CONTRACT OF SALE - DPPR REALTY CORP.

 

 

                                                                    EXHIBIT 10.5

 

      THIS CONTRACT OF SALE (the "Agreement") made as of November 7, 2005 by and

between DPPR Realty Corp., a New York corporation, having an office at c/o Peter

Rettaliata, Air Industries Machining, Corp., 1479 North Clinton Avenue, Bay

Shore New York 11706 (the "Seller") and Gales Industries, Incorporated, a

Delaware corporation, having an office at 333 East 66th Street, New York, New

York 10021 (the "Purchaser").

 

                               W I T N E S S E T H:

 

      WHEREAS, Seller is the owner of that certain plot, piece or parcel of land

described in Exhibit A annexed hereto (the "Land") and all improvements thereon

erected, known as 1480 North Clinton Avenue, Bay Shore, New York (collectively

the "Improvements") (the Land and the Improvements are hereinafter collectively

called the "Premises"); and

 

      WHEREAS, Seller desires to sell and convey and Purchaser desires to

purchase the Premises;

 

      NOW, THEREFORE, in consideration of the mutual covenants herein set forth,

Purchaser and Seller hereby agree as follows:

 

      1. Sale of Premises.

 

            1.1. On the terms and conditions contained in this Agreement, Seller

agrees to sell and Purchaser agrees to purchase the Premises.

 

            1.2. The sale also includes all right, title and interest, if any,

of Seller in and to all easements, rights of way, privileges, licenses,

appurtenances and other rights and benefits, if any, running with the Premises.

 

            1.3. All of Seller's right, title and interest, if any in fixtures,

equipment, furniture, furnishings, fitting or articles of personal property

located on and used or employed in connection with the Premises (collectively,

the "Fixtures") are included in this sale.

 

      2. Purchase Price.

 

            2.1. The purchase price of the Premises is One Million Five Hundred

Thousand Dollars ($1,500,000) (the "Purchase Price") payable upon delivery of

the Deed (as hereinafter defined) on the Closing Date (as hereinafter defined)

by, at Seller's option, Purchaser's unendorsed certified check, drawn on a bank

which is a member of the New York City Clearinghouse Association ("Acceptable

Check") payable to the order of Seller (or as otherwise directed by Seller)

without intervening endorsement, or by wire transfer of immediately available

federal funds to an account in a bank in accordance with wire transfer

instructions furnished by Seller prior to the Closing Date, or by (at Seller's

option) a combination of both.

 

      3. State of Title.

 

<PAGE>

 

            3.1. The Premises are to be sold and conveyed subject to those

exceptions to title set forth on Exhibit B ("Permitted Exceptions") and the

leases on Exhibit C which shall be assigned to Purchaser. The leases on Exhibit

C are referred to herein as the Leases (the "Leases"). Any exceptions to title

set forth in Exhibit B and the Leases may be omitted from the Deed but shall

nevertheless survive the delivery of the Deed.

 

            3.2. On the Closing, Seller shall deliver to Purchaser fee simple

title and Purchaser shall accept such title as a reputable title company

licensed to do business in the State of New York (the "Title Company") is

willing to approve and insure, subject only to the Permitted Exceptions set

forth in Exhibit B annexed hereto and to the standard printed exceptions in an

ALTA form of policy and to the Leases.

 

            3.3. The amount of unpaid taxes, assessments, water charges and

sewer rents, prorated through the Closing Date, which Seller is obligated to pay

and discharge, with the interest and penalties thereon to a date not less than

two (2) business days after the Closing Date, may at the option of Seller be

allowed to Purchaser out of the Purchase Price. If on the Closing Date there are

any other liens or encumbrances which Seller is obligated to pay or discharge in

order to convey to Purchaser such title as is herein provided to be conveyed,

Seller may use any portion of the Purchase Price to satisfy the same, provided:

 

                   (a) Seller shall deliver to Purchaser at the closing of title,

      instruments in recordable form and sufficient to satisfy such liens and

      encumbrances of record together with the monies sufficient, as determined

      by the Title Company, for the cost of recording or filing said

      instruments; or

 

                  (b) Seller, having made arrangements with the Title Company,

      shall deposit with said company sufficient monies acceptable to the Title

      Company to ensure the obtaining and the recording of such satisfactions.

