RECITALS

1
EXHIBIT 10.78

REDEMPTION AGREEMENT

REDEMPTION AGREEMENT, dated as of September 8, 2000, entered into by and
among Fidelity Holdings, Inc., a Nevada corporation (the "Company"), Strong
River Investments, Inc. ("Strong River") and Montrose Investments Ltd.
("Montrose" and together with Strong River, the "Investors" and each an
"Investor").

RECITALS

WHEREAS, the Investors severally have acquired and are the holders of
certain warrants to purchase shares of the Common Stock, $.01 par value per
share (the "Common Stock"), of the Company, designated as "Adjustable Warrants"
pursuant to (i) that certain Securities Purchase Agreement, dated as of December
8, 1999, between the Company, the Investors and Augusta Street LLC (the
"December 1999 Agreement") and (ii) that certain Securities Purchase Agreement,
dated as of February 8, 2000, between the Company, the Investors and Augusta
Street LLC (the "February 2000 Agreement" and together with the December 1999
Agreement, the "Securities Purchase Agreements"); and

WHEREAS, the Company and the Investors desire that the Company redeem all
of the Adjustable Warrants held by the Investors on the terms and conditions set
forth herein.

NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the Company and the Investors hereby agree as follows:

1. Redemption of Warrants. Concurrently with the execution and
delivery of this Agreement, each Investor shall deliver or cause to be delivered
to the Company the Adjustable Warrants held by such Investor, and the Company
shall redeem all such Adjustable Warrants by paying the consideration specified
in paragraph 2 below.

2. Consideration for Redemption. As payment in full for the
redemption of the Adjustable Warrants, concurrently with the execution and
delivery of this Agreement, the Company shall (i) pay to each Investor the sum
of $833,333.33 by wire transfer of immediately available funds to an account
designated in writing by such Investor, (ii) execute and deliver a promissory
note (a "Note") to each Investor for up to an additional $1,375,000 in the form
attached hereto as Exhibit A, and (iii) deliver or cause to be delivered to each
Investor a stock certificate, with restrictive legend, subject to removal
subject to resale with a prospectus, representing 131,196 shares of Common
Stock, which shares shall be registered in the name of such Investor and shall
be freely tradeable.

3. Effect of Redemption. (a) Upon delivery of the Adjustable Warrants
to the Company and payment of the consideration specified in paragraph 2, (i)
the Adjustable Warrants shall be canceled by the Company and (ii) the Investors
shall have no further rights as holders of Adjustable Warrants.

(b) Notwithstanding anything herein to the contrary, upon
delivery of the Adjustable Warrants and payment of the consideration specified
in paragraph 2 hereof, insofar as they relate to the Investors, Sections 3.10
and 3.13 of each Securities Purchase Agreement shall be deleted in their
entirety, rendered null and void, and the Investors shall have no rights and
obligations thereunder. All other sections of the Securities Purchase
Agreements, and all other transaction documents executed in connection with the
execution of any of the Securities Purchase Agreements, shall continue in full
force and effect and shall not be impaired by the terms of this Agreement.

(c) Upon delivery of the Adjustable Warrants and payment of the
consideration specified in paragraph 2, the Investors shall have no further
rights as holders of Adjustable Warrants under the Registration Rights Agreement
executed in connection with the execution of each Securities Purchase Agreement.

4. Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Investors:

(a) The Company has the requisite corporate power and authority
to enter into and to consummate the transactions contemplated by this Agreement
and the Notes (together, the "Transaction Documents") and otherwise to carry out
its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Company and no further corporate action is
required by the Company. Each of the Transaction Documents has been duly
executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.

(b) The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company's articles of incorporation, bylaws or other charter
documents (each as amended through the date hereof), or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, indenture or instrument (evidencing
a Company debt or otherwise) to which the Company is a party or by which any
property or asset of the Company is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected.

(c) The shares of Common Stock to be issued to the Investors
pursuant to paragraph 2 hereof are duly authorized and, when issued in
accordance with the terms hereof,

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shall have been duly and validly issued, fully paid and nonassessable, free and
clear of all liens, encumbrances and rights of first refusal of any kind.

