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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 1998.
REGISTRATION NO. 333-45225
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GLOBUS INTERNATIONAL RESOURCES CORP.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
NEVADA 5141 88-0203697
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
TWO WORLD TRADE CENTER, SUITE 2400
NEW YORK, NEW YORK 10048
(212) 839-8000
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
SERGE PISMAN, PRESIDENT
TWO WORLD TRADE CENTER, SUITE 2400
NEW YORK, NEW YORK 10048
(212) 839-8000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPY OF ALL COMMUNICATIONS TO:
GERALD A. ADLER, ESQ.
MARY P. O'HARA, ESQ.
BONDY & SCHLOSS LLP
6 EAST 43RD STREET, 25TH FLOOR
NEW YORK, NEW YORK 10017
(212) 661-3535
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
________________________________________________________________________________
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 14, 1998
PROSPECTUS
GLOBUS INTERNATIONAL RESOURCES CORP.
500,000 SHARES OF COMMON STOCK $.001 PAR VALUE,
256,456 OF WHICH UNDERLY 10% CONVERTIBLE NOTE;
500,000 COMMON STOCK PURCHASE WARRANTS,
256,456 OF WHICH UNDERLY 10% CONVERTIBLE NOTE;
500,000 SHARES OF COMMON STOCK, $.001 PAR VALUE,
UNDERLYING COMMON STOCK PURCHASE WARRANTS
This prospectus relates to 500,000 shares of common stock, par value $0.001
per share (the 'Common Stock'), 256,456 of which underly a 10% Convertible Note
(the 'Note') and 500,000 Common Stock Purchase Warrants (the 'Warrants'),
256,456 of which underly the Note, of Globus International Resources Corp. (the
'Company') being offered hereby by the holder thereof (the 'Selling
Securityholder'), as well as 500,000 Shares of Common Stock underlying the
Warrants, which are also being offered by the Selling Securityholder. (Shares of
Common Stock being registered herewith are referred to herein as the 'Shares').
The Shares and Warrants underlying the Note, as well as the Shares underlying
the Warrants, are issuable from time to time by the Company upon conversion of
the Note, or exercise of any or all of the Warrants, in whole or in part by the
holder thereof. The Note entitles the holder thereof to convert the Note into
the number of shares of Common Stock as is equal to the then outstanding
principal for which a conversion notice is given divided by the 'Conversion
Price', such price being the lesser of $2.50 per share or seventy-five percent
(75%) of the average closing bid prices of the Corporation's Common Stock as
reported on the OTC Bulletin Board for the five consecutive trading days
immediately preceding the Date for Conversion. The Note also entitles the holder
thereof to receive a Warrant, exercisable at $3.625 per share, for each Share of
Common Stock received in the Note conversion.
The Common Stock is traded on the Over-the-Counter Bulletin Board (the 'OTC
Bulletin Board').
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK. SEE 'RISK FACTORS' BEGINNING ON PAGE 6 FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
The Company will receive none of the proceeds from the sale of the Shares
or Warrants by the Selling Securityholder. The Company will bear all costs
relating to the registration of the Shares, which are estimated to be
approximately $90,000 'Plan of Distribution.'
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
Prior to the date of this Prospectus, the Company was not subject to the
informational requirements of the Securities Exchange Act of 1934. The Company
intends to furnish its stockholders with annual reports containing financial
statements audited by its independent accounting firm, after the end of each
fiscal year, and such other periodic reports as the Company deems appropriate or
as may be required by law.
2
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PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and the Company's financial
statements (including the notes thereto) appearing elsewhere in this prospectus.
Each prospective investor is therefore urged to read this prospectus in its
entirety. The securities offered hereby involve a high degree of risk, and the
conversion of the Note and subsequent issuance of the shares by the Company will
result in immediate, substantial dilution. This prospectus contains forward
looking statements that involve risks and uncertainties. The Company's actual
results could differ materially from those anticipated in these forward looking
statements as a result of certain factors discussed under the caption 'Risk
Factors.'
THE COMPANY
The Company is a full service distributor which exports dairy and meat
products, seafood, instant soups, deli products and other grocery items from the
United States and Europe to the Russian and Eastern European marketplace through
Globus Food Systems International Corp. ('Globus Foods'). The Company plans to
expand its distribution system in Russia, including the improvement of existing
warehouse facilities and development of new warehouses.
Shuttle International Ltd., the Company's wholly owned subsidiary, is
engaged in the distribution and exportation of non-food products such as auto
parts and clothing primarily to Russia and the Commonwealth of Independent
States ('CIS'), generally the same geographic areas involved with the Company's
food business.
The Company has a Russian-born, American corporate management team with
extensive experience in managing, operating and developing distribution
businesses in international and domestic markets. The Company's senior
management are Serge Pisman, Yury Greene and Herman Roth. See 'Management.'
The market for distribution and marketing of food products in the CIS and
Russia is highly competitive. The Company believes its main competitors are
major American companies such as Heinz'tm', Kraft'tm', General Foods'tm', and
Campbell'tm' which are currently in the marketplace. The Company has established
a distribution network which is expanding. The Company is seeking to increase
distribution of existing and newly introduced products in current markets. The
Company currently markets its food products through its distribution system in
over 30 cities in Russia and the CIS states. The products are sold to over 800
leading supermarkets and food stores in Moscow and other regions. In addition,
the Company attends most major trade shows in Russia and the CIS states and it
is featured in different trade publications and directories. The Company
believes that it enjoys an increasing awareness among Russian food and other
importers and distributors.
The Company was incorporated in Nevada on October 24, 1984. Its executive
offices are located at Two World Trade Center, Suite 2400, New York, NY 10048
and its telephone number is (212) 839-8000.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered........................ 500,000 Shares of Common Stock, 256,456 of which underly, and are
issuable upon conversion of, the Note; 500,000 Warrants, 256,456
of which underly, and are issuable upon conversion of, the Note; and
500,000 Shares underlying the Warrants. See 'Plan of Distribution.'*
Securities Outstanding Before the Offering
and the Conversion of the balance
remaining on the Note................... 4,750,533 shares of Common Stock; $500,000 10% Convertible Note (with
$280,000 balance remaining plus interest); options to purchase up to
900,000 shares of Common Stock in the aggregate issued to the
Company's officers.
</TABLE>
3
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<PAGE>
<TABLE>
<S> <C>
Securities Outstanding After the Offering
and the Conversion of the Note at the
assumed conversion price of $1.11 per
share................................... Approximately 5,006,989 shares of Common Stock; 500,000 Common
Stock Purchase Warrants*
Use of Proceeds........................... The Company will not receive any proceeds from the sale of Shares by
the Selling Securityholder or from the issuance of the Shares upon
the conversion of the Note. However, the Company will receive
forgiveness of all or a portion of the Note to the extent it is
converted into the Shares and the Warrants. If the Note is converted
in full at the maximum price, the Company will receive loan
forgiveness of approximately $280,000.
Risk Factors.............................. An investment in the Shares and Warrants offered hereby involves a
high degree of risk and, therefore, the Shares and Warrants should
not be purchased by anyone who cannot afford the loss of their entire
investment. Prospective purchasers of the Shares should carefully
review and consider the factors set forth under 'Risk Factors' as
well as other information contained herein, before purchasing any of
the Shares or Warrants. See 'Risk Factors'.
</TABLE>
- ------------
* The number of Shares being registered and sold pursuant to this prospectus and
the registration statement of which it is a part is an estimate: all
calculations in this Prospectus have been made assuming a market price of
$1.48 per share (resulting in a conversion rate of $1.11 per share) and full
conversion of the Note into the Shares and Warrants underlying the Note. See
'Plan of Distribution.'
4
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary historical consolidated financial
data for the Company as at December 31, 1997 (unaudited), September 30, 1997 and
1996, for the three months ended December 31, 1997 and 1996 (unaudited), and for
the years ended September 30, 1997 and 1996. The summary historical financial
data as at and for the years ended September 30, 1997 and 1996 are derived from
the audited consolidated financial statements (and notes thereto) of the Company
included elsewhere in this Prospectus. The summary financial data as at December
31, 1997 and for the three months ended December 31, 1997 and 1996 are derived
from the unaudited consolidated financial statements (and notes thereto) of the
Company included elsewhere in this Prospectus which, in the opinion of
management, reflect all adjustments and accruals, consisting only of normal
recurring adjustments and accruals, necessary to present fairly the financial
statements of the Company as at December 31, 1997 and for the periods ended
December 31, 1997 and 1996. The results for the three months ended December 31,
1997 and 1996 are not indicative of the results to be expected for the full
year. The summary historical consolidated financial data should be read in
conjunction with the consolidated financial statements (and notes thereto) of
the Company and 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEAR
ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Data
Net sales............................ $4,984,003 $3,939,800 $15,389,452 $9,987,751
Cost of goods sold................... 4,560,067 3,631,400 14,012,761 9,392,550
Selling expenses..................... 120,674 70,018 429,220 229,534
General and administrative
expenses........................... 136,498 93,421 611,154 448,545
Depreciation and amortization........ 48,266 3,462 109,624 14,461
Interest income...................... 12,156 12,745 44,554 44,611
Interest expense..................... (179,331) (7,089) (32,244)
Other income......................... -- 4,950 5,487 --
Provision for taxes.................. 50,064 66,700 118,244 6,662
Minority interest.................... -- 2,812 2,812 --
Net income (loss).................... (98,739) 82,593 128,640 (101,634)
Per Share Data
Net income (loss) per common share... $(0.02) $0.03 $0.03 $(0.04)
Average number of shares
outstanding........................ 4,548,860 2,867,284 3,729,065 2,546,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1997 1997
------------ ------------- -------------
<S> <C> <C> <C>
Balance Sheet Data
Working capital............................................... $3,768,240 $ 3,713,805 $ 3,026,109
Current assets................................................ 7,591,076 5,762,544 4,726,124
Total assets.................................................. 8,052,938 6,210,912 4,799,950
Long-term obligations......................................... 12,921 12,921 181,342
Total liabilities............................................. 3,835,757 2,061,660 1,881,357
Accumulated deficit........................................... (109,344) (10,605) (142,057)
Total stockholders' equity.................................... $4,217,181 $ 4,149,253 $ 2,918,593
</TABLE>
5
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RISK FACTORS
An investment in the Shares being offered hereby involves a high degree of
risk. Prior to making any investment decisions, prospective investors should
carefully consider the following factors, together with the other information
presented in this Prospectus including the Financial Statements (and notes
thereto).
LIMITED OPERATING HISTORY
The Company was incorporated on October 24, 1984 but has been active
primarily in the food exporting business for the past two and one half years and
inactive prior thereto for many years. The likelihood of success of the Company
must be considered in light of the problems, delays, expenses and difficulties
frequently encountered by a new enterprise, many of which may be beyond the
Company's control. The Company is subject to all of the risks inherent in the
creation of a new business and the development and marketing of products in a
competitive environment. No assurance can be given that the Company will
continue to be profitable. See 'Business' and the Company's financial statements
located elsewhere in this Prospectus.
RISKS RELATING TO EMERGING MARKETS
Substantially all of the Company's revenue is derived from operations in
emerging markets, where the Company's businesses are subject to numerous risks
and uncertainties, including political, economic and legal risks such as
unexpected changes in regulatory requirements, tariffs, customs, duties and
other trade barriers, difficulties in staffing and managing foreign operations,
problems in collecting accounts receivable, political risks, food and other
export and import restrictions or prohibitions, delays from customs brokers or
government agencies, seasonal reductions in business activity during the summer
months in Europe and certain other parts of the world, and potentially adverse
tax consequences resulting from operating in multiple jurisdictions with
different tax laws, which could materially adversely impact the Company's
business, results of operations and financial condition.
The political systems of many of the emerging market countries in which the
Company operates or plans to operate are slowly emerging from a legacy of
totalitarian rule. Political conflict and, in some cases, civil unrest and
ethnic strife may continue in some of these countries for a period of time. Many
of the economies of these countries are weak, volatile and reliant on
substantial foreign assistance. Expropriation of private businesses in such
jurisdictions remains a possibility, whether by an outright taking or by
confiscatory tax or other policies. There can be no assurance that the Company's
operations will not be materially and adversely affected by such factors or by
actions to expropriate or seize its operations. The success of free market
reforms undertaken in certain of the emerging market countries in which the
Company operates is also uncertain, and further economic instability may occur.
These factors may reduce and delay business activity, economic development and
foreign investment.
Legal systems in emerging market countries frequently have little or no
experience with commercial transactions between private parties. The extent to
which contractual and other obligations will be honored and enforced in emerging
market countries is largely unknown. Accordingly, there can be no assurance that
difficulties in protecting and enforcing rights in emerging market countries
will not have a material adverse effect upon the Company and its operations.
Additionally, the Company's businesses operate in uncertain regulatory
environments. The laws and regulations applicable to the Company's activities in
emerging market countries are in general new and subject to change and, in some
cases, incomplete. There can be no assurance that local laws and regulations
will become stable in the future, or that changes thereto will not adversely
affect the operations of the Company. See 'Business.'
RISKS RELATING TO RUSSIA AND THE CIS
Substantially all of the Company's revenue is derived from operations in
Russia and the CIS. Foreign companies conducting operations in the former Soviet
Union face significant political, economic, and legal risks.
6
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Political. The political systems of Russia and the other independent
countries of the CIS, which are in a stage of relative infancy, are vulnerable
to instability due to the populace's dissatisfaction with reform, social and
ethnic unrest and changes in government policies. Such instability could lead to
events that could have a material adverse effect on the Company's operations in
these countries. In recent years, Russia has been undergoing a substantial
political transformation. During this transformation, legislation has been
enacted to protect private property against expropriation and nationalization.
However, due to the lack of experience in enforcing these provisions in the
short time they have been in effect and due to potential political changes in
the future, there can be no assurance that such protections would be enforced in
the event of an attempted expropriation or nationalization. Expropriation or
nationalization of the Company, its assets or portions thereof, whether by an
outright taking or by confiscatory tax or other policies potentially without
adequate compensation, would have a material adverse effect on the Company.
The various government institutions and the relations between them, as well
as the governments' policies and the political leaders who formulate and
implement them, are subject to rapid and potentially violent change. For
example, the Constitution of the Russian Federation gives the president of the
Russian Federation substantial authority and any major changes in, or rejection
of, current policies favoring political and economic reform by the President may
have a material adverse effect on the Company. Furthermore, the political and
economic changes in Russia have resulted in significant dislocations of
authority. The local press and international press have reported that
significant organized criminal activity has arisen and high levels of corruption
among government officials exist where the Company operates. While the Company
does not believe it has been adversely affected by these factors to date, no
assurance can be given that the depredations or organized or other crime will
not in the future have a material adverse effect on the Company.
Economic. Over the past five years, the Russian government has enacted
reforms to create the conditions for a more market-oriented economy. Despite
some progress in implementing its reforms, including progress in reducing
inflation and stabilizing the currency and industrial production, there remains
generally rising unemployment and underemployment, high government debt relative
to gross domestic product and high levels of corporate insolvency. No assurance
can be given that reform policies will continue to be implemented and, if
implemented, will be successful. Nor can any assurance be given that Russia will
remain receptive to foreign trade and investment or that the economy will
improve.
In addition, Russia, the CIS and other emerging countries in which the
Company operates currently rely upon substantial financial assistance from
several foreign governments and international organizations. To the extent any
of this financial assistance is reduced or eliminated, economic development in
Russia, the CIS and other such countries may be adversely affected.
Russian and CIS businesses have a limited operating history in
market-oriented conditions. The relative infancy of the business culture is
reflected in the Russian banking system's undercapitalization and liquidity
crises. There have been concerns about rumors that many Russian banks continue
to have cash shortages. The Russian Central Bank has reduced bank reserve
requirements, in order to inject more liquidity into the Russian financial
system, but has stressed that it will not bail out the weaker banks. Many of
these banks are expected to disappear over the next several years as a result of
bank failure and anticipated consolidation in the industry. Letters of credit
issued by Russian banks are generally considered to pose a higher risk, and
Russian companies generally lack strong credit histories. Moreover, many
European and American manufacturers and distributers are reluctant to deal
directly with Russian companies due to such risks. A general Russian banking
crisis could have a material adverse effect on the Company's operations and
financial performance and on the viability of the Company's receivables.
Legal Risks. As part of the effort to transform their economies into more
market-oriented economies, the Russian and other CIS governments have rapidly
introduced laws, regulations and legal structures intended to give participants
in the economy a greater degree of confidence in the legal validity and
enforceability of their obligations. Risks associated with the legal systems of
Russia and the other independent republics of the CIS include (i) the untested
nature of the independence of the judiciary and its immunity from economic,
political or nationalistic influence; (ii) the relative
7
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inexperience of judges and courts in commercial dispute resolutions and
generally in interpreting legal norms; (iii) inconsistencies among laws,
presidential decrees, government resolutions and ministerial orders; (iv)
frequently conflicting local, regional and national laws, rules and regulations;
(v) the lack of legislative, judicial or administrative guidance in interpreting
the applicable rules; and (vi) a high degree of discretion on the part of
government authorities and arbitrary decision making which increases among other
things, the risk of property expropriation. The result has been considerable
legal confusion, particularly in areas such as company law, commercial and
contract law, securities and antitrust law, foreign trade and investment law and
tax law. Accordingly, there can be no assurance that the Company will be able to
enforce its rights in any disputes with its joint venture partners or other
parties in Russia or the CIS or that its ventures will be able to enforce their
respective rights in any disputes with partners, customers, suppliers,
regulatory agencies or other parties in Russia or that the Company can be
certain that it will be found to be in compliance with all applicable laws,
rules and regulations.
RELIANCE ON KEY EXECUTIVES
The Company is heavily dependent upon the efforts and abilities of Serge
Pisman, Yury Greene, Herman Roth and Eric Piker. The loss of the services of any
of these individuals would have a material adverse effect on the Company's
business, financial condition and/or results of operations. Currently, the
Company has employment agreements with each of these key employees, but it does
not have key-man insurance on any of their lives.
COMPETITION
The Company operates in an industry which is highly competitive, and the
diverse distribution channels in which the Company markets its products
frequently involve different competitive factors. Most companies which compete
with the Company have greater financial and other resources than the Company.
European and American manufacturers are desirous of marketing and distributing
their products and services to the former Soviet Union markets. The Company
believes its main competitors are major American companies with brands such as
Heinz'tm', Kraft'tm', General Foods'tm', and Campbell'tm' which are currently in
the marketplace. These companies have greater marketing, distribution,
financial, and other resources than the Company permitting such companies to
secure significant contracts and implement extensive advertising. No assurance
can be given that the Company will be able to successfully compete with such
other companies on a long term basis. See 'Business.'
SEASONALITY
The Company's product mix consists of food, clothing, automotive parts and
equipment. Sales of food products tend to increase during the months of October,
November and February. Sales of clothing, auto parts and equipment tend to
increase during the months of October, November and December. These increases
generally coincide with the observance of traditional religious and state
holidays.
SHARES ELIGIBLE FOR FUTURE SALE
Assuming the conversion of the remaining $280,000 balance on the Note in
full at the assumed conversion price of $1.11 per share, the Company will have
outstanding 5,006,989 shares of Common Stock, not including options to acquire
300,000 shares issued to each of Messrs. Pisman, Greene and Roth. Of such
5,006,989 shares, 3,127,944 shares will be 'restricted securities' and in the
future, may be sold only in compliance with Rule 144 or other exemption under
the Securities Act, unless registered under the Securities Act. Under Rule 144,
a person who has owned Common Stock for at least one (1) year may, under certain
circumstances, sell within any three-month period, a number of shares of Common
Stock that does not exceed the greater of one (1%) percent of the then
outstanding shares of Common Stock or the average weekly trading volume during
the four (4) calendar weeks prior to such sale. In addition, a person who is not
deemed to have been an affiliate at any time during the three (3) months
preceding a sale and who has beneficially owned the restricted securities for
the last two (2)
8
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years, is entitled to sell all such shares without regard to the volume
limitations, current public information requirements, manner of sale provisions
and notice requirements. The Company cannot predict how sales made pursuant to
Rule 144 would affect the prevailing market price of the shares of Common Stock.
See 'Shares Eligible for Future Sale.'
PENNY STOCK RULE
Trading in the Company's securities is conducted on the OTC Bulletin Board.
In the absence of the common stock being quoted on Nasdaq, or the Company having
$2 million in net tangible assets, trading in the common stock would be covered
by Rule 15g-9 promulgated under the Securities Exchange Act of 1934, as amended
(the 'Exchange Act') for non-Nasdaq and non-exchange listed securities. Under
such rule, broker-dealers who recommend such securities to persons other than
established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. In addition, such broker-dealers must
provide each customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. Securities are exempt from this rule if the market
price is at least $5.00 per share.
The Securities and Exchange Commission (the 'Commission') has adopted
regulations that generally define a penny stock to be an equity security that
has a market price of less that $5.00 per share, subject to certain exemptions.
Such exemptions include an equity security listed on Nasdaq and an equity
security issued by an issuer that has (i) net tangible assets in excess of $5
million, if such issuer has been in continuous operation for less than three (3)
years, (ii) net tangible assets in excess of $2 million if such issuer has been
in continuous operation for at least three (3) years, or (iii) average revenue
of at least $6 million for the preceding three (3) years. Unless an exemption is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith. The Company's common stock is not
presently subject to the regulations on penny stock because the Company has net
tangible assets in excess of $2 million and has been in operation for at least
three years. However, if the Company's net tangible assets were to fall below $2
million during a period in which the Company's revenues did not exceed $6
million for the then preceding three fiscal years, the Company's Common Stock
would then become subject to the penny stock rule, and the market liquidity for
the common stock could be severely and adversely affected due to the limitations
on the ability of broker-dealers to sell the common stock in the public market.
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO SELL SHARES
At such time as the Shares and Warrants become registered under the
Securities Act of 1933, as amended (the 'Securities Act'), holders of the Shares
and Warrants will be able to sell the Shares only if (i) a current Prospectus
under the Securities Act relating to the Shares and Warrants is then in effect
and (ii) the Shares are qualified for sale or exempt from qualification under
the applicable securities laws of the states in which the Selling Securityholder
makes sales. Although the Company has agreed to use its best efforts to maintain
a current registration statement covering the Shares and Warrants, there can be
no assurance that the Company will be able to do so. The value of the Shares and
Warrants may be greatly reduced if a registration statement covering the Shares
and Warrants is not kept current or if the Shares and Warrants are not
qualified, or exempt from qualification, in the states in which the holders of
Shares and Warrants reside. Persons holding Shares or Warrants who reside in
jurisdictions in which the Shares or Warrants are not qualified and in which
there is no exemption will be unable to sell their Shares and/or Warrants.
CONTROL BY MAJORITY STOCKHOLDERS
Presently, Messrs. Pisman, Greene and Roth own collectively approximately
51.6% of the issued and outstanding shares of Common Stock. Assuming conversion
of the Note in full at the maximum rate of $1.11 per share, the exercise of the
warrants, and the exercise of options for the issuance of
9
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<PAGE>
900,000 shares of Common Stock, in the aggregate, Messrs. Pisman, Greene and
Roth will own collectively approximately 52.6% of the issued and outstanding
shares of Common Stock. As the Company's Bylaws and Certificate of Incorporation
do not provide for cumulative voting for the election of directors, Messrs.
Pisman, Greene and Roth will be able to continue to elect the Company's
directors, appoint officers and otherwise control the Company's affairs and
operations by virtue of their holding approximately 51.6% of the outstanding
shares. See 'Principal Shareholders.'
NO PUBLIC MARKET
The Company securities offered to date have all been offered on a private
basis pursuant to exemptions from the registration requirements under the
federal securities laws. Accordingly, while resales of the Company's Common
Stock may be made by persons other than affiliates of the Company, there is
currently no significant public market for the Common Stock. See 'Description of
Securities.'
NO DIVIDENDS ON COMMON STOCK
The Company does not currently pay and does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future because it intends to
retain its earnings to finance the expansion of its business. There can be no
assurance that the operations of the Company will result in sufficient revenues
to enable the Company to operate at profitable levels or to generate a positive
cash flow. Therefore, investors who anticipate the need of immediate income, in
the form of dividends on their common stock, should not purchase Shares in
this offering.
POSSIBLE ADVERSE EFFECT OF ISSUANCE OF PREFERRED STOCK
The Company's Certificate of Incorporation, as amended, authorizes the
issuance of 100,000 shares of Preferred Stock, with designations, rights and
preferences to be determined from time to time by the Board of Directors. As a
result of the foregoing, the Board of Directors is empowered, without further
shareholder approval, to issue Preferred Stock with dividend, liquidation,
conversion, voting or other rights that could adversely affect the voting power
or other rights of the holders of the Common Stock. In the event of issuance,
the Preferred Stock could be used, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no plans to issue any shares of Preferred Stock, there
can be no assurance that it will not issue Preferred Stock at some time in the
future. See 'Description of Securities.'
FORWARD LOOKING STATEMENTS
This Prospectus and the information incorporated herein by reference
contain various forward-looking statements, including those identified or
predicated by the words 'believes,' 'anticipates,' 'expects,' 'plans' or similar
expressions. Such statements are subject to a number of uncertainties that could
cause the actual results to differ materially from those projected. Such factors
include, but are not limited to, those described under 'Risk Factors'. Given
these uncertainties, prospective purchasers are cautioned not to place undue
reliance upon such statements.
USE OF PROCEEDS
The Company will receive none of the proceeds from the sale of either the
Shares or the Warrants by the Selling Securityholder. The Company will cease to
be indebted with respect to all or a portion of the principal of the Note to the
extent the Note is converted into Shares of Common Stock and Warrants. In
addition, if all of the Warrants were exercised, the Company would receive gross
proceeds of approximately $1,660,718. No assurance can be given that any of the
Warrants will be exercised.
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CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1997 and as adjusted to reflect the issuance of 458,129 Shares of
the Common Stock offered hereby upon conversion of the Note at an actual price
of $1.14 for 201,673 shares and an assumed price $1.11 per share for 256,456
shares and the receipt and initial application of the net proceeds therefrom.
The following table should be read in conjunction with the financial statements
and related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
---------- ------------- ---------------
<S> <C> <C> <C>
Total current liabilities......................................... $3,822,836 $ 2,599,169 $ 3,314,503
Long-term obligations............................................. 12,921 12,921 12,921
Total liabilities................................................. 3,835,757 3,612,090 3,327,424
Stockholders' equity:
Common Stock, par value, $.001 per share: 4,548,860 issued
and outstanding............................................ 4,549 -- --
4,750,533 shares prior to the offering and conversion of the
balance remaining on the Note.............................. -- 4,751 --
5,006,989 shares after conversion of the assumed balance on
Note (including 4,666 of accrued interest at December 31,
1997 on the Note).......................................... -- -- 5,007
Preferred Stock, no par value, 100,000 shares authorized and
unissued........................................................ -- -- --
Additional paid-in capital........................................ 4,321,976 4,510,241 4,659,851
Accumulated deficit............................................... (109,344) (109,344) (109,344)
Total capitalization.................................... $8,052,938 $ 8,017,738 $ 7,882,938
</TABLE>
- ------------
(1) Retroactively reflects at December 31, 1997 the conversion of $220,000 of
the 10% Convertible Note and $3,667 in accrued interest thereon into 201,673
shares (at $1.11 per share) of the Company's Common Stock; and (ii) a charge
to additional paid-in capital of $35,200 of deferred financing costs upon
conversion.
(2) Retroactively reflects the assumed conversion of the remaining $280,000
principal balance and $4,666 in accrued interest of the Company's 10%
Convertible Note into 256,456 shares ($1.11 per share) of the Company's
Common Stock with charges to additional paid in capital for $44,800 in
deferred financing costs upon conversion and $90,000 in registration costs.
DIVIDEND POLICY
The Company has never paid dividends on its Common Stock and does not
anticipate paying dividends or altering its dividend policy in the foreseeable
future. The Company currently intends to retain all available funds for use in
the operation and expansion of its business. The payment of dividends on its
Common Stock will depend upon its earnings, financial condition, cash flows,
capital requirements and such other considerations as the Board of Directors
may consider relevant, including any contractual prohibitions with respect to
the payment of dividends.
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary historical consolidated financial
data for the Company as at December 31, 1997 (unaudited), September 30, 1997 and
1996, for the three months ended December 31, 1997 and 1996 (unaudited), and for
the years ended September 30, 1997 and 1996. The summary historical financial
data as at and for years ended September 30, 1997 and 1996 is derived from the
audited consolidated financial statements (and notes thereto) of the Company
included elsewhere in this Prospectus. The summary financial data as at December
31, 1997 and for the three months ended December 31, 1997 and 1996 is derived
from the unaudited consolidated financial statements (and notes thereto) of the
Company included elsewhere in the Prospectus which, in the opinion of
management, reflect all adjustments and accruals, consisting only of normal
recurring adjustments and accruals, necessary to present fairly the financial
statements of the Company as at December 31, 1997 and for the periods ended
December 31, 1997 and 1996. The results for the three months ended December 31,
1997 and 1996 are not indicative of the results to be expected for the full
year. The summary historical consolidated financial data should be read in
conjunction with the consolidated financial statements (and notes thereto) of
the Company and 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED FOR THE YEAR
DECEMBER 31, ENDED SEPTEMBER 30,
------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Data
Net sales............................ $4,984,003 $3,939,800 $15,389,452 $9,987,751
Cost of goods sold................... 4,560,067 3,631,400 14,012,761 9,392,550
Selling expenses..................... 120,674 70,018 429,220 229,534
General and administrative
expenses........................... 136,498 93,421 611,154 448,545
Depreciation and amortization........ 48,266 3,462 109,624 14,461
Interest income...................... 12,156 12,745 44,554 44,611
Interest expense..................... (179,331) (7,089) (32,244)
Other income......................... -- 4,950 5,487 --
Operating income (loss).............. 250,494 (261,839)
Provision for taxes.................. 50,064 66,700 118,244 4,442
Minority interest.................... -- 2,812 2,812 --
Net income (loss).................... (98,739) 82,593 128,640 (101,634)
Per Share Data
Net income (loss) per common share... $(0.02) $0.03 $0.03 $(0.04)
Average Number of Shares
Outstanding........................ 4,548,860 2,867,284 3,729,065 2,546,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1997 1996
------------ ------------- -------------
<S> <C> <C> <C>
Balance Sheet Data
Working capital............................................... $3,768,240 $ 3,713,805 $ 3,026,109
Current assets................................................ 7,591,076 5,762,544 4,726,124
Total assets.................................................. 8,052,938 6,210,012 4,799,950
Long-term obligations......................................... 12,921 12,921 181,342
Total liabilities............................................. 3,835,757 2,061,660 1,881,357
Accumulated deficit........................................... (109,344) (10,605) (142,057)
Total stockholders' equity.................................... $4,217,181 $ 4,149,253 $ 2,918,593
</TABLE>
12
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto contained elsewhere in
this Prospectus.
GENERAL
The Company was incorporated in October 1984 as Ross Custom Electronics
('Ross'). Ross was engaged in the electronics business. During fiscal 1993, 1994
and through June 1995, Ross had virtually no operations. On March 15, 1995, Ross
merged with Globus Food Systems International Corp. which was accounted for as a
pooling of interests. On October 18, 1996, the Company changed its name to
Globus International Resources Corp. ('Globus'). Globus, in August 1995,
commenced operations by acquiring food and paint products from domestic and
European suppliers and selling those products to wholesalers in Russia and other
former U.S.S.R. countries (also referred to as the Commonwealth of Independent
States ('CIS')).
On December 11, 1996, the Company acquired all of the issued and
outstanding capital stock of Shuttle International, Ltd. ('Shuttle') of which
90% was accounted for in a transaction similar to a pooling of interests and the
remaining 10% minority interest was accounted as a purchase acquisition with a
recognition of goodwill of $137,000. Shuttle is engaged in the distribution and
exportation of non-food products such as auto parts and clothing primarily to
Russia and the CIS states or, generally, the same geographic areas involved with
the Company's food business. Shuttle also has an International Seminars
Department which provides directors and management of large and medium sized
Russian companies with western banking, financial systems and accounting
seminars at the World Trade Center Institute in New York City. Previously
Shuttle, in cooperation with a Canadian modular housing manufacturer, had built
modern cottages in an exclusive Moscow suburb. All houses were prebuilt in
Canada and shipped in sea containers.
The revenues and expenses of the Company from October 1, 1993 to June 30,
1995 were generated solely by Shuttle. Globus commenced acquiring inventory in
May 1996 and sales commenced in August 1996.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
Revenues increased $1,285,000 (37.8%) in the food products segment to
$4,581,000 in 1997 over the 1996 quarter. The increase is largely attributable
to the commencement of the sale of meat products to a new customer in the 1997
quarter. The other product lines' sales decreased $141,000 (25.8%) to $403,000
in the current quarter from $544,000 in 1996. The reduction is attributable to a
decrease in auto accessories sales while the sales of clothing remained
relatively constant. The cost of sales for the three months ended December 31,
1997 increased $929,000 (25.6%) to $4,560,000 (91.5% of sales) from $3,631,000
(92.2% of sales) for the corresponding period in 1996. This increase is
attributable to the increased sales volume. The decrease in cost of sales as a
ratio of revenues is attributable to increased sales margins in both segments.
As a percentage of sales, gross profit for the food product segment increased
from 6.7% to 7.1% due to increased selling prices whereas the 2.6% increase in
gross profits to 24.8% in 1997 for the auto accessories and clothing sales is
due to a different product mix with higher margins of items sold during the
current period.
Selling expenses increased $51,000 (72.9%) in the current quarter to
$121,000 (2.4% of sales) from $70,000 (1.8% of sales). Such increase is
attributable to increased variable selling costs resulting from the $1,044,000
increase in sales (26.5%) for the quarter and an increase in personnel costs.