      Purchaser, if request is made within a reasonable time prior to the

      Closing Date, agrees to provide at Closing separate wire transfer and/or

      Acceptable Checks as requested, aggregating the amount of the Purchase

      Price set forth in Article 2.1 hereof, to facilitate the satisfaction of

      any such liens or encumbrances. The existence of any such liens or

      encumbrances shall not be deemed objections to title if Seller shall

      comply with the foregoing requirements and the Title Company shall agree

      to insure the Purchaser against collection of such liens and/or

      encumbrances, without additional cost to Purchaser.

 

            3.4. Purchaser agrees to make an application to Title Company

promptly after the execution of this Agreement for a full title search and

examination upon the Premises, and Purchaser further agrees that Purchaser will

cause to be delivered to Seller's counsel a copy of the title report and

examination of such Title Company. At least ten (10) days prior to the scheduled

Closing Date, Purchaser shall have the title re-examined by the Title Company

and shall deliver to Seller's counsel a copy of the Title Company's updated

title report with a notice of liens, encumbrances or other defects of title

subject to which Purchase is unwilling to accept title.

 

 

                                       2

<PAGE>

 

            3.5. (a) Seller agrees to satisfy all mortgages on the Premises. Any

judgement, lien, encumbrance or objection to which Seller's title to the

Premises is subject on the Closing Date or any other valid ground which

Purchaser may then have for refusing to close this transaction other than (i)

mortgages (which Seller is obligated to satisfy), (ii) those Permitted

Exceptions subject to which Purchaser is obligated to accept title hereunder and

(iii) the Leases, are referred to herein as "Objectionable Liens." If on the

Closing Date Seller's title to the Premises is subject to any Objectionable

Liens and Purchaser shall be unwilling to waive the same and close Seller shall

have the right, at Seller's sole election to either: (a) take such action as

Seller shall deem advisable to remove, remedy or comply with such Objectionable

Liens and Seller is obligated to spend up to two hundred fifty thousand

($250,000) dollars (the "Maximum Expense") to remove, remedy or comply with such

Objectionable Liens except Seller shall not be obligated to commence any action

or proceeding to cure any such defect or to expend more than the Maximum Expense

to remove any Objectionable Liens, or (b) to cancel this Agreement, provided

that if Seller notifies Purchaser of its election to cancel this Agreement,

Purchaser shall have the right to waive such Objectionable Liens and to close

this transaction, in which event Purchaser shall be given a credit equal to the

reasonably estimated cost of removing, remedying or complying with such

Objectionable Liens, not to exceed $250,000, less such amount as Seller may have

spent in attempting to remove, remedy or comply with such Objectionable Liens.

In the event of Seller's election to take action to remove, remedy or comply

with such Objectionable Liens, Seller shall be entitled to one or more

adjournments of the Closing Date for one or more periods to a date not later

than the closing date of the transactions contemplated by the Stock Purchase

Agreement, dated as of July 25, 2005, by and among Gales Industries,

Incorporated, Air Industries Machining, Corp., Luis Peragallo, Jorge Peragallo,

Peter Rettaliata and Dario Peragallo (the "Stock Purchase Agreement") as amended

or may be amended. If for any reason whatsoever Seller shall not have succeeded

in removing, remedying or complying with such Objectionable Liens at the

expiration of such adjournments, or at such time prior thereto as Seller

determines that it will not be able to satisfy same, Seller shall give Purchaser

notice thereof and Purchaser shall have five (5) business days from the delivery

of such notice in accordance with the terms hereof to elect by notice to Seller

to purchase the Premises subject to such Objectionable Liens with a credit as

provided above. If Purchaser shall still be unwilling to waive the same and to

close this transaction without abatement of the Purchase Price or allowance of

any kind other than as provided above, this Agreement shall be deemed to be

canceled. In the event of the cancellation of this Agreement under any of the

circumstances referred to and as provided in this Article 3.5, this Agreement

shall cease, terminate and come to an end, and (except as otherwise expressly

provided in this Agreement), neither party hereto shall have any rights,

obligations or liabilities against or to the other, except that Purchaser shall

be entitled to reimbursement for the net amount charged Purchaser by the Title

Company for a title examination without issuance of a policy and the net cost to

Purchaser of a survey for the Premises (said reimbursable items are herein

referred to as "Purchaser's Title and Survey Costs"). In no event shall Seller

be required to, and nothing herein contained shall obligate Seller to, expend

any money in excess of two hundred fifty thousand ($250,000) dollars in the

aggregate or to bring any action or proceeding or otherwise incur any costs or

expenses to cure any purported defect or objection or to fulfill any condition

or to render or deliver title to the Premises to Purchaser as herein provided,

except as set forth in this Section.

