Exhibit 10.14
Reorganization Agreement
with Xxxxx Xxxxxxx and
Xxxxxx Xxxxxxx for
Acquisition of Major Fleet &
Leasing Corp.
lO.l4
PLAN AND AGREEMENT OF REORGANIZATION
UNDER I.R.C. 9368(a)(1)(B)
FIDELITY HOLDINGS INC.
AND
THE SHAREHOLDERS OF
MAJOR FLEET & LEASING CORP.
THIS PLAN AND AGREEMENT OF REORGANIZATION, dated this 23rd day of
August, 1996, made by and between:
FIDELITY HOLDINGS, INC., a Nevada business corporation having its
principal business office located at 00-00 Xxx Xxxxxxx Xxxx, Xxxxx 0000, Xxx
Xxxxxxx, Xxx Xxxx 00000 (hereinafter sometimes referred to as "FIDELITY");
AND
XXXXX XXXXXXX and XXXXXX XXXXXXX (hereinafter jointly and severally
sometimes referred to as "SHAREHOLDERS"), adult individuals who are all of the
shareholders of MAJOR FLEET & LEASING CORP., a New York business corporation
having its principal business office located at 00 Xxxxxxxx Xxxxx, -Xxxxxx, Xxx
Xxxx (hereinafter sometimes referred to as "MAJOR");
WITNESSETH THAT:
WHEREAS, FIDELITY desires to acquire from SHAREHOLDERS all of the
issued and outstanding capital stock of MAJOR, so as to constitute MAJOR as a
wholly-owned subsidiary of FIDELITY, in exchange for shares of the voting
Preferred Stock of FIDELITY in a transaction qualifying as a tax-free
reorganization;
WHEREAS, FIDELITY, by its Nevada Certificate of Incorporation which was
issued on November 7, 1995 is authorized to issue 2,000,000 shares of
undesignated Preferred Stock having a par value of $.Ol per share, none of which
shares are presently issued and outstanding, and 50,000,000 shares of Common
Stock having a par value of $.Ol per share, of which 5,750,000 shares are issued
and outstanding;
WHEREAS, MAJOR, INC., by its Certificate of Incorporation which was
issued on August 12, 1985 is authorized to issue 200 shares of Common Stock
having no par value, 20 of which shares are
issued and outstanding;
NOW THEREFORE, the constituent corporations, in consideration of the
mutual covenants, agreements and provisions hereinafter contained do I hereby
prescribe the terms and conditions of their reorganization and the mode of
carrying the same into effect, as follows:
ARTICLE I
THE REORGANIZATION/EXCHANGE
1. PLAN OF REORGANIZATION. SHAREHOLDERS are the owners of all of the
issued and outstanding capital stock of MAJOR, which consists of 20 shares of
Common Stock. It is the intention of the parties that all of such issued and
outstanding Common Stock of MAJOR be acquired by FIDELITY in exchange solely for
its voting stock, as defined in Paragraph 2 following, in a reorganization
qualifying under ss.3 68 (a) (1) (B) of the Internal Revenue Code of 1986, as
amended.
2. CONVERTIBLE PREFERRED STOCK. Prior to the Closing of the exchange of
shares as provided in this Agreement, FIDELITY's Board of Directors shall
designate, and FIDELITY shall file with the office of the Secretary of State of
Nevada a Certificate of Designation, establishing the 1996-MAJOR Series of
Convertible Preferred Stock (1996-MAJOR Series). (A copy of the Certificate of
Designation is attached hereto, marked. as Exhibit A, and made a part hereof by
reference.) Such stock shall be voting, such voting to be together with the
common stock, with each share of the 1996MAJOR Series to have 2 votes,
consistent with the votes which the underlying shares of Common Stock would have
upon conversion of the 1996-MAJOR Series. The 1996-MAJOR Series shall be
convertible into FIDELITY's Common Stock, taking the 1996-MAJOR Series at a
value of $10 per share and valuing the Common,Stock at Five Dollars ($5.00) for
each Common Share. The 1996-MAJOR Series shall receive dividends on a
participating basis with the Common Stock, if earned and if declared by the
Board of Directors of FIDELITY. If the
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Board of Directors shall declare a dividend to the holders of the FIDELITY
Common Stock, then the holders of the 1996-MAJOR series shall receive, per
share, twice the same dividend equivalent to the dividend payable with respect
to the underlying Common Stock if the 1996-MAJOR Series were converted to Common
Stock. In the event of liquidation, dissolution or winding-up of FIDELITY,
whether voluntary or involuntary, the holders of the 1996-MAJOR Series shall a
distribution preferential to the Common Stock of $10.00 per share plus declared
but unpaid dividends and, in any event, shall at least receive the Sinking Fund,
as described in Paragraph 7 below., At any time after July 1, 1997, the holders
of the 1996MAJOR Series shall have the right to require that FIDELITY repurchase
the shares, using the Sinking Fund to be established as described in Paragraph 7
below; however, FIDELITY shall not be required to repurchase any shares in
excess of the then available Sinking Fund, although FIDELITY may, in its
discretion, purchase any put shares from general corporate funds. Commencing
January 1, 2002, FIDELITY shall have the option to redeem any shares of the
1996-MAJOR Series then outstanding by payment of $15.87 plus declared but unpaid
dividends to the date of redemption:
(i) in cash; or
(ii) in cash, to the extent of the available Sinking Fund, and the
balance by the issuance of Bonds, described in Paragraph 8 below, collateralized
by, and paid from, a'continuation of the Sinking Fund. In the event of the
occurrence of an "Event of Rescission", the holders of the then issued and
outstanding shares of the 1996-MAJOR Series shall have the right to rescind this
exchange transaction and receive back, in exchange for such shares of the
1996-MAJOR Series, all of the capital stock, of all classes and series, of
MAJOR. The term "Event of Rescission" shall mean:
(i) Any determination by the, Internal Revenue Service that the
stock-for-stock exchange does not qualify as a tax- free reorganization.
