SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A-1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
Learner's World, Inc.
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(Name of Small Business Issuer in Its Charter)
New York 11-3331350
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
369 Avenue U, Brooklyn, New York 11223
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(Address of Principal Executive Offices) (Zip Code)
(718) 449-3194
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Exchange Act: None
Securities to be registered under Section 12(g) of the
Exchange Act:
Title of Each Class to be so registered:
Common Stock ($0.0001 Par Value)
Name of Each Exchange on Which Each Class is to be Registered: N/A
This form is being filed with the Securities and Exchange Commission in order to
become a reporting company under the Exchange Act of 1934 and to regain the
Company's quotation on the OTC Bulletin Board in compliance with National
Association of Securities Dealers, Inc. (NASD(R)) Rules 6530 and 6540 to limit
quotations on the OTC Bulletin Board(R) (OTCBB) to the securities of companies
that report their current financial information to the SEC, banking, or
insurance regulators.
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TABLE OF CONTENTS
Page No.
PART I
Item 1. Description of Business .....................................1
Item 2. Management's Discussion and Analysis or
Plan of Operation ........................................8
Item 3. Description of Property ....................................14
Item 4. Security Ownership of Certain Beneficial
Owners and Management ...................................14
Item 5. Directors, Executive Officers, Promoters
and Control Persons .....................................15
Item 6. Executive Compensation .....................................16
Item 7. Certain Relationships and Related Transactions .............17
Item 8. Description of Securities ..................................17
PART II
Item 1. Market for Common Equity and Related
Stockholder Matters......................................18
Item 2. Legal Proceedings ..........................................19
Item 3. Changes in and Disagreements with Accountants ..............19
Item 4. Recent Sales of Unregistered Securities ....................19
Item 5. Indemnification of Directors and Officers...................22
PART F/S
Financial Statements .........................................................23
PART III
Item 1. Exhibits....................................................24
Signatures....................................................................25
Item 2. Index to Exhibits ..........................................26
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
As used herein the term "Company" refers to Learner's World, Inc., a New York
Corporation, and its subsidiaries and predecessors, unless the context indicates
otherwise. The Company was formed on June 28, 1996, with the intent to own and
operate facilities for the care, education and recreation of children. In
December 1996, the Company acquired three children's care and learning
facilities from three affiliated corporations for a four year note of $775,000,
bearing interest at the rate of 7% per annum. (See "Certain Relationships and
Related Transactions"). The Company's facilities are at the following locations
in the New York metropolitan area: (i) 369 Avenue U, Brooklyn, New York,
established in May 1993; (ii) 1535 First Avenue, New York, New York, established
in September 1994, the Company has since moved the location of this facility to
432 Lakeville, Lake Success, New York 11402; and (iii) 208-34 Cross Island
Parkway, Bayside, New York, established in June 1994. The Company provides the
following services for children and students: (1) day care and recreational
services for children between the ages of two and one-half and ten, (2) academic
tutorial services for students of all ages through high school, (3) instruction
in computer skills and functions for students and adults, and (4) psychological
diagnostic and remedial services for children, provided through licensed
consulting professionals.
A. Family Entertainment and Child Care Centers
Services
Each center the Company operates offers the following services to families in
the New York City metropolitan area:
o Play Center: The play centers feature a distinct play zone
comprised of a series of state of the art "soft" play equipment
providing physical challenges and mental stimulations.
o Mini-Play Center: The mini-play center is a special toddler area
with mini-play equipment and other games and activities designed
for toddlers.
o Birthday Center: Each center has private rooms available seven
days a week (including certain holidays) for birthdays and other
celebrations.
o Snack Bar: A comfortable eating area and a convenient quick serve
snack bar are located inside each center.
o Play Center Arcade: This area of the centers provide arcade
machines for children who wish to take a break from the physical
exertion of the Play Center.
o Academic Tutorial Services: Academic tutorial services for
students ranging from Kindergarten to 12th grade.
o Child Care: The Company's facilities provide child care and
recreational activities for two and one-half to ten year old
children from 7:00 A.M. to 7:00 P.M. five days per week.
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o Computer Assisted Instruction: Computer assisted instruction for
students and adults at all levels.
o Diagnostic and Prescriptive Services: Diagnostic and prescriptive
services for children having difficulties in the school
environment.
The Company's sources of revenue are tuition and fees, generally charged on an
hourly basis for day care, tutoring and computer instruction. Charges for
diagnostic and treatment services are also currently made on an hourly basis.
Although the family entertainment centers which include locations in Manhattan,
Brooklyn and Queens, are financially solvent the addition of child care,
tutorial and computer instruction has enhanced revenue as these programs operate
mostly during the hours when the play activities are at the minimal. All of
these services are easily and logically merged. They are compatible in both
theme and space utilization.
Competitive Conditions
The children's day care and educational business is highly competitive. Numerous
children's day care centers and educational facilities compete with the Company
for customers and qualified personnel, including teachers, instructors and
care-givers. There are many child care and family entertainment facilities
located throughout the city of New York. Many of the Company's competitors are
smaller privately owned facilities that operate only a single location and are
greatly dependent on the surrounding geographic area and do not directly compete
with or effect the revenues of the Company. However, some of the Company's
competitors are larger corporations that operate franchises throughout the city,
many of these child care corporations have significant resources and directly
compete with the Company for child care revenues. New children's day care
centers and educational facilities will be established in the future by
competitors and may compete with the Company for customers, employees and
suppliers. These competitors may have greater financial and managerial resources
than the Company. The Company also competes with other types of facilities for
children and students, including traditional schools, vocational schools,
standard day care and babysitting services, children's recreational centers such
as The Discovery Zone, and other educational and recreational opportunities for
children.
Method of Competition
The Company will attempt to gain a competitive advantage over its competitors in
the child care industry by diversifying the products that it offers and
therefore better utilizing its resources for a greater profit potential. The
addition of child care, and academic programs into currently functioning family
entertainment centers has resulted in centers that are functionally and
financially productive from the opening hour of 7:00 A.M. to the close of
operations of 7:00 PM.
Suppliers
The Company receives supplies from a variety of distributors. The few single
vendors that the Company uses for items such as teaching materials and
curriculum, paper and school supplies, food, and other items necessary for a
fully operational day care facility are easily replaced if needed and would not
have a material effect upon the revenues of the Company should the Company need
to change principal suppliers.
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Dependance On One or Few Customers
The primary customers for the Company are individual family households and no
single customer makes up more than a small percent of the total revenues. The
Company does not expect that this will change in the future.
Government Regulation
The Company and its facilities are subject to extensive government regulation at
the federal, state and local level. The Company must comply with government
regulations regarding employment, wages, safety, child care, teacher
certification, staff credentials, access for handicapped and disabled persons
and other laws, rules, regulations and ordinances. The Company must follow the
State of New York child care regulations and hold current licences for each
facility in order to conduct a child care business. The Company has held
licences since 1996 and is currently in good standing with the State of New York
having renewed its licenses in April of 1999. These licenses are renewed
automatically every two years upon application. The next renewal will occur in
April of 2001. Although the Company does not foresee any change in the state or
federal regulation of child care, if changes should occur the Company believes
that it can adapt to such new regulations and that those changes would not have
any significant effect on revenues or current operations of the Company.
However, no assurance can be made that compliance or failure to comply with
future regulation will not have a materially adverse effect on the business,
operating results or financial condition of the Company.
Test Preparation Internet Website
The Company has several products and plans for others which have been used to
create a dynamic interactive online test preparation and vocational training
website. The Company's new website became fully operational in January of 2000
and is located on the Internet at www.learnersworld.com. Through this website
the Company plans to offer to the public a location on the Internet where the
customers can prepare for tests such as the SAT and other educational exams
including but not limited to medical, law, and business. The site will be
designed to help customers prepare for vocational tests, such as civil service,
post office, park ranger, police or firefighter. The Company also hopes to be
able in the future to offer courses in other professions such as insurance
agent, stock broker, or real estate agent. The Company intends to bring this
content to the Internet and pair it with existing and emerging software to
create an exciting interactive online learning environment.
Products
The Company will supply online computer based training to be used to prepare for
vocational and educational placement testing. All test preparation courses will
be interactive with live chat rooms and instructor availability. Each course
includes simulated test environment for time and content as well as a specific
section on test taking techniques for the particular exam. By offering it's
services online, the Company will attempt to address a perceived need for
alternative modes of training that are both flexible and convenient. Unlike the
current educational offerings now available on the Internet, which are mostly
university or government based or highly technical in content, the Company
intends to offer training which will assist people to obtain necessary knowledge
or certification to prepare for exams and to train for new skills. The
exams/training which the Company intends to offer will help the customer to
obtain such benefits as gaining employment or advancing in their current careers
and advancing their educational goals.
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The Company plans to provide test preparation courses in the following areas:
o Civil Service
o SAT
o CLEP
The Company is also developing additional test preparation areas which may
include:
o Postal Service
o Security Guard Training
o High School Diploma Program
o AMA Qualifying Exams For Foreign Doctors:
o Hospitality (hotel/motel) Management
o Medical And Related, Such As Home Health Attendants, EKG,
Nurses Aid, Etc. ESL (English as a second language)
Distribution
Distribution for the test preparation courses will be through the Company's
website, www.learnersworld.com.
Target Market
The Company's target market is growing as factors including downsizing, welfare
to workfare programs, the need for more skilled and better trained workers and a
competitive workplace puts an emphasis on lifetime learning and successful test
taking. Also, corporations are looking for cost efficient methods to train their
employees around the country and the world.
Many persons are looking for ways to increase their academic credentials and
improve their work environment by seeking to obtain higher education and obtain
more responsible positions. Many of these activities start with the need to take
an exam of some kind. This is an area in which the Company can help them to
become prepared. These potential customers need to fit education into their busy
lifestyles. The Company intends to combine current technology with well designed
test preparation and training materials for academic, vocational, professional
and health care learning as well as custom designed courses for corporate
training.
According to the Company's research, the Company's target customers are showing
a growing interest in the Company's proposed educational format, categorized as
distance learning. The increased level of advertising by degree granting
colleges and universities is making more and more people aware of the benefits
and legitimacy of distance learning via the Internet. Internet World magazine
gives examples of "The Internet Education" which included online degree programs
offered by traditional institutions such as Penn State and Indiana University,
as well as nontraditional entities such as University Online and the Global
Network Academy. Businesses see profits in the estimated $670 billion the United
States spends on education each year (growing about 3% a year) and the 67
million students in the United States alone.
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Family PC Magazine estimates that 1 million students are taking distance
learning classes via the Internet. The International Data Corporation estimates
that the number of college students enrolled in online courses will reach 2.2
million by the year 2002. The Company believes the private/public sector growth
of test preparation and training will be following close behind. Corporate
America is also showing a growing interest in distance education. Faced with
retraining an estimated 50 million American workers, corporations are using
distance learning in all aspects of training, both internally and externally.
Many major corporations like IBM save millions of dollars each year using
distance education to train employees more effectively and efficiently than
traditional methods. Budgeted spending on formal training by U.S. organizations
with 100 or more employers topped $60 billion in 1998 and is estimated to grow
to $62.5 billion in 1999. That is a 29 percent increase since 1993,without
accounting for mild inflation. As always, salaries paid to internal training
staff make up the bulk of the budget. This salary total is up 2.4 percent over
the previous year and is now in excess of $43 billion. The fastest growing
segment, however, is outside expenditures and the $15 billion spent on the
commercial training market is a significant increase from 1998 (Training
Industry Magazine 1999). If we add to this the estimated amount spent by
companies with under 100 employees and the amount otherwise spent for test
preparation of all kinds, the Company estimates the total market may exceed $85
billion. The Company hopes to capture a small portion of this market. The
Company's research shows, that there may be a need for proposed training and
testing services. Annually, there are 100,000 people applying to take the
sanitation workers exam, 49,000 New Yorkers requesting mail handler's exams, and
60,000 applying for applications for police and fire exams. This demonstrates a
potential need for vocational test preparation. Falling SAT scores and less than
satisfactory math and science scores among school students provide a great
potential for the Company's products.
Pricing Policy
The Company's pricing policy should make it's site an enticing alternative to
traditional methods of learning (i.e. classroom and home study) while still
providing appropriate profit margins. Approximately 60% - 70% of the Company's
offerings will be priced between $49.95 and $69.95, an average of approximately
$60.
The remainder of the Company's tests, mostly in the professional and health care
series, will range in price from $99.95 to $199.95. Corporate projects requiring
custom developed content will be priced from the mid five figures to the low six
figures, with additional ongoing fees for web hosting and maintenance.
Business Strategy
The Company's strategy is to offer an extensive array of test preparation and
training courses covering needs in academics, health care, vocations and
professions in a dynamic and enjoyable fashion. A separate segment of the
Company's web site will deal with custom designed training and test preparation
courses for private industry, government agencies and unions. The Company will
attempt to create brand recognition by implementing an aggressive advertising
campaign emphasizing the Company's benefits, including quality content, a
learner community, support services, and a high level of interaction.
Competitive Conditions
There are currently several significantly larger companies that will compete
with the Company in the test preparation and training market. The companies
include, but may not be limited to Kaplan, Princeton Review, and Sylvan Learning
Centers. These companies are well established and have significantly greater
resources and currently established websites. Additionally, the web site
developed by the "Educational
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Testing Services" (ETS) has a fairly sophisticated model for online test taking.
However, it only does the test taking online, not the training for the tests.
ETS is the largest administrator and developer of tests in the country and is
the organization responsible for development, distribution and grading of tests
including, SAT, GMAT, GRE and most other college entrance exams as well as other
exams for the government. The Company's ability to compete with these companies
will greatly depend on its ability to establish a unique and appealing product,
its ability to increase the public awareness of its product and bring
individuals to its website.
The Company believes it can compete to some degree with these bigger companies
because, to the knowledge of the Company, the competition has yet to offer the
unique mixture of content and format offered by the Company. Universities and
colleges use the Internet for distance learning courses, but they do not provide
test preparation and career development content. Companies offering test
preparation continue to do so in the traditional format. They are just beginning
to formulate distance learning strategies. None of them offer vocational test
preparation. This gives the Company a unique opportunity to help define
standards and to possibly become a market leader.
Method of Competition
The Company will attempt to give its customers access to computer based training
over the Internet at a more reasonable cost and create content driven,
interactive educational training sites. The Company will also attempt to gain an
advantage over its competition by utilizing the computer and online technology.
The Company believes that because its content and products will be based solely
online it will be able to more efficiently change and adapt to current market
conditions. Utilizing this approach, the Company hopes to gain an advantage over
the competitors by offering products as quickly as possible in an online
environment. Emphasis will be placed by the Company on increasing its exposure
to the public through advertising both through the Internet and traditional
media outlets, such as print and broadcast media. Through this strategy the
Company believes that it can establish itself in the test preparation market.
The Company's intention is to use the computer to provide individualized test
preparation training and evaluation where a student signs onto the web site at
anytime and needs only an available terminal to begin a session. Once the
student signs on to the computer, the computer will determine if the student's
account is up to date, where they left off in their last session and then
proceed with the student from that point. The computer will address each student
as an individual, or as far as the computer is concerned, a class of one person.
Student interaction with the computer will be tracked and at the end of each
session, depending on the students responses to questions, the computer will do
an evaluation and recommend which parts of the course material should be
reviewed by the student before going forward. If necessary, students will be
reminded to make a payment before their next session, will be encouraged to
provide referrals and will be notified of special events and/or calendar
changes, etc.
Patent Protection
The Company is in the process, with Patent Counsel, of researching and preparing
filings for patent protection for certain of its products, in order to protect
what it believes is a unique combination of content and delivery system. The
Application process is ongoing. However, no application for Patent protection
has been filed as of the date of this filing.
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Income Streams
Once the Company's plans are fully developed, it is intended that the Company
will have four distinct income streams. The users paying to take test
preparation and training courses. Advertising sales, a business that could
become significant because of the exceptional demographics of our potential user
base which is expected to include high school and college students, blue collar
workers, and professional and health care workers. Most of these people are
expected to fall into the sixteen to forty year old age group.
The third income stream will be from the sale and development of certain
Internet based training materials for corporations, government agencies and
profit and non-profit institutions that might have a need for the Company's
services in that area. Once developed, the Company would hope to generate
ongoing fees by hosting the developed material on Company computers and charging
the client monthly for the hosting services provided. Lastly, the Company
expects to realize referral fees and royalties from Internet based retailers to
whom we direct our user base.
Growth
In order to fund future growth of the company, the Company will need to raise
additional capital. The Company is presently seeking to obtain additional
funding through the sale of equity in the Company. Funds raised by the sale of
equity will be used to fund capital improvements and to fund the continuation of
research and development of course materials, some of which are very
sophisticated, requiring audio and video highlights and skilled professionals
for content. These courses will be sold for considerably more than base prices.
The Company will also need to significantly increase its advertising to support
the Company goal of growing the Company's business on the national and
international level. This will allow the Company to take advantage of being one
of the first into the market and to attempt to secure and hold a significant
market share. Initial advertising will be print, radio, and possibly subways and
billboards. The addition of an Informercial has been decided upon and, when
budget allows, TV spots will be added.
The Company's future plans include acquiring additional web content through the
purchase of existing schools and/or courses, appropriate acquisitions and the
development of international markets as well as executing our marketing plan for
national growth.
As one of the first into this marketplace, with a fully interactive, Internet
based offering, consisting of live chat rooms and audio/video feeds to support
our test preparation/training materials, the Company expects to be able to
create a real user community. The Company will venture to develop a user base of
people with common interests in an effort to secure a share of this multi
billion-dollar market. In addition, the expected demographics of our users are
expected to be an attraction to potential advertisers who may be willing to pay
us to advertise on our web site.
Employees
As of October 31, 1999, the Company had 27 employees, 7 of whom were classified
as full-time and 20 of whom were classified as part-time. Most of the Company's
part-time employees are teachers in child care programs and Company-owned family
centers. Two of the full-time employees work exclusively on the Company's
website. None of the Company's employees are represented by a union and the
Company
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considers its relationship with its employees to be good.
Reports to Security Holders
The Company's annual report will contain audited financial statements. The
Company is not required to deliver an annual report to security holders and will
not voluntarily deliver a copy of the annual report to the security holders.
Prior to this form being filed there were no other disclosure forms filed
regarding the Company's financial and management situation. The Company intends
to, from this date forward, file all of its required information with the
Securities and Exchange Commission ("SEC"). The Company plans to file its 10KSB,
10QSB, and all other forms that may be or become applicable to the Company with
the SEC.
The public may read and copy any materials that are filed by the Company with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The statements
and forms filed by the Company with the SEC have also been filed electronically
and are available for viewing or copy on the SEC maintained Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The Internet address
for this site can be found at http://www.sec.gov. Additional information can be
found concerning the company on the Internet at http://www.learnersworld.com.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company plans to continue its expansion into the child care and adult
education fields. This will be accomplished through the building of new
locations, the acquisition of suitable locations and its venture onto the
Internet with its Internet based educational, test preparation and vocational
training web site.
A. Results of Operations
Gross Income
Gross income for the year ended December 31, 1998 increased to $1,253,266 from
$1,092,560 for the year ended December 31, 1997, an increase of 14.7%. The
increase in gross income is primarily attributable to the acquisition of a new
facility and the subsequent increase in enrollment.
Gross income for the three and nine months ended September 30, 1999 were
$298,007 and $960,435 compared to $313,316 and $977,547 for the comparable
periods in 1998, a decrease of 5% and 1.8%, respectively. The decrease in sales
was primarily attributable to fluctuations in enrollments. These fluctuations
are mainly seasonal with enrollments decreasing at the close of the school year
for the summer, and increasing with the beginning of school in the fall.
The average number of students enrolled for the year ended December 31, 1998,
was an estimated 269 compared to 25 students for the year ended December 31,
1997. The significant increase in students enrolled in 1998 was the result of an
additional facility opening in 1998 and the fact that the Company only operated
its schools for the last two quarters in 1997.
The Company charged an average tuition of $218 per student each quarter which
generated a total of $233,684 in tuition for the year ended December 31, 1998
compared to an average tuition of $258 per student each quarter which generated
a total of $13,187 in tuition for the year ended December 31, 1997.
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The remaining gross income generated in December 31, 1998 and 1997 were
$1,019,582 and $1,079,373, respectively. The most significant component of gross
income for the years ended December 31, 1998 and 1997 was gross income generated
from play areas. The Company generated a total of $936,714 in gross income
relating to play areas for the year ended December 31, 1998 compared to
$1,075,863 for the year ended December 31, 1997, a decrease of $139,149 or
12.9%. The decrease in gross income generated by the play areas was attributable
to the Company's decision to focus its efforts on increasing student enrollments
in 1998.
The remaining miscellaneous gross revenues relating to various fees for the year
ended December 31, 1998 was $82,868 compared to $3,510 1997 for the year ended
December 31, 1997. The increase in miscellaneous fees in 1998 was attributable
to an increase in students enrolled in 1998.
The average number of students enrolled for the period ended September 30, 1999,
was an estimated 274 compared to 259 students for the period ended September 30,
1998.
The Company charged an average tuition of $274 per student each quarter which
generated a total of $225,588 in tuition for the period ended September 30,
1999, compared to an average tuition of $213 per student each quarter which
generated a total of $165,916 in tuition for the period ended September 30,
1998.
The remaining gross income generated during the periods ending September 30,
1999 and 1998 were $734,846 and $811,631, respectively. The most significant
component of gross income for the periods ended September 30, 1999 and 1998 was
generated from play areas. The Company generated a total of $675,482 in gross
income relating to play areas for the period ended September 30, 1999 compared
to $733,078 for the period ended September 30, 1998, a decrease of $57,596 or
7.9%. The decrease in gross income generated by the play areas was attributable
to the company focusing on recruiting additional students for the schools.
The remaining miscellaneous gross revenues relating to various fees for the year
ended September 30, 1999 was $59,365 compared to $78,553 for the period ended
September 30, 1998. The decrease in miscellaneous fees paid in 1999 was
attributable to a decrease in extracurricular activities.
Losses
Net losses for the year ended December 31, 1998 decreased to $195,316 from
$255,677 for the year ended December 31, 1997, a decrease of 23.6%. The decrease
in losses was attributable primarily to an increase in gross income.
Net losses for the three and nine months ended September 30, 1999, were $50,937
and $334,737 compared to $49,240 and $147,719 for the same periods in 1998,
increases of 3.4% and 126.6%, respectively. The increase in losses for the three
months ended September 30, 1999, and the increase in losses for the nine month
period ended September 30, 1999 over the same period in 1998 is primarily
attributable to an increase in general and administrative expenses as a result
of increases in expenses related to the development of the Company's online
testing website and a decrease in cost of sales as a percentage of sales.
Due to continued expansion of the online testing website the Company expects to
continue to incur losses at least through 1999 and there can be no assurance
that the Company will achieve or maintain profitability or that its revenue
growth can be sustained in the future.
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Expenses
Selling, general and administrative expenses for the year ended December 31,
1998, increased to $552,977 from $403,969 for the year ended December 31, 1997,
an increase of 37%. The increase in selling general and administrative expenses
was the result of additional cost associated with an increase in gross income in
1998.
Selling, general and administrative expenses for the three and nine months ended
September 30, 1999, increased to $197,995 and $577,515 compared to $139,977 and
$433,086 for the same periods in 1998, increases of $58,018 and $144,429 or
41.4% and 33.3%, respectively. The increases in selling, general and
administrative expenses was the result of an increase in expenses related to the
development of the Company's online testing website. The Company estimates that
general and administrative expenses attributable to the start up of its test
preparation website consumed approximately 20-30% of all general and
administrative expenses for periods presented. Development and maintenance of
the website will be an ongoing expense. However, with the website having become
operational in January of 2000, it is expected that there may be a decreased
amount devoted to site development, but an increase in costs associated with
site maintenance. At this time, the Company is unable to determine whether
ongoing website maintenance costs will be greater or less than any corresponding
savings in development costs. Because the website has just become operational in
January of 2000, the Company is unable, with any degree of accuracy, to
determine when, if ever, the Company will begin to recognize revenue from its
test preparation products.
Depreciation and amortization expenses for the years ended December 31, 1998 and
1997 were $150,228 and $80,786, respectively.
Depreciation and amortization expenses for the nine months ended September 30,
1999 and September 30, 1998 were $117,099 and $112,672, respectively.
A. Cost of Sales
The cost of sales for the year ended December 31, 1998 was $744,277 compared to
$660,730 for the year ended December 31, 1997. The increase in the cost of sales
were primarily attributable to an increase sales as result of an increase in
tuition collected. Cost of sales as a percentage of sales for December 31, 1998
and 1997 respectively, were 59.4% and 60.5%. The following table provides a
categorization of the expenses that are grouped in to cost of sales:
Cost Of Goods Sold 12/31/98 12/31/97
Purchases $245,844 $230,481
Payroll Costs 496,194 364,002
Maintenance and Repairs 2,239 35,112
Equipment Leasing - 16,519
Outside Services - 14,616
TOTAL: $744,277 $660,730
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The Company has no meaningful data which shows a correlation between cost of
sales and fluctuations in sales because of the short period in which the Company
has operated the schools. The Company currently has adequate staffing to
maintain regulatory student-teacher ratios and the requirements of daily
operations. At no time in 1998 or 1999 has overstaffing been an issue.
The cost of sales for the three and nine months ended September 30, 1999 were
$132,286 and $599,758 compared to $184,822 and $578,708 for the same periods in
1998. The decrease in the cost of sales for the three months ended September 30,
1999 over the same period in 1998 was primarily attributable to a decrease in
sales in 1999. The increase in cost of sales for the nine month period ended
September 30, 1999 was attributable to increase labor costs. Cost of sales as a
percentage of sales for the nine months ended September 30, 1999 and 1998
respectively, were 62.5% and 59.2%.
B. Liquidity and Capital Resources
At December 31, 1998, the Company had current assets of $38,903 and total assets
of $1,135,560 as compared to $19,997 and $1,138,415 for December 31, 1997. The
Company had a net working capital deficit of $205,313 at December 31, 1997
compared to a net working capital deficit of $165,927 at December 31, 1998.
At September 30, 1999, the Company had current assets of $39,176 and total
assets of $1,113,235. The Company had a net working capital deficit of $82,304,
an $83,623 improvement in net working capital over December 31, 1998.
Cash flow used in operations was $173,572 for the year ended December 31, 1998,
and $192,109 for the year ended December 31, 1997.
Cash flow used in operations was $282,401 for the nine months ended September
30, 1999 as compared to cash flows used in operations of $131,853 for the
comparable period in 1998.
Cash flow generated from financing activities was $230,007 for the year ended
December 31, 1998 and $280,261 for the year ended December 31, 1997.
Cash flow generated from financing activities was $288,876 for the nine months
ended September 30, 1999 and $146,736 for the comparable period in 1998. The
Company's financing activities primarily consisted of private placements of its
common stock.
The Company's cash flows fluctuate during the year due to the seasonal nature of
the Company's business. Traditionally, enrollments are higher during the period
of the year when schools ore in regular session (September-May) with lower
enrollments during the summer months (June-August). The decline in enrollments
during the summer is offset to some degree by the revenues from the Company's
summer camps.
C. Income Tax Expense (Benefit)
The Company has an income tax benefit resulting from net operating losses of
$103,100. Depending on the future results of the operations of the company, this
potential tax benefit may or may not be usable. This benefit is not recognized
in the financials because the amount of the benefit that may ultimately be
recognized is uncertain.
11
<PAGE>
D. Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three years. The Company believes that it can offset inflationary
increases in the cost of materials and labor through increased sales and
improved operating efficiency.
E. Capital Expenditures
The Company made no significant capital expenditures on property or equipment
for nine months ended September 30, 1999 and made no significant capital
expenditures on property or equipment for the years ended December 31, 1998 or
1997.
In order to fund future capital expenditures consistent with anticipated growth
of the Company, the Company will need to raise additional capital. On a short
term basis, the Company expects that funds from secured promissory notes
received from the March 3, 1999 sale of stock by the Company will provide
sufficient funds to meet short term capital expenditure needs. To meet long term
needs for capital expenditures, the Company may need to raise additional
capital. The Company is presently seeking to obtain additional funding through
the sale of equity in the Company. Funds raised by the sale of equity could be
used to fund capital improvements as well as for the continuation of research
and development of the Company's course materials, some of which are very
sophisticated, requiring audio and video highlights and skilled professionals
for content. Other uses for such funds could be to increase its advertising to
support the Company goal of growing the Company's business on the national and
international level.[See " Recent Sales of Unregistered Securities" (P. 19 ),
and "Growth" (P.7)].
F. Trends, Events, Uncertainties that may have a Material Effect on Liquidity
Risk of Lawsuits
Inherent in the business of education and caring for children in a commercial
business is the risk of lawsuits for alleged injuries to the children. The
Company has an insurance policy with liability limits of $3,000,000 aggregate
limit which includes $1,000,000 in personal injury liability coverage to protect
the Company from legal claims to the amount of the policy coverage for risks as
specified in the policy of insurance. Although currently there are no pending
lawsuits against the Company, there is no assurance that there will not be such
lawsuits in the future and that the Company will not incur losses as the result
of such lawsuits in excess of its insurance coverage. Lawsuits against the
Company will tend to increase operating expenses and lower the potential for
profitability, as well as cause possible harm to the Company's reputation.