 

 

                                       3

<PAGE>

 

            (b) Other than as set forth in Schedule 4.27 to the Stock Purchase

Agreement, all notes or notices of violation of law or governmental advances,

orders or requirements which were noted or issued prior to the date of this

Agreement by any governmental department, agency or bureau having jurisdiction

as to conditions affecting the Premises and all liens which have attached to the

Premises prior to the date hereof shall be the obligations of Seller to remove.

Notwithstanding the foregoing, if the reasonable cost of the removal of the

Objectionable Liens and violations, in the aggregate, exceeds two hundred fifty

thousand ($250,000) dollars less such amount as Seller may expend or credit to

Purchaser in respect of Objectionable Liens as provided in Section 3.5(a) (such

amount being referred to as the "Remainder"), then Seller shall have the right

to cancel this Agreement, provided that if Seller notifies Purchaser of its

election to cancel this Agreement, Purchaser shall have the right to waive such

violations and liens, and to close this transaction, in which event Purchaser

shall be given a credit equal to the Remainder.

 

      In no event shall the aggregate amount which Seller is obligated to expend

or credit to Purchaser in respect of Objectionable Liens pursuant to Section

3.5(a) and violations pursuant to this Section 3.5(b) exceed two hundred fifty

thousand ($250,000) dollars.

 

            3.6. Corporate franchise or business taxes owing to municipal,

county or state governments by any corporation in the chain of title of the

Premises, or any transfer, inheritance, estate, dissolution, license or similar

taxes, charges or liens not excepted in this Agreement, shall not constitute an

objection to title, and Purchaser shall take title subject to the same provided

that the Title Company will agree to affirmatively insure at no additional cost

to Purchaser that said taxes or other items will not be collected out of the

Premises.

 

      4. Adjustments.

 

            4.1. Except as otherwise expressly provided herein, all

apportionments shall be made in accordance with the "Customs in Respect to Title

Closings" adopted by the Real Estate Board of New York, Inc. The following are

to be apportioned as of midnight of the day immediately prior to the Closing

Date:

 

                  (a) real estate taxes, on the basis of the fiscal tax year for

      which assessed;

 

                  (b) water and sewer rents and/or charges on the basis of the

      fiscal year for which assessed;

 

                  (c) water meter and sewer rent meter charges in accordance

      with the amounts fixed with respect thereto in a meter reading made as of

      a date not more than thirty (30) days prior to the Closing Date, except

      that if such reading cannot with reasonable efforts be obtained by such

      date, then the unfixed water meter and sewer charges, if any, for any

      intervening period shall be apportioned on the basis of the last reading

      therefor;

 

                  (d) rents and additional rents under the Leases and interest,

      if any, payable in respect of the deposits under the Leases which are

      delivered to Purchaser;

 

 

                                       4

<PAGE>

 

                  (e) utilities;

 

                  (f) charges payable under transferable Service Contracts, if

      any; and

 

                  (g) fuel, if any, to the extent not payable by tenants under

      the Leases.

 

            4.2. If the Closing shall occur before a tax rate is fixed, the

apportionment of taxes shall be upon the basis of the tax rate for the next

preceding year applied to the latest assessed valuation and the parties shall

adjust post-closing upon receipt of the tax bill.

 

            4.3. If, on the Closing Date, the Premises or any part thereof shall

be or shall have been affected by an assessment or assessments which are or may

become payable in annual installments, of which the first installment is then a

charge or lien, or has been paid, then for the purpose of this Agreement all the

unpaid installments of any such assessment, including those which are to become

due and payable after the Closing Date, shall be payable by Seller. If the first

installment shall be due following the Closing then Purchaser shall assume the

entire obligation without abatement.

 

            4.4. In the event the apportionments as provided in this Article,

when computed result in a payment due Seller, then such payment shall be made at

the Closing by Acceptable Check. If such apportionment results in a credit to

Purchaser, the cash portion of the Purchase Price due at Closing shall be

reduced by the amount of such credit.