(ii) Any breach by the FIDELITY of the Reorganization
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Agreement; or
(iii) Any failure by FIDELITY to establish, fully fund, properly
maintain and apply, and/or safeguard the Sinking Fund; or I (iv) Any breach
by FIDELITY of the terms of the 1996- MAJOR Series of Convertible Preferred
Stock; or
(v) Admission by FIDELITY of insolvency, adjudication of FIDELITY as
insolvent, and/or an inability or failure of FIDELITY to pay its debts and
liabilities in the normal course of business; or
(vi) Any proceeding shall be commenced by or against FIDELITY relating
to FIDELITY under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, dissolution, or liquidation law or
statute of any jurisdiction, whether nor or hereafter in effect, and any
such proceeding shall remain undismissed for a period of ninety (90) days
or FIDELITY by any act indicates its consent to, approval of, or
acquiescence in, any such proceeding; or
(vii) A receiver or trustee is appointed for FIDELITY or for all or a
substantial part of the property of FIDELITY and any such receivership or
trusteeship shall remain undischarged for a period of sixty (60) days.
(viii) Any change in any of the top three executives of FIDELITY
(Chairman of the Board, President, CEO), provided that this basis for
rescission must be utilized within ninety (90) days of the change or it
shall be deemed waived.
3. EXCHANGE OF SHARES. (a) FIDELITY and the SHAREHOLDERS agree that at
Closing all 20 shares of MAJOR shall be exchanged with FIDELITY for 250,000
shares of the voting Preferred Stock of FIDELITY to be immediately issued'-. The
following numbers of FIDELITY shares will, at Closing, be delivered to the
individual SHAREHOLDERS in exchange for their MAJOR shares, as follows:
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No. of Shares No. of Shares
of MAJOR of FIDELITY
SHAREHOLDERS Exchanged to be Issued
------------ -------------- -------------
Xxxxx Xxxxxxx 10 125,000
Xxxxxx Xxxxxxx 10 125,000
-- -------
TOTAL 20 250,000
The FIDELITY shares shall be issued in certificates of such denominations,
amounts, and names as may be requested by the respective SHAREHOLDERS. The
SHAREHOLDERS represent and warrant that they are taking, and will hold, such
shares for investment. (b) It is the present intention of FIDELITY to file a
Registration Statement with the Securities and Exchange Commission (Form SB-2) f
or the registration of an issuance of Common Stock. FIDELITY shall, an behalf of
the holders of the 1996-MAJOR Series, include in such Registration Statement, at
FIDELITY's expense, when filed, Five Hundred Thousand (500,000) shares of Common
Stock, so as to permit any conversion of the 1996-MAJOR Series after
effectiveness of such Registration Statement to be for registered
("freetrading") shares. (c) If, between the date hereof and Closing, the gross
assets of MAJOR shall equal or exceed $2,500,000 in value, FIDELITY shall issue,
as an incentive bonus" 100,000 shares of its voting Common Stock. Such Common
Stock shall (i) be restricted as to further transfer as required by applicable
rules and regulations of the Securities and Exchange Commission, (ii) shall not
be entitled to any demand or "piggyback" registration rights, and (iii) shall
not participate in the rights and powers accorded to the 250,000 shares of
voting Preferred Stock being issued for the exchange (including the "put" and
the sinking fund).
4. DELIVERY OF SHARES. At the Closing, the SHAREHOLDERS shall deliver
certificates for all of the issued and outstanding shares of common stock of
MAJOR duly endorsed with signatures Medallion guaranteed so as to make FIDELITY
the sole owner thereof, free and clear of all claims and encumbrances.
Simultaneously at the Closing, FIDELITY shall issue and deliver to the
SHAREHOLDERS
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certificates representing all of the FIDELITY ..shares of voting Preferred Stock
to be issued in exchange for the MAJOR shares, in such names, denominations and
amounts as SHAREHOLDERS shall have requested. In the alternative, FIDELITY may
deliver to SHAREHOLDERS duly executed instructions to its Transfer Agent for the
immediate issuance of such shares. Time is of the essence.
5. INVESTMENT REPRESENTATIONS. Each SHAREHOLDER acknowledges, agrees and
represents that:
(a) He has been advised that none of the shares of FIDELITY being acquired
hereunder have been registered under the Securities Act of 1933 (the 111933
Act").
(b) All of the shares of FIDELITY being acquired hereunder are being, and
will be, acquired and held for investment, not for resale or distribution to the
public and not f or the purpose of effecting or causing to be effected a public
offering of such securities and, further, that none of such securities will be
sold, transferred, assigned or disposed of except to, or in trust for the
benefit of, members of a shareholder's immediate family or their personal
representatives, devisees, and legatees, or in accordance with the 1933 Act and
the Rules and Regulations of the Securities and Exchange Commission promulgated
thereunder.
(c) He has been advised and is aware of the fact, that by reason of the
foregoing investment representations and restrictions upon transfer: (i) the
shares of the FIDELITY stock must be held indefinitely unless they are
subsequently registered under the 1933 Act or an exemption from such
registration is available; (ii) if Rule 144 of the Rules and Regulations
promulgated by the SEC is applicable to any future routine sales of any such
securities, such sales can be made only in limited amounts in accordance with
the terms and conditions of that Rule; (iii) in the case of securities to which
that Rule is not applicable, compliance with some applicable disclosure
exemption, if any be available, will be required; (iv) all of the certificates
for the shares of FIDELITY's voting Preferred Stock will bear a legend
restricting transfer
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thereof, and, if applicable, the certificates for FIDELITY's Common Stock issued
upon conversion of such Preferred Stock will also bear such legend; and (v) the
Transfer Agent of FIDELITY I s Pref erred Stock will be given "stop-transfer"
instructions so as to prevent any illegal transfer of such shares and similar
instructions will be issued with respect to the Common Stock receivable upon
conversion of such Common Stock.
