-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Aua6LBpKhR87B2/N9IPHp/URQWW03U5KPocWAcqZ/dhPTJvZwKWhNg16ReIbhdLI o2UL5MKXT1Y8E9THLWJFbg== 0001020568-02-000008.txt : 20020416 0001020568-02-000008.hdr.sgml : 20020416 ACCESSION NUMBER: 0001020568-02-000008 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DISTINCTIVE DEVICES INC CENTRAL INDEX KEY: 0000059963 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-INDUSTRIAL MACHINERY & EQUIPMENT [5084] IRS NUMBER: 131999951 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-02749 FILM NUMBER: 02610570 BUSINESS ADDRESS: STREET 1: ONE BRIDGE PLAZA SUITE 100 CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 5612744233 MAIL ADDRESS: STREET 1: ONE BRIDGE PLAZA SUSITE 100 CITY: FORT LEE STATE: NJ ZIP: 07024 FORMER COMPANY: FORMER CONFORMED NAME: LMC DATA INC DATE OF NAME CHANGE: 19761021 10KSB 1 dd10k01-2.txt FORM 10KSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 0-2749 DISTINCTIVE DEVICES, INC. (Name of small business issuer in its charter) New York (State of incorporation or organization) 13-1999951 (I.R.S. Identification No.) One Bridge Plaza, Suite 100, Fort Lee, New Jersey 07024 (Address of principal executive offices) Issuer's telephone number: (201)363-9922 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.05 per share (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes(X) No( ) Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ( ) Issuer is a development stage company and had nominal operating revenues of $36,000 for the fiscal year ended December 31, 2001. The aggregate market value of voting stock held by non-affiliates of the issuer approximated $550,000 as of February 28, 2002, computed by reference to the average of the bid and asked prices for such stock as reported by the Pink Sheets OTC Market Report. 19,134,824 shares of issuer's common stock, $.05 par value, were outstanding at February 28, 2002. Issuer had no other class of common equity. DOCUMENTS INCORPORATED BY REFERENCE: None INDEX PART I Page Item 1. DESCRIPTION OF BUSINESS 4 Item 2. DESCRIPTION OF PROPERTIES 6 Item 3. LEGAL PROCEEDINGS 6 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 6 PART II Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 7 Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 8 Item 7. FINANCIAL STATEMENTS 10 Index to Financial Statement F-1 Reports of Independent Auditors F-2 Financial Statements F-5 Notes to Financial Statements F-10 Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 10 PART III Item 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT 11 Item 10. EXECUTIVE COMPENSATION 13 Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 13 Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 15 Item 13. EXHIBITS AND REPORTS ON FORM 8-K 16 SIGNATURES 18 [3] PART I Item 1. DESCRIPTION OF THE BUSINESS Distinctive Devices, Inc. is a New York corporation organized in 1961 (herein referred to as "we", "our", "issuer", "DDI" or "the Company"). The business of the Company has taken a new direction following the election of Mr. Sanjay Mody as president in May 2001. In June 2001, DDI's offices were relocated from Florida to Mr. Mody's offices in Fort Lee, New Jersey. Drawing on Mr. Mody's business contacts and relationships in the U.S., his native India, and elsewhere, DDI is now engaged in three principal activities, namely, (i) design, development and production of software products including web-related services, (ii) distribution of DSL (Digital Subscriber Line) equipment marketed to telephone companies in Eastern Europe and (iii) trading in rough and polished gemstones. Software activities are conducted by two subsidiaries, Webpulse Consulting Inc., Fort Lee, New Jersey ("Webpulse"), and Distinctive Devices (India), PLC, Mumbai (Bombay), India. Webpulse was acquired by DDI in October 2001 in exchange for 1,770,000 shares of the Company's Common Stock. Mr. Mody's spouse was the controlling shareholder of Webpulse. DDI-India was organized and activated during 2001. Webpulse is engaged in the design and development of website and portal software. Also, it owns and operates an e-commerce website called GEMBEX, which allows dealers in jewelry and precious and semi-precious stones to meet one another on the Internet for the purpose of negotiating sales and purchases. Subscribers to the service pay a fixed monthly fee and GEMBEX is not a party to the negotiations, payment or delivery of the goods. Instead, GEMBEX serves solely as a "meeting place" for its subscribers. GEMBEX revenues were nominal during 2001. DDI-India is staffed by experienced engineers and marketing managers proficient in the design, production and maintenance of customized software solutions, integration services and website design and support. In prior employment, they have provided such products and services to a number of private companies and governmental agencies in India. Similar entities are prospective customers for DDI-India and its products and services will be marketed in the U.S. by Webpulse. Marketing involves identification of, and proposing solutions for, a prospective customer's software requirements. [4] In September 2001, DDI was appointed as the exclusive distributor in Bulgaria, Russia, Turkey and Ukraine for RealTime Access, Inc. ("RTA"). RTA manufactures platforms which enable local telephone companies to provide fast access DSL services to their customers over existing copper wire infra-structure (also known as a "last mile solution"). Worldwide, some 110 carriers now utilize RTA equipment, including 90 in the U.S. RTA facilities are located in Livermore, California and New Delhi, India. Mr. Mody and Mr. Mehta, directors of DDI, are also directors and shareholders of RTA. During the first three months of 2002, DDI sales of RTA equipment approximated $200,000. There were no such DDI sales during 2001. Gemstone trading activity is conducted by a wholly-owned subsidiary, International Gemsource Inc., organized by DDI in January 2002. During the first three months of 2002, revenues from gemstone trading approximated $200,000. The Company faces intense competition in each of its principal activities. In the software field, some 20 other public companies offer similar services. The largest of these firms are based in India and maintain marketing offices in the U.S. and other parts of the world. In most instances, competitors are divisions of Indian conglomerates, all with far greater resources than the Company's. Webpulses's GEMBEX website competes with an established U.S. jewelry supplier website that has more than 2,000 subscribers. With fewer than 30 subscribers, our GEMBEX website activity may be abandoned. RTA is the smallest of five U.S. companies offering long-reach DSL and voice equipment to small line-size telephone companies. It is the only one of the five with manufacturing facilities in India. Trading in rough and polished gemstones, the activity of International Gemsource, Inc., is a business with hundreds of competitors worldwide, many of which have resources far greater than the Company's. [5] Historically, DDI sold its prior businesses in 1996 and became a public shell. In August 1999, it merged with Eagleview Industries, Inc., which was engaged in developing a wireless Internet and telecommunications service in the New York City area. As a consequence, control of DDI passed to the controlling shareholder of Industries who became DDI's president. During 2000, DDI privately-placed 3,156,810 shares of common stock at $1 per share (see Note 9 to the within Financial Statements). In 2001, we abandoned the wireless plan, following Mr. Mody's election as president in May 2001. Currently (March 2002), DDI and its subsidiaries have six full-time employees in the U.S., seven in India and a part-time employee in Russia. For further information please refer to Item 6 of this Report. ITEM 2. DESCRIPTION OF PROPERTIES The Company's head office in an office complex in Fort Lee, New Jersey comprises 2,300 sq. ft. and is currently leased at the rate of $5,175 per month. The lease expires in 2005 and is subject to annual escalations. Our subsidiary's lease in Mumbai (Bombay), India comprises 6,000 sq. ft. in a multi-story building. The lease rate and terms are currently being negotiated. The facility provides space for software production, engineering and design, as well as the subsidiary's offices. ITEM 3. LEGAL PROCEEDINGS None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the quarter ended December 31, 2001. [6] PART II Item 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS Issuer's common stock, $.05 par value, is traded over-the-counter under the symbol DDEV. Quotations are reported in the OTC Bulletin Board and the Pink Sheets OTC Market Report. The Company has no other common equity outstanding. Information furnished by the Pink Sheets OTC Market Report reports the range of high and low bid quotations for each quarterly period during the two most recent fiscal years, as set forth below. Quotations represent prices between dealers and do not include retail mark-up, mark-down or commissions, and may not represent actual transactions. Bid Prices 2001 2000 High Low High Low Fiscal quarter ended: March 31 $0.39 $0.13 $7.94 $2.88 June 30 0.28 0.10 6.88 1.35 September 30 0.19 0.06 2.88 0.88 December 31 0.09 0.05 0.97 0.22 At February 28, 2002, approximately 1,750 holders of record held our common stock. We estimate that an additional 300 to 400 persons hold our stock in Street Name. The Company has never paid a dividend on its common stock and has no plan to do so in the foreseeable future. Recent Sales of Unregistered Securities In January 2001, DDI issued 182,460 shares of its Common Stock in exchange for substantially all remaining shares of EagleView Industries, Inc. ("Industries"). Industries was acquired by DDI in a reverse merger transaction in August 1999. DDI acquired 80.7% of the outstanding stock of Industries at the closing of the transaction, an additional 17% during 2000 and the final 2% in January 2001, for a total holding of 99.7%. Mr. Wolff, a Company director, acted as the finder in the DDI/Industries transaction and was issued 18,960 shares of DDI Common Stock in 2001 as compensation with respect to the DDI shares issued to shareholders of Industries during 2000 and 2001. Industries' plan to offer wireless telecommunications and Internet connectivity services in the New York City area was abandoned in 2001 and Industries is now inactive, aside from the ongoing liquidation of its inventories and equipment. [7] On October 31, 2001, 1,770,000 shares of DDI's common stock (par value $.05) were exchanged for all outstanding shares of Webpulse Consulting, Inc. The value of DDI's Common Stock exchanged for Webpulse exceeded the fair value of the net assets acquired by approximately $11,000. Mr. Mody's wife was the controlling shareholder of Webpulse. Mr. Mody was, and remains, president of Webpulse. In December 2001, Mr. Mody and his wife exchanged 1,250,000 common shares for 10,000 shares of DDI's newly-authorized Series C Convertible Preferred Stock. The exchange was undertaken to enable the Company to sell the same number of common shares for cash to a new investor, since the available number of authorized and unissued common shares were inadequate. Each share of Series C Preferred Stock is convertible into 125 common shares and votes on an as-converted basis, subject to mandatory conversion upon an increase in authorized Common Stock. At the next meeting of stockholders one agenda item will be a proposal to increase authorized common share capital. Assuming shareholder approval, Series C Preferred Stock will be converted and the exchange will be automatically reversed. Also in December 2001, the Company issued for cash 1,250,000 common shares at $.08 per share. Simultaneously, the purchaser acquired for cash $400,000 of the Company's new 10% Convertible Subordinated Debentures due in five years. The Debentures are convertible into Common Stock at prices ranging from $.25 per share in the first year to $.75 in the fifth year. The beneficial holder of the shares and the debentures is Mr. Ammosov, who became a director of the Company in March 2002 (see Items 9 and 11 herein). The foregoing security sales and exchanges were made pursuant to the exemption provided by Regulation D, Rule 506 and Section 3(a)(9) or 4(2) of the Securities Act of 1933. Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Plan of Operation During 2001, the Company abandoned its earlier plan to provide wireless Internet and telecommunications services in the New York City area and we wrote-off the estimated non-recoverable value of inventories and equipment related to that proposed activity (see Note 12 to the Financial Statements below). [8] The current operating plan, as we enter 2002, is to establish our new Indian subsidiary as a premier, low cost, provider of software products and development services in India, the U.S., and other markets and to expand gemstone trading activity through our new subsidiary, International Gemsource, Inc. With regard to our distribution agreement with RTA, a working relationship evolved in late 2001 with Linkcapital Business Consulting, Ltd., of Moscow, Russia. Linkcapital is a diversified operating and investment company with some 700 employees. A test installation of RTA equipment began in December 2001 at Center Telecom, a Moscow telephone company. The installation will be completed this month (March 2002). Linkcapital holds a 49% interest in our RTA activities in Russia. In December 2001, an affiliate of Linkcapital invested $500,000 in DDI stock and debentures (see Items 5, 11 and 12 herein). In March 2002, Linkcapital's principal, Mr. Alexander Ammosov, joined DDI's board of directors (see Item 9 herein). For the year ended December 31, 2001, DDI sustained a loss from continuing operations approximating $980,000 compared to a similar loss in the prior year of nearly $1,800,000. During the fourth quarter in each of these years the loss from continuing operations approximated $254,000 in 2001 compared to $290,000 in 2000. Results for 2001 were further impacted by the write-down of equipment and inventory values relating to our now-abandoned venture to provide wireless telecommunication services. The write-down amounted to $353,472. Working capital at December 31, 2001, approximated $890,000. This amount may not be sufficient to fund continuing operations at the current level thus creating doubt concerning the Company's ability to continue as a going concern (see Note 14 to the within financial statements). As additional working capital is needed, we will seek to place additional amounts of debentures and/or common stock. There can be no assurance, however, that the future placement of such securities can be successfully accomplished, or would not be dilutive to current shareholders. [9] Risks and Uncertainties The Company is subject to all the risks inherent in an early stage company in the software, systems and Internet industries. These risks include, but are not limited to, a limited operating history, limited resources, dependence upon consumer and business acceptance of the products and services, the changes taking place in the electronic commerce industry and the general economic climate. The Company's operating results may be materially affected by the foregoing factors. STATEMENTS CONTAINED HEREIN AND ELSEWHERE IN THIS REPORT CONCERNING FUTURE ACTIVITIES, PERFORMANCE OR INTENTIONS ARE FORWARD-LOOKING STATEMENTS WHICH, BY THEIR NATURE, INVOLVE RISK AND UNCERTAINTY BECAUSE THEY RELATE TO EVENTS, AND DEPEND ON CIRCUMSTANCES, THAT WILL OCCUR IN THE FUTURE, MANY OF WHICH ARE NOT WITHIN THE COMPANY'S CONTROL. ACTUAL RESULTS AND EVENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH STATEMENTS AS THE RESULT OF KNOWN OR UNKNOWN RISKS, UNCERTAINTIES AND/OR OTHER FACTORS AND THERE CAN BE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE CORRECT. Item 7. FINANCIAL STATEMENTS The consolidated financial statements of the Company are filed under this Item, beginning at page F-1 of this Report. Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On October 23, 2001, the Company engaged Rosen Seymour Shapps Martin & Company LLP, New York City, as its independent accountants, replacing Goldstein Lewin & Co. of Boca Raton, Florida. The change was made pursuant to a decision by the Company's Board of Directors that we could be better served by an accounting firm located in the New York City area, given the move of our head office from Florida to Fort Lee, New Jersey. Audit reports issued by our independent accountants for either of the past two fiscal years ended December 31, 2001 did not contain any adverse opinion or disclaimer of opinion, nor were such reports modified in any way, nor were there any disagreements with the firms on any matter of accounting principles or practices, financial disclosure or audit scope or procedures. [10] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) INDEX TO FINANCIAL STATEMENTS Years Ended December 31, 2001 and 2000 Page Independent Auditors' Reports F-2-4 Consolidated Financial Statements: Consolidated Balance Sheets F-5-6 Consolidated Statements of Operations F-7 Consolidated Statements of Changes in Stockholders' Equity F-8 Consolidated Statements of Cash Flows F-9 Notes to Consolidated Financial Statements F-10-21 [F-1] INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Distinctive Devices, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheet of Distinctive Devices Inc. and subsidiaries as of December 31, 2001 and the related statements of operations, changes in stockholders' equity and cash flows for the year then ended, and the deficit accumulation of $1,333,902 during the year ended December 31, 2001. Deficit accumulations of $2,369,680 from February 5, 1998 (inception) to December 31, 2000 were reported upon by other auditors in their report dated March 5, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express and opinion on these consolidated financial statements based on our audit. We did not audit the financial statements of Distinctive Devices (India) Private Limited ("DDI India"), a wholly-owned subsidiary, which statements reflect total assets of $57,246 and total liabilities of $14,300 as of December 31, 2001 and operating expenses of $19,170 for the year then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for DDI India is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Distinctive Devices Inc. and subsidiaries as of December 31, 2001, and the results of their operations and their cash flows for the year then ended, and the deficit accumulated during development stage of $1,333,902 for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. [F-2] The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 14, the Company has sustained losses since inception and its working capital is not sufficient to fund the current level of operations for the next year. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 14. The financial statements do not include any adjustment that might result from the outcome of this uncertainty. /s/ Rosen Seymour Shapss Martin & Company LLP CERTIFIED PUBLIC ACCOUNTANTS New York, New York March 27, 2002 [F-3] INDEPENDENT AUDITORS REPORT To the Board of Directors and Stockholders Distinctive Devices, Inc. and Subsidiary (Development Stage Companies) Delray Beach, Florida We have audited the accompanying consolidated balance sheet of Distinctive Devices, Inc. and Subsidiary (Development Stage Companies) as of December 31, 2000, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the year ended December 31, 2000 and from February 5, 1998 (inception) to December 31, 2000 (not separately presented herein). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a text basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Distinctive Devices, Inc. and Subsidiary as of December 31, 2000, and the results of their operations and their cash flows for the year ended December 31, 2000, and for the period from February 5, 1998 (inception) to December 31, 2000 (not separately presented herein), in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 14 to the financial statements, the Company has sustained losses since inception and its working capital is not sufficient to fund the current level of operations for the next year. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding this matter are also described in Note 14. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ GOLDSTEIN LEWIN & CO. Boca Raton, Florida March 5, 2001 [F-4] PART II - FINANCIAL INFORMATION Item 7. - Financial Statements DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED BALANCE SHEETS December 31, 2001 2000 Assets Current assets: Cash and cash equivalents $ 689,958 $ 985,032 Accounts receivable 19,800 - Loans and other receivables - 22,190 Inventories - 102,722 Prepaid expenses 530 4,750 Asset of discontinued operations and assets held for sale (Note 12) 272,415 419,407 ------- --------- Total current assets 982,703 1,534,101 Property and equipment, net (Note 2) 271,728 391,914 Goodwill (Note 5) 11,221 - Other assets 42,324 65,839 ------- --------- Total assets $ 1,307,976 $ 1,991,854 ========= ========= (Continued) [F-5] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED BALANCE SHEETS (Continued) December 31, 2001 2000 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued liabilities $ 42,521 $ 26,616 Accrued professional fees 50,500 6,997 --------- --------- Total current liabilities 93,021 33,613 Convertible subordinated debentures (Note 3) 400,000 - --------- --------- Total liabilities 493,021 33,613 --------- --------- Minority interest 2,116 - --------- --------- Commitments and Contingencies (Note 16) Stockholders' equity: Convertible preferred stock Series C, $1 par; 1,000,000 shares authorized; Outstand: 10,000 shares in 2001 -0- shares in 2000 (Note 6) 10,000 - Common stock, $.05 par; 20,000,000 shares authorized; Outstanding: 19,134,824 shares in 2001, 17,163,404 shares in 2000 (Notes 3, 5, 6 and 7) 956,741 858,170 Common stock to be issued - 17,136 shares in 2000 - 73,034 Additional paid-in capital 3,549,680 3,396,717 Deficit accumulated during the development stage (3,703,582) (2,369,680) --------- --------- Total stockholders' equity 812,839 1,958,241 --------- --------- Total liabilities and stockholders' equity $ 1,307,976 $ 1,991,854 ========= ========= The accompanying notes are an integral part of the financial statements. [F-6] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED STATEMENTS OF OPERATIONS
Period From February 5,1998 Year Ended December 31, (Inception) to 2001 2000 December 31, 2001 Revenue Operations Other $ 35,888 $ - $ 35,888 Operating expenses (1,037,697) (907,275) (2,065,761) --------- --------- --------- Operating loss (1,001,809) (907,275) (2,029,873) --------- ------- --------- Other income (expense): Interest and other income 21,379 66,296 99,475 Loss on disposal of property and equipment - (6,500) (6,500) --------- ------- --------- Total other income (expense) 21,379 59,796 92,975 --------- ------- --------- (980,430) (847,479) (1,936,898) Minority interest - 51,628 170,673 --------- -------- --------- (980,430) (795,851) (1,766,225) --------- -------- --------- Provision for income taxes (Note 15) - - - --------- -------- --------- Net loss from continuing operations (980,430) (795,851) (1,766,225) --------- -------- --------- Discontinued operations (Note 12): Loss from discontinued wireless ISP operations, net of tax benefits of $-0- after valuation allowance - (988,063) (1,605,078) Loss on write-down of assets from discontinued operations, net of tax benefit of $-0- after valuation allowance (353,472) - (353,472) --------- -------- --------- Net loss from discontinued operations (353,472) (988,063) (1,958,550) --------- -------- --------- Net loss $(1,333,902) $(1,783,914) $(3,724,775) ========= ========= ========= Weighted average shares of common stock outstanding (1) 17,575,374 16,503,818 13,433,919 ========== ========== ========== Loss per share - basic and diluted: Loss from continuing operations $ (0.06) $ (0.05) $ (0.13) Loss from discontinued operations (0.02) (0.06) (0.15) ----- ----- ----- Net loss per share - basic and diluted $ (0.08) $ (0.11) $ (0.28) ===== ===== ===== (1) The weighted average shares of common stock outstanding were not adjusted for the potential effects of the Company's convertible preferred stock or its convertible subordinated debentures because of their antidilutive effect. The accompanying notes are an integral part of the financial statements.
