<PAGE> 1
As filed with the Securities and Exchange Commission
on August 9, 1996
================================================================================
Registration No. 333-________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GENERAL CREDIT CORPORATION
--------------------------
(Name of small business issuer in its charter)
New York State 6099 13-3895072
- ---------------------- ---------------------------- ----------------------
(State or jurisdiction (Primary Standard Industrial I.R.S. Employer
of incorporation Classification Code Number) Identification Number)
or organization)
211 East 70th Street, New York, New York 10021 (212) 861-2867
-------------------------------------------------------------
(Address and telephone number of principal executive offices)
211 East 70th Street, New York, New York 10021
----------------------------------------------
(Address of principal place of business or intended principal place of business)
Irwin Zellermaier
211 East 70th Street
New York, New York 10021 (212) 861-2867
----------------------------------------------------------
(Name, address, and telephone number of agent for service)
Copies to:
Charles J. Rennert David A. Carter, P.A.
Berman Wolfe & Rennert, P.A. 355 West Palmetto Park Road
International Place, Suite 3500 Boca Raton, Florida 33432
100 Southeast Second Street (561) 750-6999
Miami, Florida 33131-2130 Fax: (561) 367-0960
(305) 577-4177 (Counsel for the Underwriter)
Fax: (305) 373-6036
(Counsel for the Company)
Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Dollar Proposed Maximum Proposed Amount of
Title of Each Class of Amount to Offering Maximum Aggregate Registration
Securities to be Registered be Registered Price per Share Offering Price Fee
--------------------------- ------------- --------------- -------------- ---
<S> <C> <C> <C> <C>
Common Stock (1) 2,530,000 $ 3.00 $7,590,000 $2,617.24
par value $.001 per share
Redeemable Common Stock 2,530,000 $ 0.125 $ 316,250 $ 109.05
Purchase Warrants(2)
Common Stock (3) 2,530,000 $ 3.00 $7,590,000 $2,617.24
par value $.001 per share
underlying Redeemable Common
Stock Purchase Warrants
Common Stock 220,000 $ .00002 $ 5 $ 1.00
Underwriter Warrants (4)
Common Stock (5) 220,000 $ 4.65 $1,023,000 $ 352.76
par value $.001 per share
underlying Common Stock
Underwriter Warrants
Warrant Underwriter Warrants 220,000 $ .00002 $ 5 $ 1.00
(6)
Underwriter Underlying 220,000 $0.19375 $ 42,625 $ 14.70
Warrants (7)
Common Stock (8) 220,000 $ 4.65 $1,023,000 $ 352.76
par value $.001 per share
underlying Underwriter
Underlying Warrants
---------
Total Fee $6,065.75
=========
</TABLE>
- -------------------------
(1) Includes 330,000 shares reserved for the option, exercisable within 30
days after the date on which the Securities and Exchange Commission
(the "Commission") declares this Registration Statement effective, to
cover over-allotments, if any (the "Over-Allotment Option"), granted
by the Company to Barron Chase Securities, Inc. (the "Underwriter").
(2) Includes 330,000 Redeemable Common Stock Purchase Warrants (the
"Purchase Warrants") reserved for the Over-Allotment Option. The
Purchase Warrants (a) may be purchased separately from the Common
Stock in the offering, (b) are exercisable during a three-year period
commencing on the effective date of this Registration Statement, and
(c) shall be redeemable, at the option of the Registrant, at $0.25 per
Purchase Warrant upon 30 days' prior written notice, (i) if the
closing bid price, as reported on The Nasdaq SmallCap Market, or the
closing sale price, as reported on a national or regional securities
exchange, as applicable, of the shares of the Registrant's Common
Stock for 30 consecutive trading days ending within ten days of the
notice of redemption of the Purchase Warrants averages in excess of
$6.00 per share, subject to adjustment, and (ii) after a then current
registration statement has been declared effective by the Commission
<PAGE> 3
with regard to the shares of Common Stock to be received by the holder
upon exercise, but (iii) during the one-year period after the
effective date of this Registration Statement, only with the written
consent of the Underwriter. Pursuant to Rule 416 under the Securities
Act of 1933, as amended (the "Securities Act"), such additional number
of these securities are also being registered to cover any adjustment
resulting from the operation of the anti-dilution provisions relating
to the Purchase Warrants.
(3) Reserved for issuance upon exercise of the Purchase Warrants.
Pursuant to Rule 416 under the Securities Act, such additional number
of shares of Common Stock subject to the Purchase Warrants are also
being registered to cover any adjustment resulting from the operation
of the anti-dilution provisions relating to the Purchase Warrants.
(4) To be issued to the Underwriter. Pursuant to Rule 416 under the
Securities Act, such additional number of Underwriter stock purchase
options (the "Common Stock Underwriter Warrants") are also being
registered to cover any adjustment resulting from the operation of the
anti-dilution provisions relating to the Common Stock Underwriter
Warrants.
(5) Reserved for issuance upon exercise of the Common Stock Underwriter
Warrants. Pursuant to Rule 416 under the Securities Act, such
additional number of shares of Common Stock subject to the Common
Stock Underwriter Warrants are also being registered to cover any
adjustment resulting from the operation of the anti-dilution
provisions relating to the Common Stock Underwriter Warrants.
(6) To be issued to the Underwriter. Pursuant to Rule 416 under the
Securities Act, such additional number of Underwriter warrant purchase
options (the "Warrant Underwriter Warrants") are also being registered
to cover any adjustment resulting from the operation of the
anti-dilution provisions relating to the Warrant Underwriter Warrants.
(7) Reserved for issuance upon exercise of the Warrant Underwriter
Warrants. Pursuant to Rule 416 under the Securities Act, such
additional number of warrants to purchase shares of Common Stock
subject to the Warrant Underwriter Warrants ("Underwriter Underlying
Warrants") are also being registered to cover any adjustment resulting
from the operation of the anti-dilution provisions relating to the
Warrant Underwriter Warrants.
(8) Reserved for issuance upon exercise of the Underwriter Underlying
Warrants. Pursuant to Rule 416 under the Securities Act, such
additional number of shares of Common Stock subject to the Underwriter
Underlying Warrants are also being registered to cover any adjustment
resulting from the operation of the anti-dilution provisions relating
to the Underwriter Underlying Warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 9, 1996
PROSPECTUS
GENERAL CREDIT CORPORATION
2,200,000 SHARES OF COMMON STOCK
2,200,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
General Credit Corporation (the "Company") is offering hereby
2,200,000 shares (the "Shares") of Common Stock, $.001 par value per share (the
"Common Stock"), and 2,200,000 Redeemable Common Stock Purchase Warrants (the
"Purchase Warrants") of the Company. The Shares and the Purchase Warrants
(collectively, the "Securities") are separately transferable at any time after
the date of this Prospectus (the "Effective Date"). Each Purchase Warrant
entitles the registered holder thereof to purchase, at any time during the
period commencing on the Effective Date, through _____________, 1999, one share
of the Common Stock at a price of $3.00 per share, subject to adjustment under
certain circumstances. The Purchase Warrants offered hereby are not
exercisable unless, at the time of exercise, the Company has a current
prospectus covering the shares of Common Stock issuable upon exercise of the
Purchase Warrants and such shares have been registered, qualified or deemed to
be exempt under the securities laws of the states of residence of the
exercising holders of the Purchase Warrants. Commencing after the Effective
Date, the Purchase Warrants are subject to redemption by the Company, at the
option of the Company, at $0.25 per Purchase Warrant, upon 30 days' prior
written notice, if the closing bid price, as reported on The Nasdaq SmallCap
Market ("Nasdaq"), or the closing sale price, as reported on a national or
regional securities exchange, as applicable, of the shares of the Common Stock
for 30 consecutive trading days ending within ten days of the notice of
redemption of the Purchase Warrants averages in excess of $6.00 per share,
subject to adjustment. The Company is required to maintain an effective
registration statement with respect to the Common Stock underlying the Purchase
Warrants prior to redemption of the Purchase Warrants. Prior to the first
anniversary of the Effective Date, the Purchase Warrants will not be redeemable
by the Company without the written consent of the Underwriter. See "RISK
FACTORS--Non-Registration in Certain Jurisdictions of Shares Underlying the
Purchase Warrants."
Prior to this Offering, there has been no public market for the Common
Stock or the Purchase Warrants. The Common Stock and the Purchase Warrants
have been approved for listing on Nasdaq under the symbols "____" and "____,"
respectively, and on The Boston Stock Exchange under the symbols "_____" and
"_____", respectively. There is no assurance that an active trading market in
the Common Stock or the Purchase Warrants will develop or that, if developed,
any such market will be sustained. The offering price of the Shares and the
Purchase Warrants, as well as the exercise price and other terms of the
Purchase Warrants, have been determined by negotiation between the Company and
Barron Chase Securities, Inc. (the "Underwriter"), and bear no relationship to
the Company's asset value, net worth or other established criteria of value.
THE CLOSING OF THIS OFFERING ("CLOSING") IS SUBJECT TO THE SIMULTANEOUS
ACQUISITION BY THE COMPANY OF THE BUSINESS OF NEW YORK PAYROLL FACTORS, INC., A
NEW YORK CORPORATION (THE "NYPF BUSINESS COMBINATION"). See "RISK FACTORS"
and "UNDERWRITING."
THE SECURITIES ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. IN ADDITION, PURCHASERS OF THE SECURITIES WILL SUFFER
IMMEDIATE SUBSTANTIAL DILUTION IN THAT THE BOOK VALUE PER SHARE OF THE COMMON
STOCK AFTER THIS OFFERING WILL BE SUBSTANTIALLY LESS THAN THE PUBLIC OFFERING
PRICE OF THE COMMON STOCK. SEE "RISK FACTORS" AND "DILUTION" AT PAGES [ ] AND
[ ].
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
<TABLE>
<CAPTION>
===================================================================================================================================
Price to Public Underwriting Discounts (1) Proceeds to Company(2)
--------------- -------------------------- ----------------------
<S> <C> <C> <C>
Per Share $3.00 $.30 $2.70
Per Purchase
Warrant $.125 $.0125 $.1125
Total (3) $6,875,000 $687,500 $6,187,500
===================================================================================================================================
</TABLE>
_________________ See footnotes on page [ ] of Prospectus
[BARRON CHASE SECURITIES LOGO]
THE DATE OF THIS PROSPECTUS IS ___________, 1996
2
<PAGE> 6
(1) Does not include additional compensation to be received by the
Underwriter in the form of (i) a non-accountable expense allowance (the
"Non-Accountable Expense Allowance") equal to 3% of the total public offering
price for the Securities ($.09 per Share and $.00375 per Purchase Warrant);
(ii) stock purchase options (the "Common Stock Underwriter Warrants"), for
nominal consideration, to purchase up to 220,000 shares of Common Stock of the
Company at an exercise price of $4.65 per share (155% of the initial public
offering price), exercisable during a five-year period commencing on the
Effective Date, (iii) warrant purchase options (the "Warrant Underwriter
Warrants"), for nominal consideration, to purchase up to 220,000 warrants (the
"Underwriter Underlying Warrants") at an exercise price of $.19375 per warrant
(155% of the initial public offering price), exercisable during a three-year
period commencing on the Effective Date, each of which Underwriter Underlying
Warrants entitle the holder to purchase a share of Common Stock of the Company
at an exercise price of $4.65 per share, exercisable during a three-year period
commencing on the Effective Date, and (iv) engagement by the Company of the
Underwriter as a non-exclusive financial advisor to the Company for a period of
three years from the Closing at a fee of $108,000, payable at the Closing. The
Common Stock Underwriter Warrants, the Warrant Underwriter Warrants, and the
Underwriter Underlying Warrants are sometimes referenced in this Prospectus as
the "Underwriter Warrants." The Company has registered the Underwriter
Warrants and the shares of Common Stock underlying any of the Underwriter
Warrants (the "Underlying Shares") and has agreed to certain additional
registration rights with respect to the Underwriter Warrants and the Underlying
Shares under the Securities Act of 1933, as amended (the "Securities Act").
The Underwriter may also become entitled to a finder's fee in connection with
any business combination, strategic alliance or other business transaction to
which the Company may become a party based upon an introduction by the
Underwriter within five years after the Closing. In addition, the Company has
agreed to indemnify the Underwriter against certain civil liabilities,
including liabilities under the Securities Act. See "UNDERWRITING."
(2) Before deducting expenses of this Offering payable by the Company
(excluding the Underwriting Discount), including the Non-Accountable Expense
Allowance, federal and state registration and filing fees and taxes, and
listing, printing, legal, accounting and transfer agent fees (collectively, the
"Offering Costs"). The net proceeds to the Company, after deducting all
commissions and the Offering Costs (the "Net Proceeds"), are estimated to be
$5,700,426 (approximately 82.9% of the gross proceeds of this Offering), or
$6,597,613 (approximately 83.4% of the gross proceeds of this Offering) if the
Over-Allotment Option (as hereinafter defined) is exercised in full.
(3) The Company has granted to the Underwriter an option, exercisable
within 30 days after the Effective Date, to purchase up to 330,000 additional
shares of Common Stock of the Company and up to 330,000 additional Purchase
Warrants on the same terms and conditions as set forth above, solely to cover
over-allotments, if any (the "Over-Allotment Option"). If the Over-Allotment
Option is exercised in full, the total Price to Public, Underwriting Discount
and Proceeds to Company for Shares will be increased to $7,906,250, $790,625
and $7,115,625. See "UNDERWRITING."
The Securities are offered subject to prior sale, when, as and if
delivered to and accepted by the Underwriter and subject to the approval of
certain legal matters by counsel and certain other conditions. It is expected
that delivery of the certificates representing the Securities will be made at
the offices of Barron Chase Securities, Inc., 7700 West Camino Real, Suite 200,
Boca Raton, Florida 33433, on or about ______________, 1996.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act") and, in accordance
therewith, is required to file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Upon the
Closing, the Securities will be listed on Nasdaq and The Boston Stock Exchange.
Accordingly, such reports, proxy statements and other information can be
inspected and copied at the Commission's principal office, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; the Northeast Regional
Office of the Commission at 7 World Trade Center, Suite 1300, New York, New
York 10048; and the Midwest Regional Office of the Commission, Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, where copies may
be obtained upon payment of the fees prescribed by the Commission, as well as
at the offices of Nasdaq, 1735 K Street, N.W., Washington, D.C., and at the
offices of The Boston Stock Exchange located at One Boston Place, 38th Floor,
Boston, MA 02108.
3
<PAGE> 7
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
REGISTERED SECURITIES ISSUED IN THIS OFFERING AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
NASDAQ OR THE BOSTON STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
INVESTORS SHOULD CAREFULLY REVIEW THE FINANCIAL STATEMENTS WHICH ARE
AN INTEGRAL PART OF THIS PROSPECTUS.
[Balance of page intentionally left blank.]
4
<PAGE> 8
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Each prospective investor is urged to
read this Prospectus in its entirety.
THE COMPANY
Since its inception as a New York corporation in February 1995, the
Company's activities have been limited to administrative activities and, in
February 1996, entering into an agreement to purchase the business of New York
Payroll Factors, Inc., a New York corporation organized in January 1989
("NYPF"). To date, the Company has not generated any revenues nor engaged in
any operations. THE CLOSING IS SUBJECT TO THE SIMULTANEOUS CLOSING OF THE NYPF
BUSINESS COMBINATION.
Since the purchase of its current business in January 1992, NYPF has
provided working capital financing to its customers (the"NYPF Customers")
through the discounted purchase of checks (commonly referred to as "check
factoring"), generally on a non-recourse basis with respect to the NYPF
Customers except to the extent of forged signatures on and stop payments of the
purchased checks. The NYPF Customers are small- and medium-sized independent
contracting firms located in the New York City metropolitan area and northern
New Jersey area, some of which provide goods and services to labor intensive
businesses such as apparel manufacturers (commonly referred to as "garment
industry" firms) and construction firms. Included among the NYPF Customers are
sewing contractors, wholesale distributors, independent trucking companies,
printing companies, converters, healthcare providers, insurers and commercial
real estate owners. The makers of the checks are manufacturers, construction
firms and other businesses paying for goods or services purchased from the
NYPF Customers. Occasionally, NYPF purchases checks directly from the
manufacturers, construction firms and other businesses themselves. The NYPF
Customers, typical of garment industry contractors and other small- and
medium-sized vendors generally, face extraordinary periodic short-term cash
requirements. By factoring checks, the NYPF Customer can realize cash more
quickly.
For the fiscal years ended December 31, 1994 and 1995 and the
three-month periods ended March 31, 1995 and 1996, NYPF generated net income of
$191,813, $288,601, $156,727 (unaudited) and $197,940 (unaudited),
respectively, from the negotiation by it of checks purchased from NYPF
Customers. See Financial Statements of NYPF. Management of NYPF estimates
that as of June 1, 1996, there were over 900 NYPF Customers, 400 of which were
active on a monthly basis.
Management of NYPF estimates that NYPF typically purchases checks for
between 98% and 99% of the face amount of the check, depending on the amount of
the check, the historical volume of checks of the maker purchased by NYPF, the
nature of the maker's business and NYPF's judgment as to the payment history
and creditworthiness of the maker of the check. The weighted average
discounted purchase price is 98.9% of the face amount of the check. The
difference between the face amount of the check and NYPF's purchase price for
the check is known as the "discount." The discount is negotiated on a case by
case basis. The Company believes that the NYPF Customers prefer NYPF as
opposed to more conventional financial institution financing as a source of
funds because (i) NYPF does not require complex credit agreements, credit
evaluation of NYPF Customers, guarantees or other credit enhancement, financial
statements, collateral or a minimum borrowing base of receivables or inventory,
all or some of which would typically be required by a financial institution
prior to establishing an accounts receivable or asset based line of credit, and
(ii) NYPF provides liquidity virtually upon demand of the NYPF Customers, in
larger amounts daily than most financial institutions are able to supply.
Management of NYPF estimates that during the three months ended March 31,
1996, the average face amount of a check purchased by NYPF was approximately
$4,000 (unaudited). In an attempt to limit its exposure arising from a
purchased check not being collectible, NYPF's policy is rarely to purchase any
check the face amount of which is in excess of $50,000. See "RISK FACTORS
- --Credit Losses; Recessionary Environment" and "PROPOSED BUSINESS."
The Company's office is located at 211 East 70th Street, New York, New
York 10021 and its telephone number is (212) 861-2867.
5
<PAGE> 9
THE OFFERING
<TABLE>
<S> <C>
Securities offered . . . . . . . . . . . . . . . . . 2,200,000 shares of Common Stock at $3.00 per Share and
2,200,000 Purchase Warrants at $0.125 per Purchase Warrant. The
Shares and the Purchase Warrants are separately transferable at
any time after the Effective Date. Each Purchase Warrant
entitles the registered holder thereof to purchase, at any time
during the period commencing on the Effective Date, through
_____________, 1999, one share of the Common Stock at a price of
$3.00 per share, subject to adjustment under certain
circumstances. The Purchase Warrants offered hereby are not
exercisable unless, at the time of exercise, the Company has a
current prospectus covering the shares of Common Stock issuable
upon exercise of the Purchase Warrants and such shares have been
registered, qualified or deemed to be exempt under the
securities laws of the states of residence of the exercising
holders of the Purchase Warrants. Commencing after the
Effective Date, the Purchase Warrants are subject to redemption
by the Company, at the option of the Company, at $0.25 per
Purchase Warrant, upon 30 days prior written notice, if the
closing bid price, as reported on Nasdaq, or the closing sale
price, as reported on a national or regional securities
exchange, as applicable, of the shares of the Common Stock for
30 consecutive trading days ending within ten days of the notice
of redemption of the Purchase Warrants averages in excess of
$6.00 per share, subject to adjustment. The Company is required
to maintain an effective registration statement with respect to
the Common Stock underlying the Purchase Warrants prior to
redemption of the Purchase Warrants. Prior to the first
anniversary of the Effective Date, the Purchase Warrants will
not be redeemable by the Company without the written consent of
the Underwriter. See "DESCRIPTION OF SECURITIES" and
"UNDERWRITING."
</TABLE>
6
<PAGE> 10
<TABLE>
<S> <C>
Shares of Common Stock Outstanding
Prior to this Offering . . . . . . . . . . . . . . 2,023,000 shares
After this Offering (1) . . . . . . . . . . . . . 4,598,000 shares
Estimated Net Proceeds . . . . . . . . . . . . . . . $5,700,426 (or $6,597,613 if the Over-Allotment Option
is exercised in full)
Use of Proceeds . . . . . . . . . . . . . . . . . . Approximately $2,920,000 (51.2%, or 44.3% if the Over-Allotment
Option is exercised in full) of the Net Proceeds will be used to
consummate the NYPF Business Combination. Approximately
$305,000 will be used to retire Company indebtedness to certain
individuals and approximately $2,500,000 (43.9%) of the
estimated Net Proceeds of approximately $5,700,426 (or
$3,372,613 or 51.1% of the estimated Net Proceeds of $6,597,613
if the Over-Allotment Option is exercised in full) will be used
for working capital. See "USE OF PROCEEDS" and "PROPOSED
BUSINESS."
</TABLE>
<TABLE>
<CAPTION>
Purchase
Common Stock Warrants
<S> <C> <C>
Nasdaq Symbols
Boston Stock Exchange Symbols
</TABLE>
RISK FACTORS AND DILUTION
The Securities involve a high degree of risk and immediate substantial
dilution and should not be purchased by investors who cannot afford the loss of
their entire investment. See "RISK FACTORS," "DILUTION" and "USE OF PROCEEDS."
Purchasers of the Securities will incur immediate substantial dilution
of their investment. The unaudited net tangible book value per share of the
Common Stock as of March 31, 1996 was $(0.02). Immediately after the issuance
of an aggregate of 375,000 shares of the Common Stock in connection with the
closing of the NYPF Business Combination and the Closing (assuming that a value
of $0.125 is ascribed to the Purchase Warrants) and application of the Net
Proceeds, estimated to be $5,700,426, assuming no exercise of the
Over-Allotment Option, the unaudited net tangible book value per share of the
Shares will be $0.51, reflecting an immediate dilution of $2.49 per Share
(which represents approximately 83% of the public offering price of the
Shares). See "DILUTION" and Financial Statements of the Company.
__________
(1) Includes the issuance of an aggregate of 375,000 shares of the Common
Stock to Gerald Schultz and Gerald Nimberg in connection with the
closing of the NYPF Business Combination. The numbers of Shares
stated in the above table assume no exercise of the Over-Allotment
Option and do not include 2,200,000 shares of Common Stock reserved
for issuance upon exercise of the Purchase Warrants, 440,000 shares of
Common Stock reserved for issuance upon exercise of the Underwriter
Warrants or 183,000 shares of Common Stock reserved for issuance upon
exercise of options (the "Lender Options") granted by the Company to
certain individuals who have loaned funds to the Company. The Lender
Options are exercisable immediately and continuing through the first
anniversary of the Closing at an exercise price of $1.00 per share.
The inclusion of the Common Stock and the Purchase Warrants on Nasdaq
and The Boston Stock Exchange does not imply that an established
public trading market will develop therefor or, if developed, that
such market will be sustained. See "RISK FACTORS--No Assurance of
Public Market; Arbitrary Determination of Offering Price," "PRINCIPAL
SHAREHOLDERS," and "UNDERWRITING."
7
<PAGE> 11
RISK FACTORS
THE SECURITIES ARE SPECULATIVE, AND INVOLVE IMMEDIATE SUBSTANTIAL
DILUTION AND A HIGH DEGREE OF RISK, INCLUDING, BUT NOT NECESSARILY LIMITED TO,
THE SEVERAL FACTORS DESCRIBED BELOW. EACH PROSPECTIVE INVESTOR SHOULD CONSIDER
CAREFULLY THE FOLLOWING RISK FACTORS INHERENT IN AND AFFECTING THE BUSINESS OF
THE COMPANY AND THIS OFFERING BEFORE MAKING AN INVESTMENT DECISION.
RECENTLY ORGANIZED COMPANY; LIMITED RESOURCES; NO PRESENT SOURCE OF REVENUES
The Company was incorporated on February 10, 1995 and is in the
development stage. THE CLOSING IS SUBJECT TO THE SIMULTANEOUS CLOSING OF THE
NYPF BUSINESS COMBINATION. Since its inception, the Company's activities have
been limited to administrative activities and, in February 1996, entering into
an agreement to purchase the business of NYPF. The Company, to date, has not
generated any revenues nor engaged in any operations. There can be no
assurances that NYPF, at the time of the NYPF Business Combination, or at any
time thereafter, will derive any material revenues from its operations or
operate on a profitable basis.
QUALIFIED REPORT OF INDEPENDENT ACCOUNTANTS; GOING CONCERN
The Company's independent accountants' report on the Company's
financial statements includes an explanatory paragraph to the effect that THE
COMPANY'S ABILITY TO COMMENCE OPERATIONS IS DEPENDENT ON THE SALE OF THE
SECURITIES OR OTHER FUNDRAISING, WHICH RAISES SUBSTANTIAL DOUBTS ABOUT ITS
ABILITY TO CONTINUE AS A GOING CONCERN, and that the financial statements do
not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern. See
"PROPOSED BUSINESS," "EXPERTS" and Financial Statements of the Company.
COMPETITION
NYPF competes in its check factoring business with firms that provide
working capital financing to small- and medium-sized businesses. Those
competing firms include banks, financial institutions, commercial finance
companies and factoring companies, some of which may have substantially greater
financial and other resources than NYPF. The Company believes based on an
informal study conducted by it that there are approximately 20 check factoring
firms operating in the New York City "garment district" generating, in the
aggregate, approximately $26,000,000 gross proceeds (amounts collected from the
negotiation of checks purchased) weekly. See "PROPOSED BUSINESS--Competition."
There can be no assurance that the Company can continue to compete successfully
with its competitors.
GOVERNMENT REGULATION
Under the Bank Secrecy Act and the Financial Recordkeeping and
Currency and Foreign Transactions Reporting Act regulations of the U.S.
Department of the Treasury, each financial institution, which includes NYPF,
must file a Currency Transaction Report ("CTR") for each deposit, withdrawal,
exchange of currency, or other payment or transfer by, through, or to the
financial institution, which involves a transaction in currency of more than
$10,000. In addition, any series of transactions within a 24-hour period that
total more than $10,000, and that NYPF has knowledge were effected for the same
individual, must also be reported. During a typical week, approximately 25 of
NYPF's check factoring transactions require the filing of a CTR. The Company
believes that NYPF's computerized daily transaction reports, its staff training
and supervision and its diligence and persistence in obtaining from the NYPF
Customers the information required to be reported assist NYPF in complying with
these reporting requirements, but there can be no assurance that all
information reported by NYPF is accurate, complete, and in accordance with such
statute and regulations.
Although some states, including New York and New Jersey have
established limits on check-cashing fees, the Company believes that these
limits are not applicable to its business and that, in any event, NYPF's
discount of the face amount of checks that it purchases is within these limits.
NYPF is subject to all local laws and ordinances relating to weapons carried by
its security guards, messengers and other employees.
There can be no assurance that the Company will not be materially
adversely affected by legislation or regulations enacted in the future. See
"PROPOSED BUSINESS--Regulation."
8
<PAGE> 12
INHERENT RISKS OF CASH BUSINESS
The check factoring business requires cash availability, which
presents a certain degree of risk of cash shortages from employee error and
theft. NYPF has implemented controls and security procedures to minimize this
risk, including a policy requiring cash counting, before delivery to a NYPF
Customer, by two employees and daily cash activity reconciliation and monthly
reconciliation of cash with bank statements; however, the risk cannot be
completely eliminated. NYPF maintains insurance to cover losses from theft in
the amount of $500,000 per occurrence on a claims made basis. In addition,
NYPF is subject to losses from returned checks. See "--Credit Losses;
Recessionary Environment," "PROSPECTUS SUMMARY--The Company," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" and "PROPOSED BUSINESS
- --Security."
CREDIT LOSSES; RECESSIONARY ENVIRONMENT
The financial failure or dishonesty of the NYPF Customers or the
makers of the checks presented to the NYPF Customers and ultimately purchased
by NYPF may adversely affect the Company's ability to recover fully amounts due
on checks purchased by the Company. Accordingly, the Company will make
provisions for credit losses. The allowance for credit losses is determined
after evaluating the outstanding checks, current economic conditions, changes
in the nature and the volume of the outstanding checks, past loss experience
and other pertinent considerations. Many of these considerations involve
significant estimation and are subject to rapid changes which may be unforeseen
by management and could result in immediate increased losses and material
adjustments to the allowance. As a result, ultimate losses could be
significant and may vary from current estimates and the amount of provisions
for credit losses may be either greater or less than actual future charge-offs
of the bad checks relating to these provisions. Additionally, NYPF's results of
operations could be materially and adversely affected if NYPF were to
experience a loss as a result of the purchase of fraudulent or otherwise
uncollected checks. See "PROPOSED BUSINESS." Moreover, the risks to which
NYPF's business will be subject become more acute in an economic slowdown or
recession because less business activity is generated by the NYPF Customers,
resulting in decreased factoring fees and financial ability of NYPF Customers
and makers of checks to pay outstanding checks and in increased credit losses.
Some of the NYPF Customers and their customers are start-up or less mature
ventures that may be more susceptible to economic slowdowns or recessions. See
"--Inherent Risks of Cash Business."
ABILITY OF THE COMPANY TO CONTINUE ITS GROWTH STRATEGY
The Company's growth strategy is dependent upon its ability to
increase NYPF's factored check volume by purchasing checks which are fully
collectible. In 1995, NYPF's fee income from factored checks decreased from
1994 by 3.8% to $1,467,620 but its net income increased over 1994 by 50.5% to
$288,601, primarily as a result of reduction in management compensation. NYPF
experiences turnover in its NYPF Customer base annually as a result primarily
of credit issues. Therefore, NYPF's ability to further implement its strategy
for continued growth of factored check volume is largely dependent upon NYPF's
ability to attract and retain quality NYPF Customers in a competitive market
and on the business growth of NYPF Customers, which may be affected by a number
of factors not within NYPF's control. Historical growth rates are not
necessarily indicative of future results. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION--Results of Operations--NYPF."
DEPENDENCE ON AVAILABILITY OF FUNDING SOURCES
To date, NYPF has obtained substantially all of its funds for its
factoring activities from unsecured loans from individuals, including its
officer, Gerald Schultz, and from two financial institutions and a financial
services firm, all of which liabilities are anticipated to be extinguished upon
the closing of the NYPF Business Combination. While the Company expects to
have continued access to credit after expiration of these facilities, there is
no assurance that such financing will be available, or if available, that it
will be on terms as favorable. In the event the Company were not able to renew
or find alternative financing for its activities, the Company would be forced
to curtail or cease its check factoring business. See "--Possible Use of Debt
Financing; Debt of NYPF" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION--Liquidity and Capital Reserves--NYPF."
9
<PAGE> 13
POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company has had no revenues to date and is dependent upon the
proceeds of this Offering to consummate the NYPF Business Combination.
Although the Company believes that the proceeds of this Offering will be
sufficient to effect the NYPF Business Combination, the Company cannot
ascertain with any degree of certainty the capital requirements of NYPF's
operations after the Closing. In the event that the Net Proceeds prove to be
insufficient for such purposes, the Company will be required to seek additional
financing. The failure by the Company to secure such additional financing
could have a material adverse effect on the continued development or growth of
the Company. See "PROPOSED BUSINESS."
POSSIBLE USE OF DEBT FINANCING; DEBT OF NYPF
There are currently no limitations relating to the Company's or NYPF's
ability to borrow funds to increase the amount of capital available to the
Company to finance the operations of NYPF. The amount and nature of any
borrowings by the Company will depend on numerous considerations, including the
Company's capital requirements, the Company's perceived ability to meet debt
service on any such borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. There can be no
assurances that debt financing, if required or otherwise sought, would be
available on terms deemed to be commercially acceptable and in the best
interests of the Company. The inability of the Company to borrow funds
required to continue its operations or to provide funds for an additional
infusion of capital may have a material adverse effect on the Company's
financial condition and future prospects. Additionally, to the extent that
debt funding ultimately proves to be available, any borrowings may subject the
Company to various risks traditionally associated with incurring of
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest. As of December 31,
1995, NYPF had available to it (i) financing in the form of informal,
uncollateralized relationships with financial institutions, as well as (ii)
working capital loans made by individuals not affiliated with NYPF in the
aggregate amount outstanding at December 31, 1995 of $600,000, acquisition debt
(from the 1992 acquisition by NYPF of its current business) of $179,121, and
loans from an officer of NYPF, Mr. Schultz, in the amount of $472,816. As of
March 31, 1996, (i) financing by institutions and the financial services firm
was in the aggregate amount of $100,000, and (ii) working capital loans by
unaffiliated individuals was in the aggregate amount outstanding of $990,000,
acquisition debt outstanding was $159,545 and the outstanding amount of the
loans from Mr. Schultz was $807,614. All amounts outstanding under the
relationships, line and loans are anticipated to be extinguished upon the
closing of the NYPF Business Combination. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION--Liquidity and Capital Resources--NYPF" and Notes
3, 4 and 6 to Financial Statements of NYPF.
TAX CONSIDERATIONS
Simultaneously with the Closing, the Company will purchase the assets
of NYPF in the NYPF Business Combination. Included in the purchased assets
will be goodwill of approximately $4,436,168 and other intangible assets. The
purchased goodwill and intangibles will be held in connection with the conduct
of a trade or business and accordingly will be amortizable, for tax purposes,
over a 15-year period pursuant to Internal Revenue Code Section 197. See Note
(E) to General Credit Corporation Unaudited Pro Forma Financial Statements.
No substantial deferred tax assets or liabilities are anticipated to
be recorded in the application of Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes" to the assets purchased. Both
the allocation of purchase price and the depreciable lives of acquired assets
will be similar for both book and tax.
10
<PAGE> 14
DEPENDENCE UPON KEY PERSONNEL
The operations of the Company largely depend upon the efforts of Irwin
Zellermaier, the Company's Chairman, Chief Executive Officer and director, and,
until the closing of the NYPF Business Combination, President, David Bader, the
Company's Vice President, Secretary, Treasurer, Chief Financial Officer and
director, and Gerald Nimberg, who, upon the closing of the NYPF Business
Combination, will become the Company's President, Chief Operating Officer and
director. See "MANAGEMENT." It is anticipated that Messrs. Zellermaier,
Nimberg and Bader are the only persons whose activities will be material to the
operations of the Company subsequent to the NYPF Business Combination. The
Company has obtained "key man" life insurance on the lives of Messrs.
Zellermaier and Nimberg, each policy being in the amount of $1,000,000.
Although the Company anticipates it will maintain this "key man" life insurance
for at least five years from the Effective Date, no assurances can be given
that such insurance can be maintained at reasonable rates, if at all. The loss
of the services of any of Messrs. Zellermaier, Bader or Nimberg before suitable
replacements are obtained could have a material adverse effect on the Company's
capacity to successfully achieve its business objectives. It is anticipated
that Mr. Zellermaier will devote approximately 75% of his business time to the
affairs of the Company and, accordingly, may have conflicts of interest in
allocating his management time among various business activities. See
"MANAGEMENT--Employment Agreements/Executive Compensation" and
"MANAGEMENT--Conflicts of Interest."
Following the Closing, the officers and directors of the Company,
including Mr. Nimberg, will own in the aggregate approximately 25.6% of the
Company's outstanding Common Stock, assuming no exercise of the Purchase
Warrants, the Over-Allotment Option, the Underwriter Warrants or the Lender
Options, and approximately 17.3% of the Company's outstanding Common Stock if
the Purchase Warrants are exercised in full but assuming no exercise of the
Over-Allotment Option, the Underwriter Warrants, or the Lender Options. In the
election of directors, shareholders are not entitled to cumulate their votes
for nominees. As a result, the officers and directors of the Company are in a
position to have a significant impact on the outcome of substantially all
matters on which shareholders are entitled to vote, including the election of
directors. See "PRINCIPAL SHAREHOLDERS" and "DESCRIPTION OF SECURITIES."
DIVIDEND POLICY
The Company has not paid any dividends on its capital stock to date
and does not currently intend to pay cash dividends in the foreseeable future.
The payment of dividends, if any, will be contingent upon the Company's
revenues and earnings, if any, capital requirements and general financial
condition subsequent to the NYPF Business Combination. The payment of any
dividends subsequent to the NYPF Business Combination will be within the
discretion of the Company's then Board of Directors. It is the current
intention of the Board of Directors to retain all earnings, if any, for use in
the Company's business operations and, accordingly, the Board does not
anticipate paying any cash dividends in the foreseeable future. See
"DESCRIPTION OF SECURITIES --Dividends."
BROAD DISCRETION IN USE OF PROCEEDS
Approximately $2,500,000 (43.9%) of the estimated Net Proceeds (or
$3,372,613 or 51.1% if the Over-Allotment Option is exercised in full) will be
applied to working capital and general corporate purposes. Accordingly, the
Company will have broad discretion in the application of such proceeds. See
"USE OF PROCEEDS."
NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE
Prior to this Offering, there has been no public market for the Common
Stock or the Purchase Warrants. It is anticipated that, upon the Closing,
trading of the Securities will be conducted on Nasdaq or The Boston Stock
Exchange. There is no assurance that an active trading market in the Common
Stock or the Purchase Warrants will develop or that, if developed, any such
market will be sustained. The offering price of the Shares and the Purchase
Warrants, as well as the exercise price and other terms of the Purchase
Warrants, have been determined by negotiation between the Company and the
Underwriter and bear no relationship to the Company's asset value, net worth or
other established criteria of value. See "DESCRIPTION OF SECURITIES--Certain
Market Information" and "UNDERWRITING."
11
<PAGE> 15
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION
New investors will incur an immediate and substantial dilution of
approximately $2.49 per Share (83%) between the pro forma net tangible book
value per share after this Offering of $0.51 and the public offering price of
$3.00 per share allocable to each Share (assuming no exercise of the Purchase
Warrants, the Over-Allotment Option, the Underwriter Warrants or the Lender
Options.) The existing shareholders of the Company acquired their shares of
Common Stock at a nominal price. Accordingly, new investors will bear
virtually all of the risks inherent in an investment in the Company. See
"DILUTION" and "PROPOSED BUSINESS."
SHARES ELIGIBLE FOR FUTURE SALE
All of the 2,398,000 shares of Common Stock issued and outstanding
before giving effect to the Securities purchased in this Offering (which
amount, for this purpose, includes an aggregate of 375,000 shares to be issued
to Gerald Schultz and Gerald Nimberg in connection with the closing of the NYPF
Business Combination), referred to in this Prospectus as the "Current Shares,"
as well as the 183,000 shares of Common Stock issuable upon exercise of the
Lender Options, are "restricted securities," as that term is defined under Rule
144 ("Rule 144"), promulgated under the Securities Act, and may only be sold
pursuant to a registration statement under the Securities Act, in compliance
with Rule 144, or pursuant to another exemption therefrom. For a description
of Rule 144, see "DESCRIPTION OF SECURITIES--Certain Market Information." None
of such shares will be eligible for sale under Rule 144 prior to October 1,
1997. Furthermore, the holders of all of the Current Shares and all of the
Lender Options have agreed not to sell, transfer or otherwise dispose of any
shares of Common Stock or any Lender Options for a period of 24 months from the
Effective Date, or any longer period required by the law of any state, without
the prior written consent of the Underwriter. The Company is unable to predict
the effect that any subsequent sales of the Company's securities by its
existing shareholders, under Rule 144 or otherwise, may have on the
then-prevailing market price of the Common Stock, although such sales could
have a depressive effect on such market price. Nevertheless, the possibility
that substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities. See "PRINCIPAL SHAREHOLDERS" and "DESCRIPTION OF
SECURITIES--Shares Eligible for Future Sale."
NASDAQ ELIGIBILITY AND MAINTENANCE; POSSIBLE DELISTING OF SECURITIES FROM
NASDAQ
Under the current rules relating to the listing of securities on
Nasdaq, a company must have at least $4,000,000 in total assets, at least
$2,000,000 in stockholders equity, and a minimum bid price of $3.00 per share.
For continued listing, a company must maintain at least $2,000,000 in total
assets, at least $1,000,000 in stockholders equity, and a minimum bid price of
$1.00 per share.
The Common Stock and the Purchase Warrants (the "Listed Securities")
are expected to be eligible for initial listing on Nasdaq under these rules
upon the Closing. If at any time after issuance the Common Stock and Purchase
Warrants are not listed on Nasdaq, and no other exclusion from the definition
of a "penny stock" under the Exchange Act were available, transactions in the
Listed Securities would become subject to the penny stock regulations which
impose additional sales practice requirements on broker-dealers who sell such
securities. See "--Risk of Low-Priced Stocks."
If the Company should experience losses from operations, it may be
unable to maintain the standards for continued listing and the Listed
Securities could be subject to delisting from Nasdaq. Trading, if any, in the
Listed Securities would thereafter be conducted in the over-the-counter market
on an electronic bulletin board established for securities that do not meet the
Nasdaq listing requirements or in what are commonly referred to as the "pink
sheets." As a result, an investor may find it more difficult to dispose of, or
to obtain accurate quotations as to the price of, the Listed Securities.
RISK OF LOW-PRICED STOCKS
If the Listed Securities were delisted from Nasdaq, and no other
exclusion from the definition of a "penny stock" under applicable Commission
regulations were available, such Listed Securities would be subject to the
penny stock rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally defined as investors with net
worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
together with spouse). For transactions covered by
12
<PAGE> 16
these rules, the broker-dealer must make a special suitability determination
for the purchase and must have received the purchaser's written consent to the
transaction prior to sale. Consequently, delisting from Nasdaq, if it were to
occur, could materially adversely affect the ability of broker-dealers to sell
the Listed Securities and the ability of purchasers in this Offering to sell
their Securities in the secondary market. See "DESCRIPTION OF
SECURITIES--Certain Market Information."
UNDERWRITER'S INFLUENCE ON THE MARKET
A significant amount of the Securities may be sold to customers of the
Underwriter. Such customers subsequently may engage in transactions for the
sale or purchase of such Securities through or with the Underwriter. Although
it has no obligation to do so, the Underwriter has indicated to the Company
that it intends to make a market in the Securities. Such market-making
activity may be discontinued at any time. The price and liquidity of the
Common Stock and Purchase Warrants may be significantly affected by the degree,
if any, of the Underwriter's participation in such market. If the Underwriter
ceases making a market, the market and market prices for such Securities may be
adversely affected and the holders thereof may be unable to sell the
Securities. See "DESCRIPTION OF SECURITIES--Certain Market Information."
NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES UNDERLYING THE PURCHASE
WARRANTS
The Purchase Warrants are not exercisable unless, at the time of
exercise, the Company has a current prospectus covering the shares of Common
Stock issuable upon exercise of the Purchase Warrants and such shares have been
registered, qualified or deemed to be exempt under the securities laws of the
states of residence of the exercising holders of the Purchase Warrants.
Although the Company will use its best efforts to have all of the shares of
Common Stock issuable upon exercise of the Purchase Warrants registered or
qualified on or before the exercise date and to maintain a current prospectus
relating thereto until the expiration of the Purchase Warrants, there is no
assurance that it will be able to do so.
Although the Purchase Warrants will not knowingly be sold to
purchasers in jurisdictions in which the Securities are not registered or
otherwise qualified for sale, purchasers may buy Purchase Warrants in the
after-market or may move to jurisdictions in which the shares underlying the
Purchase Warrants are not so registered or qualified during the period that the
Purchase Warrants are exercisable. In this event, the Company would be unable
to issue shares of Common Stock to those persons desiring to exercise their
Purchase Warrants (whether in response to a redemption notice or otherwise),
unless and until the shares could be qualified for sale in the jurisdictions in
which such purchasers reside, or exemptions exist in such jurisdictions from
such qualification. Purchase Warrant holders would have no choice but to
attempt to sell the Purchase Warrants or allow them to expire unexercised. See
"DESCRIPTION OF SECURITIES--Purchase Warrants."
NON-EXERCISE OF PURCHASE WARRANTS CALLED FOR REDEMPTION
Commencing after the Effective Date, the Purchase Warrants are subject
to redemption by the Company, at the option of the Company, at $0.25 per
Purchase Warrant, upon 30 days prior written notice, if the closing bid price,
as reported on Nasdaq, or the closing sale price, as reported on a national or
regional securities exchange, as applicable, of the shares of the Common Stock
for 30 consecutive trading days ending within ten days of the notice of
redemption of the Purchase Warrants averages in excess of $6.00 per share,
subject to adjustment. Prior to the first anniversary of the Effective Date,
the Purchase Warrants will not be redeemable by the Company without the written
consent of the Underwriter. The Company is required to maintain an effective
registration statement with respect to the Common Stock underlying the Purchase
Warrants prior to redemption of the Purchase Warrants. In the event the
Company elects to redeem the Purchase Warrants, such Purchase Warrants will be
exercisable until the close of business on the date for redemption fixed in
such notice. If any Purchase Warrant called for redemption is not exercised by
such time, it will cease to be exercisable and the holder will be entitled only
to the redemption price. Redemption of the Purchase Warrants could force
Purchase Warrant holders either to (i) exercise the Purchase Warrants and pay
the exercise price thereof at a time when it may be less advantageous
economically to do so, or (ii) accept the redemption price in consideration for
cancellation of the Purchase Warrants, which could be substantially less than
the market value thereof at the time of redemption. See "DESCRIPTION OF
SECURITIES--Purchase Warrants."
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<PAGE> 17
UNDERWRITER WARRANTS
In connection with this Offering, the Company has agreed to sell to
the Underwriter and/or persons related to the Underwriter, for nominal
consideration, the Common Stock Underwriter Warrants and the Warrant
Underwriter Warrants. See note (1) to the table on the cover page of this
Prospectus. The holders of the Underwriter Warrants will have certain
registration rights with respect to the Underwriter Warrants and the Underlying
Shares. See "UNDERWRITING." In addition, the sale, or even the possibility of
sale, of the Underlying Shares could have an adverse effect on the market price
for the Company's securities or on the Company's ability to obtain future
public financing. If and to the extent the Underwriter Warrants are exercised,
shareholders may experience dilution in the book value of their holdings. See
"DILUTION."
ELIMINATION OF LIABILITY FOR DIRECTORS
The Company's Certificate of Incorporation, as amended (the "Charter")
contains provisions which eliminate the personal liability of directors, both
to the Company and to its shareholders, for monetary damages resulting from
breaches of certain of their fiduciary duties as directors of the Company. As
a result of such Charter provisions, the rights of the Company shareholders to
recover monetary damages from directors of the Company for breaches of
directors' fiduciary duties may be significantly limited.
USE OF PROCEEDS
The Net Proceeds to the Company, after the Offering Costs of
approximately $487,074 from the sale of the Securities and the Underwriting
Discount, are estimated to be $5,700,426. If the Over-Allotment Option is
exercised in full, the Offering Costs would be $518,012 and the Net Proceeds
would be 6,597,613.
Approximately $2,920,000 of such Net Proceeds will be used to
consummate the NYPF Business Combination. Of the remaining Net Proceeds,
approximately $305,000 will be used to retire Company indebtedness to certain
individuals and approximately $2,500,000 (approximately $3,372,613 if the
Over-Allotment Option is exercised in full) will be retained by the Company for
working capital purposes, including the payment of management salaries. See
"PROPOSED BUSINESS" and "MANAGEMENT--Employment Agreements/Executive
Compensation."
The Net Proceeds not immediately required for the purposes set forth
above will be invested in United States Government securities or other minimum
risk, short-term interest-bearing investments; provided, however, that the
Company will attempt not to invest the Net Proceeds in a manner which may
result in the Company being deemed to be an investment company under the
Investment Company Act of 1940.
CAPITALIZATION
The following table sets forth the capitalization of the Company at
March 31, 1996, as adjusted on a pro forma basis to give effect to the issuance
during July 1996 of an aggregate of 265,000 shares of the Common Stock to
companies controlled by James M. Beimel, Sr. and James Connell, the issuance of
an aggregate of 375,000 shares of the Common Stock to Messrs. Schultz and
Nimberg in connection with the closing of the NYPF Business Combination, the
sale of 2,200,000 Shares and 2,200,000 Purchase Warrants being offered hereby
and the application of the estimated Net Proceeds from the sale of securities
as set forth under "USE OF PROCEEDS." See "PRINCIPAL SHAREHOLDERS." This
table should be read in conjunction with the Company's financial statements and
the notes thereto included elsewhere in this Prospectus.
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<PAGE> 18
<TABLE>
<CAPTION>
Outstanding As Adjusted
----------- -----------
for this
--------
Offering
--------
<S> <C> <C>
Long-Term Debt
less current portion $200,000
Common Stock, $.001 par
value: 20,000,000 shares authorized;
1,758,000 shares issued; 4,598,000 as
adjusted for issuances after March 31, 1996,
the closing of the NYPF Business Combination
and this Offering (1) $1,758 4,598
Additional paid in capital (7,824) 6,815,027
Accumulated deficit (24,208) (24,208)
-------- ----------
Total shareholders' equity $(30,274) $6,795,417
======== ==========
</TABLE>
(1) Includes the issuance of 265,000 shares after March 31, 1996 but
before the Closing to companies controlled by Messrs. Beimel and
Connell, and the issuance of an aggregate of 375,000 shares to
Messrs. Schultz and Nimberg in connection with the closing of the NYPF
Business Combination. Assumes no exercise of the Purchase Warrants,
the Over-Allotment Option, the Underwriter Warrants, or the Lender
Options. See "PROSPECTUS SUMMARY--The Offering," "PRINCIPAL
SHAREHOLDERS," "UNDERWRITING" and Note 6 to Financial Statements of
the Company.
DILUTION
The difference between the public offering price per share and the pro
forma net tangible book value per share of Common Stock of the Company after
this Offering constitutes the dilution to investors in this Offering. Net
tangible book value per share is determined by dividing the net tangible book
value of the Company (total tangible assets less total liabilities and loan
origination costs) by the number of outstanding shares of Common Stock.
At March 31, 1996, the net tangible book value of the Company was
$(30,274) or approximately $(.02) per share of capital stock of the Company
(based upon 1,758,000 shares then outstanding). After giving effect to the
issuance during July 1996 of an aggregate of 265,000 shares of the Common Stock
to companies controlled by James J. Beimel, Sr. and James Connell, the closing
of the NYPF Business Combination, the issuance of an aggregate of 375,000
shares of the Common Stock to Messrs. Schultz and Nimberg in connection with
that closing, the sale of 2,200,000 Shares offered hereby (and assuming that a
value of $0.125 is ascribed to the Purchase Warrants offered hereby) and the
application of the estimated Net Proceeds, the pro forma net tangible book
value of the Company at March 31, 1996 would have been $2,359,249 or
approximately $0.51 per share, representing an immediate increase in net
tangible book value of $2,389,523 or $0.53 per share to existing shareholders
and an immediate dilution of $2.49 per Share to new investors (which represents
83% of the public offering price of the Shares). As of the date hereof, there
are currently no plans, proposals, arrangements, understandings or obligations
with respect to the sale of additional securities to any persons for the period
commencing with the Closing, other than the Company's issuance of shares of
Common Stock upon the exercise of the Over-Allotment Option, the Underwriter
Warrants and the Lender Options. See "PROSPECTUS SUMMARY--The Offering,"
"PRINCIPAL SHAREHOLDERS," "UNDERWRITING" and Financial Statements of the
Company.
15
<PAGE> 19
The following table illustrates the foregoing information with respect
to dilution to new investors on a per-Share basis after this Offering:
<TABLE>
<S> <C> <C>
Initial public offering price per Share $3.00
Net tangible book value per
share of Common Stock, before this Offering $(0.02)
Increase per share of Common Stock attributable to
payment by new investors .53
------
Pro forma adjusted net tangible book value
per share of Common Stock after this Offering .51
Net tangible book value dilution to new investors
per Share of Common Stock $2.49
=====
</TABLE>
The following table sets forth as of the Effective Date, with respect
to existing shareholders (including for this purpose Messrs. Schultz and
Nimberg, who will become shareholders upon the closing of the NYPF Business
Combination) and new investors, on a pro forma basis, a comparison of the
number of shares of Common Stock acquired from the Company, their percentage
ownership of such shares, the total consideration paid, the percentage of total
consideration paid and the average price per share of Common Stock:
<TABLE>
<CAPTION>
Securities Purchased(1) Total Consideration
----------------------- -------------------
Amount Percentage Amount Percentage
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Existing Shareholders 2,398,000 52.2% $1,127,219 14.1%
New Investors-Shares 2,200,000 47.8% $6,600,000 82.5%
New Investors-Purchase Warrants 2,200,000 100.0% $ 275,000 3.4%
---------- ---
8,002,219 100%
========== ===
</TABLE>
(1) The above table assumes no exercise of the Purchase Warrants, the
Over-Allotment Option, the Underwriter Warrants or the Lender Options.
If the Over-Allotment Option is exercised in full with respect to
Shares and with respect to Purchase Warrants, the new investors will
have paid $7,906,250 for 2,530,000 Shares and 2,530,000 Purchase
Warrants, representing approximately 87.5% of the total consideration
of $9,033,469. See "PROSPECTUS SUMMARY--The Offering," "PRINCIPAL
SHAREHOLDERS" and "UNDERWRITING."
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
Financial Statements and Notes thereto of the Company and NYPF included
elsewhere in this Prospectus.
GENERAL
The Company was organized in February 1995, and to date has had no
revenues and has not engaged in any operations. THE CLOSING IS SUBJECT TO THE
SIMULTANEOUS CLOSING OF THE NYPF BUSINESS COMBINATION. In addition to the
consummation of the NYPF Business Combination and entering into the check
factoring business, the Company may explore the possibility of offering other
financial services, including accounts receivable, asset based lending and
medical receivables financing. The Company has no agreements, agreements in
principle or understandings with respect to entering into these other
commercial finance areas. See "PROPOSED BUSINESS--The NYPF Business
Combination" and "-- Employees."
16
<PAGE> 20
Management of NYPF estimates that NYPF typically purchases checks for
between 98% and 99% of the face amount of the check, depending upon the amount
of the check, the historical volume of checks of the maker purchased by NYPF,
the nature of the maker's business and NYPF's judgment as to the payment
history and creditworthiness of the maker of the checks. The weighted average
discounted purchase price is 98.9% of the face amount of the check. The
difference between the face amount of the check and NYPF's purchase price for
the check is known as the "discount." The discount is negotiated on a case by
case basis. NYPF's fee income is derived solely from discounts. Gross
proceeds relating to the purchase of checks is recognized for financial
accounting purposes in the month the related check is negotiated by NYPF. The
term "gross proceeds" means amounts collected by NYPF from its negotiation of
checks purchased from the NYPF Customers. See "PROPOSED BUSINESS--Sources of
Business" and "--Commissioned Agent."
RESULTS OF OPERATIONS--NYPF
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH
31, 1995 (UNAUDITED)
For the three months ended March 31,1996, NYPF derived fee income of
$479,605 from the purchase of checks, as compared to $350,112 for the
three-month period ended March 31, 1995. This increase of approximately
$130,000 (approximately 37%) was a result of the activities of a commissioned
agent. Purchased checks increased from $32,500,000 in the first quarter of
1995 to $42,700,000 in the first quarter of 1996. See "PROPOSED
BUSINESS--Sources of Business" and "--Commissioned Agent."
Selling, general and administrative expenses, including, among other
expenses, amounts paid in respect of sales representatives, payroll and related
expenses and office overhead costs (including rent) increased by approximately
$51,405 (37.2%) to $189,534 for the three months ended March 31, 1996, as
compared to $138,129 for the three-month period ended March 31, 1995. This
increase was primarily a result of a $42,000 increase in commissions to the
commissioned agent and a $5,000 increase in rent expense due to the opening of
a third location in New York City. NYPF's payroll costs increased to
approximately $73,000 from $67,000 primarily as a result of additional
employees hired at its new facility. Selling, general and administrative
expenses constituted approximately 39.5% and 39.5% of fee income for the three
months ended March 31, 1996 and March 31, 1995, respectively.
For the three-month period ended March 31, 1996, interest expense was
$88,229 versus $49,829 for the comparable three-month period in 1995. This
increase of $38,400 (or 77%) is a result of increased borrowings of over
$800,000 during the first quarter of 1996. (See "--Liquidity and Capital
Resources--NYPF.")