(d) He has relied only and exclusively upon his own investigation into
FIDELITY and its financial condition for purposes of deciding to enter into and
close this Agreement and to accept shares of FIDELITY in exchange for shares of
MAJOR. He has not relied upon any oral or written representation made by
FIDELITY or any of its officers or directors or representatives of FIDELITY and
that no representation, or statements shall survive the Closing with the sole
exception of the representations and warranties contained in this Agreement.
(e) He has received the audited f inancial statements of FIDELITY for the
year ended December 31, 1995, and the reviewed financial statements for the
period ended March 13, 1996 and has had full opportunity to review and inspect
all books and records of FIDELITY and its subsidiaries.
6. CLOSING.
(a) Closing shall take place at 10:60 a.m. on Wednesday, October 23, 1996
at the offices of FIDELITY, 00-00 Xxx Xxxxxxx Xxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxx
Xxxx 00000 or such other time and place as the parties may mutually select.
(b) In addition to the share certificates to be delivered to FIDELITY
pursuant to Paragraph 3 above, SHAREHOLDERS shall deliver or cause to be
delivered to FIDELITY the following documents at Closing:
(1) Certified copy of the Minutes of the Meeting of the Board of
Directors of MAJOR ratifying and approving this Agreement and
the Closing thereof, and the conveyance of shares by its
SHAREHOLDERS;
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(2) Certificate of good standing reflecting that MAJOR is a
corporation in good standing in the state of its incorporation;
(3) Audited financial statements for MAJOR as of December December
31, 1993, 1994 and 1995, and in-house and/or compiled f inancial
statements as of September 30, 1996 together with a certificate
executed by the President and Secretary of MAJOR certifying that
to the best of their knowledge and belief, the financial
statements are accurate and complete;
(4) A certificate from each of the SHAREHOLDERS updating the
representations and warranties included in this agreement, as if
made on the Closing date; and
(5) Any and all other documents which may be reasonably requested by
FIDELITY to effect and close this transaction.
(c) In addition to the share certificates or Transfer Agent
instructions to be delivered to SHAREHOLDERS pursuant to Paragraph 3 above,
FIDELITY shall deliver to SHAREHOLDERS the following documents at Closing:
(1) Certified resolution of the Board of Directors of FIDELITY
ratifying this Agreement and the Closing thereof and expressly
authorizing the issuance of shares as required by this
Agreement;
(2) A certificate of good standing of FIDELITY reflecting that
FIDELITY is in good standing under the laws of the state of its
incorporation;
(3) Financial statements of FIDELITY, reflecting on an unaudited
basis, its financial condition as of September 30, 1996;
(4) A certificate from the President and Secretary of FIDELITY
confirming the representations and warranties made by FIDELITY
as if made on the Closing date; and
(5) Any and all other documents as may be required by the
SHAREHOLDERS to close this Agreement.
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7. SINKING FUND.
Following Closing, FIDELITY shall establish a Sinking Fund for (i) meeting
any demands f or required repurchases of such shares (Puts), (ii) provide funds
for the redemption of such shares, and (iii) provide funds to collateralize and
repay any Bonds which may be issued to redeem shares of the 1996-MAJOR Series.
The Sinking Fund shall be established, funded and utilized as follows:
(a) On the second Thursday of the first month succeeding the first
calendar quarter after the first issuance of any shares of the 1996-MAJOR
series, and continuing on the second Thursday of each month (April, July,
October and January) succeeding each calendar quarter, FIDELITY shall
determine the amount of the Sinking Fund deposit to be made and shall make
such deposit, in the name of MAJOR. The Sinking Fund shall only be
retained as cash or invested in short-term government bills and notes, in
interest-bearing savings accounts, or other highly liquid and secure
investments.
(b) The amount of the deposit required shall be equal to the net income
determined on a cash basis, after calculating federal, state and local tax
liabilities, of MAJOR derived from revenues from the motor vehicle
operations, including transactions with, or through, Major Automotive
Group, including but not limited to Major Chevrolet, Geo, Dodge,
Chrysler-Plymouth, JeepEagle, and Subaru.
(c) In calculating the net income from motor vehicle operations, the
management fee paid under the Management Agreement for such operations
shall be deducted but none of the costs, expenses or liabilities incurred
by or arising, directly or indirectly, from the other business operations
of MAJOR shall be deducted, it being the intent to utilize the net income
equivalent to
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continuing historical operations of MAJOR ' determined on a cash basis, as
a Sinking Fund. However, a charge of fifteen percent (15%) of the net
income,, prior to deduction of the management fee, shall be deducted to
compensate for overall corporate expenses not specifically charged to such
operations (e.g., accounting and auditing costs, legal/SEC fees and costs,
etc.).
(d) Such Sinking Fund shall be established and funded without reference to
the book or taxable income or loss of MAJOR, but solely as provided above.
(e) No funds deposited, or required to be deposited, in the Sinking Fund
shall be expended or transferred from the segregated account in the name
of MAJOR except by transfer to FIDELITY as specifically required to meet
any required repurchases (Puts), redemptions, or Bond repayments.
(f) Shares of the 1996-MAJOR Series redeemed from general corporate funds
of FIDELITY, i.e., out of funds other than the Sinking Fund, may be
credited, at the option of FIDELITY, in its sole discretion, against the
sinking fund requirements, such credit to be equal to the general
corporate funds expended.