5. Representations and Warranties of the Investors. Each of the
Investors severally represents and warrants to the Company that (i) the Investor
has the requisite power and authority to enter into and to consummate the
transactions contemplated by this Agreement and otherwise to carry out its
obligations hereunder, (ii) the execution and delivery of this Agreement by the
Investor and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Investor, (iii)
this Agreement has been duly executed by the Investor and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms and (iv) the Investor is acquiring the shares of Common Stock for its
own account for investment purposes only and not with a view to or for
distributing or reselling such shares or any part thereof or interest therein.

6. Releases. Upon execution of this Agreement and for good and
valuable consideration to be given in accordance with the provisions of the
Agreement, each of the Investors severally covenants not to xxx and releases and
discharges Fidelity Holdings, Inc., its subsidiaries, officers, directors and
employees, successors, affiliates and assigns from all actions, causes of
action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims and
demands in law, admiralty or equity, which the Investors or their heirs,
executors, administrators, successors and assigns ever had, now have, or
hereafter can, shall or may have from the beginning of the world to the date of
this Agreement, with respect to any rights and obligations that may arise out of
any ownership of the Adjustable Warrants, except with respect to any rights or
obligations under this Agreement. Additionally, each Investor covenants that it
has not filed and has not joined in any filing, and covenants not to initiate or
cause to be initiated on its behalf, any complaint, charge, claim or proceeding
(each, a "Proceeding") against the Company based on the Investors' ownership of
Adjustable Warrants before any local, state or Federal agency, court or other
body, other than with respect to the obligations of the Company to the Investors
under this Agreement, and agrees not to voluntarily participate or join in any
Proceeding.

7. Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New York, as applied to agreements among New York
residents entered into and to be performed entirely within New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it

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under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.

8. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.

9. Entire Agreement; Amendments. This Agreement (including the
Exhibit hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subject matter hereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by all parties hereto.

10. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
paragraph prior to 8:00 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Agreement later than 8:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:

If to the Company: Fidelity Holdings, Inc.
00-00 Xxx Xxxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxx, Chairman

With copies to: Xxxxxxx Xxxxxx Xxxx & Ball P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000

If to an Investor: To the address set forth under
such Investor's name on the signature pages hereto.

11. Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

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12. Survival. The representations, warranties and agreements herein
shall survive the consummation of the transactions described herein.

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13. Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.

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IN WITNESS WHEREOF, the parties hereto have executed this Redemption
Agreement effective as of the day and year first above written.

FIDELITY HOLDINGS, INC.

By:
-------------------------------------
Name:
Title:

STRONG RIVER INVESTMENTS, INC.

By:
-------------------------------------
Name:
Title:

Address for Notice:

Strong River Investments, Inc.
c/x Xxxxxxx Capital Corp.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Avi Vigder

With copies to:

Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx. Esq. and
Xxxxxxx X. Xxxxxxxxx, Esq.

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MONTROSE INVESTMENTS LTD.

By:
-------------------------------------
Name:
Title:

Address for Notice:

Montrose Investments Ltd.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxx and Xxx Xxxxxx

With copies to:

Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx. Esq. and
Xxxxxxx X. Xxxxxxxxx, Esq.

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EXHIBIT A

PROMISSORY NOTE

$1,375,000 September 8, 0000
Xxx Xxxx, Xxx Xxxx

FOR VALUE RECEIVED, FIDELITY HOLDINGS, INC., a Nevada
corporation ("Payor"), having an address at 00-00 Xxx Xxxxxxx Xxxx, Xxxxx 0000,
Xxx Xxxxxxx, Xxx Xxxx 00000, hereby promises to pay to the order of STRONG RIVER
INVESTMENTS, INC. ("Payee") at c/x Xxxxxxx Capital Corp., 000 Xxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, XX 00000, or at such other address as may be designated
from time to time hereafter by Payee, in lawful money of the United States of
America and in immediately available funds, the principal sum of up to ONE
MILLION THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($1,375,000) (the "Principal
Amount") in accordance with the payment schedule set forth herein. This Note is
one of two promissory notes issued pursuant to a certain Redemption Agreement,
dated as of even date herewith, among Payor, Payee and Montrose Investments Ltd.
("Montrose"). These promissory notes, together with a note issued by Payor to
Augusta Street LLC on the date hereof in the amount of $1,166,666.67, are
referred to herein as the "Investor Notes."

