the Board of Directors:
For Against Withheld
--- ------- --------
Barry Siegel 5,185,833 0 0
Michael Karpoff 5,185,833 0 0
Paul J. Di Stefano 5,185,833 0 0
Barry J. Spiegel 5,185,833 0 0
Leonard Giarraputo 5,185,833 0 0
2. Ratification of the selection by the Board of Directors of Nussbaum Yates &
9
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Wolpow, P.C. as the independent accountants to audit the Company's financial
statements for 1998.
For Against Withheld
--- ------- --------
Barry Siegel 5,185,833 0 0
Michael Karpoff 5,185,833 0 0
Paul Di Stefano 5,185,833 0 0
Barry J. Spiegel 5,185,833 0 0
Leonard Giarraputo 5,185,833 0 0
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Employment Agreement dated March 23, 1998 between the Company and
Gerald M. Zutler.
27 Financial Data Schedules
(b) Reports on Form 8-K
None
10
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
FIRST PRIORITY GROUP, INC.
Date: May 5, 1998 By: /s/ Barry Siegel
----------------
Barry Siegel
Chairman of the Board
of Directors, Chief Executive Officer
Treasurer, Secretary and Principal
Financial and Accounting Officer
11
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Index of Exhibits
Exhibit No. Description
10.1 Employment Agreement dated March 23, 1998 between the Company and
Gerald M. Zutler.
27 Financial Data Schedules
12
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated March 23, 1998 by and between
First Priority Group, Inc., a New York corporation with an address at 51 East
Bethpage Road, Plainview, New York 11803 (the "Company"), and Gerald M. Zutler,
residing at 7407 Rue Notre Dame, St. Dorothe (Laval), Quebec H7X3J2, Canada (the
"Employee").
W I T N E S S E T H
WHEREAS, the Company desires that Employee be employed by it and render
services to it, and Employee is willing to be so employed and to render such
services to the Company, all on the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment
Subject to and upon the terms and conditions contained in this Agreement,
the Company hereby employs Employee, for the period set forth in Paragraph 2
(subject to the terms and conditions of this Agreement), to render the services
to the Company, its affiliates and/or subsidiaries described in Paragraph 3.
2. Term
Employee's term of employment under this Agreement shall commence on March
23, 1998 (the "Commencement Date") and shall continue for a period of thirty-six
months (36) months plus one day thereafter, terminating on March 22, 2001 (the
"Expiration Date"), unless earlier terminated under the terms and conditions
herein (the "Employment Term").
3. Duties
(a) Employee's responsibilities shall be to manage and direct the
operational affairs of the Company as shall from time to time be designated by
the Chief Executive Officer ("CEO") of the Company. Employee shall be based in
Nassau or Suffolk counties during the Employment Term and shall have the title
of President and Chief Operating Officer.
(b) Employee agrees to abide by all By-Laws and policies of the
Company promulgated from time to time by the Company.
4. Exclusive-Services and Best Efforts
Employee shall devote his entire working time, attention, best efforts and
ability exclusively to the service of the Company, its affiliates and
subsidiaries during the term of this Agreement.
5. Compensation
13
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(a) Base Salary. Commencing on the Commencement Date, the Employee
shall receive an annual salary, payable pursuant to the Company's normal payroll
procedures in place from time to time, during the Employment Term, in the amount
of Ninety Thousand Dollars ($90,000), subject to all required federal, state and
local payroll deductions. The Employee's Base Salary may be increased upon the
recommendation of the CEO and the approval of the Board of Directors.
(b) [Intentionally left blank]
(c) The Employee shall be granted a stock option under the
Company's 1995 Incentive Stock Plan (the "Plan") with the right to purchase up
to 200,000 shares of the Company's common stock (the "Stock Option"). The Stock
Option shall be granted at a price equal to the closing price of the Company's
common stock as quoted on the Nasdaq OTC Bulletin Board on the date on which the
Employee commences employment with the Company. The Stock Option shall become
exercisable in one-third increments upon the first, second and third anniversary
of the Stock Option grant. The Company will provide the Employee a Stock Option
Contract for his signature which will set out the terms of the option.