(g) The Sinking Fund requirements shall continue so long as (i) any shares
of the 1996-MAJOR Series and/or (ii) and Bonds issued in redemption of
shares of the 1996-MAJOR Series, shall be outstanding. When all shares of
the 1996-MAJOR Series-have been repurchased, converted, or redeemed, and
when all principal and interest of Bonds issued in redemption of the
1996-MAJOR Series have been repaid in full, the Sinking Fund
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requirements shall cease and any balance therein not set aside for
redemptions and/or Bond repayments shall revert to the general funds of
MAJOR.
X. XXXXX.
If after January 1, 2002 FIDELITY elects to redeem the then outstanding
shares of the 1996-MAJOR Series as provided in Paragraph 2 above, and FIDELITY
does not pay the entire redemption price in cash, but elects to pay out the then
available Sinking Fund and pay the balance with Bonds, FIDELITY shall authorize
and issue Bonds, in a transaction structured to the greatest extent possible to
meet the requirements of Section 368 (a) (1) (E) of the Internal Revenue Code,
as follows:
(a) The Bonds shall be designated as the Redemption Bonds and shall be
issued as a single series, all such Bonds ranking equally, in registered form.
(b) The Redemption Bonds shall bear interest at the then current prime
rate as established by CitiBank, with such interest being paid quarterly in
arrears on the second Thursday of April, July, October and January for the
immediately prior calendar quarter.
(c) The Redemption Bonds shall be restricted as to further transfer; i.e.,
not registered under the Securities Act of 1933, and shall not be issued under a
Trust Indenture.
(d) The Redemption Bonds shall be general obligations of FIDELITY,
collateralized with a first lien on the Sinking Fund provided in Paragraph 7
above, which shall be continued so long as any Redemption Bonds remain
outstanding. Upon determination of the Sinking Fund deposit each quarter,
FIDELITY shall first use such funds to pay the interest on such Redemption Bonds
and shall use any remaining balance for the redemption of outstanding Redemption
Bonds, selected by lot. Any payment of principal or interest not made when
scheduled shall be delinquent; any delinquency not cured within ten (10)
business days shall be a default. In the event of default, a majority of the
bondholders, in dollar amount then
11
outstanding, may, by written notice, declare the balance of the Redemption Bonds
then outstanding and the interest accrued thereon immediately due and payable
and, thereupon, such principal and interest shall be immediately due and
payable.
(e) The Redemption Bonds shall be redeemable by FIDELITY at any time and
from time to time, without prepayment penalty, from general corporate funds. If
less than all of the then outstanding Redemption Bonds are redeemed at any time,
the Redemption Bonds to be redeemed shall be selected by lot.
(f) Notwithstanding the Sinking Fund payment and redemption provisions,
the Redemption Bonds shall immediately mature: (i) upon acceleration by the
holders in the event of default; (ii) if FIDELITY makes an assignment for the
benefit of creditors, voluntary or involuntary bankruptcy or reorganization
proceedings are commenced with respect to FIDELITY and not dismissed within
ninety (90) days, or a receiver is appointed for a substantial part of the
FIDELITY assets; (iii) if liquidation or dissolution proceedings are commenced
for FIDELITY; and/or (iv) sixty (60) months after issuance.
(g) If Redemption Bonds are issued at separate dates, all of such
Redemption Bonds outstanding at any time shall rank equally and shall share with
respect to collateral and payment priority.
(h) The Redemption Bonds shall not be'convertible into, or exchangeable
for, any other securities of FIDELITY and no holder of the Redemption Bonds
shall have any preemptive right to purchase any other security of FIDELITY.
(i) The holders of the Redemption Bonds shall not have voting rights, nor
any other rights as shareholders of FIDELITY.
(j) The holders of the Redemption Bonds shall not have recourse for
payment of the principal or interest against any shareholder, officer, director,
employee or agent of FIDELITY, whether past, present, or future, such being
waived.
ARTICLE II
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MUTUAL ACCESS TO PREMISES, BOOKS AND RECORDS
1. Between the date hereof and the Closing FIDELITY and its
representatives shall have such reasonable access during normal business hours
to the properties, offices, records and books of account of MAJOR, as will not
unreasonably interfere with the business and operations of MAJOR, for the
purposes of investigating the financial position, assets, liabilities and all
other matters relating to the business of MAJOR and the correctness of Major's
representations and warranties and the fulfillment of the covenants and
conditions of SHAREHOLDERS as required in this Agreement.
2. Between the date hereof and the Closing SHAREHOLDERS and their
representatives shall have such reasonable access during normal business hours
to the properties, offices, records and books of account of FIDELITY, as will
not unreasonably interfere with the business and operations of FIDELITY, for the
purposes of investigating the financial position, assets, liabilities and all
other matters relating to the business of MAJOR and the correctness of
Fidelity's representations and warranties and the fulfillment of the covenants
and conditions of FIDELITY as required in this Agreement.
ARTICLE III
INTERIM OPERATIONS OF MAJOR FLEET & LEASING CORP.