[F-7] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'EQUITY
Deficit Addi- Accumulated Total Preferred tional Shares During the Stock Stock Common Stock Paid-in to be Development Holders' Shares Amount Shares Amount Capital Issued Stage Equity Initial issuance of shares for cash - $ - 6,000,000 $ 300,000 $ (299,700) - $ - $ 300 Net loss - 1998 - - - - - - (195) (195) ------ ------- --------- ----------- ----------- ------ ----------- Balance at December 31, 1998 - - 6,000,000 300,000 (299,700) - (195) 105 Issuance of shares for cash - - 2,051,340 102,367 699,957 - - 802,524 Acquisition of net assets on recapitalization - - 4,119,902 205,995 (1,666) - - 204,329 Issuance of shares for finder's fee - - 121,712 6,086 85,198 - - 91,284 Net loss - 1999 - - - - - - (606,764) (606,764) ------ ------- --------- ----------- ----------- ------ ----------- Balance at December 31, 1999 - - 12,292,954 614,648 483,429 - (606,959) 491,118 Issuance of shares for cash - - 3,156,810 157,841 2,998,969 - - 3,156,810 Issuance of shares for acquisition of minority interest - - 1,713,640 85,681 (85,681) - - - Shares to be issued for finder's fee - - - - - 73,034 - 73,034 Reduction of minority interest - - - - - - 21,193 21,193 Net loss - - - - - - (1,783,914) (1,783,914) ------ ------- --------- ----------- ----------- ------ ----------- Balance at December 31, 2000 - - 17,163,404 858,170 3,396,717 73,034 (2,369,680) 1,958,241 Issuance of shares for acquisition of minority interest - - 182,460 9,123 (9,123) - - - Issuance of shares for finder's fee - - 18,960 948 72,086 (73,034) - - Issuance of shares for acquisition of shares of subsidiary - - 1,770,000 88,500 - - - 88,500 Exchange of common for preferred shares 10,000 10,000 (1,250,000) (62,500) 52,500 - - - Issuance of shares for cash - - 1,250,000 62,500 37,500 - - 100,000 Net loss - - - - - - (1,333,902) (1,333,902) ------ ------- --------- ----------- ----------- ------ ----------- Balance at December 31, 2001 10,000 $10,000 19,134,824 $ 956,741 $ 3,549,680 - $(3,703,582) $ 812,839 ====== ======= ========== =========== =========== ====== =========== ===========
The accompanying notes are an integral part of the financial statements. [F-8] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED STATEMENTS OF CASH FLOWS
Period From February 5, 1998 Year Ended December 31, (Inception) to 2001 2000 December 31, 2001 Cash flows from operating activities: Net loss from continuing operations $ (980,430) $ (795,851) $(1,766,225) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 128,705 110,855 250,608 Write down of assets from discontinued operations 353,472 - 353,472 Loss on disposal or property and equipment - 6,500 6,500 Minority interest in net loss - (51,628) (170,673) Common stock issued for services - 73,034 164,318 Changes in operating assets and liabilities: Accounts receivable (19,800) - (19,800) Loan and other receivables 7,190 (7,190) - Inventories 43,682 (282,637) (238,955) Prepaid expenses 4,220 (4,750) (530) Other assets 59,040 (60,636) (6,799) Accounts payable and accrued liabilities (8,369) 19,385 18,247 Accrued professional fees 43,503 - 50,500 Due to related parties - (95,000) (197,700) -------- --------- --------- Net cash used in continuing operations (368,787) (1,087,918) (1,557,037) -------- --------- --------- Cash flows from investing activities: Acquisition of property and equipment (103,048) (512,556) (865,357) Proceeds from the sale of property and equipment - 2,500 2,500 Issuance of notes receivable - (20,000) (20,000) Payments received on notes receivable 15,000 5,000 20,000 Cash received on acquisition of Webpulse 13,117 - 13,117 Cash effect of recapitalization - - 398,904 ------- -------- -------- Net cash used in investing activities (74,931) (525,056) (450,836) ------- -------- ------- Cash flows from financing activities: Proceeds from: Issuance of convertible subordinated debentures (Note 3) 400,000 - 400,000 Minority interest 2,116 - 2,116 Issuance of common stock 100,000 3,156,810 4,254,265 ------- --------- --------- Net cash provided by financing activities 502,116 3,156,810 4,656,381 ------- --------- --------- Increase in cash and cash equivalents from continuing operations 58,398 1,543,836 2,648,508 Net cash used in discontinued operations (353,472) (988,063) (1,948,550) ------- --------- --------- Cash and cash equivalents: Beginning of period 985,032 429,259 - ------- ------- --------- End of period $ 689,958 $ 985,032 $ 689,958 ======= ======= ========
The accompanying notes are an integral part of the financial statements. [F-9] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Prior to July 2001, the Company's principal business activity was the development of a wireless internet and telecommunication service, which activity was discontinued in July 2001. The Company is now engaged in three principal activities: i) design, development and production of software products including web-related services, conducted by two subsidiaries, Webpulse Consulting Inc. ("Webpulse") based in New Jersey and Distinctive Devices (India) PLC ("DDI - India") based in Bombay, India. Webpulse was acquired by the Company in October 2001 for 1,770,000 shares of its stock from, among others, the controlling shareholder of Webpulse, who is the wife of a director of the Company, who is also its president, chief executive officer and treasurer. Webpulse is engaged in the design and development of Website and portal software and also owns and operates an e-commerce website called Gembex, which allows dealers in jewelry and precious and semi-precious stones to transact commerce on the Internet. Subscribers to Gembex pay a fixed monthly fee. Gembex is not a party to the negotiations, payment for or delivery of any merchandise. Gembex's revenues were nominal during 2001. DDI - India engages in the design, production and maintenance of customized software solutions, integration services and website design and support. Its products and services will be marketed in the United States by Webpulse. ii) distribution of digital subscriber line (DSL) equipment marketed to telephone companies in Eastern Europe. In September 2001, DDI was appointed the exclusive distributor in Bulgaria, Russia, Turkey and Ukraine for RealTime Access, Inc. ("RTA"). RTA manufactures platforms which enable local telephone companies to provide fast access DSL services to their customers over existing copper wire infrastructure (also known as a "last mile solution"). Two directors of the Company, one of whom is its president and treasurer, are also directors and shareholders of RTA. (Continued) [F-10] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) iii) trading in rough and polished gemstones. Gemstone trading activity is conducted by a wholly-owned subsidiary, International Gemsource Inc., organized by DDI in January 2002. At December 31, 2001, the Company's software product design, development and production activities are its most significant business segment. Principles of Consolidation The consolidated financial statements include the accounts of Distinctive Devices, Inc. ("DDI") and its subsidiaries, EagleView Industries, Inc. ("Industries"), DDI - India, and Webpulse, whose operations have been included from October 31, 2001, the date of acquisition (collectively, the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. Webpulse's operations prior to October 31, 2001 (date of acquisition) have been eliminated. The Company is a development stage enterprise. Risks and Uncertainties The Company is subject to all the risks inherent in an early stage company in the software, systems and Internet industries. These risks include, but are not limited to, a limited operating history, limited resources, dependence upon consumer and business acceptance of its products and services, the changes taking place in the electronic commerce industry and the general economic climate. The Company's operating results may be materially affected by the foregoing factors. Also, a significant portion of the Company's operations are conducted in Bombay, India and Eastern Europe. The potential exists for the Company to experience severe negative financial impact from political, social and economic (including exchange rate fluctuations) events occurring within these remote geographic areas. This concentration of operations involves additional risk of uncertainty (see Note 18). Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Per Share Information The per share information is computed based upon the weighted average number of shares outstanding during the period. (Continued) [F-11] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Preferred Stock The Company has outstanding 10,000 shares of Series C convertible preferred stock. Each share of Series C preferred stock is convertible into 125 shares of common stock at the option of the holder. The Series C preferred stock votes on an equal per share basis (as if converted) with the common stock and is eligible to receive dividends equivalent to the underlying shares of common stock (see Note 6). Foreign Currency Translation The balance sheet accounts of DDI India, whose functional currency is the local foreign currency, are translated at exchange rates in effect at the end of the period, and statement of operations accounts are translated at the average exchange rates for the period. Translation adjustments are required to be included as a separate component of stockholders' equity; however, at December 31, 2001, translation adjustments were insignificant. Cash and Cash Equivalents Cash and cash equivalents include deposit accounts, money market funds and all highly liquid debt instruments with maturities of three months or less when acquired. Inventories Inventories consist primarily of radio equipment and accessories. During 2001 these inventories were written down to their net realizable value and reclassified into assets held for sale (see note 12). Assets Held for Sale Property and equipment, and inventories amounting to $92,500 and $179,915, respectively, related to the Company's discontinued wireless ISP operations have been written down to their net realizable values, segregated and classified as available for sale (see Notes 12 and 13). Property and Equipment Property and equipment are stated at cost and depreciated on a straight-line basis over the assets' estimated useful lives (see Note 2). (Continued) [F-12] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Goodwill Intangible The Company reviews the carrying value of intangible assets including goodwill on a periodic basis, at least annually, to determine if there is any impairment in carrying value. As of December 31, 2001, the Company believes that there has been no impairment in value of the carrying value of its intangible asset. Stock Option Plan In 2001, the Company's Board approved the establishment of a stock option plan (the "Plan") to provide incentives to attract future employees and retain existing key employees with the Company (see Note 10). The Plan is subject to shareholders' approval. Reclassification The 2000 financial statements have been reclassified to conform to the 2001 presentation. NOTE 2: PROPERTY AND EQUIPMENT Estimated Useful December 31, Life-Years 2001 2000 Computers and Software 5 $269,626 $270,220 Furniture and Office Equipment 10 93,179 68,539 Technical Equipment 7 - 109,252 Leasehold Improvements 5 - 37,092 -------- ------- 362,805 485,103 Less: Accumulated Depreciation 91,077 93,189 ------- ------- $271,728 $391,914 ======= ======= The balance sheet as of December 31, 2000 has been restated for assets of discontinued operations of $239,492, net of depreciation of $27,594. Property and equipment depreciation expense for the years ended December 31, 2001 and 2000 and the period from February 5, 1998 (inception) to December 31, 2001 amounted to $128,705, $110,855 and $250,608, respectively. (Continued) [F-13] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3. CONVERTIBLE SUBORDINATED DEBENTURES The Company issued $400,000 of 10% convertible Subordinated Debentures (the "Debentures") dated December 27, 2001 that mature in five (5) years. The Debentures are convertible into common stock at the holder's option at conversion prices ranging from $ .25 per share in the first year to $ .75 per share in the fifth year. Upon shareholder approval of additional authorized capital, the Company expects to reserve shares to permit complete conversion, although partial conversion is permitted. The Company has the right to redeem the Debentures in whole or in part at percentages of principal amount ranging from 105.00% in the second year to 101.25% in the fifth year. The Debentures are subordinated to all existing or future obligations for money borrowed from financial institutions. NOTE 4. MINORITY INTEREST During the year ended December 31, 2000, the Company exchanged 1,713,640 shares of its common stock for 856,820 shares of common stock held by minority shareholders of Industries. As a result of this transaction, at December 31, 2000, the Company owned approximately 97.9% of the outstanding shares of Industries. In January 2001, the Company issued 182,460 shares of its $0.05 par value common stock to minority shareholders of Industries for shares of Industries. Subsequent to this transaction the Company owned 99.7% of Industries. As these were a continuation of the August 10, 1999 reorganization, no goodwill was recorded and only an adjustment to additional paid-in capital has been made for the resultant differences in par value of the shares. As a result of the Industries' stockholders' deficit, the minority interest has been reduced to zero with a corresponding offset to equity. During 2001, the Company began its software development operation in Bombay, India through the creation of its subsidiary, DDI-India. The Company has a 96.6% interest in DDI-India, with a minority interest of 3.4%. NOTE 5. RELATED PARTY TRANSACTIONS Webpulse Acquisition On October 31, 2001, the Company purchased Webpulse Consulting, Inc. in exchange for 1,770,000 shares of its common stock from, among others, the controlling shareholder of Webpulse (Mrs. Mody) who is the wife of a director of the Company, who is also its president and treasurer (see Note 1). The acquisition was accounted for as purchase and accordingly, the aggregate purchase price was allocated to the underlying assets and liabilities based upon their respective fair values at the date of the acquisition. The excess of the cost over the fair value of the net assets acquired (goodwill) was determined to be $11,221. The following proforma information gives the effect of the acquisition on the Company's continuning operating results and basic and diluted loss per share as if the acquisition had taken place on January 1, 2000: (Continued) [F-14] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2001 2000 Revenue $ 38,124 $ 11,600 Expenses and other items, net 1,066,684 856,652 --------- --------- Net loss $ (1,028,560) $ (845,052) ========= ========= Loss per share - basic and diluted $(0.05) $(0.05) Mrs. Mody received 1,100,000 shares of the Company's common stock and Mr. Shrikant Mehta, a director of the Company and a relative of Mrs. Mody, received 150,000 shares. Exclusive Distribution Agreement In September 2001, the Company entered into an exclusive distribution agreement with Realtime Access, Inc. ("RTA"), a U.S. corporation with facilities in Livermore, California and New Delhi, India, which is engaged in the manufacture of platforms which enable local telephone companies to provide fast access DSL services to their customers over existing copper wire infrastructure, giving the Company exclusive rights to market RTA's products in certain world markets. Both Shrikant Mehta, a director of the Company, and Sanjay Mody, a director, president and treasurer of the Company, are shareholders and directors of RTA. There were no transactions between the Company and RTA in the year ended December 31, 2001. Sale of Unregistered Shares In December 2001, the Company completed the sale of 1,250,000 shares of its common stock at $.08 per share and the sale of $400,000 of its 10% convertible subordinate debentures to Alexander Ammosov of Linkcapital Business Consulting, Ltd., of Moscow, Russia ("Linkcapital") who subsequently became a director of the Company in March 2002. Linkcapital holds a 49% interest in marketing operations in Russia engaged in by the Company pursuant to the above described exclusive distribution agreement. The Company's president and a director are also RTA directors and shareholders. Finder's Fee In December 2001 and 1999, the Company issued 18,960 and 121,712 shares, respectively, of its common stock to James Wolff, a director of the Company, as a finder's fee in connection with the August 1999 Business Combination, as discussed in Note 8. Private Placement Sanjay Mody acquired 750,000 of the Company's common stock pursuant to a private placement completed in 2000 (see Note 9). Consulting Agreement During the year 2000 the Company paid the management of EagleView Technologies, Inc. $70,000 for consulting fees. (Continued) [F-15] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6. CONVERTIBLE PREFERRED STOCK The Company has 1,000,000 authorized shares of preferred stock, par value $1. The Board of Directors of the Company has the authority to issue the shares in one or more series and to fix the assignation preferences, powers and other rights, as it deems appropriate. On December 19, 2001, the Board established a Series C Convertible Preferred Stock of 60,000 shares. Series A and B were issued and retired in prior years. Upon approval by the shareholders of a Certificate of Amendment increasing the number of authorized common shares to a number sufficient for conversion of all outstanding shares of preferred stock and upon filing of the Certificate of Amendment with the New York Secretary of State, each share of preferred stock will be automatically converted to 125 shares of common stock (adjusted for future stock splits). Each preferred share shall have 125 votes (adjusted for future stock splits) and the same voting rights as common stock. On December 19, 2001 the Company issued 10,000 shares of preferred stock to its president and his spouse in exchange for 1,250,000 shares of common stock. NOTE 7. COMMON STOCK The Company has 20,000,000 authorized shares of common stock, par value $ .05. The common stock has one vote per share for the election of directors and all other matters submitted to a vote of stockholders. On December 27, 2001, the Company issued 1,250,000 shares of common stock for $100,000 to the holder of the Convertible Subordinated Debentures (see Note 6). NOTE 8. BUSINESS COMBINATION On August 10, 1999, DDI acquired 80.7% of the outstanding common stock of EagleView Industries, Inc. ("Industries") pursuant to a Stock Exchange Agreement (the "Agreement"). DDI issued 8,051,340 shares of its common stock to certain stockholders of Industries on a two for one basis plus 121,712 shares of common stock as a finder's fee to an individual. The Agreement also provides that within thirteen months following the closing date, DDI will offer to exchange additional shares of common stock for the balance of Industries common stock and that DDI will issue, as an additional finder's fee, such number of shares which will equal 1% of the common shares issued in exchange for the balance of the Industries common stock. As a result of this transaction, control of DDI was changed and at December 31, 1999, shareholders of Industries owned approximately 60% of DDI. For accounting purposes, the acquisition has been treated as a recapitalization of Industries with Industries as the acquirer (reverse acquisition), and consequently, no goodwill has been recorded on the merger. The share amounts of Industries have been retroactively restated to reflect the conversion, on a two for one basis, with an adjustment to additional paid-in capital for the resultant differences in par value. Prior to the reorganization, DDI had 4,119,902 shares outstanding. (Continued) [F-16] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company recorded stock-based compensation related to the finder's fee based upon the trading prices of the common stock exchanged. During the years ended December 31, 2001 and 2000, as part of the Agreement the Company exchanged 182,460 and 1,713,640 shares of its common stock for 91,230 and 856,820 shares of Industries common stock, respectively, held by minority shareholders. In addition, during the year ended December 31, 2001, the Company issued 18,960 shares as a finder's fee to James Wolff, a director of the Company, in connection with the minority interest exchange. As this is a continuation of the Agreement adjustments to additional paid-in capital were made for the differences in par value. NOTE 9. PRIVATE PLACEMENT During the year 2000, the Company offered in a private placement, shares of its common stock at a price of $1 per share. The shares were offered on a "best efforts" basis with no minimum and as a result the Company issued an aggregate of 3,156,810 shares with total proceeds of $3,156,810. Sanjay Mody, the Company's President and Chief Executive Officer, acquired 750,000 shares in the transaction. NOTE 10. STOCK OPTION PLAN In 2001, the Company's Board approved the establishment of a stock option plan, the 2001 Stock Option Plan, to provide incentives to attract future employees and retain existing key employees with the Company. The Plan, which is subject to shareholder approval within 12 months, allows the Company to grant options for up to 2,000,000 shares of common stock to employees, officers and directors. The option price is the market price at the date of grant. Mr. Sanjay Mody was granted options to purchase 500,000 shares of common stock at the current market price, exercisable upon the effective date of obtaining approval to increase the authorized number of shares, and subject to shareholder approval. Vesting of the options shall be over two years. No compensation was recorded for the 500,000 options granted in 2001 because the amount would be immaterial since the options were granted at amounts equal to market, and are subject to shareholder approval in year 2002. (Continued) [F-17] DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 11. SUPPLEMENTAL CASH FLOW INFORMATION Period From February 5, 1998 Year Ended (Inception) to December 31, December 31, 2001 2000 2001 Supplemental cash flows: Interest paid during period $ 167 $ 121 $ 288 ===== ==== ===== Taxes paid during period $ 3,458 $ 527 $ 4,512 ===== ==== ===== Supplemental noncash activities: Common stock issued in connection with acquisition of minority interest $ 9,123 $ 85,681 $ 94,804 ===== ====== ====== Common stock issued for services $ 73,034 $ - $ 164,318 ====== ===== ======= Preferred stock issued in exchange for common stock $ 10,000 $ - $ 10,000 ====== ===== ======= Assets acquired and liabilities assumed in connection with recapitalization: Assets acquired $ - $ - $ 402,029 Liabilities assumed - - (197,700) ------ ----- ------- $ - $ - $ 204,329 ====== ===== ======= Common stock issued in connection with acquisition of Webpulse - (See Note 5) 1,770,000 shares at fair value $ 88,500 $ - $ 88,500 ====== ==== ======= Net assets acquired: Assets other than cash 88,436 - 88,436 Cash received on acquisition 13,117 - 13,117 Liabilities assumed (24,274) - (24,274) ------- ---- ------- 77,279 - 77,279 ------ ---- ------- Goodwill $ 11,221 $ - $ 11,221 ======= ==== ======= NOTE 12. DISCONTINUED OPERATIONS On July 2, 2001, the Board of Directors of the Company approved the discontinuation of its wireless ISP business operations and ceased operations on that day. Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business," the accompanying financial statements were reclassified to reflect the disposition. The net operating results, net assets and net cash flows of this business have been reported as discontinued operations as follows: (Continued) [F-18] DISTINCTIVE DEVICES, INC AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2001 2000 Net assets $ 272,415 $ 419,407 ======= ======= Loss from discontinued operations $ - $(988,063) ======= ======= Loss on disposal of discontinued assets $(353,472) $ - ======= ======= Net cash flow used by discontinued operations $(353,472) $(988,063) ======= ======= NOTE 13. RELOCATION OF OFFICES During 2001 the Company closed its offices in Delray Beach, Florida, Union City, New Jersey and New York City, New York, and relocated its operations to Fort Lee, New Jersey. Cost associated with the termination of leases due to the relocation is not determinable at this time (see Note 16). NOTE 14. GOING CONCERN As shown in the accompanying financial statements, the Company incurred net losses of $1,333,902, $1,783,914 and $3,724,775 during the years ended December 31, 2001, 2000 and for the period from February 5, 1998 (inception) to December 31, 2001, respectively. The Company's working capital of $889,682 is not sufficient to fund continuing operations at the current level. These factors create substantial doubt about the Company's ability to continue as a going concern. Management of the Company is considering acquiring or merging with an operating company, commencing new operations, reducing expenses, and obtaining financing through issuance of debt and stock. The ability of the Company to continue as a going concern is dependent on its ability to continue to obtain financing, the successful implementation of management's plan and the establishment of profitable operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. NOTE 15. INCOME TAXES The provision for income tax (benefit) for the years ended December 31, 2001 and 2000 was $300,000 and $675,000, respectively. The Company has recorded a full valuation allowance with respect to any future tax benefits due to the uncertainty of their ultimate realization. The net increase in the valuation allowance was $500,000, $675,000 and $1,400,000 for the years ended December 31, 2001 and 2000, and the period from February 5, 1998 (inception) to December 31, 2001, respectively. The deficit accumulated during the development stage, February 5, 1998 (inception) through December 31, 2001, is approximately $3,700,000. (Continued) [F-19] DISTINCTIVE DEVICES, INC AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 16. COMMITMENTS AND CONTINGENCIES Operating Leases The Company is the lessee in various noncancellable operating leases for facilities located in New Jersey, New York and Florida. In Fort Lee, New Jersey, the lease is for a period of five years beginning June 1, 2000, at an annual rent of $62,100 plus escalation for increases in operating costs, fuel and real estate taxes, payable $5,175 monthly plus escalations. In New York, the Company leases office space that was intended to be used as a relay point for its microwave transmissions. The lease for this space was to expire in 2010, but the space was vacated and the lease surrendered in May 2001. The Company leased space for its head office in Delray Beach, Florida. The lease calls for monthly payments of $3,800 and expires in 2004, but was terminated in 2001. Future minimum lease payments for each year of the remaining years are as follows: Year Ending December 31, Minimum Lease Payment 2002 $ 62,100 2003 62,100 2004 62,100 2005 31,050 ------- $217,350 ======= Other Leases The Company vacated three locations during 2001 and has terminated two of the subject leases. Attempts continue to formally terminate the third lease. The cost to do so (if any) is not determinable at this time. Rent expense aggregated $180,164, $180,317 and $379,915 for the years ended December 31, 2001 and 2000, and the period from February 5, 1998 (inception) to December 31, 2001, respectively. In addition, DDI India occupies facilities on a month-to-month basis with lease terms and rates currently being negotiated. (Continued) [F-20] DISTINCTIVE DEVICES, INC AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 17. NEW ACCOUNTING PRONOUNCEMENTS In June 2001 the Financial Accounting Standards Board ("FASB") issued two new statements of accounting, SFAS No. 141 "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." Although the provisions of SFAS 141 were effective June 30, 2001, management has determined that the Statement did not have a material impact on the Company's financial position or results of operations. In June 2001, the FASB issued SFAS No. 143, "Accounting for Assets Retirement Obligations" and in August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Both statements are effective in 2002. Management is assessing the effect of these statements on the Company's future operations. NOTE 18. RISK OF LOSS The Company's maximum risk of loss is the sum of the carrying amount of receivables from customers, deposits with financial institutions above FDIC insured limits, and assets of its foreign subsidiary. Such risk of loss aggregated approximately $640,000 at December 31, 2001. NOTE 19. SUBSEQUENT EVENT In January 2002, the Company organized International Gemsource Inc. to be based in Fort Lee, New Jersey, which will operate as a subsidiary of the Company engaging in the trading of rough and polished gemstones. [F-21] PART III Item 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Positions Held and Family Name Age Duration of Service Relationship Sanjay S. Mody 44 Director since 2000 See Note President and CEO Treasurer and CFO since May 2001 Alexander Ammosov 37 Director since None March 2002 Earl M. Anderson, Jr. 77 Director since 1982 None Secretary since 2000 Walter E. Freeman 77 Director since 1983 None Shrikant C. Mehta 59 Director since 2001 See Note James W. Wolff 60 Director since 2000 None Note: Mr. Mehta is Mr. Mody's uncle. The term of office of all directors will expire at the next Annual Meeting of Stockholders and when their respective successors have been duly elected and qualified. Officers serve at the pleasure of the directors. The board has no standing committees but plans to establish an Audit Committee and a Compensation Committee. The following provides a brief account of their principal occupations during the past five years. Mr. Mody joined the Company as a director in March 2000 and assumed his current position as Chief Executive Officer and Chief Financial Officer in May 2001. He served since 2000 as President of Webpulse Consulting, Inc. (a subsidiary of the Company since October 2001). Previously, he served for four years as a Vice President of Laidlaw Global Securities, Inc., New York City. He holds equity interests in, and serves as a director of, Caprius, Inc. (OTCBB: CAPR), a manufacturer of diagnostic test kits, and several closely-held technology companies in the U.S. and his native India. [11] Mr. Ammosov is the Deputy Chairman of "COPF" Bank and Chairman of Linkcapital Business Consulting, Ltd., both headquartered in Moscow, Russia, and has been so involved for the past five years. "COPF" is a securities brokerage firm where Mr. Ammosov supervises financing of new Bank projects. Linkcapital is a diversified holding company with interests in oil distribution, aircraft sales, retail food chains, tourism, diamond production, and pension fund management. Mr. Anderson has acted as an independent management consultant for more than thirty years. He served as the Company's President for twenty years, prior to the DDI/Industries stock exchange transaction in August 1999. He is a director of Sunair Electronics, Inc.