G. Trends, Events, Uncertainties that may have a Material Effect on Net Revenue
or Income
Year 2000
Many current installed computer systems and software may be coded to accept only
two-digit entries in the date code field and cannot distinguish 21st century
dates from 20th century dates. As a result, many software and computer systems
may need to be upgraded or replaced. Because of the nature of the business of
the Company's Internet Division there is uncertainty about the overall effect of
the Year 2000 on the Internet and therefore the Company's Internet operations.
If other third parties that the Company uses or the overall
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<PAGE>
Internet should experience significant problems from Year 2000 related issues,
it could significantly affect the operation and ability of the Company to
perform business over the Internet and therefore could adversely affect revenues
of it's online test preparation division. The Company has taken steps to insure
that all of the internal computer systems are compliant. The Company has to date
replaced its computers with new Year 2000 compliant machines. The Company has
not incurred material costs to date in the process, and does not believe that
the cost of additional actions will have a material effect on its operating
results or financial condition. However, the Company's current systems and
products may contain undetected errors or defects with Year 2000 date functions
that may result in material costs. In addition, the Company utilizes third-party
equipment, software and content, including non-information technology systems,
such as security systems, building equipment and systems with embedded
micro-controllers that may not be Year 2000 compliant.
Failure of third-party equipment, software or content to operate properly with
regard to the Year 2000 issue could require the Company to incur unanticipated
expenses to remedy problems, which could have a material adverse effect on its
business, operating results and financial condition. If any problems arise from
third parties or from the Internet in general related to the Year 2000 issues,
the ability of the Company's Internet division to respond is limited, due to its
nature as an Internet Company. The Company's Internet division does not have
significant third party suppliers that it depends on with the exception of the
third party that hosts the Company's website. The Company has received
assurances from this supplier that all equipment use to host the Company's site
is Year 2000 Compliant.
Additionally, the computer systems necessary to maintain the viability of the
Internet or any of the Web sites that direct consumers to the Company's online
site may not be Year 2000 compliant. Computers used by customers to access the
Company's online site may not be Year 2000 compliant, delaying customer's
product purchases. The Company cannot guarantee that its systems will be Year
2000 compliant or that the Year 2000 problem will not adversely affect its
business, which includes limiting or precluding customer purchases.
As of March 22, 2000 the Company has not had or become aware of any significant
problems associated with Year 2000 issues.
Labor Related Risks
The Company depends extensively on the availability, quality and reliability of
teachers, instructors, tutors and care-givers which it utilizes to provide
children's educational and day care services. There is no assurance that the
Company will have an adequate supply of qualified personnel at acceptable cost
to operate a profitable business. The Company is subject to all of the risks
inherent in a business that utilized skilled labor, including but not limited to
strikes, disadvantageous collective bargaining agreements, labor showdowns,
unavailability of qualified employees, worker's compensation claims, increases
in worker's compensation and other insurance premiums (or unavailability of such
insurance), wage disputes, discrimination claims, wrongful termination claims,
the loss of qualified employees and inability to replace them, and related
risks. At the current time, none of the Company's employees are unionized. The
risks may also inhibit the Company's ability to expand or establish new
facilities. If such labor issues should arise the Company will attempt to remedy
the situation by using temporary employees and its current staff to temporarily
cover shortages until additional qualified permanent employees can be found.
Uncertainties Regarding Market Acceptance of New Services
Although the Company's management will attempt to complete the market research
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<PAGE>
necessary to determine whether there will be sufficient demand for its new
Internet based services, it is possible that the Company will decide to offer a
service that will be rejected by its target customers. The inability to amortize
development marketing and sales support costs could adversely affect the
financial condition and operating results of the Company. There remains
uncertainty regarding the Internet as a viable distribution method of the
Company's products. There is a risk that the customers of the Company will not
use the Internet for their test training and would rather continue to use more
traditional training methods.
Going Concern
The Company's auditors have expressed an opinion as to the Company's ability to
continue as a going concern as a result of an accumulated deficit of $793,254 as
of September 30, 1999. The Company's ability to continue as a going concern is
subject to the ability of the Company to obtain a profit and /or obtaining the
necessary funding from outside sources. Management's plan to address the
Company's ability to continue as a going concern, includes: (1) obtaining
additional funding from the sale of the Company's securities; (2) increasing
sales; (3) obtaining loans and grants from various financial institutions where
possible. Although management believes that it will be able to obtain the
necessary funding to allow the Company to remain a going concern through the
methods discussed above, there can be no assurances that such methods will prove
successful.
ITEM 3. PROPERTY
In December 1996, the Company acquired three children's care and learning
facilities from three affiliated corporations for a four year note of $775,000,
bearing interest at the rate of 7% per annum, with monthly payments beginning on
January 1, 1998. The Company's facilities are at the following locations in the
New York metropolitan area: (i) 369 Avenue U, Brooklyn, New York, established in
May 1993; (ii) 1535 First Avenue, New York, New York, established in September
1994, the Company has since moved the location of this facility to 432
Lakeville, Lake Success, New York 11402; and (iii) 208-34 Cross Island Parkway,
Bayside, New York, established in June 1994.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the stock of the Company as of October 31, 1999, by each
shareholder who is known by the Company to beneficially own more than 5% of the
outstanding Common Stock, by each director, and by all executive officers and
directors as a group.
14
<PAGE>
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Amount and Nature of Percent
Ownership Beneficial Ownership of Class
<S> <C> <C> <C>
Common Salvatore Casaccio(1) 2,944,200 29.0%
Stock, $.0001 President, Secretary, CEO,
par value Director
64 Burton Ave.
Staten Island, New York 10309
Common Agrippino Casaccio, Director 2,944,200 29.0%
Stock, $.0001 2040 East 26th Street
par value Brooklyn, New York 11229
Common Carmine Notaro, Director 110,790 1.1%
Stock, $.0001 34 Garner Lane
par value Bayshore, New York 11772
Common Kevin Gersh, Director 72,718 0.7%
Stock, $.0001 178 West 19th Street
par value Huntington Station, NY 11746
Common Dominick J. Morreale, Director 58,093 0.6%
Stock, $.0001 RFD 59A Smith Lane
par value St. James, New York 11780
Common All Executive Officers and 6,130,001 60.5%
Stock, $.0001 Directors as a Group
par value (Five persons)
</TABLE>
Changes in Control
There are currently no arrangements in place that will result in a change in
control of the Company.
ITEM 5. DIRECTORS, OFFICERS, PROMOTERS, AND CONTROL PERSONS
The directors, executive officers, and significant employees of the Company,
their respective ages, and positions with the Company are as follows:
Name Age Position
Salvatore Casaccio 46 President, CEO, Secretary,
Significant Employee, Director
Agrippino Casaccio 30 Director
Carmine Notaro 49 Director
Kevin Gersh 32 Director
Dominick J. Morreale 60 Director
Salvatore Casaccio, 46, is President, Chief Executive Officer, Secretary and
Director of the Company and has held these positions since 1996. He has
- --------
(1) Salvatore Casaccio and Agrippino Casaccio are brothers.
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managerial experience, including experience as the co-founder and current
President of Mineo Foods in Brooklyn, New York. From 1988 to present Mr.
Casaccio has owned and operated a J.C. Penney Catalog Store in Brooklyn, New
York. From 1993 to 1996 Mr. Casaccio Served as Chairman of the Board and Chief
Executive Officer for Childrobics, a New York based family entertainment
company. Mr. Casaccio is a member of the Downtown Brooklyn Development
Association and a past member of its Executive Committee. Agrippino Casaccio, a
director of the Company, is Salvatore Casaccio's brother.
Agrippino Casaccio, 30, Director, has been a restauranteur in Brooklyn, New York
since 1991. He is co- founder, co-owner and manager of Mineo Foods and has been
a Director of the Company since 1996.
Carmine Notaro, 49, Director, holds Biology and Mathematics degrees from Dowling
College and is a Licensed Real Estate Broker. In 1972, Mr. Notaro moved in to
the commercial real estate field analyzing and acquiring income producing
properties for A-1 Realty, working in this capacity until 1978 when he became
the Assistant to the President of COR-ACE Realty. From 1984 to 1990, Mr. Notaro
served in a variety of executive positions. He was President of D'Amro Realty
Corporation, Secretary of Eagle Executive Development Corporation, and a Sponsor
of Wading River Road Associations, acquisitions of Development of Sub-Divisions.
Since 1991, he has served as President of both R.O.I. realty Group and R.G.C.
Construction Group. Mr. Notaro has been a Director of the Company since 1996.
Kevin Gersh, 32, Director, from 1980 to present he is serving as Corporate
Treasurer of West Hills Day Camp, having worked his way in to management from
the entry level. Since 1996, Mr. Gersh has been a partner in the Long Island
Brewing Company, a 120 seat American cuisine restaurant. In 1989, he co- founded
KG Corporation, a corporate catering and event planning company and continues to
act as President today. In 1995, Mr. Gersh founded a construction and real
estate management company, EKG Corporation, and is currently serving as its
President. From 1993 to present he has acted as the President and Owner of West
Hills Child Care, Inc. and West Hills Montessori School, Inc. Mr. Gersh attended
Florida State University and Western State College. He has been a Director of
the Company since 1996.
Dominick J. Morreale, 60, Director, holds an Ed.D. in Administration from Nova
University, a Masters in Education and a Bachelors in Psychology from Adelphi
University. Dr. Morreale has spent his career as an educator which includes
experience as an instructor at the elementary and college levels, as well as
Principal and Supervisor of Special Education for pre-school through school-aged
handicapped children. From 1985 until 1996, Dr. Morreale served as Assistant
Superintendent for the South Huntington, New York School District. Beginning in
1995, he also served as the Deputy Superintendent of the district until his
retirement in 1996. After his retirement, Dr. Morreale became Director of the
South Huntington Diagnostic and Treatment Center and serves in this capacity
concurrently along with his directorship of the Company which also began in
1996. Dr. Morreale has received numerous teaching awards and sits on several
educational boards and committees.
ITEM 6. EXECUTIVE COMPENSATION
A. Compensation of Executives
The following table provides summary information for the years 1998, 1997 and
1996 concerning cash and noncash compensation paid or accrued by the Company to
or on behalf of president. There were no other employees to receive compensation
in excess of $100,000 in those years.
16
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payout
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options payout Compensation
Position ($) ($) ($) ($) SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salvatore 1998 - - - - - - -
Casaccio, 1997 - - - - - - -
CEO and 1996 - - - - - - -
Director
- --------------- -------- ------------ --------- ---------------- ------------ -------------- ---------- ----------------
</TABLE>
B. Compensation of Directors
Currently there is no plan to compensate Directors of the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1996, the Company acquired all of the outstanding shares of three
children's care and learning corporations, Eastside Playarobics, Inc., Avenue U
Playarobics, Inc. and Baybridge Playarobics, Inc. The shares of these
corporations were acquired from two directors and majority shareholders of the
Company, Salvatore Casaccio and Agrippino Casaccio, and a relative of the
directors, Antonio Casaccio. The shares were acquired for a four year note of
$775,000 bearing interest at a rate of 7% per annum, with monthly payments
beginning on January 1, 1998. On October 26, 1999 a promissory note was signed
to modify the terms of the note to state that the Company shall have no interest
on the $775,000 through December 1999. On January 1, 2000 the note shall bear an
interest of 7% per annum, with monthly interest only payments beginning on
February 1, 2000 and continuing through February 1, 2001. Beginning March 1,
2001 monthly payments of principal and interest in the amount of $11,918.18
shall be payable on the first of each month through December 31, 2007, at which
time the entire unpaid balance shall be due.
On March 2, 1999, the Company issued the following 5 directors and officers of
the Company common shares of stock at $0.02 per share in exchange for debt:
Name Number of Shares Issued Amount of Debt Paid
- ------------------------------------------------------- ----------------------
Dr. Dominick J. Morreale 50,000 $ 1,000
Salvatore Casaccio 2,900,000 $58,000
Carmine Notaro 100,000 $ 2,000
Kevin Gersh 50,000 $ 1,000
Agrippino Casaccio 2,900,000 $58,000
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, $.0001 par value per share. Holders of common stock are entitled
to dividends when, as and if declared by the Board of Directors out of funds
available therefore. Holders of common stock are entitled to cast one vote for
each
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<PAGE>
share held at all stockholders meetings for all purposes, including the election
of directors. The holders of more than 50% of the common stock issued and
outstanding and entitled to vote, present in person or by proxy, constitute a
quorum at all meetings of stockholders. The vote of the holders of a majority of
common stock present at such a meeting will decide any question brought before
such meeting, except for certain actions such as amendments to the Company's
Certificate of Incorporation, mergers or dissolutions which require the vote of
the holders of the of a majority of the outstanding common stock. Upon
liquidation or dissolution, the holder of each outstanding share of common stock
will be entitled to share equally in the assets of the Company legally available
for distribution to such stockholder after payment of all liabilities and after
such distributions to preferred stockholders legally entitled to such
distributions. Holders of common stock do not have any preemptive, subscription
or redemption rights. The holders of the common stock are fully paid and
nonassessable. The holders of the common stock do not have any registration
rights with respect to the stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS.
The Company was traded on the OTC BB under the symbol LWRD.OB. The Company is
currently listed on the "pink sheets" under the symbol "LWRD" The table below
sets forth the high and low sales prices for the Company's Common Stock for each
quarter of 1997, 1998 and the first three quarters of 1999. The quotations below
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions:
Quarter High Low
------- ---- ---
1997 First $ N/A $ N/A
Second $ N/A $ N/A
Third $ N/A $ N/A
Fourth $ N/A $ N/A
Quarter High Low
------- ---- ---
1998 First(2) $1.25 $1.00
Second $6.00 $1.06
Third $5.00 $0.25
Fourth $0.63 $0.25
- --------
(2) The Company's stock did not trade until January of 1998.
18
<PAGE>
Quarter High Low
------- ---- ---
1999 First $0.28 $0.25
Second(3) $9.80 $4.50
Third $8.19 $1.88
Record Holders
As of October 31, 1999, there were approximately 21 shareholders of record
holding a total of 9,646,250 shares of Common Stock. The holders of the Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of stockholders. Holders of the Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock.
Dividends
The Company has not declared any cash dividends since inception and does not
anticipate paying any dividends in the foreseeable future. The payment of
dividends is within the discretion of the Board of Directors and will depend on
the Company's earnings, capital requirements, financial condition, and other
relevant factors. There are no restrictions that currently limit the Company's
ability to pay dividends on its Common Stock other than those generally imposed
by applicable state law.
ITEM 2. LEGAL PROCEEDINGS
The Company is currently not a party to any pending legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with its accountants in its
two most recent fiscal or any later interim period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following is a list of all securities sold by the Company within the last
three years including, where applicable, the identity of the person who
purchased the securities, title of the securities, and the date sold are
outlined below. All shares are adjusted to reflect a 30 to 1 reverse split
effected on March 1, 1999.
In July of 1997, the Company issued a total of 6,666 shares of its common stock
at $15.00 per share to the following 19 investors for cash, pursuant to a
Private Placement Memorandum dated March 31, 1997:
- --------
(3) Price reflects a 30 to 1 reverse split effected on March 1st, 1999.
19
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Investor # of Shares Issued
- -------------------------------------------- ------------------------
Joshua Ami 267
Antonio Casaccio 1,378
Janine Detore 167
Bruce Feldman 567
Edward Gersh 400
JB Maintenance 300
Angela Ratola 100
Laura Ann Barba 133
Robert Dillion 333
Wayne Feldman 200
Susan Loprieno 222
Lodovice Morreals 244
Donna Raiola 133
Fred J. Ciccone 100
Joseph DiStefano 550
F-G Recycling 500
Greenpoint Recycling 500
Frank Meresca 550
Michelle Sessa 22
The Company issued the 6,666 shares of its common stock pursuant to Rule 504
under Regulation D of the Securities Act of 1933. All investors where given the
opportunity to inspect the books and records of the Company. The Company relied
on the following facts in determining that Rule 504 Regulation D was available:
(a) the Company was not subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act; (b) the Company was engaged in the operation of child
day care and family entertainment centers and therefore was neither a
development stage company with no specific business plan or purpose nor a
company whose plan was to merger with an unidentified company; (c) the aggregate
offering price did not exceed $1,000,000 and (d) the Company filed a Form D
within 15 days of the first sale of the shares subject to the offering.
In July of 1997, the Company issued 3,334 shares of its common stock to Sierra
Lakes Associates, Inc. as compensations for consulting services rendered to the
Company, pursuant to section 4(2) of the Securities Act of 1933 in an isolated
private transaction by the Company which did not involve a public offering. The
Company made this offering based on the following factors: (1) the issuance was
an isolated private transaction by the Company which did not involve a public
offering; (2) there was one offeree who was an officer of or a consultant to the
Company; (3) the offeree did not resell the stock but continued to hold it for
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<PAGE>
at least two years; (4) there were no subsequent or contemporaneous public
offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the sale of the stock took place
directly between the offeree and the Company.
On March 2, 1999, the Company issued the following 5 directors and officers of
the Company a total of 6,000,000 common shares of stock at $0.02 per share in
exchange for $120,000 in debt:
Name Number of Shares Issued Amount of Debt Paid
- -------------------------- ------------------------------ --------------------
Dr. Dominick J. Morreale 50,000 $1,000
Salvatore Casaccio 2,900,000 $58,000
Carmine Notaro 100,000 $2,000
Kevin Gersh 50,000 $1,000
Agrippino Casaccio 2,900,000 $58,000
The stock was issued pursuant to section 4(2) of the Securities Act of 1933 in
an isolated private transaction by the Company which did not involve a public
offering. The Company made this offering based on the following factors: (1) the
issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) there were only five offerees who were officers
of or consultants to the Company; (3) the offerees did not resell the stock but
continued to hold it for at least two years; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offerees and the Company.
On March 3, 1999, the Company issued a total of 3,506,250 shares of its common
stock at $0.25 per share to the following 8 entities:
Investor # of Shares Issued For
- ----------------------------------- -------------------- ----------------------
East-West Trading Corp. 493,750 Cash And Secured
Promissory Note
Sequoia International 493,750 Cash And Secured
Promissory Note
Karston Electronics Ltd. 493,750 Cash And Secured
Promissory Note
Leeward Consulting Group, LLC 493,750 Cash And Secured
Promissory Note
Lexington Sales Corporation Ltd. 493,750 Cash And Secured
Promissory Note
Oriental Investments Limited 493,750 Cash And Secured
Promissory Note
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<PAGE>
Premier Sales Corporation Limited 493,750 Cash And Secured
Promissory Note
The David Michael Irrevocable Trust, 50,000 Cash And Secured
c/o Wendall Hall, Trustee Promissory Note
The Company issued the 3,506,250 shares of its common stock pursuant to Rule 504
under Regulation D of the Securities Act of 1933. All investors where given the
opportunity to inspect the books and records of the Company. The Company relied
on the following facts in determining that Rule 504 Regulation D was available:
(a) the Company was not subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act; (b) the Company was engaged in the operation of child
day care and family entertainment centers and therefore was neither a
development stage company with no specific business plan or purpose nor a
company whose plan was to merger with an unidentified company; (c) the aggregate
offering price did not exceed $1,000,000 and (d) the Company filed a Form D
within 15 days of the first sale of the shares subject to the offering.
December of 1999 the Company issued 40,000 shares of common stock for services
to Richard D. Surber, pursuant to Rule 701 of the Securities Act of 1933. The
Company relied on the following facts in determining that Rule 701 was
available: (a) the shares were issued pursuant to a written compensatory benefit
plan issued by the Company, (b) the individual listed rendered bonafide services
not in connection with the offer or sale of securities in capital raising
transaction, (c) the shares were issued pursuant to a written contract relating
to the issuance of shares paid as compensation for services rendered, and (d)
the amount of shares offered and sold in reliance on Rule 701 did not exceed
$500,000 and all securities sold in the last 12 months have not exceeded
$5,000,000.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 7, Section 721 through 726 of the New York Statues provide for
indemnification of the Company's officers and directors in certain situations
where they might otherwise personally incur liability, judgments, penalties,
fines and expenses in connection with a proceeding or lawsuit to which they
might become parties because of their position with the Company.
In accordance with the provisions referenced above, the Company shall indemnify
to the fullest extent permitted by it bylaws, and in the manner permissible
under the laws of the State of New York, any person made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he is or was a
director or officer of the Company, or served any other enterprise as director,
officer or employee at the request of the Company. The Board of Directors, in
its discretion, shall have the power on behalf of the Company to indemnify any
person, other than a director or officer, made a party to any action, suit or
proceeding by reason of the fact that he/she is or was an employee of the
Company.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company,
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 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 proceedings) is asserted by such director, officer, or controlling
person in connection with any securities being registered, the Company
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
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PART F/S
The Company's financial statements for the fiscal year ended December 31, 1998
and the interim reports for September 30, 1999 are attached hereto as F-1
through F-21.
INDEX TO FINANCIAL STATEMENTS
Audited Financial Reports for Year ending December 31, 1998
Auditors' Report ............................................................F-1
Balance Sheet ...............................................................F-2
Statements of Operations ....................................................F-3
Statement of Stockholder's Equity ...........................................F-4
Statements of Cash Flows ....................................................F-5
Notes to Financial Statements ...............................................F-6
Unaudited Interim Financial Reports for the period ending September 30, 1999
Balance Sheet ..............................................................F-15
Statements of Operations ...................................................F-17
Statements of Cash Flows ...................................................F-18
Statements of Shareholder's Equity..........................................F-19
Notes to Interim Financial Statements ......................................F-20
23
<PAGE>
[Letterhead of Sellers & Associates, P.C.]
INDEPENDENT AUDITOR'S REPORT
Learner's World, Inc.
and Subsidiaries
To The Stockholders
We have audited the accompanying consolidated balance sheets of Learner's World,
Inc. and Subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations and accumulated equity (deficit), and
consolidated statements of cash flows for each of the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
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 estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Learner's World,
Inc. and Subsidiaries as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the years then ended in conformity
with generally accepted accounting principles.
/S/ Sellers & Associates, P.C.
September 23, 1999
Except Notes 3 and 10, dated October 26, 1999
Ogden, Utah
F-1
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 2,195 $ 13,287
Receivables 36,708 6,710
----------- ------------
Total current assets 38,903 19,997
----------- ------------
Property and equipment, net of accumulated depreciation 1,041,526 1,062,049
----------- ------------
Other assets
School licensing 2,917 -
Security deposits 52,214 56,369
----------- ------------
Total other assets $ 55,131 $ 56,369
============ =============
Total assets $ 1,135,560 $ 1,138,415
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts and notes payable $ 114,458 $ 187,920
Taxes payable 64,399 28,483
Current portion of long term debt - non stockholders 25,973 8,907
----------- ------------
Total current liabilities 204,830 225,310
----------- ------------
Long-term liabilities
Term debt - long term portion - non stockholders 36,599 36,572
Due to stockholders 1,251,648 1,038,734
----------- ------------
Total other liabilities 1,288,247 1,075,306
----------- ------------
Total liabilities 1,493,077 1,300,616
----------- ------------
Stockholders' equity (deficit)
Common stock, $.0001 par value
20,000,000 shares authorized
4,200,000 shares issued and outstanding 420 420
Paid in capital 100,580 100,580
Accumulated (deficit) (458,517) (263,201)
----------- ------------
Total stockholders' equity (deficit) (357,517) (162,201)
----------- ------------
Total liabilities and stockholders' equity (deficit) $ 1,135,560 $ 1,138,415
============ =============
</TABLE>
See Accompanying Notes to Financial Statements
F-2
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDING DECEMBER 31, 1998 AND 1997
1998 1997
--------- ---------
Income $ 1,253,266 $ 1,092,560
Cost of sales 744,277 660,730
--------- ------------
Gross profit 508,989 431,830
General and administration expenses 552,977 403,969
Depreciation, amortization and interest expense 150,228 80,786
--------- ------------
Income (loss) from continuing operations before
provision for income taxes
(194,216) (252,925)
Provision for income taxes - current 1,100 2,752
--------- ------------
Net (loss) $ (195,316) $ (255,677)
Income (loss) per weighted-average share of
commonstock outstanding
Net (loss) per share $ (0.50) $ (0.06)
============ =============
Weighted-average number of common stock outstanding 4,200,000 4,125,000
============ =============
See Accompanying Notes to Financial Statements
F-3
<PAGE>
LEARNER'S WORLD, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Stock Accumulated Total
(Deficit) Equity
Shares Amount (Deficit)
----------------- --------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Balance as of December 31, 1996 4,000,000 $ 1,000 $ (7,524) $ (6,524)
Issuance of Stock 200,000 100,000 100,000
Net (loss) for the year ended
December 31, 1997 - - (255,677) (255,677)
----------------- --------------- ------------------- --------------------
Balance as of December 31, 1997 4,200,000 $ 101,000 $ (263,201) $ (162,201)
Net (loss) for the year ended
December 31, 1998 - - (195,316) (195,316)
----------------- --------------- ------------------- --------------------
Balance as of December 31, 1998 4,200,000 $ 101,000 $ (458,517) $ (357,517)
================= ================ ==================== =====================
</TABLE>
See Accompanying Notes to Financial Statements
F-4
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDING DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Cash Flows From Operating Activities
Net (loss) $ (195,316) $ (255,677)
----------- ------------
Adjustments To Reconcile Net Loss To Net Cash
Used In Operating Activities
Depreciation 84,550 71,910
Amortization 583 -
Abandonment of property and equipment - 179,645
(Increase) in accounts and notes receivable (29,998) (6,710)
Decrease in security deposit 4,155 24,036
(Decrease) in accounts and notes payable (73,462) (153,796)
Increase (decrease) in taxes payable 35,916 (51,517)
----------- ------------
Net Adjustment 21,744 63,568
----------- ------------
Net Cash (Used) In Operating Activities (173,572) (192,109)
----------- ------------
Cash Flows From Investing Activities
Purchase of equipment (64,027) (84,774)
Purchase of school licensing (3,500) -
----------- ------------
Net Cash (Used) By Investing Activities (67,527) (84,774)
----------- ------------
Cash Flows From Financing Activities
Increase in notes and loans payable - non stockholders 17,093 45,479
Increase in notes and loans payable - stockholders 212,914 134,782
Proceeds from issuance of capital stock 100,000
----------- ------------
Net Cash Provided By Financing Activities 230,007 280,261
----------- ------------
Net (decrease) in cash (11,092) 3,378
Cash - beginning 13,287 9,903
----------- ------------
Cash - end $ 2,195 $ 13,287
============ =============
Other information
Interest paid in cash $ 10,845 $ 8,876
============ =============
</TABLE>
See Accompanying Notes to Financial Statements
F-5
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 & 1997
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial Statements include the accounts of Learner's
World, Inc. and its wholly owned subsidiaries: Avenue U Playrobics, Inc.,
Baybridge Playrobics, Inc., and Eastside Playrobics, Inc. Eastside
Playrobics, Inc. discontinued operations in 1997 and continues to exist as
a legal entity with no activity. Intercompany activity has been eliminated
in consolidation.
The Company is authorized to issue up to 20,000,000 shares of common stock,
$.0001 par value.
The Company provides learning, daycare and entertainment facilities for
children in New York City.
Property and Equipment
Property, equipment, and leasehold improvements are valued at cost.
Depreciation is provided by use of the straight-line method over the
shorter of estimated useful lives or lease terms of the assets. Fully
depreciated assets are written off the year after they are fully
depreciated or amortized.
Upon the sale or retirement of property and equipment the related cost and
accumulated depreciation are eliminated from the accounts and the resulting
gain or loss is recorded. Repairs and maintenance expenditures that do not
extend the useful lives are included in expense during the period they are
incurred.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be
cash equivalents.
Net Income (Loss) Per Share
Basic net income or loss per share is computed by dividing net income or
loss by the weighted average number of common shares outstanding.
Revenue Recognition
Revenue is recognized from sales and services when they are performed.
Income Taxes
The Company has adopted the provisions of statements of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which
incorporates the use of the asset and liability approach of accounting for
income taxes. The asset and liability approach requires the recognition of
deferred tax assets and liability for the expected future consequences of
temporary differences between the financial reporting basis and tax basis
of assets and liabilities.
F-6
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 & 1997
Note 1 - Summary of Significant Accounting Policies - Continued
No income tax returns have been filed since June 30, 1995. The income tax
year end was changed from June 30 to December 31, making a short tax year
end from July 1, 1996 to December 31, 1996.
Use of Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Impairment of Long-Lived Assets
It is the Company's policy to periodically evaluate the economic recover
ability of all of its long-lived assets. In accordance with that policy,
when the Company determines that an asset has been impaired, it recognizes
the loss on the basis of the discounted future cash flows expected from the
assets.