(a) From the execution of this Agreement to Closing, MAJOR shall not take
any action, or enter into any agreement, that would constitute or cause any
inducement, representation or warranty of SHAREHOLDERS contained in this
Agreement to become untrue, nor to take any action or enter into any agreement,
that would constitute, or cause, a breach of this Agreement. Between the date of
this Agreement and Closing, the affairs and business of MAJOR shall be conducted
in the ordinary course of business. The SHAREHOLDERS represent and warrant that
they will take such action, and will cause MAJOR to take such action, or refrain
from such action, as is necessary to insure that prior to Closing, without the
prior written consent of FIDELITY, MAJOR shall not:
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(i) except as provided in (b) below, enter into any employment/consulting
or consulting agreement or otherwise
salary/wage/compensation/remuneration/ pension/profit sharing liability;
(ii) amend its Articles of Incorporation and/or by-laws;
(iii) issue or agree to issue any stock or other securities, including any
right, warrant or option to purchase or otherwise acquire any of its stock
or securities convertible thereunto;
(iv) except as provided in (b) below, issue any bonds, debentures, notes
or other evidences of indebtedness, or create or incur any new
indebtedness, mortgage, security interest, lien, charge or encumbrance;
(v) except as provided in (c) below, declare or pay any dividend (whether
in cash, property, or securities);
(vi) purchase or redeem any of its stock; except as provided in (b) below,
enter into any contract or agreement, whether written or oral, which shall
survive the Closing except agreements which are executed in the ordinary
course of business; or
(viii) sale, lease, or encumber, or enter into any agreement to do any of
the foregoing, any real or personal property owned by it except in the
ordinary course of business.
(b) It is the specific intent of FIDELITY in acquiring ownership of MAJOR
that its current business operations shall continue and shall be expanded.
Because the source of funding for the Sinking Fund is the net income from the
continuation of such operations, it is the intent of SHAREHOLDERS that such
operations continue and be expanded. Pending Closing, SHAREHOLDERS shall cause
MAJOR to carry on its business in substantially the same manner as heretofore,
maintaining the goodwill of customers and financing institutions and maintaining
the morale of employees and agents. To secure for MAJOR the continuing
relationships now,in effect, MAJOR may, with the consultation of FIDELITY,
formalize
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create any employment relationship or existing oral contracts, understandings
and arrangements and enter into such employment, retainer, and management
contracts as shall effectuate such mutual intent.
(c) FIDELITY acknowledges that (i) MAJOR has been a Subchapter S
corporation and (ii) substantial income, previously taxed to SHAREHOLDERS,
remains undistributed. SHAREHOLDERS are authorized to distribute such amounts of
such undistributed, previously taxed income as they elect. Any amount not
distributed shall be added to the initial Sinking Fund.
(d) The representations and warranties of SHAREHOLDERS contained in
subparagraph (a) above shall not survive closing.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
or
FIDELITY
FIDELITY, intending SHAREHOLDERS to rely thereon, represents, warrants and
agrees as follows:
1. FIDELITY is, as of the date of this Agreement, a validly existing
corporation in good standing, duly organized pursuant to the laws of the State
of Nevada, with all legal and corporate authority and power to conduct its
business as now being conducted and to own its properties and to the best of its
knowledge it possesses all necessary permits and licenses required in connection
with the conduct of its business.
2. The conduct of FIDELITY'S present business is to the best of its
knowledge in full compliance with all applicable, federal, state and local
governmental statutes, rules, regulations, ordinances and decrees.
3. Pursuant to its Articles of Incorporation as amended FIDELITY is
authorized to issue 2,000,000 shares of undesignated Preferred Stock having a
par value of $.01 per share, none of which shares are presently issued and
outstanding, and 50,000,000 shares of Common Stock having a par value of $. 01
per share, of which 5,750,000 shares are presently issued and outstanding. There
are
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adequately reserved for; to the extent that tax liabilities have accrued, but
have not become payable, they are adequately reflected as liabilities on the
books of the company; and FIDELITY is not a party to any t action or proceeding
by any governmental authority for assessment or collection of taxes,' nor has
any claim for assessments been asserted against FIDELITY.
8. There are presently no contingent liabilities, factual circumstances,
threatened or pending litigation, contractually assumed obligations or
unasserted possible claims which are known to FIDELITY, which might result in a
material adverse change in the future financial condition or operations of
FIDELITY other than as previously disclosed to MAJOR or reflected in FIDELITY'S
financial statements provided to MAJOR.
9. The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not require the consent, authority or
approval of any other person or entity except such as have been obtained.
10. No transactions have been entered into either by or on behalf of
FIDELITY, other than in the ordinary course of business nor have any acts been
performed (including within the definition of the term "performed" the failure
to perform any required acts) which would adversely affect the goodwill of
FIDELITY.
11. The entering into of this Agreement and the performance thereof
has been duly and validly authorized by all required corporate action and does
not require any consents other than such as have been unconditionally
obtained.
12. The audited financial statements for FIDELITY as of December 31,
1995 furnished to SHAREHOLDERS (attached hereto as Exhibit B) are true and
complete, prepared in conformity with generally accepted accounting principles
consistently applied during the periods, and present fairly the financial
positions, results of operations, and change in financial positions, of
FIDELITY. FIDELITY represents that:
(a) Except as set forth in the audited financial statements of FIDELITY,
dated December 31, 1995, FIDELITY is the owner, free
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and clear of any liens, pledges, or encumbrances, of all of the property and
assets set forth in the Balance Sheet;
(b) FIDELITY has no liabilities or obligations except those disclosed in
the financial statements at December 31, 1995, except those set forth on other
Exhibits to this Agreement and FIDELITY does not have any knowledge of facts
which would require the setting up of additional reserves with respect thereto;
(c) FIDELITY is not in def xxxx under or in breach of the provisions of
any credit facility, loan, debt, security, mortgage, indebtedness, material
contract, or agreement to which it is a party or by which it is bound, which
default or breach would materially adversely effect its business or properties
or condition, financial or otherwise, or would result in the creation of a lien
or charge upon any of the properties or assets of MAJOR;
(d) No waiver, indulgence or postponement of any of the obligations of
MAJOR have been granted by any Obligee;
(e) There exists no event, current condition, or act which with the giving
of notice of the lapse of time or the happening of any other event or condition
would become a default under or breach of any such credit facility, loan, debt,
security, mortgage, indebtedness, or material contract, or would result in the
creation of a lien or charge upon the properties or assets of FIDELITY as
reflected in the Balance Sheet dated December 31, 1995. None of the terms of any
credit facility, loan., debt, security, mortgage indebtedness or other material
contract or any other contract or agreement would prevent the consummation of
the Closing of this Agreement.