(AMEX: SNR), a company engaged in the production of high frequency radio equipment and systems. Mr. Freeman has acted as a financial consultant and bank management advisor in the Washington, D.C. area for more than five years. Mr. Mehta has served for more than five years as CEO and president of Combine International, Inc., a major jewelry manufacturer, and Internet Operations Center, Inc., engaged in web hosting and Internet professional services. He is the founder of both companies and both are based in the Detroit, Michigan area. He is also a founder and director of Inknowvator, Inc. I*Logic, Inc., the POM Group, Inc. and Lenderlive.com, all closely-held corporations. Also, he serves as a director of Caprius Inc. (OTCBB: CAPR). Mr. Wolff's background is in commercial banking, in New York and Florida. During the past five years he has been involved in venture capital activities in Florida as president of First Internet Capital, Inc., of Boca Raton. He acted as the finder in the DDI/Industries stock exchange transaction in August 1999. Based solely upon a review of information furnished to the issuer during the most recent fiscal year, including written representations, no director, officer or beneficial owner of more than 10% of issuer's common stock failed to file reports required by Section 16(a) of the Exchange Act during the most recent fiscal year, or prior years, except that Mr. Wolff, a director, failed to file Form 4 reports with respect to the sale of common stock during 2001. [12] Item 10. EXECUTIVE COMPENSATION The following table sets forth compensation paid or accrued to the chief executive officer. No director or officer received compensation exceeding $100,000 for any of the last three completed fiscal years. SUMMARY COMPENSATION TABLE Name and Principal Fee or Other Position Period Salary Compensation Total James W. Wolff Jan.-May $46,200 None $46,200 President and CEO 2001 Sanjay S. Mody May-Dec. $65,000 None $65,000 President and CEO 2001 Compensation does not include benefits which may be deemed personal, the amount of which cannot be precisely determined. No stock options or stock appreciation rights were granted in 2001 nor are any stock option or SARs outstanding. In 2001, directors approved the issuance of an option to Mr. Mody to purchase 500,000 shares of common stock. The option and its terms are subject to shareholder approval at the next meeting of stockholders. No compensation was paid for directors' services in 2001. Four board meetings were held during the year at which attendance was 100%. Other matters requiring board action were taken by unanimous written consent of directors, in lieu of a meeting. The Company has had no formal compensatory plan or contract with respect to the employment, resignation, retirement or termination of any director or officer, nor arising from a change in control of the Company. Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding DDI's Common Stock owned on February 28, 2002 (i) by each person who is known to DDI to own beneficially more than 5% of DDI's Common Stock, (ii) by each of DDI's directors and officers and (iii) by all directors and officers as a group: [13] Percent of Name of Number of Shares Outstanding Beneficial Owner Beneficially Owned (1) Shares (2)(5) Alexander Ammosov (3) 1,750,000 9.1% Earl M. Anderson, Jr. 835,800 4.4% Walter E. Freeman (4) 25,780 * Shrikant C. Mehta 150,000 * Sanjay S. Mody (5) 2,050,000 10.1% James W. Wolff (6) 42,620 * EagleView Technologies, Inc.(7) 1,513,914 7.9% PMB 271 5030 Champion Blvd. Boca Raton, FL 33436 Directors and officers as a group (6 persons) 4,854,200 23.8% *less than 1% (1) Unless otherwise noted, we believe that the beneficial owners have sole voting and investment power with respect to their shares. (2) There are 19,134,824 shares of Common Stock outstanding. In addition, there are 10,000 shares of Series C Convertible Preferred Stock outstanding. At such time as the shareholders approve an increase in common share capital, the 10,000 preferred shares will be automatically converted into 1,250,000 shares of Common Stock. Prior to such conversion, holders of preferred shares have 125 votes per share of Preferred Stock at any meeting of shareholders (see Note 6 to the within financial statements). (3) Mr. Ammosov holds 500,000 shares directly and 1,250,000 shares indirectly, through a company he controls. (4) Includes shares held by Mr. Freeman's wife as to which Mr. Freeman disclaims beneficial ownership. (5) Includes 9,000 preferred shares held by Mr. Mody's wife which are convertible into 1,125,000 shares of common stock. Mr. Mody disclaims ownership with respect to these shares. Mr. Mody also holds 1,000 preferred shares directly, which are convertible into 125,000 common shares. Preferred shares may not be converted until additional common shares are authorized by a meeting of stockholders, at which time the preferred shares will be automatically converted to common. The percent of outstanding shares held by Mr. Mody assumes the conversion to common stock of the preferred shares held by Mr. Mody and his wife. [14] (6) Shares are held by a company controlled by Mr. Wolff. (7) EagleView Technologies, Inc. is controlled by Mr. Paolini, a former president and director of DDI and Industries. The address for all individuals listed above is c/o Distinctive Devices, Inc., One Bridge Plaza, Suite 100, Fort Lee, New Jersey 07024. Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There have been no transactions during the past two years, nor have any been proposed, to which the Company was or is to be a party and in which any director, officer, or five percent security holder had, or is to have, a direct or indirect material interest, except for the following: (i) Mr. Wolff, a director, received 18,960 common shares in 2001 as finder's compensation related to the 2000 and 2001 exchange of DDI Common Stock for the remaining shares of Industries, as more fully described in Item 5 of this Report; (ii) In September 2001 an exclusive distribution agreement was entered into with RTA whereunder DDI is marketing RTA products in Bulgaria, Russia, Turkey and Ukraine. Messrs. Mehta and Mody are shareholders and directors of RTA; (iii) Of the 1,770,000 shares of DDI common stock exchanged for 100% of Webpulse's outstanding shares on October 31, 2001 (see Item 5 of this Report), the wife of Mr. Mody, DDI's president and a director, received 1,100,000 shares and Mr. Mehta, a director, received 150,000 shares; (iv) In December 2001, Mr. Mody and his wife transferred 1,250,000 shares of DDI Common Stock to the Company in exchange for 10,000 shares of newly-authorized Series C Convertible Preferred Stock, as more fully described in Item 5 of this Report; and, (v) In December 2001, Link Assets Limited, a Russian organization controlled by Mr. Ammosov, who became a director in 2002, purchased for cash 1,250,000 common shares of DDI at $.08 per share and $400,000 principal amount of DDI 10% Convertible Subordinated Debentures. For further information please refer to Item 5 of this Report and Notes 5 and 9 to the within financial statements. [15] Item 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 The Certificate of Incorporation of Registrant consists of the Restated Certificate of Incorporation dated June 21, 1965 and Certificates of Amendment thereof dated October 21, 1969, August 1, 1973, September 9, 1974, and August 25, 1976, which are incorporated herein by reference to Exhibit 3(a) to Registrant's Annual Report on Form 10-K for the year ended February 28, 1981. 3.2 Certificate of Amendment of the Certificate of Incorporation dated September 16, 1983, is incorporated herein by reference to Exhibit 3(a) to Registrant's Annual Report on Form 10-K for the year ended February 29, 1984. 3.3* Certificate of Amendment of the Certificate of Incorporation dated December 26, 2001. 3.4 By-Laws of Registrant are incorporated herein by reference to Exhibit 3(b) to Registrant's Annual Report on Form 10-K for the year ended February 28, 1981. 3.5 Amendment to the by-laws of Registrant dated November 20, 2000, is incorporated herein by reference to Exhibit 3(b) to Registrant's Annual Report on Form 10-KSB for the year ended December 31, 2000. 4.1 The Common Stock Certificate of Registrant is incorporated by reference to Exhibit 4(a) to Registrant's Annual Report on Form 10-K for the year ended February 28, 1981. 10.1 Stock Purchase Agreement, dated as of October 26, 2001, between Registrant and the stockholders of Webpulse Consulting, Inc., is incorporated herein by reference to Exhibit 2 in Form 8-K for an event of October 31, 2001. 10.2* 10% Convertible Subordinated Debenture, dated December 27, 2001, in the principal amount of $400,000. 10.3* Exclusive Distributor Agreement dated September 1, 2001, between Registrant and RealTime Access, Inc. 10.4* Lease agreement, dated May 8, 2000, between Registrant's subsidiary Webpulse Consulting, Inc., and Bridge Plaza Realty Associates L.L.C. with respect to Registrant's occupancy of premises in Ft. Lee, New Jersey. 21* Subsidiaries of the Registrant *Filed herewith [16] (b) Reports on Form 8-K A Report on Form 8-K was filed, dated May 15, 2001, reporting in Item 5 the election of Mr. Mody as President, CEO, Treasurer and CFO of Registrant and the addition of two directors. A Report on Form 8-K was filed, dated October 23, 2001, reporting in Item 4 a change in Registrant's independent accountants. A Report on Form 8-K was filed, dated October 31, 2001, reporting in Item 2 the exchange of Registrant's Common Stock for all outstanding shares of Webpulse Consulting, Inc. (c) Index of Exhibits filed herewith. Exhibit Number 3.3 Certificate of Amendment of the Certificate of Incorporation dated December 26, 2001. 10.2 10% Convertible Debenture, dated December 21, 2001, in the principal amount of $400,000. 10.3 Exclusive Distributor Agreement, dated September 1, 2001, between Registrant and RealTime Access, Inc. 10.4 Lease Agreement, dated May 8, 2000, between Registrant's subsidiary, Webpulse Consulting, Inc. and Bridge Plaza Realty Associates L.L.C. with respect to the Registrant's occupancy of premises in Fort Lee, New Jersey. 21 Subsidiaries of the Registrant. Exhibit 21. Subsidiaries of the Registrant Jurisdiction of S. Subsidiaries Incorporation Ownership Webpulse Consulting, Inc. New Jersey 100% Distinctive Devices (India), PLC India 96.6% International Gemsource Inc. Delaware 100% EagleView Industries, Inc. (inactive) Florida 99.7% [17] SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DISTINCTIVE DEVICES, INC. (Registrant) March 29, 2002 by: /s/ SANJAY S. MODY Sanjay S. Mody President and Treasurer Chief Executive Officer Chief Financial Officer In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. March 29, 2002 /s/ ALEXANDER AMMOSOV Alexander Ammosov Director March 29, 2002 /s/ EARL M. ANDERSON, JR. Earl M. Anderson, Jr. Director March 29, 2002 /s/ WALTER E. FREEMAN Walter E. Freeman Director MARCH 29, 2002 /s/ SHRIKANT C. MEHTA Shrikant C. Mehta Director March 29, 2002 /s/ SANJAY S. MODY Sanjay S. Mody Director March 29, 2002 /s/ JAMES W. WOLFF James W. Wolff Director [18] EX-3 3 crtamdt.txt CERT OF AMENDMENT Exhibit 3.3 CERTIFICATE OF AMENDMENT OF DISTINCTIVE DEVICES, INC. (Pursuant to Section 805 of the New York Business Corporation Law) Pursuant to the provisions of Section 805 of the Business Corporation Law, the undersigned hereby certifies as follows: 1. The name of the corporation is Distinctive Devices, Inc., a corporation organized and existing under the laws of the State of New York (the "Corporation"). The Corporation was formed under the name of Leasatronic Machine Corp. 2. The Certificate of Incorporation of the Corporation was filed by the Department of State on May 5, 1961. 3. The Certificate of Incorporation of the Corporation, as now in full force and effect, is hereby amended by the addition to Article THIRD of a provision stating the number, designation, relative rights, preferences and limitations of a Series C Preferred Stock of the par value of $1.00 each, as fixed by the Board of Directors before the issuance of such Series, under authority vested in the Board of Directors in the Certificate of Incorporation, and as permitted by Section 502 of the Business Corporation Law, as follows: (f) Series C Preferred Stock There is hereby created a series of preferred shares of the corporation designated 'Series C Preferred Stock' consisting of 60,000 shares (hereinafter called the 'Series C Preferred Stock'). Such number of shares constituting the Series C Preferred Stock may be increased or decreased from time to time by the Board of Directors, in accordance with the authority contained in the Certificate of Incorporation, in respect of any unissued shares of such series, provided that the aggregate number of shares constituting such series, together with all other series of preferred shares, shall in no event exceed the aggregate number of shares of preferred stock authorized in this Certificate of Incorporation. The relative rights, preferences and limitations of the Series C Preferred Stock are as set forth in the Certificate of Incorporation as heretofore amended, and, in addition, are as follows: (1) General. All shares of Series C Preferred Stock shall be identical with each other in all respects. All shares of Series C Preferred Stock shall be of such rank as to any other outstanding series of Preferred Stock, if any, of the Corporation as to dividends and as to distributions upon liquidation, dissolution or winding up, as shall be provided herein and in the resolutions of the Board of Directors of the Corporation creating such other series of Preferred Stock. (2) Conversion. (i) Conversion. Following the approval by the Corporation's shareholders of an amendment to the Certificate of Incorporation increasing the number of authorized shares of Common Stock to a number sufficient for conversion of all of outstanding shares of Series C Preferred Stock into authorized but unissued shares of Common Stock (the "Certificate Amendment"), and effective on the date that the Certificate Amendment is filed with the New York Secretary of State, each outstanding share of Series C Preferred Stock shall automatically be converted into shares of Common Stock at the rate (the "Conversion Rate") of one hundred and twenty five (125) shares of Common Stock for each one (1) share of Series C Preferred Stock. The date of such conversion is referred to herein as the "Conversion Date". (ii) Adjustment. In the event of a stock split (forward or reverse), stock dividend, reorganization, recapitalization or other event affecting the Common Stock or the Series C Preferred Stock, the Board of Directors of the Corporation shall make an equitable adjustment in the Conversion Rate, if necessary, to reflect such event in order to preserve the foregoing Conversion Rate. In the case of any capital reorganization of the Corporation, or any consolidation or merger of the Corporation with or into another corporation, or any sale or conveyance to another corporation of all or substantially all of the property of the Corporation, the holder of each share of Series C Preferred Stock then outstanding shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock of the Corporation into which such share of Series C Preferred Stock might have been converted immediately prior to such reorganization, consolidation, merger, sale or conveyance, and shall have no further conversion rights under these provisions; and any such resulting or surviving corporation shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities or property as the holders of the Series C Preferred Stock shall be entitled to receive pursuant to the provisions hereof. In the case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this subparagraph (ii) to Common Stock shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities or property. The provisions of this subparagraph shall apply to successive stock splits, stock dividends, reorganizations, recapitalizations or other events affecting the Common Stock or the Series C Preferred Stock. Whenever onversion Rate and/or the securities issuable upon conversion is adjusted as herein provided, the Corporation shall give notice to the holders of the Series C Preferred Stock of such adjustment setting forth the new Conversion Rate and the number of shares of Common Stock (or other securities) issuable upon conversion and a brief statement of the facts requiring such adjustment and the computation by which such adjustment was made. (iii) Procedure for Conversion. Immediately following the Conversion Date, the Corporation shall send notice to each holder of Series C Preferred Stock advising the holder of the conversion and requesting that the holder surrender at the principal office of the Corporation (or at such other place as the Board of Directors of the Corporation shall have designated for such purpose) the certificate or certificates for the holder's shares of Series C Preferred Stock properly endorsed in blank for transfer or accompanied by a proper instrument of assignment or transfer in blank and bearing any necessary transfer tax stamps thereto affixed and cancelled, together with a written request stating the name or names in which the holder wishes the certificate or certificates for shares of Common Stock to be issued. Promptly after receiving the documents specified in the immediately preceding sentence, the Corporation shall cause the transfer agent to deliver to such holder of Series C Preferred Stock or to the holder's nominee or nominees, a certificate or certificates for the number of full shares of Common Stock to which the holder shall be entitled as aforesaid. (iv) No Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of Series C Preferred Stock. In lieu of fractional shares, the number of shares of Common Stock issuable upon conversion shall be rounded up or down to the nearest whole share of Common Stock. (v) Effect of Conversion. All shares of Series C Preferred Stock which shall have been converted as provided in this Paragraph (2) shall no longer be deemed to be outstanding as of the Conversion Date and all rights with respect to such shares shall forthwith cease and terminate except for the right of the holders thereof to receive full shares of Common Stock, and such shares shall return to the status of authorized but unissued Preferred Stock of no designated series and shall not be issuable by the Corporation as Series C Preferred Stock. (3) Voting Rights. (i) Generally. Except as set forth in Subparagraph (ii) below, (x) the holder of each issued and outstanding share of Series C Preferred Stock shall have the right to cast one hundred and twenty five (125) votes (or such other votes per share equal to the Conversion Rate on the record date for voting) on every matter duly brought before the holders of Common Stock at all meetings of shareholders of the Corporation to be held prior to the Conversion Date; and (y) the holders of Series C Preferred Stock and the holders of Common Stock shall vote together as one class on all matters submitted to a vote of the shareholders of the Corporation. (ii) Separate Vote. The holders of a majority of the outstanding Series C Preferred Stock, voting as a separate class and having one vote per share, shall be required to approve: (a) the amendment of the terms and conditions of the Series C Preferred Stock; (b) the issuance of any securities with rights, preferences and privileges (the "Preferences") superior to the Preferences of the Series C Preferred Stock; or (c) the redemption of any Common Stock of the Corporation. (4) Dividends. The holder of each issued and outstanding share of Series C Preferred Stock shall have the right to participate in all dividends declared with respect to the Common Stock, on an as converted to Common Stock basis, as determined on the date on which any such dividends are declared. (5) Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation (a "Liquidation"), the holders of the Series C Preferred Stock shall be entitled to participate together with the holders of the Common Stock on a basis as though each outstanding share of Series C Preferred Stock were converted into Common Stock at the Conversion Rate in effect on the date the Liquidation takes place. Neither the consolidation or merger of the Corporation into or with another corporation or corporations, nor the sale of all or substantially all of the Corporation's assets, nor the distribution to the shareholders of the Corporation of all or substantially all of the consideration for such sale, unless such consideration (apart from assumption of liabilities) or the net proceeds thereof consists substantially in cash, shall be deemed a Liquidation. (6) Redemption. The holders of the Series C Preferred Stock shall have no right to require the Corporation to redeem all or any part of their shares of Series C Preferred Stock. 4. This amendment was authorized by the Board of Directors at a duly held meeting of the Board. IN WITNESS WHEREOF, the undersigned has caused this Certificate of Amendment to be executed by a duly authorized officer on the 20th day of December, 2001. /s/ Sanjay Mody Name: Sanjay Mody Title: President EX-10 4 convdeb.txt 10% CONV. DEBENTURE EXHIBIT 10.2 THIS DEBENTURE AND THE SHARES OF COMMON STOCK UNDERLYING THIS DEBENTURE (COLLECTIVELY, THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT OR IN A TRANSACTION THAT, IN THE OPINION OF COUNSEL TO DISTINCTIVE DEVICES, INC., QUALIFIES AS AN EXEMPT TRANSACTION UNDER SUCH ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. No. 1 US $ 400,000. Dated: December 27, 2001 DISTINCTIVE DEVICES, INC. 10% CONVERTIBLE DEBENTURE FOR VALUE RECEIVED, Distinctive Devices, Inc., a New York corporation (the "Company"), hereby promises to pay to the order of LINK ASSETS LIMITED, a limited liability company under the laws of the Isle of Jersey, the registered holder hereof (the "Holder"), the principal sum of Four Hundred Thousand US Dollars (US $400,000) five (5) years from the date hereof (the "Maturity Date") and to pay interest on the principal sum outstanding, at the rate of ten percent (10%) per annum, semi-annually on the last day of June and December, commencing June 30, 2002 until maturity or otherwise satisfied in full. All interest will be paid to the person in whose name this Debenture (or one or more predecessor Debentures) is registered on the records of the Company regarding registration and transfers of the Debentures (the "Debenture Register"), provided, however, that the Company's obligation to a transferee of this Debenture arises only if such transfer, sale or other disposition is made in accordance with the terms and conditions of the Subscription Agreement executed by the original Holder. Subject to the provisions herein, the principal of, and interest on, this Debenture are payable at the address last appearing on the Debenture Register of the Company as designated in writing by the Holder from time to time. This Debenture is one of a duly authorized issue of up to $2,400,000 in principal amount of Debentures of the Company, designated as 10% Convertible Debenture (hereinafter the "Debentures"). The Debentures were initially issued as part of a private placement by the Company of up to 600,000 units (the "Units") pursuant to the terms of a Subscription Agreement, among the Company and the original Holders. Each Unit consisted of (i) $4.00 principal amount of Debentures and (ii) shares of Common Stock, $.05 par value, of the Company (the "Common Stock"). This Debenture is subject to the following additional provisions: 1. Exchanges. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange. 2. Transfer. This Debenture has been issued subject to investment representations of the original Holder hereof and may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (the "Securities Act"), and other applicable state and foreign securities laws. The Holder shall send the form of Assignment attached hereto as Exhibit A duly executed with the Debenture to the Company. In the event of any proposed transfer of this Debenture or issue of shares of Common Stock upon conversion hereof to a person other than the Holder, the Company may require, prior to issuance of a new Debenture or the shares of Common Stock in the name of such other person, that it receive reasonable transfer documentation, including opinions, that the issuance of the Debenture or the shares of Common Stock in such other name does not and will not cause a violation of the Securities Act or any applicable state or foreign securities laws. Prior to due presentment for transfer or conversion of this Debenture, the Company and any agent of the Company may treat the person in whose name this Debenture is duly registered on the Company's Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. 3. Conversion. 3.01 Right to Convert. The Holder of this Debenture is entitled, at his option, to convert at any time commencing upon the date hereof and continuing until the Debenture is repaid in full or as provided in Article 4 herein, all or part of the then outstanding principal amount of this Debenture into shares of Common Stock of the Company (the "Conversion Shares"), at a conversion price for each share of Common Stock (the "Conversion Price") based upon the year from initial issuance during which the Company receives the notice of conversion (the "Conversion Notice"), as set forth below, subject to adjustment pursuant to Section 5 hereof: Year Conversion Price Per Share ---- -------------------------- First $0.25 Second $0.37 1/2 Third $0.50 Fourth $0.62 1/2 Fifth $0.75 Unpaid interest, if any, accrued or accruing from the date of issuance to the Conversion Date (as defined) shall, at the option of the Company, be paid in cash or shares of Common Stock upon conversion at the then Conversion Price. No fraction of shares or certificate representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. 3.02 Notice of Conversion. Conversion shall be effectuated by surrendering the Debentures to be converted to the Company with the form of Conversion Notice attached hereto as Exhibit B, executed by the Holder of the Debenture evidencing the Holder's intention to convert this Debenture. The date on which notice of conversion is duly given (the "Conversion Date") shall be deemed to be the date on which the Holder has delivered this Debenture, with a duly executed Conversion Notice, to the Company. As soon as practicable after receipt of the aforementioned documents, the Company shall issue and deliver to the Holder (or such other person designated in the Conversion Notice), a certificate or certificates for the full number of shares of Common Stock issuable upon the conversion. 3.03 Partial Conversion. If less than the entire principal amount of this Debenture is to be converted, upon the conversion the Company shall issue a new Debenture to the Holder in a principal amount equal to unconverted principal amount of this Debenture when converted. 3.04 Reservation of Shares. The Company shall reserve out of its authorized but unissued shares of Common Stock (or shares held in treasury) enough shares of Common Stock to permit the conversion of this Debenture upon shareholder approval of an increase in the number of authorized shares of Common Stock. All shares of Common Stock which may be issued upon conversion of this Debenture shall be validly issued, fully paid and non-assessable. 4. Redemption. 4.01 Right to Redeem. The Company shall have the right to redeem this Debenture at any time, in whole or in part, commencing one (1) year from the date hereof, at a redemption price (the "Redemption Price"), (expressed in percentages of the principal amount) set forth below, plus accrued and unpaid interest to the redemption date (the "Redemption Date"). If redeemed during the periods indicated below, the applicable redemption percentage would be: Year Percentage ---- ---------- Second 105.00% Third 103.75% Fourth 102.50% Fifth 101.25% 4.02 Notice of Prepayment. Notice of prepayment of this Debenture shall be given to the Holder at his address as specified in the Debenture Register at least fifteen (15) days prior to the date fixed for such prepayment. The notice of redemption shall state (i) the Redemption Date, (ii) the Redemption Price, (iii) the Conversion Price and the date that the right to convert would terminate, and (iv) the place where the Debenture is to be surrendered for redemption. Upon notice of prepayment being given as aforesaid, the Company covenants and agrees that it will pay on the Redemption Date the amount payable on the redemption together with all accrued and unpaid interest thereon. 4.03 Debenture to Become Due on Date Called for Redemption. If this Debenture is called for redemption, then this Debenture shall become due and payable on the Redemption Date stated in such notice and shall cease to bear interest on and after such Date, and the only right of the Holder will be to receive the Redemption Price, unless, upon presentation, the Company shall fail to redeem this Debenture. 4.04 Partial Redemption. If less than the principal amount of all outstanding Debentures are to be redeemed, the redemption shall be pro rata on each Debenture equal to the percentage the aggregate redemption amount (excluding accrued and unpaid interest) bears to the aggregate principal amount of all outstanding Debentures. Upon surrender of this Debenture upon a partial redemption, the Company shall issue a new Debenture to the Holder in a principal amount equal to the unredeemed principal amount of this Debenture when surrendered. 5. Anti-dilution. 5.01 Adjustment. The Conversion Price shall be subject to adjustment from time to time as follows: (a) If the number of shares of Common Stock outstanding at any time after the date hereof is increased by a stock dividend or other distribution of securities to the Company's stockholders without consideration (other than a distribution of rights to purchase securities for cash) payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, immediately following the record date fixed for the determination of holders of Common Stock entitled to receive such stock dividend, said other distribution, subdivision or split-up, the number of Conversion Shares and the Conversion Price of this Debenture shall be appropriately adjusted so that the number of Conversion Shares shall be increased and the Conversion Price decreased in proportion to such increase of outstanding shares. (b) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination or reverse stock split of the outstanding shares of Common Stock, then, immediately following the record date for such combination or reverse split, the number of Conversion Shares and the Conversion Price of this Debenture shall be appropriately adjusted so the number of Conversion Shares shall be decreased and the Conversion Price shall be increased in proportion to such decrease in outstanding shares. 5.02 Determination. Any adjustment required by Section 5.01 shall be made by the Company which adjustment shall be conclusive to the Holder. Upon a determination of an adjustment pursuant to this Section, the Company shall send notice to the Holder specifying the new number of Conversion Shares and the Conversion Price, and the reason and calculation for the adjustment. 