Fair Value of Financial Instruments
The methods and assumptions used to estimate the fair value of each class
of financial instrument are as follows:
Cash and cash equivalents, receivables, accounts and notes payable, taxes
payable and current portion term debt - non stockholders and stockholders:
The carrying amounts approximate fair value because of the short
maturity of these instruments.
Other assets:
The carrying amounts of school licensing and security deposits
approximate fair value because the Company uses the school licensing
to run a school at one location and it is amortized over the life of
the school lease and the security deposits are refundable.
Long-term liabilities:
The carrying amounts of the Company's borrowings (See notes 3 & 4)
under its debt due to non stockholders and stockholders approximate
fair value because the interest rates are either fixed or vary based
on floating rates identified by reference to market rates. The
carrying amounts and fair values of long-term debt are approximated to
be one and the same at December 31, 1998 and 1997.
F-7
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 & 1997
Note 2 - Property and Equipment
Property and equipment, at cost, are summarized December 31, as follows:
1998 1997 Estimated Useful
Lives
------------ ------------ --------------------
Machinery and equipment $ 716,640 $ 689,937 3 - 7 years
Furniture and fixtures 96,417 96,417 7 years
Leasehold improvements 416,103 378,779 3 - 18 years
------------ ------------ --------------------
1,229,160 1,165,133
(Less) accumulated depreciation ( 187,634) ( 103,084)
------------ ------------
TOTAL: $ 1,041,526 $ 1,062,049
============ ============
Machinery and Equipment is subdivided into the following: 3 year assets
(computer equipment), 5 year assets (rug shampoo) and 7 year assets which
includes all other equipment (indoor playground equipment, etc.).
The following table breaks down leasehold improvements:
Facility Term/Useful Life Amounts
- -------------------------------------- ------------------------ ---------
*Lakeville Building: (Long Island, NY) 3 year lease $ 33,493
15 year estimated life
*Baybridge: (Queens, NY) 18 year lease 239,591
20 year estimated life
*Avenue U: (Brooklyn, NY) 18 year lease 143,019
20 year estimated life
---------
TOTAL: $416,103
=========
The above improvements are all building renovations on leased real estate.
The useful life was determined by taking the life of the lease, which was
shorter than the estimated useful life.
F-8
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 & 1997
Note 3 - Due to Stockholders
Three major stockholders have financed a significant portion of the
Company's activities and operations. The promissory note for $775,000
referred to below, bears interest at 7% per annum, beginning January 1,
1998. All other amounts due to stockholders are not interest bearing
obligations. All obligations are presented in the financial statements as
long-term debt. Refer also to notes 5 and 10.
At December 31, 1998 and 1997, the following amounts were owed to the three
major stockholders:
<TABLE>
<CAPTION>
1998 1997
-------------- ----------
<S> <C> <C>
Note payable due to Salvatore Casaccio,
Antonio Casaccio, and Agrippino Casaccio from
the sale of their stock to the Company of Avenue U
Playrobics, Inc., Baybridge Playrobics, Inc. and Eastside
Playrobics, Inc. on December 17, 1996 for $775,000.
The acquisition of the stock of the subsidiaries by the
Company is accounted for by the purchase method of
accounting. Secured by stock of the Corporations sold
to the Company.
Amounts due to the stockholders on this note are payable over four
years. The monthly payment of principal plus interest began January 1,
1998 at $16,146 per month, plus interest. No payments have been made as
of December 31,
(1999) $ 775,000 $ 775,000
Accrued interest on the note payable of $775,000 $ 54,250 -
The remaining balance due to stockholders are loans and
advances as needed and are unsecured and bear no
interest. $ 422,398 $ 263,734
----------- ---------
Total $1,251,648 $1,038,734
(Less) Current portion due to Stockholders ( - ) ( - )
----------- ----------
Total Long-term debt due to Stockholders $1,251,648 $1,038,734
========== ==========
</TABLE>
F-9
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 & 1997
Note 3 - Due to Stockholders - Continued
Maturities of long-term debt due to stockholders for the five years after
1998 are:
December 31, 1999 $ 670,392
2000 193,752
2001 193,752
2002 193,752
2003 -
2004 & After -
---------
Total $1,251,648
==========
Note 4 - Term Debt - Non Stockholders
Term Debt consists of the following:
Payable to a supplier, secured by selected equipment.
Monthly payment of $1,275 for 60 months with 36
months remaining at 15.4% interest rate $ 36,572
Payable to a private party, guaranteed by a major
stockholder. Monthly payment of $1,410 for 24
months with 21 months remaining at 1.5% over
prime interest rate. $ 26,000
-----------
Total Term Debt $ 62,572
(Less) Current Portion - Non Stockholders ( 25,974)
-----------
Total Long-Term Debt - Non Stockholders $ 36,598
===========
Maturities of long-term debt - non stockholders for the five years of 1998
are:
1999 $ 25,973
2000 22,502
2001 14,097
2002 -
2003 -
2004 & After -
--------
Total $ 62,572
===========
F-10
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 & 1997
Note 5 - Related Party Transactions
As indicated in Note 3 - Notes Payable due to Stockholders, the Company's
major stockholders sold the Company their interests in the subsidiaries of
the Company. They also have financed a significant portion of the Company's
activity and operations. Should these major stockholders withdraw their
support to the Company, the Company would most likely not survive.
Management indicates the major stockholders intend to continue their
support of the Company.
Note 6 - Capital Stock
Through a private offering memorandum dated March 31, 1997, the Company
offered to sell 200,000 units at $.50 per unit. Each unit consists of one
share of common stock, and five warrants to purchase five shares of common
stock at a price of $.85 per share. The warrants expired December 31, 1998
without any warrants exercised. The units were offered pursuant to Rule 504
of Regulation D promulgated under Section 3 (b) of the Securities Act of
1933, as amended (the "Act").
The offer and sale of the units has not been registered under the "Act". No
units may be resold, assigned or otherwise transferred unless a
registration statement under the "Act" is in effect, or the Company has
received evidence satisfactory to it that such transfer does not involve a
transaction requiring registration under the "Act" and is in compliance
with the "Act."
Note 7 - Commitments and Contingencies
As of December 31, 1998, the Company had entered into leases for its
premises in Brooklyn and Queens, New York. The lease commitment on Brooklyn
is for 10 years to March 25, 2003 with an option to lease 5 additional
years at the Company's option. The lease commitment on Queens is for 20
years to May 31, 2014.
Future minimum rental payments required under these leases for each of the
next five years and in the aggregate, after 1998 are as follows:
Total Brooklyn Queens
----------------------------------------------------------
1999 $ 244,056 $ 119,166 $ 124,890
2000 255,012 125,127 129,885
2001 266,459 131,379 135,080
2002 278,384 137,946 140,438
2003 181,051 34,902 146,149
2004-2014 1,953,347 - 1,953,347
----------- ----------- -----------
Total $ 3,178,309 $ 548,520 $ 2,629,789
=========== =========== ===========
F-11
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 & 1997
Note 8 - Income Taxes
<TABLE>
<CAPTION>
1998 1997
------------- ------------
<S> <C> <C>
(Loss) before income taxes at December 31, 1998
and 1997 consisted of:
Total $ (195,316) $ (255,677)
============= ============
The provision for income taxes at December 31,
1998 consisted of:
Current income taxes
Federal $ - $ -
State 2,649 1,549
------------- ------------
Total $ 2,649 $ 1,549
============= ============
The provision for income taxes is different from that which would be
obtained by applying the statutory Federal income tax rate to income
(loss) before income taxes. The items causing this difference at
December 31, 1998 are:
1998 1997
------------- ------------
Federal income tax at U.S. lowest
statutory rate $ 53,700 $ 39,400
State income taxes, net of
Federal benefit 15,600 10,000
Change in valuation allowance (69,300) (49,400)
------------- ------------
Total $ - $ -
============= ============
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 are:
1998 1997
------------- ------------
Deferred tax assets:
Net operating loss carryforward $ 103,100 $ 49,400
------------- ------------
Total gross deferred tax assets 103,100 49,400
(Less) valuation allowance ( 103,100) (49,400)
------------- ------------
Net deferred tax assets - -
Deferred tax liabilities: - -
------------- ------------
Total gross deferred tax liabilities - -
------------- ------------
Net deferred tax $ - $ -
============= ============
</TABLE>
F-12
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 & 1997
Note 8 - Income Taxes - Continued
The valuation allowance for deferred tax assets as of December 31, 1998
and 1997 are $103,100 and $49,400 respectively. The net change in the
total valuation allowance for the year ended December 31, 1998 and 1997
was $19,900 and $48,000 respectively.
During 1998, the Company made $1,203 in cash payments on income taxes.
As of December 31, 1998, the Company has available for income tax
purposes approximately $458,000 in net operating loss carry forwards
which may be used to offset future taxable income. These loss carry
forwards begin to expire in fiscal year 2012. Should the Company
undergo an ownership change as defined in Section 382 of the Internal
Revenue Code, the Company's tax net operating loss carry forwards
generated prior to the ownership change will be subject to an annual
limitation which could eliminate, reduce or defer the utilization of
these losses.
Note 9 - Financial Condition and Going Concern
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. The Company has
sustained substantial operating losses for 1997 and 1998.
Also, Stockholders' equity (deficit) has worsened from $(162,201) at
December 31, 1997 to $(357,517) at December 31, 1998. Management is
seeking additional fundings through revenues, borrowings and stock
issues. Refer to Note 10 - Subsequent Events (Unaudited) that discusses
additional monies raised since December 31, 1998.
Major stockholders have forborne any demand of cash payments due them
from the Company. One of the major shareholders continues to advance
the Company cash as needed and has indicated he will continue doing so,
if needed, for at least through 1999.
Since a major shareholder continues to loan the Company money as needed
and plans to continue doing so through 1999 and also because management
continues raising money by other avenues, including revenues,
management is taking necessary steps to ensure the Company remains a
going concern.
Note 10 - Subsequent Events (Unaudited)
On February 25, 1999, the Company amended its articles of
incorporation. The articles of incorporation, as amended, provide for
20,000,000 shares par $.0001 per share authorized whereas at December
31, 1998 it was 20,000,000 shares no par value authorized. In
conjunction with this change, the articles of incorporation, as
amended, made a 30 for 1 reverse stock split, effective March 1, 1999.
As a result, the 4,200,000 shares issued and outstanding at December
31, 1998 is effectively changed to 140,000 shares issued and
outstanding at March 1, 1999. The financial statements at December 31,
1998 do not reflect this subsequent event.
F-13
<PAGE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 & 1997
Note 10 - Subsequent Events (Unaudited) - Continued
On March 2, 1999, the Company issued its officers and directors a total
of 6,000,000 shares of common stock at $.02 per share in exchange for
$120,000 in debt.
On March 3, 1999, the Company issued new stock under a Rule 504
Regulation D offering. The issuance of 3,506,250 shares were issued for
$876,563, of which over $400,000 has been received as of September 30,
1999.
On October 26, 1999 the $775,000 promissory note due to stockholders
was modified. All accrued and unpaid interest was waived and the
payment terms were modified. Accrued interest totaling $98,812 was
written off and added to paid in capital.
[THIS SPACE LEFT INTENTIONALLY BLANK]
F-14
<PAGE>
LEARNER'S WORLD, INC. AND SUBSIDIARIES
Consolidated Unaudited Condensed Balance Sheets
For Nine Months Ending September 30, 1999
ASSETS
Current Assets
Cash $ 2,468
Receivables from schools 36,708
----------
Total current assets 39,176
----------
Property and equipment - net
Machinery equipment 693,235
Furniture fixtures 96,465
Leasehold improvements 447,161
Accumulated depreciation - M&E (101,226)
Accumulated depreciation - furniture / fixtures (31,018)
Accumulated depreciation - LHI (85,689)
----------
Total Property and Equipment 1,018,928
----------
Other assets
Security deposits 52,214
School licensing 2,917
----------
Total other assets 55,131
----------
TOTAL ASSETS $ 1,113,235
===========
See notes to consolidated unaudited condensed financial statements
F-15
<PAGE>
LEARNER'S WORLD, INC. AND SUBSIDIARIES
Consolidated Unaudited Condensed Balance Sheets (continued)
For Nine Months Ending September 30, 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts and notes payable $ 33,587
Taxes payable 64,681
Current portion of long-term debt non stock 23,212
----------
Total current liabilities 121,480
----------
Long-term liabilities
Notes payable - Imperial Business 15,751
Long-term debt to stockholders 1,158,259
-------------
Total long-term debt 1,174,010
-------------
Total liabilities 1,295,490
-------------
Minority interest
Shareholders' equity
Common stock $.0001 par value; 20,000,000 shares
authorized; 9,646,250 shares issued and outstanding 965
Additional paid-in capital 1,096,597
Stock Subscriptions (receivable) (486,563)
Accumulated deficit (793,254)
-------------
Total shareholders' equity (deficit) (182,255)
-------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,113,235
=============
See notes to consolidated unaudited condensed financial statements
F-16
<PAGE>
LEARNER'S WORLD, INC. AND SUBSIDIARIES
Consolidated Unaudited Condensed Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME $ 298,007 $ 313,316 $ 960,435 $ 977,547
COST OF SALES 132,286 184,822 599,758 578,708
------------- ------------- -------------- -------------
GROSS PROFIT 165,721 128,494 360,677 398,839
GENERAL AND ADMINISTRATIVE
EXPENSES 197,995 139,977 577,515 433,086
DEPRECIATION, AMORTIZATION AND
INTEREST EXPENSES 18,463 37,557 117,099 112,672
------------- ------------- -------------- -------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE PROVISION FOR
INCOME TAXES (50,737) 49,040) (333,937) (146,919)
PROVISION FOR INCOME TAXES -
CURRENT 200 200 800 800
------------- ------------- -------------- -------------
NET INCOME (LOSS) $ (50,937) $ 49,240) $ (334,737) $ (147,719)
============= ============= ============== =============
INCOME (LOSS) PER WEIGHTED-
AVERAGE SHARE OF COMMON STOCK
OUTSTANDING
Net income (loss) per share $ (0.01) $ (0.35) $ (0.05) $ (1.06)
============= ============= ============== =============
Weighted average number of common shares
outstanding 9,646,250 140,000 6,430,833 140,000
============= ============= ============== =============
</TABLE>
See notes to consolidated unaudited condensed financial statements
F-17
<PAGE>
LEARNER'S WORLD, INC. AND SUBSIDIARIES
Consolidated Unaudited Condensed Statements of Cash Flows
For Nine Months Ending September 30, 1999 and 1998
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1999 1998
--------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATION
ACTIVITIES
Net income (Loss) $ (334,737) $ (147,719)
----------------- ----------------
Adjustments to reconcile net income (loss) to net cash provided:
Depreciation 63,413 3,413
Amortization - 433
Abandonment of property and equipment - -
(Increase) in accounts and notes receivable - (20,930)
Decrease in security deposit - 4,155
(Decrease) in accounts and notes payable 115,466 (25,201)
Increase (decrease) in taxes payable 281 (6,004)
----------------- ----------------
Net Adjustment 52,336 15,866
----------------- ----------------
NET CASH USED IN OPERATING
ACTIVITIES $ (282,401) (131,853)
----------------- ----------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of equipment (6,202) (21,460)
Purchase of schooling licensing - (3,500)
----------------- ----------------
NET CASH FLOWS (USED) BY $ (6,202) $ (24,960)
INVESTING ACTIVITIES ----------------- ----------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Decrease in notes and loans payable -
non stockholders (23,610) (6,586)
Increase in notes and loans payable -
stockholders (77,514) 153,322
Proceeds from issuance of capital stock - net of
receivables 390,000 -
----------------- ----------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES $ 288,876 $ 146,736
----------------- ----------------
NET INCREASE (DECREASE) IN CASH 273 (10,077)
CASH AT BEGINNING OF PERIOD 2,195 13,287
----------------- ----------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,468 $ 3,210
================= ================
OTHER INFORMATION
Interest paid in cash 40,688 48,948
================= ================
</TABLE>
See notes to consolidated unaudited condensed financial statements
F-18
<PAGE>
LEARNER'S WORLD, INC. AND SUBSIDIARIES
Consolidated Unaudited Condensed Statements of Shareholders' Equity
For Nine Months Ending September 30, 1999 and 1998
<TABLE>
<CAPTION>
Common Stock Stock
------------ Paid-In Subscription Accumulated
Shares Amount Capital (receivable) (Deficit) Total
---------- ---------- ----------- --------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance of December 31,1997 4,200,000 $ 420 $ 100,580 $ - $ (263,201) $ (162,201)
Adjustment for 1 for 30 reverse split (4,060,000) (406) 406 - - -
Net(Loss) for the year ended
December 31, 1998 - - - - (195,316) (195,316)
---------- ---------- ----------- --------------- -------------- ----------------
Balance as of December 31, 1998 140,000 14 100,986 - (458,517) (357,517)
Stock issued for debt 6,000,000 600 119,400 - - 120,000
Stock issued for cash 3,456,250 346 863,716 (486,563) - 377,499
Stock issued for services 50,000 5 12,495 - 12,500
Net (Loss) for nine months ended
September 30, 1998 - - - - (334,737) (334,737)
---------- ---------- ----------- --------------- -------------- ----------------
Balance as of September 30, 1999 9,646,250 $ 965 $ 1,096,597 (486,563) $ (793,254) $ (182,255)
========== ========== =========== =============== =============== ================
</TABLE>
See notes to consolidated unaudited condensed financial statements
F-19
<PAGE>
LEARNER'S WORLD, INC. AND SUBSIDIARIES
Consolidated Unaudited Condensed Financial Statements
September 30, 1999
NOTE 1 - BASIS OF PRESENTATION
The interim consolidated financial statements at September 30, 1998 and for the
three and nine month periods ended September 30, 1998 are unaudited, but include
all adjustments which the Company considers necessary for the fair presentation.
The accompanying unaudited financial statements are for the interim periods and
do not include all disclosures normally provided in annual financial statements,
and should be read in conjunction with the Company's Form 10-SB for the year
ended December 31, 1998. The accompanying unaudited interim financial statements
for the three and nine months ended September 30, 1999 are not necessarily
indicative of the results which can be expected for the entire year.
The preparation of financial statements in conformity with generally accepted
accounting principles required management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during th
reporting period. Actual results could differ from those estimates.
NOTES 2 - COMMITMENTS AND CONTINGENCIES
The Company is exposed to various legal matters encountered in normal course of
business. In the opinion of management, the resolution of these mater will not
have a material adverse effect on the company's consolidated financial position
or results of operations.
NOTE 3 - INCOME TAXES
The Company accounts for income taxes in accordances with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which required an asset and liability approach to
accounting for income taxes. Under SFAS 109, deferred tax assets or liabilities
are computed on the difference between the financial statement and income tax
bases and assets and liabilities ("temporary differences") using the enacted
marginal tax rate. Deferred income tax expenses or benefits are based on the
changes in the deferred tax asset or liability from period to period.
Management has net operating loss carryforwards and may or may not be able to
realize all the tax benefits from available net operation loss carryforwards and
has, therefore, provided a valuation allowance of an equal amount. No income tax
expense is reflected in the Statement of Operations for the nine months ended
September 30, 1999.
NOTE 4 - COMMON STOCK
On February 25, 1999, the Company amended it articles of incorporation. The
articles of incorporation, as amended, made a 30 for 1 reverse stock split,
effective March 1, 1999. This 30 for 1 reverse stock split has been recognized
in these financial statements retroactive to December 31, 1997 for comparative
purposes.
In March 1999, the Company issued new stock under Rule 504 Regulation D
offering. The issuance of 3,506,250 shares were issued for $876,562.50 of which
$389,999 has been received as of September 30, 1999. The amount receivable of
$486,563 is fully secured by marketable securities.
F-20
<PAGE>
LEARNER'S WORLD, INC. AND SUBSIDIARIES
Consolidated Unaudited Condensed Financial Statements
September 30, 1999
NOTE 4 - COMMON STOCK - CONTINUED
The marketable securities pledged as collateral for the notes receivable are
being held in escrow to completion of this agreement by Kim Taylor, esq. 1003
South 1400 East, Salt Lake City, Utah 84105, Telephone (801) 582-7811. Please
refer to Agreement item 7. (a).
The principal of the seven promissory notes each consist of $123,437.50, which
is to be paid in full in 24 months from March 18, 1999. The Note shall bear
interest of Eight Percent per annum to be paid annually over the term and/or any
extension of the Note.
Each note is secured by way of 43,462 Shares of Oasis Hotel Resorts and Casino,
Inc. at an average market price of $1.82.
[THIS SPACE LEFT INTENTIONALLY BLANK]
F-21
<PAGE>
PART III
ITEM 1. EXHIBITS
(a) Exhibits. Exhibits required to be attached are listed in the Index to
Exhibits beginning on page 26 of this Form 10-SB under "Item 2. Description
of Exhibits."
[THIS SPACE LEFT INTENTIONALLY BLANK]
24
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, this 22nd day of March, 2000.
/s/ Salvatore Casaccio
----------------------------------
Name: Salvatore Casaccio
Title: Chief Executive Officer
[THIS SPACE LEFT INTENTIONALLY BLANK]
25
<PAGE>
ITEM 2. DESCRIPTION OF EXHIBITS
INDEX TO EXHIBITS
Exhibit
No. Page No. Description
3(i) 27 Certificate of Incorporation of Learner's World, Inc., a New
York corporation, dated June 27, 1996.
3(ii) 30 Certificate of Amendment of the Articles of Incorporation of
the Company filed on April 11, 1997 effecting the change of
the authorized number of shares to 20,000,000, par value to
$.0001 and effecting a 39,000-for-1 forward split of the
issued shares.
3(iii) 32 Certificate of Amendment of the Articles of Incorporation of
the Company filed on January 31, 1999 effecting a 1-for-30
reverse split of the issued shares.
3(iv) 34 By-laws of the Company.
Material Contracts
10(i) 44 Agreement of Sale dated December 17, 1996, between the Company
and Baybridge Playrobics, Inc.
10(ii) 50 Promissory Note dated October 26, 1999, between the Company
and Antonio Casaccio, Agrippino Casaccio and Salvatore
Casaccio, showing the terms of payment for the Agreement of
Sale dated December 17, 1996.
10(iii) 53 Benefit Plan for the Company dated November 19, 1999.
10(iv) 58 Leases for building located at 369 Avenue U, Brooklyn, New York
11223.
10(v) 77 Leases for building located at 208-32 to 208-46 Bell Boulevard,
Bayside, New York 11360.
27 95 Financial Data Schedule "CE"
[THIS SPACE LEFT INTENTIONALLY BLANK]
26
CERTIFICATE OF INCORPORATION
AVENUE U PLAYROBICS, INC.
Under Section 402 of the Business Corporation Law.
The undersigned, for the purpose of forming a corporation pursuant to
Section 402 of the Business Corporation Law of the State of New York, does
hereby certify and set forth:
FIRST: The name of the corporation is AVENUE U PLAYROBICS, INC.
SECOND: The purposes for which the corporation is formed are:
To engage in any lawful act or activity for which corporations
may be organized under the business corporation law, provided
that the corporation is not formed to engage in any act or
activity which requires the act or approval of any state
official, department, board, agency or other body without such
approval or consent first being obtained.
To carry on a general mercantile, industrial, inverting and
trading business all its branches-, to devise, invent,
manufacture, fabricate, assemble, install, service, maintain,
alter, buy, sell, import, export, license as licensor or
licensee, lease as lessor or lessee, distribute, job, enter
into, negotiate, execute, acquire, and assign contracts in
respect of, acquire, receive, grant, and assign licensing
arrangements, options, franchises, and other rights in respect
of and generally deal in and with at wholesale and retail, as
principal, and as sales, business, special, or general agent,
representative, broker, factor, merchant, distributor, jobber,
advisor, or in any other lawful capacity, goods, wares,
merchandise, commodities, and unimproved, improved, finished,
processed and other real, personal and mixed property of any
and all kinds, together with the components, resultants, and
by-products thereof.
To create, manufacture, contract for, buy, sell, import,
export, distribute, job and generally deal in and with,
whether at wholesale or retail, and as principal, agent,
broker, factor, commission merchant, licensor, licensee or
otherwise, any and all kinds of goods, wares, and merchandise,
and in connection therewith or independent thereof, to
establish and maintain, by any manner or means, buying
offices, distribution centers, specialty and other shops,
stores, mail-order establishments, concessions, leased
departments, and any and all other departments, sites and
locations necessary, convenient or useful in the furtherance
of any business of the corporation.
To develop, experiment with, manufacture, fabricate, produce,
assemble, buy, lease or otherwise acquire, hold, own, operate,
use, install, equip, maintain, service, process, possess,
repossess, remodel recondition, transport, import, export,
sell, lease or otherwise dispose of and generally to deal in
and with any and all kinds of raw materials, products,
manufactured articles and products, equipment, machinery,
devices, systems, parts, tools and implements, apparatus, and
goods, wares, merchandise and tangible property of every kind,
used or capable of being used for any purpose whatsoever, and
wheresoever located.
To acquire by purchase, subscription, underwriting or
otherwise, and to own, hold for investment, or otherwise, and
to use, sell, assign, transfer, mortgage, pledge, exchange or
27
<PAGE>
otherwise dispose of real and personal property of every sort
and description and wheresoever situated, including shares of
stock, bonds, debentures, notes, scrip, securities, evidences
of indebtedness, contracts or obligations of any corporation
or association, whether domestic or foreign, or of ally firm
or individual or of the United States or any state, territory
or dependency of the United States or any foreign country, or
any municipality or local authority within or without the
United Stater,, and also to issue in exchange therefor,
stocks, bonds or other securities or evidences of indebtedness
of this corporation and, while the owner or holder of any such
property, to receive, collect and dispose of the interest,
dividends and income on or from such property and to possess
and exercise in respect thereto all of the rights, powers and
privileges of ownership, including all voting powers thereon.
To construct, build, purchase, lease or otherwise acquire,
equip, hold, own, improve, develop, manage, maintain, control,
operate, lease, mortgage, create liens upon, sell, convey or
otherwise dispose of and turn to account, any and all plants,
machinery, works, implements and things or property, real and
personal, of every kind and description, incidental to,
connected with, or suitable, necessary or convenient for any
of the purposes enumerated herein, including all or any part
or parts of the properties, assets, business and goodwill of
any persons, firms, associations or corporations.
The powers, rights and privileges provided in this certificate
are not to be deemed to be in limitation of similar, other or
additional powers, rights and privileges granted or permitted
to a corporation by the Business Corporation Law, it being
intended that this corporation shall have all rights, powers
and privileges granted or permitted to a corporation by such
statute.
THIRD: The office of the corporation is to be located in the County
of Kings, State of New York. ------
FOURTH: The aggregate number of shares which the corporation shall
have the authority to issue is Two Hundred (200), all of which
shall be without par value.
FIFTH: The Secretary of State is designated as the agent of the
corporation upon whom process against it may be served. The
post office address to which the Secretary of State shall mail
a copy of any process against the corporation served on him
is:
369 Avenue U
Brooklyn, New York 11223
SIXTH: The personal liability of directors to the corporation or its
shareholders for damages for any ------ breach of duty in such
capacity is hereby eliminated except that such personal
liability shall not be eliminated if a judgment or other final
adjudication adverse to such director establishes that his
acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of law or that he personally
gained in fact a financial profit or other advantage to which
he was not legally entitled or that his acts violated Section
719 of the Business Corporation Law.
28
<PAGE>
IN WITNESS WHEREOF. this certificate has been subscribed to this 27th day
of June, 1996 by the undersigned who affirms that the statements made herein are
true under the penalties of perjury.
/S/ GERALD WEINBERG
---------------------
GERALD WEINBERG
90 State Street
Albany, New York
29
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
LEARNERS WORLD, INC.
(A New York Corporation)
(Under Section 805 of the Business Corporation Law)
IT IS HEREBY CERTIFIED THAT:
(1) THE NAME of the corporation is:
LEARNERS WORLD, INC.
(2) The Certificate of Incorporation was filed by the Department
of State on the 28th day of June 1996.
(3) The Certificate of Incorporation of this corporation is hereby
amended to effect the following changes:
Of the present Two Hundred (200) authorized shares of the
Corporation to change One Hundred (100) authorized common
shares without par value of the corporation, all of which are
issued, into Three Million Nine Hundred Thousand (3,900,000)
common shares of a par value of One One Hundredth of a Cent
(.01 cents) each, the terms of the change being at the rate of
Thirty Nine Thousand (39,000) issued common shares of a par
value of One One Hundredth of a Cent (. 0 1 cents) for one (1)
issued common share without par value and to change One
Hundred (100) authorized common shares without par value of
the corporation, none of which are issued, into Sixteen
Million One Hundred Thousand (I 6,1 00,000) common shares of a
par value of One One Hundredth of a Cent (.01 cents) each, the
terms of the change being at the rate of One Hundred Sixty One
Thousand (161,000) unissued common shares of a par value of
One One Hundredth of a cent (.01 cents) for one unissued
common share without par value.