Net income for the three-month period ended March 31, 1996 was
$197,940 as compared to $156,727 for the three- month period ended March 31,
1995, representing an increase by approximately 26.3%. This increase resulted
from an increase of 31% in the purchase of checks resulting in increased fees
income of approximately $130,000 offset by increases in selling, general and
administrative expenses and interest expenses noted above. Net income as a
percentage of fee income was approximately 41.3% and 44.8% for the three months
ended March 31, 1996 and March 31, 1995, respectively.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
For the year ended December 31, 1995, NYPF derived fee income of
$1,467,620 from the purchase of checks as compared to $1,525,378 for the year
ended December 31, 1994, a decrease of $57,758 or 3.8%. Fee income decreased
as a result of a decrease in the purchase of checks in 1995 of approximately
$8,000,000 or 5.4% as compared to 1994.
Selling, general and administrative expenses, including, among other
expenses, amounts paid in respect of sales representatives, payroll and related
expenses and office overhead costs decreased by approximately 17.4% to
$941,201, for the year ended December 31, 1995 as compared to $1,139,757 for
the year ended December 31, 1994. This decrease was due primarily to a
decrease in officers' salaries from $453,000 in 1994 to $270,000 in 1995 (or
$183,000) as a result of management's decision to reduce officers' salaries to
reflect an overall reduction in fee income. Bad debt expense decreased by
approximately $22,000 due to the reduced volume of purchased checks and a focus
on increased credit monitoring procedures. Other costs in 1995, primarily
office payroll costs and related expenses of $235,000, security services of
$75,000 and bank charges of $48,000 remained relatively consistent with 1994
expenses. Excluding officers' salaries, selling, general and administrative
expenses were $671,201 and $686,757 in 1995 and 1994, respectively, reflecting
minimal variance in NYPF's overhead costs. Selling, general and
17
<PAGE> 21
administrative expenses constituted approximately 64.1% and 74.7% of fee income
for the fiscal years ended December 31, 1995 and December 31, 1994,
respectively.
Interest expense of $176,960 in 1994 increased by $33,744 (or 19%) to
$210,704 in 1995 due to NYPF's increase in average borrowing during 1995 and
increases in interest rates of borrowings from related parties.
NYPF's provision for income taxes reflects primarily the provision for
New York City income taxes as NYPF is approved for S corporation status for
federal and state income tax purposes, which provides for corporate taxable
income to be passed through directly to the shareholders.
Net income for the year ended December 31, 1995 increased by
approximately $97,000 (or 50.5%) to $288,601 as compared to $191,813 for the
year ended December 31, 1994. This increase resulted primarily from a decrease
in officers' salaries of $183,000 offset by an increase in interest costs of
approximately $34,000 and a decrease of fee income of approximately $58,000.
Net income as a percentage of fee income was approximately 19.7% and 12.6% for
the fiscal years ended December 31, 1995 and December 31, 1994, respectively.
Net income excluding officers' salaries was approximately $559,000 and $645,000
in 1995 and 1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES--NYPF
NYPF's capital requirements generally increase proportionately to the
aggregate face amount of checks purchased, although more rapid collection of
purchased checks can mitigate NYPF's cash needs.
Since its inception through March 31, 1996, NYPF has financed its
operations principally through (i) an equity investment of $50,000; (ii)
working capital loans in the aggregate amount of $1,897,614, provided by two
financial institutions and a financial services firm, individuals not
affiliated with NYPF and Mr. Schultz, an officer of NYPF (the "Working Capital
Loans"); and (iii) net proceeds received from the collection of purchased
checks. On June 12, 1996, a Working Capital Management Account Line of Credit
agreement between NYPF and a financial services firm was activated whereby the
maximum principal amount outstanding at any time would be $300,000, which is
collateralized by most of the assets of NYPF. In addition, the provisions of
the agreement require NYPF to maintain cash in a separate trust account with
the financial services firm in an amount not less than 66% of the outstanding
line of credit balance. As of June 14, 1996, the outstanding line of credit
balance is $300,000 and the restricted cash associated with the agreement is
$200,000. Interest on the outstanding principal balance accrues at the annual
rate of prime plus 1%. As of March 31, 1996, NYPF was indebted pursuant to the
Working Capital Loans in the amount of $1,897,614, all of which liabilities are
anticipated to be extinguished upon the closing of the NYPF Business
Combination. See"RISK FACTORS--Possible Use of Debt Financing; Debt of NYPF"
and Notes 3, 4 and 6 to Financial Statements of NYPF.
During the three-month periods ended March 31, 1996 and March 31,
1995, NYPF incurred positive cash flow of $704,436 and $343,192, respectively.
Such increases primarily related to increased borrowings of $805,222 and
$406,682 in the first quarter of 1996 and 1995, respectively.
During the fiscal year ended December 31, 1995, NYPF incurred a net
increase in cash of $51,812 as a result of, among other things, cash flows
from operations of approximately $283,000, a reduction in borrowings of
approximately $53,000 and a payment of approximately $159,000 in dividend to
shareholders.
As of March 31, 1996 and December 31, 1995 NYPF had available cash of
$1,951,830 and $1,247,394, respectively. NYPF's total liabilities increased to
$2,062,332 as of March 31, 1996 from $1,267,383 as of December 31, 1995.
Assuming the sale of the Securities offered hereby, of which there can
be no assurance, the Company expects to use a significant portion of the Net
Proceeds to purchase checks. The Company also expects that its operating
expenses will increase due to additional overhead, including the payment of
salaries, required for the increased monitoring and processing of newly
acquired checks and the management of a public company. The Company expects
that the Net Proceeds and the anticipated cash flow from its operations will be
sufficient to meet its working capital requirements for at least 12 months.
See "MANAGEMENT--Employment Agreements/Executive Compensation."
As of the Effective Date, the Company is not involved in any material
acquisitions, nor are any material acquisitions currently planned, other than
the NYPF Business Combination. There is no assurance that the Company's
18
<PAGE> 22
resources will be sufficient to finance any acquisition or expansion other than
the NYPF Business Combination. See "PROPOSED BUSINESS--Possible Expansion."
EFFECTS OF INFLATION
The Company believes that the results of its operations subsequent to
the NYPF Business Combination will not be materially impacted by inflation.
TAX CONSIDERATIONS
Simultaneously with the Closing, the Company will purchase the assets
of NYPF in the NYPF Business Combination. Included in the purchased assets
will be goodwill of approximately $4,436,168 and other intangible assets. The
purchased goodwill and intangibles will be held in connection with the conduct
of a trade or business and accordingly will be amortizable, for tax purposes,
over a 15-year period pursuant to Internal Revenue Code Section 197. See Note
(E) to General Credit Corporation Unaudited Pro Forma Financial Statements.
No substantial deferred tax assets or liabilities are anticipated to
be recorded in the application of Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes" to the assets purchased. Both
the allocation of purchase price and the depreciable lives of acquired assets
will be similar for both book and tax.
19
<PAGE> 23
GENERAL CREDIT CORPORATION
(A Development Stage Corporation)
Unaudited Pro Forma Financial Statements
The following sets forth the unaudited pro forma balance sheet as of March 31,
1996 which has been prepared by combining the unaudited balance sheets of
General Credit Corporation (the "Company") and New York Payroll Factors, Inc.
("NYPF"). The acquisition is being accounted for using the purchase method as
if the acquisition had occurred on March 31, 1996. The combined balance sheet
was based on terms provided in the asset purchase agreement and reflects the
issuance of common stock and receipt of proceeds from the proposed public
offering. The unaudited pro forma statements of operations for the year ended
December 31, 1995 and three months ended March 31, 1996, which presents the
results of operations as if the Company (a) had reflected compensation to
certain executive officers pursuant to Employment Agreements as if such
agreements had been in effect for the for the year ended December 31, 1995 and
the three months ended March 31, 1996, (b) NYPF had not elected to be treated
as an S corporation during those periods, (c) had adjusted for a pro forma
reduction in interest expense for the year ended December 31, 1995 and the
three months ended March 31, 1996, associated with the portion of the Offering
proceeds to be used to retire debt at December 31, 1995 and March 31, 1996,
respectively, (e) had reflected amortization of the excess purchase price over
the net book value of net assets acquired, which is currently estimated to be
amortized over a fifteen-year period on a straight-line basis, and (f) had
reflected interest expense on the note payable issued in connection with the
acquisition. In management's opinion, all adjustments necessary to reflect the
effects of the transaction have been made.
The unaudited pro forma results of operations are not necessarily indicative of
the actual results that would have occurred had the transactions been
consummated on such date, nor is it necessarily indicative of future financial
position or operating results of the Company. The unaudited pro forma
financial statements and accompanying notes should be read in conjunction with
the historical financial statements and the related notes of the Company
included elsewhere in this prospectus.
20
<PAGE> 24
GENERAL CREDIT CORPORATION
PRO FORMA BALANCE SHEET
(UNAUDITED)
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL GENERAL
GENERAL NEW YORK CREDIT
CREDIT PAYROLL PRO FORMA CORPORATION
ASSETS: CORPORATION FACTORS, INC. ADJUSTMENTS PRO FORMA
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 78,624 $1,951,830 $ 778,861 (A)(B)(C) $2,809,315
Restricted cash 25,000 (25,000)(C)
Accounts receivable 35,541 (35,541)(C)
Prepaid expenses and other assets 28,496 (28,496)(C)
--------- ---------- ----------- ----------
Total current assets 78,624 2,040,867 689,824 2,809,315
Fixed assets, at cost, net of accumulated
depreciation 49,272 49,272
Deposit on acquisition 100,000 (100,000)(B)
Goodwill 418,853 4,017,315 (B) 4,436,168
Other assets 24,458 9,560 34,018
--------- ---------- ----------- ----------
$ 203,082 $2,518,552 $ 4,607,139 $7,328,773
========= ========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Acquisition debt $ 300,000 (B) $ 300,000
Notes payable $ 230,000 $1,174,696 (1,174,696)(C) 230,000
Accounts payable and accrued expenses 3,356 5,173 (5,173)(C) 3,356
Due to officer 807,614 (807,614)(C)
Long-term portion of notes payable 74,849 (74,849)(C)
--------- ---------- ----------- ----------
Total liabilities 233,356 2,062,332 (1,762,332) 533,356
--------- ---------- ----------- ----------
Shareholders' equity (deficiency):
Common stock 1,758 50,000 (47,160)(A)(B)(C) 4,598
Additional paid-in capital 11,176 6,803,851 (A)(B) 6,815,027
Retained earnings (deficiency) (24,208) 406,220 (406,220)(C) (24,208)
Less deferred offering costs (19,000) 19,000 (A)
--------- ---------- ----------- ----------
Total shareholders' equity (deficiency) (30,274) 456,220 6,369,471 6,795,417
--------- ---------- ----------- ----------
Total liabilities and shareholders' equity $ 203,082 $2,518,552 $ 4,607,139 $7,328,773
========= ========== =========== ==========
</TABLE>
21
<PAGE> 25
GENERAL CREDIT CORPORATION
PRO FORMA INCOME STATEMENT
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL GENERAL
GENERAL NEW YORK CREDIT
CREDIT PAYROLL PRO FORMA CORPORATION
CORPORATION FACTORS, INC. ADJUSTMENTS PRO FORMA
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenue $1,467,620 $1,467,620
Operating expenses:
General and administrative $ 371 884,385 $ 70,220 (D) 954,976
Amortization expense 42 56,816 239,566 (E) 296,424
----- ---------- --------- ----------
Income (loss) from operations (413) 526,419 (309,786) 216,220
Interest expense 210,704 (193,696)(F)(G) 17,008
----- ---------- --------- ----------
Income (loss) before provision
for income taxes (413) 315,715 (116,090) 199,212
Provision for income taxes - 27,114 71,717 (H) 98,831
----- ---------- --------- ----------
Net income (loss) $(413) $ 288,601 $(187,807) $ 100,381
===== ========== ========= ==========
Pro forma net income per share (I) $ .04
==========
Pro forma weighted average number of
common shares outstanding (I) 2,520,000
==========
Pro forma net income per share
including shares sold in offering (J) $ .02
==========
Pro forma weighted average number of
common shares outstanding,
including shares sold in offering (J) 4,720,000
==========
</TABLE>
22
<PAGE> 26
GENERAL CREDIT CORPORATION
PRO FORMA INCOME STATEMENT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL GENERAL
GENERAL NEW YORK CREDIT
CREDIT PAYROLL PRO FORMA CORPORATION
CORPORATION FACTORS, INC. ADJUSTMENTS PRO FORMA
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenue $479,605 $ 479,605
Operating expenses:
General and administrative $ 1,722 175,327 $ 92,500 (D) 269,549
Amortization expense 7,738 14,207 59,888 (E) 81,833
-------- -------- --------- -----------
Income (loss) from operations (9,460) 290,071 (152,388) 128,223
Interest expense 14,335 88,229 (87,332)(F)(G) 15,232
-------- -------- --------- -----------
Income (loss) before provision
for income taxes (23,795) 201,842 (65,056) 112,991
Provision for income taxes - 3,902 53,830 (H) 57,732
-------- -------- --------- -----------
Net income (loss) $(23,795) $197,940 $(118,886) $ 55,259
======== ======== ========= ===========
Pro forma net income per share (I) $ .02
===========
Pro forma weighted average number of
common shares outstanding (I) 2,520,000
===========
Pro forma net income per share,
including shares sold in offering (J) $ .01
===========
Pro forma weighted average number of
common shares outstanding,
including shares sold in offering (J) 4,720,000
===========
</TABLE>
23
<PAGE> 27
GENERAL CREDIT CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(A) To reflect the issuance of common stock and redeemable common stock
purchase warrants of General Credit Corporation and receipt of net proceeds of
$5,700,426 as set forth in the Registration Statement. Also reflects 265,000
shares issued in July to two unrelated entities.
(B) To reflect cash payment of $3,070,000, issuance of 375,000 shares of
common stock of General Credit Corporation at $3 per share ($1,125,000) and the
issuance of a $300,000 note to the owners of New York Payroll Factors, Inc. and
the excess of purchase price paid ($4,495,000) over the historical basis of net
assets purchased ($58,832). The General Credit Corporation stock is expected
to be issued at a market price of $3.00 which is determined using the offering
price as set forth in the Registration Statement.
(C) To reflect in the pro forma balance sheet those assets to be
distributed in accordance with the asset purchase agreement and liabilities to
be assumed or eliminated prior to the effective date of the Acquisition.
(D) To reflect the compensation of $160,000, $85,000 and $95,000 to Irwin
Zellermaier, David Bader and Gerald Nimberg, respectively, pursuant to separate
Employment Agreements as if the Agreements had been in effect for the year
ended December 31, 1995 and the three months ended March 31, 1996, offset by
$269,786 in savings from compensation paid to the Chief Executive Officer of
New York Payroll Factors, Inc. during fiscal 1995.
(E) Represents amortization of the excess purchase price of $4,436,168 over
the net book value of assets acquired, which is currently estimated to be
amortized over a fifteen-year period on a straight-line basis, less
amortization reflected in the historical statements.
(F) To reflect a reduction in interest expense associated with the portion
of the Offering proceeds used to retire debt at December 31, 1995 and March 31,
1996.
(G) To reflect interest expense on the $300,000 note payable issued in
connection with the acquisition.
(H) To reflect the provision for income taxes based upon pro forma income
before taxes as if New York Payroll Factors, Inc. had been a C corporation.
24
<PAGE> 28
(I) Pro forma net income per share, for the year ended December 31, 1995
and the three months ended March 31, 1996, respectively, has been computed by
dividing pro forma net income by the weighted average number of common stock
and common stock equivalents of 122,000 outstanding during the period, as
adjusted for the increase in shares explained in Note (B) above. The pro forma
weighted average number of common shares does not include the increase in
shares related to the anticipated public offering.
(J) In addition to (I) above, the weighted average number of common shares
outstanding include shares issued in connection with the anticipated public
offering.
25
<PAGE> 29
PROPOSED BUSINESS
INTRODUCTION
Since its inception as a New York corporation in February 1995, the
Company's activities have been limited to administrative activities and, in
February 1996, entering into an agreement to purchase the business of NYPF. To
date, the Company has not generated any revenues nor engaged in any operations.
THE CLOSING IS SUBJECT TO THE SIMULTANEOUS CLOSING OF THE NYPF BUSINESS
COMBINATION.
The description of NYPF in this Prospectus is based solely upon
information provided to the Company and its accountants by NYPF's management and
accountants.
Since the purchase of its current business in January 1992, NYPF has
provided working capital financing to the NYPF Customers through the discounted
purchase of checks (commonly referred to as "check factoring"), generally on a
non-recourse basis with respect to the NYPF Customers except to the extent of
forged signatures on and stop payments of the purchased checks. The NYPF
Customers are small- and medium-sized independent contracting firms located in
the New York City metropolitan area and northern New Jersey area, which NYPF's
management estimates have annual sales of approximately $5,000,000 and some of
which provide goods and services to labor intensive businesses such as apparel
manufacturers (commonly referred to as "garment industry" firms) and
construction firms. Included among the NYPF Customers are sewing contractors,
wholesale distributors, independent trucking companies, printing companies,
converters, healthcare providers, insurers and commercial real estate owners.
The makers of the checks are manufacturers, construction firms and other
businesses paying for goods or services purchased from the NYPF Customers.
Occasionally, NYPF purchases checks directly from the manufacturers,
construction firms and other businesses themselves. The NYPF Customers,
typical of garment industry contractors and other small- and medium-sized
vendors generally, face extraordinary periodic short-term cash requirements.
By factoring checks, the NYPF Customer can realize cash more quickly.
Operating from a single office on the lower east side of Manhattan in
1992, NYPF changed its emphasis from primarily Spanish-speaking sewing
contractors in the "garment district" of Manhattan, many of which required
credit on a weekly basis, to contractors predominantly owned by persons of
Asian ancestry and requiring nominal credit.
For the fiscal years ended December 31, 1994 and 1995 and the
three-month periods ended March 31, 1995 and 1996, NYPF generated net income of
$191,813, $288,601, $156,727 (unaudited) and $197,740 (unaudited),
respectively, from the negotiation by it of checks purchased from NYPF
Customers. See Financial Statements of NYPF. In mid-1995, NYPF opened its
second office, in midtown Manhattan near the "garment district," and, in
January 1996, NYPF opened its third site, on Seventh Avenue in the "garment
district." See "--Facilities." NYPF
26
<PAGE> 30
also expanded its use of sales agents from three in 1992 to eight currently,
increasing the volume of checks purchased by NYPF. Management of NYPF
estimates that as of June 1, 1996, there were over 900 NYPF Customers, 400 of
which were active on a monthly basis and approximately 500 of which were
predominantly Asian sewing contractors.
INDUSTRY OVERVIEW
Factoring, including check factoring, has been a method of working
capital financing in the United States for over 200 years. The factoring
industry has undergone considerable consolidation over the past several years;
as a result, the industry is characterized by a small number of very large
factors operating nationally, with a multitude of small companies generally
operating on a local or regional basis. In a recent survey, the largest 14
factoring companies nationally reported factoring volume in 1995 of $60.9
billion, an increase of 48% over reported volume in 1988. Currently, however,
the Company believes, based on an informal study, that there are approximately
20 check factoring firms operating in the New York City "garment district," all
within the same seven block area in which the NYPF Customers are located.
THE NYPF BUSINESS COMBINATION
The NYPF Business Combination consists of the acquisition, by the
Company or its wholly-owned subsidiary corporation, of NYPF's corporate and
trade names and trademarks, goodwill, computer programs and software, lists of
the NYPF Customers and all other assets of NYPF associated with or related to
NYPF's business (excluding cash, the purchase price for the NYPF Business
Combination and certain corporate records), and assignment to the Company or
its wholly-owned subsidiary of purchase and sale agreements with respect to
factored checks between NYPF and the NYPF Customers, and rights of NYPF's
affiliates as tenants under three commercial leases, for (i) a total purchase
price of $3,370,000, of which $150,000 has been paid to date (to be applied in
part to extinguish liabilities of NYPF that are not assumed by the Company,
including, among other liabilities, the Working Capital Loans and amounts due
as of the closing of the NYPF Business Combination under commercial leases),
$300,000 shall be evidenced by a negotiable promissory note payable to NYPF as
described below (the "Note") and the $2,920,000 balance shall be paid in cash
to NYPF at the closing of the NYPF Business Combination, and (ii) the issuance
of an aggregate of 375,000 shares of the Common Stock, 150,000 of which shares
are to be issued to Gerald Schultz, majority shareholder of NYPF, and 225,000
of which shares are to be issued to Gerald Nimberg, Vice President and Chief
Operating Officer of NYPF. The Note will be payable in 36 equal monthly
installments of principal and simple interest, calculated on the basis of the
annual rate of 10.5%. At the closing of the NYPF Business Combination, it is
contemplated that Mr. Nimberg will become the President and Chief Operating
Officer of the Company pursuant to a ten-year employment agreement with the
Company, as well as a director of the Company. See "MANAGEMENT--Employment
Agreements/Executive Compensation." Messrs. Schultz and Nimberg have agreed
that each of them shall not compete with the Company's operations for a period
of five years within the geographic region consisting of New York State, New
Jersey and Connecticut. See "RISK FACTORS--Dependence on Availability of
Funding Sources" and "--Possible Use of Debt Financing; Debt of NYPF," "USE OF
PROCEEDS," Note 5 to Financial Statements of the Company and Note 6 to
Financial Statements of NYPF.
NYPF'S OPERATING PROCEDURES
Management of NYPF estimates that NYPF typically purchases checks for
between 98% and 99% of the face amount of the check, depending on the amount of
the check, the historical volume of checks of the maker purchased by NYPF, the
nature of the maker's business and NYPF's judgment as to the payment history
and creditworthiness of the maker of the check. The weighted average
discounted purchase price is 98.9% of the face amount of the check. The
difference between the face amount of the check and NYPF's purchase price for
the check is known as the "discount." The discount is negotiated on a case by
case basis. The Company believes that the NYPF Customers prefer NYPF as
opposed to more conventional financial institution financing as a source of
funds because (i) NYPF does not require complex credit agreements, credit
evaluation of NYPF Customers, guarantees or other credit enhancement, financial
statements, collateral or a minimum borrowing base of receivables or inventory,
all or some of which would typically be required by a financial institution
prior to establishing an accounts receivable or asset based line of credit, and
(ii) NYPF provides liquidity virtually upon demand of the NYPF Customers, in
larger amounts daily than most financial institutions are able to supply.
Management of NYPF estimates that during the three months ended March 31,
1996, the average face amount of a check purchased by NYPF was approximately
$4,000 (unaudited) and NYPF purchased an average of $2,600,000 (unaudited) in
face amount of checks weekly, of which about $1,500,000 (unaudited) in face
amount of checks was purchased on Fridays and Saturdays. In an attempt to
limit its exposure arising from a purchased check not being collectible, NYPF's
policy is rarely to purchase any check
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<PAGE> 31
the face amount of which is in excess of $50,000. See "RISK FACTORS --Credit
Losses; Recessionary Environment."
NYPF's procedures include its entering into a Purchase and Sale
Agreement with each NYPF Customer, including a list of the current customers of
the NYPF Customer, stating the amount of the discount on checks to be purchased
by NYPF from the NYPF Customer, and providing, among other things, that (i)
NYPF is not required to purchase any check having a face amount less than
$2,500, or not made payable to the order of the NYPF Customer, or drawn on an
account of anyone other than a check maker approved by NYPF, (ii) the NYPF
Customer is responsible for losses resulting from forged or unauthorized
signatures of makers of checks or stop payments of checks, (iii) the NYPF
Customer represents to NYPF that, among other things, it owns the checks sold,
each check represents payment for merchandise or services actually delivered or
performed for a customer of the NYPF Customer in a business and not a consumer
transaction, and each check is genuine and not subject to offsets or defenses.
NYPF generally requires presentation of identification by each representative
of an NYPF Customer seeking to sell a check to NYPF. NYPF Customers can advise
NYPF of check amounts and their requested bill denominations so that cash
envelopes are available when their representatives arrive at NYPF's offices.
NYPF also offers a door-to-door armed guard delivery service upon the request
of NYPF customers. Pursuant to banking resolutions and powers of attorney in
favor of NYPF provided by each NYPF Customer, NYPF endorses each purchased
check beneath the endorsement of the NYPF Customer before depositing it in
NYPF's bank account.
SOURCES OF BUSINESS
During 1995 and the first three months of 1996, management of NYPF
estimates that it obtained, as a percentage of its fee income (i) approximately
10% from sales representatives at a weighted average fee income of 1.0%, (ii)
approximately 4.3% from NYPF's independent contractor relationship with Ace
Ventures Inc. ("Ace"), described below, operating from premises located at 499
Seventh Avenue, New York, New York (see "--Commissioned Agent"), (iii)
approximately 35% from NYPF Customers that have factored checks with NYPF for
more than three years, and (iv) approximately 20% from referrals of new NYPF
Customers from existing NYPF Customers. NYPF has maintained a sales
representation relationship with one of its seven representatives for more than
three years.
COMMISSIONED AGENT
NYPF entered into an agreement with Ace as of February 1, 1996. Under
the terms of that agreement, Ace is NYPF's exclusive agent to arrange check
factoring with prospective NYPF Customers predominantly owned by persons of
Asian ancestry and operating businesses located in midtown Manhattan, New York
in or near the "garment district" (the "Asian Market"), so long as Ace
maintains gross proceeds from the Asian Market of an average of $700,000 per
week, and Ace is required to refer to NYPF all check factoring business that
Ace generates in the Asian Market, with no obligation of NYPF either to accept
any particular Ace customer as an NYPF Customer or to accept any minimum
aggregate check face amount of business referred to NYPF through Ace. NYPF
generally is required under that agreement to supply Ace's daily cash funding
requirement requested by Ace from NYPF at least one week in advance. NYPF pays
Ace a commission calculated as a percentage of NYPF's fee income resulting from
Ace's efforts, ranging from 40% to 50%, depending upon the amount of such fee
income and the days of check purchases; upon the Closing, Ace's commission will
increase to 50% of all of NYPF's fee income from the Asian Market resulting
from Ace's efforts. Ace reimburses NYPF for certain costs. NYPF is not
restricted from soliciting business directly from any prospective NYPF
Customer, even within the Asian Market, so long as NYPF does not use an agent
other than Ace to do so with respect to the Asian Market. The agency initial
term is the same as the term of the lease of the office (ending on January 31,
2001). See "--Facilities" and "--Security."
COMPETITION
NYPF competes in its check factoring business with firms that provide
working capital financing to small- and medium-sized businesses. Those
competing firms include banks, financial institutions, commercial finance
companies and factoring companies, some of which may have substantially greater
financial and other resources than NYPF. The Company believes based on an
informal study conducted by it that there are approximately 20 check factoring
firms operating in the New York City "garment district" generating, in the
aggregate, approximately $26,000,000 gross proceeds weekly, of which NYPF
believes that it generates the most gross, proceeds, both annually and, on an
average, weekly. Based upon the Company's informal survey, the four largest
factors in the United States had approximately $67,900,000,000 of reported
gross proceeds in 1995, compared to approximately $136,000,000
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<PAGE> 32
in gross proceeds for the Company in 1995. NYPF also competes with other
regional factoring companies that target clients similar to the clients of NYPF
and that have operated in the markets serviced by NYPF for a longer period of
time than NYPF. There can be no assurance that the Company can continue to
compete successfully with its competitors.
SECURITY
All NYPF employees work behind bullet-resistant plexiglass and steel
partitions, and security measures for each office include safes, alarm systems
and security cameras that are monitored by third parties, control over entry to
cash processing areas, detection of entry through perimeter openings, walls and
ceilings, checking all movement in and out of secured areas, wireless phones,
security guards and telephone battery back-up.
Since NYPF's business requires it to maintain a significant supply of
cash in its stores, NYPF is subject to the risk of cash shortages resulting
from theft and employee errors. Although the Company has implemented various
programs to reduce these risks and to provide security for its facilities and
employees, there can be no assurance that these problems will be eliminated.
Daily transportation of currency and checks is provided by nationally
recognized armored carriers and insured bonded vendors.
EMPLOYEES
As of the Effective Date, after giving effect to the closing of the
NYPF Business Combination, the Company's employees will consist of its three
executive officers, Irwin Zellermaier, Gerald Nimberg and David Bader, and four
additional full-time and seven additional part-time employees. Subsequent to
the consummation of the NYPF Business Combination, Messrs Bader and Nimberg
will devote their full business time to the operations of the Company and Mr.
Zellermaier will continue to devote approximately 75% of his business time to
the Company's business. Prior to the consummation of the NYPF Business
Combination, Mr. Bader devotes approximately 25% of his business time to the
affairs of the Company.
REGULATION
Under the Bank Secrecy Act and the Financial Recordkeeping and
Currency and Foreign Transactions Reporting Act regulations of the U.S.
Department of the Treasury, each financial institution, which includes NYPF,
must file a CTR for each deposit, withdrawal, exchange of currency, or other
payment or transfer by, through, or to the financial institution, which
involves a transaction in currency of more than $10,000. In addition, any
series of transactions within a 24-hour period that total more than $10,000,
and that NYPF has knowledge were effected for the same individual, must also be
reported. During a typical week, approximately 25 of NYPF's transactions
require the filing of a CTR. The Company believes NYPF's computerized daily
transaction reports, its staff training and supervision and its diligence and
persistence in obtaining from the NYPF Customers the information required to be
reported assist NYPF in complying with these reporting requirements, but there
can be no assurance that all information reported by NYPF is accurate,
complete, and in accordance with such statute and regulations.
Although some states, including New York and New Jersey, have
established limits on check-cashing fees, the Company believes that these
limits are not applicable to its business and that, in any event, NYPF's
discount of the face amount of checks that it purchases is within these limits.
NYPF is subject to all local laws and ordinances relating to weapons carried by
its security guards, messengers and other employees.
There can be no assurance that the Company will not be materially
adversely affected by legislation or regulations enacted in the future.
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<PAGE> 33
POSSIBLE EXPANSION
The Company plans, at a future time, to explore the possibility of its
opening additional check factoring offices and its providing a broader range of
financial services to small- and medium-sized firms, including asset based
lending, invoice or accounts and credit card receivable factoring and premium
finance services, both within and outside the New York City metropolitan area
and northern New Jersey area. The Company believes that there exists a market
niche to deliver working capital assistance to small- and medium-sized
companies that are seeking funding in the $250,000 to $1,000,000 range. As a
means of positioning itself to enter into the business of providing a broader
range of products to its customers, the Company may acquire an established
business operation. The Company has no agreements, agreements in principle or
understandings with regard to an acquisition of an operating business or with
regard to providing a broader range of services generally.
FACILITIES
Since February, 1995, the Company, pursuant to a month-to-month
sublease agreement with Irwin Zellermaier, Chairman, Chief Executive Officer
and a director of the Company, at no cost to the Company, has maintained its
executive offices in approximately 1,000 square feet of space located at 211
East 70th Street, New York, New York 10021. The Company considers this space,
which is leased by Mr. Zellermaier, adequate for its current operations. Upon
the Closing, the Company will terminate its operations at 211 East 70th Street
and assume NYPF's leases, and may lease additional office space in NYPF's
service area (the New York City metropolitan area and northern New Jersey
area). See "USE OF PROCEEDS." As of the date hereof, the Company has no
agreements, agreements in principle or understandings with respect to the
acquisition of such additional leased office space. NYPF bears the obligations
of its affiliates under two separate noncancelable operating leases through
January 31, 1997 and July 31, 2000, respectively, for office space of 500
square feet and 1,200 square feet, respectively, located at 201 Allen Street
(on the lower east side of Manhattan) and 55 West 39th Street (in midtown
Manhattan near the "garment district"). Ace operates out of leased space at
499 Seventh Avenue, New York, New York, pursuant to a five-year lease through
January 31, 2001. The aggregate minimum rentals under these leases through
January 31, 2001 are $357,283. See "--Commissioned Agent" and Note 5 to
Financial Statements of NYPF.
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<PAGE> 34
MANAGEMENT
The following sets forth certain information concerning the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
Irwin Zellermaier(1) 71 Chairman, Chief Executive Officer, director and, until the closing of
the NYPF Business Combination, President
Gerald Nimberg 53 President, Chief Operating Officer, director, all effective as of the
closing of the NYPF Business Combination
David Bader 51 Vice President, Secretary, Treasurer, Chief Financial Officer,
director
Vincent J. Putignano(1)(2) 51 director
Brien G. Reidy(1)(2) 45 director
- ---------------------
</TABLE>
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
IRWIN ZELLERMAIER, Chairman and Chief Executive Officer and director
of the Company since February 1995, and President of the Company from February
1995 until the closing of the NYPF Business Combination, has been engaged in
investment banking and management consulting as a sole proprietorship for more
than five years.
GERALD NIMBERG, President and Chief Operating Officer and director of
the Company effective as of the closing of the NYPF Business Combination, has
been Vice President and Chief Operating Officer of NYPF since May 1993. From
May 1992 until May 1993, he was Regional Manager of Exchange Mortgage, Inc., a
residential mortgage lending firm, and from May 1991 until May 1992, he was
Regional Manager of Gelt Funding, also a residential mortgage lending firm.
Previously, he was a manager of various divisions of Sun Oil.
DAVID BADER, Vice President, Secretary, Treasurer and Chief Financial
Officer and director of the Company since April 1996, has been engaged in
financial and management consulting through Riz Business Consultants since
1988.
VINCENT J. PUTIGNANO, director of the Company since July 1996, has
operated a securities brokerage and investment banking and consulting business
in New York State since 1978. Before March 1991, he was President and Chief
Executive Officer of United States Business Products, Inc., a business
equipment firm. Since March 1991, he has engaged in sales administration and
consulting with Minor & Casey, a commercial real estate firm.
BRIEN G. REIDY, director of the Company since July 1996, has been
engaged in financial consulting and public relations in California and New York
since 1987.
Each director serves until the next annual meeting of shareholders and
until his successor is elected and qualified. Each officer is appointed to
serve until the next annual meeting of the Board of Directors and until his
successor has been appointed and qualified.
The Charter includes certain provisions, permitted under New York law,
that a director of the Company will not be personally liable to the Company or
its shareholders for damages for breach of duty as a director, except for
liability arising from (i) acts or omissions in bad faith or which involve
intentional misconduct or a knowing violation of law, (ii) any transaction from
which the director personally gained in fact a financial or other advantage to
which he was not legally entitled, or (iii) certain corporate actions
prohibited by the New York Business Corporation Law ("Corporate Law"). See
"DESCRIPTION OF SECURITIES--Charter and By Laws."
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<PAGE> 35
EMPLOYMENT AGREEMENTS/EXECUTIVE COMPENSATION
Irwin Zellermaier and David Bader, currently the only two employees of
the Company, have received no cash compensation from the Company since its
inception for their services rendered. Mr. Zellermaier, however, has received
from the Company reimbursement for his reasonable business expenses incurred in
connection with activities on behalf of the Company.
In June 1996, Irwin Zellermaier entered into a ten-year employment
agreement with the Company, effective immediately. Under the terms of that
agreement, Mr. Zellermaier serves as the Chairman and Chief Executive Officer
of the Company and becomes entitled to receive an annual base salary of
$160,000 per annum subsequent to the Closing and continuing through and
including June 2006. Mr. Zellermaier currently devotes and will continue to
devote approximately 75% of his business and professional time to the affairs
of the Company. The employment agreement with Mr. Zellermaier further provides
that Mr. Zellermaier shall receive bonuses and such other fringe benefits as
are paid to other executive officers of the Company. Such fringe benefits take
the form of medical coverage and an automobile expense allowance of $1,500 per
month, the aggregate value of which is estimated at approximately $6,000 per
annum. Further pursuant to the terms of his employment agreement, Mr.
Zellermaier has agreed during the term of his employment with the Company and
for a three-year period thereafter not to compete with the Company.
David Bader serves as the Vice President and Chief Financial Officer
of the Company pursuant to the terms of a five-year employment agreement which
terminates in June 2001. Pursuant to the agreement, Mr. Bader is entitled to
receive an annual base salary of $85,000 per annum, effective as of the
Closing. The employment agreement with Mr. Bader further provides for payment
of bonuses and for such other fringe benefits as are paid to other executive
officers of the Company. Such fringe benefits take the form of medical
coverage and an automobile expense allowance of $150 per month, the aggregate
value of which is estimated at approximately $4,200 per annum. Further
pursuant to the terms of his employment agreement, Mr. Bader has agreed during
the term of his employment with the Company and for a three-year period
thereafter not to compete with the Company.
At the closing of the NYPF Business Combination, Gerald Nimberg and
the Company will enter into a ten-year employment agreement which will
terminate on the tenth anniversary of that closing, pursuant to which, Mr.
Nimberg, as of that closing, shall begin to serve as the President and Chief
Operating Officer of the Company. The employment agreement with Mr. Nimberg
provides that Mr. Nimberg shall receive an annual base salary of $95,000 per
annum, commencing with the closing of the NYPF Business Combination, with
annual adjustments for increases in the Consumer Price Index. The employment
agreement with Mr. Nimberg further provides for payment of bonuses and for such
other fringe benefits as are paid to other executive officers of the Company.
Such fringe benefits take the form of medical coverage, the aggregate value of
which is estimated at approximately $6,000 per annum. Further pursuant to the
terms of his employment agreement, Mr. Nimberg has agreed during the term of
his employment with the Company and for a three-year period thereafter not to
compete with the Company.
CONFLICTS OF INTEREST
It is anticipated that Irwin Zellermaier will devote approximately 75%
of his business time to the affairs of the Company and, accordingly, may have
conflicts of interest in allocating his management time among various business
activities.
In the course of his other business activities, including private
investment activities, Mr. Zellermaier may become aware of investment and
business opportunities which may be appropriate for presentation to the Company
as well as the other entities with which he is affiliated. He may have
conflicts of interest in determining to which entity a particular business
opportunity should be presented. In general, officers and directors of
corporations incorporated under the laws of the State of New York are required
to present certain business opportunities to such corporations. Accordingly,
as a result of multiple business affiliations, Mr. Zellermaier may have similar
legal obligations relating to presenting certain business opportunities to
multiple entities. In addition, conflicts of interest may arise in connection
with evaluations of a particular business opportunity by the Board of Directors
with respect to the foregoing criteria. There can be no assurances that any of
the foregoing conflicts will be resolved in favor of the Company.
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<PAGE> 36
PRINCIPAL SHAREHOLDERS
The following table sets forth information, as of the date hereof and
as adjusted to reflect the issuance of an aggregate of 375,000 shares of Common
Stock to Messrs. Schultz and Nimberg in connection with the NYPF Business
Combination and the sale of the Shares offered hereby, based on information
obtained from the persons named below, with respect to the beneficial ownership
of shares of Common Stock by (i) each person known by the Company to be the
owner of more than 5% of the outstanding shares of Common Stock; (ii) each
director; and (iii) all officers and directors as a group:
<TABLE>
<CAPTION>
Before Offering After Offering
Amount and Approximate Amount and Approximate
Nature of Percentage of Nature of Percentage of
Name and Address Beneficial Outstanding Beneficial Outstanding
of Beneficial Owner Ownership (1) Shares (2) Ownership (1) Shares (3)
------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Irwin Zellermaier
211 East 70th Street
New York, NY 10021 855,000 42.3% 855,000 18.6%
Victoria Kleinmunz (4)
17 Bayowski Road
West Orange, NJ 07052 805,000 39.8% 805,000 17.5%
Gerald Schultz
201 Allen Street
New York, NY 10001 -- -- 150,000(5) 3.3%
James M. Beimel, Sr. (6)
216 Boulevard of the Allies
Pittsburgh, PA 15222 215,000 10.6% 215,000 4.7%
Gerald Nimberg
1009 Owl Place
Cherry Hill, NJ 08003 -- -- 225,000(5) 4.9%
David Bader
38 Milton Road
Babylon, NY 11702 98,000 4.8% 98,000 2.1%
James Connell (7)
76 Macintosh Drive
Portsmouth, RI 02871 50,000 2.5% 50,000 1.1%
Vincent J. Putignano
907 Palmer Avenue
Mamaroneck, NY 10543 -- -- -- --
Brien G. Reidy
Seven Miller Lane West
East Hampton, NY 11937 -- -- -- --
All officers and directors as a
group (4 persons before the
Closing, 5 persons after the
Closing) 953,000 47.1% 1,178,000 25.6%
- --------------------------------
</TABLE>
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<PAGE> 37
(1) Unless otherwise noted, all persons named in the table have sole
voting and sole investment power with respect to all shares of Common
Stock beneficially owned by them, and no persons named in the table
are acting as nominees for any persons or are otherwise under the
control of any person or group of persons. As used herein, the term
"beneficial ownership" with respect to a security is defined by Rule
13d-3 under the Exchange Act as consisting of sole or shared voting
power (including the power to vote or direct the vote) or sole or
shared investment power (including the power to dispose or direct the
disposition) with respect to the security through any contract,
arrangement, understanding, relationship or otherwise, including a
right to acquire any such power during the next 60 days. Unless
otherwise noted for such persons, beneficial ownership consists of
sole ownership, voting and investment power with respect to all shares
shown as beneficially owned by them.
(2) Based upon 2,023,000 shares of Common Stock outstanding before the
Closing and the closing of the NYPF Business Combination, excluding
183,000 shares of Common Stock reserved for issuance upon exercise of
the Lender Options.
(3) Based upon 4,598,000 shares of Common Stock to be outstanding after
the Closing and the closing of the NYPF Business Combination, assuming
no exercise of the Purchase Warrants, Over-Allotment Option,
Underwriter Warrants, or Lender Options. See "UNDERWRITING."
(4) Represents shares held by D.P. Morton & Associates, L.L.C., of which
Victoria Kleinmunz is the owner of 98% of the outstanding shares of
common stock and the sole director.
(5) Represents shares of Common Stock contemplated to be issued
simultaneously with the closing of the NYPF Business Combination,
pursuant to the provisions of the agreement between the Company and
NYPF providing for the NYPF Business Combination. Upon the closing of
the NYPF Business Combination, Mr. Nimberg will become an officer and
a director of the Company. See "PROPOSED BUSINESS--The NYPF Business
Combination."
(6) Represents shares held by JMB Holding Inc., of which James M. Beimel,
Sr. is the sole shareholder and director.
(7) Represents shares held by Wall Street Equities, Inc., of which James
Connell is the sole shareholder, director and President.
Mr. Zellermaier may be deemed to be a "promoter" and "parent" of the
Company, as such terms are defined under the federal securities laws.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 20,000,000 shares of Common Stock,
par value $.001 per share. Prior to this Offering, 2,023,000 shares of Common
Stock are outstanding, held of record by five persons. Upon the closing of the
NYPF Business Combination, an additional 375,000 shares will be issued, in
addition to the Securities purchased in this Offering. See "PRINCIPAL
SHAREHOLDERS."
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by shareholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted for the election of
directors can elect all of the directors. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining available for distribution to
them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over the Common Stock. Holders of
shares of Common Stock, as such, have no conversion, preemptive or other
subscription rights, and, except as noted herein, there are no redemption
provisions applicable to the Common Stock. All of the
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<PAGE> 38
outstanding shares of Common Stock are, and the Shares, when issued and paid
for as set forth in this Prospectus, will be, fully paid and nonassessable. See
"UNDERWRITING."
The holders of Common Stock do not have any subscription, redemption
or conversion rights, nor do they have any preemptive or other rights to
acquire or subscribe for additional, unissued or treasury shares. Accordingly,
if the Company were to elect to sell additional shares of Common Stock
following this Offering, persons acquiring Common Stock in this Offering would
have no right to purchase additional shares, and, as a result, their percentage
equity interest in the Company would be reduced.
Pursuant to the Company's By Laws, except for any matters which,
pursuant to Corporate Law, require a greater percentage vote for approval, the
holders of majority of the issued and outstanding Common Stock entitled to
vote, if present in person or by proxy, are necessary and sufficient to
constitute a quorum for the transaction of business at meetings of the
Company's shareholders. Further, except as to any matter which, pursuant to
Corporate Law, requires a greater percentage vote for approval, the affirmative
vote of the holders of a majority of the Common Stock voted on the matter
(provided a quorum as aforesaid is present) is necessary and sufficient to
authorize, affirm or ratify any act or action except the election of directors,
which is by a plurality of the votes cast.
The holders of Common Stock do not have cumulative voting rights.
Accordingly, the holders of more than half of the outstanding shares of Common
Stock can elect all of the directors to be elected in any election. In such
event, the holders of the remaining shares of Common Stock would not be able to
elect any directors. The Board of Directors is empowered to fill any vacancies
on the Board of Directors created by the resignation, death or removal of
directors.
In addition to voting at duly called meetings at which a quorum is
present in person or by proxy, Corporate Law, the Charter and the Company's By
Laws provide that shareholders may take action without the holding of a meeting
by written consent or consents signed by the holders of that number of the
outstanding shares of the capital stock of the Company entitled to vote thereon
which would be required to take the subject action. Prompt notice of the
taking of any action without a meeting by less than unanimous consent of the
shareholders will be given to those shareholders who do not consent in writing
to the action. The purposes of this provision are to facilitate action by
shareholders and to reduce the corporate expense associated with annual and
special meetings of shareholders. Pursuant to the rules and regulations of the
Commission, if shareholder action is taken by written consent, the Company will
be required to send to each shareholder entitled to vote on the matter acted
on, but whose consent was not solicited, an information statement containing
information substantially similar to that which would have been contained in a
proxy statement.
Upon the Closing, without giving effect to the exercise of the
Purchase Warrants, Over-Allotment Option, Underwriter Warrants, or Lender
Options, the Company's executive officers and directors will beneficially own
approximately 25.6% of the outstanding shares of Common Stock, and may
accordingly be in a position to significantly influence the voting results of
certain actions required or permitted to be taken by shareholders of the
Company, including the election of directors. As a result, the officers and
directors of the Company are in a position to control the outcome of
substantially all matters on which shareholders are entitled to vote, including
the election of directors.
PURCHASE WARRANTS
The following is a brief summary of certain provisions of the Purchase
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Purchase Warrant Agreement
between the Company and American Stock Transfer & Trust Company (the "Transfer
and Warrant Agent"). A copy of the Purchase Warrant Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
See "ADDITIONAL INFORMATION."
Exercise Price and Terms. Each Purchase Warrant entitles the holder
thereof to purchase, at any time from the Effective Date through the third
anniversary of the Effective Date, one share of Common Stock at a price of
$3.00 per share if exercised prior to ___________, 1999, when the Purchase
Warrants expire, subject to adjustment in accordance with the anti-dilution and
other provisions referred to below.
The holder of any Purchase Warrant may exercise such Purchase Warrant
by surrendering the certificate representing the Purchase Warrant to the
Transfer and Warrant Agent, with the subscription form on the reverse side
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<PAGE> 39
of such certificate properly completed and executed, together with payment of
the exercise price. The Purchase Warrants may be exercised at any time in
whole or in part at the applicable exercise price until expiration of the
Purchase Warrants three years from the Effective Date. No fractional shares
will be issued upon the exercise of the Purchase Warrants.
Commencing after the Effective Date, the Purchase Warrants are subject
to redemption by the Company, at the option of the Company, at $0.25 per
Purchase Warrant, upon 30 days prior written notice, if the closing bid price,
as reported on Nasdaq, or the closing sale price, as reported on a national or
regional securities exchange, as applicable, of the shares of the Common Stock
for 30 consecutive trading days ending within ten days of the notice of
redemption of the Purchase Warrants averages in excess of $6.00 per share,
subject to adjustment. The Company is required to maintain an effective
registration statement with respect to the Common Stock underlying the Purchase
Warrants prior to redemption of the Purchase Warrants. Prior to the first
anniversary of the Effective Date, the Purchase Warrants will not be redeemable
by the Company without the written consent of the Underwriter. In the event
the Company exercises the right to redeem the Purchase Warrants, such Purchase
Warrants will be exercisable until the close of business on the date for
redemption fixed in such notice. If any Purchase Warrant called for redemption
is not exercised by such time, it will cease to be exercisable and the
holder will be entitled only to the redemption price. Redemption of the
Purchase Warrants could force the Purchase Warrant holders either to (i)
exercise the Purchase Warrants and pay the exercise price thereof at a time
when it may be less advantageous economically to do so, or (ii) accept the
redemption price in consideration for cancellation of the Purchase Warrant,
which could be substantially less than the market value thereof at the time of
redemption.
The exercise price of the Purchase Warrants bear no relation to any
objective criteria of value and should in no event be regarded as an indication
of any future market price of the Securities offered hereby.
The Company has authorized and reserved for issuance a sufficient
number of shares of Common Stock to accommodate the exercise of all Purchase
Warrants to be issued in this Offering. All shares of Common Stock issued upon
exercise of the Purchase Warrants, if exercised in accordance with their terms,
will be fully paid and non-assessable.
Adjustments. The exercise price and the number of shares of Common
Stock purchasable upon exercise of the Purchase Warrants are subject to
adjustment upon the occurrence of certain events, including stock dividends,
stock splits, combinations or reclassification of the Common Stock, or sale by
the Company of shares of its Common Stock (or other securities convertible into
or exercisable for Common Stock) at a price per share or share equivalent below
the then-applicable exercise price of the Purchase Warrants or the then-current
market price of the Common Stock. Additionally, an adjustment would be made in
the case of a reclassification or exchange of Common Stock, consolidation or
merger of the Company with or into another corporation, or sale of all or
substantially all of the assets of the Company, in order to enable Purchase
Warrant holders to acquire the kind and number of shares of stock or other
securities or property receivable in such event by a holder of that number of
shares of Common Stock that would have been issued upon exercise of the
Purchase Warrant immediately prior to such event. No adjustments will be made
until the cumulative adjustments in the exercise price per share amount to $.05
or more. No adjustment to the exercise price of the shares subject to the
Purchase Warrants will be made for dividends (other than stock dividends), if
any paid on the Common Stock or upon exercise of the Purchase Warrants, the
Underwriter Warrant or any other options or warrants outstanding as of the date
of this Prospectus.
Transfer, Exchange and Exercise. The Purchase Warrants are in
registered form and may be presented to the Transfer and Warrant Agent for
transfer, exchange or exercise at any time prior to their expiration date three
years from the Effective Date, at which time the Purchase Warrants become
wholly void and of no value. If a market for the Purchase Warrants develops,
the holder may sell the Purchase Warrants instead of exercising them. There
can be no assurance, however, that a market for the Purchase Warrants will
develop or continue. If the Company is unable to qualify for sale in
particular states the Common Stock underlying the Purchase Warrants, holders of
the Purchase Warrants residing in such states and desiring to exercise the
Purchase Warrants will have no choice but to sell such Purchase Warrants or
allow them to expire. See "--Transfer and Warrant Agent."
Warrant Holder Not a Shareholder. The Purchase Warrants do not confer
upon holders any voting or any other rights as shareholders of the Company.
36
<PAGE> 40
CHARTER AND BY LAWS
Pursuant to Corporate Law, if the certificate of incorporation or a
by-law adopted by the shareholders so provides, then the power to adopt, amend
and repeal a corporation's by-laws is conferred upon the board of directors as
well as the shareholders, but any by-law adopted by the board of directors may
be amended or repealed by the shareholders. The shareholders of the Company
have not adopted any by-law. The Company's By Laws provide that (i) the Board
of Directors has no power to change the quorum for meetings of shareholders or
of the Board of Directors, or to change any provisions of the By Laws with
respect to the removal of directors or the filling of vacancies on the Board of
Directors resulting from the removal of one or more directors by the
shareholders and (ii) each director has one vote on each matter for which
directors are entitled to vote and, except as otherwise provided by law, by the
Charter or by the By Laws, the action of a majority of the directors present at
any meeting at which a quorum is present will be the act of the Board of
Directors.
The Charter provides with respect to the indemnification of directors
and officers that the Registrant shall indemnify its directors and officers to
the fullest extent permitted by Corporate Law. See "MANAGEMENT."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, there will be 4,598,000 shares of
Common Stock outstanding excluding (a) an aggregate of 3,300,000 shares
issuable upon the exercise of (i) the Purchase Warrants; (ii) the
Over-Allotment Option; and (iii) the Underwriter Warrants, including shares
issuable under the Underwriter Underlying Warrants granted as of the Effective
Date, and (b) an aggregate of 183,000 shares of Common Stock reserved for
issuance upon exercise of the Lender Options. See "CAPITALIZATION" and
"UNDERWRITING." Of these shares, the 2,200,000 shares sold in this Offering,
the 2,200,000 shares underlying the Purchase Warrants, and the maximum of
1,100,000 shares issuable upon full exercise of the Over-Allotment Option and
the exercise of the Underwriter Warrants, will be freely tradeable without
restriction or further registration under the Securities Act, except for any
such shares purchased by an "affiliate" of the Company. The 2,398,000 Current
Shares and the 183,000 shares of Common Stock issuable upon exercise of the
Lender Options are "restricted securities" as defined in Rule 144 and may not
be sold without registration under the Securities Act unless pursuant to an
applicable exemption therefrom (collectively, the "Restricted Shares").
In general, under Rule 144, a person (or persons whose shares are
required to be aggregated) who has satisfied a two-year holding period may,
under certain circumstances, sell within any three-month period a number of
Restricted Shares, and an "affiliate" of the Company may, under certain
circumstances, sell within any three-month period a number of shares, whether
or not Restricted Shares, which does not exceed the greater of 1% of the
then-outstanding shares of Common Stock or the average weekly trading volume
during the four calendar weeks prior to such sale as reported on NASDAQ, all
exchanges and the consolidated transaction reporting system. Rule 144 also
permits the sale of Restricted Shares without any quantity limitations by a
person who is not an "affiliate" of the Company, who has not been an
"affiliate" of the Company for at least three months immediately preceding the
sale, and who has owned the shares for at least three years. The holders of
all of the Current Shares and all of the Lender Options have agreed not to sell
any shares of Common Stock for a period of 24 months from the Effective Date,
or any longer period required by the law of any state, without the prior
written consent of the Underwriter (the "Lock-up"). Without the Lock-up,
1,758,000 of the Current Shares would become eligible for sale under Rule 144
in October 1997 and 265,000 of the Current Shares would become eligible for
sale under Rule 144 in July 1998.
The Company is unable to predict the effect that any subsequent sales
of the Company's securities by its existing shareholders, under Rule 144 or
otherwise, may have on the then-prevailing market price of the Common Stock,
although such sales could have a depressive effect on such market price. The
foregoing summary of Rule 144 is not intended to be a complete description
thereof.
DIVIDENDS
The Company has not paid any dividends on its capital stock to date
and does not currently intend to pay cash dividends prior to the consummation
of the NYPF Business Combination. The payment of dividends after the NYPF
Business Combination, if any, will be contingent upon the Company's revenues
and earnings, if any, capital requirements and general financial condition at
that time. The payment of any dividends subsequent to NYPF Business
Combination will be within the discretion of the Company's then Board of
Directors. It is the current intention of the
37
<PAGE> 41
Board of Directors to retain all earnings, if any, for use in the Company's
business operations and, accordingly, the Board does not anticipate paying any
cash dividends in the foreseeable future.
TRANSFER AND WARRANT AGENT
The transfer agent for the Common Stock and the warrant agent for the
Purchase Warrants is American Stock Transfer & Trust Company, New York, New
York.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement,
Barron Chase Securities, Inc. (the "Underwriter") has agreed to purchase from
the Company an aggregate of 2,200,000 Shares and 2,200,000 Purchase Warrants
(collectively, the "Securities"). The Securities are offered by the
Underwriter subject to prior sale, when, as and if delivered to and accepted by
the Underwriter and subject to approval of certain legal matters by counsel and
certain other conditions. The Underwriter is committed to purchase all
Securities offered by this Prospectus, if any are purchased.
The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Securities to the public at the offering price set forth
in the cover page of this Prospectus, and that the Underwriter may allow
concessions to certain selected dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD") and certain foreign dealers,
all of whom agree to sell the Securities in conformity with the NASD's Conduct
Rules. Such concessions will not exceed the amount of the underwriting
discount that the Underwriter is to receive.
The Company has granted to the Underwriter an Over-Allotment Option,
exercisable for 30 days from the Effective Date, to purchase up to an
additional 330,000 Shares and an additional 330,000 Purchase Warrants at the
public offering price less the Underwriting Discount (defined below) set forth
on the cover page of this Prospectus. The Underwriter may exercise this option
solely to cover over-allotments in the sale of the Securities being offered by
this Prospectus.
Officers and directors of the Company may introduce the Underwriter to
persons to consider this Offering and to purchase Securities either through the
Underwriter or through participating dealers. In this connection, officers and
directors will not receive any commissions or any other compensation.
