AGREEMENT BETWEEN POWER PHONE INC.,
LEN GARON ENTERPRISES, INC. AND LEN GARON
FOR PURCHASE OF PREPAID ARTWORK
FOR VALUE RECEIVED, the receipt of which is acknowledged by the
undersigned, it is hereby agreed by and between the parties hereto as follows.
1. LEN GARON ENTERPRISES, INC. ("LG") hereby transfers to POWER PHONE, INC.
("POWER") two million dollars ($2,000,000), at direct wholesale distributor
prices, of original artwork, limited edition prints and hand-colored enhanced
prints ("artwork") created and supplied by LEN GARON through his professional
talents as an artist.
2. LG will deliver to POWER all necessary documentation required to
properly effectuate and/or reflect the transfer of the artwork to POWER or
designee. Such documentation shall be subject to LG's approval, which approval
shall not be unreasonably withheld.
3. LG and LEN GARON warrant that LG has acquired full legal assignable
title and unencumbered ownership of the prepaid artwork transferred hereunder
and can deliver the artwork within a commercially reasonable time from the date
of POWER's requests for delivery.
4. LG agrees to deliver the artwork, hereunder being transferred, within a
commercially reasonable time, in blocks and in amounts as shall be from time to
time reasonably required by POWER, upon demand.
5. LG will supply POWER with an inventory list and an appraisal.
6. LG will maintain the artwork and provide the services due hereunder at
its own cost and risk.
7. In consideration for the transfer of the artwork to POWER, POWER hereby
agrees to issue to LG forty thousand (40,000) shares of Series A Redeemable
Convertible Preferred Stock redeemable at $25 per share, as set forth herein.
8. Each share of the Series A Preferred Stock shall be convertible into ten
(10) common shares of POWER.
9. The Preferred Stock shall have a priority for dividends over the common
stock of POWER. Dividends of the Preferred Stock are cumulative and accrue at
the rate of two dollars ($2.00) per share annually, accruing annually, beginning
from the date of the original issue of such Preferred Stock. At the option of
POWER the dividends may be paid by the issuance of common shares of POWER at a
price of equal to the overage of
high bid and low ask of the common stock of POWER, thirty days prior to the
dividend payment record date.
10. The Preferred Stock is redeemable in whole or in part at any time, at
the option of POWER, or at the option of LG pursuant to paragraph 16 herein, at
a redemption price of twenty five dollars ($25.00) per share plus accrued and
unpaid dividends, if such exist.
11. POWER will use reasonable best efforts to sell and/or market the
artwork. Reasonable best efforts may, at POWER's discretion, include packaging
artwork together with or as part of other products of POWER or other companies
POWER may deal with, reselling through television, art galleries, art shows and
charitable functions, and exchanging artwork for other assets of equal or
greater value. Retail prices shall be determined by LG using LG's sole
reasonable discretion. If after two (2) years of such reasonable best efforts
POWER is unable to sell and/or market the artwork for a total price at or above
$2,000,000, then POWER shall have the right to cancel any unearned Preferred
Shares issued hereunder and return the unsold artwork and cancel the agreement.
If POWER opts to cancel, LG shall be entitled to retain all earned shares of
preferred stock, which amount includes shares released due to actual sales, as
described below. In line with the purposes of this paragraph, and subject to
paragraph 16 herein, all of the 40,000 Preferred shares issued hereunder shall
have a restriction as to transfer and conversion to common shares, as described
in paragraph 8, for the first 2 years from the time of their issuance.
During the two year restriction period, preferred shares shall be released
from the restriction, as herein, in an amount directly proportionate to the
actual sales achieved in relation to the original $2,000,000 value.
12. POWER shall be responsible for all costs incurred in the marketing,
selling and delivery of the artwork. LG shall be responsible for the proper care
and warehousing of the artwork until delivered to POWER.
13. LEN GARON and LG shall provide the artwork together with personal
services and provide the use of their sales network for distribution and
marketing as such may be reasonably required by POWER at POWER's sole reasonable
discretion. If such additional services are used, LG will be paid a commission
of 10% of the sale price or a reasonable negotiated consulting fee, whichever is
lower.
14. All copyrights, licensing rights and rights of reproduction for all of
the art remain the property of LG, LEN GARON, their heirs, successors and
assigns. The acquisition or purchase of any such rights by POWER shall be the
subject of future agreements and is not covered by this contract.
15. If, after the two years specified in paragraph 11, the preferred shares
or their equivalent in common shares, given the right of redemption, do not have
a market price of at least two million dollars ($2,000,000), or a pro rated
amount considering shares that may have been redeemed under paragraph 10, then,
at the option of POWER, either artwork shall be returned in an amount equal to
such deficiency in price, or, additional preferred shares may be issued to
compensate for the deficiency, or POWER may cancel this agreement by returning
the remaining artwork and canceling its pro-rated equivalent number of preferred
shares.