This Stock Option shall be subject to the terms of the Plan.
6. Business Expenses
Employee shall be reimbursed for only those business expenses incurred by
him (a) which are reasonable and necessary for Employee to perform his duties
under this Agreement in accordance with policies established from time to time
by the Company, and (b) for which Employee has submitted vouchers and/or
receipts. The Employee shall be issued a corporate credit card that he shall use
solely for business expenses which are reasonable and necessary for the Employee
to perform his duties under this Agreement in accordance with policies
established from time to time by the Company
7. Employee Benefits
During the Employment Term, Employee shall participate, to the extent he is
eligible under the terms and conditions thereof, in any health, life, disability
insurance, or 401(k) plan, or other employee benefit plans maintained by
Employer (but nothing herein shall obligate the Company to establish or maintain
any such benefit plan). Employee will not be covered under the Company's health
insurance until the Employee has been employed by the Company for more than
ninety (90) days. The Employee shall be reimbursed for any payments he must make
to continue his health insurance under the COBRA benefits offered by his former
employer, until the Employee is covered under the Company's health insurance
plan.
The Company shall reimburse the Employee for the cost of moving to the New
York metropolitan area in an amount not to exceed Six Thousand Dollars ($6,000)
("Moving Expenses"). The Company shall reimburse the Employee for such Moving
Expenses that the Employee deems necessary without providing the Company with
any supporting documentation. Additionally, the Company shall reimburse the
Employee for temporary living expenses, that shall include lodging, meals and
laundry expenses, for a period of fifteen (15) days from the Commencement Date.
The Company shall pay the Employee a monthly automobile allowance of Six
Hundred Dollars ($600).
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8. Vacation and Sick Leave
Employee shall be entitled to three (3) weeks of vacation per annum during
the Employment Term, to be taken at such times as may be mutually agreed upon by
the Company and Employee. The Employee shall be entitled to one (1) week of sick
leave per annum during the Employment Term.
9. Death and Disability
(a) The Employment Term shall terminate on the date of Employee's
death, in which event Employee's salary payable pursuant to Paragraph 5 and any
accrued vacation, through the date of Employee's death, shall be paid to his
estate. Employee's estate will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Paragraph 9(a).
(b) If during the Employment Term, Employee, because of physical or
mental illness or incapacity, shall become substantially unable to perform the
duties and services required of him under this Agreement for a period of
forty-five (45) consecutive days or ninety (90) days in the aggregate in any one
calendar year, the Company may, upon at least ten (10) days' prior written
notice given at any time after the expiration of such 45 or 90-day period, as
the case may be, to Employee of its intention to do so, terminate this Agreement
as of such date as may be set forth in the notice. In case of such termination,
Employee shall be entitled to receive his salary payable pursuant to Paragraph 5
through the date of termination. Employee will not be entitled to any other
compensation upon termination of this Agreement pursuant to this Paragraph 9(b).
10. Termination
(a) The Company may terminate the employment of Employee For Cause
(as hereinafter defined). Upon such termination, the Company shall be released
from any and all further obligations under this Agreement, except that the
Company shall be obligated to pay Employee the unpaid prorated salary pursuant
to Paragraph 5 earned or accrued up through the day on which Employee is
terminated.
(b) The Company may terminate the employment of Employee Without
Cause (as hereinafter defined). Upon such termination, the Company shall be
released from any and all further obligations under this Agreement, except that
the Company shall be obligated to pay Employee the unpaid prorated salary
pursuant to Paragraph 5 earned or accrued up through the day on which Employee
is terminated, in addition to the lesser of (i) Base Salary and other employee
benefits, as set forth in Paragraph 7, for a nine (9) month period from the date
employment is terminated, or (ii) the Base Salary and other employee benefits
that would have been paid the Employee from the date employment is terminated
through the Expiration Date.
