SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 10-KSB
(Mark One)
_X_ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the fiscal year ended December 31, 1999
OR
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF
ACT 1934.
From the transition period from ______________ to ______________.
Commission file number 001-14995
Accufacts Pre-Employment Screening, Inc.
(Name if Small Business Issuer in Its Charter)
Delaware 13-4056901
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6 Greene Street NY, NY 10013
(Address of Principal Executive Offices) (Zip Code)
(212) 966-0666
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
on Which Registered
Common Stock, par OTCBB
value $.01 per share
Securities registered under Section 12(g) of the Exchange Act:
N/A
(Title of Class)
N/A
(Title of Class)
Check whether the issuer: (1) filed all reports to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for past 90 days.
Yes [X] No [_]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ____
State issuer's revenues for its most recent fiscal year. $2,283,533
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State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date within the past 60 days. $3,375,000, based on 2,700,000 shares
of common stock, par value $.01 per share, held by non-affiliates of the
Registrant and an average bid and asked price of $1.25 as reported on the OTC
Bulletin Board on April 4, 2000.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 6,627,471 shares of common
stock, par value $.01 per share, as of March 31, 2000.
Transitional Small Business Disclosure (check one): Yes ___ No _X_
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FORWARD LOOKING STATEMENTS
Accufacts Pre-Employment Screening, Inc., a Delaware corporation (the
"Company"), cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements that may be deemed to have been made in this Form
10-KSB or that are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in the Form 10-KSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may," "expect," "believe,"
"anticipate," "intend," or comparable terminology are intended to identify
forward-looking statements. Factors that may affect the Company's results
include, but are not limited to, the Company's limited operating history, its
ability to produce additional products and services, its dependence on a limited
number of customers and key personnel, its possible need for additional
financing, its dependence on certain industries, and competition from its
competitors. The Company is also subject to other risks detailed herein or set
forth from time to time in the Company's filings with the Securities and
Exchange Commission.
PART I
Item 1. Description of Business.
Business Development
Accufacts Pre-Employment Screening, Inc. (the "Company") was originally
incorporated in the state of New York on October 6, 1996. On August 31, 1998,
the Company was merged into Southern Cargo Company, Inc., a public shell
incorporated in the State of Florida in 1993 but which did not commence
operations until mid-1998 ("Southern Cargo"). Simultaneously with such
acquisition, Southern Cargo changed its name to Accufacts Pre-Employment
Screening, Inc., and shortly thereafter reincorporated under the same name in
the State of Delaware.
On October 13, 1999, the Company acquired all of the operating assets of
Maglio, Inc., a Florida corporation engaged in providing pre-employment
screening services ("Maglio, Inc."), by merging Maglio, Inc. with and into
Maglio-Accufacts Pre-Employment Screening, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company ("Maglio-Accufacts").
As used in this Form 10-KSB, the names "Accufacts Pre-Employment Screening,
Inc.," "Accufacts" and the "Company" all refer to the existing Delaware
corporation, its predecessor business entities and Maglio-Accufacts. The term
"business" refers to the business of the Company, its predecessors and
subsidiaries.
Business of Issuer
The Company is engaged in conducting and providing background checks of
individuals for potential employers through the use of databases and a national
network of agents (engaged on an independent contractor basis) developed by the
Company. The background information products and services currently provided by
the Company consist of:
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o criminal history,
o pre-employment credit reports,
o social security number verification,
o driving record history,
o pre-employment verification,
o education verification,
o professional reference verification,
o professional license verification,
o federal criminal/civil search,
o sex offender registration, and
o nation fugitive search.
The Company believes that employers increasingly are realizing the benefits
of conducting thorough background checks of employees as well as the verifying
employment applications, not only because of the desire to help assure a better
quality employee, but also, in some industries, the concern with negligent
hiring lawsuits. The Company has approximately 700 customers located throughout
the United States. During each of the fiscal years ended December 31, 1999, 1998
and 1997, sales of the Company's services were made in 50 states, with
approximately 35.0%, 50.0% and 60.0%, respectively, of total sales having been
made in the State of New York. The Company's business strategy is to accelerate
market presence throughout the United States. The Company also intends to
enhance its existing products, develop new ones and pursue acquisitions of other
companies, assets and/or product lines that either complement or expand its
existing business. See "Business."
Markets
The Company markets its employment background checking products and
services throughout the United States. Although any company with employees is a
potential customer of Accufacts, the Company believes that companies or
businesses with one or more of the following characteristics would typically
benefit most from conducting background checks on employees and job-applicants:
o High risk of liability for negligent hiring lawsuits relating to the
action or inaction of employees;
o Physically demanding jobs;
o Employees with access to goods and cash of employers;
o High employee turnover; and
o Desire for better quality employees, not only with respect to
competence, but also integrity.
Industries in which one or more of these characteristics exist include:
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o construction;
o retail;
o manufacturing;
o property management, including commercial office buildings, apartments
and hotels;
o medical, including nursing homes, hospitals and in-home health care
providers;
o city and county governments, including schools, gaming, temporary and
permanent placement agencies; and
o accounting firms.
Products and Services
General.
The Company's products and services are designed to verify job applicant
background information for employers and consist of database searches through
the use of the Company's in-house computer system and manual retrieval and
copying of public records by the Company's network courier system. The Company's
customers may request and receive records by telephone, mail, facsimile or
through the Company's two web sites, www.accufacts.com and www.maglioinc.com, or
by using proprietary software developed by Accufacts or a modem-equipped
personal computer or terminal to access the Company's on-line order placing
network. This network is available 24 hours per day, seven days a week.
Accufacts licenses its software to its customers free of charge.
The prices to Accufacts' customers of the reports prepared by the Company
vary in price from $5.00 to $75.00 per report, depending upon the type and
location of the background check requested by the customer. The reports may be
viewed on screen or printed in either Accufacts' or the customer's offices. The
reports remain in a computer file in Accufacts' host computer system for two
years and are available to the customer at no additional cost during that
period.
The Company's in-house computer host system consists of automated,
networked PCs running Window NT, using SQL data bases which automatically read
orders out to the Company's agents and/or to third party databases for automatic
processing. In addition, the Company operates its Internet-based consumer order
entry system with the same automatic computer system, thereby reducing
turnaround time and operating costs as compared to the Company's computers.
The Company's network agent system currently consists of persons and small
companies located throughout the United States. The agents are engaged as
independent contractors by written agreements which provide for payment of a fee
on a per document, per day or monthly basis. The number of agents in each state
or locality depends on the size, population density, numbers of counties, and
the organization of the court systems within the state or locality.
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The Company currently offers the following products and services:
Criminal Histories--Searches in selected geographical areas for the
presence of a criminal record. This background information is available
statewide from 32 states or from all 3,300 counties in the United States on a
county-by-county basis. The remaining 18 states do not have an accessible
statewide depository for this type of information. This information is retrieved
by Accufacts through its network agent system, computer access directly into the
states and certain counties or, in some instances, by facsimile, mail and
telephone.
Motor Vehicle Driving Reports--Confirms driving records. This background
information is retrieved by Accufacts through a non-affiliated third party and
is available from all 50 states, the District of Columbia, and Puerto Rico. This
same information could be obtained directly by the Company from the source or
from other non-affiliated third parties. These reports and the credit reports
discussed below are the only two products for which Accufacts serves as a
broker.
Credit Information. This background information is a special form of a
common "credit report" designed for employment purposes only. The report
complies with current provisions of the Fair Credit Reporting Act, as amended
("FCRA"). See "Government Regulation" below. Accufacts serves as a broker for
this information for all three of the major credit bureaus (Equifax, TRW and
TransUnion) and retrieves the information from these credit bureaus through
software developed and owned by Accufacts . Accufacts customers may order any
combination of the three credit bureaus.
Social Security Number. This report will verify the issue date, number and
name associated with the number. It will also indicate if the number has been
reported deceased or not-issued as of a certain date. The report may also reveal
other names, including, "also-known-as" or maiden names, and/or addresses
previously or currently used by the applicant.
Employment Verifications. Pursuant to the client's requirements, this
report can include a complete verification of all previous employers, or a
review of the most recent two or three positions held.
Education Verifications. This report contains the applicant's academic
history including: name of institution, dates of attendance, major course of
study and the type of degree(s) received by the individual.
Professional License Verification. Professional licenses in most states may
be verified to include physicians, registered nurses, dentists, chiropractors,
physical therapists, attorneys, certified public accountants, etc.
Professional/Personal Reference Verification. This report is based on an
interview of a co-worker or personal reference as provided by the applicant. The
co-worker or personal reference is questioned as to the length and nature of
their relationship with the applicant and the applicant's skills and work ethic.
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Federal Search. This search consists of a check for criminal and civil
filings in a Federal District identified by the client, or the district of
residence as identified by Accufacts. This search will reveal criminal and civil
information that has not been purged, sealed or expunged by the court and
generally involves a two to four-year time frame from the date of the search.
New York State Sex Offender Registry Search. This is a statewide search of
the New York State Sex Offender Registry Database. New York State sex offenders
are categorized by the risk that they pose to public safety. For a sex offender
to be included in the Registry, he or she must be under the supervision of the
New York State Criminal Justice System to include probation, parole or
incarceration.
Nationwide Search for Outstanding Warrants. This search is conducted
through a law-enforcement entity and includes a search of the NCIC database for
wanted persons. It should be noted that for a subject to be listed on the NCIC
database, a State, Local or Federal Law Enforcement Agency must have entered the
subject into the database as a wanted person.
Accelerated Market Presence
Accufacts intends to continue the acceleration of its market presence
throughout the United States by further expanding and refining sales and
marketing techniques used by it over the past several years, including the
following methods:
o Face-to-face selling with prospective customers, primarily larger
companies;
o in-house telemarketing to existing customers and to prospective
customers who have shown an interest in purchasing Accufacts' products
and services;
o independent resellers;
o public relations;
o participation in trade shows and seminars;
o advertising in trade publications;
o maintaining a web page on the Internet; and
o mailing of news releases to existing customers and to prospective
customers.
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Acquisitions of Other Companies and/or Product Lines
The Company is pursuing the acquisition of other companies, assets and/or
product lines that either complement or expand Accufacts' business. Target
companies are regional or state background checking companies or companies with
complementary products including but not limited to drug testing, skills testing
or safety and security products. The Company may use cash or stock or a
combination of stock and cash to affect any such acquisitions. The Company has
had, and will continue to have, discussions from time-to-time with potential
acquisition candidates. On October 13, 1999, the Company acquired Maglio, Inc.
buy merging it into Maglio-Accufacts, a wholly-owned subsidiary of the Company.
Other than the acquisition of Maglio, Inc. in October 1999, the Company has not
consummated any acquisitions nor is any acquisition considered probable as of
the date of this Form 10-KSB. No assurance can be given that the Company will be
successful in these efforts.
Long-Term Customer Relationships
The Company is committed to providing quality products and services to its
customers. Management believes that the Company's emphasis on building long-term
relationships with its customers has played a significant role in Accufacts'
success. Management further believes that these relationships are important not
only to generate additional sales from existing customers, but also for customer
referrals. A large percentage of the Company's sales have been generated by
referrals from customers. The Company intends to continue to send monthly
newsletters to existing customers; monitor its larger customers daily; and
contact each of its customers on a regular basis through telesales.
Quality Customer Service and Support
In order to offer customers quality service and support, Accufacts has
developed and will continue to enhance a client service and support program
including:
o the availability of a customer service representative twelve hours a
day Monday through Friday;
o in-house training of all customer service representatives on
Accufacts' products;
o quality control checks for Accufacts' products; and
o minimum acceptable performance guidelines for employees.
In addition, Accufacts realizes the importance of long-term employees to
the success of its operations and, therefore, strives to provide a positive work
environment and benefits package for employees.
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Marketing and Sales
The Company's marketing program consists of direct marketing activities,
exhibitions at trade shows, the Internet, public relations activities and
in-house telemarketing. All of the leads generated by these marketing activities
are referred to new customer telesales representatives for follow-up and, if
applicable, obtaining the documentation (including executed User Agreements)
needed to open new customer accounts.
There are five employees at the Company's headquarters in New York, who are
involved in marketing activities, one of whom is the Director of Marketing.
Customers
The Company currently has approximately 700 customers located throughout
the United States. During each of the fiscal years ended December 31, 1999, 1998
and 1997, sales were made in 50 states, with approximately 35.0%, 50.0% and
60.0%, respectively, of total sales having been made in the State of New York.
No single customer of Accufacts accounted for more than 10.0% of total Accufacts
sales during the fiscal years ended December 31, 1999, 1998 or 1997.
Historically, the Company experiences 35.0% of its annual sales in the
fourth quarter due to increased hiring by retailers, starting in mid-October and
continuing through the holiday season.
Government Regulation
The Company is a "consumer reporting agency" within the meaning of that
term as used in, and therefore is subject to, the provisions of the FCRA, and is
regulated by the Federal Trade Commission ("FTC") under the Federal Trade
Commission Act. Under the provisions of the FCRA, a consumer reporting agency
may furnish a "consumer report" to a customer (other than a consumer or in
response to a court order) only if such agency has reason to believe that, among
other matters, the customer intends to use the information for a permissible
purpose, including in connection with a credit transaction involving the
consumer on whom the information is to be furnished or the review or collection
of an account of the consumer or the customer otherwise has a legitimate need
for the information in connection with a business transaction concerning the
consumer. The background checking reports of Accufacts are consumer reports for
purposes of the FCRA. In addition, certain of Accufacts' consumer reports are
"investigative consumer reports" within the meaning of that term under the FCRA.
The FCRA also prohibits disclosure of obsolete information concerning a
consumer. Obsolete information generally means information which is more than
seven years old.
The FCRA requires a consumer reporting agency to maintain reasonable
procedures designed to ensure that the prohibitions on the use of obsolete
information are not violated, and that the information contained in a consumer
credit report is used for a proper purpose. In addition, a consumer reporting
agency must follow reasonable procedures to assure maximum accuracy of the
information concerning the consumer about whom the report relates. See sub
caption "Legal Considerations" below. The FCRA also requires a consumer
reporting agency,
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upon request from a consumer, to disclose all information about that consumer in
a consumer report, together with the source and the recipients of the
information. In some cases, this information must be delivered to the consumer
at no cost, and, in others, the agency may charge a reasonable fee. Accufacts
historically has not charged such a fee.
The Consumer Credit Reporting Reform Act (CCRRA) of 1996 amended the FCRA
and added new requirements on consumer reporting agencies providing consumer
reports for employment purposes. The requirements include:
o providing customers with a notification of their responsibilities
under the FCRA;
o obtaining certifications from customers that they are performing
certain specific actions as required by the FCRA;
o providing the subject of the report with a free copy of the report if
adverse action is taken by an employer based on information in the
consumer report; and
o providing a copy of a "Summary of Your Rights Under the Fair Credit
Reporting Act" with each consumer report.
The CCRRA also placed new requirements on the resale of consumer reports. A
consumer reporting agency providing consumer reports to a reseller must now
obtain the identity of the end user of the information for each report. In
addition, the consumer reporting agency must receive certifications from
resellers that their customers are performing the same specific actions as are
required of the consumer reporting agency's direct customers, and ensure that
reports are being resold only for permissible purposes.
The FCRA provides that an investigative consumer report may not be prepared
on any consumer unless such consumer receives notice thereof in writing not
later than three days after the date on which the report was first requested,
which must include a statement, among others, that the consumer has the right to
request complete disclosure of the nature and scope of the investigation
requested. The FCRA further provides that if the consumer requests disclosure of
the information, the consumer reporting agency must make such disclosure in
writing not later than five days after the date on which the request for
disclosure was received. A consumer reporting agency may not be held liable for
any violation of the FCRA provisions relating to investigative consumer reports
if that agency shows by preponderance of the evidence that at the time of the
violation, such agency maintained reasonable procedures to assure compliance
with those provisions. Of the Company's current products, education/credential
confirmations and reference checks are investigative consumer reports for
purposes of the FCRA.
The FCRA provides for civil liability sanctions against a consumer
reporting agency by a consumer for willful or negligent noncompliance with the
FCRA and criminal sanctions against officers and directors thereof who knowingly
and willfully disclose information in a report to a person not authorized to
receive the information.
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State laws also impact the Company's business. There are a number of states
which have laws similar to the FCRA, and some states which have human rights
laws more strict than the FCRA. A large number of states also regulate the type
of information which can be made available to the public and/or impose
conditions to the release of the information. For example, some state laws
prohibit access to certain types of information, such as workers' compensation
histories or criminal histories, while others restrict access without a signed
release from the subject of the report. In addition, many privacy and consumer
advocates and federal regulators have become increasingly concerned with the use
of personal information, particularly credit reports. Attempts have been made
and will continue to be made by these groups to adopt new or additional federal
and state legislation to regulate the use of personal information. Federal
and/or state laws relating to consumer reporting agencies and/or access and use
of personal information, in particular, and privacy and civil rights, in
general, amended or enacted in the future could materially adversely impact
Accufacts' operations.
Legal Considerations
Under general legal concepts and, in some instances, by specific state and
federal statute, the Company could be held liable to customers and/or to the
subjects of background checking reports prepared by the Company for inaccurate
information or misuse of the information. The FCRA contains civil liability
provisions for willful and negligent noncompliance with its requirements. The
FCRA further provides in effect that, except for liability for willful or
negligent noncompliance with the FCRA and false information furnished with
malice or willful intent to injure a consumer, a consumer reporting agency, any
user of information or any person who furnishes information to a consumer
reporting agency will not be liable to the consumer for defamation, invasion of
privacy or negligence based on information disclosed to such consumer under the
provisions of the FCRA.
The Company has developed and implemented internal policies designed to
help ensure that background information retrieved by it concerning a consumer is
accurate and that it otherwise complies with the provisions of the FCRA. In
addition, each customer of Accufacts is required to sign an agreement, wherein
such customer agrees, among other matters, to accept responsibility for using
information provided by Accufacts in accordance with the provisions of the FCRA
and all other applicable federal and state laws and regulations including
federal and state equal opportunity laws and regulations. Accufacts also has
internal checks in place regarding access and release of such information.
Additionally, Accufacts requires that all employees sign a written
acknowledgment covering the proper procedures for handling confidential
information.
In Feburary 2000, the Company obtained an errors and omissions insurance
policy for its officer, directors and employees in the amount of $5.0 million.
Such policy expires on February 13, 2001.
Competition
The background checking industry is highly fragmented. The Company faces
both direct and indirect competition for its products and services. In addition,
many companies perform employee background checking in-house.
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Direct Competition
There are a large number of companies engaged in the sale of one or more of
the background checking products sold by the Company, and the Company believes
that this number will increase. A significant number of these competitors are
small companies operating on a local or regional basis; while some are large
companies operating on a national scale. To the Company's knowledge, the
background checking portion of the business of its larger direct competitors is
currently a small portion of their overall operation. Unlike many of its direct
competitors, the Company serves as a broker for only two of its products --
credit reports and motor vehicle driving records -- and obtains the data for the
remainder of its products from the source. The Company believes that this helps
to give it a competitive pricing advantage. The Company also believes that it
has a competitive advantage over many of its competitors because of the wide
variety of products that it can offer to customers, and because of its newly
developed order entry and report retrieval system. Many of the Company's
competitors, however, have substantially greater financial and personnel
resources than the Company. In addition, it is possible that one or more of the
Company's larger direct competitors could expand their background checking
product line in the future.
Indirect Competition
The Company faces indirect competition from a number of companies engaged
in, among others, drug, aptitude and attitude testing, handwriting analysis and
on-the-job trial employment (employee leasing). These procedures, though often
used with background checking, compete with Accufacts' products and services.
Most of these competitors operate on a national scale and have substantially
greater financial and personnel resources than the Company. In addition, it is
possible that one or more of these competitors could expand their product lines
in the future to include background checking products and services.
Employees
The Company has a total of 40 full-time employees, five of whom are
involved in marketing, two in finance, 24 in data processing, one in
programming, five in customer service and three in management. None of the
Company's employees is represented by labor unions or is subject to collective
bargaining arrangements. Accufacts considers its relations with its employees to
be good.
Item 2. Description of Property.
The Company maintains its principals offices at a 3,000 square foot
facility located at 6 Greene Street, New York, NY 10013 pursuant to a lease
agreement, dated April 1, 1997, between the Company and 6 Greene Street
Associates, LLC. The lease, as amended, is for five years, expiring May 2003,
and the rent is $2,500 per month, or $30,000 per year, including heat, but
excluding electrical charges. The Company believes that these facilities are
adequate for its current needs.
Maglio-Accufacts, the wholly-owned subsidiary of Accufacts, and successor
to Maglio, Inc., maintains a 2,960 square foot office located at 2180 West State
Road 434, Suite 4150, Longwood, Florida 32779 pursuant to a lease agreement,
dated May 28, 1998, as amended,
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between Maglio, Inc. and CB Sanlando Center, Inc, and assigned to
Maglio-Accufacts. The term of the lease agreement is for five years, commencing
August 1, 1998 until July 31, 2003, and the monthly rent is (i) $4,440 for the
period from August 1, 1999 to September 31, 2000, (ii) $4,564 for the period
from August 1, 2000 to July 31, 2001, (iii) $4,687 for the period from August 1,
2001 to July 31, 2002 and (iv) $4,872 for the period from August 1, 2002 to July
31, 2003.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Part II
Item 5. Market for Common Equity and Related Stockholder Matters.
In August 1998, Southern Cargo acquired all of the assets and assumed all
of the liabilities of our Company and changed its name to Accufacts
Pre-Employment Screening, Inc. and its state of incorporation from Florida to
Delaware. On September 9, 1998, the Company's common stock, par value $.01 per
share (the "Common Stock"), commenced being quoted on the OTC Bulletin Board,
the "OTCBB," under the symbol "APES." The following table sets forth the high
and low bid prices for the Company's Common Stock, commencing September 9, 1998,
on a quarterly basis. The quotations represent bid between dealers and do not
included retail mark-up, mark-down or commissions, and do not represent actual
transactions.
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Quarter Low Bid Price* High Bid Price*
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Fiscal 1998:
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3rd Quarter (from September 9, 1998) $1.0000 $3.0000
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4th Quarter $1.1250 $3.1875
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Fiscal 1999:
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1st Quarter $1.2500 $4.3750
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2nd Quarter $1.1250 $5.0000
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3rd Quarter $1.5625 $2.7500
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4th Quarter $1.6250 $2.6875
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Fiscal 2000:
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1st Quarter $1.3750 $2.5625
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2nd Quarter (through April 5, 2000) $1.2500 $1.4375
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*Source: OTCBB Quarterly Reports.
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The Company believes that as of March 31, 2000, there were 20 holders of
record of 6,627,471 shares of Common Stock, including holders which maintain
their ownership in "Street-Name."
Dividends
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends on its Common Stock in the foreseeable future.
The Company anticipates that for the foreseeable future, earnings will be
retained for the development of its business. Accordingly, the Company does not
anticipate paying dividends on the Preferred Stock or Common Stock in the
foreseeable future. The payment of future dividends will be at the sole
discretion of the Company's Board of Directors and will depend upon among other
of the Company and general business conditions.
Recent Sales of Unregistered Securities
The following is a summary of all securities sold by the Registrant within
the past three years which were not registered pursuant to the Securities Act of
1933, as amended (the "Act"):
o On August 20, 1998, the Company issued an aggregate of 3,750,000
shares of its Common Stock to Philip Luizzo, the President and Chief
Executive of Accufacts, in connection with the merger of Accufacts
into Southern Cargo. The Company relied upon Section 4(2) promulgated
under the Act in that such issuance did not involve a public offering.
o On August 26, 1998, the Company issued an aggregate of 500,000 shares
of Common Stock to Robert DePalo in consideration for consulting
services rendered. The Company relied upon Section 4(2) promulgated
under the Act in that such issuance did not involve a public offering.
o On August 26, 1998, the Company issued 500,000 shares of Common Stock
to the Old Oak Fund, Inc. in consideration for financial consulting
services rendered. The Company relied upon Section 4(2) promulgated
under the Act in that such issuance did not involve a public offering.
o On August 26, 1998, the Company issued 200,000 shares of Common Stock
to Tammy Perrotta in consideration for financial advisory services
rendered. The Company relied upon Section 4(2) promulgated under the
Act in that such issuance did not involve a public offering.
o During the period commencing September 15, 1998 until December 18,
1998, the Company sold an aggregate of 500,000 shares of Common Stock
in a private placement to sophisticated investors pursuant to Rule 504
of Regulation D promulgated under the Act.
o On October 13, 1999, the Company issued an aggregate of 177,471 shares
of its Common Stock to Richard J. Maglio, the principal owner of
Maglio, Inc., of
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<PAGE>
which 174,971 shares were issued in connection with the acquisition of
Maglio, Inc. by Maglio-Accufacts and 2,500 shares in consideration for
Mr. Maglio entering into a non-competition agreement with the Company.
The Company relied upon Section 4(2) promulgated under the Act in that
such issuance did not involve a public offering.
o On October 11, 1999, the Company issued to Richard J. Maglio, in
connection with the acquisition of Maglio, Inc. by Maglio-Accufacts,
an option to purchase up to 50,000 shares of Common Stock of Accufacts
at a purchase price of $2.50 per share at any time commencing October
11, 2000 until, and including, October 11, 2002. The Company relied
upon Section 4(2) promulgated under the Act in that such issuance did
not involve a public offering.
Item 6. Management's Discussion and Analysis or Plan of Operation Plan of
Operation.
Accufacts Pre-Employment Screening, Inc., a Delaware corporation (the
"Company"), had revenues of $2,283,533 for the fiscal year ended December 31,
1999, as compared to $1,598,772 for the year ended December 31, 1998,
representing an increase of $684,761, or 42.8%. Such increase was due to
internal growth, a larger client base and cross-selling additional services
attributable to the acquisition of Maglio, Inc., a Florida corporation engaged
in providing pre-employment screening services ("Maglio, Inc."), by
Maglio-Accufacts Pre-Employment Screening, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company, in October 1999 (the "Maglio
Acquisition").
General and administrative expenses were $1,008,012 for the fiscal year
ended December 31, 1999, as compared to $552,474 for the fiscal year ended
December 31, 1998, representing an increase of $455,538, or 82.5%. Such increase
was attributable to the Maglio Acquisition, including the commencement of
programs to integrate Maglio, Inc.'s operations into the Company's, increased
legal and accounting fees and increased marketing expenses due to the Company's
increased attendance at industry trade shows and sponsorships.
Net losses were $215,566 for the fiscal year ended December 31, 1999, as
compared to $124,881 for the fiscal year ended December 31, 1998, representing
an increase of $90,685, or 72.6%. Such increase was attributable to increased
expenditures in connection with integrating and creating a simplified and
automated new infrastructure to connect the Company's Florida and New York
offices. By combining the Florida and New York operations, the Company's
management believes that it will be able to reduce the amount of time allocated
to general and administrative matters as well as reduce costs of revenue, and
focus more on marketing.
Net cash used in operating activities was $394,927 for the fiscal year
ended December 31, 1999, as compared to $106,214 for the fiscal year ended
December 31, 1998, representing an increase of $288,713, or 271.8%.
Days outstanding in receivables was 62 days for the fiscal year ended
December 31, 1999, as compared to 59 days for the fiscal year ended December 31,
1998, representing an increase of 3 days, or 5.1%. This increase was
attributable to the gain of a larger client base with longer payment terms.
15
<PAGE>
The Company's financing activities included borrowing from a bank,
stockholders' loans and private placement offering. The Company's financing
activities resulted in net cash provided by financing activities of $681,115 and
$199,289 for the years ended December 31, 1999 and 1998, respectively,
reflecting an increase of $481,826, or a change of 241.7%. The Company believes
it will be able to fund its short-term cash needs through funds from operations
and additional capital raising efforts.
Liquidity and Capital Resources
The Company intends to increase its business through the use of operating
profits and borrowings and additional capital raising. The Company believes that
its anticipated cash flow operations as well as availability of funds from
existing bank facilities and proceeds of the offering completed recently will
provide the liquidity to meet its current foreseeable cash needs for at least a
year.
At December 31, 1999, the Company had total assets $1,510,236, as compared
to $447,210 at December 31, 1998, representing an increase of $1,063,026, or
237.8%. At December 31, 1999, the Company had total liabilities of $452,370, as
compared to $300,904 at December 31, 1998, representing an increase of $151,466,
or 50.3%.
The Company had a working capital of $483,889 as of December 31, 1999, as
compared to $90,748 as of December 31, 1998, representing an increase of
$393,141, or 433.2%
The Company currently has a bank source of funding:
o Line of credit in the amount of $100,000 ($43,274 of which was
outstanding as of December 31, 1999) with an annual percentage rate of
7.75%.
o An overdraft protection on Business Checking Account of $25,000 ($0 of
which was outstanding as of December 31, 1999) with an annual
percentage rate of 13.75%.
Year 2000 Issue
The Company's in-house systems were Year 2000 compliant and its client
software was also Year 2000 compliant. The Company did not experience any
software problems attributable to the Year 2000 problem.
Item 7. Financial Statements.
Consolidated Financial Statements are found immediately following the
signature page of this Report on pages F-1 through F-18.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
16
<PAGE>
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The directors and executive officers of Accufacts and Maglio-Accufacts are
as follows:
<TABLE>
<CAPTION>
Director of Director of
Position with Accufacts Position with Maglio-Accufacts
Name Age Accufacts Since Maglio-Accufacts Since
- ---- --- ------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Philip Luizzo 34 Chief Executive Officer, 1998 President and 1999
President and Chairman Director
Of the Board
John C. Svedese 39 Vice President and 1998 Vice President and 1999
Director Director
Richard J. Maglio 53 -- -- Vice President of 1999
Operations and
Director
Anthony J. Luizzo 56 Corporate Secretary and 1998 Corporate Secretary 1999
Director and Director
Frank Luizzo 50 Director 1998 Director 1999
Joseph W. Slattery 62 Director 1998 Director 1999
</TABLE>
Philip Luizzo, the President, Chief Executive Officer and Chairman of the
Board of Directors of Accufacts and the President and a Director of
Maglio-Accufacts, has served as the President and Chief Executive Officer of
Accufacts and its predecessor, Southern Cargo, since 1994 and as President of
Maglio-Accufacts since 1999. For more than two years prior to 1994, Mr. Luizzo
was a manager of L.C. Security. Mr. Luizzo earned an undergraduate degree in
Finance from The University of Nevada, Las Vegas and has authored a number of
articles on background screening for major magazines and professional journals
including Security Management Magazine and The Internal Auditing Alert. Mr.
Luizzo has lectured to numerous companies and Professional organizations on
aspects of conducting background investigations for prospective employees.
Philip Luizzo is the son of Anthony J. Luizzo, the Corporate Secretary and a
Director of Accufacts' and Maglio-Accufacts, and the nephew of Frank Luizzo, a
Director of Accufacts and Maglio-Accufacts.
John C. Svedese, the Vice President and a Director of Accufacts and
Maglio-Accufacts, has over 12 years experience as a senior investigative auditor
for the New York City District Council of Carpenters. Mr. Svedese has been with
Accufacts and its predecessor, Southern Cargo, since 1994 and with
Maglio-Accufacts since 1999, and is familiar with all aspects of the Company's
growth and development. Mr. Svedese monitors the day-to-day operations of
Accufacts in the New York City office. In order to maintain Accufacts' high
level of personal as well as professional services, he also acts as the business
liaison between Accufacts and its clients. Mr. Svedese assists the Board of
Education of the City of New York by providing seminars regarding pre-employment
screening by corporations to its faculty and students.
17
<PAGE>
Richard J. Maglio, the Vice President of Operations and a Director of
Maglio-Accufacts since October 1999, served as the President of Maglio, Inc., a
business engaged in providing employment background screening services to client
companies throughout the United States, since its inception in 1986 until it was
merged into Maglio-Accufacts in October 1999. Mr. Maglio earned an undergraduate
degree in Human Resources Management from the University of Wisconsin-Oshkosh in
1968.