16. Thirty five percent (35%) of the gross sales of the artwork shall be
used as a specific fund in order to effectuate the redemption of the Preferred
Stock as described in paragraph 10. Such redemption effected by using moneys
from the fund shall be at the option of LG. An accounting shall be given to LG
on a monthly basis stating the current amount of the fund. LG has an thirty day
period from the receipt of the accounting in order to opt for redemption. If LG
does not respond or does not assert its right to cause redemption, then the
amount existing in the fund at the time of accounting may be released by POWER
from the fund and used by POWER for any purpose. This shall not effect LG's
ability to assert its right to cause redemption at a later date from future
amounts in the fund.
17. LG retains the right to sell artwork from the inventory being
transferred hereunder. Such right shall exist only prior to such artwork
becoming the subject of a sale order by POWER and shall be upon LG's notice to
POWER. LG shall immediately replace any artwork sold hereunder with artwork of
equal value.
In order to preserve LG's right to sell, herein granted, POWER shall demand
delivery of artwork, as per paragraph 4 herein, only when an actual order is in
place or when needed in reasonable amounts for shows, exhibits and sample items.
POWER shall have a right of substitution and exchange of artwork for
artwork of equal value. Such substitution is dependent upon availability.
18. LG shall have 60 days from the time written notice is received in order
to cure any default hereunder.
19. Both parties have fully satisfied themselves as to the nature of this
transaction together with its complete details and implications.
20. Any disputes between the parties shall be settled by AAA Arbitration at
Philadelphia, Pennsylvania.
21. This contract shall be governed by and construed in accordance with the
laws of the State of Pennsylvania.
22. LEN GARON has individually joined in this agreement solely for the
purposes of paragraphs 3 and personal services to be provided under paragraph
13. All other responsibility, other than those of POWER, shall be the
responsibility of LG, and the liability of LEN GARON (individually) shall be so
limited.
IN WITNESS WHEREOF, the designated Officers of the undersigning
corporations, and LEN GARON personally as to paragraphs 3 and 13, have affixed
their signatures on this 21st day of June, 1995.
PHONE POWER, INC. LEN GARON ENTERPRISES, INC.
by: /s/Noah Steinberg by: /s/Len Garon Pres.
------------------------- -----------------------------
Noah Steinberg, President Len Garon, President
/s/Len Garon
-----------------------------
Len Garon
ADDENDUM TO
AGREEMENT BETWEEN POWER PHONE, INC.,
LEN GARON ENTERPRISES, INC. AND LEN GARON
FOR PURCHASE OF PREPAID ARTWORK
FOR VALUE RECEIVED, the receipt of which is acknowledged by the
undersigned, it is hereby agreed by and between the parties hereto as follows:
1. As additional consideration for the transfer of the artwork to POWER,
and in accordance with the letter of intent providing for consideration from
POWER in the amount of 80,000 preferred shares, POWER hereby agrees to issue to
CABLE PRINT NETWORK MARKETING, INC. (CPNM), forty thousand (40,000) shares of
Series A Redeemable Convertible Preferred Stock redeemable at $25 per share, as
set forth herein.
2. Each share of the Series A Preferred Stock shall be convertible into ten
(10) common shares of POWER.
3. The Preferred Stock shall have a priority for dividends over the common
stock of POWER.
4. The Preferred Stock is redeemable in whole or in part at any time, at
the option of POWER, at a redemption price of twenty five dollars ($25.00) per
share plus accrued and unpaid dividends, if such exist.
5. These preferred shares are subject to cancellation and release from
restriction in the same manner as the preferred shares being issued to LG as
provided for in the main part of the agreement. All of the 40,000 Preferred
shares issued hereunder shall have a restriction as to transfer and conversion
to common shares, for the first 2 years from the time of their issuance.
During the two year restriction period, preferred shares shall be released
from the restriction, as herein, in an amount directly proportionate to the
actual sales achieved in relation to the original $2,000,000 value.
6. CPNM shall be responsible for producing and aiding in the implementation
of a marketing plan in relation with the sale of the artwork.
7. CPNM shall have 60 days from the time written notice is received in
order to cure any default hereunder or by LG as per the main agreement herein.
8. Both parties have fully satisfied themselves as to the nature of this
transaction together with its complete details and implications.
9. Any disputes between the parties shall be settled by AAA Arbitration at
Philadelphia, Pennsylvania.
10. This contract shall be governed by and construed in accordance with the
laws of the State of Pennsylvania.
IT WITNESS WHEREOF, the designated Officers of the undersigning
corporations, and LEN GARON have affixed their signatures on this 21st day of
June, 1995.
PHONE POWER, INC. LEN GARON ENTERPRISES, INC.
by: /s/Noah Steinberg by: /s/Len Garon Pres.
------------------------- ------------------------------
Noah Steinberg, President Len Garon, President
/s/Len Garon
------------------------------
Len Garon