(4) To accomplish the foregoing amendment, the "Fourth" Article of
the Certificate of Incorporation of the corporation relating
to the number of shares the corporation shall have authority
to issue and the par value of said shares is hereby amended to
read as follows:
The aggregate number of shares which the corporation shall
have the authority to issue is Twenty Million (20,000,000),
all of which shall have a par value of One One Hundredth of a
Cent(. 01 cents).
30
<PAGE>
(5) The Amendment of the Certificate of Incorporation was
authorized first by vote of the Board of Directors and then by
unanimous written consent of the holders of all the
outstanding shares entitled to vote thereon.
IN WITNESS WHEREOF, this Certificate has been subscribed this day of April
1997 by the undersigned who affirm(s) that the statements made herein
are true under the penalties of perjury.
CAPACITY IN
NAME WHICH SIGNED SIGNATURE
- ------------------------ -------------------- ---------------------------
DR. DOMINICK J. MORREALE SHAREHOLDER/DIRECTOR /S/ DR. DOMINICK J. MORREALE
SALVATORE CASACCIO SHAREHOLDER/DIRECTOR /S/ SALVATORE CASACCIO
CARMINE NOTARO SHAREHOLDER/DIRECTOR /S/ CARMINE NOTARO
KEVIN GERSH SHAREHOLDER/DIRECTOR /S/ KEVIN GERSH
AGRIPPINO CASACCIO SHAREHOLDER/DIRECTOR /S/ AGRIPPINO CASACCIO
THE ABOVE SIGNERS CONSTITUTE HOLDERS OF ALL OF THE OUTSTANDING SHARES OF THE
CORPORATION.
31
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
LEARNERS WORLD, INC.
(A New York Corporation)
(Under Section 805 of the Business Corporation Law)
IT IS HEREBY CERTIFIED THAT:
(1) The name of the Corporation is:
LEARNERS WORLD, INC.
(2) The Certificate of Incorporation of this corporation was filed
by the Department of State ON THE 28TH day of June, 1996.
(3) The Certificate of Incorporation of this corporation is hereby
amended to effect the following changes:
Of the present Twenty Million (20,000,000) authorized shares
of the Corporation, all of which have a par value of One One
Hundredth of a Cent ($.0001) each, to change Four Million Two
Hundred Thousand (4,200,000) common shares of the corporation,
all of which are issued, in to One Hundred Forty Thousand
(140,000) common shares of the same par value ($.0001) each.
The terms of the change being a 30:1 reverse stock split at
the rate of thirty (30) shares down to one share of common
stock, all having par value of One One Hundredth of a Cent
($.0001) per share.
This amendment changes the number of issued shares
from Four Million Two Hundred Thousand (4,200,000) before the
30:1 reverse stock split in to One Hundred Forty Thousand
(140,000) shares resulting from the reverse stock split. This
amendment also changes the number of unissued shares from
Fifteen Million Eight Hundred Thousand (15,800,000) shares
before the 30:1 reverse stock split in to Nineteen Million
Eight Hundred Sixty Thousand (19,860,000) shares resulting
from the reverse stock split. The par value of the shares of
common stock of the corporation remain unchanged at One One
Hundredth of a Cent ($.0001).
The terms of this change in issued stock are as
follows: the change from Four Million Two Hundred Thousand
(4,200,000) shares in to One Hundred Forty Thousand (140,000)
shares shall be effective as of March 1, 1999.
(4) To accomplish the foregoing amendment, the "fourth" Article of
the Certificate of Incorporation of the corporation relating
to the number of shares the corporation shall
32
<PAGE>
have authority to issue is hereby amended to read as follows:
"The aggregate number of shares which the corporation
shall have the authority to issue is Twenty Million
(20,000,000) shares, all of which shall have a par value of
One One Hundredth of a Cent ($.0001)."
(5) The Certificate of Amendment of the Certificate of
Incorporation was authorized, pursuant to Section 803(a) of
the Business Corporation Law, by vote of the Board of
Directors and then by a majority vote of the outstanding
shares of common stock entitled to vote thereon at a meeting
of shareholders of this corporation duly called and HELD ON
THE 31ST day of January, 1999, a quorum being present.
IN WITNESS THEREOF, THIS CERTIFICATE OF AMENDMENT HAS BEEN SUBSCRIBED THIS
31ST day of January, 1999 by the undersigned directors.
IN WITNESS THEREOF, the undersigned Board of Directors has executed this
document, to be effective on the date first appearing above.
/S/ DR. DOMINICK J. MORREALE
----------------------------
Dr. Dominick J. Morreale, Director
/S/ SALVATORE CASACCIO
----------------------------
Salvatore Casaccio, Director
/S/ CARMINE NOTARO
----------------------------
Carmine Notaro, Director
/S/ KEVIN GERSH
----------------------------
Kevin Gersh, Director
/S/ AGRIPPINO CASACCIO
----------------------------
Agrippino Casaccio, Director
33
BY-LAWS
ARTICLE I
THE CORPORATION
SECTION 1. NAME. The legal name of this corporation (hereinafter
called the "Corporation") is LEARNER'S WORLD, INC.
SECTION 2. OFFICES. The Corporation shall have its principal office in
the State of New York. The Corporation may also have offices at such other
places within and without the United States as the Board of Directors may from
time to time appoint or the business of the Corporation may require.
Section 3. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal, New
York." One or more duplicate dies for impressing such seal may be kept and used.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the shareholders shall be
held at the principal office of the Corporation in the State of New York or at
such other place, within or without the State of New York, as is fixed in the
notice of the meeting.
SECTION 2. ANNUAL MEETING. An annual meeting of the shareholders of the
Corporation for the election of directors and the transaction of such other
business as may properly come before the meeting shall be held on the first
Monday of in each year if not a legal holiday, and if a legal holiday, then on
the next secular day following, at ten o'clock A.M., Eastern Standard Time, or
at such other time as is fixed in the notice of the meeting. If for any reason
any annual meeting shall not be held at the time herein specified, the same may
be held at any time thereafter upon notice, as herein provided, or the business
thereof may be transacted at any special meeting called for the purpose.
SECTION 3. SPECIAL MEETINGS. Special meetings of shareholders may be
called by the President whenever he deems it necessary or advisable-, A special
meeting of the shareholders shall be called by the President whenever so
directed in writing by a majority of the entire Board of Directors or whenever
the holders of one-third (1/3) of the number of shares of the capital stock of
the Corporation entitled to vote at such meeting shall, in writing, request the
same.
SECTION 4. NOTICE OF MEETINGS. Notice of the time and place of the
annual and of each special meeting of the shareholders shall be given to each of
the shareholders entitled to vote at such meeting by mailing the same in a
postage prepaid wrapper addressed to each such shareholder at his address as it
appears on the books of the Corporation, or by Delivering the same personally to
any such shareholder in lieu of such mailing, at least ten (10) and not more
than fifty (50) days prior to each meeting, Meetings may be held without notice
if all of the shareholders entitled to vote thereat are present in
34
<PAGE>
person or by proxy, or if notice thereof is waived by all such shareholders not
present in person or by proxy, before or after the meeting. Notice by mail shall
be deemed to be given when deposited, with postage thereon prepaid, in the
United States mail. If a meeting is adjourned to another time, not more than
thirty (30 days hence, or to another place, and if an announcement of the
adjourned time or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the Board of Directors, after
adjournment fix a new record date for the adjourned meeting. Notice of the
annual and each special meeting of the shareholders shall indicate that it is
being issued by or at the direction of the person or persons calling the
meeting, and shall state the name and capacity of each such person. Notice of
each special meeting shall also state the purpose or purposes for which it has
been called. Neither the business to be transacted at nor the purpose of the
annual or any special meeting of the shareholders need be specified in any
written waiver of notice.
SECTION 5. RECORD DATE FOR SHAREHOLDERS. For the purpose of determining
the shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or other distribution or the allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than
fifty(5) days nor less than ten (I 0) days before the date of such meeting, nor
more than fifty (50) days prior to any other action. If no record date is fixed,
the record date for DETERMINING SHAREHOLDERS ENTITLED TO NOTICE OF OR to vote at
a meeting of shareholders shall be at the CLOSE OF BUSINESS ON THE DAY NEXT
PRECEDING THE DAY ON WHICH NOTICE IS GIVEN, OR, IF NO NOTICE IS given, the day
on which the meeting is held; the record date for determining shareholders
entitled to express consent to corporate action in writing, without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; and the record date for
determining shareholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 6. PROXY PRESENTATION. Every shareholder may authorize another
person or persons to act for him by proxy in all matters in which a shareholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the shareholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after eleven months from its date unless such
proxy provides for a longer period. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided in
Section 608 of the New York Business Corporation Law.
SECTION 7. VOTING AT SHAREHOLDERS' MEETINGS. Each share of stock shall
entitle the holder thereof to one vote, In the election of directors, a
plurality of the votes cast shall elect. Any other action shall be authorized by
a majority of the votes cast except where the New York Business Corporation Law
prescribes a different percentage of votes or a different exercise of voting
power. In the election of directors, and for any other action, voting need not
be by ballot.
SECTION 8. QUORUM AND ADJOURNMENT. Except for a special election of
directors pursuant to Section 603 of the New York Business Corporation Law, the
presence, in person or by proxy, of the holders of a majority of the shares of
the stock of the Corporation outstanding and entitled to vote thereat shall be
requisite and shall constitute a quorum at any meeting of the shareholders, When
a
35
<PAGE>
quorum is once present to organize a meeting, it shall not be broken by the
subsequent withdrawal of any shareholders, If at any meeting of shareholders
there shall be less than a quorum so present, the shareholders present in person
or by proxy and entitled to vote thereat, may adjourn the meeting from time to
time until a quorum shall be present, but no business shall be transacted at any
such adjourned meeting except such as. might have been lawfully transacted had
the meeting not adjourned.
SECTION 9. LIST OF SHAREHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare, make and certify, at least ten
(1) days before every meeting of shareholders, a complete list of the
shareholders, as of the record date fixed for such meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city or other municipality or
community where the meeting is to be held. The list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and may
be inspected by any shareholder who is present, If the right to vote at any
meeting is challenged, the inspectors of election, if any, or the person
presiding thereat, shall require such list of shareholders to be produced as
evidence of the right of the persons challenged to vote at such meeting, and all
persons who appear from such list to be shareholders entitled to vote thereat
may vote at such meeting,
SECTION 10. INSPECTORS OF ELECTION. The Board of Directors, in advance
of any meeting, may, but need not, appoint one or more inspectors of election to
act at the meeting or any adjournment thereof. If an inspector or inspectors are
not appointed, the person presiding at the meeting may, and at the request of
any shareholder entitled to vote thereat shall, appoint one or more inspectors.
In case any person who may be appointed as an inspector fails to appear or act,
the vacancy may be filled by appointment made by the Board of Directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of Shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, determine the result and do such acts as are proper
to conduct the election or vote with fairness to all shareholders. On request of
the person presiding at the meeting or any shareholder entitled to vote thereat,
the inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them. Any report or certificate made by
the inspector or inspectors shall be prima facie evidence of the facts stated
and of the vote as certified by them.
SECTION 11. ACTION OF THE SHAREHOLDERS WITHOUT MEETINGS. Any action
which may be taken at any annual or special meeting of the shareholders may be
taken without a meeting on written consent, setting forth the action so taken,.
signed by the holders of all outstanding shares entitled to vote thereon.
Written consent thus given by the holders of all outstanding shares entitled to
vote shall have the same effect as a unanimous vote of the shareholders.
ARTICLE III
DIRECTORS
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SECTION 1. NUMBER OF DIRECTORS. The number of directors which shall
constitute the entire
Board of Directors shall be at least three, except that where all outstanding
shares of the stock of the Corporation are owned beneficially and of record by
less than three shareholders, the number of directors may be less than three but
not less than the number of shareholders, Subject to the foregoing limitation,
such number may be fixed from time to time by action of a majority of the entire
Board of Directors or of the shareholders at an annual or special meeting, or,
if the number of directors is not so fixed, the number shall be three or shall
be equal to the number of shareholders (determined as aforesaid), whichever is
less. Until such time as the corporation shall issue shares of its stock, the
Board of Directors shall consist of two persons. No decrease in the number of
directors shall shorten the term of any incumbent director.
SECTION 2. ELECTION AND TERM. The initial Board of Directors shall be
elected by the incorporator and each initial director so elected shall hold
office until the first annual meeting of share ' holders and until his successor
has been elected and qualified. Thereafter, each director who is elected AT AN
ANNUAL MEETING OF SHAREHOLDERS, AND EACH DIRECTOR WHO IS ELECTED IN THE INTERIM
TO FILL A VACANCY OR. A newly created directorship, shall hold office until the
next annual meeting of shareholders and until his successor has been elected and
qualified.
SECTION 3. FILLING VACANCIES, RESIGNATION AND REMOVAL. Any director may
tender his resignation at any time. Any director or the entire Board of
Directors may be removed, with or without cause, by vote of the shareholders. In
the interim between annual meetings of shareholders or special meetings of
shareholders called for the election of directors or for the removal of one or
more directors and for the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including
unfilled vacancies resulting from the resignation or removal of directors for
cause or without cause may be filled by the vote of a majority of the remaining
directors then in office, although less than a quorum or by the sole remaining
director.
SECTION 4. QUALIFICATIONS AND POWERS. Each director shall be at least
eighteen years of age. A director need not be a shareholder, a citizen of the
United States or a resident of the State of New York. The business of the
Corporation shall be managed by the Board of Directors, subject to the
provisions of the Certificate of Incorporation. In addition to the powers and
authorities by these By-Laws expressly conferred upon it, the Board may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or, done exclusively by the shareholders.
SECTION 5. REGULAR AND SPECIAL MEETINGS OF THE BOARD. The Board of
Directors may hold its meetings, whether regular or special, either within or
without the State of New York, The newly elected Board may meet at such place
and time as shall be fixed by the vote of the shareholders at the annual
meeting, for the purpose of organization or otherwise, and no notice of such
meeting shall be necessary to the newly elected directors in order legally to
constitute the meeting, provided a majority of the entire Board shall be
present; or they may meet at such place and time as shall be fixed by the
consent in writing of all directors. Regular meetings of the Board may be held
with or without notice at such time and place as shall from time to time be
determined by resolution of the Board. Whenever the time or place of regular
meetings of the Board shall have been determined by resolution of the Board, no
regular meetings shall be held pursuant to any resolution of the Board altering
or modifying its previous resolution relating to the time or place of the
holding of regular meetings, without first giving. at least three days written
notice to each director, either personally or by telegram, or at least five days
written notice to each director by Mail, of the substance and effect of such new
resolution relating to the ' time and place at which regular meetings of the
board may thereafter be held without notice. Special meetings of the Board shall
be held whenever called by the President, Vice-President, the Secretary or
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any director in writing. Notice of each special meeting of the Board shall be
delivered personally to each director or sent by telegram to his residenc6 or
usual place of business at least three days before the meeting, or mailed to him
to his residence or usual place of business at least five days before the
meeting. Meetings of the Board, whether regular or special, may be held at any
time and place, and for any purpose, without notice, when all the directors are
present or when all directors not present shall, in writing, waive notice of and
consent to the holding of such meeting. All or any of the directors may waive
notice of any meeting and the presence of the director at any meeting of the
Board shall be deemed a waiver of notice thereof by him. A notice, or waiver of
notice, need not specify the purpose or purposes of any regular or special
meeting of the Board.
SECTION 6. QUORUM AND ACTION. A majority of the entire Board of
Directors shall constitute a quorum except that when the entire Board consists
of one director, then one director shall constitute a quorum, and except that
when a vacancy or vacancies prevents such majority, a majority of the directors
in office shall constitute a quorum, provided that such majority shall
constitute at lease one-third of the entire Board. A majority of the directors
present, whether or not they constitute a quorum, may adjourn a meeting to
another time and place, Except as herein otherwise provided, and except as
otherwise provided by the New York Business Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board.
SECTION 7. TELEPHONIC MEETINGS. Any member or members of the Board of
Directors, or of any committee designated by the Board, may participate in a
meeting of the Board, or any such committee, as the case may be, by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting-to hear each other at the same time, and
participation in a meeting by such means shall constitute presence in person at
such meeting.
SECTION 8. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
SECTION 9. COMPENSATION OF DIRECTORS. By resolution of the Board of
Directors, the directors may be paid their expenses, if any, for attendance at
each regular or special meeting of the Board or of any committee designated by
the Board and may be paid a fixed sum for attendance at such meeting, or a
stated salary as director, or both. Nothing herein contained shall be construed
to preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor; provided however that directors who are also
salaried officers. shall not receive fees or salaries as directors.
ARTICLE IV
COMMITTEES
SECTION 1. IN GENERAL. The Board of Directors may, by resolution or
resolutions passed by the affirmative vote therefore of a majority of the entire
Board, designate an Executive Committee and such other committees as the Board
may from time to time determine, each to consist of three or more directors, and
each of which, to the extent provided in the resolution or in the certificate of
incorporation or in the By-Laws, shall have all the powers of the Board, except
that no such Committee shall have power to fill vacancies in the Board, or to
change the membership of or to fill vacancies in any Committee, or to make,
amend, repeal or adopt By-Laws of the Corporation, or to submit to the
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shareholders any action that needs shareholder approval under these By-Laws or
the New York Business Corporation Law, or to fix the compensation of the
directors for serving on the Board or any committee thereof, or to amend
or-repeal any resolution of the Board which by its terms shall not be so
amendable or repealable, Each committee shall serve at the pleasure of the
Board, The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence of disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
SECTION 2. EXECUTIVE COMMITTEE. Except as otherwise limited by the
Board of Directors or by these By-Laws, the Executive Committee, if so
designated by the Board of Directors, shall have and may exercise, when the
Board is not in session, all the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall have power
to authorize the sea[ of the Corporation to be affixed to all papers which may
require it. The Board shall have the power at any time to change the membership
of the Executive Committee, to fill vacancies in it, or to dissolve it. The
Executive Committee may make rules for the conduct of its business and may
appoint such assistance as it shall from time to time deem necessary. A majority
of the members of the Executive Committee, if more than a single member, shall
constitute a quorum.
ARTICLE V
OFFICERS
SECTION 1. DESIGNATION, TERM AND VACANCIES. The officers of the
Corporation shall be a President, one or more Vice-Presidents, a Secretary, a
Treasurer, and such other officers as the Board of Directors may from time to
time deem necessary. Such officers may have and perform the powers and duties
usually pertaining to their respective offices, the powers and duties
respectively prescribed by law and by these By-Laws, and such additional powers
and duties as may from time to time be prescribed by the Board. The same person
may hold any two or more offices, except that the offices of President and
Secretary may not be held by the same person unless all the issued and
out-standing stock of the Corporation is owned by one person, in which instance
such person may hold all or any combination of offices.
The initial officers of the Corporation shall be appointed by the
initial Board of Directors, each to hold office until the meeting of the Board
of Directors following the first annual meeting of shareholders and until his
successor has been appointed and qualified. In hereafter, the officers of the
Corporation shall be appointed by the Board as soon as practicable after the
election of the Board at the annual meeting of shareholders, and each officer so
appointed shall hold office until the first meeting of the Board of Directors
following the next annual meeting of shareholders and until his successor has
been appointed and qualified. Any officer may be removed at any time, with or
without cause, by the affirmative vote therefor of a majority of the entire
Board of Directors. All other agents and employees of the Corporation shall hold
office during the pleasure of the Board of Directors. Vacancies occurring among
the officers of the Corporation shall be filled by the Board of Directors. The
salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
SECTION 2. PRESIDENT. The President shall preside at all meetings of
the shareholders and at all meetings of the Board of Directors at which he may
be present. Subject to the direction of the Board of Directors, he shall be the
chief executive officer of the Corporation, and shall have general charge of the
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entire business of the Corporation. He may sign certificates of stock and sign
and seal bonds, debentures, contracts or other obligations authorized by the
Board, and may, without previous authority of the Board, make such contracts as
the ordinary conduct of the Corporation's business requires. He shall have the
usual powers and duties vested in the President of a corporation. He shall have
power to select and appoint all necessary officers and employees of the
Corporation, except those selected by the Board of Directors, and to remove all
such officers and employees except those selected by the Board of Directors, and
make new appointments to fill vacancies. He may delegate any of his powers to a
Vice- President of the Corporation.
SECTION 3. VICE-PRESIDENT. A Vice-President shall have such of the
President's powers and duties as the President may from time to time delegate to
him, and shall have such other powers and perform such other duties as may be
assigned to him by the Board of Directors. During the absence or incapacity of
the President, the Vice-President, or, if there be more than one, the
Vice-President having the greatest seniority in office, shall perform the duties
of the President, and when so acting shall have all the powers and be subject to
all the responsibilities of the office of President.
SECTION 4. TREASURER. The Treasurer shall have custody of such funds
and securities of the Corporation as may come to his hands or be committed to
his care by the Board of Directors. Whenever necessary or proper, he shall
endorse an behalf of the Corporation, for collection, checks, notes, or other
obligations, and shall deposit the same to the credit of the Corporation in such
bank or banks or depositories, approved by the Board of Directors as the Board
of Directors or President may designate. He may sign receipts or vouchers for
payments made to the Corporation, and the Board of Directors may require that
such receipts or vouchers shall also be signed by some other officer to be
designated by them. Whenever required by the Board of Directors, he shall render
a statement of his cash accounts and such other statements respecting the
affairs of the Corporation as may be required. He shall keep proper and accurate
books of account. He shall perform all acts incident to the office of Treasurer,
subject to the control of the Board.
SECTION 5. SECRETARY. The Secretary shall have custody of the seal of
the Corporation and when required by the Board of Directors, or when any
instrument shall have been signed by the President duly authorized to sign the
same, or when necessary to attest any proceedings of the shareholders or
directors, shall affix it to any instrument requiring the same and shall attest
the same with his signature, provided that the seal may be affixed by the
President or Vice-President or other officer of the Corporation to any document
executed by either of them respectively on behalf of the Corporation which does
not require the attestation of the Secretary. He shall attend to the giving and
serving of notices of meetings. He shall have charge of such books and papers as
properly belong to his office or as may be committed to his care by the Board of
Directors. He shall perform such other duties as appertain to his office or as
may be required by the Board of Directors.
SECTION 6. DELEGATION. In case of the absence of any officer of the
Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may temporarily delegate the powers or duties, or any of
them, of such officer to any other officer or to any director.
ARTICLE VI
STOCK
SECTION 1. CERTIFICATES REPRESENTING SHARES. All certificates rep-
resenting shares of the capital stock of the Corporation shall be in such form
not inconsistent with the Certificate of Incorporation, these By-Laws or the
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laws of the State of New York and shall set forth thereon the statements
prescribed by Section 508, and where applicable, by Sections 505, 616, 620, 709
and 1002 of the Business Corporation Law. Such shares shall be approved by the
Board of Directors, and shall be signed by the President or a Vice-President and
by the Secretary or the Treasurer and shall bear the seal of the Corporation and
shall not be valid unless so signed and sealed. Certificates countersigned by a
duly appointed transfer agent and/or registered by a duly appointed registrar
shall be deemed to be so signed and sealed whether the signatures be manual or
facsimile signatures and whether the seal be a facsimile seal or any other form
of seal. All certificates shall be consecutively numbered and the name of the
person owning the shares represented thereby, his residence, with the number of
such shares and the date of issue, shall be entered on the Corporation's books.
All certificates surrendered shall be canceled and no new certificates issued
until the former certificates for the same number of shares shall have been
surrendered and canceled, except as provided for herein.
In case any officer or officers who shall have signed or whose
facsimile signature or signatures shall have been affixed to any such
certificate or certificates, shall cease to be such officer or officers of the
Corporation before such certificate or certificates shall have been delivered by
the Corporation, such certificate or certificates may nevertheless be adopted by
the Corporation, and may be issued and delivered as though the person or persons
who signed such certificates, or whose facsimile signature or signatures shall
have been affixed thereto, had not ceased to be such officer or officers of the
Corporation.
Any restriction on the transfer or registration of transfer of any
shares of stock of any class or series shall be noted conspicuously on the
certificate representing such shares.
SECTION 2, FRACTIONAL SHARE INTERESTS. The Corporation, may, but shall
not be required to, issue certificates for fractions of a share. if the
Corporation does not issue fractions of a share, it shall (1) arrange for the
disposition of fractional interests by those entitled thereto, (2) pay in cash
the fair value of fractions of a share as of the time when those entitled to
receive such fractions are determined, or (3) issue scrip or warrants in
registered or bearer form which shall entitle the holder to receive a
certificate for a full share upon the surrender of such scrip or warrants
aggregating a full share. A certificate for a fractional share shall, but scrip
or warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
distribution of the assets of the Corporation in the event of liquidation. The
Board of Directors may cause scrip or warrants to be issued subject to the
conditions that they shall become void if not exchanged for certificates
representing full shares before a specified date, or subject to the condition
that the shares for which scrip or warrants are exchangeable may be sold by the
Corporation and the proceeds thereof distributed to the holders of scrip or
warrants, or subject to any other conditions which the, Board of Directors may
impose.
SECTION 3. ADDRESSES OF SHAREHOLDERS. Every shareholder shall furnish
the Corporation with an address to which notices of meetings and all other
notices may be served upon or mailed to him, and in default thereof notices may
be addressed to him at his last known post office address.
SECTION 4. STOLEN, LOST OR DESTROYED CERTIFICATES. The Board of
Directors may in its sole discretion direct that a new certificate or
certificates of stock be issued in place of any certificate or certificates of
stock theretofore issued by the Corporation, alleged to have been stolen, lost
or destroyed, and the Board of Directors when authorizing the issuance of such
new certificate or certificates, may, in its discretion, and as a condition
precedent thereto, require the owner of such stolen, lost or destroyed
Certificate or certificates or his legal representatives to give to the
Corporation and to such registrar or registrars and/or transfer agent or
transfer agents as may be authorized or required to countersign such
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new certificate or certificates, a bond in such sum as the Corporation may
direct not exceeding double the value of the stock represented by the
certificate alleged to have been stolen, lost or destroyed, as indemnity against
any claim that may be made against them or any of them for or in respect of the
shares of stock represented by the certificate alleged to have been stolen, lost
or destroyed.
SECTION 5. TRANSFERS OF SHARES. Upon compliance with all provisions
restricting the transferability of shares, if any, transfers of stock shall be
made only upon the books of the Corporation by the holder in person or by his
attorney thereunto authorized by power of attorney duly filed with the Secretary
of the Corporation or with a transfer agent or registrar, if any, upon the
surrender and cancellation of the certificate or certificates for such shares
properly endorsed and the payment of all taxes due thereon. The Board of
Directors may appoint one or more suitable banks and/or trust companies as
transfer agents and/or registrars of transfers, for facilitating transfers of
any class or series of stock of the Corporation by the holders thereof under
such regulations as the Board of Directors may from time to time prescribe. Upon
such appointment being made all certificates of stock of such class or series
thereafter issued shall be countersigned by one of such transfer agents and/or
one of such registrars of transfers, and shall not be valid unless so
countersigned.
ARTICLE VII
DIVIDENDS AND FINANCE
SECTION 1. DIVIDENDS. The Board of Directors shall have power to fix
and determine and to vary, from time to time, the amount of the working capital
of the Corporation before declaring any dividends among its shareholders, and to
direct and determine the use and disposition of any net profits or surplus, and
to determine the date or dates for the declaration and payment of dividends and
to determine the amount of any dividend, and the amount of any reserves
necessary in their judgment before declaring any dividends among its
shareholder, and to determine the amount of the net profits of the Corporation
from time to time available for dividends.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall end on
the last day of in each year and shall begin on the next succeeding day, or
shall be for such other period as the Board of Directors may from time to time
designate with the consent of the Department of Taxation and Finance, where
applicable.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 1. STOCK OF OTHER CORPORATIONS. The Board of Directors shall
have the right to authorize any director, officer or other person on behalf of
the Corporation to attend, art and vote at meetings of the Shareholders of any
corporation in which the Corporation shall hold stock, and to exercise thereat
any and all rights and powers incident to the ownership of such stock, and to
execute waivers of notice of such meetings and calls therefor; and authority may
be given to exercise the same either on one or more designated occasions or
generally on all occasions until revoked by the Board. In the event that the
Board shall fail to give such authority, such authority may be exercised by the
President in person or by proxy appointed by him on behalf of the Corporation.
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Any stocks, or securities owned by this Corporation may, if so
determined by the Board of Directors, be registered either in the name of this
Corporation or in the name of any nominee or nominees appointed for that purpose
by the Board of Directors.
SECTION 2. BOOKS AND RECORDS. Subject to the New York Business Corp-
oration Law, the Corporation may keep its books and accounts outside the State
of New York.