The Company has agreed to pay the Underwriter a commission of 10% of
the gross proceeds of this Offering (the "Underwriting Discount"), including
the gross proceeds from the sale of the Over-Allotment Option, if exercised.
In addition, the Company has agreed to pay to the Underwriter the
Non-Accountable Expense Allowance of 3% of the gross proceeds of this Offering,
including proceeds from any Securities purchased pursuant to the Over-Allotment
Option. The Underwriter's expenses in excess of the Non-Accountable Expense
Allowance will be paid by the Underwriter. To the extent that the expenses of
the Underwriter are less than the amount of the Non-Accountable Expense
Allowance received, such excess shall be deemed to be additional compensation
to the Underwriter.
The Company has agreed to engage the Underwriter as a financial
advisor for a period of three years from the Closing, at a fee of $108,000, all
of which is payable to the Underwriter at the Closing. Pursuant to the terms
of a financial advisory agreement, the Underwriter has agreed to provide, at
the Company's request, advice to the Company concerning potential merger and
acquisition and financing proposals, whether by public financing or otherwise.
Prior to this Offering, there has no public market for the shares of
Common Stock or Purchase Warrants. Consequently, the initial public offering
price for the Securities, and the terms of the Purchase Warrants (including the
exercise price of the Purchase Warrants), have been determined by negotiation
between the Company and the Underwriter. Among the factors considered in
determining the public offering price were the history of, and the prospects
for, the Company's business, an assessment of the Company's management, its
past and present operations, the Company's development and the general
condition of the securities market at the time of this Offering. The initial
public offering price does not necessarily bear any relationship to the
Company's assets, book value, earnings or other established criterion of value.
Such price is subject to change as a result of market conditions and other
factors, and no assurance can be given that a public market for the Shares or
the Purchase Warrants will develop after the Closing,
38
<PAGE> 42
or if a public market in fact develops, that such public market will be
sustained, or that the Shares or Purchase Warrants can be resold at any time at
the offering or any other price. See "RISK FACTORS--No Assurance of Public
Market; Arbitrary Determination of Offering Price."
At the Closing, the Company will issue to the Underwriter or persons
related to the Underwriter, for nominal consideration, the Common Stock
Underwriter Warrants to purchase up to 220,000 shares of Common Stock (the
"Underlying Shares") and the Warrant Underwriter Warrants to purchase up to
220,000 warrants (the "Underwriter Underlying Warrants"). The Common Stock
Underwriter Warrants, the Warrant Underwriter Warrants and the Underwriter
Underlying Warrants are sometimes referred to in this Prospectus as the
"Underwriter Warrants." The Common Stock Underwriter Warrants and the Warrant
Underwriter Warrants will be exercisable for a five-year period and a
three-year period, respectively, commencing on the Effective Date. The initial
exercise price of each Common Stock Underwriter Warrant shall be $4.65 per
Underlying Share (155% of the public offering price). The initial exercise
price of each Warrant Underwriter Warrant shall be $.19375 per Underwriter
Underlying Warrant (155% of the public offering price). Each Underwriter
Underlying Warrant will be exercisable for a three-year period commencing on
the Effective Date to purchase one share of Common Stock at an exercise price
of $4.65 per share of Common Stock. The Underwriter Warrants will not be
transferable for twelve months from the Effective Date, except (i) to officers
of the Underwriter and members of the selling group and officers and partners
thereof; (ii) by will; or (iii) by operation of law.
The Common Stock Underwriter Warrants and the Warrant Underwriter
Warrants contain provisions providing for appropriate adjustment in the event
of any merger, consolidation, recapitalization, reclassification, stock
dividend, stock split or similar transaction. The Underwriter Warrants contain
net issuance provisions permitting the holders thereof to elect to exercise the
Underwriter Warrants in whole or in part and instruct the Company to withhold
from the securities issuable upon exercise, a number of securities, valued at
the current fair market value on the date of exercise, to pay the exercise
price. Such net exercise provision has the effect of requiring the Company to
issue shares of Common Stock without a corresponding increase in capital. A
net exercise of the Underwriter Warrants will have the same dilutive effect on
the interests of the Company's shareholders as will a cash exercise. The
Underwriter Warrants do not entitle the Underwriter to any rights as a
shareholder of the Company until such Underwriter Warrants are exercised and
shares of Common Stock are purchased thereunder.
The Underwriter Warrants and the securities issuable thereunder may
not be offered for sale except in compliance with the applicable provisions of
the Securities Act. The Company has agreed that if it shall cause a post-
effective amendment, a new registration statement, or similar offering document
to be filed with the Commission, the holders shall have the right, for seven
years from the Effective Date, to include in such registration statement or
offering statement the Underwriter Warrants or the securities issuable upon
their exercise at no expense to the holders. Additionally, the Company has
agreed that, upon request by the holders of 50% or more of the Underwriter
Warrants and registrable securities during the period commencing 12 months from
the Effective Date and expiring four years thereafter, the Company will, under
certain circumstances, register the Underwriter Warrants and any of the
securities issuable upon their exercise.
The Company has also agreed that if the Company participates in any
transaction which the Underwriter has introduced in writing to the Company
during a period of five years after the Closing (including mergers,
acquisitions, joint ventures and any other business excluding the NYPF Business
Combination), and which is consummated after the Closing (including an
acquisition of assets or stock for which it pays, in whole or in part, with
shares or other securities of the Company), or if the Company retains the
services of the Underwriter in connection with any such transaction, then the
Company will pay for the Underwriter's services an amount equal to 5% of up to
one million dollars of value paid or received in the transaction, 4% of the
next million of such value, 3% of the next million of such value, 2% of the
next million of such value, and 1% of the next million dollars of such value
and of all such value above $4,000,000.
The Company has agreed to indemnify the Underwriter against any costs
or liabilities incurred by the Underwriter by reasons of misstatements or
omissions to state material facts in connection with the statements made in the
Registration Statement on Form SB-2 filed by the Company with the Commission
(the "Registration Statement") under the Securities Act and this Prospectus.
The Underwriter has in turn agreed to indemnify the Company against any costs
or liabilities by reason of misstatements or commissions to state material
facts in connection with the statements made in the Registration Statement and
this Prospectus, based on information relating to the Underwriter and furnished
in writing by the Underwriter. To the extent that this section may purport to
provide exculpation from
39
<PAGE> 43
possible liabilities arising from the federal securities laws, in the opinion
of the Commission, such indemnification is contrary to public policy and
therefore unenforceable.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to
copies of each such agreement which are filed as exhibits to the Registration
Statement. See "ADDITIONAL INFORMATION."
LEGAL PROCEEDINGS
The Company is not a party to, nor is it aware of, any pending
litigation to which it is a party or of which its property is subject.
NYPF is engaged from time to time as plaintiff in litigation relating
to collection of returned checks. Such litigation has not historically had any
material effect on NYPF's financial condition or results of operations.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of
Common Stock offered hereby will be passed upon for the Company by Berman Wolfe
& Rennert, P.A., Miami, Florida. Certain matters regarding New York law have
been passed upon for the Company by Robert P. Gaudiosi, Esq., Melville, New
York. Certain legal matters will be passed upon for the Underwriter by David
A. Carter, P.A., Boca Raton, Florida.
EXPERTS
The balance sheet of the Company as of December 31, 1995 and the
statements of operations, shareholder's equity (deficiency) and cash flows for
the period February 10, 1995 (inception) to December 31, 1995, included in this
Prospectus and Registration Statement have been included herein in reliance on
the report, which includes an explanatory paragraph relating to the Company's
ability to continue as a going concern, of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that Firm as experts in
accounting and auditing.
The balance sheet of NYPF as of December 31, 1995 and the statements
of income, shareholders' equity and cash flows for each of the two years in the
period ended December 31,1995, included in this Prospectus and Registration
Statement have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that Firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission the Registration Statement
under the Securities Act with respect to the Shares, the Purchase Warrants, the
Underwriter Warrants and the Underlying Shares. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and this
Offering, reference is made to the Registration Statement, including the
exhibits filed therewith, which may be examined at the Commission's principal
office, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549; the Northeast Regional Office of the Commission at 7 World Trade Center,
Suite 1300, New York, New York 10048; and the Midwest Regional Office of the
Commission, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, where copies may be obtained upon payment of the fees
prescribed by the Commission. Descriptions contained in this Prospectus as to
the contents of any contract or other document filed as an exhibit to the
Registration Statement are not necessarily complete and each such description
is qualified by reference to such contract or document. The Company will
provide without charge to each person who receives a Prospectus, upon written
or oral request of such person to the following address or telephone number, a
copy of any of the information that is incorporated by reference in this
Prospectus: 211 East 70th Street, New York, New York 10021; (212) 861-2867.
40
<PAGE> 44
GENERAL CREDIT CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
PAGE
<S> <C>
Report of Independent Accountants F-2
Balance Sheets as of December 31, 1995 (audited) and March 31, 1996 (unaudited) F-3
Statements of Operations for the period February 10, 1995 (inception) to December 31, 1995
(audited), for the three months ended March 31, 1996 (unaudited) and for the period
February 10, 1995 (inception) to March 31, 1996 (unaudited) F-4
Statements of Shareholders' Equity (Deficiency) for the period February 10, 1995 (inception)
to December 31, 1995 (audited) and for the three months ended March 31, 1996 (unaudited) F-5
Statements of Cash Flows for the period February 10, 1995 (inception) to December 31, 1995
(audited), for the three months ended March 31, 1996 (unaudited) and for the period
February 10, 1995 (inception) to March 31, 1996 (unaudited) F-6
Notes to Financial Statements F-7
</TABLE>
F-1
<PAGE> 45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
General Credit Corporation:
We have audited the accompanying balance sheet of General Credit Corporation (a
development stage corporation), as more fully described in Note 1, as of
December 31, 1995 and the related statements of operations, shareholders'
equity (deficiency) and cash flows for the period February 10, 1995 (inception
date) to December 31, 1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of General Credit Corporation as
of December 31, 1995 and the results of its operations and its cash flows for
the period February 10, 1995 (inception) to December 31, 1995, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's ability to commence operations is dependent
on obtaining adequate financial resources through a contemplated public
offering, or otherwise, which raises substantial doubts about its ability to
continue as a going concern. If unsuccessful, the Company may be unable to
continue in its present form. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result
should the Company be unable to continue as a going concern.
Coopers & Lybrand L.L.P.
Melville, New York
July 25, 1996.
F-2
<PAGE> 46
GENERAL CREDIT CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS: 1995 1996
------------ ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 2,483 $ 78,624
------- --------
Total current assets 2,483 $ 78,624
Deposit on acquisition 100,000
Other assets 1,208 24,458
------- --------
Total assets $ 3,691 $203,082
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable $ $230,000
Due to corporate officer and shareholder 7,150
Accounts payable and accrued expenses 3,356
------- --------
Total current liabilities 7,150 233,356
------- --------
Commitments (Note 5)
Shareholders' equity (deficiency):
Common shares, $.001 par value, 20,000,000 shares authorized,
1,758,000 shares issued and outstanding 1,758 1,758
Additional paid-in capital 196 11,176
Deficit accumulated during development stage (413) (24,208)
Less deferred offering costs (5,000) (19,000)
------- --------
Total shareholders' equity (deficiency) (3,459) (30,274)
------- --------
Total liabilities and shareholders' equity $ 3,691 $203,082
======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 47
GENERAL CREDIT CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FEBRUARY 10, 1995 FOR THE THREE FEBRUARY 10, 1995
(INCEPTION) TO MONTHS ENDED (INCEPTION) TO
DECEMBER 31, MARCH 31, MARCH 31,
1995 1996 1996
--------------- ------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Expenses:
General and administrative 371 1,722 2,093
Amortization 42 7,738 7,780
Interest expense - (14,335) (14,335)
---------- ---------- ----------
Net loss $ (413) $ (23,795) $ (24,208)
========== ========== ==========
Net loss per common share $ - $ (.01) $ (.01)
========== ========== ==========
Weighted average number of common
shares outstanding 1,880,000 $1,880,000 1,880,000
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 48
GENERAL CREDIT CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE DEFERRED TOTAL
--------------------- PAID-IN DEVELOPMENT OFFERING SHAREHOLDER'S
SHARES AMOUNT CAPITAL STAGE COSTS EQUITY
--------- --------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 10, 1995 (inception) $ - $ - $ - $ - $ -
Issuance of common shares to original
founders for cash, at par value 1,758,000 1,758 196 1,954
Net loss for the period from February 10, 1995
(inception) to December 31, 1995 (413) (413)
Payment of offering costs (5,000) (5,000)
--------- ------ ------- -------- -------- --------
Balance, December 31, 1995 1,758,000 1,758 196 (413) (5,000) (3,459)
Options issued in connection with bridge
financing (Note 3) (unaudited) 10,980 10,980
Payment of offering costs (unaudited) (14,000) (14,000)
Net loss for the three months ended
March 31, 1996 (unaudited) - - (23,795) (23,795)
--------- ------ ------- -------- -------- --------
Balance, March 31, 1996 (unaudited) 1,758,000 $1,758 $11,176 $(24,208) $(19,000) $(30,274)
========= ====== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 49
GENERAL CREDIT CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FEBRUARY 10, 1995 FOR THE THREE FEBRUARY 10, 1995
(INCEPTION) TO MONTHS ENDED (INCEPTION) TO
DECEMBER 31, MARCH 31, MARCH 31,
1995 1996 1996
----------------- ------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (413) $ (23,795) $ (24,208)
Items not affecting cash:
Amortization 42 7,738 7,780
Change in assets and liabilities:
Accounts payable and accrued expenses 3,356 3,356
------ --------- ----------
Net cash provided by (used in)
operating activities (371) (12,701) (13,072)
------ --------- ----------
Cash flow from investing activities:
Deposit on acquisition (100,000) (100,000)
--------- ----------
Net cash used in investing activities (100,000) (100,000)
--------- ----------
Cash flows from financing activities:
Borrowings under bridge financing - 230,000 230,000
Proceeds from issuance of stock options 10,980 10,980
Proceeds from issuance of common stock 1,954 - 1,954
Deferred debt costs (1,250) (30,988) (32,238)
Deferred offering costs (5,000) (14,000) (19,000)
Loans from (repayments to) officer and 7,150 (7,150) -
shareholder
------ --------- ----------
Net cash (used in) provided by
financing activities 2,854 188,842 191,696
------ --------- ----------
Net increase in cash and
cash equivalents 2,483 76,141 78,624
Cash, beginning of period - 2,483 -
------ --------- ----------
Cash, end of period $2,483 $ 78,624 $ 78,624
====== ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 50
GENERAL CREDIT CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS AND REORGANIZATION
General Credit Corporation, a development stage company (the "Company"),
was incorporated in February, 1995, for the purpose of seeking out
business opportunities, including acquisitions. Since inception, the
Company's activities have been limited to administrative activities.
The accompanying financial statements have been prepared on a going
concern basis. The Company's continuation as a going concern is dependent
upon either the successful completion of the proposed public offering
(Note 4) or attaining other sources of financing.
Under its original certification of incorporation the Company was
authorized to issue 200 shares of its no par value common stock. Pursuant
to a plan of reorganization, effective April 22, 1996, the Company
authorized a 100,000 for one stock split and effected a 8,790 for one
stock dividend to shareholders of record. The accompanying financial
statements have been retroactively adjusted to reflect the foregoing
reorganization.
DEFERRED OFFERING COSTS
At December 31, 1995 and March 31, 1996, the Company has deferred costs
aggregating $5,000 and $19,000 (unaudited), respectively, in connection
with an expected public offering of its equity securities (Note 4). If
the offering is unsuccessful, they will be charged to operations.
DEBT ISSUANCE COSTS
Debt issuance costs related to the issuance of debt are capitalized and
amortized to interest expense using the effective interest method over the
lives of the related debt.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist of cash deposits.
Cash balances are held principally at one financial institution.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and notes payable are reflected in the accompanying balance sheet at
amounts considered by management to reasonably approximate fair value.
The fair value of the Company's notes payable approximates recorded
amounts as similar borrowings have been offered to the Company at
comparable rates and maturities.
F-7
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS, CONTINUED
EARNINGS PER SHARE
Net loss per share of common stock is based on the weighted average number
of common stock and common stock equivalents of $122,000, all deemed
outstanding for each period.
STATEMENT OF CASH FLOWS
The Company considers all highly liquid debt instruments, purchased with
maturities of three months or less, to be cash equivalents.
OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's 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 revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
INCOME TAXES
Under the balance sheet-based liability method specified by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
("SFAS 109"), deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which are expected to be
in effect when the differences reverse. The Company records a valuation
allowance to reduce deferred tax assets to the amount expected to be
realized.
As of December 31, 1995, the Company's net operating loss for tax purposes
differs from the loss for financial reporting purposes as a result of
certain costs being capitalized and expensed over a five-year period for
tax purposes. The Company has recorded a full valuation allowance against
the potential future benefit of such deferred tax assets.
2. OTHER ASSETS:
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ----------
(unaudited)
<S> <C> <C>
Debt issuance costs $1,000 $24,262
Other 208 196
------ -------
$1,208 $24,458
====== =======
</TABLE>
3. NOTES PAYABLE:
During fiscal 1996, the Company obtained $230,000 of bridge financing to
provide interim working capital and pay for costs associated with the
proposed public offering (Note 4). The
F-8
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS, CONTINUED
uncollateralized notes bear interest at 12% per annum and are payable upon
closing of the offering. The Company believes the payment terms will be
renegotiated if the offering does not close. In addition, the bridge
lenders received options to purchase a total of 138,000 shares of the
Company's common stock at $1 per share for a term of one year from the
closing of the offering.
Subsequent to March 31, 1996, the Company raised an additional $75,000 and
issued an additional 45,000 options to the holders of the notes. These
notes have the same terms as noted above. All the options issued in
connection with the bridge financing were valued at approximately $11,000
and will be amortized over the expected term of the debt.
4. PROPOSED PUBLIC OFFERING:
The Proposed Offering (the "Offering") calls for the Company to offer for
public sale 2,200,000 shares of its common stock and 2,200,000 redeemable
common stock warrants at $3.00 and $.125, respectively. Each warrant
would entitle the holder thereof to purchase one additional share of
common stock at an exercise price of $3.00 from the effective date of the
Registration Statement of the Offering until 1999. The Company would be
entitled to call all or a portion of the warrants for a redemption price
of $.25 per warrant upon 30 days prior written notice to the holders.
In connection with the proposed public offering, the Company will agree to
grant to the underwriter warrants to purchase up to 220,000 shares of
common stock at an exercise rate of $4.65 per underlying share,
exercisable during a five-year period commencing on the effective date. In
addition, the Company will grant warrants to the underwriter to purchase
up to 220,000 warrants ("representative underlying warrants") at an
exercise price of $.19375 per underlying warrant, exercisable during a
five-year period commencing on the effective date. Each underlying
warrant would entitle the holder to purchase a share of the Company's
common stock at an exercise price of $3.60 per share, exercisable during a
three-year period commencing on the effective date.
As additional compensation for the underwriter's services in connection
with the Offering, the Company will agree to pay the underwriter a
nonaccountable expense allowance of 3% of the total purchase price to the
public in the Offering and will agree to engage the underwriter as a
financial advisor for a three-year period from the closing of the Offering
at a total cost of $108,000 payable at closing.
5. PROPOSED ACQUISITION:
On February 19, 1996, the Company entered into a definitive agreement to
acquire New York Payroll Factors, Inc. ("NYPF") in exchange for $3,070,000
in cash, 375,000 shares of the Company's common stock, and a $300,000 note
payable due in 36 equal monthly installments at an interest rate of 10.5%
per annum. During March, April and July 1996, the Company has made
payments of $100,000, $25,000 and $25,000, respectively, towards the total
purchase price and has
F-9
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS, CONTINUED
included such deposits in other assets. The remaining balance is
expected to be paid from the proceeds of the Offering (Note 4). If the
acquisition does not close by November 15, 1996, the Company will forfeit
its deposit.
The following unaudited pro forma results of operations assume the
acquisition occurred as of January 1, 1995 and was recorded under the
purchase method of accounting. The proposed acquisition would result in
the recording of goodwill of $4,436,168 which is currently estimated to be
amortized over a fifteen-year period.
<TABLE>
<S> <C>
Net revenue $1,467,620
Net income 100,381
Net earnings per share $ .04
</TABLE>
6. SUBSEQUENT EVENT:
During July 1996, the Company sold 265,000 common shares to two unrelated
entities at par value. The value of the shares of approximately $114,000
will be included as part of the cost of the public offering (Note 4).
F-10
<PAGE> 54
NEW YORK PAYROLL FACTORS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants F-12
Balance Sheets as of December 31, 1995 (audited) and March 31, 1996 (unaudited) F-13
Statements of income for the years ended December 31, 1995 and 1994 (audited),
and for the three months ended March 31, 1996 and 1995 (unaudited) F-14
Statements of Shareholders' Equity for the year ended December 31, 1995 and 1994 (audited)
and for the three months ended March 31, 1996 (unaudited) F-15
Statements of Cash Flows for the years ended December 31, 1995 and 1994 (audited),
and for the three months ended March 31, 1996 and 1995 (unaudited) F-16
Notes to Financial Statements F-17
</TABLE>
F-11
<PAGE> 55
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of New York Payroll Factors, Inc.:
We have audited the accompanying balance sheet of New York Payroll Factors,
Inc. (the "Company"), as of December 31, 1995, and the related statements of
income, shareholders' equity, and cash flows for each of the two years in the
period ended December 31, 1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As more fully disclosed in Note 6, the Company entered into an agreement to
sell certain of its assets and all of its operations.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New York Payroll Factors, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Melville, New York
July 25, 1996.
F-12
<PAGE> 56
NEW YORK PAYROLL FACTORS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1995 1996
----------------- -----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 1,247,394 $ 1,951,830
Restricted cash 25,000
Accounts receivable 40,339 35,541
Prepaid expenses and other current assets 20,043 28,496
----------------- -----------------
Total current assets 1,307,776 2,040,867
Fixed assets, at cost, less accumulated depreciation 29,896 49,272
Intangibles, net 433,060 418,853
Other 4,375 9,560
----------------- -----------------
Total assets $ 1,775,107 $ 2,518,552
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 684,004 $ 1,174,696
Due to related parties 472,816 807,614
Accrued expenses 15,446 5,173
----------------- -----------------
Total current liabilities 1,172,266 1,987,483
Long-term portion of notes payable 95,117 74,849
Commitments (Note 5)
Shareholders' equity:
Common stock (no par value, 200 shares authorized,
26 shares issued and outstanding 50,000 50,000
Retained earnings 457,724 406,220
----------------- -----------------
Total shareholders' equity 507,724 456,220
----------------- -----------------
Total liabilities and shareholders' equity $ 1,775,107 $ 2,518,552
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE> 57
NEW YORK PAYROLL FACTORS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------------------------- --------------------------------------------
1994 1995 1995 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Fee income, net $ 1,525,378 $ 1,467,620 $ 350,112 $ 479,605
Selling, general and administrative
expenses 1,139,757 941,201 138,129 189,534
--------------- --------------- -------------- -------------
Income from operations 385,621 526,419 211,983 290,071
Interest expense 176,960 210,704 49,828 88,229
--------------- --------------- -------------- -------------
Income before provision
for income taxes 208,661 315,715 162,155 201,842
Provision for income taxes 16,848 27,114 5,428 3,902
--------------- --------------- --------------- -------------
Net income $ 191,813 $ 288,601 $ 156,727 $ 197,940
=============== =============== =============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE> 58
NEW YORK PAYROLL FACTORS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 26 $ 50,000 $ 413,992 $ 463,992
Net income for the year 191,813 191,813
Distributions to shareholders (277,674) (277,674)
------ -------------- ---------------- ---------------
Balance, December 31, 1994 26 50,000 328,131 378,131
Net income for the year 288,601 288,601
Distributions to shareholders (159,008) (159,008)
------ -------------- ---------------- ---------------
Balance, December 31, 1995 26 50,000 457,724 507,724
Net income for the three
months ended March 31, 1996
(unaudited) 197,940 197,940
Distributions to shareholders
(unaudited) (249,444) (249,444)
------ -------------- ---------------- ---------------
Balance, March 31, 1996 (unaudited) 26 $ 50,000 $ 406,220 $ 456,220
====== ============== ================ ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE> 59
NEW YORK PAYROLL FACTORS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
--------------------------------- -------------------------------------
1994 1995 1995 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 191,813 $ 288,601 $ 156,727 $ 197,940
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation 6,752 8,113 1,687 2,370
Amortization 56,816 56,816 14,207 14,207
Changes in assets and liabilities:
Accounts receivable 3,435 (18,116) (32,506) 4,798
Prepaid expenses and other 3,559
current assets (5,027) (6,649) (8,453)
Other assets (4,375) (5,185)
Accrued expenses 41,865 (54,121) (53,914) 163
Income tax payable 67 12,531 (10,437)
------------- ------------- ------------- --------------
Net cash provided by
operating activities 295,721 282,800 89,760 195,403
------------- ------------- ------------- --------------
Cash flows from investing activities:
Capital expenditures (19,144) (830) (21,746)
------------- ------------- --------------
Net cash used in
investing activities (19,144) (830) (21,746)
------------- ------------- --------------
Cash flows from financing activities:
Note payable borrowing 1,179,732 225,000 342,500 490,000
Note payable repayments (1,064,472) (359,056) (92,317) (19,575)
Distributions to shareholders (277,674) (159,008) (152,420) (249,444)
Net proceeds from related parties 385,379 81,220 156,499 334,798
Restricted funds (25,000)
------------- ------------- ------------- --------------
Net cash (used in) provided
by financing activities 222,965 (211,844) 254,262 530,779
------------- ------------- ------------- --------------
Net increase in cash 518,686 51,812 343,192 704,436
Cash at beginning of period 676,896 1,195,582 1,195,582 1,247,394
------------- ------------- ------------- --------------
Cash at end of period $ 1,195,582 $ 1,247,394 $ 1,538,774 $ 1,951,830
============= ============= ============= ==============
Supplemental information:
Interest paid during the year $ 176,960 $ 221,025
Taxes paid during the year 18,942 16,677
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE> 60
NEW YORK PAYROLL FACTORS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS
The Company was incorporated on January 24, 1989, pursuant to the laws
of New York State. The Company is engaged in providing working capital
financing to its customers through the discounted purchase of checks made
payable to the Company's customers. The Company deals with numerous small
and medium sized labor intensive contracting firms located in New York and
New Jersey, none of which provide the Company revenues in excess of 5% of
total revenues. Revenues are recognized at the time the customer is
provided cash for the purchase of third party checks.
FIXED ASSETS
Fixed assets are recorded at cost. Expenditures for additions and
betterments are capitalized and expenditures for maintenance and repairs are
charged to operations as incurred. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets
(leasehold improvements, 5-7 years, equipment, furniture and fixtures, 7
years). Upon retirement or disposal, the asset cost and related accumulated
depreciation and amortization are eliminated from the respective accounts
and the resulting gain or loss, if any, is included in the results of
operations for the period.
INTANGIBLE ASSETS
The net assets of businesses acquired are recorded at their fair value
at the acquisition date and any excess of acquisition costs over the fair
value of identifiable net assets acquired is included in goodwill and is
amortized on a straight-line basis over fifteen years. At December 31, 1995
and March 31, 1996, goodwill was $387,401 and $378,675 (unaudited),
respectively, net of amortization of $136,088 and $144,814 (unaudited),
respectively.
Covenants not to compete are stated at cost and are amortized using the
straight-line method over six years. At December 31, 1995 and March 31,
1996, covenants not to compete were $45,659 and $40,178 (unaudited),
respectively, net of amortization of $85,841 and $91,322 (unaudited),
respectively.
The Company continually evaluates the existence of goodwill impairment
on the basis of whether the goodwill is fully recoverable from projected,
undiscounted net cash flows for each related business. Based upon its most
recent analysis, the Company believes that no impairment of goodwill exists
at December 31, 1995. For the years ended December 31, 1995 and 1994 and
for the three months ended March 31, 1996, amortization of goodwill was
$56,816, $56,816 and $14,207 (unaudited), respectively.
F-17
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS, CONTINUED
INCOME TAXES
The Company is approved for S corporation status for income tax
purposes. Accordingly, taxable income, deductions and tax credits are
passed through to, and included in, the shareholders' respective income tax
returns and no provision for federal income taxes is included in the
accompanying statements of operations. S corporations operating in New York
are subject to a corporate level surcharge on their allocable net income
which is calculated using an effective rate equal to the difference between
the subchapter C corporate level tax rate and the highest personal income
tax rate. S corporations operating in New York City are taxed as C
corporations.
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), in 1994. Accordingly,
deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and
their financial reporting amounts based on enacted tax rates which will be
in effect when the differences reverse. Valuation allowances are
established when necessary to reduce deferred income tax assets to the
amount expected to be realized. Income tax provision is the tax payable for
the year and the change during the year in deferred income tax assets and
liabilities. The adoption of SFAS No. 109 did not have an impact on the
Company.
STATEMENT OF CASH FLOWS
The Company considers all highly liquid debt instruments, purchased with
original maturities of three months or less, to be cash equivalents. At
March 31, 1996, the Company had $25,000 (unaudited) in restricted cash
representing collateral for overdrafts.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist of accounts receivable and cash
deposits. Cash balances are held principally at one financial institution
and may, at times, exceed insurable amounts.
The Company believes concentration of credit risk with respect to
accounts receivable is limited due to the large number of customers
comprising the Company's customer base and the fact that no single customer
represents greater than 5% of the Company's sales or accounts receivable.
The Company performs ongoing informal background and financial evaluations
of its customers and does not require collateral.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents and notes payable are reflected in the
accompanying balance sheets at amounts considered by management to
reasonably approximate fair value.
USE OF ESTIMATES
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, liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements,
F-18
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS, CONTINUED
and reported amounts of revenues and expenses during the reporting
period. The Company performs ongoing credit evaluations of the entities
whose checks are discounted by customers.
2. FIXED ASSETS:
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures $ 33,738 $ 33,738
Office equipment 25,066 41,592
Leasehold improvements 7,586 12,806
-------------- --------------
66,390 88,136
Less: Accumulated amortization 36,494 38,864
-------------- --------------
$ 29,896 $ 49,272
============== ==============
</TABLE>
Depreciation expense for the years ended December 31, 1995 and 1994 and
for the three months ended March 31, 1996 were $8,113, $6,752 and $2,370
(unaudited), respectively.
3. NOTES PAYABLE:
In connection with the acquisition of the payroll factoring business
during fiscal 1992, the Company issued notes for the remaining unpaid
purchase price. These notes bear interest at 9% per annum and are
collateralized by the assets of the Company. The terms of the note require
the Company to pay $7,819 on a monthly basis through the maturity date of
June, 1998. At December 31, 1995 and March 31, 1996, $179,121 and $159,545
(unaudited), respectively, remains outstanding.
At December 31, 1995 and March 31, 1996, the Company had notes payable
to an unrelated party of $600,000. These notes are due at various dates
through fiscal 1996 and are payable on demand in the event the Company sells
its assets or stock. The notes have interest rates ranging from 17% to 24%
annually and are personally guaranteed by the majority shareholder of the
Company.
During the first quarter 1996, the Company borrowed an additional
$390,000 (unaudited) from two individuals for working capital purposes. Of
the total new borrowings, $300,000 is due at various dates through March
1997 and is payable on demand in the event the Company sells its assets or
stock. The remaining $90,000 note is payable on demand. These notes bear
interest at 20% annually and are personally guaranteed by the majority
shareholder of the Company. In addition, in January, 1996, the Company
borrowed $100,000 (unaudited) under a credit facility with a financial
institution bearing interest at the bank's prime (8.25% at March 31, 1996)
plus 1% and due in February, 1997.
F-19
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
FUTURE DECEMBER 31, MARCH 31,
YEARS 1995 1996
------ --------------- -----------------
<S> <C> <C>
1 $ 684,004 $ 1,174,696
2 85,602 65,334
3 9,515 9,515
--------------- -----------------
$ 779,121 $ 1,249,545
=============== =================
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Due to related parties includes a note payable of $472,816 to one of the
Company's shareholders which bears interest at a rate of 8% per annum and is
payable upon the shareholders' demand. During the three month period ended
March 31, 1996, the Company borrowed an additional $334,798 to fund working
capital requirements. This additional note bears interest at 8% per annum
and is payable upon the shareholders' demand.
5. COMMITMENTS AND CONTINGENCIES:
The Company is obligated under noncancelable real property agreements.
Minimum rents under these obligations are as follows:
<TABLE>
<S> <C>
1996 $ 80,136
1997 67,913
1998 67,762
1999 71,216
2000 65,627
Thereafter 4,629
--------------
$ 357,283
==============
</TABLE>
These leases contain escalation clauses with respect to related
operating costs. The accompanying financial statements reflect rent expense
on a straight-line basis over the terms of the lease as required by
generally accepted accounting principles. Rent expense was $31,743, $21,169
and $10,842 (unaudited) for fiscal 1995, 1994 and for the three months ended
March 31, 1996, respectively.
During February 1996, the Company entered into an exclusive agency
arrangement with an unrelated entity. This arrangement provides that the
entity will refer certain check factoring customers to the Company for a fee
ranging from 40% to 50% of the net fee revenues received. The arrangement
is currently expected to terminate during January 2001.
F-20
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. SUBSEQUENT EVENTS:
On February 14, 1996, the Company entered into a definitive agreement to
sell certain assets and all of its operations to General Credit Corporation
("GCC") in exchange for $3,070,000 in cash, 375,000 shares of GCC common
stock and a $300,000 note payable due in 36 monthly installments at an
interest rate of 10.5% per annum. During March, April and July of 1996, the
Company has received downpayments of $100,000, $25,000 and $25,000,
respectively, towards the total selling price.
On June 12, 1996, the Company entered into a line of credit agreement
with Merrill Lynch in the amount of $300,000. This facility is
collateralized by the assets of the Company and bears interest at the bank's
prime rate (8.25% at June 30, 1996) plus 1%. In addition, the provisions of
the agreement require the Company to maintain cash in a separate trust
account with Merrill Lynch in an amount not less than 66% of the outstanding
line of credit balance. As of June 14, 1996, the outstanding line of credit
balance is $300,000 and the restricted cash associated with the agreement is
$200,000.
F-21
<PAGE> 65
No dealer, salesman or any other person has been authorized to give any
information or to make any representation, other than those contained in this
Prospectus, in connection with the offering described herein, and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or the Underwriter. This Prospectus in connection
with the Offering does not constitute an offer to sell or solicitation of any
offer to buy, by any person in any jurisdiction in which it is unlawful for
such person to make such offer or solicitation. Neither the delivery of this
Prospectus nor any offer, solicitation or sale made hereunder, shall under any
circumstance, create any implication that the information herein is correct as
of any time subsequent to the date of the Prospectus.
TABLE OF CONTENTS
Page
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management's Discussion and
Analysis or Plan of Operation . . . . . . . . . . . . . . . . . .
General Credit Corporation Unaudited Pro Forma
Financial Statements
Proposed Business . . . . . . . . . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . .
Description of Securities . . . . . . . . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-1
UNTIL _________, 1996 (25 DAYS AFTER THE FIRST DATE ON WHICH THE REGISTERED
SECURITIES WERE BONA FIDE OFFERED TO THE PUBLIC), ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WITH RESPECT TO THEIR
SOLICITATION OF SUBSCRIPTIONS TO PURCHASE THE SECURITIES OFFERED HEREBY.
GENERAL CREDIT CORPORATION
2,200,000 SHARES OF COMMON STOCK
2,200,000 REDEEMABLE
COMMON STOCK PURCHASE WARRANTS
PROSPECTUS
---------------
BARRON CHASE SECURITIES, INC.
7700 WEST CAMINO REAL
SUITE 200
BOCA RATON, FLORIDA 33433
(561) 347-1200
ATLANTA, GEORGIA
BEVERLY HILLS, CALIFORNIA
BOSTON, MASSACHUSETTS
CHICAGO, ILLINOIS
CLEARWATER, FLORIDA
DALLAS, TEXAS
DENVER, COLORADO
EAST BOCA RATON, FLORIDA
HOOPESTON, ILLINOIS
MIAMI, FLORIDA
MIDDLETOWN, NEW JERSEY
MINNEAPOLIS, MINNESOTA
OKLAHOMA CITY, OKLAHOMA
PHOENIX, ARIZONA
SARASOTA, FLORIDA
TAMPA, FLORIDA
TULSA, OKLAHOMA
________, 1996
<PAGE> 66
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Paragraph Seventh of the Certificate of Incorporation, as amended, of
General Credit Corporation (the "Registrant") provides with respect to the
indemnification of directors and officers that the Registrant shall indemnify
its directors and officers to the fullest extent permitted by law in existence
either now or hereafter.
Reference is made to Section 6 of the Underwriting Agreement, which
provides for indemnification of the officers and directors of the Registrant
under certain circumstances.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth various expenses, other than
underwriting discounts, which will be incurred in connection with the Offering.
Other than the SEC registration fee, NASD filing fee and non-accountable
expense allowance payable to Barron Chase Securities, Inc. (the "Underwriter"),
amounts set forth below are estimates:
<TABLE>
<S> <C> <C>
SEC registration fee $6,066
NASD filing fee 2,258
* Non-Accountable Expense Allowance 206,250
Blue sky fees and expenses 15,000
Listing expenses 20,000
Printing and engraving expenses 25,000
Legal fees and expenses 110,000
Accounting fees and expenses 100,000
Transfer and Warrant Agent fees 2,500
--------
TOTAL: 487,074
========
Additional Non-Accountable Expense
Allowance assuming exercise of
Over-Allotment Option in full 30,938
--------
TOTAL: $518,012
========
</TABLE>
_____________
* Assumes no exercise of the Over-Allotment Option.
II-1
<PAGE> 67
Item 26. Recent Sales of Unregistered Securities.
The following sets forth information relating to all securities of the
Registrant sold by it since February 10, 1995, the date of the Registrant's
inception:
<TABLE>
<CAPTION>
Name Date of Issuance Shares of Common Stock Consideration per Share
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Irwin Zellermaier 4/24/96 855,000 $ .001
Victoria Kleinmunz (1) 4/24/96 805,000 $ .001
James M. Beimel, Sr. (2) 7/29/96 215,000 $ .001
David Bader 4/24/96 98,000 $ .001
James Connell (3) 7/10/96 50,000 $ .001
</TABLE>
- ---------------------
(1) Represents shares held by D.P. Morton & Associates, L.L.C., of which
Victoria Kleinmunz is the owner of 98% of the outstanding shares of common
stock and the sole director.
(2) Represents shares held by JMB Holding Inc., of which James M. Beimel,
Sr. is the sole shareholder and director.
(3) Represents shares held by Wall Street Equities, Inc., of which James
Connell is the sole shareholder, director and President.
Shares of Common Stock are contemplated to be issued in connection
with the closing of the NYPF Business Combination, in the amount of 150,000
shares to Gerald Schultz and 225,000 shares to Gerald Nimberg.
Item 27. Exhibits.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit Description
<S> <C>
1.1 Form of Underwriting Agreement between the Registrant and the Underwriter.
1.2 Form of Selected Dealer Agreement between the Underwriter and the Selected Dealers.
1.3 Form of Financial Advisory Agreement between the Registrant and the Underwriter.
1.4 Form of Merger and Acquisition Agreement between the Registrant and the Underwriter.
2.1 Amended and Restated Asset Purchase Agreement dated as of February 19, 1996 among
New York Payroll Factors, Inc., Gerald Schultz, Gerald Nimberg, and the Registrant.
Schedule 2.3 Allocation of Purchase Price
Schedule 3.6 Material Changes
Schedule 3.7 Advances and Accounts Receivable
Schedule 3.11 Litigation
Schedule 3.13 Employees
Schedule 3.15 Transactions with Affiliates
Schedule 3.16 Employee Benefit Plans
Exhibit "A" Assets
Exhibit "B" Obligations and Liabilities
Exhibit "C" Contracts
Exhibit "D" Employment Agreement between Buyer and Gerald Nimberg
</TABLE>
3.1 Certificate of Incorporation of the Registrant.
II-2
<PAGE> 68
<TABLE>
<S> <C>
3.2 Certificate of Amendment of Certificate of Incorporation of the Registrant.
3.3 By Laws of the Registrant.
*4.1 Form of certificate evidencing shares of Common Stock.
*4.2 Form of certificate evidencing Purchase Warrant.
*4.3 Form of Warrant Agreement between the Registrant and the Transfer and Warrant Agent.
4.4 Form of Underwriter's Warrant Agreement between the Registrant and the Underwriter.
*5.1 Opinion of Berman Wolfe & Rennert, P.A.
**10.1 Employment Agreement dated as of June 1, 1996 between the Registrant and Irwin Zellermaier.
**10.2 Employment Agreement dated as of June 1, 1996 between the Registrant and David Bader.
10.3 Lease Agreement dated January 13, 1992 between 201 Allen Street Associates, as Landlord, and Mersa Corp., as
Tenant.
10.4 Lease Agreement dated as of January 31, 1996 between Benjamin P. Feldman as Receiver for 491-499 Seventh Avenue,
as Owner, and G.S. Capital Corp., as Tenant.
10.5 Lease Agreement dated as of May 4, 1995 between Millinery Syndicate, Inc., as Owner, and Meryka, Inc., as Tenant.
10.6 Agreement dated as of February 1, 1996 between New York Payroll Factors, Inc. and Ace Ventures Inc.
10.7 Promissory note and option grant agreement dated February 7, 1996 made by the Registrant to David A. Viets.
10.8 Promissory note and option grant agreement dated February 7, 1996 made by the Registrant to M. S. Chen.
10.9 Promissory note and option grant agreement dated February 19, 1996 made by the Registrant to Dr. Isreal Kazew.
10.10 Promissory note and option grant agreement dated February 22, 1996 made by the Registrant to John G. Watson.
10.11 Promissory note and option grant agreement dated February 29, 1996 made by the Registrant to Dominic Ricci.
10.12 Promissory note and option grant agreement dated March 4, 1996 made by the Registrant to Anthony Fazio.
10.13 Promissory note and option grant agreement dated April 2, 1996 made by the Registrant to Regis Ferguson.
10.14 Promissory note and option grant agreement dated May 14, 1996 made by the Registrant to Christopher J. Wetzel.
*10.15 Form of Agreement regarding Restriction on Transferability of Shares.
23.1 Consent of Independent Accountants.
</TABLE>
II-3
<PAGE> 69
<TABLE>
<S> <C>
*23.2 Consent of Counsel (included as part of Exhibit 5.1).
25.1 Power of Attorney (included on the signature page of Part II of this Registration Statement).
</TABLE>
* To be filed by amendment
** Contracts with executive officers.
(b) FINANCIAL STATEMENT SCHEDULES. Financial statement schedules
are omitted because the conditions requiring their filing do not exist or the
information required thereby is included in the financial statements filed,
including the notes thereto.
Item 28. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post effective amendment to this registration statement:
(i) To include any Prospectus required by section 10(a)(3)of
the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; and
(iii) To include any additional or changed material
information with respect to the plan of distribution.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) To provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise
(other than insurance), the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against the public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
(6) (a) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4), or 497(h) under the Securities Act of 1933 shall be deemed to
be part of this registration statement as of the time it was declared
effective.
II-4
<PAGE> 70
(b) For the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 71
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
General Credit Corporation, the Registrant, certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form
SB-2 and authorized this Registration Statement to be signed on its behalf by
the undersigned, in the City of New York, State of New York, on the 8th day
of August, 1996.
GENERAL CREDIT CORPORATION
By: /s/ Irwin Zellermaier
---------------------------------
Irwin Zellermaier,
Chairman, Chief Executive
Officer, President
POWER OF ATTORNEY
We, the undersigned officers and directors of General Credit
Corporation, do hereby constitute and appoint Irwin Zellermaier our true and
lawful attorney and agent to do any and all acts and things and to execute any
all instruments which said attorney and agent may deem necessary and advisable
to enable said corporation to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including,
specifically, but without limitation, power and authority to sign for us or any
of us and all amendments hereto; and we do hereby ratify and confirm all that
the said attorney and agent shall do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement was signed below by the following persons m the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Irwin Zellermaier Chairman, Chief August 8, 1996
- ------------------------------------------ Executive Officer, President, director
Irwin Zellermaier
/s/ David Bader Vice President, Secretary, August 8, 1996
- ----------------------------------------- Treasurer, Chief
David Baker Financial Officer,
Chief Accounting Officer
director
director August , 1996
- -----------------------------------------
Vincent J. Putignano
/s/ Brien G. Reidy director August 8, 1996
- -----------------------------------------
Brien G. Reidy
</TABLE>
II-5
<PAGE> 72
INDEX TO EXHIBITS
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement between the Registrant and the Underwriter.
1.2 Form of Selected Dealer Agreement between the Underwriter and the Selected Dealers.
1.3 Form of Financial Advisory Agreement between the Registrant and the Underwriter.
1.4 Form of Merger and Acquisition Agreement between the Registrant and the Underwriter.
2.1 Amended and Restated Asset Purchase Agreement dated as of February 19, 1996 among New York Payroll Factors, Inc.,
Gerald Schultz, Gerald Nimberg, and the Registrant.
Schedule 2.3 Allocation of Purchase Price
Schedule 3.6 Material Changes
Schedule 3.7 Advances and Accounts Receivable
Schedule 3.11 Litigation
Schedule 3.13 Employees
Schedule 3.15 Transactions with Affiliates
Schedule 3.16 Employee Benefit Plans
Exhibit "A" Assets
Exhibit "B" Obligations and Liabilities
Exhibit "C" Contracts
Exhibit "D" Employment Agreement between Buyer and Gerald Nimberg
3.1 Certificate of Incorporation of the Registrant.
3.2 Certificate of Amendment of Certificate of Incorporation of the Registrant.
3.3 By Laws of the Registrant.
4.4 Form of Underwriter's Warrant Agreement between the Registrant and the Underwriter.
10.1 Employment Agreement dated as of June 1, 1996 between the Registrant and Irwin Zellermaier.
10.2 Employment Agreement dated as of June 1, 1996 between the Registrant and David Bader.
10.3 Lease Agreement dated January 13, 1992 between 201 Allen Street Associates, as Landlord, and Mersa Corp., as
Tenant.
10.4 Lease Agreement dated as of January 31, 1996 between Benjamin P. Feldman as Receiver for 491-499 Seventh Avenue,
as Owner, and G.S. Capital Corp., as Tenant.
10.5 Lease Agreement dated as of May 4, 1995 between Millinery Syndicate, Inc., as Owner, and Meryka, Inc., as Tenant.
10.6 Agreement dated as of February 1, 1996 between New York Payroll Factors, Inc. and Ace Ventures Inc.
10.7 Promissory note and option grant agreement dated February 7, 1996 made by the Registrant to David A. Viets.
10.8 Promissory note and option grant agreement dated February 7, 1996 made by the Registrant to M. S. Chen.
</TABLE>
II-6
<PAGE> 73
<TABLE>
<S> <C>
10.9 Promissory note and option grant agreement dated February 19, 1996 made by the Registrant to Dr. Isreal Kazew.
10.10 Promissory note and option grant agreement dated February 22, 1996 made by the Registrant to John G. Watson.
10.11 Promissory note and option grant agreement dated February 29, 1996 made by the Registrant to Dominic Ricci.
10.12 Promissory note and option grant agreement dated March 4, 1996 made by the Registrant to Anthony Fazio.
10.13 Promissory note and option grant agreement dated April 2, 1996 made by the Registrant to Regis Ferguson.
10.14 Promissory note and option grant agreement dated May 14, 1996 made by the Registrant to Christopher J. Wetzel.
23.1 Consent of Independent Accountants.
25.1 Power of Attorney (included on the signature page of Part II of this Registration Statement).
27.1 Financial Data Schedule (General Credit - YEAR)
27.2 Financial Data Schedule (General Credit - 3-MOS)
27.3 Financial Data Schedule (New York Payroll Factors, Inc. - YEAR)
27.4 Financial Data Schedule (New York Payroll Factors, Inc. - 3-MOS)
</TABLE>
II-7
<PAGE> 1
EXHIBIT 1.1
GENERAL CREDIT CORPORATION
2,200,000 SHARES OF COMMON STOCK AND
2,200,000 COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
Boca Raton, Florida
_____________, 1996
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Gentlemen:
General Credit Corporation (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein, hereby
proposes to issue and sell to Barron Chase Securities, Inc. (the
"Underwriter"), pursuant to the terms of this Underwriting Agreement (the
"Agreement"), on a "firm commitment" basis, 2,200,000 shares of Common Stock
(the "Shares") at $3.00 per Share and 2,200,000 Redeemable Common Stock
Purchase Warrants (the "Warrants") at $.125 per Warrant. The Shares and the
Warrants are collectively referred to as the "Securities". Each Warrant is
exercisable to purchase one (1) share of Common Stock (the "Common Stock") at
$3.00 per share at any time during the period between the Effective Date and
three (3) years from the Effective Date. The date upon which the Securities
and Exchange Commission ("Commission") shall declare the Registration Statement
of the Company effective shall be the "Effective Date". The Warrants are
subject to redemption under certain circumstances. In addition, the Company
proposes to grant to the Underwriter the option referred to in Section 2(b) to
purchase all or any part of an aggregate of 330,000 additional Shares and/or
330,000 additional Warrants (the "Option Securities").
You have advised the Company that you desire to purchase the
Securities, and that you are authorized to execute this Agreement. The Company
confirms the agreements made by it with respect to the purchase of the
Securities by the Underwriter, as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with the
Underwriter as of the Effective Date (as defined above), the
<PAGE> 2
Closing Date (as hereinafter defined) and the Option Closing Date (as
hereinafter defined) that:
(a) A registration statement (File No. 333-_______) on Form SB-2
relating to the public offering of the Securities, including a preliminary form
of the prospectus, copies of which have heretofore been delivered to you, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Commission thereunder, and has been filed
with the Commission under the Act. The Company has prepared in the same manner
and proposes to file, prior to the Effective Date of such registration
statement, an additional amendment or amendments to such registration
statement, including a final form of Prospectus, copies of which shall be
delivered to you. "Preliminary Prospectus" shall mean each prospectus filed
pursuant to the Rules and Regulations under the Act prior to the Effective
Date. The registration statement (including all financial schedules and
exhibits) as amended at the time it becomes effective and the final prospectus
included therein are respectively referred to as the "Registration Statement"
and the "Prospectus", except that (i) if the prospectus first filed by the
Company pursuant to Rule 424(b) of the Rules and Regulations shall differ from
said prospectus as then amended, the term "Prospectus" shall mean the
prospectus first filed pursuant to Rule 424(b), and (ii) if such registration
statement or prospectus is amended or such prospectus is supplemented, after
the effective date of such registration statement and prior to the Option
Closing Date (as hereinafter defined), the terms "Registration Statement" and
"Prospectus" shall include such registration statement and prospectus as so
amended, and the term "Prospectus" shall include the prospectus as so
supplemented, or both, as the case may be.
(b) At the Effective Date and at all times subsequent thereto up
to the Option Closing Date, if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriter or Selected Dealers: (i) the Registration Statement and Prospectus
will in all respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus
will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make statements
therein, in light of the circumstances under which they are made, not
misleading; provided, however, that the Company makes no representations,
warranties or agreement as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by the Underwriter specifically
for use in the preparation thereof. It is understood that the statements set
forth in the Prospectus with respect to stabilization, under the heading
"Underwriting" and regarding the identity of counsel to the Underwriter under
the heading "Legal
2
<PAGE> 3
Matters" constitute the only information furnished in writing by the
Underwriter for inclusion in the Prospectus.
(c) Each of the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with full power and
authority (corporate and other) to own its properties and conduct its business
as described in the Prospectus and is duly qualified to do business as a
foreign corporation and is in good standing in all other jurisdictions in which
the nature of its business or the character or location of its properties
requires such qualification, except where failure to so qualify will not
materially affect the Company's business, properties or financial condition.
(d) The authorized, issued and outstanding securities of the
Company as of the date of the Prospectus is as set forth in the Prospectus
under "Capitalization"; all of the issued and outstanding securities of the
Company have been, or will be when issued as set forth in the Prospectus, duly
authorized, validly issued and fully paid and non-assessable; the issuances
and sales of all such securities complied in all material respects with
applicable Federal and state securities laws; the holders thereof have no
rights of rescission against the Company with respect thereto, and are not
subject to personal liability by reason of being such holders; none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company; except as set forth in the Prospectus, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or agreements or
other rights to convert any obligation into, any securities of the Company have
been granted or entered into by the Company; and all of the securities of the
Company, issued and to be issued as set forth in the Registration Statement,
conform to all statements relating thereto contained in the Registration
Statement and Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and
paid for pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights of any security
holder of the Company. Neither the filing of the Registration Statement nor
the offering or sale of the Securities as contemplated in this Agreement gives
rise to any rights, other than those which have been waived or satisfied, for
or relating to the registration of any securities of the Company, except as
described in the Registration Statement.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in
3
<PAGE> 4
accordance with their terms and entitled to the benefits provided by the
warrant agreement pursuant to which such Warrants are to be issued (the
"Warrant Agreement"), which will be substantially in the form filed as an
exhibit to the Registration Statement. The shares of Common Stock issuable
upon exercise of the Warrants have been reserved for issuance and when issued
in accordance with the terms of the Warrants and Warrant Agreement, will be
duly and validly authorized, validly issued, fully paid and non-assessable,
free of pre-emptive rights and no personal liability will attach to the
ownership thereof. The Warrant exercise price and the Warrant exercise period
may not be changed or revised by the Company, without the prior written consent
of the Underwriter. The Warrant Agreement has been duly authorized and, when
executed and delivered pursuant to this Agreement, will have been duly executed
and delivered and will constitute the valid and legally binding obligation of
the Company enforceable in accordance with its terms.
The Common Stock Underwriter Warrants, the Warrant Underwriter
Warrants, the Underlying Warrants, the shares of Common Stock issuable upon
exercise of the Common Stock Underwriter Warrants, and the shares of Common
Stock issuable upon exercise of the Underlying Warrants (all as defined in the
Underwriter's Warrant Agreement described in Section 12 herein), have been duly
authorized and, when issued, delivered and paid for, will be validly issued,
fully paid, non-assessable, free of pre-emptive rights and no personal
liability will attach to the ownership thereof, and will constitute valid and
legally binding obligations of the Company enforceable in accordance with their
terms and entitled to the benefits provided by the Underwriter's Warrant
Agreement.
(f) This Agreement, the Warrant Agreement, the Financial Advisory
Agreement, the Merger and Acquisition Agreement (the "M/A Agreement") and the
Underwriter's Warrant Agreement have been duly and validly authorized, executed
and delivered by the Company, and assuming due execution of this Agreement by
the other party hereto, constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally. The Company has full power and lawful
authority to authorize, issue and sell the Securities to be sold by it
hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is
required in connection with such authorization, execution and delivery or with
the authorization, issue and sale of the Securities or the securities to be
issued pursuant to the Underwriter's Warrant Agreement, except such as may be
required under the Act or state securities laws, or as otherwise have been
obtained.
(g) Except as described in the Prospectus, neither the Company nor
any subsidiary is in material violation, breach of or
4
<PAGE> 5
default under, and consummation of the transactions herein contemplated and the
fulfillment of the terms of this Agreement will not conflict with, or result in
a breach of, or constitute a material default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the property or
assets of the Company or each subsidiary or any of the terms or provisions of
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or each subsidiary is a party or by which the
Company or each subsidiary may be bound or to which any of the property or
assets of the Company or each subsidiary is subject, nor will such action
result in any material violation of the provisions of the articles of
incorporation or by-laws of the Company or each subsidiary, as amended, or any
statute or any order, rule or regulation applicable to the Company or
subsidiary of any court or of any regulatory authority or other governmental
body having jurisdiction over the Company or each subsidiary.