(c) As used herein, the term "For Cause" shall mean:
(i) any material breach of this Agreement by Employee
that, in the case of a breach that may be cured or remedied, is not cured or
remedied to the reasonable satisfaction
15
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of the Company within 30 days after notice is given by the Company to Employee,
setting forth in reasonable detail the nature of such breach;
(ii) Employee's failure to perform his duties and services
hereunder to the reasonable satisfaction of the CEO of the Company that, in the
case of any such failure that may be cured or remedied, is not cured or remedied
to the reasonable satisfaction of the Company within 30 days after notice is
given by the Company to Employee, setting forth in reasonable detail the nature
of such failure;
(iii) any material act, or material failure to act, by
Employee in bad faith and to the material detriment of the Company; or
(iv) commission by Employee of a material act involving
moral turpitude, dishonesty, unethical business conduct, or any other conduct
which significantly impairs the reputation of the Company, its subsidiaries or
affiliates.
(v) the conviction of the Employee of a felony, including
the plea of nolo contendere
(d) As used herein, the term "Without Cause" shall mean:
(i) Termination by the Company of the Employee's
employment for any reason other than For Cause, Death or Disability.
11. Disclosure of Information and Restrictive Covenant
(a) Employee acknowledges that, by his employment, he has been and
will be in a confidential relationship with the Company and will have access to
confidential information and trade secrets of the Company, its subsidiaries and
affiliates, including, but not limited to, confidential information or trade
secrets belonging or relating to the Company, its subsidiaries, affiliates,
customers and/or clients or proprietary processes or procedures of the Company,
its subsidiaries, affiliates, customers and/or clients. Proprietary processes
and procedures shall include, but shall not be limited to, all information which
is known only to employees of the Company, its respective subsidiaries and
affiliates or others in a confidential relationship with the Company or its
respective subsidiaries and affiliates which relates to business matters.
Confidential information and trade secrets include, but are not limited to,
customer and client lists, price lists, marketing and sales strategies and
procedures, operational and equipment techniques, business plans and systems,
quality control procedures and systems, special projects and technological
research, including projects, research and reports for any entity or client or
any project, research, report or the like concerning sales or manufacturing or
new technology, employee compensation plans and any other information relating
thereto, and any other records, files, drawings, inventions, discoveries,
applications or processes which are not in the public domain (all the foregoing
shall be referred to herein as the "Confidential Information"). Employee agrees
that in consideration of the execution of this Agreement by the Company, he will
not use, or disclose to any third party, any of the Confidential Information,
other than as required to perform his services hereunder or as directed or
authorized by the Company's Board of Directors or President.
(b)
(i) Employee will not, at any time prior to the
Expiration Date, or if the Employee's employment shall terminate prior to the
Expiration Date, then for a period of one (1) year after the Employee ceases to
be employed by the Company, engage in or participate in any business activity,
including, but not limited to, acting as a director, officer, employee, agent,
independent contractor, partner, consultant, licensor or licensee, franchiser or
franchisee, proprietor, syndicate member, or shareholder that operates a
business or activity
16
<PAGE>
which competes with any business or activity engaged in by the Company.
(ii) Any time during his employment by the Company or
after the Employee ceases to be employed by the Company, divulge to any persons,
firms or corporations, other than the Company (hereinafter referred to
collectively as "third parties"), or use or allow or cause or authorize any
third parties to use, any such Confidential Information; and
(iii) At any time during his employment by the Company and
for a period of one (1) year after the Employee ceases to be employed by the
Company, solicit or cause or authorize directly or indirectly to be solicited,
for or on behalf of the Employee or third parties, any business from persons,
firms, corporations or other entities who were at any time within one (1) year
prior to the cessation of his employment hereunder, customers of the Company;
and
(iv) At any time during his employment by the Company and
for a period of one (1) year after the Employee ceases to be employed by the
Company, accept or cause or authorize directly or indirectly to be accepted, for
or on behalf of the Employee or third parties, any business from any such
customers of this Company; and
(v) At any time during his employment by the Company and
for a period of one (1) year after the Employee ceases to be employed by the
Company, solicit or cause or authorize directly or indirectly to be solicited
for employment, for or on behalf of the Employee or third parties, any persons
who were at any time within one year prior to the cessation of his employment
hereunder, employees of the Company; and
(vi) At any time during his employment by the Company and
for a period of one year after the Employee ceases to be employed by the
Company, employ or cause or authorize directly or indirectly to be employed, for
or on behalf of the Employee or third parties, any such employees of the
Company; and
(vii) At any time during his employment by the Company and
for a period of one (1) year after the Employee ceases to be employed by the
Company, compete with the Company in any fashion or work for, advise, be a
consultant to or an officer, director, agent or employee of or otherwise
associate with any person, firm, corporation or other entity which is engaged in
or plans to engage in a business or activity which competes with any business or
activity engaged in by the Company, or which is under development or in a
planning stage by the Company.