5.03 Consolidation, Merger and Sale of Assets. If the Company merges or consolidates with another corporation or sells or transfers all or substantially all of its assets to another person and the holders of the Common Stock are entitled to receive stock, securities or property in respect of or in exchange for Common Stock, then as a condition of such merger, consolidation, sale or transfer, the Company and any such successor, purchaser or transferee shall amend this Debenture to provide that it may thereafter be converted on the terms and subject to the conditions set forth above into the kind and amount of stock, securities or property receivable upon such merger, consolidation, sale or transfer by a holder of the number of shares of Common Stock into which this Debenture might have been converted immediately before such merger, consolidation, sale or transfer, subject to adjustments which shall be as nearly equivalent as may be practicable. In the event of any proposed merger, consolidation or sale or transfer of all or substantially all of the assets of the Company (a "Sale"), the Holder hereof shall receive notice from the Company of such Sale at least fifteen (15) days prior to the proposed effective date of the Sale. The notice shall disclose the Holder's rights in respect of such Sale, and have the right to convert by delivering a Notice of Conversion to the Company prior to the effective date of the Sale. 6. Subordination. 6.01 Senior Indebtedness. The rights of the Holder hereof to the principal sum or portion of principal, and the interest due on this Debenture are and shall remain subject and subordinate to the prior payment of the principal of (and premium and fees, if any) and interest on (i) all existing or future obligations of the Company for money borrowed from any bank, trust company or other financial institution engaged in the business of lending money, and (ii) any modifications, renewals, extensions or refundings of the foregoing (hereinafter called the "Senior Indebtedness"). 6.02 Effect of Subordination. Upon receivership, insolvency, assignment for the benefit of creditors (whether or not pursuant to bankruptcy or other insolvency laws), sale of all or substantially all of the assets and liabilities of the Company, (i) no amount shall be paid by the Company in respect of the principal of or interest on this Debenture at the time outstanding, unless and until the principal of and interest on the Senior Indebtedness then outstanding shall have been paid in full, and (ii) no claim or proof of claim shall be filed with the Company by or on behalf of the Holder of this Debenture which shall assert any right to receive any payments in respect of the principal of and interest on this Debenture, except subject to the payment in full of the principal of and interest on all of the Senior Indebtedness then outstanding. 6.03 Rights of Holder. No provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed, nor shall anything herein prevent the Holder from exercising all remedies otherwise permitted to him by applicable law or hereunder upon the occurrence of any Event of Default, subject to the rights, if any, of the holders of Senior Indebtedness. The Holder shall be entitled to assume that no event which would give rise to subordination under this Section 6 has occurred unless the Company or any holder of Senior Indebtedness shall have given notice to the Holder or the Holder has otherwise received notice of such event. This Debenture is unsecured. This Debenture and all other Debentures now or hereafter issued of similar terms are direct obligations of the Company. This Debenture ranks equally with all other Debentures included in the Units, and shall be senior to any other indebtedness of the Company (including trade debt) other than the Senior Indebtedness. 7. Securities Laws. The Holder of the Debenture, by acceptance hereof, agrees that this Debenture is being acquired for investment and that such Holder will not offer, sell or otherwise dispose of this Debenture or the Conversion Shares except under circumstances which will not result in a violation of the Securities Act or any applicable state Blue Sky or foreign laws or similar laws relating to the sale of securities. If at the time of the conversion of this Debenture no registration statement under the Securities Act with respect to the Conversion Shares is in effect, the Holder will make such representations and warranties as were made in the Subscription Agreement regarding his acquisition of the Conversion Shares. 8. Event of Default. 8.01 Events. The existence of any one or more of the following events shall constitute an "Event of Default": (a) the Company shall fail to pay within thirty (30) days of the due date any sum due in respect of principal or interest thereon in respect of this Debenture or any of the other Debentures included in the Units, whether at maturity, by redemption or otherwise; or (b) the Company shall fail to perform or observe, in any material respect, any other covenant, term, provision, condition, agreement or obligation of the Company under this Debenture and such failure shall continue uncured for a period of thirty (30) days after notice from the Holder of such failure; or (c) the Company shall fail to perform or observe, in any material respect, any covenant, term, provision, condition, agreement or obligation of the Company under any Senior Indebtedness and the holder thereof has demanded acceleration of the principal amount of such Senior Indebtedness, and such demand for acceleration shall not have been waived or rescinded; or (d) the Company shall (i) admit in writing its inability to pay its debts generally as they mature; (ii) make an assignment for the benefit of creditors or commence proceedings for its dissolution; or (iii) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; or (e) a trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within ninety (90) days after such appointment; or (f) any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company and shall not be dismissed within ninety (90) days thereafter; or (g) proceedings for bankruptcy, reorganization, insolvency or liquidation proceedings or other relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company and, if instituted against the Company, shall not be dismissed within ninety (90) days after such institution or the Company shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit the material allegations of, or default in answering a petition filed in any such proceeding. 8.02 Remedies. Upon the occurrence and continuation of an Event of Default, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) the holders of not less than a majority of the principal amount of Debentures then outstanding may, by written notice to the Company, declare the Debenture immediately due and payable, without presentment, demand, protest or notice of any kind, anything herein or in any other Debenture to the contrary notwithstanding, and thereafter the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law, subject to Section 6 hereof regarding subordination. 9. Benefits. This Debenture shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Holder and his heirs, administrators, successors and assigns, provided that the Holder may transfer all or part of the unpaid principal amount of this Debenture to a member of his immediate family, to a trust of which the Holder or a member of his immediate family is the beneficiary, or to a corporation or other entity wholly-owned by the Holder. 10. Amendments and Waivers. 10.01 Consent. With the written consent of the holders of at least a majority of the then aggregate principal amount of the outstanding Debentures, any covenant, agreement or condition of the Debentures may be waived by the holders (either generally or in a particular instance and either retroactively or prospectively), or such holders and the Company may from time to time enter into agreements for the purpose of amending any covenant, agreement or condition of the Debentures or changing in any manner the rights of the Holders; provided, however: (a) no such amendment or waiver shall (i) change the stated maturity of this Debenture or reduce the interest rate, or reduce the amount of the principal hereof, or (ii) adversely, as to the Holder, change or modify the terms under which this Debenture may be converted pursuant to Section 3 hereof, or (iii) reduce the percentage of holders of Debentures required to approve any such amendment or effectuate any such waiver, without the consent of all of the holders of Debentures then outstanding; and (b) no such waiver shall extend or effect any obligation not expressly waived or impair any right consequent thereon. 10.02 Application. Any such amendment or waiver shall apply equally to all holders of Debentures, including the Holder, and shall be binding upon them, upon each future Holder and upon the Company, whether or not such Debenture shall have been marked to indicate such amendment or waiver, but any Debenture issued thereafter shall bear a notation referring to any such amendment or continuing waiver. 11. Notices. All communications and notices provided for herein shall be in writing and shall be deemed to have been sufficiently given or served for all purposes if delivered in person or sent by express courier or by certified or registered mail, postage prepaid if sent by certified or registered mail, to the following addresses: if to the Company, at its office, One Bridge Plaza, Suite 100, Fort Lee, New Jersey 07024, Attention: President, or at any other address designated by the Company in writing to the Holder of Record of this Debenture; and if to any Holder of Record of the Debenture, as specified in writing to the Company by an initial or successor Holder of Record. 12. Governing Law. This Debenture shall be deemed to be a contract made under, and to be construed in accordance with, the laws of the State of New York, without giving effect to conflicts of law. 13. Section Headings. The descriptive section headings herein have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provisions hereof. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized. DISTINCTIVE DEVICES, INC. By: /s/ Sanjay Mody Name: Sanjay S. Mody Title: President EXHIBIT A ASSIGNMENT (To be executed by the Registered Holder if such Holder desires to transfer the Debenture) FOR VALUE RECEIVED _____________________________ hereby sells, assigns and transfers unto ____________________________________ whose address is _____________________________________ all [___________] $US of the principal amount of this Debenture, together with all right, title and interest therein. Dated: ____________, 20___ ------------ Signature: ______________________ (Insert social security or other tax identification number of assignee) (The above signature must correspond with the name as written upon page 1 of this Debenture in every particular, without alteration or enlargement or any change whatever.) ________________________________ *This amount must be for $1,000 or multiple thereof. EXHIBIT B CONVERSION NOTICE (To be executed by the Registered Holder in order to convert the Debenture) The undersigned hereby irrevocably elects to convert $ ________________ of the principal amount of the Debenture No. ___ into shares of Common Stock of DISTINCTIVE DEVICES, INC. (the "Company") according to the conditions hereof, as of the date written below. Date of Conversion __________________________________________________________ Applicable Conversion Price ________________________________________________ Signature ___________________________________________________________________ [Name] Social Security or other tax identification number: ________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ If the shares of Common Stock issuable upon conversion are to be registered in the name other than that of the Registered Holder, provide the following information as to the proposed holder of the shares: Name: ______________________________________________ Address: ______________________________________________ ______________________________________________ Social Security or tax identification number: ______________________________ Reason for transfer: ______________________________________________________ EX-10 5 distribute.txt DISTRIBUTOR AGREEMENT Exhibit 10.3 RealTime Access EXCLUSIVE DISTRIBUTOR AGREEMENT This Exclusive DISTRIBUTOR Agreement is hereby entered into and is effective as of September 1, 2001. by and between RealTime Access, Inc., a California Corporation, with its principal offices located in Livermore, California (hereinafter referred to as "SELLER") and Distinctive Devices, Inc,, a New York corporation, with its principal offices located in Fort Lee, New Jersey. (Hereinafter "DISTRIBUTOR"). Now, therefore, in. consideration of the covenants and conditions herein, the parties agree as follows: 1. Definitions 1.1 Products: The term "Products" shall mean all SELLER equipment, services or licenses as listed in Appendix A. 1.2 Exclusive Distributor Agreement: The term "Exclusive Distributor Agreement" shall mean that, during the term of this agreement DISTRIBUTOR will not sell Products, which compete, with SELLER's Products and, so long as DISTRIBUTOR meets the field trial and sales volume commit tents of Section 6.7 and Section 23 herein respectively, SELLER will sell its Products in. the territories (as listed in Appendix F) only through DISTRIBUTOR. Both parties to this Agreement acknowledge the need for a close working relationship, including the exchange of market information and pursuit of business opportunities of mutual interest. Both parties commit to the support of this relationship. 1.3 Territory: The term "territory" shall mean the countries listed in Appendix F. 2.0 Term of Agreement The Agreement is for a term of two (2) years from the effective date unless terminated earlier as described in Section 13, Termination of agreement, is automatically renewable under the terms and conditions of this Agreement for successive one-year terms. In addition, SELLER and DISTRIBUTOR shall agree to a mutual written agreement of minimum sales volume for successive years. If the parties continue to do business with one another after the expiration of this Agreement, the relevant terms of this Agreement will continue to govern the relationship, and in this cask the relationship may be terminated unilaterally by the DISTRIBUTOR merely by ceasing to do business with the Following any termination of the Agreement, DISTRIBUTOR shall not have any right to continue as DISTRIBUTOR of SELLER's Products regardless of any undocumented continuation of this Agreement nor shall DISTRIBUTOR be entitled to any compensation in connection with such termination. In the event that at the termination date potential business opportunities exist as result of DISTRIBUTORS marketing efforts, a six month grace period will be allowed for these opportunities to be realized. 1f at the end of the six-month grace period no sales have resulted, SELLER can appoint another distributor to handle accounts, in which case DISTRIBUTOR shall not be entitled to any compensation. DISTRIBUTOR can continue to do business with the SELLER, with their written authorization. 3. SELLER's Product DISTRIBUTOR shall purchase from SELLER the Products described in Appendix A of this Agreement, and optionally, from time to time, Products not described in Appendix A of this Agreement which shall be designated as Custom Products. Any update, enhancement, or improvement of a Product made generally available by the SELLER ox any new Product similar in function to any Product already set forth in Appendix A shall be added to Appendix A as a new Product. SELLER reserves the right to discontinue any Product by giving DISTRIBUTOR 180 days notice. Other new Products as developed by SELLER may be offered to DISTRIBUTOR at SELLER's option and may be added to the Products. 4. Prices 4.1 Purchase Prices. DISTRIBUTOR's Purchase Prices for Product under this Agreement will be based on List Prices shown in Appendix A of this Agreement. SELLER may change List Prices after notifying DISTRIBUTOR in writing at least ninety (90) days prior to the effective date of the price change. Prices for Custom Products shall be negotiated. 4.2 Discount. DISTRIBUTOR's discount applicable to prices shown in Appendix A is shown in Appendix B of this Agreement. 5. Orders and Lead Times 5.1 Orders. All orders placed by DISTRIBUTOR with SELLER will be subject to the terms of this Agreement. Unless expressly agreed by both parties in writing, the terms of this Agreement shall take precedence over any language included on any orders or acknowledgments. 5.2 Lead Times: Products ordered by DLSTRIBUTOR shall be shipped on the date requested provided that this date is consistent with applicable lead times given on Order Acknowledgment. Orders which request shorter lead times will be filled on a best efforts basis. Within 5 days of receipt of DISTRIBUTOR's order for Products, SELLER will respond with an Order Acknowledgment accepting or modifying DISTRIBUTOR's required quantities or delivery dates. 5.3 Title: Title shall pass to DISTRIBUTOR upon SELLER's release of Product to the carrier for shipment to DISTRIBUTOR, 5.4 Payment: SELLER reserves the right to establish credit terms. Initial orders will be shipped under payment terms of 45 days net from date of shipment and will be changed to 60 days net when DISTRIBUTOR's credit record has been established. 5.5 Shipping: SELLER shall ship as specified on DISTRIBUTOR's purchase orders. Shipment shall be F.O.B. SELLER's Livermore, California facility, freight prepaid and invoiced to DISTRIBL70R at actual rates. All Duty charges are responsibility of DISTRIBUTOR Insurance coverage can be provided upon request by DISTRIBUTOR when placing DISTRIBUTOR's Purchase Order at DISTRIBUTORS expense. 5.6 Cancellation: DISTRIBUTOR may cancel, in writing, any purchase orders prior to shipment of Products. If orders are canceled within 90 days of scheduled shipment the DISTRIBUTOR will pay cancellation charges as shown In Appendix C. DISTRIBUTOR may cancel, in writing, any Custom Designed Products prior to shipment of such Products only if, together with its notice of cancellation, DISTRIBUTOR offers to pay SELLER all SELLER's incurred and non-cancelable costs for such Custom Designed Products. SELLER shall make best efforts to minimize cost of Custom Designed Products after receiving notice of cancellation. 5.7 Price Adjustments: In the event SELLER reduces prices on any Products which DISTRIBUTOR has previously purchased and which remain in DISTR11WTOR's inventory, SELLER will provide DISTRIBUTOR with a credit of an amount equal to difference between the purchased price and the reduced price of the Products, the credit to beapplied to future orders, provided the Products were purchased by DISTRIBUTOR not more than 6 months prior to the reduction in price. DISTRIBUTOR will be asked to report inventory balances prior to the price adjustment. No price adjustment will be granted if DISTRIBUTOR has not reported inventory balances prior to the price adjustment or for the DISTRIBUTOR reported no inventory on hand for the Product having a price adjustment 15 days after the end of each fiscal quarter. 5.8 Product Return. Within ten ('10) days of receipt of request for Product Return Authorization for repair or credit, SELLER will issue the Return Authorization or will provide DISTRIBUTOR with adequate reason for its refusal to issue the Authorization Returns authorized for credit shall bear restocking charges shown in Appendix C. Credit will be based at current pricing when returned Product is received, subject to Product being in like new condition. Credits will be issued as a credit memo to be used, to offset future purchases. DISTRIBUTOR shall insure and pay all return costs and duties if applicable. 6. Business Commitments--DISTRIBUTOR 6.1 Products: DISTRIBUTOR will aggressively and with its best efforts, distribute and market SELLER's Products in (as listed in Appendix F) on an ongoing basis, including, without limitation, the inclusion of SELLER's Products in DISTRIBUTOR's catalogs or other promotional material. DISTRMUTOR agrees in all such efforts it will refer to SELLER by name anal SELLER's Products by SELLER's then current model names or numbers. All inclusion of SELLER's Products in DISTRIBUTOR's promotional material shall be subject to prior approval by SELLER, which shall not be unreasonably withheld nor delayed. 6.2 Forecasts: DISTRIBUTOR shall furnish monthly to SELLER by Product a 12-month rolling, non-binding forecast by month of expected, orders for SELLER's Products. 6.3 lnventory: DISTRIBUTOR agrees to inventory and supply to customers, as needed, and for prices and terms as it shall in its sole judgment determine, emergency spare parts for use in meeting critical customer needs for replacement equipment for SELLER's Products. 6.4 Training: DISTRIBUTOR agrees, after the initial delivery of a system to a customer and the initial familiarization of the customer with SELLER's Products, to train any additional customer personnel as needed to assure continued usage of the system purchased and the purchase of additional of SELLER's Products. 6.5 Compliance with Export Laws. DISTRIBUTOR will comply with all export laws, related trees, and regulations of the United States Department of Commerce and United States Governmental Agencies and authorities from !~,o9ntries listed in Appendix E, and not export, or allow the export, of any of SELLER's Products in violation of any such restrictions, laws or regulations. 6.6 Reporting: DISTRIBUTOR will provide a quarterly report to SELLER including but not limited to 1.) Copies of all Proposals made to present and prospective customers, 2.) Copies of documents relating to shipments by DISTRIBUTOR, 3.) Reasons for all RMA returns. 6.7 Demo/Field Trial Equipment: DISTRIBUTOR shall place a purchase order for a minimum two (2) systems (will not exceed $25,000) to be used. for demonstrations and/or field trials when requested by customer. The initial order shall be placed within 30 days of signing this agreement. The payment terms shall be formalized when end-customer finalizes its system configuration, but at least 15 days before shipping. SELLER reserves the right to revise payment terms as set forth in point 5.4 of this agreement, for dcmonslration and field trial systems. SELLER shall provide sales, marketing and technical support to DISTRIBUTOR and DISTRIBUTOR's customers as needed. DISTRIBUTOR can expand territorial exclusivity beyond the territories listed in Appendix F with confirmed field trial orders and subsequent equipment installation. 6.8 Bid and performance Bonds: DISTRIBUTOR agrees to accept financial responsibility for the terms and conditions of bid and performance bonds set forth by the end user. Failure to meet these financial responsibilities could be deemed a brooch of this agreement, and SELLER could then, at its option, appoint replacement distributor(s). 6.9 Technical Support. DISTRIBUTOR will provide all in-country technical support for all Products sold. Upon mutual agreement, technical support personnel will be sent to the SELLER facilities for technical training, or SELLER will provide training in-country. DISTRIBUTOR is responsible for all transportation and living expenses, 6.10 Translations of Advertising and Promotional Material SELLER agrees to provide DISTRIBUTOR hard copies of advertising and promotional material in the English language. Any additional translations in other languages will be at DISTRIBUTOR's expense. SELLER maintains ownership of any translations if it decides to pay for the cost of the translations. 7 Business Commitments- SELLER 7.1 Products: SELLER will make available Products identified in Appendix A of this Agreement for shipment to DISTRIBUTOR under the terms included in section. 5 of this Agreement 7.2 Sales Sunport SELLER will provide, without charge to DISTRIBUTOR, detailed technical sales support to DISTRIBUTOR's customers on the technology, configuration, use, and deployment and economics of Products. SELLER will not provide routine sates support to DISTRIBUTOR'S customcrs on the basic features, Product structure, uses, competitors or prices of Products. 7.3 Training: SELLER will provide initial and annual Product training on the general categories and patterns of use of Products, including competitors, basic features, Product structure, and prices for D61RIBUTOR's sales personnel at DISTRIBUTOR'S facilities or at SELLER'S facilities at no cost to DISTRIBUTOR. Additional training will be provided upon the release of a significantly new Product 7.4 Advertising and From otional Material: SELLER will provide reasonable anvunts of its normally available Advertising and Promotional material for use by DISTRIBUTOR'S sales personnel at no cost to DISTRIBUTOR. 7,5 Proposal Sun,p"ort: SELLER will provide technical support to assist DISTRIBUTOR in responding to major Requests For Quotation or Requests For Information (or similarly intended customer requests). Such. technical support shall include, but not be limited to detailed descriptions of the technology, configuration, use, and deployment and economics of Products. 7.6 Technical SupRort for Customers: SELLER will provide to DISTRIBUTOR and customers of DISTRIBUTOR, at no charge, the following technical support services: (a) Initial System Support: SELLER will, upon the initial delivery only of a Product of SELLER to any of DISTRIBUTOR'S customers, without charge to customer or DISTRI13WOR, provide training to customer on the installation, maintenance, and use of the Product. (b) Hotline Consultation Support: SELLER will provide, without charge to DISTRIBUT'OR'S customers, a 24-hour per day, 7-day per week telephone line which customers may call to obtain technical assistance on the use and operation of SELLER's Products. (c) Field Engineer Support: SELLER will make available, at rates and terms then current, either at SELLER's facility or, if required, at customers' facility, field engineering personnel to analyze customer problems and repair faults. 8.0 Periodic Review: DISTRIBUTOR and SELLER shall meet quarterly to review their relationship, which shall include, but not be limited to, the following: (a) Coordination of joint sales and promotion efforts; (b) Status of customer standardization activities in DISTRIBUTOR's territory; (c) DISTRIBUTOR's sale of SELLER Products during the previous quarter and comparison to forecast (d) Open RFQs; (e) Unsuccessful responses to RFQs; (f) Identification of business opportunities in D15111BUTQR's territ6ry and review of business strategy. (g) Description of features and delivery of new SELLER Products, and, (h) Competitive and market developments. 9 - Warranties: 9.1 Product Warranties: SELLER's normal Product warranties (as shown in Appendix D will apply to all Products purchased by DISTRIBUTOR. DIS1'R113UTOR's customers will return Products under warranty to DISTRIBUTOR, who shall return Products to SELLER. DISTRIBUTOR shall bear the costs of freight and insurance to SELLER's repair facility. SELLER shall bear costs of freight and insurance for return of Products to DISTRIBUTOR. If SELLER determines it is not practical to repair the returned Product, SELLER may, at its sole discretion, replace the returned Product with equivalent-Product. SELLER MAKES NO OTHER WARRANTIES THAN THOSE SHOWN IN APPENDIX D WITH RESPECT TO ANY PRODUCTS AND DISCLAIMS ANY OTHER WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. No warranty shall be applicable to any Product that is modified or altered without the permission of SELLER, is not maintained in accordance with SELLER's maintenance recommendations, has been operated in a manner other than specified by SELLER, or has been treated with abuse or negligence, DISTRIBUTOR is fully responsible for the satisfaction of its customers and will be responsible for any claims, damages, settlement expenses, or attorney's fees incurred above and beyond SELLER's stated warranty obligations to DXSTRrBUTOR and DISTRIBUTORS customers. 9.2 No Trouble Found Returns: DISTRIBUTOR shall pay all charges for return of Product froze SELLER to DISTRIBUTOR for returns where no trouble is .found (to be referred to as "No Trouble Found"). This provision in .1 . In r Out of Warrant Re irs. After five returns where no trouble is found, DISTRIBUTOR will pay an additional charge of 15% of the purchase price for any subsequent "No Trouble Found" return. 9.3 Out of Warranty Repairs: SELLER agrees to repair Products sold under this Agreement for a period of ten (10) years after date of sale at prices then current for repair services unless the Product has been modified or altered without the permission of SELLER, or has not been maintained in accordance with SELLER's maintenance recommendations, or has been operated in a manner other than specified by SELLER, or has been treated with abuse or negligence. If the Product is not repairable, SELLER shall return the Product to DISTRIBUTOR with a reason for the failure to repair. DISTRIBUTOR shall bear the costs of freight, duty and insurance for all Products returned to SELLER's repair facility for out-ofwarranty repair. DISTRIPiJTOR shall bear costs of freight, duty and insurance for return of Products to DISTRIBUTOR. 10 Limited Liability NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR OTHERWISE, SELLER WILL NOT BE LIABLE WITH RESPECT TO ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (A) ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF TIDE AMOUNTS PAID TO SELLER UNDER THE AGREEMENT IN THE TWELVE MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE, OR (B) ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS, OR (C) COSTS OF PROCUREMENT OF SU13STITUTE GOODS, TECHNOLOGIES, OR SERVICES. 11 Infringement: In the event DISTRIBUTOR receives a claim that the Product or any part thereof infringes upon the patent, copyright, or trademark rights of others, DISTRIBUTOR shall immediately notify SELLER in writing of all such claims. SELLER shall defend or settle such claims, procure for DISTRIBUTbR the right to use the Products or modify the Products to avoid infringement. DISTRIBUTOR agrees to provide reasonable assistance to SELLER in such defense and to give SELLER the opportunity to assume sole control over any defense or negotiations for settlement or compromise. In any event, SELLER will indemnify and hold DISTRIBUTOR harmless from any resulting costs or damages. However, SELLER shall have no liability for any claim based upon the combination, operation, or use of any Product applied with the equipment not supplied by SELLER or based upon alteration of the Product by someone other than SELLER. 12 Trademarks During the term of this Agreement, or any extension thereof, DISTRIBUTOR may use any of SELLER's trademarks, insignias, logos, or proprietary marks in connection with DISTRIBUTOR's sales, advertisements, and promotions of the Product. DISTRIBLTOR acknowledges that these trademarks and logos are valuable assets of SELLER and DfSTRIBUTOR's use of such proprietary marks shall be in accordance with SELLER's direction and policies. SELLER grants DISTRIBUTOR permission to reprint any of SELLER's literature at DISTRIBUTOR'S expense, in connection with DISTRIBUTOR's sales, advertisements, and promotions of the Product, consistent with the limitations contained in paragraph 6.1. 