General and administrative expenses increased $43,000 (46.2%) to $136,000 or
2.7% in the current period from $93,000 (2.4%) in the comparable prior year's
period. Legal, consulting and other professional fees accounted for $30,000 of
the increase while the remaining cost increases are attributable to sundry
managerial and office costs.
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Depreciation and amortization increased $45,000 to $48,000 (1.0% of sales)
from $3,000 in 1996. The increase is attributable to goodwill amortization of
$6,000 deferred consulting fees of $24,000 and amortization of deferred
financing costs of $15,000.
Interest income in both three month periods remained constant. Interest
expense increase $172,000 to $179,000 (3.6% of sales) in the current period from
$7,000 (0.2% of sales) in the quarter ended December 31, 1996. The increase
arises from interest on the convertible note issued in the current quarter plus
a $167,000 charge for the financing costs associated with this note's conversion
option to shares of the Company's common stock at 75% of the market value at the
time of conversion.
The decrease in tax provision from $67,000 in 1996 to $50,000 is
attributable to reduction in income in the current period as a result of
increased operating costs and the charge to operations of nondeductible costs
for income tax purposes.
Net income in 1996 decreased from $83,000 to a net loss of $99,000 in 1997
for the reasons noted above.
COMPARISON OF THE YEAR ENDED SEPTEMBER 30, 1997 AND 1996
Revenues increased $5,401,000 (54.1%) in the year ended September 30, 1997
to $15,389,000 from $9,988,000 for the year ended September 30, 1996. The
increase is attributable to (i) an increase in the food products segment of
$3,368,000 (34.7%) to $13,077,000 in 1996, (ii) the sales of clothing and auto
paint products to Russian customers, which commenced in October, 1996, of
$791,000 and $1,009,0000, respectively, and (iii) an increase in other
automotive parts sales of $234,000 (83.9%) in 1996 to $513,000 in the current
period. The cost of sales in 1997 of $14,013,000 was $4,620,000 (49.2%) higher
than the 1996 cost of sales of $9,393,000 which resulted in an improved gross
margin of 8.9% in 1997 as compared to 6.0% in 1996. The improved margins
resulted from the apparel sales and improved margins of food products. These
improved margins were offset by reduced margins in the Company's sales of auto
accessories items.
Selling expenses increased $200,000 (87.3%) during 1997 to $429,000 or 2.8%
of sales as compared to $229,000 or 2.3% of sales in 1996. This increase which
is evenly split between the food products segment and the other segment, is
attributable to an increase in fixed costs in 1997 of personnel and occupancy
expenses resulting from the operating of the Company's World Trade Center
office, plus an increase in variable selling expenses resulting from the
increased sales volume.
General and administrative costs increased $152,000 (36.1%) to 4.0% of net
sales in 1997 from $449,000 (4.5% of net sales). This increase arises from the
addition of additional personnel costs of which $137,000 is to the Company's
officers. Depreciation and amortization increased $96,000 (685.7%) to $110,000
(0.7% of sales) from $14,000 (0.1% of sales) in 1996. This increase resulted
from amortization of goodwill and deferred consulting contracts in 1997.
Interest income remained relatively constant in both periods, whereas
interest expense decreased $5,000 (15.6%) to $27,000 in 1997 primarily due to
the reduction in long-term debt.
The increase in the provision for taxes in the current period of $111,000
(or 0.8% of sales) to $118,000 from a provision of $7,000 in 1996 is the result
of increased income.
Net income increased $230,000 from a net loss of $101,000 in 1996 to
$129,000 in 1997 as a result of the foregoing.
COMPARISON OF THE YEAR ENDED SEPTEMBER 30, 1996 AND 1995
Net sales increased $7,668,000 (330.5%) to $9,988,000 in fiscal 1996 as
compared to $2,320,000 in net sales in fiscal 1995. This increase is a mix of an
increase in food sales of $8,374,000 and a reduction in automotive accessories
sales of $706,000 from fiscal 1995 levels. This variant in product sales mix is
the reason the cost of sales increased 4.8% to 84.0% of sales ($9,393,000) in
fiscal 1996 from 89.2% of net sales ($2,069,000) in fiscal 1995. Historically,
export sales of food products are more competitive and realize a lower gross
margin than the sale of automotive accessories.
14
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Selling expenses increased $145,000 (170.6%) to $230,000 in fiscal 1996
from $85,000 in fiscal 1995. As a percent of sales they decreased from 3.7% in
1995 to 2.3% in 1996. The $145,000 increase is attributable to the payroll costs
of increased personnel and the opening in February 1996 of the Company's new
sales, administrative and executive offices in New York City.
General and administrative costs increased $195,000 (66.3%) to $449,000
(6.3% of sales) in fiscal 1996 from $294,000 (12.7% of sales) in fiscal 1995.
The higher costs attained in 1996 are largely attributable to the incurrence of
$128,000 in professional and consulting fees in the last quarter of fiscal 1996
as well as increased administrative costs associated with the Company's new
headquarters and increased sales volume.
In fiscal 1996, the Company had interest income of $12,000 (net of interest
expenses of $32,000) as compared to net interest expense of $21,000 (net of
$4,000 in interest income) in 1995. The increase in interest income is the
result of investing cash generated from operations in interest bearing cash
equivalents.
The provision for income taxes of $7,000 in 1996 resulted primarily from
the non-deductibility of $236,000 of the above mentioned consulting fees while
the $48,000 tax benefit reflected in fiscal 1995 arises from the loss incurred
in that period.
The net loss for both fiscal 1996 and 1995 was $101,000.
FINANCIAL CONDITION
DECEMBER 31, 1997 COMPARED TO SEPTEMBER 30, 1997
The Company's free cash position at December 31, 1997 decreased $239,000 to
$379,000 (net of a cash overdraft of $65,000) from $518,000 at September 30,
1997. The decrease is attributable to the increase in restricted cash (held by a
bank as collateral for acceptance payable and bank lines of credit) of $577,000
and an increase in accounts receivable and inventories. Unrestricted cash was
increased during the period from the net proceeds of the sale of a $500,000
convertible note.
The increase in accounts receivable is largely attributable to the
Company's extending longer credit terms and amounts to its old and new
customers. The increase in the inventory level is attributable to the auto
accessory and clothing segment purchases for orders to be shipped in the second
quarter of fiscal 1998.
The liabilities to the Company's banks increased $1,599,000 to $1,630,000
at December 31, 1997 from $31,000 at September 30, 1997. The increased use of
the Company's four bank lines of credit was used to pay for the purchases of the
Company's food segment products. This enabled the Company to reduce its accounts
and acceptances payable obligations to $1,068,000 at December 31, 1997 from
$1,440,000 at September 30, 1997.
Accrued expenses, income taxes payable and other current liabilities in the
aggregate remained stable.
In January 1998, $224,000 of the $500,000 convertible note and accrued
interest was converted into 201,673 shares of the Company's common stock. The
Company received the net proceeds of the note in November 1997. The $280,000
balance of the note plus accrued interest thereon at 10% is due and payable on
November 1, 1998. The noteholder may, at its option, convert any portion of or
all of the remaining liability into shares of common stock at any time up to its
due date.
Stockholder's equity increased $68,000 to $4,217,000 at December 31, 1997
from $4,149,000 at September 30, 1997 even though the Company sustained a
$99,000 net loss for the period. The $99,000 net loss included a $167,000
finance charge for the discount between the stated value of the Company's
convertible note and the fair value of common shares the note could be converted
into on the date of the note's issuance. The $167,000 charge to operations has a
similar $167,000 increase to additional paid-in capital.
15
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SEPTEMBER 30, 1997 COMPARED TO SEPTEMBER 30, 1996
Cash and cash equivalents at September 30, 1997 of $518,000 is $178,000
more than the cash and cash equivalents of $340,000 in September 30, 1996. This
increase in cash is primarily the result of cash generated from the reduction in
restricted cash of $268,000. Restricted cash is held by a bank as collateral for
outstanding acceptances payable.
Accounts receivable increased $2,401,000 (750.3%) to $2,721,000 at
September 30, 1997 while sales for 1997 increased $5,401,000 (54.1%). The
increase in accounts receivable is not only attributable to the increased sales
volume but also to the extension of credit terms for sales and a reduction in
the requirement of cash prepayals prior to shipment. The Company's inventory
level at September 30, 1997 was $885,000 less than the $2,889,000 level at
September 30, 1996 primarily because of a $818,000 reduction in the automotive
paint inventory.
The Company expended $3,000 to acquire property assets in fiscal 1997 and
expensed $50,000 in professional fees in 1997 in connection with the successful
sale of the $500,000 (10%) Convertible Note in November 1997. The Company issued
25,000 shares of its Common Stock, in the aggregate, in payment for indebtedness
for services rendered and consulting services to be rendered.
Accounts and acceptances payable increased $272,000 to $1,440,000 at
September 30, 1997 from $1,168,000 at September 30, 1996.
Accrued expenses and other current liabilities increased $118,000 to
$249,000 at September 30, 1997 primarily as a result of an increase in
professional fees payable of $75,000 and an increase in salaries and interest
payable to related parties of $32,000.
The income tax liability of $91,000 (net of $52,000 deferred tax asset) at
September 30, 1997 is $110,000 higher than the $22,000 deferred tax assets (net
of $14,000 current liability). The increased obligation is a result of the
provision for taxes based upon the income for the year ended September 30, 1997.
Notes payable to banks and related parties of $218,000 at September 30,
1997 was $211,000 less than the September 30, 1996 amount of $429,000. This is
the result of the repayment of long-term debt and related party debt of $242,000
and the use of two bank lines of credit of $31,000 at September 30, 1997. The
Company satisfied obligations for services rendered aggregating $144,000 at
September 30, 1996 by the issuance of 325,000 shares of its Common Stock.
Stockholders' equity increased $1,230,000 to $4,149,000 at September 30,
1997 from $2,919,000 at September 30, 1996. The increase arises from the
issuance of the Company's common stock for services, cash and Shuttle's minority
interest aggregating $1,101,000 during the period and the net income of $129,000
earned during the period.
SEPTEMBER 30, 1996 COMPARED TO SEPTEMBER 30, 1995
Unrestricted cash and cash equivalents increased $76,000 from $264,000 at
September 30, 1995 to $340,000 at September 30, 1996 and restricted cash
increased $206,000 to $1,136,000 at September 30, 1998. The increase in cash and
cash equivalents primarily is the result of the net proceeds from loans to the
Company from its stockholders and other related parties of $210,000 and the
non-cash charge of $128,000 to operations in the fourth quarter of fiscal 1996
from the issuance of shares of the Company's common stock in December 1996 at
their fair market value for services rendered by counsel and consultants. These
professionals valued their services at $44,000.
Accounts receivable decreased $162,000 to $320,000 at September 30, 1996
from $482,000 at September 30, 1995 because of the Company's expanded use of
obtaining advance payments from customers for sales prior to shipment of the
products.
Inventories increased $2,869,000 from $20,000 at September 30, 1995 to
$2,889,000 at September 30, 1996. This increase resulted from the acquisition of
$2,819,000 of automotive paint products for 56,389 shares of the Company's
common stock in May 1996. The Company commenced selling these products in fiscal
1997. In fiscal 1996, the Company used $52,000 of cash to acquire property
assets and for deposits on its leaseholds.
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Accounts and acceptances payable, accrued expenses and other current
liabilities aggregated $1,299,000 at September 30, 1996 which is $57,000 less
than these liabilities aggregated at September 30, 1995. The reduction is
largely due to the payment of accrued salaries and rent to the Company's
officers and entities affiliated with the officers.
The deferred income tax asset (net of currently payable income taxes)
decreased from $39,000 at September 30, 1995 to $22,000 at September 30, 1996 as
a result of the reversal of timing differences between the deductibility of
expenses for income tax and financial reporting purposes.
Notes payable aggregated $386,000 at September 30, 1995 of which $11,000
was to related parties which was paid in fiscal 1996 and $375,000 is an
installment note payable to a bank. The installments due and paid in fiscal 1996
were $167,000 resulting in the liability to the bank of $208,000 at September
30, 1996. During fiscal 1996, the Company's officers and/or entities affiliated
with the officers loaned the Company $220,000 for working capital requirements.
Such notes were outstanding at September 30, 1996.
At September 30, 1996, the Company had recognized a liability of $128,000
for services rendered by professionals and consultants during fiscal 1996. These
obligations were satisfied by the issuance of shares of the Company's common
stock in December 1996.
Stockholders' equity increased $2,864,000 to $2,918,000 at September 30,
1996. The increase arises from the issuance of shares of the Company's common
stock for cash of $147,000 and inventory of $2,819,000 less the net loss
incurred in fiscal 1996 of $101,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at December 31, 1997, September 30, 1997 and
1996 was $3,768,000, $3,714,000 and $3,026,000, respectively. The Company's
primary sources of working capital have been (i) the proceeds from its bank
lines of credit, the Convertible Note, the working capital term loan, related
party loans and advances, and (ii), the issuance of its securities for cash, as
payment for services rendered and as payment for inventory. The Company, in
January 1996 and March 1996, issued 971 shares and 500 shares, respectively, of
its common stock for cash payments of $97,000 and $50,000, respectively. In May
1996, the Company issued 56,389 shares of its common stock for inventory whose
fair market value was $2,819,400. The Company issued 325,000 shares of its
common stock in payment of $128,000 of obligations incurred for services
rendered. The Company in 1997 issued 870,000 shares of its Common Stock to 29
investors for an aggregate of $522,000 in cash (before costs associated with the
offering). Prior to the acquisition of Shuttle in December 1996, the then
stockholders of Shuttle sold 10% of its capital shares for $100,000 in cash. The
Company acquired this 10% minority interest in Shuttle for 250,000 shares of its
common stock as part of the same transaction in which it acquired 90% from three
of its officer/directors for 2,250,000 shares of common stock.
Currently, the Company's primary cash requirements include (i) the funding
of its inventory purchases for and receivables from sales of products and (ii)
ongoing selling, administrative and other operating expenses. Management
believes that its present two unsecured bank lines aggregating $100,000 and its
two secured letter of credit and acceptances payable lines of credit aggregating
$3,500,000 and the net proceeds from the issuance at par of its $500,000, 10%
Convertible note in November 1997 should be, in the aggregate, sufficient to
fund the Company's operations for the next 12 months if the Company's operations
are consistent with management's expectations. The Company may need additional
financing thereafter. There can be no assurance that the Company will be able to
obtain financing on a favorable or timely basis. The type, timing and terms of
financing elected by the Company will depend upon its cash needs, the
availability of other financing sources and the prevailing conditions in the
financial markets. Moreover, any statement regarding the Company's ability to
fund its operations from expected cash flows is speculative in nature and
inherently subject to risks and uncertainties, some of which cannot be predicted
or quantified.
17
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BUSINESS
GENERAL
The Company is a full service distributor which exports dairy and meat
products, seafood, instant soups, deli products and other grocery items from the
United States and Europe to the Russian and Eastern European marketplace through
its subsidiary, Globus Food Systems International Corp. The Company plans to
expand its distribution system in Russia, including the improvement of existing
warehouse facilities and development of new warehouses. In October 1996, the
Company commenced export to Russia of acrylic auto paint.
Shuttle International Ltd., a New York corporation ('Shuttle'), the
Company's wholly owned subsidiary, is engaged in the distribution and
exportation of non-food products such as auto parts and clothing, primarily to
Russia and the CIS states, generally the same geographic areas involved with the
Company's food business.
The Company has a Russian-born, American corporate management team with
extensive experience in managing, operating and developing distribution
businesses in international and domestic markets. The Company's senior
management are Serge Pisman, Yury Greene and Herman Roth. See 'Management'.
The market for distribution and marketing of food products in the CIS and
Russia is highly competitive. The Company believes its main competitors are
major American companies with brands such as Heinz'tm', Kraft'tm', General
Foods'tm', and Campbell'tm' which are currently in the marketplace. The Company
has established a distribution network which is expanding. The Company is
seeking to increase distribution of existing and newly introduced products in
current markets. The Company's food products are currently marketed through its
distribution system in over 30 cities in Russia and the CIS states. The products
are sold in over 800 leading supermarkets and food stores in Moscow and other
regions. In addition, the Company attends most major trade shows in Russia and
the CIS states and it is featured in different trade publications and
directories. The Company believes that it enjoys an increasing awareness among
Russian, as well as other, food importers and distributors.
DEVELOPMENT OF BUSINESS
The Company was incorporated on October 24, 1984 under the name Ross Custom
Electronics ('Ross') and was originally engaged in the electronics business. On
May 6, 1995, Globus Food Systems International Corp., a privately held Delaware
corporation engaged in the business of exporting food supplies, was merged into
Ross, and Ross changed its corporate name to Globus Food Systems International
Corp. On October 18, 1996, the Company changed its corporate name to Globus
International Resources Corp. to reflect a broadening of its exporting business
to include non-food related products and services. In September 1996, the
Company formed a New York corporation, Globus Food Systems International Corp.
('Globus Foods'), a wholly owned subsidiary, which conducts its food exporting
business.
On December 11, 1996 the Company acquired, from Serge Pisman, Yury Greene
and Herman Roth, its principal shareholders, and others, all of the issued and
outstanding capital stock of Shuttle in exchange for 2,500,000 shares of the
Company's common stock. Shuttle is engaged in the business of exporting non-food
products, principally auto parts and western clothing and accessories.
The Company's principal place of business is located at Two World Trade
Center, Suite 2400, New York, NY 10048. The Company is engaged, through Globus
Foods, in the marketing and exporting of foods from the United States and
certain European countries primarily to Russia and former USSR republics (also
referred to as the Commonwealth of Independent States ('CIS'), for resale to
supermarkets and restaurants. The Company has also arranged for the export of
acrylic auto paint to Russia.
DESCRIPTION OF BUSINESS
The Company is a full service distributor exporting a variety of food
products from selected quality manufacturers in the United States and Europe to
the Russian and Eastern European marketplace
18
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<PAGE>
through Globus Foods. Certain of these manufacturers sell their products in
these territories exclusively through Globus Foods. The Company sells dairy and
meat products, seafood, instant soups, deli products and some other grocery
items. Russian warehouse facilities for food products are generally inadequate
and the Company plans to improve existing facilities and develop new warehouses
in Russia in order to provide consumers with broad access to American and
European food products.
Meats, sausages and deli products comprise approximately 75% of all of the
Company's food items. Diary products and seafood constitute approximately 12%
and 10% respectively. The remaining 3% include instant soups and various other
grocery items. The shipment of these food products increase in October, November
and February due to the observance of traditional national and religious
holidays.
In October 1996, the Company commenced export to Russia of acrylic auto
paint. In connection therewith it entered into an agreement in May 1996 with
Fruit Impex S.A., a Panamanian corporation to acquire acrylic auto paint valued
at $2,819,400 in exchange for 56,389 shares of Common Stock (adjusted for the
Company's reverse stock split). The shares are subject to a three year escrow
and voting rights agreement wherein the Company is entitled to all voting
rights. The Company, at its option, during the three year escrow term may
repurchase all or a portion of the shares for $75.00 per share.
On September 12, 1997, the Company entered into a letter of understanding
with Globe Meat Technology Ltd. ('GMT Denmark'), a Danish corporation and Globe
Meat Technology Poland S.A. ('GMT Poland'), a Polish corporation. The letter of
understanding contemplates the entry by the parties into a commercial trade
agreement whereby the Company would export pork products to Russia and other CIS
countries. Pursuant to such an agreement, the Company, with the assistance of
GMT Poland, would open a $2,000,000 revolving line of credit in its own name at
a Polish bank. The Company would purchase pigs from Polish farmers for delivery
to GMT Poland. GMT Poland would then slaughter the pigs and process the meat
according to the Company's specifications, based upon the market for such meat
products in Russia and other CIS countries. At the end of one year, the Company
will have an option either to receive 30% of the net profits of GMT Poland or to
purchase a 30% equity interest in GMT Poland at a purchase price of $2,000,000.
Although Russia and other CIS states ceased the regulation of prices in
1992, since the beginning of 1995, Russia has reinstated certain price
regulations. From time to time, the federal government of Russia as well as
certain regional authorities place direct price limitations on certain products
and subsidize products to maintain certain price levels. In some cases, these
governments place restrictions on profits which can be derived from sales of
food products. See 'Risk Factors -- Risks Relating to Russia and the CIS.'
Russia and the other CIS states frequently experience shortages of grain
and other food products. These shortages result in higher prices and in greater
reliance on foreign food producers and distributors, such as the Company.
SHUTTLE INTERNATIONAL, LTD.
On December 11, 1996, the Company acquired all of the issued and
outstanding shares of capital stock of Shuttle International, Ltd. ('Shuttle').
Shuttle is engaged in the distribution and exportation of non-food products such
as auto parts and clothing primarily to Russia and the CIS states, generally in
the same geographic areas involved with the Company's food business.
Shuttle supplies auto parts and accessories to large wholesalers,
auto-service repair shops and automotive parts stores. These repair shops and
stores service exclusively automotive needs for automobiles not made in Russia
or the CIS. Shuttle ships to its large wholesaler customers container loads, on
a weekly basis, by air as well as sea. Shuttle has established relationships
with large U.S. wholesalers and manufacturers, as well as local dealers which
credit terms of from 30-45 days.
Shuttle is an exclusive supplier of American western clothing to the
'Texas' chain of Western wear clothing and apparel stores in Moscow. The Company
supplies jeans, shirts, outerwear, hats, belts, boots, etc. from American
manufacturers to Russian retailers and wholesalers.
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Shuttle also has an International Seminars Department which provides
directors and management of large and medium sized Russian companies, with
western banking, financial systems and accounting seminars at the World Trade
Center Institute in New York City.
Shuttle, in cooperation with the Canadian modular housing manufacturer
'Modulex', has built modern cottages in an exclusive Moscow suburb. All houses
were pre-built in Canada and shipped in sea containers.
The Company's food and non-food distribution and exporting businesses
contribute approximately 85% and 15% of gross revenues respectively during
fiscal 1997.
PRINCIPAL SUPPLIERS
The Company has formed trade relationships with international food
manufacturers which supply the Company's food products and include Banner Smoked
Fish, Inc., a processor of smoked fish, Jermi Fasewerk, a manufacturer of smoked
and processed cheeses, Fodor Cheese, Comapeche a maker of seafood products, and
Interaliment, a manufacturer of frozen surimi and various fish products. The
Company does not believe that the loss of any of its suppliers would have a
material adverse effect on its business.
DISTRIBUTION AND MARKETING OPERATIONS
The Company sells food products to distributors who distribute to major
supermarkets, restaurants, and other food vendors in Russia and the CIS. The
Company has established a distribution network which is expanding. Sales to two
customers, Marcon-Express and Marcon-Trade, accounted for 46.6% and 45.8% of
sales in fiscal 1997. During the three months ended December 31, 1997 sales to
these customers were 31.0% and 30% of the total sales. Also during this period,
another customer, GMT, accounted for 31.2% of food sales. These customers each
accounted for 47.8% of the food section sales. Customer/distributors for the
other lines of products are M-Auto, Texas and Envilad. Sales to these
distributors accounted for 46.1%, 35.0%, and 0% for the quarter ended December
31, 1997 and 30.0%, 25.5% and 39.0% for fiscal 1977. The Company does not
believe that this concentration of sales represents a material risk of loss with
respect to its financial position. While the size of the markets in Russia and
Eastern Europe is substantial and demand for food items is strong, there are
only a few companies that export food products at competitive and comparable
prices. Price fluctuation in the cost of goods, however could materially affect
the results of the Company's operations.
All of Shuttle's sales for the year ended September 30, 1996 were to one
customer in Russia, Markon-Auto. During fiscal 1996, Shuttle sold only
aftermarket automotive parts which were purchased from new and used car dealers
as well as auto parts retailers, all of whom are located in the Metropolitan New
York City area. In Moscow, Shuttle's principal market for auto parts and auto
repair facilities are conducted generally from large terminals enabling the
Company to concentrate its sales to several large distributors.
In 1996, Shuttle commenced exporting and distributing in Russia a broad
line of active wear, Western style clothing and Native American accessories.
Shuttle has not established exclusive arrangements with its manufacturers and
suppliers.
The Company is seeking to increase distribution of existing and newly
introduced products in current markets. The Company believes that in order to
continue to improve profit margins, it must reduce the cost of goods sold and
increase sales volume. The Company expects to reduce costs by obtaining volume
discounts from its suppliers, and increase its gross margin by offering its
customers better credit terms. The Company's food products are currently
marketed through its distribution system in over 30 cities in Russia and the CIS
states. The products are sold in over 800 leading supermarkets and food stores
in Moscow and other regions. In addition, the Company attends most major trade
shows in Russia and the CIS states and it is featured in different trade
publications and directories. The Company believes that it enjoys an increasing
awareness among Russian, as well as other, food importers and distributors.
20
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Generally, the Company receives orders from Russian and European wholesale
distributors. These orders are filled by the Company's principal suppliers
against the Company's bank letters of credit and on general credit terms.
Approximately 30% of the Company's customers pay to the Company in advance of
delivery of the order up to 50% of the charge for the order with the balance due
within 30 days. The Company has thus far experienced good credit relations with
its customers.
COMPETITION
The Company faces significant competition in the marketing and sales of its
products. The recent economic reforms and political changes in Russia created
enormous business opportunities for US agribusiness companies. During 1997, US
exports of agricultural products and machinery increased over 400% and export of
food processing machinery increased over 80%. European and American
manufacturers are desirous of marketing and distributing their products and
services to the former Soviet Union markets. The Company believes its main food
product competitors are major American and international companies with brands
such as Heinz'tm', Kraft'tm', General Foods'tm', General Mills'tm', Nabisco'tm',
Nestle'tm' and Campbell'tm' which are currently in the marketplace. Shuttle
competes with dealerships and auto manufacturers located in Russia and the CIS
with a supply of parts and other import/exports. These companies have greater
marketing, distribution, financial, and other resources than the Company
permitting such companies to secure significant contracts and implement
extensive advertising. However, these American manufacturers do not find it cost
efficient to contract with small vendors whereas the Company sells its products
to both large and small distributors. American and European manufacturers and
distributors are reluctant to deal directly with Russian companies due to the
high risk of letters of credit issued by Russian banks, the lack of strong
credit history of Russian companies, and the lack of established business
practices and a fully developed legal system. The Company however is willing to
deal with the Russian and Eastern European distributors since its management is
familiar with both Western and Russian business practices and understands
Russian customer needs.
SEASONALITY
The Company's product mix consists of food, clothing, automotive parts and
equipment. Sales of food products tend to increase during the months of October,
November and February. Sales of clothing, auto parts and equipment tend to
increase during the months of October, November and December. These increases
generally coincide with the observance of traditional religious and state
holidays.
BUSINESS STRATEGY
The Company plans to concentrate its efforts to expand its food exporting
business by attracting more customers and offering a larger variety of food
items on competitive terms. The Company plans to continue to identify other
product lines for export where its export expertise can be profitably utilized.
In addition to expanding its exporting and distribution business the Company
will consider joint venture opportunities in its established geographic and
business areas.
The Company's management believes that the Company may benefit from
vertical integration of its food operations, which, it is believed, can provide
production and cost controls on finished products, reduced tariffs, private
labeling and higher profit margins. As part of its vertical integration
strategy, the Company has entered into a letter of intent with GMT Poland and
GMT Denmark for the procurement and processing, in Poland, of pork and pork
products, under its own proprietary label, for distribution throughout Russia
and the CIS. Pursuant to a final agreement, as contemplated in the letter of
intent, the Company, with the assistance of GMT Poland, would open a $2,000,000
revolving line of credit in its own name at a Polish bank. The Company would
purchase pigs from Polish farmers for delivery to GMT Poland. GMT Poland would
then slaughter the pigs and process the meat according to the Company's
specifications, based upon the market for such meat products in Russia and other
CIS countries. At the end of one year, the Company will have an option either to
receive 30% of the net
21
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<PAGE>
profits of GMT Poland or to purchase a 30% equity interest in GMT Poland at a
purchase price of $2,000,000. See 'Description of Business.'
The Company formulated its plans for the GMT venture in response to
increasing demand for pork and pork by-products, such as sausages, in Russia and
the Ukraine. The Company exported to Russia approximately $2 million of products
in the last two years from Steff Goulberg, a major Danish pork producer. Since
the Company is a major exporter of Danish meat products to Russia, it decided to
enter into an alliance with major members of the Danish meat industry, such as
GMT Denmark, to establish slaughtering and meat processing plants in Eastern
Europe and Russia. The Danish meat industry, specifically the pig meat industry,
is based on a cooperative system in which Danish farmers produce over 20 million
pigs per year and export over 80% of the production, making Denmark one of the
world's largest exporters of pig meat.
To achieve such high production, Denmark has developed modern techniques
for slaughtering and processing pig meat. Only four slaughterhouses process the
entire production of the Danish farmers. Strict controls on hygiene and the use
of new technology have ensured that Danish meat products meet the highest
quality standards throughout the world.
Because of high custom duties for finished food products in Russia and the
Ukraine, the Company intends to own and construct a meat processing plant in
Moscow, using Danish know-how and technology, which would process frozen pig
carcasses from Poland into a variety of finished products which cater to the
tastes of the Russian market. By importing raw material from Poland, the Company
can substantially reduce tariffs and increase its profitability. Pigs in Russia
are more expensive than in Poland because they are raised on collective farms in
Russia in contrast to individual farms in Poland. The Company estimates the
total cost of such a plant at $3-4 million and tentatively plans to finance the
project either through a joint venture with a Russian company or the issuance of
debt or equity.
The Company is also planning to build a 100,000 square-foot refrigerated
warehouse facility in Moscow, 85% of which would be allocated to frozen and
chilled foods and the remaining 15% to dry storage. As planned, the building
would contain new refrigeration and computer equipment from U.S. manufacturers.
The Company estimates that the building will cost approximately $10,000,000 to
build and will take approximately a year to complete. Preliminary investigation
of sites in Moscow has uncovered several properties which already have some of
the infrastructure in place.
In July 1997, the Company met with representatives of Ex-Im Bank, Overseas
Private Investment Corporation, and the U.S. Trade and Development Agency
('TDA') in Washington to determine their interest in funding new refrigerated
warehouses in Moscow. Based upon their interest, the Company submitted a
proposal to the TDA requesting a grant for a feasibility study for one warehouse
in Moscow. In December 1997, the TDA approved $100,000 for such a study, which
is expected to begin in early 1998. The study may take about three months, and
should generate a business plan to enable the Company to obtain government
funding for the design and construction of the plant. Based upon preliminary
discussions with government agencies and commercial banks, the Company believes
that approximately 85% of the project may be financed using funds from such
agencies or banks.
Throughout Russia, there is a dearth of modern, refrigerated warehouses
which can reliably provide cold storage for frozen food. Most of the existing
facilities are over fifty years old, use antiquated refrigeration equipment,
have inadequate or unreliable power sources, and lack security for stored
merchandise. Most U.S. exporters are reluctant to ship bulk quantities of frozen
food to Russia because of this shortage of reliable frozen food warehouses.
Consequently, most of the frozen food shipped into Russia comes from European
manufacturers in truck quantities or from exporters who have their own storage
facilities.
Shuttle is considering participation in the construction of a new plant in
Moscow to build automatic transmissions for the local car market. The
anticipated cost for the plant is $3 million. The Russian government is
currently considering funding for the project, if the plant can produce
transmission parts for domestic autos, and should finalize its conclusions in
mid 1998. The Company may also participate with a U.S. manufacturer.
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GOVERNMENT REGULATION
The Company is required to comply with customs and import regulations in
the countries to which it imports its product. To the best of its knowledge, the
Company is in compliance with all such regulations.
EMPLOYEES
At January 8, 1998, the Company employed 9 persons on a full time basis.
The Company also hires from 2-4 part time temporary workers on a day to day
basis, depending upon its requirements. None of the Company's employees is
represented by a union.
PROPERTY
The Company, pursuant to a five-year agreement with the Port Authority of
New York and New Jersey, leases approximately 2,840 square feet of space for an
administrative, clerical and executive office for the Company's export business
at 2 World Trade Center, Suite #2400, New York, NY 10047. The term of the lease
commenced on February 15, 1996. Annual rent payments are $62,484 in years one
and two, $68,160 in year three, $76,680 in year four, and $82,368 in year five.
Under the terms of the Agreement, the Port Authority has the right to terminate
this Agreement without cause, subject to certain conditions, at any time on one
hundred eighty (180) days' notice to the Company. The Company also has a lease
with 1616 Mermaid Associates for a five year term which commenced on January 1,
1995 for approximately 1,000 square feet at 1616 Mermaid Avenue, Brooklyn, New
York 11224. The annual rent is $12,000. The Company has an option to renew this
lease for an additional five year term with annual rent increased by 9%.
Shuttle, pursuant to a five year lease agreement with 1616 Mermaid
Associates, leases approximately 1,000 square feet of space for its export
business at 1616 Mermaid Avenue, Brooklyn, New York 11224. The term of the lease
commenced on March 1, 1994. The annual rent is $18,000.
1616 Mermaid Associates is owned by Messrs. Serge Pisman, Herman Roth and
Yury Greene, the Company's President, Secretary and Treasurer, respectively.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Serge Pisman............................... 33 President and Director
Herman Roth................................ 49 Secretary and Director
Yury Greene................................ 58 Treasurer and Director
</TABLE>
Serge Pisman has been President and a Director of the Company since May
1995 and is responsible for business development of food products, food related
equipment and modular construction supplies in Russia and CIS states. Mr. Pisman
has been Executive Vice President of Shuttle since 1991. Mr. Pisman has a
Bachelor's degree in accounting from Brooklyn College.
Yury Greene has been Treasurer and a Director of the Company since May 1995
and is responsible for customer relations and contract negotiation with U.S. and
European suppliers of food products and food related services and implementation
of the first modular construction project in Moscow, Russia. Mr. Greene has been
President of Shuttle since 1991. Mr. Greene has a Bachelor's degree in
Electrical Engineering from the Politechnical Institute in Lvov, Ukraine.