(c) Employee will not induce or persuade other employees of the
Company to join him in any activity prohibited by Paragraph 11 or 12.
(d) This Paragraph 11 and Paragraph 12, 13 and 14 shall survive the
expiration or termination of the Agreement for any reason.
(e) It is expressly agreed by Employee that the nature and scope of
each of the provisions set forth in Paragraphs 11 and 12 are reasonable and
necessary. If, for any reason, any aspect of these provisions as they apply to
Employee is determined by a court of competent jurisdiction to be unreasonable
or unenforceable, the provisions shall only be modified to the minimum extent
required to make the provisions reasonable and/or enforceable, as the case may
be. Employee acknowledges and agrees that his services are of a unique character
and expressly grants to the Company or any subsidiary, successor or assignee of
the Company, the right to enforce the provisions above through the use of all
remedies available at law or in equity, including, but not limited to,
injunctive relief.
12. Company Property
17
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(a) Any patents, inventions, discoveries, applications, processes
or designs, devised, planned, applied, created, discovered or invented by
Employee in the course of Employee's employment under this Agreement and which
pertain to any aspect of the Company's or its respective subsidiaries' or
affiliates' businesses shall be the sole and absolute property of the Company,
and Employee shall make prompt report thereof to the Company and promptly
execute any and all documents reasonably requested to assure the Company the
full and complete ownership thereof.
(b) All records, files, lists, including computer generated lists,
drawings, documents, equipment and similar items relating to the Company's
business which Employee shall prepare or receive from the Company shall remain
the Company's sole and exclusive property. Upon termination of the Employment
Term, or, if earlier, upon demand by the Company, Employee shall promptly return
to the Company all property of the Company in his possession. Employee further
represents that he will not copy or cause to be copied, print out or cause to be
printed out any software, documents or other materials originating with or
belonging to the Company. Employee covenants that, upon termination of his
employment with the Company, he will not retain in his possession any such
software, documents or other materials.
13. Remedy
It is mutually understood and agreed that Employee's services are special,
unique, unusual, extraordinary and of an intellectual character giving them a
peculiar value, the loss of which cannot be reasonably or adequately compensated
in damages in an action at law. Accordingly, in the event of any breach of this
Agreement by Employee, including, but not limited to, the breach of the
nondisclosure, non-solicitation and non-compete clauses under Paragraphs 11 and
12 hereof, the Company shall be entitled to equitable relief by way of
injunction or otherwise in addition to damages the Company may be entitled to
recover. Nothing herein shall be deemed to restrict any remedy available to
Employee for breach of the Agreement by the Company.
14. Representations and Warranties of Employee and the Company
(a) In order to induce the Company to enter into this Agreement,
Employee hereby represents and warrants to the Company as follows: (i) Employee
has the legal capacity and unrestricted right to execute and deliver this
Agreement once to perform all of his obligations hereunder: (ii) the execution
and delivery of this Agreement by Employee and the performance of his
obligations hereunder will not violate or be in conflict with any fiduciary or
other duty, instrument, agreement, document, arrangement or other understanding
to which Employee is a party or by which he is or may be bound or subject; and
(iii) Employee is not a party to any instrument, agreement, document,
arrangement or other understanding with any person (other than the Company)
requiring or restricting the use or disclosure of any confidential information
or the provision of any employment, consulting or other services.
(b) The Company hereby represents and warrants to Employee, as
follows: (i) the execution, delivery, and performance of this Agreement has been
duly authorized by all necessary corporate action of the Company; and (ii) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except that such enforcement may be
subject to any bankruptcy, insolvency, reorganization, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally.