Anthony J. Luizzo, CFE, CST, DABFE, the Corporate Secretary and a Director
of Accufacts and Maglio-Accufacts, has been an owner and principal employee of
L.C. Consulting Group, Inc. for more than five years. Mr. Luizzo has over 35
years of law enforcement and security management experience as a former
detective with the New York City Police Department and as a senior security
administrator with the New York City Mayor's Office of Economic Development and
Business Services and the NYC Health & Hospitals Corporation. Anthony Luizzo
earned a graduate degree in criminology and undergraduate degree in security
management from Pacific Western University and held adjunct faculty positions at
John Jay College of Criminal Justice Studies and New York University. Mr. Luizzo
is presently an adjunct faculty member at Long Island University. Mr. Luizzo is
a certified fraud examiner, certified security trainer, certified police
instructor, and a board certified forensic examiner. He has written over 25
articles addressing aspects of security and loss prevention management for a
wide variety of magazines and professional trade journals including The CPA
Journal, Security Management Magazine, The Journal of Health Care Protection
Management, and The White Paper. He is the author of "Play it Safe," a retail
fraud prevention brochure, and coauthor of Fraud Auditing: A Complete Guide, a
workbook for accountants and auditors on conducting fraud audits and
investigations published by the Foundation for Accounting Education. Mr. Luizzo
has lectured on security management issues to corporations, municipal agencies
and professional organizations nationwide. He has conducted over 5,000 security
surveys for corporations, hospitals, commercial, institutional and residential
complexes, and often testifies as a security expert in litigation involving
deficient security. Mr. Luizzo is the President of the New York Chapter of
Certified Fraud Examiners. He serves or has served on the Board of Directors of
The Associated Licensed Detectives of New York State, The Society of
Professional Investigators, and The Academy of Security Educators and Trainers.
Anthony Luizzo is the father of Philip Luizzo, the President, Chief Executive
Officer and Chairman of the Board of Directors of Accufacts and the President
and a Director of Maglio-Accufacts, and the brother of Frank Luizzo, a Director
of Accufacts and Maglio-Accufacts.
Frank Luizzo, CFE, a Director of Accufacts and Maglio-Accufacts, has, for
more than the past two years, been the Director of Operations of several
security-related departments at the Hard Rock Hotel and Casino in Las Vegas,
Nevada. For more than three years prior thereto, he was the General Manager of
United Coin Machine Co. in Las Vegas Nevada which is in the business of managing
slot machine route operations. Mr. Luizzo has over 30 years of law enforcement
and security management experience as a former Nevada State Trooper and Gaming
Agent/Supervisor - Gaming Control Board State of Nevada. Mr. Frank Luizzo is
presently the Director of Security for The Hard Rock Hotel and Casino, Las
Vegas, Nevada and formerly held positions as General Manager, United Coin
Machine Co. and Assistant to the Chairman, Aladdin Hotel and Casino. Mr. Luizzo
coauthored an article on "Casino Fraud" featured in Security Management Magazine
and was prominently featured in television documentaries on "Gaming Security"
for The Discovery Channel and "E" Entertainment. Mr. Luizzo is a member and past
president of the Las Vegas Security Chief's Association, a member of the
18
<PAGE>
International Association of Financial Crime Investigators, and current
president of the Harmon Avenue Business Association. Mr. Frank Luizzo is the
uncle of Philip Luizzo, the President, Chief Executive Officer and Chairman of
the Board of Accufacts and the President and a Director of Maglio-Accufacts, and
the brother of Anthony J. Luizzo, the Corporate Secretary and a Director of
Accufacts and Maglio-Accufacts.
Joseph W. Slattery, CFE, a Director of Accufacts and Maglio-Accufacts, has
been a manager with L.C. Security where he conducts the security board training
division for more than the past five years. Mr. Slattery has over 40 years of
law enforcement and security management experience as a former Deputy Inspector
with the New York City Police Department and as private security
consultant/trainer. Mr. Slattery earned an undergraduate/graduate degree in
security management from John Jay College of Criminal Justice Studies. Mr.
Slattery is a certified fraud examiner and a certified security guard instructor
in New York State. Mr. Slattery is a former treasurer for The Captain's
Endowment Association - New York City Police Department and a current board
member of The New York Chapter of Certified Fraud Examiners. Mr. Slattery has
lectured on various aspects of security, loss prevention and fraud prevention
management to corporations, municipal agencies and professional organizations
nationwide. Throughout his career, he has conducted numerous security surveys of
corporate facilities, hospitals, and commercial/industrial entities.
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualified, subject to death,
resignation or removal from office prior to such time.
Section 16(a) Beneficial Ownership Reporting Compliance
During the fiscal year ended December 31, 1999, Philip Luizzo, the
Company's President, Chief Executive Officer and Chairman of the Board; John
Svedese, the Vice President and a Director of the Company; Anthony J. Luizzo,
the Secretary and a Director of the Company; and Frank Luizzo and Joseph W.
Slattery, both of whom are Directors of the Company, did not timely file their
initial statements of beneficial ownership of securities on Form 3 with the
Securities and Exchange Commission and with the Company. Other than Philip
Luizzo, none of the other persons mentioned above beneficially held any
securities of the Company at either the required or actual time of filing such
Forms 3. Philip Luizzo's initial ownership of 3,750,000 shares of Common Stock
of the Company has remained unchanged from the date of filing to the date
hereof.
Item 10. Executive Compensation.
The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company to the Chief Executive Officer and
to the four most highly compensated executive officers other than the Chief
Executive Officer whose annual compensation exceeded $100,000 for the fiscal
year ended December 31, 1999 (collectively, the "Named Executive Officers") for
services during the fiscal years ended December 31, 1999, 1998 and 1997:
19
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------------------
Other Annual
Fiscal Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($)(1)
--------------------------- ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
Philip Luizzo, President and 1999 $150,000 $ 0 $ 8,400
Chief Executive Officer 1998 $ 49,420 $ 0 $ 0
1997 $ 43,630 $ 0 $ 0
</TABLE>
- ----------
(1) Includes a monthly car allowance of $700 per month.
Currently, the Directors of the Company are not compensated for serving on
the Board of Directors.
On October 11, 1999, the Company entered into an employment agreement with
Richard J. Maglio, the Vice President of Operations and a Director of
Maglio-Accufacts. The term of the employment agreement is for three years,
commencing October 11, 1999 until October 11, 2002, during which Mr. Maglio is
to be employed as the Vice President of Operations of Maglio-Accufacts. Pursuant
to the terms of the employment agreement, Mr. Maglio is to receive an annual
base salary of $75,000, which shall be increased by a minimum of 4.0% for each
subsequent year, and 3.0% of any profits of the Company in excess of $500,000.
Mr. Maglio also received options to purchase up to 50,000 shares of Common Stock
of Accufacts at a purchase price of $2.50 per share at any time commencing
October 11, 2000 until October 11, 2002. During the term of the employment
agreement, Mr. Maglio is entitled to be reimbursed for automobile expenses not
exceeding $521 per month and for expenses incurred in connection with his
employment. Mr. Maglio's compensation under the foregoing employment agreement
was $21,723 for the fiscal year ended December 31, 1999.
The Company does not have a stock option plan at this time.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Philip Luizzo is employed as President and Chief Executive Officer of
Accufacts under an employment agreement, dated September 1, 1998, as amended.
The term of Mr. Luizzo's employment agreement is five years and provides for (i)
an annual base salary of $150,000, (ii) 10.0% of any profit in excess of
$500,000, (iii) reasonable out-of-pocket expenses and (iv) a monthly car
allowance of up to $700. In addition, in the event Mr. Luizzo is terminated
without cause or if there is a change-of-control (as defined in the employment
agreement) of the Company, Mr. Luizzo is entitled to receive his salary for a
period of two years commencing on the date of termination or change-of-control,
as the case may be. Also, if the Company terminates the employment agreement
without cause, the Company shall purchase Mr. Luizzo's shares in the Company
over a period of 6 months at the lesser of (x) market value (average of bid and
asked prices) or (y) $1.00 per share.
20
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information concerning the beneficial
ownership of the Company's outstanding Common Stock as of March 31, 2000, by (i)
each person known by the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock, (ii) each Named Executive
Officer, (iii) each of the Company's directors and (iv) all executive officers
and directors as a group. Unless otherwise indicated below, to the knowledge of
Advanced Knowledge all persons listed below have sole voting and investment
power with respect to their shares of Common Stock except to the extent that
authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>
Amount and Nature of Percentage of Class
Name and Address of Beneficial Owner (1) Beneficial Ownership (2) (3)
---------------------------------------- ------------------------ -------------------
<S> <C> <C>
Philip Luizzo 3,750,000 56.6%
John C. Svedese 0 --
Richard J. Maglio(4) 177,471 2.7%
Anthony J. Luizzo 0 --
Frank Luizzo 0 --
Joseph W. Slattery 0 --
All executive officers and directors as a group (six persons) 3,927,471 59.3%
</TABLE>
- ----------
(1) Unless otherwise noted, the address for each individual is in care of
Accufacts Pre-Employment Screening, Inc., 6 Greene Street, New York, New
York 10013.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof. Each
beneficial owner's percentage ownership is determined by assuming that
options or warrants that are held by such person (but not those held by any
other person) and which are exercisable within 60 days from the date of
filing this Form 10-KSB have been exercised. Unless otherwise indicated,
the Company believes that all persons named in the table have sole voting
and investment power with respect to all shares of Common Stock
beneficially owned by them.
(3) Based on 6,627,471 shares of Common Stock as of March 31, 2000.
(4) Address for reporting person is c/o Maglio-Accufacts Pre-Employment
Screening, Inc., 2180 West State Road 434, Suite 4150, Longwood, Florida
32779.
Item 12. Certain Relationships and Related Transactions.
None.
Item 13. Exhibits, List and Reports on Form 8-K.
On October 28, 1999, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K, dated October 13, 1999, regarding the
acquisition of all of the operating assets of Maglio, Inc., a pre-employment
screening services company based in Longwood, Florida, by merging Maglio, Inc.
with and into Maglio-Accufacts.
On December 23, 1999, the Company filed with the Securities and Exchange
Commission an amendment to the foregoing Form 8-K for the purpose of including
financial statements and pro forma financial information required by Item 7 of
Form 8-K.
21
<PAGE>
Exhibits
Exhibit
No. Description
- ------- -----------
2.1 Plan and Agreement of Merger of Maglio, Inc. and Maglio-Accufacts
Pre-Employment Screening, Inc., dated October 11, 1999, by and among
Accufacts Pre-Employment Screening, Inc., Maglio-Accufacts
Pre-Employment Screening, Inc. and Maglio, Inc. (1)
2.2 Supplemental Agreement, dated as of October 11, 1999, by and among
Accufacts Pre-Employment Screening, Inc., Maglio-Accufacts
Pre-Employment Screening, Inc., Maglio, Inc. and Richard J. Maglio (1)
3.1 Articles of Incorporation of Accufacts Pre-Employment Screening, Inc.
and Certificate of Merger (2)
3.2 By-laws of Accufacts Pre-Employment Screening, Inc. (2)
3.3 Certificate of Incorporation of Maglio-Accufacts Pre-Employment
Screening, Inc.
3.4 By-laws of Maglio-Accufacts Pre-Employment Screening, Inc.
4.1 Specimen of Common Stock Certificate of Accufacts Pre-Employment
Screening, Inc. (2)
4.2 Asset Purchase Agreement, dated August 26, 1998, between Southern Cargo,
Inc. and Accufacts Pre-Employment Screening, Inc. (2)
4.3 Shareholder Rights and Registration Rights Agreement, dated as of
October 11, 1999, by and between Accufacts Pre-Employment Screening,
Inc. and Richard J. Maglio (1)
10.1 Employment Agreement, dated September 1, 1998, between the Registrant
and Philip Luizzo (2)
10.2 Amendment, dated October 5, 1999, to the Employment Agreement, dated
September 5, 1998, between the Registrant and Philip Luizzo (3)
10.3 Employment Agreement, dated September 1, 1998, between the Registrant
and John Svedese (2)
10.4 Employment Agreement, dated October 11, 1999, by and among the
Registrant, Maglio-Accufacts Pre-Employment Screening, Inc. and Richard
J. Maglio
10.5 Lease Agreement, dated April 1, 1997, between the Registrant and 6
Greene Street Associates, LLC., as amended
10.6 Lease Agreement, dated August 28, 1998, between Maglio, Inc. and CB
Sanlando Center, Inc.
21.1 List of Subsidiaries
27.1 Financial Data Schedule
- ----------
(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K, dated
October 13, 1999, filed with the Securities and Exchange Commission on
October 28, 1999 (SEC File No.: 001-14995), and is incorporated by
reference herein.
(2) Filed as an exhibit to the Registrant's Form 10-SB filed with the
Securities and Exchange Commission on May 7, 1999 (SEC File No.:
001-14995), and is incorporated by reference herein.
(3) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1999 filed with the Securities and
Commission on November 15, 1999 (SEC File No.: 001-14995), and is
incorporated by reference herein.
22
<PAGE>
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Accufacts Pre-Employment Screening, Inc.
Date: April 11, 2000
By: /s/ Philip Luizzo
-----------------
Philip Luizzo
President and
Chief Executive Officer
(Principal Executive Officer)
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Philip Luizzo Date: April 11, 2000
- -----------------------
Philip Luizzo
President and Chief Executive Officer
(Principal Executive Officer)
/s/ John C. Svedese Date: April 11, 2000
- -----------------------
John C. Svedese
Vice President and Director
/s/ Frank Luizzo Date: April 11, 2000
- -----------------------
Frank Luizzo
Director
/s/ Joseph W. Slattery Date: April 11, 2000
- ----------------------
Joseph W. Slattery
Director
/s/ Anthony Luizzo Date: April 11, 2000
- ----------------------
Anthony Luizzo
Secretary and Director
23
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONTENTS
Page
----
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-3 - 4
Statements of Operations F-5
Statements of Changes in Stockholders' Equity F-6
Statements of Cash Flows F-7 - 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-9 - 18
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Accufacts Pre-Employment Screening, Inc and Subsidiary.
We have audited the accompanying consolidated balance sheet of Accufacts
Pre-Employment Screening, Inc. and subsidiary as of December 31, 1999, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the two years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Accufacts
Pre-Employment Screening Inc. and subsidiary as of December 31, 1999, and the
results of their consolidated operations and their cash flows for the two years
then ended, in conformity with generally accepted accounting principles.
/s/ Marcum & Kliegman LLP
March 14, 2000
New York, New York
F-2
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 298,331
Accounts receivable, net of allowance for doubtful accounts
of $4,836 636,463
----------
Total Current Assets $ 934,794
PROPERTY AND EQUIPMENT, Net 155,084
OTHER ASSETS
Security deposits 8,554
Prepaid expense 68,572
Deferred income tax asset 185,600
Intangible assets, net 157,632
----------
Total Other Assets 420,358
----------
TOTAL ASSETS $1,510,236
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 194,056
Current maturities of capital lease obligations 8,295
Note payable, bank 43,274
Loans payable, stockholder 21,280
Deferred income tax liability 184,000
-----------
Total Current Liabilities $ 450,905
OTHER LIABILITIES
Capital lease obligations, less current maturities 1,465
-----------
TOTAL LIABILITIES 452,370
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized,
none issued and outstanding --
Common stock, $0.01 par value, 50,000,000 authorized,
6,627,471 issued and outstanding 66,275
Additional paid-in-capital 1,319,821
Accumulated deficit (328,230)
-----------
TOTAL STOCKHOLDERS' EQUITY 1,057,866
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,510,236
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
----------- -----------
REVENUES $ 2,283,533 $ 1,598,772
COST OF SALES 1,531,924 1,119,043
----------- -----------
GROSS PROFIT 751,609 479,729
GENERAL AND ADMINISTRATIVE EXPENSES 1,008,012 552,474
----------- -----------
OPERATING LOSS (256,403) (72,745)
OTHER INCOME (EXPENSE)
Interest income (expense), net 4,857 (10,031)
----------- -----------
LOSS BEFORE INCOME TAXES (251,546) (82,776)
INCOME TAX (BENEFIT) EXPENSE (35,980) 42,105
----------- -----------
NET LOSS $ (215,566) $ (124,881)
=========== ===========
Net (Loss) Per Share, Basic and Diluted $ (0.03) $ (0.02)
=========== ===========
Weighted average number of common shares outstanding 6,228,556 5,181,096
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
--------------------------
Preferred Stock Shares Additional
-------------------------- -------------------------- Paid in
Shares Amount Subscribed Issued Amount Capital
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - January 1, 1998 -- -- $ -- 200 $ 5,380 $ --
Issuance of shares resulting from merger 3,750,000 37,500
Recapitalization resulting from merger 999,800 4,620
Issuance of shares for consulting services 1,200,000 12,000
Issuance of shares in connection with the
Offering, net of offering costs 125,000 1,250 198,220
Common stock subscribed in connection with
the Offering 375,500 3,750 746,250
Stock subscription receivable in connection
with the Offering
Net loss
----------- ----------- ----------- ----------- ----------- -----------
BALANCE - December 31, 1998 375,500 6,075,000 64,500 944,470
Stock subscription received (375,000) 375,000
Issuance of shares relating to acquisition 174,971 1,750 370,063
Issuance of shares relating to
non-competition agreement 2,500 25 5,288
Net loss
----------- ----------- ----------- ----------- ----------- -----------
BALANCE - December 31, 1999 -- $ -- -- 6,627,471 $ 66,275 $ 1,319,821
=========== =========== =========== =========== =========== ===========
<CAPTION>
Stock
Subscription Accumulated
Receivable Deficit Total
----------- ----------- -----------
<S> <C> <C>
BALANCE - January 1, 1998 $ -- $ 55,687 $ 61,067
Issuance of shares resulting from merger (37,500) --
Recapitalization resulting from merger (5,970) (1,350)
Issuance of shares for consulting services 12,000
Issuance of shares in connection with the
Offering, net of offering costs 199,470
Common stock subscribed in connection with
the Offering 750,000
Stock subscription receivable in connection
with the Offering (750,000) (750,000)
Net loss (124,881) (124,881)
----------- ----------- -----------
BALANCE - December 31, 1998 (750,000) (112,664) 146,306
Stock subscription received 750,000 750,000
Issuance of shares relating to acquisition 371,813
Issuance of shares relating to
non-competition agreement 5,313
Net loss (215,566) (215,566)
----------- ----------- -----------
BALANCE - December 31, 1999 $ -- $ (328,230) $ 1,057,866
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(215,566) $(124,881)
--------- ---------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 44,330 33,358
Increase in accounts receivable (119,593) (60,515)
Increase in prepaid expense (68,572) --
Increase in security deposits -- (508)
Increase in accounts payable and accrued expenses 6,074 6,332
Increase (decrease) in deferred income taxes (41,600) 40,000
--------- ---------
TOTAL ADJUSTMENTS (179,361) 18,667
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (394,927) (106,214)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (23,702) (25,233)
Payment for intangible asset (21,000) (19,000)
Cash acquired in connection with acquisition 4,348 --
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (40,354) (44,233)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on capital lease obligations (9,179) (6,395)
Net repayments of note payable, bank (54,706) (5,786)
Repayments on stockholder's loans (5,000) --
Proceeds from issuance of common stock 750,000 250,000
Payments for the offering costs -- (38,530)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 681,115 199,289
--------- ---------
NET INCREASE IN CASH 245,834 48,842
CASH - Beginning 52,497 3,655
--------- ---------
CASH - Ending $ 298,331 $ 52,497
========= =========
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
1999 1998
-------- --------
<S> <C> <C>
Cash paid during the years for:
Interest $ 6,192 $ 10,066
Income taxes $ 4,529 $ 1,034
Non-cash investment and financing activities:
Acquired assets through capital leases $ -- $ 25,334
Subscription receivable for common stock subscribed in
connection with the Offering $ -- $750,000
Issuance of shares resulting from merger $371,813 $ 37,500
Issuance of shares for consulting services $ -- $ 12,000
Accounts payable acquired in connection with the merger $ -- $ 1,350
Issuance of shares resulting from collection of stock subscription $750,000 $ --
Issuance of shares relating to a non-competition agreement $ 5,313 $ --
The Company acquired the following assets and liabilities in connection with
its acquisition of Maglio, Inc. during the year ended December 31, 1999:
Accounts receivable $227,475
Property and equipment 84,296
Security deposit 5,846
Accounts payable (35,632)
Notes payable (34,645)
--------
Total $247,340
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies
Nature of Business
Accufacts Pre-Employment Screening, Inc. ("Accufacts") was incorporated on
October 6, 1994 in the State of New York. On August 31, 1998, Accufacts
consummated a merger with a public shell, Southern Cargo Company
("Southern"), a Florida corporation. Southern simultaneously with this
merger changed its name to Accufacts Pre-Employment Screening Inc. ("APES")
and shortly thereafter re-incorporated in the State of Delaware. Under the
terms of the merger all of the outstanding shares of Accufacts were
acquired by Southern in exchange for 3,750,000 shares of Southern's $.01
par value common stock. This transaction was accounted for as a reverse
acquisition whereby Accufacts was the acquirer for accounting purposes. The
historical financial statements prior to August 31, 1998 were those of
Accufacts.
APES and its subsidiary acts as an information service bureau and is
engaged primarily in the business of verifying job applicant background
information for employers using databases and a national network of agents
throughout the United States.
Business Combination
On October 13, 1999, APES acquired all of the net assets of Maglio, Inc.
("Maglio"), a Florida corporation, by merging Maglio with and into
Maglio-Accufacts Pre-Employment Screening, Inc. ("MAPES"), a wholly-owned
subsidiary established by APES. The acquisition was accounted for using the
purchase method of accounting and was completed by issuing 177,471 shares
of APES common stock consisting of 174,971 shares of common stock in
consideration for the acquisition and 2,500 share of common stock in
consideration for a stockholder of Maglio entering into a non-competition
agreement. The purchase price over the fair value of the net assets
acquired was $120,125 and is being amortized using the straight-line method
over 20 years. The fair value of the non-competition agreement was $5,313
and is being amortized using the straight-line method over the term of the
agreement (see Note 3).
Principles of Consolidation
The Consolidated financial statements include the accounts of APES and
MAPES, collectively referred to as the "Company". The operations and
financial position of MAPES were included in the consolidated financial
statements since October 13, 1999. All significant accounts and
transactions have been eliminated in the consolidation.
F-9
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Property and Equipment and Depreciation
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the expected useful lives of the assets. Upon
retirement or other disposition of depreciable assets, the cost and related
accumulated depreciation are eliminated from the accounts, and any gain or
loss on disposal is credited to or charged against income. In the event of
a trade in, the undepreciated cost of the trade-in is included in the cost
of the newly acquired asset.
Revenue Recognition
Revenues are recorded at the time of performance of service.
Cash
The Company has cash balance in a bank in excess of the maximum amount
insured by the FDIC as of December 31, 1999.
Advertising Cost
Advertising costs are expensed as incurred. For the years ended December
31, 1999 and 1998, advertising expense was $34,128 and $15,378,
respectively.
Income Taxes
The Company's method of accounting for income taxes is the liability method
required by FASB Statement No. 109 "Accounting for Income Taxes". Income
taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due and deferred taxes.
The Company will file a consolidated federal tax return in 1999.
Computer Software
The Company adopted Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use". SOP
98-1 establishes the accounting for costs of software products developed or
purchased for internal use, including when such costs should be
capitalized. In accordance with SOP 98-1, payroll and payroll-related costs
incurred directly associated with the internal-use software project were
capitalized by the Company and such capitalized costs are amortized on a
straight-line basis over three years.
Net Income (Loss) Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"), which is required to be adopted beginning with the quarter
ended December 31, 1997. The Company adopted SFAS 128, which eliminates the
presentation of primary and fully diluted earnings per share ("EPS") and
requires the presentation of basic and diluted EPS. Net income (loss) per
share is computed based on the weighted average number of shares of common
stock outstanding during the periods. Common stock equivalents were not
included in the calculation of diluted earnings per share in 1999 and 1998
as such inclusion would be antidiluted.
F-10
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
The Company's financial instruments include cash, accounts receivable and
accounts payable. Due to the short-term nature of these instruments, the
fair value of these instruments approximate their recorded value. The
Company has other liabilities, which it believes is stated at estimated
fair market value.
Impairment of Long-Lived Assets
Property and equipment and intangible assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. If the sum of the expected undiscounted cash
flows is less than the carrying value of the related asset or group of
assets, a loss is recognized for the difference between the fair value and
carrying value of the asset or group of assets.
Stock-Based Compensation
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation"
was issued. SFAS 123 prescribes accounting and reporting standards for all
stock-based compensation plans, including employee stock options,
restricted stock, employee stock purchase plans and stock appreciation
rights. SFAS 123 requires compensation expense to be recorded (i) using the
new fair value method or (ii) using the existing rules prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations with pro forma disclosure
of what net income and earnings per share would have been had the Company
adopted the new fair value method. The Company intends to continue to
account for its stock based compensation plans in accordance with the
provisions of APB 25.
Comprehensive Income
During the year ended December 31, 1998, the Company adopted FASB Statement
No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires
the reporting of comprehensive income in addition to net income from
operations. Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net income. The
adoption of SFAS 130 and the related required disclosures have no effects
on the financial statements for the years ended December 31, 1999 and 1998.
F-11
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Reporting of Segments
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", effective for fiscal years
beginning after December 15, 1997, with reclassification of earlier periods
required for comparative purposes. SFAS No. 131 establishes the criteria
for determining an operating segment and establishes the disclosure
requirements for reporting information about operating segments. The
Company has determined that under SFAS No. 131, it operates in one segment
of service and its customers and operations are within the United States.
Pensions and Other Benefit Plans
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", effective for fiscal
years beginning after December 15, 1997, with restatement of disclosures
for earlier periods required for comparative purposes. SFAS No. 132 revises
certain employers' disclosures about pension and other post-retirement
benefit plans. The Company adopted this standard in 1998 and the
implementation of this standard did not have any impact on its financial
statements.
Start-up Activities Costs
In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the
Costs of Start-up Activities", and effective for fiscal years beginning
after December 15, 1998. SOP 98-5 requires the costs of start-up activities
and organization costs to be expensed as incurred. The Company adopted this
standard in 1999 and the implement of this standard did not have a material
impact on its financial statements.
Accounting Developments
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning
after June 15, 1999, which has been deferred to June 15, 2000 by publishing
of SFAS No. 137. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. This Statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial condition and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative
instrument depends on its intended use and the resulting designation. The
Company does not expect that the adoption of this standard will have a
material impact on its financial statements.
F-12
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 - Property and Equipment
Property and equipment is comprised of the following at December 31, 1999:
Estimated Useful
Amount Lives
------------ -----------------
Furniture $ 56,134 7 years
Telephone equipment 6,843
Equipment 141,161 5 years
Computer software 62,612 3 years
---------
266,750
Less: accumulated depreciation 111,666
---------
Property and equipment, net $ 155,084
=========
Depreciation expense for the years ended December 31, 1999 and 1998
amounted to $38,741 and $31,141 respectively.
NOTE 3 - Intangible Assets
Intangible assets at December 31, 1999 consists of the following:
Estimated Useful
Amount Lives
------------ -----------------
Customer lists $ 19,000 5 years
Goodwill 141,125 20 years
Non-competition covenant 5,313 3 years
---------
165,438
Less: accumulated amortization 7,806
---------
Non-competition covenant, net $ 157,632
=========
Amortization expense for the years ended December 31, 1999 and 1998
amounted to $5,589 and $2,217, respectively.
F-13
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - Note Payable, Bank
The Company has a $75,000 line of credit with a bank through June 30, 2000.
The line bears interest at prime plus 2%, is secured by substantially all
of the assets of the Company and is personally guaranteed by a stockholder
of the Company.
The Company also has a $25,000 business checking line of credit with a
bank. The credit line bears interest at prime plus 6% and is secured by
substantially all of the assets of the Company. There is no outstanding
balance under this line at December 31, 1999.
NOTE 5 - Loans Payable, Stockholder
Loans payable, stockholder represents advances made by a stockholder of the
Company through the normal course of business. Such advances are
noninterest-bearing with no definitive repayment terms.
NOTE 6 - Stockholders' Equity
At inception, Accufacts authorized and issued 200 shares of no par value
common stock for $5,380. On August 31, 1998, the Company issued 3,750,000
shares of its, $.01 par value, common stock in connection with the merger
between Accufacts and Southern which has been accounted for as a
recapitalization (see Note 1). In addition, historical stockholders' equity
of Accufacts prior to the merger was retroactively restated for the
equivalent number of shares received in the merger after giving effect to
the difference in par value of Accufacts and Southern. As a result, 999,800
shares of common stock were recapitalized by the Company for the
restorative effects of the recapitalization. The Company also issued
1,200,000 of the Company's $.01 par value common stock for consulting
services rendered.
On September 15, 1998, the Company offered to sell as part of the placement
offering pursuant to Rule 504 of Regulation D of the Securities Act of 1933
a minimum of 25,000 shares and a maximum of 500,000 shares of the Company's
$.01 par value common stock at an offering price of $2.00 per share (the
"Offering"). The Offering was completed on December 18, 1998 whereby
125,000 shares were sold and 375,000 shares were subscribed for. The net
proceeds from the sale of the common stock at December 31, 1998 was
$199,470, net of direct related costs of $50,530. The stock subscriptions
in the amount of $750,000 were received during 1999 and 375,000 shares of
common stock were issued.
On October 13, 1999, the Company issued 177,471 shares of its $.01 par
value common stock in connection with the acquisition of Maglio and for
entering into a non-competition agreement with a stockholder of Maglio (see
Note 1).
F-14
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - Income Taxes
Prior to the August 31, 1998 merger, the Company elected to be taxed as an
S corporation for federal and state income tax purposes. Pursuant to this
election, earnings or losses were subject to tax at the stockholder's level
rather than the corporate level. As a result of the August 31, 1998 merger,
the S Corporation status was terminated. In addition, the Company also
prepares its tax returns on the cash basis and the financial statements on
the accrual basis which results in temporary differences.
The income tax expense (benefit) for the years ended December 31, 1999 and
1998 consists of the following:
1999 1998
------------- -------------
Current:
Federal $ -- $ --
State 4,320 2,105
Local 1,300 --
-------- -------
Deferred:
Federal (16,000) 30,000
State (11,600) 10,000
Local (14,000) --
-------- -------
$(35,980) $42,105
======== =======
The components of deferred tax asset (liability) at December 31, 1999
consist of the following:
Current
Cash basis accounting adjustment $ (184,000)
Non-Current
Net operating loss carryforward 185,600
----------
Deferred Tax Asset, Net $ 1,600
==========
The following is a reconciliation of income tax computed at the Federal
Statutory rate to the provision for taxes:
F-15
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - Income Taxes, continued
1999 1998
-------- --------
Federal tax (benefit) computed at statutory rate $(73,292) $(42,460)
State and local tax (benefit) net of federal benefit (19,980) 1,389
Cash basis adjustments and tax implications resulting
from termination of S corporation status 57,292 83,176
-------- --------
$(35,980) $ 42,105
======== ========
At December 31, 1999, based upon tax returns filed and to be filed, the
Company has net operating loss carryforward for federal tax purposes of
approximately $417,000 which will expire in year 2019.
NOTE 8 - Commitments
Capitalized Lease Obligation
The Company obtained equipment under two capital leases expiring through
the year 2001. The assets and liabilities under capital leases are recorded
at the lower of the present value of the minimum lease payments or the fair
values of the asset. The assets are included in property and equipment and
are being depreciated over the assets estimated useful lives.
Minimum future lease payments under capital leases as of December 31, 1999
for each of the next two years, and in aggregate, are as follows:
For the Year Ending
December 31, Principal Interest Total
--------------------------------------------------------- -----------------
2000 $8,295 $ 721 $ 9,016
2001 1,465 32 1,497
------ ----- -------
Total $9,760 753 $10,513
====== ===== =======
Interest rate on these two capitalized leases are 13.1% and 14.2%,
respectively, and is imputed based on the lessor's implicit rate of return.
Monthly payments of $499 and $433 are payable through March 2001 and July
2000, respectively.
Operating Lease Agreement
The Company is obligated under a noncancelable operating lease for office
space expiring March 2003. The Company also rents another premises under a
noncancelable operating lease which expires July 2003. Rent expense for the
years ended December 31, 1999 and 1998 was $43,090 and $26,400,
respectively.