1. Payment Schedule. (a) Three hundred thirty-three
thousand three hundred forty dollars ($333,340.00) of the principal of this Note
shall be payable on September 30, 2000.

(b) The remaining $1,041,660 of principal of the
Note shall be payable thereafter in 18 equal monthly installments of $57,870,
which payment shall be made on the 1st of each month, beginning with November 1,
2000.

(c) Notwithstanding the provisions of paragraph
(a) and (b) above, Payor may, at its election, fulfill its payment obligations
under this Note by making payments of (i) $750,000.000 on the date that is 30
calendar days following the date hereof, and (ii) $416,666.67 on the date that
is 60 calendar days from the date hereof, in which event, no other payments
shall be due and payable under this Note.

2. Interest on Late Payments. If any amount due
hereunder is not paid when due, such amount until paid shall bear interest at a
per annum rate equal to fifteen percent (15%) or, if less, the maximum rate
permitted by applicable law.

3. Prepayment. This Note may be prepaid in whole or in
part at any time without penalty or premium upon the prior consent of Payee;
provided that Montrose shall be

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entitled to prepayment on the Investor Note held by Montrose to the same extent
as any prepayment to be made hereunder.

4. Acceleration of Payment. This Note shall
automatically become due, and the outstanding Principal Amount and any accrued
but unpaid interest thereon become payable without any action on the part of
Payee, in the event (i) Payor becomes subject, as debtor, to any voluntary or
involuntary bankruptcy or insolvency proceeding, (ii) Payor makes an assignment
for the benefit of its creditors, (iii) a receiver or trustee is appointed with
respect to Payor or any of its properties, assets or business, (iv) Payor fails
to make any payment hereunder within ten days after the same becomes due and
payable, or (v) Payor fails to make any payment under any other Investor Note
within ten days after the same becomes due and payable.

5. Affirmative Waivers; Costs of Collection. Payor (a)
hereby waives presentment, demand, protest, notice of protest and/or dishonor,
and all other demands or notices of any sort whatsoever with respect to this
Note and (b) agrees to pay all costs and expenses, including reasonable
attorneys' fees, which may be incurred in the collection of this Note.

6. Amendments, Etc. No amendment or waiver of any
provision of this Note, nor consent to any departure by Payor herefrom, shall in
any event be effective unless the same shall be in writing and signed by Payee,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, however, that the
obligations of Payor hereunder shall terminate upon the payment in full of any
and all monies due and owing by Payor to Payee.

7. No Waiver; Remedies. No failure on the part of Payee
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

8. Partial Invalidity. If any provision hereof is, for
any reason and to any extent, determined by a court of competent jurisdiction to
be invalid or unenforceable with respect to any person, entity or circumstance,
then neither the remainder of this Note, nor the application of the provision to
other persons, entities, or circumstances, shall be affected thereby, but
instead shall be enforceable to the maximum extent permitted by law.

9. Binding Effect. This Note shall be binding upon
Payor and its successors and shall inure to the benefit of Payee and its
successors and assigns. The term "Payee," as used herein, shall also include any
endorsee, assignee or other payee of this Note.

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brought and enforced in any state court or, or any United States District Court
situate in, the State of New York, and Payor hereby irrevocably submits to the
non-exclusive jurisdiction of such courts and waives any objection to
jurisdiction or venue in any such proceeding commenced in such court. Payor
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
Payor at its address set forth on page 1 hereof and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.