Herman Roth has been Vice President of Shuttle since 1991 and is
responsible for establishing food products and food related equipment and
business development. Mr. Roth has been Secretary and a Director of the Company
since May, 1995. Mr. Roth has a Bachelor's degree in economics from the
Leningrad Agricultural Institute in Russia.
LIMITATIONS ON PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
The Nevada Business Corporation Act, in general, allows corporations to
indemnify their directors and officers against expenses (including attorneys'
fees), judgments, fines and settlement amounts actually and reasonably incurred
by such person in connection with suits or proceedings, if the person acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation. In the case of the criminal
action, the director or officer must have had no reasonable cause to believe
that person's conduct was unlawful. Under current law, no indemnification may be
made if in connection with a proceeding, or in the right of the corporation in
which the director or officer was adjudged to be liable to the corporation.
The Company will enter into an indemnification agreement with each of its
directors and officers.
OTHER SIGNIFICANT EMPLOYEES
Eric Piker, age 32, has been Director of International Sales of Shuttle
since April 1992 and is responsible for food product research contracts and
customer relations. Mr. Piker has been director of international sales and
marketing of the Company since May 1995.
EXECUTIVE COMPENSATION
The Company has not paid any compensation exceeding $100,000 to its
executive officers since its merger in 1995.
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The following table sets forth the annual compensation for the Company's
Chief Executive Officer and President:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ---------- ------------
--------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY* BONUS COMPENSATION OPTIONS COMPENSATION
- ----------------------------------------- ---- ------- ------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Serge Pisman, President.................. 1997 $90,000 2,000 --
1996 47,000 1,667
1995 34,000
</TABLE>
- ------------
* $34,000 was accrued during 1995 but paid in 1996; $19,118 was accrued during
1996 but paid in 1997; and $14,528 was accrued during 1997 and will be paid in
1998.
CERTAIN TRANSACTIONS
Herman Roth loaned $125,000 to the Company in April, 1996 in exchange for
the Company's 7% promissory note in the principal amount of $125,000. This note,
payable on March 31, 1997 was extended to April 30, 1998.
Ida and Victor Pisman, Serge Pisman's parents, loaned $20,000 to the
Company in August 1996 in exchange for the Company's 15% promissary note in the
principal amount of $20,000. This note was payable on August 22, 1997 and was
extended to August 25, 1998.
Olitsa Roth, through a professional corporation she owns, Herman Roth's
wife, loaned $75,000 to the Company in July, 1996 in exchange for the Company's
7% promissary note in the principal amount of $75,000. This note was paid in
full on March 4, 1997.
Prior to the acquisition of Shuttle, Serge Pisman, Herman Roth and Yury
Greene owned collectively 90% of the capital stock of Shuttle. All of the issued
and outstanding shares of capital stock of Shuttle were acquired by the Company
on December 11, 1996 in exchange for 2,500,000 shares of the Company's common
stock.
Serge Pisman, Herman Roth and Yury Greene own 1616 Mermaid Associates which
leases office space to the Company and to Shuttle. See 'Property.'
Serge Pisman, Herman Roth and Yury Greene have personally guaranteed
payment of sums due under the Company's $1,500,000 line of credit with the Park
Avenue Bank, N.A.
Yury Greene has personally guaranteed payment of sums due under the
Company's $75,000 line of credit with Chase Manhattan Bank, N.A.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Stock, as of the date of this Prospectus and as adjusted
to reflect the conversion of the Note into the underlying Shares and Warrants
(i) each person who is known by the Company to beneficially own more than 5% of
the Common Stock, (ii) each director of the Company, (iii) each of the Company's
named executive officers and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE APPROXIMATE
BENEFICIAL OWNER OF OWNERSHIP % OF CLASS
- ----------------------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
FTP Inc.(1).................................................................. 916,258(1) 14.4%
Robert W. Martyn(1)(2)....................................................... 916,258(2) 14.4%
Serge Pisman(3).............................................................. 1,116,667 17.6%
Herman Roth(3)............................................................... 1,116,666 17.5%
Yury Greene(3)............................................................... 1,116,666 17.5%
All directors and officers as a group (3 in number).......................... 3,349,999 52.6%
</TABLE>
(footnotes on next page)
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(footnotes from previous page)
(1) FTP Inc.'s and Mr. Martyn's address is 48 Par-La-Ville Road, Hamilton,
Bermuda HM11. The 916,251 shares beneficially owned represents 201,673 owned
directly, 256,456 Shares which FTP, Inc. has the right to purchase upon
conversion of the Note, at an assumed price of $1.11 per share and shares
underlying 458,129 Warrants, which are issuable in an amount equal to the
number of shares obtained in the conversion of the Note.
(2) Mr. Martyn owns his securities indirectly as sole shareholder of FTP
Inc. and disclaims any direct beneficial ownership thereof.
(3) Messrs Pisman, Roth and Greene's business address is 2 World Trade Center,
New York, New York 10048. Each of these officers has an option to acquire
300,000 shares of Common Stock at an exercise price of $1.72, which is 110%
of the average bid and asked price per share on the date of grant, which is
included in the shares for each officer and the total.
PLAN OF DISTRIBUTION
The Company will receive none of the proceeds from the sale of the Shares
and Warrants by the Selling Securityholder. Upon the conversion of the remaining
balance of the Note, in full, at an assumed price of $1.11 per share, the
Company will have benefitted from the cessation of its indebtedness represented
by the Note in the approximate amount of $500,000. This Prospectus relates to
the sale of the Shares underlying the Note as well as the Shares underlying the
Warrants any of which Shares and Warrants may be sold from time to time by the
Selling Securityholder. The Selling Securityholder may sell Shares and/or
Warrants in any of several ways, including without limitation, negotiated
transactions, block sales or individual sales. The Company does not know for
certain how the Selling Securityholder will choose to make such sales.
The Company will bear all of the expenses of registration of the Shares and
Warrants under the federal and state securities laws, including legal and filing
fees. Such expenses payable by the Company are currently estimated to be
$90,000.
SELLING SECURITYHOLDER
FTP Inc., a Bahamian corporation, is the holder of the Note which is
convertible into all of the Shares and Warrants offered hereby. FTP, Inc.
presently owns 201,673 shares of the Company's Common Stock. Assuming the
balance of the Note is converted in full at the assumed conversion price of
$1.11 per share, FTP Inc. will own 458,129 shares of Common Stock and 458,129
Common Stock Purchase Warrants. As a result, FTP Inc. will own 14.4% of the
Company's outstanding Common Stock, prior to any sales by FTP Inc. pursuant
hereto.
DESCRIPTION OF SECURITIES
The following description of the Common Stock of the Company and the
Company's Certificate of Incorporation and Bylaws is a summary and is qualified
in its entirety by the provisions of the Certificate of Incorporation and Bylaws
which are included as exhibits to the Registration Statement of which this
Prospectus is a part, and by the provisions of the Nevada Business Corporation
Act.
COMMON STOCK
The Company is authorized to issue 50,000,000 shares of common stock, $.001
par value of which 4,750,533 shares are currently issued and outstanding and an
additional 256,456 shares of which will be issued and outstanding upon
conversion of the balance remaining on the Note. The holders of shares of common
stock have one vote per share. None of the shares have preemptive or cumulative
voting rights, have any rights of redemption or are liable for assessments or
further calls. None of the shares
26
<PAGE>
<PAGE>
will have any conversion rights. The holders of common stock are entitled to
dividends, when and as declared by the Board of Directors from funds legally
available therefor and upon liquidation of the Company to share pro rata in any
distribution to shareholders.
On October 18, 1996, the Company reverse split its common stock reducing
the number of shares outstanding from 17,692,899 to 353,860.
10% CONVERTIBLE NOTE
The Company has outstanding a 10% Convertible Note, the underlying
securities of which are being offered hereby. The Note is convertible at the
option of the holder thereof at any time. The number of shares of Common Stock
that shall be issuable upon conversion of the Note shall equal the amount of the
outstanding principal for which a Conversion Notice (as such term is defined in
the Note) is given, divided by the conversion price, which in turn is equal to
the lesser of (i) $2.50 per share or (ii) seventy-five percent of the average
closing bid prices of the Company's Common Stock as reported on the
Over-the-Counter Bulletin Board for the five consecutive trading days
immediately preceding the date of conversion.
COMMON STOCK PURCHASE WARRANTS
Upon conversion of the Note, the Selling Securityholder will receive an
amount of Common Stock Purchase Warrants equal to the number of Shares received
by the Selling Securityholder pursuant to the conversion. Each Warrant is
immediately exercisable and entitles the holder thereof to purchase one share of
Common Stock at a price of $3.625 per share.
TRANSFER AGENT
Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York
is the transfer agent and registrar for the Company's common stock.
SHARES ELIGIBLE FOR FUTURE SALE
Assuming the conversion of the remaining $280,000 balance on the Note in
full at the assumed conversion price of $1.11 per share, the Company will have
outstanding 5,006,989 shares of Common Stock, not including options to acquire
300,000 common shares issued to each of Messrs. Pisman, Greene and Roth. Of such
5,006,989 shares, 3,127,944 shares will be 'restricted securities' and in the
future, may be sold only in compliance with Rule 144 or other exemption under
the Securities Act, unless registered under the Securities Act. Under Rule 144,
a person who has owned Common Stock for at least one (1) year may, under certain
circumstances, sell within any three-month period, a number of shares of Common
Stock that does not exceed the greater of one (1%) percent of the then
outstanding shares of Common Stock or the average weekly trading volume during
the four (4) calendar weeks prior to such sale. In addition, a person who is not
deemed to have been an affiliate at any time during the three (3) months
preceding a sale and who has beneficially owned the restricted securities for
the last two (2) years, is entitled to sell all such shares without regard to
the volume limitations, current public information requirements, manner of sale
provisions and notice requirements. Messrs. Pisman, Greene and Roth own
collectively 2,449,999 restricted shares, not including options to acquire
300,000 common shares issued to each of them. All of such 2,449,999 shares are
currently eligible for resale under Rule 144. The Company cannot predict how
sales made pursuant to Rule 144 would affect the prevailing market price of the
shares of Common Stock. See 'Shares Eligible for Future Sale.'
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings and
has no knowledge that any such proceedings are threatened.
27
<PAGE>
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
In September 1995, the Company's securities began trading on the
over-the-counter Bulletin Board and in the over-the-counter market 'pink
sheets'. The Company's trading symbol is 'GIRC'. At December 31, 1997, the
average per share bid and ask price of the Company's common stock was $1.625 and
$1.50, respectively. Over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions and may not represent
actual transactions. The following sets forth the range of high and low bid
information for the quarterly periods indicated as reported by the National
Quotation Bureau:
<TABLE>
<CAPTION>
HIGH LOW
----- ------
<S> <C> <C> <C>
1995:
1st Quarter.................................................................... (1) (1)
2nd Quarter.................................................................... (1) (1)
3rd Quarter.................................................................... 5.125 5.125
4th Quarter.................................................................... 5.125 5.125
1996:
1st Quarter.................................................................... 5.625 4.625
2nd Quarter.................................................................... 4.625 3.75
3rd Quarter.................................................................... 3.875 .25
4th Quarter.................................................................... 1.75 .0625
1997:
1st Quarter.................................................................... 1.125 .125
2nd Quarter.................................................................... .875 .125
3rd Quarter.................................................................... 4.5 2.5
4th Quarter.................................................................... 4.5 1.5
</TABLE>
The foregoing bid information has not been adjusted for the reverse stock
split which occurred on October 18, 1996.
- ------------
(1) Bid information not available.
HOLDERS
As of April 13, 1998, the number of holders of record of shares of common
stock, excluding the number of beneficial owners whose securities are held in
street name was approximately 68.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its common
stock in the foreseeable future because it intends to retain its earnings to
finance the expansion of its business. Thereafter, declaration of dividends will
be determined by the Board of Directors in light of conditions then existing,
including without limitation the Company's financial condition, capital
requirements and business condition.
LEGAL MATTERS
The validity of the Common Stock and Warrants offered hereby will be passed
upon for the Company by Bondy & Schloss LLP, New York, New York. Gerald A.
Adler, Esq., a partner in said firm, owns either directly or indirectly an
aggregate of 107,973 shares of the Company's Common Stock.
EXPERTS
The financial statements of the Company for the years ended September 30,
1997 and 1996 have been audited by Weinick Sanders Leventhal & Co., LLP
certified public accountants, as set forth in their report hereon appearing
elsewhere herein, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
28
<PAGE>
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 (together with all amendments and exhibits thereto, the 'Registration
Statement') under the Securities Act, with respect to the shares being offered
in this offering. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain items of which are omitted in
accordance with the rules and regulations of the Commission. The omitted
information may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Seven World Trade Center, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661. Such material can also be obtained at
the Commission's Web site at http://www.sec.gov. Copies of such material can be
obtained from the public reference section of the Commission at prescribed
rates. Statements contained in this Prospectus as to the contents of any
contract or other document field as an exhibit to the Registration Statement are
not necessarily complete and in each instance reference is made to the copy of
the document filed as an exhibit to the Registration Statement, each statement
made in this Prospectus relating to such documents being qualified in all
respect by such reference. For further information with respect to the Company
and the securities being offered hereby, reference is hereby made to such
Registration Statement, including the exhibits thereto and the financial
statements, notes, and schedules filed as a part thereof.
29
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
DECEMBER 31, 1997
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C>
Independent Accountants' Report....................................................................... F-1
Financial Statements:
Consolidated Balance Sheets as at December 31, 1997 (Unaudited) and September 30, 1997 and
1996............................................................................................ F-3
Consolidated Statements of Operations For the Three Months Ended December 31, 1997 and 1996
(Unaudited) and For the Years Ended September 30, 1997 and 1996................................. F-4
Consolidated Statements of Changes in Stockholders' Equity For the Three Months Ended December
31, 1997 (Unaudited) and For the Years Ended September 30, 1997 and 1996........................ F-5
Consolidated Statements of Cash Flows For the Three Months Ended December 31, 1997 and 1996
(Unaudited) and For the Years Ended September 30, 1997 and 1996................................. F-6
Notes to Consolidated Financial Statements............................................................ F-7 - F-20
</TABLE>
F-1
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
GLOBUS INTERNATIONAL RESOURCES CORP.
We have audited the accompanying consolidated balance sheets of Globus
International Resources Corp. (formerly Globus Food Systems International Corp.)
and its subsidiaries as at September 30, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant 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 consolidated financial position of
Globus Resources International Corp. and its subsidiaries as at September 30,
1997 and 1996, and the results of their operations and their cash flows for the
years ended September 30, 1997 and 1996, in conformity with generally accepted
accounting principles.
New York, N. Y.
December 2, 1997
F-2
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------ ------------------------
1997 1997 1996
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (NOTE 7)
Current assets:
Cash and cash equivalents (Note 2)................................ $ 444,030 $ 517,867 $ 339,844
Cash -- restricted (Notes 2 and 7)................................ 1,025,004 447,543 1,136,279
Accounts receivable (Notes 2 and 7)............................... 3,933,681 2,721,130 319,546
Inventories (Notes 2 and 10)...................................... 2,113,361 2,004,004 2,889,215
Deferred income taxes (Notes 2 and 8)............................. 55,000 52,000 35,600
Prepaid expenses.................................................. 20,000 20,000 5,640
------------ ---------- ----------
Total current assets......................................... 7,591,076.. 5,762,544.. 4,726,124
------------ ---------- ----------
Property assets -- at cost, net of accumulated depreciation (Notes 2
and 4)............................................................... 40,387 27,625 40,771
------------ ---------- ----------
Other assets:
Deferred financing costs (Notes 2 and 13)......................... 80,000 50,000 --
Deferred consulting costs (Notes 2, 10 and 12).................... 189,062 215,625 --
Goodwill net of accumulated amortization (Note 2)................. 121,938 124,128 --
Organization costs (Note 2)....................................... 4,475 4,991 7,055
Security deposits (Note 5)........................................ 26,000 26,000 26,000
------------ ---------- ----------
421,475 420,744 33,055
------------ ---------- ----------
$8,052,938 $6,210,913 $4,799,950
------------ ---------- ----------
------------ ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft.................................................... $ 65,000 $ -- $ --
Bank lines of credit payable (Note 7)............................. 1,629,539 31,342 --
Notes payable -- related parties (Notes 6 and 7).................. 145,000 145,000 220,439
Convertible note payable (Note 7)................................. 500,000 -- --
Current portion of long-term debt (Note 7)........................ 41,666 41,666 166,667
Accounts and acceptances payable (Note 7)......................... 1,068,125 1,439,619 1,168,167
Accrued expenses and other current liabilities -- related parties
(Note 6)........................................................ 119,565 111,277 79,185
Accrued expenses and other current liabilities.................... 100,704 137,228 51,439
Income taxes payable (Notes 2 and 8).............................. 153,237 142,607 14,118
------------ ---------- ----------
Total current liabilities.................................... 3,822,836 2,048,739 1,700,015
------------ ---------- ----------
Long-term obligations:
Note payable -- bank (Note 7)..................................... -- -- 41,666
Deferred rent liability (Note 9).................................. 12,921 12,921 10,176
Deferred income taxes (Notes 2 and 8)............................. -- -- 2,000
Other obligations (Note 10)....................................... -- -- 127,500
------------ ---------- ----------
Total long-term obligations.................................. 12,921 12,921 181,342
------------ ---------- ----------
Commitments and contingencies (Note 12)................................ -- -- --
Stockholders' equity (Notes 1, 7, 10, 12 and 13):
Preferred stock, no par value, authorized and unissued -- 100,000
shares.......................................................... -- -- --
Common stock, $.001 par value Authorized -- 50,000,000 shares,
issued and outstanding -- 4,548,860, 4,548,860, and 2,603,860
shares, respectively............................................ 4,549 4,549 2,604
Additional paid-in capital........................................ 4,321,976 4,155,309 3,058,046
Deficit........................................................... (109,344) (10,605) (142,057)
------------ ---------- ----------
Total stockholders' equity................................... 4,217,181 4,149,253 2,918,593
------------ ---------- ----------
$8,052,938 $6,210,913 $4,799,950
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ -------------------------
1997 1996 1997 1996
---------- ---------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales (Note 11)..................................... $4,984,003 $3,939,800 $15,389,452 $9,987,751
Cost of goods sold (Note 11)............................ 4,560,067 3,631,400 14,012,761 9,392,550
---------- ---------- ----------- ----------
Gross profit............................................ 423,936 308,400 1,376,691 595,201
---------- ---------- ----------- ----------
Operating expenses:
Selling............................................ 120,674 70,018 429,220 229,534
General and administrative......................... 136,498... 93,421.... 611,154.... 448,545
Depreciation and amortization...................... 48,266 3,462 109,624 14,461
Allowance for doubtful accounts.................... -- -- -- 10,000
---------- ---------- ----------- ----------
Total operating expenses................................ 305,438 166,901 1,149,998 702,540
---------- ---------- ----------- ----------
Income (loss) from operations........................... 118,498 141,499 226,693 (107,339)
---------- ---------- ----------- ----------
Other income (expenses):
Interest income.................................... 12,158 12,745 44,554 44,611
Interest expense (Notes 7 and 10).................. (179,331) (7,089) (27,038) (32,244)
Other income....................................... -- 4,950 5,487 --
---------- ---------- ----------- ----------
(167,173) 10,606 23,003 12,367
---------- ---------- ----------- ----------
Income (loss) before income taxes and minority
interest.............................................. (48,675) 152,105 249,696 (94,972)
Provision for income taxes (Notes 2 and 8).............. 50,064 66,700 118,244 6,662
---------- ---------- ----------- ----------
Income (loss) before minority interest.................. (98,739) 85,405 131,452 (101,634)
Minority interest (Notes 1 and 2)....................... -- 2,812 2,812 --
---------- ---------- ----------- ----------
Net income (loss)....................................... $ (98,739) $ 82,593 $ 128,640 $ (101,634)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Net income (loss) per common share
(Note 2).............................................. $(0.02) $0.03 $0.03 $(0.04)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Weighted average number of shares outstanding........... 4,548,860 2,867,284 3,729,065 2,546,000
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
AND FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON SHARES ADDITIONAL RETAINED
---------------------- ------------------- PAID-IN EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPTIAL (DEFICIT)
--------- --------- --------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1995 reflective
of the reverse stock split declared
October 18, 1996.................... -- $ -- 296,000 $ 296 $ 17,954 $(108,698)
Acquisition of 90% interest in Shuttle
International, Ltd. on December 11,
1996................................ -- -- 2,250,000 2,250 73,750 68,275
--------- --------- --------- ------ ---------- ---------
Adjusted balance October 1, 1995...... -- -- 2,546,000 2,546 91,704 (40,423)
Issuance of common stock for cash..... -- -- 1,471 2 146,998 --
Issuance of common shares for
inventory........................... -- -- 56,389 56 2,819,344 --
Net loss for fiscal 1996.............. -- -- -- -- (101,634)
--------- --------- --------- ------ ---------- ---------
Balance at September 30, 1996......... -- -- 2,603,860 2,604 3,058,046 (142,057)
Proceeds from sale of Shuttle's common
stock prior to merger............... -- -- -- -- 100,000 --
Acquisition of Shuttle International,
Ltd.-minority interest.............. -- -- 250,000 250 131,179 2,812
Issuance of common stock for
consulting services................. -- -- 500,000 500 299,500 --
Issuance of common stock in
satisfaction of indebtedness for
services rendered................... -- -- 555,000 555 281,445 --
Cancellation of common stock
surrendered by a former
consultant.......................... -- -- (230,000) (230 ) (137,770) --
Issuance of common stock for cash, net
of offering costs................... -- -- 870,000 870 422,909 --
Net income for fiscal 1997............ -- -- -- -- -- 128,640
--------- --------- --------- ------ ---------- ---------
Balance at September 30, 1997......... -- -- 4,548,860 4,549 4,155,309 (10,605)
Interest element attributed to
convertible debt.................... -- -- -- -- 166,667 --
Net loss for the three months ended
December 31, 1997 (Unaudited)....... -- -- -- -- -- (98,739)
--------- --------- --------- ------ ---------- ---------
Balance at December 31, 1997
(Unaudited)......................... -- $ -- 4,548,860 $4,549 $4,321,976 $(109,344)
--------- --------- --------- ------ ---------- ---------
--------- --------- --------- ------ ---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE FOR THE
MONTHS ENDED YEARS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................ $ (98,739) $ 82,593 $ 128,640 $ (101,634)
----------- ----------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................ 48,266 3,462 109,624 14,461
Deferred rent............................................ -- 2,000 2,745 10,176
Deferred income taxes.................................... (3,000) 14,000 (18,400) 17,400
Provision for doubtful accounts.......................... -- -- -- 10,000
Common stock issued for services rendered................ -- 16,500 16,500 127,500
Interest charge on debt discount......................... 166,667 -- -- --
Minority interest........................................ -- 2,812 2,812 --
Increase (decrease) in cash flows as a result of changes
in asset and liability account balances:.............
Accounts receivable.................................. (1,212,551) (687,916) (2,401,584) 151,913
Inventories.......................................... (109,357) 239,635 885,211 (50,315)
Prepaid expenses..................................... -- 5,640 (14,360) 22,340
Accounts and acceptances payable..................... (306,494) 6,088 271,452 (16,342)
Accrued expenses and other current liabilities:......
Related parties.................................. 8,288 (35,762) 32,092 (36,999)
Other............................................ (36,524) (29,439) 85,789 (3,967)
Income taxes payable................................. 10,630 40,100 128,489 1,818
----------- ----------- ----------- -----------
Total adjustments............................................ (1,434,075) (422,880) (899,630) 247,985
----------- ----------- ----------- -----------
Net cash provided by (used in) operating activities............ (1,532,814) (340,287) (770,990) 146,351
----------- ----------- ----------- -----------
Cash flows from investing activities:..........................
Acquisition of property assets............................... (16,759) -- (2,738) (31,446)
Security deposits............................................ -- -- -- (21,000)
----------- ----------- ----------- -----------
Net cash used in investing activities.......................... (16,759) -- (2,738) (52,446)
----------- ----------- ----------- -----------
Cash flows from financing activities:..........................
Proceeds from line of credit................................. 1,598,197 -- 31,342 --
Proceeds from convertible note payable....................... 500,000 -- -- --
Proceeds from and repayment of long-term note payable........ -- -- (166,667) (166,667)
Proceeds from and repayments of related party indebtedness... -- -- (75,439) 209,819
Proceeds from issuances of common stock...................... -- 142,000 523,779 147,000
Deferred financing cost...................................... (45,000) -- (50,000) --
----------- ----------- ----------- -----------
Net cash provided by financing activities...................... 2,053,197 142,000 263,015 190,152
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........... 503,624 (198,287) (510,713) 284,057
Cash and cash equivalents at beginning of year................. 965,410 1,476,123 1,476,123 1,192,066
----------- ----------- ----------- -----------
Cash and cash equivalents at end of year....................... $ 1,469,034 $ 1,277,836 $ 965,410 $ 1,476,123
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental Schedules of Non-Cash Operating and Financing
Activities:..................................................
Common stock issued for acquisition of inventory, services
rendered and payment of liability for services previously
rendered................................................. $ -- $ 467,000 $ 582,000 $ 2,819,400
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Common stock issued for acquisition of minority interest..... $ -- $ 150,000 $ 150,000 $ --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental Disclosures of Cash Flow Information:.............
Interest paid................................................ $ 1,293 $ -- $ 12,411 $ 23,918
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Taxes paid................................................... $ 42,370 $ 2,300 $ 4,744 $ 1,894
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
NOTE 1 -- ORGANIZATION
Globus International Resources Corp. (the 'Company') was incorporated in
the State of Nevada on October 24, 1984 as Ross Custom Electronics. On March 15,
1995, the Company merged with Globus Food Systems International Corp. ('Globus')
and changed its name to Globus Food Systems International Corp. hereafter
referred to as the Merger. On September 18, 1996, the Company formed a
wholly-owned New York State subsidiary corporation, Globus Food Systems
International Corp. On October 8, 1996, the Board of Directors approved the
change of the Company's name to Globus International Resources Corp. and
declared a reverse stock split of 1 share for each 50 shares issued and
outstanding.
Prior to the Merger, the Company on March 15, 1995 amended its article of
incorporation to change its authorized common shares from 200,000 (4,000 shares
after retroactively reflecting the October 18, 1996 reverse split) $1.00 par
value shares to 50,000,000 authorized shares with a par value of $.001. Then the
Board of Directors immediately declared a forward stock split of 10:1 thereby
increasing the issued and outstanding shares from 200,000 to 2,000,000 (4,000 to
40,000 shares after retroactively reflecting the October 18, 1996 reverse
split). Under the terms of the Merger the Company exchanged 5,000,000 (100,000
shares after retroactively reflecting the October 18, 1996 reverse split) shares
of its common stock for a like number of the Globus common shares. The value of
the shares issued in the Merger exchange was $5,000. The Company also issued
700,000 (14,000 shares after retroactively reflecting the October 18, 1996
reverse split) shares of its common stock to a consultant of Globus for services
rendered in the Merger. The merger transaction is being accounted for as a
reverse acquisition in a manner similar to a pooling of interests.
On December 11, 1996, the Company acquired all of the issued and
outstanding capital stock of Shuttle International, Ltd. (Shuttle) in exchange
for 2,500,000 shares of the Company's common stock. The Company's three
officer/directors owned 90% of the Shuttle prior to the acquisition by the
Company. After the acquisition these three officer/directors owned 2,449,999
(55.6%) shares of the Company's issued and outstanding common stock whereas
prior to the acquisition, they owned 200,000 shares of (56.5%) of the Company's
then issued and outstanding common shares. The acquisition of Shuttle was
accounted for (i) at historical cost in a manner similar to a pooling of
interests for the acquired stock of the Company's three officer/directors and
(ii) as a purchase recorded at market value for the acquired stock of the
minority interest and the resulting goodwill for the difference between the
market value of the minority interest and its equity on the date acquired.
The accompanying financial statements reflect the Merger, the March 15,
1995 and September 12, 1995 stock splits, the issuance of the common shares to
the consultant, the October 18, 1996 reverse stock split, and the December 11,
1996 acquisition of 90% of Shuttle as if they had occurred at the beginning of
the periods presented.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
Globus is a full service export distributor of food and paint products from
manufacturers in the United States and Europe primarily to the Russian and CIS
States marketplaces.
Shuttle is engaged in the distribution and exportation of non-food products
such as auto parts and clothing primarily to Russia and the CIS states or,
generally, the same geographic areas involved with the Company's food business.
Shuttle also has an International Seminars Department which provides
F-7
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
directors, and management of large and medium size Russian companies with
western banking, financial systems and accounting seminars at the World Trade
Center Institute in New York City.
Previously Shuttle, in cooperation with a Canadian modular housing
manufacturer, had built modern cottages in an exclusive Moscow suburb. All
houses were pre-built in Canada and shipped in sea containers.
Both Globus' and Shuttle's business rely upon their established trade
relationships in Russia and the CIS states.
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements as at September 30, 1997
and December 31, 1997, for the year ended September 30, 1997, and for the three
months ended December 31, 1997 and 1996 include the accounts of Globus
International Resources Corp. and its subsidiaries, Shuttle International, Ltd.
and Globus Foods International, Inc. The consolidated financial statements as at
September 30, 1996 includes the accounts of Globus International Resources Corp.
and its subsidiaries, Shuttle International, Ltd. for the year ended September
30, 1996 and Globus Foods International, Inc. as at September 30, 1996 and from
its inception on September 18, 1996 to September 30, 1996. All material
intercompany transactions and balances have been eliminated in consolidation.
The financial statements as at December 31, 1997 and for the three months
ended December 31, 1997 and 1996 have not been audited. In the opinion of
management, the unaudited interim consolidated financial statements reflect all
adjustments and accruals, consisting only of normal recurring adjustments and
accruals, necessary to present fairly the financial position of the Company as
at December 31, 1997 and the results of its operations, changes in stockholders'
equity and cash flows for the three months ended December 31, 1997 and 1996. The
results for the three months ended December 31, 1997 and 1996 are not
necessarily indicative of the results to be expected for the full year.
(C) REVENUE RECOGNITION
The Company recognizes revenues in accordance with generally accepted
accounting principles in the period in which its products are shipped to its
customers. The Company records expenses in the period in which they are
incurred, in accordance with generally accepted accounting principles.
(D) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
(E) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
(F) CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and trade accounts
receivable. The Company places its cash with high
F-8
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
credit quality financial institutions which at times may be in excess of the
FDIC insurance limit. Concentrations of credit risk with respect to trade
accounts receivable are generally limited due to the Company's requiring the
prepayment from approximately 30% of its customers of up to 50% of each sale
prior to shipment. Additionally, the accompanying financial statements reflect
an allowance for doubtful accounts of $10,000 at December 31, 1997, September
30, 1997 and 1996.
(G) INVENTORIES
Inventories, consisting principally of finished goods, are valued at the
lower of cost (first-in, first-out method) or market.
(H) PROPERTY AND EQUIPMENT
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets of 5 to 7 years. The cost of leasehold improvements
is amortized over the lesser of the length of the related leases or the
estimated useful lives of the assets. Depreciation is computed on the straight-
line method for financial reporting purposes. Repairs and maintenance
expenditures which do not extend original asset lives are charged to income as
incurred.
(I) GOODWILL
In December 1996, the Company acquired all of the outstanding capital stock
of Shuttle which was owned 90% by officer/directors of the Company. The
remaining 10% was owned by an unaffiliated individual who received 250,000
shares of the Company's common stock for his minority interest which aggregated
$18,571. The Company's common stock had a fair value of $0.60 per share at the
time of acquisition for a aggregate value of $150,000. The difference between
the fair value of the Company's common stock and the minority interest at the
date of acquisition aggregating $131,429 has been attributed to goodwill and is
being amortized over fifteen (15) years. Amortization charged to operations was
$7,301, $2,190 and $730 for the year ended September 30, 1997, and for the three
months ended December 31, 1997 and 1996, respectively.
(J) INCOME TAXES
Deferred taxes are primarily attributable to different methods of computing
depreciation and amortization and timing differences of deducting officers'
compensation for financial reporting purposes and income tax reporting purposes.
(K) INTANGIBLES
Organization costs are being amortized over a sixty month period.
Amortization charged to operations was $2,064 and $2,215 in the years ended
September 30, 1997 and 1996, respectively and $516 for the three months ended
December 31, 1997 and 1996.
Deferred consulting costs are being amortized over the life of the
consulting agreements. Amortization charged to operations in fiscal 1997 was
$84,375 and for the three months ended December 31, 1997 was $26,563.
Deferred financing costs are legal, accounting and other costs associated
with the placement of a $500,000 convertible note in November 1997. Amortization
charged to operations in the three months ended December 31, 1997 was $15,000.
F-9
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
(L) PER SHARE DATA
Net income (loss) per share was computed by the weighted average number of
shares outstanding during each period. The issuance of all common shares in
connection with the stock splits, the Merger (consummated on March 15,1995), the
October 18, 1996 reverse stock split and the acquisition of Shuttle have been
retroactively reflected in the computation as if they had occurred as at October
1, 1994.
NOTE 3 -- ACQUISITION OF SHUTTLE INTERNATIONAL, LTD.
On December 11, 1996, the Company acquired all of the capital stock of
Shuttle International, Ltd. ('Shuttle') in exchange for 2,500,000 shares of the
Company's common stock. This transaction has been accounted for as a pooling of
interests and, accordingly, the consolidated financial statements for the period
presented have been restated to reflect the accounts of the Company and Shuttle.