SECTION 3. NOTICES. Whenever any notice is required by these By-Laws to
be given, personal notice is not meant unless expressly so stated, and any
notice so required shall be deemed to be sufficient if given by depositing the
same in a post office box in a sealed postpaid wrapper, addressed to the person
entitled thereto at his last known post office address, and such notice shall be
deemed to have been given on the day of such mailing.
Whenever any notice whatsoever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation or these By-Laws a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or, after the time stated
therein, shall be deemed equivalent thereto.
SECTION 4. AMENDMENTS. Except as otherwise provided herein, these
By-Laws may be altered, amended or repealed and By-Laws may be made at any
annual meeting of the shareholders or at any special meeting thereof if notice
of the proposed alteration, amendment or repeal or By-Law or By-Laws to be made
be contained in the notice of such special meeting, by the holders of a majority
of the shares of stock of the Corporation outstanding and entitled to vote
thereat or by a majority of the Board of Directors at any regular meeting of the
Board of Directors, or at any special meeting of the Board of Directors, if
notice of the proposed alteration, amendment or repeal, or By-Law or By-Laws to
be made, be contained in the Notice of such Special Meeting.
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AGREEMENT OF SALE
AGREEMENT made and entered into as of the 17th day of December, 1996,
by and between SALVATORE CASACCIO, residing at 64 Burton Avenue, Staten Island,
New York 10309, ANTONIO CASACCIO, residing at 2009 East 24th Street, Brooklyn,
New York 11229 and AGRIPPINO CASACCIO, residing at 2009 East 24th Street,
Brooklyn, New York (hereinafter referred to as the "Sellers"), EASTSIDE
PLAYROBICS, INC. a domestic corporation organized and existing under and by
virtue of the Laws of the State of New York with its principal place of business
at 345 East 80th Street, New York, New York 11735 ("EASTSIDE"), AVENUE U
PLAYROBICS, INC. a domestic corporation organized and existing under and by
virtue of the Laws of the State of New York with its principal place of business
at 369 Avenue U, Brooklyn, New York 11223("AVENUE U") and BAYBRIDGE PLAYROBICS,
INC. a domestic corporation organized and existing under and by virtue of the
Laws of the State of New York with its principal place of business at 208-32
Cross Island Parkway, Bayside, New York 11360 ("BAYBRIDGE") and LEARNERS WORLD
INC. a domestic corporation organized and existing under and by virtue of the
Laws of the State of New York with its principal place of business at 369 Avenue
U, Brooklyn, New York ( hereinafter referred to as "Purchaser").
WITNESSETH:
WHEREAS: EASTSIDE, AVENUE U and BAYBRIDGE presently own and operate
children's indoor playgrounds located at 345 East 80th Street, New York, New
York, 369 Avenue U, Brooklyn, New York and 208-32 Cross Island Parkway, Bayside,
New York, respectively;
WHEREAS: SALVATORE CASACCIO, ANTONIO CASACCIO and AGRIPPINO CASACCIO desire
to sell all of their shares in the subject Corporations, EASTSIDE, AVENUE U and
BAYBRIDGE to Purchaser at a price of $ 775,000.00 (the "Purchase Price");
WHEREAS: EASTSIDE now has issued and outstanding One Hundred (100) common
shares, of which 33.4 shares are owned by Salvatore Casaccio, 33.3 shares are
owned by Antonio Casaccio and 33.3 shares are owned by Agrippino Casaccio;
WHEREAS: AVENUE U now has issued and outstanding One Hundred (100) common
shares, of which 33.4 shares are owned by Salvatore Casaccio, 33.3 shares are
owned by Antonio Casaccio and 33.3 shares are owned by Agrippino Casaccio;
WHEREAS: BAYBRIDGE now has issued and outstanding one Hundred (100) common
shares, of which 33.4 shares are owned by Salvatore Casaccio, 33.3 shares are
owned by Antonio Casaccio and 33.3 shares are owned by Agrippino Casaccio;
WHEREAS: The Corporation's Boards of Directors have unanimously determined
that the Purchase Price is fair and that the offer of the Purchaser should be
accepted, and agree to all of the terms of this transaction;
WHEREAS: The Purchaser agrees to assume any and all obligations, financial
and otherwise of the Sellers;
NOW, THEREFORE, in consideration of the foregoing promises and the
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
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1. SALE AND PURCHASE OF SHARES. The Sellers agree to sell and transfer
to the Purchaser and the Purchaser agrees to purchase, upon the terms and
conditions hereinafter set forth, the 300 shares of the common/capital stock of
the Corporations, EASTSIDE, AVENUE U and BAYBRIDGE, said shares constituting all
of the authorized and issued shares of the Corporation (hereinafter referred to
as the "Shares").
2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by the
Purchaser as follows:
(a) SEVEN HUNDRED SEVENTY FIVE THOUSAND
($ 775,000.00) Dollars to be paid over a period of FOUR years, payable together
with interest at the rate of 7% per annum (hereinafter "Balance of Purchase
Price"). The monthly payment of principal and interest shall be $ and shall
commence on January 1, 1998 and monthly thereafter. In the event any payment is
later that 15 days after date due, the Purchaser shall pay a late charge of 4%
the payment due as a late charge. The $ 775,000.00 shall be evidenced by a
single Promissory Note (the "Note") representing the sums due and providing for
the payment of monthly installments. Purchaser shall sign any and all documents
necessary to secure and insure payment of the terms of the Note, including but
not limited to UCC-1's , Security Agreements, Guarantees, Affidavits and other
necessary documents. In addition, Purchaser shall pay the fees of the Seller's
attorney in connection with drafting the aforesaid documents, and Purchaser
shall provide life insurance to the Seller, naming the Seller as the Named
Beneficiary.
In the event Seller desires to sell, transfer or otherwise negotiate
the above Notes, Purchasers and/ or Guarantors shall execute any and all
documents necessary to effectuate such sale, transfer or negotiation at closing.
In the event additional documents need to be signed by the Purchasers and/or
Guarantors after closing, Purchasers and Guarantors agree to sign sign.
3. ACCEPTABLE FUNDS. All money payable under this Agreement, unless
otherwise specified, shall be paid in good check of Purchaser, payable to the
direct order of the Seller or Seller's designee, or as otherwise agreed to in
writing by the parties and their attorneys.
4. CLOSING DOCUMENTS. The Closing means the settlement of the
obligations of the Seller, Purchaser and Guarantors to each other under this
Agreement, including the payment of the purchase price to the Seller as provided
in Paragraph "2" hereof, and delivery of the closing documents provided for in
Article 5 hereof. The closing shall be held at the office of CRAIG A. EATON,
ESQ. 1662 SHEEPSHEAD BAY ROAD, BROOKLYN, NEW YORK 11235, AT 9:30 AM ON OR ABOUT
DECEMBER 1996 (the "Closing Date").
5. CLOSING DOCUMENTS. At the Closing, Sellers shall execute and
deliver to Sellers' Attorney:
(a) the Certificate or Certificates for the Shares duly endorsed so as
to effectively transfer ownership of the Shares to Purchaser; As security for
the indebtedness, the Purchaser's shares shall be signed in blank and delivered,
along with the original Leases to the subject premises identified herein, to
Sellers' attorney, CRAIG A. EATON ("Escrowee"), to be hand in escrow by him as
provided for herein. Purchaser shall pay all costs and fees in connection with
the filing and preparation of the Security Agreement and forms, including
Sellers, attorneys, fees.
(b) letters of resignation from each director and officer of the
Corporation, effective as of the Closing Date.
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(c) the Certificate of Incorporation and other organizational documents
of the Corporation.
(d) UCC-l financing statements/forms and other forms necessary to
secure Purchaser's indebtedness.
The Stock Certificate/Certificates and all other documents shall be
held in escrow by Sellers' attorney until such time as full payment is made to
the Sellers. In the event of a default in the payment of any sums due under the
Note, the Escrow Agent shall turn over the Stock Certificates and other
documents to the Sellers, and said Sellers may then re-enter the premises.
In the event of a default, Sellers may declare the entire unpaid
principal balance due and payable, and in addition shall have all rights and
remedies provided for in the Notes and Security Agreements.
In the event Escrowee receives a Notice that there was a default in the
payment of any installment due under the Note, upon ten (10) days notice to
Purchaser, by Certified Mail, RRR, Escrowee shall deliver the Stock Certificates
to Sellers, at which time Sellers may complete the blank endorsement, thereby
transferring said shares as directed by Sellers, and Sellers may take possession
of the Original Leases to the subject premises.
At the Closing, Purchaser shall execute and deliver to Sellers:
(a) Promissory Note/Notes, Security Agreement, UCC-I's,
Guarantee and any other documents needed to secure payment of the Note/Notes.
The Security Agreement shall give Sellers a security interest in all
property, furniture, fixtures, equipment, merchandise, computers, games, stock,
inventory, accounts receivable, bank accounts and all other assets, property and
rights of the Purchaser.
(b) Assumption Agreement and any documents needed to
effectuate Purchaser and Guarantors agreement to assume any and all obligations,
financial and otherwise of the Seller, including but not limited to
(c) General Releases.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER: Purchaser represent
s and warrants
to Seller as follows:
(a) Purchaser is a corporation organized and existing under and by
virtue of the laws of the State of New York, and is duly qualified to do
business in the State of New York. Purchaser has full power and authority to
carry out and perform its undertakings and obligations as provided herein. The
execution and delivers by Purchaser of this Agreement and the consummation of
the transactions contemplated herein have been duly authorized by the Board of
Directors of Purchaser.
(b) No action, approval, consent or authorization of any governmental
authority is necessary for Purchaser to consummate the transactions contemplated
hereby.
7. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Purchaser as follows:
46
<PAGE>
(a) Seller has full power and authority to carry out and perform its
undertakings and obligations as provided herein. The execution and delivery by
Seller of this Agreement and the consummation of the transactions contemplated
herein have been duly authorized by the Board of Directors of the Seller.
(b) No action, approval, consent or authorization of any governmental
authority is necessary for Seller to consummate the transactions contemplated
hereby.
(c) The Corporation is a corporation duly organized and existing
under and by virtue of the Laws oil the State of New York, and the Corporation
is validly existing and has not been dissolved.
(d) The Seller represents and warrants that it is the owner, free and
clear of any encumbrance, of the common shares of the Corporation referred to in
this Agreement.
8. NO OTHER REPRESENTATIONS. Purchaser acknowledges that neither
Seller nor any representatives or agents of Seller have made any representation
or warranty, express or implied, regarding the Corporation, or any thing or
matter affecting or relating to this Agreement, except as specifically set forth
in this Agreement.
9. BROKERAGE. Purchaser represents and warrants that i: has not dealt
with any broker or finder in connection with this Agreement, the purchase of the
shares from Seller or the transactions contemplated hereby, and no broker or any
other person or entity is entitled to receive any brokerage commission, finder's
fee or any type of compensation in connection with this Agreement or the
transactions contemplated hereby. Purchase shall indemnify and hold Seller
harmless from and against all liability, claim, loss, damage and/or expenses,
including reasonable attorneys fees, pertaining to any action, claim or suit,
brought by any broker, finder, or other person or entity with whom Purchaser
dealt with. The provisions of this Article io shall survive the closing.
10. STOCK.The Purchaser's Stock shall be issued and owned as follows:
One Hundred (100%) Percent of the issued and outstanding stock to be
held in the name of Purchaser.
11. RESIGNATION OF SELLER. Concurrently herewith, the Sellers shall
each submit their resignation as directors of the Corporation. The resignation
of such Directors shall take effect at the time of its submission.
12. GENERAL RELEASE. On the Closing Date, the Corporation and the
parties shall exchange general releases, each of which, however, shall contain a
provision excluding the respective obligations of the parties hereunder.
13. SURVIVAL. None of the representations, warranties, covenants or
other obligations of Seller hereunder shall survive the closing, except as
expressly provided herein. Acceptance of the Bill of Sale by Purchaser shall be
deemed full and complete performance and discharge of every agreement and
obligation on the part of Seller hereunder, except those, if any, which
expressly are stated herein to survive the closing.
14. ARBITRATION. Any dispute or controversy under this Agreement
shall be determined and settled by arbitration in New York City in accordance
with the rules of the American Arbitration Association. Any award rendered
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<PAGE>
therein shall be final and binding on the parties and judgment may be entered
thereon in any court of competent jurisdiction.
15. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the respective parties hereto, their legal representatives,
successors, and assigns.
16. ENTIRE AGREEMENT. This Agreement supersedes all agreements
previously made between the parties relating to its subject matter. There are no
other understandings or agreements between them. It is understood that no oral
or other representations have been made by either party to the other, and that
all agreements, representations and warranties made are incorporated herein, and
this document contains the entire agreement between the parties, and the same or
any portion thereof may not be abandoned, modified, amended, discharged or
waived without a writing signed by the parties.
17. NOTICES. All notices, demands, other communications or other
documents required or permitted to be given hereunder shall be in writing and
delivered personally or mailed by certified mail, postage prepaid, addressed to
the parties at their last known addresses.
18. NON WAIVER. No delay or failure by either party to exercise any
right under this Agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right, unless otherwise expressly
provided herein.
19. HEADINGS. Headings in this Agreement are for convenience only
and shall not be used to interpret or construe its provisions.
20. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. MISCELLANEOUS. In the event of a sale, donation, pledge,
hypothecation, assignment and/or transfer of LEARNERS WORLD INC. or the sale,
donation, pledge, hypothecation, assignment and/or transfer of any shares of
stock of LEARNERS WORLD INC., then in such event, any and all unpaid principal
balance due under the terms of the Note, shall be accelerated and shall become
due and upon such sale, and payment is to be made out of the proceeds of such
sale.
23. LEGEND ON CERTIFICATES. Every Certificate representing the Shares
of LEARNERS WORLD INC. shall bear the following legend:
THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO, AND MAY NOT
BE TRANSFERRED EXCEPT IN ACCORDANCE WITH, THE PROVISIONS OF THAT CERTAIN
AGREEMENT OF SALE DATED DECEMBER 1996, WHICH REQUIRES FULL PAYMENT OF ANY AND
ALL OUTSTANDING PRINCIPAL, INTEREST AND OTHER CHARGES DUE UNDER THE TERMS OF THE
PROMISSORY NOTES SIGNED PURSUANT TO THE TERMS OF SUCH AGREEMENT OF SALE.
IN WITNESS WHEREOF each of the parties hereto has executed this
Agreement as of the date and year first above written.
48
<PAGE>
Corporate Seal:
/S/ SALVATORE CASACCIO
-------------------------
SALVATORE CASACCIO
/S/ AGRIPPINO CASACCIO
-------------------------
AGRIPPINO CASACCIO
/S/ ANTONIO CASACCIO
-------------------------
ANTONIO CASACCIO
EASTSIDE PLAYROBICS, INC.
BY: /S/ SALVATORE CASACCIO
--------------------------
AVENUE U PLAYROBICS, INC
BY: /S/ SALVATORE CASACCIO
---------------------------
BAYBRIDGE PLAYROBICS, INC.
BY: /S/ SALVATORE CASACCIO
----------------------------
LEARNERS WORLD, INC.
----------------------------
BY: /S/ DOMINICK J. MORREALE
49
$775,000.00 DATED: OCTOBER 26, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, Learner's World, Inc. ("Maker"), promises
to pay to Antonio Casaccio, Agrippino Casaccio and Salvatore Casaccio,
individuals hereinafter referred to jointly as "Holder", or order, Seven Hundred
Seventy Five Thousand Dollars ($775,000.00). As full and complete payment of
that Agreement of Sale dated December 17, 1996 to which the Maker and Holder
were parties.
1. PAYMENTS. The principle on the obligation represented hereby
shall be repaid in installments of interest only beginning
on February 1, 2000 through February 1, 2001, beginning with
March 1, 2001 monthly payments of interest and principle in
the amount of $11,918.18 shall be due with an equal amount
due the first of each calendar month until December 31, 2007
at which time the entire unpaid principle and any unpaid
interest, if any, shall be paid in full. There is no back
interest accruable or due at any time before December 31,
1999.
2. INTEREST. The obligation shall bear simple interest which
shall be at the rate of 7% per annum, beginning on January
1, 2000, with the entire unpaid interest payable on or
before December 31, 2007.
3. TYPE AND PLACE OF PAYMENTS. Payments of principal and
interest shall be made in lawful money of the United States
of America to the above-named Holder at 369 Avenue U,
Brooklyn, New York 11223, or order.
4. PREPAYMENT. Advance payment or payments may be made on the
principal, without penalty or forfeiture. There shall be no
penalty for any prepayment.
5. DEFAULT. Upon the occurrence or during the continuance of
any one or more of the events hereinafter enumerated, Holder
or the holder of this Note may forthwith or at any time
thereafter during the continuance of any such event, by
notice in writing to the Maker, declare the unpaid balance
of the principal and interest on the Note to be immediately
due and payable, and the principal and interest shall become
and shall be immediately due and payable without
presentation, demand, protest, notice of protest, or other
notice of dishonor, all of which are hereby expressly waived
by Maker, such events being as follows:
(a) Default in the payment of the principal and interest of
this Note or any portion thereof when the same shall
become due and payable, whether at maturity as herein
expressed, by acceleration, or otherwise, unless cured
within five (5) days after notice thereof by Holder or
the holder of such Note to Maker.
(b) Maker shall file a voluntary petition in bankruptcy or
a voluntary petition seeking reorganization, or shall
file an answer admitting the jurisdiction of the court
and any material allegations of an involuntary petition
filed pursuant to any act of Congress relating to
bankruptcy or to any act purporting to be amendatory
thereof, or shall be adjudicated
50
<PAGE>
bankrupt, or shall make an assignment for the benefit of
creditors, or shall apply for or consent to the
appointment of any receiver or trustee for Maker, or of
all or any substantial portion of its property, or
Maker shall make an assignment to an agent authorized
to liquidate any substantial part of its assets; or
(c) An order shall be entered pursuant to any act of
Congress relating to bankruptcy or to any act
purporting to be amendatory thereof approving an
involuntary petition seeking reorganization of the
Maker, or an order of any court shall be entered
appointing any receiver or trustee of or for Maker, or
any receiver of trustee of all or any substantial
portion of the property of Maker, or a writ or warrant
of attachment or any similar process shall be issued by
any court against all or any substantial portion of the
property of Maker, and such order approving a petition
seeking reorganization or appointing a receiver or
trustee is not vacated or stayed, or such writ, warrant
of attachment, or similar process is not released or
bonded within 60 days after its entry or levy.
6. ATTORNEYS' FEES. If this Note is placed with an attorney for
collection, or if suit be instituted for collection, or if any
other remedy permitted by law is pursued by Holder, because of
any default in the terms and conditions herein, then in such
event, the undersigned agrees to pay reasonable attorneys' fees,
costs, and other expenses incurred by Holder in so doing.
7. SECURITY. The payment of this note is secured by a Security
Agreement of even date herewith, payment being secured by the
real and personal property of the Maker.
8. CONSTRUCTION. This Note shall be governed by and construed in
accordance with the laws of the State of New York.
Learner's World, Inc., "Maker"
BY: /S/ SALVATORE CASACCIO
--------------------------------
TITLE: PRESIDENT
ATTEST BY
Secretary of Learner's World, Inc.
ACCEPTED: SALVATORE CASACCIO /S/ SALVATORE CASACCIO
------------------------
ANTONIO CASACCIO /S/ ANTONIO CASACCIO
------------------------
AGRIPINO CASACCIO /S/ AGRIPINO CASACCIO
------------------------
51
THE 1999 BENEFIT PLAN
OF
LEARNER'S WORLD, INC.
52
<PAGE>
THE 1999 BENEFIT PLAN OF Learner's World, Inc.
Learner's World, Inc., a New York corporation (the "Company"),
hereby adopts The 1999 BENEFIT PLAN OF LEARNER'S WORLD, INC.'S EMPLOYEES (THE
"PLAN") THIS 19TH day of November 1999. Under the Plan, the Company may issue
shares of the Company's common stock or grant options to acquire the Company's
common stock, par value $0.0001 (the "Stock"), from time to time to employees,
directors, officers, consultants or advisors of the Company or its subsidiaries,
all on the terms and conditions set forth herein. In addition, at the discretion
of the Board of Directors, Shares may from time to time be granted under this
Plan to other individuals, including consultants or advisors, who contribute to
the success of the Company or its subsidiaries but are not employees of the
Company or its subsidiaries, provided that bona fide services shall be rendered
by consultants and advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
1. PURPOSE OF THE PLAN. The Plan is intended to aid the Company in
maintaining and developing a management team, attracting qualified officers and
employees capable of assuring the future success of the Company, and rewarding
those individuals who have contributed to the success of the Company. The
Company has designed this Plan to aid it in retaining the services of executives
and employees and in attracting new personnel when needed for future operations
and growth and to provide such personnel with an incentive to remain employees
of the Company, to use their best efforts to promote the success of the
Company's business, and to provide them with an opportunity to obtain or
increase a proprietary interest in the Company. It is also designed to permit
the Company to reward those individuals who are not employees of the Company but
who management perceives to have contributed to the success of the Company or
who are important to the continued business and operations of the Company. The
above goals will be achieved through the granting of Shares.
2. ADMINISTRATION OF THIS PLAN. Administration of this Plan shall be
determined by the Company's Board of Directors (the "Board"). Subject to
compliance with applicable provisions of the governing law, the Board may
delegate administration of this Plan or specific administrative duties with
respect to this Plan on such terms and to such committees of the Board as it
deems proper (hereinafter the Board or its authorized committee shall be
referred to as "Plan Administrators"). The interpretation and construction of
the terms of this Plan by the Plan Administrators thereof shall be final and
binding on all participants in this Plan absent a showing of demonstrable error.
No member of the Plan Administrators shall be liable for any action taken or
determination made in good faith with respect to this Plan. Any shares approved
by a majority vote of those Plan Administrators attending a duly and properly
held meeting shall be valid. Any shares approved by the Plan Administrators
shall be approved as specified by the Board at the time of delegation.
3. SHARES OF STOCK SUBJECT TO THIS PLAN. The total value of shares
issues pursuant to this Plan shall not exceed a value of greater then Five
Hundred Thousand dollars ($500,000). If any right to acquire Stock granted under
this Plan is exercised by the delivery of shares of Stock or the relinquishment
of rights to shares of Stock, only the net shares of Stock issued (the shares of
stock issued less the shares of Stock surrendered) shall count against the total
number and value of shares reserved for issuance under the terms of this Plan.
4. RESERVATION OF STOCK ON GRANTING OF RIGHTS. At the time any right
is granted under the terms of this Plan, the Company will reserve for issuance
53
<PAGE>
the number of shares of Stock subject to such right until that right is
exercised or expires. The Company may reserve either authorized but unissued
shares or issued shares reacquired by the Company.
5. ELIGIBILITY. The Plan Administrators may grant shares to employees,
officers, and directors of the Company and its subsidiaries, as may be existing
from time to time, and to other individuals who are not employees of the Company
or its subsidiaries, including consultants and advisors, provided that such
consultants and advisors render bona fide services to the Company or its
subsidiaries and such services are not rendered in connection with the offer or
sale of securities in a capital-raising transaction. In any case, the Plan
Administrators shall determine, based on the foregoing limitations and the
Company's best interests, which employees, officers, directors, consultants and
advisors are eligible to participate in this Plan. Shares shall be in the
amounts, and shall have the rights and be subject to the restrictions, as may be
determined by the Plan Administrators, all as may be within the provisions of
this Plan.
6. TERMS OF GRANTS AND CERTAIN LIMITATIONS ON RIGHT TO EXERCISE.
a. Each right to shares may its terms established by the Plan
Administrators at the time the right is granted.
b. The terms of the right, once it is granted, may be reduced
only as provided for in this Plan and under the express
written provisions of the grant.
c. Unless otherwise specifically provided by the written
provisions of the grant or required by applicable disclosure
or other legal requirements promulgated by the Securities and
Exchange Commission ("SEC"), no participant of this Plan or
his or her legal representative, legatee, or distributee will
be, or shall be deemed to be, a holder of any shares subject
to any right unless and until such participant exercises his
or her right to acquire all or a portion of the Stock subject
to the right and delivers any required consideration to the
Company in accordance with the terms of this Plan and then
only as to the number of shares of Stock acquired. Except as
specifically provided in this Plan or as otherwise
specifically provided by the written provisions of any grant,
no adjustment to the exercise price or the number of shares of
Stock subject to the grant shall be made for dividends or
other rights for which the record date is prior to the date on
which the Stock subject to the grant is acquired by the
holder.
d. Rights shall vest and become exercisable at such time or
times and on such terms as the Plan Administrators may
determine at the time of the grant of the right.
e. Grants may contain such other provisions, including further
lawful restrictions on the vesting and exercise of the grant
as the Plan Administrators may deem advisable.
f. In no event may an grant be exercised after the expiration
of its term.
g. Grants shall be non-transferable, except by the laws of
descent and distribution.
7. EXERCISE PRICE. The Plan Administrators shall establish the
exercise price payable to the Company for shares to be obtained pursuant to any
54
<PAGE>
purchase options which exercise price may be amended from time to time as the
Plan Administrators shall determine.
8. PAYMENT OF EXERCISE PRICE. The exercise of any option shall be
contingent on receipt by the Company of the exercise price paid in either cash,
certified or personal check payable to the Company.
9. WITHHOLDING. If the grant or exercise of any right is subject to
withholding or other trust fund payment requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), or applicable state or local laws, the
Company will initially pay the recipient's liability and will be reimbursed by
that person no later than six months after such liability arises and such person
hereby agrees to such reimbursement terms.
10. DILUTION OR OTHER ADJUSTMENT. The shares of Common Stock subject to
this Plan and the exercise price of outstanding options are subject to
proportionate adjustment in the event of a stock dividend on the Common Stock or
a change in the number of issued and outstanding shares of Common Stock as a
result of a stock split, consolidation, or other recapitalization. The Company,
at its option, may adjust the grants and rights made hereunder, issue
replacements, or declare grants void.
11. OPTIONS TO FOREIGN NATIONALS. The Plan Administrators may, in order
to fulfill the purpose of this Plan and without amending this Plan, grant
Options to foreign nationals or individuals residing in foreign countries that
contain provisions, restrictions, and limitations different from those set forth
in this Plan and the Options made to United States residents in order to
recognize differences among the countries in law, tax policy, and custom. Such
grants shall be made in an attempt to give such individuals essentially the same
benefits as contemplated by a grant to United States residents under the terms
of this Plan.
12. LISTING AND REGISTRATION OF SHARES. Each grant shall be subject to
the requirement that if at any time the Plan Administrators shall determine, in
their sole discretion, that it is necessary or desirable to list, register, or
qualify the shares covered thereby on any securities exchange or under any state
or federal law, or obtain the consent or approval of any governmental agency or
regulatory body as a condition of, or in connection with, the granting of such
rights or the issuance or purchase of shares thereunder, such right may not be
exercised in whole or in part unless and until such listing, registration,
consent, or approval shall have been effected or obtained free of any conditions
not acceptable to the Plan Administrators.
13. EXPIRATION AND TERMINATION OF THIS PLAN. This Plan may be abandoned
or terminated at any time by the Plan Administrators except with respect to any
rights then outstanding under this Plan. This Plan shall otherwise terminate on
the earlier of the date that is five years from the date first appearing in this
Plan or the date on which the 1.5 millionth share is issued hereunder.
14. AMENDMENT OF THIS PLAN. This Plan may not be amended more than once
during any six month period, other than to comport with changes in the Code or
the Employee Retirement Income Security Act or the rules and regulations
promulgated thereunder. The Plan Administrators may modify and amend this Plan
in any respect; provided, however, that to the extent such amendment or
modification would cause this Plan to no longer comply with the applicable
provisions of the Code governing incentive stock options as they may be amended
from time to time, such amendment or modification shall also be approved by the
shareholders of the Company.
55
<PAGE>
ATTEST:
/S/ SALVATORE CASACCIO
-----------------------------
Salvatore Casaccio, President
56
STANDARD FORM OF STORE LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
- -------------------------------------------------------------------------------
AGREEMENT OF LEASE MADE AS OF THIS 26TH day of March, 1993 between JOHN
PADUANO, party of the first part, hereinafter referred to as OWNER and CHILD'S
PLAYROBICS, INC., a domestic corporation, party of second part, hereinafter
referred to as TENANT.
WITNESSETH: Owner hereby lease to Tenant and Tenant hereby hires from
Owner the entire premises (building, lot, basement and parking lot) located at
369 Avenue U, Block 7104, lot 499 (listed on 1964 Cert. Of Occup. As lot 522) in
the Borough of Brooklyn, City of New York, for term of Fifteen (15) Years (or
until such term shall sooner cease and expire as hereinafter provided) to
commence on the
Day of nineteen hundred and , and to end on the
thirtieth (30) day of May, two thousand and fourteen both dates inclusive, at an
annual rate of $ . See paragraph "C" hereof.
Which Tenant agrees to pay in lawful money of the United States which
shall be legal tender in payment of all debts and dues, public and private, at
the time of payment, in equal monthly installment in advance of the first day of
each month during said term, at the office of Owner or such place as Owner may
designate, without any set off or deduction whatsoever, excepts that Tenant
shall pay first monthly installment(s) on the execution hereof (unless this
lease be a renewal).