13. At Closing, FIDELITY shall not have any debt or liability nor any
contract or commitment which will require the payment of any sum which will
survive closing.
The foregoing representations, warranties and agreements shall be true
and correct as of the effective date of the reorganization. Such
representations, warranties and agreements shall survive the reorganization
until March 31, 1997. None of such representations, warranties and agreements
contain, or shall contain as of the
18
effective date of the reorganization, any false or misleading statement of a
material fact or omit, as of the effective date of the reorganization, to state
any material fact necessary In order to make the representations, warranties and
agreements not misleading.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
or
SHAREHOLDERS
SHAREHOLDERS, intending FIDELITY to rely thereon, jointly and severally
represent, warrant and agree as follows:
1. MAJOR is, as of the date of this Agreement, a validly existing
corporation in good standing,duly organized pursuant to the laws of the State of
New York with all legal and corporate authority and power to conduct its
business as now being conducted and to own its properties, and it possesses all
necessary permits and licenses required in connection with the conduct of its
business.
2. The conduct of MAJOR's business is to the best of SHAREHOLDERS'
knowledge in full compliance with all applicable, federal, state and local
governmental statutes, rules, regulations, ordinances and decrees.
3. Pursuant to its Articles of Incorporation MAJOR is authorized to issue
200 shares of Common Stock having no par value, of which 20 shares issued and
outstanding. There are no other authorized or outstanding securities of any
class or of any kind or character of the corporation and there are no
outstanding subscriptions, options, warrants or other agreements or commitments
obligating the corporation to issue or to sell any additional shares of MAJOR's
stock or any options or rights with respect thereto, or any securities
convertible into any shares of stock of any class.
4. The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance
19
with the terms of this Agreement will not result in a breach of any of the terms
or provisions of, or constitute a default under, the Articles of Incorporation
or By-Laws of MAJOR; any indenture, credit facility, loan agreement, lease, or
other agreement or instrument to which the corporation is a party or by which it
or its assets are bound; or any applicable regulation, judgment, order or decree
of any governmental instrumentality or court, domestic or foreign, having
jurisdiction over the corporation, its securities or its properties.
5. MAJOR is not a party to any written or oral agreement which grants an
option or right of first refusal or other arrangement to acquire any of the
stock or to any agreement that affects the voting rights of any of the stock,
nor has the corporation made any commitment of any kind relating to the issuance
of shares of any of its stock, whether by subscription, right of conversion,
option or otherwise.
6. MAJOR is not a party to any agreement or understanding for the sale or
exchange of inventory or services for consideration other than cash or at a
discount in excess of normal discount for quantity or cash payment.
7. MAJOR has filed with the appropriate governmental agencies, in correct
form, all tax returns and tax reports required to be filed; all federal, state
and local income, capital stock, franchise, sales, use, occupation, FICA,
unemployment (FICA and state) or other taxes due have been fully paid or
adequately reserved for; to the extent that tax liabilities have accrued, but
have not become payable, they are adequately reflected as liabilities on the
books of the company; and MAJOR is not a party to any action or proceeding by
any governmental authority for assessment or collection of taxes, nor has any
claim for assessments been asserted against MAJOR.
8. There are presently no contingent liabilities, factual circumstances,
threatened or pending litigation, contractually assumed obligations or
unasserted possible claims which are known to MAJOR, which might result in a
material adverse change in the
20
future financial condition or operations of MAJOR other than as previously
disclosed to FIDELITY in writing or reflected in MAJOR's financial statements
provided to FIDELITY.
9. The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not require the consent, authority or
approval of any other person or entity except such as have been obtained.
10. No transactions have been entered into either by or on behalf of
MAJOR, other than in the ordinary course of business nor have any acts been
performed (including within the definition of the term "performed" the failure
to perform any required acts) which would adversely affect the goodwill of
MAJOR.
11. The entering into of this Agreement and the performance thereof has
been duly and validly authorized by all required corporate action and does not
require any consents other than such as have been unconditionally obtained.
12. The audited financial statements for MAJOR as of December 31, 1993,
December 31, 1994, and December 31, 1995, furnished to FIDELITY (attached hereto
as Exhibit A) are true and complete, prepared in conformity with generally
accepted accounting principles consistently applied during the periods, and
present fairly the financial positions, results of operations, and changes in
financial positions, of MAJOR. The SHAREHOLDERS represent that:
(a) Except as set forth in the audited financial statements of MAJOR,
dated December 31, 1995, MAJOR is the owner, free and clear of any liens,
pledges, or encumbrances, of all of the property and assets set forth in the
Balance Sheet;
(b) MAJOR has no liabilities or obligations except those disclosed in the
financial statements at December 31, 1995, except those set forth on other
Exhibits to this Agreement and SHAREHOLDERS do not have any knowledge of facts
which would require the setting up of additional reserves with respect thereto;
(c) MAJOR is not in def xxxx under or in breach of the provisions of any
credit facility, loan, debt, security, mortgage, indebtedness, material
contract, or agreement to which it is a
21
party or by which it is bound, which def xxxx or breach would materially
adversely effect its business or properties or condition, financial or
otherwise, or would result in the creation of a lien or charge upon any of the
properties or assets of MAJOR;
(d) No waiver, indulgence or postponement of any of the obligations of
MAJOR have been granted by any obligee;
(e) There exists no event, current condition, or act which with the giving
of notice of the lapse of time or the happening of any other event or condition
would become a default under or breach of any such credit facility, loan, debt,
security, mortgage, indebtedness, or material contract, or would result in the
creation of a lien or charge upon the properties or assets of MAJOR as reflected
in the Balance Sheet dated December 31, 1995. None of the terms of any credit
facility, loan, debt, security, mortgage indebtedness or other material contract
or any other contract or agreement would prevent the consummation of the Closing
of this Agreement.