Unaudited net sales and net income (loss) of the separate companies for the
periods preceding the acquisition were as follows:
<TABLE>
<CAPTION>
GLOBUS SHUTTLE
------------------------ -----------------------
NET INCOME NET INCOME
NET SALES (LOSS) NET SALES (LOSS)
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
For the three months ended December 31, 1996....... $3,616,581 $ 74,511 $ 323,219 $ 28,124
---------- ---------- --------- ----------
---------- ---------- --------- ----------
For the year ended September 30, 1996.............. $9,708,457 $(196,241 ) $ 279,294 $(59,893)
---------- ---------- --------- ----------
---------- ---------- --------- ----------
</TABLE>
NOTE 4 -- PROPERTY ASSETS
Property assets consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, -------------------
1997 1997 1996
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Data processing and office equipment............................. $ 56,994 $55,930 $52,792
Furniture and fixtures........................................... 21,283 21,283 21,683
Automobiles and trucks........................................... 15,695 -- --
------------ ------- -------
93,972 77,213 74,475
Less: Accumulated depreciation................................... 53,585 49,588 33,704
------------ ------- -------
$ 40,387 $27,625 $40,771
------------ ------- -------
------------ ------- -------
</TABLE>
Depreciation expense charged to operations for the years ended September
30, 1997 and 1996 amounted to $15,884 and $12,347, respectively and for the
three months ended December 31, 1997 and 1996 was $3,997 and $2,216,
respectively.
NOTE 5 -- SECURITY DEPOSITS
Security deposits are comprised of rent deposits relating to various
leaseholds which the Company occupies of which $3,000 is for warehouse space
leased for a related party (See Note 6).
F-10
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
NOTE 6 -- RELATED PARTY TRANSACTIONS
(A) NOTES PAYABLE
A stockholder and the Company entered into a loan agreement on April, 1996
whereby the stockholder acquired the Company's 7% interest bearing note $125,000
at par. The note was originally payable in full plus accrued interest on March
31, 1997. On April 30, 1997, the note was amended and the due date was extended
to April 30, 1998. As a condition of the extension of the above note, the
Company's 7% interest bearing note payable (which was originally payable in full
plus accrued interest on July 16, 1997) to a professional corporation owned by
this stockholder's spouse in the amount of $75,000 was prepaid in March 1997.
Interest charged to operations for the years ended September 30, 1997 and 1996
was $11,337 and $4,375, and for the three months ended December 31, 1997 and
1996 was $2,118 and $3,826, respectively. Accrued interest payable on these
loans aggregated $17,940, $15,752 and $4,376 at December 31, 1997, September 30,
1997 and 1996, respectively, and is included in accrued expenses. In May 1997,
the stockholder agreed to subordinate his loan to a bank which had granted the
Company a $2,000,000 line of credit.
On August 26, 1996, the parents of the Company's President purchased
Shuttle's 15% interest bearing $20,000 note at par. The note, as amended, is
repayable in full on August 25, 1998 with accrued interest. Interest charged to
operations was $2,925 and $325 for the years ended September 30, 1997 and 1996,
and was $731 for the three months ended December 31, 1997 and 1996,
respectively. Accrued interest payable to these individuals is $3,250 which is
included in accrued expenses at December 31, 1997 and September 30, 1997,
respectively, and $325 at September 30, 1996. These creditors have agreed to
subordinate this indebtedness to a bank which had granted the Company a
$2,000,000 line of credit in May 1997.
(B) LOAN PAYABLE
Included in accrued expenses -- related parties at September 30, 1996 is a
non-interest bearing $10,000 demand loan payable to a corporation which is
controlled by Company's three executive officer/directors. This loan was repaid
in 1997.
(C) RENT PAYABLE
Globus and Shuttle lease warehouse space from an entity controlled by three
of the Company's officer/directors. Rent charged to operations in the years
ended September 30, 1997 and 1996 was $30,000 and $27,000, respectively, and for
the three months ended December 31, 1997 and 1996 was $7,500 and $5,500,
respectively, of which $27,375, $27,375 and $20,000 was unpaid and included in
accrued expenses-related parties at December 31, 1997, September 30, 1997 and
1996, respectively. The leases which expire in 1999 require aggregate monthly
rentals of $2,500. Each lease has option for renewal of five years at aggregate
monthly rentals of $3,000.
(D) OFFICERS' COMPENSATION
On May 1, 1995, the Company's President, CFO and Vice President of sales
were authorized compensation in the aggregate of $127,000 per year. Although the
Board of Directors' resolution was for one year, these officers, who also
comprise the entire Board of Directors have verbally agreed to continue to be
employed at the same annual amounts through September 30, 1996. The officers
have also agreed to defer payment of their compensation until the Company's cash
flow permits.
F-11
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
Compensation charged to operations for these officer/directors was $133,000,
$270,000, and $67,500 during fiscal 1996, fiscal 1997 and the three months ended
December 31, 1997, respectively. At December 31, 1997, September 30, 1997 and
1996 these officers were owed $104,000, $65,000 and $39,000, respectively, in
unpaid wages. In August 1997, the Board authorized each of these officers'
compensation at $90,000 for fiscal 1997 and in November 1997 each of these
officers compensation was increased to $150,000 for calendar 1998.
NOTE 7 -- FINANCING ARRANGEMENTS
(A) LONG-TERM DEBT
The Company entered into an unsecured $500,000 working capital term loan
agreement on April 2, 1995 with a foreign bank. The loan is to be repaid in
twelve (12) equal quarterly principal installments of $41,667 plus interest at
1.75% (8.16% at December 31, 1997, 7.53% at September 30, 1997 and 7.23% at
September 30, 1996) over the LIBOR rate. Current maturities of this indebtedness
are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, ----------------------
1997 1997 1996
------------ -------- ---------
(UNAUDITED)
<S> <C> <C> <C>
1997.......................................................... $ -- $ -- $ 166,667
1998.......................................................... 41,666 41,666 41,666
------------ -------- ---------
41,666 41,666 208,333
Less: Portion payable in one year............................. (41,666) (41,666) (166,667)
------------ -------- ---------
$ -- $ -- $ 41,666
------------ -------- ---------
------------ -------- ---------
</TABLE>
(B) SHORT-TERM DEBT
(i) Banks
The Company has five credit facilities at December 31, 1997 with four
domestic banks. Two unsecured lines of credit arrangements with two banks
aggregating $100,000 were entered into in 1996. One line, which is guaranteed by
an officer of the Company, for a maximum borrowing of $75,000 had $19,444 and
$66,735 outstanding at September 30, 1997 and December 31, 1997, respectively.
Another line of $25,000 had $11,898 outstanding at December 31, 1997 and
September 30, 1997. Interest on the lines which averaged 10.5% in 1997 is 2%
over prime (10.5% at December 31, 1997 and September 30, 1997). During fiscal
1997, the average month-end balance outstanding under these two lines was
$13,652 and the highest month-end balance was $31,898. The Company in December
31, 1997 obtained an unsecured $25,000 line of credit of which $24,000 was
outstanding at December 31, 1997. The line bears interest at 15% and is
guaranteed by an officer of the Company. The Company's fourth credit facility
allows the Company to obtain letters of credit and acceptances payable for
acquiring its finished goods up to an aggregate of $1,500,000 of which no
portion was outstanding at December 31, 1997 and $35,000 was outstanding at
September 30, 1997. The facility does not permit borrowing by the Company. The
Company has pledged its accounts receivable and certain cash accounts held by
the bank as collateral for any obligation under this credit facility. At
December 31, 1997, September 30, 1997 and 1996, the cash pledged as collateral
was $-0-, $35,000 and $1,136,279, respectively. In May 1997, the Company
obtained a fifth line of credit from a bank for letters of credit, direct
borrowings and acceptances payable aggregating $2,000,000 of which a maximum of
$1,500,000 can be used for direct debt and acceptances payable. There were no
direct or acceptance borrowings under this line from inception to
F-12
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
September 30, 1997. The Company at September 30, 1997 utilized $865,811 of this
line in letters of credit. At December 31, 1997, the Company had outstanding
direct receivables of $454,000, acceptances payable of $1,072,906 and letters of
credit of $731,627. At December 31, 1997 the bank temporarily increased the line
to $2,258,533, of which up to $1,600,000 can be direct borrowings, and reduces
the collateral to $1,025,004. Outstanding debt borrowings under this line of
credit bear interest at 1 3/4% over prime (10.25% at December 31, 1997 and
September 30, 1997). This line is collateralized by the guarantees of three of
the Company's officer/directors and a first lien on all corporate assets not
previously pledged or collateralized. One of these stockholders and the parent
of another have subordinated notes payable by the Company to them aggregating
$145,000 to this bank. Additionally, the Company must maintain certificates of
deposit with this bank equal to 50% of the amount of any outstanding letters of
credit and/or bank borrowings under the line. The cash pledged as collateral
under this was $1,025,004 at December 31, 1997 and $447,543 at September 30,
1997.
(ii) Related Parties
On April 7, 1996, the Company borrowed $125,000 from an officer/stockholder
which is to be repaid, as extended, with interest at 7% on April 30, 1998: on
July 16, 1996 the Company borrowed $75,000 from a professional corporation,
controlled by this stockholder's spouse, which was repaid in March 1997: and on
August 26, 1996 the Company borrowed $20,000 from a parent of its President as
evidenced by a 15% note which is repayable in full, as extended, on August 25,
1998 with accrued interest. Both of these notes are subordinated to a bank (see
above).
(iii) Convertible Note
On November 2, 1997, the Company sold at par its 10% interest bearing
convertible note in the amount of $500,000 to a foreign corporation. The note is
due and payable on November 2, 1998. In connection with the sale of the note,
the Company incurred $95,000 of financing costs which are being amortized over
the life of the note. The note principal and incurred interest, at the holder's
option is convertible in whole or part into (i) shares of the Company's common
stock at the lesser of $2.50 per share or 75% of the average bid and ask of the
Company's common stock for the five (5) trading days immediately proceeding the
noteholder's notice to convert and (ii) an equal number of warrants to acquire
the same number of shares in (i) at $3.625 per share. As required by generally
accepted accounting principles a financing expense of $166,667 was charged to
operations on the date of the notes issuance for the discount between the amount
paid for the note and the fair value of the common shares into which it can be
converted with a corresponding increase in additional paid-in capital. On
January 25, 1998, $223,857 of principal at interest was converted into 201,673
shares of common stock and warrants to acquire 201,673 shares of common stock at
$3.625 per share.
F-13
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
NOTE 8 -- INCOME TAXES
The components of the provision (credit) for income taxes are:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------ --------------------
1997 1996 1997 1996
------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Currently payable:
Federal................................................... $37,000 $48,700 $ 99,244 ($15,800)
State and local........................................... 16,064 4,000 37,400 4,762
------- ------- -------- --------
53,064 52,700 136,644 (11,038)
------- ------- -------- --------
Deferred:
Federal................................................... (2,600) 12,000 (13,400) 17,300
State and local........................................... (400) 2,000 (5,000) 400
------- ------- -------- --------
(3,000) 14,000 (18,400) 17,700
------- ------- -------- --------
$50,064 $66,700 $118,244 $ 6,662
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
Deferred tax provision (benefit) results from differences in the
recognition of expense for tax and financial statement purposes. The sources of
these differences and the federal tax effect of each are as follows:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------ -------------------
1997 1996 1997 1996
------- ------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Related party interest and rent expense.................... $ (700) $(1,000) $ (6,400) $(4,300)
Allowance for doubtful accounts............................ 700 -- (900) (3,400)
Depreciation of property assets............................ -- 1,000 -- 4,400
Executive compensation..................................... (2,600) 12,000 (6,100) 20,600
------- ------- -------- -------
($2,600) $12,000 $(13,400) $17,300
------- ------- -------- -------
------- ------- -------- -------
</TABLE>
The difference between income taxes computed using the statutory federal
income tax rate and that shown in the financial statements are summarized as
follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
DECEMBER 31,
-------------------------------------
1997 1996
----------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Income (loss) before income taxes............................... $(48,675) $152,105
-------- --------
-------- --------
Computed tax -- benefit at statutory rate....................... $(16,600) (34.0)% $ 51,700 34.0%
State tax net of federal tax benefit............................ 10,364 21.3 6,000 3.9
Non-deductible portion of interest and compensatory element of
debt and common stock issuances............................... 56,700 116.5 5,600 3.7
Amortization of goodwill........................................ 800 1.6 -- --
Other -- net.................................................... (1,200) (2.5) 3,400 2.2
-------- ----- -------- ----
Total tax provision........................................ $ 50,064 102.9% $ 66,700 43.8%
-------- ----- -------- ----
-------- ----- -------- ----
</TABLE>
F-14
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
DECEMBER 31,
-------------------------------------
1997 1996
---------------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Income (loss) before income taxes............................... $249,696 $(94,972)
-------- --------
-------- --------
Computed tax -- benefit at statutory rate....................... $ 84,900 34.0% $(32,300) (34.0)%
State tax net of federal tax benefit............................ 16,944 6.8 3,462 3.6
Non-deductible portion of interest and compensatory element of
debt and common stock issuances............................... 5,600 2.2 28,400 29.9
Amortization of goodwill........................................ 2,500 1.0 -- --
Other -- net.................................................... 8,300 3.4 7,100 7.5
-------- ---- -------- -----
Total tax provision........................................ $118,244 47.4% $ 6,662 7.0%
-------- ---- -------- -----
-------- ---- -------- -----
</TABLE>
NOTE 9 -- DEFERRED RENT
The accompanying financial statements reflect rent expense on a
straight-line basis over the life of the lease. Rent expense charged to
operations differs with the cash payments required under the terms of the real
property operating leases because of scheduled rent payment increases throughout
the term of the leases. The deferred rent liability is the result of recognizing
rental expense as required by generally accepted accounting principles.
NOTE 10 -- COMMON STOCK
(A) SALE OF SECURITIES
(i) The Company during 1997 in a best efforts private placement
memorandum sold to qualified investors 87 units of its securities for cash
of $423,779 (net of costs associated with the offering of $98,221) pursuant
to Rule 504 of Regulation D of the Securities Act of 1933, as amended. Each
unit is comprised of 10,000 shares of the Company's $.001 par value common
stock. The offering memorandum which was originally for 70 units and
scheduled to expire on March 30, 1997 was extended and the number units to
be sold was increased.
(ii) The Company sold 971 shares and 500 shares of its common shares
(as adjusted for all stock splits) in January, 1996 and March, 1996,
respectively, for an aggregate of $147,000.
(iii) The Company in May 1996, exchanged 56,389 of its common shares
(as adjusted for all stock splits) for inventory of automotive paint whose
fair market value was $2,819,400. The Company, at its option, through
April, 1999 may repurchase all or a portion of the shares for $75 per
share.
(B) COMMON STOCK ISSUED FOR SERVICES RENDERED
During 1997, the Company satisfied liabilities for services rendered during
the year ended September 30, 1996 by employees, counsel and a consultant by the
issuance of shares of its common stock. The fair value of the shares issued on
the dates of each issuance, as determined by the Board of Directors, was charged
to operations in fiscal 1996. The obligations so satisfied are as follows:
(i) The Board of Directors on October 26, 1996 entered into employment
agreement with two employees for 3 years, as amended, at annual aggregate
salaries of approximately $120,000. Each
F-15
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
contract stipulated that each employee was to receive shares of the
Company's common stock as payment for services previously rendered
aggregating $3,465. The fair value of the 55,000 shares issued to the
employees, as determined by the Board of Directors on October 26, 1996, of
$22,000 was charged to operations in fiscal 1996 and included in other
obligations payable at September 30, 1996.
(ii) The Board of Directors on November 1, 1996 entered into an
agreement with its counsel under which the Company issued 200,000 shares of
its common stock as full payment of legal expenses incurred prior to
September 30, 1996. Although, the agreement stipulates that the law firm
valued the services when rendered at $15,000, the Board of Directors
determined that the fair value of the shares issued on the date of issuance
was $80,000 which was charged to operations in fiscal 1996 and included in
other obligations payable at September 30, 1996.
(iii) The Board of Directors on December 1, 1996 entered into an
agreement with a financial consultant for 3 years, as amended. The
consultant is to receive $2,500 per month for his consulting services. The
agreement also required the Company to issue 300,000 share of its common
stock as full payment of $25,500 for services rendered by the consultant
prior to September 30, 1996. The fair value of the common shares issued, as
determined by the Board of Directors on December 1, 1996, was $180,000
($0.60 per share) of which $25,500 was charged to operations in 1996 and is
included in other obligations payable at September 30, 1996. On May 22,
1997, the Company and this consultant terminated the agreement. As part of
the termination, the consultant surrendered to the Company 230,000 shares
of the Company's common stock which was issued to him for no consideration.
The Company canceled and returned to authorized and unissued these
surrendered shares and is reflected in the financial statements as a
reduction of common stock and additional paid-in capital of $138,000. The
Company charged to operations $16,500 in the three months ended December
31, 1997 and fiscal 1997, respectively, for the excess of the fair value of
the 70,000 shares of common stock not surrendered of $42,000 ($0.60 per
share) and the value the consultant attributed to his services.
(iv) In December 1996, the Company entered into a three year
consulting services agreement with Crabbe Capital Group Ltd. which was
subsequently extended an additional year. Pursuant to the terms of this
agreement, the consultant shall (i) introduce the Company to the
consultant's network of domestic and international commercial banking
sources, (ii) advise and assist the Company in identifying, studying, and
evaluating interest and exchange rate fluctuations, and (iii) assist the
Company in securing letters of credit and reviewing its commercial banking
alliances and strategies.
As compensation for entering into the agreement, the Company issued
325,000 shares of its common stock, 275,000 of which were issued pursuant
to Rule 504 of Regulation D of the Securities Act of 1933, as amended. The
remaining 50,000 shares shall bear a legend, in general terms, stating that
those shares have not been registered under the Securities Act of 1933, as
amended. The fair value of the 325,000 shares of common stock issued of
$195,000 as determined by the Board of Directors will be amortized and
charged to operations over the life of the consulting agreement.
(v) In December 1996, the Company entered into a one year consulting
services agreement (the 'Agreement') with Comstat, Inc. under the terms of
which, the consultant shall advise and assist the Company in identifying,
studying, and evaluating mergers, acquisitions, joint ventures, and
strategic alliances, strategic corporate planning and long-term business
policies. Additionally, the consultant shall assist the Company in
acquiring additional products to increase its product line
F-16
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
and in obtaining and expanding corporate purchases of its product through a
network of import/export associates. As compensation for entering into the
agreement, the Company issued 50,000 shares of its common stock issues,
pursuant to Rule 504 of Regulation D of the Securities Act of 1993, as
amended. The fair value of the 50,000 shares of common stock issued of
$30,000 as determined by the Board of Directors will be amortized and
charged to operations over the life of the consulting agreement.
(vi) In March 1997, the Company entered into a two year consulting
agreement with Regency Group Enterprises, Inc. The consultant received
125,000 shares of the Company's common stock to render financial advise in
regards to strategic corporate planning, long-term investment policies, and
potential mergers and acquisitions. The fair value as determined by the
Board of Directors, of shares issued of $75,000 will be amortized over the
two year life of the agreement.
(C) STOCK OPTIONS
The Company granted to each of three officers on December 31, 1997 options
to acquire 300,000 shares of the Company's common stock at $1.72 per share (110%
of the market value at the date of grant. The Company applies APB 25 in
accounting for its stock options. Accordingly, because the grant price equalled
or exceeded the market price on the date of grant, no compensation expense is
recognized for the stock options issued. Had compensation cost for these stock
options been recognized based upon the fair value on the grant date under the
methodology prescribed by FAS 123, the Company's net income and earnings per
share for the three months December 31, 1997 would not have been impacted
because the options were granted at the end of the period.
The fair value of the options granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<S> <C>
Expected life of option....................................... 10 years
Risk-free interest rate....................................... 10.0%
Expected volitality........................................... 175.0 %
Expected dividend yield....................................... NONE
</TABLE>
The fair value of the 900,000 options granted on December 31, 1997 of
$1,404,000 ($1.56 per share) will be amortized to expense over the option period
in determining their pro forma earnings impact.
NOTE 11 -- MAJOR RELATIONSHIPS AND SEGMENT INFORMATION
The Company is comprised of two business segments. The distribution of food
products and the distribution of auto paint and parts and clothing. Clothing
sales commenced in July 1996 represent 5.1%, 0.5%, 2.8% and 1.0% for fiscal
1997, fiscal 1996 and for the quarters ended December 31, 1997 and 1996,
respectively. Set forth below are sales, operating income, capital expenditures,
depreciation and identifiable assets of the segments. Operating income is
reflective of a $36,000 allocated charge in the three months ended December 31,
1997 and a $115,000 allocated charge for fiscal 1997 from the food distribution
segment to the auto and clothing segments.
F-17
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS FOR THE YEARS ENDED
ENDED DECEMBER 31, SEPTEMBER 30,
------------------- --------------------
1997 1996 1997 1996
------ ------ ------- ------
<S> <C> <C> <C> <C>
Net sales (000's):
Food products................................ $4,581 $3,396 $13,077 $9,709
Other........................................ 403 544 2,313 297
------ ------ ------- ------
$4,984 $3,940 $15,390 $9,988
------ ------ ------- ------
------ ------ ------- ------
Operating income (loss) (000's):
Food products................................ $ 111 $ 96 $ 229 $ (30)
Other........................................ 7 46 (2) (77)
------ ------ ------- ------
$ 118 $ 142 $ 227 $ (107)
------ ------ ------- ------
------ ------ ------- ------
Depreciation (000's):
Food products................................ $ 44 $ 1 $ 95 $ 8
Other........................................ 4 2 15 7
------ ------ ------- ------
$ 48 $ 3 $ 110 $ 15
------ ------ ------- ------
------ ------ ------- ------
Capital additions (000's):
Food products................................ $ 17 $ -- $ 3 $ 31
Other........................................ -- -- -- --
------ ------ ------- ------
$ 17 $ -- $ 3 $ 31
------ ------ ------- ------
------ ------ ------- ------
Identifiable assets:
Food products................................ $4,697 $1,597 $ 2,788 $2,852
Other........................................ 3,356 3,575 3,423 1,948
------ ------ ------- ------
$8,053 $5,172 $ 6,211 $4,800
------ ------ ------- ------
------ ------ ------- ------
</TABLE>
The food products segment has had only nine (9) customer since it started
shipments in August 1995. One customer accounted for 31.0%, 47.2%, 46.6%, and
47.8% of the food products segment's sales for the three months ended December
31, 1997 and 1996 and the years ended September 30, 1997 and 1996, respectively.
Sales of this segment's products for another customer were 30.7%, 53.8%, 45.7%
and 47.8% for the same periods. During the three months ended December 31, 1997
this segment commenced shipping to a new customer which represented 31.2% of
sales.
The other segments' sales were to eight (8) customers of which one customer
accounted for 46.1%, 30.0%, 15.5%, and 100.0% of sales for the three months
ended December 31, 1997 and 1996 and for the years ended September 30, 1997 and
1996, respectively. Another customer accounted for 35.0%, 29.5%, 21.3% and 0.0%
of sales for the same periods. A third customer received 39.0% sales for fiscal
1997 and 40.5% of sales for the three months ended December 31, 1996.
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company is a lessee under three operating real property leases for
office and warehouse space. Rent expense charged to operations for the three
months ended December 31, 1997 and 1996 was $29,953 and $32,208, respectively,
and for the years ended September 30, 1997 and 1996 was $101,337
F-18
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
and $48,223, respectively. Future minimum annual rent commitments as of the
Company's fiscal year-end are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
- -----------------------------------------------------
<S> <C>
1998.............................................. $96,000
1999.............................................. 94,000
2000.............................................. 80,000
2001.............................................. 34,000
</TABLE>
(B) LETTERS OF CREDIT
The Company is contingently liable for approximately $732,000 and $900,000,
in letters of credit outstanding at December 31, 1997 and September 30, 1997,
respectively.
(C) CONSULTING AGREEMENT
(i) In July 1996, the Company entered into a financial consulting
agreement with an individual who will advise the Company on certain
financial matters. The agreement provides for the consultant to receive
$2,000 a month for his services commencing in August 1996. The agreement
may be terminated by either party upon two weeks notice.
(ii) The Company entered into a four year consulting services
agreement with Crabbe Capital Group Ltd. under which the consultant shall
(i) introduce the Company to the consultant's network of domestic and
international commercial banking sources, (ii) advise and assist the
Company in identifying, studying, and evaluating interest and exchange rate
fluctuations, and (iii) assist the Company in securing letters of credit
and review commercial banking alliances and strategies. The Company issued
to the consultant 325,000 shares of its common stock as compensation for
its services. The fair value of the 325,000 shares of common stock issued
of $195,000 is being amortized and charged to operations over the life of
the consulting agreement. Amortization charged to operations in fiscal 1997
was $40,625.
(iii) The Company entered into a one year consulting services
agreement with a consultant to (i) advise and assist the Company in
identifying, studying, and evaluating mergers, acquisitions, joint
ventures, and strategic alliances, (ii) consult with the Company concerning
on-going strategic corporate planning and long-term business policies, and
assist the Company in acquiring additional products to increase its product
line and in obtaining and expanding corporate purchases of its product
through a network of import/export associates. As compensation for entering
into the agreement, the Company issued 50,000 shares of its common stock
whose fair value of $30,000 is being amortized and charged to operations
over the life of the consulting agreement. Amortization charged to
operations in fiscal 1997 was $25,000.
(iv) The Company has another financial consulting agreement under
which the consultant for two years will advise the Company's management in
regards to strategic corporate planning, long-term investment policies and
potential mergers and acquisitions. The consultant was issued 125,000
shares of the Company's stock as payment for its services to be rendered.
The fair value of the issued shares of $75,000 is being charged over the
life of the agreement. Amortization charged to operations in 1997 was
$18,750.
F-19
<PAGE>
<PAGE>
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
(FORMERLY GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION RELATING TO THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 IS UNAUDITED) AND
AS AT AND FOR THE YEARS SEPTEMBER 30, 1997 AND 1996
(D) EMPLOYMENT CONTRACT
The Company's President, CFO and Vice President of sales were verbally
authorized compensation in aggregate of $127,000 per year through September 30,
1996. The Board of Directors' authorized an annual salary of $90,000 for each of
these officers, who also are members of the Board of Directors for fiscal 1997
and $150,000 for calendar 1998. The officers have agreed to defer payment of
their compensation until the Company's cash flow permits. At December 31, 1997,
September 30, 1997 and 1996 these officers were owed $71,000, $65,000 and
$39,000, respectively. Such liabilities are included in accrued expenses and
other current liabilities -- related parties.
Additionally in October 1995, the Company entered into three year
employments contracts with two employees the aggregate annual compensation under
these contracts is approximately $120,000.
(E) CONVERTIBLE DEBT
In November 1997, the Company issued, at par, its 10% interest bearing
$500,000 convertible debt security to a foreign corporation. The amount of the
note's principal and/or unpaid interest at 10% can be converted into the
Company's common shares at the noteholder's option throughout the term of the
note. The note is convertible into common shares at the lesser of $2.50 per
share or 75% of the average bid and ask of the Company's common stock for the
five (5) trading days immediately proceeding the noteholder's exercise of the
conversion option and into an equal number of warrants to acquire the same
number of shares at $3.625 per share. As required by generally accepted
accounting principles, a financing charge of $166,667 was charged to operations
in November 1997 for the discount between the amount paid for the note and the
fair value of common shares into which it can be converted.
On January 5, 1998, the noteholder converted $220,000 of debt and $3,857 of
accrued interest into 201,693 shares of the Company's common stock and warrants
to acquire another 201,673 common shares at $3.625 per share. The note agreement
requires the Company to register the common shares which are issued under any
conversion of the debt to common stock by the noteholder.
(F) YEAR 2000
The Company recognizes the need to ensure its operations will not be
adversely affected by year 2000 software failures. The Company is communicating
with suppliers, customers and others with which it does business to coordinate
year 2000 conversion. The cost of achieving compliance is estimated to be a
minor increase over the cost of normal software upgrades and replacements.
F-20
<PAGE>
<PAGE>
_____________________________ _____________________________
NO UNDERWRITER, DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................................................................... 3
Summary Historical Financial Information................................................................................... 5
Risk Factors............................................................................................................... 6
Use of Proceeds............................................................................................................ 10
Capitalization............................................................................................................. 11
Dividend Policy............................................................................................................ 11
Selected Historical and Financial Data..................................................................................... 12
Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 13
Business................................................................................................................... 18
Management................................................................................................................. 24
Certain Transactions....................................................................................................... 25
Security Ownership of Certain Beneficial Owners and Management............................................................. 25
Plan of Distribution....................................................................................................... 26
Description of Securities.................................................................................................. 26
Legal Matters.............................................................................................................. 28
Experts.................................................................................................................... 28
Additional Information..................................................................................................... 29
Index to Financial Statements.............................................................................................. F-1
</TABLE>
------------------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN
THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
GLOBUS
INTERNATIONAL
RESOURCES CORP.
500,000 SHARES OF COMMON STOCK
$.001 PAR VALUE AND
500,000 COMMON STOCK PURCHASE
WARRANTS, EACH UNDERLYING A
10% CONVERTIBLE NOTE;
500,000 SHARES OF COMMON STOCK,
$.001 PAR VALUE, UNDERLYING
COMMON STOCK PURCHASE WARRANTS
----------------------
PROSPECTUS
----------------------
, 1998
_____________________________ _____________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTOR AND OFFICERS.
The Nevada Business Corporation Act, in general, allows corporations to
indemnify their directors and officers against expenses (including attorneys'
fees), judgments, fines and settlement amounts actually and reasonably incurred
by such person in connection with suits or proceedings, if the person acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation. In the case of the criminal
action, the director or officer must have had no reasonable cause to believe
that person's conduct was unlawful. Under current law, no indemnification may be
made if in connection with a proceeding, or in the right of the corporation in
which the director or officer was adjudged to be liable to the corporation.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses incurred in connection
with the issuance and distribution of the securities being registered hereby
expected to be incurred by the Company:
<TABLE>
<S> <C> <C>
SEC registration fee.............................................................. $848.36
State securities law fees and expenses............................................ $ *
Printing and engraving expenses................................................... $ *
Legal fees and expenses........................................................... $50,000 *
Accounting fees and expenses...................................................... $ *
Transfer agent fee................................................................ $ *
-------
Total................................................................... $ *
-------
-------
</TABLE>
- ------------
* To be completed by amendment.
All amounts in the above table are estimated except the SEC registration
fee.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following paragraphs set forth information with respect to all
securities of the Company sold within the past three years without registering
the securities under the Act. The information includes the names of purchasers,
date of issue, number of shares issued and the consideration received by the
Company for the issuance of these shares.
Commencing December 30, 1996 through June 13, 1997, the Company completed a
private placement of Units, each Unit consisting of 10,000 shares of the Company
under Rule 504 of Regulation D under the Act. A total of 87 Units were sold at
$6,000 per Unit, or $.60 per share, as follows:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ----------------------------------------------------------------- ----------------
<S> <C>
Konstantin S. Prives............................................. 50,000
Harvey M. Goldfarb............................................... 20,000
International Consumer Corp...................................... 30,000
William J. Vargas................................................ 10,000
Michael F. Daniels............................................... 50,000
Dennis Brovarone................................................. 10,000
Annarosa Spanu................................................... 50,000
Christine Piazza................................................. 10,000
John Piazza...................................................... 10,000
Swan Alley (Nominee)............................................. 170,000
Michael Krall.................................................... 20,000
Norman L. Andersen............................................... 20,000
Gary W. Brownell................................................. 10,000
</TABLE>
(table continued on next page)
II-1
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ----------------------------------------------------------------- ----------------
<S> <C>
Grace Ann McCauley............................................... 20,000
William C. Hyde.................................................. 30,000
Francine Piazza.................................................. 10,000
Robert Bauer..................................................... 10,000
Harish H. Shah, MD............................................... 40,000
Abraham Chanuka.................................................. 20,000
Anthony Stropoli................................................. 60,000
Maryrose Baffi................................................... 20,000
Abdu-Aziz........................................................ 10,000
Regency Group.................................................... 20,000
Ronald E. Lichtman............................................... 10,000
Salvatore R. Piazza.............................................. 30,000
SBG Advisors, Inc................................................ 40,000
Candice Pokross.................................................. 30,000
Mitchell Kaminsky................................................ 10,000
Sharon S. Warshauer.............................................. 20,000
James Labate..................................................... 30,000
----------------
Total.................................................. 870,000
----------------
----------------
</TABLE>
All of the following securities were without registration under the Act
by reason of the exemption from registration afforded by the provisions of
Section 4(2) thereof, as transactions by an issuer not involving a public
offering, and/or Rule 506 of Regulation D promulgated under the Act:
On November 2, 1997, the Company sold at par its $500,000 10% Convertible
Note to FTP Inc. To the Company's best knowledge FTP Inc. is an accredited
investor.
In March 1997, the Company issued 125,000 shares to Regency Group
Enterprises, Inc. as compensation for consulting services rendered through March
1999. To the Company's best knowledge, Regency is an accredited investor.
On December 16, 1996 the Company issued 35,000 shares to Eric Piker, an
employee of the Company as compensation for services rendered. Although not
accredited, the Company believes Mr. Piker to be a sophisticated investor. As an
employee, Mr. Piker has access to the Company's books and records and any
information necessary to make an informed investment decision.
On December 16, 1996 the Company issued 20,000 shares to Lenny Esterman, an
employee of the Company as compensation for services rendered. Although Mr.
Esterman is not accredited, the Company believes he is a sophisticated investor.
As an employee, he has access to the Company's books and records and any
information necessary to make an informed investment decision.
On December 16, 1996 the Company issued 500,000 shares to consultants to
the Company, as compensation for services rendered, as follows:
<TABLE>
<S> <C>
Crabbe Capital Group, Inc........................................ 250,000
Loren Investment Group, Inc. .................................... 300,000
Comstat, Inc..................................................... 50,000
</TABLE>
To the best of the Company's knowledge, each of these entities was an
accredited investor at the time of purchase and each of their respective
principals is sophisticated and had access to information on the Company
necessary to make an informed investment decision.