F-16
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8 - Commitments, continued
Operating Lease Agreement, continued
Future minimum rental payments under the above noncancelable operating
leases as of December 31, 1999 are as follows:
For the Year Ending
December 31, Amount
---------------------------- ------------------
2000 $ 82,997
2001 85,377
2002 87,165
2003 41,602
--------
Total $297,141
========
Employment Agreements
On September 1, 1998, the Company entered into two five-year employment
agreements with two officers whereby the Company will pay a total salary of
$200,000 per annum. At December 31, 1999, total future minimum commitments
under these two agreements are $734,000.
On October 11, 1999, the company entered into a three-year employment
agreement with an executive whereby the Company will pay a total salary of
$75,000 per annum plus stock options. At December 31, 1999, total future
minimum commitments under this agreement was $209,000.
NOTE 9 - Stock Options
In October 1999, the Company granted options, to purchase 50,000 shares of
its common stock, to an executive at an exercise price of $2.50 per share.
These options will be exercisable on the first anniversary of the grant
date, therefore as of December 31, 1999, the options are not vested and the
proforma net loss and net loss per share are the same as net loss and net
loss per share as reported in the accompanying statements of operations.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
SFAS 123. The fair market value for these options was estimated at the date
of grant using a Black-Scholes option-pricing model amounted to $1.53 per
share with the following weighted-average assumptions for the year ended
December 31, 1999:
F-17
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9 - Incentive Stock Option Plan, continued
Expected volatility 1.014
Dividend yield --
Risk-free rate 5.87%
Average life 3 year
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because of the Company's employee stock
options have characteristics significantly different from those traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
F-18
<PAGE>
Exhibits
Exhibit
No. Description
- ------- -----------
3.3 Certificate of Incorporation of Maglio-Accufacts Pre-Employment Screening,
Inc.
3.4 By-laws of Maglio-Accufacts Pre-Employment Screening, Inc.
10.4 Employment Agreement, dated October 11, 1999, by and among the Registrant,
Maglio-Accufacts Pre-Employment Screening, Inc. and Richard J. Maglio
10.5 Lease Agreement, dated April 1, 1997, between the Registrant and 6 Greene
Street Associates, LLC., as amended
10.6 Lease Agreement, dated August 28, 1998, between Maglio, Inc. and CB
Sanlando Center, Inc.
21.1 List of Subsidiaries
27.1 Financial Data Schedule
CERTIFICATE OF INCORPORATION
OF
Maglio-AccuFacts Pre-Employment Screening,
Inc.
The undersigned incorporator, in order to form a corporation under the
General Corporation Law of the State of Delaware, certifies as follows:
1. Name. The name of the corporation is Maglio-AccuFacts Pre- Employment
Screening, Inc. (hereinafter called the "Corporation").
2. Address; Registered Agent. The address of the Corporation's registered
office is c/o Corporation Service Company, 1013 Centre Road, City of Wilmington,
County of New Castle, State of Delaware 19805; and its registered agent at such
address is Corporation Service Company.
3. Nature of Business; Purposes. The nature of the business and purposes to
be conducted or promoted by the Corporation are to engage in, carry on and
conduct any lawful act or activity for which corporations may be organized under
the General Corporation Law of Delaware.
<PAGE>
4. Number of Shares. The total number of shares of stock which the
Corporation shall have authority to issue is One Thousand (1,000) with a par
value of $.01 per share. All such shares are of one class and are shares of
common stock.
5. Name and Address of Incorporator. The name and mailing address of the
incorporator is: David E. Tripodi, c/o Frankfurt, Garbus, Klein & Selz, P.C.,
488 Madison Avenue, New York, NY 10022.
6. Election of Directors. Members of the Board of Directors may be elected
either by written ballot or by voice vote.
7. Adoption, Amendment and/or Repeal of By-Laws. The Board of Directors may
from time to time (after adoption by the undersigned of the original by-laws of
the Corporation) make, alter or repeal any by-laws of the Corporation; provided,
that any by-laws made or amended by the Board of Directors may be amended or
repealed, and any by-laws may be made, by the stockholders of the Corporation.
-2-
<PAGE>
8. Compromise and Arrangements. Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receivers appointed for this
Corporation under the provisions of section 279 of Title 8 of the Delaware Code
order a meeting of the creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
-3-
<PAGE>
9. Liability of Directors. The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by paragraph
(7) of sub- section (b) of Section 102 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented.
10. Indemnification. The Corporation shall, to the fullest extent permitted
by Section 145 of the General Corporation Law, as amended, indemnify all persons
whom it may indemnify pursuant thereto.
IN WITNESS WHEREOF, this Certificate has been signed on this 22nd day of
September, 1999, and the signature of the undersigned shall constitute the
affirmation and acknowledgment of the undersigned, under penalties of perjury,
that the Certificate is the act and deed of the undersigned and that the facts
stated in the Certificate are true.
/s/ David E. Tripodi
-----------------------------------
David E. Tripodi, Sole Incorporator
-4-
BY-LAWS
of
MAGLIO-ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
(a Delaware Corporation)
ARTICLE I - OFFICES
The principal office of the Corporation shall be at 6 Greene Street, New
York, NY 10013. The registered office of the Corporation in the State of
Delaware shall be c/o The Prentice Hall Corporation Systems, Inc., 1013 Centre
Road New Castle County, City of Wilmington, State of Delaware 19805. The
Corporation may also have offices at such other places within or without the
State of Delaware as the Board of Directors may from time to time determine, or
the business of the Corporation may require.
ARTICLE II - STOCKHOLDERS
Section 1. Place of Meetings. Meetings of Stockholders shall be held at the
principal office of the Corporation or at such places within or without the
State of Delaware as set forth in the Notice of Meeting or in a duly executed
Waiver of Notice thereof.
Section 2. Annual Meeting. The annual meeting of the Stockholders shall be
held at 10:00 A.M. on the last day of August in each year if not a Saturday,
Sunday or legal holiday, and if a Saturday, Sunday or legal holiday, then on the
next business day following at the same hour. At such meeting the Stockholders
shall elect a Board of Directors and transact such other business as may
properly come before the meeting. If the Annual Meeting of Stockholders is not
held as herein prescribed, the election of Directors may be held at any meeting
thereafter called.
Section 3. Special Meetings. Special Meetings of the Stockholders may be
called, at any time, by the Board of Directors or the President, and must be
called by the President or Secretary at the request, in writing, of a majority
of the Board of Directors or at the request, in writing, by ten percent (10%) of
the outstanding shares entitled to vote at such special meeting.
Section 4. Fixing Record Date. For the purpose of determining the
Stockholders entitled to notice of or to vote at any meeting of Stockholders, or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting or for the purpose of determining Stockholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors shall fix, in advance, a
date as the record date for any such determination of Stockholders. Such date
shall not be more than fifty (50) nor less than
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ten (10) days before the date of such meeting nor more than fifty (50) days
prior to any other action. If no record date is fixed, it shall be determined in
accordance with the provisions of law.
Section 5. Notice of Meetings of Stockholders. Written notice of meetings
of Stockholders shall be given either personally or by mail to each Stockholder
entitled to vote at such meeting, not less than ten (10) nor more than fifty
(50) days before the date of the meeting. Such notice shall state the place,
date and hour of the meeting and, unless it is the Annual Meeting, shall state
the purpose or purposes for which it is called and that it is being issued by,
or at the direction of the person or persons calling the Meeting. No business
other than that specified in the Notice of Meeting shall be transacted at any
such Special Meeting. If action is proposed to be taken that might entitle
Stockholders to payment for their Shares, the notice shall include a statement
of that purpose and to that effect. If mailed, the notice shall be deemed given
when deposited in the United States mail, postage prepaid and directed to the
Stockholder at the address which appears on the record of Stockholders.
Section 6. Waivers. Notice of meetings need not be given to any Stockholder
who signs a Waiver of Notice, in person or by proxy, whether before or after the
meeting. The attendance of any Stockholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack of notice of
such meeting, shall constitute a waiver of notice by him.
Section 7. Quorum of Stockholders. The holders of a majority of the shares
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at a meeting of Stockholders for the transaction of any
business. When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any Stockholders, and the Stockholders present
may adjourn the meeting despite the absence of a quorum.
Section 8. Proxies. Every Stockholder entitled to vote at a meeting of
Stockholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy. Every proxy must be signed by
the Stockholder or his attorney-in-fact and be duly notarized. No proxy shall be
valid after expiration of eleven (11) months from the date thereof unless
otherwise expressly so provided in the proxy. Every proxy shall be revocable at
the pleasure of the Stockholder executing it except where an irrevocable proxy
is permitted by law.
Section 9. Qualifications of Voters. Every Stockholder of record shall be
entitled at every meeting of Stockholders to one (1) vote for every share
standing in his name on the record of Stockholders, unless otherwise provided in
the Certificate of Incorporation.
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Section 10. Vote of Stockholders. Except as otherwise provided by law or
the Certificate of Incorporation:
(a) all corporate action shall require the affirmative vote of a
majority of shares entitled to vote thereon; and
(b) voting at all meetings of Stockholders shall be viva voce, but any
qualified voter may demand a vote by ballot, each of which shall state the
name of the Stockholder voting and the number of shares voted by him. If
such ballot be cast by a proxy, it shall also state the name of such proxy.
If a vote by ballot is demanded as aforesaid, two inspectors of election
shall be appointed by the presiding officer of the meeting.
Section 11. Written Consent of Stockholders. Whenever by a provision of
statute or of the Certificate of Incorporation or by these By-Laws, the vote of
Stockholders is required or permitted to be taken at a meeting thereof in
connection with any corporation action, the meeting and the vote of Stockholders
may be dispensed with if all of the Stockholders who would have been entitled to
vote upon the action if such meeting were held shall expressly consent in
writing to such corporate action being taken.
ARTICLE III - DIRECTORS
Section 1. Board of Directors. The business of the Corporation shall be
managed by its Board of Directors, each of whom shall be at least twenty-one
(21) years of age and need not be Stockholders.
Section 2. Number of Directors. When there are less than three (3)
Stockholders, the number of Directors shall be not less than such number; if
there are three (3) or more Stockholders, then there shall be not less than
three (3) Directors. The number of Directors may, at any time, be increased or
decreased to the extent permitted by law, by vote of a majority of the Shares
entitled to vote at any Annual or Special Meeting of Stockholders, if the notice
of such meeting or the waiver thereof contains a statement of the proposed
increase or decrease. The initial number of Directors of the Corporation shall
be six (6).
Section 3. Election and Term of Directors. At each Annual Meeting of
Stockholders, the Stockholders shall elect Directors to hold office until the
next Annual Meeting. Each Director shall hold office until the expiration of the
term for which he is elected and until his successor has been elected and
qualified or until his prior resignation or removal.
Section 4. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of Directors and
vacancies occurring in the Board of Directors for any reason except the removal
of Directors without cause may be filled by a vote of a majority of the
Directors then in office, even
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though less than a quorum exists. Vacancies occurring by reason of the removal
of Directors without cause shall be filled by a vote of the Stockholders. A
Director elected to fill a vacancy caused by resignation, death or removal,
shall be elected to hold office for the unexpired term of his predecessor.
Section 5. Removal of Directors. Any or all of the Directors may be removed
for cause by majority vote of the Stockholders or by action of the Board of
Directors. Directors may be removed at any time and without cause by a vote of
the Stockholders.
Section 6. Resignation. A Director may resign at any time by giving written
notice to the Board of Directors, the President or the Secretary of the
Corporation. Unless otherwise specified in the notice, the resignation shall
take effect upon receipt thereof by the Board of Directors or such officer, and
acceptance of the resignation shall not be necessary to make it effective.
Section 7. Quorum of Directors. A majority of the Directors shall
constitute a quorum for the transaction of business or of any specified item of
business by the Board of Directors.
Section 8. Action of the Board of Directors; Validity of Contracts. The
vote of a majority of the Directors present at the time of the vote, if a quorum
is present at such time, shall be the act of the Board of Directors. Each
Director present shall have one (1) vote, regardless of the number of Shares, if
any, which he may hold. No contract or other transaction between this
Corporation and any other Corporation shall be impaired, affected or
invalidated, nor shall any Directors be liable in any way by reason of the fact
that any one or more of the Directors of this Corporation is or are interested
in, or is a director or officer, or are directors or officers of such other
Corporation, provided that such facts are disclosed or made known to the Board
of Directors. Any Director, personally and individually, may be a party to or
may be interested in any contract or transaction of this Corporation, and no
Director shall be liable in any way by reason of such interest, provided that
the fact of such interest be disclosed or made known to the Board of Directors,
and provided that the Board of Directors shall authorize, approve or ratify such
contract or transaction by the vote (not counting the vote of any such Director)
of a majority of a quorum, notwithstanding the presence of any such Director at
the meeting at which such action is taken. Such Director or Directors may be
counted in determining the presence of a quorum at such meeting. This Section
shall not be construed to impair or invalidate or in any way affect any contract
or other transaction which would otherwise be valid under the law applicable
thereto.
Section 9. Place and Time of Meetings. The Board of Directors may hold its
meetings at the office of the Corporation or at such other places, either within
or without the State of Delaware, as it may from time to time determine.
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Section 10. Annual Meeting. An Annual Meeting of the Board of Directors
shall be held immediately following the Annual Meeting of Stockholders at the
place of such Annual Meeting of Stockholders, and no notice of such meeting
shall be necessary.
Section 11. Notice of Meetings of the Board of Directors; Adjournment.
(a) Regular meetings of the Board of Directors may be held without
notice at such time and place as it shall, from time to time, determine.
Special meetings of the Board of Directors shall be held upon notice to the
Directors and may be called by the President upon three (3) days notice to
each Director, either personally or by mail or by wire; special meetings
shall be called by the President or by the Secretary in a like manner on
written request of one (1) Director. Notice of a meeting need not be given
to any Director who submits a waiver of notice whether before or after the
meeting or who attends the meeting without protesting prior thereto, or at
its commencement, the lack of notice to him.
(b) A majority of the Directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice of the
adjournment shall be given to all Directors who were absent at the time of
the adjournment, and, unless such time and place are announced at the
meeting, to the other Directors.
Section 12. Chairman. At all meetings of the Board of Directors, the
President, or, in his absence, a Chairman chosen by the Board of Directors shall
preside.
Section 13. Compensation. No compensation shall be paid to Directors or
members of any committee, as such, for their services, but by resolution of the
Board of Directors a fixed sum and expenses for attendance, at each regular or
special meeting of the Board of Directors or of any such committee, may be
authorized. Nothing herein contained shall be construed to preclude any Director
or committee member from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 14. Directors' Annual Report. The Board of Directors shall present
at each Annual Meeting of Stockholders a full and clear statement of the
business and condition of the Corporation.
Section 15. Written Consent of Directors. Whenever, by provision of statute
or of the Certificate of Incorporation or by these By-Laws, the vote of the
Board of Directors or any committee thereof is required or permitted to be taken
at a meeting thereof in connection with any corporate action, the meeting and
the vote of the Board of Directors or any committee thereof may be dispensed
with if all of the members of the Board of Directors or the committee consent in
writing to the adoption of a resolution
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authorizing the action. The resolution and the written consent thereto by the
members of the Board of Directors or the committee shall be filed with the
minutes of the proceedings of the Board of Directors or committee.
Section 16. Participation of Directors by Conference Telephone. Any one or
more members of the Board of Directors or any committee thereof may participate
in a meeting by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
Section 17. Committees. The Board of Directors, by resolution adopted by a
majority of the entire Board, may designate from among its members one or more
committees, each consisting of one or more Directors, and each of which, to the
extent provided in such resolution, shall have all the authority of the Board.
However, no such committee shall have authority as to any of the following
matters:
(a) the submission to Stockholders of any action as to which
Stockholders' authorization is required by law;
(b) the filling of vacancies on the Board of Directors or on any
committee;
(c) the fixing of compensation of any Director for serving on the
Board or on any committee;
(d) the amendment or repeal of these By-Laws, or the adoption of new
By-Laws; or
(e) the amendment or repeal of any resolution of the Board of
Directors which, by its terms, shall not be so amendable or repeallable.
The Board of Directors may designate one or more Directors as alternate members
of any such committee who may replace any absent member or members at any
meeting of such committee. Each such committee shall serve at the pleasure of
the Board of Directors and shall keep minutes of its meetings and report the
same to the Board of Directors.
ARTICLE IV - OFFICERS
Section 1. Offices, Election, Term.
(a) The Board of Directors may elect or appoint a President, one or
more Vice Presidents, a Secretary and a Treasurer, and such other officers
as it may determine, who shall have such duties, powers and functions as
hereinafter provided.
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(b) All officers shall be elected or appointed to hold office until
the meeting of the Board of Directors immediately following the Annual
Meeting of Stockholders.
(c) Each officer shall hold office for the term for which he is
elected or appointed and until his successor has been elected or appointed
and qualified.
Section 2. Removal, Resignation, and Salary.
(a) Any officer elected or appointed by the Board of Directors may be
removed by the Board at any time, with or without cause.
(b) In the event of the death, resignation or removal of an officer,
the Board of Directors, in its discretion, may elect or appoint a successor
to fill the unexpired term.
(c) Any two or more offices may be held by the same person except, if
there are two or more Stockholders, the offices of President and Secretary.
(d) The salaries of all officers shall be fixed by the Board of
Directors.
(e) The Directors may require any officer to give security for the
faithful performance of his duties.
Section 3. Duties of the President. The President shall:
(a) be the chief executive officer of the Corporation and he shall
preside at all meetings of the Stockholders and of the Board of Directors;
(b) be responsible for the general and active management of the
business of the Corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect; and
(c) be ex officio a member of all committees.
Section 4. Duties of a Vice President. During the absence or disability of
the President, the Vice President or, if there are more than one, the Executive
Vice President, shall have all of the powers and functions of the President.
Each Vice President shall perform such other duties as the Board of Directors
shall prescribe.
Section 5. Duties of the Secretary. The Secretary shall:
(a) attend all meetings of the Board of Directors and of the
Stockholders;
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(b) record all votes and minutes of all proceedings in a book kept for
that purpose;
(c) give or cause to be given notice of all meetings of Stockholders
and of special meetings of the Board of Directors;
(d) keep in safe custody the seal of the Corporation and affix it to
any instrument when authorized by the Board of Directors or the President;
(e) when required, prepare or cause to be prepared and available at
each meeting of Stockholders a certified list, in alphabetical order, of
the names of Stockholders entitled to vote thereat, indicating the number
of shares of each respective class held by each;
(f) keep all the documents and records of the Corporation, as required
by law or otherwise, in the proper and safe manner; and
(g) perform such other duties as may be prescribed by the Board of
Directors or the President.
Section 6. Duties of an Assistant Secretary. During the absence or
disability of the Secretary, the Assistant Secretary or, if there be more than
one, the one so designated by the President or by the Board of Directors, shall
have all the powers and functions of the Secretary.
Section 7. Duties of the Treasurer. The Treasurer shall:
(a) have the custody of the corporate funds and securities;
(b) keep full and accurate accounts of receipts and disbursements in
the corporate books;
(c) deposit all money and other valuables in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board of Directors;
(d) disburse the funds of the Corporation as may be ordered or
authorized by the Board of Directors and preserve proper vouchers for such
disbursements;
(e) render to the President and the Board of Directors, at the regular
meetings of the Board of Directors, or whenever they require it, an account
of all his transactions as Treasurer and of the financial condition of the
Corporation;
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(f) render a full financial report at the Annual Meeting of the
Stockholders, if so requested;
(g) be furnished by all corporate officers and agents, at his request,
with such reports and statements as he may require as to all financial
transactions of the Corporation; and
(h) perform such other duties as are given to him by these By-Laws or
from time to time, are assigned to him by the Board of Directors or the
President.
Section 8. Delegation of Duties. In the case of the absence of any officer
of the Corporation, or for any other reason that the Board of Directors deems
sufficient, the Board of Directors may delegate, for any designated period of
time, the powers or duties, or any of these, of such officer to any other
officer, or to any Director, provided that one person is not given the powers
and duties of both the President and Secretary.
Section 9. Shares of Other Corporations. Whenever the Corporation is the
holder of shares of any other corporation, any right or power of the Corporation
as such Stockholder (including the attendance, acting and voting at
Stockholders' meetings and execution of waivers, consents, proxies or other
instruments) may be exercised on behalf of the Corporation by the President, any
Vice President, or such other person as the Board of Directors may authorize.
ARTICLE V - CERTIFICATES FOR SHARES
Section 1. Certificates. The shares of the Corporation shall be represented
by certificates prepared in such form as the Board of Directors may, from time
to time, prescribe and shall be signed by the President or Vice President, and
by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, and sealed with the seal of the Corporation or a facsimile. If the
certificates are signed by a transfer agent acting on behalf of the Corporation,
and a registrar, the signatures of the officers of the Corporation may be
facsimile. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on any such certificate or certificates,
shall cease to be such officer or officers of the Corporation, whether because
of death, resignation or otherwise, before such certificate or certificates have
been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates, or whose
facsimile signature or signatures have been used thereon, had not ceased to be
such officer or officers of the Corporation.
Section 2. Transfer of Shares.
(a) Upon surrender to the Corporation or the transfer agent of the
Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
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shall be the duty of the Corporation to issue a new certificate; every such
transfer shall be entered on the transfer book of the Corporation which
shall be kept at its principal office. No transfer shall be made within ten
(10) days next preceding the Annual Meeting of Stockholders.
(b) The Corporation shall be entitled to treat the holders of record
of any share as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not it shall have express
or other notice thereof, except as expressly provided by law.
Section 3. Lost or Destroyed Certificates. The Board may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate to be lost or destroyed. When authorizing such issue of a new
certificate or certificates, the Board may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the Corporation a bond in such
sum and with such surety or sureties as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost or destroyed.
ARTICLE VI - CORPORATE SEAL
The seal of the Corporation shall be circular in form and bear the name of
the Corporation, the year of its organization and the words "Corporate Seal
1999, Delaware". The seal may be used by causing it to be impressed directly on
the instrument or writing to be sealed, or upon adhesive substance affixed
thereto. The seal on the certificates for shares or on any corporate obligation
for the payment of money may be facsimile, engraved or printed.
ARTICLE VII - EXECUTION OF INSTRUMENTS
All corporate checks, demands for money, notes of the Corporation,
instruments and documents, shall be signed or countersigned, executed, verified
or acknowledged by such officer or officers or other person or persons as the
Board may, from time to time, designate.
ARTICLE VIII - DIVIDENDS
Subject to the provisions of the Certificate of Incorporation relating
thereto, if any, dividends may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in cash,
bonds, property, or in the shares of the capital stock subject to any provisions
of the Certificate of Incorporation. Before payment of any dividend, there may
be set aside out of any funds of the
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Corporation available for dividends, such sum or sums as the Directors, from
time to time, in their absolute discretion, think proper as a reserve fund to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Corporation or for such other purpose as the Directors shall
think conducive to the interest of the Corporation, and the Directors may modify
or abolish any such reserve in the manner in which it was created.
ARTICLE IX - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of Directors
from time to time.
ARTICLE X - BY-LAW CHANGES
The By-Laws may be amended, repealed or adopted, by vote of the holders of
a majority of the shares at the time entitled to vote in the election of any
Directors. By-Laws may also, subject to the provisions of the General Corporate
Law, be amended, repealed or adopted by the Board of Directors in the manner
required for the authorization by the Board of Directors of any corporate
action. If any By-Law regulating an impending election of Directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of Stockholders for the election of Directors, the
By-Laws so adopted, amended or repealed, together with a concise statement of
the changes made.
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The undersigned Incorporator certifies that the foregoing by-laws have been
adopted as the first by-laws of the Corporation, in accordance with the
requirements of the General Corporation Law of the State of Delaware on this
23rd day of September, 1999.
/s/ David E. Tripodi
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David E. Tripodi, Incorporator
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EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of October 11, 1999,
is by and among AccuFacts Pre-Employment Screening, Inc., a Delaware corporation
("AccuFacts"), Maglio- AccuFacts Pre-Employment Screening, Inc., a Delaware
corporation ("Employer"), and Richard J. Maglio ("Executive").
In consideration of the mutual covenants and promises herein contained, the
parties hereto agree as follows:
1. Employment.
Employer agrees to employ Executive as the Vice-President of Operations of
Employer and Executive accepts such employment, under and subject to the terms
and conditions hereinafter set forth.
2. Term.
Subject to earlier termination as hereafter provided, this Agreement shall
have a term of three (3) years commencing on the date first appearing above (the
"Effective Date") and ending on the third anniversary of the Effective Date (the
"Term").
3. Duties.
During the Term, Executive shall be responsible for the operations of
Employer, the transition and integration of Maglio, Inc. into the Employer and
such other duties consistent with his status as Vice President of Operations as
are given to him from time to time by the Board of Directors. Executive shall
devote his best efforts, skills, and abilities to the discharge of his duties
hereunder and in promoting the interests of the Employer. In the performance of
his duties, he shall cooperate with agents and other employees of the Employer
and its affiliates. Executive shall not be engaged in, or be concerned with, any
other commercial duties or pursuits which detract from performing his duties
provided for herein.
4. Compensation: Salary, Equity Participation and Other Benefits.
4.1 Salary. During the Term, Employer shall pay Executive a base salary in
the amount of seventy-five thousand dollars ($75,000) per annum (the "Base
Salary"), which shall be payable bi-weekly in arrears, or in such other manner
as may be reasonably determined by the Board, but in no event less frequently
than monthly, and which shall be subject to all applicable federal and state
withholding, payroll and other taxes. Beginning on the first anniversary of the
Effective Date, the Base Salary shall be increased by a minimum of 4% of the
Base Salary (the "First Anniversary Base Salary"). Beginning on the second
anniversary of the Effective Date, the First Anniversary Base Salary shall be
increased by a minimum of 4% of the First Anniversary Base Salary (the "Second
Anniversary Base Salary"). The Base Salary, the First Anniversary Base Salary,
the Second Anniversary Base Salary and fringe benefits shall be reviewed
annually by the Board
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following the close of each full year end of Employer or at such other times as
the Board may consider appropriate, and an upward adjustment to the Base Salary,
the First Anniversary Base Salary, the Second Anniversary Base Salary and/or the
awarding of a bonus or other form of compensation may be made in the sole
discretion of the Board.
4.2 Bonus of Profit Participation. Employer shall pay Executive 2% of any
profit EBITA of AccuFacts (including AccuFact's subsidiaries) in excess of
$500,000.00 as determined by AccuFact's accountants at the end of each fiscal
year during the Term. Such amounts, if any, shall be paid as bonuses to
Executive no later than April 15 of the following fiscal year.
4.3 Grant of Stock Options. In partial consideration of Executive's
covenants hereunder, AccuFacts shall issue to Executive stock options granting
the option to purchase fifty thousand (50,000) shares (the "Options") of the
common stock, $.01 par value, of AccuFacts. The Options shall be vested and
exercisable upon the first anniversary of the Effective Date at a strike price
of $2.50 per share and shall expire on the third anniversary of the Effective
Date.
4.4 Automobile Lease. During the Term, Executive shall be entitled to the
use of an automobile leased or owned by Employer and Employer shall pay or
reimburse Executive the direct expenses associated with such automobile
(insurance, maintenance and the like). The monthly lease or purchase payments
for such automobile shall not exceed $521.
4.5 Fringe Benefits. Executive shall be entitled to participation in such
medical plans, insurance (including without limitation, disability insurance)
and other benefits as are accorded other employees of Employer generally;
provided, however, that in the event that Employer institutes company policies
to provide any members of senior management more extensive insurance and other
similar plans and benefits than it provides its employees generally, Executive
shall be entitled to participate in such plans and benefits.
4.6 Vacation. Executive shall be entitled to three (3) weeks' paid vacation
during each calendar year, and a pro-rata portion thereof for any partial
calendar year in which Executive's employment hereunder commences or terminates.
If the employment of Executive is terminated for any reason, he shall be paid
for all accrued and unused vacation time.
4.7 Business Expenses. It is understood that Executive will from time to
time incur reasonable expenses in conjunction with his employment. Employer will
reimburse him for any such reasonable expenses if he shall present an itemized
written account in accordance with Employer's policies.
5. Guaranty. AccuFacts hereby acknowledges and agrees that it will guaranty all
obligations of Subsidiary to be performed hereunder.
6. Nondisclosure and Developments. In consideration of his employment by
Employer, Executive shall, contemporaneously with his signing of this Agreement,
execute a Nondisclosure and Developments Agreement in the form annexed hereto as
Exhibit A (the "Nondisclosure Agreement"), the terms and conditions of which are
incorporated herein by reference. In the event that Executive has previously
executed the Nondisclosure Agreement, then such agreement shall
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remain in full force and effect in accordance with its terms and all references
herein to the Nondisclosure Agreement shall refer to such previously executed
agreement.
7. Covenant Not to Compete.
(a) In consideration of the Non-Competition Consideration as set forth in
the Supplemental Agreement (the "Supplemental Agreement") dated as of even date
herewith by and among AccuFacts, Employer, Executive and Maglio, Inc., and for
other good and valuable consideration the receipt and sufficiency of which
Executive hereby acknowledges, Executive hereby agrees that for the period
commencing on the Effective Date and ending on the later of (i) three (3) years
following the Effective Date or (ii) two (2) years from the date of termination
of the Term hereof (the "Non-Compete Period"), Executive shall not, without the
prior written consent of Employer:
(i) directly or indirectly, engage, whether as an individual
proprietor, partner, stockholder, officer, executive, director, employee,
author, consultant, contractor, joint venturer, lender, investor,
representative or in any other capacity whatsoever (other than as a holder
of not more than one percent (1%) of the total outstanding stock of a
publicly held company), with or without pay, or assist any other Person (as
such term is defined in the Supplemental Agreement) in engaging in any
activity or line of business which is similar to, or competitive with, the
Business (as such term is defined in the Supplemental Agreement) as
conducted by Employer at any time during the Non-Compete Period (the
"Proscribed Business Activities");
(ii) directly or indirectly (1) enter into any kind of arrangement
with any person then employed by AccuFacts or Employer with a view to
terminating the employment of such person or (2) solicit, engage, or hire
any individual who is then employed or was employed by AccuFacts or
Employer during the previous six (6) month period;
(iii) directly or indirectly, either on its own behalf or on behalf of
any other Person:
A. attempt in any manner to persuade any customer, client,
distributor or supplier of AccuFacts or Employer to cease to do
business, or to reduce the amount of business which such customer,
client, distributor or supplier has customarily done or contemplates
doing, with AccuFacts or Employer; or
B. solicit business of any customer, client, distributor or
supplier of Employer or render any services of the type usually
rendered by AccuFacts or Employer for any such customer, client,
distributor or supplier of AccuFacts or Employer.
(b) Notwithstanding anything herein to the contrary, for purposes of
clarification, the parties hereby acknowledge that the Proscribed Business
Activities do not include general business consulting within the field of human
resources and executive/professional recruitment or placement, including, as a
part of such recruiting or placement, background checks; provided, however, that
such background checks not included in the Proscribed Business Activities may
not be conducted by Executive with a view towards re-sale and/or separate
charging.
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<PAGE>
(c) The provisions of this Section 7 shall be void and of no effect in the
event that (i) Executive's employment with Employer is terminated without cause
as set forth herein and Executive has not received the Severance Payment in
connection with such termination as set forth herein or (ii) Employer has failed
to pay Executive the consideration payable to him pursuant to the terms hereof
and Executive subsequently terminates this Agreement by reason of such failure.
(d) The covenants contained in the preceding paragraphs shall be construed
as a series of separate covenants, one for each county, city and state of any
geographic area where any business is carried on by AccuFacts or Employer.
Except for geographic coverage, each such separate covenant shall be deemed
identical in terms to the covenant contained in the preceding paragraphs. If, in
any judicial proceeding, a court refuses to enforce any of such separate
covenants (or any part thereof), then such unenforceable covenant (or such part)
shall be eliminated from this Agreement to the extent necessary to permit the
remaining separate covenants (or portions thereof) to be enforced. In the event
that the provisions of this Section 7 are deemed to exceed the time, geographic
or scope limitations permitted by applicable law, then such provisions shall be
reformed to the maximum time, geographic or scope limitations, as the case may
be, permitted by applicable laws.
8. Termination.
8.1 Death. Executive's employment hereunder shall terminate forthwith upon
the death of Executive.