(h) Subject to the qualifications stated in the Prospectus, the
Company and each subsidiary have good and marketable title to all properties
and assets described in the Prospectus as owned by each of them, free and clear
of all liens, charges, encumbrances or restrictions, except such as are not
materially significant or important in relation to its business; all of the
material leases and subleases under which the Company or each subsidiary is the
lessor or sublessor of properties or assets or under which the Company or each
subsidiary holds properties or assets as lessee or sublessee as described in
the Prospectus are in full force and effect, and, except as described in the
Prospectus, neither the Company nor each subsidiary is in default in any
material respect with respect to any of the terms or provisions of any of such
leases or subleases, and no claim has been asserted by anyone adverse to rights
of the Company or each subsidiary as lessor, sublessor, lessee, or sublessee
under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company or each subsidiary to continued possession
of the leased or subleased premises or assets under any such lease or sublease
except as described or referred to in the Prospectus; and the Company and each
subsidiary owns or leases all such properties described in the Prospectus as
are necessary to its operations as now conducted and, except as otherwise
stated in the Prospectus, as proposed to be conducted as set forth in the
Prospectus.
(i) Coopers & Lybrand, L.L.P., who has given their reports on
certain financial statements filed and to be filed with the Commission as part
of the Registration Statement, and which are included in the Prospectus, are
with respect to the Company, independent public accountants as required by the
Act and the Rules and Regulations.
(j) The financial statements and schedules, together with related
notes, set forth in the Prospectus and the Registration
5
<PAGE> 6
Statement present fairly the financial position and results of operations and
changes in financial position of the Company on the basis stated in the
Registration Statement, at the respective dates and for the respective periods
to which they apply. Said statements and related notes and schedules have been
prepared in accordance with generally accepted accounting principles applied on
a basis which is consistent during the periods involved. The Company's
internal accounting controls and procedures are sufficient to cause the Company
and each subsidiary to prepare financial statements which comply in all
material respects with generally accepted accounting principles applied on a
basis which is consistent during the periods involved. During the preceding
five (5) year period, nothing has been brought to the attention of the
Company's management that would result in any reportable condition relating to
the Company's internal accounting procedures, weaknesses or controls.
(k) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and the Prospectus and to and including
the Option Closing Date, except as set forth in or contemplated by the
Registration Statement and the Prospectus, (i) neither the Company nor any
subsidiary has incurred and will not have incurred any material liabilities or
obligations, direct or contingent, and has not entered into and will not have
entered into any material transactions other than in the ordinary course of
business and/or as contemplated in the Registration Statement and the
Prospectus; (ii) neither the Company nor any subsidiary has and will not have
paid or declared any dividends or have made any other distribution on its
capital stock; (iii) there has not been any change in the capital stock of, or
any incurrence of long-term debt by, the Company or any subsidiary; (iv)
neither the Company nor any subsidiary has issued any options, warrants or
other rights to purchase the capital stock of the Company or any subsidiary;
and (v) there has not been and will not have been any material adverse change
in the business, financial condition or results of operations of the Company or
any subsidiary, or in the book value of the assets of the Company or any
subsidiary, arising for any reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company or any subsidiary, threatened, any material
action, suit, proceeding, inquiry, arbitration or investigation against the
Company or any subsidiary, or any of the officers or directors of the Company
or any subsidiary, or any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might result in any material adverse
change in the condition (financial or other), business prospects, net worth, or
properties of the Company or any subsidiary.
(m) Except as disclosed in the Prospectus, each of the Company and
each subsidiary has filed all necessary federal, state
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<PAGE> 7
and foreign income and franchise tax returns and has paid all taxes shown as
due thereon; and there is no tax deficiency which has been or to the knowledge
of the Company might be asserted against the Company or any subsidiary that has
not been provided for in the financial statements.
(n) Except as set forth in the Prospectus, each of the Company and
each subsidiary has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all material
respects in compliance therewith and owns or possesses adequate right to use
all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service mark registrations, copyrights,
and licenses necessary for the conduct of such business and has not received
any notice of conflict with the asserted rights of others in respect thereof.
To the best of the Company's knowledge, none of the activities or business of
the Company or any subsidiary are in violation of, or cause the Company or any
subsidiary to violate, any law, rule, regulation or order of the United States,
any state, county or locality, or of any agency or body of the United States or
of any state, county or locality, the violation of which would have a material
adverse impact upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company and any
subsidiary.
(o) Neither the Company nor any subsidiary has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public
or quasi-public duties, other than payments or contributions required or
allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other
taxes (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the Underwriter
hereunder will have been fully paid or provided for by the Company and all laws
imposing such taxes will have been fully complied with.
(q) All contracts and other documents which are required to be
described in or filed as exhibits to the Registration Statement have been so
described and/or filed.
(r) Except as described in the Registration Statement and
Prospectus, no holders of Common Stock or of any other securities of the
Company have the right to include such Common Stock or other securities in the
Registration Statement and Prospectus.
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<PAGE> 8
(s) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, neither the Company nor any subsidiary has any
material contingent liabilities.
(t) The Company has no subsidiary corporations except as disclosed
in the Registration Statement and Prospectus, nor has it any equity interest in
any partnership, joint venture, association or other entity except as disclosed
in the Registration Statement or Prospectus. Except as described in the
Registration Statement and Prospectus, the Company owns all of the outstanding
securities of each of its subsidiaries.
(u) The Commission has not issued an order preventing or
suspending the use of any Preliminary Prospectus with respect to the offer and
sale of the Securities and each Preliminary Prospectus, as of its date, has
conformed fully in all material respects with the requirements of the Act and
the Rules and Regulations and did not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading.
(v) Neither the Company, nor, to the Company's knowledge, any of
its officers, directors, employees or stockholders, have taken or will take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any of the securities of the
Company.
(w) Item 26 of Part II of the Registration Statement accurately
discloses all unregistered securities sold by the Company within the three year
period prior to the date as of which information is presented in the
Registration Statement. All of such securities were sold in transactions which
were exempt from the registration provisions of the Act and not in violation of
Section 5 thereof.
(x) Other than as set forth in the Prospectus, the Company has not
entered into any agreement pursuant to which any person is entitled, either
directly or indirectly, to compensation from the Company for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriter against any losses, claims, damages
or liabilities, which shall include, but not be limited to, all costs to defend
against any such claim, so long as such claim arises out of agreements made or
allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or five percent (5%) or greater stockholder of the Company or
any subsidiary has any direct or indirect affiliation or association with any
member of the National Association of Securities Dealers, Inc. ("NASD"), except
as disclosed to the Underwriter in writing, and no beneficial owner of
8
<PAGE> 9
the Company's unregistered securities has any direct or indirect affiliation or
association with any NASD member except as disclosed to the Underwriter in
writing. The Company will advise the Underwriter and the NASD if any five
percent (5%) or greater shareholder of the Company or any subsidiary is or
becomes an affiliate or associated person of an NASD member participating in
the distribution.
(z) The Company and each subsidiary is in compliance in all
material respects with all federal, state and local laws and regulations
respecting the employment of its employees and employment practices, terms and
conditions of employment and wages and hours relating thereto. There are no
pending investigations involving the Company or any subsidiary by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state or local laws and regulations. There is no
unfair labor practice charge or complaint against the Company or any subsidiary
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or to the knowledge of the
Company, threatened against or involving the Company or any subsidiary or any
predecessor entity. No question concerning representation exists respecting
the employees of the Company or any subsidiary and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company
or any subsidiary. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any
subsidiary, if any.
(aa) Neither the Company nor any subsidiary maintains, sponsors nor
contributes to, nor is it required to contribute to, any program or arrangement
that is an "employee pension benefit plan", an "employee welfare benefit plan",
or a "multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). Neither the Company nor any subsidiary
maintained or contributed to a defined benefit plan, as defined in Section
3(35) of ERISA.
(ab) Based upon written representations received from the officers
and directors of the Company and each subsidiary, except as disclosed in the
Prospectus, during the past five years, none of the officers or directors of
the Company or any subsidiary have been:
(1) Subject of a petition under the Federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which either or them was a general
partner at or within two years before the time of such filing,
or any corporation or business
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<PAGE> 10
association of which either of them was an executive officer
at or within two years before the time of such filing;
(2) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) The subject of any order, judgment, or decree
not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily
enjoining either of them from, or otherwise limiting, any of
the following activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
Federal or State securities law or Federal Commodity
laws.
(4) The subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated of any Federal
or State authority barring, suspending or otherwise limiting
for more than sixty (60) days either of their right to engage
in any activity described in paragraph (3)(i) above, or be
associated with persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in
a civil action or by the Securities and Exchange Commission to
have violated any Federal or State securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in
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<PAGE> 11
a civil action or by the Commodity Futures Trading Commission
to have violated any Federal Commodities Law, and the judgment
in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated.
(ac) Based upon written representations received from the officers
and directors of the Company, each of the officers and directors of the Company
has reviewed the sections in the Prospectus relating to their biographical data
and equity ownership position in the Company, and all information contained
therein is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement and upon
the basis of the representations, warranties and agreements herein contained,
the Company hereby agrees to issue and sell to the Underwriter an aggregate of
2,200,000 Shares at $2.70 per Share and 2,200,000 Warrants at $.1125 per
Warrant (the public offering price less ten percent (10%)), at the place and
time hereinafter specified. The price at which the Underwriter shall sell the
Securities to the public shall be $3.00 per Share and $.125 per Warrant.
Delivery of the Securities against payment therefor shall take place
at the offices of Barron Chase Securities, Inc., 7700 West Camino Real, Suite
200, Boca Raton, Florida 33433 (or at such other place as may be designated by
the Underwriter) at 10:00 a.m., Eastern Time, on such date after the
Registration Statement has become effective as the Underwriter shall designate,
but not later than ten (10) business days (holidays excepted) following the
first date that any of the Securities are released to you, such time and date
of payment and delivery for the Securities being herein called the "Closing
Date".
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter to
purchase all or any part of an aggregate of an additional 330,000 Shares and
330,000 Warrants at the same price per Share and Warrant as the Underwriter
shall pay for the Securities being sold pursuant to the provisions of
subsection (a) of this Section 2 (such additional Securities being referred to
herein as the "Option Securities"). This option may be exercised within thirty
(30) days after the Effective Date of the Registration Statement upon notice by
the Underwriter to the Company advising as to the amount of Option Securities
as to which the option is being exercised, the names and denominations in which
the certificates for such Option Securities are to be registered and the time
and date when such certificates are to be delivered. Such time and date shall
be determined by the Underwriter but shall
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<PAGE> 12
not be later than ten (10) full business days after the exercise of said
option, nor in any event prior to the Closing Date, and such time and date is
referred to herein as the "Option Closing Date". Delivery of the Option
Securities against payment therefor shall take place at the offices of the
Underwriter. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriter of the Securities referred to in
subsection (a) above. In the event the Company declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of Common
Stock or any other consideration, prior to the Option Closing Date, such
dividend or distribution shall also be paid on the Option Closing Date.
(c) The Company will make the certificates for the Securities to
be sold hereunder available to you for inspection at least two (2) full
business days prior to the Closing Date at the offices of the Underwriter, and
such certificates shall be registered in such names and denominations as you
may request. Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of the
Company to the Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered by the Company to you
for the account of the Underwriter against payment of the purchase prices by
the Underwriter, by certified or bank cashier's checks in New York Clearing
House funds, payable to the order of the Company or by wire transfer in New
York Clearing House funds.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Securities pursuant
to the provisions of subsection (b) above, payment for such Securities shall be
made payable in New York Clearing House funds at the offices of the
Underwriter, or by wire transfer in New York Clearing House funds, at the time
and date of delivery of such Securities as required by the provisions of
subsection (b) above, against receipt of the certificates for such Securities
by the Underwriter for the account of the Underwriter registered in such names
and in such denominations as the Underwriter may request.
It is understood that the Underwriter proposes to offer the Securities
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement is declared
effective by the Commission.
3. Covenants of the Company. The Company covenants and agrees
with the Underwriter that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you
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<PAGE> 13
and will not at any time, whether before or after the Effective Date, file any
amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously been advised and furnished with a copy or to
which you or your counsel shall have objected in writing, acting reasonably, or
which is not in compliance with the Act and the Rules and Regulations. At any
time prior to the later of (i) the completion by the Underwriter of the
distribution of the Securities as contemplated hereby; or (ii) 25 days after
the date on which the Registration Statement shall have become or been declared
effective, the Company will prepare and file with the Commission, promptly upon
your request, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary or advisable in connection with the
distribution of the Securities and as mutually agreed by the Company and the
Underwriter.
After the Effective Date and as soon as the Company is advised
thereof, the Company will advise you, and confirm the advice in writing, of the
receipt of any comments of the Commission, of the effectiveness of any post-
effective amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request made by
the Commission for amendment of the Registration Statement or for supplementing
of the Prospectus or for additional information with respect thereto, of the
issuance by the Commission or any state or regulatory body of any stop order or
other order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such
purposes, and will use its best efforts to prevent the issuance of any such
order, and, if issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary and Final Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriter and Selected Dealers to use the Prospectus
in connection with the sale of the Securities for such period as in the opinion
of counsel to the Underwriter the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. In case of the
happening, at any time within such period as a Prospectus is required under the
Act to be delivered in connection with sales by the Underwriter or Selected
Dealers, of any event of which the Company has knowledge and which materially
affects the Company or the securities of the Company, or which in the opinion
of counsel for the Company or counsel for the Underwriter, should be set forth
in an amendment to the Registration Statement or a supplement to the
Prospectus, in order to make the statements therein not then misleading, in
light of the circumstances existing at the time the Prospectus is required to
be delivered to a
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<PAGE> 14
purchaser of the Securities, or in case it shall be necessary to amend or
supplement the Prospectus to comply with law or with the Act and the Rules and
Regulations, the Company will notify you promptly and forthwith prepare and
furnish to you copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as you may reasonably request,
in order that the Prospectus, as so amended or supplemented, will not contain
any untrue statement of a material fact or omit to state any material facts
necessary in order to make the statements in the Prospectus, in the light of
the circumstances under which they are made, not misleading. The preparation
and furnishing of any such amendment or supplement to the Registration
Statement or amended Prospectus or supplement to be attached to the Prospectus
shall be without expense to the Underwriter.
The Company will comply with the Act, the Rules and Regulations
thereunder, the Securities Exchange Act of 1934 (the "1934 Act"), and the rules
and regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will act in good faith and use its best efforts
and cooperate with you and your counsel to qualify to register the Securities
for sale under the securities or "blue sky" laws of such jurisdictions as the
Underwriter may designate and will make such applications and furnish such
information as may be required for that purpose and to comply with such laws,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities or to execute a general consent to service of process
in any jurisdiction in any action other than one arising out of the offering or
sale of the Securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriter may reasonably
request.
(c) If the sale of the Securities provided for herein is not
consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not limited
to, all such expenses itemized in Section 8(a) and 8(c) hereof, and either (i)
the out-of-pocket expenses of the Underwriter, not to exceed the $50,000
previously paid if the Underwriter elects to terminate the offering for any
reason; or (ii) the out-of-pocket expenses of the Underwriter if the Company
elects to terminate the offering for any reason. For the purposes of this
sub-paragraph, the Underwriter shall be deemed to have assumed such expenses
when they are billed or incurred, regardless of whether such expenses have been
paid. The Underwriter shall not be responsible for any expenses of the Company
or others, or for any charges or claims relative to the proposed public
offering if it is not consummated.
(d) The Company will deliver to you at or before the Closing
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<PAGE> 15
Date two signed copies of the Registration Statement, including all financial
statements and exhibits filed therewith, and of each amendment or supplement
thereto. The Company will deliver to or upon the order of the Underwriter,
from time to time until the Effective Date of the Registration Statement, as
many copies of any Preliminary Prospectus filed with the Commission prior to
the Effective Date of the Registration Statement as the Underwriter may
reasonably request. The Company will deliver to the Underwriter on the
Effective Date of the Registration Statement and thereafter for so long as a
Prospectus is required to be delivered under the Act, from time to time, as
many copies of the Prospectus, in final form, or as thereafter amended or
supplemented as the Underwriter may from time to time reasonably request.
(e) For so long as the Company is a reporting company under either
Section 12 or 15 of the 1934 Act, the Company, at its expense, will furnish to
the Underwriter during the period ending five (5) years from the Effective
Date, (i) as soon as practicable after the end of each fiscal year, a balance
sheet of the Company and any of its subsidiaries as at the end of such fiscal
year, together with statements of income, surplus and cash flow of the Company
and any subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as they are available, a copy of all reports
(financial or other) mailed to security holders; (iii) as soon as they are
available, a copy of all non-confidential documents, including annual reports,
periodic reports and financial statements, furnished to or filed with the
Commission under the Act and the 1934 Act; (iv) copies of each press release,
news item and article with respect to the Company's affairs released by the
Company; and (v) such other information as you may from time to time reasonably
request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will make generally available to its stockholders
and to the registered holders of its Warrants and deliver to you as soon as it
is practicable, but in no event later than the first day of the sixteenth full
calendar month following the Effective Date, an earnings statement (which need
not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the
necessary action to become a reporting company under Section 12 of the 1934
Act, and the Company will make all filings required to, and will have obtained
approval for, the listing of the Shares and
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<PAGE> 16
Warrants on The NASDAQ Small Cap Market System, and the Boston or Pacific Stock
Exchange, and will use its best efforts to maintain such listing for at least
seven (7) years from the date of this Agreement.
(i) For such period as the Company's securities are registered
under the 1934 Act, the Company will hold an annual meeting of stockholders for
the election of Directors within 180 days after the end of each of the
Company's fiscal years and, within 150 days after the end of each of the
Company's fiscal years will provide the Company's stockholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial statements shall be those required by
Rule 14a-3 under the 1934 Act and shall be included in an annual report
pursuant to the requirements of such Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption
"Use of Proceeds" in the Prospectus, and will file such reports with the
Commission with respect to the sale of the Securities and the application of
the proceeds therefrom as may be required by Sections 12, 13 and/or 15 of the
1934 Act and pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon your request, prepare and file
with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the reasonable opinion of counsel to the Underwriter and the Company
may be reasonably necessary or advisable in connection with the distribution of
the Securities and will use its best efforts to cause the same to become
effective as promptly as possible.
(l) On the Closing Date, the Company shall execute and deliver to
you the Underwriter's Warrant Agreement. The Underwriter's Warrant Agreement
and Warrant Certificates will be substantially in the form of the Underwriter's
Warrant Agreement filed as an Exhibit to the Registration Statement.
(m) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the Underwriter's Warrants outstanding from time to time.
(n) All beneficial owners of the Company's securities (including
Warrants, Options and Common Stock of the Company), as of the Effective Date,
shall agree in writing, in a form satisfactory to the Underwriter, not to sell,
transfer or otherwise dispose of any of such securities or underlying
securities for a period of twenty-four (24) months from the Effective Date, or
any longer period required by any State, without the prior written
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<PAGE> 17
consent of the Underwriter. All sales of the Company's securities by officers
and/or directors of the Company shall be effected through the Underwriter.
(o) The Company will obtain, on or before the Closing Date, key
person life insurance on each of the lives of Irwin Zellermaier and Gerald
Nimberg in an amount of not less than $1,000,000 each, and will use its best
efforts to maintains such insurance for a period of at least five (5) years
from the Effective Date.
(p) At the Closing Date, the Company will engage the Underwriter
as a non-exclusive financial advisor to the Company for a period of thirty-six
(36) months commencing on the first day of the month following the Company's
receipt of the proceeds of this offering, at an aggregate fee of $108,000, all
of which shall be payable to the Underwriter on the Closing Date. The
financial advisory agreement will provide that the Underwriter shall, at the
Company's request, provide advice and consulting services to the Company
concerning potential merger and acquisition proposals and the obtaining of
short or long-term financing for the Company, whether by public financing or
otherwise.
(q) Prior to the Closing Date, the Company shall, at its own
expense, undertake to list the Company's securities in the appropriate
recognized securities manual or manuals published by Standard & Poor's
Corporation and such other manuals as the Underwriter may designate, such
listings to contain the information required by such manuals and the Uniform
Securities Act. The Company hereby agrees to use its best efforts to maintain
such listing for a period of not less than five (5) years. The Company shall
take such action as may be reasonably requested by the Underwriter to obtain a
secondary market trading exemption in such states as may be reasonably
requested by the Underwriter.
(r) During the one hundred eighty (180) day period commencing on
the Closing Date, the Company will not, without the prior written consent of
the Underwriter, grant options or warrants to purchase the Company's Common
Stock at a price less than the initial per share public offering price.
(s) Prior to the Closing Date, neither the Company nor any
subsidiary will issue, directly or indirectly, without your prior consent, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering of the Securities other than
routine customary advertising of the Company's products and services, and
except as required by any applicable law or the directives of any relevant
regulatory authority in any relevant jurisdiction.
(t) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the
financial statements to be included in any registration statement or similar
disclosure document to be filed
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<PAGE> 18
by the Company hereunder, or any amendment or supplement thereto. For a period
of five (5) years from the Effective Date, the Company, at its expense, shall
cause its regularly engaged independent certified public accountants to review
(but not audit) the Company's financial statements for each of the first three
(3) fiscal quarters prior to the announcement of quarterly financial
information, the filing of the Company's quarterly report and the mailing of
quarterly financial information to stockholders.
(u) The Company shall retain American Stock Transfer & Trust
Company as the transfer agent for the securities of the Company, or such other
transfer agent as you may agree to in writing. In addition, the Company shall
direct such transfer agent to furnish the Underwriter with daily transfer
sheets as to each of the Company's securities as prepared by the Company's
transfer agent and copies of lists of stockholders and warrantholders as
reasonably requested by the Underwriter, for a five (5) year period commencing
from the Closing Date.
(v) The Company shall cause the Depository Trust Company, or such
other depository of the Company's securities, to deliver a "special security
position report" to the Underwriter on a daily and weekly basis at the expense
of the Company, for a five (5) year period from the Effective Date.
(w) Following the Effective Date, the Company shall, at its sole
cost and expense, prepare and file such Blue Sky applications with such
jurisdictions as the Underwriter shall designate and the Company may reasonably
agree.
(x) On the Effective Date and for a period of three (3) years
thereafter, the Company's Board of Directors shall consist of a minimum of five
(5) persons, two (2) of whom shall be independent and not otherwise affiliated
with the Company or associated with any of the Company's affiliates. The
Underwriter shall have the opportunity to invite an observer to attend Board of
Directors meetings of the Company at the expense of the Company.
(y) On the Closing Date, the Company shall execute and deliver to
you a non-exclusive M/A Agreement with the Underwriter in a form satisfactory
to the Underwriter, providing:
(1) The Underwriter will be paid a finder's fee, of from
five percent (5%) of the first $1,000,000 ranging in $1,000,000
increments down to one percent (1%) of the excess, if any, over
$4,000,000 of the consideration involved in any transaction introduced
in writing by the Underwriter (including mergers, acquisitions, joint
ventures, and any other business for the Company introduced by the
Underwriter) consummated by the Company, as an "Introduced,
Consummated Transaction", by which the Underwriter introduced the
other party to the Company during a period ending five (5) years
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from the date of the M/A Agreement; and
(2) That any such finder's fee due to the Underwriter
will be paid in cash or stock as mutually agreed at the closing of the
particular Introduced, Consummated Transaction for which the finder's
fee is due.
(z) After the Closing Date, the Company shall prepare and publish
"tombstone" advertisements of at least 5 x 5 inches in publications to be
designated by the Underwriter at a total cost not to exceed $20,000.
(aa) For such period as any Warrants are outstanding, the Company
shall use its best efforts to cause post-effective amendments to the
Registration Statement or a new Registration Statement to become effective in
compliance with the Act and without any lapse of time between the effectiveness
of any such post-effective amendments and cause a copy of each Prospectus, as
then amended, to be delivered to each holder of record of a Warrant and to
furnish to the Underwriter and each dealer as many copies of each such
Prospectus as the Underwriter or such dealer may reasonably request. Such
post-effective amendments or new Registration Statements shall also register
the Underwriter's Warrants and all the securities underlying the Underwriter's
Warrants. The Company shall not call for redemption of any of the Warrants
unless a Registration Statement covering the securities underlying the Warrants
has been declared effective by the Commission and remains current at least
until the date fixed for redemption. In addition, the Warrants shall not be
redeemable during the first year after the Effective Date without the written
consent of the Underwriter.
(ab) Until such time as the securities of the Company are listed or
quoted on either the New York Stock Exchange or the American Stock Exchange,
the Company shall engage the Company's legal counsel to deliver to the
Underwriter a written opinion detailing those states in which the Shares and
Warrants of the Company may be traded in non-issuer transactions under the Blue
Sky laws of the fifty states ("Secondary Market Trading Opinion"). The initial
Secondary Market Trading Opinion shall be delivered to the Underwriter on the
Effective Date, and the Company shall continue to update such opinion and
deliver same to the Underwriter on a timely basis, but in any event at the
beginning of each fiscal quarter, for a five (5) year period, if required.
(ac) As promptly as practicable after the Closing Date, the Company
will prepare, at its own expense, hard cover "bound volumes" relating to the
offering, and will distribute such volumes to the individuals designated by the
Underwriter or counsel to the Underwriter.
4. Conditions of Underwriters' Obligations. The obligations
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<PAGE> 20
of the Underwriter to purchase and pay for the Securities which they have
agreed to purchase hereunder from the Company are subject, as of the date
hereof and as of each Closing Date, to the continuing accuracy of, and
compliance with, the representations and warranties of the Company herein, to
the accuracy of statements of officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following conditions:
(a) (i) The Registration Statement shall have become effective
not later than 5:00 p.m., Eastern Time, on the date of this Agreement, or at
such later time or on such later date as you may agree to in writing; (ii) at
or prior to the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceeding for that purpose shall have been initiated or pending, or shall be
threatened, or to the knowledge of the Company, contemplated by the Commission;
(iii) no stop order suspending the effectiveness of the qualification or
registration of the Securities under the securities or "blue sky" laws of any
jurisdiction (whether or not a jurisdiction which you shall have specified)
shall be threatened or to the knowledge of the Company contemplated by the
authorities of any such jurisdiction or shall have been issued and in effect;
(iv) any request for additional information on the part of the Commission or
any such authorities shall have been complied with to the satisfaction of the
Commission and any such authorities, and to the satisfaction of counsel to the
Underwriter; and (v) after the date hereof no amendment or supplement to the
Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to the Underwriter and the Underwriter did not
object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any subsidiary or any material adverse change in
the long-term debt of the Company or any subsidiary except as set forth in or
contemplated by the Registration Statement, (ii) there shall not have been any
material adverse change in the general affairs, business, properties, condition
(financial or otherwise), management, or results of operations of the Company
or any subsidiary, whether or not arising from transactions in the ordinary
course of business, in each case other than as set forth in or contemplated by
the Registration Statement or Prospectus; (iii) neither the Company nor any
subsidiary shall have sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree, which is not set forth in the
Registration Statement and Prospectus; and (iv) the Registration Statement and
the Prospectus and any amendments or
20
<PAGE> 21
supplements thereto shall contain all statements which are required to be
stated therein in accordance with the Act and the Rules and Regulations, and
shall in all material respects conform to the requirements thereof, and neither
the Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstance under which they are made, not
misleading.
(c) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company or any subsidiary, threatened, any material
action, suit, proceeding, inquiry, arbitration or investigation against the
Company or any subsidiary, or any of the officers or directors of the Company
or any subsidiary, or any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might result in any material adverse
change in the condition (financial or other), business prospects, net worth, or
properties of the Company or any subsidiary.
(d) Each of the representations and warranties of the Company
contained herein shall be true and correct as of this date and at the Closing
Date as if made at the Closing Date, and all covenants and agreements herein
contained to be performed on the part of the Company and all conditions herein
contained to be fulfilled or complied with by the Company at or prior to the
Closing Date shall have been duly performed, fulfilled or complied with.
(e) At each Closing Date, you shall have received the opinion,
dated as of each Closing Date, from Berman Wolfe and Rennert, P.A., counsel for
the Company, in form and substance satisfactory to counsel for the Underwriter,
to the effect that:
(i) the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full
corporate power and authority to own its properties and conduct its
business as described in the Registration Statement and Prospectus and
is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each other jurisdiction in which the
ownership or leasing of its properties or conduct of its business
requires such qualification except for jurisdictions in which the
failure to so qualify would not have a material adverse effect on the
Company and each subsidiary as a whole;
(ii) the authorized capitalization of the Company is as set
forth under "Capitalization" in the Prospectus; all shares of the
Company's outstanding stock and other securities requiring
authorization for issuance by the Company's Board of Directors have
been duly authorized, validly issued, are fully
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<PAGE> 22
paid and non-assessable and conform to the description thereof
contained in the Prospectus; the outstanding shares of Common Stock of
the Company and other securities have not been issued in violation of
the preemptive rights of any shareholder and the shareholders of the
Company do not have any preemptive rights or, to such counsel's
knowledge, other rights to subscribe for or to purchase securities of
the Company, nor, to such counsel's knowledge, are there any
restrictions upon the voting or transfer of any of the securities of
the Company, except as disclosed in the Prospectus; the Common Stock,
the Shares, the Warrants, and the securities contained in the
Underwriter's Warrant Agreement conform to the respective descriptions
thereof contained in the Prospectus; the Common Stock, the Shares, the
Warrants, the shares of Common Stock to be issued upon exercise of the
Warrants and the securities contained in the Underwriter's Warrant
Agreement, have been duly authorized and, when issued, delivered and
paid for, will be duly authorized, validly issued, fully paid, non-
assessable, free of pre-emptive rights and no personal liability will
attach to the ownership thereof; all prior sales by the Company of the
Company's securities have been made in compliance with or under an
exemption from registration under the Act and applicable state
securities laws and no shareholders of the Company have any rescission
rights against the Company with respect to the Company's securities; a
sufficient number of shares of Common Stock has been reserved for
issuance upon exercise of the Warrants and the Underwriter Warrants,
and to the best of such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any registration rights
or other rights, other than those which have been waived or satisfied
or described in the Registration Statement;
(iii) this Agreement, the Underwriter's Warrant Agreement,
the Warrant Agreement, the Financial Advisory Agreement and the M/A
Agreement have been duly and validly authorized, executed and
delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement by the Underwriter, are the
valid and legally binding obligations of the Company, enforceable in
accordance with their terms, except (a) as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which
effect creditors' rights generally; and (b) no opinion is expressed as
to the enforceability of the indemnity provisions or the contribution
provisions contained in this Agreement;
(iv) the certificates evidencing the outstanding
securities of the Company, the Shares, the Common Stock and
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<PAGE> 23
the Warrants are in valid and proper legal form;
(v) to the best of such counsel's knowledge, except as set
forth in the Prospectus, there is not pending or, to the knowledge of
the Company, threatened, any material action, suit, proceeding,
inquiry, arbitration or investigation against the Company or any
subsidiary or any of the officers of directors of the Company or any
subsidiary, nor any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might materially and adversely
affect the condition (financial or otherwise), business prospects, net
worth, or properties of the Company or any subsidiary;
(vi) the execution and delivery of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement, the Financial
Advisory Agreement and the M/A Agreement, and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, will not result in a
violation of, or constitute a default under (a) the Articles of
Incorporation or By-Laws of the Company and each subsidiary; (b) to
the best of such counsel's knowledge, any material obligations,
agreement, covenant or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any contract, indenture,
mortgage, loan agreement, lease, joint venture or other agreement or
instrument to which the Company or any subsidiary is a party or by
which it or any of its properties is bound; or (c) to the best of such
counsel's knowledge, any material order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality
or court, domestic or foreign;
(vii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or
are pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations; and
(viii) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or
delivery of the Securities by the Company, in connection with the
execution, delivery and performance of this Agreement by the Company
or in connection with the taking of any action contemplated herein, or
the issuance of the Underwriter's Warrants or the Securities
underlying the
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<PAGE> 24
Underwriter's Warrants, other than registrations or qualifications of
the Securities under applicable state or foreign securities or Blue
Sky laws and registration under the Act.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law, upon opinions of
counsel satisfactory to you and counsel to the Underwriter. The opinion of
such counsel to the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Underwriter is
justified in relying thereon.
Such counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to the attention of such counsel to lead
such counsel to believe that the Registration Statement or any amendment
thereto at the time it became effective contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or that the Prospectus
or any supplement thereto contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make statements therein, in light of the circumstances under which
they are made, not misleading (except, in the case of both the Registration
Statement and any amendment thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto and other financial
information and statistical data contained therein, as to which such counsel
need express no opinion).
(f) You shall have received on each Closing Date a certificate
dated as of each Closing Date, signed by the Chief Executive Officer and the
Chief Financial Officer of the Company and such other officers of the Company
as the Underwriter may request, certifying that:
(i) No Order suspending the effectiveness of the
Registration Statement or stop order regarding the sale of the
Securities in effect and no proceedings for such purpose are pending
or are, to their knowledge, threatened by the Commission;
(ii) They do not know of any litigation instituted or, to
their knowledge, threatened against the Company or any subsidiary or
any officer or director of the Company or any subsidiary of a
character required to be disclosed in the
24
<PAGE> 25
Registration Statement which is not disclosed therein; they do not
know of any contracts which are required to be summarized in the
Prospectus which are not so summarized; and they do not know of any
material contracts required to be filed as exhibits to the
Registration Statement which are not so filed;
(iii) They have each carefully examined the Registration
Statement and the Prospectus and, to the best of their knowledge,
neither the Registration Statement nor the Prospectus nor any
amendment or supplement to either of the foregoing contains an untrue
statement of any material fact or omits to state any material fact
required to be stated therein or necessary to make the statement
therein, in light of the circumstances under which they are made, not
misleading; and since the Effective Date, to the best of their
knowledge, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in the condition of the Company or
any subsidiary, financial or otherwise, or in the results of its
operations, except as reflected in or contemplated by the Registration
Statement and the Prospectus and except as so reflected or
contemplated since such date, there has not been any material
transaction entered into by the Company or any subsidiary;
(v) The representations and warranties set forth in this
Agreement are true and correct in all material respects and the
Company has complied with all of its agreements herein contained;
(vi) Neither the Company nor any subsidiary is delinquent in
the filing of any federal, state and municipal tax return or the
payment of any federal, state or municipal taxes; they know of no
proposed redetermination or re-assessment of taxes, adverse to the
Company or any subsidiary, and the Company and each subsidiary has
paid or provided by adequate reserves for all known tax liabilities;
(vii) They know of no material obligation or liability of the
Company or any subsidiary, contingent or otherwise, not disclosed in
the Registration Statement and Prospectus;
(viii) This Agreement, the Underwriter's Warrant Agreement,
the Warrant Agreement, the Financial Advisory Agreement and the M/A
Agreement, the consummation of the transactions therein contemplated,
and the fulfillment of the terms thereof, will not result in a breach
by the Company of any terms of, or constitute a default under, its
Articles of
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<PAGE> 26
Incorporation or By-Laws, any indenture, mortgage, lease, deed or
trust, bank loan or credit agreement or any other material agreement
or undertaking of the Company or any subsidiary including, by way of
specification but not by way of limitation, any agreement or
instrument to which the Company or any subsidiary is now a party or
pursuant to which the Company or any subsidiary has acquired any right
and/or obligations by succession or otherwise;
(ix) The financial statements and schedules filed with and as
part of the Registration Statement present fairly the financial
position of the Company as of the dates thereof all in conformity with
generally accepted principles of accounting applied on a consistent
basis throughout the periods involved. Since the respective dates of
such financial statements, there have been no material adverse change
in the condition or general affairs of the Company, financial or
otherwise, other than as referred to in the Prospectus;
(x) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
except as may otherwise be indicated therein, neither the Company nor
any subsidiary has, prior to the Closing Date, either (i) issued any
securities or incurred any material liability or obligation, direct or
contingent, for borrowed money, or (ii) entered into any material
transaction other than in the ordinary course of business. The
Company has not declared, paid or made any dividend or distribution of
any kind on its capital stock;
(xi) They have reviewed the sections in the Prospectus
relating to their biographical data and equity ownership position in
the Company, and all information contained therein is true and
accurate; and
(xii) Except as disclosed in the Prospectus, during the past
five years, they have not been:
(1) Subject of a petition under the Federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which either or them was a general
partner at or within two years before the time of such filing,
or any corporation or business association of which either of
them was an executive officer at or within two years before
the time of such filing;
(2) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
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<PAGE> 27
(3) The subject of any order, judgment, or decree
not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily
enjoining either of them from, or otherwise limiting, any of
the following activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
Federal or State securities law or Federal Commodity
laws.
(4) The subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated of any Federal
or State authority barring, suspending or otherwise limiting
for more than sixty (60) days either of their right to engage
in any activity described in paragraph (3)(i) above, or be
associated with persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in
a civil action or by the Securities and Exchange Commission to
have violated any Federal or State securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to
have violated any Federal Commodities Law, and the judgment in
such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(g) The Underwriter shall have received from Coopers & Lybrand,
L.L.P.
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<PAGE> 28
independent accountants to the Company, certificates or letters, one dated and
delivered on the Effective Date and one dated and delivered on the Closing
Date, in form and substance satisfactory to the Underwriter, stating that:
(i) they are independent certified public accountants
with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) the financial statements and the schedules included
in the Registration Statement and the Prospectus were examined by them
and, in their opinion, comply as to form in all material respects with
the applicable accounting requirements of the Act, the Rules and
Regulations and instructions of the Commission with respect to
Registration Statements on Form SB-2;
(iii) on the basis of inquiries and procedures conducted by
them (not constituting an examination in accordance with generally
accepted auditing standards), including a reading of the latest
available unaudited interim financial statements or other financial
information of the Company (with an indication of the date of the
latest available unaudited interim financial statements), inquiries of
officers of the Company who have responsibility for financial and
accounting matters, review of minutes of all meetings of the
shareholders and the Board of Directors of the Company and other
specified inquiries and procedures, nothing has come to their
attention as a result of the foregoing inquiries and procedures that
causes them to believe that:
(a) during the period from (and including) the
date of the financial statements in the Registration Statement
and the Prospectus to a specified date not more than five days
prior to the date of such letters, there has been any change
in the Common Stock, long-term debt or other securities of the
Company (except as specifically contemplated in the
Registration Statement and Prospectus) or any material
decreases in net current assets, net assets, shareholder's
equity, working capital or in any other item appearing in the
Company's financial statements as to which the Underwriter may
request advice, in each case as compared with amounts shown in
the balance sheet as of the date of the financial statement in
the Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or will
occur;
(b) during the period from (and including) the date
of the financial statements in the Registration Statement and
the Prospectus to such specified date there was any material
decrease in revenues or in the total or per
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<PAGE> 29
share amounts of income or loss before extraordinary items or
net income or loss, or any other material change in such other
items appearing in the Company's financial statements as to
which the Underwriter may request advice, in each case as
compared with the fiscal period ended as of the date of the
financial statement in the Prospectus, except in each case for
increases, changes or decreases which the Prospectus discloses
have occurred or will occur;
(c) the unaudited interim financial statements of
the Company appearing in the Registration Statement and the
Prospectus (if any) do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Rules and Regulations or are not fairly presented
in conformity with generally accepted accounting principles
and practices on a basis substantially consistent with the
audited financial statements included in the Registration
Statements or the Prospectus.
(iv) they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be in
agreement; and
(v) they have not during the immediately preceding five
(5) year period brought to the attention of the Company's management
any reportable condition related to the Company's internal accounting
procedures, weaknesses and/or controls.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriter. Any changes, increases or decreases
in the items set forth in such letters which, in the judgment of the
Underwriter, are materially adverse with respect to the financial position or
results of operations of the Company shall be deemed to constitute a failure of
the Company to comply with the conditions of the obligations to the Underwriter
hereunder.
(h) Upon exercise of the option provided for in Section 2(b)
hereof, the obligation of the Underwriter to purchase and pay for the Option
Securities referred to therein will be subject (as of
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<PAGE> 30
the date hereof and as of the Option Closing Date) to the following additional
conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to your knowledge
or the knowledge of the Company, shall be contemplated by the
Commission, and any reasonable request on the part of the Commission
for additional information shall have been complied with to the
satisfaction of counsel to the Underwriter.
(ii) At the Option Closing Date, there shall have been
delivered to you the signed opinion from Berman Wolfe & Rennert, P.A.,
counsel for the Company, dated as of the Option Closing Date, in form
and substance satisfactory to counsel to the Underwriter, which
opinion shall be substantially the same in scope and substance as the
opinion furnished to you at the Closing Date pursuant to Section 4(e)
hereof, except that such opinion, where appropriate, shall cover the
Option Securities.
(iii) At the Option Closing Date, there shall have been
delivered to you a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company, dated the Option Closing Date,
in form and substance satisfactory to counsel to the Underwriter,
substantially the same in scope and substance as the certificate
furnished to you at the Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been
delivered to you a letter in form and substance satisfactory to you
from Coopers & Lybrand, L.L.P., independent accountants to the Company,
dated the Option Closing Date and addressed to the Underwriter
confirming the information in their letter referred to in Section 4(g)
hereof and stating that nothing has come to their attention during the
period from the ending date of their review referred to in said letter
to a date not more than five business days prior to the Option Closing
Date, which would require any change in said letter if it were
required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Securities
shall be satisfactory in form and substance to the Underwriter, and
the Underwriter and counsel to the Underwriter shall have been
furnished with all such documents, certificates, and opinions as you
may request in connection with this transaction in order to evidence
the accuracy and completeness of any of the representations,
warranties or statements of the Company or its compliance with any of
the
30
<PAGE> 31
covenants or conditions contained herein.
(i) No action shall have been taken by the Commission or the NASD,
the effect of which would make it improper, at any time prior to the Closing
Date, for members of the NASD to execute transactions (as principal or agent)
in the Common Stock and no proceedings for the taking of such action shall have
been instituted or shall be pending, or, to the knowledge of the Underwriter or
the Company, shall be contemplated by the Commission or the NASD. The Company
represents that at the date hereof it has no knowledge that any such action is
in fact contemplated by the Commission or the NASD. The Company shall advise
the Underwriter of any NASD affiliations of any of its officers, directors, or
stockholders or their affiliates in accordance with paragraph 1(y) of this
Agreement.
(j) At the Effective Date, you shall have received from counsel to
the Company, dated as of the Effective Date, in form and substance satisfactory
to counsel for the Underwriter, a written Secondary Market Trading Opinion
detailing those states in which the Shares and Warrants may be traded in
non-issuer transactions under the Blue Sky laws of the fifty (50) states after
the Effective Date, in accordance with paragraph 3(ab) of this Agreement.
(k) The authorization and issuance of the Securities and delivery
thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to counsel
for the Underwriter, and such counsel shall be furnished with such documents,
certificates and opinions as they may reasonably request to enable them to pass
upon the matters referred to in this sub-paragraph.
(l) Prior to the Effective Date, the Underwriter shall have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriter, as described in the Registration Statement.
(m) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be canceled at, or at
any time prior to, the Closing Date and/or the Option Closing Date by the
Underwriter notifying the Company of such cancellation in writing or by
telegram or facsimile at or prior to the applicable Closing Date. Any such
cancellation shall be without liability of the Underwriter to the Company.
5. Conditions of the Obligations of the Company. The obligation
of the Company to sell and deliver the Securities is subject to the following
conditions:
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<PAGE> 32
(i) The Registration Statement shall have become
effective not later than 5:00 p.m., Eastern Time, on the date of this
Agreement, or on such later time or date as the Company and the
Underwriter may agree in writing; and
(ii) At the Closing Date and the Option Closing Date, no stop
orders suspending the effectiveness of the Registration Statement
shall have been issued under the Act or any proceedings therefore
initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the Closing Date but are not fulfilled
after the Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Securities on exercise of the
option provided for in Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and holds
harmless the Underwriter and each person, if any, who controls the Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include but not
be limited to, all reasonable costs of defense and investigation and all
attorneys' fees), to which the Underwriter or such controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in (i) the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, (ii) any blue sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company and filed in
any state or other jurisdiction in order to qualify any or all of the
Securities under the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), or arise out of
or are based upon the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus, Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such cases to the
extent, but only to the extent, that any such losses, claim, damages or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Underwriter specifically for use in the preparation of the Registration
Statement or any such amendment or supplement thereof or any such Blue Sky
Application or any such Preliminary Prospectus or the Prospectus or any such
amendment or supplement thereto. Notwithstanding the foregoing, the Company
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<PAGE> 33
shall have no liability under this section if such untrue statement or omission
made in a Preliminary Prospectus is cured in the Prospectus and the Prospectus
is not delivered to the person or persons alleging the liability upon which
indemnification is being sought. This indemnity will be in addition to any
liability which the Company may otherwise have.
(b) The Underwriter indemnifies and holds harmless the Company, each
of its directors, each nominee (if any) for director named in the Prospectus,
each of its officers who have signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of the Act, against
any losses, claims, damages or liabilities (which shall, for all purposes of
this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statements or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by you or by any Underwriter through you specifically
for use in the preparation thereof. Notwithstanding the foregoing, the
Underwriter shall have no liability under this section if such untrue statement
or omission made in a Preliminary Prospectus is cured in the Prospectus and the
Prospectus is not delivered to the person or persons alleging the liability
upon which indemnification is being sought through no fault of the Underwriter.
This indemnity agreement will be in addition to any liability which the
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify in writing the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly
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notified, to assume the defense thereof, subject to the provisions herein
stated, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party and in the reasonable judgment of
the Underwriter, it is advisable for the Underwriter or controlling persons to
be represented by separate counsel (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
Underwriter or such controlling person, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for
all such Underwriter and controlling persons, which firm shall be designated in
writing by you). No settlement of any action against an indemnified party
shall be made without the consent of the indemnifying party, which shall not be
unreasonably withheld in light of all factors of importance to such
indemnifying party.
7. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) the Underwriter makes claim
for indemnification pursuant to Section 6 hereof but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case,
notwithstanding the fact that the express provisions of Section 6 provide for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of the Underwriter, then the Company and each person who
controls the Company, in the aggregate, and the Underwriter shall contribute to
the aggregate losses, claims, damages or liabilities to which it may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all
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<PAGE> 35
reasonable costs of defense and investigation and all reasonable attorneys'
fees) in either such case (after contribution from others) in such proportions
that the Underwriter is responsible in the aggregate for that portion of such
losses, claims, damages or liabilities represented by the percentage that the
underwriting discount per Share and per Warrant appearing on the cover page of
the Prospectus bears to the public offering price appearing thereon, and the
Company shall be responsible for the remaining portion, provided, however, that
(a) if such allocation is not permitted by applicable law then the relative
fault of the Company and the Underwriter and controlling persons, in the
aggregate, in connection with the statements or omissions which resulted in
such damages and other relevant equitable considerations shall also be
considered. The relative fault shall be determined by reference to, among
other things, whether in the case of an untrue statement of a material fact or
the omission to state a material fact, such statement or omission relates to
information supplied by the Company, or the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the Underwriter
agree that it would not be just and equitable if the respective obligations of
the Company and the Underwriter to contribute pursuant to this Section 7 were
to be determined by pro rata or per capita allocation of the aggregate damages
(even if the Underwriter and their controlling persons in the aggregate were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
first sentence of this Section. No person ultimately determined to be guilty
of a fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who is not ultimately
determined to be guilty of such fraudulent misrepresentation. As used in this
paragraph, the term "Underwriter" includes any officer, director, or other
person who controls the Underwriter within the meaning of Section 15 of the
Act, and the word "Company" includes any officer, director, or person who
controls the Company within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not permitted by law,
then the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company, its officers, directors and
controlling persons to the full extent permitted by law. This foregoing
agreement shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than the Company and the
Underwriter. No contribution shall be requested with regard to the settlement
of any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
8. Costs and Expenses. (a) Whether or not this Agreement
becomes effective or the sale of the Securities to the Underwriter
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<PAGE> 36
is consummated, the Company will pay all costs and expenses incident to the
performance of this Agreement by the Company including but not limited to the
fees and expenses of counsel to the Company and of the Company's accountants;
the costs and expenses incident to the preparation, printing, filing and
distribution under the Act of the Registration Statement (including the
financial statements therein and all amendments and exhibits thereto),
Preliminary Prospectus and the Prospectus, as amended or supplemented; the fee
of the National Association of Securities Dealers, Inc. ("NASD") in connection
with the filing required by the NASD relating to the offering of the Securities
contemplated hereby; all state filing fees, expenses and disbursements and
legal fees of counsel to the Underwriter who shall serve as Blue Sky counsel to
the Company in connection with the filing of applications to register the
Securities under the state securities or blue sky laws (which legal fees shall
be payable by the Company in the sum of $20,000, of which $10,000 has been
paid); the cost of printing and furnishing to the Underwriter copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, this
Agreement, the Selected Dealers Agreement, and the Blue Sky Memorandum; the
cost of printing the certificates evidencing the securities comprising the
Securities; the cost of preparing and delivering to the Underwriter and its
counsel bound volumes containing copies of all documents and appropriate
correspondence filed with or received from the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc., and all
closing documents; and the fees and disbursements of the transfer agent for the
Company's securities. The Company shall pay any and all taxes (including any
original issue, transfer, franchise, capital stock or other tax imposed by any
jurisdiction) on sales to the Underwriter hereunder. The Company will also pay
all costs and expenses incident to the furnishing of any amended Prospectus or
of any supplement to be attached to the Prospectus. The Company shall also
engage the Company's counsel to provide the Underwriter with a written
Secondary Market Trading Opinion in accordance with paragraphs 3(ab) and 4(j)
of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at
the Closing Date pay to the Underwriter a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received from the sale of the
Securities, of which an advance of $50,000 has been paid to date. In the event
the overallotment option is exercised, the Company shall pay to the Underwriter
at the Option Closing Date an additional amount equal to three percent (3%) of
the gross proceeds received upon exercise of the overallotment option.
(c) Other than as disclosed in the Registration Statement, no person
is entitled either directly or indirectly to compensation from the Company,
from the Underwriter or from any other person for services as a finder in
connection with the proposed offering, and
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<PAGE> 37
the Company agrees to indemnify and hold harmless the Underwriter against any
losses, claims, damages or liabilities, which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees, to which the Underwriter may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the claim of any person (other
than an employee of the party claiming indemnity) or entity that he or it is
entitled to a finder's fee in connection with the proposed offering by reason
of such person's or entity's influence or prior contact with the indemnifying
party.
9. Effective Date. The Agreement shall become effective upon its
execution except that you may, at your option, delay its effectiveness until
11:00 a.m., Eastern time, on the first full business day following the
effective date of the Registration Statement, or at such earlier time after the
effective date of the Registration Statement as you in your discretion shall
first commence the public offering by the Underwriter of any of the Securities.
The time of the public offering shall mean the time after the effectiveness of
the Registration Statement when the Securities are first generally offered by
you to the Selected Dealers. This Agreement may be terminated by you at any
time before it becomes effective as provided above, except that Sections 3(c),
6, 7, 8, 12, 13, 14, 15, 16 and 17 shall remain in effect notwithstanding such
termination.
10. Termination. (a) This Agreement, except for Sections 3(c),
6, 7, 8, 12, 13, 14, 15, 16, and 17 hereof, may be terminated at any time
prior to the Closing Date, and the option referred to in Section 2(b) hereof,
if exercised, may be cancelled at any time prior to the Option Closing Date, by
you if in your judgment it is impracticable to offer for sale or to enforce
contracts made by the Underwriter for the resale of the Securities agreed to be
purchased hereunder by reason of: (i) the Company having sustained a material
adverse loss, whether or not insured, by reason of fire, earthquake, flood,
accident or other calamity, or from any labor dispute or court or government
action, order or decree; (ii) trading in securities on the New York Stock
Exchange or the American Stock Exchange having been suspended or limited; (iii)
material governmental restrictions having been imposed on trading in securities
generally (not in force and effect on the date hereof); (iv) a banking
moratorium having been declared by Federal or New York or Florida state
authorities; (v) an outbreak of major international hostilities or other
national or international calamity having occurred involving the United States;
(vi) the passage by the Congress of the United States or by any state
legislative body of similar impact, of any act or measure, or the adoption of
any orders, rules or regulations by any governmental body or any authoritative
accounting institute or board, or any governmental executive, which is
reasonably believed likely by the Underwriter to have a material adverse impact
on the business,
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<PAGE> 38
financial condition or financial statements of the Company or the market for
the securities offered hereby; (vii) any material adverse change in the
financial or securities markets beyond normal market fluctuations having
occurred since the date of this Agreement; (viii) any material adverse change
having occurred, since the respective dates as of which information is given in
the Registration Statement and Prospectus, in the earnings, business prospects
or general condition of the Company, financial or otherwise, whether or not
arising in the ordinary course of business; (ix) a pending or threatened legal
or governmental proceeding or action relating generally to the Company's
business, or a notification having been received by the Company of the threat
of any such proceeding or action, which could, in the reasonable judgment of
the Underwriter, materially adversely affect the Company; (x) except as
contemplated by the Prospectus, the Company is merged or consolidated into or
acquired by another company or group or there exists a binding legal commitment
for the foregoing or any other material change of ownership or control occurs;
or (xi) the Company shall not have complied in all material respects with any
term, condition or provisions on their part to be performed, complied with or
fulfilled (including but not limited to those set forth in this Agreement)
within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section, the Company shall be
promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
11. Underwriter's Warrant Agreement. At the Closing Date, the
Company will issue to the Underwriter and/or persons related to the
Underwriter, for an aggregate purchase price of $10, and upon the terms and
conditions set forth in the form of Underwriter's Warrant Agreement annexed as
an exhibit to the Registration Statement, Underwriter Warrants to purchase up
to an aggregate of 220,000 Shares and 220,000 Warrants, in such denominations
as the Underwriter shall designate. In the event of conflict in the terms of
this Agreement and the Underwriter's Warrant Agreement, the language of the
form of Underwriter's Warrant Agreement shall control.
12. Representations, Warranties and Agreements to Survive
Delivery. The respective indemnities, agreements, representations, warranties
and other statements of the Company and its principal officers, where
appropriate, and the Underwriter set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriter, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment
for the Securities and the termination of this Agreement.
13. Notice. All communications hereunder will be in writing
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<PAGE> 39
and, except as otherwise expressly provided herein, will be mailed, delivered
or telegraphed and confirmed:
If to the Underwriter: Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Copy to: David A. Carter, P.A.
355 West Palmetto Park Road
Boca Raton, Florida 33432
If to the Company: Irwin Zellermaier, President
General Credit Corporation
211 E. 70th Street
New York, New York 10021
Copy to: Charles J. Rennert, Esq.
Berman Wolfe & Rennert, P.A.
International Place, 35th Floor
100 Southeast Second Street
Miami, Florida 33131-2130
14. Parties in Interest. This Agreement herein set forth is made
solely for the benefit of the Underwriter, the Company and, to the extent
expressed, any person controlling the Company or the Underwriter, and directors
of the Company, nominees for directors (if any) named in the Prospectus, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors, assigns and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser of the Securities, as
such purchaser, from the Underwriter.
15. Applicable Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida applicable to
contracts made and to be performed entirely within the State of Florida. The
parties agree that any action brought by any party against another party in
connection with any rights or obligations arising out of this Agreement shall
be instituted properly in a federal or state court of competent jurisdiction
with venue only in the Fifteenth Judicial Circuit Court in and for Palm Beach
County, Florida or the United States District Court for the Southern District
of Florida, West Palm Beach Division. A party to this Agreement named as a
Defendant in any action brought in connection with this Agreement in any court
outside of the above named designated county or district shall have the right
to have the venue of said action changed to the above designated county or
district or, if necessary, have the case dismissed, requiring the other party
to refile such action in an appropriate court in the above designated county or
federal district.
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<PAGE> 40
16. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
17. Entire Agreement. This Agreement and the agreements referred
to within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreement, understanding, negotiations and discussions,
whether written or oral, of the parties hereto.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding Agreement between the Company and the Underwriter in accordance with
its terms.
Very truly yours,
GENERAL CREDIT CORP.
BY: _______________________________
Irwin Zellermaier, President
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
BARRON CHASE SECURITIES, INC.
BY: _______________________________
Robert T. Kirk, President
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<PAGE> 1
EXHIBIT 1.2
GENERAL CREDIT CORPORATION
2,200,000 Shares of Common Stock and
2,200,000 Common Stock Purchase Warrants
SELECTED DEALER AGREEMENT
Boca Raton, Florida
_____________, 1996
Gentlemen:
1. Barron Chase Securities, Inc. (the "Underwriter") is offering
for sale an aggregate of 2,200,000 Shares of Common Stock (the "Shares") and
2,200,000 Warrants (the "Warrants") (collectively the "Firm Securities") of
General Credit Corporation (the "Company"), which the Underwriter has agreed to
purchase from the Company, and which are more particularly described in the
Registration Statement, Underwriting Agreement and Prospectus. In addition,
the Underwriter has been granted an option to purchase from the Company up to
an additional 330,000 Shares and an additional 330,000 Warrants (the "Option
Securities") to cover overallotments in connection with the sale of the Firm
Securities. The Firm Securities and any Option Securities purchased are herein
called the "Securities". The Securities and the terms under which they are to
be offered for sale by the Underwriter is more particularly described in the
Prospectus.