230,000 of the shares issued to Loren Investments were returned to the
Company.
In March 1997, Crabbe Capital Group, Inc. received an additional 75,000
shares pursuant to an amendment to the original contract for additional
services.
On December 16, 1996, the Company issued 200,000 shares to the law firm of
Loselle Greenawalt Kaplan Blair and Adler as compensation for services rendered
valued at $15,000. The Company believes each of the principals of Loselle
Greenawalt to be sophisticated.
II-2
<PAGE>
<PAGE>
On December 11, 1996 the Company acquired all of the outstanding capital
stock of Shuttle International Ltd., a New York Corporation in exchange for
2,500,000 shares of the Company's common stock issued to the following
individuals:
<TABLE>
<S> <C>
Yury Green....................................................... 750,000
Serge Pisman..................................................... 750,000
Herman Roth...................................................... 750,000
Zolton Lebovich.................................................. 250,000
</TABLE>
Each of these individuals is sophisticated and has access to information
on the Company necessary to make an informed investment decision.
On May 13, 1996 the Company issued 56,389 shares of common stock to Fruit
Impex, S.A., a Panamanian corporation in exchange for acrylic auto paint valued
at $2,819,399 but retained an option to repurchase these shares for a three year
period for $75.00 per share. The Company believes that Fruit Impex, S.A. is an
accredited investor and that its principals are sophisticated.
On January 26, 1996 the Company issued 870 shares to Grand Sports
International, Ltd., for $87,000 and 100 shares to Midwest Land Development,
Inc., for $10,000. The Company believes that Grand Sports and Midwest Land are
accredited investors and that, at the time of the issuance, their respective
principals were sophisticated and had access to information on the Company
necessary to make an informed investment decision.
On March 1, 1996 the Company issued 500 shares to Grand Sports
International USA, Ltd., for $50,000.
On September 12, 1995 the Company issued the following shares in exchange
for services rendered in connection with the merger and prior to their being
added to the Company's payroll:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ----------------------------------------------------------------- ----------------
<S> <C>
Serge Pisman..................................................... 33,334
Yury Greene...................................................... 33,333
Herman Roth...................................................... 33,333
Eric Piker....................................................... 2,000
</TABLE>
On September 12, 1995, the Company issued 40,000 shares in a stock dividend
to existing shareholders.
II-3
<PAGE>
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL SCHEDULES.
(a) Exhibits
<TABLE>
<S> <C>
2.1 -- Agreement and Plan of Reorganization*
3.1 -- Articles of Incorporation, as amended*
3.2 -- By-laws*
4.1 -- Specimen Certificate for Shares of Common Stock*
4.2 -- Stock Option Plan**
4.3 -- Convertible Note, dated November 3, 1997, payable (subject to conversion provisions) to the order of
FTP Inc.**
4.4 -- Off-Shore Subscription Agreement, by and between the Company and FTP Inc., dated November 3, 1997**
5.1 -- Opinion and Consent of Bondy & Schloss LLP
10.1 -- Lease by and between the Company and The Port Authority of New York and New Jersey dated February 12,
1996.
10.2 -- Lease by and between Globus Food Systems International and 1616 Mermaid Associates, dated January 1,
1995.*
10.3 -- Lease by and between Shuttle International Inc. and 1616 Mermaid Associates, dated March 1, 1994.*
10.4 -- Inventory Purchase Agreement, by and between Globus Food Systems International Corp. and Fruit Impex,
S.A., dated May 13, 1996.*
10.5 -- Employment Agreement, by and between the Company and Serge Pisman.**
10.6 -- Employment Agreement, by and between the Company and Yury Greene.**
10.7 -- Employment Agreement, by and between the Company and Herman Roth.**
23.1 -- Consent of Weinick Sanders Leventhal & Co., LLP
23.5 -- Consent of Bondy & Schloss LLP (included in item 5.1 above)
24 -- Powers of Attorney (included on Company signature page)
</TABLE>
- ------------
* Previously filed.
** To be filed by amendment.
II-4
<PAGE>
<PAGE>
(b) Financial Statement Schedules.
All supplemental schedules are omitted because they are not required or
because the information is shown in the financial statements or notes thereto.
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) an any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume filed and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth in
the 'Calculation of Registration Fee' table in the effective
registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of he securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
II-5
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing of Form SB-2 and has authorized this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on April 14, 1998.
GLOBUS INTERNATIONAL RESOURCES CORP.
By: /s/ SERGE PISMAN
...................................
SERGE PISMAN,
PRESIDENT AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------- ---------------------------------------------- -------------------
<S> <C> <C>
/s/ SERGE PISMAN President and Director April 14, 1998
........................................
(SERGE PISMAN)
/s/ HERMAN ROTH Secretary and Director April 14, 1998
........................................
(HERMAN ROTH)
/s/ YURY GREENE Treasurer and Director April 14, 1998
........................................
(YURY GREENE)
</TABLE>
II-6
<PAGE>
<PAGE>
April 14, 1998
Globus International Resources Corp.
Two World Trade Center, 8th Floor
New York, New York 10005
RE: REGISTRATION STATEMENT ON FORM SB-2
OF GLOBUS INTERNATIONAL RESOURCES CORP.
Ladies and Gentlemen:
We have acted as counsel to and for Globus International Resources
Corp. (the "Company"), in connection with the preparation and filing of a
Registration Statement on Form SB-2 and Amendment No. 1 thereto, together with
any and all exhibits and schedules attached thereto (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), relating to 500,000 shares of
Common Stock, par value $.001 per share, 256,456 of which underly a certain 10%
Convertible Note (the "Note"), 500,000 Common Stock Purchase Warrants (the
"Warrants"), 256,456 of which underly the Note, and 500,000 shares of Common
Stock underlying the Warrants of the Company.
We have examined the Company's Certificate of Incorporation, as
amended, By-laws, resolutions of the Board of Directors of the Company and such
other items as we deem material to this opinion.
Based upon the foregoing information and examination, it is our opinion
that the shares of Common Stock of the Company covered by the Registration
Statement have been duly authorized and, when sold, issued and paid for, will be
validly issued, fully paid and nonassessable. It is our further opinion that the
Warrants have been duly authorized, validly issued and are the legal and binding
obligations of the Company.
<PAGE>
<PAGE>
Globus International Resources Corp.
April 14, 1998
Page 2
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and we further consent to the reference under the caption
"Legal Matters" in the Prospectus which forms a part of the Registration
Statement to the fact that this opinion concerning the validity of the issue has
been rendered by us.
Very truly yours,
BONDY & SCHLOSS LLP
<PAGE>
<PAGE>
WTC-OL 92567.1 Lease No. WT-3216-B-24 (2483)
- -----------------------------------------------------------------------------
THE PORT AUTHORITY
OF NEW YORK AND NEW JERSEY
WORLD TRADE CENTER
--------------------------
AGREEMENT OF LEASE
between
THE PORT AUTHORITY
OF NEW YORK AND NEW JERSEY
and
GLOBUS FOOD SYSTEMS
INTERNATIONAL CORP.
<PAGE>
<PAGE>
TABLE OF CONTENTS
Section 1. Letting ..........................................................1
Section 2. Term .............................................................1
Section 3. Rights of User by the Lessee .....................................1
Section 4. Basic Rental .....................................................1
Section 5. Governmental Requirements.........................................2
Section 6. Rules and Regulations.............................................2
Section 7. Responsibilities of the Lessee....................................2
Section 8. Maintenance and Repair............................................3
Section 9. Casualty .........................................................4
Section 10. Indemnity.........................................................5
Section 11. Ingress and Egress................................................5
Section 12. Construction by the Lessee........................................5
Section 13. Signs.............................................................6
Section 14. Injury and Damage to Person or Property...........................6
Section 15. Additional Rent and Charges.......................................6
Section 16. Rights of Entry Reserved..........................................6
Section 17. Condemnation......................................................7
Section 18. Abatement of Rental...............................................8
Section 19. Assignment and Sublease...........................................8
Section 20. Termination.......................................................8
Section 21. Right of Re-entry................................................10
Section 22. Survival of the Obligations of the Lessee........................10
Section 23. Reletting by the Port Authority..................................10
Section 24. Waiver of Redemption.............................................11
Section 25. Remedies and Suits Against the Lessee............................11
Section 26. Surrender........................................................11
Section 27. Acceptance of Surrender of Lease.................................11
Section 28. Brokerage........................................................12
Section 29. Notices..........................................................12
Section 30. Payments ........................................................12
Section 31. Subordination....................................................12
Section 32. Quiet Enjoyment..................................................12
Section 33. Non-Liability of Individuals.....................................12
Section 34. Headings ........................................................13
Section 35. Construction and Application of Terms............................13
Section 36. Definitions......................................................13
Section 37. Letting Postponed................................................14
Section 38. Changes in the Facility..........................................14
Section 39. Force Majeure....................................................15
Section 40. Premises ........................................................15
Section 41. Governmental Compliance..........................................15
Section 42. Services and Utilities...........................................16
-i-
<PAGE>
<PAGE>
Section 43. Finishes to be Provided by the Port Authority....................17
Section 44. Basic Rental ....................................................18
Section 45. Liability Insurance..............................................20
Section 46. Electricity......................................................21
Section 47. Late Charges ....................................................23
Section 48. Additional Provisions............................................24
Section 49. Security Deposit.................................................27
Section 50. Changes, Additions and Deletions to this Agreement...............29
Section 51. Entire Agreement.................................................30
-ii-
<PAGE>
<PAGE>
LEASE AGREEMENT
WTC-OL 92567.4
THIS AGREEMENT, made as of the 12th day of February, 1996, by and between
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called the "Port
Authority"), a body corporate and politic, created by Compact between the States
of New Jersey and New York, with the consent of the Congress of the United
States of America, and having an office at One World Trade Center, in the
borough of Manhattan, City, County, and State of New York, and GLOBUS FOOD
SYSTEMS INTERNATIONAL CORP.
(hereinafter called the "Lessee"), a corporation organized and existing under
and by virtue of the laws of the State of Nevada having an office and place of
business at 1616 Mermaid Avenue, Brooklyn, New York 11224
whose representative is Serge Pisman
WITNESSETH That:
The Port Authority and the Lessee, for and in consideration of the rents,
convenants and agreements hereinafter contained, mutually covenant and agree as
follows:
Section 1. Letting
The Port Authority hereby lets to the Lessee and the Lessee hereby hires
and takes from the Port Authority, at the World Trade Center (sometimes
hereinafter referred to as the "Facility"), in the Borough of Manhattan, City,
County and State of New York, the space(s) as shown in diagonal hatching
on the sketch(es) annexed hereto, made a part hereof and marked "Exhibit A,"
together with the fixtures, improvements and other property of the Port
Authority located or to be located therein or thereon, the said space(s),
fixtures, improvements and other property of the Port Authority being
hereinafter collectively referred to as the "premises". The Port Authority and
the Lessee hereby acknowledge that the aforesaid premises constitute non-
residential real property.
Section 2. Term
The term of the letting under this Agreement shall commence at 12:01
o'clock A.M. on February 15, 1996 and shall, unless sooner terminated, or unless
extended, expire at 11:59 o'clock P.M. on February 14, 2001.
Section 3. Rights of User by the Lessee
The Lessee shall use the premises for the following purposes only and for
no other purpose whatsoever: as administrative, clerical and executive offices
for the Lessee's import/export business.
Section 4. Basic Rental
(a) The Lessee agrees to pay to the Port Authority a basic rental for the
premises
as stated in Section 44.
<PAGE>
<PAGE>
WTC-OL 92567-1
(c) The basic rental shall be subject to adjustment during the letting in
accordance with provisions of Schedule A attached to this Agreement and hereby
made a part hereof.
SECTION 5. Governmental Requirements
(a) The Lessee shall procure all licenses, certificates, permits or other
authorization from all governmental authorities having jurisdiction over the
operations of the Lessee at the premises or at the Facility which may be
necessary for the conduct of its operations.
(b) The Lessee shall pay all taxes, import duties, license, certification,
permit and examination fees, excises and other charges which may be assessed,
levied, exacted or imposed on its property, operations or occupancy hereunder or
any property whatsoever which may be received at the premises or on the gross
receipts or income herefrom and shall make all applications. reports and returns
required in connection therewith. If any bond or other undertaking shall be
required by any governmental authority in connection with any of the operations
of the Lessee or any property received or exhibited by the Lessee at the
premises, the Lessee shall furnish the same and pay all other expenses in
connection therewith.
(c) The Lessee shall promptly observe, comply with and execute the
provisions of any and all present and future governmental laws, rules and
regulations, requirements, orders and directions which may pertain or apply to
the oprations of the Lessee on the premises or at the Facility or its occupancy
of the premises, and the Lessee shall, in accordance with and subject to the
provisions of the Section of this Agreement entitled "Construction by the
Lessee", make any and all improvements, alterations or repairs of the premises
that may be required at any time hereafter by any such present or future law,
rule regulation, requirement, order or direction.
(d) The provisions of this Section are not to be construed as a submission
by the Port Authority to the application to itself of such requirements, or any
of them.
SECTION 6. Rules and Regulations
(a) The Lessee covenants and agrees to observe and obey (and to compel its
officers, members, employees, agents, representatives, contractors, customers,
guests, invitees and those doing business with it to observe and obey) the Rules
and Regulations of the Port Authority (a copy of which is attached hereto,
hereby made a part hereof and marked "Exhibit R") for the government of the
conduct and operations of the Lessee, and such further reasonable rules and
regulations (including amendments and supplements thereto) as may from time to
time and throughout the letting be promulgated by the Port Authority for reasons
of safety, health or preservation of property, or for the maintenance of the
good and orderly appearance of the premises and the Facility or for the safe or
efficient operation of the Facility. The Port Authority agrees that, except in
cases of emergency, it will give notice to the Lessee of every such further rule
or regulation adopted by it at least five (5) days before the Lessee shall be
required to comply therewith.
(b) No statement or provision in the said Rules and Regulations shall be
deemed a representation or promise by the Port Authority that any services or
privileges described therein shall be or remain available or that such charges,
prices, rates or fees, if any, as are stated therein shall be or remain in
effect all of the same being subject to change by the Port Authority from time
to time whenever it deems a change advisable.
SECTION 7. Responsibilities of the Lessee
(a) The Lessee shall conduct its operations in an orderly and proper manner
and so as not as annoy, disturb or be offensive to others at the Facility, and
the Lessee shall control the conduct, demeanor and appearance of is officers,
members, employees, agents, representatives, contractors, customers, guests,
invitees and those doing business with it. Upon objection from the Port
Authority concerning the conduct, demeanor or appearance of any such the Lessee
shall immediately take all steps necessary to remove the cause of the objection.
(b) The Lessee shall not commit any nuisance on the premises, or do or
permit to be done anything which may result in the creation or commission of a
nuisance on the premises, and the Lessee shall not cause or permit to be
caused or produced upon the premises to permeate the same or to emanate
therefrom, any unusual, noxious or objectionable smokes, gases, vapors,
odors or objectionable noises.
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WTC-OL 92570
(c) The Lessee shall not keep, maintain, place or install in the premises
any fixtures or equipment the use of which is not consistent with and required
for the purposes of the letting as set forth in the Section of this Agreement
entitled "Rights of User by the Lessee" and the Lessee shall not use or connect
any equipment or engage in any activity or operation in the premises which will
cause or tend to cause an overloading of the capacity of any existing or future
utility, mechanical, electrical, communication or other systems, or portion
thereof, serving the premises, nor shall the Lessee do or permit to be done
anything which may interfere with the effectiveness or accessibility of existing
and future utility, mechanical, electrical, communication or other systems or
portions thereof on the premises or elsewhere at the Facility.
(d) The Lessee shall not overload any floor, roadway, passageway, pavement
or other surface or any wall, partition, column or other supporting member, or
any elevator or other conveyance, in the premises or at the Facility and without
limiting any other provision of this Agreement, the Lessee shall repair, replace
or rebuild any such damaged by overloading.
(e) The Lessee shall not install, maintain or operate or permit the
installation, maintenance or operation on the premises of any vending machine or
service designed to dispense or sell food, beverages, tobacco products or
merchandise of any kind, whether or not included in the above categories, or any
restaurant, cafeteria, kitchen, stand or other establishment for the
preparation, dispensing or sale of food, beverages, tobacco or tobacco products,
or merchandise of any kind or any equipment or device for the furnishing to the
public of a service of any kind, including without limitation thereto any
telephone pay-stations.
(f) The Lessee shall not use or make any reference, by advertising or
otherwise, to the names "World Trade Center" (except to designate the Lessee's
business address and then only in a conventional manner and without emphasis or
display), "Port of New York Authority", "Port Authority" or any simulation or
abbreviation of any such names, or any emblem, picture or reproduction of the
World Trade Center, for any purpose whatsoever. Furthermore, the Lessee shall
not make use of or originate any material intended for publication or visual or
oral presentation which may tend to impair the reputation of the World Trade
Center or its desirability. Upon notice from the Port Authority the Lessee shall
immediately discontinue any such use or reference.
(g) The Lessee shall not do or permit to be done any act or thing upon the
premises or at the Facility which will invalidate or conflict with any insurance
policies covering the premises or any part thereof, or the Facility, or any part
thereof, of which, in the opinion of the Port Authority, may constitute an
extra-hazardous condition, so as to increase the risks normally attendant upon
the operations contemplated by the Section of this Agreement entitled "Rights of
User by the Lessee", and the Lessee shall promptly observe, comply with and
execute the provisions of any and all present and future rules and regulations,
requirements, orders and directions of the National Fire Protection Association
and the New York Fire Insurance Rating Organization, and of any other board or
organization exercising or which may exercise similar functions, which may
pertain or apply to the operations of the Lessee on the premises, and the Lessee
shall, subject to and in accordance with the provisions of the Section of this
Agreement entitled "Construction by the Lessee", make any and all improvements,
alterations or repairs of the premises that may be required at any time
hereafter by any such present or future rule, regulation, requirement, order or
direction, and if by reason of any failure on the part of the Lessee to comply
with the provisions of this Agreement any insurance rate on the premises or any
part thereof, or on the Facility or any part thereof, shall at any time be
higher than it otherwise would be, then the Lessee shall pay to the Port
Authority, as an item of additional rental, that part of all insurance premiums
paid by the Port Authority which shall have been charged because of such
violation or failure by the Lessee, but no such payment shall relieve the Lessee
of its other obligations under this paragraph.
(h) The Lessee recognizes that the Port Authority has undertaken the
planning, construction and operation of the Facility as a facility of commerce
pursuant to concurrent legislation of the State of New York, Chapter 209, Laws
of New York, 1962 and the State of New Jersey, Chapter 8, Laws of New Jersey,
1962. The purpose, character and scope of the Lessee's occupancy, operation and
usage of the premises as described in Section 3 of this Agreement are of primary
importance and inducement to the Port Authority in entering into this Agreement
of lease with the Lessee. The Lessee has represented to the Port Authority that
all its occupancy, operation and usage, throughout the term of the letting
hereunder, will be in strict accordance with and subject to the provisions and
requirements of Section 3 of this Agreement and the Port Authority has relied
on such representations in entering into this Agreement. Without affecting the
Lessee's liability for any breach of this representation and its obligations
hereunder, in the event that the Lessee has not complied with all the
requirements of this Section and of Section 3 of this Agreement, the Port
Authority may by five (5) days notice terminate this Agreement and the letting
hereunder and the same shall be and operate as a conditional limitation and have
the same effect as if it were specifically included as a ground for termination
under subdivision (a) of Section 20 of this Agreement.
Section 8. Maintenance and Repair
(a) Except to the extent of such items of cleaning service as may be
supplied by the Port Authority as stated in Section 42, the Lessee shall at all
times keep the premises in a clean and orderly condition and appearance,
together with all fixtures, equipment and personal property of the Lessee
located in or on the premises, including without limitation thereto the interior
surface of windows and both sides of all entrance doors.
(b) The Lessee shall repair, replace, rebuild and paint all or any part of
the premises or of the Facility which may be damaged or destroyed by the acts or
omissions of the Lessee, its officers, members, employees, agents,
representatives, contractors, customers, guests, invitees or other persons who
are doing business with the Lessee or who are on or at the premises or the
Facility with the consent of the Lessee.
(c) The Lessee shall take good care of the premises, including therein,
without limitation thereto, walls, partitions, floors, ceilings, doors and
columns, and all parts thereof, and all equipment and fixtures, and
3
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<PAGE>
WTC-OL-92570
shall do all preventive maintenance and make all necessary non-structural
repairs, replacements, rebuilding and painting necessary to keep the premises in
the condition existing at the commencement date of the letting and to keep any
improvements, additions and fixtures made or installed during the term of the
letting in the condition they were in when made or installed except for
reasonable wear which does not adversely affect the watertight condition or
structural integrity of the building or adversely affect the efficient or proper
utilization or the appearance of any part of the premises.
(d) In the event the Lessee fails to commence so to make or do any repair,
replacements, rebuilding or painting required by this Agreement within a period
of ten (10) days after notice from the Port Authority so to do, or fails
diligently to continue to completion the repair, replacement, rebuilding or
painting of all of the premises required to be repaired, replaced, rebuilt or
painted by the Lessee under the terms of tis Agreement, the Port Authority may,
at its option, and in addition to any other remedies which may be available to
it, repair, replace, rebuild or paint all or any part of the premises included
in the said notice, the Port Authority"s cost thereof to be paid by the Lessee
on demand. This option or the exercise thereof shall not be deemed to create or
imply any obligation or duty to the Lessee or others.
(e) The obligation of the Lessee as set forth in paragraphs (b) and (c) of
this Section, in the event of damage or destruction covered by any contract of
insurance under which the Port Authority is the insured, is hereby released to
the extent that the loss is recouped by actual payment to the Port Authority of
the proceeds of such insurance; provided, however, that if at any time because
of this release the insurance carrier of any policy covering the premises or any
part thereof shall increase the premiums otherwise payable for fire, extended
coverage or rental coverage applicable to the premises, the Lessee shall pay to
the Port Authority an amount equivalent to such increase or increases on demand;
and provided, further, that if at any time this release shall invalidate any
such policy of insurance or reduce, limit or void the rights of the Port
Authority thereunder, or if because of this release, any such insurance carrier
shall cancel any such policy or shall refuse to issue or renew the same or shall
refuse to issue a policy with an endorsement thereon under which this release is
permitted without prejudice to the interest of the insured or shall cancel such
endorsement or refuse to renew the same or shall take any other action to alter,
decrease or diminish the benefits of the Port Authority under the policy, then
the release shall be void and of no effect. Nothing herein shall be construed to
imply an obligation on the Port Authority to carry any such insurance policy or
to obtain or keep in force such endorsement.
SECTION 9. Casualty
(a) In the event that, as a result of a casualty insured against by the
Port Authority under the New York standard form of fire insurance policy carried
by it on the premises, the premises are damaged without the fault of the Lessee,
its officers, members, employees, customers, guests, invitees or other persons
who are doing business with the Lessee or who are on the premises with the
Lessee's consent, so as to render the premises untenantable in whole or part,
then
(1) if the Port Authority finds that the necessary repairs or
rebuilding can be completed within ninety (90) days after the occurrence of
the damage, the Port Authority shall repair or rebuild with due diligence,
and the rental hereunder shall be abated, as hereinafter provided in the
Section of this Agreement entitled "Abatement of Rental", only for the
period from the occurrence of the damage to the completion of the repairs
or rebuilding, whether or not the work of repair or rebuilding is actually
completed within the said ninety (90) days; or
(2) if the Port Authority finds that such repairs or rebuilding cannot
be completed within ninety (90) days after the occurrence of the damage, or
if the Port Authority concludes that other than the premises also require
rebuilding, then the Port Authority shall have options: (i) to proceed with
due diligence to repair or to rebuild the premises as necessary; or (ii) to
terminate the letting as to the damaged portion of the premises only, and
the rental hereunder shall be abated as provided in the Section of this
Agreement entitled "Abatement of Rental", from and after the occurrence of
the damage, or (iii) to terminate the letting as to the entire premises;
and in the case of (i) and (iii), the rental hereunder shall be abated, as
provided in the Section of this Agreement entitled "Abatement of Rental",
either, as the case may require, for the period form the occurrence of the
damage to the completion of repairs and rebuilding of the premises or for
the period from the occurrence of the damage to the effective date of
termination.
(b) The parties do hereby stipulate that neither the provisions of Section
227 of the Real Property Law of the State of New York nor those of any other
similar statute shall extend or apply to this Agreement.
4
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WTC-OL 92567
(c) The Lessee shall give the Port Authority immediate notice in case of
any fire, accident or casualty in the premises or elsewhere in the Facility if
the occurrence elsewhere in the Facility is known to and involves the Lessee,
its officers, members, employees, agents, representatives, contractors, or is
known to any of them and involves customers, guests or invitees of the Lessee.
(d) In the event of a partial or total destruction of the premises, the
Lessee shall immediately remove any and all of its property and all debris from
the premises or the portion thereof destroyed and if the Lessee does not
promptly so remove, the Port Authority may remove the Lessee's property to a
public warehouse for deposit or retain the same in its own possession and sell
the same at public auction, the proceeds of which shall be applied first to the
expenses of removal, storage and sale, second to any sums owed by the Lessee to
the Port Authority, with any balance remaining to be paid to the Lessee; if the
expenses of such removal, storage and sale shall exceed the proceeds of sale,
the Lessee shall pay such excess to the Port Authority upon demand.
SECTION 10. Indemnity
(a) The Lessee shall indemnify and hold harmless the Port Authority, its
Commissioners, officers, agents and employees from (and shall reimburse the Port
Authority for the Port Authority's costs or expenses including legal expenses
incurred in connection with the defense of) all claims and demands of third
persons including but not limited to those for death, for personal injuries, or
for property damages, arising out of any default of the Lessee in performing or
observing any term or provision of this Agreement, or out of the use or
occupancy of the premises by the Lessee or by others with its consent, or out of
any of the acts or omissions of the Lessee, its officers, members, employees,
agents, representatives, contractors, customers, guests, invitees and other
persons who are doing business with the Lessee or who are at the premises with
the Lessee's consent where such acts or omissions are on the premises, or
arising out of any acts or omissions of the Lessee, its officers, members,
employees, agents and representatives where such acts or omissions are
elsewhere.
(b) If so directed, the Lessee shall at its own expenses defend any suit
based upon any such claim or demand (even if such suit, claim or demand is
groundless, false or fraudulent), and in handling such it shall not, without
obtaining express advance permission from the General Counsel of the Port
Authority, raise any defense involving in any way the jurisdiction of the
tribunal over the person of the Port Authority, the immunity of the Port
Authority, its Commissioners, officers, agents or employees, the governmental
nature of the Port Authority or the provision of any statutes respecting suits
against the Port Authority.
SECTION 11. Ingress and Egress
The Lessee solely for itself, its officers, employees and such business
invitees as are at the premises in connection with the transaction of the
regular business of the Lessee, shall have the right of ingress and egress
between the premises and the City streets outside the Facility. Such right shall
be exercised by means of such corridors, lobbies, public areas and pedestrian or
vehicular ways, and by means of such elevators, escalators or other facilities
for movement of persons or property, to be used subject to all the provisions of
this Agreement and in common with others having rights of passage and movement
within the Facility, as may from time to time be designated by the Port
Authority for the use of the public. The use of any such facility, way or other
area shall be subject to the rules and regulations of the Port Authority which
are now in effect or which may hereafter be promulgated for the safe and
efficient operation of the Facility. The Port Authority may, at any time,
temporarily or permanently close, move, change or limit the use of, or consent
to or request the closing, moving, changing or limitation of the use of, any
such facility, way or any other area at or near the Facility presently or
hereafter used as such, so long as a means of ingress and egress as provided
above remains available to the Lessee. The Lessee hereby releases and discharges
the Port Authority, and all municipalities and other governmental authorities,
and their respective successors and assigns, of and from any and all claims,
demands, or causes of action which the Lessee may now or at any time hereafter
have against any of the foregoing, arising or alleged to arise out of the
closing, changing or limitation of the use of any facility, way or other area,
whether within or outside the Facility. The Lessee shall not do or permit
anything to be done which will interfere with the free access and passage of
others to space adjacent to the premises or in any areas, streets, ways,
facilities and walks near the premises.
SECTION 12. Construction by the Lessee
The Lessee shall not erect any structures, make any modifications,
alterations, additions, improvements, repairs or replacements or do any
construction work on or to the premises, or install any fixtures in or on the
premises (other than trade fixtures, removable without injury to the premises)
without the prior consent of the Port Authority, and in the event any
construction, improvement, alteration, modification, addition, repair or
replacement is made or done with or without such consent and unless the consent
of the Port Authority shall expressly provide otherwise, the same shall
immediately become
5
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WTC-OL 92568
the property of the Port Authority and the Lessee shall have no right to change
or remove the same either during the term or at the expiration thereof.
Notwithstanding the foregoing, immediately upon notice from the Port Authority
given at any time during the letting, the Lessee shall remove or change any of
the same made or done by it without the Port Authority's consent, and in the
case of any of the same made or done with the Port Authority's consent, the
Lessee if so required by notice from the Port Authority, shall remove or change
the same immediately upon the expiration or termination of the letting, or
immediately upon receipt of such notice as may be given within sixty (60) days
after such expiration or termination. With respect to any modifications,
additions, alterations, improvements, installations or construction made or done
by the Port Authority at the request of the Lessee either prior to or during the
term of the letting, the Lessee shall have the same obligations as provided
above with respect to that made or done by the Lessee with the Port Authority's
consent.
SECTION 13. Signs
Except with the prior consent of the Port Authority, the Lessee shall not
erect, maintain or display any signs, advertising, posters or similar devices at
or on the exterior parts of the premises or in the premises so as to be visible
through the windows, glass walls or exterior doors thereof. Upon the expiration
or termination of the letting, the Lessee shall remove, obliterate or paint out,
as the Port Authority may direct, any and all signs and advertising, posters or
similar devices and in connection therewith shall restore the area affected to
the same condition as at the commencement of the letting.
SECTION 14. Injury and Damage to Person or Property
The Port Authority shall not be liable to the Lessee or others for any
personal injury, death or property damage from falling material, water, rain,
hail, snow, gas, steam, dampness, explosion, smoke, radiation, and/or
electricity, whether the same may leak into or fall, issue, or flow from any
part of the premises or of the Facility, including without limitation thereto
any utility, mechanical, electrical, communication or other systems therein, or
from any other place or quarter unless said damage, injury or death shall be due
to the negligent acts of the Port Authority, its employees or agents.
SECTION 15. Additional Rent and Charges
(a) If the Lessee shall fail or refuse to perform any of its obligations
under this Agreement, the Port Authority, in addition to all other remedies
available to it, shall have the right to perform any of the same and the Lessee
shall pay the Port Authority's cost thereof on demand. If the Port Authority has
paid any sum or sums or has incurred any obligations, expense or cost which the
Lessee has agreed to pay or reimburse the Port Authority for, or if the Port
Authority is required or elects to pay any sum or sums or incurs any
obligations, expense or cost by reason of the failure, neglect or refusal of the
Lessee to perform or fulfill any one or more of the conditions, covenants or
agreements contained in this Agreement, or as a result of an act or omission of
the Lessee contrary to the said conditions, covenants and agreements, including
any legal expense or cost in connection with any actions or proceeding brought
by the Port Authority against the Lessee or by third parties against the Port
Authority, the Lessee agrees to pay the sum or sums so paid or the expense and
the Port Authority's cost so incurred, including all interest costs, damages and
penalties, and the same may be added to any installment of rent thereafter due
hereunder and each and every part of the same shall be and become additional
rent, recoverable by the Port Authority in the same manner and with like
remedies as if it were originally a part of the basic rental as set forth in the
Section of this Agreement entitled "Basic Rental".
(b) "Cost" or "costs" of the Port Authority in this Agreement shall mean
and include (1) payroll costs including but not limited to contributions to the
retirement system, or the cost or participation in other pension plans or
systems, insurance costs, sick leave pay, holiday, vacation, authorized absence
pay or other fringe benefits; (2) cost of materials, supplies and equipment used
(including rental thereof); (3) payments to contractors; (4) any other direct
costs; and (5) 30% of the foregoing.
SECTION 16. Rights of Entry Reserved
(a) The Port Authority, by its officers, employees, agents, representatives
and contractors shall have the right at all reasonable times to enter upon the
premises for the purpose of inspecting the same for observing the performance by
the Lessee of its obligations under this Agreement, and for the doing of any act
or thing which the Port Authority may be obligated or have the right to do under
this Agreement or otherwise.
(b) Without limiting the generality of the foregoing, the Port Authority,
by its officers, employees, representatives and contractors, shall have the
right, for the benefit of the Lessee or for the benefit of other at the
Facility, to maintain initially existing and future utility, mechanical,
electrical, communication and other systems or portions thereof on the premises,
and to enter upon the premises at all reasonable times to make such repairs,
alterations and replacements as may, in the opinion of the Port Author-
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WTC-OL 92567
ity, be deemed necessary or advisable and, from time to time, to construct or
install over, in, under or through the premises new lines, pipes, mains, wires,
conduits, equipment and other such; and to use the premises for access to other
portions of the Facility not otherwise conveniently accessible; provided,
however, that such repair, alteration, replacement, construction or access shall
not unreasonably interfere with the use of the premises by the Lessee.
(c) In the event that any property of the Lessee shall obstruct the access
of the Port Authority, its employees, agents or contractors to any of the
existing or future utility, mechanical, electrical, communication and other
systems and thus shall interfere with the inspection, maintenance, repair or
modification of any such system, the Lessee shall move such property as
requested by the Port Authority, in order that the access may be had to the
system or part thereof for its inspection, maintenance, repair or modification.