11. Waiver of Jury Trial. PAYOR KNOWINGLY, IRREVOCABLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS NOTE, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY
THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR PAYEE TO ENTER INTO THE
LOAN TRANSACTION EVIDENCED BY THIS NOTE.

12. Lost or Stolen Promissory Note. If this Note is
lost, stolen, mutilated or otherwise destroyed, Payor shall execute and deliver
to Payee a new promissory note containing the same terms, and in the same form,
as this Note. In such event, Payor may require Payee to deliver to Payor an
affidavit of lost instrument and customary indemnity in respect thereof as a
condition to the delivery of any such new promissory note.

13. Due Authorization. This Note has been duly
authorized, executed and delivered by Payor and is the legal obligation of
Payor, enforceable against Payor in accordance with its terms.

14. Indemnity. Payor shall indemnify and hold Payee
harmless from and against any and all losses, liabilities, claims, damages or
expenses arising out of the making or holding of the loan represented by this
Note, including, without limitation, the fees and expenses of counsel.

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IN WITNESS WHEREOF, Payor has caused this Note to be duly executed and
delivered as of the date first set forth above.

FIDELITY HOLDINGS, INC.

By:
---------------------------
Name:
Title:

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PROMISSORY NOTE

$1,375,000 August __, 0000
Xxx Xxxx, Xxx Xxxx

FOR VALUE RECEIVED, FIDELITY HOLDINGS, INC., a Nevada
corporation ("Payor"), having an address at 00-00 Xxx Xxxxxxx Xxxx, Xxxxx 0000,
Xxx Xxxxxxx, Xxx Xxxx 00000, hereby promises to pay to the order of MONTROSE
INVESTMENTS LTD. ("Payee") 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, XX 00000, or
at such other address as may be designated from time to time hereafter by Payee,
in lawful money of the United States of America and in immediately available
funds, the principal sum of up to ONE MILLION THREE HUNDRED SEVENTY-FIVE
THOUSAND DOLLARS ($1,375,000) (the "Principal Amount") in accordance with the
payment schedule set forth herein. This Note is one of two promissory notes
issued pursuant to a certain Redemption Agreement, dated as of even date
herewith, among Payor, Payee and Strong River Investments, Inc. ("Strong
River"). These promissory notes, together with a note issued by Payor to Augusta
Street LLC in the amount of $1,166,666.67, are referred to herein as the
"Investor Notes."

1. Payment Schedule. (a) Three hundred thirty-three
thousand three hundred forty dollars ($333,340.00) of the principal of this Note
shall be payable on September 30, 2000.

3. Prepayment. This Note may be prepaid in whole or in
part at any time without penalty or premium upon the prior consent of Payee;
provided that Strong River shall be entitled to prepayment on the Investor Note
held by Strong River to the same extent as any prepayment to be made hereunder.

voluntary or involuntary bankruptcy or insolvency proceeding, (ii) Payor makes
an assignment for the benefit of its creditors, (iii) a receiver or trustee is
appointed with respect to Payor or any of its properties, assets or business,
(iv) Payor fails to make any payment hereunder within ten days after the same
becomes due and payable, or (v) Payor fails to make any payment under any other
Investor Note within ten days after the same becomes due and payable.

10. Governing Law. This Note and the rights and
obligations of Payor and Payee hereunder shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
conflicts of law principles thereof. Payor hereby agrees that any proceeding
arising out of or in connection with this Note may, if a Payee so elects, be
brought and enforced in any state court or, or any United States District Court
situate in, the State of New York, and Payor hereby irrevocably submits to the
non-exclusive jurisdiction of such courts and waives any objection to
jurisdiction or venue in any such proceeding commenced in such court. Payor
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
Payor at its address set forth on page 1 hereof and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.

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13. Due Authorization. This Note has been duly
authorized, executed and delivered by Payor and is the legal obligation of
Payor, enforceable against Payor in accordance with its terms.

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IN WITNESS WHEREOF, Payor has caused this Note to be duly executed
and delivered as of the date first set forth above.

FIDELITY HOLDINGS, INC.

By:
-----------------------------
Name:
Title:

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