13 Termination of Agreement 13.1. Termination For Cause Either party shall have the right to terminate this agreement immediately upon written notice on the occurrence of the following events: A. If the other party materially breaches any provision of this Agreement arid fails to cure such breach within 30 days of receiving written notice describing the breach; or B. If the other party ceases operations, becomes insolvent, seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement, or comparable proceeding,; or C. Upon invalid assignment of the rights under this ,Agreement (Section 19). In the event DISTRIBUTOR is terminated for breach (Section A above) or for an invalid assignment (Section C above), then DISTRIBUTOR waives any rights to return equipment to SELLER as granted in Section 5, Orders, and Lead Times. 13.2 Termination for Convenience SELLER has the right to terftinate portions or all of this agreement at any time if DISTRIBUTER is riot meeting obligations as identified in Section 23 - - Exclusivity, or Appendix G Territory Milestones. SELLER has the right to terminate agreement with thirty (30) day written notice if it determines it no longer desires to pursue business opportunities in territories identified in Appendix F. Both parties agree to discuss and negotiate in good faith for territories where portions or all of the obligations are being met. If DISTRIBUTOR teminates this Agreement for convenience, it waives any rights to return equipment to Manufacturer as granted in Section 5, Orders, and Lead Times. l4 Effect of Termination Upon termination, DISTRIBUTOR agrees to cease claiming to be an authorized exclusive distributor of SELLER and shall immediately upon termination remove all signs, names, insignias, logos, proprietary marks, and other promotional advertising, sales information, technical, and other materials which identifies or appears to identify it with SELLER, and return same to SELLER. 15 Relationship of Parties This Agreement does not in any way create the relationship of joint venture, partnership, or principal and agent between SELLER and DISTRIBUTOR, and neither shall have the power or ability to pledge the credit of the other, nor to bind the other, nor to contract in the name of or create a liability against the other in any way for any purpose. DISTRIBUTOR" an independent contractor and is solely responsible for actions of its employees.or agents. DISTRIBUTOR will indemnify SELLER for all claims arising out of tale actions of DISTRIBUTOR'S employees or agents in providing unauthorized representations or warranties or failing to disclose all warranties or representations of SELLER. 16 Survival of Obligations The termination of this Agreement shall not affect the obligations of either party to the other which arise under the terms and conditions of this Agreement, rights arising from this Agreement, or causes of action, which have accrued prior to the date of the termination. 17 Notices Except as otherwise provided herein, any notices or demands which are required by law or under the terms of this Agreement shall be triven or made by either party in writing, delivered by major commercial delivery service, or mailed by certified mail, return receipt requested, to the respective parties set forth below. Notice to DISTRIBUTOR. Distinctive Devices, Inc. Qne Bridge Plaza, Suite 100, Fort Lee, NT 07024 USA Tel. 201-363-9922 Attention: SanjaY Mody, President Noticv to SELLER. RealTimc Access, Inc. 455 North Canyons Parkway Suite B Livermore, CA. 94550 U. S. A. Tel. (925) 377 -9000 Attention: Rafael J. Zamora, President & CEO 18 Governing Law This Agreement shall be construed in accordance with- the laws of the State of California, excluding the conflict of laws principles thereof. All disputes to be settled by the Process of Arbitration in California, U.S.A., or if unsuccessful in Arbitration, shall be adjudicated in the Court of Jurisdiction of Livermore, California, U.S.A. 19 Non-Assignability The rights and obligations created hereunder cannot be assigned lay either party either voluntarily or by operation of the law without the prior written consent of the other party. Any unauthorized transfer or attempt to transfer or assign shall automatically terminate this Agreement. 20 Force Majeure Neither party shall be responsible for delays or failure in performance resulting from acts of God, labor strikes, acts of war or civil disruption, government regulations imposed after the fact, public utility failures, or natural disasters. 21 Confidentiality DISTRIBUTOR and SELLER agree that during the term of this Agreement, each will disclose to the other proprietary information regarding matters dealing with actions necessary to carry out the intent and terms of this Agreement. The parties agree that each will keep the other's proprietary information and all related matters confidential and prevent disclosure of said information by its agents, employees, or representatives, including disclosure to any subsidiaries, affiliates, or associated companies. 22 Severability In the event that any prov1sion of this Agreement shall be unenforceable or illegal, such provision shall be severed and the entire Agreement shall not fail, but the balance of the Agreement shall continue in full force and effect. 23 Exclusivity Should DISTRIBUTOR, in each year of the Agreement fail to meet the following minimum volume of SELLER's Products ordered and delivered (all amounts in U.S. $) in ail territories, then SELLER shall have the right to appoint other distributor's in those territories listed in Appendix F. Year 1; $1,000,000 (for all territories covered by this agreement) All succeeding years; To be reviewed three (3) months prior to start of calendar year. SELLER's assumption of the right to appoint other distributors in - atl territories listed in Appendix F does not relieve DISTRIBUTOR of the obligation to refrain from selling competing, Product lines. Exclusivity may be terminated in the event of a breach of the terms of this agreement, even if cured. 24 Headings: Headings and Captions are for convenience only, and shall not be used in any interpretation of this agreement. 25 Miscellaneous: 25.1 Time. Time is of the essence of this Agreement. 25.2 Corporate Authority. The persons executing this Agreement warrant that they have the right power, legal, capacity, anal appropriate authority to enter into this Agreement on behalf of the entity for whom they sign. 25.3 Original Equipment Manufacturer. In the future, SELLER and DISTRIBUTOR may enter into discussions when DISTRIBIUTOR may desire to private label SELLER's Products under DISTRIBUTOR's nkime. Both parties agree to enternto such discussions as sales volumes increase following the execution of this agreement. Any such OEM agreement will be defined in a separate Agreement APPENDIX A - PRODUCT LIST AND LIST PRICES CoBAnet International - Prices are denominated in US$ FOB Livermore, CA. CoBA INTERNATIONAL PRICE LIST
TYPE BASE OPTIONS DESCRIPTION US MODEL LIST PRICE ===== ======= ======== ====================== ========= RT T1301 - CoBAnet Remote Terminal 32 Lines - Cabinets - 00000 Base Configuration $800 1xxxx Outdoor Mount Enclosure $375 4xxxx Indoor Mount- Rack 19" - 5xxxx Indoor Mount - Rack 23" - 7xxxx Indoor Mount- Wall enclosure - x1xxx Local Power, -48 VDC - x6xxx Local Power,100-240Vac,60/50Hz,w/batteries $4,175 xx1xx With VF Protection Krone Block- Solid State $365 xx2xx With VF Protection Krone Block- Gas $365 xx3xx With VF Protection Block-5 Pin Tubes-Solid State $275 xx4xx With VF Protection Block-5 Pin Tubes-Gas $275 xxx1x With VF Stub-50 Feet,24AWG(Gell filled) $275 xxx2x With VF Stub-10 feet,24AWG(Air Core) $115 xxxx1 With xDSL Splitter Mounting Kit (2 Splitters) $250 T1302 - CoBAnet Remote Terminal 10/16 Lines - 00000 Base Configuration $625 1xxxx Outdoor Mount Enclosure $275 4xxxx Indoor Mount-Rack 10" - 5xxxx Indoor Mount-Rack 23" - 7xxxx Indoor Mount-Wall Enclosure - x1xxx Local Power,-48 VDC - x6xxx Local Power,100-240 VAC,60/50 Hz,w/batteries $2,075 xx1xx With VF Protection Krone Block-Solid State $365 xx2xx With VF Protection Krone Block-Gas $365 xx3xx With VF Protection-5 Pin Tubes-Solid State $225 xx4xx With VF Protection-5 Pin Tubes-Gas $225 xxx1x With VF Stub-50feet,24 AWG (Gell filled) $275 xxx2x With VF Stub-10feet,24 AWG (Air Core) $115 xxxx1 With xDSL Splitter Mounting Kit (2 Splitters) $250 T1303 - CoBAnet Remote Terminal 64 Lines - 00000 Base Configuration $1,600 1xxxx Outdoor Mount Enclosure $750 4xxxx Indoor Mount-Rack 19" - 5xxxx Indoor Mount-Rack 23" - 7xxxx Indoor Mount-Wall Enclosure - x1xxx Local Power,-48 VDC - x6xxx Local Power,100-240 VAC,60/50Hz w/batteries $4,775 xx1xx With VF Protection Krone Block-Solid State $730 xx2xx With VF Protection Krone Block-Gas $730 xx3xx With VF Protection-5 Pin Tubes-Solid State $550 xx4xx With VF Protection-5 Pin Tubes-Gas $550 xxx1x With VF Stub-50feet, 24 AWG (Gell Filled) $550 xxx2x With VF Stub-10feet, 24 AWG (Air Core) $230 xxxx1 With xDSL Splitter Mounting Kit(4 Splitters) $500 RT Shelf And Mech. M1911 - RT Shelf - 1xxxx Full Size (24&32 Line) $150 2xxxx Small Size (12&16 Line) $125 M1912 - RT Backplane Assemblies - 1xxxx Full Size(24&32 Line)-Release 1 $750 2xxxx Small Size(12&16 Line)-Release 1 $600 3xxxx Full Size (24&32 Line)- Release 2 $750 4xxxx Small Size (12&16 Line)-Release 2 $600 M1913 - RT Outdoor Enclosures - 1xxxx Full Size (24&32 Line) $375 2xxxx Small Size (12&16 Line) $275 RT shelf And Mech. M1921 - RT Mounting Hardware-Full RT - 1xxxx Pole Mount Basket $75 2xxxx Wall $75 3xxxx Rack Mounting Kit $95 x1xxx 19" Bays N/C x2xxx 23" Bays N/C M1922 - RT Mounting Hardware-Small RT - 1xxxx Pole Mount Bracket $75 2xxxx Wall $75 3xxxx Rack Mounting Kit $95 x1xxx 19" Bays N/C x2xxx 23" Bays N/C RT P1960 - RT,Local Power Kit - AC/power 1xxxx Local Power,100-240VAC,60/50Hz,w/batteries,32L $4,175 Ringing 2xxxx Local Power,100-240VAC,60/50Hz,w/batteries,64L $4,775 Generator 3xxxx -48 VDC - P4510 - Remote Terminal Power Supply Charger - 1xxxx Lorain Power Supply,32L RT $2,550 2xxxx Lorain Power Supply,64L RT $3,275 P4530 xxxxx Lorrain Power Supply Modules $725 M6000 xxxxx Power Sonic batteries,4pack $400 RTCables C1910 - RT Cables - And Misc. 1xxxx VF Stub - Access. x1xxx 50 Pairs,0.5mm/24AWG - xx1xx 17 Meters/50Feet $275 xx2xx 3Meters/10 Feet $115 K1910 - RT Spares Kits - 1xxxx Generic Kit - 2xxxx Surge Protectors-Primary Protection - x1xxx Krone Block $275 x2xxx Krone module of 10-solid state $150 x3xxx Krone module of 10-Gas $150 x4xxx 5 Pin Mounting Block $200 x5xxx 5 Pin Tubes-Solid State(kit qty 10) $150 x6xxx 5 Pin Tubes-Gas (kit qty 10) $150 6xxxx Versutile Krone Tool $92 9xxxx Rt Cable Port Kits - x1xxx 1"Port-shrink wrap $100 x2xxx 1"Closed Port(To close the 2nd hole small RT) $75 M5000 1xxxx xDSL RT splitter Mounting Kit(2 splitters) $250 COT's T1400 - CoBAnet Central Office Terminal - xxxxx Release1-Base Configuration $800 x1xxx Release1-Front configuration $1,000 1xxxx Release2-Base Configuration $800 11xxx Release2-Front Configuration $1,000 COT Shelf M1410 - COT Shelf-CoBAnet - And Mech. 00000 Release1-Base Configuration $300 x1xxx Release1-Front Configuration $525 1xxxx Release2-Base Configuration $300 11xxx Release2-Front Configuration $525 M1710 - COT Backplane Assembly - 2xxxx CoBAnet Central Office Terminal-Release 1 $600 3xxxx CoBAnet Central Office Terminal-Release 2 $600 M1720 - COT Shelf-Upgrade to front Connectorization - 2xxxx CoBAnet Central Office terminal - M1730 - COT Mounting Hardware - 2xxxx CoBAnet Central Office Terminal - x1xxx Mounting ears $46 xx1xx 19" Bays N/C xx2xx 23" Bays N/C COT Pwr P1710 - COT Power Supply Unit - 1xxxx COT Power Supply Unit $300 2xxxx COT Power Supply Unit with Loadsharing $400 COT C1710 - COT Cables - Cables 1xxxx VF Harness/Pig tail-1 Meter/3feet $90 And Misc. 2xxxx VF Harness/Pig tail-1 Meter/3feet,front access $125 Access. K1710 - COT Spares Kits - 1xxxx Generic Kit-CoBA - 2xxxx Generic Kit-CoBAnet,Rel.2 - B1710 - COT EF&I Items - 1xxxx Bolted Aluminum Bay $325 2xxxx Fusc&Alarm panel $490 x1xxx 19" Bay N/C x2xxx 23" Bay N/C Transport R1110 - COT Transport Card-ETSI HDSL-Conexant - Modules 1xxxx 2 Pairs $850 2xxxx 3 Pairs $1,050 x1xxx Point-to-point 32 lines N/C x2xxx Point-to-Multipoint 16 Lines (per pair) $100 x3xxx Point-to-Multipoint 10 Lines (per pair) $200 R1460 - COT Transport Adaptor Card-ETSI HDSL-Conexant $275 R1310 - RT Transport Card-ETSI HDSL-Conexant - 1xxxx 1 Pair $775 2xxxx 2 Pairs $975 3xxxx 3 Pairs $1,175 R1710 - RT Transport Adaptor Card-ETSI HDSL-Conexant $275 Loop R1210 - Transport Loop Extender-ETSI HDSL-Conexant - Extenders 1xxxx 1 Pair,10 Lines-Conexant Rel.1 - 2xxxx 1 Pair,16 Lines-Conexant,Rel.1 - 3xxxx 2 Pairs,32 Lines-Conexant,Rel.1 $2,750 4xxxx 3 Pairs,32 Lines-Conexant,Rel.1 - M2510 - Transport Loop Extender Housing - 1xxxx 820 Type Universal Housing,Protected,Filled,2 Slot $2,750 M2511 - Transport Loop Extender Housing - 1xxxx QuickPro Universal Housing,Protected,Filled,2 slot $950 Line L1110 - COT POTS Line Card-LS/Payphone-ETSI - Cards 2xxxx 8 Lines $550 X1xxx 600 Ohm Impedance - X2xxx 900 Ohm Impedance - X3xxx Complex Impedance - Xx1xx 16 KHz Pulse Metering - Xx2xx 12 KHz Pulse Metering - L1310 - RT POTS Line Card-LS/Payphone-ETSI - 1xxxx 2 Lines $280 2xxxx 8 lines $680 x1xxx 600 Ohm Impedance - x2xxx 900 Ohm Impedance - x3xxx Complex Impedance - xx1xx 16 KHz Pulse Metering - xx2xx 12 KHz Pulse Metering - xxx1x 20 Hz Ringing - xxx2x 25 Hz Ringing - SPECIAL L1452 xxxxx COT ISDN-BRI-ETSI(2Lines) $500 Services L1652 xxxxx RT ISDN-BRI-ETSI (2Lines) $500 LineCards L1470 - COT ISP Interface - 20000 COT ISP Interface-E1(ATM)/Ethernet(IP) $1,150 L1971 xxxxx RT xDSL-Variable rate (2Lines) $1,500 XDSL Q1000 - xDSL CPE,ATM-based - Accessories xxxxx xDSL,Extreme 100B,Full-rate,1E-Port,bridge $550 1xxxx xDSL,Extreme1000,Full-rate,4E-Port,bridge/router $700 2xxxx xDSL,Extreme200,Full-rate,1 USB/1 Ethernet $650 M4000 - xDSL assemblies - 1xxxx RTxDSL Splitter $90 2xxxx CPE,Voice Passive Filter $16 OAM&P I1960 - RT Subscriber Loop Test Unit Card - Xxxxx RT Subscriber Loop Test Unit Card,Rel.1 $450 1xxxx RT Subscriber Loop Test Unit Card,Rel.2 $450 I1710 - COT System Management Card - 1xxxx Alarm History, Subscriber Testing, Remote Access $300 2xxxx Alarm History,Subscriber Testing,Remote Access,MLT $350 3xxxx Alarm History,Subscriber Testing,Remote Access,4TEL $350 F1750 - COT System Management Firmware $125 EMS T1450 - CoBAnet Element Management System - 1xxxx Turn-key System $15,000 2xxxx Applications Software Only $11,500 S1450 - EMS Applications Software $11,500 K1720 - EMS Spares Kits - 1xxxx EMS Accessories Kit - MiniCoBA PRICE LIST =================== RT T4712 - MiniCoBA Remote Terminal Unit 2 Lines Unit 00000 Base Configuration - 1xxxx Outdoor Mount Enclosure-Plastic $475 2xxxx Outdoor Mount Enclosure-Aluminum $325 x1xxx 600 Ohm Impedance - x3xxx Complex Impedance - xx1xx 25Hz Ringing - xx2xx 20Hz Ringing - xxx2x 12 KHz Pulse Meeting - xxxx0 MDF Subscriber Terminals - xxxx1 Pouyet Subscriber Terminals w/gas tubes - T4812 - MiniCoBA Remote Terminal Unit 4 Lines - 00000 Base Configuration - 1xxxx Outdoor Mount Enclosure-Plastic $550 2xxxx Outdoor Mount Enclosure-Aluminum $450 x1xxx 600 Ohm Impedance - x2xxx 900 Ohm Impedance - x3xxx Complex Impedance - xx1xx 25 Hz Ringing - xx2xx 20 Hz Ringing - xxx1x 16KHz Pulse Metering - xxx2x 12 KHz Pulse Metering - xxxx0 MDF Subscriber Terminals - xxxx1 Pouyet Subscriber Terminals w/gas tubes - T4912 - MiniCoBA Remote Terminal Unit 8 Lines - 00000 Base Configuration - 1xxxx Outdoor Mount Enclosure-Plastic $1,100 2xxxx Outdoor Mount Enclosure-Aluminum $900 x1xxx 600 Ohm Impedance - x2xxx 900 Ohm Impedance - x3xxx Complex Impedance - xx1xx 25Hz Ringing - xx2xx 20Hz Ringing - xxx1x 16KHz Pulse Metering - xxx2x 12KHz Pulse Metering - xxxx0 MDF Subscriber Terminals - xxxx1 Pouyet Subscriber Terminals w/gas tubes - T4711 - MiniCoBA COT Line Unit 2 Lines - 00000 Base Configuration - 1xxxx COT Line Unit,2 Lines, 64Kbps $375 1xxx 600 Ohm Impedance - X2xxx 900 Ohm Impedance - X3xxx Complex Impedance - Xx1xx 25 Hz Ringing - Xx2xx 20 Hz Ringing - Xxx1x 16KHz Pulse Metering - Xxx2x 12 KHz Pulse Metering - COT T4811 - MiniCoBA COT Line Unit 4 Lines - Line Unit 00000 Base configuration - 1xxxx COT Line Unit, 4 Lines, 64Kbps $425 x1xxx 600 Ohm Impedance - x2xxx 900 Ohm Impedance - x3xxx Complex Impedance - xx1xx 25 Hz Ringing - xx2xx 20 Hz Ringing - xxx1x 16kHz Pulse Metering - xxx2x 12kHz Pulse Metering - T4911 - MiniCoBA COT Line Unit 8 Lines - 00000 Base Configuration - 1xxxx COT Line Unit, 8 Lines,64Kbps $850 x1xxx 600 Ohm Impedance - x2xxx 900 Ohm Impedance - x3xxx Complex Impedance - xx1xx 25 Hz Ringing - xx2xx 20 Hz Ringing - xxx1x 16kHz Pulse Metering - xxx2x 12kHz Pulse Metering - COT's T4800 - CoBAnet Central Office Terminal - 00000 Base Configuration $800 x1xxx Front Connectorization $100 OAM&P T1410 - miniCoBA Element Management System $11,500 I1710 - COT System Management Card $375 F1750 - COT System Management Firmware $75
APPENDIX B - DISCOUNTS DISTRIBUTOR DISCOUNT: The typical discount. for COBA and u>iniCoBA will result iii 5175 and $140 per POTS line pricing rcspcctivcly. Discount will depend on Product requirements. DISTRIBUTOR will previdc in-country customer pricing including any and all markups required to socure business. In the event that customer requires direct contract negotiations with RealTime Access Inc, (SELLER), the DISTRIBUTOR and SELLER will negotiate an appropriate commission stricture including amount of commission and paymortts schedule. APPENDIX C - CANCELLATION AND RESTOCKING POLICY A 20% charge will be applied on every single cancellation or restocking request from the DISTRIBUTOR. APPENDIX D - PRODUCT WARRANTY PRODUCT WARRANTY: 3 YEARS from shipment date APPENDIX E - RETURN AND REPAIR POLICY PRODUCT WARRANTY RealTime Access, Inc. that all products furnished hereunder shall be free form defects in material and workmanship and shall conform to the specifications current at time of shipment for a period of thirty-six (36) months form date of shipment to PURCHASER, The warranty shall survive inspection and payment, provided that PURCHASER promptly notifies RealTime Access, Inc. of any defect covered by warranty. RealTime Access, Inc, warrants that all Products ordered hereunder shall be new and tree and clear of liens and encumbrances. Defective Products shall be returned to RealTime Access, Inc., postage prepaid, and shall be repaired or replaces with new or functionally equivalent Product at RealTime Access, Inc.'s option, and returned to PRUCHASER, postage prepaid. Unless otherwise agreed, RealTime Access, Inc. shall ship repaired or replacement Products within thirty (30) days of receipt. Repaired or replaced Products shall be warranted for the remainder of the original warranty period or for six (6j months form the date of shipment of the repaired or replaced Products to PURCHASER, whichever is longer. No warranty shall be applicable to any Product that is modified or altered without the permission of RealTime Access, Inc., is not maintained in accordance with RealTimc Access, Ina's admittance recommendations, has been operated in a manner other than specified by RealTime Access, Inc., or has been treated with abuse or negligence. REPAIRS NOT COVERED UNDER WARRANTY RealTime Access, Inc shall provide service on all Products ordered under this Agreement for a period of ten (10) years after the expiration of this Agreement. Products to be repaired shall be returned to the RealTime Access, Inc., postage prepaid and repaired or replaced with a new or functionally equivalent Product at RealTime Access, Inc,'s option, and returned to PURCHASER postage prepaid, Unless otherwise agreed, RcalTime Access, Inc, shall ship repaired or replacement Products within thirty (34) days of receipt, RealTime Access, Inc.'s charges for repair are at 25% of list price regardless of defect if any, and are exclusive of any applicable excise or sales taxes, shipping, duties, or insurance. RealTime Access, Inc. will not invoice PURCHASER for any applicable excise or sales taxes where PURCHASER furnishes RealTime Access, Inc, a tax cxcmption certificate, a certificate of authority, a direct pay permit or any document granting exception to sales or excise tax acceptable to the applicable taxing authority. RealTime Access, Inc, shall have the right, in its sole discretion, to the change the repair charges. Changes in these charges shall be effective 90 days written notification to PURCHASER. EMERGENCY REPLACEMENT In the case where a customer requires an emergency replacement of a RealTime Access, Ire. product, the customer must call the RcalTime Access, Inc, Account Manger to obtain a Replacement Authorization. After notifying the customer that an emergency replacement is possible and providing a Replacement Authorization Number, RealTimc Access, Inc, will ship the replacement unit within 24 hours, via air or other mcans that the customer may direct. The customer will be invoiced for the replacement unit at full list prig, plus a $75 emergency handling charge per assembly and shipping, The customer must return the failed assembly to RealTime Access, Inc. within 30 days, identifying it with the Replacement Authorization number, If returned assembly is in warranty, the customer's account will be credited for the full list price of the assembly. if the returned assembly is out of warranty, but us repairable, the customer's account will be credited with an amount equal to 60% of the list price of the assembly, No credit will be given if the customer fails to return the failed assembly within 30 days or if the failed unit proves unrepairable, Assemblies suAied via emergency replacement are warranted for two years form date of shipment. The emergency handling charge is waived in the case if assemblies, which fail upon, first use, "out-or=box' failures. If an emergency Replacement does fail on first use, then RealTime Access, Inc. will need the order number under which the original equipment was shipped. FIELD SERVICE AND TECHNICAL SUPPORT Technical support to RcalTimc Access, lnc, customers is provided free of charge via telephone from RealTirne Access. Inc, Customer Technical Assistance Center (CTAC), in Livermore CA. Technical Support: 1-877-370-0111 Main Telephone: 925-371-9000 If personnel on duty in the CTAC cannot solve a problem over the telephone, an escalation procedure is initiated resulting in highly trained engineering specialists or development engineers becoming involved in the attempt to diagnose the problem. The CTAC does not answer questions (or will charge for the answer to questions) involving proper configurations of equipment, applications engineering or new orders. Consult Product Marketing for the answers to such questions. On site technical support generally requires a purchase order number except when covered by a specific support contract. Contract service rates are generally negotiated. REPAIR PROCEDURES In order to return Products to Rea3Time Access, Inc., PURCHASER shall contact RealTime Access, Inc, and obtain an RMA (Return Material Authorization) and associated MIA Number, which shall be displayed on any shipping containers used to return Products to RealTime Access, Inc, Products shall additionally be identified as follows: (a) Name and address of`PURCHASER location form which shipment of Products for repair was made; (b) Quantities and model numbers of Products being dclivercd for repair, the nature of the defect or failures, and purchase order number under which repairs are to be made; (c) Name and telephone number of PUCHASER employee to be contracted concerning proposed repairs or replacement; (d) PURCHASEk location to which repaired or replacement Products should be shipped, Invoices from RealTime Access, Inc. for repaired or replacement Products shall set forth as a minimum: (a) PURCHASER purchases order number which Products were repaired; (b) Quantities and model number of Products repaired and associated repair charges; (c) Applicable: sales or excise taxes; (d) Total amount payable; (e) Address to which payment should be made. Payment with respect to invoices for repair or replacement shad be due from PURCHASER thirty (30) days after receipt of invoice from RealTime Access, Inc. ORDER CANCELLATION Orders canceled before the agreed upon delivery will be charged a cancellation fee as shown, unless specific contractual agreement specifying other charges is in existence; When order is canceled: Cancellation fee (% of purchase order price) 90+ days 20% 45 to 60 days 35% 30 to 45 days 45% 15 to 30 days 60% Under 15 days 75% APPENDIX F-TERRITORIES Russia Ukraine Bulgaria Turkey APPENDIX G - TERRITORY MILESTONES DISTRIBUTOR must insure that SELLER's Products are homologated/typeapproved with the territories. In addition, field trials of the equipment must be deployed. 26 Entire Agreement: This Agreement supersedes all prior proposals, oral or wAlbon, and all previous negotiations, communications or discussions between the two parties relating to the subject matter of this Agreement. 27 Waiver Failure of either DISTRIBUTOR or SELLER to enforce any Clause in this Agreement does not constitute a waiver of the clause. The follawieg is a list of Appendices, which are attached hereto and incorpated by reference. Appendix A Product List and List Prices Appendix B Discounts Appendlx C Canceellation and Restoring Policy Appendix D Warranty Appendix E Return and Repair Policy Appendix F Territories Appendix G Territory Milastones DISTRIBUTOR SELLER - RealTime Access, Inc. /s/Sanjay Mody /s/Rafael I. Zamora President President & CEO 09/01/2001 09/01/2001 Distinctive Devices, Inc. RealTime Access, Inc. EX-10 6 lease10-4.txt LEASE AGREEMENT Exhibit 10.4 LEASE from: BRIDGE PLAZA REALTY ASSOCIATES L.L.C. Lessor to: WEBPULSE CONSULTING, INC. Lessee Building: One Bridge Plaza Fort Lee, New Jersey TABLE OF CONTENTS 1. DESCRIPTION: 3 2. TERM: 3 3. BASIC RENT: 3 4. USE AND OCCUPANCY: 3 5. CARE AND REPAIR OF PREMISES/ENVIRONMENTAL: 4 6. ALTERATIONS. ADDITIONS OR IMPROVEMENTS: 5 7. ACTIVITIES INCREASING FIRE INSURANCE RATES: 6 8. ASSIGNMENT AND SUBLEASE: 6 9. COMPLIANCE WITH RULES AND REGULATIONS: 9 10. DAMAGES TO BUILDING: 9 11. EMINENT DOMAIN: 10 12. INSOLVENCY OF LESSEE: 10 13. LESSOR'S REMEDIES ON DEFAULT: 10 14. DEFICIENCY: 11 15. SUBORDINATION OF LEASE: 12 16. SECURITY DEPOSIT: 12 17. RIGHT TO CURE LESSEE'S BREACH: 13 18. MECHANIC'S LIENS: 13 19. RIGHT TO INSPECT AND REPAIR: 13 20. SERVICES TO BE PROVIDED BY LESSOR/LESSOR'S EXCULPATION: 13 21. INTERRUPTION OF SERVICES OR USE: 14 22. BUILDING STANDARD OFFICE ELECTRICAL SERVICE: 14 23. ADDITIONAL RENT: 15 24. LESSEE'S ESTOPEL: 18 25. HOLDOVER TENANCY: 18 26. RIGHT TO SHOW PREMISES: 18 27. LESSOR'S WORK- LESSEE'S DRAWINGS: 18 28. WAIVER OF TRIAL BY JURY: 19 29. LATE CHARGE: 19 30. LESSEE'S INSURANCE: 19 (i) 31. NO OTHER REPRESENTATIONS: 21 32. QUIET ENJOYMENT: 21 33. INDEMNITY: 21 34. ARTICLE HEADINGS: . 21 35. APPLICABILITY TO HEIRS AND ASSIGNS: 21 36. OUTSIDE PARKING SPACES: 22 37. LESSORS LIABILITY FOR LOSS OF PROPERTY: 22 38. PARTIAL INVALIDITY: 22 39. LESSEE'S BROKER: 22 40. PERSONAL LIABILITY: 23 41. NO OPTION: 23 42. DEFINITIONS: 23 43. LEASE COMMENCEMENT: 24 44. NOTICES: 24 45. ACCORD AND SATISFACTION: 24 46. EFFECT OF WAIVERS: 24 47. LEASE CONDITION: 25 48. MORTGAGEE'S NOTICE AND OPPORTUNITY TO CURE: 25 49. LESSOR'S RESERVED RIGHT: 25 50. CORPORATE AUTHORITY: 25 51. AFTER-HOURS USE: 25 52. LESSEE'S EXPANSION/RELOCATION: 26 53. BUILDING PERMIT: 27 (i) LEASE, is made the 8th day of May, 2000 between BRIDGE PLAZA REALTY ASSOCIATES L.L.C., ("Lessor") whose address is c/o Mack-Cali Realty Corporation, 11 Commerce Drive, Cranford, New Jersey 07016 and WEBPULSE CONSULTING, INC. ("Lessee") whose address is 35 Harvard Street, Closter, New Jersey 07624. PREAMBLE BASIC LEASE PROVISIONS AND DEFINITIONS In addition to other terns elsewhere defined in this Lease, the following terms whenever used in this Lease shall have only the meanings set forth in this section, unless such meanings are expressly modified, limited or expanded elsewhere herein. 1. ADDITIONAL RENT shall mean all sums in addition to Fixed Basic Rent payable by Lessee to Lessor pursuant to the provisions of the Lease. 2. BASE PERIOD COSTS shall mean the following: A. Base Operating Costs: Those Operating Costs incurred during Calendar Year 2000. B. Base Real Estate Taxes: Those Real Estate Taxes incurred during Calendar Year 2000. C. Base Utility and Energy Costs: Those Utility and Energy Costs incurred during Calendar Year 2000. 3. BUILDING shall mean One Bridge Plaza, Fort Lee, New Jersey. 4. BUILDING HOLIDAYS shall be those shown on Exhibit E. 5. BUILDING HOURS shall be Monday through Friday, 8:00 a.m. to 6:00 p.m., and on Saturdays from 8:00 a.m. to 1:00 p.m., but excluding those holidays as set forth on Exhibit E attached hereto and made a part hereof, except that Common Facilities, lighting in the Building and Office Building Area shall be maintained for such additional hours as, in Lessor's sole judgement, is necessary or desirable to insure proper operating of the Building and Office Building Area. 6. COMMENCEMENT DATE is June 1, 2000 and shall for purposes hereof be subject to Articles 27 and 43 hereof. 7. DEMISED PREMISES OR PREMISES shall be deemed to be 2,300 gross rentable square feet on the first floor as shown on Exhibit A hereto, which includes an allocable share of the Common Facilities as defined in Article 42(b). 8. EXHIBITS shall be the following, attached to this Lease and incorporated herein and made a part hereof. Exhibit A Location of Premises Exhibit A-1 Office Building Area Exhibit B Rules and Regulations Exhibit C Lessor's Work Exhibit C-1 Air Conditioning & ideating Design Standards Exhibit D Cleaning Services Exhibit E Building Holidays Exhibit F Tenant Estoppel Certificate Exhibit G Commencement Date Agreement Exhibit H Guaranty of Lease 9. EXPIRATION DATE shall be the last day of the month in which the day before the fifth (5th) anniversary of the Commencement Date occurs. [1] 10. FIXED BASIC RENT shall mean: THREE HUNDRED TEN THOUSAND FIVE HUNDRED AND 00/100 DOLLARS ($310,500.00) for the Term payable as follows: Years Yearly Rate Monthly Installment Years Yearly Rate Monthly Installment 1-5 $62,100.00 $5,175.00 11. LESSEE'S BROKER shall mean Alexander Summer. 12. LESSEE'S PERCENTAGE shall be 1.15% subject to adjustment as provided for in Article 42(d). 13. OFFICE BUILDING AREA is as set forth on Exhibit A-1. 14. PARKING SPACES shall mean a total of five(5) unassigned spaces, as well as 2 assigned spaces. 15. PERMITTED USE shall be general office use and for no other purpose. 