(d) Nothing in this Section shall or shall be construed to impose upon the
Port Authority any obligations so to construct or maintain or to make repairs,
replacements, alterations or additions, or shall create any liability for any
failure so to do. The Lessee is and shall be in exclusive control and possession
of the premises and the Port Authority shall not in any event be liable for any
injury or damage to any property or to any person happening on or about the
premises nor for any injury or damage to the premises nor to any property of the
Lessee or of any other person located therein or thereon (other than those
occasioned by the negligent acts of the Port Authority).
(e) At any time and from time to time during normal business hours within
the six (6) months next preceding the expiration of the letting, the Port
Authority, by its agents and employees, whether or not accompanied by
prospective lessees, occupiers or users of the premises, shall have the right to
enter thereon for the purpose of exhibiting and viewing all parts of the same.
(f) If, during the last month of the letting, the Lessee shall have removed
all or substantially all of the Lessee's property from the premises, the Port
Authority may immediately enter and alter, renovate and redecorate the premises
and change locks on doors in the premises.
(g) The exercise of any or all of the foregoing rights by the Port
Authority or others shall not be or be construed to be an eviction of the Lessee
nor be made the grounds for any abatement of rental or any claim or demand for
damages, consequential or otherwise.
SECTION 17. Condemnation
(a) In any action or proceeding instituted by any governmental or other
authorized agency or agencies for the taking for a public use of any interest in
all or any part of the premises, or in case of any deed, lease or other
conveyance in lieu thereof (all of which are in this Section referred to as
"taking or conveyance") the Lessee shall not be entitled to assert any claim to
any compensation, award or part thereof made or to be made therein or therefor
or any claim to any consideration or rental or any part thereof paid therefor,
or to institute any action or proceeding or to assert any claim against such
agency or agencies or against the Port Authority for or on account of any such
taking or conveyance, except for the possible claim to any award for trade
fixtures owned and installed by the Lessee, it being understood and agreed
between the Port Authority and the Lessee that the Port Authority shall be
entitled to all the compensation or awards made or to be made or paid and all
such consideration or rentals, free of any claim or right of the Lessee. No
taking by or delivery to any governmental authority under this paragraph (a)
shall be or be construed to be an eviction of the Lessee or be the basis for any
claim by the Lessee for damages, consequential or otherwise.
(b) In the event of a taking or conveyance of the entire premises by any
governmental or other authorized agency or agencies, then the letting under this
Agreement shall, as of the date possession is taken from the Port Authority by
such agency or agencies, cease and determine in the same manner and with the
same effect as if the term of the letting had on that date expired.
(c) In the event of a taking or conveyance by any governmental or other
authorized agency or agencies of a part of the premises then the letting as to
such part only shall, as of the date possession thereof is taken from the Port
Authority by such agency or agencies, cease and determine, and the rental
thereafter to be paid by the Lessee to the Port Authority shall be abated as
provided in the Section of this Agreement entitled "Abatement of Rental" from
and after the date of such taking or conveyance.
(d) In the event that the taking or conveyance or the delivery by the
Lessee or taking by the Port Authority pursuant to Section 41 covers fifty per
cent (50%) or more of the total usable area of the premises, then the Lessee and
the Port Authority shall each have an option exercisable by notice given within
ten (10) days after such taking or conveyance, to terminate the letting
hereunder, as of the date of such taking, and such termination shall be
effective as if the date of such taking were the original date of expiration
hereof.
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WTC-OL-92568
SECTION 18. Abatement or Rental
(a) In the event that the Lessee shall at any time become entitled to an
abatement of rent, the basis rental set forth in the section of the Agreement
entitled "Basic Rental" shall be abated for the period the abatement is in
effect by the same percentage that the area of the part of the premises the use
of which is denied to the Lessee is of the total area of the premises.
(b) For the purposes of this Section, the number of square feet contained
in the premises or parts thereof shall be computed as follows: By measuring from
the inside surface of outer building walls to the surface of the public area
side, or of the non-exclusive area side, as the case may require, of all
partitions separating the space measured from adjoining areas designated for the
use of the public or for use by the Lessee in common with others, and to the
center of partitions separating the space measured from adjoining space
exclusively used by others; no deduction will be made for columns, partitions,
pilasters or projections necessary to the building and contained within the
space measured. Permanent partitions enclosing elevator shafts, stairs,
fire-towers, vents, pipe-shafts, meter-closets, flues, stacks and any vertical
shafts have the same relation to the space measured as do outer building walls.
(c) In the event that during the term of the letting under this Agreement
the Lessee shall be partially evicted and shall remain in possession of the
premises or the balance thereof, the Lessee agrees that notwithstanding it might
have the right to suspend payment of the rent in the absence of this provision,
it agrees to pay and will pay at the times and in the manner herein provided,
the full rent reserved less only an abatement thereof computed in accordance
with the above.
SECTION 19. Assignment and Sublease
(a) The Lessee shall not assign, sell, convey, transfer, mortgage, or
pledge this Agreement or any part thereof, or any rights created thereby or the
letting, or any part thereof, without the prior written consent of the Port
Authority.
(b) The Lessee shall not sublet the premises, or any part thereof, without
the prior written consent of the Port Authority.
(c) If the Lessee assigns, sells conveys, transfers mortgages, pledges or
sublets in violation of paragraphs (a) or (b) of this Section or if the premises
are occupied by anybody other than the Lessee, the Port Authority may collect
rent from any assignee, sublessee or anyone who claims a right to this Agreement
or letting or who occupies the premises, and shall apply the net amount
collected to the basic rental herein reserved; and no such collection shall be
deemed a waiver by the Port Authority of the covenants contained in paragraphs
(a) and (b) of this Section or an acceptance by the Port Authority of any such
assignee, sublessee, claimant or occupant as Lessee, nor a release of the Lessee
by the Port Authority from the further performance by the Lessee of the
covenants contained herein. The granting of consent by the Port Authority to any
assignment or subletting shall not be deemed to operate as a waiver of the
requirement for obtaining the express prior written consent of the Port
Authority to any other or subsequent assignment or subletting.
(d) The Lessee shall not use, or permit any person to use, the premises or
any portion thereof, except for the purposes set forth in the Section of this
Agreement entitled "Rights of User by the Lessee."
SECTION 20. Termination
(a) If any one or more of the following events shall occur, that is to say:
(1) The Lessee shall become insolvent, or shall take the benefit of
any present or future insolvency statute, or shall make a general
assignment for the benefit of creditors, or file a voluntary petition in
bankruptcy or a petition or answer seeking an arrangement or its
reorganization or the readjustment of its indebtedness under the federal
bankruptcy laws or under any other law or statute of the United States or
of any State thereof, or consent to the appointment of a receiver, trustee,
or liquidator of all or substantially all its property; or
(2) By order or decree of a court the Lessee shall be adjudged
bankrupt or an order shall be made approving a petition filed by any of the
creditors or if the Lessee is a corporation, by any of the stockholders of
the Lessee, seeking its reorganization or the readjustment of its
indebtedness under the federal bankruptcy laws or under any law or statute
of the United States or of any State thereof: or
(3) A petition under any part of the federal bankruptcy laws or an
action under any present or future insolvency law or statute shall be filed
against the Lessee and shall not be dismissed within thirty (30) days after
the filing thereof; or
(4) The letting hereunder or the interest or estate of the Lessee
under this Agreement shall be transferred to, pass to or devolve upon, by
operation of law or otherwise, any other person, firm or corporation; or
(5) The Lessee, if a corporation shall, without the prior consent of
the Port Authority, become a possessor or merged corporation in a merger, a
constituent corporation in a consolidation, or a corporation in
dissolution; or
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WTC-OL 92567
(6) The Lessee is a partnership, and the said partnership shall be
dissolved as the result of any act or omission of its partners or any of
them, or by operation of law or the order of decree of any court having
jurisdiction, or for any other reason whatsoever; or
(7) By or pursuant to, or under authority of any legislative act,
resolution or rule, or any order or decree of any court or governmental
board, agency or officer, a receiver, trustee, or liquidator shall take
possession or control of all or substantially all the property of the
Lessee, or any execution or attachment shall be issued against the Lessee
or any of its property, whereupon possession of the premises shall be taken
by someone other than the Lessee, and any such possession or control shall
continue in effect for a period of fifteen (15) days; or
(8) Any lien is filed against the premises because of any act or
omission of the Lessee and is not removed within ten (10) days; or
(9) The Lessee shall voluntarily abandon, desert, vacate or
discontinue its operations in the premises, or, after exhausting or
abandoning any right of further appeal, the Lessee shall be prevented for a
period of thirty (30) days by action of any governmental agency from
conducting its operations on the premises, regardless of the fault of the
Lessee; or the Lessee shall fail to take occupancy and commence operations
within fifteen (15) days after the commencement date; or
(10) The Lessee shall fail duly and punctually to pay the rentals or
to make any other payment required hereunder when due to the Port
Authority; or
(11) The Lessee shall fail to keep, perform and observe each and every
other promise, covenant and agreement set forth in this Agreement on its
part to be kept, performed, or observed, within ten (10) days after receipt
of notice of default thereunder from the Port Authority (except where
fulfillment of its obligation requires activity over a period of time, and
the Lessee shall have commenced to perform whatever may be required for
fulfillment within ten (10) days after receipt of notice and continues such
performance without interruption except for causes beyond its control); or
(12) If this Agreement shall require a guarantor of one or more of the
Lessee's obligations under this Agreement and any of the events described
in subparagraphs (1), (2), (3) or (7) above shall occur to or with respect
to the guarantor (whether or not they shall also occur to or with respect
to the Lessee);
then upon the occurrence of any such event or at any time thereafter during the
continuance thereof, the Port Authority may by five (5) days' notice terminate
the letting, such termination to be effective upon the date specified in such
notice. Such right of termination and the exercise thereof shall be and operate
as a conditional limitation.
(b) If any of the events enumerated in paragraph (a) of this Section shall
occur prior to the commencement of the letting, the Lessee shall not be entitled
to enter into possession of the premises and the Port Authority upon the
occurrence of any such event or at any time thereafter during the continuance
thereof by twenty-four (24) hours' notice may cancel the interest of the Lessee
under this Agreement, such cancellation to be effective upon the date specified
in such notice.
(c) No acceptance by the Port Authority of rentals, fees, charges or other
payments in whole or in part for any period or periods after a default in any of
the terms, covenants and conditions to be performed, kept or observed by the
Lessee shall be deemed a waiver of any right on the part of the Port Authority
to terminate the letting.
(d) No waiver by the Port Authority of any default on the part of the
Lessee in performance of any of the terms, covenants or conditions hereof to be
performed, kept or observed by the Lessee shall be or be construed to be a
waiver by the Port Authority of any other or subsequent default in performance
of any of the said terms, covenants and conditions.
(e) The rights of termination described above shall be in addition to any
other rights of termination provided in this Agreement and in addition to any
rights and remedies that the Port Authority would have at law or in equity
consequent upon any breach of this Agreement by the Lessee, and the exercise by
the Port Authority of any right of termination shall be without prejudice to any
other such rights and remedies.
(f) The Lessee shall not interpose any counterclaims in any summary
proceeding or action for non-payment of rental which may be brought by the Port
Authority.
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WTC-OL 92567.1
SECTION 21. Right of Re-entry
The Port Authority shall, as an additional remedy upon the giving of a
notice of termination as provided in the Section of this Agreement entitled
"Termination", have the right to re-enter the premises and every part thereof
upon the effective date of termination without further notice of any kind, and
may regain and resume possession either with or without the institution of
summary or any other legal proceedings or otherwise. Such re-entry, or regaining
or resumption of possession, however, shall not in any manner affect, alter or
diminish any of the obligations of the Lessee under this Agreement, and shall in
no event constitute an acceptance of surrender.
SECTION 22. Survival of the Obligations of the Lessee
(a) In the event that the letting shall have been terminated in accordance
with a notice of termination as provided in the Section of this Agreement
entitled "Termination", or the interest of the Lessee cancelled pursuant
thereto, or in the event that the Port Authority has re-entered, regained or
resumed possession of the premises in accordance with the provisions of the
Section of this Agreement entitled "Right of Re-entry", all the obligations of
the Lessee under this Agreement shall survive such termination or cancellation,
re-entry, regaining or resumption of possession and shall remain in full force
and effect for the full term of this Agreement, and the amount or amounts of
damages or deficiency shall become due and payable, as more specifically stated
in paragraph (b) below, to the Port Authority to the same extent, at the same
time or times and in the same manner as if no termination, cancellation,
re-entry, regaining or resumption of possession had taken place.
(b) Immediately upon any termination or cancellation pursuant to the
Section of this Agreement entitled "Termination", or upon any re-entry,
regaining or resumption of possession in accordance with the Section of this
Agreement entitled "Right of Re-entry", there shall become due and payable by
the Lessee to the Port Authority, in addition to rental accrued prior to the
effective date of termination, without notice or demand and as damages, the sum
of the following:
(1) subject to the provisions of paragraph (c) below, an amount equal
to the then present value of all basic rental provided for in this
Agreement for the entire term, following the effective date of termination,
as originally fixed in the Section of this Agreement entitled "Term" less
the amount thereof which may have been actually paid by the Lessee;
(2) the amount of all other unfulfilled monetary obligations of the
Lessee under this Agreement, including without limitation thereto, all sums
constituting additional rental hereunder and the cost to and expenses of
the Port Authority for fulfilling all other obligations of the Lessee which
would have accrued or matured during the balance of the term or on the
expiration date originally fixed or within a stated time after expiration
or termination; and
(3) an amount equal to the cost to an the expenses of the Port
Authority in connection with the termination, cancellation, regarding
possession and restoring and reletting the premises, the Port Authority's
legal expenses and cost, and the Port Authority's cost and expenses for the
care and maintenance of the premises during any period of vacancy, and any
brokerage fees and commissions in connection with any reletting.
(c) The Port Authority may at any time bring an action to recover all the
damages as set forth above not previously recovered in separate actions, or it
may bring separate actions to recover the items of damages set forth in
subparagraphs (2) and (3) of paragraph (b) above and separate actions
periodically to recover from time to time only such portion of the damages set
forth in subparagraph (1) of paragraph (b) above as would have accrued as rental
up to the time of the action if there had been no termination or cancellation.
In any such action the Lessee shall be allowed a credit against its survived
damages obligations equal to the amounts which the Port Authority shall have
actually received from any tenant, licensee, permittee or other occupier of the
premises or a part thereof during the period for which damages are sought, and
if recovery is sought for a period subsequent to the date of suit a credit equal
to the market rental value of the premises during such period (discounted to
reflect the then present value thereof). If at the time of such action the Port
Authority has relet the premises, the rental for the premises obtained through
such reletting shall be deemed to be the market rental value of the premises or
be deemed to be the basis for computing such market rental value if less than
the entire premises were relet. In no event shall any credit allowed to the
Lessee against its damages for any period exceed the then present value of the
basic rental which would have been payable under this Agreement during such
period if a termination or cancellation had not taken place. In determining
present value of rental an interest rate of 4% per annum shall be used.
SECTION 23. Reletting by the Port Authority
The Port Authority, upon termination or cancellation pursuant to the
Section of this Agreement entitled "Termination", or upon any re-entry,
regaining or resumption of possession pursuant to the Section of this Agreement
entitled "Right of Re-entry", may occupy the premises or may relet the prem-
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ises, and shall have the right to permit any person, firm or corporation to
enter upon the premises and use the same. The Port Authority may grant free
rental or other concessions and such reletting may be of part only of the
premises or of the premises or a part thereof together with other space, and for
a period of time the same as or different from the balance of the term hereunder
remaining, and on terms and conditions and for purposes the same as or different
from those set forth in this Agreement. The Port Authority shall also, upon
termination or cancellation pursuant to the Section of this Agreement entitled
"Termination", or upon its re-entry, regaining or resumption of possession
pursuant to the Section of this Agreement entitled "Right of Re-entry", have the
right to repair or to make structural or other changes in the premises,
including changes which alter the character of the premises and the suitability
thereof for the purposes of the Lessee under this Agreement, without affecting,
altering or diminishing the obligations of the Lessee hereunder. In the event
either of any reletting or of any actual use and occupancy by the Port Authority
(the mere right to use and occupy not being sufficient however) there shall be
credited to the account of the Lessee against its survived obligations hereunder
any net amount remaining after deducting from the amount actually received from
any lessee, licensee, permittee or other occupier as the rental or fee for the
use of the said premises or portion thereof during the balance of the letting as
the same is originally stated in this Agreement, or from the market value of the
occupancy of such portion of the premises as the Port Authority may during such
period actually use and occupy, all expenses, costs and disbursements incurred
or paid by the Port Authority in connection therewith. No such reletting or such
use and occupancy shall be or be construed to be an acceptance of a surrender.
SECTION 24. Waiver of Redemption
The Lessee hereby waives any and all rights of redemption, granted by or
under any present or future law, arising in the event it is evicted or
dispossessed for any cause, or in the event the Port Authority obtains or
retains possession of the premises in any lawful manner.
SECTION 25. Remedies and Suits Against the Lessee
All remedies provided in this Agreement shall be deemed cumulative and
additional and not in lieu of or exclusive of each other or of any other remedy
available to the Port Authority at law or in equity. In the event of a breach or
threatened breach by the Lessee of any term, covenant, condition or provision of
this Agreement, the Port Authority shall have the right of injunction and the
right to invoke any other remedy allowed by law or in equity as if termination,
re-entry, summary proceedings and any other specific remedies including without
limitation thereto, indemnity and reimbursement, were not mentioned herein, and
neither the mention thereof nor the pursuance or exercise or failure to pursue
or exercise any right or remedy shall preclude the pursuance or exercise of any
other right or remedy.
SECTION 26. Surrender
(a) The Lessee covenants and agrees to yield and deliver peaceably to the
Port Authority possession of the premises on the date of the cessation of the
letting, whether such cessation be by termination, expiration or otherwise,
promptly and in the same condition as at the time the Lessee entered into
possession, such reasonable wear excepted as would not adversely affect or
interfere with the efficient and proper utilization of the premises or any part
thereof.
(b) Unless the same are required for the performance by the Lessee of its
obligations hereunder, the Lessee shall have the right at any time during the
letting to remove from the premises, and, on or before the expiration or earlier
termination of the letting, shall so remove its equipment, removable fixtures
and other personal property, and all property of third persons for which it is
responsible, repairing all damages caused by such removal. If the Lessee shall
fail to remove such property on or before the termination or expiration of the
letting, the Port Authority shall have the same rights with respect to such
property as it has in the event of casualty under Section 9(d).
SECTION 27. Acceptance of Surrender of Lease
No agreement of surrender or to accept a surrender shall be valid unless
and until the same shall have been reduced to writing and signed by the duly
authorized representatives of the Port Authority and of the Lessee. Except as
expressly provided in this Section, neither the doing of, nor any omission to
do, any act or thing, by any of the officers, agents or employees of the Port
Authority, shall be deemed an acceptance of a surrender of the letting or of
this Agreement. Without limiting the foregoing, no employee or officer of the
Port Authority shall be authorized to accept the keys of the premises
prior to the expiration date of the letting as fixed in the Section of this
Agreement entitled "Term" and no delivery of the keys by the Lessee shall
constitute a termination of this Agreement or acceptance of surrender.
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WTC-OL 42974
SECTION 28. Brokerage
The Lessee represents and warrants that no broker has been concerned in the
negotiation of this Agreement and that there is no broker who is or may be
entitled to be paid a commission in connection therewith. The Lessee shall
indemnify and save harmless the Port Authority from any claims for commission or
brokerage made by any and all persons, firms or corporations whatsoever for
services in connection with the negotiation and execution of this Agreement.
SECTION 29. Notices
(a) Notices, requests, permissions, consents and approvals given or
required to be given to or by either party under this Agreement, shall not be
effective unless they are given in writing, and all such notices and requests
shall be (i) personally delivered to the party or a duly designated officer or
representative of such party: or (ii) delivered to the office of such party,
officer or representative during regular business hours, or (iii) delivered to
the residence of such party, officer or representative; or (iv) if directed to
the Lessee, delivered at the premises at any time; or (v) forwarded to such
party, officer or representative at the office or residence address by
registered or certified mail. The Lessee shall designate an office within the
Port of New York District and an officer or representative whose regular place
of business is at such office. Until further notice, the Port Authority hereby
designates its Executive Director, and the Lessee designates the person named as
representative on the firstpage hereof as their respective officers or
representatives upon whom notices and requests may be served, and the Port
Authority designates its office at One World Trade Center, New York, New York
10048, and the Lessee designates its office at its address stated on the first
page hereof, as their respective offices where notices and requests may be
served.
(b) If any notice is mailed or delivered, the giving of such notice shall
be complete upon receipt, or, in the event of a refusal by the addressee, upon
the first tender of the notice to the addressee or at the permitted address. If
any notice is sent by telegraph, the giving of such notice shall be complete
upon receipt or, in the event of a refusal by the addressee, upon the first
tender of the notice by the telegraph company to the addressee or at the address
thereof.
SECTION 30. Payments
(a) All payments required of the Lessee by this Agreement shall be made at
the office of the Treasurer of the Port Authority, One World Trade Center, New
York, New York 10048, or to such other officer or address as may be substituted
therefor.
(b) No payment by the Lessee or receipt by the Port Authority of a lesser
rental amount than that which is due and payable under the provisions of this
Agreement at the time of such payment shall be deemed to be other than a payment
on account of the earliest rental then due, nor shall any endorsement or
statement on any check or in any letter accompanying any check or payment be
deemed an accord and satisfaction, and the Port Authority may accept such check
or payment without prejudicing in any way its right to recover the balance of
such rental or to pursue any other remedy provided in this Agreement or by law.
SECTION 31. Subordination
This Agreement and the letting hereunder are and shall be subject and
subordinate to all mortgages which may now or hereafter affect the premises or
the Facility, and to all renewals, modifications, consolidations, replacements
and extensions thereof, and although the provisions of this Section shall be
deemed to be self-operating and effective for all purposes without any further
instrument on the part of the Lessee, the Lessee shall execute on demand and
without expense to the Port Authority such further instruments confirmatory of
the provisions of this Section as the Port Authority may request.
SECTION 32. Quiet Enjoyment
The Port Authority covenants and agrees that as long as it remains the
owner of the Facility, the Lessee, upon paying all rentals hereunder and
performing all the covenants, conditions and provisions of this Agreement on its
part to be performed, shall and may peaceably and quietly have, hold and enjoy
the premises free of any act or acts of the Port Authority except as expressly
permitted in this Agreement.
SECTION 33. Non-Liability of Individuals
Neither the Commissioners of the Port Authority nor any of them, nor any
officer, agent or employee thereof, shall be charged personally by the Lessee
with any liability or held liable to it under any term or provision of this
Agreement, or because of its execution or attempted execution, or because of any
breach or attempted or alleged breach thereof.
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SECTION 34. Headings
The section headings and the paragraph headings, if any, are inserted only
as a matter of convenience and for reference and in no way define, limit or
describe the scope or intent of any provision hereof.
SECTION 35. Construction and Application of Terms
(a) Wherever in this Agreement a third person singular neuter pronoun or
adjective is used referring to the Lessee, the same shall be taken and
understood to refer to the Lessee, regardless of the actual gender or number
thereof.
(b) Whenever in this Agreement the Lessee is placed under an obligation
or covenants to do or to refrain from or is prohibited from doing, or is
entitled or privileged to do, any act or thing, the following shall apply:
(1) If the Lessee is a corporation, its obligations shall be performed
or its rights or privileges shall be exercised only by its officers and
employees; or
(2) If the Lessee is an unincorporated association or a business or
"Massachusetts" trust, the obligation shall be that of its members or
trustees, as well as of itself, and shall be performed only by its members
or trustees, and officers and employees, and the right or privilege shall
be exercised only by its members or trustees, and its officers and
employees; or
(3) If the Lessee is a partnership, the obligation shall be that of
its partners and shall be performed only by its partners and employees and
the rights or privileges shall be exercised only by its partners and
employees; or
(4) If the Lessee is an individual, the obligations shall be that of
himself (or herself) and shall be performed only by himself (or herself)
and his (or her) employees and the right or privilege shall be exercised
only by himself (or herself) and his (or her) employees.
(5) None of the provisions of this paragraph (b) shall be taken to
alter, amend or diminish any obligation of the Lessee assumed in relation
to its invitees, customers, agents, representatives, contractors or other
persons, firms or corporations doing business with it.
(c) If more than one individual or other legal entity is the Lessee under
this Agreement, each and every obligation hereof shall be the joint and several
obligation of each such individual or other legal entity.
(d) Unless otherwise stated in the Section of this Agreement entitled
"Rights of User by the Lessee", the rights of user thereby granted to the Lessee
with respect to the premises shall be exercised by the Lessee only for its own
account and, without limiting the generality of the foregoing, shall not be
exercised as agent, representative, factor, broker, forwarder, bailee, or
consignee without legal title to the subject matter of the consignment.
(e) The Lessee's representative, hereinbefore specified in this Agreement
(or such substitute as the Lessee may hereafter designate in writing), shall
have full authority to act for the Lessee in connection with this Agreement and
any things done or to be done hereunder, and to execute on the Lessee's behalf
any amendments or supplements to this Agreement or any extension thereof.
(f) This Agreement does not constitute the Lessee, the agent or
representative of the Port Authority for any purpose whatsoever.
(g) All designations of time herein contained shall refer to the
time-system then officially in effect in the municipality wherein the premises
are located.
(h) No greater rights or privileges with respect to the use of the premises
or any part thereof or with respect to the Facility are granted or intending to
be granted to the Lessee by this Agreement, or by any provision thereof, than
the rights and privileges expressly granted hereby.
SECTION 36. Definitions
The following terms, when used in this Agreement, shall have the respective
meanings given below:
(a) "Letting" shall mean the letting under this Agreement for the original
term stated herein, and shall include any extensions thereof which may be made
pursuant to the provisions of this Agreement, or otherwise.
(b) "World Trade Center" or "Facility" shall mean the building complex to be
constructed by the Port Authority within the area in the Borough of Manhattan,
City, County and State of New York, bounded generally by the east side of Church
Street on the east, the south side of Liberty Street
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and the south side of Liberty Street extended on the south, the Hudson River on
on the west, and on the north by a line beginning at the point of intersection
of the Hudson River and the north side of Vesey Street extended, running along
the north side of Vesey Street extended and and the north side of Vesey Street
to the west side of Washington Street, then along the west side of Washington
Street to the north side of Barclay Street, then along the north side of Barclay
Street to the east side of West Broadway, then along the east side of West
Broadway to the north side of Vesey Street, then along the north side of Vesey
Street to the east side of Church Street, together with such additional
contiguous area as may be agreed upon from time to time between the Port
Authority and the said City of New York;
(c) the phrase "utility, mechanical, electrical communication and other
systems" shall mean and include (without limitation thereto) the following:
machinery, engines, dynamos, boilers, elevators, escalators, incinerators and
incinerator flues, systems for the supply of fuel, electricity, water, gas and
steam, plumbing, heating, sewerage, drainage, ventilating, air conditioning,
communications, fire-alarm, fire-protection, sprinkler, telephone, telegraph and
other systems, fire hydrants, fire hoses, and their respective wires, mains,
conduits, lines, tubes, pipes, equipment, motors, cable, fixtures and other
equipment.
(d) "Causes or conditions beyond the control of the Port Authority", shall
mean and include acts of God, the elements, weather conditions, tides,
earthquakes, settlements, fire, acts of governmental authority, war, shortage of
labor or materials, act of third parties for which the Port Authority is not
responsible, injunctions, strikes, boycotts, picketing, slowdowns, work
stoppages, labor troubles or disputes of every kind (including all those
affecting the Port Authority, its contractors, suppliers or subcontractors) or
any other condition or circumstances, whether similar to or different from the
foregoing (it being agreed that the foregong enumeration shall not limit or be
characteristic of such conditions or circumstances) which is beyond the control
of the Port Authority or which could not be prevented or remedied by reasonable
effort and at reasonable expense.
(e)"Holidays" or "legal holidays" shall mean and include the following days
in each year: the first day of January; known as New Year's day; the twelfth
day of February, known as Lincoln's birthday; the third Monday in February,
known as Washington's birthday; the last Monday in May, known as Memorial day;
the fourth day of July, known as Independence day; the first Monday in
September, known as Labor day; the second Monday in October, known as Columbus
day, the fourth Monday in October, known as Veterans' day; the fourth Thursday
in November, known as Thanksgiving day; and the twenty-fifth day of
December, known as Christmas day; and if any of such days is Sunday, the next
day thereafter; and each general Election day in the State of New York; and such
other or different day or dates as are declared "holidays" or "legal holidays"
under the laws of the State of New York or as may hereafter be so declared.
(f) "Normal business hours," shall mean 8:00 o'clock A.M. to 6:00 o'clock
P.M. Mondays to Fridays inclusive, legal holidays excepted.
SECTION 37. Letting Postponed
If, on the date fixed as the commencement of the term of the letting in the
Section of this Agreement entitled "Term", the premises are not available or
ready for occupancy or use by the Lessee, by reason of the fact that the
premises or any part thereof, or any part of the Facility, are in the course of
construction, repair, alteration or improvement or by reason of the fact that
the occupant of the premises, or a part thereof, failed or refused to deliver
possession, or by reason of any causes or conditions beyond the control of the
Port Authority, the Port Authority may postpone the letting and the Port
Authority shall not be subject to any liability for such postponement or failure
to give possession on such date. No such postponement or failure to give
possession on such date shall affect the validity of this Agreement or the
obligations of the Lessee hereunder. However, rental shall not commence until
possession of the premises is tendered by the Port Authority to the Lessee;
tender shall be made by notice given at least five (5) days prior to the
effective date of the tender; and in the event that the commencement date of the
letting of the premises shall be postponed, then the expiration date of the
letting shall be postponed for a period of time equivalent to the period between
the commencement date stated in the Section of this Agreement entitled "Term"
and the last day of the calendar month in which the actual commencement date
shall fall. In the event that notice of tender of the premises is not given for
possession to commence on or before three hundred sixty-five (365) days
after the date fixed as the commencement of the term of the letting in the
Section of this Agreement entitled "Term", then this Agreement shall be deemed
cancelled, except that each party shall and does release and discharge the other
party from any and all claims or demands based on this Agreement, or a breach or
alleged breach thereof.
SECTION 38. Changes in the Facility
The Lessee recognizes that because the Facility may not yet be constructed
at the time of execution of this Agreement the space exhibit(s) attached hereto
show(s) the premises as the Port Authority presently anticipates they will be
built. If the Port Authority changes the construction prior to completion
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thereof so that the premises as shown on the said space exhibits(s) are
substantially diminished in area, the Port Authority may offer to substitute
other space at least equivalent in area to the premises shown on the said space
exhibits(s) and located in a portion of the Facility comparable to the location
where the premises shown on the said space exhibit(s) are located, by notice to
the Lessee given not later than thirty (30) days prior to the commencement date
of the letting. The Lessee within twenty (20) days after receipt of such notice
shall have the right to reject the substitution by notice to the Port Authority.
If such substitution is made and not rejected by the Lessee as hereinbefore
stated, the space substituted shall from and after the effective date of
substitution be the premises hereunder and the space shown on the space
exhibits(s) shall cease to be the premises hereunder, provided, however, that
any such substitution by the Port Authority shall be effective not later than
the commencement date of the letting hereunder. If the area of the premises is
substantially diminished and the Port Authority does not exercise its privilege
of substitution or the Lessee rejects the substitution as hereinbefore stated,
the Lessee shall have the right to cancel this Agreement and the letting
hereunder by five (5) days' notice to the Port Authority given and effective not
later than the commencement date of the letting and each party shall release and
does hereby release the other party of and from any and all demands based on
this Agreement, or a breach or alleged breach thereof. If the area of the
premises is substantially diminished and the Lessee has not exercised its right
of cancellation or if the premises are diminished in area but not substantially
diminished there shall be an abatement of rental as hereinbefore provided in the
Section of this Agreement entitled "Abatement of Rental". No diminution of area
of the premises shall be or be construed to be an eviction or partial eviction
of the Lessee. "Substantially" shall mean a diminution of ten percent (10%) or
more.
SECTION 39. Force Majeure
(a) The Port Authority shall not be liable for any failure, delay or
interruption in performing it obligations hereunder due to causes or conditions
beyond the control of the Port Authority. Further, the Port Authority shall not
be liable unless the failure, delay or interruption shall result from failure on
the part of the Port Authority to use reasonable care to prevent or reasonable
efforts to cure such failure, delay or interruption.
(b) No abatement, diminution or reduction of the rent or other charges
payable by the Lessee, shall be claimed by or allowed to the Lessee for any
inconvenience, interruption, cessation or loss of business or other loss caused,
directly or indirectly, by any present or future laws, rules, requirements,
orders, directions, ordinances or regulations of the United States of America,
or of the state, county or city governments, or of any other municipal,
governmental or lawful authority whatsoever, or by priorities, rationing or
curtailment of labor or materials, or by war or any matter or thing resulting
therefrom, or by any other cause or condition beyond the control of the
Port Authority, nor shall this Agreement be affected by any such causes or
conditions.
SECTION 40. Premises
(a) The Lessee acknowledges that it has not relied upon any representation
or statement of the Port Authority or its Commissioners, officers, employees or
agents as to the suitability of the premises for the operations permitted on the
premises by this Agreement. Without limiting any obligation of the Lessee to
commence operations hereunder at the time and in the manner stated elsewhere in
this Agreement, the Lessee agrees that no portion of the premises will be used
initially or at any time during the letting which is in a condition unsafe or
improper for the conduct of the Lessee's operations hereunder so that there is
possibility of injury or damage to life or property. For all purposes of this
Agreement the premises hereunder (notwithstanding any statement elsewhere in
this Agreement of any rule for the measurement of the area thereof) shall be
deemed to include all of the enclosing partitions, and the adjacent exterior
building walls and glass to and including the exterior surface thereof.