2. The Securities are to be offered to the public by the
Underwriter at the price per Share and price per Warrant set forth on the cover
page of the Prospectus (the "Public Offering Price"), in accordance with the
terms of offering set forth in the Prospectus.
3. The Underwriter, subject to the terms and conditions hereof,
is offering a portion of the Securities for sale to certain dealers who are
actually engaged in the investment banking or securities business and who are
either (a) members in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"), or (b) dealers with their principal places of
business located outside the United States, its territories and its possessions
and not registered as brokers or dealers under the Securities Exchange Act of
1934, as amended (the "1934 Act"), who have agreed not to make any sales within
the United States, its territories or its possessions or to persons who are
nationals thereof or residents therein (such dealers who shall agree to sell
Securities hereunder being herein called "Selected Dealers") at the public
offering price, less a selling concession (which may be changed) of not in
excess of $______ per Share and/or $_______ per Warrant payable as hereinafter
provided, out of which concession an amount not exceeding $__________ per Share
and/or $_________ per
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<PAGE> 2
Warrant may be reallowed by Selected Dealers to members of the NASD or foreign
dealers qualified as aforesaid. The Selected Dealers who are members of the
NASD agree to comply with all of the provisions of the NASD Conduct Rules.
Foreign Selected Dealers agree to comply with the provisions of Section 2740 of
the NASD Conduct Rules, and, if any such dealer is a foreign dealer and not a
member of the NASD, such Selected Dealer also agrees to comply with the NASD's
Interpretation with Respect to Free-Riding and Withholding, and to comply, as
though it were a member of the NASD, with the provisions of Sections 2730 and
2750 of the NASD Conduct Rules, and to comply with Section 2420 thereof as that
section applies to non-member foreign dealers. The Underwriter has agreed
that, during the term of this Agreement, it will be governed by the terms and
conditions hereof.
4. Barron Chase Securities, Inc. shall act as Underwriter and
shall have full authority to take such action as we may deem advisable in
respect to all matters pertaining to the public offering of the Securities.
5. If you desire to act as a Selected Dealer, and purchase any of
the Securities, your application should reach us promptly by facsimile or
telegraph at the offices of Barron Chase Securities, Inc., 7700 West Camino
Real, Suite 200, Boca Raton, Florida 33433. We reserve the right to reject
subscriptions in whole or in part, to make allotments, and to close the
subscription books at any time without notice. The Securities allotted to you
will be confirmed, subject to the terms and conditions of this Agreement.
6. The privilege of subscribing for the Securities is extended to
you only on the condition that the Underwriter may lawfully sell the Securities
to Selected Dealers in your state or other applicable jurisdiction.
7. Any Securities to be purchased by you under the terms of this
Agreement may be immediately reoffered to the public in accordance with the
terms of offering as set forth herein and in the Prospectus, subject to the
securities or Blue Sky laws of the various states or other jurisdictions.
You agree to pay us on demand for the account of the Underwriter an
amount equal to the Selected Dealer concession as to any Securities purchased
by you hereunder which, prior to the completion of the public offering as
defined in paragraph 8 below, we may purchase or contract to purchase for our
account and, in addition, we may charge you with any broker's commission and
transfer tax paid in connection with such purchase or contract to purchase.
Certificates for Securities delivered on such repurchases need not be the
identical certificates originally purchased.
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<PAGE> 3
You agree to advise us from time to time, upon request, of the number
of Securities purchased by you hereunder and remaining unsold at the time of
such request, and, if in our opinion any such Securities shall be needed to
make delivery of the Securities sold or overallotted for the account of the
Underwriter, you will, forthwith upon our request, grant to us for the account
of the Underwriter the right, exercisable promptly after receipt of notice from
you that such right has been granted, to purchase, at the Public Offering Price
less the selling concession or such part thereof as we shall determine, such
number of Securities owned by you as shall have been specified in our request.
No expenses shall be charged to Selected Dealers. A single transfer
tax, if payable, upon the sale of the Securities by the Underwriter to you will
be paid when such Securities are delivered to you. However, you shall pay any
transfer tax on sales of Securities by you and you shall pay your proportionate
share of any transfer tax (other than the single transfer tax described above)
in the event that any such tax shall from time to time be assessed against you
and other Selected Dealers as a group or otherwise.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the sale of the
Securities other than as contained in the Prospectus.
8. The first three paragraphs of Section 7 hereof will terminate
when we shall have determined that the public offering of the Securities has
been completed and upon telefax notice to you of such termination, but, if not
theretofore terminated, they will terminate at the close of business on the
30th full business day after the date hereof; provided, however, that we shall
have the right to extend such provisions for a further period or periods, not
exceeding an additional 30 days in the aggregate upon telefax notice to you.
9. For the purpose of stabilizing the market in the Securities,
we have been authorized to make purchases and sales of the Securities of the
Company, in the open market or otherwise, for long or short account, and, in
arranging for sales, to overallot.
10. On becoming a Selected Dealer, and in offering and selling the
Securities, you agree to comply with all the applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the 1934 Act. You
confirm that you are familiar with Rule 15c2-8 under the 1934 Act relating to
the distribution of preliminary and final prospectuses for securities of an
issuer (whether or not the issuer is subject to the reporting requirements of
Section 13 or 15(d) of the 1934 Act) and confirm that you have complied and
will comply therewith.
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<PAGE> 4
We hereby confirm that we will make available to you such number of
copies of the Prospectus (as amended or supplemented) as you may reasonably
request for the purposes contemplated by the 1933 Act or the 1934 Act, or the
rules and regulations thereunder.
11. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Securities are qualified
for sale under the respective securities or Blue Sky laws of such states and
other jurisdictions, but we shall not assume any obligation or responsibility
as to the right of any Selected Dealer to sell the Securities in any state or
other jurisdiction or as to the eligibility of the Securities for sale therein.
We will, if requested, file a Further State Notice in respect of the Securities
pursuant to Article 23-A of the General Business Law of the State of New York.
12. No Selected Dealer is authorized to act as agent for the
Underwriter, or otherwise to act on our behalf, in offering or selling the
Securities to the public or otherwise or to furnish any information or make any
representation except as contained in the Prospectus.
13. Nothing will constitute the Selected Dealers an association or
other separate entity or partners with the Underwriter, or with each other, but
you will be responsible for your share of any liability or expense based on any
claim to the contrary. We shall not be under any liability for or in respect
of value, validity or form of the Securities, or the delivery of the
certificates for the Securities, or the performance by anyone of any agreement
on its part, or the qualification of the Securities for sale under the laws of
any jurisdiction, or for or in respect of any other matter relating to this
Agreement, except for lack of good faith and for obligations expressly assumed
by us or by the Underwriter in this Agreement and no obligation on our part
shall be implied herefrom. The foregoing provisions shall not be deemed a
waiver of any liability imposed under the 1933 Act.
14. Payment for the Securities sold to you hereunder is to be made
at the Public Offering Price less the above-mentioned selling concession on
such time and date as we may advise, at the office of Barron Chase Securities,
Inc., 7700 West Camino Real, Suite 200, Boca Raton, Florida 33433, by a
certified or official bank check or wire transfer in current New York Clearing
House funds, payable to the order of Barron Chase Securities, Inc., as
Underwriter, against delivery of certificates for the Securities so purchased.
If such payment is not made at such time, you agree to pay us interest on such
funds at the prevailing broker's loan rate.
15. Notices to us should be addressed to us at the offices of
Barron Chase Securities, Inc., 7700 West Camino Real, Suite 200, Boca Raton,
Florida 33433, Attention: Robert T. Kirk. Notices to you shall be deemed to
have been duly given if telephoned,
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<PAGE> 5
telefaxed, telegraphed or mailed to you at the address to which this letter is
addressed.
16. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to the
choice of law or conflicts of law principles thereof.
17. If you desire to purchase any Securities and act as a Selected
Dealer, please confirm your application by signing and returning to us your
confirmation on the duplicate copy of this letter enclosed herewith, even
though you may have previously advised us thereof by telephone or telegraph.
Our signature hereon may be by facsimile.
Very truly yours,
BARRON CHASE SECURITIES, INC.
BY:______________________________
Authorized Officer
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<PAGE> 6
Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
We hereby subscribe for __________ Shares and/or ___________ Warrants
of General Credit Corporation in accordance with the terms and conditions
stated in the foregoing Selected Dealers Agreement and letter. We hereby
acknowledge receipt of the Prospectus referred to in the Selected Dealers
Agreement and letter. We further state that in purchasing said Shares and/or
Warrants we have relied upon said Prospectus and upon no other statement
whatsoever, whether written or oral. We confirm that we are a dealer actually
engaged in the investment banking or securities business and that we are either
(i) a member in good standing of the National Association of Securities
Dealers, Inc. ("NASD"); or (ii) a dealer with its principal place of business
located outside the United States, its territories and its possessions and not
registered as a broker or dealer under the Securities Exchange Act of 1934, as
amended, who hereby agrees not to make any sales within the United States, its
territories or its possessions or to persons who are nationals thereof or
residents therein. As a member of the NASD, we hereby agree to comply with all
of the provisions of NASD Conduct Rules. If we are a foreign Selected Dealer,
we agree to comply with the provisions of Section 2740 of the Conduct Rules,
and if we are a foreign dealer and not a member of the NASD, we agree to comply
with the NASD's interpretation with respect to free-riding and withholding, and
agree to comply, as though we were a member of the NASD, with provisions of
Sections 2730 and 2750 of such Conduct Rules, and to comply with Section 2420
thereof as that Section applies to non-member foreign dealers.
Firm:________________________________
By:________________________________
(Name and Position)
Address:________________________________
________________________________
Telephone No.:________________________________
Dated:___________________, 1996
6
<PAGE> 1
EXHIBIT 1.3
FINANCIAL ADVISORY AGREEMENT
This Agreement is made and entered into as of the ______ day of
___________, 1996, between General Credit Corporation (the "Company") and
Barron Chase Securities, Inc. (the "Financial Advisor").
W I T N E S S E T H :
WHEREAS, the Company has engaged the Financial Advisor to act as the
Underwriter in connection with the public offering of the Company's securities;
and
WHEREAS, the Financial Advisor has experience in providing financial
and business advice to public and private companies; and
WHEREAS, the Company is seeking and the Financial Advisor is willing
to furnish business and financial related advice and services to the Company on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of, and for the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
1. Purpose. The Company hereby engages the Financial Advisor on
a non-exclusive basis for the term specified in this Agreement to render
financial advisory and consulting advice to the Company as an investment banker
relating to financial and similar matters upon the terms and conditions set
forth herein.
2. Representations of the Financial Advisor and the Company. The
Financial Advisor represents and warrants to the Company that (i) it is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD") and that it is engaged in the securities brokerage business; (ii) in
addition to its securities brokerage
<PAGE> 2
business, the Financial Advisor provides consulting advisory services; and
(iii) it is free to enter into this Agreement and the services to be provided
pursuant to this Agreement are not in conflict with any other contractual or
other obligation to which the Financial Advisor is bound. The Company
acknowledges that the Financial Advisor is in the business of providing
financial services and consulting advice (of the type contemplated by this
Agreement) to others and that nothing herein contained shall be construed to
limit or restrict the Financial Advisor in conducting such business with
respect to others, or rendering such advice to others.
3. Duties of the Financial Advisor. During the term of this
Agreement, the Financial Advisor will provide the Company with consulting
advice as specified below at the request of the Company, provided that the
Financial Advisor shall not be required to undertake duties not reasonably
within the scope of the consulting advisory service in which the Financial
Advisor is engaged generally. In performance of these duties, the Financial
Advisor shall provide the Company with the benefits of its best judgment and
efforts. It is understood and acknowledged by the parties that the value of
the Financial Advisor's advice is not measurable in any quantitative manner,
and that the amount of time spent rendering such consulting advice shall be
determined according to the Financial Advisor's discretion.
The Financial Advisor's duties may include, but will not necessarily
be limited to:
1) Advice relating to corporate financing activities;
2) Recommendations relating to specific business
operations and investments;
2
<PAGE> 3
3) Advice relating to financial planning; and
4) Advice regarding future financings involving
securities of the Company or any subsidiary.
4. Term. The term of this Agreement shall be for thirty-six (36)
months commencing on the first day of the month following the Company's receipt
of the proceeds from the contemplated public offering (the "Commencement
Date"); provided, however, that this Agreement may be renewed or extended upon
such terms and conditions as may be mutually agreed upon by the parties hereto.
5. Fee. The Company shall pay the Financial Advisor a fee of
$108,000 for the financial services to be rendered pursuant to this Agreement,
all of which shall be payable at the Closing Date of the Company's proposed
public offering.
6. Expenses. In addition to the fees payable hereunder, the
Company shall reimburse the Financial Advisor, within five (5) business days of
its request, for any and all reasonable out-of-pocket expenses incurred in
connection with the services performed by the Financial Advisor and its counsel
pursuant to this Agreement, including (i) reasonable hotel, food and associated
expenses; (ii) reasonable charges for travel; (iii) reasonable long-distance
telephone calls; and (iv) other reasonable expenses spent or incurred on the
Company's behalf. All such expenses in excess of $500 shall be pre-approved by
the Company.
7. Introduction of Customers, Origination of Line of Credit and
Similar Transactions. In the event the Financial Advisor originates a line of
credit with a lender or a corporate partner, the Company and the Financial
Advisor will mutually agree on a satisfactory fee and the
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<PAGE> 4
terms of payment of such fee. In the event the Financial Advisor introduces
the Company to a joint venture partner or customer and sales develop as a
result of the introduction, the Company agrees to pay a fee of five percent
(5%) of total sales generated directly from this introduction during the first
two years following the date of the first sale. Total sales shall mean cost
receipts less any applicable refunds, returns, allowances, credits and shipping
charges and monies paid by the Company by way of settlement or judgment arising
out of claims made by or threatened against the Company. Commission payments
shall be paid on the 15th day of each month following the receipt of customers'
payments. In the event any adjustments are made to the total sales after the
commission has been paid, the Company shall be entitled to an appropriate
refund or credit against future payments under this Agreement.
All fees to be paid pursuant to this paragraph, except as otherwise
specified, are due and payable to the Financial Advisor in cash at the closing
or closings of any transaction specified in this paragraph. In the event that
this Agreement shall not be renewed or if terminated for any reason,
notwithstanding any such non-renewal or termination, the Financial Advisor
shall be entitled to a full fee as provided under this paragraph for any
transaction for which the discussions were initiated during the term of this
Agreement and which is consummated within a period of twelve months after
non-renewal or termination of this Agreement. Nothing herein shall impose any
obligation on the part of the Company to enter into any transaction or to use
any services of the Financial Advisor offered pursuant to this paragraph or
this Agreement.
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<PAGE> 5
8. Use of Advice by the Company; Public Market for the Company's
Securities. The Company acknowledges that all opinions and advice (written or
oral) given by the Financial Advisor to the Company in connection with the
engagement of the Financial Advisor are intended solely for the benefit and use
of the Company in considering the transaction to which they relate, and the
Company agrees that no person or entity other than the Company shall be
entitled to make use of or rely upon the advice of the Financial Advisor to be
given hereunder, and no such opinion or advice shall be used for any other
purpose or reproduced, disseminated, quoted or referred to at any time, in any
manner or for any purpose, nor may the Company make any public references to
the Financial Advisor, or use of the Financial Advisor's name in any annual
reports or any other reports or releases of the Company without the prior
written consent of the Financial Advisor.
The Company acknowledges that the Financial Advisor makes no
commitment whatsoever as to making a public trading market in the Company's
securities or to recommending or advising its clients to purchase the Company's
securities. Research reports or corporate finance reports that may be prepared
by the Financial Advisor will, when and if prepared, be done solely on the
merits or judgment and analysis of the Financial Advisor or any senior
corporate finance personnel of the Financial Advisor.
9. Company Information; Confidentially. The Company recognizes
and confirms that, in advising the Company and in fulfilling its engagement
hereunder, the Financial Advisor will use and rely on data, material and other
information furnished to the Financial Advisor by the Company. The Company
acknowledges and agrees that in performing its
5
<PAGE> 6
services under this engagement, the Financial Advisor may rely upon the data,
material and other information supplied by the Company without independently
verifying the accuracy, completeness or veracity of same. In addition, in the
performance of its services, the Financial Advisor may look to such others for
such factual information, economic advice and/or research upon which to base
its advice to the Company hereunder as the Financial Advisor shall in good
faith deem appropriate.
Except as contemplated by the terms hereof or as required by
applicable law, the Financial Advisor shall keep confidential all non-public
information provided to it by the Company, and shall not disclose such
information to any third party without the Company's prior written consent,
other than such of its employees and advisors as the Financial Advisor
determines to have a need to know.
10. Indemnification.
The Company shall indemnify and hold harmless the Financial Advisor
against any and all liabilities, claims, lawsuits, including any and all awards
and/or judgments to which it may become subject under the Securities Act of
1933, (the "Act"), the Securities Exchange Act of 1934, as amended (the "1934
Act") or any other federal or state statute, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including costs, expenses,
awards and/or judgments) arise out of or are in connection with the services
rendered by the Financial Advisor or any transactions in connection with this
Agreement, except for any liabilities, claims and lawsuits (including awards
and/or judgments), arising out of willful misconduct or willful omissions of
the Financial Advisor. In addition, the Company shall also indemnify and hold
harmless the Financial Advisor against any and all reasonable
6
<PAGE> 7
costs and expenses, including reasonable counsel fees, incurred relating to the
foregoing.
The Financial Advisor shall give the Company prompt notice of any such
liability, claim or lawsuit which the Financial Advisor contends is the subject
matter of the Company's indemnification and the Company thereupon shall be
granted the right to take any and all necessary and proper action, at its sole
cost and expense, with respect to such liability, claim and lawsuit, including
the right to settle, compromise and dispose of such liability, claim or
lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
The Financial Advisor shall indemnify and hold the Company harmless
against any and all liabilities, claims and lawsuits, including any and all
awards and/or judgments to which it may become subject under the Act, the 1934
Act or any other federal or state statute, at common law or otherwise, insofar
as said liabilities, claims and lawsuits (including costs, expenses, awards
and/or judgments) arise out of or are based upon willful misconduct or willful
omissions of the Financial Advisor. In addition, the Financial Advisor shall
also indemnify and hold the Company harmless against any and all reasonable
costs and expenses, including reasonable counsel fees, incurred relating to the
foregoing.
The Company shall give the Financial Advisor prompt notice of any such
liability, claim or lawsuit which the Company contends is the subject matter of
the Financial Advisor's indemnification and the Financial Advisor thereupon
shall be granted the right to take any and all necessary and proper action, at
its sole cost and expense, with
7
<PAGE> 8
respect to such liability, claim and lawsuit, including the right to settle,
compromise or dispose of such liability, claim or lawsuit, excepting therefrom
any and all proceedings or hearings before any regulatory bodies and/or
authorities.
11. The Financial Advisor as an Independent Contractor. The
Financial Advisor shall perform its services hereunder as an independent
contractor and not as an employee of the Company or an affiliate thereof. It
is expressly understood and agreed to by the parties hereto that the Financial
Advisor shall have no authority to act for, represent or bind the Company or
any affiliate thereof in any manner, except as may be agreed to expressly by
the Company in writing from time to time.
12. Miscellaneous.
(a) This Agreement between the Company and the Financial Advisor
constitutes the entire agreement and understanding of the parties hereto, and
supersedes any and all previous agreements and understandings, whether oral or
written, between the parties with respect to the matters set forth herein.
(b) Any notice or communication permitted or required hereunder
shall be in writing and shall be deemed sufficiently given if hand-delivered or
sent postage prepaid by certified or registered mail, return receipt requested,
to the respective parties as set forth below, or to such other address as
either party may notify the other in writing:
If to the Company: Irwin Zellermaier, President
General Credit Corporation
211 E. 70th Street
New York, New York 10021
Copy to: Charles J. Rennert, Esq.
Berman Wolfe & Rennert, P.A.
International Place, 35th Floor
8
<PAGE> 9
100 Southeast Second Street
Miami, Florida 33131-2130
If to the
Financial Advisor: Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Copy to: David A. Carter, P.A.
355 West Palmetto Park Road
Boca Raton, Florida 33432
(c) This Agreement shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors, legal
representatives and assigns.
(d) This Agreement may be executed in any number of counterparts,
each of which together shall constitute one and the same original document.
(e) No provision of this Agreement may be amended, modified or
waived, except in a writing signed by all of the parties hereto.
(f) This Agreement shall be construed in accordance with and
governed by the laws of the State of Florida, without giving effect to conflict
of law principles. The parties hereby agree that any dispute which may arise
between them arising out of or in connection with this Agreement shall be
adjudicated before a court located in Palm Beach County, Florida, and they
hereby submit to the exclusive jurisdiction of the courts of the State of
Florida located in Palm Beach County, Florida and of the federal courts in the
Southern District of Florida with respect to any action or legal proceeding
commenced by any party, and irrevocably waive any objection they now or
hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Agreement, and consent
to the service
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<PAGE> 10
of process in any such action or legal proceeding by means of registered or
certified mail, return receipt requested, in care of the address set forth in
paragraph 12(b) hereof.
(g) This Agreement has been duly authorized, executed and
delivered by and on behalf of the Company and the Financial Advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
Very truly yours,
GENERAL CREDIT CORPORATION
BY:___________________________________
Irwin Zellermaier, President
BARRON CHASE SECURITIES, INC.
BY:___________________________________
Robert T. Kirk, President
10
<PAGE> 1
EXHIBIT 1.4
_______________, 1996
Irwin Zellermaier, President
General Credit Corporation
211 E. 70th Street
New York, New York 10021
Re: Merger and Acquisition Agreement
Gentlemen:
You have agreed that Barron Chase Securities, Inc., (the "Finder") may
act as a non-exclusive finder or financial consultant for you in various
transactions in which General Credit Corporation (the "Company") may be
involved, such as mergers, acquisitions, joint ventures, debt or equity
placements and similar or other on-balance or off-balance sheet corporate
finance transactions. The Company hereby agrees that in the event that the
Finder shall first introduce to the Company another party or entity, in
writing, and that as a result of such introduction, a transaction between such
entity and the Company is consummated ("Consummated Transaction"), then the
Company shall pay to the Finder a finder's fee as follows:
a. Five percent (5%) of the first $1,000,000 of the consideration
paid in such transaction;
b. Four percent (4%) of the consideration in excess of $1,000,000
and up to $2,000,000;
c. Three percent (3%) of the consideration in excess of
$2,000,000 and up to $3,000,000;
d. Two percent (2%) of any consideration in excess of $3,000,000
and up to $4,000,000; and
e. One percent (1%) of any consideration in excess of $4,000,000.
The fee due the Finder shall be paid by the Company in cash and/or in
stock at the closing of the Consummated Transaction as mutually agreed between
the Company and the Finder, without regard to whether the Consummated
Transaction involves payments in cash, in stock, or a combination of stock and
cash, or is made on an installment sale basis. By way of example, if the
Consummated Transaction involves securities of the acquiring entity (whether
securities of the Company, if the Company is the acquiring party, or securities
of another entity, if the Company is the selling party) having a value of
$5,000,000, the consideration to
<PAGE> 2
be paid by the Company to the Finder at closing shall be $150,000.
In the event that for any reason the Company shall fail to pay to the
Finder all or any portion of the finder's fee payable hereunder when due,
interest shall accrue and be payable on the unpaid balance due hereunder from
the date when first due through and including that date when actually collected
by the Finder, at a rate equal to two (2) points over the prime rate of
Citibank, N.A. in New York, New York, computed on a daily basis and adjusted as
announced from time to time.
This agreement shall be effective on the date hereof and shall expire
on the fifth anniversary of the date hereof.
Notwithstanding anything herein to the contrary, if the Company shall,
within 180 days immediately following the termination of the five year period
provided above, conclude a Consummated Transaction with any party introduced by
the Finder to the Company prior to the termination of said five year period,
the Company shall also pay the Finder the fee determined above.
The Company represents and warrants to the Finder that the engagement
of the Finder hereunder has been duly authorized and approved by the Board of
Directors of the Company and this letter agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company.
This agreement has been executed and delivered in the State of Florida
and shall be governed by the laws of such state, without giving effect to the
conflicts of laws rules thereunder.
This agreement shall be binding upon, and enforceable against, the
successors and assigns of each of the undersigned.
Please sign this letter at the place indicated below, whereupon it
will constitute our mutually binding agreement with respect to the matters
contained herein.
Very truly yours,
BARRON CHASE SECURITIES, INC.
BY:_______________________________
Robert T. Kirk, President
Agreed to and Accepted:
GENERAL CREDIT CORPORATION
By:________________________________
Irwin Zellermaier, President
<PAGE> 1
EXHIBIT 2.1
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
BY AND AMONG
NEW YORK PAYROLL FACTORS, INC., AS SELLER,
AND
GENERAL CREDIT CORPORATION, AS BUYER
AS OF FEBRUARY 19, 1996
<PAGE> 2
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT ("Agreement") is
made as of the 19th day of February, 1996, by and among NEW YORK PAYROLL
FACTORS, INC., a New York corporation ("Seller"), GENERAL CREDIT CORPORATION, a
New York corporation ("Buyer") and GERALD SCHULTZ ("Schultz") and GERALD
NIMBERG ("Nimberg") only with respect to sections 2.1(b), 2.1(c), 8.3, 12 and
13.
RECITALS
A. Seller is engaged in the business of providing working capital
financing to its customers through the discounted purchase of checks made
payable to the order of those customers (the "Business").
B. Schultz and Nimberg are the sole shareholders of Seller.
C. Buyer desires to acquire from Seller, and Seller desires to sell
to Buyer, upon the terms and subject to the conditions herein set forth,
certain properties, assets and rights comprising the Business described in
Exhibit "A" to this Agreement (the "Assets"), free and clear of all
liabilities, liens, claims and encumbrances except liabilities expressly
assumed by Buyer or its nominee hereunder.
D. Buyer or its nominee desires to assume certain obligations and
liabilities of Seller described in Exhibit "B" to this Agreement accruing after
the Closing as defined in Section 8.1 below.
E. Buyer desires to acquire from Seller and from other entities
controlled by Schultz (the "Controlled Entities") all rights of Seller and the
Controlled Entities, and to assume the obligations and liabilities of Seller
and the Controlled Entities arising after the Closing, under or in connection
with each of the leases, licenses and contracts listed on Exhibit "C"to this
Agreement (the "Contracts").
NOW, THEREFORE, in consideration of the foregoing recitals, which are
hereby incorporated herein, and of the mutual promises herein contained, it is
hereby agreed as follows:
1. CONVEYANCE OF ASSETS
1.1 Assets to be Acquired from Seller. On the terms and subject to
the conditions set forth in this Agreement, Buyer or its nominee (which, at
Buyer's election, may be Buyer's wholly-owned subsidiary) (the "Nominee") shall
buy from Seller, and Seller shall sell, transfer and deliver to Buyer or the
Nominee, at the Closing, all of the properties, assets and rights of Seller
relating to the Assets and the Contracts, other than the Excluded Assets as
described in Section 1.2 below. The Assets include, without limitation except
as set forth in Section 1.2 below, all of Seller's office furniture, fixtures
and office, auxiliary and other equipment and all
1
<PAGE> 3
parts relating thereto associated with or related to the Assets or the property
described in the Contracts ("Office Equipment"), all good will incident to or
associated with the Assets or the Business, all of Seller's telephone numbers,
telephone and advertising listings (to the extent transferable), customer lists
and all other information, data and intangibles relating to the customers,
suppliers, agents and contractors of and lenders to Seller or otherwise related
to the Assets or the Business (including without limitation all customer
accounts, purchasing sources, financing sources, factoring sources and customer
relationships), and all of Seller's corporate and trade names, service marks,
designs, copyrights, computer programs and software, trade secrets, processes,
know how, literature, advertising and promotional displays and materials
associated with or related to the Assets or the Business, and any applications
related thereto.
1.2 Excluded Assets. Notwithstanding anything in Section 1.1 to the
contrary, the Assets do not include the following ("Excluded Assets"):
(a) Minutes, minute books and stock record books of Seller;
(b) Seller's cash on hand and in bank accounts, any other cash
or cash equivalents (including post-dated checks), accounts and advances
receivable, prepaid expenses, prepaid rent, prepaid insurance and security
deposits, and all marketable and other securities;
(c) Any rights, liabilities or obligations arising under, or
with respect to, any of Seller's Plans (as such term is defined in Section 3.16
below), including, but not limited to, any rights, liabilities or obligations
arising under, or with respect to, the health care continuation requirements
under Section 4980B of the Internal Revenue Code of 1986, as amended (the
"Code") and Part 6 of Subtitle B of Title I of ERISA ("COBRA"); and
(d) The Consideration to be received by and the rights of
Seller under this Agreement.
2. CONSIDERATION
2.1 Consideration. The consideration to be paid and delivered by Buyer
for the Assets, rights of Controlled Entities under the Contracts and
performance by Seller and the Participating Individuals of their obligations
hereunder (the "Consideration") shall be:
(a) $3,070,000, payable in cash to Seller, of which $125,000
has been paid before the date hereof, $25,000 is being paid upon the signing of
this Agreement and $2,920,000 shall be paid in cash to Seller at the Closing
(the $150,000 paid on or before the date hereof representing a non-refundable
option by Buyer);
(b) 150,000 shares of the Common Stock, $.001 par value per
share, of Buyer (the "Common Stock") delivered to Schultz at the Closing;
(c) 225,000 shares of the Common Stock delivered to Nimberg at
the Closing; and
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<PAGE> 4
(d) $300,000 payable to Seller or its assigns in 36 equal
monthly installments of principal and simple interest, calculated on the basis
of the annual rate of 10.5%, commencing on the first calendar day of a month
which day is at least 30 days after the Closing, in the monthly installment
amount of $9,750.73, the obligation to pay which shall be evidenced by a
negotiable promissory note (the "Promissory Note") made by Buyer in the form
annexed hereto as Exhibit "E."
The shares of the Common Stock to be delivered to Schultz and Nimberg hereunder
represent an assignment by Seller to Schultz and Nimberg of portions of the
proceeds of sale of the Assets. The stock certificates representing the shares
of Common Stock to be issued under this Section 2.1 at the Closing shall bear a
legend in substantially the following form:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE LAW. THESE SHARES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED, PLEDGED OR ENCUMBERED WITHOUT (1) REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY APPLICABLE STATE LAW OR
(2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED."
2.2 Assumption of Assumed Liabilities. Buyer or the Nominee shall assume
and agree to pay and satisfy only the obligations and liabilities described in
Exhibit "B" to this Agreement accruing after the Closing and the obligations
and liabilities of Seller and the Controlled Entities arising after the Closing
under or in connection with the Contracts (collectively, the Assumed
Liabilities"). Except for the Assumed Liabilities, Buyer shall not assume, and
Seller shall be and remain liable for, any and all obligations, liabilities and
indebtedness of Seller, whether due or to become due, absolute or contingent,
direct or indirect, or asserted or unasserted and whether relating to Seller,
the Business, the Assets or otherwise. Seller shall indemnify Buyer and Buyer's
officers, directors and affiliates from and against any and all actual losses
(including attorneys' fees and costs) arising out of losses, liabilities,
obligations or indebtedness of, or claims against, Seller, whether vested or
contingent, as of the date of this Agreement, other than the Assumed
Liabilities.
2.3 Allocation of Purchase Price. Seller and Buyer agree that, for tax
purposes with respect to the sale of the Assets, each of them shall report that
the consideration paid and delivered by Buyer under Section 2.1 hereof shall be
allocated in accordance with the valuations set forth on Schedule 2.3 attached
hereto.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into and perform its obligations under
this Agreement, Seller makes to Buyer the representations and warranties set
forth below:
3.1 Corporate Status and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Seller has no
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<PAGE> 5
subsidiaries and has no interest in or any agreement to acquire or hold an
interest in any corporation, joint venture, partnership, syndicate or other
incorporated or unincorporated venture. Seller has all requisite power to own,
lease and license its properties and assets and to carry on its business in the
manner and in the places where such properties and assets are owned, leased,
licensed or operated or such businesses are conducted. Seller has all
applicable licenses and permits and is duly qualified to do business in, and is
in good standing in all jurisdictions in which its ownership, leasing or
licensing of property and assets makes such qualification necessary.
3.2 Authority for Agreement. Seller has full right, power and authority
to enter into this Agreement and to perform its obligations hereunder. The
entry into and performance hereof has been duly authorized by all necessary
corporate action on the part of Seller in accordance with its corporate
charter, by-laws and applicable law, and this Agreement constitutes a valid
agreement binding upon and enforceable against Seller in accordance with its
terms. Each of Schultz and Nimberg has full right, power and authority to enter
into this Agreement and to perform his obligations under Section 13.2 hereof,
and this Agreement constitutes a valid agreement binding upon and enforceable
against each of them in accordance with its terms.
3.3 No Breach or Default. The execution and delivery of this Agreement by
the Seller and each of Schultz and Nimberg and the consummation of the
transactions herein provided will not:
(a) Result in a breach of any of the terms or conditions of, or
constitute a default under, or in any manner release any party thereto from any
obligation under any mortgage, note, bond, indenture, contract, agreement,
license or other instrument or obligation of any kind or nature to which the
Seller is a party, or by which Seller, any of the Assets, the Contracts or the
Business may be bound or affected, or result in the creation of a mortgage,
security interest or other encumbrance upon or affecting the Assets or the
Contracts, other than prohibitions on transferring certain of the Assets, all
of which prohibitions shall have been waived in writing by the aggrieved
parties prior to the Closing;
(b) Violate any order, writ, injunction or decree of any court,
administrative agency or governmental body or require the approval, consent or
permission of any governmental or regulatory body or authority, other than
certain consents refined to in Section 6.7 hereof; or
(c) Violate any provision of the corporate charter or by-laws of
Seller.
3.4 Seller's Consents. To the best knowledge of Seller, other than
certain consents referred to in Section 6.7 hereof, no consent, approval or
authorization of any governmental authority or other person or entity is
required for the execution and delivery of this Agreement and the consummation
by Seller of the transactions contemplated hereby.
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3.5 Financial.
(a) Seller's books, accounts and records are, and have been,
maintained in Seller's usual, regular and ordinary manner, in accordance with
good accounting practices and all material transactions to which Seller is or
has been a party are properly reflected therein.
(b) Seller has provided Buyer with (i) complete and correct
copies of the audited balance sheets, statements of income and cash flows and
notes to financial statements of Seller, all as and for the years ended
December 31, 1994 and December 31, 1995, respectively; and (ii) an unaudited
balance sheet and statement of income as of and for the six-month period ended
June 30, 1996 (collectively, the "Financial Statements"). The Financial
Statements present fairly the financial position of Seller as of the dates
thereof, and the results of operations and cash flows of Seller for the
respective periods covered by said statements, in accordance with generally
accepted accounting principles ("GAAP") consistently applied.
(c) Seller has no material obligation or liability of any nature
whatsoever (direct or indirect, matured or unmatured, known or unknown,
absolute, accrued, contingent or otherwise), whether or not required by GAAP to
be set forth on, reflected on or reserved against on a balance sheet (all of
the foregoing herein collectively being referred to as "Liabilities"), except
for:
(i) Liabilities set forth on, reflected on or
reserved against on the face of the Balance Sheet of the Seller as of June 30,
1996 (the "Balance Sheet Date");
(ii) Liabilities which were incurred by Seller
subsequent to the Balance Sheet Date, but only to the extent that such
Liabilities were incurred in the ordinary course of the Business and consistent
with past practice;
(iii) Liabilities under the executory portion of any
written purchase order, sales order, lease, agreement or commitment of any kind
by which Seller is bound and which was entered into in the ordinary course of
the Business and consistent with past practice;
(iv) Liabilities under the executory portion of
permits, licenses and governmental directives and agreements which have been
issued to Seller; and
(v) Liabilities pursuant to the litigation listed on
Schedule 3.11.
3.6 No Material Change. Except as set forth on Schedule 3.6, since the
Balance Sheet Date, there has not been:
(a) Any material adverse change in Seller's financial
condition, properties, assets, liabilities or Business or a decrease in
Seller's net worth;
(b) Any material damage, destruction or loss of any properties
of Seller, whether or not covered by insurance;
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(c) Any change in the manner in which the Business has been
conducted, including, without limitation, collection of advances or accounts
receivable and payment of accounts payable;
(d) Any change in the accounting principles, methods or
practices or any change in the depreciation or amortization policies or rates
utilized by Seller;
(e) Any voluntary or involuntary sale, assignment,
abandonment, surrender, termination, transfer, license or other disposition, of
any kind or nature, of any property or right (including, without limitation,
any Office Equipment, advances or accounts receivable, intangible assets,
business records or Contracts), excepting only transfers in accordance with
past practices or collection of advances or accounts receivable in the ordinary
course of business;
(f) Any change in the treatment and protection of trade
secrets or other confidential information relating to the Business;
(g) Any change in the Business or Seller's relationships with
any customer, supplier, agent, contractor, or lender which might reasonably be
expected to adversely affect any of the Assets, any of the Contracts, the
Business or the prospects of Buyer with respect to any of the foregoing;
(h) Any strike, material grievance proceeding or other labor
dispute, any union organizational activity or other occurrence, event or
condition of any similar character which might reasonably be expected to
adversely affect any of any of the Contracts, the Assets, the Business or the
prospects of Buyer with respect to any of the foregoing;
(i) Any loan or advance by Seller to any party other than
credit extended to customers in the ordinary course of business as previously
conducted;
(j) Any incurrence by Seller of debts, liabilities or
obligations of any nature whether accrued, absolute, contingent, direct,
indirect or inchoate, or otherwise, and whether due or to become due, except:
(i) current liabilities incurred for services
rendered in the ordinary course of the Business and entered into at arms'
length;
(ii) obligations incurred in the ordinary course of
the Business entered into at arms' length;
(iii) liabilities on account of taxes and governmental
charges, but not penalties, interest or fines in respect thereof;
(iv) obligations or liabilities incurred by virtue of
the execution of this Agreement; or
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(v) liabilities pursuant to the litigation listed on
Schedule 3.11; or
(k) Any occurrence not included in paragraphs (a) through (j)
of this Section 3.6 which has resulted, or which Seller has reason to believe
might reasonably be expected to result, in a material adverse change in the
Assets, the Contracts, the Business or the prospects of Buyer with respect to
any of the foregoing.
3.7 Advances and Accounts Receivable. Simultaneously with the
execution and delivery of this Agreement, Seller is delivering to Buyer a true,
correct and complete list setting forth the names of all persons from whom
Seller has advances or accounts receivable and the amounts thereof as of the
date stated on Schedule 3.7. At the Closing, Seller shall deliver to Buyer a
true, correct and complete list setting forth the names of all customers from
whom Seller has, as of the Closing, advances or accounts receivable and the
amounts thereof.
3.8 Tax Status.
(a) Seller has filed all tax returns (foreign, federal, state
and local) required to be filed by it on or before the date of this Agreement
under the laws of all jurisdictions wherein the location of the Assets, the
nature or transaction of the Business or other requirements subject it to
liability for taxes or other governmental charges ("Applicable Tax Laws"), and
all taxes shown to be due and payable on said returns, all assessments received
by Seller and all other taxes and installments of taxes or other governmental
charges (foreign, federal, state and local) due and payable by or with respect
to Seller under Applicable Tax Laws on or before the date hereof have been
paid.
(b) There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any tax or
deficiency against Seller or the Assets.
(c) To Seller's knowledge, there are no actions, suits,
proceedings, investigations, audits or claims now pending against or related to
Seller or the Assets regarding any tax or assessment, or any material matters
under discussion with any taxing authority relating to any taxes or
assessments, or any claims for additional taxes or assessments asserted by any
such authority.
3.9 Title to Assets. All of the Assets are owned directly by Seller
and Seller will convey to Buyer at the Closing good title to all of the Assets,
free and clear of all security interests, liens, claims, encumbrances,
mortgages, pledges, conditional sale and other title retention agreements,
assessments, covenants, restrictions, reservations and other burdens and
charges of every kind and nature.
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3.10 Contracts and Agreements. Seller has delivered to or made
available for inspection by Buyer and its agents true, correct and complete
copies of all of the contracts, agreements, leases, subleases, plans,
arrangements, commitments and other documents to which Seller is a party or
which in any manner relate to, or affect, the Assets or the Business
("Documents").
To the best knowledge of Seller, all of the Documents delivered to or made
available for inspection by Buyer and its agents are and remain in full force
and effect in accordance with their terms. To the best knowledge of Seller,
neither Seller nor any other party to any Document is in default, or alleged to
be in default, thereunder and there exists no condition or event which, after
notice or lapse of time or both, would constitute such a default by Seller or
by any other party to any such Document. To the best knowledge of Seller,
other than certain consents referred to in Section 6.7 hereof, no consent from
any party to any Document is required in order for such Document to remain in
full force and effect in accordance with its terms upon the Closing.
3.11 Litigation and Governmental Action. Other than subpoenas received
in the regular course of business and except as set forth on Schedule 3.11, to
the best knowledge of Seller, there are no suits, actions or claims,
governmental investigations or inquiries, legal, administrative or arbitration
proceedings pending or, to the knowledge of Seller, threatened against Seller,
or to which Seller is a party (whether or not covered by insurance) which in
any manner relate to or affect the Assets, the Contracts or the Business, and
Seller does not know of any basis or grounds for any suit, action, claim,
investigation, inquiry or proceeding. Except as set forth on Schedule 3.11,
there is not outstanding any notice, order, writ, injunction or decree of any
court, governmental agency or arbitration tribunal relating to or affecting the
Assets, the Contracts or the Business.
3.12 Compliance with Laws and Regulations. Seller has at all times
complied and, to the best knowledge of Seller, is currently complying, in all
material respects, with all laws, rules, regulations, orders and requirements
(foreign, federal, state and local) applicable to it in all jurisdictions in
which the Assets are located or the Business is conducted or to which the
Assets, the Contracts or the Business are subject which have a material impact
on Seller or the Assets, the Contracts or the Business, including, without
limitation, all applicable labor, wage and hour and price laws and regulations,
all applicable civil rights and equal opportunity employment laws and
regulations, all state and federal antitrust laws, all federal, state and local
statutes, laws, regulations, ordinances, orders and codes relating to the
environment ("Environmental Laws") and the Federal Occupational Health and
Safety Act. Except as otherwise disclosed pursuant to this Agreement, Seller
does not know of any assertion by any party that Seller has violated any such
laws, rules, regulations, orders or requirements and no notice in that regard
has been received by Seller, Schultz or Nimberg.
3.13 Status of Employees.
(a) Schedule 3.13 is a true, correct and complete list setting
forth the names and current salaries or rates of compensation of all employees
of Seller and all independent contractors, including individuals who render
services on a regular basis to Seller.
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(b) Since the Balance Sheet Date, no person or entity has
received any extraordinary compensation except as specified on Schedule 3.13
and there has been no increase in the compensation or rate of compensation
payable to any employee or regular independent contractor of Seller nor any
material change in employee benefit arrangements, nor has any increase in
compensation or material change in employee benefit arrangements been promised
to employees orally or in writing (whether or not legally binding).
(c) To the best knowledge of Seller, all persons employed by
Seller except Nimberg are employees at will or otherwise employed such that
Seller may lawfully terminate their employment without creating any material
cause of action against Buyer or otherwise giving rise to any material
liability of Buyer under the Workers Adjustment Retraining and Notification Act
("WARN") or for wrongful discharge, breach of contract, tort or any other cause
at law or in equity.
(d) To the best knowledge of Seller, Seller has not, prior to
and including the date of Closing, violated any provision of COBRA. No COBRA
violation exists or will exist with respect to any employees of Seller prior to
and including the date of the Closing.
(e) As of the date of the Closing, Seller will not be and will
never have been an enterprise subject to WARN and will not incur and will never
have incurred liabilities, penalties, other charges or all of the above under
WARN.
3.14 Assets and Rights. The Assets and the Contracts, together with
the Excluded Assets, constitute all of the assets, properties and rights of
every type and description, real, personal and mixed, tangible and intangible,
which are used in and necessary for the conduct of Business.
3.15 Transactions with Affiliates. Except as set forth on Schedule
3.15, neither Seller nor any Affiliate (as defined in Section 13.1 below) of
Seller owns, directly or indirectly, an equity interest of 1% or more in, or is
an employee or agent of, any corporation, firm, association or business
organization which is (i) a competitor of Seller or (ii) a customer of or
supplier of goods or services of any kind to Seller or (iii) a lessor to Seller
of any of the Assets or under any of the Contracts. Schedule 3.15 contains a
summary of the terms of all relationships and transactions between Seller and
its Affiliates since January 1, 1995.
3.16 Employee Benefit Plans.
(a) For purposes of this Agreement, the term "Plans" means:
(i) all employee benefit plans as defined in Section 3(3) of ERISA; (ii) all
other severance pay, vacation, deferred compensation, excess benefit, stock,
stock option, and incentive plans, contracts, schemes, programs, funds,
commitments, or arrangements of any kind; and (iii) all other plans, contracts,
schemes, programs, funds, commitments, or arrangements providing money,
services, property, or other benefits, whether written or oral, qualified or
nonqualified, funded or unfunded, and including any that have been frozen or
terminated, which pertain to any employee, former
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employee, director, officer, shareholder, consultant, or independent contractor
of Seller or any Affiliate of Seller and (i) to which Seller or any Affiliate
of Seller is or has been a party or by which any of them is or has been bound
or (ii) with respect to which Seller or any Affiliate of Seller has made any
payments or contributions or to which Seller or any Affiliate of Seller may
otherwise have any liability (including any such plan or arrangement formerly
maintained by Seller or any Affiliate of Seller). All Plans are listed and
briefly described on Schedule 3.16. For purposes of this Section 3.16 only,
"Affiliate" shall mean any corporation or other business entity that is
included in a controlled group of corporations within which Seller is also
included, as provided in Section 414(b) of the Code; or which is a trade or
business under common control with Seller, as provided in Section 414(c) of the
Code; or which constitutes a member of an affiliated service group within which
Seller is also included, as provided in Section 414(m) of the Code; or which is
required to be aggregated with Seller pursuant to regulations issued under
Section 414(o) of the Code.
(b) Each Plan is in compliance with ERISA and other applicable
laws (including, without limitation, compliance with the health care
continuation requirements of COBRA and any proposed regulations promulgated
thereunder). Except as set forth in Schedule 3.16, Seller and each applicable
Affiliate of Seller have received favorable determination letters as to the
qualification under the Code of each pension plan, as defined in Section 3(2)
of ERISA, and there have been no amendments or other developments since the
date of such determination letters which would cause the loss of such qualified
status. No violation of ERISA has at any time occurred in connection with the
administration of any of the Plans, and there are no actions, suits, or claims
(other than routine, non-contested claims for benefits) pending or threatened
against the Plans, or any administrator or fiduciary thereof, which could
result in any liability.
(c) Full payment as of the Closing shall have been made of:
(i) all amounts which Seller and any Affiliate of Seller are required, under
the terms of all Plans, to have paid as contributions to such Plans as of the
last day of the most recent fiscal year prior to the Closing; and (ii) all pro
rata amounts which Seller and any Affiliate of Seller are required to pay as
contributions to each such Plan for the fiscal year that includes the date of
the Closing.
(d) Neither Seller nor any Affiliate of Seller provides, nor
have they at any time provided, coverage under any welfare plan, as defined in
Section 3(1) of ERISA (including, but not limited to, life insurance,
disability, medical, dental, prescription drugs, or accidental death or
dismemberment) to any of their retirees, other than any continuation or
conversion coverage which any such retiree may have purchased at his own
expense.
(e) Neither Seller nor any Affiliate currently maintains,
administers or contributes to, or at any time in the past has maintained,
administered or contributed to a defined benefit plan subject to Section 4021
of ERISA or a multiemployer plan as defined in Section 3(37) of ERISA.
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3.17 Real Property. Seller uses no offices or other places of
business, and neither owns, uses, leases nor occupies any real property other
than the real property described in the Contracts (the "Leased Property") and
none of the Assets is situated at any location other than the Leased Property.
To the best knowledge of Seller, neither the whole nor any portion of the
Leased Property is subject to any pending condemnation, taking or other similar
proceeding by any public authority, and Seller neither knows nor has any
grounds to believe that any such condemnation or taking is threatened or
contemplated with respect to the Leased Property. To the best knowledge of
Seller, there is no plan, study or effort by any governmental authority or
agency which in any way affects or would affect the present use or zoning of
the Leased Property nor any existing, proposed or contemplated plan to widen,
modify or realign any street or highway adjoining the Leased Property. To the
best knowledge of Seller, neither the Leased Property nor the occupancy by or
operation of the Business at the Leased Property is in violation of any law or
any building, zoning, fire, health, or other ordinance, code or regulation, and
has not received notice alleging any such violation or requiring or calling
attention to the need for any work, repairs, construction, alterations or
installation on or in connection with the Leased Property which has not been
heretofore complied with by Seller. To the best knowledge of Seller, the
zoning classification of the Leased Property permits the operations presently
conducted thereon.
3.18 Condition of Assets. All of the Assets of a tangible nature are
in good condition and repair, ordinary wear and tear excepted, and are
adequately insured against damage or loss. All of such Assets are located at
the Leased Property.
3.19 Environmental Matters.
(a) Seller has not, and to the best knowledge of Seller, no
other person or persons have, manufactured, discharged, dispersed, released,
stored, treated, transported, generated or disposed of Hazardous Material (as
defined in paragraph (g) below), or allowed Hazardous Material to be located
on, under or about or transported from or to the Leased Property, including,
without limitation, the soil, surface water and subsurface water of, under or
on the Leased Property, or any other property used in connection with the
Business.
(b) Seller has not, and to the best knowledge of Seller, no
other person or persons have, used, installed, incorporated into or disposed of
asbestos or asbestos containing materials on, under or about the Leased
Property, or any other property used in connection with the Business, or
transported from the Leased Property any asbestos or asbestos containing
materials.
(c) Seller has not, and to the best knowledge of Seller, no
other person or persons have, used or located polychlorinated biphenyls
("PCBs") on, under or about the Leased Property, or any other property used in
connection with the Business, or transported from the Leased Property any PCBs.
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(d) Seller has not, and to the best knowledge of Seller, no
other person or persons have, located underground storage tanks on or under the
Leased Property, or any other property used in connection with the Business.
(e) To the best knowledge of Seller, no investigation,
administrative order, consent order and agreement, litigation or settlement
with respect to Hazardous Material, is proposed, threatened, anticipated or in
existence with respect to the Leased Property, any other property used in
connection with the Business, or otherwise relating to the Assets or the
Business.
(f) To the best knowledge of Seller, the Leased Property and
Seller's operations are and at all times have been, in compliance with the
Environmental Laws. No actual or constructive notice, demand, claim or other
communications have been given to or served on Seller or any predecessor of
Seller or anyone acting on Seller's behalf or in its interest from any entity,
governmental body or individual claiming any violation of any of the
Environmental Laws, or demanding payment, contribution, remedial action or any
other action or inaction with respect to any actual or alleged environmental
damage or injury to persons, real property, personal property or natural
resources (any of the foregoing, whether now existing or hereafter brought, is
herein called a "Claim"), and no basis for any Claim exists.
(g) "Hazardous Material" means asbestos, asbestos-containing
materials, PCBs, petroleum products, urea formaldehyde foam insulation and any
other hazardous, toxic or special substance, material or waste that is defined,
determined or identified as such in any Environmental Laws.
3.20 Customers and Suppliers. Seller does not know or have any reason
to believe that, either as a result of the transactions contemplated hereby or
for any other reason, any present customer, supplier, agent or contractor of,
or lender to, Seller will not continue to conduct business with Buyer or the
Nominee after the Closing in substantially the same manner as it has conducted
business with Seller in the past.
3.21 Brokerage. There are no claims for commissions or other
compensation in connection with any of the transactions contemplated by this
Agreement based on any arrangement or agreement binding on Seller, Schultz or
Nimberg.
3.22 Theft Insurance. Seller has maintained theft insurance in an
amount of not less than $__________ (on a claims-made basis) from ____________,
will maintain theft insurance in that amount through the Closing and has
maintained adequate reserves for losses from theft.
3.23 Negative Representations.
(a) Since the Balance Sheet Date, Seller has not sold or
transferred any material assets or property relating to the Business except in
the usual and ordinary course of business and except for cash applied in
payment of Seller's liabilities in the usual and ordinary course of its
business or made any distribution or payment to any of its shareholders or
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employees except for compensation to employees in the usual and ordinary course
of its business at the rates specified on Schedule 3.13.
(b) Seller is not a party to any agency, broker's, finder's or
franchise agreement other than the Contracts.
3.24 Shareholders. The sole shareholders and the number of outstanding
shares of common stock of Seller and the number of such shares owned by each of
Schultz and Nimberg are as follows:
Schultz 25
Nimberg 1
Total Outstanding 26
3.25 Full Disclosure. No representation or warranty by Seller or any
of the Participating Individuals in this Agreement or in any statement,
schedule, certificate, exhibit or other document furnished to Buyer pursuant
hereto contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
herein or therein, in light of the circumstances in which they are made, not
misleading. There are no facts known to Seller and not disclosed herein which
might reasonably be expected to affect materially and adversely the value of
the Assets or the Contracts.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into and perform its obligations under
this Agreement, Buyer makes to Seller the representations and warranties set
forth below:
4.1 Corporate Status and Authority. Buyer and the Nominee each is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of New York.
4.2 Authority for Agreement. Buyer and the Nominee has full right,
power and authority to enter into this Agreement and to perform its obligations
hereunder. The entry into and performance hereof have been duly authorized by
all necessary corporate action on the part of Buyer and the Nominee in
accordance with its corporate charter, by-laws and applicable law and this
Agreement constitutes a valid agreement binding upon and enforceable against
Buyer and the Nominee in accordance with its terms.
4.3 No Breach or Default. The execution and delivery of this
Agreement by Buyer and the consummation by Buyer or the Nominee of the
transactions herein provided will not:
(a) Result in the breach of any of the terms or conditions of,
or constitute a default under, or in any manner release Buyer from any
obligation under any mortgage, note,
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bond, contract, indenture, agreement, license or other instrument or obligation
of any kind or nature to which Buyer is now a party or by which Buyer or any of
its properties or assets may be bound or affected or result in the creation of
a mortgage, security interest or other encumbrance upon or affecting the Assets
or the Contracts;
(b) Violate any order, writ, injunction or decree of any
court, administrative agency or governmental body or require the approval,
consent or permission of any governmental body or authority, other than certain
consents referred to in Section 6.7 hereof; or
(c) Violate any provision of the corporate charter or by-laws
of Buyer.
4.4 Brokerage. There are no claims for commissions or other
compensation in connection with any of the transactions contemplated by this
Agreement based on any arrangement or agreement binding on Buyer.
4.5 Full Disclosure. No representation or warranty by Buyer in this
Agreement or in any statement, schedule, certificate, exhibit or other document
furnished to Seller pursuant hereto contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they are made, not misleading.
4.6 No Fraudulent Conveyance. No payment to Seller by Buyer or the
Nominee will constitute a fraudulent or improper conveyance or improper
application of the funds constituting said payment, Buyer has legal title to
the funds comprising all payments to be made hereunder, and there are no liens
or claims affecting said funds.
4.7 No Violation of Securities Laws. Any registration, underwriting
and sale of securities to be issued by Buyer or the Nominee shall be lawfully
done in compliance with all applicable laws and regulations in all respects
material to Seller.
5. CONDUCT PENDING CLOSING
Seller covenants and agrees as follows:
5.1 Conduct of Operations. During the period from the date of this
Agreement to the Closing, the Business shall be operated by Seller solely in
the usual and ordinary course of such business and in compliance with the terms
of this Agreement, and all additions to and substitutions for and changes of
form of the Assets occurring from the date hereof to the Closing shall be
deemed to constitute Assets hereunder. Without limiting the generality of the
foregoing:
(a) Seller will use its best efforts to preserve the business
and organization of the Business so as to: (i) maintain and keep in full force
and effect the contracts constituting the Assets and the Contracts in
accordance with their existing terms; (ii) keep available the services of the
present employees and agents of Seller; (iii) maintain the integrity of all
confidential
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information regarding the Business; and (iv) preserve the good will of, and
Seller's business and contractual relationships with, suppliers, customers,
agents, contractors, lenders and others having business relations with Seller.