8.2 Disability. Executive's employment hereunder shall terminate, at the
option of Employer, upon 30 days prior written notice delivered to Executive
after the 90 Day Period, in the event that the Board makes a good faith
determination that Executive suffers from Disability (as hereinafter defined) so
as to be unable to substantially perform his duties hereunder for an aggregate
of ninety (90) calendar days during any period of twelve (12) consecutive months
(the "90 Day Period"). As used in this Agreement, the term "Disability" shall
mean the material inability, in the opinion of a majority of the Board of
Directors, set forth in a resolution giving the particulars thereof, of
Executive to perform his duties in accordance with the terms of Section 3 hereof
due to physical and/or mental infirmity, which opinion is concurred by a
physician or psychiatrist reasonably satisfactory to Employer and Executive or
his duly appointed representative or guardian.
8.3 Without Cause. Employer may terminate this Agreement at any time during
the term without cause, subject to the provisions of Section 9.4 hereof.
8.4 For Cause. At any time during the term of this Agreement, Employer (by
vote of a disinterested majority of the Board of Directors) may terminate
Executive's employment hereunder for "Cause" upon a good faith finding of the
Board of Directors of Cause and notice to Executive setting forth in reasonable
detail the nature of such "Cause". The following actions of Executive shall
constitute "Cause" for purposes of this Agreement:
(i) Executive's embezzlement or substantial and material misuse of
Employer's funds for unauthorized purposes;
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<PAGE>
(ii) Executive's conviction by a court of competent jurisdiction of,
or plea of guilty or nolo contendere to, any felony involving the
possession of controlled substances, homicide, moral turpitude, theft or
larceny, including, but not limited to, the theft of Employer's property;
(iii) Executive's breach of his covenants set forth in Articles 6 and
7 of this Agreement in a material manner; or
(iv) Substantial non-performance by Executive of his duties in
accordance with the terms of Section 3 hereof, which non-performance is not
the result of illness, disability, death or accident.
Termination under clauses (i) through (iii) hereunder may be made forthwith upon
the events recited therein. Termination under clause (iv) may be made upon 45
days prior written notice, with Executive having an opportunity to cure his
default during such period.
9. Limited Compensation Upon Termination.
9.1 Death. If the Executive's employment shall be terminated by reason of
his death, the Employer shall pay to such person as Executive shall designate in
a notice filed with Employer, or if no such person shall be designated, to his
estate as a lump sum benefit, Executive's Salary earned to the date of his death
and, except as otherwise provided in this Agreement, any payments the
Executive's spouse, beneficiaries or estate may be entitled to receive pursuant
to any pension or employee benefit plan or life insurance policy or similar plan
or policy then maintained by the Employer for such purpose, and such payment
shall, assuming the Employer is in compliance with the provision of this
Agreement, fully discharge the Employer's obligations with respect to Section 4
of this Agreement.
9.2 Disability. During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to Disability, the Executive
shall continue to receive his Base Salary until either of (i) the Executive's
employment is terminated pursuant to Section 7.2 of this Agreement or (ii) the
payments of disability benefits under any disability policy for which Employer
has paid the premiums shall become generally available to the Executive.
9.3 For Cause. If the Executive's employment shall be terminated for Cause,
the Employer shall pay the Executive his full Salary through the Date of
Termination, at the rate in effect at the time Notice of Termination is given,
and, the Employer shall have no further obligations with respect to Section 4 of
this Agreement.
9.4 Without Cause. If the Executive's employment shall be terminated
without cause, the Employer shall pay the Executive his full salary through the
Date of Termination, at the rate in effect at the time notice of termination is
given, and, in addition, Executive will be entitled to continue to receive his
then current salary, including any increases thereto as contemplated by Section
4.1 of this Agreement (the "Severance Payment") for a period commencing on the
date of his termination and continuing through the end of the Term hereof (the
"Severance Period"). Executive shall receive no other bonuses or benefits, other
than COBRA and no other rights shall accrue during the Severance Period.
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<PAGE>
10. Change in Control.
(a) Unless he elects to terminate this Agreement pursuant to subsection (c)
below, executive understands and acknowledges that the Employer may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Employer hereunder.
(b) In the event of a Change of Control (as defined herein), Executive may,
at his sole discretion, elect to terminate this Agreement by providing written
notice to the Employer at least five business days prior to the anticipated
closing of the transaction giving rise to the Change in Control. In such case,
the applicable provisions of Section 9.4 will apply as though the Employer had
terminated Executive's employment without cause; provided, however, that under
such circumstances, the amount of the Severance Payment due shall be paid in a
lump sum at the then present value thereof (at a 5% interest rate) and the
non-competition provisions of Section 7 shall apply for a period of three years
from the effective date of termination.
(c) For purposes of applying Section 9.4 under the circumstances described
in subsection (b) above, the effective date of termination will be the closing
date of the transaction giving rise to the Change of Control and all
compensation, severance, reimbursements and lump-sum payments due the Executive
must be paid in full by AccuFacts at or prior to such closing.
(d) a "Change of Control" shall be deemed to have occurred in the event
that, prior to the expiration of this Agreement, (i) there is a sale or
acquisition of AccuFacts or Employer, (ii) Philip Luizzo no longer has a
"controlling interest" (as such term is defined in the U.S. Securities Exchange
Act of 1934, as amended) in AccuFacts, or (iii) there is a sale of substantially
all of the assets of AccuFacts or its subsidiaries.
(e) Executive must be notified in writing by the Employer at any time that
the Employer or AccuFacts anticipates that a Change of Control may take place.
11. Miscellaneous.
11.1 Notices. All notices shall be in writing and given by personal
delivery, certified mail, return receipt requested, or by commercial overnight
courier, to the recipient's address set forth above or to such other address or
addresses as either party may specify in writing to the other. Notice shall be
deemed given the date of personal delivery, the fifth business day after
mailing, or the next business day after delivery to such courier (unless the
return receipt or the couriers records evidence a later delivery).
11.2 No Assignment. This Agreement shall not be assigned by either party
without the advance written consent of the other, provided that Employer may
assign this Agreement to a successor to all or a substantial portion of its
business. This Agreement shall be binding upon and inure to the benefit of the
parties, their successors and permitted assigns.
11.3 Entire Agreement. This Agreement (including the Nondisclosure
Agreement executed simultaneously) constitutes the entire agreement between the
parties with respect to its
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<PAGE>
subject matter, except as provided herein, all other prior agreements,
representations, statements, negotiations and undertakings are terminated and
superseded hereby.
11.4 Survival. After expiration or termination of this Agreement, all
provisions relating to payment shall survive until completion of required
payments. In addition to those provisions which specifically provide for
survival beyond expiration or termination, all provisions regarding restrictions
on competition, assignment of Developments (as defined in the Nondisclosure
Agreement), post-termination solicitation of employees or customers of Employer,
confidentiality and/or protection of proprietary rights and trade secrets shall
survive without any time limits unless and until the expiration of any time
period specified elsewhere in this Agreement with respect to the provision in
question.
Notwithstanding the foregoing, in no event shall any of the Executive's
obligations, other than those relating to confidentiality and/or protection of
proprietary rights and trade secrets, survive beyond twenty-four (24) months
from Executive's termination.
11.5 Governing Law. This Agreement shall be deemed to have been made in
State of Florida, and shall be governed by and construed in accordance with the
laws of the State of Florida, exclusive of its rules governing choice of law and
conflict of laws. Each party hereto irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding arising out of this Agreement
may be brought in the United States District Court for the Middle District of
Florida, Orlando Division or, if such court does not have jurisdiction or will
not accept jurisdiction, in any court of general jurisdiction in the County of
Orange, Florida; (ii) consents to the jurisdiction or any such court in any such
suit, action or proceeding; and (iii) waives any objection which such party may
have to the laying of venue of any such suit, action or proceeding in any such
court.
11.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to constitute an original
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Employment Agreement on the date first above written.
EXECUTIVE
/s/ Richard J. Maglio
---------------------
Richard J. Maglio
ACCUFACTS PRE-EMPLOYMENT
SCREENING, INC.
By: /s/ Philip Luizzo
---------------------
Name: Philip Luizzo
Title: President
MAGLIO-ACCUFACTS PRE-EMPLOYMENT
SCREENING, INC.
By: /s/ Philip Luizzo
---------------------
Name: Philip Luizzo
Title: President
As Guarantor of all obligations hereunder of
Maglio-AccuFacts Pre-Employment Screening, Inc.,
pursuant to Section 5 of this Agreement,
ACCUFACTS PRE-EMPLOYMENT
SCREENING, INC.
By: /s/ Philip Luizzo
- ---------------------
Name: Philip Luizzo
Title: President
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<PAGE>
Exhibit A
NONDISCLOSURE AND DEVELOPMENTS AGREEMENT
In consideration and as a condition of my employment by Maglio-AccuFacts
Pre- Employment Screening, Inc. (the "Employer"), the undersigned hereby agrees
with the Employer as follows:
1. I will not at any time, during my employment or for a period of seven
years after the termination of my employment, reveal to any person or entity any
of the trade secrets or confidential information ("Confidential Information")
concerning the organization, business or finances of the Employer, including
without limitation any names or lists of names of customers, employees,
potential employees, independent contractors or any other business contacts
developed by me or by other employees or agents of the Employer, or of any third
party which the Employer is under an obligation to keep confidential, except as
may be required in the ordinary course of performing my duties as an employee of
the Employer, and I shall keep secret all matters entrusted to me and shall not
use or attempt to use any such information in any manner which may injure or
cause loss or may be calculated to injure or cause loss, whether directly or
indirectly, to the Employer.
Further, I agree that during the Term of my employment and for seven years
thereafter, I shall not make, use or indirectly cause to be used any
Confidential Information of any nature relating to any matter within the scope
of the business of the Employer or concerning any of its dealings or affairs
other than for the benefit of the Employer. I further agree that I shall not,
after the termination of my employment, use or directly cause to be used any
such Confidential Information of the Employer, it being agreed that all of the
foregoing shall be and remain the sole and exclusive property of the Employer
and that immediately upon the termination of my employment I shall deliver at
the Employer's request, all of the foregoing, and all copies thereof, to the
Employer, at its main office.
Notwithstanding the foregoing, I shall not be obligated to maintain the
confidentiality of any information contemplated under the terms of this
Agreement which:
a. is already known to me prior to disclosure by the Employer;
b. at the time of disclosure is generally available to the public or
which after such disclosure becomes generally available to the public
through no fault of mine; or
c. is acquired by me from a third party without restriction on
disclosure or use;
or
d. is approved for use or disclosure by written authorization of the
Employer.
2. If at any time or times during my employment, I shall (either alone or
with others) make, conceive, discovery or reduce to practice any invention,
modification, discovery, design, development, improvement, process, software
program, work of authorship, documentation, formula, data, technique, know-how,
secret or intellectual property right whatsoever or any interest therein
(whether or not patentable or registrable under copyright or similar statutes or
subject to analogous protection) (herein called "Developments") that relates to
the then current business of the
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<PAGE>
Employer or any then planned new business as defined in the then current
business plan or then current corporate documents of the Employer, or any of the
products or services being developed, manufactured or sold by the Employer or
which may be used in relation therewith, then: (A) such Developments and the
benefits thereof shall immediately become the sole and absolute property of the
Employer and its assigns and I hereby assign any rights I may have or acquire in
the Developments and benefits and/or right resulting therefrom to the Employer
and its assigns without further compensation, (B) to the extent consistent with
the Copyright Act of 1976 (the "Copyright Act"), each such Development shall be
a "work made for hire" as that term is defined in Section 101 of the Copyright
Act, and shall be the sole property of the Employer and the Employer shall be
the sole author thereof within the meaning of the Copyright Act, and if any such
Development or any portion thereof is not deemed to be a "work made for hire,"
this Agreement shall operate as an irrevocable assignment of the copyright to
the Development throughout the world, (C) I shall promptly disclose to the
Employer (or any persons designated by it) each such Development, and (D) I
shall communicate, without cost or delay, and without publishing the same, all
available information relating thereto (with all necessary plans and models) to
the Employer.
Upon disclosure of each Development to the Employer, I will, during my
employment and at any time thereafter, at the request and cost of the Employer,
sign, execute, make and do all such deeds, documents, acts and things as the
Employer and its duly authorized agents may reasonably require:
(a) to apply for, obtain and vest in the name of the Employer alone
(unless the Employer otherwise directs) letters patent, copyrights or other
analogous protection in any country throughout the world and when so
obtained or vested to renew and restore the same; and
(b) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or applications
for revocation of such letters patent, copyright or other analogous
protection.
In the event the Employer is unable, after reasonable effort, to secure my
signature on any letter patent, copyright or other analogous protection relating
to a Development, whether because of my physical or mental incapacity or for any
other reason whatsoever, I hereby irrevocably designate and appoint the Employer
attorney-in-fact, to act for and in my behalf and stead to execute and file any
such application or applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent, copyright or other
analogous protection thereon with the same legal force and effect as if executed
by me.
3. I represent that my performance of all of the terms of this Agreement
and as an employee of the Employer does not and will not breach any agreement to
keep in confidence proprietary information acquired by me in confidence or in
trust prior to my employment by the Employer. I have not entered into, and I
agree I will not enter into, any agreement, either written or oral, in conflict
herewith.
4. I recognize that the Confidential Information constitutes "trade
secrets" under Section 688.002(4), Florida Statutes and that Section 812.081,
Florida Statutes, specifically prohibits, and makes a criminal offense,
unauthorized possession and use of such Confidential Information by me and/or by
any person acting in concert with me.
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<PAGE>
5. Any waiver by the Employer of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other provision hereof.
6. I hereby agree that each provision herein shall be treated as a separate
and independent clause, and the unenforceability of any one clause shall in no
way impair the enforceability of any of the other clauses herein. Moreover, if
one or more of the provisions contained in this Agreement shall for any reason
be held to be excessively broad as to scope, activity or subject so as to be
unenforceable at law, such provision or provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the maximum extent compatible with the applicable law as it shall
then appear.
7. My obligations under this Agreement shall survive the termination of my
employment regardless of the manner of such termination and shall be binding
upon my heirs, executors, administrators and legal representatives.
Notwithstanding the foregoing, in no event shall any of my obligations under
this Agreement survive beyond one (1) year from my termination except the
covenants set forth in paragraph 1.
8. The term "Employer" shall include AccuFacts Pre-Employment Screening,
Inc., and any of its subsidiaries, subdivisions or affiliates. The Employer
shall have the right to assign this Agreement in its entirety to its successors
and assigns (and its rights in part to any purchaser of any of its products, to
the extent relevant to such products), and all covenants and agreements
hereunder shall inure to the benefit of and be enforceable by said successors,
assigns or purchasers.
9. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, exclusive of its conflict of laws rules.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Agreement as of the 11th day of October 1999.
Richard J. Maglio
Name of Executive
/s/ Richard J. Maglio
----------------------------------
Signature
Address
Maglio-AccuFacts Pre-Employment Screening, Inc.
By: /s/ Philip Luizzo
----------------------------------
Name: Philip Luizzo
Title: President
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6 Greene Street Associates, LLC
329 Canal Street
New York, New York 10013
December 21, 1999
Subject: Lease Extension:
The current Lease between Accufacts Screening Inc., 6 Greene Street, New York,
NY 10013, and 6 Greene Street Associates, LLC, 329 Canal Street, New York, NY
10013, scheduled to end on March 31, 2000, is hereby extended for a term of 36
months (April 1, 2000 to March 31, 2003), at a new annual rental rate of
$30,000.00 ($2500.00 per month). All provisions of the current lease remain in
effect.
Tenant
/s/ Philip Luizzo
Landlord
[illegible]
<PAGE>
RIDER TO LEASE
Lease Dated:
Landlord: 6 GREENE STREET ASSOCIATES, LLC
Tenant: ACCUFACTS SCREENING INC.
THE PROVISIONS OF THIS RIDER ARE INTENDED TO AMPLIFY AND EXPAND UPON THE
PROVISIONS OF THE PREPRINTED FORM OF THIS LEASE, BUT IN THE EVENT ANY PROVISION
OF THIS RIDER CONFLICTS WITH ANY PROVISION OF THE PREPRINTED FORM, THE
PROVISIONS OF THIS RIDER SHALL SUPERSEDE.
R1. Certain Remedies.
A. Tenant acknowledges that: (i) its agreement to fully and timely pay all
installments of Rent is a material inducement for Landlord to enter into this
lease; (ii) the aggregate amount of all Rent installments are due and payable in
full at the commencement of the term of this lease but Landlord, solely for
Tenant's convenience, has permitted said amount to be payable in equal monthly
installments during the term of this lease; (iii) upon default in the full and
timely payment of any Rent installment, the entire unpaid balance of the
aggregate amount of all Rent installments for the then remainder of the term of
this lease (as originally reserved) will become due and payable if such
installment of Rent shall not be paid in full within ten (10) days of written
notice from Landlord advising of Landlord's intent to proceed under this Article
R1; and (iv) in no event will Tenant be entitled to credit for any monies
received by Landlord for rent and/or use and occupancy for the demised premises
or any part thereof until after the expiration of the term of this lease (as
originally reserved). Tenant agrees that the provisions of this Article R1: (a)
will not constitute or be deemed to be liquidated damages or a penalty; (b) will
apply notwithstanding any contrary provision of this lease; and (c) will be in
addition to, and not limit, any other rights or remedies available to Landlord
pursuant to this lease and otherwise (including, without limitation, those
regarding additional rent reserved under this lease). The parties agree that
upon the making of this lease this Article fairly reflects their intent with
respect to a default by Tenant under this lease.
R2. Arrearages. All sums whatsoever not included within Rent payable by
Tenant under this lease constitute additional rent and are payable without set
off or deduction, whether or not so specified elsewhere in this lease. If the
Rent or any additional rent is not paid on or before the tenth day of the month
for which such payment is due, there shall be added, as additional rent, a late
charge equal to 2% of the unpaid amount. All sums in arrears under this lease
will bear interest, at the then maximum annual rate of interest chargeable in
New York State, from their respective due dates until received by Landlord, but
this in no way limits any claim for damages or any other rights and remedies
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<PAGE>
available to Landlord for any breach or default by Tenant. Tenant's obligations
under this lease will survive the expiration or sooner termination of this
lease. Acceptance by Landlord of rent from any party other than Tenant shall not
be deemed to operate as a consent by Landlord to any assignment or subletting to
such party, nor constitute any acceptance of such party as a tenant hereunder,
nor vest any rights in such party nor release Tenant from any of its
obligations, nor be deemed a modification of any of the provisions of this
lease.
B. Landlord and Tenant agree that the words "and additional rent" are to be
deemed inserted immediately following each reference to "rent" or "Rent" in this
lease. Should any dispute arise between Landlord and Tenant with respect to the
amount of any additional rent due pursuant to this lease, Tenant shall pay to
Landlord, until such dispute is resolved, the amounts deemed by Landlord to be
due.
C. Notwithstanding anything to the contrary contained in this Article or
elsewhere in this lease, the parties further agree that: (i) all references in
this lease to expenses to which Landlord is entitled are to be deemed
illustrative only and Landlord will be entitled (in addition to all other sums
recoverable by Landlord) to all expenses of every nature which it may incur in
connection with any default, re-entry, expiration and/or dispossess by summary
proceedings or otherwise; and (ii) wherever in this lease Tenant is required to
pay to Landlord any monies as "additional rent" such monies will be payable to
Landlord at the time(s) specified in this lease for the payment thereof, as if
there had not occurred any default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise.
R3. Rent Restrictions. If any of the fixed annual rent or additional rent
payable under this Lease shall be or become uncollectible, reduced or required
to be refunded because of any rule, regulation or law, Tenant shall enter into
such agreements and take such other legally permissible steps as Landlord may
reasonably request to permit Landlord to collect the maximum rents which from
time to time during the continuance of such rule, regulation or law may be
legally permissible and not in excess of the amounts reserved therefor under
this Lease. Upon the termination of such rule, regulation or law, (a) the rents
hereunder shall be payable in the amounts reserved herein for the periods
following such termination and (b) Tenant shall pay to Landlord, to the maximum
extent legally permissible, an amount equal to (i) the rents which would have
been paid pursuant to this Lease but for such rule, regulation or law, less (ii)
the rents paid by Tenant during the period such rule, regulation or law was in
effect.
R4. Security. Simultaneously with the execution of this Lease, Tenant
shall deposit with Landlord the sum of $2,200.00 as security for the due and
faithful payment, as herein provided, of the rent, additional rent, charges and
damages payable by Tenant under this lease or pursuant to law and for the due
and faithful keeping, observance and performance of all the other covenants,
agreements, terms, provisions and conditions of this lease on the part of Tenant
to be kept, observed and performed. The security will be deposited into an
interest bearing account. If at any time Tenant shall be in default in the
payment of any such rent or in the keeping, observance or performance of any
such other covenant, agreement, term, provision or condition, Landlord may at
its election apply the security so on deposit with Landlord to the payment of
any such rent or to the payment of the costs incurred by Landlord in curing such
default, as the case may be. If as a
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result of any such application of all or any part of such security, the amount
of cash so on deposit with Landlord shall be less than $2,200.00 , Tenant shall
forthwith deposit with Landlord cash in an amount equal to the deficiency. If at
the expiration of the term of this lease Tenant shall not be in default in the
payment of any such rent, charge or damage or in the keeping, observance or
performance of any such other covenant, agreement, term, provision or condition,
then Landlord shall, within a reasonable time after the expiration of said term,
return to Tenant said security, if any, (with interest earned thereon, less a 1%
administrative fee) then on deposit with Landlord pursuant to this Article.
Tenant shall not be entitled to any interest on said security so on deposit with
Landlord, or on any part thereof, and Landlord may commingle the security
deposit with its other assets. In the event of a transfer of Landlord's interest
in the building, Landlord shall have the right to transfer the security to the
transferee and Landlord shall, without any further agreement between the
parties, thereupon be released by Tenant from all liability for the return of
such security; and Tenant agrees to look to the new landlord 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 landlord. Tenant
further covenants that it will not assign or encumber or attempt to assign or
encumber said security or any part thereof and that neither Landlord nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
R5. Condition of Premises: Tenant's Work.
A. Tenant acknowledges and agrees that no materials whatsoever are to be
furnished by Landlord and no work whatsoever is to be performed by Landlord in
connection with the demised premises or any part thereof and Tenant agrees to
accept the demised premises in its "as is" condition as existing on the date of
this lease. Landlord shall not be required to perform any work or expend any
sums to prepare the demised premises for Tenant's use or occupancy. Landlord in
no way warrants the suitability of the demised premises for the Tenant's
business and Tenant acknowledges that no representations have been made by
Landlord pertaining thereto or with respect to any other matter or thing except
as expressly set forth in this lease. Except as expressly set forth in this
lease, Landlord shall have no obligation, liability or responsibility of any
nature with respect to any installations at any time made in the demised
premises by or for Tenant or existing in the demised premises on the date of
this lease, including but not limited to, the plumbing, heating, electrical, air
conditioning and disposal systems, and Tenant agrees, in addition to its other
obligations under this lease, including but not limited to Article 4, to
maintain, repair and/or replace, to the extent necessary, all of the foregoing.
Landlord's sole obligation shall be to perform structural repairs to the demised
premises, provided such repairs are not necessitated by the acts or omissions of
Tenant, in which event such repairs shall be made by Tenant.
B. Supplementing Article 3 of the preprinted form of this lease, if
Landlord consents the performance of any alterations or changes to the demised
premises it is hereby agreed, in addition to the requirements of Article 3 of
the preprinted form of this lease that:
(a) Tenant's Work shall be done (i) in a good and workmanlike manner;
(ii) solely in accordance with plans and specifications first approved in
writing by Landlord; (iii) at Tenant's sole cost and expense; and (iv) at
such times and in such manner as Landlord may from time to time reasonably
designate. Tenant shall reimburse Landlord upon demand, for any reasonable
costs and expenses incurred by Landlord in connection with Landlord's
review of such plans and specifications.
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(b) Tenant will advise Landlord in writing of the names of any
contractors or subcontractors that Tenant proposes to use and shall obtain
Landlord's prior written consent to same prior to engaging any such
contractors or subcontractors.
(c) All alterations shall be performed in accordance with all
applicable requirements of law, including but not limited to those imposed
by the New York City Building Department, the New York City Fire
Department, O.S.H.A. and as otherwise described in Article 6 of this lease.
(d) Prior to commencement of Tenant's Work, Tenant shall furnish
Landlord with certificates evidencing the existence of the following
insurance coverages, in form and content satisfactory to Landlord: workers'
compensation insurance and comprehensive general liability insurance,
including but not limited to completed operations coverage, products
liability coverage, contractual coverage, broad form property damage,
independent contractors coverage and personal insurance coverage, naming
Landlord as an additional insured, with coverage of not less than
$5,000,000 combined single limit.
(e) Movement of all men and material shall only be done at the
direction, the times and the manner reasonably designated by Landlord.
(f) As a condition to the commencement of Tenant's Work, Tenant shall
deliver such performance, payment and completion bonds, shall comply with
provisions of this Article R11 and shall comply with such other conditions
relating to Tenant's Work as shall be reasonably required by Landlord.
(g) Except in compliance with all of the aforesaid, Tenant shall make
no alterations, installations, additions or improvements in or to the
demised premises without Landlord's prior written consent in each instance.
(C) Notice is hereby given that Landlord shall not be liable for any labor
or materials furnished to or to be furnished to Tenant upon credit and that no
mechanic's or other lien for any such labor or materials shall attach to or
affect the reversion or other interest of Landlord in and to the demised
premises or the building , for work claimed to have been done for or materials
claimed to have been furnished to Tenant. Any mechanic's or other lien filed
against the demised premises and/or the building shall be discharged by Tenant,
at its expense within fifteen days after such filing by payment, filing of a
bond or otherwise.
R6. Air Conditioning.
The operation of any air conditioning systems installed within the demised
premises and any replacements thereof shall be maintained and repaired by
Tenant, at Tenant's sole cost and expense. Upon the expiration or other
termination of this Lease, Tenant shall surrender to Landlord said air
conditioning systems and equipment used in connection therewith (including but
not limited to ducts and compressors). Nothing herein contained shall be
construed so as to require Landlord to furnish any of the aforesaid equipment
nor to repair or replace same.
R7. Utilities.
A. Tenant shall arrange for and pay, when due, for all electricity utilized
in the demised premises, as indicated by electric meters measuring same, which
meters shall be installed, maintained in good working order and repaired (and
replaced, if necessary), by Tenant. Tenant shall make all required security
deposits and make all other payments directly to the utility
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company furnishing such utility. The failure of Tenant to timely make payment of
any utility bill shall be a default under this lease.
B. No diminution or abatement of rent or additional rent or other
compensation or claim of constructive eviction shall be claimed by Tenant as a
result of any interruption, suspension or curtailment of any utility,
airconditioning units or any other service to the demised premises.
R8. Cleaning and Refuse.
A. Supplementing and modifying Article 31 of the preprinted form of this
Lease, cleaning and refuse collection, removal and disposal shall be arranged
and paid for by Tenant and are the sole responsibility of Tenant. Tenant shall
maintain the interior and exterior of the demised premises in a clean and
orderly fashion and shall not permit the accumulation of any refuse in or about
the demised premises. If Tenant shall fail to do any of the foregoing, Landlord
shall have the right, but not the obligation, to cause the demised premises to
be cleaned and/or rubbish to be collected, removed and disposed of at the sole
cost and expense of Tenant, and the amount so expended shall constitute
additional rent to be paid by Tenant to Landlord upon demand.
B. Tenant shall not suffer or permit the presence of any flammable,
combustible or explosive materials in or about the demised premises.
R9. Landlord Transfers. If Landlord's interest in the demised premises
terminates for any reason, the Landlord named herein shall be entirely relieved
of all obligations to Tenant hereunder and Tenant hereby agrees to attorn to any
succeeding owner, landlord, mortgagee or other party in interest for the then
remaining term of this lease and upon the terms and conditions of this lease.
The foregoing is to inure to the benefit of any such owner, landlord, mortgagee
or other party in interest and is self operative upon request. However, Tenant
agrees to execute and deliver, within 5 days after request, a recordable
instrument satisfactory to the owner, landlord, mortgagee or other party in
interest, acknowledging such attornment and confirming the terms and conditions
of the tenancy hereby created. Nothing contained in this Article is to impair
any right privilege or option of such owner, landlord or mortgagee.
RlO. Indemnification. Tenant covenants and agrees to indemnify and save
harmless, Landlord and any fee owner and any mortgagee and any lessor under any
ground or underlying lease, and their respective contractors, agents and
employees, licensees and invitees, from and against any and all liability
(statutory or otherwise), claims, suits, demands, damages, judgments, costs,
interest and expenses (including, but not limited to, counsel fees and
disbursements incurred in connection with any action or proceeding), to which
they may be subject or which they may suffer by reason of, or by reason of any
claim for, any injury to, or death of, any person or persons (including, without
limitation, Landlord, its agents, contractors, employees, licensees and
invitees) or damage to property (including any loss of use thereof) or otherwise
arising from or in connection with the occupancy or use of or from any work,
installation or thing whatsoever done in, at or about the demised premises prior
to, during, or subsequent to, the term of this lease or arising from any
condition of the demised premises or resulting from any default by Tenant in the
performance of Tenant's obligations under this lease or from any act, omission
or negligence of Tenant or any of Tenant's officers, directors, agents,
contractors, employees, subtenants, licensees or invitees.
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R11. Exculpation. Tenant agrees that Tenant will look solely to the
interest of Landlord or its successor in the land and the building for the
satisfaction of any judgment or other judicial process requiring the payment of
money as a result of any negligence, intentional act, or breach of this lease by
Landlord or such successor, and no other assets of Landlord or such successor
will be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies in any of such events.
R12. Insurance
A. Tenant shall at all times during the term of this lease, keep in force,
with responsible insurance companies licensed to do business in the State of New
York and acceptable to Landlord, a policy of comprehensive general liability and
property damage insurance in a single limit of not less than $1,000,000 covering
death or injury to any person(s) as well as property damage. Such policy will:
(a) include Landlord and such other parties as Landlord may designate as parties
insured; (b) under no circumstances be considered anything other than primary
insurance; (c) include by endorsement as a part of the policy an agreement
insuring Tenant's indemnity and hold harmless obligations under Article R10; and
(d) provide that it may not be canceled or changed without at least 15 days,
prior notice from the insurer to each party insured thereunder. In addition,
Tenant, at its expense, will maintain Workmen's Compensation insurance in
accordance with law and appropriate insurance covering damage to Tenant's
Property. Tenant will furnish Landlord with either the original policy or, at
Landlord's option, a certificate of each of the insurances so carried by Tenant.
B. Tenant understands and agrees that Landlord will not be obligated to
carry insurance of any kind on any personal property in the demised premises
(regardless of whether such property shall be owned by Tenant and including, but
not limited to, Tenant's goods, supplies, furnishings, furniture, fixtures,
equipment, improvements, betterments, installations or appurtenances). Tenant
hereby waives any and all right of recovery which it might otherwise have
against Landlord, any fee owner or mortgagee and their respective officers,
directors, agents, contractors, servants and employees for loss or damage to
such property or any part thereof.
C. Tenant covenants, warrants and agrees that in the event the casualty
and/or liability insurance rate for the building of which the demised premises
form a part shall increase as a result of the use or occupation of the demised
premises by Tenant then, and in such event, Tenant shall pay to Landlord the
whole increased cost of insurance premiums resulting from such increase in rate.
Such sums shall be due and payable upon the rendition of Landlord's billing or
notification to Tenant and shall be deemed additional rent and collectible as
such. A letter or certificate by the insurance company or broker with whom the
insurance coverage is made will be conclusive evidence of the increase amount in
premium and rate.
R13. Waiver of Subrogation. Each of the parties hereto, their successors,
assigns and subtenants, as the case may be, insofar as may be permitted by the
terms of the insurance policies carried by it, does hereby waive all claims,
causes of action and right of recovery against the other party, its contractors,
agents, employees, invitees or licensees for any loss or damage occurring to the
demised premises or the improvements, furniture, fixtures, merchandise and
personal property of every kind located in and about the demised premises or the
building of which the same are a part, resulting from any perils covered by
insurance regardless of the cause or origin, including the negligence of either
party, its
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contractors, agents, employees, invitees or licensees to the extent that the
same is covered by any policy or policies of insurance, including rental value,
interruption of business or similar insurance. If the waiver, as set forth
herein, of either Landlord or Tenant, their successors, assigns and subtenants,
as the case may be, shall contravene any law with respect to exculpatory
agreements, the liability of the party in question shall be deemed not waived
but shall be deemed secondary to the insurer or insurers, as the case may be. In
the event that the waiver herein granted shall cause the payment of additional
premium, the party benefiting from such waiver shall, upon 10 days, written
notice of the same, pay such additional premium or this paragraph shall be null
and void for so long as such party shall fail to pay such premium.