16. SECURITY DEPOSIT shall be $15,525.00 17. TERM shall mean five (5) years from the Commencement Date, plus the number of days, if any, to have the lease expire on the last day of a calendar month, unless extended pursuant to any option contained herein. [2] W I T N E S S E T H For and in consideration of the covenants herein contained, and upon the terms and conditions herein set forth, Lessor and Lessee agree as follows: 1. DESCRIPTION: Lessor hereby leases to Lessee, and Lessee hereby hires from Lessor, the Premises as defined in the Preamble which includes an allocable share of the Common Facilities, as shown on the plan or plans, initialed by the parties hereto, marked Exhibit A attached hereto and made part of this Lease in the Building as defined in the Preamble, (hereinafter called the "Building") which is situated on that certain parcel of land (hereinafter called "Office Building Area") as described on Exhibit A-1 attached hereto and made part of this Lease, together, with the right to use in common with other lessees of the Building, their invitees, customers and employees, those public areas of the Common Facilities as hereinafter defined. 2. TERM: The Premises are leased for a term to commence on the Commencement Date, and to end at 12:00 midnight on the Expiration Date, all as defined in the Preamble. 3. BASIC RENT: The Lessee shall pay to the Lessor during the Term, the Fixed Basic Rent as defined in the Preamble (hereinafter called "Fixed Basic Rent") payable in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. The Fixed Basic Rent shall accrue at the Yearly Rate as defined in the Preamble and shall be payable, in advance, on the first day of each calendar month during the Term at the Monthly installments as defined in the Preamble, except that a proportionately lesser sum may be paid for the first and last months of the Term of this Lease if the Term commences on a day other than the first day of the month, in accordance with the provisions of this Lease herein set forth. Lessor acknowledges receipt from Lessee of the first monthly installment by check, subject to collection, for Fixed Basic Rent for the first month of the Lease Term. Lessee shall pay Fixed Basic Rent, and any Additional Rent as hereinafter provided, to Lessor at Lessor's above stated address, or at such other place as Lessor may designate in writing, without demand and without counterclaim, deduction or set off. Payment of the Fixed Basic Rent shall commence on the two (2) month anniversary of the Commencement Date. If such day is other than the first day of a calendar month, the first monthly installment of Fixed Basic Rent shall be prorated to the end of said calendar month and shall be payable on such day.* 4. USE AND OCCUPANCY: Lessee shall use and occupy the Premises for the Permitted Use as defined in the Preamble. If at any time during the Term of this Lease, Lessee adopts a policy prohibiting Lessee, its employees, agents or invitees from smoking within the Premises, Lessee shall establish a designated area within the Premises where Lessee shall permit smoking. Lessee shall establish such designated area at Lessee's sole expense in accordance with Article 6 of this Lease. Such designated area shall include, among other things, adequate area, ventilation and fire safety equipment. Lessee hereby acknowledges that such designated area is necessary and reasonable to prevent smoking by Lessee, Lessee's employees, agents and invitees in unauthorized areas of the Building or Common Facilities in violation of relevant fire and safety laws and regulations and to prevent fire hazards within the Premises. [3] 5. CARE AND REPAIR OF PREMISES/ENVIRONMENTAL: (a) Lessee shall commit no act of waste and shall take good care of the Premises and the fixtures and appurtenances therein, and shall, in the use and occupancy of the Premises, conform to all laws, orders and regulations of the federal, state and municipal governments or any of their departments affecting the Premises and with any and all environmental requirements resulting from the Lessee's use of the Premises, this covenant to survive the expiration or sooner termination of the Lease. Lessor shall, subject to the same being included in Operating Costs, make all necessary repairs to the Premises, Common Facilities and to the assigned parking areas, if any, except where the repair has been made necessary by misuse or neglect by Lessee or Lessee's agents, servants, visitors or licensees, in which event Lessor shall nevertheless make the repair but Lessee shall pay to Lessor, as Additional Rent, immediately upon demand, the costs therefor. All improvements made by Lessee to the Premises, which are so attached to the Premises, shall become the property of Lessor upon installation. Not later than the last day of the Term, Lessee shall, at Lessee's expense, remove all Lessee's personal property and those improvements made by Lessee which have not become the property of Lessor, including trade fixtures, cabinetwork, movable paneling, partitions and the like; repair all injury done by or in connection with the installation or removal of said property and improvements; and surrender the Premises in as good condition as they were at the beginning of the Term, reasonable wear and damage by fire, the elements, casualty or other cause not due to the misuse or neglect by Lessee, Lessee's agents, servants, visitors or licensees excepted. All other property of Lessee remaining on the Premises after the last day of the Term of this Lease shall be conclusively deemed abandoned and may be removed by Lessor, and Lessee shall reimburse Lessor for the cost of such removal. Lessor may have any such property stored at Lessee's risk and expense. ENVIRONMENTAL (b) Compliance with Environmental Laws. Lessee shall, at Lessee's own expense, promptly comply with each and every federal, state, county and municipal environmental law, ordinance, rule, regulation, order, directive and requirement, now or hereafter existing ("Environmental Laws"), applicable to the Premises, Lessee, Lessee's operations at the Premises, or all of them. (c) ISRA Compliance. Lessee shall, at Lessee's own expense, comply with the Industrial Site Recovery Act, NIS.A. 13:1K-6 et seg., the regulations promulgated thereunder and any amending and successor legislation and regulations ("ISRA"). (d) Information to Lessor. At no expense to Lessor, Lessee shall promptly provide all information and sign all documents requested by Lessor with respect to compliance with Environmental Laws. (e) Lessor Audit. Lessee shall permit Lessor and its representatives access to the Premises, from time to time, to conduct an environmental assessment, investigation and sampling, all at Lessee's own expense. (f) Lessee Remediation. Should any assessment, investigation or sampling reveal the existence of any spill, discharge or placement of Contaminants in, on, under, or about, or migrating from or onto the Premises, the Building or the Office Building Area, as a result of the action or omission of Lessee or a "Lessee Representative", then, in addition to being in default under this Lease and Lessor having all rights available to Lessor under this Lease and by law by reason of such default, Lessee shall, at Lessee's own expense, in accordance with Environmental Laws, undertake all action required by Lessor and any governmental authority, including, without limitation, promptly obtaining and delivering to Lessor an unconditional No Further Action Letter. For purposes of this Article, the term "Lessee's Representative" shall mean any shareholder, officer, director, member, partner, employee, agent, licensee, assignee, sublessee or invitee of Lessee, or any third party other than Lessor, or [4] another lessee of the Building, or a shareholder, officer, director, member, partner, employee, agent, licensee, assignee, sublessee or invitee of such other lessee. In no event shall any of Lessee's remedial action involve engineering or institutional controls, a groundwater classification exception area or well restriction area, and Lessee's remedial action shall meet the most stringent published or unpublished remediation standards for soil, surface water, groundwater and drinking water. Promptly upon completion of all required investigatory and remedial activities, Lessee shall, at Lessee's own expense, to Lessor's satisfaction, restore the affected areas of the Premises, the Building or the Office Building Area, as the case may be, from any damage or condition caused by the investigatory or remedial work. (g) Environmental Questionnaire. Upon Lessor's request, contemporaneously with the signing and delivery of this Lease, and thereafter upon renewal of the lease, if at all, Lessee shall complete, execute and deliver to Lessor an environmental questionnaire in form and substance satisfactory to Lessor. (h) Environmental Documents and Conditions. For purposes of this Article, the term "Environmental Documents" shall mean all environmental documentation concerning the Building or the Office Building Area, of which the Premises is a part, or its environs, in the possession or under the control of Lessee, including, without limitation, plans, reports, correspondence and submissions. During the term of this Lease and subsequently, promptly upon receipt by Lessee or Lessee's Representatives, Lessee shall deliver to Lessor all Environmental Documents concerning or generated by or on behalf of Lessee, whether currently or hereafter existing. In addition, Lessee shall promptly notify Lessor of any environmental condition of which Lessee has knowledge, which may exist in, on, under, or about, or may be migrating from or onto the Building or the Office Building Area. (i) Lessor's Right to Perform Lessee's Obligations. Notwithstanding anything to the contrary set forth in this Lease, in the event, pursuant to this Lease, Lessee is required to undertake any sampling, assessment, investigation or remediation with respect to the Premises, the Building or the Office Building Area, as the case may be, then, at Lessor's discretion, Lessor shall have the right, upon notice to Lessee, from time to time, to perform such activities at Lessee's expense, and all sums incurred by Lessor shall be paid by Lessee, as Additional Rent, upon demand. (j) Indemnity. Lessee shall indemnify, defend and hold harmless Lessor, Lessor's officers, directors, shareholders, employees and personal or legal representatives from and against any and all claims, liabilities, losses, damages, penalties and costs, foreseen or unforeseen, including, without limitation, counsel, engineering and other professional or expert fees, which an indemnified party may incur resulting directly or indirectly, wholly or partly from Lessee's actions or omissions with regard to Lessee's obligations under this Article. (k) Survival. This Article shall survive the expiration or earlier termination of this lease. Lessee's failure to abide by the terms of this Article shall be restrainable or enforceable, as the case may be, by injunction. (l) Interpretation. The obligations imposed upon Lessee under subparagraphs (a) through (j) above are in addition to and are not intended to limit, but to expand upon, the obligations imposed upon Lessee under this Article 5. As used in this Article, the term "Contaminants" shall include, without limitation, any regulated substance, toxic substance, hazardous substance, haza0ous waste, pollution, pollutant, contaminant, petroleum, asbestos or polychlorinated biphenyls, as defined or referred to in any Environmental Laws. Where a law or regulation defines any of these terms more broadly then another, the broader definition shall apply. [5] 6. ALTERATIONS, ADDITIONS OR IMPROVEMENTS: Lessee shall not, without first obtaining the written consent of Lessor, make any alterations, additions or improvements in, to or about the Premises. 7. ACTIVITIES INCREASING FIRE INSURANCE RATES: Lessee shall not do or suffer anything to be done on the Premises which will increase the rate of fire insurance on the Building. 8. ASSIGNMENT AND SUBLEASE: Provided Lessee is not in default of any provisions of this Lease, Lessee may assign or sublease the within Lease to any party subject to the following: a. In the event Lessee desires to assign this Lease or sublease all or part of the Premises to any other party, the terms and conditions of such assignment or sublease shall be communicated to the Lessor in writing no less than ninety (90) days prior to the effective date of any such sublease or assignment, and, prior to such effective date, the Lessor shall have the option, exercisable in writing to the Lessee, to: (i) sublease such space from Lessee at the lower rate of (a) the rental rate per rentable square foot of Fixed Basic Rent and Additional Rent then payable pursuant to this Lease or (b) the terms set forth in the proposed sublease, (ii) recapture in the case of subletting, that portion of the Premises to be sublet or all of the Premises in the case of an assignment ("Recapture Space") so that such prospective sublessee or assignee shall then become the sole Lessee of Lessor hereunder, or (iii) recapture the Recapture Space for Lessor's own use and the within Lessee shall be fully released from any and all obligations hereunder with respect to the Recapture Space, b. In the event that the Lessor elects not to recapture the Lease or relet the Premises as hereinabove provided, the Lessee may nevertheless assign this Lease or sublet the whole or any portion of the Premises, subject to the Lessor's prior written consent, which consent shall rift be unreasonably withheld, on the basis of the following terms and conditions: i. The Lessee shall provide to the Lessor the name and address of the assignee or sublessee. ii. The assignee or sublessee shall assume, by written instrument, all of the obligations of this Lease, and a copy of such assumption agreement shall be furnished to the Lessor within ten (10) days of its execution. Any sublease shall expressly acknowledge that said sublessee's rights against Lessor shall be no greater than those of Lessee. Lessee further agrees that notwithstanding any such subletting, no other and further subletting of the Premises by Lessee or any person claiming through or under Lessee shall or will be made except upon compliance with and subject to the provisions of this Article 8. iii. Each sublease shall provide that it is subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and that in the event of default by Lessee under this Lease, Lessor may, at its option, take over all of the right, title and interest of Lessee, as sublessor, under such sublease, and such sublessee shall, at Lessor's option, attorn to Lessor pursuant to the then executory provisions of such sublease, except that Lessor shall not (i) be liable for any previous act or omission of Lessee under such sublease or, (ii) be subject to any offset not expressly provided in such sublease which theretofore accrued to such sublease to which Lessor has not one month's rent. [6] iv. The Lessee and each assignee shall be and remain liable for the observance of all the covenants and provisions of this Lease, including, but not limited to, the payment of Fixed Basic Rent and Additional Rent reserved herein, through the entire Term of this Lease, as the same may be renewed, extended or otherwise modified. v. The Lessee and any assignee shall promptly pay to Lessor any consideration received for any assignment and/or all of the rent, as and when received, in excess of the Rent required to be paid by Lessee for the area sublet computed on the basis of an average square foot rent for the gross square footage Lessee has leased. vi. In any event, the acceptance by the Lessor of any rent from the assignee or from any of the subtenants or the failure of the Lessor to insist upon a strict performance of any of the terms, conditions and covenants herein shall not release the Lessee herein, nor any assignee assuming this Lease, from any and all of the obligations herein during and for the entire Term of this Lease. vii. In Lessor's reasonable judgment, the proposed assignee or subtenant is engaged in a business or activity, and the Premises, or the relevant part thereof, will be used in a manner, which (a) is in keeping with the then standard of the Building and (b) is limited to the use of the Premises as general offices. viii. The proposed assignee or subtenant shall be an entity which has existed for at least one (1) year and is not then an occupant of any part of the Building or any other building then owned by Lessor within a five-mile radius of the Building. ix. The proposed assignee or subtenant is not an entity or a person with whom Lessor is or has been, within the preceding twelve (12) month period, negotiating to lease space in the Building. x. There shall not be more than one (1) subtenant in the Premises. xi. Lessee shall not advertise the subtenancy for less than the then current market rent per rentable square foot for the Premises as though the Premises were vacant. xii. Lessee shall not have (a) publicly advertised the availability of the Premises without prior notice to and approval by Lessor, nor shall any advertisement state the name (as distinguished from the address) of the Building or (b) listed the Premises for subletting or assignment with other than a broker, agent or representative who waives any entitlement to a commission or other fee in the event of a recapturing of the Premises; xiii. The proposed occupancy shall not, in Lessor's reasonable opinion, increase the density of population using the Demised Premises to exceed one (1) person per 250 gross rentable square feet of space or exceed the parking allocation presently provided for in this Lease; xiv. The proposed assignee or subtenant shall only use the Premises for general offices and shall riot be engaged in any of the following: (a) educational, including but not limited to, instructional facilities and correspondence schools; (b) employment agencies; (c) model agencies; (d) photographic studios or laboratories; (e) spas, health, physical fitness or exercise salons; (f) small loan offices; (g) real estate brokerage or real estate sales offices open to the general public or construction offices; [7] (h) medical or dental facilities, including professional offices, treatment facilities, dispensaries or laboratories; (i) federal, state or local government offices; (j) so-called boiler room operations; (k) retail stock brokerage offices; and (l) religious organizations making facilities available to congregations for uses other than business purposes. xv. The proposed assignee or subtenant shall not be entitled, directly or indirectly, to diplomatic or sovereign immunity and shall be subject to the service of process in, and the jurisdiction of, the state courts of New Jersey. xvi. Lessor shall require a FIVE HUNDRED AND 00/100 DOLLAR ($500.00) payment to cover its handling charges for each request for consent to any sublet or assignment prior to its consideration of the same. Lessee acknowledges that its sole remedy with respect to any assertion that Lessor's failure to consent to any sublet or assignment is unreasonable shall be the remedy of specific performance and Lessee shall have no other claim or cause of action against Lessor as a result of Lessor's actions in refusing to consent thereto. c. If Lessee is a corporation other than a corporation whose stock is listed and traded on a nationally recognized stock exchange, the provisions of Sub-section a. shall apply to a transfer (however accomplished, whether in a single transaction or in a series of related or unrelated transactions) of stock (or any other mechanism such as, by way of example, the issuance of additional stock, a stock voting agreement or change in class(es) of stock) which results in a change of control of Lessee as if such transfer of stock (or other mechanism) which results in a change of control of Lessee were an assignment of this Lease, and if Lessee is a partnership or joint venture, said provisions shall apply with respect to a transfer (by one or more transfers) of an interest in the distributions of profits and losses of such partnership or joint venture (or other mechanism, such as, by way of example, the creation of additional general partnership or limited partnership interests) which results in a change of control of such a partnership or joint venture, as if such transfer of an interest in the distributions of profits and losses of such partnership or joint venture which results in a change of control of such partnership or joint venture were an assignment of this Lease; but said provisions shall not apply to transactions with a corporation into or with which Lessee is merged or consolidated or to which all or substantially all of Lessee's assets are transferred or to any corporation which controls or is controlled by Lessee or is under common control with Lessee, provided that in the event of such merger, consolidation or transfer of all or substantially all of Lessee's assets (i) the successor to Lessee has a net worth computed in accordance with generally accepted accounting principles at least equal to the greater of (1) the net worth of Lessee immediately prior to such merger, consolidation or transfer, or (2) the net worth of Lessee herein named on the date of this Lease, and (ii) proof satisfactory to Lessor of such net worth shall have been delivered to Lessor at least 10 days prior to the effective date of any such transaction. d. In the event that any or all of Lessee's interest in the Premises and/or this Lease is transferred by operation of law to any trustee, receiver, or other representative or agent of Lessee, or to Lessee as a debtor in possession, and subsequently any or all of Lessee's interest in the Premises and/or this Lease is offered or to be offered by Lessee or any trustee, receiver, or other representative or agent of Lessee as to its estate or property (such person, firm or entity being hereinafter referred to as the "Grantor"), for assignment, conveyance, lease, or other disposition to a person, firm or entity other than Lessor (each such transaction being hereinafter referred to as a "Disposition"), it is agreed that Lessor has and shall have a right of first refusal to purchase, take, or otherwise acquire, the same upon the same terms and conditions as the Grantor thereof shall accept upon such Disposition to such other person, firm, or entity; and as to each such Disposition the Grantor shall give written notice to Lessor in reasonable detail of all of the terms and [8] conditions of such Disposition within twenty (20) days next following its determination to accept the same but prior to accepting the same, and Grantor shall not make the Disposition until and unless Lessor has failed or refused to accept such right of first refusal as to the Disposition, as set forth herein. Lessor shall have sixty (60) days next following its receipt of the written notice as to such Disposition in which to exercise the option to acquire Lessee's interest by such Disposition, and the exercise of the option by Lessor shall be effected by notice to that effect sent to the Grantor; but nothing herein shall require Lessor to accept a particular Disposition or any Disposition, nor does the rejection of any one such offer of first refusal constitute a waiver or release of the obligation of the Grantor to submit other offers hereunder to Lessor. In the event Lessor accept such offer of first refusal, the transaction shall be consummated pursuant to the terms and conditions of the Disposition described in the notice to Lessor. In the event Lessor rejects such offer of first refusal, Grantor may consummate the Disposition with such other person, firm, or entity; but any decrease in price of more than two percent (2%) of the price sought from Lessor or any change in the terms of payment for such Disposition shall constitute a new transaction requiring a further option of first refusal to be given to Lessor hereunder. e. Without limiting any of the provisions of Articles 12 and 13, if pursuant to the Federal Bankruptcy Code (herein referred to as the "Code"), or any similar law hereafter enacted having the same general purpose, Lessee is permitted to assign this Lease notwithstanding the restrictions contained in this Lease, adequate assurance of future performance by an assignee expressly permitted under such Code shall be deemed to mean the deposit of cash security in an amount equal to the sum of one year's Fixed Basic Rent plus an amount equal to the Additional Rent for the calendar year preceding the year in which such assignment is intended to become effective, which deposit shall be held by Lessor for the balance of the Term, without interest, as security for the full performance of all of Lessee's obligations under this Lease, to be held and applied in the manner specified for security in Article 16. :#, f. Except as specifically set forth above, no portion of the Premises or of Lessee's interest in this Lease may be acquired by any other person or entity, whether by assignment, mortgage, sublease, transfer, operation of law or act of the Lessee, nor shall Lessee pledge its interest in this Lease or in any security deposit required hereunder. 9. COMPLIANCE WITH RULES AND REGULATIONS: Lessee shall observe and comply with the rules and regulations hereinafter set forth in Exhibit B attached hereto and made a part hereof and with such further reasonable rules and regulations as Lessor may prescribe, on written notice to the Lessee, for the safety, care and cleanliness of the Building and the comfort, quiet and convenience of other occupants of the Building. Lessee shall not place a load upon any floor of the Premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Lessor reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Lessee, at Lessee's expense, in settings sufficient, in Lessor's judgement, to absorb and prevent vibration, noise and annoyance. 10. DAMAGES TO BUILDING: If the Building is damaged by fire or any other cause to such extent the cost of restoration, as reasonably estimated by Lessor, will equal or exceed twenty-five percent (25%) of the replacement value of the Building (exclusive of foundations) just prior to the occurrence of the damage, then Lessor may, no later than the sixtieth (60th) day following the date of damage, give Lessee a notice of election to terminate this Lease, or if the cost of restoration [9] will equal or exceed fifty percent (50%) of such replacement value and if the Premises shall not be reasonably usable for the purpose for which they are leased hereunder, then Lessee may, no later than the sixtieth (60th) day following the date of damage, give Lessor a notice of election to terminate this Lease. In either said event of election, this Lease shall be deemed to terminate on the thirtieth (30th) day after the giving of said notice, and Lessee shall surrender possession of the Premises within a reasonable time thereafter, and the Fixed Basic Rent, and any Additional Rent, shall be apportioned as of the date of said surrender and any Fixed Basic Rent or Additional Rent paid for any period beyond said date shall be repaid to Lessee. If the cost of restoration shall not entitle Lessor to terminate this Lease, or if, despite the cost, Lessor does not elect to terminate this Lease, Lessor shall restore the Building and the Premises with reasonable promptness, subject to Force Majeure, and Lessee shall have no right to terminate this Lease. Lessor need not restore fixtures and improvements owned by Lessee. In any case in which use of the Premises is affected by any damage to the Building, there shall be either an abatement or an equitable reduction in Fixed Basic Rent, depending on the period for which and the extent to which the Premises are not reasonably usable for the purpose for which they are leased hereunder. The words "restoration" and "restore" as used in this Article 10 shall include repairs, If the damage results from the fault of the Lessee, Lessee's agents, servants, visitors or licensees, Lessee shall not be entitled to any abatement or reduction in Fixed Basic Rent, except to the extent of any rent insurance received by Lessor. 11. EMINENT DOMAIN: If Lessee's use of the Premises is materially affected due to the taking by eminent domain of (a) the Premises or any part thereof or any estate therein; or (b) any other part of the Building; then, in either event, this Lease shall terminate on the date when title vests pursuant to such taking. The Fixed Basic Rent, and any Additional Rent, shall be apportioned as of said termination date and any Fixed Basic Rent or Additional Rent paid for any period beyond said date, shall be repaid to Lessee. Lessee shall not be entitled to any part of the award for such taking or any ~4yment in lieu thereof, but Lessee may file a separate claim for any taking of fixtures and improvements owned by Lessee which have not become the Lessor's property, and for moving expenses, provided the same shall, in no way, affect or diminish Lessor's award. In the event of a partial taking which does not effect a termination of this Lease but does deprive Lessee of the use of a portion of the Premises, there shall either be an abatement or an equitable reduction of the Fixed Basic Rent, and an equitable adjustment reducing the Base Period Costs as hereinafter defined depending on the period for which and the extent to which the Premises so taken are not reasonably usable for the purpose for which they are leased hereunder. 12. INSOLVENCY OF LESSEE: Either (a) the appointment of a receiver to take possession of all or substantially all of the assets of Lessee, or, (b) a general assignment by Lessee for the benefit of creditors, or, (c) any action taken or suffered by Lessee under any insolvency or bankruptcy act, shall constitute a default of this Lease by Lessee, and Lessor may terminate this Lease forthwith and upon notice of such termination Lessee's right to possession of the Premises shall cease, and Lessee shall then quit and surrender the Premises to Lessor but Lessee shall remain liable as hereinafter provided in Article 14 hereof. 13. LESSOR'S REMEDIES ON DEFAULT: If Lessee defaults in the payment of Fixed Basic Rent, or any Additional Rent, or defaults in the performance of any of the other covenants and conditions hereof or permits the Premises to become deserted, abandoned or vacated, Lessor may give Lessee notice of such default, and if Lease does not cure any fixed basic Rent or Additional Rent default within five (5) days or other default within fifteen (15) days after giving of such notice (or if such [10] other default is of such nature that it cannot be completely cured within such period, if Lessee does not commence such curing within such fifteen (15) days and thereafter proceed with reasonable diligence and in good faith to cure such default), then Lessor may terminate this Lease on not less than ten (10) days notice to Lessee, and on the date specified in said notice, Lessee's right to possession of the Premises shall cease but Lessee shall remain liable as hereinafter provided. If this Lease shall have been so terminated by Lessor pursuant to Articles 12 or 13 hereof, Lessor may at any time thereafter resume possession of the Premises by any lawful means and remove Lessee or other occupants and their effects. Lessee shall pay to Lessor, on demand, such expenses as Lessor may incur, including, without limitation, court costs and reasonable attorney's fees and disbursements, in enforcing the performance of any obligation of Lessee under this Lease. 