(b) No new assets will be acquired by or on behalf of Seller
without Buyer's written consent except in the ordinary course of business and
in an individual amount not to exceed $5,000.00. Buyer shall be advised prior
to Closing of any new such Assets.
(c) All Assets of a tangible nature will be kept and
maintained in as good operating condition and repair as they are on the date
hereof, ordinary wear and tear excepted, and to the extent applicable, all
intangible Assets will be maintained in full force and effect.
(d) Seller will continue to collect its advances and accounts
receivable through the Closing and pay its accounts payable in a commercially
reasonable manner and in accordance with present practice or as otherwise
agreed upon by Buyer and Seller.
(e) No expenditure or commitment for the purchase of any other
capital asset shall be made or entered into without Buyer's written consent.
(f) Seller will not sell, transfer or encumber any material
assets or property rights relating to the Business, except in the usual and
ordinary course of business and except for cash applied in payment of Seller's
liabilities in the usual and ordinary course of its business, or make any
payments or distributions to any of its officers, directors, shareholders or
employees except for compensation to employees in the usual and ordinary course
of its business at the rates specified in Schedule 3.13 and distributions to
its shareholders of cash owned by Seller immediately prior to the Closing and
not transferred to Buyer, and which in no event shall include the proceeds of
the Assets transferred to Buyer hereunder.
(g) Seller shall not otherwise incur or pay any liability
other than in the ordinary course of business with respect to the Business or
on behalf of Buyer.
(h) No litigation shall be instituted or compromised or
settled by Seller without Buyer's prior written consent.
(i) Until the Closing, Seller shall maintain adequate theft
insurance.
(j) Seller will take such actions as Buyer reasonably requests
and otherwise use its best efforts to cause fulfillment of all the conditions
to which the parties' obligations are subject.
(k) Seller will promptly notify Buyer in writing if Seller is
advised or is aware that any customer, supplier, agent, contractor or lender of
the Business intends to cease doing business with Seller.
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5.2 Access to Records and Premises. From and after the date hereof,
Seller shall give to Buyer, Buyer's counsel, accountants, engineers and other
representatives full access during normal business hours and upon reasonable
notice to all of the offices, properties, and other records of Seller so that
Buyer may, at its sole expense, investigate and inspect them, and Seller will
furnish to Buyer copies of all documents and information concerning the Assets
as Buyer may reasonably request. Any such investigation or inspection by Buyer
shall not be deemed a waiver of, or otherwise limit, the representations,
warranties and covenants of Seller, except that, by Buyer's closing hereunder,
Buyer shall acknowledge that it has had full, fair and complete access to the
offices, properties and records of Seller; that Buyer has had a full and fair
opportunity to request any and all documents and information concerning the
Seller and to investigate and inspect same, and that by Closing, Buyer is
satisfied that Seller made full and fair disclosure.
5.3 Notice of Changes. Between the date hereof and the Closing,
Seller agrees to notify Buyer in writing promptly of any occurrence or state of
facts (other than changes occurring in the ordinary course of business) which
will result in any of the warranties and representations contained in Article 3
hereof not being true and correct if restated as of the Closing.
5.4 Transferee Liability. The parties agree that Buyer will not by
virtue of the transactions which are the subject hereof assume any liabilities
or obligations of Seller whatsoever except for the Assumed Liabilities, and,
accordingly, Seller agrees to take all actions necessary to fully protect Buyer
from and against any and all transferee liability arising out of the
transactions which are the subject of this Agreement. Such actions shall
include, without limitation, the following:
(a) Seller will, promptly after the date hereof, (i) secure
from the appropriate officials and deliver to Buyer as promptly as possible, a
certificate that no taxes, interest or penalties are due from Seller as a
result of the transactions contemplated by this Agreement, and (ii) file
notices of the transactions contemplated by this Agreement with the appropriate
governmental authorities in connection with bulk sales tax, real property
transfer tax, sales and use tax and other taxes affected by or arising from
those transactions, and deliver to Buyer affidavits or other proof of each such
filing.
(b) Any and all transferee liabilities arising prior to or at
the Closing but assessed or otherwise asserted against Buyer, including without
limitation those asserted under the tax or revenue laws or regulations of any
foreign or domestic jurisdiction, shall be Indemnified Liabilities pursuant to
Article 10 below.
5.5 Taxes. Without limiting the generality of the provisions of
Sections 5.4 and 9.2 hereof, Seller shall file when due the New York State Bulk
Sales Tax filing in respect of the sale of the Assets under this Agreement.
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6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
All obligations of Buyer under this Agreement with respect to the Closing
are subject, at Buyer's option, to the fulfillment of each of the following
conditions precedent:
6.1 Seller's Closing Documents. Seller shall have executed (as
appropriate) and delivered to Buyer, at or before the Closing, all of the
documents to be provided by it pursuant to Section 8.2 below.
6.2 Schultz and Nimberg Closing Documents. Each of Schultz and
Nimberg shall have executed and delivered (as appropriate) to Buyer all of the
documents to be provided by him pursuant to Section 8.3 below.
6.3 Representations and Warranties. All representations and
warranties of Seller contained in this Agreement shall be true and accurate in
all material respects as of the date when made and at the Closing as if made
again at and with respect to the Closing.
6.4 Obligations. Seller shall have performed in all material respects
all duties and obligations required by this Agreement to be performed by Seller
prior to or at the Closing.
6.5 No Suits or Actions. No suit or action by any party, nor any
investigation, inquiry or proceeding by any governmental authority, nor any
legal or administrative proceeding shall have been instituted or threatened at
or before the Closing which:
(a) Questions the validity or legality of any transaction
contemplated hereby;
(b) Seeks to enjoin any transaction contemplated hereby;
(c) Seeks material damages on account of the consummation of
any transaction contemplated hereby; or
(d) Is a petition of bankruptcy by or against Seller, Schultz
or Nimberg or is an assignment for the benefit of creditors of Seller, Schultz
or Nimberg.
6.6 Casualty Prior to Closing. None of the Assets or any Leased
Property shall have been materially lost or damaged, and no notice shall have
been received or action initiated by any governmental authority having the
right of eminent domain regarding the damaging, taking or acquiring by such
authority of any of the Assets or any Leased Property. In the event of any
non-material loss or damage, all insurance proceeds or rights to collect
insurance proceeds with respect thereto shall become Assets, assignable or
otherwise deliverable to Buyer or the Nominee at the Closing.
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6.7 Assignment of Contracts; Consents from Third Parties.
(a) Seller and the Controlled Entities shall, on or prior to
the Closing and to the extent required by Buyer, have assigned to Buyer or the
Nominee all of their respective rights under the Contracts and all of Seller's
rights under all other contracts and agreements entered into in the ordinary
course of business; and all consents with respect to any of the foregoing
necessary in order for Buyer or the Nominee to fully and effectively succeed to
all of the rights of Seller and the Controlled Entities thereunder shall have
been obtained and shall be in form and content reasonably satisfactory to Buyer
and its counsel.
(b) Seller and the Controlled Entities, at or prior to the
Closing and to the extent requested by Buyer, shall have assigned to Buyer or
the Nominee all of the rights of Seller and the Controlled Entities under any
and all permits or licenses or similar authorizations related to the conduct of
the Business to the extent assignable.
(c) All governmental consents, permissions and approvals to
the transactions herein provided for or contemplated, together with all
governmental licenses, permits and the like which are required for the
consummation of the transactions herein provided for shall have been received
by Buyer or the Nominee at or prior to Closing and shall be in form and
content reasonably satisfactory to Buyer and its counsel.
6.8 Proof of Insurance. Seller shall have delivered to Buyer or
the Nominee prior to Closing, proof satisfactory to Buyer, that Seller has
maintained theft insurance through the Closing customary and adequate for the
Business.
6.9 Lien Searches. Seller, at its expense, shall have delivered to
Buyer or the Nominee UCC lien searches, which shall report results, as are
satisfactory to Buyer. All liens with respect to the Assets shall have been
released and releases (including Form UCC-3s) shall be delivered to Buyer or
the Nominee at or before the Closing.
6.10 Adverse Change. There shall have occurred no material adverse
change in the condition of the Assets or any Leased Property through the
Closing.
6.11 Failure of Conditions. In the event that any of the conditions
set forth in this Article 6 have not been fulfilled as of the Closing and in
the further event that Buyer shall not have elected to waive such condition and
consummate the transactions contemplated hereby notwithstanding such
nonfulfillment, Buyer may at its sole option elect to cancel this Agreement by
written notice to Seller provided that such election shall not be deemed to
terminate or in any way affect any claims or causes of action Buyer may
otherwise have against Seller by virtue of misrepresentations or breaches of
the obligations hereunder of Seller; provided, however, that in the event any
of the consents referred to in Section 6.7 hereof shall not have been obtained,
Buyer's sole remedy therefor shall be to elect not to consummate the Closing.
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7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
All obligations of Seller under this Agreement with respect to the Closing
are subject, at its option, to the fulfillment of each of the following
conditions precedent;
7.1 Buyer's Closing Documents. Buyer shall have executed (as
appropriate) and delivered to Seller, at or before the Closing, all of the
documents to be provided by it pursuant to Section 8.4 below.
7.2 Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and accurate in
all material respects as of the date when made and at the Closing as if made
again at and with respect to the Closing.
7.3 Obligations. Buyer shall have performed in all material respects
all duties and obligations required by this Agreement to be performed by it
prior to or at the Closing.
7.4 No Suits or Actions. No suit or action by any party, nor any
investigation, inquiry or proceeding by any governmental authority, nor any
legal or administrative proceeding shall have been instituted or threatened at
or before the Closing which:
(a) Questions the validity or legality of any transaction
contemplated hereby;
(b) Seeks to enjoin any transaction contemplated hereby;
(c) Seeks material damages on account of the consummation of
any transaction contemplated hereby; or
(d) Is a petition of bankruptcy by or against Buyer or is an
assignment for the benefit of creditors of Buyer.
7.5 Failure of Conditions. In the event that any of the conditions
set forth in this Article 7 have not been fulfilled as of the Closing and in
the further event that Seller shall not have elected to waive such condition
and consummate the transactions contemplated hereby notwithstanding such
nonfulfillment, Seller may at its sole option elect to cancel this Agreement by
written notice to Buyer provided that such election shall not be deemed to
terminate or in any way affect any claims or causes of action Seller may
otherwise have against Buyer by virtue of misrepresentations or breaches of
Buyer's obligations hereunder, except that Seller's remedies therefor shall be
limited to its retaining all funds paid to Seller before the Closing under
Sections 2.1(a) and 8.1 hereof as liquidated damages and not as a penalty.
8. CLOSING
8.1 Time and Place of Closing. The consummation of the purchase and
sale of the Assets and the related transactions and deliveries contemplated by
this Agreement (the "Closing") shall take place simultaneously with, at the
same place as, and subject to, the closing
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of Buyer's prospective initial public offering of the Common Stock (the "IPO"),
or at such other time or place as the parties may mutually agree, but not later
than November 15, 1996; provided, however, that upon payment by Buyer to Seller
of an additional $25,000 in cash (by a cashier's or certified check or
confirmation of the wire transfer to Seller) on or before November 15, 1996,
the latest date of the Closing shall be postponed to November 30, 1996; and
provided further, however, that upon payment by Buyer to Seller of an
additional $25,000 in cash (by a cashier's or certified check or confirmation
of the wire transfer to Seller) after November 15, 1996 but on or before
December 1, 1996, the latest date of the Closing shall be postponed to December
31, 1996, said additional sums constituting non-refundable options.
8.2 Documents to be Delivered by Seller. At the Closing, the
following shall be delivered or provided to Buyer by Seller:
(a) Seller shall execute and deliver warranty bills of sale
and other sufficient instruments of conveyance and transfer as shall be
effective to vest in Buyer all of Seller's title to and interest in the Assets;
(b) Seller shall deliver copies of resolutions of the Board of
Directors and shareholders of Seller and each of the Controlled Entities
authorizing the execution of this Agreement and the consummation of the
transactions herein provided for, which resolutions shall have been certified
as true, correct and in full force and effect as of the Closing by the
Secretaries of the respective corporations;
(c) Seller shall deliver a certified copy of the certificate
of incorporation, as amended, and by-laws, as amended, and a good standing
certificate issued by the Secretary of the State of New York of Seller and each
of the Controlled Entities dated not more than ten days prior to the Closing;
(d) Seller shall deliver the proof, affidavits and
certificates provided for in Section 5.4 above;
(e) Seller shall deliver keys and combinations, as
appropriate, to all locks used on or in connection with any of the Assets and
any Leased Property;
(f) Seller shall deliver all instruments, executed by the
respective tenants and other parties to the Contracts, necessary or appropriate
in order that all of the Contracts shall be assigned to and assumed by Buyer as
of the Closing;
(g) Seller shall have delivered the advances and accounts
receivable list as of the date of the Closing provided for in Section 3.7
above; and
(h) Seller shall deliver a certificate dated the date of the
Closing ("Seller's Closing Certificate") executed by the President of Seller
certifying that: (i) all representations and warranties of Seller contained in
this Agreement or in any schedule or exhibit hereto or in any statement
(including financial statements), certificate, exhibit or other document
delivered
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pursuant hereto were true and accurate as of the date when made; (ii) all of
said representations and warranties are, by the execution and delivery of
Seller's Closing Certificate, made again on and as of the Closing and are then
true and accurate in all material respects; and (iii) Seller has performed and
complied in all material respects with all the covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing.
8.3 Documents to be Delivered by Schultz and Nimberg. At the Closing,
the following instruments, documents and showings shall be delivered or
provided to Buyer by Schultz and Nimberg, as indicated below:
(a) Each of Schultz and Nimberg shall execute and deliver
agreements between them and the underwriter of the IPO (the "Representative")
not to sell, transfer or otherwise dispose of any shares of the Common Stock in
the public market for a period of 24 months from the effective date of the
registration statement filed with the Securities and Exchange Commission in
order to effect that public offering, or any longer period required by the law
of any state, without the prior written consent of the Representative, subject
to the provisions of Article 12 hereof; and
(b) Nimberg shall execute and deliver an employment agreement
between Nimberg, as employee, and Buyer or the Nominee, as employer,
substantially in the form of Exhibit "D" attached hereto (the "Employment
Agreement").
8.4 Documents to be Delivered by Buyer. At the Closing, the following
instruments, documents and showings shall be delivered or provided by Buyer:
(a) Buyer shall deliver copies of resolutions of the Boards of
Directors of Buyer and the Nominee authorizing the execution of this Agreement
and the consummation of the transactions herein provided for, which resolutions
are certified as true, correct and in full force and effect as of the Closing
by the Secretaries of Buyer and the Nominee;
(b) Buyer shall deliver a cashier's or certified check or
confirmation of the wire transfer to Seller of funds in the amount of
$2,920,000;
(c) Buyer shall deliver to Seller the Promissory Note;
(d) Buyer shall deliver to Schultz and Nimberg stock
certificates representing the shares of the Common Stock to which each of them
is entitled under Section 2.1 above;
(e) Buyer or the Nominee shall execute and deliver the
instruments of assumption of Contracts referenced in Section 8.2(f) above;
(f) Buyer or the Nominee shall execute and deliver the
Employment Agreement; and
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(g) Buyer shall provide a certificate dated the date of the
Closing ("Buyer's Closing Certificate") executed by the President of Buyer
certifying that: (i) all representations and warranties of Buyer contained in
this Agreement or in any schedule or exhibit hereto or in any certificate,
exhibit or other document delivered pursuant hereto were true and accurate as
of the date when made; (ii) all of said representations and warranties are, by
the execution and delivery of the Buyer's Closing Certificate, made again on
and as the Closing and are then true and accurate in all material respects;
and (iii) Buyer has performed and complied in all material respects with all
the covenants, agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
9. POST CLOSING OBLIGATIONS OF THE PARTIES
9.1 Further Obligations of the Parties. At and after the Closing:
(a) Each party and the Controlled Entities shall execute all
certificates, instruments and other documents and take all actions reasonably
requested by the other parties to effectuate the purposes of this Agreement and
to consummate and evidence the consummation of the transactions herein provided
for; and
(b) Seller and the Controlled Entities shall take all action
reasonably necessary or appropriate to put the Buyer or the Nominee in
immediate actual possession and operating control of all of the Assets and the
Leased Property.
9.2 Taxes. Without limiting the generality of the provisions of
Section 5.4 hereof, Seller shall be responsible for and pay or cause to be paid
when due, whether before, at or after the Closing or out of the proceeds it
receives pursuant to Section 2.1, all sales, use, transfer, and similar taxes,
fees and charges of whatever nature, imposed by law on Seller, due any
governmental authority as a result of the transactions contemplated by this
Agreement, including without limitation the New York State Bulk Sales Tax
filing, and the New York State and New York City Real Property Transfer
Tax/Gains Tax attributable to the Contracts.
9.3 Payment to Seller's Creditors. Seller covenants and agrees
promptly to pay when due all liabilities and obligations of Seller to its
creditors and other third parties (except to the extent of the Assumed
Liabilities, as to which Buyer will make such payment and satisfaction). Any
and all amounts asserted against or paid by Buyer with respect to claims of
Seller's creditors and other third parties shall be Indemnified Liabilities for
the purposes of Article 10 below.
9.4 Ongoing Employment Relationships. All employees of Seller shall
be terminated by Seller as of the close of business on the date of the Closing,
and may be hired by Buyer or the Nominee effective the opening of business on
the business day first following the date of the Closing at the salaries or
rates of compensation set forth on Schedule 3.13.
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10. SURVIVAL OF WARRANTIES, INDEMNIFICATION AND LIQUIDATED DAMAGES
10.1 Survival and Extent of Representations, Warranties
Indemnifications, and Covenants. All representations, warranties,
indemnifications and covenants contained in this Agreement or in Seller's
Closing Certificate or any Participating Individual's Closing Certificate shall
survive the Closing hereunder and shall continue in full force and effect
thereafter for a period of two years from the date of the Closing.
10.2 Indemnification by Seller. Seller hereby agrees (notwithstanding
the Closing and regardless of any investigation at any time made by or on
behalf of Buyer, or of any information that Buyer may have in respect thereof
or the failure by Buyer to examine the operations, premises, books, records and
accounts of Seller prior to the Closing) to indemnify, save, defend and hold
harmless Buyer from and against, and, to the extent they constitute
out-of-pocket expenditures by Buyer, promptly to reimburse Buyer for, all
losses, liabilities, indebtedness, damages, actions, causes of action, debts,
dues, judgments, penalties, fines, costs, obligations, taxes, expenses and
fees, including all reasonable attorney's fees and court costs, incurred by or
asserted against the Buyer (all of such losses, liabilities and other items
being hereinafter collectively referred to as "Indemnified Liabilities")
resulting from (i) the material breach of any representation, warranty or
covenant of Seller or any of the Controlled Entities contained in this
Agreement or in any agreement or other document delivered under or in
connection with the transactions contemplated by this Agreement, (ii) any
obligation, liability, or indebtedness of Seller outstanding as of the Closing
that is not an Assumed Liability, or (iii) the cost and expense of defending
any action, demand or claim by any third party against or affecting Seller or
any of the Controlled Entities which, if true or successful, would give rise to
a material breach of any of the representations, warranties or covenants of
Seller or any of the Controlled Entities or would obligate Buyer to any
obligation, liability or indebtedness referred to in the preceding clauses even
if such action, demand or claim ultimately proves to be untrue or unfounded.
10.3 Indemnification by Buyer. Buyer hereby agrees to indemnify, save,
defend and hold harmless Seller from and against and, to the extent same
constitute out-of-pocket expenditures by Seller, promptly to reimburse Seller
for, all losses, liabilities, indebtedness, damages, actions, causes of action,
debts, dues, judgments, penalties, fines, costs, obligations, taxes, expenses
and fees, including all reasonable attorneys' fees and court costs, incurred by
or asserted against Seller (all of such losses, liabilities and other items
being hereinafter collectively referred to as "Indemnified Liabilities")
resulting from (i) the material breach of any representation, warranty or
covenant of Buyer, or (ii) the cost and expense of defending any action, demand
or claim by any third party against or affecting Buyer which, if true or
successful, would give rise to a material breach of any of the representations,
warranties or covenants of Buyer or would obligate Seller to any obligation,
liability or indebtedness referred to in the preceding clauses even if such
action, demand or claim ultimately proves to be untrue or unfounded.
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10.4 Procedure for Claims and Demands.
(a) If a party shall be presented with or have actual notice
of an action, claim or demand which gives or may give rise to any of the
Indemnified Liabilities, such party or parties (together the "Indemnified
Party") shall, within 60 business days thereafter, notify the indemnifying
party or parties (together, the "Indemnifying Party") in writing thereof, it
being understood and agreed that any failure or delay to so notify shall not
relieve the Indemnifying Party from liability hereunder except and solely to
the extent that such failure or delay shall have increased such liability or
materially and adversely affected the ability of the Indemnifying Party to
defend against, settle, satisfy or mitigate any such action, claim or demand.
Following actual receipt of such notice, the Indemnifying Party as applicable
shall have the right, at its sole cost and expense, to contest or defend such
action, claim or demand through attorneys, accountants and others chosen
thereby and, in the event it elects to do so, shall promptly notify the
Indemnified Party of such intent to contest or defend such action, claim or
demand. If, within 30 days following receipt of such notice, the Indemnifying
Party has not notified the Indemnified Party that such action, claim or demand
will be contested or defended by it, the Indemnified Party shall have the right
to (i) authorize attorneys satisfactory to it or him to represent it or him
connection therewith, and (ii) at any time settle, compromise or pay such
action, claim or demand, in either of which events the Indemnified Party shall
be entitled to such rights of indemnification as are provided herein.
(b) In the event and so long as the Indemnifying Party is
actively contesting or defending against an action, claim or demand as
hereinabove provided, the Indemnified Party shall cooperate at its expense in
such contest or defense and shall provide such access to the books and records
as shall be necessary in connection with such defense or contest subject to
reimbursement of any out-of-pocket expenses incurred in doing so. In the event
and as long as the Indemnifying Party is actively conducting such defense or
contest, such actions, claims or demands shall not be settled, compromised or
paid by the Indemnified Party without the prior written consent of the
Indemnifying Party, unless such claim or demand has been adjudicated by a final
and unappealable order of a court of competent jurisdiction.
10.5 Limitations on Liability.
(a) The parties agree that the provisions of this Article 10
were bargained for by the parties and that the parties' liability under this
Agreement shall be only for those matters covered by the indemnification
provisions of this Article 10.
(b) If the Closing does not occur on or before the latest date
provided under Section 8.1 above and all conditions precedent to Buyer's
obligations under Article 6 hereof shall have been fulfilled on or before that
date, then Seller shall be entitled to retain all monies paid as options, as
liquidated damages and not as a penalty.
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11. BROKERS
Seller shall indemnify and hold the Buyer harmless and Buyer shall indemnity
and hold Seller harmless from any claim by any broker or other person for
commissions or other compensation for bringing about the transactions
contemplated hereby, where such claim is based on the purported employment or
authorization of such broker or other person by the Indemnifying Party.
12. REGISTRATION RIGHTS
12.1 Certain Definitions. As used in this Article 12, the following
terms shall have the following respective meanings:
"Business Day" means any day other than a Saturday, Sunday or any other day
on which commercial banks are authorized by law to be closed in New York, New
York.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Holder" means each of Schultz, Nimberg or any holder of outstanding
Registrable Securities who acquired such Registrable Securities from a Holder
in a transaction or series of transactions not involving any public offering
within the meaning of the Securities Act.
"Registrable Securities" means (i) the shares of Common Stock acquired by
Schultz or Nimberg under this Agreement, and (ii) any securities issued or
issuable in respect of any Registrable Securities by way of any stock split or
stock dividend or in connection with any combination of shares,
recapitalization, merger, consolidation, reorganization or otherwise (the
"Shares"); provided, however, that as to any particular Registrable Securities,
once issued, such securities shall cease to be Registrable Securities if (A) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of by the Holder in accordance with such registration statement, (B)
such securities shall have been distributed by a Holder pursuant to Rule 144 of
the General Rules and Regulations under the Securities Act, or (c) such
securities shall have ceased to be outstanding.
"Register", including "Registered" and "Registration" refer to a
registration effected by preparing and filing with the Commission a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
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"Requesting Holders" means any Holder or Holders of Registrable Securities
who request Registration as provided in this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
12.2 Buyer Registration. (a) If at any time or from time to time,
Buyer determines to register under the Securities Act any of its equity
securities for its own account or for the account of other security holders
(other than a registration of shares covered by a stock option plan on Form S-8
or in connection with a business combination pursuant to Form S-4; provided
that no other Buyer shareholder's shares are being registered pursuant to such
Form S-4) Buyer shall (x) give written notice of such proposed registration
(which shall include a list of jurisdictions in which Buyer intends to attempt
to qualify the offer and sale of such securities under applicable state
securities laws) to each Holder at least 30 Business Days before the
anticipated filing date of the registration statement, and such notice shall
offer Holders the opportunity to include in such registration such number of
shares of Registrable Securities as Holders may request and (y) include in such
registration (and any related qualification under state securities laws) and in
any underwriting involved therein all Registrable Securities specified in any
written request or requests by Holders received by Buyer within 15 Business
Days after written notice of the proposed registration.
(b) Buyer shall cause the managing underwriter or underwriters
of a proposed underwritten offering to permit inclusion of the Registrable
Securities requested to be included in the registration for such offering on
the same terms and conditions as any similar securities of Buyer or other
persons included therein; provided, however, that all Holders proposing to
distribute their securities through such underwriting (together with Buyer and
all other persons distributing their securities through such underwriting)
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Buyer; provided,
however, that the Holders shall be exempt and excluded from any indemnification
of the managing underwriter or underwriters other than with respect to
information provided by the respective Holders to Buyer or the underwriter.
(c) Notwithstanding the foregoing, if the managing underwriter
or underwriters of such offering delivers an opinion to Buyer that the total
amount of securities that the Holders or Buyer and any other persons or
entities intended to be included in such offering is sufficiently large to
affect materially and adversely the success of such offering, then the
underwriter and Buyer may limit or exclude entirely the Registrable Securities
to be included in such registration and underwriting. In such event, Buyer
shall so advise all Holders and other persons whose securities would otherwise
be registered and underwritten and the amount or kind of Registrable Securities
to be offered for the account of Holders shall be reduced to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing underwriter or
underwriters; provided, however, that, if securities are being offered for the
account of other persons or entities as well as Buyer and Holders, the
reduction imposed on each Holder shall not represent a greater fraction of the
number of
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securities intended to be offered by such Holder than the fraction of
reductions imposed on such other persons or entities with respect to the amount
of securities they intended to offer. No Registrable Securities excluded from
the underwriting by reason of a limitation on the size of the underwriting
shall be included in the registration. If any Holder disapproves of the terms
of the underwriting, such Holder may elect to withdraw therefrom by written
notice to Buyer and the managing underwriter. The Registrable Securities so
withdrawn shall also be withdrawn from registration; provided, however, that,
if by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the managing
underwriter), then Buyer shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
shares in the same proportion used in effecting the limitation referred to
above.
12.3. Registration Procedures. (a) Whenever any Registrable Securities
are to be registered pursuant to Section 12.2 of this Agreement, Buyer will use
its best efforts to effect the registration as quickly as practicable, will
keep each Holder participating therein advised in writing as to the progress of
such registration, and in connection with such registration Buyer will as
expeditiously as possible:
(i) notify participating Holders of any stop order issued or
threatened by the Commission in connection therewith and take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be necessary to
keep the registration statement effective for a period of not less than 180
days (or such shorter period which will terminate when all Registrable
Securities covered by such registration statement have been sold or withdrawn
at the request of participating Holders); cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act applicable to it with respect to the
disposition of all securities covered by such registration statement during the
applicable period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement or supplement to the
prospectus; Buyer shall not be deemed to have used its best efforts to keep a
registration statement effective during the applicable period if it voluntarily
takes any action that would result in participating Holders not being able to
sell such Registrable Securities during that period, unless such action is
required under applicable law;
(iii) furnish to participating Holders such number of copies of
the registration statement and amendments thereto and such number of copies of
the prospectus (including each preliminary prospectus) and any amendments or
supplements thereto, and any documents incorporated by reference therein, as
participating Holders or the underwriters, if any, may request in order to
facilitate the disposition of the Registrable Securities being sold by
participating Holders (it being understood that Buyer consents to the use of
the prospectus and any amendment or supplement thereto by participating Holders
and the underwriter or
27
<PAGE> 29
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such prospectus or any amendment or
supplement thereto);
(iv) notify participating Holders at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, when
Buyer becomes aware of the occurrence of any event as a result of which the
prospectus included in such registration statement (as then in effect) contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading and, as promptly as
practicable thereafter, if required by applicable law, prepare and file with
the Commission and furnish a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading;
(v) use its best efforts to cause all Registrable Securities
included in such registration statement to be listed, by the date of the first
sale of Registrable Securities pursuant to such registration statement, on each
securities exchange, if any, on which the Common Stock of Buyer is then listed
or proposed to be listed;
(vi) make "generally available to its security holders" (within
the meaning of Rule 158) an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder no later than 45
days after the end of the 12-month period beginning with the first day of
Buyer's first fiscal quarter commencing after the effective date of the
registration statement, which earnings statement shall cover said 12-month
period;
(vii) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at the
earliest possible moment;
(viii) if requested by the managing underwriter or underwriters
or any participating Holder, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters or any participating Holder, as the case may be, reasonably
requests to be included therein, including, without limitation, information
with respect to the number of Registrable Securities being sold by
participating Holders to any underwriter or underwriters, the purchase price
being paid therefor by such underwriter or underwriters and with respect to any
other terms of an underwritten offering of the Registrable Securities to be
sold in such offering, and promptly make all required filings of such
prospectus by supplement or post-effective amendment;
(ix) as promptly as practicable after filing with the
Commission of any document which is incorporated by reference in a prospectus
contained in a registration statement, deliver a copy of such document to each
participating Holder;
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<PAGE> 30
(x) on or prior to the date on which the registration
statement is declared effective, use its best efforts to register or qualify,
in connection with the registration or qualification of the Registrable
Securities covered by the registration statement, for offer and sale under the
securities or blue sky laws of each state and other jurisdictions of the United
States as participating Holders or the underwriter may reasonably request in
writing, to use its best efforts to keep each such registration or
qualification effective, including through new filings, amendments or renewals,
during the period such registration statement is required to be kept effective
and to do any and all other acts or things necessary or advisable to enable the
disposition in all such jurisdictions of the Registrable Securities covered by
the applicable registration statement; provided, that Buyer will not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;
(xi) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as
participating Holders may reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(xii) make available for inspection by participating Holders, any
underwriter participating in any disposition pursuant to such registration
statement, and the counsel retained by the participating Holders, counsel for
the underwriters and any accountant or other agent retained by participating
Holders or any such underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of Buyer (the
"Records"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause Buyer's officers, directors and
employees to supply all information reasonably requested by any such Inspectors
in connection with such registration statement; provided, that records which
Buyer determines, in good faith, to be confidential and which Buyer notifies
the Inspectors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction;
(xiii) engage a bank or other company to act as transfer agent
and registrar for the securities sold pursuant to such registration statement;
and
(xiv) take all other steps necessary to effect the registration
of the Registrable Securities contemplated hereby.
(b) Each participating Holder agrees that, upon receipt of any
notice from Buyer of the occurrence of any event of the kind described in
Section 12.3(a)(iv) hereof, he, she, or it will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until it has received copies of the
supplemented or amended prospectus contemplated by Section 12.3(a)(iv) hereof.
In the event Buyer shall give any such notice, Buyer shall extend the period
during which such registration statement shall be maintained effective pursuant
to this Agreement by the number of days during the period from and including
the date of the giving of such notice pursuant to Section 3(a)(iv) hereof to
and
29
<PAGE> 31
including the date when participating Holders shall have received the copies of
the supplemented or amended prospectus contemplated by Section 12.3(a)(iv)
hereof.
12.4. Registration Expenses. All expenses incident to Buyer's
performance of or compliance with this Agreement, including without limitation
all Commission and American Stock Exchange or other registration and filing
fees, escrow fees, fees and expenses of compliance with securities or blue sky
laws (including fees and disbursements of Buyer's counsel in connection with
blue sky qualifications of the Registrable Securities), rating agency fees,
printing expenses, messenger and delivery expenses, internal expenses
(including, without limitation, all salaries and expenses of Buyer's officers
and employees performing legal or accounting duties), the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange on which similar securities issued by Buyer are then
listed, and fees and disbursements of counsel for Buyer and their independent
certified public accountants (including the expenses of any special audit or
"cold comfort" letters required by or incident to such performance), Securities
Act liability insurance (if Buyer elects to obtain such insurance), the fees
and expenses of any special experts retained by Buyer in connection with such
registration, fees and expenses of other persons retained by Buyer, fees and
expenses of one special counsel retained by the participating Holders incurred
in connection with each registration hereunder (all such fees and expenses
being herein referred to as "Registration Expenses") will be borne by Buyer.
12.5 Transfer of Registration Rights. The right to cause Buyer to
register Registrable Securities granted under this Agreement may be assigned to
a transferee or assignee of any Holder to the extent that such transferee or
assignee received such shares in accordance with applicable law.
12.6 Participation in Underwritten Registrations. No Holder of
Registrable Securities may participate in any underwritten registration
pursuant to Section 12.2 hereunder unless such Holder (a) agrees to sell his,
her, or its securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements; provided however, that, other than as stated herein,
the Holders shall be exempt and excluded from any indemnification of the
managing underwriter or underwriters.
12.7 Waivers and Amendments. Any provision of this Article 12 may be
waived at any time by the party that is entitled to the benefits thereof. This
Article 12 may not be amended, supplemented or modified at any time without the
written consent of Buyer and each Holder intended to be bound by such
amendment, supplement or modification.
13. MISCELLANEOUS PROVISIONS
13.1 Definition of Affiliate. As used herein, with respect to any
person or entity, the term "Affiliate" shall mean and include:
30
<PAGE> 32
(a) With respect to Seller only, Schultz and Nimberg; or
(b) Any corporation, partnership, trust, person or other
entity directly or indirectly controlling, controlled by, or under common
control with, such person (including the members of such persons immediate
family) or entity; or
(c) Any officer, director, or holder or beneficial owner of 5%
or more of the outstanding securities, of such person or entity.
For the purposes of clause (c), the term "beneficial owner" shall include
any group of individuals acting in concert. A party shall be deemed the
beneficial owner of any securities held by any person whose ownership would be
attributed to such party under Section 318 of the Code.
Notwithstanding the foregoing, for the purposes of Section 3.16 above,
"Affiliate" shall have the meaning set forth in paragraph 3.16(a).
13.2 Non-Competition; Non Solicitation.
(a) Non-Competition. For a period of five years from the
Closing, unless otherwise agreed to in writing by Buyer, and except for
Nimberg's employment by Buyer, Seller and each of Schultz and Nimberg will not,
directly or indirectly, own, manage, operate, join, control, be employed by or
participate in, the ownership, management, operation or control of, or be
connected in any manner with any person or entity engaged in the business of
factoring or credit card financing in the States of New York, New Jersey and
Connecticut (collectively, the "Region"). It is agreed that each of the
cities, counties and other political subdivisions within the Region shall be
considered a separate geographic area and a separate covenant from Seller and
each of Schultz and Nimberg to Buyer and the invalidity of any of such
covenants shall not affect this Agreement or any other covenant made hereunder.
(b) Non-Solicitation. For a period of five years from the
Closing, Seller and each of Schultz and Nimberg agree that they shall refrain
from soliciting and shall not, directly or indirectly, as sole proprietor,
independent contractor, employee, consultant, agent, partner, or joint
venturer, or as an officer, director, shareholder, agent or employee of any
firm, person, entity, partnership or corporation, or otherwise: (i) solicit the
employees, agents and contractors of Buyer to leave the service of Buyer, or
(ii) solicit the business of any customer of Buyer, with respect to the
business of factoring or credit card financing.
(c) Enforcement. In the event of an actual or threatened
breach by Seller or any of the Participating Individuals of paragraph (a) or
(b) of this Section 13.2, Buyer shall be entitled to an injunction restraining
Seller and each of Schultz and Nimberg from the prohibited conduct. If the
court should determine that the duration or scope (geographic or otherwise) of
the provisions of this Section 13.2 are reasonable, the parties hereto agree to
accept enforcement of those provisions in accordance with such determination,
subject to their rights of appeal. Nothing contained herein shall be construed
as prohibiting Buyer or any third party from pursuing any of the remedies
available to it for such breach or threatened breach, including recovery of
damages
31
<PAGE> 33
from any one or more of Seller, Schultz or Nimberg. In any action or
proceeding to enforce the provisions of this Section 13.2, the prevailing party
shall be reimbursed by the other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and filing fees and
all attorney's fees, incurred either at the trial level or at the appellate
level. If Seller, Schultz or Nimberg shall be in violation of any of the
restrictive covenants contained in this Agreement, then the time limitation
otherwise applicable to such restrictive covenant shall be extended for a
period of time equal to the period of time during which such breach or breaches
occur. If Buyer seeks injunctive relief from such breach in any court, then
the covenant shall be extended for a period of time equal to the pendency of
such proceedings, including all appeals. The existence of any claim or cause of
action by Seller, Schultz or Nimberg against Buyer, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the enforcement
by Buyer of the foregoing restrictive covenants, but shall be litigated
separately.
(d) In the event the non-competition or non-solicitation
clause or any other restrictive covenant of this Agreement shall be deemed
unenforceable, invalid or overbroad in whole or in part for any reason, then
any court of competent jurisdiction is hereby authorized, requested and
instructed to reform any such provision to provide for the maximum competitive
restraints upon the activities of Seller, Schultz and Nimberg (in time and
geographic area), which may then be legal and valid, and the parties hereto
agree to accept enforcement of each such provision as so reformed, subject to
their rights of appeal.
13.3 Further Assurances. On the terms and subject to the conditions
herein provided, each of the parties hereto and the Controlled Entities shall
use its or his best efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and to afford the other parties
hereto the practical realization and benefits of those transactions. Buyer
acknowledges that Seller and each of Schultz and Nimberg has cooperated with
Buyer and Buyer's agents, attorneys and accountants in connection with the IPO.
13.4 Notices. All notices, requests, demands or other communications
hereunder (including notices of all asserted claims or liabilities) shall be in
writing and shall be either delivered personally, by messenger service, by
guaranteed over night delivery service or mailed by U.S. mail, certified or
registered, return receipt requested, with appropriate postage prepaid to the
addressees and addresses herein designated or such other address as may be
designated in writing by notice given in the manner provided herein and shall
be effective upon personal delivery thereof, if delivered personally or by
messenger service, one business day after delivery to the overnight delivery
service, if delivered by overnight delivery service, or on delivery, if sent by
mail:
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<PAGE> 34
If to Seller: New York Payroll Factors, Inc.
201 Allen Street
New York, NY 10001
Attention: Gerald Schultz
If to Schultz: 1 Links CourtHuntington, NY 11743
If to Nimberg: 1009 Owl Place
Cherry Hill, NJ 08003
If to Buyer: General Credit Corporation
211 East 70th Street
New York, NY 10021
Attention: Irwin Zellermaier
13.5 Assignability; Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Seller hereby expressly consents to the assignment by
Buyer of the rights and obligations of Buyer hereunder subsequent to the
Closing.
13.6 Governing Law; Venue. This Agreement shall be construed and
governed in accordance with the internal laws of the State of New York. Buyer,
Seller, each of the Controlled Entities, Schultz and Nimberg hereby consent to
service of process and to the jurisdiction of any appropriate court located in
New York City, New York in any action to enforce the provision of this
Agreement.
13.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
13.8 Entire Agreement. Except as otherwise specifically provided
herein, this Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
communications, writings and other documents with regard thereto. No
modification, amendment or waiver of any provision hereof shall be binding upon
any party hereto unless it is in writing and executed by all of the parties
hereto or, in the case of a waiver, by the party waiving compliance.
13.9 Waiver. The waiver by any party hereto of any breach, default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall not be deemed to extend to any prior or subsequent
breach, default, misrepresentation or breach of warranty or covenant hereunder
and shall not affect in any way any rights arising by virtue of any such prior
or subsequent occurrence.
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<PAGE> 35
13.10 Incorporation by Reference. All schedules and exhibits hereto are
incorporated herein by this reference.
13.11 No Joint Venture. Nothing contained in this Agreement shall be
deemed or construed by the parties hereto or by any third person to create the
relationship of principal and agent or of partnership or of joint venture or of
any association between the parties. None of the provisions contained in this
Agreement nor any acts of the parties hereto shall be deemed to create any
relationship between the parties other than the relationship specified in this
Agreement.
13.12 Confidentiality. Seller and Buyer hereby agree that the terms and
conditions of this Agreement and the transactions contemplated herein shall
remain confidential and not be disclosed by either party, except to employees
and agents and otherwise to the extent necessary to perform due diligence and
obligations hereunder until the Closing. Notwithstanding the foregoing, Buyer
shall have the right to make public disclosures as may be necessary or
advisable to satisfy applicable laws, rules and regulations applicable to
public companies.
13.13 Number/Gender. All words and personal pronouns relating thereto
shall be read and construed as the number and gender of the party or parties
referred to in each case requires and the verb shall be construed as agreeing
with the required word or pronoun.
13.14 Captions. The division of this Agreement into articles, sections,
subsections, Schedules and exhibits is for convenience of reference only and
shall not affect the interpretation or construction of this Agreement.
13.15 Allocation of Fees and Expenses. Except as otherwise provided
herein, Buyer and Seller each shall be responsible for their own legal and
audit fees and other charges incurred in connection with the purchase and sale
of the Assets, the completion of the transactions contemplated hereby and any
post-Closing matters in connection with the transactions contemplated hereby.
13.16 Time of the Essence. Time shall be of the essence of this
Agreement and of every part hereof.
13.17 Severability. In the event that one or more of the provisions,
warranties, representations or covenants or any portion of them contained in
this Agreement are unenforceable or are declared invalid for any reason
whatsoever, such unenforceability or invalidity shall not affect the
enforceability or the validity of the remaining terms or portions of this
Agreement, and each such unenforceable or invalid provision, warranty,
representation or covenant or portion thereof shall be severable from the
remainder of this Agreement.
13.18 Attorneys' Fees. In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any other damages assessed, its reasonable attorneys' fees and
other costs and expenses incurred in litigating or otherwise settling or
resolving such dispute.
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13.19 Remedies Cumulative. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity, except to the extent otherwise provided by
Section 10.5 hereof.
13.20 Construction. The parties acknowledge that Buyer, Seller, the
Controlled Entities, Schultz and Nimberg and their respective counsel each have
reviewed and revised this Agreement and that the rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any documents
executed in connection herewith.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, HAVE HAD THE
OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE, AND
UNDERSTAND EACH OF THE PROVISION OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
NEW YORK PAYROLL FACTORS, INC.,
as Seller
By: /s/ Gerald Schultz
------------------------------------
Gerald Schultz, President
/s/ Gerald Schultz
----------------------------------------
Gerald Schultz only as to Sections
2.1(b), 2.1(c), 8.3, 12 and 13
/s/ Gerald Nimberg
----------------------------------------
Gerald Nimberg only as to Sections
2.1(b), 2.1(c), 8.3, 12 and 13
GENERAL CREDIT CORPORATION,
as Buyer
By: /s/ Irwin Zellermaier
------------------------------------
Irwin Zellermaier, Chairman and
Chief Executive Officer, Chairman and CEO
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The undersigned, as Controlled Entities as defined in and for the purpose of
the above Agreement, hereby agree to be bound by the provisions of Sections
9.1, 13.3 and 13.6 hereof:
MERSA CORP.
G.S. CAPITAL CORP.
MERYKA, INC.
By: /s/ Gerald Schultz
---------------------------
Gerald Schultz, President
36
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
GENERAL CREDIT CORPORATION
Under Section 402 of the Business Corporation
Law of the State of New York
Irwin Zellermaier
211 East 70th Street - Apt. 8A
New York, New York 10021
<PAGE> 2
CERTIFICATE OF INCORPORATION
OF
GENERAL CREDIT CORPORATION
Under Section 402 of the Business Corporation
Law of the State of New York
In order to form a corporation under and pursuant to the laws of the
State of New York, the undersigned, being of legal age, hereby sets forth as
follows:
PARAGRAPH FIRST: The name of the corporation is:
GENERAL CREDIT CORPORATION
PARAGRAPH SECOND: This corporation is formed to engage in any
lawful act or activity for which corporation may be organized under the
Business Corporation Law of the State of New York, provided that it is not
formed to engage in any act or activity which requires the consent or approval
of any state official, department, board, agency or other body, without such
approval or consent first being obtained.
PARAGRAPH THIRD: The office of the corporation in the State of
New York shall be located in the County of New York.
PARAGRAPH FOURTH: The corporation shall be authorized to issue
the following shares:
Class Number of Shares Par Value
COMMON 200 NO PAR VALUE
PARAGRAPH FIFTH: The Secretary of State is designated as the
agent of the corporation upon whom process against the corporation may be
served, and the address to which the Secretary of State shall mail a copy of
any process against the corporation served upon is c/o Irwin Zellermaier, 211
East 70th Street - Apt. 8A, New York, New York 10021.
<PAGE> 3
PARAGRAPH SIXTH: The shareholders or the Board of Directors of
the corporation shall have the power to adopt, alter, amend or repeal the
By-Laws of the corporation.
PARAGRAPH SEVENTH: (a) The corporation may, to the fullest
extent permitted by Section 721 through 726 of the Business Corporation Law of
New York, indemnify any and all directors and officers whom it shall have power
to indemnify under the said sections from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which the persons so indemnified may be
entitled under any By-Law, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his/her official capacity and as
to action in another capacity by holding such office, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefits of the heirs, executors and administrators of such a person.
(b) A director of this Corporation shall not be personally liable to
the Corporation or its shareholders for damages for any breach of duty in
his/her capacity as a director, unless a judgment or other final adjudication
adverse to him/her establishes that (i) his/her acts or omissions were in bad
faith or involved intentional misconduct or a knowing violation of law, or (ii)
he/she personally gained in fact a financial or other advantage to which he/she
was not legally entitled or (iii) his/her acts violated Section 719 of the
Business Corporation Law.
PARAGRAPH EIGHTH: A director or officer of the Corporation
shall not, in the absence of fraud, be disqualified from his/her office by
dealing with or contracting with the Corporation as vendor, purchaser or
otherwise.
In the absence of fraud, no transaction, contract or act of the
Corporation, the Board of Directors, the Executive Committee of the Board of
Directors, or any other duly constituted committee, shall be void, voidable or
affected by reason of the fact that any director or officer of the Corporation,
or any firm of which any director or officer of the Corporation is a member, or
any corporation of which any director or officer of the Corporation is an
officer, director, or shareholder, is in any way interested in the transaction,
contract or act if either:
<PAGE> 4
(a) the fact of such common directorship, officership, or financial
or other interest is disclosed or known to the Board of Directors or the
Executive Committee, and the Board of Directors or the Executive Committee
approves the transaction, contract or act by a vote sufficient for such
purposes without the vote of such interested director, if any; provided that
any such director may be counted in determining the presence of a quorum at any
such meeting of the Board of Directors or the Executive Committee; or
(b) the fact of such common directorship, officership or financial or
other interest is disclosed or known to the shareholders entitled to vote on
the transaction, contract or act and the transaction, contract or act is
approved by vote of the shareholders entitled to vote thereon, whether or not
the Board of Directors of the Executive Committee has approved the transaction,
contract or act.
Any such transaction, contract or act which is ratified by a majority
in interest of a quorum of the shareholders of the Corporation having voting
power at any annual or special meeting called for such purpose, shall, if such
common ownership or financial or other interest is disclosed in the notice of
the meeting, be valid and as binding as though approved or ratified by every
shareholder of the Corporation, except as otherwise provided by the laws of the
State of New York.
IN WITNESS WHEREOF, I hereunto sign my name and affirm that the
statements made herein are true under the penalties of perjury, this ninth day
of February, 1995.
NAME ADDRESS
S/IRWIN ZELLERMAIER 211 East 70th Street - Apt. 8A
Irwin Zellermaier - New York, New York 10021
Incorporator
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GENERAL CREDIT CORPORATION
Under Section 805 of the
Business Corporation Law
Office of Irwin Zellermaier
211 East 70th Street
New York, New York 10021
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GENERAL CREDIT CORPORATION
Under Section 805 of the
Business Corporation Law
Pursuant to the provisions of Section 805 of the Business Corporation
Law, the undersigned, being the sole incorporator of the corporation, hereby
certifies:
FIRST: The name of the corporation is:
GENERAL CREDIT CORPORATION
SECOND: That the Certificate of Incorporation was filed by the
Secretary of State of New York on the tenth day of February, 1995.
THIRD: That the amendment to the Certificate of Incorporation
effected by this Certificate is as follows:
Paragraph IV of the Certificate of Incorporation, relating to the
authorized shares of the corporation, is hereby amended to change the number
and par value of the presently authorized 200 common shares without par value
to 20,000,000 common shares of $.001 par value and shall read as follows:
"IV: The corporation shall be authorized to issue the
following shares:
Class Number of Shares Par Value
COMMON 20,000,000 $.001
<PAGE> 3
FOURTH: All of the previously authorized 200 shares without par value
are unissued and are hereby changed into the newly authorized 20,000,000 shares
of the par value of $.001 at the rate of 100,000 of the newly authorized common
shares for one share of the previously authorized shares.
FIFTH: That this amendment to the Certificate of Incorporation was
authorized by the written consent of the incorporator of the corporation there
being no shareholders of record or subscribers to shares whose subscriptions
have been accepted nor officers or directors.
IN WITNESS WHEREOF, I hereunto sign my name and affirm that the
statements made herein are true under the penalties of perjury, this
twenty-second day of April, 1996.
S/IRWIN ZELLERMAIER
Irwin Zellermaier, Sole Incorporator
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
GENERAL CREDIT CORPORATION
ARTICLE I - OFFICES
The principal office of the Corporation shall be located in the City, County
and State so provided in the Certificate of Incorporation. The Corporation may
also maintain offices at such other places within or without the State of New
York as the Board of Directors may, from time to time, determine and the
business may require.
ARTICLE II - SHAREHOLDERS
1. Place of Meetings.
Meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places within or without the State of New York as
the Board shall authorize.
2. Annual Meetings.
The annual meeting of the shareholders of the Corporation shall be held at 2:00
P.M. on the last Tuesday of the third month in each year after the close of the
fiscal year of the Corporation, if such date is not a legal holiday and if a
legal holiday, then on the next business day following at the same hour, at
which time the shareholders shall elect a Board of Directors, and transact such
other business as may properly come before the meeting.
3. Special Meetings.
Special meetings of the shareholders may be called at any time by the Board or
by the President, and shall be called by the President or the Secretary at the
written request of the holders of ten percent (10%) of the outstanding shares
entitled to vote thereat, or as otherwise required by law.
<PAGE> 2
4. Notice of Meetings.
Written notice of each meeting of shareholders, whether annual or special,
stating the time when and place where it is to be held, shall be served either
personally or by mail. Such notice shall be served not less than ten nor more
than fifty days before the meeting, upon each shareholder of record entitled to
vote at such meeting, and to any other shareholder to whom the giving of notice
may be required by law. Notice of a special meeting shall also state the
purpose or purposes for which the meeting is called, and shall indicate that it
is being issued by the person calling the meeting. If, at any meeting, action
is proposed to be taken that would, if taken, entitle shareholders to receive
payment for their shares, the notice of such meeting shall include a statement
of that purpose and to that effect. If mailed, such notice shall be directed
to each such shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed to some other address, in which event, it shall be mailed to the address
designated in such request.
5. Waiver.
Notice of any meeting need not be given to any shareholder who submits a signed
waiver of notice either before or after a meeting. The attendance of any
shareholder at a meeting, in person or by proxy, shall constitute a waiver of
notice by such shareholder.
6. Fixing Record Date.
For the purpose of determining the shareholders entitled to notice of or to
vote any meeting of shareholders or any adjournment thereof, or to express
consent to or dissent from any proposal without a meeting, or for the purpose
of determining shareholders entitled to receive payment of any dividend or the
allotment of any rights, or for the purpose of any other action, the Board
shall fix, in advance, a date as the record date for any such determination of
shareholders. Such date shall not be more than fifty nor less than ten days
before the date of such meeting, nor more than fifty days prior to any other
action. If no record date is fixed it shall be determined in accordance with
the provisions of law.
7. Quorum.
(a) Except as otherwise provided by the Certificate of Incorporation, at
all meetings of shareholders of the Corporation, the presence at the
commencement of such meetings, in person or by proxy, of shareholders holding a
majority of the total number of shares of the Corporation then issued and
outstanding on the records of the Corporation and entitled to vote, shall be
<PAGE> 3
necessary and sufficient to constitute a quorum for the transaction of any
business. If specified item of business is required to be voted on by a class
or classes, the holder of a majority of the shares of such class or classes
shall constitute a quorum for the transaction of such specified item of
business. The withdrawal of any shareholder after the commencement of a
meeting shall have no effect on the existence of a quorum, after a quorum has
been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting.
8. Voting
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation,
(1) directors shall be elected by a plurality of the votes cast; and
(2) all other corporate action to be taken by vote of the shareholders,
shall be authorized by a majority of votes cast;
at a meeting of shareholders by the holders of shares entitled to vote thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of shares
of the Corporation entitled to vote, shall be entitled to one vote for each
share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without
a meeting, may do so by proxy; provided, however, that the instrument
authorizing such proxy to act shall have been executed in writing by the
shareholder himself, or by his attorney-in-fact duly authorized in writing. No
proxy shall be valid after the expiration of eleven months from the date of its
execution, unless the proxy shall specify the length of time it is to continue
in force. The proxy shall be delivered to the Secretary at the meeting and
shall be filed with the records of the Corporation. Every proxy shall be
revocable at the pleasure of the shareholder executing it, except as otherwise
provided by law.
(d) Any action that may be taken by vote may be taken without a meeting on
written consent. Such action shall constitute action by such shareholders with
the same force and effect as if the same had been approved at a duly called
meeting of shareholders and evidence of such approval signed by all of the
shareholders shall be inserted in the Minute Book of the Corporation.
<PAGE> 4
Article III - Board of Directors
1. Number
The number of the directors of the Corporation shall be three (3), until
otherwise determined by a vote of the Board, and it shall in no event be less
than three, unless all of the outstanding shares are owned of record by less
than three shareholders, in which event, the number of directors shall not be
less than the number of shareholders.
2. Election
Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board need not be shareholders and shall be
elected by a majority of the votes cast at a meeting of shareholders, by the
holders of shares entitled to vote in the election.
3. Term Of Office
Each director shall hold office until the annual meeting of the shareholders
next succeeding his election, and until his successor is elected and qualified,
or until his prior death, resignation or removal.
4. Duties and Powers
The Board shall be responsible for the control and management of the affairs,
property and interest of the Corporation, and may exercise all powers of the
Corporation, except those powers expressly conferred upon or reserved to the
shareholders.
5. Annual Meetings
Regular annual meetings of the Board Shall be held immediately following the
annual meeting of shareholders.
6. Regular Meetings and Notice
The Board may provide by resolution for the holding of regular meetings of the
Board of Directors, and may fix the time and place thereof.
Notice of regular meetings shall not be required to be given and, if given,
need not specify the purpose of the meeting; provided, however, that in case
the Board shall fix or change the time or place of any regular meeting, notice
of such action be given to each director who shall not have been present at the
meeting at which such action was taken within
<PAGE> 5
the time limited, and in the manner set forth at Section 7 of this Article III,
unless such notice shall be waived.
7. Special Meetings and Notice.
(a) Special meetings of the Board shall be held whenever called by the
President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Notice of special meetings shall be mailed directly to each director,
addressed to him at the address designated by him for such purpose or at his
usual place of business, at least two (2) business days before the day on which
the meeting is to be held, or delivered to him personally or given to him
orally, not later than the business day before the day on which the meeting is
to be held.
(c) Notice of a special meeting shall not be required to be given to any
director who shall attend such meeting, or who submits a signed waiver of
notice.
8. Chairman.
At all meetings of the Board, the Chairman, if present, shall preside. If
there shall be no Chairman, or he shall be absent, then the President shall
preside. In his absence, the Chairman shall be chosen by the Directors
present.