13. No adverse material change in the business or financial position since
December 31, 1995 has occurred and no event, condition or state of facts which
materially and/or adversely affects, or threatens to materially and/or adversely
affect, the business or results of operations or financial condition of MAJOR
and its subsidiaries.
14. There are no loans, accrued obligations, liabilities, claims, or
contractual obligations owed by MAJOR to any of its Officers, Directors, or
Stockholders except those set forth on Exhibit B hereto.
15. There is no suit, action, or legal, administrative, arbitration or
other proceeding or governmental investigation, or any change in the zoning,
building, or licensing ordinances affecting the real property or any significant
leasehold interests of MAJOR, pending or threatened, which might affect the
business, financial condition, or earnings of MAJOR
16. Except as set forth on Exhibit C, attached hereto, MAJOR does not have
any debts and liabilities over $5,000 nor any
22
contracts or commitments which will require the payment of over $5,000 which
will survive the reorganization.
17. The shares of MAJOR being acquired by FIDELITY from SHAREHOLDERS I
hereby are duly and validly authorized, issued and outstanding and are fully
paid and nonassessable. SHAREHOLDERS are the legal and beneficial owners of such
shares and there are no adverse claims against such shares or liens and
encumbrances thereon. There are no agreements between any of the SHAREHOLDERS
and any other individual or entity which would prevent or affect the
consummation of the transaction provided for in this Agreement.
18. The corporate record book of MAJOR is complete and contains all
amendments to the Articles, Bylaws, and all Minutes of meetings of Directors and
Shareholders.
19. This Agreement and all Exhibits to this Agreement and all documents
delivered to FIDELITY by the SHAREHOLDERS at the Closing in connection with this
transaction are true and correct. The representations and warranties made by
SHAREHOLDERS in this Agreement contain no untrue statements of material facts
and do not omit to state a material fact necessary to make the statements
contained herein not misleading. Notwithstanding any investigation that may be
made by FIDELITY, all representations and warranties of the SHAREHOLDERS made in
this Agreement shall be deemed to have been made both at the time of the
execution of.this Agreement and at the Closing and shall survive the Closing of
this Agreement.
The foregoing representations, warranties and agreements and those
contained in Article I, Paragraph 4 above shall be true and correct as of the
effective date of the reorganization. Such representations, warranties and
agreements shall survive the reorganization until March 31, 1997. None of such
representations, warranties and agreements contain, or shall contain as of the
effective date of the reorganization, any false or misleading statement of a
material fact or omit, as of the effective date of the reorganization, to state
any material fact necessary in order to make the representations,, warranties
and agreements not misleading.
23
ARTICLE VI
CONDUCT OF MAJOR BEFORE CLOSING
From the execution of this Agreement to Closing, SHAREHOLDERS shall
not permit MAJOR to take any action, or enter into any agreement, that would
constitute or cause any inducement, representation or warranty of
SHAREHOLDERS (as to MAJOR) contained in this Agreement to become untrue, nor
to take any action or enter into any agreement, that would constitute, or
cause, a breach of this Agreement. Specifically, but not in limitation of
the foregoing, MAJOR shall not:
(a) enter into any employment/consulting or consulting agreement or
otherwise create any employment relationship or salary/wage/
compensation/remuneration liability;
(b) amend its Articles of Incorporation and/or By-Laws;
(c) issue or agree to issue any stock or other securities, including any
right, warrant or option to purchase or otherwise acquire any of its
stock or securities convertible thereinto;
(d) issue any bonds, debentures, notes or other evidences of
indebtedness;
(e) declare or pay any dividend (whether in cash, property, or
securities);
(f) purchase or redeem any of its stock;
(g) enter into any Agreement, whether written or oral, which shall
survive the Closing except agreements which are executed in the
ordinary course of business; or
(h) sale, lease, or encumber, or enter into any agreement to do any of
the foregoing, any real or personal property owned by it except in
the ordinary course of business.
MAJOR will use its best efforts to- preserve intact the business organization of
MAJOR, to keep available to it the services of its present officers and
employees, to preserve its present relationships with persons having significant
business relations
24
with it, to maintain all of its properties in customary repair and condition and
to maintain insurance policies in respect of its business and properties
consistent with current practice.
ARTICLE VII
CONDUCT OF PARTIES PENDING CLOSING
1. FIDELITY and MAJOR (through SHAREHOLDERS) each agree to give to the
other and the authorized representatives of the other full access to all the
premises and books and records of it and to furnish the other with such
financial and operating data and other information with respect to the business
and properties of it as the other shall from time to time request; provided,
however, that any such investigation shall not affect any of the representations
and warranties hereunder; and provided further, that any such investigation
shall be conducted in such manner as not to interfere unreasonably with the
operation of the business of the other. In the event of termination of this
agreement, MAJOR and FIDELITY will each return to the other all documents, work
papers and other material obtained from the other in connection with the
transactions contemplated hereby and will use all reasonable efforts to keep
confidential any information obtained pursuant to this agreement unless such
information is readily ascertainable from public or published information or
trade sources.
2. Each of MAJOR and FIDELITY shall use its best efforts to obtain the
consent or approval of each person whose consent or approval shall be required
in order to permit MAJOR or FIDELITY, as the case may be, to consummate the
reorganization.