Rl4. Tenant Property. Landlord or its agents shall not be liable for any
damage to property of Tenant or of others entrusted to Landlord's agents, nor
for the loss of or damage to any property of Tenant by theft or otherwise.
Landlord or its agents shall not be liable for any injury or damage to persons
or property resulting from any cause, including but not limited to, fire,
explosion, falling plaster, steam, gas, electricity, water, rain or snow or
water leaks or seepage any part of said roof.
R15. Brokerage.
A. Tenant represents and warrants to Landlord that Paragraph B of this
Article lists all brokers with whom Tenant has dealt in connection with this
lease, and Tenant agrees to indemnify, defend and save Landlord harmless from
and against any and all liabilities, costs and expenses (including, without
limitation, attorneys fees and disbursements) arising from the claims of any
other brokers based upon alleged dealings with Tenant or anyone acting for or on
behalf of Tenant in connection with this lease.
B. NONE
Rl6. Seeking Consent of Landlord. If Tenant or (with Tenant's
authorization), any subtenant requests Landlord's consent or approval to
alterations, subletting or any other matter or thing requiring Landlord's
consent or approval under this lease, and if in connection with such request
Landlord seeks the advice of its attorneys and/or architects, then Landlord, as
a condition precedent to granting its consent or approval, may require (in
addition to any other requirements of Landlord in connection with such request)
that Tenant pay the fees of Landlord's attorneys and/or architects in connection
with the consideration of such request and/or the preparation of any documents
pertaining thereto.
Rl7. Consent of Landlord. Wherever in this lease Landlord's consent or
approval is required, if Landlord shall delay or refuse such consent or
approval, Tenant in no event shall be entitled to make, nor shall Tenant make,
any claim, and Tenant hereby waives any claim, for money damages (nor shall
Tenant claim any money damages by way of set-off, counterclaim or defense) based
upon any claim or assertion by Tenant that Landlord unreasonably withheld or
unreasonably delayed its consent or approval. Tenant's sole remedy shall be an
action or proceeding to enforce any such provision, for specific performance,
injunction or declaratory judgment.
R18. Signage. Tenant shall not place any signs, lettering or decorations
in, on, behind or in front of the demised premises including any windows of the
demised premises, without the Landlord's prior written consent and only after
the submission to
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and approval by Landlord of detailed plans and specifications.
R19. No Surrender. No agreement to accept a surrender of this lease shall
be valid unless in writing signed by Landlord. No employee of Landlord or of
Landlord's agents shall have any power to accept the keys of the demised
premises prior to the termination of this lease. The delivery of keys to
Landlord or any employee of Landlord or of Landlord's agent shall not operate as
a termination of this lease or a surrender of the demised premises. In the event
of Tenant at any time desiring to have Landlord sublet the premises for Tenant's
account, Landlord or Landlord's agents are authorized to receive said keys for
such purpose without releasing Tenant from any of the obligations under this
lease. The failure of Landlord to seek redress for violation of, or to insist
upon the strict performance of, any covenant or condition of this lease or any
rules and regulations adopted by Landlord, 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 Landlord of rent with
knowledge of the breach of any covenant of this lease shall not be deemed a
waiver of such breach. No provision of this lease shall be deemed to have been
waived by Landlord, unless such waiver be in writing signed by Landlord. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
rent herein stipulated shall be deemed to be other than on the account of the
earliest stipulated rent. Any endorsement or statement on any check or any
letter accompanying any check or payment shall be without any force or effect
and shall be without prejudice to Landlord's right to recover the balance of
such rent or pursue any of Landlord's other remedies.
R20. Holdover. Supplementing Article 22 of the preprinted form of this
lease, if Tenant fails to timely surrender the demised premises at the
expiration or earlier termination of this lease, time being of the essence, such
holding over shall not constitute a renewal or extension of this Lease. Tenant
shall indemnify and hold Landlord harmless from and against all loss, liability
and expense including reasonable attorneys fees resulting from a delay on the
part of Tenant in so surrendering the demised premises including, without
limitation, any claims made by any subsequent tenant. The parties recognize that
it would be impossible to accurately measure or foresee the damage sustained by
landlord upon the expiration or earlier termination of the term hereof.
Accordingly, in addition to Landlord's other rights and remedies, Tenant shall
pay to Landlord for each month and for each portion of a month during which
Tenant holds over in the demised premises an amount equal to three (3) times the
last monthly rent under this lease plus liquidated damages of $50.00 per day.
Nothing contained herein shall be deemed to permit Tenant to retain possession
of the demised premises after the expiration or earlier termination of this
lease.
R21. Applicable Law: No Offer. New York State law governs the validity,
performance and enforcement of this lease. The invalidity or unenforceability of
any provision of this lease shall not affect or impair any other provision.
Submission of this document for examination does not constitute an offer to
lease, or a reservation of or option for the demised premises, and this document
becomes effective only when mutually executed and delivered.
R22. Information: Certificates. Tenant agrees that from time to time,
within 10 days after Landlord's written request, Tenant will execute,
acknowledge and deliver to Landlord a statement certifying to such reasonable
information regarding this lease as Landlord may request, including (without
limitation) the
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commencement and expiration dates of the term of this lease, that this lease is
unmodified and in full force and effect (or if there have been modifications,
that it is in full force and effect as modified and stating the modifications),
and the dates to which Rent and all other sums due hereunder from Tenant have
been paid in advance, if any, and stating whether or not to the knowledge of the
signer of such certificate Landlord is in default under this lease, and, if so,
specifying each such default of which the signer has knowledge. Breach of the
foregoing will constitute Tenant's acknowledgment, which may be relied on by any
mortgagee or person holding or proposing to acquire an interest in the building
or this lease, that this lease is unmodified and in full force and effect and
will constitute, as to any such person, a waiver of any defaults on Landlord's
part which may exist prior to the date of such notice. The foregoing does not
limit any other rights and remedies available to Landlord for breach of this
Article Rl5.
R23. Modifications. If, in connection with obtaining financing or
refinancing for the building of which the demised premises form a part, a bank,
insurance company or other lender shall request reasonable modifications to this
lease as a condition to such financing or refinancing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder (except, to
the extent that Tenant may be required to give notices of any default by
Landlord to such lender and/or permit the curing of such defaults by such lender
together with the granting of such additional time for such curing as may be
required for such lender to get possession of the said building) or materially
adversely affect the leasehold interest hereby created. In no event shall a
requirement that the consent of any such lender be given for any modification of
this lease or for any assignment or sublease, be deemed to materially adversely
affect the leasehold interest hereby created.
R24. Certain Remedies. If Tenant shall default in the observance or
performance of any term or covenant on Tenant's part to be observed or performed
under any of the terms or provisions of this Lease, (a) Landlord may remedy such
default for the account of Tenant, immediately and without notice in case of
emergency, or in any other case if Tenant shall fail to remedy such default with
all reasonable dispatch after Landlord shall have notified Tenant in writing of
such default and the applicable grace period for curing such default shall have
expired; and (b) if Landlord makes any expenditures or incurs any obligations
for the payment of money in connection with such default, including, but not
limited to, reasonable attorneys fees in instituting, prosecuting or defending
any action or proceeding, such sums paid or obligations incurred, with interest
at the maximum rate permitted by law, shall be deemed to be additional rent
hereunder and shall be paid by Tenant to Landlord upon rendition of a bill to
Tenant therefor. The provisions of this Article R24 shall survive the expiration
or other termination of this lease.
R25. Use. A. Subject to the restrictions contained in the Certificate of
Occupancy for the demised premises in any way which would violate any provisions
of the Certificate of Occupancy or in any unlawful manner, Tenant shall use and
occupy the demised premises for only the purpose and for no other purpose than
as set forth in Article 2 of this Lease. Landlord makes no representation that
the Certificate of Occupancy for the building or the demised premises permits
the use permitted hereunder.
B. Tenant acknowledges that the building of which the demised premises form
a part is a mixed use structure for
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residential and commercial use. Tenant shall take such steps, follow such
procedures and install such soundproofing systems and material as shall prevent
noise from emanating from the demised premises to (i) other areas in the
building; and (ii) to the street outside of the demised premises.
R26. Financial Statements. Tenant shall, without charge, at any time and
from time to time deliver to Landlord, within ten (10) days of request therefor,
copies of the most current financial statements of Tenant of this lease,
prepared by an independent certified public accountant, and such further
detailed financial information with respect to Tenant and as Landlord may
reasonably request.
R27. Disputes Among Tenants. In the event of any claim by Tenant to the
effect that another tenant in any way infringes upon or violates any of Tenant's
rights under this lease, Tenant's sole remedy shall be to commence legal action
against such other tenant and Landlord shall in no way or event be required to
institute any legal proceedings, take any other steps or otherwise participate
in any action or dispute or against the other tenant.
R28. Permits and Licenses. Tenant shall, at its sole cost and expense,
prior to the opening for business with the public, obtain any and all permits,
licenses, approvals and/or certificates of occupancy for the lawful operation of
its business, and shall comply with all applicable laws, regulations and codes
and all rules and regulations of each and every department, bureau, body or
agency, or any governmental or quasi-governmental authority having jurisdiction
over the operation, occupancy, maintenance and use of the demised premises. If
Tenant fails, for any reason whatsoever, to obtain all licenses, approvals
and/or certificates of occupancy, or permits necessary for the operation of
Tenant's business, such failure shall not affect Tenant's obligations under this
Lease.
R29. Miscellaneous.
A. This Lease shall be construed without regard to any presumption or other
rule requiring construction against the party causing this Lease to be drafted.
B. Except as otherwise expressly provided in this Lease, each covenant,
agreement, obligation or other provision of this Lease on Tenant's or Owner's
part to be performed shall be deemed and construed as a separate and independent
covenant of such party, not dependent on any other provision of this Lease.
C. All terms and words used in this Lease, regardless of the number or
gender in which they are used, shall be deemed to include any other number and
any other gender as the context may require.
D. No remedy or election hereunder shall be deemed exclusive but shall,
whenever possible, be cumulative with all other remedies at law or in equity.
E. If any term, covenant, condition or provision of this Lease or the
application thereof to any circumstance or any person, firm or corporation shall
be invalid or unenforceable to any extent, the remaining terms, covenants,
conditions and provisions of this Lease shall not be affected thereby and each
remaining term, covenant, condition and provision of this Lease shall be valid
and shall be enforceable to the fullest extent
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permitted by law.
F. 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 hereof.
R30. Tenants pay brokers Fee's.
[ILLEGIBLE]
-------------------------------
LANDLORD
/s/ Philip Luizzo
-------------------------------
TENANT
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----------------------------------------
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
----------------------------------------
Agreement of Lease, made as of this day of 1997, between
6 GREENE STREET ASSOCIATES, LLC, 329 Canal Street, New York, NY 10013
party of the first part, hereinafter referred to as OWNER, and
ACCUFACTS SCREENING INC., 1870 86th Street, Brooklyn, NY 11214
party of the second part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
First Floor, Front Loft
in the building known as 329-331 Canal Street, a/k/a 6 Greene Street, New York,
NY
in the Borough of Manhattan, City of New York, for the term of three (3) (or
until such term shall sooner cease and expire as hereinafter provided) to
commence on the 1 day of April nineteen hundred and ninety seven, and to end on
the 31 day of March, two thousand and both dates inclusive, at an annual rental
rate of twenty six thousand four hundred ($26,400.00) dollars ($2,200.00 per
month)
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 installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment on the execution hereof (unless this lease be
a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
Rent: 1. Tenant shall pay the rent as above and has hereinafter provided.
Occupancy: 2. Tenant shall use and occupy demised premises for general office
use (See Rider) and no other purpose
provided such use is in accordance with the certificate of occupancy for the
building, if any, and for no other purpose.
Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
without Owner's prior written consent. Subject to the prior written consent of
Owner, and to the provisions of this article, Tenant, at Tenant's expense, may
make alterations, installations, additions or improvements which are
nonstructural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises using
contractors or mechanics first approved in each instance by Owner. Tenant shall,
at its expense, before making any alterations, additions, installations or
improvements obtain all permits, approval 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. 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 part, for work claimed to have been done
for, or materials furnished to, Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within thirty days thereafter,
at Tenant's expense, by payment or filing the bond required by law or otherwise.
All fixtures and all paneling, partitions, railings and like installations,
installed in the premises at any time, either by Tenant or by Owner on Tenant's
behalf, shall, upon installation, become the property of Owner and shall remain
upon and be surrendered with the demised premises unless Owner, by notice to
Tenant no later than twenty days prior to the date fixed as the termination of
this lease, elects to relinquish Owner's right thereto and to have them removed
by Tenant, in which event the same shall be removed from the demised premises by
Tenant prior to the expiration 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, moveable office furniture and equipment, but upon
removal of any such from the premises or upon removal of other installations as
may be required by Owner, Tenant shall immediately and at its expense, repair
and restore the premises to the condition existing prior to 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
removed from the premises by Owner, at Tenant's expense.
Repairs:
4. Owner shall maintain and repair the exterior of and the public portions
of the building. Tenant shall, throughout the term of this lease, take good care
of the demised premises including the bathrooms and lavatory facilities (if the
demised premises encompass the entire floor of the building) and the windows and
window frames and, the fixtures and appurtenances therein and at Tenant's sole
cost and expense promptly make all repairs thereto and to the building. Tenant
shall also repair all damage to the building and the demised premises caused by
the moving of Tenant's fixtures, furniture or equipment. All the aforesaid
repairs shall be of quality or class equal to the original work or construction.
If Tenant fails, after ten days notice, to proceed with due diligence to make
repairs required to be made by Tenant, the same may be made by the Owner at the
expense of Tenant, and the expenses thereof incurred by Owner shall be
collectible, as additional rent, after rendition of a bill or statement
therefor. If the demised premises be or become infested with vermin, Tenant
shall, at its expense, cause the same to be exterminated. Tenant shall give
Owner prompt notice of any defective condition in any plumbing, heating system
or electrical lines located in the demised premises and following such notice,
Owner shall remedy the condition with due diligence, but at the expense of
Tenant, if repairs are necessitated by damage or injury attributable to Tenant,
Tenant's servants, agents, employees, invitees or licensees as aforesaid. Except
as specifically provided in Article 9 or elsewhere in this lease, there shall be
no allowance to the Tenant for a diminution of rental value and no liability on
the part of Owner by reason of inconvenience, annoyance or injury to business
arising from Owner, Tenants or others making or failing to make any repairs,
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. It is specifically agreed that Tenant shall not be entitled to any set
off or reduction of rent by reason of any failure of Owner to comply with the
covenants of this or any other article of this lease. Tenant agrees that
Tenant's sole remedy at law in such instance will be by way of any action for
damages for breach of contract. The provisions of this Article 4 with respect to
the making of repairs shall not apply in the case of fire or other casualty with
regard to which Article 9 hereof shall apply.
Window Cleaning:
5. Tenant will not clean nor require, permit, suffer or allow any window in
the 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.
Requirements of Law, Fire Insurance:
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter Tenant shall, at Tenant's sole cost and
expense, promptly comply with all present and future laws, orders and
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 Office, or any similar body which shall
impose any violation, order or duty upon Owner or Tenant with respect to the
demised premises, whether or not arising out of Tenant's use or manner of use
thereof, or, with respect to the building, if arising out of Tenant's use or
manner of use of the demised premises of the building (including the use
permitted under the lease). Except as provided in Article 30 hereof, nothing
herein shall require Tenant to make structural repairs or alterations unless
Tenant has, by its manner of use of the demised premises or method of operation
therein, violated any such laws, ordinances, orders, rules, regulations or
requirements with respect thereto. Tenant shall no do or
<PAGE>
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 not keep anything in the demised premises except
as now or hereafter permitted by the Fire Department, Board of Fire
Underwriters, Fire Insurance Rating Organization and other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. If by reason of failure to comply with the foregoing the
fire insurance rate shall, at the beginning of this 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. In any action or proceeding wherein Owner and Tenant are
parties, a schedule or "make-up" or 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 rates then applicable to said premises. Tenant
shall not place a load upon any floor of the demised premises 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 mechanical equipment. Such installations shall
be placed and maintained by Tenant, at Tenant's expense, in settings sufficient,
in Owner's judgement, to absorb and prevent vibration, noise and annoyance.
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 or 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 from time to time 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, ifs agents, servants or
employees; Owner or its agents shall not be liable for any damage caused by
other tenants or persons in, upon or about said building or caused by operations
in connection of any private, public or quasi public work. If at any time any
windows of the demised premises are temporarily closed, darkened or bricked up
(or permanently closed, darkened or bricked up, if required by law) for any
reason whatsoever including, but not limited to Owner's own acts, Owner shall
not be liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefor nor abatement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. 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
attorney's fees, paid, suffered or incurred as a result of any breach by Tenant,
Tenant's agents, 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
sub-tenant and any agent, contractor, employee, invitee or licensee of any
sub-tenant. In case any action or proceeding is brought against Owner by reasons
of any such claim, Tenant, upon written notice from Owner, will, at Tenant's
expense, resist or defend such action or proceeding by counsel approved by Owner
in writing, such approval not to be unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) If the demised premises 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 and other items of additional 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 and other items of additional rent as
hereinafter expressly provided 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 (or sooner reoccupied in part by Tenant
then rent shall be apportioned as provided in subsection (b) above), 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, or 30 days after adjustment of
the insurance claim for such fire or casualty, whichever is sooner, 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
term 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, to
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
- ----------
[GRAPHIC OMITTED] Rider to be added if necessary.
made by Tenant which were on account of 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
control. 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 hereinabove shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, including Owner's obligation to restore under
subparagraph (b) above, 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 with respect to
subparagraphs (b), (d) and (e) above, against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The release
and waiver herein referred to shall be deemed to include any loss or damage to
the demised premises and/or to any personal property, equipment, trade fixtures,
goods and merchandise located therein. 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. If, and to the
extent, that such waiver can be obtained only by the payment of additional
premiums, then the party benefiting from the waiver shall pay such premium
within ten days after written demand or shall be deemed to have agreed that the
party obtaining insurance coverage shall be free of any further obligation under
the provisions hereof with respect to waiver of subrogation. 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. Tenant shall have the right to make
an independent claim to the condemning authority for the value of Tenant's
moving expenses and personal property, trade fixtures and equipment, provided
Tenant is entitled pursuant to the terms of the lease to remove such property,
trade fixtures and equipment at the end of the term and provided further such
claim does not reduce Owner's award.
Assignment, Mortgage, Etc.:
11. Tenant, for itself, its heirs, distributees, executors, administrators,
legal representatives, successors and assigns, expressly covenants 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. Transfer of the majority of
the stock of a corporate Tenant or the majority partnership interest of a
partnership Tenant shall be deemed an assignment. 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 this 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 underletting.
Electric Current: [GRAPHIC OMITTED]
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 other 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 hereof 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 after 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 premise and to erect new pipes and conduits therein
provided, wherever possible, they are within walls or otherwise concealed. 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 mortgagees 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
<PAGE>
the demised premises the usual notices "To Let" and "For Sale" which notices
Tenant shall permit to remain thereon without molestation. If Tenant is not
present to open and permit an entry into the demised 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 property, such entry shall not render Owner or its agents liable
therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the 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 thereunder.
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 location 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, if used by Tenant,
whether or not specifically leased hereunder.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in
violation 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. If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business, Tenant shall be responsible for
and shall procure and maintain such license or permit.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary notwithstanding,
this lease may be cancelled by Owner by 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 or 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 lease.
(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 rental reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised 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 percent (4%) per annum. If such premises or any
part thereof be relet 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 of rent reserved upon such reletting
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 becomes vacant or deserted "or if this lease be rejected under
Section 235 of Title 11 of the U.S. Code (bankruptcy code);" or if any execution
or attachment shall be issued against Tenant or any of Tenant's property
whereupon the demised premises shall be taken or occupied by someone other than
Tenant, or if Tenant shall make default with respect to any other lease between
Owner and Tenant; or if Tenant shall have failed, after five (5) days written
notice to redeposit with Owner any portion of the security deposited hereunder
which Owner has applied to the payment of any rent and additional rents due and
payable hereunder or failed to move into or take possession of the premises
within thirty (30) days after the commencement of term of this lease, of which
fact Owner shall be the sole judge; then in any one or more of such events, upon
Owner serving a written fifteen (15) days notice upon Tenant specifying the
nature of said default and upon the expiration of said fifteen (15) 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 fifteen (15) day period, and if Tenant
shall not have diligently commenced during such default within such fifteen (15)
days 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
five (5) days' notice of cancellation of this lease upon Tenant, and upon the
expiration of said five (5) days this lease and the term thereunder shall end
and expire as fully and completely as if the expiration of such five (5) 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. If Tenant shall make
default hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Owner may cancel and terminate such renewal or
extension agreement by written notice.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or other wise, (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, (c) Tenant or
the legal representative 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 covenanted to
be paid and the net amount, if any, of the rents collected on account of the
subsequent 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,
reasonable 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 and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights of Owner to
collect the deficiency for any subsequent month by a similar proceeding. 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 judgment,
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
hereunder as aforesaid. 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 demised
premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any 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, after notice if
required and upon expiration of any applicable grace period if any, (except in
an emergency), 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. If Owner, in connection with the foregoing or
in connection with 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 reasonable attorney's fees, in instituting,
prosecuting or defending any action or proceedings, and prevails in any such
action or proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within ten (10) days of rendition of any bill
or statement to Tenant therefor. 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.
Building Alterations and Management:
20. Owner shall have the right at any time without the same constituting an
eviction and without incurring liability to tenant therefore 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.
There shall be no allowance to Tenant for diminution of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or injury
to business arising from Owner or other Tenant making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
any controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
<PAGE>
No Representations by Owner:
21. 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 premises, the rents, leases, expenses of
operation or any other matter or thing affecting or related to the demised
premises or the building 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" on the date possession is tendered
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.
End of Term:
22. 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 and damages which Tenant is not required
to repair as provided elsewhere in this lease excepted, and Tenant shall remove
all its property from the demised premises. 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:
23. Owner covenants and agrees with Tenant that upon Tenant paying the rent
and additional rent and observing and performing all 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 34
hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
Failure to Give Possession:
24. 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
demised premises are 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 if Owner has not completed any work required to be performed by
Owner, 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 Owner's inability to obtain
possession or complete any work required) until after Owner shall have given
Tenant notice that Owner is able to deliver possession in the condition required
by this lease. 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 possession and/or occupancy shall be deemed to be
under all the terms, covenants, conditions and provisions of this lease, except
the obligation to pay the fixed annual rent set forth in page one of this lease.
The provisions of this article are 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:
25. 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 than on 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. All checks tendered to owner as and for the
rent of the demised premises shall be deemed payments for the account of Tenant.
Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to
operate as an attornment to owner by the payor of such rent or as a consent by
Owner to an assignment or subletting by Tenant of the demised premises to such
payor, or as a modification of the provisions of this lease. No act or thing
done by Owner or Owner's agents during the term hereby demised shall be deemed
an 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:
26. 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 proceeding or action for
possession including a summary proceeding for possession of the premises, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding including a counterclaim under Article 4 except for statutory
mandatory counterclaims.
Inability to Perform:
27. 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 impliedly 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,
fixtures or other materials if Owner is prevented or delayed from doing so by
reason of strike or labor troubles or any cause whatsoever beyond Owner's sole
control including, but not limited to, government preemption or restrictions 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 which have been
or are affected, either directly or indirectly, by war or other emergency.
Bills and Notices:
28. 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 or 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 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 hereinabove
given or at such other address as Owner shall designate by written notice.
Water Charges:
29. 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 measure 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 in default of
which Owner may cause such meter and equipment to be replaced or repaired and
collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay
for water consumed, as shown on said meter as and when bills are rendered, and
on default in making such payment Owner may pay such charges and collect the
same from Tenant, as additional rent. Tenant covenants and agrees to pay, as
additional rent, 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.
Sprinklers:
30. Anything elsewhere in this lease to the contrary notwithstanding, if
the New York Board of Fire Underwriters or the New York Fire Insurance Exchange
or any bureau, department or official of the federal, state or city government
recommend or require 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, 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 expenses, 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
[GRAPHIC] 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.
Elevators, Heat, Cleaning:
31. As long as Tenant is not in default under any of the covenants of this
lease beyond the applicable grace period provided in this lease for the curing
of such defaults, Owner shall: (a) provide necessary passenger elevator
facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m.
to 1 p.m.; (b) if freight elevator service is provided, same shall be provided
only on regular business days Monday through Friday inclusive, and on those days
only between the hours of 9 a.m. and 12 noon and between 1 p.m. and * p.m.; (c)
furnish heat, water and other services supplied by Owner to the demised
premises, when and as required by law, on business days from 8 a.m. to 6 p.m.
and on Saturdays from 8
- -------------------------------------------
[GRAPHIC] Space to be filled in or deleted.
*4:30
<PAGE>
a.m. to 1 p.m.; (d) clean the public halls and public portions of the building
which are used in common by all tenants. Tenant shall, at Tenant's expense, keep
the demised premises, including the windows, clean and in order, to the
reasonable satisfaction of Owner, and for that purpose shall employ the person
or persons, or corporation approved by Owner. 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 time as Owner may elect
and shall be due and payable hereunder, and the amount of such bills shall be
deemed to be, and be paid as, additional rent. Tenant shall, however, have the
option of independently 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 rubbish 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. Owner reserves
the right to stop service of the heating, elevator, plumbing and electric
systems, when necessary, by reason of accident, or emergency, or for repairs,
alterations, replacements or improvements, in the judgment of Owner desirable or
necessary to be made, until said repairs, alterations, replacements or
improvements shall have been completed. If the building of which the demised
premises are a part supplies manually operated elevator services, Owner may
proceed diligently with alterations necessary to substitute automatic control
elevator service without in any way affecting the obligations of Tenant
hereunder.
Security:
SEE RIDER
Captions:
33. 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:
34. The term "Owner" as used in this lease means only the owner of the fee
or of the leasehold of the building, or the mortgagee in possession, for the
time being of the land and building (or the owner of a lease of the building or
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 or 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
obligations 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 "rent"
includes the annual rental rate whether so expressed or expressed in monthly
installments, and "additional rent." "Additional rent" means all sums which
shall be due to Owner from Tenant under this lease, in addition to the annual
rental rate. The term "business days" as used in this lease, shall exclude
Saturdays, Sundays and all days observed by the State or Federal Government as
legal holidays and those designated as holidays by applicable building service
union employees service contract or by the applicable Operating Engineers
contract with respect to HVAC service. Wherever it is expressly provided in this
lease that consent shall not be unreasonably withheld, such consent shall not be
unreasonably delayed.
Adjacent Excavation-Shoring:
35. 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 persons 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:
36. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faith fully, and comply strictly with, the Rules and
Regulations annexed hereto 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 notice, in writing upon Owner within fifteen (15) 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:
37. Owner shall replace, at the expense of the 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 expense, 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 therefor shall be deemed to be, and be paid, as
additional rent.
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 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 to which the rent and
additional rent have been paid, and stating whether or not there exists any
default by Owner under this Lease, and , if so, specifying each such default.
Directory Board Listing:
39. If, at the request of and as accommodation to Tenant, Owner shall place
upon the directory board in the lobby of the building, one or more names of
persons other than Tenant, such directory board listing shall not be construed
as the consent by Owner to an assignment or subletting by Tenant to such person
or persons.
Successors and Assigns:
40. The covenants, conditions and agreements contained in this lease shall
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. Tenant shall look only to Owner's estate
and interest in the land and building for the satisfaction of Tenant's remedies
for the collection of a judgement (or other judicial process) against Owner in
the event of any default by Owner hereunder, and no other property or assets of
such Owner (or any partner, member, officer or director thereof, disclosed or
undisclosed), shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to this lease,
the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of
the demised premises.
- -------------------------------------------
[GRAPHIC] Space to be filled in or deleted.
SEE RIDER ATTACHED HERETO AND MADE A PART HEREOF
In Witness Whereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
<TABLE>
<S> <C>
Witness for Owner: 6 GREENE STREET ASSOCIATES, LLC [CORPORATE SEAL]
------------------------------------------------
[L.S.]
- ---------------------------------- ------------------------------------------------
By:
Witness for Tenant ACCUFACTS SCREENING INC. [CORPORATE SEAL]
------------------------------------------------
[L.S.]
- ---------------------------------- ------------------------------------------------
By: Philip Luzzio, Pres.
</TABLE>
MEMORANDUM CONFIRMING TERM
THIS MEMORANDUM ("Memorandum") is made as of August 28, 1998 between CB
SANLANDO CENTER, INC., a Delaware corporation, ("Landlord"), and Maglio, Inc.
("Tenant"), pursuant to that certain Lease Agreement between Landlord and Tenant
dated as of May 28, 1998 (the "Lease") for the premises located at 2180 West
State Road 434, Suite 4150, Longwood, Florida 32779 (the "Premises") and more
particularly described in the Lease. All initial-capitalized terms used in this
Memorandum have the meanings ascribed to them in the Lease.
1. Landlord and Tenant hereby confirm that:
(a) The Commencement Date of the Term is August 1, 1998.
(b) The Expiration Date of the Term is July 31, 2003; and
(c) The date rental commences under the Lease is August 1, 1998
(d) The Rent Schedule referenced in Article 39 is hereby shown as
follows:
- --------------------------------------------------------------------------------
Annual Rent Monthly
Square per Installment
Period Feet square foot Annual Rent of Rent
- --------------------------------------------------------------------------------
Commencement Date: 7/31/99 2,960.00 $17.50 $51,800.00 $4,316.67
- --------------------------------------------------------------------------------
8/1/99 - 7/31/2000 2,960.00 $18.00 $53,280.00 $4,440.00
- --------------------------------------------------------------------------------
8/1/2000 - 7/31/2001 2,960.00 $18.50 $54,760.00 $4,563.33
- --------------------------------------------------------------------------------
8/1/2001 - 7/31/2002 2,960.00 $19.00 $56,240.00 $4,686.67
- --------------------------------------------------------------------------------
8/1/2002 - 7/31/2003 2,960.00 $19.75 $58,460.00 $4,871.67
- --------------------------------------------------------------------------------
2. Tenant hereby confirms that:
(a) All commitments, arrangements or understandings made to induce
Tenant to enter into the Lease have been satisfied;
(b) All space and improvements have been completed and furnished in
accordance with the provisions of the Lease; and
(c) Tenant has accepted and is in full and complete possession of the
Premises.
3. This Memorandum shall be binding upon and inure to the benefit of the
parties and their permitted successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Memorandum as of the
date first set forth above.
LANDLORD: TENANT:
CB SANLANDO CENTER, INC. MAGLIO, INC.
C/O: RREEF Management Company,
a Delaware Corporation
By: /s/ Charleen E. L. Burgio By: /s/ Richard J. Maglio
------------------------- ----------------------
Charleen E. L. Burgio, Richard J. Maglio
District Manager Title: President
Dated: 8/28, 1998 Dated: 8/24, 1998
<PAGE>
[LETTERHEAD THE RREEF FUNDS]
TENANT ACCEPTANCE OF PREMISES
TENANT (OR LESSEE) NAME: Maglio, Inc.
LANDLORD (OR LESSOR) NAME: CB Sanlando Center, Inc. a Delaware
Corporation; c/o RREEF Management
Company, a Delaware Corporation
LEASE REFERENCE DATE: May 28, 1998
TERM OF LEASE: 5 years
ADDRESS OF LEASED PREMISES: 2180 W SR 434, STE 4150
Longwood, FL 32779
APPROXIMATE SQUARE FOOTAGE: 2,960
THE ABOVE DESCRIBED PREMISES WERE INITIALLY OCCUPIED AND ACCEPTED BY TENANT ON
August 1, 1998.
THE ABOVE DESCRIBED LEASE TERM BEGINS August 1, 1998 AND EXPIRES July 31, 2003.