9. Quorum and Adjournments.
(a) At all meetings of the Board, the presence of a majority of the entire
Board shall be necessary to constitute a quorum for the transaction of
business, except as otherwise provided by law, by the Certificate of
Incorporation, or by these By-Laws. Participation of any one or more members
of the Board 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, shall constitute presence in person at any such meeting.
(b) A majority of the directors present at any regular or special meeting,
although less than a quorum, may adjourn the same from time to time without
notice, until a quorum shall be present.
10. Manner of Acting.
(a) At all meetings of the Board, each director present shall have one
vote.
<PAGE> 6
(b) Except as otherwise provided by law, by the certificate of
Incorporation, or these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board. Any action authorized, in writing, by all of the directors entitled to
vote thereon and filed with the minutes of the Corporation shall be the act of
the Board with the same force and effect as if the same had been passed by
unanimous vote at a duly called meeting of the Board.
11. Vacancies.
Any vacancy in the Board of Directors resulting from an increase in the number
of directors, or the death, resignation, disqualification, removal or inability
to act of any director, shall be filled for the unexpired portion of the term
by a majority vote of the remaining directors, though less than a quorum, at
any regular meeting or special meeting of the Board called for that purpose.
12. Resignation.
Any director may resign at any time by giving written notice to the Board, the
President or the Secretary of the Corporation. Unless otherwise specified in
such written notice, such resignation shall take effect upon receipt thereof by
the Board or such officer, and the acceptance of such resignation shall not be
necessary to make it effective.
13. Removal.
Any director may be removed, with or without cause, at any time by the
shareholders, at a special meeting of the shareholders called for that purpose,
and may be removed for cause by action of the Board.
14. Compensation.
No compensation shall be paid to directors as such, for their services, but by
resolution of the Board, a fixed sum and expenses for actual attendance may be
authorized for attendance at each regular or special meeting of the Board.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
15. Contracts.
(a) No contract or other transaction between this Corporation and any
other business shall be affected or invalidated, nor shall any director be
liable in any way by reason of the fact that a director of this Corporation is
interested in, or
<PAGE> 7
is a director, officer, or is financially interested in such other business,
provided such fact is disclosed to the Board.
(b) Any director may be a party to or may be interested in any contract or
transaction of this Corporation individually, and no director shall be liable
in any way by reason of such interest, provided that the fact of such
participation or interest be disclosed to the Board and provided that the Board
shall authorize 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 ant which such
action is taken. Such director may be counted in determining the presence of a
quorum at such meeting. This Section shall not be construed to invalidate or
in any way affect any contract or other transaction which would otherwise be
valid under the law applicable thereto.
16. Committees.
The Board, by resolution adopted by a majority of the entire Board, may from
time to time designate from among its members an executive committee and such
other committees, and alternate members thereof, as they dem desirable, each
consisting of three or more members, with such powers and authority (to the
extent permitted by law) as may be provided in such resolution. Each such
committee shall remain in existence at the pleasure of the Board.
Participation of any one or more members of a committee 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, shall
constitute a director's presence in person at any such meeting. Any action
authorized in writing by all of the members of a committee and filed with the
minutes of the committee shall be the act of the committee with the same force
and effect as if the same had been passed by unanimous vote at a duly called
meeting of the committee.
ARTICLE IV - OFFICERS
1. Number and Qualifications.
The officers of the Corporation shall consist of a President, one or more Vice
Presidents, a Secretary, a Treasurer, and such other officers, including a
Chairman of the Board, as the Board of Directors may from time to time deem
advisable. Any officer other than the Chairman of the Board may be, but is not
required to be, a director of the Corporation. Any two or more offices may be
held by the same person,
<PAGE> 8
except the offices of President and Secretary.
2. Election.
The officers of the Corporation shall be elected by the Board at the regular
annual meeting of the Board following the annual meeting of shareholders.
3. Term of Office.
Each officer shall hold office until the annual meeting of the Board next
succeeding his election, and until his successor shall have been elected and
qualified, or until his death, resignation or removal.
4. Resignation.
Any officer may resign at any time by giving written notice thereof to the
Board, the President or the Secretary of the Corporation. Such resignation
shall take effect upon receipt thereof by the Board or by such officer, unless
otherwise specified in such written notice. The acceptance of such resignation
shall not be necessary to make it effective.
5. Removal.
Any officer, whether elected or appointed by the Board, may be removed by the
Board, either with or without cause, and a successor elected by the Board at
any time.
6. Vacancies.
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by the Board.
7. Duties.
Unless otherwise provided by the Board, officers of the Corporation shall each
have such powers and duties as generally pertain to their respective offices,
such powers and duties as may be set forth in these by-laws, and such powers
and duties as may be specifically provided for by the Board. The President
shall be the chief executive officer of the Corporation.
8. Sureties and Bonds.
At the request of the Board, any officer, employee or agent of the Corporation
shall execute for the Corporation a bond
<PAGE> 9
in such sum, and with such surety as the Board may direct, conditioned upon the
faithful performance of his duties to the Corporation, including responsibility
for negligence and for the accounting for all property, funds or securities of
the Corporation which may come into his hands.
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 shareholder shall be exercised on
behalf of the Corporation in such manner as the Board may authorize.
ARTICLE V - SHARES OF STOCK
1. Certificates.
(a) The certificates representing shares in the Corporation shall be in
such form as shall be approved by the Board and shall be numbered and
registered in the order issued. They shall bear the holders's name and the
number of shares, and shall be signed by (i) the Chairman of the Board or the
President or a Vice President, and (ii) the Secretary or Treasurer, or any
Assistant Secretary or Assistant Treasurer, and shall bear the corporate seal.
(b) Certificate representing shares shall not be issued until they are
fully paid for.
(c) The Board may authorize the issuance of certificates for fractions of
a share which shall entitle the holder to exercise voting rights, receive
dividends and participate in liquidating distributions, in proportion to the
fractional holdings.
2. Lost or Destroyed Certificates.
Upon notification by the holder of any certificate representing shares of the
Corporation of the loss or destruction of one or more certificates representing
the same, the Corporation may issue new certificates in place of any
certificates previously issued by it, and alleged to have been lost or
destroyed. Upon production of evidence of loss or destruction, in such form as
the Board in its sole discretion may require, the Board may require the owner
of the lost or destroyed certificates to provide the Corporation with a bond
in such sum as the Board may direct, and with such surety as may be
satisfactory to the Board, to indemnify the Corporation against any claims,
loss, liability or damage
<PAGE> 10
it may suffer on account of the issuance of the new certificates. A new
certificate may be issued without requiring any such evidence or bond when, in
the judgment of the Board, it is proper to do so.
3. Transfers of Shares.
(a) Transfers of shares of the Corporation may be made on the share
records of the Corporation solely by the holder of such records, in person or
by a duly authorized attorney, upon surrender for cancellation of the
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed and with such proof of
the authenticity of the signature, and the authority to transfer and the
payment of transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
shares as the absolute owner thereof for all purposes and shall not be bound to
recognize any legal, equitable or other claim to, or interest in, such shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by law.
4. Record Date.
In lieu of closing the share records of the Corporation, the Board may fix, in
advance a date not less than ten days and not more than fifty days, as the
record date for the determination of shareholders entitled to receive notice
of, and to vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividends, or allotment of any rights, or for the
purpose of any other action. If no record date is fixed, the record date for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the day immediately
preceding the day on which notice is given, or, if no notice is given, the day
on which the meeting is held; the record date for determining shareholders for
any other purpose shall be at the close of business on the day on which the
resolution of the directors relating thereto is adopted. When a determination
of shareholders of record entitled to notice of or to vote at any meeting of
shareholders has been made as provided for herein, such determination shall
apply to any adjournment thereof, unless the directors fix a new record date
for the adjourned meeting.
<PAGE> 11
ARTICLE VI - DIVIDENDS
Subject to this Certificate of Incorporation and to applicable law, dividends
may be declared and paid out of any funds available therefor, as often, in such
amount, and at such time or times as the Board may determine. Before payment
of any dividend, there may be set aside out of the net profits of the
Corporation available for dividends, such sum or sums as the Board, from time
to time, in its sole discretion, deems 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 Board shall think
conducive to the interests of the Corporation, and the Board may modify or
abolish any such reserve.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board from time to
time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from
time to time by the Board.
ARTICLE IX - AMENDMENTS
1. By Shareholders.
All by-laws of the Corporation shall be subject to revision, amendment or
repeal, and new by-laws may be adopted from time to time, by a majority vote of
the shareholders who are at such time entitled to vote in the election of
directors.
2. By Directors.
The Board shall have power to make, adopt, alter, amend and repeal, from time
to time, by-laws of the Corporation; provided, however, that the shareholders
entitled to vote with respect thereto as provided for by Section 1 of this
Article IX may alter, amend or repeal by-laws made by the Board. The Board
shall have no power to change the quorum for meetings of shareholders or of the
Board, or to change any
<PAGE> 12
provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal of one or more
directors by the shareholders. If any by-law regulating an impending election
of directors is adopted, amended or repealed by the Board, there shall be set
forth in the notice of the next meeting of shareholders for the election of
directors, the by-law so adopted, amended or repealed, together with a concise
statement of the changes made.
The undersigned Incorporator certifies that he has adopted the
foregoing by-laws as the first by-laws of the Corporation, in accordance with
the requirements of the Business Corporation Law.
Dated: February 10, 1995
S/IRWIN ZELLERMAIER
Incorporator
<PAGE> 1
EXHIBIT 4.4
UNDERWRITER'S WARRANT AGREEMENT (the "Underwriter's Warrant Agreement"
or "Agreement"), dated as of __________ , 1996, between GENERAL CREDIT
CORPORATION (the "Company"), and BARRON CHASE SECURITIES, INC. (the
"Underwriter").
W I T N E S S E T H:
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between
the Company and the Underwriter, to act as the Underwriter in connection with
the Company's proposed public offering of 2,200,000 shares of the Company's
Common Stock at $3.00 per share and 2,200,000 Warrants ("Public Warrants") at
$.125 per warrant (the "Public Offering"); and
WHEREAS, the Company proposes to issue to the Underwriter and/or
persons related to the Underwriter as those persons are defined in Rule 2710 of
the NASD Conduct Rules (the "Holder"), 220,000 warrants ("Common Stock
Underwriter Warrants") to purchase 220,000 shares of the Company's Common stock
(the "Shares") and 220,000 warrants ("Warrant Underwriter Warrants") to
purchase 220,000 Common Stock Purchase Warrants ("Underlying Warrants")
exercisable to purchase 220,000 shares of the Company's Common Stock. The
"Common Stock Underwriter Warrants" and the "Warrant Underwriter Warrants" are
collectively referred to as the "Warrants". The "Shares" and the "Underlying
Warrants" are collectively referred to as the "Warrant Securities"; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Holders in consideration for, and as part of
the compensation in connection with, the Underwriter acting as Underwriter
pursuant to the Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of TEN DOLLARS AND NO CENTS ($10.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant and Period.
The Public Offering has been registered under a Registration Statement
on Form SB-2 (File No. 333-______) and declared effective by the Securities and
Exchange Commission (the "SEC" or "Commission") on _________, 1996 (the
"Effective Date"). This Agreement, relating to the purchase of the Warrants,
is entered into pursuant to the Underwriting Agreement between the Company and
the Underwriter in connection with the Public Offering.
1
<PAGE> 2
Pursuant to the Warrants, the Holders are hereby granted the right to
purchase from the Company, at any time during the period commencing on the
Effective Date and expiring five (5) years thereafter (the "Expiration Time"),
up to 220,000 Shares at an initial exercise price (subject to adjustment as
provided in Article 8 hereof) of $4.65 per share (155% of the public offering
price) and/or 220,000 non-redeemable Underlying Warrants at an initial exercise
price of $.19375 per warrant (155% of the public offering price) (the "Exercise
Price" or "Purchase Price"), subject to the terms and conditions of this
Agreement. Each Underlying Warrant is exercisable to purchase one (1) share of
Common Stock at $4.65 per share during the three (3) year period commencing on
the Effective Date.
Except as specifically otherwise provided herein, the Shares and the
Underlying Warrants constituting the Warrant Securities shall bear the same
terms and conditions as such securities described under the caption
"Description of Securities" in the Registration Statement, and as designated in
the Company's Articles of Incorporation and any amendments thereto, and the
Underlying Warrants shall be governed by the terms of the Warrant Agreement
executed in connection with the Company's public offering (the "Warrant
Agreement"), except as provided herein, and the Holders shall have registration
rights under the Securities Act of 1933, as amended (the "Act"), for the
Warrants, the Shares, the Underlying Warrants, and the shares of Common Stock
underlying the Underlying Warrants, as more fully described in paragraph seven
(7) of this Underwriter's Warrant Agreement. In the event of any extension of
the expiration date or reduction of the exercise price of the Public Warrants,
the same such changes to the Underlying Warrants shall be simultaneously
effected, except that the Underlying Warrants shall expire no later than five
(5) years from the Effective Date.
2. Warrant Certificates.
The warrant certificates (the "Warrant Certificate") delivered and to
be delivered pursuant to this Agreement shall be in the form set forth in the
form of Warrant Certificate, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
3.1 Full Exercise.
(i) The Holder hereof may effect a cash exercise of the
Common Stock Underwriter Warrants and/or the Warrant Underwriter
Warrants and/or the Underlying Warrants by surrendering the Warrant
Certificate, together with a Subscription in the form of Exhibit "A"
attached thereto, duly
2
<PAGE> 3
executed by such Holder to the Company, at any time prior to the
Expiration Time, at the Company's principal office, accompanied by
payment in cash or by certified or official bank check payable to the
order of the Company in the amount of the aggregate purchase price
(the "Aggregate Price"), subject to any adjustments provided for in
this Agreement. The aggregate price hereunder for each Holder shall
be equal to the exercise price as set forth in Section six (6) hereof
multiplied by the number of Warrants, Underlying Warrants or Shares
that are the subject of each Holder's Warrant (as adjusted as
hereinafter provided).
(ii) The Holder hereof may effect a cashless exercise of
the Common Stock Underwriter Warrants and/or the Underlying Warrants
by delivering the Warrant Certificate to the Company together with a
Subscription in the form of Exhibit "B" attached thereto, duly
executed by such Holder, in which case no payment of cash will be
required. Upon such cashless exercise, the number of Shares to be
purchased by each Holder hereof shall be determined by dividing: (i)
the number obtained by multiplying the number of Shares that are the
subject of each Holder's Warrant Certificate by the amount, if any, by
which the then Market Value (as hereinafter defined) exceeds the
Purchase Price; by (ii) the then per share Market Value or purchase
price, whichever is greater. In no event shall the Company be
obligated to issue any fractional securities and, at the time it
causes a certificate or certificates to be issued, it shall pay the
Holder in lieu of any fractional securities or shares to which such
Holder would otherwise be entitled, by the Company check, in an amount
equal to such fraction multiplied by the Market Value. The Market
Value shall be determined on a per Share basis as of the close of the
business day preceding the exercise, which determination shall be made
as follows: (a) if the Common Stock is listed for trading on a
national or regional stock exchange or is included on the NASDAQ
National Market or Small-Cap Market, the average closing sale price
quoted on such exchange or the NASDAQ National Market or Small-Cap
Market which is published in The Wall Street Journal for the ten (10)
trading days immediately preceding the date of exercise, or if no
trade of the Common Stock shall have been reported during such period,
the last sale price so quoted for the next day prior thereto on which
a trade in the Common Stock was so reported; or (b) if the Common
Stock is not so listed, admitted to trading or included, the average
of the closing highest reported bid and lowest reported ask price as
quoted on the National Association of Securities Dealer's OTC Bulletin
Board or in the "pink sheets" published by the National Daily
Quotation Bureau for the first day immediately preceding the date of
exercise on which the Common Stock is traded.
3
<PAGE> 4
3.2 Partial Exercise. The securities referred to in paragraph
3.1 above also may be exercised from time to time in part by surrendering the
Warrant Certificate in the manner specified in Section 3.1 hereof, except that
with respect to a cash exercise, the Purchase Price payable shall be equal to
the number of securities being purchased hereunder multiplied by the per
security Purchase Price, subject to any adjustments provided for in this
Agreement. Upon any such partial exercise, the Company, at its expense, will
forthwith issue to the Holder hereof a new Warrant Certificate or Warrants of
like tenor calling in the aggregate for the number of securities (as
constituted as of the date hereof) for which the Warrant Certificate shall not
have been exercised, issued in the name of the Holder hereof or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct.
4. Issuance of Certificates.
Upon the exercise of the Warrants and/or the Underlying Warrants, the
issuance of certificates for the shares of Common Stock and/or other securities
shall be made forthwith (and in any event within three (3) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Sections 5 and 7 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the shares
of Common Stock and/or other securities shall be executed on behalf of the
Company by the manual or facsimile signature of the then present Chairman or
Vice Chairman of the Board of Directors or President or Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or Assistant Secretary of
the Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants.
The Holder of a Warrant Certificate, by its acceptance thereof,
covenants and agrees that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of one
(1) year from the Effective
4
<PAGE> 5
Date of the Public Offering, except (a) to officers of the Underwriter or to
officers and partners of Selected Dealers participating in the Public Offering;
(b) by will; or (c) by operation of law.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Prices.
The initial exercise price of each Common Stock Underwriter Warrant
shall be $4.65 per share (155% of the public offering price). The initial
exercise price of each Warrant Underwriter Warrant shall be $.19375 per
Underlying Warrant (155% of the public offering price). The initial exercise
price of each Underlying Warrant shall be $4.65 per share. The adjusted
exercise price shall be the price which shall result from time to time from any
and all adjustments of the initial exercise price in accordance with the
provisions of Section 8 hereof. The Warrant Underwriter Warrants and the
Underlying Warrants are exercisable during the three (3) year period commencing
on the Effective Date.
6.2 Exercise Price.
The term "Exercise Price" herein shall mean the initial exercise price
or the adjusted exercise price, depending upon the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933.
The Warrants, the Shares, the Underlying Warrants and the shares of
Common Stock issuable upon exercise of the Underlying Warrants (collectively
the "Registrable Securities") have been registered under the Securities Act of
1933, as amended (the "Act"). Upon exercise, in part or in whole, of the
Warrants, certificates representing the Shares, the Underlying Warrants and/or
the shares of Common Stock issuable upon exercise of the Underlying Warrants
shall bear the following legend in the event there is no current registration
statement effective with the Securities and Exchange Commission at such time as
to such securities:
The securities represented by this certificate may not be offered or
sold except pursuant to (i) an effective registration statement under
the Act, (ii) to the extent applicable, Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an exemption
from registration under such Act and applicable state securities laws
is
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available.
7.2 Piggyback Registration.
If, at any time commencing after the Effective Date of the offering
and expiring seven (7) years thereafter, the Company prepares and files a
post-effective amendment to the Registration Statement, or a new Registration
Statement, under the Act, or files a Notification on Form 1-A or otherwise
registers securities under the Act, or files a similar disclosure document with
the Commission (collectively the "Registration Documents") as to any of its
securities under the Act (other than under a Registration Statement pursuant to
Form S-8), it will give written notice by registered mail, at least thirty (30)
days prior to the filing of each such Registration Document, to the Underwriter
and to all other Holders of the Registrable Securities of its intention to do
so. If the Underwriter and/or other Holders of the Registrable Securities
notify the Company within twenty (20) days after receipt of any such notice of
its or their desire to include any such Registrable Securities in such proposed
Registration Documents, the Company shall afford the Underwriter and such
Holders of such Registrable Securities the opportunity to have any Registrable
Securities registered under such Registration Documents or any other available
Registration Document.
Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of
any such securities shall have been made) to elect not to file any such
proposed registration statement, or to withdraw the same after the filing but
prior to the effective date thereof.
7.3 Demand Registration.
(a) At any time commencing one (1) year after the Effective Date
of the Public Offering, and expiring four (4) years thereafter, the Holders of
Registrable Securities representing more than 50% of such securities at that
time outstanding shall have the right (which right is in addition to the
registration rights under Section 7.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Commission, on one
occasion, a registration statement and/or such other documents, including a
prospectus, and/or any other appropriate disclosure document as may be
reasonably necessary in the opinion of both counsel for the Company and counsel
for the Underwriter and Holders, in order to comply with the provisions of the
Act, so as to permit a public offering and sale of their respective Registrable
Securities for nine (9) consecutive months (or such longer period of time as
permitted by the Act) by such Holders and any other Holders of any of the
Registrable Securities who notify the Company within ten (10) days after being
given notice from the
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Company of such request. A Demand Registration shall not be counted as a
Demand Registration hereunder until such Demand Registration has been declared
effective by the SEC and maintained continuously effective for a period of at
least nine months or such shorter period when all Registrable Securities
included therein have been sold in accordance with such Demand Registration,
provided that a Demand Registration shall be counted as a Demand Registration
hereunder if the Company ceases its efforts in respect of such Demand
Registration at the request of the majority Holders making the demand for a
reason other than a material and adverse change in the business, assets,
prospects or condition (financial or otherwise) of the Company and its
subsidiaries taken as a whole.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by the majority of the Holders to
all other registered Holders of any of the Registrable Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing one (1) year after
the Effective Date of the offering, and expiring four (4) years thereafter, the
Holders of a majority of the Registrable Securities shall have the right,
exercisable by written request to the Company, to have the Company prepare and
file, on one occasion, with the Commission a registration statement or any
other appropriate disclosure document so as to permit a public offering and
sale for nine (9) consecutive months (or such longer period of time as
permitted by the Act) by any such Holder of Registrable Securities; provided,
however, that the provisions of Section 7.4(b) hereof shall not apply to any
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders participating in the offering
pro-rata.
(d) Any written request by the Holders made pursuant to this
Section 7.3 shall:
(i) specify the number of Registrable Securities which
the Holders intend to offer and sell and the minimum price at which
the Holders intend to offer and sell such securities;
(ii) state the intention of the Holders to offer such
securities for sale;
(iii) describe the intended method of distribution of such
securities; and
(iv) contain an undertaking on the part of the Holders to
provide all such information and materials concerning the Holders and
take all such action as may be reasonably required to permit the
Company to comply with all applicable
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<PAGE> 8
requirements of the Commission and to obtain acceleration of the
effective date of the registration statement.
(e) In the event the Company receives from the Holders of any
Registrable Securities representing more than 50% of such securities at that
time outstanding, a request that the Company effect a registration on Form S-3
with respect to the Registrable Securities and if Form S-3 is available for
such offering, the Company shall, as soon as practicable, effect such
registration as would permit or facilitate the sale and distribution of the
Registrable Securities as are specified in the request. All expenses incurred
in connection with a registration requested pursuant to this Section shall be
borne by the Company. Registrations effected pursuant to this Section 7.3(e)
shall not be counted as registrations pursuant to Section 7.3(a) and 7.3(c)
hereof.
7.4 Covenants of the Company With Respect to Registration.
In connection with any registration under Section 7.2 or 7.3 hereof,
the Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within forty-five (45) days of receipt of any demand pursuant to
Section 7.3, and shall use its best efforts to have any such registration
statement declared effective at the earliest practicable time. The Company
will promptly notify each seller of such Registrable Securities and confirm
such advice in writing, (i) when such registration statement becomes effective,
(ii) when any post-effective amendment to such registration statement becomes
effective and (iii) of any request by the SEC for any amendment or supplement
to such registration statement or any prospectus relating thereto or for
additional information.
The Company shall furnish to each seller of such Registrable
Securities such number of copies of such registration statement and of each
such amendment and supplement thereto (in each case including each preliminary
prospectus and summary prospectus) in conformity with the requirements of the
Act, and such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities by such seller.
(b) The Company shall pay all costs (excluding transfer taxes, if
any, and fees and expenses of Holder(s)' counsel and the Holder's pro-rata
portion of the selling discount or commissions), fees and expenses in
connection with all registration statements filed pursuant to Sections 7.2 and
7.3(a) hereof including, without limitation, the Company's legal and accounting
fees, printing expenses, blue sky fees and expenses. The Holder(s) will pay
all costs, fees and expenses in connection with any registration statement
filed pursuant to Section 7.3(c).
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If the Company shall fail to comply with the provisions of Section 7.3(a), the
Company shall, in addition to any other equitable or other relief available to
the Holder(s), be liable for any or all special and consequential damages
sustained by the Holder(s) requesting registration of their Registrable
Securities.
(c) The Company shall prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be reasonably necessary to keep such
registration statement effective for at least nine months (or such longer
period as permitted by the Act), and to comply with the provisions of the Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the seller or sellers of Registrable Securities set forth in
such registration statement. If at any time the SEC should institute or
threaten to institute any proceedings for the purpose of issuing a stop order
suspending the effectiveness of any such registration statement, the Company
will promptly notify each seller of such Registrable Securities and will use
all reasonable efforts to prevent the issuance of any such stop order or to
obtain the withdrawal thereof as soon as possible. The Company will use its
good faith reasonable efforts and take all reasonably necessary action which
may be required in qualifying or registering the Registrable Securities
included in a registration statement for offering and sale under the securities
or blue sky laws of such states as reasonably are required by the Holder(s),
provided that the Company shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign corporation to do
business under the laws of any such jurisdiction. The Company shall use its
good faith reasonable efforts to cause such Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities of the United States or any State thereof
as may be reasonably necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities.
(d) The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement and each person,
if any, who controls such Holders within the meaning of Section 15 of the Act
or Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act,
the Exchange Act or otherwise, arising from such registration statement but
only to the same extent and with the same effect as the provisions pursuant to
which the Company has agreed to indemnify the Underwriter as contained in the
Underwriting Agreement.
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<PAGE> 10
(e) If requested by the Company prior to the filing of any
registration statement covering the Registrable Securities, each of the
Holder(s) of the Registrable Securities to be sold pursuant to a registration
statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from written
information furnished by such Holder, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in the Underwriting Agreement
pursuant to which the Underwriter has agreed to indemnify the Company, except
that the maximum amount which may be recovered from each Holder pursuant to
this paragraph or otherwise shall be limited to the amount of net proceeds
received by the Holder from the sale of the Registrable Securities.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants or Underlying Warrants prior
to the filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Registrable Securities to be included in any registration
statement filed pursuant to Section 7.3 hereof without the prior written
consent of the Holders of the Registrable Securities representing a majority of
such securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
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(i) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to books, records and properties and opportunities to discuss
the business of the Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable times and as often as any such
Holder shall reasonably request.
(j) With respect to a registration statement filed pursuant to
Section 7.3, the Company, if requested, shall enter into an underwriting
agreement with the managing underwriter, reasonably satisfactory to the
Company, selected for such underwriting by Holders holding a majority of the
Registrable Securities requested to be included in such underwriting. Such
agreement shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The
Holders, if required by the Underwriter to be parties to any underwriting
agreement relating to an underwritten sale of their Registrable Securities,
may, at their option, require that any or all the representations, warranties
and covenants of the Company to or for the benefit of such underwriters shall
also be made to and for the benefit of such Holders. Such Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such Holders and their
intended methods of distribution.
(k) Notwithstanding the provisions of paragraph 7.2 or paragraph
7.3 of this Agreement, the Company shall not be required to effect or cause the
registration of Registrable Securities pursuant to paragraph 7.2 or paragraph
7.3 hereof if, within thirty (30) days after its receipt of a request to
register such Registrable Securities (i) counsel for the Company delivers an
opinion to the Holders requesting registration of such Registrable Securities,
in form and substance satisfactory to counsel to such Holder(s), to the effect
that the entire number of Registrable Securities proposed to be sold by such
Holder(s) may otherwise be sold, in the manner proposed by such Holder(s),
without registration under the Securities Act, or (ii) the SEC shall have
issued a no-action position, in form and substance satisfactory to counsel for
the Holder(s) requesting registration of such
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<PAGE> 12
Registrable Securities, to the effect that the entire number of Registrable
Securities proposed to be sold by such Holder(s) may be sold by it, in the
manner proposed by such Holder(s), without registration under the Securities
Act.
(l) After completion of the Public Offering, the Company shall
not, directly or indirectly, enter into any merger, business combination or
consolidation in which (a) the Company shall not be the surviving corporation
and (b) the stockholders of the Company are to receive, in whole or in part,
capital stock or other securities of the surviving corporation, unless the
surviving corporation shall, prior to such merger, business combination or
consolidation, agree in writing to assume the obligations of the Company under
this Agreement, and for that purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities which the Holders would
be entitled to receive in exchange for Registrable Securities under any such
merger, business combination or consolidation, provided that to the extent such
securities to be received are convertible into shares of Common Stock of the
issuer thereof, then any such shares of Common Stock as are issued or issuable
upon conversion of said convertible securities shall also be included within
the definition of "Registrable Securities".
8. Adjustments to Exercise Price and Number of Securities.
8.1 Adjustment for Dividends, Subdivisions, Combinations or
Reclassifications.
In case the Company shall (a) pay a dividend or make a distribution in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (b) subdivide its outstanding shares of Common Stock into
a greater number of shares, (c) combine its outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of its shares
of Common Stock any shares of capital stock of the Company; then, and in each
such case, the per share Exercise Price and the number of Warrant Securities in
effect immediately prior to such action shall be adjusted so that the Holder of
this Warrant thereafter upon the exercise hereof shall be entitled to receive
the number and kind of shares of the Company which such Holder would have owned
immediately following such action had this Warrant been exercised immediately
prior thereto. An adjustment made pursuant to this Section shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this Section, the Holder of this Warrant shall
become entitled to receive shares of two or more classes of capital stock of
the Company, the Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the adjusted Exercise Price
between or
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among shares of such class of capital stock.
Immediately upon any adjustment of the Exercise Price pursuant to this
Section, the Company shall send written notice thereof to the Holder of Warrant
Certificates (by first class mail, postage prepaid), which notice shall state
the Exercise Price resulting from such adjustment, and any increase or decrease
in the number of Warrant Securities to be acquired upon exercise of the
Warrants, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
8.2 Adjustment For Reorganization, Merger or Consolidation.
In case of any reorganization of the Company or consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental Warrant agreement providing that the Holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the
number of shares of Common Stock of the Company for which such warrant might
have been exercised immediately prior to such reorganization, consolidation,
merger, conveyance, sale or transfer. Such supplemental Warrant agreement
shall provide for adjustments which shall be identical to the adjustments
provided in Section 8 and such registration rights and other rights as provided
in this Agreement. The Company shall not effect any such consolidation,
merger, or similar transaction as contemplated by this paragraph, unless prior
to or simultaneously with the consummation thereof, the successor corporation
(if other than the Company) resulting from such consolidation or merger or the
corporation purchasing, receiving, or leasing such assets or other appropriate
corporation or entity shall assume, by written instrument executed and
delivered to the Holders, the obligation to deliver to the Holders, such shares
of stock, securities, or assets as, in accordance with the foregoing
provisions, such holders may be entitled to purchase, and to perform the other
obligations of the Company under this Agreement. The above provision of this
Subsection shall similarly apply to successive consolidations or successively
whenever any event listed above shall occur.
8.3 Dividends and Other Distributions.
In the event that the Company shall at any time prior to the exercise
of all of the Warrants and/or Underlying Warrants
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distribute to its stockholders any assets, property, rights, evidences of
indebtedness, securities (other than a distribution made as a cash dividend
payable out of earnings or out of any earned surplus legally available for
dividends under the laws of the jurisdictions of incorporation of the Company),
whether issued by the Company or by another, the Holders of the unexercised
Warrants shall thereafter be entitled, in addition to the shares of Common
Stock or other securities and property receivable upon the exercise thereof, to
receive, upon the exercise of such Warrants, the same property, assets, rights,
evidences of indebtedness, securities or any other thing of value that they
would have been entitled to receive at the time of such distribution as if the
Warrants had been exercised immediately prior to such distribution. At the
time of any such distribution, the Company shall make appropriate reserves to
ensure the timely performance of the provisions of this subsection or an
adjustment to the Exercise Price, which shall be effective as of the day
following the record date for such distribution.
8.4 Adjustment in Number of Securities.
Upon each adjustment of the Exercise Price pursuant to the provisions
of this Section 8, the number of securities issuable upon the exercise of each
Warrant and/or Underlying Warrant shall be adjusted to the nearest full amount
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of securities issuable upon exercise of the
Warrants and/or the Underlying Warrants immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
8.5 No Adjustment of Exercise Price in Certain Cases.
No adjustment of the Exercise Price shall be made if the amount of
said adjustment shall be less than 5 cents ($.05) per Share, provided, however,
that in such case any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time of and together
with the next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least 5 cents ($.05) per Share.
8.6 Accountant's Certificate of Adjustment.
In each case of an adjustment or readjustment of the Exercise Price or
the number of any securities issuable upon exercise of the Warrants and/or
Underlying Warrants, the Company, at its expense, shall cause independent
certified public accountants of recognized standing selected by the Company
(who may be the independent certified public accountants then auditing the
books of the Company) to compute such adjustment or readjustment in accordance
herewith and prepare a certificate showing such adjustment or readjustment, and
shall mail such certificate, by first class mail,
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postage prepaid, to any Holder of the Warrants and/or Underlying Warrants at
the Holder's address as shown on the Company's books. The certificate shall
set forth such adjustment or readjustment, showing in detail the facts upon
which such adjustment or readjustment is based including, but not limited to, a
statement of (i) the Exercise Price at the time in effect, and (ii) the number
of additional securities and the type and amount, if any, of other property
which at the time would be received upon exercise of the Warrants and/or
Underlying Warrants.
8.7 Adjustment of Underlying Warrant Exercise Price.
With respect to any of the Underlying Warrants whether or not the
Underlying Warrants have been exercised (or are exercisable) and whether or not
the Underlying Warrants are issued and outstanding, the Underlying Warrant
exercise price and the number of shares of Common Stock underlying such
Underlying Warrants shall be automatically adjusted in accordance with the
Warrant Agreement between the Company and the Company's transfer agent, upon
occurrence of any of the events relating to adjustments described therein.
Thereafter, the Underlying Warrants shall be exercisable at such adjusted
Underlying Warrant exercise price for such adjusted number of underlying shares
of Common Stock or other securities, properties or rights.
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of securities in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interest.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock upon the exercise of the Warrants and/or
Underlying Warrants, nor shall it be required to issue script or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests may be eliminated, at the Company's option, by rounding
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<PAGE> 16
any fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights, or in lieu thereof paying cash equal to such
fractional interest multiplied by the current value of a share of Common Stock.
11. Reservation and Listing.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants and the Underlying Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable
upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and/or the Underlying Warrants, and payment of the
Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. As
long as the Warrants and/or Underlying Warrants shall be outstanding, the
Company shall use its best efforts to cause all shares of Common Stock issuable
upon the exercise of the Warrants and the Underlying Warrants to be listed and
quoted (subject to official notice of issuance) on all securities Exchanges and
Systems on which the Common Stock and/or the Public Warrants may then be listed
and/or quoted, including NASDAQ.
12. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as conferring
upon the Holders of the Warrants and/or Underlying Warrants the right to vote
or to consent or to receive notice as a stockholder in respect of any meetings
of stockholders for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any
time prior to the expiration of the Warrants and/or Underlying Warrants and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
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(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and business
as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date of the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notices shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. Underlying Warrants.
The form of the certificate representing the Underlying Warrants (and
the form of election to purchase shares of Common Stock upon the exercise of
the Underlying Warrants and the form of assignment printed on the reverse
thereof) shall be substantially as set forth in the exhibits to the Warrant
Agreement. Subject to the terms of this Agreement, one (1) Underlying Warrant
shall evidence the right to initially purchase one (1) fully-paid and
non-assessable share of Common Stock at an initial purchase price of $4.65
during the three (3) year period commencing on the Effective Date of the
Registration Statement, at which time the Underlying Warrants, unless the
exercise period has been extended, shall expire. The exercise price of the
Underlying Warrants and the number of shares of Common Stock issuable upon the
exercise of the Underlying Warrants are subject to adjustment, whether or not
the Warrants have been exercised and the Underlying Warrants have been issued,
in the manner and upon the occurrence of the events set forth in the Warrant
Agreement, which is hereby incorporated herein by reference and made a part
hereof as if set forth in its entirety herein. Subject to the provisions of
this Agreement and upon issuance of the Underlying Warrants, each registered
holder of such Underlying Warrant shall have the right to purchase from the
Company (and the Company shall issue to such registered holders) up to the
number of fully-paid and non-assessable shares of Common Stock (subject to
adjustment as provided in the Warrant Agreement) set forth in such Warrant
Certificate, free and clear of all preemptive rights of stockholders, provided
that such registered Holder complies with the terms governing exercise of the
Underlying Warrant set forth in the Warrant Agreement, and pays the applicable
exercise price, determined in accordance with the terms of the
17
<PAGE> 18
Warrant Agreement. Upon exercise of the Underlying Warrants, the Company shall
forthwith issue to the registered Holder of any such Underlying Warrant in his
name or in such name as may be directed by him, certificates for the number of
shares of Common Stock so purchased. Except as otherwise provided herein and
in this Agreement, the Underlying Warrants shall be governed in all respects by
the terms of the Warrant Agreement. The Underlying Warrants shall be
transferrable in the manner provided in the Warrant Agreement, and upon any
such transfer, a new Underlying Warrant certificate shall be issued promptly to
the transferee. The Company covenants to send to each Holder, irrespective of
whether or not the Warrants have been exercised, any and all notices required
by the Warrant Agreement to be sent to holders of Underlying Warrants.
14. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given when personally
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of any of the Registrable
Securities, to the address of such Holder as shown on the books of the
Company; or
(b) If to the Company, to the address set forth below or
to such other address as the Company may designate by notice to the
Holders.
Irwin Zellermaier, President
General Credit Corporation
211 E. 70th Street
New York, New York 10021
With a copy to: Charles J. Rennert, Esq.
Berman Wolfe & Rennert, P.A.
International Place, 35th Floor
100 Southeast Second Street
Miami, Florida 33131-2130
15. Entire Agreement: Modification.
This Agreement (and the Underwriting Agreement and Warrant Agreement
to the extent applicable) contain the entire understanding between the parties
hereto with respect to the subject matter hereof, and the terms and provisions
of this Agreement may not be modified, waived or amended except in a writing
executed by the Company and the Holders of at least a majority of Registrable
Securities (based on underlying numbers of shares of Common Stock). Notice of
any modification, waiver or
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<PAGE> 19
amendment shall be promptly provided to any Holder not consenting to such
modification, waiver or amendment.
16. Successors.
All the covenants and provisions of this Agreement shall be binding
upon and inure to the benefit of the Company, the Holders and their respective
successors and assigns hereunder.
17. Termination.
This Agreement shall terminate at the close of business on
_________, 2003. Notwithstanding the foregoing, the indemnification provisions
of Section 7 shall survive such termination.
18. Governing Law; Submission to Jurisdiction.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Florida and for all
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws. The
Company, the Underwriter and the Holders hereby agree that any action,
proceeding or claim arising out of, or relating in any way to, this Agreement
shall be brought and enforced in a federal or state court of competent
jurisdiction with venue only in the Fifteenth Judicial Circuit Court in and for
Palm Beach County, Florida or the United States District Court for the Southern
District of Florida, West Palm Beach Division, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. The Company, the
Underwriter and the Holders hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum. Any such process or summons to
be served upon any of the Company, the Underwriter and the Holders (at the
option of the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
14 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the party so served in any action, proceeding or claim.
19. Severability.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
20. Captions.
The caption headings of the Sections of this Agreement are for
convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive
effect.
19
<PAGE> 20
21. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Underwriter and any other registered
Holder(s) of the Warrant Certificates or Registrable Securities any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and the Underwriter and
any other Holder(s) of the Warrant Certificates or Registrable Securities.
22. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
GENERAL CREDIT CORPORATION
By:______________________________
Irwin Zellermaier, President
Attest:
_____________________________
David Bader, Secretary
BARRON CHASE SECURITIES, INC.
By:______________________________
Robert Kirk, President
20
<PAGE> 21
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M, EASTERN TIME ON ______________, 200___
NO. W-_____ ________ Common Stock
Underwriter
Warrants and/or
________ Warrant
Underwriter
Warrants
This Warrant Certificate certifies that ________________, or
registered assigns, is the registered holder of _________ Common Stock
Underwriter Warrants and/or _______ Warrant Underwriter Warrants. Each Common
Stock Underwriter Warrant permits the Holder hereof to purchase initially, at
any time from ______, 1996 ("Purchase Date") until 5:30 p.m. Eastern Time on
________, 2001 ("Expiration Date"), one (1) share of General Credit Corporation
(the "Company") Common Stock at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $4.65 per share (155%
of the public offering price). Each Warrant Underwriter Warrant permits the
Holder hereof to purchase initially, at any time from the Purchase Date until
three (3) years from the Purchase Date, one (1) Underlying Warrant at the
Exercise Price of $.19375 per Underlying Warrant. Each Underlying Warrant
permits the Holder thereof to purchase, at any time from the Purchase Date
until three (3) years from the Purchase Date, one (1) share of the Company's
Common Stock at the Exercise Price of $4.65 per share.
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<PAGE> 22
Any exercise of Common Stock Underwriter Warrants and/or Warrant
Underwriter Warrants shall be effected by surrender of this Warrant Certificate
and payment of the Exercise Price at an office or agency of the Company, but
subject to the conditions set forth herein and in the Underwriter's Warrant
Agreement dated as of ________, 1996, between the Company and Barron Chase
Securities, Inc. (the "Underwriter's Warrant Agreement"). Payment of the
Exercise Price shall be made by certified check or official bank check in New
York Clearing House funds payable to the order of the Company in the event
there is no cashless exercise pursuant to Section 3.1(ii) of the Underwriter's
Warrant Agreement. The "Common Stock Underwriter Warrants" and the "Warrant
Underwriter Warrants" are collectively referred to as "Warrants". The
Underlying Warrants shall be exercised pursuant to the provisions of the
Underwriter's Warrant Agreement and pursuant to the Warrant Agreement entered
into by the Company relating to the Public Warrants, unless there is a cashless
exercise pursuant to Section 3.1(ii) of the Underwriter's Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., Eastern Time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Underwriter's Warrant
Agreement, which Underwriter's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation or rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence
of certain events, the Exercise Price and the type and/or number of the
Company's securities issuable thereupon may, subject to certain conditions, be
adjusted. In such event, the Company will, at the request of the holder, issue
a new Warrant Certificate evidencing the adjustment in the Exercise Price and
the number and/or type of securities issuable upon the exercise of the
Warrants; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Underwriter's Warrant Agreement.
Upon due presentment for registration or transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Underwriter's Warrant Agreement, without any charge except for any tax or other
governmental charge imposed in connection with such
22
<PAGE> 23
transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in the
Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of ______________, 1996
GENERAL CREDIT CORPORATION
By:_____________________________
Irwin Zellermaier, President
(Seal)
Attest:
_____________________________
David Bader, Secretary
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<PAGE> 24
EXHIBIT "A"
FORM OF SUBSCRIPTION (CASH EXERCISE)
(To be signed only upon exercise of Warrant)
TO: General Credit Corporation
211 E. 70th Street
New York, New York 10021
The undersigned, the Holder of Warrant Certificate number ___ (the
"Warrant"), representing _________ Common Stock Underwriter Warrants and/or
__________ Warrant Underwriter Warrants of General Credit Corporation (the
"Company"), which Warrant Certificate is being delivered herewith, hereby
irrevocably elects to exercise the purchase right provided by the Warrant
Certificate for, and to purchase thereunder, ___________ Shares and/or
___________ Underlying Warrants of the Company, and herewith makes payment of
$__________________ therefor, and requests that the certificates for such
securities be issued in the name of, and delivered to, _______________________
____________________________, whose address is,_______________________________
___________________________________________________________, all in accordance
with the Underwriter's Warrant Agreement and the Warrant Certificate.
Dated: _______________________
_______________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant Certificate)
_______________________________________
_______________________________________
(Address)
24
<PAGE> 25
EXHIBIT "B"
FORM OF SUBSCRIPTION (CASHLESS EXERCISE)
TO: General Credit Corporation
211 E. 70th Street
New York, New York 10021
The undersigned, the Holder of Warrant Certificate number ____(the
"Warrant"), representing _________ Common Stock Underwriter Warrants and/or
__________ Underlying Warrants of General Credit Corporation (the "Company"),
which Warrant is being delivered herewith, hereby irrevocably elects the
cashless exercise of the purchase right provided by the Underwriter's Warrant
Agreement and the Warrant Certificate for, and to purchase thereunder, Shares
of the Company in accordance with the formula provided at Section three (3) of
the Underwriter's Warrant Agreement. The undersigned requests that the
certificates for such Shares be issued in the name of, and delivered to,
______________________________________________________________________________
___________________, whose address is,________________________________________
_________________________________________________________________________, all
in accordance with the Warrant Certificate.
Dated: _______________________
_______________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant Certificate)
_______________________________________
_______________________________________
(Address)
25
<PAGE> 26
EXHIBIT "C"
FORM OF SUBSCRIPTION (CASH EXERCISE)
(To be signed only upon exercise of Warrant)
TO: General Credit Corporation
211 E. 70th Street
New York, New York 10021
The undersigned, the Holder of Warrant Certificate number ___ (the
"Warrant"), representing _________ Underlying Warrants of General Credit
Corporation (the "Company"), which Warrant Certificate is being delivered
herewith, hereby irrevocably elects to exercise the purchase right provided by
the Warrant Certificate for, and to purchase thereunder, __________ Shares of
the Company, and herewith makes payment of $_____________ therefor, and
requests that the certificates for such securities be issued in the name of,
and delivered to, ______________________________________________, whose
address is,_________________________________________________________________
_________________________________________________________, all in accordance
with the Underwriter's Warrant Agreement and the Warrant Certificate.
Dated: _______________________
_______________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant Certificate)
_______________________________________
_______________________________________
(Address)
26
<PAGE> 27
(FORM OF ASSIGNMENT)
(To be exercised by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _______________________________________________ hereby
sells, assigns and transfers unto
(Print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
_____________________ Attorney, to transfer the within Warrant Certificate on
the books of the within-named Company, and full power of substitution.
Dated: Signature:
_____________________________ _______________________________________
(Signature must conform in all respects
to name of holder as specified on the
fact of the Warrant Certificate)
_______________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
27
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT CONTRACT
BETWEEN
GENERAL CREDIT CORPORATION
AND
IRWIN ZELLERMAIER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III
DUTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE IV
COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE V
EXPENSES AND INSURANCE . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE VI
VACATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE VII
DEATH OR DISABILITY DURING EMPLOYMENT . . . . . . . . . . . . . 3
ARTICLE VIII
TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . . 4
ARTICLE IX
RESIGNATION . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE X
NON-COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE XI
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE XII
CONSTRUCTION OF CONTRACT . . . . . . . . . . . . . . . . . . . . 6
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
EMPLOYMENT CONTRACT
THIS CONTRACT is made and entered into as of this 1st day of June,
1996 ("Contract"), between GENERAL CREDIT CORPORATION, a New York corporation
("EMPLOYER"), and IRWIN ZELLERMAIER ("EMPLOYEE").
R E C I T A L S:
A. EMPLOYEE is the Chairman and Chief Executive Officer of
EMPLOYER.
B. EMPLOYEE and EMPLOYER desire to enter into this Contract to
memorialize the employment relationship between EMPLOYER and EMPLOYEE.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto mutually agree
as follows:
ARTICLE I
RECITALS
The above stated Recitals are true and correct and are incorporated by
reference into this Contract.
ARTICLE II
TERM
The term (the "Term") of this Contract shall be ten (10) years
commencing on the date of this Contract and ending ten (10) years thereafter
unless terminated earlier as provided herein.
ARTICLE III
DUTIES
A. In General. Upon the terms and subject to the conditions of
this Contract, EMPLOYER hereby employs EMPLOYEE for the term of this Contract
as its Chairman and Chief Executive Officer. EMPLOYEE shall have the powers
and duties as Chairman and Chief Executive Officer of EMPLOYER as directed by
the Board of Directors, which direction shall be pursuant to reasonable
policies adopted from time to time and communicated by written notice to
EMPLOYEE. EMPLOYEE's duties shall include the management of EMPLOYER's
business interests ("Businesses") and such other duties as are consistent with
his position (the "Duties"). During the term of this Contract and except for
illness, disability, reasonable vacation periods and reasonable leaves of
absence, EMPLOYEE shall devote such portions of his business time, attention,
skill and efforts as is necessary for the faithful performance of the Duties.
EMPLOYEE
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<PAGE> 4
hereby accepts such employment and, consistent with fiduciary standards which
exist between an employer and an employee, EMPLOYEE shall perform the Duties in
an efficient, trustworthy and businesslike manner.
B. Delegation. Notwithstanding anything to the contrary
contained in this Article III, EMPLOYEE shall have the right and authority to
delegate responsibility to one or more personnel if he and the Board of
Directors deem such delegation appropriate.
C. Other Activities. EMPLOYEE shall use his best efforts for the
benefit of EMPLOYER by whatsoever activities he deems appropriate to maintain
and improve EMPLOYER's standing in the community generally and among other
members of the industries in which EMPLOYER is from time to time engaged,
including such entertaining for business purposes as he considers appropriate.
ARTICLE IV
COMPENSATION
A. Base Salary, Bonus, and Employee Benefit Plans. For all
services rendered by EMPLOYEE in any capacity during his employment under this
Contract (including any renewals hereof), EMPLOYER shall pay EMPLOYEE as
compensation the sum of the amounts set forth in the following subparagraphs 1.
through 3.:
1. Base Salary. During the Term, EMPLOYEE shall be paid
the sum of One Hundred Sixty Thousand ($160,000) Dollars on an annualized
basis, payable semi-monthly.
2. Bonus. Within the sole discretion of the Board of
Directors of EMPLOYER, EMPLOYEE may receive a bonus.
3. Employee Benefit Plans. EMPLOYEE shall be entitled
to participate in any and all plans, arrangements or distributions by EMPLOYER
pertaining to or in connection with any pension, bonus, profit sharing, stock
options and/or similar benefits and/or health benefits for its regular
employees and/or for its employees and/or for its executives, as determined by
the Board of Directors or committees, pursuant to the governing instruments
which establish and/or determine eligibility and other rights of the
participants and beneficiaries under such plans or other benefit programs.
B. Payments Upon Termination.
1. Termination by EMPLOYER for Cause; Voluntary
Unilateral Decision by EMPLOYEE Without Cause. If EMPLOYEE is terminated by
(i) EMPLOYER for Cause (as hereinafter defined); or (ii) voluntary unilateral
decision by EMPLOYEE without Cause (as hereinafter defined), then EMPLOYEE
shall be entitled to (1) base salary pursuant to Paragraph A.1. of Article IV
earned through the date of termination; (2) accrued vacation under Article VI
hereof; and (3) all applicable reimbursements from EMPLOYER due under Article V
hereof.
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<PAGE> 5
2. Termination for Reasons Other than Termination by
EMPLOYER for Cause; or Voluntary Unilateral Decision by EMPLOYEE. If there is
a termination of this Contract for any reason by either party, other than as a
result of (i) termination by EMPLOYER for Cause (as hereinafter defined); or
(ii) termination by voluntary unilateral decision by EMPLOYEE without Cause (as
hereinafter defined), EMPLOYEE shall be entitled to (1) receive, in one lump
sum payment, that amount which is equivalent to EMPLOYEE's total compensation
(base salary plus bonus) paid by EMPLOYER to EMPLOYEE for the six (6) months
prior to EMPLOYEE's termination; and (2) all applicable allowances and
reimbursements from EMPLOYER due under Article V.
ARTICLE V
EXPENSES AND INSURANCE
A. Business Expenses. EMPLOYEE is authorized to incur reasonable
expenses to execute and/or promote the Businesses of EMPLOYER, including, but
not limited to, expenses related to maintenance of professional licenses and
expenses for entertainment, travel, and similar items. EMPLOYER will reimburse
EMPLOYEE for all reasonable travel or other expenses incurred while on business.
B. Automobile. During the term of this Contract, EMPLOYER shall
furnish EMPLOYEE with a monthly allowance in the amount of $1,500 for the
expenses of his use of an automobile in the performance of his duties.
C. Insurance. EMPLOYER will provide for EMPLOYEE medical
insurance reasonably satisfactory to EMPLOYEE, his spouse and family dependents.
ARTICLE VI
VACATION
EMPLOYEE will be entitled to four (4) weeks paid vacation annually and
such other time as authorized by the Board of Directors.
ARTICLE VII
DEATH OR DISABILITY DURING EMPLOYMENT
If EMPLOYEE dies or becomes permanently and totally disabled during
the term of the Contract, EMPLOYER shall pay to EMPLOYEE or EMPLOYEE's estate,
as the case may be, the base salary which would otherwise be payable to
EMPLOYEE, for a period of three (3) months after the date on which EMPLOYEE's
death or disability occurred. EMPLOYER shall have no further financial
obligations to EMPLOYEE or his estate, except as otherwise provided in Articles
IV and V hereof.
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<PAGE> 6
ARTICLE VIII
TERMINATION OF EMPLOYMENT
A. Termination by EMPLOYEE. EMPLOYEE may terminate his
employment with EMPLOYER at any time upon notice to EMPLOYER for "Cause." For
this purpose, the term "Cause" means an adjudication by a court of competent
jurisdiction that EMPLOYER has materially breached any provision of this
Contract; provided, however, that in the event EMPLOYEE believes that this
Contract has been breached, he shall provide EMPLOYER with written notice of
such breach and provide the EMPLOYER with a thirty (30) day period in which to
cure or remedy such breach.
B. Termination by EMPLOYER. EMPLOYEE's employment may be
terminated by EMPLOYER at any time upon notice to EMPLOYEE for "Cause." For
this purpose, the term "Cause" means:
1. EMPLOYEE's material breach of any provision of this
Contract; provided, however, that in the event EMPLOYER believes that this
Contract has been breached, it shall provide EMPLOYEE with written notice of
such breach and provide EMPLOYEE with a thirty (30) day period in which to cure
or remedy such breach;
2. An adjudication by a court of competent jurisdiction
that EMPLOYEE committed an injurious act of fraud or dishonesty against
EMPLOYER, its subsidiaries or affiliates; and
3. The use by EMPLOYEE of an illegal substance,
including, but not limited to, marijuana, cocaine, heroin, and all other
illegal substances, and/or the dependence by EMPLOYEE upon the use of alcohol,
which, in any case, in the opinion of both EMPLOYEE's family physician and a
physician chosen by EMPLOYER, materially impairs EMPLOYEE's ability to perform
his Duties hereunder, which dependence is not cured or rehabilitated, as
determined by EMPLOYEE's physician, within three (3) months of receipt of
written notice from EMPLOYER to EMPLOYEE.
C. Death or Disability. This Contract shall terminate upon the
death or the disability of EMPLOYEE. Termination for death or disability shall
not be termination for Cause. EMPLOYEE or his heirs or estate (as the case may
be) shall be entitled to the compensation provided for termination by death or
disability in this Contract.
D. Termination of Obligations. Upon the resignation of EMPLOYEE
or termination of EMPLOYEE's employment in accordance with the provisions of
this Article VIII, all obligations of EMPLOYEE and EMPLOYER hereunder shall be
terminated except as otherwise provided in this Article VIII and by Article IV
hereof.
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<PAGE> 7
ARTICLE IX
RESIGNATION
Any termination of employment under this Contract, whether or not
voluntary, will automatically constitute a resignation of EMPLOYEE as an
officer and director of all subsidiaries of EMPLOYER.
ARTICLE X
NON-COMPETITION
A. Non-Competition. While in the employment of EMPLOYER and for
the period of three (3) years thereafter, unless otherwise agreed to in writing
by EMPLOYER, EMPLOYEE will not, directly or indirectly, own, manage, operate,
join, control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with any business
engaged in the business of providing working capital financing to its customers
through the discounted purchase of checks made payable to the order of those
customers, or any factoring or credit card financing or related business in the
same geographic areas in which EMPLOYER is then conducting such business. It
is agreed that each of the cities, counties and other political subdivisions
constituting the geographic areas in which EMPLOYER shall be conducting such
business shall be considered a separate geographic area and a separate covenant
from EMPLOYEE to EMPLOYER and the invalidity of any of such covenants shall not
affect this Contract or any other covenant made hereunder.