(b) The Port Authority may by written authorization allow the Lessee to
enter into the possession of the premises prior to the date specified in the
Section of this Agreement entitled "Term" as the commencement of the term of the
letting, solely for the purpose of moving personal property of the Lessee into
the premises and of installing fixtures. If the Lessee receives such written
authorization, the Lessee shall use and occupy the premises in accordance with
and subject to all the terms, covenants, conditions and provisions of this
Agreement other than those relating to payment of rent and rights of user and
except as may be expressly provided otherwise by the written authorization.
SECTION 41. Governmental Compliance
In the event that all or any portion of the premises is required by the
Port Authority to comply with any present or future governmental law, rule,
regulation, requirement, order or direction, the Port Authority shall give the
Lessee notice that all or any such portion of the premises is so required and
the Lessee shall deliver all or any such portion of the premises so required on
the date specified in such
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WTC-OL 92567
notice, and if the Lessee does not so deliver, the Port Authority may take the
same. No such taking or delivery shall be or be construed to be an eviction of
the Lessee or a breach of this Agreement. In the event that the Lessee has
received a notice hereunder it shall deliver all or any such portion of the
premises so required in the same condition as that required hereunder for the
delivery of the premises on the cessation of the letting. In the event of the
taking or delivery of all the premises, this Agreement and the letting hereunder
shall on the day of such taking or delivery cease and expire as if that day were
the date, originally stated herein for the expiration of this Agreement; and, in
the event of the taking or delivery of any portion of the premises, then, from
and after such taking or delivery, such portion of the premises shall cease to
be a part of the premises hereunder. There shall be an abatement of the rental
in the event of any such taking or delivery of a portion of the premises as
provided in the Section of this Agreement entitled "Abatement of Rental".
SECTION 42. Services and Utilities
(a) Subject to all the terms and provisions of this Agreement, the Port
Authority will furnish without additional charge to the Lessee the following:
(1) Heat, ventilation and air cooling to maintain in the premises an
even and comfortable working temperature during normal business hours;
(2) To the extent that the Lessee's consumption does not exceed the
capacity of feeders, risers or wiring in the premises or Facility,
electricity, during normal business hours, in reasonable quantities solely
for illumination, by which is meant the energizing of fluorescent and
incandescent bulbs (to be supplied, paid for and installed by the Lessee),
and for the operation of such machines and equipment as the Port Authority
may consent to in advance; and
(b) Unless the premises contain toilet and washroom facilities, the Port
Authority shall, without additional charge, furnish non-exclusive toilet and
washroom facilities for the employees of the Lessee.
(c) The Port Authority will supply cleaning services in the premises as
described in Schedule B attached hereto and hereby made a part hereof.
(d) If the Lessee, in accordance with the Section of this Agreement
entitled "Construction by the Lessee" or otherwise, erects any partitions or
makes any improvements which stop, hinder, obstruct or interfere with the
cooling of the air or the heating of the premises, or if the Lessee shall fail
to close and keep closed the window coverings when the sun is shining on the
windows of the premises, then no such action by the Lessee shall impose any
obligations on the Port Authority to install facilities, fixtures or equipment
for air-cooling or for heating additional to those existing or presently
contemplated or to increase the capacity or output of initially existing
facilities, equipment or fixtures and the Lessee shall not in any such event be
relieved of any of its obligations hereunder because a comfortable temperature
is not maintained. No consent given by the Port Authority to the erection of
partitions or the making of any improvements shall be or be deemed to be a
representation that the work consented to will not stop, hinder, obstruct or
interfere with either the cooling of the air or heating of the premises or any
portion thereof. It is hereby understood further that the installation by the
Lessee of any equipment which itself requires air cooling or which requires
additional quantities of air cooling at the portion of the premises where such
equipment is installed, or the concentration in any portion of the premises of
such a number of people so as to require additional quantities of air cooling,
shall not impose any obligation on the Port Authority to install facilities,
fixtures and equipment for air cooling additional to those initially existing,
or to increase the capacity or output of initially existing facilities,
equipment or fixtures and the Lessee shall not in any such event be relieved of
any of its obligations hereunder.
(c) The Lessee shall keep closed all entrance doors and all windows in the
premises except that doors may be opened when required for ingress or egress.
The Lessee shall not otherwise waste or dissipate the air cooling or heating
services. Without otherwise affecting the Port Authority's rights or remedies in
the event of any breach by the Lessee of its obligations under this Agreement,
the Port Authority shall have the right to discontinue or reduce the said
heating or air-cooling service during any period of such waste or dissipation
and any failure of the Port Authority to supply any such service under such
conditions shall not affect any of the Lessee's obligations under this
Agreement.
(f) If any federal, state, municipal or other governmental body, authority
or agency or any public utility assesses, levies, imposes, makes or increases
any charge, fee or rent on the Port Authority for any service, system or utility
now or in the future supplied to or available to the premises or to any
occupants or users thereof or to the structure or building of which the premises
form a part (including but not limited to any sewer rent or charge for the use
of sewer systems), the Lessee shall, at the option of the Port Authority
exercised at any time and from time to time by notice to the Lessee, pay, in
accordance with said notice, such charge, fee or rent or increase thereof (or
the portion thereof allocated by the Port Authority to the premises or the
Lessee's operations hereunder) either directly to the governmental body,
authority or agency or to the public utility or directly to the Port Authority.
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(g) The Port Authority shall have the right to discontinue temporarily the
supply of any of the above services when necessary or desirable in the opinion
of the Port Authority in order to make any repairs, alterations, changes or
improvements in the premises or elsewhere in the Facility including but not
limited to all systems for the supply of services.
(h) No failure, delay, interruption or reduction in any service or services
shall be or shall be construed to be an eviction of the Lessee, shall be grounds
for any diminution or abatement of the rentals payable hereunder, or shall
constitute grounds for any claim by the Lessee for damages, consequential or
otherwise, unless due to the negligent act of the Port Authority, its employees
or agents. The Lessee shall not be entitled to receive any service or services
during any period during which the Lessee shall be in default under any of the
provisions of this Agreement.
(i) The Port Authority shall be under no obligation to supply any service
or services if and to the extent and during any period that the supplying of any
such service or services or the use of any component necessary therefor shall
be prohibited or rationed by any federal, state or municipal law, rule,
regulation, requirement, order or direction and if the Port Authority deems
it in the public interest to comply therewith, even though such law, rule,
regulation, requirement, order or direction may not be mandatory on the Port
Authority as a public agency.
(j) The Port Authority shall have no obligations or responsibility with
respect to the performance of any services or providing, supplying or furnishing
to the Lessee of any utilities or services whatsoever except as expressly
provided in this Section.
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Section 44. Basic Rental
The Lessee shall pay a basic rental to the Port Authority, for the
premises, as follows:
(a) For the period from and after the commencement date of the letting
through the day preceding the second (2nd) anniversary of the commencement date
of the letting, at the rate of Sixty-two Thousand Four Hundred Eighty-four
Dollars and No Cents ($62,484.00) per annum, payable in the sum of Five Thousand
Two Hundred Seven Dollars and No Cents ($5,207.00) upon the execution of this
Agreement by the Lessee and the delivery thereof to the Port Authority and in
advance in equal monthly installments of Five Thousand Two Hundred Seven Dollars
and No Cents ($5,207.00) each on the sixtieth (60th) day following the
commencement date of the letting and on the first day of each calendar month
thereafter through the day preceding the 2nd anniversary of the commencement
date of the letting;
(b) For the period from and after the second (2nd) anniversary of the
commencement date of the letting through the day preceding the third (3rd)
anniversary of the commencement date of the letting, at the rate of Sixty-eight
Thousand One Hundred Sixty Dollars and No Cents ($68,160.00) per annum, payable
in advance in equal monthly installments of Five Thousand Six Hundred Eighty
Dollars and No Cents ($5,680.00) each on the 2nd anniversary of the commencement
date of the letting and on the first day of each calendar month thereafter
through the day preceding the 3rd anniversary of the commencement date of the
letting;
(c) For the period from and after the third (3rd) anniversary of the
commencement date of the letting through the day preceding the fourth (4th)
anniversary of the commencement date of the letting, at the rate of Seventy-six
Thousand Six Hundred Eighty Dollars and No Cents ($76,680.00) per annum, payable
in advance in equal monthly installments of Six Thousand Three Hundred Ninety
Dollars and No Cents ($6,390.00) each on the 3rd anniversary of the commencement
date of the letting and on the first day of each calendar month thereafter
through the day preceding the 4th anniversary of the commencement date of the
letting; and
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(d) For the period from and after the fourth (4th) anniversary of the
commencement date of the letting throughout the balance of the term of the
letting at the rate of Eighty-two Thousand Three Hundred Sixty-eight Dollars and
No Cents ($82,368.00) per annum, payable in advance in equal monthly
installments of Six Thousand Eight Hundred Sixty-four Dollars and No Cents
($6,864.00) each on the 4th anniversary of the commencement date of the letting
and on the first day of each calendar month thereafter throughout the balance of
the term of the letting.
(e) Paragraph (b) of Section 4 was deleted in its entirety. In the event
that the sixtieth (60th) day following the commencement date of the letting
under this Agreement is other than the first day of a calendar month, the
installment of basic rental payable on the 60th day following the commencement
date of the letting shall be the amount of the monthly installment stated in
paragraph (a) of this Section multiplied by a fraction, the numerator of which
shall be the number of days from and including the 60th day following the
commencement date of the letting through and including the last day of the
calendar month in which such 60th day occurs and the denominator of which shall
be the number of days in that calendar month. If any rental increase referred to
above in this Section 44 is effective on a day other than the first day of a
calendar month, then in addition to the full monthly installment of basic rental
payable on the first day of such month there shall be payable in advance on the
date of such increase an installment of basic rental equal to one twelfth (1/12)
of the annual amount by which the basic rental is then being increased
multiplied by a fraction, the numerator of which shall be the number of days
from the date of such increase to the last day of such calendar month, both days
inclusive, and the denominator of which shall be the number of days in that
calendar month. If the expiration or termination date of the letting is other
than the last day of a calendar month, the installment of basic rental payable
on the first day of the calendar month in which such expiration or termination
date occurs shall be the amount of the applicable monthly installment stated
above in this Section multiplied by a fraction, the numerator of which shall be
the number of days the letting was in effect in the calendar month in which the
expiration or termination date occurs and the denominator of which shall be the
number of days in said month.
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Section 45. Liability Insurance
(a) The Lessee in its own name as assured shall secure and pay the
premium on a policy of comprehensive general liability insurance, including a
contractual liability endorsement, for such coverage as may be stipulated by the
Port Authority, covering the Lessee's operations hereunder which shall be
effective throughout the letting under this Agreement and shall be in a combined
single limit of not less than $1,000,000 for bodily injury, for wrongful death
and for property damage arising from any one occurrence.
(b) The Port Authority shall be included as an additional insured in any
policy of liability insurance required by this Section.
(c) As to any insurance required by this Section, a certified copy of
each of the policies or a certificate or certificates evidencing the existence
thereof, or binders, shall be delivered to the Port Authority within twenty (20)
days prior to the commencement date of the letting hereunder. In the event any
binder is delivered, it shall be replaced within thirty (30) days by a certified
copy of the policy or a certificate. Each such copy or certificate shall contain
a valid provision or endorsement that the policy may not be cancelled,
terminated, changed or modified, without giving ten (10) days' written advance
notice thereof to the Port Authority. A renewal policy shall be delivered to the
Port Authority at least fifteen (15) days prior to the expiration date of each
expiring policy, except for any policy expiring after the date of expiration of
the letting. If at any time any of the policies shall be or become
unsatisfactory to the Port Authority as to form or substance, or if any of the
carriers issuing such policies shall be or become unsatisfactory to the Port
Authority the Lessee shall promptly obtain a new and satisfactory policy in
replacement.
(d) Each policy of insurance required by this Section shall contain a
provision that the insurer shall not, without obtaining express advance
permission from the General Counsel of the Port Authority, raise any defense
involving in any way the jurisdiction of the tribunal over the person of the
Port Authority, the immunity of the Port Authority, its Commissioners, officers,
agents or employees, the governmental nature of the Port Authority or the
provisions of any statutes respecting suits against the Port Authority.
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WT-SP-10576
Section 46. Electricity
(a) Notwithstanding the provisions of Section 42(a)(2) of this
Agreement and subject to all the terms, conditions and provisions of Section
42(f), (g), (h) and (i) of this Agreement, the Port Authority may periodically
throughout the term of the letting at such times as the Port Authority may
elect, arrange for a survey of the premises by the Port Authority's Engineering
Department or by an independent utility consultant to be selected by the Port
Authority for the purpose of establishing the Lessee's annual consumption of and
demand for electricity (such consumption of and demand for electricity being
hereinafter referred to as "consumption and demand"). Such consumption and
demand shall be based on the wattage of lamps and any other electrical machinery
and the frequency and duration of the use thereof in the premises. The Lessee's
annual consumption and demand shall be divided by the number of "billing
periods" per year established by the public utility company supplying
electricity in the vicinity of the premises so as to determine the Lessee's
consumption and demand per billing period. In lieu of such determination of
consumption and demand, the same may be measured by meter which the Port
Authority may at its option, exercised at any time during the term of the
letting, install on or off the premises and in the event any such meter fails to
record such, the Lessee's consumption of and demand for electricity for any
period that a meter is out of service will be considered to be the same as the
consumption and demand for a like period either immediately before or
immediately after such interruption as selected by the Port Authority. The Port
Authority shall compute the cost of such consumption and demand either as
determined by the survey or measured by meter based on the greater of (1) the
rates (including the fuel or other adjustment factor if any) which the Lessee
under the service classification applicable to the Lessee as of the date of each
billing period would be required to pay if the Lessee had purchased such
electricity directly from the public utility company supplying the same in the
vicinity or (2) the Port Authority's cost of obtaining and supplying the same
quantity of electricity. The Lessee shall pay the cost of such consumption and
demand for each such billing period to the Port Authority upon demand therefor
and the same shall be deemed additional rental collectible in the same manner
and with like remedies as if it were a part of the basic rental reserved
hereunder. The determination of consumption and demand by survey shall be
effective until the next succeeding survey and shall be binding
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WT-SP-2679
and conclusive on both the Lessee and the Port Authority as to all matters,
including but not limited to the frequency and duration of use of the lamps and
other electrical machinery and equipment in the premises. The cost of each such
survey shall be borne by the Port Authority, provided that if the Lessee makes
any alternations or improvements to the premises in accordance with the
provisions of Section 12 of this Agreement or otherwise which may result in
greater consumption or demand, the Port Authority may direct a new survey to
establish the consumption and demand for electricity in the premises and the
cost thereof shall be borne by the Lessee. Any method of measurement used herein
shall not preclude the Port Authority from reverting to the use of any prior
method.
(b) Notwithstanding that the Port Authority has agreed to supply
electricity to the Lessee, the Port Authority shall be under no obligation to
provide or continue such service if the Port Authority is prevented by law,
agreement or otherwise from metering or measuring consumption and demand as
hereinabove set forth or elects not to so meter or measure the same, and in any
such event the Lessee shall make all arrangements and conversions necessary to
obtain electricity directly from the public utility. Also in such event the
Lessee shall perform the construction necessary for conversion and if any lines
or equipment of the Port Authority are with the consent of the Port Authority
used therefor the Port Authority may make an appropriate charge therefor to the
Lessee based on its costs and expenses for the said lines and equipment.
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Section 47. Late Charges
If the Lessee should fail to pay any amount required under this
Agreement when due to the Port Authority, including without limitation any
payment of basic or other rental or any payment of utility or other charges or
if any such amount is found to be due as the result of an audit, then, in such
event, the Port Authority may impose (by statement, bill or otherwise) a late
charge with respect to each such unpaid amount for each late charge period
(hereinbelow described) during the entirety of which such amount remains unpaid,
each such late charge not to exceed an amount equal to eight-tenths of one
percent of such unpaid amount for each late charge period. There shall be
twenty-four late charge periods on a calendar year basis; each late charge
period shall be for a period of at least fifteen (15) calendar days except one
late charge period each calendar year may be for a period of less than fifteen
(but not less than thirteen) calendar days. Without limiting the generality of
the foregoing, late charge periods in the case of amounts found to have been
owing to the Port Authority as the result of Port Authority audit findings shall
consist of each late charge period following the date the unpaid amount should
have been paid under this Agreement. Each late charge shall be payable
immediately upon demand made at any time therefor by the Port Authority. No
acceptance by the Port Authority of payment of any unpaid amount or of any
unpaid late charge amount shall be deemed a waiver of the right of the Port
Authority to payment of any late charge or late charges payable under the
provisions of this Section with respect to such unpaid amount. Each late charge
shall be recoverable by the Port Authority in the same manner and with like
remedies as if it were originally a part of the basic rental as set forth in the
section of this Agreement entitled "Basic Rental". Nothing in this Section is
intended to, or shall be deemed to, affect, alter, modify or diminish in any way
(i) any rights of the Port Authority under this Agreement, including without
limitation the Port Authority's rights set forth in the section of this
Agreement entitled "Termination" or (ii) any obligations of the Lessee under
this Agreement. In the event that any late charge imposed pursuant to this
Section shall exceed a legal maximum applicable to such late charge, then, in
such event, each such late charge payable under this Agreement shall be payable
instead at such legal maximum.
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<PAGE>
<PAGE>
Section 48. Additional Provisions
(a) Without limiting any other right of termination under this
Agreement, the Port Authority shall have the right to terminate this Agreement
and the letting hereunder without cause, at any time on one hundred eighty (180)
days' notice to the Lessee. In the event of termination pursuant to this
Section, this Agreement and the letting hereunder shall cease and expire as if
the effective date of termination stated in the notice were the date originally
fixed herein for the expiration of the term of the letting.
(b) Notwithstanding the foregoing provision, the Port Authority shall,
within thirty (30) days after giving the notice referred to in paragraph (a),
tender to the Lessee an agreement, which shall constitute an offer to amend this
Agreement, providing for the letting to the Lessee of other space at the World
Trade Center, consisting of a single block of space, substantially similar in
size to the premises but the configuration of such and its location within the
Facility shall be solely within the discretion of the Port Authority. Such
agreement shall contain an exhibit depicting such other space, the effective
date upon which the letting of such space shall commence, a statement of the
number of rentable square feet comprising such space and the annual basic rental
payable for such space which shall be computed at the same annual per rentable
square foot rate as the basic rental set forth in this Agreement. In addition to
the annual basic rental payable for such space the agreement will provide that
the Lessee will continue to pay additional basic rental as provided in the
Schedule A attached to this Agreement based on the number of square feet in such
space. The agreement will also provide that the Lessee will surrender, vacate
and yield up to the Port Authority the premises on the date preceding the
effective date the letting of such space shall commence and that the Port
Authority will, (1) finish the space or cause the same to be finished at no cost
to the Lessee substantially in the same manner and to the same extent as the
premises, (2) arrange for or, at the Port Authority's option, reimburse the
Lessee for its reasonable expenditures for moving the
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<PAGE>
<PAGE>
Lessee's property from the premises to such other space, (3) reimburse the
Lessee for its reasonable expenditures for installing telephone equipment in
such space substantially equivalent to the Lessee's present installation and (4)
reimburse all reasonable payments made by the Lessee in connection with office
stationery no longer usable by the Lessee as a result of its move to such other
space. All terms, conditions and provisions of this Agreement as so amended will
remain in force and effect as to such space which shall be and become the
premises from the effective date of the letting of such space through the
balance of the term of the letting under this Agreement. The Lessee shall within
twenty (20) days after delivery to it of such agreement by the Port Authority,
execute, acknowledge and deliver the same to the Port Authority. Upon the
delivery of a fully executed and acknowledged copy of the agreement by the Port
Authority to the Lessee, the notice theretofore served pursuant to paragraph (a)
hereof shall be deemed null and void and of no further force or effect. In the
event the Lessee does not accept the Port Authority's offer by delivering the
agreement executed and acknowledged by it to the Port Authority within the time
specified herein, then the offer contained therein shall be deemed withdrawn and
the notice terminating the letting served in accordance with the provisions of
subparagraph (a) hereof shall be and remain fully effective and the Port
Authority shall have no further obligation to offer other space to the Lessee
either at the World Trade Center or elsewhere. If the agreement is executed by
the parties hereto the provisions of this Section shall be of no further force
and effect.
(c) The provisions of paragraph (b) of this Section shall be
independent of and shall not be deemed a condition precedent or prerequisite to
the exercise of the right of termination by the Port Authority under paragraph
(a) hereof.
(d) The Lessee acknowledges that it has been advised by the Port
Authority that any failure of the Lessee to surrender, vacate and yield up to
the Port Authority the premises on the day preceding the effective date of
termination set forth in paragraph
- 25 -
<PAGE>
<PAGE>
(a) hereof or on the day preceding the effective date of the letting of the
space to which the Lessee is moved as referred to in paragraph (b) hereof, will
or may cause the Port Authority injury, damage or loss. The Lessee hereby
assumes the risk of such injury, damage or loss and hereby agrees that it shall
be responsible for the same and shall pay the Port Authority for the same
whether such are foreseen or unforeseen, special, direct, consequential or
otherwise and the Lessee hereby expressly agrees to indemnify and hold the Port
Authority harmless against any such injury, damage or loss. The foregoing shall
not constitute or be deemed to constitute the sole and exclusive remedy of the
Port Authority for such failure of the Lessee.
(e) In the event the Lessee should become entitled to reimbursement
pursuant to the provisions of subdivisions (2), (3) or (4) of paragraph (b)
above, the Lessee shall submit to the Port Authority a statement signed by a
responsible officer of the Lessee certifying the amount due to the Lessee
together with such documentation, records, paid bills and invoices to
substantiate the amount due the Lessee. After examination and approval of such
certified statement and any other documentation as may be reasonably requested
by the Port Authority, the Port Authority will determine the amount due to the
Lessee and will grant the Lessee a credit in such amount against the Lessee's
rental obligations next becoming due.
- 26 -
<PAGE>
<PAGE>
Section 49. Security Deposit
(a) Upon the execution of this Agreement by the Lessee and delivery thereof
to the Port Authority, the Lessee shall deposit with the Port Authority (and
shall keep deposited throughout the letting under this Agreement) the sum of
Twenty-one Thousand Dollars and No Cents ($21,000.00) either in cash, or bonds
of the United States of America, or of the State of New Jersey, or of the State
of New York, or of The Port Authority of New York and New Jersey, having a
market value of that amount, as security for the full, faithful and prompt
performance of and compliance with, on the part of the Lessee, all of the terms,
provisions, covenants and conditions of this Agreement on its part to be
fulfilled, kept, performed or observed. Bonds qualifying for deposit hereunder
shall be in bearer form but if bonds of that issue were offered only in
registered form, then the Lessee may deposit such bonds or bonds in registered
form, provided, however, that the Port Authority shall be under no obligation to
accept such deposit of a bond in registered form unless such bond has been
re-registered in the name of the Port Authority (the expense of such
re-registration to be borne by the Lessee) in a manner satisfactory to the Port
Authority. The Lessee may request the Port Authority to accept a registered bond
in the Lessee's name and if acceptable to the Port Authority the Lessee shall
deposit such bond together with an irrevocable bond power (and such other
instruments or other documents as the Port Authority may require) in form and
substance satisfactory to the Port Authority. In the event the deposit is
returned to the Lessee any expenses incurred by the Port Authority in
re-registering a bond to the name of the Lessee shall be borne by the Lessee. In
addition to any and all other remedies available to it, the Port Authority shall
have the right, at its option, at any time and from time to time, with or
without notice, to use the deposit or any part thereof in whole or partial
satisfaction of any of its claims or demands against the Lessee. There shall be
no obligation on the Port Authority to exercise such right and neither the
existence of such right nor the holding of the deposit itself shall cure any
default or breach of this Agreement on the part of the Lessee. With respect to
any bonds deposited by the Lessee, the Port Authority shall have the right, in
order to satisfy any of its claims or demands against the Lessee, to sell the
same in whole or in part, at any time, and from time to time, with or without
prior notice at public or private sale, all as determined by the Port Authority,
together with the right to purchase the same at such sale free of
- 27 -
<PAGE>
<PAGE>
all claims, equities or rights of redemption of the Lessee. The Lessee hereby
waives all right to participate therein and all right to prior notice or demand
of the amount or amounts of the claims or demands of the Port Authority against
the Lessee. The proceeds of every such sale shall be applied by the Port
Authority first to the costs and expenses of the sale (including but not limited
to advertising or commission expenses) and then to the amounts due the Port
Authority from the Lessee. Any balance remaining shall be retained in cash
toward bringing the deposit to the sum specified above. In the event that the
Port Authority shall at any time or times so use the deposit, or any part
thereof, or if bonds shall have been deposited and the market value thereof
shall have declined below the above-mentioned amount, the Lessee shall, on
demand of the Port Authority and within two (2) days thereafter, deposit with
the Port Authority additional cash or bonds so as to maintain the deposit at all
times to the full amount above stated, and such additional deposits shall be
subject to all the conditions of this Section 49. After the expiration or
earlier termination of the letting under this Agreement, as the said letting may
have been extended, and upon condition that the Lessee shall then be in no wise
in default under any part of this Agreement, as this Agreement may have been
amended or extended (or both), and upon written request therefor by the Lessee,
the Port Authority will return the deposit to the Lessee less the amount of any
and all unpaid claims and demands (including estimated damages) of the Port
Authority by reason of any default or breach by the Lessee of this Agreement or
any part thereof. The Lessee agrees that it will not assign or encumber the
deposit. The Lessee may collect or receive any interest or income earned on
bonds and interest paid on cash deposited in interest-bearing bank accounts,
less any part thereof or amount which the Port Authority is or may hereafter be
entitled or authorized by law to retain or to charge in connection therewith,
whether as or in lieu of an administrative expense, or custodial charge, or
otherwise; provided, however, that the Port Authority shall not be obligated by
this provision to place or to keep cash deposited hereunder in interest bearing
bank accounts.
(b) For purposes of the provisions set forth in paragraph (a) above, the
Lessee hereby certifies that its I.R.S. Employer Identification No. is
11-3243544.
- 28 -
<PAGE>
<PAGE>
Section 50. Changes, Additions and Deletions to this Agreement
Prior to the execution of this Agreement by either of the parties hereto
the following changes, additions and deletions were made:
(a) The words "and paid for by the Lessee" set forth in the first and
second lines of paragraph (a) of Section 8 were deleted.
(b) The words "made at the office of the Treasurer of the Port
Authority, One World Trade Center, New York, New York 10048" set forth in the
first and second lines of paragraph (a) of Section 30 were deleted and the words
"mailed to The Port Authority of New York and New Jersey, P.O. Box 17309,
Newark, New Jersey 07194" were inserted in lieu thereof.
(c) The following phrase shall be deemed inserted after the word
"acknowledges" appearing in the first line of paragraph (a) of Section 40:
"that it has inspected the premises and agrees to take the same in its
"as is" condition and".
(d) The Lessee acknowledges that facilities for heat, ventilation and
air-cooling have heretofore been installed in the premises pursuant to a certain
design configuration for the premises and notwithstanding the provisions of
Section 42, the Port Authority makes no representations that such heat,
ventilation and air-cooling shall maintain in the premises an even and
comfortable working temperature and in the event any alteration to such
facilities shall be required in order to maintain an even and comfortable
working temperature, the cost of the same shall be borne by the Lessee.
(e) The words "and the Lessee shall take and pay for" set forth in the
first line of paragraph (c) of Section 42 were deleted.
(f) Section 43 was deleted in its entirety.
It shall not be necessary to physically make the aforesaid changes in the
aforesaid Sections of this Agreement.
- 29 -
<PAGE>
<PAGE>
WTC. OL 92567.2
Section 51. Entire Agreement
This Agreement consists of the following: pages 1 through 30, inclusive,
plus Exhibits A and R and Schedules A and B.
It constitutes the entire agreement of the parties on the subject matter
hereof and may not be changed, modified, discharged or extended except by
written instrument duly executed by the Port Authority and the Lessee. The
Lessee agrees that no representations or warranties shall be binding upon the
Port Authority unless expressed in writing in this Agreement.
IT WITNESS WHEREOF, the parties hereto have executed these presents as of
the day and year first above written.
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY
ATTEST:
[Signature illegible] By [Signature illegible]
- ------------------------------------- -------------------------------------
SECRETARY DIRECTOR
WORLD TRADE DEPARTMENT
GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.
ATTEST:
[Signature illegible] By [Signature illegible]
- ------------------------------------- -------------------------------------
"APPROVED" President
------------------------ (Title) /s/ Serge Pisman,
FORM TERMS ---------------------------------
(CORPORATE SEAL)
GLOBUS FOOD SYSTEMS INTERNATIONAL CORP.
CORPORATE
SEAL
1995
DELAWARE
- 30 -
<PAGE>
<PAGE>
[FLOOR PLAN]
ALL DIMENSIONS ARE APPROXIMATE
INITIALED:
/s/ J. H.
------------------------------
FOR THE PORT AUTHORITY
/s/ S. P.
------------------------------
FOR THE LESSEE
SOUTH TOWER BUILDING
FLOOR 24
THE PORT OF NEW YORK AUTHORITY
THE WORLD TRADE CENTER
DATE: FEB. 23, 1996 EXHIBIT A DRAWING NO. WT-3216-B24
<PAGE>
<PAGE>
WTC-OL-1082
SCHEDULE A
1. For the purposes of this Schedule A, the following provisions shall
apply:
(a) "Taxes" shall mean real estate taxes and assessments which
may be imposed from time to time by the United States of America, the
State of New York or any municipality or other govenmental authority,
upon the Port Authority with respect to the buildings, structures,
facilities or land at the World Trade Center or with respect to the
rentals or income therefrom in lieu of or in addition to any tax or
assessment which would otherwise be a real estate tax or assessment and
taxes shall include any payments in lieu of real estate taxes or
assessments which may be agreed upon between the Port Authority and any
of the foregoing governmental authorities, other than payments in lieu
of taxes described in paragraph (b) below.
(b) "Payments in lieu of taxes" shall mean such payments as the
Port Authority has agreed to pay the City of New York under an agreement
dated 1967 as it may have been or may be hereafter supplemented or
amended (hereinafter called "the City Agreement").
(c) The "annual per rentable square foot factor" referred to
in this Schedule was initially fixed at $1.25 in the City Agreement and
provision was made in paragraph 7(3) of the City Agreement for changes
therein from time to time to reflect changes in the tax rate and changes
in assessed valuations.
(d) "Tax base" shall mean the annual per rentable square foot
factor finally established to be the annual per rentable square foot
factor to be used in computing payments in lieu of taxes for the tax
year beginning July 1, 1995.
(e) "Tax year" shall mean the twelve-month period established by
The City of New York as a tax year for real estate tax purposes.
Page 1 of Schedule A
<PAGE>
<PAGE>
WTC-OL-1082
(f) "Wage rate" shall mean the cost for an hour's work by a porter engaged
to work by a porter engaged to work a 40 hour work week in a Class A office
building in the City of New York which hourly cost shall be limited solely to
the hourly wage rate for porters as that rate is established from time to time
by collective bargaining agreement between the Realty Advisory Board on Labor
Relations, Incorporated, acting on behalf of various building owners and Local
32B-32J, Service Employees International Union, AFL-CIO, (which collective
bargaining agreement is hereinafter referred to as "the Contract"), plus a
proper proportion of fringe benefits and other payroll costs. As used herein:
(1) "Porter" or "porters" shall mean those employees engaged in the
general maintenance and operation of office buildings and classified as
"Others" by the Contract.
(2) "Fringe benefits" shall mean the items of cost which an employer
would be obligated to pay or would incur pursuant to the Contract on the
basis of wages paid to a porter engaged to work a 40 hour work week in
Class A office building in New York City who is entitled to receive on an
annual basis the maximum entitlement under the Contract, including, without
limitation, vacation allowances, sick leave, holiday pay, birthdays, jury
duty, medical checkup, lunch time, relief time, other paid time off,
bonuses, union assessments allocable to pension plans and welfare and
training funds, and health life, accident, or other such types of
insurance.
(3) "Other payroll costs" shall mean taxes payable pursuant to law by
an employer upon the basis of wages paid to a porter engaged to work a 40
hour work week in a Class A office building in New York City, including,
without limitation, F.I.C.A., New York State Unemployment Insurance and
Federal Unemployment Insurance.
If at any time during the term of the letting under the Lease the
Contract shall require regular employment of porters on days or during
hours when
Page 2 of Schedule A
<PAGE>
<PAGE>
WTC-OL-1082
overtime or other premium pay rates are in effect pursuant to the
Contract the hourly wage rate for porters under the Contract for the
applicable period shall be determined by dividing the weekly wage an
employer would be obligated to pay a porter engaged to work a 40 hour
work week in a Class A office building in New York City under the
Contract by 40.
If either the Realty Advisory Board on Labor Relations,
Incorporated or Local 32B-32J, Service Employees International Union,
AFL-CIO shall cease to exist or a collective bargaining agreement shall
cease to be negotiated between the Realty Advisory Board on Labor
Relations, Incorporated and Local 32B-32J, Service Employees
International Union, AFL-CIO, or if the job classification "Others"
shall be renamed or abolished in any subsequent collective bargaining
agreement entered into between the Realty Advisory Board on Labor
Relations, Incorporated and Local 32B-32J, Service Employees
International Union, AFL-CIO, then the wage rate to be used in applying
the provisions of this Schedule shall be the wage rate for those
employees engaged in the general maintenance and operation of Class A
office buildings either pursuant to any subsequent collective
bargaining agreement between the Realty Advisory Board on Labor
Relations, Incorporated and Local 32B-32J, Service Employees
International Union, AFL-CIO, or if there is no such agreement, then
pursuant to such agreement as the Port Authority shall select.
(g) "Basic wage rate" shall mean the wage rate in effect on
January 1, 1996.
(h) "Rentable square feet in the premises" shall mean 2,840
square feet.
(i) "Lease" shall mean the agreement of lease to which this
schedule is attached.