BY: ______________________________________________
TITLE: ___________________________________________
DATED: ___________________________________________
<PAGE>
[LETTERHEAD THE RREEF FUNDS]
June 29, 1998
Mr. Dick Maglio
Maglio, Inc.
2180 W. SR 434, Suite 4150
Longwood, Florida 32779
Re: Lease and Lease Termination
Dear Dick:
Enclosed please find one fully executed original of each of the above documents
for your files.
We are pleased that you have expanded and renewed your lease, and look forward
to a mutually rewarding relationship over the next five years.
Please do not hesitate to contact me should you have any questions.
Sincerely,
/s/ Karen S. Padgett
Karen S. Padgett
Building Manager
ksp
enclosure
<PAGE>
LEASE TERMINATION AGREEMENT
THIS AGREEMENT is made as of May 28, 1998, by and between CB SANLANDO
CENTER, INC. ("Landlord"), successor in interest to Turner Development
Corporation ("Turner"), and MAGLIO INC., formerly known as R.J. Maglio &
Associates, Inc. ("Tenant"), with respect to certain premises located in the
building (the "Building") commonly known as 2180 Sanlando Center, Longwood,
Florida.
1. RECITALS. This agreement is made with reference to the following facts
and objectives:
(a) Turner and Tenant entered into a written Lease dated August 12, 1991
for Suite 2160 of the Building, as amended by Amendment No. 1 dated
August 28, 1991 (changed suite number to 2158), Amendment Number 2
dated April 26, 1994 (changed expiration date to June 30, 1999 and
leased premises to suite 4150), Amendment Number 3 dated February 7,
1995 (changed square footage to 2,091) and Amendment Number 4 dated
August 4, 1995 and a letter dated January 8, 1997 (advising Landlord
that Tenant's name had changed to Maglio, Inc.) said Lease, Amendments
and letter collectively, the "Lease"), pursuant to which Turner leased
to Tenant leased from Turner, premises consisting of approximately
2,091 square feet in Suite 4150 of the Building (the "Premises").
(b) Landlord acquired all of Turner's right, title and interest in and to
the Lease.
(c) The term of the Lease is scheduled to expire on June 30, 1999.
(d) Landlord and Tenant wish to provide for the earlier termination of the
Lease and to stipulate as to the payment due on termination, all on
the terms and conditions stated herein.
(e) Now, therefore, in consideration of the mutual promises herein
contained and the detriments to be suffered by each of the parties,
the parties wish to terminate the Lease within the time period
provided in this Agreement, and so that Landlord and Tenant can be
released and discharged from
<PAGE>
further performance of the Lease provisions, except as otherwise
provided herein.
2. TERMINATION DATE. Provided that Tenant shall have complied with all of
its covenants and agreements under the Lease and hereunder the Lease shall
terminate as of July 31, 1998 ("Termination Date"), in the same manner and with
the same effect as if that date had been originally fixed in the Lease for the
expiration of the term, conditioned on the performance by the parties of the
provisions of this Agreement.
3. OUTSTANDING RENT AND OTHER CHARGES. Tenant shall pay to Landlord all
rent and other charges as specified in the Lease through the Termination Date.
Any charges which cannot be ascertained prior to the Termination Date shall be
estimated by Landlord and Tenant shall pay such estimated amount. All such
amounts shall be used and held by Landlord for payment of such obligations of
Tenant, with Tenant being liable for any additional costs upon demand by
Landlord, or with any excess to be returned to Tenant after all such obligations
have been determined and satisfied.
4. OPTIONS. Any options of Tenant to renew the Lease, whether or not
exercised prior to the date hereof, are null and void and of no further effect.
5. REPRESENTATION OF PARTIES. Each party represents that it has not made
any assignment, sublease, transfer, conveyance, or other disposition of the
Lease, or interest in the Lease, or any claim, demand, obligation, liability,
action, or cause of action arising from the Lease, and that it has full right,
power and authority to enter into this Agreement.
6. ATTORNEY'S FEES. If either party commences an action against the other
party arising out of or in connection with this Agreement, the prevailing party
shall be entitled to recover from the non-prevailing party reasonable attorney's
fees and cost of suit.
7. FURTHER ASSURANCES. Each party agrees to cooperate with the other and to
execute and deliver all such further instruments and documents and do all such
further acts and things as such party may be reasonably requested to do from
time to time by the other party in order to carry out the provisions and
objectives of this Agreement.
8. SUCCESSORS. This Agreement shall be binding on and insure to the benefit
of the parties and their successors.
9. LANDLORD NOT BOUND. Submission of this Agreement to Tenant shall not be
deemed to be an offer. Landlord shall not be bound by this Agreement, and the
Lease shall
2
<PAGE>
remain in full force and effect without reference to this Agreement, until it
has received a copy hereof duly executed by Tenant and has delivered to Tenant a
copy hereof duly executed by Landlord, and until such delivery Landlord reserves
the right to nullify this Agreement.
10. LIMITATION OF LANDLORD'S LIABILITY. Redress for any claims against
Landlord under the Lease or this Agreement shall only be made against Landlord
to the extent of Landlord's interest in the Building of which the leased
Premises are a part. The obligations of Landlord under the Lease and this
Agreement are not intended to and shall not be personally binding on, nor shall
any resort be had to the private properties of, any of its trustees or board of
directors and officers, as the case may be, its investment manager, the general
partners thereof, or any beneficiaries, stockholders, employees, or agents of
Landlord or the investment manager.
11. EQUIPMENT REMOVAL. Within fifteen (15) days after the Termination Date,
Tenant must, at its sole cost and expense, properly remove all of Tenant's
antenna, satellite dish and broadcasting equipment from the roof of the Building
and repair and restore the roof of the Building to its original condition,
reasonable wear and tear excepted (collectively "Equipment Removal").
12. MUTUAL RELEASE. Tenant and Landlord shall have, as of the Termination
Date, no further obligation to each other under the Lease, except for
obligations ("Surviving Obligations") which are expressly provided for herein or
which by their nature would survive the
3
<PAGE>
scheduled termination of the Lease (including, without limitation and by way of
example, indemnification for claims accrued prior to Lease termination), and
each party hereby releases the other party from any liability, claims or damages
arising out of or related to the Lease, excluding Surviving Obligations.
This Agreement is executed as of the day and year first written above.
LANDLORD: TENANT:
CB SANLANDO CENTER, INC. MAGLIO, INC.
By: RREEF Management Company, a
Delaware corporation
By: /s/ Charleen E. L. Burgio By: /s/ Richard J. Maglio
------------------------- --------------------
Charleen E. L. Burgio, District Manager
Title: President
Dated: 6/18, 1998 Dated: June 10, 1998
Witnesses: Witnesses:
/s/ Karen S. Padgett /s/ Sonia [ILLEGIBLE]
- ---------------------------- ------------------------
/s/ Carolyn S. Gaston /s/ Connie Paterson
- ---------------------------- ------------------------
4
<PAGE>
LEASE
-------------------------
CB SANLANDO CENTER, INC.,
Landlord
and
MAGLIO, INC.,
Tenant
<PAGE>
TABLE OF CONTENTS
Article Page
1. USE AND RESTRICTIONS ON USE ............................................ 1
2. TERM ................................................................... 1
3. RENT ................................................................... 2
4. RENT ADJUSTMENTS ....................................................... 2
5. SECURITY DEPOSIT ....................................................... 3
6. ALTERATIONS ............................................................ 4
7. REPAIR ................................................................. 4
8. LIENS .................................................................. 5
9. ASSIGNMENT AND SUBLETTING .............................................. 5
10.INDEMNIFICATION ........................................................ 6
11.INSURANCE .............................................................. 6
12.WAIVER OF SUBROGATION .................................................. 7
13.SERVICES AND UTILITIES ................................................. 7
14.HOLDING OVER ........................................................... 7
15.SUBORDINATION .......................................................... 8
16.RULES AND REGULATIONS .................................................. 8
17.REENTRY BY LANDLORD .................................................... 8
18.DEFAULT ................................................................ 8
19.REMEDIES ............................................................... 9
20.TENANT'S BANKRUPTCY OR INSOLVENCY ...................................... 11
21.QUIET ENJOYMENT ........................................................ 12
22.DAMAGE BY FIRE, ETC .................................................... 12
23.EMINENT DOMAIN ......................................................... 13
24.SALE BY LANDLORD ....................................................... 13
25.ESTOPPEL CERTIFICATES .................................................. 13
26.SURRENDER OF PREMISES .................................................. 13
27.NOTICES ................................................................ 14
28.TAXES PAYABLE BY TENANT ................................................ 14
29.RELOCATION OF TENANT ................................................... 14
30.DEFINED TERMS AND HEADINGS ............................................. 14
31.TENANT'S AUTHORITY ..................................................... 14
32.COMMISSIONS ............................................................ 15
i
<PAGE>
33.TIME AND APPLICABLE LAW ................................................ 15
34.SUCCESSORS AND ASSIGNS ................................................. 15
35.ENTIRE AGREEMENT ....................................................... 15
36.EXAMINATION NOT OPTION ................................................. 15
37.RECORDATION ............................................................ 15
38.LIMITATION OF LANDLORD'S LIABILITY ..................................... 15
39.RENT SCHEDULE .......................................................... 16
40.PARKING ................................................................ 16
41.RADON GAS .............................................................. 16
EXHIBIT A - PREMISES
EXHIBIT B - INITIAL ALTERATIONS
EXHIBIT C - RULE AND REGULATIONS
ii
<PAGE>
GROSS (BY) OFFICE LEASE
REFERENCE PAGE
BUILDING: 2180 Sanlando Center
2180 West State Road 434
Longwood, Florida 32779
LANDLORD: CB Sanlando Center, Inc.,
a Delaware corporation
LANDLORD'S ADDRESS: c/o RREEF Management Company
100 South Ashley Drive, Suite 290
Tampa, Florida 33602
LEASE REFERENCE DATE: May 28, 1998
TENANT: Maglio, Inc.
TENANT'S ADDRESS: 2180 SR 434, Suite 4150, Longwood, FL 32779
PREMISES IDENTIFICATION: Suites Number 4150 and 4158
(for outline of Premises see Exhibit A)
PREMISES RENTABLE AREA: Approximately 2,960 sq. ft.
SCHEDULED COMMENCEMENT DATE: August 1, 1998
TERMINATION DATE: July 31, 2003
TERM OF LEASE: Five (5) years beginning on the Commencement
Date and ending on the Termination Date
(unless sooner terminated pursuant
to the Lease)
INITIAL ANNUAL RENT (Article 3): See Rent Schedule, Article 39
INITIAL MONTHLY INSTALLMENT
OF ANNUAL RENT (Article 3): See Rent Schedule, Article 39
BASE YEAR (DIRECT EXPENSES): 1998
BASE YEAR (TAXES): 1998
TENANT'S PROPORTIONATE SHARE: 1.83%
SECURITY DEPOSIT: $5,846.00
iii
<PAGE>
ASSIGNMENT/SUBLETTING FEE: $500.00
REAL ESTATE BROKER DUE PM Realty Group, Inc., representing Landlord
COMMISSION:
The Reference Page information is incorporated into and made a part of the
Lease. In the event of any conflict between any Reference Page information and
the Lease, the Lease shall control. This Lease includes Exhibits A through C,
all of which are made a part of this Lease.
LANDLORD: TENANT:
CB SANLANDO CENTER, INC. MAGLIO, INC.
By: RREEF Management Company,
a Delaware corporation
By: /s/ Charleen E. L. Burgio By: /s/ Richard J. Maglio
-------------------------- -----------------------
Charleen E. L. Burgio, Richard J. Maglio
District Manager Title: President
Dated: 6/18, 1998 Dated: June 10, 1998
Witnesses: Witnesses:
/s/ Karen S. Padgett /s/ Sonia [ILLEGIBLE]
- ------------------------- ---------------------
/s/ Carolyn S. Gaston /s/ Connie Patterson
- ------------------------- ---------------------
iv
<PAGE>
LEASE
By this Lease Landlord leases to Tenant and Tenant leases from Landlord the
Premises in the Building as set forth and described on the Reference Page. The
Reference Page, including all terms defined thereon, is incorporated as part of
this Lease.
1. USE AND RESTRICTIONS ON USE.
1.1 The Premises are to be used solely for general office purposes. Tenant
shall not do or permit anything to be done in or about the Premises which will
in any way obstruct or interfere with the rights of other tenants or occupants
of the Building or injure, annoy, or disturb them or allow the Premises to be
used for any improper, immoral, unlawful, or objectionable purpose. Tenant shall
not do, permit or suffer in, on, or about the Premises the sale of any alcoholic
liquor without the written consent of Landlord first obtained, or the commission
of any waste. Tenant shall comply with all governmental laws, ordinances and
regulations applicable to the use of the Premises and its occupancy and shall
promptly comply with all governmental orders and directions for the correction,
prevention and abatement of any violations in or upon, or in connection with,
the Premises, all at Tenant's sole expense. Tenant shall not do or permit
anything to be done on or about the Premises or bring or keep anything into the
Premises which will in any way increase the rate of, invalidate or prevent the
procuring of any insurance protecting against loss or damage to the Building or
any of its contents by the fire or other casualty or against liability for
damage to property or injury to persons in or about the Building or any part
thereof.
1.2 Tenant shall not, and shall not direct, suffer or permit any of its
agents, contractors, employees, licensees or invitees to at any time handle,
use, manufacture, store or dispose of in or about the Premises or the Building
any (collectively "Hazardous Materials") flammables, explosives, radioactive
materials, hazardous wastes or materials, toxic wastes or materials, or other
similar substances, petroleum products or derivatives or any substance subject
to regulation by or under any federal, state and local laws and ordinances
relating to the protection of the environment or of the keeping, use or
disposition of environmentally hazardous materials, substances, or wastes,
presently in effect or hereafter adopted, all amendments to any of them, and all
rules and regulations issued pursuant to any of such laws or ordinances
(collectively "Environmental Laws"), nor shall Tenant suffer or permit any
Hazardous Materials to be used in any manner not fully in compliance with all
Environmental Laws, in the Premises or the Building and appurtenant land or
allow the environment to become contaminated with any Hazardous Materials.
Notwithstanding the foregoing, and subject to Landlord's prior consent, Tenant
may handle, store, use or dispose of products containing small quantities of
Hazardous Materials (such as aerosol cans containing insecticides, toner for
copiers, paints, paint remover and the like) to the extent customary and
necessary for the use of the Premises for general office purposes; provided that
Tenant shall always handle, store, use, and dispose of any such Hazardous
Materials in a safe and lawful manner and never allow such Hazardous Materials
to contaminate the Premises or the Building and appurtenances/and or the
environment. Tenant shall protect, defend, indemnify and hold each and all of
the Landlord Entities (as defined in Article 30) harmless from and against any
and all loss, claims, liability or costs (including court costs and attorney's
fees) incurred by reason of any actual or asserted failure of Tenant to fully
comply with all applicable Environmental Laws, or the presence, handling, use or
disposition in or from the Premises of any Hazardous Materials (even though
permissible under all applicable Environmental Laws or the provisions of this
Lease), or by reason of any actual or asserted failure of Tenant to keep,
observe, or perform any provision of this Section 1.2.
2. TERM.
2.1 The Term of this Lease shall begin on the date ("Commencement Date")
which shall be the later of the Scheduled Commencement Date as shown on the
Reference Page and the date that the Landlord shall tender possession of the
Premises to Tenant. Landlord shall tender possession of the Premises with all
the work, if any, to be performed by Landlord pursuant to Exhibit B to this
Lease substantially completed. Tenant shall deliver a punch list of items not
completed within 30 days after Landlord tenders possession of the Premises and
Landlord agrees to proceed with due diligence to perform its obligations
regarding such items. Landlord and Tenant shall execute a memorandum setting
forth the actual Commencement Date and Termination Date.
2.2 Tenant agrees that in the event of the inability of Landlord to deliver
possession of the Premises on the Scheduled Commencement Date, Landlord shall
not be liable for any damage resulting from such inability, but Tenant shall not
be liable for any rent until the time when Landlord can, after notice to Tenant,
deliver possession of the Premises to Tenant. No such failure to give possession
on the Scheduled Commencement Date shall affect the other obligations of Tenant
under this Lease, except that if Landlord is unable to deliver possession of the
Premises within one hundred twenty (120) days of the Scheduled Commencement Date
(other than as a result of strikes, shortages of materials or similar matters
beyond the reasonable control of Landlord and Tenant is notified by Landlord in
writing as to such delay), Tenant shall have the option to terminate this Lease
unless said delay is as a result of: (a) Tenant's failure to agree to plans and
specifications; (b) Tenant's request for materials, finishes or
<PAGE>
installations other than Landlord's standard except those, if any, that Landlord
shall have expressly agreed to furnish without extension of time agreed by
Landlord; (c) Tenant's change in any plans or specifications; or, (d)
performance or completion by a party employed by Tenant. If any delay is the
result of any of the foregoing, the Commencement Date and the payment of rent
under this Lease shall be accelerated by the number of days of such delay.
2.3 In the event Landlord shall permit Tenant to occupy the Premises prior
to the Commencement Date, such occupancy shall be subject to all the provisions
of this Lease. Said early possession shall not advance the Termination Date.
3. RENT.
3.1 Tenant agrees to pay to Landlord the Annual Rent in effect from time to
time by paying the Monthly Installment of Rent then in effect on or before the
first day of each full calendar month during the Term, except that the first
month's rent shall be paid upon the execution of this Lease. The Monthly
Installment of Rent in effect at any time shall be one-twelfth of the Annual
Rent in effect at such time. Rent for any period during the Term which is less
than a full month shall be a prorated portion of the Monthly Installment of Rent
based upon a thirty (30) day month. Said rent shall be paid to Landlord, without
deduction or offset and without notice or demand, at the Landlord's address, as
set forth on the Reference Page, or to such other person or at such other place
as Landlord may from time to time designate in writing.
3.2 Tenant recognizes that late payment of any rent or other sum due under
this Lease will result in administrative expense to Landlord, the extent of
which additional expense is extremely difficult and economically impractical to
ascertain. Tenant therefore agrees that if rent or any other sum is not paid
when due and payable pursuant to this Lease, a late charge shall be imposed in
an amount equal to the greater of: (a) Fifty Dollars ($50.00), or (b) a sum
equal to five percent (5%) per month of the unpaid rent or other payment. The
amount of the late charge to be paid by Tenant shall be reassessed and added to
Tenant's obligation for each successive monthly period until paid. The
provisions of this Section 3.2 in no way relieve Tenant of the obligation to pay
rent or other payments on or before the date on which they are due, nor do the
terms of this Section 3.2 in any way affect Landlord's remedies pursuant to
Article 19 of this Lease in the event said rent or other payment is unpaid after
date due.
4. RENT ADJUSTMENTS.
4.1 For the purpose of this Article 4, the following terms are defined as
follows:
4.1.1 Lease Year: Each calendar year falling partly or wholly within
the Term.
4.1.2 Direct Expenses: All direct costs of operation, maintenance, repair
and management of the Building (including the amount of any credits which
Landlord may grant to particular tenants of the Building in lieu of providing
any standard services or paying any standard costs described in this Section
4.1.2 for similar tenants), as determined in accordance with generally accepted
accounting principles, including the following costs by way of illustration, but
not limitation: water and sewer charges; insurance charges of or relating to all
insurance policies and endorsements deemed by Landlord to be reasonably
necessary or desirable and relating in any manner to the protection,
preservation, or operation of the Building or any part thereof; utility costs,
including, but not limited to, the cost of heat, light, power, steam, gas, and
waste disposal; the cost of janitorial services; the cost of security and alarm
services; window cleaning costs; labor costs; costs and expenses of managing the
Building including management fees; air conditioning maintenance costs; elevator
maintenance fees and supplies; material costs; equipment costs including the
cost of maintenance, repair and service agreements and rental and leasing costs;
purchase costs of equipment other than capital items; current rental and leasing
costs of items which would be amortizable capital items if purchased; tool
costs; licenses, permits and inspection fees; wages and salaries; employee
benefits and payroll taxes; accounting and legal fees; any sales, use or service
taxes incurred in connection therewith. Direct expenses shall not include
depreciation or amortization of the Building or equipment in the Building except
as provided herein, loan principal payments, costs of alterations of tenants'
premises, leasing commissions, interest expenses on long-term borrowings,
advertising costs or management salaries for executive personnel other than
personnel located at the Building. In addition, Landlord shall be entitled to
amortize and include as an additional rental adjustment: (i) an allocable
portion of the cost of capital improvement items which are reasonably calculated
to reduce operating expenses; (ii) fire sprinklers and suppression systems and
other life safety systems; and (iii) other capital expenses which are required
under any governmental laws, regulations or ordinances which were not applicable
to the Building at the time it was constructed. All such costs shall be
amortized over the reasonable life of such improvements in accordance with such
reasonable life and amortization schedules as shall be determined by Landlord in
accordance with generally accepted accounting principles, with interest on the
unamortized amount at one percent (1%) in excess of the prime lending rate
announced from time to time as such by The Northern Trust Company of Chicago,
Illinois.
2
<PAGE>
4.1.3 Taxes: Real estate taxes and any other taxes, charges and
assessments which are levied with respect to the Building or the land
appurtenant to the Building, or with respect to any improvements, fixtures
and equipment or other property of Landlord, real or personal, located in
the Building and used in connection with the operation of the Building and
said land, any payments to any ground lessor in reimbursement of tax
payments made by such lessor; and all fees, expenses and costs incurred by
Landlord in investigating, protesting, contesting or in any way seeking to
reduce or avoid increase in any assessments, levies or the tax rate
pertaining to any Taxes to be paid by Landlord in any Lease Year. Taxes
shall not include any corporate franchise, or estate, inheritance or net
income tax, or tax imposed upon any transfer by Landlord of its interest in
this Lease or the Building.
4.2 If in any Lease Year, (i) Direct Expenses paid or incurred shall exceed
Direct Expenses paid or incurred in the Base Year (Direct Expenses) and/or (ii)
Taxes paid or incurred by Landlord in any Lease Year shall exceed the amount of
such Taxes which became due and payable in the Base Year (Taxes), Tenant shall
pay as additional rent for such Lease Year Tenant's Proportionate Share of such
excess.
4.3 The annual determination of Direct Expenses shall be made by Landlord
and if certified by a nationally recognized firm of public accountants selected
by Landlord shall be binding upon Landlord and Tenant. Tenant may review the
books and records supporting such determination in the office of Landlord, or
Landlord's agent, during normal business hours, upon giving Landlord five (5)
days advance written notice within sixty (60) days after receipt of such
determination, but in no event more often than once in any one year period. In
the event that during all or any portion of any Lease Year, the Building is not
fully rented and occupied Landlord may make any appropriate adjustment in
occupancy-related Direct Expenses for such year for the purpose of avoiding
distortion of the amount of such Direct Expenses to be attributed to Tenant by
reason of variation in total occupancy of the Building, by employing sound
accounting and management principles to determine Direct Expenses that would
have been paid or incurred by Landlord had the Building been fully rented and
occupied, and the amount so determined shall be deemed to have been Direct
Expenses for such Lease Year.
4.4 Prior to the actual determination thereof for a Lease Year, Landlord
may from time to time estimate Tenant's liability for Direct Expenses and/or
Taxes under Section 4.2, Article 6 and Article 29 for the Lease Year or portion
thereof. Landlord will give Tenant written notification of the amount of such
estimate and Tenant agrees that it will pay, by increase of its Monthly
Installments of Rent due in such Lease Year, additional rent in the amount of
such estimate. Any such increased rate of Monthly Installments of Rent pursuant
to this Section 4.4 shall remain in effect until further written notification to
Tenant pursuant hereto.
4.5 When the above mentioned actual determination of Tenant's liability for
Direct Expenses and/or Taxes is made for any Lease Year and when Tenant is so
notified in writing, then:
4.5.1 If the total additional rent Tenant actually paid pursuant to
Section 4.3 on account of Direct Expenses and/or Taxes for the Lease Year
is less than Tenant's liability for Direct Expenses and/or Taxes, then
Tenant shall pay such deficiency to Landlord as additional rent in one lump
sum within thirty (30) days of receipt of Landlord's bill therefor; and
4.5.2 If the total additional rent Tenant actually paid pursuant to
Section 4.3 on account of Direct Expenses and/or Taxes for the Lease Year
is more than Tenant's liability for Direct Expenses and/or Taxes, then
Landlord shall credit the differences against the then next due payments to
be made by Tenant under this Article 4. Tenant shall not be entitled to a
credit by reason of actual Direct Expenses and/or Taxes in any Lease Year
being less than Direct Expenses and/or Taxes in the Base Year (Direct
Expenses and/or Taxes).
4.6 If the Commencement Date is other than January 1 of if the Termination
Date is other than December 31, Tenant's liability for Direct Expenses and Taxes
for the Lease Year in which said Date occurs shall be prorated based upon a
three hundred sixty-five (365) day year.
5. SECURITY DEPOSIT. Tenant shall deposit the Security Deposit with
Landlord upon the execution of this Lease. Said sum shall be held by Landlord as
security for the faithful performance by Tenant of all the terms, covenants and
conditions of this Lease to be kept and performed by Tenant and not as an
advance rental deposit or as a measure of Landlord's damage in case of Tenant's
default. If Tenant defaults with respect to any provision of this Lease,
Landlord may use any part of the Security Deposit for the payment of any rent or
any other sum in default, or for the payment of any amount which Landlord may
spend or become obligated to spend by reason of Tenant's default, or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion is so used, Tenant shall within five
(5) days after written demand therefor, deposit with Landlord an amount
sufficient to restore the Security Deposit to its original amount and Tenant's
failure to do so shall be a material breach of this Lease. Except to such
extent, if any, as shall be required by law, Landlord shall not be required to
keep the Security Deposit separate from its general funds, and Tenant shall not
be entitled to interest on such deposit. If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the Security
Deposit or any balance thereof shall be returned to Tenant at such time after
termination of this Lease when Landlord shall have determined that all of
Tenant's obligations under this Lease have been fulfilled.
3
<PAGE>
6. ALTERATIONS.
6.1 Except for those, if any, specifically provided for in Exhibit B to
this Lease, Tenant shall not make or suffer to be made any alterations,
additions, or improvements, including, but not limited to, the attachment of any
fixtures or equipment in, on, or to the Premises or any part thereof or the
making of any improvements as required by Article 7, without the prior written
consent of Landlord. When applying for such consent, Tenant shall, if requested
by Landlord, furnish complete plans and specifications for such alterations,
additions and improvements.
6.2 In the event Landlord consents to the making of any such alteration,
addition or improvement by Tenant, the same shall be made using Landlord's
contractor (unless Landlord agrees otherwise) at Tenant's sole cost and expense.
If Tenant shall employ any Contractor other than Landlord's Contractor and such
other Contractor or any Subcontractor of such other Contractor shall employ any
non-union labor or supplier, Tenant shall be responsible for and hold Landlord
harmless from any and all delays, damages and extra costs suffered by Landlord
as a result of any dispute with any labor unions concerning the wage, hours,
terms or conditions of the employment of any such labor. In any event Landlord
may charge Tenant a reasonable charge to cover its overhead as it relates to
such proposed work.
6.3 All alterations, additions or improvements proposed by Tenant shall be
constructed in accordance with all government laws, ordinances, rules and
regulations and Tenant shall, prior to construction, provide the additional
insurance required under Article 11 in such case, and also all such assurances
to Landlord, including but not limited to, waivers of lien, surety company
performance bonds and personal guarantees of individuals of substance as
Landlord shall require to assure payment of the costs thereof and to protect
Landlord and the Building and appurtenant land against any loss from any
mechanic's, materialmen's or other liens. Tenant shall pay in addition to any
sums due pursuant to Article 4, any increase in real estate taxes attributable
to any such alteration, addition or improvement for so long, during the Term, as
such increase is ascertainable; at Landlord's election said sums shall be paid
in the same way as sums due under Article 4.
6.4 All alterations, additions, and improvements in, on, or to the Premises
made or installed by Tenant, including carpeting, shall be and remain the
property of Tenant during the Term but, excepting furniture, furnishings,
movable partitions of less than full height from floor to ceiling and other
trade fixtures, shall become a part of the realty and belong to Landlord without
compensation to Tenant upon the expiration or sooner termination of the Term, at
which time title shall pass to Landlord under this Lease as by a bill of sale,
unless Landlord elects otherwise. Upon such election by Landlord, Tenant shall
upon demand by Landlord, at Tenant's sole cost and expense, forthwith and with
all due diligence remove any such alterations, additions or improvements which
are designated by Landlord to be removed, and Tenant shall forthwith and with
all due diligence, at its sole cost and expense, repair and restore the Premises
to their original condition, reasonable wear and tear and damage by fire or
other casualty excepted.
7. REPAIR.
7.1 Landlord shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Premises, except as specified in Exhibit B if attached to
this Lease and except that Landlord shall repair and maintain the structural
portion of the Building, including the basic plumbing, air conditioning, heating
and electrical systems installed or furnished by Landlord. By taking possession
of the Premises, Tenant accepts them as being in good order, condition and
repair and in the condition in which Landlord is obligated to deliver them. It
is hereby understood and agreed that no representations respecting the condition
of the Premises or the Building have been made by Landlord to Tenant, except as
specifically set forth in this Lease.
7.2 Tenant shall, at all times during the Term, keep the Premises in good
condition and repair excepting damage by fire, or other casualty, and in
compliance with all applicable governmental laws, ordinances and regulations,
promptly complying with all governmental orders and directives for the
correction, prevention and abatement of any violations or nuisances in or upon,
or connected with, the Premises, all at Tenant's sole expense.
7.3 Landlord shall not be liable for any failure to make any repairs or to
perform any maintenance unless such failure shall persist for an unreasonable
time after written notice of the need of such repairs or maintenance is given to
Landlord by Tenant.
7.4 Except as provided in Article 22, there shall be no abatement of rent
no liability of Landlord by reason of any injury to or interference with
Tenant's business arising from the making of any repairs, alterations or
improvements in or to any portion of the Building or the Premises or to
fixtures, appurtenances and equipment in the Building. Except to the extent, if
any, prohibited by law, Tenant waives the right to make repairs at Landlord's
expense under any law, statute or ordinance now or hereafter in effect.
4
<PAGE>
8. LIENS. Tenant shall keep the Premises, the Building and appurtenant land and
Tenant's leasehold interest in the Premises free from any liens arising out of
any services, work or materials performed, furnished, or contracted for by
Tenant, or obligations incurred by Tenant. In the event that Tenant shall not
within ten (10) days following the imposition of any such lien, either cause the
same to be released of record or provide Landlord with insurance against the
same issued by a major title insurance company or such other protection against
the same as Landlord shall accept, Landlord shall have the right to cause the
same to be released by such means as it all shall deem proper, including payment
of the claim giving rise to such lien. All such sums paid by Landlord and all
expenses incurred by it in connection therewith shall be considered additional
rent and shall be payable to it by Tenant on demand.
9. ASSIGNMENT AND SUBLETTING.
9.1 Tenant shall not have the right to assign or pledge this Lease or to
sublet the whole or any part of the Premises whether voluntarily or by operation
of law, or permit the use or occupancy of the Premises by anyone other than
Tenant, and shall not make, suffer or permit such assignment, subleasing or
occupancy without the prior written consent of Landlord, and said restrictions
shall be binding upon any and all assignees of the Lease and subtenants of the
Premises. In the event Tenant desires to sublet, or permit such occupancy of,
the Premises, or any portion thereof, or assign this Lease, Tenant shall give
written notice thereof to Landlord at least ninety (90) days but no more than
one hundred eighty (180) days prior to the proposed commencement date of such
subletting or assignment, which notice shall set forth the name of the proposed
subtenant or assignee, the relevant terms of any sublease or assignment and
copies of financial reports and other relevant financial reports and other
relevant financial information of the proposed subtenant or assignee.
9.2 Notwithstanding any assignment or subletting, permitted or otherwise,
Tenant shall at all times remain directly, primarily and fully responsible and
liable for the payment of the rent specified in this Lease and for compliance
with all of its other obligations under the terms, provisions and covenants of
this Lease. Upon the occurrence of an Event of Default, if the Premises or any
part of them are then assigned or sublet, Landlord, in addition to any other
remedies provided in this Lease or provided by law, may, at its option, collect
directly from such assignee or subtenant all rents due and becoming due to
Tenant under such assignment or sublease and apply such rent against any sums
due to Landlord from Tenant under this Lease, and no such collection shall be
construed to constitute a novation or release of Tenant from the further
performance of Tenant's obligations under this Lease.