 

            4.5. As to any rent arrears for periods preceding the Closing, and

any amounts paid by the Tenants under the Leases in respect of water and sewer

rents and charges, water meter and sewer rent meter charges, utilities and real

estate and vault taxes, accruing prior to the Closing, provided the applicable

Tenant is otherwise current in respect of all amounts due under its Lease,

Purchaser shall receive the same as a trust fund for remission to Seller in

payment of the Tenants' arrears, provided Purchaser shall have no obligation to

seek to collect the same on behalf of Seller. The provisions of this Article

shall survive the Closing.

 

      5. The Deed - Deliveries at Closing

 

            5.1. The deed to be delivered by Seller shall be the usual statutory

bargain and sale deed with covenants against grantor's acts (herein called the

"Deed") in proper statutory short form for recording and shall be duly executed

and acknowledged so as to convey to Purchaser the fee simple title of the

Premises free of all encumbrances except as stated in this Agreement, which Deed

shall contain the covenant required by subdivision 5, Section 13 of the New York

State Lien Law.

 

            5.2. At the Closing, Seller shall deliver to Purchaser the following

documentation:

 

                  (a) a certification of non-foreign status, in form required by

      the Internal Revenue Code Section 1445 and regulations issued thereunder,

      signed under penalty of perjury. Seller understands that such

      certifications will be retained by Purchaser and will be made available to

      the Internal Revenue Service on request;

 

 

                                        5

<PAGE>

 

                  (b) Seller shall deliver the original copy of the Leases if

      available or if the original copy of any Lease is not available, then

      Seller shall deliver a true copy of such Lease and certify that it is a

      true copy of such Lease. Together with each of the Leases Seller shall

      deliver an assignment thereof, which assignment shall contain (i) an

      indemnification of Purchaser by Seller for all acts of Seller as landlord

      prior to the Closing and (ii) an indemnification of Seller by Purchaser

      for all acts of Purchaser as landlord from and after the Closing;

 

                  (c) possession of the Premises, together with the keys,

      subject to the Leases, as required by this Agreement;

 

                   (d) a New York State transfer tax and credit line mortgage

      form TP 584 duly executed.

 

                  (e) discharge of all mortgages, if any, on the Premises.

 

                  (f) a duly executed Bill of Sale in form reasonably

      satisfactory to Purchaser;

 

                  (g) originals or, if unavailable, copies, of plans and

      specifications, technical manuals and similar materials for the Premises

      to the extent same are in Seller's possession;

 

                  (h) originals or, if unavailable, copies, of all books and

      records relating to the Premises and maintained by Seller during Seller's

      ownership thereof; and

 

                  (i) such additional documentation as may be reasonably

      required to consummate the transaction contemplated by this contract.

 

            5.3. At the Closing, Seller shall also deliver to Purchaser the

following:

 

                  (a) If required pursuant to New York State Business

      Corporation Law, Section 909, Seller shall deliver to Purchaser: (i) a

      resolution of its board of directors authorizing the delivery of the Deed

      and (ii) a certificate executed by an officer of such corporation

      certifying as to the adoption of such resolution and setting forth facts

      demonstrating that the delivery of the Deed is in conformity with the

      requirements of said Section 909. The Deed shall also contain a recital

      sufficient to establish compliance with such law.

 

                  (b) Such affidavits and/or other evidence of

      non-applicability, if appropriate, as the Title Company shall reasonably

      require in order to omit from its title insurance policy all exceptions

      for judgments, bankruptcies or other returns against Seller and person or

      entities whose names are the same as or are similar to Seller's name.

 

 

                                       6

<PAGE>

 

            5.4. At the Closing, Purchaser shall:

 

                  (a) deliver to Seller the Purchase Price, as adjusted for

      apportionments;

 

                  (b) deliver to Seller an assumption of the Leases assigned by

      Seller to Purchaser together with an agreement indemnifying and agreeing

      to defend Seller against any claims made by Tenants with respect to the

      Leases and the Tenant's security deposits to the extent paid, credited or

      assigned to Purchaser;

 

                  (c) cause the Deed to be recorded, duly complete all required

      real property transfer tax returns and cause all such returns and checks

      in payment of such taxes to be delivered to the appropriate officers

      promptly after Closing; and

 

                  (d) deliver any other documents required by this Agreement to

      be deliv