14. DEFICIENCY: In any case where Lessor has recovered possession of the Premises by reason of Lessee's default, Lessor may, at Lessor's option, occupy the Premises or cause the Premises to be redecorated, altered, divided, consolidated with other adjoining premises or otherwise changed or prepared for reletting, and may relet the Premises or any part thereof, as agent of Lessee or otherwise, for a term or terms to expire prior to, at the same time as or subsequent to, the original Expiration Date of this Lease, at Lessor's option and receive the rent therefor. Rent so received shall be applied first to the payment of such expenses as Lessor may have incurred in connection with the recovery of possession, redecorating, altering, dividing, consolidating with other adjoining premises, or otherwise changing or preparing for reletting, and the reletting, including brokerage and reasonable attorney's fees, and then to the payment of damages in amounts equal to the Fixed Basic Rent and Additional Rent hereunder and to the costs and expenses of performance of the other covenants of Lessee as herein provided. Lessee agrees, in any such case, whether or not Lessor has relet, to pay to Lessor damages equal to the Fixed Basic Rent and Additional Rent from the date of such default to the date of expiration of the term demised and other sums herein agreed to be paid by Lessee, less the net proceeds of the reletting, if any, received by Lessor during the remainder of the unexpired term hereof, as ascertained from time to time, and the same shall be payable by Lessee on the several rent days above specified. Lessee shall not be entitled to any surplus accruing as a result of any such reletting. In reletting the Premises as aforesaid, Lessor may grant rent concessions, and Lessee shall not be credited therewith. No such reletting shall constitute a surrender and acceptance or be deemed evidence thereof. If Lessor elects, pursuant hereto, actually to occupy and use the Premises or any part thereof during any part of the balance o f the Term as originally fixed or since extended, there shall be allowed against Lessee's obligation for rent or damages as herein defined, during the period of Lessor's occupancy, the reasonable value of such occupancy, not to exceed, in any event, the Fixed Basic Rent and Additional Rent herein reserved and such occupancy shall not be construed as a release of Lessee's liability hereunder. Alternatively, in any case where Lessor has recovered possession of the Premises by reason of Lessee's default, Lessor may at Lessor's option, and at any time thereafter, and without notice or other action by Lessor, and without prejudice to any other rights or remedies it might have hereunder or at law or equity, become entitled to recover from Lessee, as Damages for such breach, in addition to such other sums herein agreed to be paid by Lessee, to the date of re-entry, expiration and/or dispossess, an amount equal to the difference between the Fixed Basic Rent and Additional Rent reserved in this Lease from the date of such default to the date of Expiration of the original Term demised and the then fair and reasonable rental value of the Premises for the same period. Said Damages shall become due and payable to Lessor immediately upon such breach of this Lease and without regard to whether this Lease be terminated or not, and if this Lease be terminated, without regard to the manner in which it is terminated. In the computation of such Damages, the difference between an installment of Fixed Basic Rent and Additional Rent thereafter becoming due and the fair and reasonable rental value of the Premises for the period for which such installment was payable shall be discounted to the date of such default at the rate of not more than six percent (6%) per annum. Lessee hereby waives all right of redemption to which Lessee or any person under Lessee might be entitled by any law now or hereafter in force. Lessor's remedies hereunder are in addition to any remedy allowed by law. [11] 15. SUBORDINATION OF LEASE: This Lease shall, at Lessor's option, or at the option of any holder of any underlying lease or holder of any mortgages or trust deed, be subject and subordinate to any such underlying leases and to any such mortgages or trust deed which may now or hereafter affect the real property of which the Premises form a part, and also to all renewals, modifications, consolidations and replacements of said underlying leases and said mortgages or trust deed. Although no instrument or act on the part of Lessee shall be necessary to effectuate such subordination, Lessee will, nevertheless, execute and deliver such further instruments confirming such subordination of this Lease as may be desired by the holders of said mortgages or trust deed or by any of the lessor's under such underlying leases. Lessee hereby appoints Lessor attorney-in-fact, irrevocably, to execute and deliver any such instrument for Lessee. If any underlying lease to which this Lease is subject terminates, Lessee shall, on timely request, attorn to the owner of the reversion. 16. SECURITY DEPOSIT: Lessee shall deposit with Lessor on the signing of this Lease, the Security Deposit as defined in the Preamble for the full and faithful performance of Lessee's obligations under this Lease, including without limitation, the surrender of possession of the Premises to Lessor as herein provided. If Lessor applies any part of said Security Deposit to cure any default of Lessee, Lessee shall, on demand, deposit with Lessor the amount so applied so that Lessor shall have the full Security Deposit on hand at all times during the Term of this Lease. In the event a bona fide sale, subject to this Lease, Lessor shall have the right to transfer the Security Deposit to the vendee, and Lessor shall be considered released by Lessee from all liability for the return of the Security Deposit; and lessee agrees to look solely to the new lessor for the return of the Security Deposit, and it is agreed that this shall apply to every transfer or assignment made of the Security Deposit to the new lessor. Provided this Lease is not in default, the Security Deposit (less any portions thereof used, applied or retained by Lessor in accordance with the provisions of this Article 16), shall be returned to Lessee after the expiration or sooner termination of this Lease and after delivery of the entire Premises to Lessor in accordance with the provisions of this Lease. Lessee covenants that it will not assign or encumber or attempt to assign or encumber the Security Deposit and Lessor shall not be bound by any such assignment, encumbrance or attempt thereof. As additional security for the faithful performance and observance by Lessee of the terms, provisions and conditions of this lease, Lessee shall deliver to Lessor simultaneously with the execution of this lease, a Guaranty of Lease, annexed hereto as Exhibit H executed and acknowledged by Sanjay Mody (the "Guarantor"). If financial statements of the Guarantor required to be delivered to Lessor pursuant to the Guaranty of Lease are unsatisfactory to' Lessor, in its sole discretion, or if' Guarantor is the subject of any bankruptcy, insolvency, receivership or creditors' proceedings, Lessee shall provide another guarantor(s) of this lease, satisfactory to Lessor, in substitution of, or in addition to, the Guarantor.* In the event of the insolvency of Lessee, or in the event of the entry of a judgement in any court against Lessee which is not discharged within thirty (30) days after entry, or in the event a petition is filed by or against Lessee under any chapter of the bankruptcy laws of the State of New Jersey or the United States of America, then in such event, Lessor may require would be sufficient to adequately assure Lessee's performance of all of its obligations under this Lease including all payments subsequently accruing. Failure of Lessee to deposit the security required by this Article 16 within ten (10) days after Lessor's written demand shall constitute a material breach of this Lease by Lessee. 17. RIGHT TO CURE LESSEE'S BREACH: If Lessee breaches any covenant or condition of this Lease, Lessor may, on reasonable notice to Lessee (except that no notice need be given in case of emergency), cute such breach at the expense of Lessee and the reasonable amount of all expenses, including attorney's fees, incurred by Lessor in so doing (whether paid by Lessor or not) shall be deemed Additional Rent payable on demand. 18. MECHANIC'S LIENS: Lessee shall, within fifteen (15) days after notice from Lessor, discharge or satisfy by bonding or otherwise any mechanic liens for materials or labor claimed to have been furnished to the Premises on Lessee's behalf. 19. RIGHT TO INSPECT AND REPAIR: Lessor may enter the Premises but shall not be obligated to do so (except as required by any specific provision of this Lease) at any reasonable time on reasonable notice to Lessee (except that no notice need be given in case of emergency) for the purpose of inspection or the making of such repairs, replacement or additions in, to, on and about the Premises or the Building, as Lessor deems necessary or desirable. Lessee shall have no claims or cause of action against Lessor by reason thereof. In no event shall Lessee have any claim against Lessor for interruption of Lessee's business, however occurring, including but not limited to that arising from the negligence of Lessor, its agents, servants or invitees, or from defects, errors or omissions in the construction or design of the Premises and/or the Building, including the structural and ri6n-structural portions thereof. 20. SERVICES TO BE PROVIDED BY LESSOR/LESSOR'S EXCULPATION: Subject to intervening laws, ordinances, regulations and executive orders, while Lessee is not in default under any of the provisions of this Lease, Lessor agrees to furnish, except on holidays, as set forth on Exhibit E attached hereto and made a part hereof: a. The cleaning services, as set forth on Exhibit D attached hereto and made a part hereof, and subject to the conditions therein stated. Except as set forth on Exhibit D, Lessee shall pay the cost of all other cleaning services required by Lessee. b. Heating, ventilating and air conditioning (herein "HVAC") as appropriate for the season, and as set forth on Exhibit C-1, attached hereto and made a part hereof, together with Common Facilities lighting and electric energy all during Building Hours, as defined in the Preamble. c. Cold and hot water for drinking and lavatory purposes. d. Elevator service during Building Hours (if the Building contains an elevator or elevators for the use of the occupants thereof). e. Restroom supplies and exterior window cleaning when reasonably required. f. Notwithstanding the requirements of Exhibit C-1 (as to HVAC) or D or any other provision of this Lease, Lessor shall not be liable for failure to furnish any of the aforesaid services when such failure is due to Force Majeure, as hereinafter defined. Lessor shall not be liable, under any circumstances, including, but not limited to, that arising from the negligence of Lessor, its agents, servants or invitees, or from defects, 13 errors or omissions in the construction or design of the Premises and/or the Building, including the structural and non-structural portions thereof, for loss of or injury to Lessee or to property, however occurring, through or in connection with or incidental to the furnishings of, or failure to furnish, any of the aforesaid services or for any interruption to Lessee's business, however occurring. [13] 21. INTERRUPTION OF SERVICES OR USE: Interruption or curtailment of any service maintained in the Building or at the Office Building Area, if caused by Force Majeure, as hereinafter defined, shall not entitle Lessee to any claim against Lessor or to any abatement in rent, and shall not constitute a constructive or partial eviction, unless Lessor fails to take measures as may be reasonable under the circumstances to restore the service without undue delay. If the Premises are rendered untenantable in whole or in part, for a period of ten (10) consecutive business days, by the making of repairs, replacements or additions, other than those made with Lessee's consent or caused by misuse or neglect by Lessee, or Lessee's agents, servants, visitors or licensees, there shall be a proportionate abatement of Rent from and after said tenth (10th) consecutive business day and continuing for the period of such untenantability. In no event, shall Lessee be entitled to claim a constructive eviction from the Premises unless Lessee shall first have notified Lessor in writing of the condition or conditions giving rise thereto, and if the complaints be justified, unless Lessor shall have failed, within a reasonable time after receipt of such notice, to remedy, or commence and proceed with due diligence to remedy such condition or conditions, all subject to Force Majeure as hereinafter defined. 22. BUILDING STANDARD OFFICE ELECTRICAL SERVICE: The cost of electric current which is supplied by the Lessor for use by the Lessee in the Premises, other than for heating or air conditioning purposes, shall be reimbursed to the Lessor at terms, classification and rates normally charged by the public utilities corporation serving that part of the municipality where the subject Premises are located. a. From and after the Commencement Date, Lessee agrees to pay as Additional Rent an estimated electrical charge of $.10 per square foot per month, payable on the first day of each and every month, until such time as an electrical survey can be performed pursuant to Article 22(b) below. b. Lessee agrees that an independent electrical engineering consultant shall make a survey of electric power demand of the electric lighting fixtures and the electric equipment of Lessee used in the Premises to determine the average monthly electric consumption thereof, and the costs of said survey shall be borne by Lessee. The findings of said consultant as to the average monthly electric consumption of Lessee shall, unless objected to by Lessee within forty-five (45) days, be conclusive and binding on Lessor and Lessee. After Lessor's consultant has submitted its report, Lessee shall pay to Lessor, within ten (10) days after demand therefor by Lessor, the amount (based on the monthly consumption found by such consultant) as owing from the Lease Term's Commencement Date, and the then expired months, to include the then current month and thereafter adjusted for the estimated electrical charges already paid pursuant to Article 22(a), on the first day of every month, in advance, the amount set forth as the monthly consumption in said report. Said amounts shall be treated as Additional Rent due hereunder. Proportionate sums shall be payable for periods of less than a full month if the Term commences or ends on any other than the first or last day of the month. If Lessee objects to said findings, Lessee shall nevertheless pay and continue to pay the amount determined by Lessor's consultant until the issue is finally resolved, but Lessee may, at its expense, seek the services of an independent electrical consultant who shall make a survey as provided above. If Lessor's and Lessee's consultant cannot agree as to Lessee's consumption within thirty (30) days of Lessee's consultant's findings either Lessor or Lessee may request the American Arbitration Association in Somerset, New Jersey to appoint an electrical engineering consultant whose decision shall be final and binding on Lessor and Lessee, and whose cost shall be shared equally. Upon the issue being finally resolved, any overpayment made by Lessee shall be promptly refunded. [14] c. In the event that there shall be an increase or decrease in the rate schedule (including surcharges or demand adjustments), of the public utility for the supply of Building Standard Office Electrical Service, or the imposition of any tax with respect to such service or increase in any such tax following the Lease Term's commencement, the Additional Rent payable hereunder shall be adjusted equitably to reflect the increase or decrease in rate or imposition or increase in the aforesaid tax. All computations shall be made on the basis of Lessee's surveyed usage as if a meter exclusively measuring such usage to the Premises was in place. d. Lessee covenants that it shall notify Lessor immediately upon the introduction of any office equipment or lighting different from that on the Premises as of Lessor's electrical survey or in addition to the aforesaid equipment or lighting on the Premises as of said survey. The introduction of any new or different equipment or lighting shall be cause for, at Lessor's election, a resurveying of the Premises at Lessee's expense. Lessor reserves the right to inspect the Premises to insure compliance with this provision. e. Lessor shall not be liable in any way to Lessee for any loss, damage or expense which Lessee may sustain or incur as a result of any failure, defect or change in the quantity or character of electrical energy available for redistribution to the Premises pursuant to this Article 22 nor for any interruption in the supply, and Lessee agrees that such supply may be interrupted for inspection, repairs and replacement and in emergencies. In any event, the full measure of Lessor's liability for any interruption in the supply due to Lessor's acts or omissions shall be an abatement of Fixed Basic Rent and Additional Rent, unless Lessor fails to take such measures as may be reasonable under the circumstances to restore such service without undue delay. In no event shall Lessor be liable for any business interruption suffered by Lessee. f. Lessor, at Lessee's expense, shall furnish and install all replacement lighting tubes, lamps, ballasts and bulbs required in the Premises. Lessee, however, shall have the right to furnish and/or install any or all of the items mentioned in this Article 22(f). g. Lessee's use of electrical service as contemplated herein shall be during Building flours, and any use in excess of said Building Hours shall result in an adjustment as set forth in Article 22(a) hereof to reflect such additional consumption. 23. ADDITIONAL RENT: It is expressly agreed that Lessee will pay in addition to the Fixed Basic Rent provided in Article 3 hereof, an Additional Rent to cover Lessee's Percentage as defined in the Preamble, of the increased cost to Lessor, for each of the categories enumerated herein, over the "Base Period Costs", as defined in the Preamble for said categories. a. Operating Cost Escalation -- If the Operating Costs incurred for the Building in which the Premises are located and Office Building Area for any Lease Year or Partial Lease Year during the Lease Term shall be greater than the Base Operating Costs (adjusted proportionately for periods less than a Lease Year), then Lessee shall pay to Lessor, as Additional Rent, Lessee's Percentage of all such excess Operating Costs. Operating Costs shall include,by way of illustration and not of limitation: personal property taxes; management fees; labor, including all wages and salaries; social security taxes, and other taxes which may be levied against Lessor upon such wages and salaries; supplies; repairs and maintenance; maintenance and service contracts; painting; wall and window washing; laundry and towel service; tools and equipment (which are not required to be capitalized for federal income tax purposes); fire and other insurance; trash removal; lawn care; snow removal and all other items properly constituting direct operating costs according to standard accounting practices (hereinafter collectively referred to as the "Operating Costs"), but not [15] including depreciation of Building or equipment; interest; income or excess profits taxes; costs of maintaining the Lessor's corporate existence; franchise taxes; any expenditures required to be capitalized for federal income tax purposes, unless said expenditures are for the purpose of reducing Operating Costs within the Building and Office Building Area, or those which under generally applied real estate practice are expensed or regarded as deferred expenses or are required under any governmental or quasi-governmental law, statute, ordinance, rule, order, requirements or regulation, in which event the costs thereof shall be included. The Base Operating Costs shall as be as defined in the Preamble. b. Fuel, Utilities and Electric Cost Escalation (hereinafter referred to as "Utility and Energy Costs") -- If the Utility and Energy Costs, including any fuel surcharges or adjustments with respect thereto, incurred for water, sewer, gas, electric, other utilities and heating, ventilating and air conditioning for the Building, to include all leased and leasable areas (not separately billed or metered within the Building) and Common Facilities electric, lighting, water, sewer and other utilities for the Building and Office Building Area, for any Lease Year or Partial Lease Year, during the Term, shall be greater than the Base Utility and Energy Costs (adjusted proportionately for periods less than a Lease Year), then Lessee shall pay to Lessor as Additional Rent, Lessee's Percentage as hereinafter defined, of all such excess Utility and Energy Costs. As used in this Article 23, the Base Utility and Energy Costs shall be as defined in the Preamble. c. Tax Escalation -- If the Real Estate Taxes for the Building and Office Building Area at which the Premises are located for any Lease Year Partial Lease Year, during the Lease Term, shall be greater than the Base Real Estate Taxes (adjusted proportionately for periods less than a Lease Year), then Lessee shall pay to Lessor as Additional Rent, Lessee's Percentage as hereinafter defined, of all such excess Real Estate Taxes. As used in this Article 23(c), the words and terms which follow mean and include the following: i. "Base Real Estate Taxes" shall be as defined in the Preamble. ii. "Real Estate Taxes" shall mean the property taxes and assessments imposed upon the Building and Office Building Area, or upon the rent, as such, payable to the Lessor, including, but not limited to, real estate, city, county, village, school and transit taxes, or taxes, assessments, or charges levied, imposed or assessed against the Building and Office Building Area by any other taxing authority, whether general or specific, ordinary or extraordinary, foreseen or unforeseen. If due to a future change in the method of taxation, any franchise, income or profit tax shall be levied against Lessor in substitution for, or in lieu of, or in addition to, any tax which would otherwise constitute a Real Estate Tax, such franchise, income or profit tax shall be deemed to be a Real Estate Tax for the purposes hereof; conversely, any additional real estate tax hereafter imposed in substitution for, or in lieu of, any franchise, income or profit tax (which is not in substitution for, or in lieu of, or in addition to, a Real Estate Tax as hereinbefore provided) shall not be deemed a Real Estate Tax for the purposes hereof. d. Lease Year -- As used in this Article 23, Lease Year shall mean a calendar year. Any portion of the Term which is less than a Lease Year as hereinbefore defined, that is, from the Commencement Date through the following December 31, and from the last January 1, falling within the Term to the end of the Term, shall be deemed a "Partial Lease Year". Any reference in this Lease to a Lease Year shall, unless the context clearly indicates otherwise, be deemed to be a reference to a Partial Lease Year if the period in question involves a Partial Lease Year. [16] e. Payment -- At any time, and from time to time, after the establishment of the Base Period Costs for each of the categories referred to above, Lessor shall advise Lessee in writing of Lessee's Percentage share with respect to each of the categories as estimated for the next twelve (12) month period (or proportionate part thereof if the last period prior to the Lease's expiration is less than twelve (12) months) as then known to the Lessor, and thereafter, the Lessee shall pay as Additional Rent, Lessee's Percentage share of these costs for the then current period affected by such advice (as the same may be periodically revised by Lessor as additional costs are incurred) in equal monthly installments, such new rates being applied to any months, for which the Fixed Basic Rent shall have already been paid which are affected by the Operating Cost Escalation and/or Utility and Energy Cost Escalation and/or Tax Escalation Costs above referred to, as well as the unexpired months of the current period, the adjustment for the then expired months to be made at the payment of the next succeeding monthly rental, all subject to final adjustment at the expiration of each Lease Year as defined in Article 23(4) hereof (or Partial Lease Year if the last period prior to the Lease's termination is less than twelve (12) months). However, Lessor shall be reimbursed by Lessee monthly during the first year of the Term for additional Utility and Energy Cost Escalations resulting from an increase in the monthly rate over the Base Utility Rate, In the event the last period prior to the Lease's termination is less than twelve (12) months, the Base Period Costs during said period shall be proportionately reduced to correspond to the duration of said final period. f. Books and Reports -- For the protection of Lessee, Lessor shall maintain books of account which shall be open to Lessee and its representatives at all reasonable times so that Lessee can determine that such Operating, Utility and Energy and Real Estate Tax Costs have, in fact, been paid or incurred. Lessee's representatives shall mean only (i) Lessee's employees or (ii) a Certified Public Accounting firm, and neither Lessee's employees nor any Certified Public Accounting firm shall be permitted to (i) perform such inspection and/or audit on a contingency basis, or (ii) perform such an inspection and/or audit for any other tenant in the Building. At Lessor's request, Lessee shall execute a confidentiality agreement reasonably acceptable to Lessor prior to any examination of Lessor's books and records. In the event Lessee disputes any one or more of sA4 charges, Lessee shall attempt to resolve such dispute with Lessor, provided that if such dispute shall not be satisfactorily settled between Lessor and Lessee, the dispute shall be referred by either party to an independent certified public accountant to be mutually agreed upon, and if such an accountant cannot be agreed upon, The American Arbitration Association may be asked by either party to select an arbitrator, whose decision on the dispute will be final and binding upon both parties, who shall jointly share any cost of such arbitration. Pending resolution of said dispute the Lessee shall pay to Lessor the sum so billed by Lessor subject to its ultimate resolution as aforesaid. g. Right of Review -- Once Lessor shall have finally determined said Operating, Utility and Energy or Real Estate Tax Costs at the expiration of a Lease Year, then as to the item so established, Lessee shall only be entitled to dispute said charge as finally established for a period of six (6) months after such charge is finally established, and Lessee specifically waives any right to dispute any such charge at the expiration of said six (6) month period. h. Occupancy Adjustment -- If, with respect to Operating Cost Escalation, as established in Article 23(a) hereof, and Utility and Energy Cost Escalation, as established in Article 23(b) hereof, the Building is less than eighty-five percent (85%) occupied during the establishment of the respective Base Periods, then the t Base Costs incurred with respect to said Operating Cost or Utility and Energy Cost shall be adjusted during any such period within the Base Period so as to reflect eighty-five percent (85%) occupancy. Similarly, if during any Lease Year or Partial Lease Year, subsequent to the Base Period the Building is less than eighty-five percent (85%) occupied, then the actual costs incurred for Operating Cost and Utility and Energy Cost shall be increased during any such period to reflect eighty-five percent (85%) occupancy so that at all times after the Base Period the Operating Cost or Utility and Energy Cost shall be actual costs, but in the event less than eighty-five [17] percent (85%) of the Building is occupied during all or part of the Lease Year involved, the Operating Cost or Utility and Energy Cost shall not be less than that which would have been incurred had eighty-five percent (85%) of the Building been occupied. The aforesaid adjustment shall only be made with respect to those items that are in fact affected by variations in occupancy levels. 24. LESSEE'S ESTOPPEL: Lessee shall, from time to time, on not less that ten (10) days prior written request by Lessor, execute, acknowledge and deliver to Lessor a written statement certifying that the Lease is unmodified and in full force and effect, or that the Lease is in full force and effect as modified and listing the instruments of modification; the dates to which the rents and charges have been paid; and, to the best of Lessee's knowledge, whether or not Lessor is in default hereunder, and if so, specifying the nature of the default. It is intended that any such statement delivered pursuant to this Article 24 may be relied on by a prospective purchaser of Lessor's interest or mortgagee of Lessor's interest or assignee of any mortgage of Lessor's interest. Lessee shall also execute and deliver the form "Lessee Estoppel Certificate" attached hereto as Exhibit F. 25. HOLDOVER TENANCY: If Lessee holds possession of the Premises after the Expiration Date of this Lease, Lessee shall (i) become a tenant from month to month under the provisions herein provided, but at twice the monthly fixed basic rental for the last month of the term plus the Additional Rent which shall continue as provided in the Lease which sum shall be payable in advance on the first day of each month, and without the requirement for demand or notice by Lessor to Lessee demanding delivery of possession of said Premises, and such tenancy shall continue until terminated by Lessor, or until Lessee shall have given to Lessor, at least sixty (60) days prior to the intended date of termination, a written notice of intent to terminate such tenancy, which termination date must be as of the end of a calendar month; and (ii) indemnify Lessor against loss or liability resulting from the delay by Lessee in so surrendering the Premises including, without limitation, any claims made by any succeeding occupant founded on such delay. Lessee's obligations under this Section shall survive the expiration or sooner termination of the Lease. The time limitations described in this Article 25 shall not be subject to extension for Force Majeure. 26. RIGHT TO SHOW PREMISES: Lessor may show the Premises to prospective purchasers and mortgagees; and during the twelve (12) months prior to termination of this Lease, to prospective tenants, during Building Hours on reasonable notice to Lessee. 