9.3 In addition to Landlord's right to approve of any subtenant or
assignee, Landlord shall have the option, in its sole discretion, in the event
of any proposed subletting or assignment, to terminate this Lease, or in the
case of a proposed subletting of less than the entire Premises, to recapture the
portion of the Premises to be sublet, as of the date the subletting or
assignment is to be effective. The option shall be exercised, if at all, by
Landlord giving Tenant written notice given by Landlord to Tenant within sixty
(60) days following Landlord's receipt of Tenant's written notice as required
above. If this Lease shall be terminated with respect to the entire Premises
pursuant to this Section, the Term of this Lease shall end on the date stated in
Tenant's notice as the effective date of the sublease or assignment as if that
date had been originally fixed in this Lease for the expiration of the Term. If
Landlord recaptures under this Section only a portion of the Premises, the rent
to be paid from time to time during the unexpired Term shall abate
proportionately based on the proportion by which the approximate square footage
of the remaining portion of the Premises shall be less than that of the Premises
as of the date immediately prior to such recapture. Tenant shall, at Tenant's
own cost and expense, discharge in full any outstanding commission obligation on
the part of Landlord with respect to this Lease, and any commissions which may
be due and owing as a result of any proposed assignment or subletting, whether
or not the Premises are recaptured pursuant to this Section 9.3 and rented by
Landlord to the proposed tenant or any other tenant.
9.4 In the event that Tenant sells, sublets, assigns or transfers this
Lease, Tenant shall pay to Landlord as additional rent an amount equal to one
hundred percent (100%) of any Increased Rent (as defined below) when and as such
Increased Rent is received by Tenant. As used in this Section, "Increased Rent"
shall mean the excess of (i) all rent and other consideration which Tenant is
entitled to receive by reason of any sale, sublease, assignment or other
transfer of this Lease, over (ii) the rent otherwise payable by Tenant under
this Lease at such time. For purposes of the foregoing, any consideration
received by Tenant in form other than cash shall be valued at its fair market
value as determined by Landlord in good faith.
9.5 Notwithstanding any other provision hereof, Tenant shall have no right
to make (and Landlord shall have the absolute right to refuse consent to) any
assignment of this Lease or sublease of any portion of the Premises
<PAGE>
if at the time either Tenant's notice of the proposed assignment or sublease or
the proposed commencement date thereof, there shall exist any uncured default of
Tenant or matter which will become a default of Tenant with passage of time
unless cured, or if the proposed assignee or sublessee is an entity: (a) with
which Landlord is already in negotiation as evidenced by the issuance of a
written proposal; (b) is already an occupant of the Building unless Landlord is
unable to provide the amount of space required by such occupant; (c) is a
governmental agency; (d) is incompatible with the character of occupancy of the
Building; or (e) would subject the Premises to a use which would: (i) involve
increased personnel or wear upon the Building; (ii) violate any exclusive right
granted to another tenant of the Building; (iii) require any addition to or
modification of the Premises or the Building in order
5
<PAGE>
to comply with building code or other governmental requirements; or, (iv)
involve a violation of Section 1.2. Tenant expressly agrees that Landlord shall
have the absolute right to refuse consent to any such assignment or sublease and
that for the purposes of any statutory or other requirement of reasonableness on
the part of Landlord such refusal shall be reasonable.
9.6 Upon any request to assign or sublet, Tenant will pay to Landlord the
Assignment/Subletting Fee plus, on demand, a sum equal to all of Landlord's
costs, including attorney's fees, incurred in investigating and considering any
proposed or purported assignment or pledge of this Lease or sublease of any of
the Premises, regardless of whether Landlord shall consent to, refuse consent,
or determine that Landlord's consent is not required for, such assignment,
pledge or sublease. Any purported sale, assignment, mortgage, transfer of this
Lease or subletting which does not comply with the provisions of this Article 9
shall be void.
9.7 If Tenant is a corporation, partnership or trust, any transfer or
transfers of or change or changes within any twelve month period in the number
of the outstanding voting shares of the corporation, the general partnership
interests in the partnership or the identity of the persons or entities
controlling the activities of such partnership or trust resulting in the persons
or entities owning or controlling a majority of such shares, partnership
interests or activities of such partnership or trust at the beginning of such
period no longer having such ownership or control shall be regarded as
equivalent to an assignment of this Lease to the persons or entities acquiring
such ownership or control and shall be subject to all the provisions of this
Article 9 to the same extent and for all intents and purposes as though such an
assignment.
10. INDEMNIFICATION. None of the Landlord Entities shall be liable and Tenant
hereby waives all claims against them for any damage to any property or any
injury to any person in or about the Premises or the Building by or from any
cause whatsoever (including without limiting the foregoing, rain or water
leakage of any character from the roof, windows, walls, basement, pipes,
plumbing works or appliances, the Building not being in good condition or
repair, gas, fire, oil, electricity or theft), except to the extent caused by or
arising form the gross negligence or willful misconduct of Landlord or its
agents, employees or contractors. Tenant shall protect, indemnify and hold the
Landlord Entities harmless from and against any and all loss, claims, liability
or costs (including court costs and attorney's fees) incurred by reason of (a)
any damage to any property (including but not limited to property of any
Landlord Entity) or any injury (including but not limited to death) to any
person occurring in, on or about the Premises or the Building to the extent that
such injury or damage shall be caused by or arise from any actual or alleged
act, neglect, fault, or omission by or of Tenant, its agents, servants,
employees, invitees, or visitors to meet any standards imposed by any duty with
respect to the injury or damage; (b) the conduct or management of any work or
thing whatsoever done by the Tenant in or about the Premises or from
transactions of the Tenant concerning the Premises; (c) Tenant's failure to
comply with any and all governmental laws, ordinances and regulations applicable
to the condition or use of the Premises or its occupancy; or (d) any breach or
default on the part of Tenant in the performance of any covenant or agreement on
the part of the Tenant to be performed pursuant to this Lease. The provisions of
this Article shall survive the termination of this Lease with respect to any
claims or liability accruing prior to such termination.
11. INSURANCE.
11.1 Tenant shall keep in force throughout the Term: (a) a Commercial
General Liability insurance policy or policies to protect the Landlord Entities
against any liability to the public or to any invitee of Tenant or a Landlord
Entity incidental to the use of or resulting from any accident occurring in or
upon the Premises with a limit of not less than $1,000,000.00 per occurrence and
not less than $2,000,000.00 in the annual aggregate, or such larger amount as
Landlord may prudently require from time to time, covering bodily injury and
property damage liability and $1,000,000 products/completed operations
aggregate; (b) Business Auto Liability covering owned, non-owned and hired
vehicles with a limit of not less than $1,000,000 per accident; (c) insurance
protecting against liability under Worker's Compensation Laws with limits at
least as required by statute; (d) Employers Liability with limits of $500,000
each accident, $500,000 disease policy limit, $500,000 disease--each employee;
(e) All Risk or Special Form coverage protecting Tenant against loss of or
damage to Tenant's alterations, additions, improvements, carpeting, floor
coverings, panelings, decorations, fixtures, inventory and other business
personal property situated in or about the Premises to the full replacement
value of the property so insured; and, (f) Business Interruption Insurance with
limit of liability representing loss of at least approximately six months of
income.
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11.2 Each of the aforesaid policies shall (a) be provided at Tenant's
expense; (b) name the Landlord Entities as additional insureds; (c) be issued by
an insurance company with a minimum Best's rating of "A:VII" during the Term;
and (d) provide that said insurance shall not be canceled unless thirty (30)
days prior written notice (ten days for non-payment of premium) shall have been
given to Landlord; and said policy or policies or certificates thereof shall be
delivered to Landlord by Tenant upon the Commencement Date and at least thirty
(30) days prior to each renewal of said insurance.
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11.3 Whenever Tenant shall undertake any alterations, additions or
improvements in, to or about the Premises ("Work") the aforesaid insurance
protection must extend to and include injuries to persons and damages to
property arising in connection with such Work, without limitation including
liability under any applicable structural work act, and such other insurance as
Landlord shall require; and the policies of or certificates evidencing such
insurance must be delivered to Landlord prior to commencement of any such Work.
12. WAIVER OF SUBROGATION. So long as their respective insurers so permit,
Tenant and Landlord hereby mutually waive their respective rights of recovery
against each other for any loss insured by fire, extended coverage, All Risks or
other insurance now or hereafter existing for the benefit of the respective
party but only to the extent of the net insurance proceeds payable under such
policies. Each party shall obtain any special endorsements required by their
insurer to evidence compliance with the aforementioned waiver.
13. SERVICES AND UTILITIES.
13.1 Provided Tenant shall not be in default under this Lease, and subject
to the other provisions of this Lease, Landlord agrees to furnish to the
Premises during ordinary business hours on generally recognized business days
(but exclusive in any event of Sundays and legal holidays), the following
services and utilities subject to the rules and regulations of the Building
prescribed form time to time: (a) water suitable for normal office use of the
Premises; (b) heat and air conditioning required in Landlord's judgment for the
use and occupation of the Premises; (c) cleaning and janitorial service; (d)
elevator service by nonattended automatic elevators; (e) such window washing as
may from time to time in Landlord's judgment be reasonably required; and, (f)
equipment to bring to Tenant's meter, electricity for lighting, convenience
outlets and other normal office use. To the extent that Tenant is not billed
directly by a public utility, Tenant shall pay, upon demand, as additional rent,
for all electricity used by Tenant in the premises. The charge shall be at the
rates charged for such services by the local public utility. Landlord shall not
be liable for, and Tenant shall not be entitled to, any abatement or reduction
of rental by reason of Landlord's failure to furnish any of the foregoing,
unless such failure shall persist for an unreasonable time after written notice
of such failure is given to Landlord by Tenant and provided further that
Landlord shall not be liable when such failure is caused by accident, breakage,
repairs, labor disputes of any character, energy usage restrictions or by any
other cause, similar or dissimilar, beyond the reasonable control of Landlord.
Landlord shall use reasonable efforts to remedy any interruption in the
furnishing of services and utilities.
13.2 Should Tenant require any additional work or service, as described
above, including services furnished outside ordinary business hours specified
above, Landlord may, on terms to be agreed, upon reasonable advance notice by
Tenant, furnish such additional service and Tenant agrees to pay Landlord such
charges as may be agreed upon, including any tax imposed thereon, but in no
event at a charge less than Landlord's actual cost plus overhead for such
additional service and, where appropriate, a reasonable allowance for
depreciation of any systems being used to provide such service.
13.3 Wherever heat-generating machines or equipment are used by Tenant in
the Premises which affect the temperature otherwise maintained by the air
conditioning system, Landlord reserves the right to install supplementary air
conditioning units in or for the benefit of the Premises and the cost thereof,
including the cost of installation and the cost of operations and maintenance,
shall be paid by Tenant to Landlord upon demand as such additional rent.
13.4 Tenant will not, without the written consent of Landlord, use any
apparatus or device in the Premises, including but not limited to, electronic
data processing machines and machines using current in excess of 200 watts or
110 volts, which will in any way increase the amount of electricity or water
usually furnished or supplied for use of the Premises for normal office use, nor
connect with electric current, except through existing electrical outlets in the
Premises, or water pipes, any apparatus or device for the purposes of using
electrical current or water. If Tenant shall require water or electric current
in excess of that usually furnished or supplied for use of the Premises as
normal office use, Tenant shall procure the prior written consent of Landlord
for the use thereof, which Landlord may refuse, and if Landlord does consent,
Landlord may cause a water meter or electric current meter to be installed so as
to measure the amount of such excess water and electric current. The cost of any
such meters shall be paid for by Tenant. Tenant agrees to pay as additional rent
to Landlord promptly upon demand therefor, the cost of all such excess water and
electric current consumed (as shown by said meters, if any, or, if none, as
reasonable estimated by Landlord) at the rates charged for such services by the
local public utility or agency, as the case may be, furnishing
<PAGE>
the same, plus any additional expense incurred in keeping account of the water
and electric current so consumed.
14. HOLDING OVER. Tenant shall pay Landlord for each day Tenant retains
possession of the Premises or part of them after termination of this Lease by
lapse of time or otherwise at the rate ("Holdover Rate") which shall be 200% of
the greater of: (a) the amount of the Annual Rent for the last period prior to
the date of such termination plus all Rent Adjustments under Article 4; and, (b)
the then market rental value of the Premises as determined by Landlord assuming
a new lease of the Premises of the then usual duration and other terms, in
either case prorated on
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a daily basis, and also pay all damages sustained by Landlord by reason of such
retention. If Landlord gives notice to Tenant of Landlord's election to that
effect, such holding over shall constitute renewal of this Lease for a period
from month to month or one year, whichever shall be specified in such notice, in
either case at the Holdover Rate, but if the Landlord does not so elect, no such
renewal shall result notwithstanding acceptance by Landlord of any sums due
hereunder after such termination; and instead, a tenancy at sufferance at the
Holdover Rate shall be deemed to have been created. In any event, no provision
of this Article 14 shall be deemed to waive Landlord's right of reentry or any
other right under this Lease or at law.
15. SUBORDINATION. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, this Lease
shall be subject and subordinate at all times to ground or underlying leases and
to the lien of any mortgages or deeds of trust now or hereafter placed on,
against or affecting the Building, Landlord's interest or estate in the
Building, or any ground or underlying lease; provided, however, that if the
lessor, mortgagee, trustee, or holder of any such mortgage or deed of trust
elects to have Tenant's interest in this Lease be superior to any such
instrument, then, by notice to Tenant, this Lease shall be deemed superior,
whether this Lease was executed before or after said instrument. Notwithstanding
the foregoing, Tenant covenants and agrees to execute and deliver upon demand
such further instruments evidencing such subordination or superiority of this
Lease as may be required by Landlord.
16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with all
the rules and regulations as set forth in Exhibit C to this Lease and all
reasonable modifications of and additions to them form time to time put into
effect by Landlord. Landlord shall not be responsible to Tenant for the
non-performance by any other tenant or occupant of the Building of any such
rules and regulations.
17. REENTRY BY LANDLORD.
17.1 Landlord reserves and shall at all times have the right to re-enter
the Premises to inspect the same, to supply janitor service and any other
service to be provided by Landlord to Tenant under this Lease, to show said
Premises to prospective purchasers, mortgagees or tenants, and to alter, improve
or repair the Premises and any portion of the Building, without abatement of
rent, and may for that purpose erect, use and maintain scaffolding, pipes,
conduits and other necessary structures and open any wall, ceiling or floor in
and through the Building and Premises where reasonably required by the character
of the work to be performed, provided entrance to the Premises shall not be
blocked thereby, and further provided that the business of Tenant shall not be
interfered with unreasonably.
17.2 Landlord shall have the right at any time to change the arrangement
and/or locations of entrances, or passageways, doors and doorways, and
corridors, windows, elevators, stairs, toilets or other public parts of the
Building and to change the name, number or designation by which the Building is
commonly known. In the event that Landlord damages any portion of any wall or
wall covering, ceiling, or floor or floor covering within the Premises, Landlord
shall repair or replace the damaged portion to match the original as nearly as
commercially reasonable but shall not be required to repair or replace more than
the portion actually damaged.
17.3 Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, any other loss occasioned by any action of
Landlord authorized by this Article 17. Tenant agrees to reimburse Landlord, on
demand, as additional rent, for any expenses which Landlord may incur in thus
effecting compliance with Tenant's obligations under this Lease.
17.4 For each of the aforesaid purposes, Landlord shall at all times have
and retain a key with which to unlock all of the doors in the Premises,
excluding Tenant's vaults and safes or special security areas (designated in
advance), and Landlord shall have the right to use any and all means which
Landlord may deem proper to open said doors in an emergency to obtain entry to
any portion of the Premises. As to any portion to which access cannot be had by
means of a key or keys in Landlord's possession, Landlord is authorized to gain
access by such means as Landlord shall elect and the cost of repairing any
damage occurring in doing so shall be borne by Tenant and paid to Landlord as
additional rent upon demand.
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18. DEFAULT.
18.1 Except as otherwise provided in Article 20, the following events shall
be deemed to be Events of Default under this Lease:
18.1.1 Tenant shall fail to pay when due any sum of money becoming due
to be paid to Landlord under this Lease, whether such sum be any
installment of the rent reserved by this Lease, any other amount treated
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as additional rent under this Lease, or any other payment or reimbursement
to Landlord required by this Lease, whether or not treated as additional
rent under this Lease, and such failure shall continue for a period of five
days after written notice that such payment was not made when due, but if
any such notice shall be given, for the twelve month period commencing with
the date of such notice, the failure to pay within five days after due any
additional sum of money becoming due to be paid to Landlord under this
Lease during such period shall be an Event of Default, without notice.
18.1.2 Tenant shall fail to comply with any term, provision or
covenant of this Lease which is not provided for in another Section of this
Article and shall not cure such failure within twenty (20) days (forthwith,
if the failure involves a hazardous condition) after written notice of such
failure to Tenant.
18.1.3 Tenant shall fail to vacate the Premises immediately upon
termination of this Lease, by lapse of time or otherwise, or upon
termination of Tenant's right to possession only.
18.1.4 Tenant shall become insolvent, admit in writing its inability
to pay its debts generally as they become due, file a petition in
bankruptcy or a petition to take advantage of any insolvency statute, make
an assignment for the benefit of creditors, make a transfer in fraud of
creditors, apply for or consent to the appointment of a receiver of itself
or of the whole or any substantial part of its property, or file a petition
or answer seeking reorganization or arrangement under the federal
bankruptcy laws, as now in effect or hereafter amended, or any other
applicable law or statute of the United States or any state thereof.
18.1.5. A court of competent jurisdiction shall enter an order,
judgment or decree adjudicating Tenant bankrupt, or appointing a receiver
of Tenant, or of the whole or any substantial part of its property, without
the consent of Tenant, or approving a petition filed against Tenant seeking
reorganization or arrangement of Tenant under the bankruptcy laws of the
United States, as now in effect or hereafter amended, or any state thereof,
and such order, judgment or decree shall not be vacated or set aside or
stayed within thirty (30) days from the date of entry thereof.
19. REMEDIES.
19.1 Except as otherwise provided in Article 20, upon the occurrence of any
of the Events of Default described or referred to in Article 18, Landlord shall
have the option to pursue any one or more of the following remedies without any
notice or demand whatsoever, concurrently or consecutively and not
alternatively:
19.1.1 Landlord may, at its election, terminate this Lease or
terminate Tenant's right to possession only, without terminating the Lease.
19.1.2 Upon any termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of Tenant's right to possession without
termination of the Lease, Tenant shall surrender possession and vacate the
Premises immediately, and deliver possession thereof to Landlord, and
Tenant hereby grants to Landlord full and free license to enter into and
upon the Premises in such event and to repossess Landlord of the premises
as of Landlord's former estate and to expel or remove Tenant and any others
who may be occupying or be within the Premises and to remove Tenant's signs
and other evidence of tenancy and all other property of Tenant therefrom
without being deemed in any manner guilty of trespass, eviction or forcible
entry or detainer, and without incurring any liability for any damage
resulting therefrom, Tenant waiving any right to claim damages for such
re-entry and expulsion, and without relinquishing Landlord's right to rent
or any other right given to Landlord under this Lease or by operation of
law.
19.1.3 Upon any termination of this Lease, whether by lapse of time or
otherwise, Landlord shall be entitled to recover as damages, all rent,
including any amounts treated as additional rent under this Lease, and
other sums due and payable by Tenant on the date of termination, plus as
liquidated damages and not as penalty, an amount equal to the sum of: (a)
an amount equal to the then present value of the rent reserved in this
Lease for the residue of the stated Term of this Lease including any
amounts treated as additional rent under this Lease and all other sums
provided in this Lease to be paid by Tenant, minus the fair rental value of
the Premises for such residue; (b) the value of the time and expense
necessary to obtain a replacement tenant or tenants, and the estimated
expenses described in Section 19.1.4 relating to recovery of the Premises,
preparation for reletting and for reletting [ILLEGIBLE]
<PAGE>
itself; and (c) the cost of performing any other covenants which would have
otherwise been performed by Tenant.
19.1.4 Upon any termination of Tenant's right to possession only
without termination of the Lease:
19.1.4.1 Neither such termination of Tenant's right to possession
nor Landlord's taking and holding possession thereof as provided in
Section 19.1.2 shall terminate the Lease or release Tenant, in whole
or in part, from any obligation, including Tenant's obligation to pay
the rent, including any amounts treated as additional rent, under this
Lease for the full Term, and if Landlord so elects Tenant shall pay
forthwith to Landlord
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the sum equal to the entire amount of the rent, including any amounts
treated as additional rent under this Lease, for the remainder of the
Term plus any other sums provided in this Lease to be paid by Tenant
for the remainder of the Term.
19.1.4.2 Landlord may, but need not, relet the Premises or any
part thereof for such rent and upon such terms as Landlord, in its
sole discretion, shall determine (including the right to relet the
premises for a greater or lesser term than that remaining under this
Lease, the right to relet the Premises as a part of a larger area, and
the right to change the character or use made of the Premises). In
connection with or in preparation for any reletting, Landlord may, but
shall not be required to, make repairs, alterations and additions in
or to the Premises and redecorate the same to the extent Landlord
deems necessary or desirable, and Tenant shall, upon demand, pay the
cost thereof, together with Landlord's expenses of reletting,
including, without limitation, any commission incurred by Landlord. If
Landlord decides to relet the Premises or a duty to relet is imposed
upon Landlord by law, Landlord and Tenant agree that nevertheless
Landlord shall at most be required to use only the same efforts
Landlord then uses to lease premises in the Building generally and
that in any case that Landlord shall not be required to give any
preference or priority to the showing or leasing of the Premises over
any other space that Landlord may be leasing or have available and may
place a suitable prospective tenant in any such other space regardless
of when such other space becomes available. Landlord shall not be
required to observe any instruction given by Tenant about any
reletting or accept any tenant offered by Tenant unless such offered
tenant has a creditworthiness acceptable to Landlord and leases the
entire Premises upon terms and conditions including a rate of rent
(after giving effect to all expenditures by Landlord for tenant
improvements, brokers's commissions and other leasing costs) all no
less favorable to Landlord than as called for in this Lease, nor shall
Landlord be required to make or permit any assignment or sublease for
more than the current term or which Landlord would not be required to
make or permit under the provisions of Article 19.
19.1.4.3 Until such times as Landlord shall elect to terminate
the Lease and shall thereupon be entitled to recover the amounts
specified in such case in Section 19.1.3, Tenant shall pay to Landlord
upon demand the full amount of all rent, including any amounts treated
as additional rent under this Lease and other sums reserved in this
Lease for the remaining Term, together with the costs of repairs,
alterations, additions, redecorating and Landlord's expenses of
reletting and the collection of the rent accruing therefrom (including
attorney's fees and broker's commissions), as the same shall then be
due or become due from time to time, less only such consideration as
Landlord may have received from any reletting of the Premises; and
Tenant agrees that Landlord may file suits from time to time to
recover any sums falling due under this Article 19 as they become due.
Any proceeds of reletting by Landlord in excess of the amount then
owed by Tenant to Landlord from time to time shall be credited against
Tenant's future obligations under this Lease but shall not otherwise
be refunded to Tenant or inure to Tenant's benefit.
19.2 Landlord may, at Landlord's option, enter into and upon the Premises
if Landlord determines in its sole discretion that Tenant is not acting within a
commercially reasonable time to maintain, repair or replace anything for which
Tenant is responsible under this Lease and correct the same, without being
deemed in any manner guilty of trespass, eviction or forcible entry and detainer
and without incurring any liability for any damage or interruption of Tenant's
business resulting therefrom. If Tenant shall have vacated the Premises,
Landlord may at Landlord's option re-enter the Premises at any time during the
last six months of the then current Term of this Lease and make any and all such
changes, alterations, revisions, additions and tenant and other improvements in
or about the Premises as Landlord shall elect, all without any abatement of any
of the rent otherwise to be paid by Tenant under this Lease.
19.3 If, on account of any breach or default by Tenant in Tenant's
obligations under the terms and conditions of this Lease, it shall become
necessary or appropriate for Landlord to employ or consult with an attorney
concerning or to enforce or defend any of Landlord's rights or remedies arising
under this Lease, Tenant agrees to pay all Landlord's attorney's fees so
incurred. Tenant expressly waives any right to: (a) trial by jury; and (b)
service of any notice required by any present or future law or ordinance
applicable to landlords or tenants but not required by the terms of this Lease.
19.4 Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies provided in this Lease or any other remedies provided
by law (all such remedies being cumulative), nor shall pursuit of any remedy
provided in this Lease constitute a forfeiture or waiver of any rent due to
Landlord under this Lease or of any damages accruing to Landlord by reason of
the violation of any of the terms, provisions and covenants contained in this
Lease.
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19.5 No act or thing done by Landlord or its agents during the Term shall
be deemed a termination of this Lease or an acceptance of the surrender of the
Premises, and no agreement to terminate this Lease or accept a surrender of said
Premises shall be valid, unless in writing signed by Landlord. No waiver by
Landlord of any violation or breach of any of the terms, provisions and
covenants contained in this Lease shall be deemed or construed to constitute a
waiver of any other violation or breach of any of the terms, provisions and
covenants contained in this Lease, Landlord's acceptance of the payment of
rental or other payments after the occurrence of an Event of Default shall not
be construed as a waiver of such Default, unless Landlord so notifies Tenant in
writing.
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Forbearance by Landlord in enforcing one or more of the remedies provided in
this Lease upon an Event of Default shall not be deemed or construed to
constitute a waiver of such Default or of Landlord's right to enforce any such
remedies with respect to such Default or any subsequent Default.
19.6 To secure the payment of all rentals and other sums of money becoming
due from Tenant under this Lease, Landlord shall have and Tenant grants to
Landlord a first lien upon the leasehold interest of Tenant under this Lease,
which lien may be enforced in equity, and a continuing security interest upon
all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract
rights, chattel paper and other personal property of Tenant situated on the
Premises, and such property shall not be removed therefrom without the consent
of Landlord until all arrearages in rent as well as any and all other sums of
money then due to Landlord under this Lease shall first have been paid and
discharged. In the event of a default under this Lease, Landlord shall have, in
addition to any other remedies provided in this Lease or by law, all rights and
remedies under the Uniform Commercial Code, including without limitation the
right to sell the property described in this Section 19.6 at a public or private
sale upon five (5) days' notice to Tenant. Tenant shall execute all such
financing statements and other instruments as shall be deemed necessary or
desirable in Landlord's discretion to perfect the security interest hereby
created.
19.7 Any and all property which may be removed from the Premises by
Landlord pursuant to the authority of this Lease or of law, to which Tenant is
or may be entitled, may be handled, removed and/or stored, as the case may be,
by or at the direction of Landlord but at the risk, costs and expense of Tenant,
and Landlord shall in no event be responsible for the value, preservation or
safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all
expenses incurred in such removal and all storage charges against such property
so long as the same shall be in Landlord's possession or under Landlord's
control. Any such property of Tenant not retaken by Tenant from storage within
thirty (30) days after removal from the Premises shall, at Landlord's option, be
deemed conveyed by Tenant to Landlord under this Lease as by a bill of sale
without further payment or credit by Landlord to Tenant.
20. TENANT'S BANKRUPTCY OR INSOLVENCY.
20.1 If at any time and for so long as Tenant shall be subjected to the
provisions of the United States Bankruptcy Code or other law of the United
States or any state thereof for the protection of debtors as in effect at such
time (each a "Debtor's Law"):
20.1.1 Tenant, Tenant as debtor-in-possession, and any trustee or
receiver of Tenant's assets (each a "Tenant's Representative") shall have
no greater right to assume or assign this Lease or any interest in this
Lease, or to sublease any of the Premises than accorded to Tenant in
Article 9, except to the extent Landlord shall be required to permit such
assumption, assignment or sublease by the provisions of such Debtor's Law.
Without limitation of the generality of the foregoing, any right of any
Tenant's Representative to assume or assign this Lease or to sublease any
of the Premises shall be subject to the conditions that:
20.1.1.1 Such Debtor's Law shall provide to Tenant's
Representative a right of assumption of this Lease which Tenant's
Representative shall have timely exercised and Tenant's Representative
shall have fully cured any default of Tenant under this Lease.
20.1.1.2 Tenant's Representative or the proposed assignee, as the
case shall be, shall have deposited with Landlord as security for the
timely payment of rent an amount equal to the larger of: (a) three
months' rent and other monetary charges accruing under this Lease; and
(b) any sum specified in Article 5; and shall have provided Landlord
with adequate other assurance of the future performance of the
obligations of the Tenant under this Lease. Without limitation, such
assurances shall include, at least, in the case of assumption of this
Lease, demonstration to the satisfaction of the Landlord that Tenant's
Representative has and will continue to have sufficient unencumbered
assets after the payment of all secured obligations and administrative
expenses to assure Landlord that Tenant's Representative will have
sufficient funds to fulfill the obligations of Tenant under this
Lease; and in the case of assignment, submission of current financial
statements of the proposed assignee, audited by an independent
certified public accountant reasonably acceptable to Landlord and
showing a net worth and working capital in amounts determined by
Landlord to be sufficient to assure the future performance by such
assignee of all of the Tenant's obligations under this Lease.
20.1.1.3 The assumption or any contemplated assignment of this
Lease or subleasing any part of the Premises, as shall be the case,
will not breach any provision in any other lease, mortgage, financing
agreement or other agreement by which Landlord is bound.
20.1.1.4 Landlord shall have, or would have had absent the
Debtor's Law, no right under Article 9 to refuse consent to the
proposed assignment or sublease by reason of the identity or nature of
the proposed assignee or sublessee or the proposed use of the Premises
concerned.
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21. QUIET ENJOYMENT. Landlord represents and warrants that it has full right and
authority to enter into this Lease and that Tenant, while paying the rental and
performing its other covenants and agreements contained in this Lease, shall
peaceably and quietly have, hold and enjoy the Premises for the Term without
hindrance or molestation from Landlord subject to the terms and provisions of
this Lease. Landlord shall not be liable for any interference or disturbance by
other tenants or third persons, nor shall Tenant be released from any of the
obligations of this Lease because of such interference or disturbance.
22. DAMAGE BY FIRE, ETC.
22.1 In the event the Premises or the Building are damaged by fire or other
cause and in Landlord's reasonable estimation such damage can be materially
restored within ninety (90) days, Landlord shall forthwith repair the same and
this Lease shall remain in full force and effect, except that Tenant shall be
entitled to a proportionate abatement in rent from the date of such damage. Such
abatement of rent shall be made pro rata in accordance with the extent to which
the damage and the making of such repairs shall interfere with the use and
occupancy by Tenant of the Premises from time to time. Within forty-five (45)
days from the date of such damage, Landlord shall notify Tenant, in writing, of
Landlord's reasonable estimation of the length of time within which material
restoration can be made, and Landlord's determination shall be binding on
Tenant. For purposes of this Lease, the Building or Premises shall be deemed
"materially restored" if they are in such condition as would not prevent or
materially interfere with Tenant's use of the Premises for the purpose for which
it was being used immediately before such damage.
22.2 If such repairs cannot, in Landlord's reasonable estimation, be made
within ninety (90) days, Landlord and Tenant shall each have the option of
giving the other, at any time within sixty (60) days after such damage, notice
terminating this Lease as of the date of such damage. In the event of the giving
of such notice, this Lease shall expire and all interest of the Tenant in the
Premises shall terminate as of the date of such damage as if such date had been
originally fixed in this Lease for the expiration of the Term. In the event that
neither Landlord nor Tenant exercises its option to terminate this Lease, then
Landlord shall repair or restore such damage, this Lease continuing in full
force and effect, and the rent hereunder shall be proportionately abated as
provided in Section 22.1.
22.3 Landlord shall not be required to repair or replace any damage or loss
by or from fire or other cause to any panelings, decorations, partitions,
additions, railings, ceilings, floor coverings, office fixtures or any other
property or improvements installed on the Premises or belonging to Tenant. Any
insurance which may be carried by Landlord or Tenant against loss or damage to
the Building or Premises shall be for the sole benefit of the party carrying
such insurance and under its sole control.