The parties hereto, for themselves, their heirs, distributees,
executors, administrator, legal representatives, successors and assigns, hereby
covenant as follows:
RENT OCCUPANCY
1. Tenant shall pay the rent as above and as hereinafter
provided.
2. Tenant shall use and occupy demised premises for use as a
children play center with refreshment, retail sales and
related use and for no other purpose, tenant shall at all
times conduct its business in a high grade and reputable
manner, shall not violate Articles 37 hereof, and shall keep
show windows and signs in a neat and clean condition.
ALTERATIONS
3. Tenant shall make no changes in or to demised premises of
any nature without Owner's prior written consent. Subject to
prior written consent of Owner and to the provisions of this
articles, Tenant at Tenant's expense, may make alterations,
installations, additions or improvement which are
nonstructural and which do not affect utility services or
plumbing and electrical lines, in or to the interior of
demised premises by using contractors or mechanics first
approved by Owner. Tenant shall, before making any
alterations, installations, additions or improvement, at its
expense, obtain all permits, approvals and certificates
required by any governmental or quasi-governmental bodies
and (upon completion) certificates of final approval thereof
and shall deliver promptly duplicates of all such permits,
approvals and certificates to Owner and Tenant agrees to
carry and will cause Tenant's contractors and
sub-contractors to carry such workman's compensation,
general liability, personal and property damage insurance as
Owner may require. If any mechanic's lien is filed against
the demised premises, or the building of which the same
forms a
57
<PAGE>
part, for work claimed to have done for, or materials
furnished to, Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within ten
days thereafter, at Tenant's expense, bu filling the bond
required by law. All fixtures and all paneling, partitions,
railing and installations, installed in the premises at any
times, either by Tenant or by Owner in Tenant's behalf,
shall, upon installations, become the property of Owner and
shall remain upon and be surrendered with the demised
premises unless Owner, by notice to Tenant no later then
twenty days prior to the date fixed as the termination of
this lease, elects to relinquish Owner's rights thereto and
to have them removed by Tenant, in which event, the same
shall be removed from the premises by Tenant prior to the
expirations of the lease, at Tenant's expense. Nothing in
this article shall be construed to give Owner title to or to
prevent Tenant's removal of trade fixtures, moveables office
furniture and equipment, but upon removal of any such from
the premises or upon removal of other installations as may
be requires by Owner. Tenant shall immediately and at its
expense, repair and restore the premises to the condition
existing prior ro installation and repair any damage to the
demised premises or the building due to such removal. All
property permitted or required to be removed by Tenant at
the end of the term remaining in the premises after Tenant's
removal shall be deemed abandoned and may, at the election
of Owner, either be retained as Owner's property or may be
removed from the premises by Owner at Tenant's expense.
REPAIR
4. Owner shall maintain and repair the public portions of
the building, both exterior and interior, except that if
Owner allows Tenant to erect on the outside of the building
a sign or signs, or a hoist, lift or sidewalk elevator for
the exclusive use of Tenant. Tenant shall maintain such
exterior installations in good appearance and shall cause
the same to be operated in a good and workmanlike manner and
shall make all repair thereto necessary to keep same in good
order and condition, at Tenant's own cost and expense, and
shall cause the same to be covered by the insurance provided
for hereafter in Article 8. Tenant shall, throughout the
term of this lease, take good care of the demised premises
and the fixtures and appurtenances therein, and the
sidewalks adjacent thereto, and it its sole cost and
expense, make all non-structural repairs thereto as and when
needed to preserve them in good working order and condition,
reasonable wear and tear, obsolescence and damage from the
elements and fire or other casualty, excepted. If the
demised premises be or become infested with vermin, Tenant
shall at Tenant's expense, cause the same to be exterminated
from time to time to the satisfaction of Owner. Except as
specifically provide in Article 9 or elsewhere in this
lease, there shall be no allowance to the Tenant for the
diminution of rental value and no liability on the part of
Owner by reason of inconvenience, annoyance or injury to
business arising from Owner, Tenant or others making or
failing to make any repair, alterations, additions or
improvements in or to any portion of the building or the
demised premises, or in and to the fixtures, appurtenances
or equipment thereof. The provisions of this article 4 with
respect o the making of repair shall not apply in the case
of fire or other casualty which are dealt with in article 9
hereof.
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WINDOW CLEANING
5. Tenant will not clean nor require, permit, suffer or
allow any window in demised premises to be cleaned from the
outside in violation of Section 202 of the New York State
Labor Law or any other applicable law or of the Rules of the
Board of Standards and Appeals, or of any other Board or
body having or asserting jurisdiction.
FIRE REQUIREMENTS
6. Prior to commencement of lease term, if Tenant is then in
possession, and at all times thereafter, Tenant at Tenant's
sole cost and expense, shall promptly conform to regulations
of all state, federal, municipal and local governments,
departments, commissions and boards and any direction of any
public officer pursuant to law and all orders, rules and
regulations of the New York Board of Fire Underwriters or
the Insurance Services Offices , or any similar body which
may impose violation, order or duty upon Owner or Tenant
with respect to the demised premises, and with respect to
the portion of the sidewalk adjacent to the premises, if the
premises are on the street level, whether or not arising out
of the Tenant's use or manner of use thereof, or with
respect to the building if arising out of the Tenant's use
or manner of use of the premises or the building (including
the use permitted under the lease). Except as provided in
Article 29 hereof, nothing herein shall require Tenant to
make structural repairs or alterations unless Tenant has by
its manner of use of the demised premises of method of
operation therein, violated any such laws, ordinances.
orders, rules, regulations or requirements with respect
thereto. Tenant shall not do or permit any act or thing to
be done in or to the demised premises which is contrary to
law, or which will invalidate or be in conflict with public
liability, fire or other policies of insurance at any time
carried by or for the benefit of Owner. Tenant shall pay all
costs, expenses, fines, penalties or damages, which may he
imposed upon Owner by reason of Tenant's failure to comply
with fire provisions or this article, if the fire insurance
rate shall, at the beginning of the lease or at any time
thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder,
for that portion of all fire insurance premiums thereafter
paid by Owner which Shall have been charged because of such
failure by Tenant, to comply with the terms of this article.
In any action or proceeding wherein Owner and Tenant are
parties, a schedule or "make-up" of rate for the building or
demised premises issued by a body making fire insurance
rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of the several
items and charges in the fire insurance rate then applicable
to said premises.
SUBORDINATION
7. This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or
hereafter affect such leases or the real property of which
demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions
of any such underlying leases and mortgages. This clause
shall be self operative and no further instrument of
subordination shall be required by any ground or underlying
lessor or by any mortgagee affecting any lease or the real
property of which the demised premises are a part. In
confirmation of such subordination, Tenant shall execute
promptly any certificate that Owner may request.
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TENANT'S LIABILITY INSURANCE, PROPERTY LOSS, DAMAGE, INDEMNITY
8. Owner or its agents shall not be liable for any damage to
property of Tenant or of others entrusted to employees of
the building, nor for loss of or damage to any property of
Tenant by theft or otherwise, nor for any injury or damage
to persons or property resulting from any cause of
whatsoever nature, unless caused by or due to the negligence
of Owner, its agents, servants or employees. Owner or its
agents will not be liable for any such damage caused by
other tenants or persons in, upon or about said building or
caused by operations in construction of any private, public
or quasi-public work. Tenant agrees at Tenant's sole cost
and expense, to maintain general public liability insurance
in standard form in favor of Owner and Tenant against claims
for bodily injury or death or property damage occurring in
or upon the demised premises, effective from the date Tenant
enters into possession and during the term of this lease.
Such insurance shall be in an amount and with carriers
acceptable to the Owner. Such policy or policies shall be
delivered to the owner. On Tenant's default in obtaining or
delivering any such policy or policies or failure to pay the
charges therefor, Owner may secure or pay the charges for
any such policy or policies and charge the Tenant as
additional rent therefor. Tenant shall indemnify and save
harmless Owner against and from all liabilities,
obligations, damages, penalties, claims, costs and expenses
for which Owner shall not be reimbursed by insurance,
including reasonable attorneys fees, paid, suffered or
incurred as a result of any breach by Tenant, Tenant's
agent, contractors, employees, invitees, or licensees of any
covenant or condition of this lease, or the carelessness,
negligence or improper conduct of the Tenant, Tenant's
agents, contractors, employees, invitees or licensees.
Tenant's liability under this lease extends to the acts and
omissions of any subtenant, and any agent, contractor,
employee, invitee or licensee of any subtenant. In case any
action or proceeding is brought against Owner by reason of
any such claim, Tenant, upon written notice from Owner,
will, at Tenant's expense, resist or defend such action or
proceeding by Council approved by Owner in writing, such
approval not to be unreasonably withheld.
DESTRUCTION, FIRE AND OTHER CASUALTY:
9. (a) If the demised promises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give
immediate notice thereof to Owner and this lease shall
continue in full force and effect except as hereinafter set
forth. (b) If the demised premises are partially damaged or
rendered partially unusable by fire or other casualty, the
damages thereto shall be repaired by and at the expense of
Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the
casualty according to the part of the premises which is
usable. (c) If the demised premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the
casualty and thenceforth shall cease until the date when the
premises shall have been repaired and restored by owner,
subject to Owner's right to elect not to restore the same as
hereinafter
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provided. (d) If the demised premises are rendered wholly
unusable or (whether or not the demised premises are damaged
in whole or in part) if the building shall be so damaged
that Owner shall decide to demolish it or to rebuild it,
then, in any of such events, Owner may elect to terminate
this lease by written notice to Tenant given within 90 days
after such fire or casualty specifying a date for the
expiration of the lease, which date shall not be more than
60 days after the giving of such notice, and upon the date
specified in such notice the terms of this lease shall
expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant
shall forthwith quit, surrender and vacate the premises
without prejudice however, Owner's rights and remedies
against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to
such date and any payments of rent made by Tenant which were
on account in any period subsequent to such date shall be
returned to Tenant, unless Owner shall serve a termination
notice as provided for herein, Owner shall make the repairs
and restorations under the conditions of (b) and (c) hereof
with all reasonable expedition subject to delays due to
adjustment of insurance claims, labor troubles and causes
beyond Owner's controls. After any such casualty, Tenant
shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of
Tenant's salvageable inventory and movable equipment,
furniture and other property. Tenant's liability for rent
shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained herein above shall relieve
Tenant from liability that may exist as a result of damage
from fire or other casualty. Notwithstanding the foregoing,
each party shall look first to any insurance in its favor
before making any claim against the other party for recovery
for loss or damage resulting from fire or other casualty,
and to the extent that such insurance is in force and
collectible and to the extent permitted by law Owner and
Tenant each hereby releases and waives all right of recovery
against the other or any one claiming through or under each
of them by way of subrogation or otherwise. The foregoing
release and waiver shall be in force only if both releasors'
insurance Policies contain a clause providing that such a
release or waiver shall not invalidate the insurance and
also, provided that such a policy can be obtained without
additional premiums. Tenant acknowledges that Owner will not
carry insurance on Tenant's furniture and/or furnishings or
any fixtures or equipment, improvements or appurtenances
removable by Tenant and agrees that Owner will not be
obligated to repair any damage thereto or replace the same.
(f) Tenant hereby waives the provisions of Section 227 of
the Real Property Law and agrees that the provisions of this
article shall govern and control in lieu thereof.
EMINENT DOMAIN: 10. If the whole or any part of the demised
premises shall be acquired or condemned by Eminent Domain
for any public or quasi-public use or purpose, then and in
that event, the term of this lease shall cease and terminate
from the date of title vesting in such proceeding and Tenant
shall have no claim for the value of any unexpired term of
said lease.
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ASSIGNMENT, MORTGAGE, ETC.:
11. Tenant for itself, its heirs, that it shall not assign,
mortgage or encumber this agreement, nor underlet, or suffer
or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner
in each instance. If this lease be assigned, or if the
demised premises or any part thereof be underlet or occupied
by anybody other than Tenant, Owner may, after default by
Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent
herein reserved, but no such assignment, underletting,
occupancy or collection shall be deemed a waiver of the
covenant, or the acceptance of the assignee, under-tenant or
occupant as tenant, or a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant
herein contained. The consent by Owner to an assignment or
underletting shall not in any wise be construed to relieve
Tenant from obtaining the express consent in writing of
Owner to any further assignment or under letting.
ELECTRIC:
12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER attached
hereto. Tenant covenants and agrees that at all times its
use of electric current shall not exceed the capacity of
existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment
which, in Owner's opinion, reasonably exercised, will
overload such installations or interfere with the use
thereof by other tenants of the building, The change at any
time of the character of electric service shall in no wise
make Owner liable or responsible to Tenant, for any loss,
damages or expenses which Tenant may sustain.
ACCESS TO PREMISES:
13. Owner or Owner's agents shall have the right (but shall
not be obligated) to enter the demised premises in any
emergency at any time, and, at other reasonable, times, to
examine the same and to make such repairs, replacements and
improvements as Owner may deem necessary and reasonably
desirable to any portion of the building or which Owner may
elect to perform, in the premises, following Tenant's
failure to make repairs or perform any work which Tenant is
obligated to perform under this lease, or for the purpose of
complying with laws, regulations and other directions of
governmental authorities. Tenant shall permit Owner to use
and maintain and replace pipes and conduits in and through
the demised premises and to erect new pipes and conduits
therein, provided they are within the walls. Owner may,
during the progress of any work in the demised premises,
take all necessary materials and equipment into said
premises without the same constituting an eviction nor shall
the Tenant be entitled to any abatement of rent while such
work is in progress nor to any damages by reason of loss or
interruption of business or otherwise. Throughout the term
hereof Owner shall have the right to enter the demised
premises at reasonable hours for the purpose of showing the
same to prospective purchasers or mortgages of the building,
and during the last six months of the term for the purpose
of showing the same to prospective tenants and may, during
said six months period, place upon the premises the usual
notice "To Let" and "For Sale"' which notices Tenant shall
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permit to remain thereon without molestation. If Tenants not
present to open and permit an entry into the premises, Owner
or Owner's agents may enter the same whenever such entry may
be necessary or permissible by master key or forcibly and
provided reasonable care is exercised to safeguard Tenant's
1)property and such entry shall not render Owner or its
agents liable therefore nor in any event shall the
obligations of the Tenant hereunder be affected. If during
the last month of term, Tenant shall have removed all or
substantially all of Tenant's property therefrom, Owner may
immediately enter, alter, renovate or redecorate the demised
premises without limitation or abatement of rent, or
incurring liability to Tenant for any compensation and such
act shall have no effect on this lease or Tenant's
obligations hereunder. Owner shall have the right at any
time, without the same constituting an eviction and without
incurring liability to Tenant therefor to change the
arrangement and/or location of public entrances,
passageways, doors, doorways, corridors, elevators. stairs,
toilets, or other public parts of the building and to change
the name, number or designation by which the building may be
known.
VAULT, VAULT SPACE, AREA:
14. No vaults, vault space or area, whether or not enclosed
or covered, not within the property line of the building is
leased hereunder, anything contained in or indicated on any
sketch, blue print or plan, or anything contained elsewhere
in this lease to the contrary notwithstanding. Owner makes
no representation as to the rotation of the property line of
the building. All vaults and vault space and all such areas
not within the property line of the building, which Tenant
may be permitted to use and/or occupy, is to be used and/or
occupied under a revocable license, and if any such license
be revoked, or if the amount of such space or area be
diminished or required by any federal, state or municipal
authority or public utility. Owner shall not be subject to
any liability nor shall Tenant be entitled to any
compensation or diminution or abatement of rent, nor shall
such revocation, diminution or requisition be deemed
constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid
by Tenant.
OCCUPANCY:
15. Tenant will not at any time use or occupy the demised
premises in violation of, Articles 2 or 37 hereof, or of,
the certificate of occupancy issued for the building of
which the demised premises are a part. Tenant has inspected
the premises and accepts them as is, subject to the riders
annexed hereto with respect to Owner's work, if any. In any
event, Owner makes no representation as to the condition of
the premises and Tenant agrees to accept the same subject to
violations whether or not of record.
BANKRUPTCY:
16. (a) Anything elsewhere in this lease to the contrary
notwithstanding. this lease may be canceled by Landlord by
the sending of a written notice to Tenant within a
reasonable time after the happening of any one or more of
the following events: (1) the commencement of a case in
bankruptcy or under the laws of any state naming Tenant as
the debtor; or (2) the making by Tenant of an assignment or
any other arrangement for the benefit of creditors under any
state statute, neither Tenant nor any person claiming
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through or under Tenant, or by reason of any statute or
order of court, shall thereafter be entitled to possession
of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in
accordance with its terms. the provisions of this Article 16
shall be applicable only to the party then owning Tenant's
interest in this case. (b) It is stipulated and agreed that
in the event of the termination of this lease pursuant to
(a) hereof, Owner shall forthwith, notwithstanding any other
provisions of this lease to the contrary, be entitled to
recover from Tenant as and for liquidated damages an amount
equal to the difference between the rent reserved hereunder
for the unexpired portion of the term demised and the fair
and reasonable rental value of the demise premises for the
same period. In the computation of such damages the
difference between any installment of rent becoming due
hereunder after the date of termination and the fair and
reasonable rental value of the demised premises for the
period for which such installment was payable shall be
discounted to the date of termination at the rate of four
per cent (4%) per annum. If such premises or any part
thereof be re-let by the Owner for the unexpired term of
said lease, or any part thereof, before presentation of
proof of such liquidated damages to any court, commission or
tribunal, the amount or rent reserved upon such re-letting
shall be deemed to be the fair and reasonable rental value
for the part or the whole of the premises so re-let during
the term of the re-letting. Nothing herein contained shall
limit or prejudice the right of the Owner to prove for and
obtain as liquidated damages by reason of such termination,
an amount equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the
proceedings in which. such damages are to be proved, whether
or not such amount be greater, equal to, or less than the
amount of the difference referred to above.
DEFAULT:
17. (1) If Tenant defaults in fulfilling any of the
covenants of this lease other than the covenants for the
payment of rent or additional rent., or if the demised
premises become vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's
property whereupon the demised promises shall be taken or
occupied by someone other than Tenant; or if this lease be
rejected under Section 365 of Title 11 of the U.S. Code
(Bankruptcy Code); or if Tenant shall fail to move into or
take possession of he premises within Fifteen (15) days
after the commencement of the term of this lease, of which
fact Owner shall the the sole judge; then, in any one or
more of such events, upon Owner serving a written five (5)
days notice upon Tenant specifying the nature of said
default. and upon the expiration of said five (5) days, if
Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of
shall be of a nature that the same cannot be completely
cured or remedied within said five (5) day period, and if
Tenant shall not have diligently commenced curing such
default within such five (5) day period, and shall not
thereafter with reasonable diligence and in good faith
proceed to remedy or cure such default, then Owner may serve
a written three (3) days notice of cancellation of this
lease upon Ten ant, and upon the expiration of said three
(3) days, this lease and the term thereunder shall end and
expire as fully and completely as if the expiration
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of such three (1) day period were the day herein definitely
fixed for the end and expiration of this lease, and the term
thereof and Tenant shall then quit and surrender the demised
premises to Owner but Tenant shall remain liable as
hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been
given, and the term shall expire as aforesaid; or if Tenant
shall make default in the payment of the rent reserved
herein or any item of additional rent herein mentioned or
any part of either or in making any other payment herein
required; then and in any of such events Owner may without
notice, re-enter the demised premises either by force or
otherwise, and dispossess Tenant by summary proceedings or
otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and
hold the premises as if this lease had not been made, and
Tenant hereby waives the service of notice of intention to
re-enter or to institute legal proceedings to that end.
REMEDIES OF OWNER AND WAIVER OF REDEMPTION:
18. In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or otherwise, (a) the
rent, and additional rent, shall become due thereupon and be
paid up to the time of such re-entry, dispossess and/or
expiration. (b) Owner may re-let the premises or any part or
parts thereof, either in the name of Owner or otherwise, for
a term OR TERMS WHICH MAY AT OWNER'S OPTION BE LESS than or
exceed the period which would otherwise have constituted the
balance of the term of this lease and may grant concessions
or free rent or charge a higher rental than that in this
lease, and/or (c) Tenant or the legal representatives of
Tenant shall also pay Owner as liquidated damages for the
failure of Tenant to observe and perform said Tenant's
covenants herein contained, any deficiency between the rent
hereby reserved and/or convenanted to be paid and the net
amount if any, of the rents collected an account of the
subse quent lease or leases of the demised premises for each
month of the period which would otherwise have constituted
the balance of the term of this lease. The failure of Owner
to re-let the premises or any part or parts thereof shall
not release or affect Tenant's liability for damages. In
computing such liquidated damages there shall be added to
the said deficiency such expenses as Owner may incur in
connection with re- letting, such as legal expenses,
attorneys' fees, brokerage, advertising and for keeping the
demised premises in good order or for preparing the same for
re-letting. Any such liquidated damages shall be paid in
monthly installments by Tenant on the rent day specified in
this lease. Owner, in putting the demised premises in good
order or preparing the same for re- rental may, at Owner's
option, make such alterations, repairs, replacements, and/or
decorations in the demised premises as Owner, in Owner's
sole judgement, considers advisable and necessary for the
purpose of re-letting the demised premises, and the making
of such alterations. repairs, replacements, and/or
decorations shall not operate or be construed to release
Tenant from liability. Owner shall in no event be liable in
any way whatsoever for failure to re-let the demised
premises, or in the event that the devised promises are
re-let, for failure to collect the rent thereof Under such
reaching, and in no event shall Tenant be entitled
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to receive any excess, if any, of such net rent collected
over the sums payable by Tenant to Owner hereunder, In the
event of a breach or threat ened breach by Tenant or an of
the covenants or provisions hereof, Owner shall have the
right of injunction and the right to invoke any remedy
allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for.
Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity.
Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws.
FEES AND EXPENSES:
19. If Tenant shall default in the observance or performance
of any term or covenant on Tenant's part to be observed or
performed Under or by virtue of any of the terms or
provisions in any article of this lease, then, unless
otherwise provided elsewhere in this lease, Owner may
immediately or at any time thereafter and without notice
perform the obligation of Tenant thereunder, and if Owner,
in connection therewith or in connection which any default
by Tenant in the covenant to pay rent hereunder, makes any
expenditures or incurs any obligations for the payment of
money, including but not limited to attorney's fees, in
instituting, prosecuting or defending any actions or
proceeding, such sums so paid or obligations incurred with
interest and costs shall be deemed to be additional rent
hereunder and shall be paid by Tenant to Owner within five
(5) days of rendition of any bill or statement to Tenant
therefor, and if Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such
obligations, such sums shall be recoverable by Owner as
damages.
NO REPRESENTATIONS BY OWNER:
20. Neither Owner nor Owner's agents have made any
representations or promises with respect to the physical
condition of the building, the land upon which it is erected
or the demised promises, the rents, leases, expenses of
operation, or any other matter or thing affecting or related
to the premises except as herein expressly set forth and no
rights, easements or licenses are acquired by Tenant by
implication or otherwise except as expressly set forth in
the provisions of this lease. Tenant has inspected the
building and the demised premises and is thoroughly
acquainted with their condition, and agrees to take the same
"as is", and acknowledges that the taking of possession of
the demised premises by Tenant shall be conclusive evidence
that the said premises and the building of which the same
form a part were in good and satisfactory condition at the
time such possession was so taken, except as to latent
defects. All understandings and agreements heretofore made
between the parties hereto are merged in this contract,
which alone fully and completely expresses the agreement
between Owner and Tenant and any executory agreement
hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of it in whole or in
part, unless such executory agreement is in writing and
signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.
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END OF TERM:
21. Upon the expiration or other termination of the term of
this lease, Tenant shall quit and surrender to Owner the
demised premises, broom clean, in good order and condition,
ordinary wear excepted, and Tenant shall remove all it's
property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination
of this lease. If the last day of the term of this lease or
any renewal thereof, falls on Sunday, this lease shall
expire at noon on the preceding Saturday unless it be a
legal holiday in which case it shall expire at noon on the
preceding business day.
QUIET ENJOYMENT:
22. Owner covenants and agrees with Tenant that upon Tenant
paying the rent and additional rent and observing and
performing the terms, covenants and conditions on Tenant's
part to be observed and performed. Tenant may peaceably and
quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease
including, but not limited to, Article 33 hereof and to the
ground leases, underlying leases and mortgages hereinbefore
mentioned.
FAILURE TO GIVE POSSESSION:
23. If Owner is unable to give possession of the demised
premises on the date of the commencement of the term hereof,
because of the holding-over or retention of possession of
any Tenant, undertenant or occupants, or if the premises arc
located in a building being constructed, because such
building has not been sufficiently completed to make the
premises ready for occupancy or because of the fact that a
certificate of occupancy has not been procured or for any
other reason, Owner shall not be subject to any liability
for failure to give possession on said date and the validity
of the lease shall not be impaired under such circumstances,
nor shall the same be construed in any wise to extend the
term of this lease, but the rent payable hereunder shall be
abated provided Tenant is not responsible for the inability
to obtain possession until after Owner shall have given
Tenant written notice that the premises are substantially
ready for Tenant's occupancy. If permission is given to
Tenant to enter into the possession of the demised premises
or to occupy premises other than the demised premises prior
to the date specified as the commencement of the term of
this lease. Tenant covenants and agrees that such occupancy
shall be deemed to be under all the terms, covenants.
conditions and provisions of this lease, except as to the
covenant to pay rent. The provisions of this article arc
intended to constitute "an express provision to the
contrary" within the meaning of Section 223-a of the New
York Real Property Law.
NO WAIVER:
24. The failure of Owner to seek redress for violation of,
or to insist upon the strict performance of any covenant or
condition of this lease or of any of the Rules or
Regulations set forth or hereafter adopted by Owner, shall
not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect
of an original violation. The receipt by owner of rent with
knowledge of the breach of any covenant of this lease shall
not be deemed a waiver of such breach and no provision of
this lease shall be deemed to have been waived by Owner
unless such waiver be in writing signed by Owner, No payment
by Tenant or receipt by Owner of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other
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than an account of the earliest stipulated rent, nor shall
any endorsement or statement of any check or any letter
accompanying any check or payment as rent be deemed an
accord and satisfaction, and Owner may accept such check or
payment without prejudice to Owner's right to recover the
balance of such rent or pursue any other remedy in this
lease provided, no act or thing done by Owner or Owner's
agents during tho term hereby demised shall be deemed in
acceptance of a surrender of said premises and no agreement
to accept such surrender shall be valid unless in writing
signed by Owner. No employee of Owner or Owner's agent shall
have any power to accept the keys of said premises prior to
the termination of the lease and the delivery of keys to any
such agent or employee shall not operate as a termination of
the lease or a surrender of the premises.
WAIVER OF TRIAL BY JURY:
25. It is mutually agreed by and between Owner and Tenant
that the respective parties hereto shall and they hereby do
waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against
the other (except for personal injury or property damage) on
any matters whatsoever arising out of or in any way
connected with this lease, the relationship of Owner and
Tenant. Tenant's use of or occupancy of said premises, and
any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences
any summary proceeding for possession of the premises,
Tenant will not interpose any counterclaim of whatever
nature or description in any such proceeding.
INABILITY TO PERFORM:
26. This lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and
agreements hereunder on part of Tenant to be performed shall
in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or
to supply or is delayed in supplying any service expressly
or implicitly to be supplied or is unable to make, or is
delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if owner is prevented or
delayed from so doing by reason of strike or labor troubles,
government preemption in connection with a national
emergency or by reason of any rule, order or regulation of
any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand
which have been or are affected by war or other, emergency,
or when, in the judgment of Owner, temporary interruption of
such services is necessary by reason of accident, mechanical
breakdown, or to make repairs, alterations or improvements.
BILLS AND NOTICES:
27. Except as otherwise in this lease provided, a bill,
statement, notice or communication which Owner may desire or
be required to give to Tenant, shall be deemed sufficiently
given or rendered if, in writing, delivered to Tenant
personally or sent by registered certified mail addressed to
Tenant at the building of which the demised premises form a
part or at the last known residence address or business
address of Tenant or left at any of the
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aforesaid premises addressed to Tenant, and the time of the
rendition of such bill or statement and of the giving of
such notice or communication shall be deemed to be the time
when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner
must be served by registered or certified mail addressed to
Owner at the address first herein above given or at such
other address as Owner shall designate by written notice.