18
<PAGE>
15. Notices
All notices given hereunder shall be in writing and shall be deemed
effectively given when mailed, if sent by registered or certified mail, return
receipt requested, addressed to Employee at his address set forth on the first
page of this Agreement, and to the Company at its address set forth on the first
page of this Agreement, Attention: Barry Siegel, Chairman of the Board, with a
copy to Muenz & Meritz, P.C., Three Hughes Place, Dix Hills, New York 11746,
Attention: Lawrence A. Muenz, or at such address as such party shall have
designated by a notice given in accordance with this Paragraph 15, or when
actually received by the party for whom intended, if sent by any other means.
16. Entire Agreement
This Agreement constitutes the entire understanding of the parties with
respect to its subject matter and no change, alteration or modification hereof
may be made except in writing signed by the parties hereto. Any prior or other
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
17. Severability
If any provision of this Agreement shall be unenforceable under any
applicable law, then notwithstanding such unenforceability, the remainder of
this Agreement shall continue in full force and effect.
18. Waivers, Modifications, Etc.
No amendment, modification or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by each of the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
19. Assignment
Neither this Agreement. nor any of Employee's rights, powers, duties or
obligations hereunder, may be assigned by Employee. This Agreement shall be
binding upon and inure to the benefit of Employee and his heirs and legal
representatives and the Company and its successors and assigns. Successors of
the Company shall include, without limitation, any corporation or corporations
acquiring, directly or indirectly, all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed "the Company" for the purpose hereof.
20. Applicable Law
This Agreement shall be deemed to have been made, drafted, negotiated and
the transactions contemplated hereby consummated and fully performed in the
State of New York and shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflicts of law rules
thereof. Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and whenever there is any conflict
between any provision of this Agreement and any statute, law, ordinance, order
or regulation, contrary to which the parties hereto have no legal right to
contract, the
19
<PAGE>
latter shall prevail, but in such event any provision of this Agreement so
affected shall be curtailed and limited only to the extent necessary to bring it
within the legal requirements.
21. Jurisdiction and Venue
It is hereby irrevocably agreed that all actions, suits or proceedings
between the Company and Employee arising out of, in connection with or relating
to this Agreement shall be exclusively heard and determined in, and the parties
do hereby irrevocably submit to the exclusive jurisdiction of, the Supreme Court
of the State of New York for Nassau or Suffolk County or the United States
District Court for the Eastern District of New York. The parties also agree that
a final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The parties hereby unconditionally waive any objection
which either of them may now or hereafter have to the venue of any such action,
suit or proceeding brought in any of the aforesaid courts, and waive any claim
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
22. Full Understanding
Employee represents and agrees that he fully understands his right to
discuss all aspects of this Agreement with his private attorney, that to the
extent, if any, that he desired, he availed himself of this right, that he has
carefully read and fully understands all of the provisions of this Agreement,
that he is competent to execute this Agreement. that his agreement to execute
this Agreement has not been obtained by any duress and that he freely and
voluntarily enters into it, and that he has read this document in its entirety
and fully understands the meaning, intent and consequences of this document
which is that it constitutes an agreement of employment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date written below.
FIRST PRIORITY GROUP, INC. GERALD M. ZUTLER
By: s/Barry Siegel By: s/Gerald M. Zutler
-------------- ------------------
Title: Chief Executive Oficer Dated: March 24, 1998
Dated: March 24, 1998
20
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 42,898,281
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<CURRENT-ASSETS> 6,146,286
<PP&E> 813,853
<DEPRECIATION> 290,551
<TOTAL-ASSETS> 6,697,326
<CURRENT-LIABILITIES> 1,756,432
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0
0
<COMMON> 127,477
<OTHER-SE> 4,813,417
<TOTAL-LIABILITY-AND-EQUITY> 6,697,326
<SALES> 4,017,501
<TOTAL-REVENUES> 4,017,501
<CGS> 0
<TOTAL-COSTS> 3,358,992
<OTHER-EXPENSES> 978,284
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<INCOME-PRETAX> (275,196)
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