22.4 In the event that Landlord should fail to complete such repairs and
material restoration within sixty (60) days after the date estimated by Landlord
therefor as extended by this Section 22.4, Tenant may at its option and as its
sole remedy terminate this Lease by delivering written notice to Landlord,
within fifteen (15) days after the expiration of said period of time, whereupon
the Lease shall end on the date of such notice or such later date fixed in such
notice as if the date of such notice was the date originally fixed in this Lease
for the expiration of the Term; provided, however, that if construction is
delayed because of changes, deletions or additions in construction requested by
Tenant, strikes, lockouts, casualties, Acts of God, war, material or labor
shortages, government regulation or control or other causes beyond the
reasonable control of Landlord, the period for restoration, repair or rebuilding
shall be extended for the amount of time Landlord is so delayed.
22.5 Notwithstanding anything to the contrary contained in this Article:
(a) Landlord shall not have any obligation whatsoever to repair, reconstruct, or
restore the Premises when the damages resulting from any casualty covered by the
provisions of this Article 22 occur during the last twelve (12) months of the
Term or any extension thereof, but if Landlord determines not to repair such
damages Landlord shall notify Tenant and if such damages shall render any
material portion of the Premises untenantable Tenant shall have the right to
terminate this Lease by notice to Landlord within fifteen (15) days after
receipt of Landlord's notice; and (b) in the event the holder of any
indebtedness secured by a mortgage or deed of trust covering the Premises or
Building requires that any insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this Lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made by any such holder, whereupon this Lease shall end on the date of such
damage as if the date of such damage were the date originally fixed in this
Lease for the expiration of the Term.
22.6 In the event of any damage or destruction to the Building or Premises
by any peril covered by the provisions of this Article 22, it shall be Tenant's
responsibility to properly secure the Premises and upon notice from Landlord to
remove forthwith, at its sole cost and expense, such portion of all of the
property belonging to Tenant or its licensees from such portion or all of the
Building or Premises as Landlord shall request.
12
<PAGE>
23. EMINENT DOMAIN. If all or any substantial part of the Premises shall be
taken or appropriated by any public or quasi-public authority under the power of
eminent domain, or conveyance in lieu of such appropriation, either party to
this Lease shall have the right, at its option, of giving the other, at any time
within thirty (30) days after such taking, notice terminating this Lease, except
that Tenant may only terminate this Lease by reason of taking or appropriation,
if such taking or appropriation shall be so substantial as to materially
interfere with Tenant's use and occupancy of the Premises. If neither party to
this Lease shall so elect to terminate this Lease, the rental thereafter to be
paid shall be adjusted on a fair and equitable basis under the circumstances. In
addition to the rights of Landlord above, if any substantial part of the
Building shall be taken or appropriated by any public or quasi-public authority
under the power of eminent domain or conveyance in lieu thereof, and regardless
of whether the Premises or any part thereof are so taken or appropriated,
Landlord shall have the right, at its sole option, to terminate this Lease.
Landlord shall be entitled to any and all income, rent, award, or any interest
whatsoever in or upon any such sum, which may be paid or made in connection with
any such public or quasi-public use or purpose, and Tenant hereby assigns to
Landlord any interest it may have in or claim to all or any part of such sums,
other than any separate award which may be made with respect to Tenant's trade
fixtures and moving expenses; Tenant shall make no claim for the value of any
unexpired Term.
24. SALE BY LANDLORD. In event of sale or conveyance by Landlord of the
Building, the same shall operate to release Landlord from any future liability
upon any of the covenants or conditions, expressed or implied, contained in this
Lease in favor of Tenant, and in such event Tenant agrees to look solely to the
responsibility of the successor in interest of Landlord in and to this Lease.
Except as set forth in this Article 24, this Lease shall not be affected by any
such sale and Tenant agrees to attorn to the purchaser or assignee. If any
security has been given by Tenant to secure the faithful performance of any of
the covenants of this Lease, Landlord may transfer or deliver any security, as
such, to Landlord's successor in interest and thereupon Landlord shall be
discharged from any further liability with regard to said security.
25. ESTOPPEL CERTIFICATES. Within ten (10) days following any written request
which Landlord may make from time to time, Tenant shall execute and deliver to
Landlord or mortgagee or prospective mortgagee a sworn statement certifying: (a)
the date of commencement of this Lease; (b) the fact that this Lease is
unmodified and in full force and effect (or, if there have been modifications to
this Lease, that this lease is in full force and effect, as modified, and
stating the date and nature of such modifications); (c) the date to which the
rent and other sums payable under this Lease have been paid; (d) the fact that
there are no current defaults under this Lease by either Landlord or Tenant
except as specified in Tenant's statement; and (e) such other matters as may be
requested by Landlord. Landlord and Tenant intend that any statement delivered
pursuant to this Article 25 may be relied upon by any mortgagee, beneficiary or
purchaser and Tenant shall be liable for all loss, cost or expense resulting
from the failure of any sale or funding of any loan caused by any material
misstatement contained in such estoppel certificate. Tenant irrevocably agrees
that if Tenant fails to execute and deliver such certificate within such ten
(10) day period Landlord or Landlord's beneficiary or agent may execute and
deliver such certificate on Tenant's behalf, and that such certificate shall be
fully binding on Tenant.
26. SURRENDER OF PREMISES.
26.1 Tenant shall, at least thirty (30) days before the last day of the
Term, arrange to meet Landlord for a joint inspection of the Premises. In the
event of Tenant's failure to arrange such joint inspection to be held prior to
vacating the Premises, Landlord's inspection at or after Tenant's vacating the
Premises shall be conclusively deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
26.2 At the end of the Term or any renewal of the Term or other sooner
termination of this Lease, Tenant will peaceably deliver up to Landlord
possession of the Premises, together with all improvements or additions upon or
belonging to the same, by whomsoever made, in the same conditions received or
first installed, broom clean and free of all debris, excepting only ordinary
wear and tear and damage by fire or other casualty. Tenant may, and at
Landlord's request shall, at Tenant's sole cost, remove upon termination of this
Lease, any and all furniture, furnishings, movable partitions of less than full
height from floor to ceiling, trade fixtures and other property installed by
Tenant, title to which shall not be in or pass automatically to Landlord upon
such termination, repairing all damage caused by such removal. Property not so
removed shall, unless requested to be removed, be deemed abandoned by the Tenant
and title to the same shall thereupon pass to Landlord under this Lease as by a
bill of sale. All other alterations, additions and improvements in, on or to the
Premises shall be dealt with and disposed of as provided in Article 6 hereof.
26.3 All obligations of Tenant under this Lease not fully performed as of
the expiration or earlier termination of the Term shall survive the expiration
or earlier termination of the Term. In the event that Tenant's failure to
perform prevents Landlord from releasing the Premises, Tenant shall continue to
pay rent pursuant to the provisions of Article 14 until such performance is
complete. Upon the expiration or earlier termination of the Term, Tenant shall
pay to Landlord the amount, as estimated by Landlord, necessary to repair and
restore the Premises as provided in this Lease and/or to discharge Tenant's
obligation for unpaid amounts due or to become due to
13
<PAGE>
Landlord. All such amounts shall be used and held by Landlord for payment of
such obligations of Tenant, with Tenant being liable for any additional costs
upon demand by Landlord, or with any excess to be returned to Tenant after all
such obligations have been determined and satisfied. Any otherwise unused
Security Deposit shall be credited against the amount payable by Tenant under
this Lease.
27. NOTICES. Any notice or document required or permitted to be delivered under
this Lease shall be addressed to the intended recipient, shall be transmitted
personally, by fully prepaid registered or certified United States Mail return
receipt requested, or by reputable independent contract delivery service
furnishing a written record of attempted or actual delivery, and shall be deemed
to be delivered when tendered for delivery to the addressee at its address set
forth on the Reference Page, or at such other address as it has then last
specified by written notice delivered in accordance with this Article 27, or if
to Tenant either its aforesaid address or its last known registered office or
home of a general partner or individual owner, whether or not actually accepted
or received by the addressee.
28. TAXES PAYABLE BY TENANT. In addition to rent and other charges to be paid by
Tenant under this Lease, Tenant shall reimburse to Landlord, upon demand, any
and all taxes payable by Landlord (other than net income taxes) whether or not
now customary or within the contemplation of the parties to this Lease: (a)
upon, allocable to, or measured by or on the gross or net rent payable under
this Lease, including without limitation any gross income tax or excise tax
levied by the State, any political subdivision thereof, or the Federal
Government with respect to the receipt of such rent; (b) upon or with respect to
the possession, leasing, operation, management, maintenance, alteration, repair,
use or occupancy of the Premises or any portion thereof, including any sales,
use or service tax imposed as a result thereof; (c) upon or measured by the
Tenant's gross receipts or payroll or the value of Tenant's equipment,
furniture, fixtures and other personal property of Tenant or leasehold
improvements, alterations or additions located in the Premises; or (d) upon this
transaction or any document to which Tenant is a party creating or transferring
any interest of Tenant in this Lease or the Premises. In addition to the
foregoing, Tenant agrees to pay, before delinquency, any and all taxes levied or
assessed against Tenant and which become payable during the term hereof upon
Tenant's equipment, furniture, fixtures and other personal property of Tenant
located in the Premises.
29. RELOCATION OF TENANT. Landlord, at its sole expense, on at least ninety (90)
days prior written notice, may require Tenant to move from the Premises to other
space of comparable size and decor in order to permit Landlord to consolidate
the space leased to Tenant with other adjoining space leased or to be leased to
another tenant. In the event of any such relocation, Landlord will pay all
expenses of preparing and decorating the new premises so that they will be
substantially similar to the Premises from which Tenant is moving, and Landlord
will also pay the expense of moving Tenant's furniture and equipment to the
relocated premises. In such event this Lease and each and all of the terms and
covenants and conditions hereof shall remain in full force and effect and
thereupon be deemed applicable to such new space except that a revised Reference
Page and a revised Exhibit A shall become part of this Lease and shall reflect
the location of the new premises.
30. DEFINED TERMS AND HEADINGS. The Article headings shown in this Lease are for
convenience of reference and shall in no way define, increase, limit or describe
the scope or intent of any provision of this Lease. Any indemnification or
insurance of Landlord shall apply to and inure to the benefit of all the
following "Landlord Entities", being Landlord, Landlord's investment manager,
and the trustees, boards of directors, officers, general partners,
beneficiaries, stockholders, employees and agents of each of them. Any option
granted to Landlord shall also include or be exercisable by Landlord's trustee,
beneficiary, agents and employees, as the case may be. In any case where this
Lease is signed by more than one person, the obligations under this Lease shall
be joint and several. The terms "Tenant" and "Landlord" or any pronoun used in
place thereof shall indicate and include the masculine or feminine, the singular
or plural number, individuals, firms or corporations, and their and each of
their respective successors, executors, administrators and permitted assigns,
according to the context hereof. The term "rentable area" shall mean the
rentable area of the Premises or the Building as calculated by the Landlord on
the basis of the plans and specifications of the Building including a
proportionate share of any common areas. Tenant hereby accepts and agrees to be
bound by the figures for the rentable space footage of the Premises and Tenant's
Proportionate Share shown on the Reference Page.
31. TENANT'S AUTHORITY. If Tenant signs as a corporation each of the persons
executing this Lease on behalf of Tenant represents and warrants that Tenant has
been and is qualified to do business in the state in which the Building is
located, that the corporation has full right and authority to enter into this
Lease, and that all persons signing on behalf of the corporation were authorized
to do so by appropriate corporate actions. If Tenant signs as a partnership,
trust or other legal entity, each of the persons executing this Lease on behalf
of Tenant represents and warrants that Tenant has compiled with all applicable
laws, rules and governmental regulations relative to its right to do business in
the state and that such entity on behalf of the Tenant was authorized to do so
by any and all
14
<PAGE>
appropriate partnership, trust or other actions. Tenant agrees to furnish
promptly upon request a corporate resolution, proof of due authorization by
partners, or other appropriate documentation evidencing the due authorization of
Tenant to enter into this Lease.
32. COMMISSIONS. Each of the parties represents and warrants to the other that
it has not dealt with any broker or finder in connection with this Lease, except
as described on the Reference Page.
33. TIME AND APPLICABLE LAW. Time is of the essence of this Lease and all of its
provisions. This Lease shall in all respects be governed by the laws of the
state in which the Building is located.
34. SUCCESSORS AND ASSIGNS. Subject to the provisions of Article 9, the terms,
covenants and conditions contained in this Lease shall be binding upon and inure
to the benefit of the heirs, successors, executors, administrators and assigns
of the parties to this Lease.
35. ENTIRE AGREEMENT. This Lease, together with its exhibits, contains all
agreements of the parties to this Lease and supersedes any previous
negotiations. There have been no representations made by the Landlord or
understandings made between the parties other than those set forth in this Lease
and its exhibits. This Lease may not be modified except by a written instrument
duly executed by the parties to this Lease.
36. EXAMINATION NOT OPTION. Submission of this Lease shall not be deemed to be a
reservation of the Premises. Landlord shall not be bound by this Lease until it
has received a copy of this Lease duly executed by Tenant and has delivered to
Tenant a copy of this lease duly executed by Landlord, and until such delivery
Landlord reserves the right to exhibit and lease the Premises to other
prospective tenants notwithstanding anything contained in this Lease to the
contrary, Landlord may withhold delivery of possession of the Premises from
Tenant until such time as Tenant has paid to Landlord any security deposit
required by Article 5, the first month's rent as set forth in Article 3 and any
sum owed pursuant to this Lease.
37. RECORDATION. Tenant shall not record or register this Lease or a short form
memorandum hereof without the prior written consent of Landlord, and then shall
pay all charges and taxes incident such recording or registration.
38. LIMITATION OF LANDLORD'S LIABILITY. Redress for any claim against Landlord
under this Lease shall be limited to and enforceable only against and to the
extent of Landlord's interest in the Building. The obligations of Landlord under
this Lease are not intended to and shall not be personally binding on, nor shall
any resort be had to the private properties of, any of it trustees or board of
directors and officers, as the case may be, its investment manager, the general
partners thereof, or any beneficiaries, stockholders, employees, or agents of
Landlord or the investment manager.
15
<PAGE>
39. RENT SCHEDULE.
<TABLE>
<CAPTION>
===========================================================================================
Period Square Feet Annual Rent Annual Rent Monthly
per square foot Installment of
Rent
===========================================================================================
<S> <C> <C> <C> <C>
Commencement Date--7/31/99 2,960.00 $17.50 $51,800.00 $4,316.67
- -------------------------------------------------------------------------------------------
8/1/99--7/31/2000 2,960.00 $18.00 $53,280.00 $4,440.00
- -------------------------------------------------------------------------------------------
8/1/2000--7/31/2001 2,960.00 $18.50 $54,760.00 $4,563.33
- -------------------------------------------------------------------------------------------
8/1/2001--7/31/2002 2,960.00 $19.00 $56,240.00 $4,686.67
- -------------------------------------------------------------------------------------------
8/1/2002--7/31/2003 2,960.00 $19.75 $58,460.00 $4,871.67
===========================================================================================
</TABLE>
40. PARKING. Free surface parking is available on a non-assigned, non-exclusive
basis, at a ratio of four (4) parking spaces per 1,000 square feet of rentable
area. Tenant shall also be entitled to the use of one (1) reserved parking space
in the covered garage.
41. RADON GAS. As required by (section) 404,056(6), Florida Statutes, the
following notification is made regarding radon gas: Radon is a naturally
occurring radioactive gas that, when it has accumulated in a building in
sufficient quantities, may present health risks to persons who are exposed to it
over time. Levels of radon that exceed federal and state guidelines have been
found in buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county public health unit.
LANDLORD: TENANT:
CB SANLANDO CENTER, INC. MAGLIO, INC.
By RREEF Management Company, a Delaware
corporation
By: /s/ Charleen E.L. Burgio By: /s/ Richard J. Maglio
-------------------------------------- --------------------------
Charleen E.L. Burgio, District Manager Richard J. Maglio
Title: President
-------------------------
Dated: 6/18 1998 Dated: June 10, 1998
----------------------, ------------------------
Witnesses: Witnesses:
/s/ Karen S. Padgett /s/ ILLEGIBLE
- ------------------------- -----------------------------
/s/ Carolyn S. Gaston /s/ Connie Patterson
- ----------------------- ------------------------------
16
<PAGE>
EXHIBIT A
attached to and made a part of Lease bearing the
Lease Reference Date of May 28, 1998 between
CB Sanlando Center, Inc., as Landlord and
Maglio, Inc., as Tenant
PREMISES
Exhibit A is intended only to show the general layout of the Premises as of the
beginning of the Term of this Lease. It does not in any way supersede any of
Landlord's rights set forth in Section 17.2 with respect to arrangements and/or
locations of public parts of the Building and changes in such arrangements
and/or locations. It is not to be scaled; any measurements or distances shown
should be taken as approximate.
[DIAGRAM]
<PAGE>
EXHIBIT B
attached to and made a part of Lease bearing the
Lease Reference Date of May 28, 1998 between
CB Sanlando Center, Inc., as Landlord and
Maglio, Inc., as Tenant
INITIAL ALTERATIONS
1. Landlord's Work. Landlord shall provide design and construction of the work
described in Schedule I attached hereto ("Landlord's Work"). Tenant may not use
or occupy the Premises with a number of personnel greater than is contemplated
in the approved space plans. As further provided herein, Tenant shall be
responsible for the incremental cost of Landlord's Work in excess of the Maximum
TI Allowance (defined below). The certificate of Landlord's architect that the
work to be done by Landlord pursuant to this Exhibit B has been substantially
completed shall be adequate evidence that the Premises have been completed in
accordance with the requirements of the Lease and that possession thereof has
been deemed delivered to Tenant, for all purposes of the Lease, including the
commencement of payment of rent.
2. Cost and Allowance.
2.1 Prior to commencing any of Landlord's Work, Landlord shall submit to
Tenant for Tenant's approval a written estimate of the cost of Landlord's Work
(an "Estimate"). Landlord may require Tenant to deposit that amount of the
amount of the Estimate which exceeds the Maximum TI Allowance with Landlord
within five (5) days after Landlord's written request therefor. Such deposit
shall be held as security for the payment of, and shall be credited, without
interest, against the sums payable by Tenant under this Lease. Landlord shall
not be required to commence its work until such payment is received, and, for
purposes only of determining if Landlord has timely complied with its
construction obligation under Section 2.2, the Scheduled Commencement Date shall
be extended one (1) day for each day that such payment is delayed after such
five day period.
2.2 This Lease and the rental rates provided for herein are premised on a
total cost of Landlord's Work not to exceed $20,720.00 ($7.00 per RSF, the
"Maximum TI Allowance"). The "cost of Landlord's Work" includes, without
limitation:
2.2.1 All costs and expenses actually incurred by Landlord pertaining
to Landlord's Work, including, but not limited to, costs charged by contractors,
subcontractors and general and other conditions costs and expenses in connection
with preparation of the Premises for occupancy;
2.2.2 All costs and expenses of preparation of the plans for such
construction, and site inspection and contract administration by Landlord's
consulting architects and/or engineers;
2.2.3 All costs of permits, licenses and other approvals required for
the performance of Landlord's Work; and
2.2.4 A construction management fee to Landlord of five percent (5%) of
the total of all such costs under the foregoing Paragraphs 2.2.1, 2.2.2 and
2.2.3.
2.3 If the total cost of Landlord's Work exceeds the Maximum TI Allowance,
the entire amount of such excess shall be borne by Tenant and shall be paid to
Landlord by Tenant upon demand as additional rent under the Lease.
3. Miscellaneous
3.1 Except as set forth in this Exhibit B, Landlord has no other agreement
with Tenant and has no obligation to do any work with respect to the Premises.
Any other work in the Premises which may be permitted by Landlord pursuant to
the terms and conditions of the Lease shall be done at Tenant's sole cost and
expense and in accordance with the terms and provisions of the Lease.
3.2 All rights and remedies of Landlord herein created or otherwise
existing at law or equity are cumulative, and the exercise of one or more such
rights or remedies shall not be deemed to exclude or waive the right to the
exercise of any other rights or remedies. All such rights and remedies may be
exercised and enforced concurrently and whenever and as often as deemed
desirable.
3.3 This Exhibit B shall not be deemed applicable to any additional space
added to the original Premises at any time or from time to time, whether by any
options under the Lease or otherwise, or to any portion of
<PAGE>
the original Premises or any additions thereto in the event of a renewal or
extension of the original term of the Lease, whether by any options under the
Lease or otherwise.
4. Recapture of Concessions. Tenant understands and agrees that in entering into
this Lease, Landlord is relying upon receipt of all the base rent to become due
with respect to all of the Leased Premises over the full term of this Lease for
amortization, including an interest factor of ten (10%) per annum (the "Interest
Rate") of the Concession Amount. For purposes hereof, the "Concession Amount"
shall be defined as the aggregate of the Maximum TI Allowance and the brokers'
commissions becoming due by reason of this Lease.
Accordingly, Tenant agrees that if this Lease or Tenant's right to possession of
the Leased Premises leased hereunder shall be terminated as of any date
("Termination Date") prior to the expiration of the full Term hereof by reason
of a default of Tenant, there shall be due and owing to Landlord as of the day
prior to the Termination Date, as rent in addition to all other amounts owed by
Tenant as of such Date, the amount ("Unamortized Amount") of the Concession
Amount determined as set forth below; provided, however, that in the event that
such amounts are recovered by Landlord pursuant to any other provision of this
Lease, Landlord agrees that it shall not attempt to recover such amounts
pursuant to this paragraph.
For the purposes hereof, the Unamortized Amount shall be determined in the same
manner as the remaining principal balance of a mortgage with the Interest Rate
payable in level payments over the same length of time would be determined; to
illustrate, according to a standard mortgage amortization table the principle
amount outstanding at the end of the fifth year of a loan of $1,000.00 payable
in level payments with interest at 8% over ten years will be $598.00 assuming
all payments to that point are made as due.
<PAGE>
SCHEDULE I
LANDLORD'S WORK
Construction per plans and specifications dated 6-10-98 (accepted by Tenant on
6-11-98) prepared by Scott Bray Design Associates.
<PAGE>
EXHIBIT C
attached to and made a part of Lease bearing the
Lease Reference Date of May 28, 1998 between
CB Sanlando Center, Inc., as Landlord and
Maglio, Inc., as Tenant
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be installed
or displayed on any part of the outside or inside of the Building without the
prior written consent of the Landlord. Landlord shall have the right to remove,
at Tenant's expense and without notice, any sign installed or displayed in
violation of this rule. All approved signs or lettering on doors and walls shall
be printed, painted, affixed or inscribed at the expense of Tenant by a person
or vendor chosen by Landlord. In addition, Landlord reserves the right to change
from time to time the format of the signs or lettering and to require previously
approved signs or lettering to be appropriately altered.
2. If Landlord objects in writing to any curtains, blinds, shades or screens
attached to or hung in or used in connection with any window or door of the
Premises, Tenant shall immediately discontinue such use. No awning shall be
permitted on any part of the Premises. Tenant shall not place anything or allow
anything to be placed against or near any glass partitions or doors or windows
which may appear unsightly, in the opinion of Landlord, from outside the
Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances,
elevators, escalators or stairways of the Building. The halls, passages, exits
entrances, shopping malls, elevators, escalators and stairways are not for the
general public, and Landlord shall in all cases retain the right to control and
prevent access to the Building of all persons whose presence in the judgment of
Landlord would be prejudicial to the safety, character, reputation and interest
of the Building and its tenants provided that nothing contained in this rule
shall be construed to prevent such access to persons with whom any tenant
normally deals in the ordinary course of its business, unless such persons are
engaged in illegal activities. No tenant and no employee or invitee of any
tenant shall go upon the roof of the Building.
4. The directory of the Building will be provided exclusively for the display of
the name and location of tenants only and Landlord reserves the right to exclude
any other names therefrom.
5. All cleaning and janitorial services for the Building and the Premises shall
be provided exclusively through Landlord. Tenant shall not cause any unnecessary
labor by carelessness or indifference to the good order and cleanliness of the
Premises. Landlord shall not in any way be responsible to any Tenant for any
loss of property on the Premises, however occurring, or for any damage to any
Tenant's property by the janitor or any other employee or any other person.
6. Landlord will furnish Tenant free of charge with two keys to each door in the
Premises. Landlord may make a reasonable charge for any additional keys, and
Tenant shall not make or have made additional keys, and Tenant shall not alter
any lock or install a new or additional lock or bolt on any door of its
Premises. Tenant, upon the termination of its tenancy, shall deliver to Landlord
the keys of all doors which have been furnished to Tenant, and in the event of
loss of any keys so furnished, shall pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions in
their installation.
8. No equipment, materials, furniture, packages, supplies, merchandise or other
property will be received in the Building or carried in the elevators except
between such hours and in such elevators as may be designated by Landlord.
9. Tenant shall not place a load upon any floor which exceeds the load per
square foot which such floor was designed to carry and which is allowed by law.
Landlord shall have the right to prescribe the weight, size and position to all
equipment, materials, furniture or other property brought into the Building.
Heavy objects shall, stand on such platforms as determined by Landlord to be
necessary to properly distribute the weight. Business machines and mechanical
equipment belonging to Tenant which cause noise or vibration that may be
transmitted to the structure of the Building or to any space in the Building to
such a degree as to be objectionable to Landlord or to any tenants shall be
placed and maintained by Tenant, at Tenant's expense, on vibration eliminators
or other devices sufficient to eliminate noise or vibration. The persons
employed to move such equipment in or out of the Building must be acceptable to
Landlord. Landlord will not be responsible for loss of, or damage to, any such
equipment or other property from any cause, and all damage done to the Building
by maintaining or moving such equipment or other property shall be repaired at
the expense of Tenant.
C-1
<PAGE>
10. Tenant shall not use any method of heating or air conditioning other than
that supplied by Landlord. Tenant shall not waste electricity, water or air
conditioning. Tenant shall keep corridor doors closed.
11. Landlord reserves the right to exclude from the Building between the hours
of 6 p.m. and 7 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal holidays any
person unless that person is known to the person or employee in charge of the
Building and has a pass or is properly identified. Tenant shall be responsible
for all persons for whom it requests passes and shall be liable to Landlord for
all acts of such persons. Landlord shall not be liable for damages for any error
with regard to the admission to or exclusion from the Building of any person.
12. Tenant shall close and lock the doors of its Premises and entirely shut off
all water faucets or other water apparatus and electricity, gas or air outlets
before Tenant and its employees leave the Premises. Tenant shall be responsible
for any damage or injuries sustained by other tenants or occupants of the
Building or by Landlord for noncompliance with this rule.
13. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed, no
foreign substance of any kind whatsoever shall be thrown into any of them, and
the expense of any breakage, stoppage or damage resulting from the violation of
this rule shall be borne by the Tenant who, or whose employees or invitees,
shall have caused it.
14. Tenant shall not install any radio or television antenna, satellite dish,
loudspeaker or other device on the roof or exterior walls of the Building.
Tenant shall not interfere with radio or television broadcasting or reception
from or in the Building or elsewhere.
15. Except as approved by Landlord, Tenant shall not mark, drive nails, screw or
drill into the partitions, woodwork or plaster or in any way deface the
Premises. Tenant shall not cut or bore holes for wires. Tenant shall not affix
any floor covering to the floor of the Premises in any manner except as approved
by Landlord. Tenant shall repair any damage resulting from noncompliance with
this rule.
16. Tenant shall not install, maintain or operate upon the Premises any vending
machine.
17. Tenant shall store all its trash and garbage within its Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with directions
issued from time to time by Landlord.
18. No cooking shall be done or permitted by any Tenant on the Premises, except
by the Tenant of Underwriters' Laboratory approved microwave over or equipment
for brewing coffee, tea, hot chocolate and similar beverages shall be permitted
provided that such equipment and use is in accordance with all applicable
federal, state and city laws, codes, ordinances, rules and regulations.
19. Tenant shall not use in any space or in the public halls of the Building any
hand trucks except those equipped with the rubber tires and side guards or such
other material-handling equipment as Landlord may approve. Tenant shall not
bring any other vehicles of any kind into the Building.
20. Tenant shall not use the name of the Building in connection with or in
promoting or advertising the business of Tenant except as Tenant's address.
21. The requirements of Tenant will be attended to only upon appropriate
application to the office of the Building by an authorized individual. Employees
of Landlord shall not perform any work or do anything outside of their regular
duties unless under special instruction from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.
22. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of any
other tenant or tenants, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all of the tenants of the Building.
23. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of premises in the Building.
24. Landlord reserves the right to make such other and reasonable rules and
regulations as in its judgment may from time to time be needed for safety and
security, for care and cleanliness of the Building and for the preservation of
good order in and about the Building. Tenant agrees to abide by all such rules
and regulations in this Exhibit C stated and any additional rules and
regulations which are adopted.
C-2
<PAGE>
25. No smoking policy: no smoking is permitted in the Building, except in areas,
if any, specifically designated for smoking by Landlord.
26. Tenant shall be responsible for the observance of all of the foregoing rules
by Tenant's employees, agents, clients, customers, invitees and guests.
C-3
<PAGE>
LANDLORD'S CONSENT
The undersigned, as landlord under the Lease dated May 28, 1998, by and
between Magio, Inc. (Tenant) and CB Sanlando Center, Inc. (Landlord), does
hereby consent to the Assignment from Maglio, Inc. to Maglio-Accufacts
Pre-Employment Screening, Inc. under the following terms and conditions:
1. No Waiver. Landlord's consent shall not be deemed to be a waiver of any
restrictions contained in the Lease concerning further assignment,
subleasing or hypothecation of the Lease.
2. Assignor's Liability. Assignor and any guarantor of the Lease obligations
shall remain liable for the performance of all provisions of the Lease, to
the same extent as provided in the Lease.
3. Broker Fees. Assignor and Assignee shall indemnify, defend and hold
Landlord harmless from and against any fees or commissions to any real
estate broker or agent in connection with this assignment of lease.
4. Assignment Cost to Transfer. In connection with this assignment, Assignor
shall pay to Landlord a fee of $500.00 to defray Landlord's cost in
effecting such transfer.
5. Conflicts. In the event of any conflict between the terms and provisions of
the Lease and the Assignment, the terms and provisions of the Lease shall
control.
6. Landlord's Liability. Redress for any claims against Landlord under the
Lease or this Assignment of Lease shall only be made against Landlord to
the extent of Landlord's interest in the property to which the Premises are
a part. The obligations of Landlord under the Lease and this Assignment of
Lease shall not be personally binding on, nor shall any resort be had to
the private properties of, any of its trustees or board of directors and
officers, as the case may be, the general partners thereof or any
beneficiaries, stockholders, employees or agents of Landlord, or its
investment managers.
LANDLORD:
CB Sanlando Center, Inc.
a Delaware corporation
By: RREEF Management Company
a Delaware corporation
By: /s/ Charleen E.L. Burgio
------------------------
Charleen E.L. Burgio
Title: District Manager
Date: 10/13/99
Exhibit 21.1
LIST OF SUBSIDIARIES
- --------------------------------------------------------------------------------
State of Names under which Subsidiary does
Name of Subsidiary: Incorporation: Business:
- --------------------------------------------------------------------------------
Maglio-Accufacts Pre- Maglio-Accufacts Pre-Employment
Employment Screening, Inc. Delaware Screening, Inc.
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary financial information extracted
from the December 31, 1999 balance sheet and income statement and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Dec-31-1999
<CASH> 298,331
<SECURITIES> 0
<RECEIVABLES> 641,299
<ALLOWANCES> 4,836
<INVENTORY> 0
<CURRENT-ASSETS> 934,794
<PP&E> 266,750
<DEPRECIATION> 111,666
<TOTAL-ASSETS> 1,510,236
<CURRENT-LIABILITIES> 450,905
<BONDS> 0
0
0
<COMMON> 66,275
<OTHER-SE> 991,591
<TOTAL-LIABILITY-AND-EQUITY> 1,510,236
<SALES> 2,283,533
<TOTAL-REVENUES> 2,283,533
<CGS> 1,531,924
<TOTAL-COSTS> 1,531,924
<OTHER-EXPENSES> 1,008,012
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,857)
<INCOME-PRETAX> (251,546)
<INCOME-TAX> (35,980)
<INCOME-CONTINUING> (215,566)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215,566)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
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