27. LESSOR'S WORK - LESSEE'S DRAWINGS: a. Lessor agrees that, prior to the commencement of the Term of this Lease, it will do substantially all of the work in the Premises in accordance with Exhibit C attached hereto and made a part hereof. b. Lessee will timely supply such drawings and information to Lessor as set forth in Exhibit C. Any delay occasioned by Lessee's failure to timely supply such drawings and information shall not delay the Commencement Date of the Term and Lessee's obligations hereunder, and the same shall commence on the date the Premises would have been delivered to Lessee pursuant to Article 2, but for Lessee's delay. c. Lease commencement shall occur and the Commencement Date is defined as that date when Lessor has done substantially all of the work to be done by Lessor in accordance with Exhibit C, unless Lessor has been precluded from completing said [18] work as a result of Lessee's acts or omissions including, but not limited to, its failure to comply with Article 27(b) hereof. Occupancy by Lessee or the delivery of a Certificate of Occupancy by Lessor (if required pursuant to local law) shall be prima facie evidence that Lessor has done substantially all of the work. 28. WAIVER OF TRIAL BY JURY: To the extent such waiver is permitted by law, the parties waive trial by jury in any action or proceeding brought in connection with this Lease or the Premises. 29. LATE CHARGE: Anything in this Lease to the contrary notwithstanding, at Lessor's option, Lessee shall pay a "Late (:barge" of eight percent (8%) of any installment of Fixed Basic Rent or Additional Rent paid more than five (S) days after the due date thereof, to cover the extra expense involved in handling delinquent payments, said Late Charge to be considered Additional Rent. The amount of the Late Charge to be paid by Lessee shall be reassessed and added to Lessee's obligations for each successive monthly period until paid. 30. LESSEE'S INSURANCE: a. Lessee covenants to provide at Lessee's cost and expense on or before the earlier of (i) the Commencement Date, or (ii) Lessee's taking actual possession for the purpose of completing any improvement work, and to keep in full force and effect during the entire Term and so long thereafter as Lessee, or anyone claiming by, through or under Lessee, shall occupy the Premises, insurance coverage as follows: i. Commercial General Liability insurance with contractual liability endorsements with respect to the Premises and the business of Lessee in which Lessee shall be adequately covered under limits of liability of not less than THREE MILLION AND 00/100 DOLLARS (S3,000,000.00) combined single limit per occurrence for bodily or personal injury (including death) and property damage. Such insurance may be carried (x) under a blanket policy covering the Premises and other locations of Lessee, if any, provided that each such policy shall in all respects comply with this Article and shall specify that the portion of the total coverage of such policy that is allocated to the Premises is in the amounts required pursuant to this Article 30 and (y) under a primary liability policy of not less than ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) and the balance under an umbrella policy. Notwithstanding anything to the contrary contained in this Lease, the carrying of insurance by Lessee in compliance with this Article 30 shall not modify, reduce, limit or impair Lessee's obligations and liability under Article 33 hereof. ii. Fire and Extended Coverage, Vandalism, Malicious Mischief, Sprinkler Leakage and Special Extended Coverage Insurance in an amount adequate to cover the cost of replacement of all personal property, decoration, trade fixtures, furnishings, equipment in the Premises and all contents therein. Lessor shall not be liable for any damage to such property of Lessee by fire or other peril includable in the coverage afforded by the standard form of fire insurance policy with extended coverage endorsement attached (whether or not such coverage is in effect), no matter how caused, it being understood that the Lessee will look solely to its insurer for reimbursement. iii. Worker's Compensation Insurance in the minimum statutory amount covering all persons employed by Lessee. [19] iv. Said limits shall be subject to periodic review and Lessor reserves the right to increase said coverage limits if, in the reasonable opinion of Lessor, said coverage becomes inadequate and is less than that commonly maintained by tenants in similar buildings in the area by tenants making similar uses. On or before the Commencement Date, and thereafter at Lessor's request, Lessee shall provide Lessor evidence of the insurance coverage required herein in the form of a duplicate original insurance policy, an insurance binder (countersigned by the insurer), or Evidence of Insurance (in form ACORD 27 with respect to property insurance and ACORD 25-S with respect to liability insurance) for each of the insurance policies Lessee is required to carry in compliance with its obligations under this Lease. b. All of the aforesaid insurance shall (i) name Lessor as an additional insured; (ii) be written by one or more responsible insurance companies licensed in the State of New Jersey satisfactory to Lessor and in form satisfactory to Lessor; (iii) contain endorsements substantially as follows: "It is understood and agreed that the insurer will give to Lessor, or any successor lessor, c/o Mack-Cali Realty Corporation, 11 Commerce Drive, Cranford, New Jersey, thirty (30) days prior written notice of any material change in or cancellation of this policy."; (iv) shall be written on an "occurrence" basis and not on a "claims made" basis. c. Lessee shall be solely responsible for payment of premium and Lessor (or its designee) shall not be required to pay any premium for such insurance. Lessee shall deliver to Lessor at least fifteen (15) days prior to the expiration of such policy, either a duplicate original or a certificate it being the intention of the parties hereto that the insurance required under the terms hereof shall be continuous during the entire Term of this Lease and any other period of time during which pursuant to the Term hereof, said insurance is required. Any insurance carried by Lessee shall be in excess of and will not contribute with the insurance carried by Lessor for injuries or damage arising out of the Premises. d. Lessee agrees, at its own cost and expense, to comply with all rules and regulations of the National Fire Protection Association (NFPA) National Fire Code. If, at any time or from time to time, as a result of or in connection with any failure by Lessee to comply with the foregoing sentence or any act or omission or commission by Lessee, its employees, agents, contractors or licensees, or a result of or in connection with the use to which the Premises are put (notwithstanding that such use may be for the purposes hereinbefore permitted or that such use may have been consented to by Lessor), the fire insurance rate(s) applicable to the Premises shall be higher than that which would be applicable for a business office legally permitted therein, Lessee agrees that it will pay to Lessor as Additional Rent, such portion of the premiums for all Lessor's fire insurance policies in force with respect to the building and the contents of any occupant thereof as shall be attributable to such higher rate(s). e. Lessor makes no representation that the limits of liability specified to be carried by Lessee or Lessor under the terms of this Lease are adequate to protect Lessee against Lessee's undertaking under this Article 30, and in the event Lessee believes that any such insurance coverage called for under this Lease is insufficient, Lessee shall provide, at is own expense, such additional insurance as Lessee deems adequate. f In the event the Premises or its contents are damaged or destroyed by fire or other insured casualty, (i) Lessor, to the extent of the coverage of Lessor's policies of fire insurance, hereby waives its rights"4' any, against Lessee with respect to such damage or destruction, even if said fire or other casualty shall have been caused, in whole or in part, by the negligence of Lessee, and (ii) Lessee, to the extent of the . coverage of Lessee's policies of fire insurance with extended coverage, hereby waives its rights, if any, against Lessor with respect to such damage, or destruction, even if said fire or other casually shall have been caused, in whole or in part, by the negligence of Lessor; provided, however, such waivers of subrogation shall only be effective with respect to loss or damage occurring during such time as Lessor's or Lessees policies of fire insurance (as the case may be) shall contain a clause or [20] endorsement providing in substance that the aforesaid waiver of subrogation shall not prejudice the type and amount of coverage under such policies or the right of Lessor or Lessee (as the case may be) to recover thereunder. If, at any time, Lessor's or Lessee's insurance carrier refuses to write insurance which contains a consent to the foregoing waiver of subrogation, Lessor or Lessee, as the case may be, shall notify the party thereof in writing, and upon the giving of such notice, the provisions of this Section shall be null and void as to any casualty which occurs after such notice. If Lessor's or Lessee's insurance carrier shall make a charge for the incorporation of the aforesaid waiver of subrogation in its policies, then the party requesting the waiver shall promptly pay such charge to the other party upon demand. In the event the party requesting their waiver fails to pay such charge upon demand, the other party shall be released of its obligation to supply such waiver, g. Should Lessee fail to maintain the insurance coverage as set forth in this Article 30, then Lessee shall be in default hereunder and shall be deemed to have breached its covenants as set forth herein. 31. NO OTHER REPRESENTATIONS: No representations or promises shall be binding on the parties hereto except those representations and promises contained herein or in some future writing signed by the party making such representation(s) or promise(s). 32. QUIET ENJOYMENT: Lessor covenants that if, and so long as, Lessee pays Fixed Basic Rent, and any Additional Rent as herein provided, and performs Lessee's covenants hereof, Lessor shall do nothing to affect Lessee's right to peaceably and quietly have, hold and enjoy the Premises for the Term herein mentioned, subject to the provisions of this Lease. 33. INDEMNITY: Lessee shall defend, indemnify and save harmless Lessor and its agents against and from; (a) any and all claims (i) arising from (x) the conduct or management by Lessee, its subtenants, licensees, its or their employees, agents, contractors or invitees on the Premises or of any business therein, or (y) any work or thing whatsoever done, or any condition created (other than by Lessor for Lessor's or Lessee's account) in or about the Premises during the Term of this Lease, or during the period of time, if any, prior to the Commencement Date that Lessee may have been given access to the Premises, (z) any default by Lessee under the terms, covenants and conditions of this Lease or (ii) arising from any negligent or otherwise wrongful act or omission of Lessee or any of its subtenants or licensees or its or their employees, agents, contractors or invitees, and (b) all costs, expenses and liabilities including attorneys fees and disbursements incurred in or in connection with each such claim, action or proceeding brought thereon. In case any action or proceeding be brought against Lessor by reason of any such claim, Lessee, upon notice from Lessor, shall resist and defend such action or proceeding. 34. ARTICLE HEADINGS: The article headings in this Lease and position of its provisions are intended for convenience only and shall not be taken into consideration in any construction or interpretation of this Lease or any of its provisions. [21] 35. APPLICABILITY TO HEIRS AND ASSIGNS: The provisions of this Lease shall apply to, bind and inure to the benefit of Lessor and Lessee, and their respective heirs, successors, legal representatives and assigns. It is understood that the term "Lessor" as used in this Lease means only the owner, a mortgagee in possession or a term lessee of the Building, so that in the event of any sale of the Building or of any lease thereof, or if a mortgagee shall take possession of the Premises, the Lessor herein shall be and hereby is entirely freed and relieved of all covenants and obligations of Lessor hereunder accruing thereafter, and it shall be deemed without further agreement that the purchaser, the term lessee of the Building, or the mortgagee in possession has assumed and agreed to carry out any and all covenants and obligations of Lessor hereunder. 36. OUTSIDE PARKING SPACES: Lessee's occupancy of the Premises shall include the use of the number of outside parking spaces as set forth in the Preamble, all of which will be unassigned. Lessor shall not be responsible for any damage or theft of any vehicle in the parking area and shall not be required to keep parking spaces clear of unauthorized vehicles or to otherwise supervise the use of the parking area. Lessee shall, upon request, promptly furnish to Lessor the license numbers of the cars operated by Lessee and its subtenants, licensees, invitees, concessionaires, officers and employees. If any vehicle of the Lessee, or of any subtenant, licensee, concessionaire, or of their respective officers, agents or employees, is parked in any part of the Common Facilities other than the employee parking area(s) designated therefor by Lessor, Lessee shall pay to Lessor such penalty as may be fixed by Lessor from time to time. All amounts due under the provisions of this Article 36 shall be deemed to be Additional Rent. 37. LESSOR'S LIABILITY FOR LOSS OF PROPERTY: Lessor shall not be liable for any loss of property from any cause whatsoever, including but not limited to theft or burglary from the Premises, and any such loss arising from the negligence of Lessor, its agents, servants or invitees, or from defects, errors or omissions in the construction or design of f& Premises and/or the Building, including the structural and non-structural portions thereof, and Lessee covenants and agrees to make no claim for any such loss at any time. 38. PARTIAL INVALIDITY: If any of the provisions of this Lease, or the application thereof to any person or circumstances, shall to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such provision or provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. 39. LESSEE'S BROKER: Lessee represents and warrants to Lessor that its broker, as defined in the Preamble is the sole broker with whom Lessee has negotiated in bringing about this Lease and Lessee agrees to indemnify and hold Lessor and its mortgagee(s) harmless from any and all claims of other brokers and expenses in connection therewith arising out of or in connection with the negotiation of or the entering into this Lease by Lessor and Lessee. In no event shall Lessor's mortgagee(s) have any obligation to any broker involved in this transaction. In the event that no broker was involved as aforesaid, then Lessee represents and warrants to the Lessor that no broker brought about this transaction, and Lessee agrees to indemnify and hold Lessor harmless from any and all claims of any broker arising out of or in connection with the negotiations of, or entering into of, this Lease by Lessee and Lessor. [22] 40. PERSONAL LIABILITY: Notwithstanding anything to the contrary provided in this Lease, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Lease by Lessor, that there shall be absolutely no personal liability on the part of Lessor, its constituent members (to include but not be limited to, officers, directors, partners and trustees) their respective successors, assigns or any mortgagee in possession (for the purposes of this Article, collectively referred to as "Lessors'), with respect to any of the terms, covenants and conditions of this Lease, and that Lessee shall look solely to the equity of Lessor in the Building for the satisfaction of each and every remedy of Lessee in the event of any breach by Lessor of any of the terms, covenants and conditions of this Lease to be performed by Lessor, such exculpation of liability to be absolute and without any exceptions whatsoever. 41. NO OPTION: The submission of this Lease Agreement for examination does not constitute a reservation of, or option for, the Premises, and this Lease Agreement becomes effective as a Lease Agreement only upon execution and delivery thereof by Lessor and Lessee. 42. DEFINITIONS: a. Affiliate -- Affiliate shall mean any corporation related to Lessee as a parent, subsidiary or brother-sister corporation so that such corporation and such party and other corporations constitute a controlled group as determined under Section 1563 of the Internal Revenue Code of 1986, as amended and as elaborated by the Treasury Regulations promulgated thereunder or any business entity in which Lessee has more than a fifty percent (50%) interest. b. Common Facilities --Common Facilities shall mean the non-assigned parking areas; lobby; elevator(s); fire stairs; public hallways; public lavatories; all other general Building facilities that service all Building tenants; air conditioning rooms; fan rooms; janitors' closets; electrical closets; telephone closets; elevator shafts and machine rooms; flues; stacks; pipe shafts and vertical ducts with their enclosing walls. Lessor may at any time close temporarily any Common Facilities to make repairs or changes therein or to effect construction, repairs or changes within the Building, or to discourage non-tenant parking, and may do such other acts in and to the Common Facilities as in its judgement may be desirable to improve the convenience thereof, but shall always in connection therewith, endeavor to minimize any inconvenience to Lessee. c. Force Majeure -- Force Majeure shall mean and include those situations beyond Lessor's reasonable control, including by way of example and not by way of limitation, acts of God; accidents; repairs; strikes; shortages of labor, supplies or materials; inclement weather; or, where applicable, the passage of time while waiting for an adjustment or insurance proceeds. Any time limits required to be met by either party hereunder, whether specifically made subject to Force Majeure or not, except those related to the payment of Fixed Basic Rent or Additional Rent, shall, unless specifically stated to the contrary elsewhere in this Lease, be automatically extended by the number of days by which any performance called for is delayed due to Force Majeure. t d. Lessee's Percentage -- The parties agree that Lessee's Percentage, as defined in the Preamble, reflects and will be continually adjusted to reflect the ratio of the gross square feet of the area rented to Lessee (including an allocable share of all Common Facilities) [the numerator] as compared with the total number of gross square feet of the entire Building (or additional buildings that may be constructed within the Office Building Area) (the denominator] measured outside wall to outside wall, but excluding therefrom any storage areas. Lessor shall have the right to make changes [23] or revisions in the Common Facilities of the Building so as to provide additional leasing area. Lessor shall also have the right to construct additional buildings in the Office Building Area for such purposes as Lessor may deem appropriate, and subdivide the lands for that purpose if necessary, and upon so doing, the Office Building Area shall become the subdivided lot on which the Building in which the Premises is located. However, if any service provided for in Article 23(a) or any utility provided for in Article 23(b) is separately billed or separately metered within the Building, then the square footage so billed or metered shall be subtracted from the denominator and the Lessee's proportionate share for such service and/or utility shall be separately computed, and the Base Costs for such item shall not include any charges attributable to said square footage. Lessee understands that as a result of changes in the layout of the Common Facilities from time to time occurring due to, by way of example and not by way of limitation, the rearrangement of corridors, the aggregate of all Building tenant proportionate shares may be equal to, less than or greater than one hundred percent (100%). 43. LEASE COMMENCEMENT: Notwithstanding anything contained herein to the contrary, if Lessor, for any reason whatsoever, including Lessor's negligence except as provided for in Article 27(b), cannot deliver possession of the Premises, as provided for in Article 27(a), to Lessee at the commencement of the agreed Term as set forth in Article 2, this Lease shall not be void or voidable, nor shall Lessor be liable to Lessee for any loss or damage resulting therefrom, but in that event, the Term shall be for the full term as specified above to commence from and after the date Lessor shall have delivered possession of the Premises to Lessee or from the date Lessor would have delivered possession of the Premises to Lessee but for Lessee's failure to timely supply to Lessor such drawings and/or information required by Exhibit C or for any other reason attributable to Lessee (herein the "Commencement Date") and to expire midnight of the day immediately preceding Term anniversary of the Commencement Date, and if requested by Lessor, Lessor and Lessee shall, ratify and confirm said Commencement and Expiration Dates by completing and signing Exhibit G attached hereto and made a part hereof. 44. NOTICES: Any notice by either party to the other shall be in writing and shall be deemed to have been duly given only if (i) delivered personally or (ii) sent by registered mail or certified mail return receipt requested in a postage paid envelope addressed or (iii) sent by nationally recognized overnight delivery service, if to Lessee, at the above described Building; if to Lessor, at Lessor's address as set forth above; or, to either at such other address as Lessee or Lessor, respectively, may designate in writing. Notice shall be deemed to have been duly given, if delivered personally, on delivery thereof, if mailed, upon the tenth (10th) day after the mailing thereof or if sent by overnight delivery service, the next business day. 45. ACCORD AND SATISFACTION: No payment by Lessee or receipt by Lessor of a lesser amount than the rent and additional charges payable hereunder shall be deemed to be other than a payment on account of the earliest stipulated Fixed Basic Rent and Additional Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment for Fixed Basic Rent or Additional Rent be deemed an accord and satisfaction, and Lessor may accept such check or payment without prejudice to Lessor's right to recover the balance of such Fixed Basic Rent and Additional Rent or pursue any other remedy provided herein or by law. [24] 46. EFFECT OF WAIVERS: No failure by Lessor to insist upon the strict performance of any covenant, agreement, term or condition of this Lease, or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such covenant, agreement, term or condition. No consent, or waiver, express or implied, by Lessor to or of any breach of any covenant, condition or duty of Lessee shall be construed as a consent or waiver to or of any other breach of the same or any other covenant, condition or duty, unless in writing signed by Lessor. 47. LEASE CONDITION: This Lease is expressly conditioned upon Lessor receiving the consent and approval of Lessor's mortgagee to its term and provisions not later than thirty (30) days after its execution by Lessee, and delivery to Lessor. Should said consent not be received within the aforesaid time period, Lessor may, at Lessor's sole option, cancel this Lease and return the first month's Fixed Basic Rent and Security Deposit to Lessee, which Lessee has deposited with Lessor upon execution of this Lease, and thereafter the parties shall have no further obligations to each other with respect to this Lease. 48. MORTGAGEE'S NOTICE AND OPPORTUNITY TO CURE: Lessee agrees to give any mortgagees and/or trust deed holders, by registered mail, a copy of any notice of default served upon Lessor, provided that, prior to such notice, Lessee has been notified in writing (by way of notice of assignment of rents and leases or otherwise) of the address of such mortgagees and/or trust deed holders. Lessee further agrees that, if Lessor shall have failed to cure such default within the time provided for in this Lease, then the mortgagees and/or trust deed holders shall have an additional thirty (30) days within which to cure such default, or if such default cannot be cured within that time, then such additional time as may be necessary, if within such thirty (30) days, any mortgagee and/or trust deed holder has commenced and is diligently pursuing the remedies necessary to cure such default (including but tilt limited to commencement of foreclosure proceedings if necessary to effect such cure), in which event this Lease shall not be terminated while such remedies are being so diligently pursued. 49. LESSOR'S RESERVED RIGHT: Lessor and Lessee acknowledge that the Premises are in a Building which is not open to the general public. Access to the Building is restricted to Lessor, Lessee, their agents, employees and contractors and to their invited visitors. In the event of a labor dispute including a strike, picketing, informational or associational activities directed at Lessee or any other tenant, Lessor reserves the right unilaterally to alter Lessee's ingress and egress to the Building or make any change in operating conditions to restrict pedestrian, vehicular or delivery ingress and egress to a particular location. 50. CORPORATE AUTHORITY: If Lessee is a corporation, Lessee represents and warrants that this Lease has been duly authorized and approved by the corporation's Board of Directors. The undersigned officers and representatives of the corporation represent and warrant that they are officers of the t corporation with authority to execute this Lease on behalf of the corporation, and within fifteen (15) days of execution hereof, Lessee will provide Lessor with a corporate resolution confirming the aforesaid. [25] 51. AFTER-HOURS USE: Lessee shall be entitled to make use of said Standard Electric Service and HVAC beyond the Building Hours, at Lessee's sole cost and expense, provided Lessee shall notify the Lessor by 3:00 p.m, on the day that Lessee shall require said overtime use if said overtime use is required on any weekday, and by 3:00 p.m. on Friday for Saturday and/or Sunday overtime use. It is understood and agreed that Lessee shall pay the sum of FORTY-FIVE AND 00/100 DOLLARS ($45.00) per hour for air-conditioning service and THIRTY AND 00/100 DOLLARS ($30.00) per hour for heating services, plus such additional percentage increase of the aforesaid hourly sum computed by measuring the percentage increase between the rate in effect (including fuel surcharges or adjustments) during the month for which such overtime use is requested and the Base Rate. The Base Rate for purposes hereof shall be the average of the rates in effect (including surcharges and/or adjustments) during Calendar Year 2000. In no event shall the Lessee pay less than the sum of FORTY-FIVE AND 00/100 DOLLARS ($45.00) per hour for such overtime air-conditioning service or less than THIRTY AND 00/100 DOLLARS ($30.00) per hour for such overtime heating service. 52. LESSEE'S EXPANSION/RELOCATION: The Lessor, in its sole discretion, shall have the right from time to time to change the location of the Premises to other space (the "Substituted Leased Premises") within the Building, subject to the terms and conditions set forth below. a. The Substituted Leased Premises shall contain a minimum floor area of approximately the same number of square feet as are contained in the Premises; and the square footage of any Common Facilities attributable to the Substituted Leased Premises shall be approximately the same as that of the Common Facilities attributable to the Premises. b. If the total square footage comprised by the Substituted Leased Premises and its attributable Common Facilities exceed the total of the Premises and its attributable Common Facilities, the Lessee shall not be required to pay any increase in the Fixed Basic Rent and Lessee's Percentage shall not be increased. If, however, such total square footage shall be less, Lessee's Fixed Basic Rent and Lessee's Percentage shall be decreased proportionately. c. The Lessor shall give the Lessee not less than forty-five (45) days prior notice of Lessor's decision to relocate the Lessee; and the Lessee agrees that no later than forty-five (45) days from the date of its receipt of such notice it shall relocate to the Substituted Leased Premises. d. The Lessor shall bear and pay for the cost and expense of any such relocation; provided, however, that the Lessee shall not be entitled to any compensation for damages for any interference with or interruption of its business during or resulting from such relocation. The Lessor shall make reasonable efforts to minimize such interference. e. In connection with any such relocation, the Lessor shall, at its own cost and expense, furnish and install in (or, if practicable, relocate to) the Substituted Leased Premises all walls, partitions, floors, floor coverings, ceilings, fixtures, wiring and plumbing, if any, (as distinguished from trade fixtures, equipment, furniture, furnishings and other personal property belonging to 4essee) required for the Lessee's proper use and occupancy thereof, all of which items shall be comparable in quality to those situated in the Premises. f. The payments of new monthly minimum rent shall commence on the earlier of ten (10) days after Lessor has completed the physical relocation and installation of permanent improvements in the Substituted Leased Premises or the date that Lessee first opens for business in the Substituted Leased Premises. [26] g. Lessor and Lessee shall promptly execute an amendment to this Lease reciting the relocation of the Premises and any changes in the monthly minimum rent payable hereunder. 53. BUILDING PERMIT: This Lease is expressly conditioned upon Lessor obtaining a building permit from the appropriate government official for Lessee's Premises. Lessor hereby agrees to make application to said government official within five (5) days following the execution of the construction drawings for the Premises. As used herein, construction drawings shall mean the final plans and specifications required pursuant to Article 27(b). EACH PARTY AGREES that it will not raise or assert as a defense to any obligation under the Lease or this Agreement or make any claim that the Lease or this Agreement is invalid or unenforceable due to any failure of this document to comply with ministerial requirements including, but not limited to, requirements for corporate seals, attestations, witnesses, notarizations, or other similar requirements, and each party hereby waives the right to assert any such defense or make any claim of invalidity or unenforceability due to any of the foregoing. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written. LESSOR: LESSEE: BRIDGE PLAZA REALTY ASSOCIATES L.L.C. WEBPULSE CONSULTING, INC. By: Mack-Cali Realty, L.P., member By: Mack-Cali Realty Corporation, its general paring By: s/s/Michael Grossman By: s/s/Sanjay S. Mody Senior Vice Pres Leasing Vice President 5/8/2000 -----END PRIVACY-ENHANCED MESSAGE-----