2. From and after each July 1, following the commencement date of the
letting under the Lease, the Lessee shall pay an additional basic rental under
the Lease at the annual rate computed by multiplying the rentable square feet
Page 3 of Schedule A
<PAGE>
<PAGE>
WTC-OL-1082
in the premises by the excess over the tax base of the total of: (i) the annual
per rentable square foot amount of taxes for the tax year beginning on that July
1; and (ii) the annual per rentable square foot factor used in computing
payments in lieu of taxes for the tax year beginning on that July 1. If taxes
become payable on a basis other than an annual amount per rentable square foot,
the Port Authority will allocate those taxes to the rentable square feet of
space in the World Trade Center and will notify the Lessee of the amount of such
allocation.
3. In addition to additional basic rental payable under paragraph 2 above
from and after the commencement date of the letting under the Lease the Lessee
shall pay additional basic rental under the Lease at an annual rate equal to
$0.01 for each $0.01, or major fraction thereof, that the wage rate in effect on
the commencement date of the letting and each wage rate thereafter established
from time to time during the term of the letting exceeds the basic wage rate,
multiplied by the rentable square feet in the premises.
4. If the imposition or allocation of taxes or the establishment of an
annual per rentable square foot factor to be used in computing payments in lieu
of taxes for any tax year or the establishment of a wage rate to be effective
for any period of time is delayed for any reason whatsoever, the Lessee shall
nevertheless continue to pay the additional basic rental at the annual rate then
in effect subject to retroactive adjustments at such time as the taxes are posed
or allocated or the said per rentable square foot factor or wage rate shall have
been established.
5. After imposition and allocation of taxes for any tax year and the
establishment for each tax year of the annual per rentable square foot factor
used in computing payments in lieu of taxes and after the effective date of each
wage rate in excess of the basic wage rate, the Port Authority will compute the
annual rate or rates of additional basic rental payable by the Lessee under
paragraph 2 or 3 above
Page 4 of Schedule A
<PAGE>
<PAGE>
WTC-OL-1082
and will notify the Lessee of the amounts thereof. Additional basic rental
accruing under paragraph 2 or 3 above shall be computed separately and each
amount thereof shall be payable by the Lessee to the Port Authority in advance
in monthly installments, each installment being equal to 1/12 of the annual rate
except that if at the time the Port Authority gives notice to the Lessee under
this paragraph, additional basic rental shall have accrued for a period prior to
the notice, the Lessee shall pay such additional basic rental in full for such
period, within ten days after such notice.
6. If after an amount of additional basic rental shall have been fixed
under paragraphs 2 or 3 above for any period, taxes are imposed or the amount of
taxes or the annual per rentable square foot factor in regard to payments in
lieu of taxes or the wage rate used for computing such additional basic rental
shall be changed or adjusted, then the additional basic rental payable for that
period shall recomputed and from and after notification of the imposition,
change or adjustment, the Lessee shall make payments based upon the recomputed
additional basic rental and upon demand the Lessee shall pay any excess in
additional basic rental as recomputed over amounts of additional basic rental
theretofore actually paid. If such change or adjustment results in a reduction
in the amount of additional basic rental for any period prior to notification,
the Port Authority will credit the Lessee with the difference between the
additional basic rental as recomputed for that period and amounts of additional
basic rental actually paid.
[signature illegible]
.....................................
FOR THE PORT AUTHORITY
[signature illegible]
.....................................
FOR THE LESSEE
Page 5 of Schedule A
<PAGE>
<PAGE>
WTC-0L-RIS1589
SCHEDULE B
Routine Office Cleaning
Daily (Five days each week except Saturdays, Sunday, and Holidays
1. Empty and damp wipe ash trays, empty waste baskets. Transport
collected waste from normal daily office operations only to trash handling areas
and removal from the building. Collection and removal of waste different from or
in excess of that from normal daily office operations is not included and shall
be deemed additional cleaning services and requested in accordance with the
provisions of this Schedule.
2. Dust horizontal surfaces of office furniture, equipment, ledges, and
sills.
3. Dust sweep vinyl asbestos floor and/or spot vacuum carpeted surfaces,
if any.
4. Clean and sanitize water fountains.
5. Damp wipe fingerprints, smears, smudges, etc., on door, wall and
partition surfaces.
Weekly (One each week)
6. Dust vertical surfaces of office furniture and equipment.
7. Vacuum entire carpeted floor surfaces.
Quarterly (Once each three months)
8. Wash interior surfaces of exterior window glass.
9. Dust all pictures, frames, charts, graphs, and similar wall hangings,
plus partitions, doors, and door frame surfaces.
J.H.
-----------------------------------
For the Port Authority
Initialled:
S.P.
-----------------------------------
For the Lessee
Schedule B
<PAGE>
<PAGE>
EXHIBIT R
RULES AND REGULATIONS
FOR THE WORLD TRADE CENTER
1. PERMISSION GRANTED TO USE WORLD TRADE CENTER CONDITIONAL. Permission
granted by the Port Authority directly or indirectly, expressly or by
implication, to any person or persons, to enter upon or use any part of the
World Trade Center, (including lessees and other persons occupying or using
space at the World Trade Center, persons doing business with the Port Authority
or with its lessees or permittees, and all other persons whatsoever whether or
not of the type indicated), is conditioned upon compliance with the Port
Authority Rules and Regulations as from time to time may be changed; and entry
upon or into the World Trade Center by any person shall be deemed to constitute
an agreement by such person to comply with said Rules and Regulations.
2. The Manager of the World Trade Center shall have authority to deny the
use of the World Trade Center to any person violating the said Rules and
Regulations or laws, ordinances or regulations of the United States, the State
of New York or the City of New York.
3. ENTRY RESTRICTIONS. Persons shall use the common areas and facilities in
the World Trade Center solely for purposes of ingress and egress, and no person
shall cause any obstruction of or loiter in any such common area or facility. No
person shall interfere with the safe, orderly flow of vehicular or passenger
traffic. No person shall be permitted to sleep, lie down or sit on the floor,
ledges, platforms, steps or escalators nor erect any unauthorized permanent or
temporary structure at the World Trade Center without the express written
permission of the Manager. In addition, no person shall spit, urinate or
defecate on any part of the World Trade Center other than in a urinal or toilet
intended for that purpose. No person shall enter upon any court or roof area or
parking area unless specifically so authorized by lease, permit, license or
other agreement with the Port Authority. The Port Authority may exclude from
buildings at the World Trade Center, between the hours of 6 p.m. and 8 a.m. and
at all hours on Saturday, Sundays and legal holidays, all persons who do not
present a pass to the World Trade Center. All such passes shall be in such form
as the Manager of the World Trade Center may prescribe from time to time and no
person shall issue passes unless authorized in writing by the Manager to do so.
Any area barricaded, roped off or otherwise restricted, shall be presumed to be
closed to the public, and members of the public are prohibited from entering
said areas without the express permission of the Manager or his designee.
Furthermore, if the Port Authority deems it advisable for security reasons,
occupants of space at the World Center and persons frequently doing business
there shall provide, and their employees shall wear or carry, badges or other
suitable means of identification which shall be subject to the prior approval
of the Port Authority. Each person responsible for issuance of a pass or other
means of identification to another person shall be liable to the Port Authority
for all acts or omissions of such other persons.
4. No person shall gamble or conduct or engage in any game of chance at the
World Trade Center unless such game of chance is permitted by local, state and
federal law and has been approved by the Manager.
5. No person may for commercial use make drawings or take still photographs
or motion pictures within the World Trade Center without permission of the
Manager.
6. No persons other than authorized persons or employees of the Port
Authority in designated areas, shall bathe, shower, shave, launder or change
clothes or remain undressed in any public restroom, sink, washroom on or within
the World Trade Center.
7. AUTHORIZATION REQUIRED FOR COMMERCIAL ACTIVITY, ENTERTAINMENT OR
SOLICITATION OF FUNDS. No person at the World Trade Center, unless duly
authorized in writing by the Port Authority, shall (a) sell, or offer for sale
any articles of merchandise or carry on any other commercial activity; or (b)
solicit any business or trade, or perform or offer to perform any service,
including without limitation thereto the carrying of baggage for hire, the
shining of shoes or bootblacking; or (c) entertain or offer to entertain any
persons by any method including, without limitation thereto, by singing, dancing
or playing any musical instrument or (d) canvass, peddle, or solicit funds for
any purpose.
8. ALCOHOLIC BEVERAGE RESTRICTIONS. No person shall drink or carry any open
alcoholic beverage on any part of the World Trade Center; provided, however,
that this section shall not apply to those premises or areas wherein the
consumption of alcoholic beverages is permitted pursuant to the provisions of a
lease or other written agreement with the Port Authority.
9. PERMISSION REQUIRED FOR POSTING OR DISTRIBUTION OF PRINTED MATTER, ETC.
No person shall post, distribute, exhibit, inscribe, paint or affix (nor shall
any person cause, direct or order the posting, distributing, exhibiting,
inscribing, painting or affixing of) signs, advertisements, circulars, notices,
posters,
Page 1 of Exhibit R
<PAGE>
<PAGE>
or printed or written or pictorial matter or articles or objects of any kind
at, in, on or to any part of the common areas and facilities of the World
Trade Center without the prior written consent of the Manager of the World Trade
Center. In the event of the violation of the foregoing. the Port Authority may
remove the same without any liability, and may charge the expense and cost
incurred for such removal to the person or persons violating this rule.
10. PROPERTY DAMAGE. No person shall deface, mark, break or otherwise
damage any part of the World Trade Center or any property thereat. No person
shall remove, alter or deface any barricade, fence or sign at the World Trade
Center.
11. All persons at the World Trade Center shall exercise the utmost care to
avoid and prevent injury to persons and damage to property. Neither any
inclusion in nor any omission from these Rules and Regulations shall be
construed to relieve any person from exercising the utmost care to avoid and
prevent injury to persons and damage to property.
12. LOST ARTICLES TO BE TURNED OVER TO PORT AUTHORITY. Persons finding lost
articles at the World Trade Center shall turn them over to a Port Authority
policeman or to the office of the Manager, Articles which are not claimed by the
owner within 90 days may be turned over to the finders thereof, unless found by
Port Authority employees.
13. ANIMALS AND PETS, BARRED, EXCEPTION. No person except a police officer
or other person authorized by the Manager of the World Trade Center shall enter
in or upon the World Trade Center with any animal or pet of any kind except a
"seeing eye" dog or an animal properly confined for shipment.
14. REQUESTS FOR PORT AUTHORITY EMPLOYEES TO PERFORM WORK OR SERVICES TO BE
DIRECTED TO MANAGER. No person shall request any Port Authority employee to do
any work or perform any service, but shall make all such requests to the Manager
of the World Trade Center who may not comply with the request unless the person
making the request is entitled to receive the service at the time the request is
made under written agreement with the Port Authority, and each person claiming
to be so entitled shall make known such fact to the Manager when the request is
made.
15. SMOKING, OPERATION OF CUTTING TORCHES AND LIKE DEVICES RESTRICTED. No
person shall smoke or carry lighted cigars, cigarettes, pipes, matches or any
naked flame in any place where smoking is specifically prohibited by signs, and
no person shall operate at the World Trade Center an oxyacetylene torch,
electric arc or similar flame or spark-producing device, cook or light a fire or
otherwise create a fire or life/safety hazard on any part of the World Trade
Center. No person shall tamper with or permit to be done anything which may
interfere with the effectiveness or accessibility of any fire prevention,
warning or extinguisher equipment at the World Trade Center nor use the same for
any purpose other than fire fighting or fire prevention. Tags showing date of
last inspection attached to units of fire extinguishing and fire fighting
equipment shall not be removed therefrom.
16. TRANSPORTATION, STORAGE, ETC. OF CERTAIN MATERIALS AND SUBSTANCES
PROHIBITED. No person shall store, keep, carry, handle, use, dispense or
transport at, in or upon the World Trade Center, or bring into the World Trade
Center for any purpose:
(a) any flammable, combustible, explosive, corrosive, oxidizing, poisonous,
compressed or otherwise offensive fluid, gas, chemical substance or material, at
such time or place or in such manner or condition as to endanger unreasonably or
as to be likely to endanger unreasonably persons or property; or
(b) any firearms or any other weapons, except persons carrying firearms
pursuant to and in compliance with law and all licenses, permits, etc. in
connection therewith including such of the following as may be on official duty:
authorized peace officers, post office, customs or express carrier employees or
members of the armed forces of the United States; or
(c) the following radioactive materials;
(1) source material (as defined in Standards for Protection Against
Radiation, promulgated by the Nuclear Regulatory Commission, Title 10, Code
of Federal Regulations, Part 20) including but not limited to uranium,
thorium, or any combination thereof (but not including the "unimportant
quantities of source material" set forth in 10 CFR 40.13);
(2) special nuclear material (as defined in Standards for Protection
Against Radiation, promulgated by the Nuclear Regulatory Commission, Title
10, Code of Federal Regulations, Part 20) including, but not limited to,
plutonium, uranium 233, uranium enriched in the isotope 233 or in the
isotope 235, or any material artificially enriched by any of the foregoing;
(3) nuclear reactor fuel elements that are partially expended or
irradiated;
(4) new nuclear reactor fuel elements;
(5) radioactive waste material; or
Page 2 of Exhibit R
<PAGE>
<PAGE>
(6) any radioactive material moving under an Interstate Commerce
Commission special permit or Nuclear Regulatory Commission permit and
escort.
17. TAMPERING WITH CONTROLS, EQUIPMENT, ETC. PROHIBITED. No person shall
tamper with or permit to be done anything which may interfere with the
effectiveness or accessibility of any World Trade Center controls, machinery or
equipment including without limitation thereto thermostats, heater valves,
sprinkler valves and devices, or blower motors, and no person shall turn on or
off heating or air cooling controls in the World Trade Center or operate, adjust
or otherwise handle or manipulate any of the aforesaid systems or portions
thereof or operate any other equipment, machinery or other devices installed or
located therein unless expressly authorized in writing by the Port Authority to
do so.
18. OVERLOADING OF UTILITY, MECHANICAL ETC., SYSTEMS PROHIBITED. No person
shall keep, maintain, place or install, use or connect at the World Trade Center
any equipment or engage in any activity or operation at the World Trade Center
which will cause or tend to cause an overloading of the capacity of any
electrical circuit or system or portion of any other utility, mechanical,
electrical, electronic, computerized communication or other systems serving the
World Trade Center, nor do or permit to be done anything which may interfere
with the effectiveness or accessibility of existing and future utility,
mechanical, electrical, electronic, computerized communication or other systems
or portions thereof at the World Trade Center. No person shall in any common
area plug a TV, radio or electrical device into any electrical outlet or connect
any device to any utility at or in the World Trade Center without the express
written approval of the Manager.
19. OBSTRUCTION OF EXPANSION OR CONTRACTION JOINTS PROHIBITED. No person
shall place any furniture, machine or equipment over any expansion or
contraction joint unless one end of such furniture, machine or equipment is free
to permit expansion or contraction.
20. PERMISSION REQUIRED FOR INSTALLATIONS OR OPERATION OF CERTAIN
EQUIPMENT. No person shall install or use at the World Trade Center, except with
the prior written consent of the Manager of the World Trade Center, any air
conditioning unit or equipment, refrigerator, heating or cooking apparatus or
other power-activated equipment or any signal or call system or other
communication systems or equipment or any device which connects to the power or
other lines for signal or communications or other transmissions in any way
whatsoever. No person shall install or operate at the World Trade Center any
device which may in the Port Authority's opinion interfere with or impair any
radio, television or telephone transmission or reception or any other
communication service.
21. PERMISSION REQUIRED TO LAY FLOOR COVERING. No person shall lay any
linoleum, floor tile, carpeting or any other affixed floor covering at the World
Trade Center without the prior written consent of the Manager of the World Trade
Center, and if such consent is given, such directions as the Port Authority may
give as to methods and procedures to be used in the laying and installing of any
such floor covering shall be followed.
22. LOCKS AND KEYS. No person shall place any additional lock of any kind
upon any window or interior or exterior door without the prior written consent
of the Manager and unless a key therefor is delivered to the Port Authority, nor
make any change in any door or window lock or the mechanism thereof, except with
the prior written consent of the Manager. Upon the expiration or sooner
termination of any agreement covering occupancy of space, the occupant shall
surrender to the Port Authority any and all keys to interior and exterior doors
or windows, whether said keys were furnished to or were otherwise procured by
occupants and in the event of the loss of any keys furnished by the Port
Authority the occupant shall pay to the Port Authority the Port Authority's cost
of replacement thereof.
23. OBSTRUCTION OF LIGHT, AIR, HEAT, PASSAGE, ETC, PROHIBITED. No person
shall obstruct or permit the obstruction of light, air or passage in the World
Trade Center or cover or obstruct any elements of the heating, ventilating or
air cooling systems therein. In addition, no person shall place any window
coverings including without limitation thereto, curtains, blinds, shades,
draperies or screens on any exterior window, without the prior written consent
of the Manager of the World Trade Center, but all occupants of space shall
provide and install, at their expense, such draperies as the Port Authority may
in its discretion require or approve, and all occupants of space shall keep the
draperies closed whenever the sun is shining on the windows.
24. APPROVAL REQUIRED FOR CERTAIN SERVICE CONTRACTS. No person shall
purchase and contract for spring water, ice, waxing, rug shampooing, draperies,
towels, cleaning, glass washing, furniture polishing, lamp servicing, cleaning
of electric fixtures, removal of waste paper, rubbish and garbage, or other
like services at the World Trade Center except from contractors, companies or
persons approved by the Port Authority.
25. MEASURES REQUIRED TO ELIMINATE DAMAGING VIBRATIONS. All persons in
their operations and use of space at the World Trade Center shall take all
reasonable measures to eliminate vibrations tending to damage any part of the
World Trade Center.
Page 3 of Exhibit R
<PAGE>
<PAGE>
26. OBJECTIONABLE NOISE PROHIBITED. No person shall make, continue, cause
or permit to be made or continued, any objectionable or disturbing noises or
disturb or interfere with occupants of the World Trade Center or neighboring
buildings or premises, whether by the use of any loudspeaker or other amplifying
device, musical instrument, radio, talking machine, television, unmusical noise,
whistling, singing, or in any other way. Nothing in this section shall affect
the right of the Port Authority in its sole discretion to authorize commercial
activity, entertainment or solicitation of funds.
27. ACT OR OMISSIONS RESULTING IN FILING OF LIENS PROHIBITED. No person
shall door omit to do anything which may be grounds for the filing of any
mechanic or other lien against the World Trade Center or any part thereof.
Nothing herein shall be deemed to be a consent by the Port Authority to any such
lien or the filing thereof or any implication that such lien would be valid or
enforceable against the Port Authority or its property, but if such lien is
filed, notwithstanding that it may be groundless or unenforceable, the Port
Authority may take such steps as may be required to remove it including payment
of any debts alleged to be owed by any person and such person shall pay the Port
Authority the Port Authority's cost thereof upon demand.
28. NAME OF PERSONS TO BE NOTIFIED IN EVENT OF EMERGENCY TO BE FILED. Each
occupant of space at the World Trade Center shall file with the Port Authority
the name, address, and telephone number of at least two authorized
representatives to be notified in the event of an emergency.
29. DOOR, WINDOWS TO BE LOCKED AND UTILITY SERVICES TURNED OFF UPON
LEAVING. All occupants of space at the World Trade Center shall, before leaving
the same at any time, close and lock all entrance door therein and turn off all
utility services controllable by the occupant.
30. USE OF PREMISES FOR LODGING, SLEEPING OR IMMORAL PURPOSES PROHIBITED.
No occupant of space at the World Trade Center shall use the same for lodging or
sleeping purposes or for any immoral purposes.
31. USE OF PREMISES DURING OTHER THAN NORMAL BUSINESS HOURS. When an
occupant of space at the World Trade Center intends to occupy the space during
hours other than normal business hours, the occupant shall make a request, in
writing, for such of those services which the occupant is entitled to receive
during normal business hours as the occupant may desire during hours other than
normal business hours, each such request to be made by 4 p.m. of the last
business day before each day during which the services are desired. Such
services will be provided and paid for by the occupant in accordance with the
schedule of rates established by the Port Authority from time to time and the
occupant agrees that the Port Authority has made no representations or
warranties that the premises will be habitable or usable by the occupant during
other than normal business hours unless the aforesaid services are requested in
advance by the occupant. An occupant of any space at the World Trade Center
shall advise the Manager of the World Trade Center one day in advance of any
occasion when the space he occupies will not be occupied during normal business
hours because of vacations or special holidays.
32. SIDEWALKS, OPEN AREA, ETC. TO BE KEPT FREE FROM SNOW, ICE, DIRT AND
RUBBISH. All persons occupying at the World Trade Center any space which has an
entrance or exit opening out on a sidewalk or other open area, shall keep all
sidewalks, open areas, curbs, lobbies, vestibules and steps adjacent to such
space free from snow, ice, dirt and rubbish.
33. ABANDONMENT OF PROPERTY PROHIBITED. No person shall abandon any
property at the World Trade Center. Nor shall any person for himself, herself or
another store either temporarily or permanently any personal property at any
part of the World Trade Center without the approval of the Manager of the World
Trade Center. No person shall store bundles, paper, cloth, cardboard or any
other material in solid, liquid or gas form that could in any way pose a fire or
life/safety hazard or obstruct or hinder passage without the express, written
approval of the Manager.
34. ACCUMULATION AND DISPOSAL OF GARBAGE, DEBRIS, WASTE, ETC. RESTRICTED.
No person shall allow any garbage, debris, or other waste materials (whether
solid or liquid) to collect or accumulate at the World Trade Center and each
person shall be responsible for the removal from the World Trade Center of all
garbage, debris and other waste materials (whether solid or liquid) arising out
of that person's operations or occupancy or use of space at the World Trade
Center. All persons shall use extreme care when effecting removal of all such
waste and in no event shall any person use for such purpose any facilities of
the Port Authority without the prior consent in writing of the Manager of the
World Trade Center. All persons shall effect such removal only during such
hours and by such means as are prescribed by the Manager of the World Trade
Center. No person shall use the water closets, wash bowls or other plumbing
fixtures for any purposes other than those for which they were designed, and
no persons shall throw therein any improper articles or substances (whether
liquid or solid) including without limitation thereto garbage, refuse,
sweepings, rubbish, rags, ashes or litter. No person shall drop or throw
anything out of the doors, windows or down the passageways or into any
ventilating or elevator shaftway, stairwell or other openings. The cost of
correcting any condition or repairing any damage resulting from misuse of
fixtures or facilities or from other actions prohibited herein shall be borne
by the persons who, or whose officers, employees, representatives, agents,
contractors or invitees, have caused the same.
Page 4 of Exhibit R
<PAGE>
<PAGE>
35. TRASH REMOVAL. All persons at the World Trade Center are responsible
for providing for their own trash removal to a compactor provided by the Manager
for this purpose. No other method of trash disposal is permitted without the
express written consent of the Manager.
36. MOVEMENT OF INVENTORY, SUPPLIES, EQUIPMENT, FURNISHINGS, ETC.
RESTRICTED. No person shall move inventory, merchandise, supplies or materials,
fixtures, equipment, furnishings, or bulky articles of any kind, including
without limiting the generality thereof, desks, chairs, tables, safes, cabinets,
shelves, business machines, fans or floor coverings, to or from any space at the
World Trade Center except with the prior written consent of the Manager of the
World Trade Center and during such hours on such days as may be prescribed by
the Manager of the World Trade Center. In no event will consent be given unless
the person employed or under contract to perform such moving is competent and
responsible and at least 24 hours' notice of the person's desire to have such
moving performed has been given in writing to the Manager of the World Trade
Center. No person shall use hand trucks in the passenger elevators or shall use
the passenger elevators to transport freight or bulky packages of any type
without the written consent of the Manager of the World Trade Center.
37. RIGHT RESERVED TO INSPECT FREIGHT, ARTICLES, PACKAGES, ETC. BROUGHT IN
OR OUT. The Port Authority reserves the right to inspect all freight and other
articles including hand-carried packages brought into or out of the World Trade
Center and to exclude therefrom all articles which violate any of these Rules
and Regulations, and to require the occupants of space and others regularly
doing business at the World Trade Center to issue package passes (in such form
as may be approved by the Port Authority) for packages being carried to or from,
or from one location to another within the World Trade Center.
38. ELEVATOR SERVICE.
(a) Non-exclusive automatic passenger elevator service will be operated
during normal business hours.
(b) Minimal passenger elevator service will be available at times other
than normal business hours for persons who may have business in the World Trade
Center during such times and whose presence in the World Trade Center is duly
authorized in the manner the Port Authority prescribes.
(c) Freight elevators and truck docks will be available for routine
movements during normal business hours. Notice must be given within normal
business hours to the Manager of the World Trade Center at least 24 hours in
advance in the event freight elevator service is desired which cannot be
accommodated as a routine movement or during normal business hours. The person
requesting the same will pay the cost for this extra freight elevator service in
accordance with the schedule of rates established by the Port Authority from
time to time. Persons for whose account property is being delivered or picked up
at the truck docks shall arrange for such delivery or pick-up to be made only at
such place or places as may be designated by the Port Authority for such
purposes and shall arrange for the handling and movement of the property in such
a way that it will be removed from the truck docks immediately upon its arrival
there, and such persons shall not allow any property to be placed or transported
at any time in any common area or facility at the World Trade Center unless the
area or facility is one which the Manager has designated as a proper area or
facility for that type of property or transportation or to remain therein for a
longer time than is necessary to transport it to its destination. The Port
Authority will not be responsible for the custody, security, handling or
movement of property while at the truck docks or on the freight elevators or
while en route to or from either of the same and the person for whose account
property is being delivered or picked up at the truck docks or is being
transported on, to or from freight elevators shall make all arrangements for
loading, unloading, handling and movement of the property and its security,
including keeping the property attended at all times. Property may be moved
within the World Trade Center solely by suitable vehicles of the indoor
industrial wheeler type with rubber tire and side guards and by way of such
routes as the Manager may designate from time to time.
39. OPERATION OF ELEVATORS BY PERSONS OTHER THAN PORT AUTHORITY EMPLOYEES
PROHIBITED. No person other than employees of the Port Authority, or their
designees, shall operate any freight elevator or passenger elevator (except for
the operation in automatic passenger elevators of such controls as are designed
for use by passengers) at the World Trade Center.
40. USE OF ELEVATOR, ESCALATORS AND LOADING DOCKS RESTRICTED.
(a) Passenger elevators and escalators may not be used to carry
freight.
(b) The use of any escalator, elevator, private right-of-way or truck
loading dock at the World Trade Center will be subject to the direct control of
the Manager.
(c) No unauthorized person shall cause an elevator or escalator to stop
by means of any emergency stopping device unless continued operation would
appear to result in probable injury to a person or persons. Any such stopping
should be reported immediately to the Manager.
41. VEHICULAR TRAFFIC RESTRICTED. No person shall (nor shall any occupant
of space at the World Trade
Page 5 of Exhibit R
<PAGE>
<PAGE>
Center permit its officers, employees, agents, representatives of other persons
who are connected with or are doing business with such occupant or who are at
the World Trade Center for the purpose of visiting such space to operate any
automotive or other vehicle (including skateboard, rollerskates or bicycle,
scooter or any self-propelled vehicle or device) in any area of the World Trade
Center not designated for such use or operate the same in any vehicular roadway,
parking area, public area or street in or adjacent to the World Trade Center, or
park or allow any vehicle to stand in any such roadway, area or street except in
accordance with such signs, speed limits, lights, signals, pavement markings,
directions, laws, ordinances, rules and regulations (of the Port Authority or of
such other agency, municipality or other governmental authority having
jurisdiction) as may be in force from time to time. No person shall park
vehicles except in those portions of the parking area designated for that
purpose by the Port Authority and except upon payment of such parking fees and
charges as may from time to time be prescribed and if specific space is assigned
to that person then only in the space so assigned. In the event that a person
shall park in any space other than the specific space assigned to that person
then that person shall pay to the Port Authority upon demand $25 per day per car
parked in any area other than those designated.
42. DISABLED, ABANDONED OR ILLEGALLY PARKED VEHICLES SUBJECT TO REMOVAL.
The Manager may remove from any area at the World Trade Center any vehicle
which is disabled, abandoned, parked in violation of these Rules and
Regulations, or which presents an operational problem to any area at the World
Trade Center at the operator's or owner's expense and without liability for
damage which may result in the course of such moving.
43. OPERATION OF MOTOR VEHICLES. No person shall operate a vehicle at the
World Trade Center in a careless or negligent manner or in disregard of the
rights and safety of others or without due caution or circumspection or at a
speed in excess of speed limits posted in the area where the vehicle is being
operated, or in any event at a speed in excess of fifteen (15) miles per hour,
or at any speed or in a manner which endangers unreasonably or is likely to
endanger unreasonably persons or property or while the driver thereof is under
the influence of intoxicating liquor or any narcotic or habit-forming drug or if
such vehicle is so constructed, equipped or loaded as to endanger unreasonably
or be likely to endanger unreasonably persons or property or unless (a) the
driver thereof is duly authorized to operate such vehicle on State or municipal
highways; and (b) such vehicle is registered in accordance with the provisions
of law.
44. DUTY OF DRIVER OF VEHICLE INVOLVED IN ACCIDENTS. The driver of any
vehicle involved in an accident at the World Trade Center results in injury or
death to any person or damage to any property shall immediately stop such
vehicle at the scene of the accident, render such assistance as may be needed,
and give his name, address, and operator's license and registration number to
the person injured or to any officer or witnesses of the accident. The operator
of such vehicle shall make a report of such accident in accordance with the law
of the State of New York.
45. DEFINITIONS. As used in these Rules and Regulations:
(a) "Holidays" or "legal holidays" shall mean and include the following
days in each year: the first day of January, known as New Year's day: the third
Monday in January, known as Martin Luther King Jr. day; the twelfth day of
February, known as Lincoln's birthday; the third Monday in February, known as
Washington's birthday; the last Monday in May, known as Memorial day; the fourth
day of July, known as Independence day; the first Monday in September, known as
Labor day; the second Monday in October, known as Columbus day; the eleventh day
of November, known as Veteran's day; the fourth Thursday in November, known as
Thanksgiving day; and the twenty-fifth day of December, known as Christmas day,
and if any of such days is Sunday, the next day thereafter; and each general
election day in the State of New York; and such other or different days or dates
as are declared "holidays" or "legal holidays" under the laws of the State of
New York or as may hereafter be so declared.
(b) "Normal business hours" shall mean 8 a.m. to 6 p.m. Mondays to Fridays
inclusive, legal holidays excepted.
(c) "Person" or "persons" shall mean and include natural persons,
corporations and other legal entities, whether foreign or domestic, sovereign
states and governments, governmental and quasi-governmental authorities,
bureaus, agencies, boards and other units of governments, and partnerships,
firms, companies, joint ventures and unincorporated associations. All persons
shall be responsible for the acts or omissions of their officers, members,
employees, agents, representatives, contractors, customers, guests, invitees and
those doing business with them.
(d) "Manager" or "Manager of the World Trade Center" shall mean the person
or persons from time to time designated by the Port Authority to exercise the
the powers and functions vested in the said Manager by these Rules and
Regulations and shall include a temporary or acting Manager of the World
Trade Center and his duly designated representative or representatives.
(e) "Common areas and facilities" shall mean and include, without limiting
the generality thereof, entrances, exits, lobbies, toilets, passages, halls,
corridors, courts, plazas, vestibules, stairways and elevators, escalators and
other areas and facilities of or the movement of persons and/or property.
Page 6 of Exhibit R
<PAGE>
<PAGE>
WTC-OL 92567.3
(Port Authority Acknowledgment)
STATE OF NEW YORK
COUNTY OF NEW YORK ss.:
On the 15th day of April, 1996, before me personally came Charles J.
Maikish to me known, who, being by me duly sworn, did depose and say that he
resides in 144 Old Route 304 New City, NY 10956; that he is the Dir., World
Trade Department of The Port Authority of New York and New Jersey, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that is was so affixed by order of the Commissioners of
said corporation; and that he signed his name thereto by like order.
/s/ Cecelia Jones
--------------------------------
CECELIA JONES
Notary Public, State of New York
No. 24-5006483
Qualified in Kings County
Commission Expires Jan. 4, 1997
(Corporate Acknowledgment)
STATE OF NEW YORK
COUNTY OF NEW YORK ss.:
On the 28 day of March, 1996, before me personally came Serge Pisman to me
known, who, being by me duly sworn, did depose and say that he resides in 140
??????? Dr. Staten Island, N.Y. 10304; that he is the President of Globus Food
Systems International Corp., one of the corporations described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
/s/ Sylvia Shepherd
--------------------------------
SYLVIA SHEPHERD
Notary Public, State of New York
No. 41-4952176
Qualified in Queens County
Commission Expires June 12, 1997
<PAGE>
<PAGE>
[LETTERHEAD OF WEINICK SANDERS LEVENTHAL & CO., LLP]
CONSENT OF WEINICK SANDERS LEVENTHAL & CO., LLP
(INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
We consent to the use in Amendment No. 1 to the Registration Statement on Form
SB-2 under the Securities Exchange Act of 1933 of our report dated December 2,
1997 on the consolidated balance sheets of Globus International Resources Corp.
and its subsidiaries as of September 30, 1997 and 1996 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended September 30, 1997 and 1996, and to the reference to
our firm under the heading "Experts" in the Prospectus.
Weinick, Sanders Leventhal & Co., LLP
New York, N.Y.
April 14, 1998
<PAGE>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 444,030
<SECURITIES> 0
<RECEIVABLES> 3,933,681
<ALLOWANCES> 0
<INVENTORY> 2,113,361
<CURRENT-ASSETS> 7,591,076
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<INTEREST-EXPENSE> (179,331)
<INCOME-PRETAX> (48,675)
<INCOME-TAX> 50,064
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