WATER CHARGES:
28. If Tenant requires, uses or consumes water for any
purpose in addition to ordinary lavatory purposes (of which
fact Tenant constitutes Owner to be the sole judge) Owner
may install a water meter and thereby measures Tenant's
water consumption for all purposes. Tenant shall pay Owner
for the cost of the meter and the cost of the installation
thereof and throughout the duration of Tenant's occupancy
Tenant shall keep said meter and installation equipment in
good working order and repair at Tenant's own cost and
expense. Tenant agrees to pay for water consumed, as shown
on said meter as and when bills are rendered. Tenant
covenants and agrees to pay the sewer rent, charge or any
other tax, rent, levy or charge which now or hereafter is
assessed, imposed or a lien upon the demised premises or the
realty of which they are part pursuant to law, order or
regulation made or issued in connection with the use,
consumption, maintenance or supply of water, water system or
sewage or sewage connection or system. The bill rendered by
Owner shall be payable by Tenant as additional rent. If the
building or the demised premises or any part thereof be
supplied with water through a meter through which water is
also supplied to other promises Tenant shall pay to Owner as
additional rent, on the first day of each month, %, ($ ) of
the total meter charges, as Tenant's portion. Independently
of and in addition to any of the remedies reserved to Owner
herein above or elsewhere in this lease. Owner may sue for
and collect any monies to be paid by Tenant or paid by Owner
for any of the reasons or purposes herein above set forth.
SPRINKLERS:
29. Anything elsewhere in this lease to the contrary
notwithstanding, if the New York Board of Fire Underwriters
or the Insurance Services Office or any bureau, department
or official of the federal, state or city government require
or recommend the installation of a sprinkler system or that
any changes, modifications, alterations, or additional
sprinkler heads or other equipment be made or supplied in an
existing sprinkler system by reason of Tenant's business, or
the location of partitions, trade fixtures, or other
contents of the demised premises, or for any other reason,
or if any such sprinkler system installations, changes,
modifications, alterations, additional sprinkler heads or
other such equipment become necessary to prevent the
imposition of a penalty or charge against the full allowance
for a sprinkler system in the fire insurance rate set by any
said Exchange or by any fire insurance company. Tenant
shall, at Tenant's expense, promptly make such sprinkler
system installations, changes, modifications, alterations,
and supply additional sprinkler heads or other equipment as
required whether the work involved shall be structural or
non-structural in nature, Tenant shall pay to Owner as
additional rent the sum of $ , on the first day of each
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month during the term of this lease, as Tenant's portion of
the contract price for sprinkler supervisory service.
HEAT, CLEANING:
30. As long as Tenant is not in default under any of the
covenants of this lease, Owner shall, if and insofar as
existing facilities permit, furnish heat to the demised
premises, when and as required by law, on business days from
8:00 a.m. to 6:00 p.m., and on Saturdays from 8:00 a.m. to
1:00 p.m. Tenant shall at Tenant's expense, keep demised
premises clean and in order, to the satisfaction of Owner,
and if demised premises are situated on the street floor,
Tenant shall, at Tenant's own expenses make all repairs and
replacements to the sidewalks and curbs adjacent thereto,
and keep said sidewalks and curbs free from snow, ice, dirt
and rubbish. Tenant shall pay to Owner the cost of removal
of any of Tenant's refuse and rubbish from the building.
Bills for the same shall be rendered by Owner to Tenant at
such times as Owner may elect and shall be due and payable
when rendered, and the amount of such bills shall be deemed
to be, and be paid as additional rent. Tenant shall,
however, have the option of indepen dently contracting for
the removal of such rubbish and refuse in the event that
Tenant does not wish to have same done by employees of
Owner. Under such circumstances, however, the removal of
such refuse and rub bish by others shall be subject to such
rules and regulations as, in the judgment of Owner, are
necessary for the proper operation of the building.
SECURITY:
31. Tenant has deposited with Owner the sum of $ as security
for the faithful performance of and observance by Tenant of
the terms, provisions and conditions of this lease, it is
agreed that in the event Tenant defaults in respect of any
of the terms, provisions and conditions of this lease, in
cluding, but not limited to, the payment of rent and
additional rent. Owner may use, apply or retain the whole or
any part of the security so deposited to the extent required
for the payment of any rent and additional rent or any other
sum as to which Tenant is in default or for any sum which
Owner may expend or may be required to expend by reason of
Tenant's default in respect of any of the terms, covenants
and conditions of this lease, including but not limited to,
any damages or deficiency in the refitting of the premises,
whether such damages or deficiency accrued before or after
summary proceedings or other re-entry by Owner. In the event
that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this
lease, the security shall be returned to Tenant after the
date fixed as the end of the lease and after delivery of
entire possession of the demised premises to Owner. In the
event of sale of the land and building or leasing of the
building, of which the demised premises form a part, Owner
shalt have the right to transfer the security to the vendee
or lessee and Owner shall thereupon be released by Tenant
from all liability for the return of such security, and
Tenant agrees to look to the new Owner solely for the return
of said security; and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of
the security to a new Owner. Tenant further covenants that
it will not assign or encumber or attempt to assign or
encumber the monies deposited herein as security and that
neither Owner nor its successors or assigns shall be bound
by any such assignment, encumbrance, attempted assignment or
attempted encumbrance.
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CAPTIONS:
32. The Captions are inserted only as a matter of
convenience and for reference and in no way define, limit or
describe the scope of this lease nor the intent of any
provision thereof.
DEFINITIONS:
33. The term "Owner" as used in this lease means only the
Owner, or the mortgagee in possession, for the time being of
the land and building (or the Owner of a lease of the
building or of the land and building) of which the demised
premises form a part, so that in the event of any sale or
sales of said land and building or ,of said lease, or in the
event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely
freed and relieved of all covenants and obligations of Owner
hereunder, and it shall be deemed and construed without
further agreement between the parties of their successors in
interest, or between the parties and the purchaser, at any
such sale, or the said lessee of the building, or of the
land and building, that the purchaser or the lessee of the
building has assumed and agreed to carry out any and all
covenants and obligation of Owner hereunder. The words
"re-enter" and "re-entry" as used in this lease are not
restricted to their technical legal meaning. The term
"business days" as used in this lease shall exclude
Saturdays (except such portion thereof as is covered by
specific hours in Article 30 hereof). Sundays and all days
designated as holidays by the applicable building service
union employees service contract or by the applicable
Operating Engineers contract with respect to HVAC service.
ADJACENT EXCAVATION/SHORING:
34. If an excavation shall be made upon land
adjacent to the demised premises, or shall
be authorized to be made, Tenant shall
afford to the person causing or authorized
to cause such excavation, license to enter
upon the demised premises for the purpose of
doing such work as said person shall deem
necessary to preserve the wall or the
building of which demised premises form a
part from injury or damage and to support
the same by proper foundations without any
claim for damages or indemnity against Owner
or diminution or abatement of rent.
RULES AND REGULATIONS:
35. Tenant and Tenant's servants, employees,
agents, visitors, and licensees shall
observe faithfully, and comply strictly with
the Rules and Regulations and such other and
further reasonable Rules and Regulations as
Owner or Owner's agents may from time to
time adopt. Notice of any additional rules
or regulations shall be given in such manner
as Owner may elect. In case Tenant disputes
the reasonableness of any additional Rule or
Regulation hereafter made or adopted by
Owner or Owner's agents, the parties hereto
agree to submit the question of the
reasonableness of such Rule or Regulation
for decision to the New York office of the
American Arbitration Association, whose
determination shall be final and conclusive
upon the parties hereto. The right to
dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall
be deemed waived unless the same shall be
asserted by service of a
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notice, in writing, upon Owner within ten
(10) days after the giving of notice
thereof. Nothing in this lease contained
shall be construed to impose upon Owner any
duty or obligation to enforce the Rules and
Regulations or terms, covenants or
conditions In any other lease, as against
any other tenant and Owner shall not be
liable to Tenant for violation of the same
by any other tenant, its servants,
employees, agents, visitors or licensees.
GLASS:
36. Owner shall replace, at the expense of Tenant, any and
all plate and other glass, damaged or broken from any cause
whatsoever in and about the demised premises. Owner may
insure, and keep insured, at Tenant's expenses all plate and
other glass in the demised premises for and in the name of
Owner. Bills for the premiums therefor shall be rendered by
Owner to Tenant at such times as Owner may elect, and shall
be due from, and payable by, Tenant when rendered, and the
amount thereof shall be deemed to be, and be paid as,
additional rent.
PORNOGRAPHIC USE PROHIBITED:
37. Tenant agrees that the value of the demised premises and
the reputation of the Owner will be seriously injured if the
premises are used for any obscene or pornographic purposes
or any sort of commercial sex establishment. Tenant agrees
that Tenant, will not bring or permit any obscene
or-pornographic material on the premises, and shall not
permit or conduct any obscene, nude, or semi-nude live
performances on the premises, nor permit use of the premises
for nude modeling, rap sessions, or as a so-called rubber
goods shop, or as a sex club of any sort, or as a massage
parlor. Tenant agrees further that Tenant will not permit
any of these uses by any sublessee or assignee of the
premises. This Article shall directly bind any successors in
interest to the Tenant. Tenant agrees that if at any time
Tenant violates any of the provisions of this Article, such
violation shall be deemed a breach of a substantial
obligation of the terms of this lease and objectionable
conduct. Pornographic material is defined for purposes of
this Article as any written or pictorial matter with
prurient appeal or any objects of instrument that are
primarily concerned with lewd or prurient sexual activity.
Obscene material is defined here as it is in Penal law
ss.235.00.
ESTOPPEL CERTIFICATE:
38. Tenant, at any time, and from time to time, upon at
least 10 days prior notice by Owner, shall execute,
acknowledge and deliver to Owner, and/or to any other
person, firm or corporation specified by Owner, a statement
certifying that this lease is unmodified and in full force
and effect (or, if there have been modifications, that the
same is in full force and effect as modified and stating the
modifications), stating the dates which the rent and
additional rent have been paid, and stating whether or not
there exists any defaults by Owner under this lease, and if
so, specifying each such default.
SUCCESSORS AND ASSIGNS:
39. The covenants. conditions and agreements contained in
this lease shall bind and inure to the benefit of Owner and
Tenant and their respectiveheirs, distributees, executors,
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administrators, successors, and except as otherwise provided
in this lease, their assigns.
IN WITNESS THEREOF, Owner and Tenant have respectively signed and
sealed this lease as of the day and year first above written.
/S/ JOHN PADUANO
---------------------
JOHN PADUANO
CHILD'S PLAYROBICS, INC.
/S/ SAL CASACCIO
--------------------
SAL CASACCIO, VICE PRESIDENT
/S/ JOSEPH A. MELNICK
---------------------
JOSEPH A. MELNICK, PRESIDENT
[THIS SPACE INTENTIONALLY LEFT BLANK]
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 35
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress to and egress from
the demised premises and for delivery of merchandise and equipment in a prompt
and efficient manner using elevators and passageways designated for such
delivery by Owner. There shall not be used in any space, or in the public hall
of the building, either by any Tenant or by jobbers, or others in the delivery
or receipt of merchandise, any hand trucks except those equipped with rubber
tires and safeguards.
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2. If the premises are situated an the ground floor of the building,
Tenant thereof shall further, at Tenant's expense, keep the sidewalks and curb
in front of said premises clean and free from ice, snow, etc.
3. The water and wash closets and plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed.
4. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the demised premises, or permit or suffer the
demised premises to be occupied or used in a manner offensive or objectionable
to Owner or other occupants of the building by reason of noise, odors and/or
vibrations or interfere in any way with other Tenants or those having business
therein.
5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside of the demised premises or the building or are the inside of the demised
premises if the same is visible from the outside of the premises without the
prior written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by
any Tenant, Owner may remove same without any liability and may charge the
expense incurred by such removal to Tenant or Tenants violating this rule. Signs
on interior doors and directory tablet shall be inscribed, painted or affixed
for each Tenant by Owner at the expense of such Tenant, and shall be of a size,
color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner and as Owner may direct. No Tenant shall lay linoleum
or similar floor covering so that the same may come in direct contact with the
floor of the demised premises, and, if linoleum or other similar floor covering
is desired to be used, an underlining of builders deadening felt shall be first
affixed to the floor by a plastic or other material, soluble in water, the use
of cement or other similar adhesive material being expressly prohibited.
7. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrance and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought in to the building and to exclude from the
building all freight which violates any of theft Rules and Regulations or the
lease of which these Rules and Regulations are a part.
8. Owner reserves the right to exclude from the building between the
hours of 6 p.m. and 8 a.m., and at all hours on Sunday and holidays all persons
who do not present a pass to the building signed by the Owner. Owner will
furnish passes to persons for whom any Tenant requests same in writing. Each
Tenant shall be responsible for all Persons for whom he requests such pass and
shall be liable to Owner for all acts of such person.
9. Owner shall have the right to prohibit any advertising by any Tenant
which, in Owner's opinion, tends to impair the reputation of Owner or its
desirability as a building for stores or offices, and upon written notice from
Owner, Tenant shall refrain from or discontinue such advertising.
10. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other process,
or any unusual or other objectionable odors to permeate in or eminate from the
demised premises.
11. Tenant shall not place a load on any floor of the demised premises
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exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Owner reserves the right to prescribe the weight and
position of all safes, business machines and mechanized equipment. Such
installations shall be placed and maintained by Tenant at Tenant's expense in
setting sufficient in Owner's judgement to absorb and proven vibration, noise
and annoyance.
GUARANTY
The undersigned guarantor guarantees to Owner, Owner's successors and
assigns, that full performance and observance of all the agreements to be
performed and observed by Tenant in the attached lease, including the "Rules and
Regulations"as therein provided, without requiring any notice to Guarantor of
nonpayment or, nonperformance, or proof, or notice of demand, to hold the
undersigned responsible under this guaranty, all of which the undersigned hereby
expressly waives and expressly agrees that the legality of this agreement and
the agreements of the Guarantor under this agreement shall not be ended, or
changed by reason of the claims to Owner against Tenant of any of the rights or
remedies attached lease. The guarantor further agrees that this guaranty shall
remain and continue in full force and effect as to any renewal, change or
extension of the lease. As a further inducement to Owner to make the lease Owner
and Guarantor agree that in any action or proceeding brought by either Owner or
Guarantor against the other on any matters concerning the lease or of this
guaranty that Owner and the undersigned shall and do waive trial by jury.
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STANDARD FORM OF STORE LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
- --------------------------------------------------------------------------------
AGREEMENT OF LEASE MADE AS OF THIS 26TH day of May, 1994 between
BAYSIDE MAIL REAL PROPERTY HOLDING CORP, 360 Merrick Road, Lynbrook, New York,
party of the first part, hereinafter referred to as OWNER and BAYBRIDGE
PLAYROBICS, INC., a domestic corporation, party of second part, hereinafter
referred to as TENANT.
WITNESSETH: Owner hereby lease to Tenant and Tenant hereby hires from
Owner the building known as 208-32 to 208-46 Bell Boulevard, Bayside 11360 in
the Borough of Queens, City of New York, for term of Fifteen (20) Years (or
until such term shall sooner cease and expire as hereinafter provided) to
commence on the First (1st)Day of June, nineteen hundred and ninety-four, and to
end on the thirtieth (30)
day of May, two thousand and fourteen, both dates inclusive, at an annual rate
of $ ( See paragraph "C" hereof).
Which Tenant agrees to pay in lawful money of the United States which
shall be legal tender in payment of all debts and dues, public and private, at
the time of payment, in equal monthly installment in advance of the first day of
each month during said term, at the office of Owner or such place as Owner may
designate, without any set off or deduction whatsoever, excepts that Tenant
shall pay first monthly installment(s) on the execution hereof (unless this
lease be a renewal).
The parties hereto, for themselves, their heirs, distributees,
executors, administrator, legal representatives, successors and assigns, hereby
covenant as follows:
RENT OCCUPANCY:
1. Tenant shall pay the rent as above and as hereinafter
provided.
2. Tenant shall use and occupy demised premises for use as a
children play center with refreshment, retail sales and related
use and for no other purpose, tenant shall at all times conduct
its business in a high grade and reputable manner, shall not
violate Articles 37 hereof, and shall keep show windows and signs
in a neat and clean condition.
ALTERATIONS: 3. Tenant shall make no changes in or to demised
premises of any nature without Owner's prior written consent.
Subject to prior written consent of Owner and to the provisions
of this articles, Tenant at Tenant's expense, may make
alterations, installations, additions or improvement which are
nonstructural and which do not affect utility services or
plumbing and electrical lines, in or to the interior of demised
premises by using contractors or mechanics first approved by
Owner. Tenant shall, before making any alterations,
installations, additions or improvement, at its expense, obtain
all permits, approvals and certificates required by any
governmental or quasi-governmental bodies and (upon completion)
certificates of final approval thereof and shall deliver promptly
duplicates of all such permits, approvals and certificates to
Owner and Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage
insurance as Owner may require. If any mechanic's lien is filed
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against the demised premises, or the building of which the same
forms a part, for work claimed to have done for, or materials
furnished to, Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within ten days
thereafter, at Tenant's expense, bu filling the bond required by
law. All fixtures and all paneling, partitions, railing and
installations, installed in the premises at any times, either by
Tenant or by Owner in Tenant's behalf, shall, upon installations,
become the property of Owner and shall remain upon and be
surrendered with the demised premises unless Owner, by notice to
Tenant no later then twenty days prior to the date fixed as the
termination of this lease, elects to relinquish Owner's rights
thereto and to have them removed by Tenant, in which event, the
same shall be removed from the premises by Tenant prior to the
expirations of the lease, at Tenant's expense. Nothing in this
article shall be construed to give Owner title to or to prevent
Tenant's removal of trade fixtures, moveables office furniture
and equipment, but upon removal of any such from the premises or
upon removal of other installations as may be requires by Owner.
Tenant shall immediately and at its expense, repair and restore
the premises to the condition existing prior ro installation and
repair any damage to the demised premises or the building due to
such removal. All property permitted or required to be removed by
Tenant at the end of the term remaining in the premises after
Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained as Owner's property or may
be removed from the premises by Owner at Tenant's expense.
REPAIR:
4. Owner shall maintain and repair the public portions of the
building, both exterior and interior, except that if Owner allows
Tenant to erect on the outside of the building a sign or signs,
or a hoist, lift or sidewalk elevator for the exclusive use of
Tenant. Tenant shall maintain such exterior installations in good
appearance and shall cause the same to be operated in a good and
workmanlike manner and shall make all repair thereto necessary to
keep same in good order and condition, at Tenant's own cost and
expense, and shall cause the same to be covered by the insurance
provided for hereafter in Article 8. Tenant shall, throughout the
term of this lease, take good care of the demised premises and
the fixtures and appurtenances therein, and the sidewalks
adjacent thereto, and it its sole cost and expense, make all
non-structural repairs thereto as and when needed to preserve
them in good working order and condition, reasonable wear and
tear, obsolescence and damage from the elements and fire or other
casualty, excepted. If the demised premises be or become infested
with vermin, Tenant shall at Tenant's expense, cause the same to
be exterminated from time to time to the satisfaction of Owner.
Except as specifically provide in Article 9 or elsewhere in this
lease, there shall be no allowance to the Tenant for the
diminution of rental value and no liability on the part of Owner
by reason of inconvenience, annoyance or injury to business
arising from Owner, Tenant or others making or failing to make
any repair, alterations, additions or improvements in or to any
portion of the building or the demised premises, or in and to the
fixtures, appurtenances or equipment thereof. The provisions of
this article 4 with respect o the making of repair shall not
apply in the case of fire or other casualty which are dealt with
in Article 9 hereof.
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WINDOW
CLEANING: 5. Tenant will not clean nor require, permit, suffer or
allow any window in demised premises to be cleaned from the
outside in violation of Section 202 of the New York State Labor
Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
FIRE REQUIREMENTS:
6. Prior to commencement of lease term, if Tenant is then in
possession, and at all times thereafter, Tenant at Tenant's sole
cost and expense, shall promptly conform to regulations of all
state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer
pursuant to law and all orders, rules and regulations of the New
York Board of Fire Underwriters or the Insurance Services Offices
, or any similar body which may impose violation, order or duty
upon Owner or Tenant with respect to the demised premises, and
with respect to the portion of the sidewalk adjacent to the
premises, if the premises are on the street level, whether or not
arising out of the Tenant's use or manner of use thereof, or with
respect to the building if arising out of the Tenant's use or
manner of use of the premises or the building (including the use
permitted under the lease). Except as provided in Article 29
hereof, nothing herein shall require Tenant to make structural
repairs or alterations unless Tenant has by its manner of use of
the demised premises of method of operation therein, violated any
such laws, ordinances. orders, rules, regulations or requirements
with respect thereto. Tenant shall not do or permit any act or
thing to be done in or to the demised premises which is contrary
to law, or which will invalidate or be in conflict with public
liability, fire or other policies of insurance at any time
carried by or for the benefit of Owner. Tenant shall pay all
costs, expenses, fines, penalties or damages, which may he
imposed upon Owner by reason of Tenant's failure to comply with
fire provisions or this article, if the fire insurance rate
shall, at the beginning of the lease or at any time thereafter,
be higher than it otherwise would be, then Tenant shall reimburse
Owner, as additional rent hereunder, for that portion of all fire
insurance premiums thereafter paid by Owner which Shall have been
charged because of such failure by Tenant, to comply with the
terms of this article. In any action or proceeding wherein Owner
and Tenant are parties, a schedule or "make-up" of rate for the
building or demised premises issued by a body making fire
insurance rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of the several items and
charges in the fire insurance rate then applicable to said
premises.
SUBORDINATION:
7. This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter
affect such leases or the real property of which demised premises
are a part and to all renewals, modifications, consolidations,
replacements and extensions of any such underlying leases and
mortgages. This clause shall be self operative and no further
instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee affecting any lease or the
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real property of which the demised premises are a part. In
confirmation of such subordination, Tenant shall execute promptly
any certificate that Owner may request.
TENANT'S LIABILITY INSURANCE, PROPERTY LOSS, DAMAGE, INDEMNITY:
8. Owner or its agents shall not be liable for any damage to
property of Tenant or of others entrusted to employees of the
building, nor for loss of or damage to any property of Tenant by
theft or otherwise, nor for any injury or damage to persons or
property resulting from any cause of whatsoever nature, unless
caused by or due to the negligence of Owner, its agents, servants
or employees. Owner or its agents will not be liable for any such
damage caused by other tenants or persons in, upon or about said
building or caused by operations in construction of any private,
public or quasi-public work. Tenant agrees at Tenant's sole cost
and expense, to maintain general public liability insurance in
standard form in favor of Owner and Tenant against claims for
bodily injury or death or property damage occurring in or upon
the demised premises, effective from the date Tenant enters into
possession and during the term of this lease. Such insurance
shall be in an amount and with carriers acceptable to the Owner.
Such policy or policies shall be delivered to the owner. On
Tenant's default in obtaining or delivering any such policy or
policies or failure to pay the charges therefor, Owner may secure
or pay the charges for any such policy or policies and charge the
Tenant as additional rent therefor. Tenant shall indemnify and
save harmless Owner against and from all liabilities,
obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including
reasonable attorneys fees, paid, suffered or incurred as a result
of any breach by Tenant, Tenant's agent, contractors, employees,
invitees, or licensees of any covenant or condition of this
lease, or the carelessness, negligence or improper conduct of the
Tenant, Tenant's agents, contractors, employees, invitees or
licensees. Tenant's liability under this lease extends to the
acts and omissions of any subtenant, and any agent, contractor,
employee, invitee or licensee of any subtenant. In case any
action or proceeding is brought against Owner by reason of any
such claim, Tenant, upon written notice from Owner, will, at
Tenant's expense, resist or defend such action or proceeding by
Council approved by Owner in writing, such approval not to be
unreasonably withheld.
DESTRUCTION, FIRE AND OTHER CASUALTY:
9. (a) If the demised promises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give immediate
notice thereof to Owner and this lease shall continue in full
force and effect except as hereinafter set forth. (b) If the
demised premises are partially damaged or rendered partially
unusable by fire or other casualty, the damages thereto shall be
repaired by and at the expense of Owner and the rent, until such
repair shall be substantially completed, shall be apportioned
from the day following the casualty according to the part of the
premises which is usable. (c) If the demised premises are totally
damaged or rendered wholly unusable by fire or other casualty,
then the rent shall be proportionately paid up to the time of the
casualty and thenceforth shall cease until the
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date when the premises shall have been repaired and restored by
owner, subject to Owner's right to elect not to restore the same
as hereinafter provided. (d) If the demised premises are rendered
wholly unusable or (whether or not the demised premises are
damaged in whole or in part) if the building shall be so damaged
that Owner shall decide to demolish it or to rebuild it, then, in
any of such events, Owner may elect to terminate this lease by
written notice to Tenant given within 90 days after such fire or
casualty specifying a date for the expiration of the lease, which
date shall not be more than 60 days after the giving of such
notice, and upon the date specified in such notice the terms of
this lease shall expire as fully and completely as if such date
were the date set forth above for the termination of this lease
and Tenant shall forthwith quit, surrender and vacate the
premises without prejudice however, Owner's rights and remedies
against Tenant under the lease provisions in effect prior to such
termination, and any rent owing shall be paid up to such date and
any payments of rent made by Tenant which were on account in any
period subsequent to such date shall be returned to Tenant,
unless Owner shall serve a termination notice as provided for
herein, Owner shall make the repairs and restorations under the
conditions of (b) and (c) hereof with all reasonable expedition
subject to delays due to adjustment of insurance claims, labor
troubles and causes beyond Owner's controls. After any such
casualty, Tenant shall cooperate with Owner's restoration by
removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment,
furniture and other property. Tenant's liability for rent shall
resume five (5) days after written notice from Owner that the
premises are substantially ready for Tenant's occupancy. (e)
Nothing contained herein above shall relieve Tenant from
liability that may exist as a result of damage from fire or other
casualty. Notwithstanding the foregoing, each party shall look
first to any insurance in its favor before making any claim
against the other party for recovery for loss or damage resulting
from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted
by law Owner and Tenant each hereby releases and waives all right
of recovery against the other or any one claiming through or
under each of them by way of subrogation or otherwise. The
foregoing release and waiver shall be in force only if both
releasors' insurance Policies contain a clause providing that
such a release or waiver shall not invalidate the insurance and
also, provided that such a policy can be obtained without
additional premiums. Tenant acknowledges that Owner will not
carry insurance on Tenant's furniture and/or furnishings or any
fixtures or equipment, improvements or appurtenances removable by
Tenant and agrees that Owner will not be obligated to repair any
damage thereto or replace the same. (f) Tenant hereby waives the
provisions of Section 227 of the Real Property Law and agrees
that the provisions of this article shall govern and control in
lieu thereof.
EMINENT DOMAIN:
10. If the whole or any part of the demised premises shall be
acquired or condemned by Eminent Domain for any public or
quasi-public use or purpose, then and in that event, the term of
this lease shall cease and terminate from the date of title
vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired term of said lease.
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ASSIGNMENT, MORTGAGE, ETC.:
11. Tenant for itself, its heirs, that it shall not assign,
mortgage or encumber this agreement, nor underlet, or suffer or
permit the demised premises or any part thereof to be used by
others, without the prior written consent of Owner in each
instance. If this lease be assigned, or if the demised premises
or any part thereof be underlet or occupied by anybody other than
Tenant, Owner may, after default by Tenant, collect rent from the
assignee, under-tenant or occupant, and apply the net amount
collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of
the covenant, or the acceptance of the assignee, under-tenant or
occupant as tenant, or a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an assignment or underletting
shall not in any wise be construed to relieve Tenant from
obtaining the express consent in writing of Owner to any further
assignment or under letting.
ELECTRIC:
12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER attached
hereto. Tenant covenants and agrees that at all times its use of
electric current shall not exceed the capacity of existing
feeders to the building or the risers or wiring installation and
Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations
or interfere with the use thereof by other tenants of the
building, The change at any time of the character of electric
service shall in no wise make Owner liable or responsible to
Tenant, for any loss, damages or expenses which Tenant may
sustain.
ACCESS TO PREMISES:
13. Owner or Owner's agents shall have the right (but shall not
be obligated) to enter the demised premises in any emergency at
any time, and, at other reasonable, times, to examine the same
and to make such repairs, replacements and improvements as Owner
may deem necessary and reasonably desirable to any portion of the
building or which Owner may elect to perform, in the premises,
following Tenant's failure to make repairs or perform any work
which Tenant is obligated to perform under this lease, or for the
purpose of complying with laws, regulations and other directions
of governmental authorities. Tenant shall permit Owner to use and
maintain and replace pipes and conduits in and through the
demised premises and to erect new pipes and conduits therein,
provided they are within the walls. Owner may, during the
progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same
constituting an eviction nor shall the Tenant be entitled to any
abatement of rent while such work is in progress nor to any
damages by reason of loss or interruption of business or
otherwise. Throughout the term hereof Owner shall have the right
to enter the demised premises at reasonable hours for the purpose
of showing the same to prospective purchasers or mortgages of the
building, and during the last six months of the term for the
purpose of showing the same to prospective
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tenants and may, during said six months period, place upon the
premises the usual notice "To Let" and "For Sale"' which notices
Tenant shall permit to remain thereon without molestation. If
Tenants not present to open and permit an entry into the
premises, Owner or Owner's agents may enter the same whenever
such entry may be necessary or permissible by master key or
forcibly and provided reasonable care is exercised to safeguard
Tenant's 1)property and such entry shall not render Owner or its
agents liable therefore nor in any event shall the obligations of
the Tenant hereunder be affected. If during the last month of
term, Tenant shall have removed all or substantially all of
Tenant's property therefrom, Owner may immediately enter, alter,
renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or
Tenant's obligations hereunder. Owner shall have the right at any
time, without the same constituting an eviction and without
incurring liability to Tenant therefor to change the arrangement
and/or location of public entrances, passageways, doors,
doorways, corridors, elevators. stairs, toilets, or other public
parts of the building and to change the name, number or
designation by which the building may be known.