ARTICLE IX
MISCELLANEOUS
1. NOTICES. All notices to a party shall be deemed given when mailed by
registered or certified mail to the address set forth below or such other
address as may be substituted therefor by notice:
TO SHAREHOLDERS:
25
(only to:) Xxxxx Xxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxx 00000
With a copy to: Xxxxxx X. Salad, Esq.
Cooper, Perskie, April, Niedelman,
Wagenheim, & Xxxxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxx Xxxxxx 00000
TO FIDELITY: Xxxxx Xxxxx, President/CEO
Fidelity Holdings, Inc.
00-00 Xxx Xxxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxx Xxxx 00000
With a copy to: Xxxxxxx X. Xxx, Esq.
0000 Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxx 00000
2. INTEGRATION. This Agreement is the entire Agreement among the parties
and supersedes the prior discussions, negotiations and agreements) among the
parties with respect thereto. There are no representations, warranties or other
assurances except as expressed in this Agreement. No alteration, modification,
or waiver of term or condition hereof shall be binding unless in writing and
signed by all parties.
3. AMENDMENTS. This Agreement may be amended only with the written
approval of the party to be charged therewith; provided, however, that no such
amendment may be made that would cause a breach of any warranty or
representation herein.
4. NO ASSIGNMENT. This agreement may not be assigned by any party or by
operation of law or otherwise.
5. CONSTRUCTION. Whenever required by the context hereof: the masculine
gender shall be deemed to include the feminine and neuter; and the singular
member shall be deemed to include the plural. Time is expressly declared to be
of the essence of this Agreement. This Agreement shall be deemed to have been
mutually prepared by all parties and shall not 'be construed against any
particular party as the draftsman.
6. INTERPRETATION. It is the intent of the parties that this
26
Agreement shall be construed and interpreted, and that all questions arising
hereunder shall be determined in accordance with the provisions of the laws of
the State of New York.
7. BINDING EFFECT. This Agreement shall be binding upon and shall inure to
the benefit of the parties and their successors and assigns.
8. ARBITRATION. Any controversy, claim or dispute arising out of or
resulting f rom this Agreement, or the breach thereof, that cannot be resolved
by negotiation, shall be resolved by arbitration, to be held in Long Island
City, New York, in accordance with the commercial rules and regulations of the
American Arbitration Association. Failure of a party to participate or cooperate
shall constitute grounds for default judgment. The arbitrator shall award legal
fees and costs to the prevailing party. The decision of the arbitrator shall in
each case, including awards and the allocation of costs, be final and binding
upon the parties. Judgment upon the award rendered by the arbitrator may be
entered in any Court having jurisdiction thereof.
9. FURTHER DOCUMENTS AND ACTIONS. Each party shall deliver such further
documents and take such further action as may be reasonably requested by another
party in order to carry out the provisions and purposes of this Agreement.
10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, including facsimile counterparts, any one of which shall be deemed
to be an original.
11. BROKERS' OR FINDERS' FEES. No agent, broker, person, or firm acting on
behalf of either party or any of their subsidiaries or under the authority of
any of them is or will be entitled to any commission or broker's or finder's fee
or financial advisory fee in connection with any of the transactions
contemplated herein.
12. EXHIBITS. All Exhibits described herein which are not attached to the
Agreement at execution shall be attached within three calendar days thereafter.
Each exhibit shall be mutually agreed to by all parties and shall bear the
signature of the party submitting same.
27
IN WITNESS WHEREOF, and intending to be legally bound, the parties have
hereunto set their hands and seals the day and year first above written.
FIDELITY HOLDINGS, INC.
ATTEST:
By: /s/ Xxxxx Xxxxx
-------------------------------------
Xxxxx Xxxxx, President/CEO
------------------------------------
Secretary
WITNESS: SHAREHOLDER:
/s/ Xxxxx Xxxxxxx
------------------------------------ ----------------------------------------
XXXXX XXXXXXX
/s/ Xxxxxx Xxxxxxx
------------------------------------ ----------------------------------------
XXXXXX XXXXXXX
28
CLOSING ADDENDUM
TO
REORGANIZATION AGREEMENT
This Closing Addendum is executed at Closing of the "B" Reorganization
Agreement between Fidelity Holdings, Inc. and Xxxxx Xxxxxxx and Xxxxxx Xxxxxxx,
the Shareholders of Major Fleet & Leasing Corp.
The parties have mutually elected to close this 2nd day of October, 1996
in lieu of the scheduled closing date of October 23, 1996 and in order to permit
such expedited closing the parties have waived the requirements for the delivery
at Closing of the financial statements as of September 30, 1996. The parties
have agreed that such financial statements shall be delivered on or before
November 15, 1996.
Since the expedited Closing precludes the concurrent delivery of the
financial statements, it is also agreed that the 1000,000 Shares of Common Stock
deliverable under the Reorganization Agreement shall not be issued pending
determination of whether the issuance conditions have been met. Within three (3)
business days after delivery to Fidelity Holdings, Inc. of the September 30,
1996 financial statements of Major Fleet & Leasing Corp., if the issuance
condition has been met, Fidelity Holdings shall immediately advise its Transfer
Agent, Olde Monmouth Stock Transfer Co. to issue the shares as provided in the
Reorganization Agreement.
IN WITNESS WHEREOF, the parties have executed this Closing Addendum this
2nd day of October, 1996:
FIDELITY HOLDINGS, INC.
By:
-------------------------------------
WITNESS:
/s/ Xxxxx Xxxxxxx
------------------------------------ ----------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
------------------------------------ ----------------------------------------
Xxxxxx Xxxxxxx