VAULT, VAULT SPACE, AREA:
14. No vaults, vault space or area, whether or not enclosed or
covered, not within the property line of the building is leased
hereunder, anything contained in or indicated on any sketch, blue
print or plan, or anything contained elsewhere in this lease to
the contrary notwithstanding. Owner makes no representation as to
the rotation of the property line of the building. All vaults and
vault space and all such areas not within the property line of
the building, which Tenant may be permitted to use and/or occupy,
is to be used and/or occupied under a revocable license, and if
any such license be revoked, or if the amount of such space or
area be diminished or required by any federal, state or municipal
authority or public utility. Owner shall not be subject to any
liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation,
diminution or requisition be deemed constructive or actual
eviction. Any tax, fee or charge of municipal authorities for
such vault or area shall be paid by Tenant.
OCCUPANCY:
15. Tenant will not at any time use or occupy the demised
premises in violation of, Articles 2 or 37 hereof, or of, the
certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises
and accepts them as is, subject to the riders annexed hereto with
respect to Owner's work, if any. In any event, Owner makes no
representation as to the condition of the premises and Tenant
agrees to accept the same subject to violations whether or not of
record.
BANKRUPTCY:
16. (a) Anything elsewhere in this lease to the contrary
notwithstanding. this lease may be canceled by Landlord by the
sending of a written notice to Tenant within a reasonable time
after the happening of any one or more of the following events:
(1) the commencement of a case in bankruptcy or under the laws of
any state naming Tenant as the debtor; or (2) the making
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by Tenant of an assignment or any other arrangement for the
benefit of creditors under any state statute, neither Tenant nor
any person claiming through or under Tenant, or by reason of any
statute or order of court, shall thereafter be entitled to
possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in
accordance with its terms. the provisions of this Article 16
shall be applicable only to the party then owning Tenant's
interest in this case. (b) It is stipulated and agreed that in
the event of the termination of this lease pursuant to (a)
hereof, Owner shall forthwith, notwithstanding any other
provisions of this lease to the contrary, be entitled to recover
from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired
portion of the term demised and the fair and reasonable rental
value of the demise premises for the same period. In the
computation of such damages the difference between any
installment of rent becoming due hereunder after the date of
termination and the fair and reasonable rental value of the
demised premises for the period for which such installment was
payable shall be discounted to the date of termination at the
rate of four per cent (4%) per annum. If such premises or any
part thereof be re-let by the Owner for the unexpired term of
said lease, or any part thereof, before presentation of proof of
such liquidated damages to any court, commission or tribunal, the
amount or rent reserved upon such re-letting shall be deemed to
be the fair and reasonable rental value for the part or the whole
of the premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right of
the Owner to prove for and obtain as liquidated damages by reason
of such termination, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and
governing the proceedings in which. such damages are to be
proved, whether or not such amount be greater, equal to, or less
than the amount of the difference referred to above.
DEFAULT:
17. (1) If Tenant defaults in fulfilling any of the covenants of
this lease other than the covenants for the payment of rent or
additional rent., or if the demised premises become vacant or
deserted; or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the demised
promises shall be taken or occupied by someone other than Tenant;
or if this lease be rejected under Section 365 of Title 11 of the
U.S. Code (Bankruptcy Code); or if Tenant shall fail to move into
or take possession of he premises within Fifteen (15) days after
the commencement of the term of this lease, of which fact Owner
shall the the sole judge; then, in any one or more of such
events, upon Owner serving a written five (5) days notice upon
Tenant specifying the nature of said default. and upon the
expiration of said five (5) days, if Tenant shall have failed to
comply with or remedy such default, or if the said default or
omission complained of shall be of a nature that the same cannot
be completely cured or remedied within said five (5) day period,
and if Tenant shall not have diligently commenced curing such
default within such five (5) day period, and shall not thereafter
with reasonable diligence and in good faith proceed to remedy or
cure such default, then Owner may serve a written three (3) days
notice of cancellation of this lease upon Tenant, and upon the
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expiration of said three (3) days, this lease and the term
thereunder shall end and expire as fully and completely as if the
expiration of such three (1) day period were the day herein
definitely fixed for the end and expiration of this lease, and
the term thereof and Tenant shall then quit and surrender the
demised premises to Owner but Tenant shall remain liable as
hereinafter provided. (2) If the notice provided for in (1)
hereof shall have been given, and the term shall expire as
aforesaid; or if Tenant shall make default in the payment of the
rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment
herein required; then and in any of such events Owner may without
notice, re-enter the demised premises either by force or
otherwise, and dispossess Tenant by summary proceedings or
otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold
the premises as if this lease had not been made, and Tenant
hereby waives the service of notice of intention to re-enter or
to institute legal proceedings to that end.
REMEDIES OF OWNER AND WAIVER OF REDEMPTION:
18. In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent, and
additional rent, shall become due thereupon and be paid up to the
time of such re-entry, dispossess and/or expiration. (b) Owner
may re-let the premises or any part or parts thereof, either in
the name of Owner or otherwise, for a term OR TERMS WHICH MAY AT
OWNER'S OPTION BE LESS than or exceed the period which would
otherwise have constituted the balance of the term of this lease
and may grant concessions or free rent or charge a higher rental
than that in this lease, and/or (c) Tenant or the legal
representatives of Tenant shall also pay Owner as liquidated
damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between the
rent hereby reserved and/or convenanted to be paid and the net
amount if any, of the rents collected an account of the subse
quent lease or leases of the demised premises for each month of
the period which would otherwise have constituted the balance of
the term of this lease. The failure of Owner to re-let the
premises or any part or parts thereof shall not release or affect
Tenant's liability for damages. In computing such liquidated
damages there shall be added to the said deficiency such expenses
as Owner may incur in connection with re- letting, such as legal
expenses, attorneys' fees, brokerage, advertising and for keeping
the demised premises in good order or for preparing the same for
re-letting. Any such liquidated damages shall be paid in monthly
installments by Tenant on the rent day specified in this lease.
Owner, in putting the demised premises in good order or preparing
the same for re- rental may, at Owner's option, make such
alterations, repairs, replacements, and/or decorations in the
demised premises as Owner, in Owner's sole judgement, considers
advisable and necessary for the purpose of re-letting the demised
premises, and the making of such alterations. repairs,
replacements, and/or decorations shall not operate or be
construed to release Tenant from liability. Owner shall in no
event be liable in any way whatsoever for failure to re-let the
demised premises, or
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in the event that the devised promises are re-let, for failure to
collect the rent thereof Under such reaching, and in no event
shall Tenant be entitled to receive any excess, if any, of such
net rent collected over the sums payable by Tenant to Owner
hereunder, In the event of a breach or threat ened breach by
Tenant or an of the covenants or provisions hereof, Owner shall
have the right of injunction and the right to invoke any remedy
allowed at law or in equity as if re-entry, summary proceedings
and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any
other remedy, in law or in equity. Tenant hereby expressly waives
any and all rights of redemption granted by or under any present
or future laws.
FEES AND EXPENSES:
19. If Tenant shall default in the observance or performance of
any term or covenant on Tenant's part to be observed or performed
Under or by virtue of any of the terms or provisions in any
article of this lease, then, unless otherwise provided elsewhere
in this lease, Owner may immediately or at any time thereafter
and without notice perform the obligation of Tenant thereunder,
and if Owner, in connection therewith or in connection which any
default by Tenant in the covenant to pay rent hereunder, makes
any expenditures or incurs any obligations for the payment of
money, including but not limited to attorney's fees, in
instituting, prosecuting or defending any actions or proceeding,
such sums so paid or obligations incurred with interest and costs
shall be deemed to be additional rent hereunder and shall be paid
by Tenant to Owner within five (5) days of rendition of any bill
or statement to Tenant therefor, and if Tenant's lease term shall
have expired at the time of making of such expenditures or
incurring of such obligations, such sums shall be recoverable by
Owner as damages.
NO REPRESENTATIONS BY OWNER:
20. Neither Owner nor Owner's agents have made any
representations or promises with respect to the physical
condition of the building, the land upon which it is erected or
the demised promises, the rents, leases, expenses of operation,
or any other matter or thing affecting or related to the premises
except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise
except as expressly set forth in the provisions of this lease.
Tenant has inspected the building and the demised premises and is
thoroughly acquainted with their condition, and agrees to take
the same "as is", and acknowledges that the taking of possession
of the demised premises by Tenant shall be conclusive evidence
that the said premises and the building of which the same form a
part were in good and satisfactory condition at the time such
possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties
hereto are merged in this contract, which alone fully and
completely expresses the agreement between Owner and Tenant and
any executory agreement hereafter made shall be ineffective to
change, modify, discharge or effect an abandonment of it in whole
or in part, unless such executory agreement is in writing and
signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.
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END OF TERM:
21. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender to Owner the demised
premises, broom clean, in good order and condition, ordinary wear
excepted, and Tenant shall remove all it's property. Tenant's
obligation to observe or perform this covenant shall survive the
expiration or other termination of this lease. If the last day of
the term of this lease or any renewal thereof, falls on Sunday,
this lease shall expire at noon on the preceding Saturday unless
it be a legal holiday in which case it shall expire at noon on
the preceding business day.
QUIET ENJOYMENT:
22. Owner covenants and agrees with Tenant that upon Tenant
paying the rent and additional rent and observing and performing
the terms, covenants and conditions on Tenant's part to be
observed and performed. Tenant may peaceably and quietly enjoy
the premises hereby demised, subject, nevertheless, to the terms
and conditions of this lease including, but not limited to,
Article 33 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
FAILURE TO GIVE POSSESSION:
23. If Owner is unable to give possession of the demised premises
on the date of the commencement of the term hereof, because of
the holding-over or retention of possession of any Tenant,
undertenant or occupants, or if the premises arc located in a
building being constructed, because such building has not been
sufficiently completed to make the premises ready for occupancy
or because of the fact that a certificate of occupancy has not
been procured or for any other reason, Owner shall not be subject
to any liability for failure to give possession on said date and
the validity of the lease shall not be impaired under such
circumstances, nor shall the same be construed in any wise to
extend the term of this lease, but the rent payable hereunder
shall be abated provided Tenant is not responsible for the
inability to obtain possession until after Owner shall have given
Tenant written notice that the premises are substantially ready
for Tenant's occupancy. If permission is given to Tenant to enter
into the possession of the demised premises or to occupy premises
other than the demised premises prior to the date specified as
the commencement of the term of this lease. Tenant covenants and
agrees that such occupancy shall be deemed to be under all the
terms, covenants. conditions and provisions of this lease, except
as to the covenant to pay rent. The provisions of this article
arc intended to constitute "an express provision to the contrary"
within the meaning of Section 223-a of the New York Real Property
Law.
NO WAIVER:
24. The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition
of this lease or of any of the Rules or Regulations set forth or
hereafter adopted by Owner, shall not prevent a subsequent act
which would have originally constituted a violation from having
all the force and effect of an original violation. The receipt by
owner of rent with knowledge of the breach of any covenant of
this lease shall not be deemed a waiver of such breach and no
provision of this lease shall be deemed to have been waived by
Owner unless such waiver be in writing signed by Owner, No
payment by Tenant or receipt
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by Owner of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than an account of the
earliest stipulated rent, nor shall any endorsement or statement
of any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Owner may accept
such check or payment without prejudice to Owner's right to
recover the balance of such rent or pursue any other remedy in
this lease provided, no act or thing done by Owner or Owner's
agents during tho term hereby demised shall be deemed in
acceptance of a surrender of said premises and no agreement to
accept such surrender shall be valid unless in writing signed by
Owner. No employee of Owner or Owner's agent shall have any power
to accept the keys of said premises prior to the termination of
the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of
the premises.
WAIVER OF TRIAL BY JURY:
25. It is mutually agreed by and between Owner and Tenant that
the respective parties hereto shall and they hereby do waive
trial by jury in any action, proceeding or counterclaim brought
by either of the parties hereto against the other (except for
personal injury or property damage) on any matters whatsoever
arising out of or in any way connected with this lease, the
relationship of Owner and Tenant. Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory
remedy. It is further mutually agreed that in the event Owner
commences any summary proceeding for possession of the premises,
Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding.
INABILITY TO PERFORM:
26. This lease and the obligation of Tenant to pay rent hereunder
and perform all of the other covenants and agreements hereunder
on part of Tenant to be performed shall in no wise be affected,
impaired or excused because Owner is unable to fulfill any of its
obligations under this lease or to supply or is delayed in
supplying any service expressly or implicitly to be supplied or
is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed
in supplying any equipment or fixtures if owner is prevented or
delayed from so doing by reason of strike or labor troubles,
government preemption in connection with a national emergency or
by reason of any rule, order or regulation of any department or
subdivision thereof of any government agency or by reason of the
conditions of supply and demand which have been or are affected
by war or other, emergency, or when, in the judgment of Owner,
temporary interruption of such services is necessary by reason of
accident, mechanical breakdown, or to make repairs, alterations
or improvements.
BILLS
AND NOTICES: 27. Except as otherwise in this lease provided, a
bill, statement, notice or communication which Owner may desire
or be required to give to Tenant, shall be deemed sufficiently
given or rendered if, in writing, delivered to Tenant personally
or sent by registered certified mail addressed to Tenant at the
building of which the demised premises form a part or at the last
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known residence address or business address of Tenant or left at
any of the aforesaid premises addressed to Tenant, and the time
of the rendition of such bill or statement and of the giving of
such notice or communication shall be deemed to be the time when
the same is delivered to Tenant, mailed, or left at the premises
as herein provided. Any notice by Tenant to Owner must be served
by registered or certified mail addressed to Owner at the address
first herein above given or at such other address as Owner shall
designate by written notice.
WATER CHARGES:
28. If Tenant requires, uses or consumes water for any purpose in
addition to ordinary lavatory purposes (of which fact Tenant
constitutes Owner to be the sole judge) Owner may install a water
meter and thereby measures Tenant's water consumption for all
purposes. Tenant shall pay Owner for the cost of the meter and
the cost of the installation thereof and throughout the duration
of Tenant's occupancy Tenant shall keep said meter and
installation equipment in good working order and repair at
Tenant's own cost and expense. Tenant agrees to pay for water
consumed, as shown on said meter as and when bills are rendered.
Tenant covenants and agrees to pay the sewer rent, charge or any
other tax, rent, levy or charge which now or hereafter is
assessed, imposed or a lien upon the demised premises or the
realty of which they are part pursuant to law, order or
regulation made or issued in connection with the use,
consumption, maintenance or supply of water, water system or
sewage or sewage connection or system. The bill rendered by Owner
shall be payable by Tenant as additional rent. If the building or
the demised premises or any part thereof be supplied with water
through a meter through which water is also supplied to other
promises Tenant shall pay to Owner as additional rent, on the
first day of each month, %, ($ ) of the total meter charges, as
Tenant's portion. Independently of and in addition to any of the
remedies reserved to Owner herein above or elsewhere in this
lease. Owner may sue for and collect any monies to be paid by
Tenant or paid by Owner for any of the reasons or purposes herein
above set forth.
SPRINKLERS:
29. Anything elsewhere in this lease to the contrary
notwithstanding, if the New York Board of Fire Underwriters or
the Insurance Services Office or any bureau, department or
official of the federal, state or city government require or
recommend the installation of a sprinkler system or that any
changes, modifications, alterations, or additional sprinkler
heads or other equipment be made or supplied in an existing
sprinkler system by reason of Tenant's business, or the location
of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler
system installations, changes, modifications, alterations,
additional sprinkler heads or other such equipment become
necessary to prevent the imposition of a penalty or charge
against the full allowance for a sprinkler system in the fire
insurance rate set by any said Exchange or by any fire insurance
company. Tenant shall, at Tenant's expense, promptly make such
sprinkler system installations, changes, modifications,
alterations, and supply additional sprinkler heads or other
equipment as required whether the work involved shall be
structural or non-structural in nature, Tenant shall pay to Owner
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as additional rent the sum of $ , on the first day of each month
during the term of this lease, as Tenant's portion of the
contract price for sprinkler supervisory service.
HEAT, CLEANING:
30. As long as Tenant is not in default under any of the
covenants of this lease, Owner shall, if and insofar as existing
facilities permit, furnish heat to the demised premises, when and
as required by law, on business days from 8:00 a.m. to 6:00 p.m.,
and on Saturdays from 8:00 a.m. to 1:00 p.m. Tenant shall at
Tenant's expense, keep demised premises clean and in order, to
the satisfaction of Owner, and if demised premises are situated
on the street floor, Tenant shall, at Tenant's own expenses make
all repairs and replacements to the sidewalks and curbs adjacent
thereto, and keep said sidewalks and curbs free from snow, ice,
dirt and rubbish. Tenant shall pay to Owner the cost of removal
of any of Tenant's refuse and rubbish from the building. Bills
for the same shall be rendered by Owner to Tenant at such times
as Owner may elect and shall be due and payable when rendered,
and the amount of such bills shall be deemed to be, and be paid
as additional rent. Tenant shall, however, have the option of
indepen dently contracting for the removal of such rubbish and
refuse in the event that Tenant does not wish to have same done
by employees of Owner. Under such circumstances, however, the
removal of such refuse and rub bish by others shall be subject to
such rules and regulations as, in the judgment of Owner, are
necessary for the proper operation of the building.
SECURITY:
31. Tenant has deposited with Owner the sum of $ as security for
the faithful performance of and observance by Tenant of the
terms, provisions and conditions of this lease, it is agreed that
in the event Tenant defaults in respect of any of the terms,
provisions and conditions of this lease, in cluding, but not
limited to, the payment of rent and additional rent. Owner may
use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and
additional rent or any other sum as to which Tenant is in default
or for any sum which Owner may expend or may be required to
expend by reason of Tenant's default in respect of any of the
terms, covenants and conditions of this lease, including but not
limited to, any damages or deficiency in the refitting of the
premises, whether such damages or deficiency accrued before or
after summary proceedings or other re-entry by Owner. In the
event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease,
the security shall be returned to Tenant after the date fixed as
the end of the lease and after delivery of entire possession of
the demised premises to Owner. In the event of sale of the land
and building or leasing of the building, of which the demised
premises form a part, Owner shalt have the right to transfer the
security to the vendee or lessee and Owner shall thereupon be
released by Tenant from all liability for the return of such
security, and Tenant agrees to look to the new Owner solely for
the return of said security; and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will
not assign or encumber or attempt to assign or encumber the
monies deposited herein as security and that neither Owner
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nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted
encumbrance.
CAPTIONS:
32. The Captions are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope
of this lease nor the intent of any provision thereof.
DEFINITIONS:
33. The term "Owner" as used in this lease means only the Owner,
or the mortgagee in possession, for the time being of the land
and building (or the Owner of a lease of the building or of the
land and building) of which the demised premises form a part, so
that in the event of any sale or sales of said land and building
or ,of said lease, or in the event of a lease of said building,
or of the land and building, the said Owner shall be and hereby
is entirely freed and relieved of all covenants and obligations
of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties of their successors in
interest, or between the parties and the purchaser, at any such
sale, or the said lessee of the building, or of the land and
building, that the purchaser or the lessee of the building has
assumed and agreed to carry out any and all covenants and
obligation of Owner hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their
technical legal meaning. The term "business days" as used in this
lease shall exclude Saturdays (except such portion thereof as is
covered by specific hours in Article 30 hereof). Sundays and all
days designated as holidays by the applicable building service
union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service.
ADJACENT EXCAVATION/SHORING:
34. If an excavation shall be made upon land adjacent to the
demised premises, or shall be authorized to be made, Tenant shall
afford to the person causing or authorized to cause such
excavation, license to enter upon the demised premises for the
purpose of doing such work as said person shall deem necessary to
preserve the wall or the building of which demised premises form
a part from injury or damage and to support the same by proper
foundations without any claim for damages or indemnity against
Owner or diminution or abatement of rent.
RULES AND REGULATIONS:
35. Tenant and Tenant's servants, employees, agents, visitors,
and licensees shall observe faithfully, and comply strictly with
the Rules and Regulations and such other and further reasonable
Rules and Regulations as Owner or Owner's agents may from time to
time adopt. Notice of any additional rules or regulations shall
be given in such manner as Owner may elect. In case Tenant
disputes the reasonableness of any additional Rule or Regulation
hereafter made or adopted by Owner or Owner's agents, the parties
hereto agree to submit the question of the reasonableness of such
Rule or Regulation for decision to the New York office of the
American Arbitration Association, whose determination shall be
final and conclusive upon the parties hereto. The right to
dispute the reasonableness of any additional Rule or Regulation
upon Tenant's part
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shall be deemed waived unless the same shall be asserted by
service of a notice, in writing, upon Owner within ten (10) days
after the giving of notice thereof. Nothing in this lease
contained shall be construed to impose upon Owner any duty or
obligation to enforce the Rules and Regulations or terms,
covenants or conditions In any other lease, as against any other
tenant and Owner shall not be liable to Tenant for violation of
the same by any other tenant, its servants, employees, agents,
visitors or licensees.
GLASS:
36. Owner shall replace, at the expense of Tenant, any and all
plate and other glass, damaged or broken from any cause
whatsoever in and about the demised premises. Owner may insure,
and keep insured, at Tenant's expenses all plate and other glass
in the demised premises for and in the name of Owner. Bills for
the premiums therefor shall be rendered by Owner to Tenant at
such times as Owner may elect, and shall be due from, and payable
by, Tenant when rendered, and the amount thereof shall be deemed
to be, and be paid as, additional rent.
PORNOGRAPHIC USE PROHIBITED:
37. Tenant agrees that the value of the demised premises and the
reputation of the Owner will be seriously injured if the premises
are used for any obscene or pornographic purposes or any sort of
commercial sex establishment. Tenant agrees that Tenant, will not
bring or permit any obscene or-pornographic material on the
premises, and shall not permit or conduct any obscene, nude, or
semi-nude live performances on the premises, nor permit use of
the premises for nude modeling, rap sessions, or as a so-called
rubber goods shop, or as a sex club of any sort, or as a massage
parlor. Tenant agrees further that Tenant will not permit any of
these uses by any sublessee or assignee of the premises. This
Article shall directly bind any successors in interest to the
Tenant. Tenant agrees that if at any time Tenant violates any of
the provisions of this Article, such violation shall be deemed a
breach of a substantial obligation of the terms of this lease and
objectionable conduct. Pornographic material is defined for
purposes of this Article as any written or pictorial matter with
prurient appeal or any objects of instrument that are primarily
concerned with lewd or prurient sexual activity. Obscene material
is defined here as it is in Penal law ss.235.00.
ESTOPPEL CERTIFICATE:
38. Tenant, at any time, and from time to time, upon at least 10
days prior notice by Owner, shall execute, acknowledge and
deliver to Owner, and/or to any other person, firm or corporation
specified by Owner, a statement certifying that this lease is
unmodified and in full force and effect (or, if there have been
modifications, that the same is in full force and effect as
modified and stating the modifications), stating the dates which
the rent and additional rent have been paid, and stating whether
or not there exists any defaults by Owner under this lease, and
if so, specifying each such default.
SUCCESSORS AND ASSIGNS:
39. The covenants. conditions and agreements contained in this
lease shall
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bind and inure to the benefit of Owner and Tenant and their
respective heirs, distributees, executors, administrators,
successors, and except as otherwise provided in this lease, their
assigns.
IN WITNESS THEREOF, Owner and Tenant have respectively signed and
sealed this lease as of the day and year first above written.
/S/ DANIEL HUEGLIN
-------------------------
DANIEL HUEGLIN, PRESIDENT
BAYBRIDGE PLAYROBICS, INC.
/S/ SAL CASACCIO
-------------------------
SAL CASACCIO, PRESIDENT
CHILD'S PLAYROBICS, INC.
[THIS SPACE INTENTIONALLY LEFT BLANK]
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 35
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress to and egress from
the demised premises and for delivery of merchandise and equipment in a prompt
and efficient manner using elevators and passageways designated for such
delivery by Owner. There shall not be used in any space, or in the public hall
of the building, either by any Tenant or by jobbers, or others in the delivery
or receipt of merchandise, any hand trucks except those equipped with rubber
tires and safeguards.
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<PAGE>
2. If the premises are situated an the ground floor of the building,
Tenant thereof shall further, at Tenant's expense, keep the sidewalks and curb
in front of said premises clean and free from ice, snow, etc.
3. The water and wash closets and plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed.
4. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the demised premises, or permit or suffer the
demised premises to be occupied or used in a manner offensive or objectionable
to Owner or other occupants of the building by reason of noise, odors and/or
vibrations or interfere in any way with other Tenants or those having business
therein.
5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside of the demised premises or the building or are the inside of the demised
premises if the same is visible from the outside of the premises without the
prior written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by
any Tenant, Owner may remove same without any liability and may charge the
expense incurred by such removal to Tenant or Tenants violating this rule. Signs
on interior doors and directory tablet shall be inscribed, painted or affixed
for each Tenant by Owner at the expense of such Tenant, and shall be of a size,
color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner and as Owner may direct. No Tenant shall lay linoleum
or similar floor covering so that the same may come in direct contact with the
floor of the demised premises, and, if linoleum or other similar floor covering
is desired to be used, an underlining of builders deadening felt shall be first
affixed to the floor by a plastic or other material, soluble in water, the use
of cement or other similar adhesive material being expressly prohibited.
7. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrance and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought in to the building and to exclude from the
building all freight which violates any of theft Rules and Regulations or the
lease of which these Rules and Regulations are a part.
8. Owner reserves the right to exclude from the building between the
hours of 6 p.m. and 8 a.m., and at all hours on Sunday and holidays all persons
who do not present a pass to the building signed by the Owner. Owner will
furnish passes to persons for whom any Tenant requests same in writing. Each
Tenant shall be responsible for all Persons for whom he requests such pass and
shall be liable to Owner for all acts of such person.
9. Owner shall have the right to prohibit any advertising by any Tenant
which, in Owner's opinion, tends to impair the reputation of Owner or its
desirability as a building for stores or offices, and upon written notice from
Owner, Tenant shall refrain from or discontinue such advertising.
10. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other process,
or any unusual or other objectionable odors to permeate in or eminate from the
demised premises.
11. Tenant shall not place a load on any floor of the demised premises
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exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Owner reserves the right to prescribe the weight and
position of all safes, business machines and mechanized equipment. Such
installations shall be placed and maintained by Tenant at Tenant's expense in
setting sufficient in Owner's judgement to absorb and proven vibration, noise
and annoyance.
GUARANTY
The undersigned guarantor guarantees to Owner, Owner's successors and
assigns, that full performance and observance of all the agreements to be
performed and observed by Tenant in the attached lease, including the "Rules and
Regulations"as therein provided, without requiring any notice to Guarantor of
nonpayment or, nonperformance, or proof, or notice of demand, to hold the
undersigned responsible under this guaranty, all of which the undersigned hereby
expressly waives and expressly agrees that the legality of this agreement and
the agreements of the Guarantor under this agreement shall not be ended, or
changed by reason of the claims to Owner against Tenant of any of the rights or
remedies attached lease. The guarantor further agrees that this guaranty shall
remain and continue in full force and effect as to any renewal, change or
extension of the lease. As a further inducement to Owner to make the lease Owner
and Guarantor agree that in any action or proceeding brought by either Owner or
Guarantor against the other on any matters concerning the lease or of this
guaranty that Owner and the undersigned shall and do waive trial by jury.
94
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
AUDITED AND UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR THE PERIODS ENDING
DECEMBER 31,1998 AND SEPTEMBER 30, 1999, RESPECTIVELY, FILED WITH THE COMPANY'S
ANNUAL REPORT ON FORM 10-SB/A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001047733
<NAME> Learner's World, Inc.
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-1-1998 JAN-1-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 420 2,468
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<CURRENT-ASSETS> 38,903 39,176
<PP&E> 1,041,526 1,018,928
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0 0
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<OTHER-SE> (357,937) (183,220)
<TOTAL-LIABILITY-AND-EQUITY> 1,135,560 1,113,325
<SALES> 0 0
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<CGS> 744,277 599,758
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<OTHER-EXPENSES> 552,977 577,515
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<INTEREST-EXPENSE> 150,228 117,099
<INCOME-PRETAX> (194,216) (333,937)
<INCOME-TAX> 1100 800
<INCOME-CONTINUING> 0 0
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<NET-INCOME> (195,316) (334,737)
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