B. Remedies. In the event of an actual or threatened breach by
the EMPLOYEE of Paragraph A. of this Article X, EMPLOYER shall be entitled to
an injunction restraining EMPLOYEE from its prohibited conduct. If the court
should hold that the duration and/or scope (geographic or otherwise) of the
covenants contained herein are unreasonable, then, to the extent permitted by
law, the court may prescribe a duration and/or scope (geographic or otherwise),
that is reasonable and the parties agree to accept such determination, subject
to their rights of appeal. Nothing contained herein shall be construed as
prohibiting EMPLOYER or any third party from pursuing any of the remedies
available to it for such breach or threatened breach, including recovery of
damages from EMPLOYEE. In any action or proceeding to enforce the provisions
of this Article X, the prevailing party shall be reimbursed by the other party
for all costs incurred in such action or proceeding, including, without
limitation, all court costs and filing fees and all attorneys' fees, incurred
either at the trial level or at the appellate level. If EMPLOYEE shall be in
violation of any of the restrictive covenants contained in this Contract, then
the time limitation otherwise applicable to such restrictive covenant shall be
extended for a period of time equal to the period of time during which such
breach or breaches occur. If EMPLOYER seeks injunctive relief from such breach
in any court, then the covenant shall be extended for a period of time equal to
the pendency of such proceedings, including all appeals. The existence of any
claim or cause of action by EMPLOYEE against EMPLOYER, whether predicated upon
this Contract or otherwise, shall not constitute a defense to the enforcement
by EMPLOYER of the foregoing restrictive covenant, but shall be litigated
separately.
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<PAGE> 8
ARTICLE XI
NOTICES
Any notice, request, demand, offer, payment or communication required
or permitted to be given by any provision of this Contract shall be deemed to
have been delivered and given for all purposes if written and if (a) delivered
personally or by courier or delivery service, at the time of such delivery; or
(b) directed by registered or certified United States mail, postage and charges
prepaid, addressed to the intended recipient, at the address specified below,
at such time that the intended recipient or its agent signs or executes the
receipt:
If to EMPLOYER:
GENERAL CREDIT CORPORATION
211 East 70th Street
New York, New York 10021
If to EMPLOYEE:
Irwin Zellermaier
211 East 70th Street
New York, New York 10021
Any party may change the address to which notices are to be mailed by giving
written notice as provided herein to the other party. Commencing immediately
after the receipt of such notice, such newly designated address shall be such
person's address for purposes of all notices or other communications required
or permitted to be given pursuant to this Contract.
ARTICLE XII
CONSTRUCTION OF CONTRACT
A. New York Law. This Contract shall be considered for all
purposes a New York document and shall be construed pursuant to the laws of the
State of New York, and all of its provisions shall be administered according to
and its validity shall be determined under the laws of the State of New York
without regard to any conflict or choice of law issues.
B. Gender and Number. Whenever appropriate, references in this
Contract in any gender shall be construed to include all other genders,
references in the singular shall be construed to include the plural, and
references in the plural shall be construed to include the singular, unless the
context clearly indicates to the contrary.
C. Certain Words. The words "hereof," "herein," "hereunder," and
other similar compounds of the word "here" shall mean and refer to the entire
Contract and not to any particular article, provision or paragraph unless so
required by the context.
D. Captions. Paragraph titles or captions contained in this
Contract are inserted only as a matter of convenience and/or reference, and
they shall in no way be construed as limiting,
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<PAGE> 9
extending, defining or describing either the scope or intent of this Contract
or of any provision hereof.
E. Counterparts. This Contract may be executed in one or more
counterparts, and any such counterpart shall, for all purposes, be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
F. Severability. The invalidity or unenforceability of any
provision hereunder (or any portion of such a provision) shall not affect the
validity or enforceability of the remaining provisions (or remaining portions
of such provisions) of this Contract.
ARTICLE XIII
MISCELLANEOUS
A. Entire Contract. This Contract (and all other documents
executed simultaneously herewith or pursuant hereto) constitutes the entire
agreement among the parties pertaining to the subject matter hereof, and
supersedes and revokes any and all prior or existing agreements, written or
oral, relating to the subject matter hereof, and this Contract shall be solely
determinative of the subject matter hereof.
B. Restrictive Covenant. In the event the non-competition clause
or any other restrictive covenant of this Contract shall be deemed
unenforceable, invalid or overbroad in whole or in part for any reason, then
any court of competent jurisdiction is hereby authorized, requested and
instructed to reform such provision(s) to provide for the maximum competitive
restraints upon EMPLOYEE's activities (in time and geographic area), which may
then be legal and valid.
C. Waiver. Either EMPLOYER or EMPLOYEE may, at any time or
times, waive (in whole or in part) any rights or privileges to which he or it
may be entitled hereunder. However, no waiver by any party of any condition or
of the breach of any term, covenant, representation or warranty contained in
this Contract, in any one or more instances, shall be deemed to be or construed
as a further continuing waiver of any other condition or of any breach of any
other terms, covenants, representations or warranties contained in this
Contract, and no waiver shall be effective unless it is in writing and signed
by the waiving party.
D. Attorneys' Fees. In the event that either party shall be
required to retain the services of an attorney to enforce any of his or its
rights hereunder, the prevailing party in any arbitration or court action shall
be entitled to receive from the other party all costs and expenses including
(but not limited to) court costs and attorneys' fees (whether in the
arbitration or in a court of original jurisdiction or one or more courts of
appellate jurisdiction) incurred by him or it in connection therewith. The
parties hereby expressly confer on the arbitrator the right to award costs and
attorneys' fees in the arbitration.
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<PAGE> 10
E. Venue. Any arbitration or other litigation arising hereunder
shall be instituted only in New York City, New York, the place where this
Contract was executed, and all parties hereto agree that venue shall be proper
in said county for all such legal or equitable proceedings.
F. Assignment. The rights and obligations of the parties under
this Contract shall inure to the benefit of and shall be binding upon their
successors, assigns, and/or other legal representatives. This Contract shall
not be assignable by EMPLOYER. The services of EMPLOYEE are personal and his
obligations may not be delegated by him except as otherwise provided herein.
G. Amendment. This Contract may not be amended, modified,
superseded, cancelled, or terminated, and any of the matters, covenants,
representations, warranties or conditions hereof may not be waived, except by a
written instrument executed by EMPLOYER and EMPLOYEE or, in the case of a
waiver, by the party to be charged with such waiver.
H. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give any
person, other than EMPLOYER and EMPLOYEE and their respective successors and
permitted assigns, any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, EMPLOYER and EMPLOYEE have caused this Contract to
be executed on the day and year first above written.
"EMPLOYER"
GENERAL CREDIT CORPORATION
By: /s/ Irwin Zellermaier
-------------------------------------
Authorized Representative
"EMPLOYEE"
/s/ Irwin Zellermaier
----------------------------------------
Irwin Zellermaier
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<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT CONTRACT
BETWEEN
GENERAL CREDIT CORPORATION
AND
DAVID BADER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III
DUTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE IV
COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE V
EXPENSES AND INSURANCE . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE VI
VACATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE VII
DEATH OR DISABILITY DURING EMPLOYMENT . . . . . . . . . . . . . 3
ARTICLE VIII
TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . . 4
ARTICLE IX
RESIGNATION . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE X
NON-COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE XI
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE XII
CONSTRUCTION OF CONTRACT . . . . . . . . . . . . . . . . . . . . 6
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
EMPLOYMENT CONTRACT
THIS CONTRACT is made and entered into as of this 1st day of June,
1996 ("Contract"), between GENERAL CREDIT CORPORATION, a New York corporation
("EMPLOYER"), and DAVID BADER ("EMPLOYEE").
R E C I T A L S:
A. EMPLOYEE is the Vice President and Chief Financial Officer of
EMPLOYER.
B. EMPLOYEE and EMPLOYER desire to enter into this Contract to
memorialize the employment relationship between EMPLOYER and EMPLOYEE.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto mutually agree
as follows:
ARTICLE I
RECITALS
The above stated Recitals are true and correct and are incorporated by
reference into this Contract.
ARTICLE II
TERM
The term (the "Term") of this Contract shall be five (5) years
commencing on the date of this Contract and ending five (5) years thereafter
unless terminated earlier as provided herein.
ARTICLE III
DUTIES
A. In General. Upon the terms and subject to the conditions of
this Contract, EMPLOYER hereby employs EMPLOYEE for the term of this Contract
as its Vice President and Chief Financial Officer. EMPLOYEE shall have the
powers and duties as Vice President and Chief Financial Officer of EMPLOYER as
directed by the President or the Board of Directors, which direction shall be
pursuant to reasonable policies adopted from time to time and communicated by
written notice to EMPLOYEE. EMPLOYEE's duties shall include the management of
EMPLOYER's business interests ("Businesses") and such other duties as are
consistent with his position (the "Duties"). During the term of this Contract
and except for illness, disability, reasonable vacation periods and reasonable
leaves of absence, EMPLOYEE shall devote such portions of his business time,
attention, skill and efforts as is necessary for the faithful
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<PAGE> 4
performance of the Duties. EMPLOYEE hereby accepts such employment and,
consistent with fiduciary standards which exist between an employer and an
employee, EMPLOYEE shall perform the Duties in an efficient, trustworthy and
businesslike manner.
B. Delegation. Notwithstanding anything to the contrary
contained in this Article III, EMPLOYEE shall have the right and authority to
delegate responsibility to one or more personnel if he and the President or the
Board of Directors deem such delegation appropriate.
C. Other Activities. EMPLOYEE shall use his best efforts for the
benefit of EMPLOYER by whatsoever activities he deems appropriate to maintain
and improve EMPLOYER's standing in the community generally and among other
members of the industries in which EMPLOYER is from time to time engaged,
including such entertaining for business purposes as he considers appropriate.
ARTICLE IV
COMPENSATION
A. Base Salary, Bonus, and Employee Benefit Plans. For all
services rendered by EMPLOYEE in any capacity during his employment under this
Contract (including any renewals hereof), EMPLOYER shall pay EMPLOYEE as
compensation the sum of the amounts set forth in the following subparagraphs 1.
through 3.:
1. Base Salary. During the Term, EMPLOYEE shall be paid
the sum of Eighty-Five Thousand ($85,000) Dollars on an annualized basis,
payable semi-monthly.
2. Bonus. Within the sole discretion of the Board of
Directors of EMPLOYER, EMPLOYEE may receive a bonus.
3. Employee Benefit Plans. EMPLOYEE shall be entitled
to participate in any and all plans, arrangements or distributions by EMPLOYER
pertaining to or in connection with any pension, bonus, profit sharing, stock
options and/or similar benefits and/or health benefits for its regular
employees and/or for its employees and/or for its executives, as determined by
the Board of Directors or committees, pursuant to the governing instruments
which establish and/or determine eligibility and other rights of the
participants and beneficiaries under such plans or other benefit programs.
B. Payments Upon Termination.
1. Termination by EMPLOYER for Cause; Voluntary
Unilateral Decision by EMPLOYEE Without Cause. If EMPLOYEE is terminated by
(i) EMPLOYER for Cause (as hereinafter defined); or (ii) voluntary unilateral
decision by EMPLOYEE without Cause (as hereinafter defined), then EMPLOYEE
shall be entitled to (1) base salary pursuant to Paragraph A.1. of Article IV
earned through the date of termination; (2) accrued vacation under Article VI
hereof; and (3) all applicable reimbursements from EMPLOYER due under Article V
hereof.
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<PAGE> 5
2. Termination for Reasons Other than Termination by
EMPLOYER for Cause; or Voluntary Unilateral Decision by EMPLOYEE. If there is
a termination of this Contract for any reason by either party, other than as a
result of (i) termination by EMPLOYER for Cause (as hereinafter defined); or
(ii) termination by voluntary unilateral decision by EMPLOYEE without Cause (as
hereinafter defined), EMPLOYEE shall be entitled to (1) receive, in one lump
sum payment, that amount which is equivalent to EMPLOYEE's total compensation
(base salary plus bonus) paid by EMPLOYER to EMPLOYEE for the six (6) months
prior to EMPLOYEE's termination; and (2) all applicable allowances and
reimbursements from EMPLOYER due under Article V.
ARTICLE V
EXPENSES AND INSURANCE
A. Business Expenses. EMPLOYEE is authorized to incur reasonable
expenses to execute and/or promote the Businesses of EMPLOYER, including, but
not limited to, expenses related to maintenance of professional licenses and
expenses for entertainment, travel, and similar items. EMPLOYER will reimburse
EMPLOYEE for all reasonable travel or other expenses incurred while on business.
B. Automobile. During the term of this Contract, EMPLOYER shall
furnish EMPLOYEE with a monthly allowance in the amount of $150 for the
expenses of his use of an automobile in the performance of his duties.
C. Insurance. EMPLOYER will provide for EMPLOYEE medical
insurance reasonably satisfactory to EMPLOYEE, his spouse and family dependents.
ARTICLE VI
VACATION
EMPLOYEE will be entitled to four (4) weeks paid vacation annually and
such other time as authorized by the Board of Directors.
ARTICLE VII
DEATH OR DISABILITY DURING EMPLOYMENT
If EMPLOYEE dies or becomes permanently and totally disabled during
the term of the Contract, EMPLOYER shall pay to EMPLOYEE or EMPLOYEE's estate,
as the case may be, the base salary which would otherwise be payable to
EMPLOYEE, for a period of three (3) months after the date on which EMPLOYEE's
death or disability occurred. EMPLOYER shall have no further financial
obligations to EMPLOYEE or his estate, except as otherwise provided in Articles
IV and V hereof.
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<PAGE> 6
ARTICLE VIII
TERMINATION OF EMPLOYMENT
A. Termination by EMPLOYEE. EMPLOYEE may terminate his
employment with EMPLOYER at any time upon notice to EMPLOYER for "Cause." For
this purpose, the term "Cause" means an adjudication by a court of competent
jurisdiction that EMPLOYER has materially breached any provision of this
Contract; provided, however, that in the event EMPLOYEE believes that this
Contract has been breached, he shall provide EMPLOYER with written notice of
such breach and provide the EMPLOYER with a thirty (30) day period in which to
cure or remedy such breach.
B. Termination by EMPLOYER. EMPLOYEE's employment may be
terminated by EMPLOYER at any time upon notice to EMPLOYEE for "Cause." For
this purpose, the term "Cause" means:
1. EMPLOYEE's material breach of any provision of this
Contract; provided, however, that in the event EMPLOYER believes that this
Contract has been breached, it shall provide EMPLOYEE with written notice of
such breach and provide EMPLOYEE with a thirty (30) day period in which to cure
or remedy such breach;
2. An adjudication by a court of competent jurisdiction
that EMPLOYEE committed an injurious act of fraud or dishonesty against
EMPLOYER, its subsidiaries or affiliates; and
3. The use by EMPLOYEE of an illegal substance,
including, but not limited to, marijuana, cocaine, heroin, and all other
illegal substances, and/or the dependence by EMPLOYEE upon the use of alcohol,
which, in any case, in the opinion of both EMPLOYEE's family physician and a
physician chosen by EMPLOYER, materially impairs EMPLOYEE's ability to perform
his Duties hereunder, which dependence is not cured or rehabilitated, as
determined by EMPLOYEE's physician, within three (3) months of receipt of
written notice from EMPLOYER to EMPLOYEE.
C. Death or Disability. This Contract shall terminate upon the
death or the disability of EMPLOYEE. Termination for death or disability shall
not be termination for Cause. EMPLOYEE or his heirs or estate (as the case may
be) shall be entitled to the compensation provided for termination by death or
disability in this Contract.
D. Termination of Obligations. Upon the resignation of EMPLOYEE
or termination of EMPLOYEE's employment in accordance with the provisions of
this Article VIII, all obligations of EMPLOYEE and EMPLOYER hereunder shall be
terminated except as otherwise provided in this Article VIII and by Article IV
hereof.
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<PAGE> 7
ARTICLE IX
RESIGNATION
Any termination of employment under this Contract, whether or not
voluntary, will automatically constitute a resignation of EMPLOYEE as an
officer and director of all subsidiaries of EMPLOYER.
ARTICLE X
NON-COMPETITION
A. Non-Competition. While in the employment of EMPLOYER and for
the period of three (3) years thereafter, unless otherwise agreed to in writing
by EMPLOYER, EMPLOYEE will not, directly or indirectly, own, manage, operate,
join, control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with any business
engaged in the business of providing working capital financing to its customers
through the discounted purchase of checks made payable to the order of those
customers, or any factoring or credit card financing or related business in the
same geographic areas in which EMPLOYER is then conducting such business. It
is agreed that each of the cities, counties and other political subdivisions
constituting the geographic areas in which EMPLOYER shall be conducting such
business shall be considered a separate geographic area and a separate covenant
from EMPLOYEE to EMPLOYER and the invalidity of any of such covenants shall not
affect this Contract or any other covenant made hereunder.
B. Remedies. In the event of an actual or threatened breach by
the EMPLOYEE of Paragraph A. of this Article X, EMPLOYER shall be entitled to
an injunction restraining EMPLOYEE from its prohibited conduct. If the court
should hold that the duration and/or scope (geographic or otherwise) of the
covenants contained herein are unreasonable, then, to the extent permitted by
law, the court may prescribe a duration and/or scope (geographic or otherwise),
that is reasonable and the parties agree to accept such determination, subject
to their rights of appeal. Nothing contained herein shall be construed as
prohibiting EMPLOYER or any third party from pursuing any of the remedies
available to it for such breach or threatened breach, including recovery of
damages from EMPLOYEE. In any action or proceeding to enforce the provisions
of this Article X, the prevailing party shall be reimbursed by the other party
for all costs incurred in such action or proceeding, including, without
limitation, all court costs and filing fees and all attorneys' fees, incurred
either at the trial level or at the appellate level. If EMPLOYEE shall be in
violation of any of the restrictive covenants contained in this Contract, then
the time limitation otherwise applicable to such restrictive covenant shall be
extended for a period of time equal to the period of time during which such
breach or breaches occur. If EMPLOYER seeks injunctive relief from such breach
in any court, then the covenant shall be extended for a period of time equal to
the pendency of such proceedings, including all appeals. The existence of any
claim or cause of action by EMPLOYEE against EMPLOYER, whether predicated upon
this Contract or otherwise, shall not constitute a defense to the enforcement
by EMPLOYER of the foregoing restrictive covenant, but shall be litigated
separately.
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<PAGE> 8
ARTICLE XI
NOTICES
Any notice, request, demand, offer, payment or communication required
or permitted to be given by any provision of this Contract shall be deemed to
have been delivered and given for all purposes if written and if (a) delivered
personally or by courier or delivery service, at the time of such delivery; or
(b) directed by registered or certified United States mail, postage and charges
prepaid, addressed to the intended recipient, at the address specified below,
at such time that the intended recipient or its agent signs or executes the
receipt:
If to EMPLOYER:
GENERAL CREDIT CORPORATION
211 East 70th Street
New York, New York 10021
If to EMPLOYEE:
DAVID BADER
38 Milton Road
Babylon, New York 11702
Any party may change the address to which notices are to be mailed by giving
written notice as provided herein to the other party. Commencing immediately
after the receipt of such notice, such newly designated address shall be such
person's address for purposes of all notices or other communications required
or permitted to be given pursuant to this Contract.
ARTICLE XII
CONSTRUCTION OF CONTRACT
A. New York Law. This Contract shall be considered for all
purposes a New York document and shall be construed pursuant to the laws of the
State of New York, and all of its provisions shall be administered according to
and its validity shall be determined under the laws of the State of New York
without regard to any conflict or choice of law issues.
B. Gender and Number. Whenever appropriate, references in this
Contract in any gender shall be construed to include all other genders,
references in the singular shall be construed to include the plural, and
references in the plural shall be construed to include the singular, unless the
context clearly indicates to the contrary.
C. Certain Words. The words "hereof," "herein," "hereunder," and
other similar compounds of the word "here" shall mean and refer to the entire
Contract and not to any particular article, provision or paragraph unless so
required by the context.
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<PAGE> 9
D. Captions. Paragraph titles or captions contained in this
Contract are inserted only as a matter of convenience and/or reference, and
they shall in no way be construed as limiting, extending, defining or
describing either the scope or intent of this Contract or of any provision
hereof.
E. Counterparts. This Contract may be executed in one or more
counterparts, and any such counterpart shall, for all purposes, be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
F. Severability. The invalidity or unenforceability of any
provision hereunder (or any portion of such a provision) shall not affect the
validity or enforceability of the remaining provisions (or remaining portions
of such provisions) of this Contract.
ARTICLE XIII
MISCELLANEOUS
A. Entire Contract. This Contract (and all other
documents executed simultaneously herewith or pursuant hereto) constitutes the
entire agreement among the parties pertaining to the subject matter hereof, and
supersedes and revokes any and all prior or existing agreements, written or
oral, relating to the subject matter hereof, and this Contract shall be solely
determinative of the subject matter hereof.
B. Restrictive Covenant. In the event the non-competition clause
or any other restrictive covenant of this Contract shall be deemed
unenforceable, invalid or overbroad in whole or in part for any reason, then
any court of competent jurisdiction is hereby authorized, requested and
instructed to reform such provision(s) to provide for the maximum competitive
restraints upon EMPLOYEE's activities (in time and geographic area), which may
then be legal and valid.
C. Waiver. Either EMPLOYER or EMPLOYEE may, at any time or
times, waive (in whole or in part) any rights or privileges to which he or it
may be entitled hereunder. However, no waiver by any party of any condition or
of the breach of any term, covenant, representation or warranty contained in
this Contract, in any one or more instances, shall be deemed to be or construed
as a further continuing waiver of any other condition or of any breach of any
other terms, covenants, representations or warranties contained in this
Contract, and no waiver shall be effective unless it is in writing and signed
by the waiving party.
D. Attorneys' Fees. In the event that either party shall be
required to retain the services of an attorney to enforce any of his or its
rights hereunder, the prevailing party in any arbitration or court action shall
be entitled to receive from the other party all costs and expenses including
(but not limited to) court costs and attorneys' fees (whether in the
arbitration or in a court of original jurisdiction or one or more courts of
appellate jurisdiction) incurred by him or it in connection therewith. The
parties hereby expressly confer on the arbitrator the right to award costs and
attorneys' fees in the arbitration.
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<PAGE> 10
E. Venue. Any arbitration or other litigation arising hereunder
shall be instituted only in New York City, New York, the place where this
Contract was executed, and all parties hereto agree that venue shall be proper
in said county for all such legal or equitable proceedings.
F. Assignment. The rights and obligations of the parties under
this Contract shall inure to the benefit of and shall be binding upon their
successors, assigns, and/or other legal representatives. This Contract shall
not be assignable by EMPLOYER. The services of EMPLOYEE are personal and his
obligations may not be delegated by him except as otherwise provided herein.
G. Amendment. This Contract may not be amended, modified,
superseded, cancelled, or terminated, and any of the matters, covenants,
representations, warranties or conditions hereof may not be waived, except by a
written instrument executed by EMPLOYER and EMPLOYEE or, in the case of a
waiver, by the party to be charged with such waiver.
H. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give any
person, other than EMPLOYER and EMPLOYEE and their respective successors and
permitted assigns, any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, EMPLOYER and EMPLOYEE have caused this Contract to
be executed on the day and year first above written.
"EMPLOYER"
GENERAL CREDIT CORPORATION
By: /s/ Irwin Zellermaier
-------------------------------------
Authorized Representative
"EMPLOYEE"
/s/ David Bader
----------------------------------------
DAVID BADER
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<PAGE> 1
Exhibit 10.3
State of New York
ss.:
County of
On the day of 19 , before me personally came
to me known and known to me to be the individual described in, and who
executed, the foregoing instrument, and acknowledged to me that he
executed the same.
State of New York,
County of ss.:
On the day of 19 , before me personally
came to me known, who, being by me duly sworn, did depose and say that he
resides at No. that he is the of
the corporation mentioned in, and which executed, the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of
the Board of said corporation; and that he signed h name
thereto by like order.
=====
LEASE
=====
Dated, 19
------ ---
IN CONSIDERATION of the letting of the premises within mentioned to the
within named Tenant and the sum of $1.00 paid to the undersigned by the within
named Landlord, the undersigned do hereby covenant and agree, to and with
the Landlord and the Landlord's legal representatives, that if default shall at
any time be made by the said Tenant in the payment of the rent and the
performance of the covenants contained in the within lease, on the Tenant's part
to be paid and performed, that the undersigned will well and truly pay the
said rent, or any arrears thereof, that may remain due to the said Landlord,
and also pay all damages that may arise in consequence of the non-performance
of said covenants, or either of them, without requiring notice of any such
default from the said Landlord. The undersigned hereby waives all right to
trial by jury in any action or proceeding hereinafter instituted by the
Landlord, to which the undersigned may be a party.
IN WITNESS WHEREOF, the undersigned ha set hand and
seal this day of , 19
WITNESS L.S.
----------------------------------------
<PAGE> 2
THIS AGREEMENT BETWEEN
201 Allen Street Associates
and as Landlord
Mersa Corp. as Tenant
WITNESSETH: The Landlord hereby leases to the Tenant the following premises:
201 Allen Street NYC Store #1
for the term of Five Years
to commence from the 1st day of February 1992 and to end on the 31st day of
January 1997 to be used and occupied only for
Payroll and affiliated services
upon the conditions and covenants following:
1st. That the Tenant shall pay the annual rent of
First Year: $12,000.00
Second Year: $15,480.00
Third Year: $16,641.00
Fourth Year: $17,889.12
Fifth Year: $19,230.84
said rent to be paid in equal monthly payments in advance on the FIRST day of
each and every month during the term aforesaid, as follows:
2/1/92-1/31/93:$1,000.00 per month
2/1/93-1/31/94:$1,290.00 per month
2/1/94-1/31/95:$1,386.75 per month
2/1/95-1/31/96:$1,490.76 per month
2/1/96-1/31/97:$1,602.57 per month
2nd. That the Tenant shall take good care of the premises and shall, at the
Tenant's own cost and expense make all repairs
and at the end or other expiration of the term, shall deliver up the demised
premises in good order or condition, damages by the elements excepted.
3rd. That the Tenant shall promptly execute and comply with all statutes,
ordinances, rules, orders, regulations and requirements of the Federal, State
and Local Governments and of any and all their Departments and Bureaus
applicable to said premises, for the correction, prevention, and abatement of
nuisances or other grievances, in, upon, or connected with said premises during
said term; and shall also promptly comply with and execute all rules, orders
and regulations of the New York Board of Fire Underwriters, or any other
similar body, at the Tenant's own cost and expense.
4th. That the Tenant, successors, heirs, executors or administrators shall not
assign this agreement, or underlet or underlease the premises, or any part
thereof, or make any alterations on the premises, without the Landlord's
consent in writing; or occupy, or permit or suffer the same to be occupied for
any business or purpose deemed disreputable or extra-hazardous on account of
fire, under the penalty of damages and forfeiture, and in the event of a breach
thereof, the term herein shall immediately cease and determine the option of
the Landlord as if it were the expiration of the original term.
5th. Tenant must give Landlord prompt notice of fire, accident, damage or
dangerous or defective condition. If the Premises can not be used because of
fire or other casualty, Tenant is not required to pay rent for the time the
Premises are unusable. If part of the Premises can not be used, Tenant must pay
rent for the usable part. Landlord shall have the right to decide which part of
the Premises is usable. Landlord need only repair the damaged structural
parts of the Premises. Landlord is not required to repair or replace any
equipment, fixtures, furnishings or decorations unless originally installed by
Landlord. Landlord is not responsible for delays due to settling insurance
claims, obtaining estimates, labor and supply problems or any other cause not
fully under Landlord's control.
If the fire or other casualty is caused by an act or neglect of Tenant,
Tenant's employees or invitees, or at the time of the fire or casualty Tenant
is in default in any term of this Lease, then all repairs will be made at
Tenant's expense and Tenant must pay the full rent with no adjustment. The cost
of the repairs will be added rent.
Landlord has the right to demolish or rebuild the Building if there is
substantial damage by fire or other casualty. Landlord may cancel this Lease
within 30 days after the substantial fire or casualty by giving Tenant notice
of Landlord's intention to demolish or rebuild. The Lease will end 30 days
after Landlord's cancellation notice to Tenant. Tenant must deliver the
Premises to Landlord on or before the cancellation date in the notice and pay
all rent due to the date of the fire or casualty. If the Lease is cancelled
Landlord is not required to repair the Premises or Building. The cancellation
does not release Tenant of liability in connection with the fire or casualty.
This Section is intended to replace the terms of New York Real Property Law
Section 227.
<PAGE> 3
RIDER TO LEASE
DATED FEBRUARY 1, 1992
between
as Landlord,
201 Allen Street Associates
and
MERSA CORP, as Tenant.
R1. The tenant agrees to promptly comply with any and all laws, ordinances,
variances, conditional variances, regulations, and all other requirements of law
as well as any and all municipal, state and federal authorities, boards,
commissions and other governmental agencies with respect to the demised
premises, and the use thereof, and the tenant shall, at his own cost and
expense, promptly comply with all orders or ordinances involving and including
all alterations or additions to the demised premises of whatever size or
description. The tenant further agrees to comply with and immediately execute
the rules, orders, regulations and recommendations, whenever issued, of the
New York Board of Fire Underwriters or any other similar board or organization
which may now or hereafter exercise similar power for the prevention of fires.
Tenant shall keep the sidewalk in front of the demised premises in good order
and repair with obligation to replace same or any part thereof if necessary.
Tenant shall be responsible for keeping the said sidewalk clean and free of all
trash, snow, and debris of any nature.
R2. The tenant hereby agrees to pay and discharge all charges, claims, and
liens incurred by reason of the consumption of water, gas and electricity, on
the demised premises or the maintenance of equipment therefore during the term
of this lease, and pay for the cost of said meters and the cost of installing
same if required.
R3. If a notice of mechanic's lien be filed against the demised premises for
labor or material alleged to have been furnished, or to be furnished at the
demised premises to or for the tenant or to or for someone claiming under the
tenant, and if the tenant shall fail to take such action as shall cause such
lien to be discharged within thirty (30) days after the lien shall have been
placed and/or filed, the landlord may terminate the lease, and/or pay the
amount of such lien or discharge it by deposit or by bonding. Any amount paid
or expense incurred by the landlord by reason of the failure of the tenant to
comply with this provision of the lease, or in defending any such action, shall
be due and payable by the tenant to the landlord on the first day of the next
following month, or, at the option of the landlord, on the first day of any
succeeding month. The receipt by the landlord of the regular stipulated rent
hereunder or any of said additional rent shall not be a waiver of any other
additional rent then due. However, if the landlord shall be in the process of
mortgage refinancing or sale of the property, and requires the lien to be
discharged in order to complete such refinancing, then the tenant shall cause
such lien to be discharged by payment, bonding or otherwise, within ten (10)
days after notice of the foregoing.
<PAGE> 4
R4. The tenant accepts the premises, the building and the improvements and
personality on the demised premises "AS IS" without any representation or
warranty by the landlord as to the condition of same, or as to the use to which
they may be put.
R5. Tenant covenants to pay as additional rent, all other amounts,
liabilities and obligations which Tenant assumes or agrees to pay hereunder
(all such other amounts, liabilities and obligations being collectively called
"Additional Rent"), and any failure on the part of the tenant to pay any item
of such Additional Rent shall be considered a default, and thereupon,
the landlord shall have all of the rights, powers and remedies provided for
herein or by law, including, but not limited to, summary proceedings, whether
such proceedings are provided for by laws now existing, or which may be
hereinafter enacted.
R6. All of the covenants, premises and agreements of Tenant herein
contained shall be deemed and construed to be "conditions" as well as
"covenants" as though the words specifically expressing or imparting covenants
and conditions were used in each separate instance.
R7. Tenant shall furnish landlord with and continue to keep in effect the
following insurance coverage on the demised premises and any future
improvements by recognized insurance carriers licensed to do business in New
York and in all cases naming landlord.
a. Public liability coverage against claims for bodily injury or
death in the amount of Two Hundred Thousand Dollars for any one person
to One Million Dollars for property damage. Such amounts may be
adjusted from time to time by landlord upon reasonable notice (i.e.,
30 days) to tenant as to amounts which may be reasonably required.
b. Plate and other glass insurance for all glass on the demised
premises, in sufficient amounts or, alternatively, the tenant shall
replace such plate glass, when and if broken, at its own cost and
expense.
All policies of insurance required under this lease shall provide that
no cancellation thereof shall be effective until at least 15 days after receipt
by landlord of written notice thereof. Tenant shall not obtain or carry
separate insurance concurrent in form or contributing in the event of loss with
that required under this lease unless landlord is named therein as a named
insured.
R8. Tenant understands that the premises above the demised premises are
occupied, in whole or in part, by commercial and/or residential tenants, and
agrees to conduct its business in such a way so as not to interfere with, or to
be a nuisance to, the said tenants.
- 2 -
<PAGE> 5
R9. Tenant may, with the landlord's prior written consent, make repairs or
alterations to the demised premises as are necessary for the proper conduct of
its business, provided that such alterations, etc. do not injure the structure
of the building, and provided that all required permits and approvals are
obtained in advance, and further provided that such work complies with all
applicable law and regulations and provided workman's compensation and other
reasonably required insurance is obtained. In the event that the tenant
desires to move or relocate any ducts, pipes, wiring, plumbing, etc. that
passes through the demised premises but does not supply same, the tenant may do
so only after first obtaining the landlord's prior written consent, and the
landlord shall have the right to choose the location of such ducts, pipes,
wiring, plumbing, etc. as a condition to granting such consent. Prior to
commencing any alterations, repairs, or additions, complete plans,
specifications and permits, licenses and approvals of appropriate governmental
agencies shall be submitted to landlord for its review. The landlord shall not
unreasonably withhold its consent.
R10. In consideration of executing this lease, the landlord shall grant the
tenant a rent concession through _________________ 19 , or the date that the
tenant opens for business, whichever is sooner.
R11. Tenant shall install its own water, gas and electric meters, and pay
all costs thereof and thereon.
R12. Tenant shall not use the premises, or permit the premises to be used,
for any activity which is deemed extra-hazardous by the New York Board of Fire
Underwriters or any other similar agency having jurisdiction.
R13. Tenant shall be responsible to place its garbage and other refuse in
proper covered receptacles, and shall not permit odors to interfere with the
residential tenants of the subject building. Tenant shall store such garbage
and refuse so as to avoid noxious or otherwise offensive smells or odors
therefrom from interfering with the comfort and quiet enjoyment of the other
occupants of the building, and all such storage facilities as same may require
shall be constructed by the tenant at the tenant's sole cost and expense. The
tenant shall be responsible for the removal of the said garbage and refuse by a
private sanitation company.
R14. The demised premises are leased subject to zoning ordinances and
resolutions and any modifications thereof and any restrictions of record and
all ordinance, laws and requirements of any and all state, municipal and federal
departments and agencies.
- 3 -
<PAGE> 6
R15. All common areas and facilities not within the leased premises which
tenant may be permitted to use and occupy, are to be used and occupied under a
revocable license and if the amount of such areas be diminished, landlord shall
not be subject to any liability nor shall tenant be entitled to any
compensation or diminution or abatement of rent, nor shall such diminution of
such areas be deemed constructive or actual eviction.
R16. All payments of rent by the tenant, regardless of how denominated,
shall be applied to the oldest outstanding arrears owed by the tenant.
Acceptance by the landlord of an amount less than the amount which is due shall
be deemed to be on account of the earliest amounts due. Any endorsement or
statement on any check or any letter accompanying any check or payment shall
not under any circumstances be deemed to be an accord and satisfaction, and
landlord may in all events accept such payment without prejudice to the
landlord's right to collect the balance or what is due or otherwise to pursue
the remedies set forth in this lease.
R17. Tenant shall, at its own cost and expense, keep the drain, waste and
sewer pipes and connections with mains free from obstruction to the reasonable
satisfaction of landlord its agents, and all authorities having jurisdiction.
Tenant will be responsible for the repair and replacement of any and all
plumbing fixtures in the demised premises including any such fixtures which
originally may have been installed by landlord.
R18. Tenant shall, at all times, operate its business in the demised
premises in such manner that no noxious or offensive odors shall be permitted
to emanate from or be produced beyond the demised premises; and for that
purpose will, if necessary, at its own cost and expense, install, utilize,
maintain and wherever necessary, replace in the demised premises an adequate
ventilation and exhaust system, including, but not limited to, such equipment
suitable to the accomplishment of the end that the building of which the
demised premises form a part and the corridors, lobbies and other portions
thereof shall be kept free from noxious odors and fumes emanating from the
demised premises.
R19. Tenant shall keep the demised premises free of insects and vermin and
to such end shall provide for proper extermination service, and proper
sanitation practices, so as to prevent occurrences of insects and vermin to the
demised premises and the building of which the demised premises form a part.
- 4 -
<PAGE> 7
R20. The tenant agrees that the landlord hereunder shall not be liable or
responsible for any damage caused to the tenants' property by reason of water
leakage from the premises above the demised premises into the demised premises.
R21. Tenant shall have the right to erect signs, provided that such signs do
not interfere with existing signs, and further provided that such signs are in
compliance with all applicable laws, regulations, ordinance, and governmental
requirements, and provided that the tenant first obtains the landlord's written
consent to same, which consent shall not be unreasonably withheld. The tenant
further agrees to obtain and keep in force any licenses required therefor.
R22. The tenant shall have the right to assign this lease, or to sublet the
demised premises with written permission.
R23. Tenant waives his right to bring a declaratory judgment action with
respect to any provision of this lease, or with respect to any notice sent
pursuant to the provisions of this lease, and expressly agrees not to seek
injunctive relief which would stay, extend or otherwise toll any of the time
limitations or provisions of this lease, or any notice sent pursuant thereto.
Any breach of this paragraph shall constitute a breach of a substantial
obligation of the tenancy, and shall be grounds for the immediate termination
of this lease. It is further agreed that in the event injunctive relief is
sought or if a "Yellowstone" injunction (FIRST NATIONAL STORES, INC. v.
YELLOWSTONE SHOPPING CENTERS, INC., 21 N.Y. 2d 630) is sought, such relief
shall be denied, and the landlord shall be entitled to recover the costs of
opposing such an application or action, including its attorneys fees actually
incurred.
R24. Tenant has inspected the premises and it is understood and agreed that
tenant will accept the said premises under this lease "AS IS", in their present
state and condition and landlord will have no obligation to undertake any
alterations, decorations, installations, additions, improvements, or repairs in
or to the demised premises during the term of this lease.
R25. Tenant hereby expressly grants to landlord an easement and shall permit
landlord to erect, use, maintain and repair pipes, ducts, cables, conduits,
plumbing, vents and wires in, to and through the premises as and to the extent
that landlord may now or hereafter deem to be necessary or appropriate for the
proper operation and maintenance of the building in which the demised premises
are located or to the extent necessary to accommodate the requirements of other
tenants in the building. All such work shall be done, so far as practicable,
in such manner as to avoid unreasonable interference with tenant's use of the
premises. Landlord shall grant tenant access to the plumbing and electrical
systems in the building to the extent that it can so as to all the hookup of
the tenant's plumbing and electrical installations.
- 5 -
<PAGE> 8
R26. If by reason of the tenant's use and occupancy of the demised premises,
landlord's 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 landlord, as additional rent hereunder, for that portion of all fire
insurance premiums thereafter paid by landlord which shall have been charged
because of such use and occupancy, and tenant shall make such reimbursement
upon the first day of the month following such outlay by landlord. Said
additional rent shall be collectible as additional rent in a summary
non-payment proceeding, in addition to all other remedies of the landlord.
R27. Tenant agrees to pay as additional rent under this lease 35% of any
and all increases in the Real Estate taxes above the Real Estate taxes for the
1988/1989 tax year imposed on the property known as 201 Allen Street, Manhattan,
and shall be payable as additional rent at the rate of one-twelfth of the
annual increase each month. Real Estate taxes, as used in this paragraph,
shall mean taxes and assessments imposed thereon for any purpose whatsoever,
with the sole exception of the NYS capital gains transfer tax. All such
increases shall be calculated as of July 1 of each year commencing on July 1,
and ending the following June 30th. In no event, however, shall a reduction in
such taxes diminish the rent to paid. A copy of the tax bills shall be
conclusive evidence of the amount of taxes.
R28. Tenant represents that no broker was instrumental in consumating this
lease, and that no conversations or prior negotiations were had with any broker
concerning the renting of the premises. Tenant agrees to indemnify and to hold
landlord harmless against any claims for brokerage commissions arising out of
any conversations or negotiations had by tenant with any broker regarding these
premises. Tenant's indemnity shall include any claims and any of the
landlord's expenses arising out of such claims, including, but not limited to,
attorneys fees.
R29. Notwithstanding anything contained herein to the contrary, the security
deposit (if any) held by the landlord may be held in an interest bearing or
income producing fund of the landlord's choosing, with all interest and/or
income thereon being deemed to be additional rent collectable by landlord, and
such interest and/or income shall be considered at all times to be the property
of the landlord.
R30. Landlord makes no representations as to the suitability, feasibility,
or legality of the use of the demised premises for any particular purposes; and
the tenant agrees and undertakes to do, at his own cost and expense, any and
all things necessary to enable the tenant to legally operate at the
subject premises. The tenant agrees to maintain and operate the premises and
all business conducted thereat in accordance with and in compliance with all
laws, rules, orders, regulations or ordinances of each and every governmental
department, unit or bureau having jurisdiction over the premises or any
business operated thereat.
- 6 -
<PAGE> 9
R31. In the event that the tenant holds over beyond the expiration date of
the term provided herein, the parties agree that the reasonable use and
occupancy during such holdover period shall be computed as follows:
a. in the event a signed lease exists with respect to the demised
premises, a total of base rent and other charges provided in such lease.
b. In the event that no such lease exists, twice the base rent
and additional rent as payable during the final year of the term
provided herein.
The foregoing does not constitute landlord's consent to any such holdover
period, and shall not be construed to extend the term hereof.
R32. Notwithstanding any provision to the contrary, all notices required to
be sent under this lease shall be sent by certified mail, return receipt
requested. If to the tenant, the notice shall be addressed to the tenant at the
demised premises. If to the landlord, the notice shall be addressed to the
landlord, 201 Allen Street Assoc., 334 East 5th Street New York, New York
10003. Either the landlord or the tenant may designate another address for
notices by sending the other party a notice of same.
R34. In the event of any conflict between the provisions of this rider and
the printed lease, the provisions of this rider shall prevail.
R35. The tenant has the option to terminate this lease within the 1st year
of this lease. He must give the landlord notice 6 months prior by certified
mail, return receipt requested.
- 7 -
<PAGE> 10
R39. The base rent to be paid during the term of this lease shall be as
follows:
<TABLE>
<CAPTION>
Annual Rent Per Month
----------- ---------
<S> <C> <C>
1st year $12,000,00 1000.00
2nd year $15,480.00 1290.00
3rd year $16,641.00 1386.75
4th year $17,889.08 1490.76
5th year $19,230.76 1602.57
</TABLE>
R40. All fixtures that are permanently attached to any part of the premises
will remain and become the landlord's possessions unless the landlord requests
the removal of any such fixture.
R41. Tenant shall be responsible for promptly removing any and all
violations on the subject premises, regardless of when same arose.
R42. Landlord gives tenant the right to install and maintain, at tenant's
sole cost and expense, a canopy over the street entrance and/or a sidewalk
cafe, provided that the same is installed in accordance with all applicable
laws and regulations and City requirements, and provided that the tenant
obtains all necessary approvals, permits and/or licenses as same are required.
Should the City of New York ever require the removal of same, tenant shall
remove same. Tenant shall be responsible for all expenses and fees incurred
with respect to the canopy and/or sidewalk cafe. All insurance policies
required under this lease shall provide landlord with coverage against liability
arising from the use and/or maintenance of the canopy and/or sidewalk cafe.
R43. Tenant shall install and maintain an "ansil system" in all hoods and
flues and chimneys to the satisfaction of the landlord, and at all locations
chosen by landlord in addition to the foregoing.
R44. Tenant shall have the right to sell alcoholic beverages in the demised
store premises provided that tenant obtains the necessary license and/or
permits to sell same.
R45. Tenant shall erect and maintain a chimney fuel one similar to the
existing fuel in place of presently existing fuel.
R46. Tenant agrees to install a fire alarm on the basement door and shall
remain closed at all times except for emergency use, and tenant agrees not to
enter or use the adjoining corridor to the adjacent basement.
Landlord: Tenant:
- ------------------------ ---------------------------
<PAGE> 1
Exhibit 10.4
AGREEMENT OF LEASE, made as of this 31st day of January 1996, between BENJAMIN
P. FELDMAN AS RECEIVER FOR 491-499 SEVENTH AVENUE, having an address in care of
S.L. Green Properties, Inc. at 70 West 36th Street, New York, New York 10018
party of the first part, hereinafter referred to as OWNER, and G.S. CAPITAL
CORP., party of the second part; hereinafter referred to as TENANT, WITNESSETH,
Owner hereby leases to Tenant and Tenant hereby hires from Owner SUITE 704
North in the building known as 499 SEVENTH AVENUE in the Borough of Manhattan,
City of New York, for the term of five (5) years (or until such term shall
sooner cease and expire as hereinafter provided) to commence on the 1st day of
February nineteen hundred and ninety-six, and to end on the 31st day of January
two thousand and one both dates inclusive, at an annual rental rate of SEE
ARTICLE 50 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(s) 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:
OCCUPANCY: 1. Tenant shall pay the rent as above and as
hereinafter provided.
USE: 2. Tenant shall use and occupy demised premises for
general and executive offices for financial factor, 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 non-structural
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 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 any 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
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, whether structural or non-structural in
nature, caused by or resulting from the carelessness, omission, neglect or
improper conduct of Tenant, Tenant's servants, employees, invitees, or
licensees, and whether or not arising from such Tenant conduct or omission, when
required by other provisions of this lease, including Article 6. 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 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 or inconvenience,
annoyance or injury to business arising from Owner, Tenant 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 fixture
appurtenances or equipment thereof. 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 the Rules of the Board of
Standards and Appeals, or of any other Borough or body having or asserting
jurisdiction.
REQUIREMENTS 6. Prior to the commencement of the lease term Tenant
OF LAW, is then in possession, and at all times thereafter Tenant
FIRE INSURANCE, shall, at Tenant's sole cost and expense, promptly comply
FLOOR LANDS: with all present and future laws, orders, regulation 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 Police, or any similar body
which shall impose any violation, order or directed 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 or the building
(including the use permitted under the lease):
<PAGE> 2
Except as provided in Article 3 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 therein.
Tenant shall not do or permit any act or thing to be done in or to the demised
premises which is contrary to law, or which will invalidate or be in conflict
with public liability, fire or other policies of insurance at any time carried
by or for the benefit of Owner. Tenant shall 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 in 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 thereunder, 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 role for the building or demised premises
issued by a body making fire insurance rates applicable in 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 violation,
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 or which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any ground or
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 execute promptly any certificate that Owner may
request.
PROPERTY--LOSS, DAMAGE, REIMBURSEMENT, 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 or
damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its agents, servants or
employees; Owner or its agents 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 careless ness,
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. In case any action or proceeding
is brought against Owner by reason of any such claim, Tenant, upon written
notice from Owner, will, at Tenant's expense, resist or defend such action or
proceeding by 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, 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, the
damages thereto shall be repaired by and at the expense of Owner and the rent,
until such repair shall be substantially completed, shall be proportionately
paid up to the time of the casualty and thenceforth shall cease until the date
when the premises shall have been repaired and restored by Owner, subject to
Owner's right to elect not to restore the same as hereinafter 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 decided 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 with 90 days after such fire or casualty, specifying a date for
the explanation 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 made by Tenant which were on account of any
period subsequent to such date shall be returned to Tenant. Unless Owner shall
<PAGE> 3
serve a termination notice as provided 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, each party shall look
first in any insurance in his favor before making any claim against the other
party for recovery for loss or damage resulting from fire or other casualty,
and to the extent that such insurance is in force and collectible and to the
extent permitted by law, Owner and Tenant each hereby releases and waives all
right of recovery against the other or any one claiming through or under each
of them by way of subrogation or otherwise. The foregoing release and waiver
shall be in force only if both releasors' insurance policies contain a clause
providing that such a release or waiver shall not invalidate the insurance.
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 be obligated to repair any damages 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 proceedings and Tenant shall have no claim for
the value of any unexpired term of said lease.
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:
12. Rates and conditions in respect to submetering or rent inclusion, as the
case may be, to be added in RIDER attached hereto. Tenant covenants and agrees
that at all times its use of electric current shall not exceed the capacity of
existing feeders to the building or the risers or wiring installation and
Tenant may not use any electrical equipment which, in Owner's opinion,
reasonably exercised, will overload such installations or interfere with the
use thereof by other tenants of the building. The change at any time of the
character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
ACCESS TO PREMISES:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to any portion of the building or which Owner may elect to perform in
the premises 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 premises 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 the 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 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 hereunder.
<PAGE> 4
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 the 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 nor any person claiming through or under Tenant, or by reason of
any statute or order of court, shall thereafter be entitled to possession of the
premises demised but shall forthwith quit and surrender the premises. If this
lease shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenant's interest
in this 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 re-let by the Owner for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount 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 ll of the U.S. Code (bankruptcy code):" or
if any execution or attachment shall be issued against Tenant or any 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
deposit hereunder which Owner has applied to the payment of any rent and
additional rent due and payable hereunder or failed to move into or take
possession of the premises within fifteen (15) days after the commencement of
the 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 five (5) days
notice upon Tenant specifying the nature of said default and upon the
expiration of said five (5) days, if Tenant shall have failed to comply with or
remedy such default, or if the said default or omission complained of shall be
of a nature that the same cannot be completely cured or remedied within said
five (5) day period, and if Tenant shall not have diligently commenced during
such default within such five (5) day period, and shall not thereafter with
reasonable diligence and in good faith, proceed to remedy or cure such default,
then Owner may serve a written three (3) days' notice of cancellation of this
lease upon Tenant; and upon the expiration of said three (3) days this lease
and the term thereunder shall end and expire as fully and completely as if the
expiration of such three (3) 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
<PAGE> 5
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 otherwise, (a) the rent, and additional rent, shall
become due thereupon and be paid up to the time of such re-entry, dispossess
and/or expiration, (b) Owner may re-let the premises or any part or parts
thereof, either in the name of the 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 representatives of Tenant shall also pay Owner as
liquidated damages for the failure of Tenant to observe and perform said
Tenant's convenants 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, attorney's 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 demise
premises in good order or preparing the same for re-rental may, at Owner's
option, make such alterations, repairs, replacements, and/or decorations in the
demised premises as Owner, in Owner's sole judgement, considers advisable and
necessary for the purpose of re-letting the demised premises, and the making of
such alterations, repairs, replacements, and/or decorations shall not operate
or be construed to release Tenant from liability 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, 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 attorney's fees, in instituting, prosecuting or defending any
action or proceedings, 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 five (5) days of
rendition of any bill or statement to Tenant thereof. 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 therefor to change the
arrangement and or location of public entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets or other public parts of the building and
to change the name, number or designation by which the building may be known.
There shall be no allowance in 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 to 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 impositions
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.
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 herein are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement made shall be
ineffective to
<PAGE> 6
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 charge, 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 a 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 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, in 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 hereinunder shall
be abated (provided Tenant is not responsible for Owners inability to obtain
possession or complete any work required) until after Owner shall have given
Tenant notice that the premises are substantially ready for Tenant's occupancy,
if permission is given to Tenant to enter into the possession of the demised
premises to occupy premises other than the demised premises prior to the
date specified as the commencement of the term of this lease. Tenant covenants
and agrees that such occupancy shall be deemed to be under all the terms,
covenants, conditions and provisions of this lease, except as to the covenant
to pay rent. The provisions of this article 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 by 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 check 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 agreements
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 summary proceeding for possession
of the premises, tenant will not interpose any counterclaim of whatever nature
or description in any such proceeding.
INABILITY TO PERFORM:
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 of 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 implied to be supplied or is
unable in make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Owner is prevented or delayed from so doing by reason of strike or
labor troubles or any cause whatsoever beyond Owner's sole control including,
but not limited to, government preemption in connection with a National
Emergency or by reason of any rule, order or regulation
<PAGE> 7
of any department or subdivision thereof of any government agency or by reason
of the conditions of supply and demand which have been or are affected by war
or other emergency.
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, 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 the 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 settled
first hereinbefore 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 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 of system. If the building
or the demised premises or any part thereof is supplied with water through a
meter through which water is also supplied to other premises Tenant shall pay
to Owner, as addition rely, on the first day of each month. %($ 0 ) of
the total meter charges as Tenant's portion. Independently of and in addition
to any of the remedies reserved to Owner hereinabove of an in addition to any of
the remedies reserved to Owner hereinabove or elsewhere in this lease, Owner
may sue for and collect any monies to be paid by Tenant or paid by Owner for
any of the reason or purposes hereinbefore set forth.
SPRINKLERS:
38. 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
recommended 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 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 expense, promptly make such sprinkler system installations,
changes, modifications, alterations, and supply additional sprinkler heads or
other equipment as required whether the work involved shall be structural or
non-structural in nature. Tenant shall pay to Owner as additional rent the sum
of $0, on the first day of each morning 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 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 5 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 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. 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 judgement 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 service, Owner may proceed with alterations
necessary to substitute automatic control elevator service upon ten (10) day
written notice to Tenant without in any way affecting the obligations of Tenant
hereunder, provided that the same shall be done with the minimum amount of
inconvenience to Tenant, and Owner pursues with due diligence the completion
of the alterations.
<PAGE> 8
Security: 32. Tenant has deposited with Owner the sum of
$10,369.25 security for the faithful performance
and observance by Tenant of the terms, provisions and
conditions of this lease; it is agreed that in the event Tenant defaults in
respect to any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease; including but not limited to, any
damages or deficiency in the reletting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of which
the demised premises form a part, Owner shall have the right to transfer the
security to the vendee or lessee and Owner shall thereupon be released by Tenant
from all liability for the return of such security, and Tenant agrees to look
to the new Owner solely for the return of said security, and it is agreed that
the provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Captions: 33. The Captions are inserted only as a matter of
convenience and for reference and in no way decline, 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 on-
ly 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 of the land and building)
of which the demised premises form a part, so that in the event of any sale or
sales of said land and building or of said lease, or in the event of a lease of
said building, or of the land and building, the said Owner shall be and hereby
is entirely freed and relieved of all covenants and obligations of Owner
hereunder, and it shall be deemed and construed without further agreement
between the parties of their successors in interest, or between the parties and
the purchaser, at any such sale, or the said lessee of the building, or of
the land and building, that the purchaser or the lessee of the building has
assumed and agreed to carry out any and all covenants and 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
new 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 (except
such portion thereof as is covered by specific hours in Article 31 hereof),
Sundays and all days observed by the State or Federal Government as legal
holidays and those designated as holidays by the applicable building service
union employees service contract or by the applicable Operating Engineers
contract with respect to HVAC service.
Adjacent 35. If an excavation shall be made upon land adjacent
Excavation to the demised premises, or shall be authorized to be
Shoring: made, Tenant shall afford to the person causing or
authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations
without any claim for damages or indemnity against Owner, or diminution or
abatement of rent.
Rules and 36. Tenant and Tenant's servants, employees, agents
Regulations: visitors, and licensees shall observe faithfully, 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
of adopted by Owner or Owner's agents, the parties hereto agree to submit the
questions of the reasonableness of such Rule or Regulation for decision in 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 ten (10) days after the giving of notice
thereof. Nothing in this lease contained shall be construed to impose upon
Owner any duty or obligation to enforce the Rules and Regulations or terms,
covenants or conditions in any other lease, as against any other tenant and
Owner shall not be liable to Tenant for violation of the same by any other
tenant, its servants, employees, agents, visitors or licensees.
Glass: 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. Hills for the premiums therefor shall
be rendered by Owner to Tenant at such times as Owner may elect, and shall be
due from, and payable by, Tenant when rendered, and the amount thereof shall be
deemed to be, and be paid, as additional rent.
Estoppel 38. Tenant, at any time, and from time to time, upon
Certificate: 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 in 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 39. If, at the request of and as accommodation to Ten-
Board Listing ant, 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 40. The covenants, conditions and agreements con-
and Assigns: tained in this lease shall bind and insure 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.
* Provided Tenant is not in default in the performance its obligations
under the terms and conditions of the Lease, Tenant shall be refunded
$3,456.42 of said security deposit after the payment of twenty four
(24) monthly installments of rent and additional rent by Tenant.
In Witness Whereof, Owner and Tenant have respectively signed and
sealed this lease as of this day and year first above written.
BENJAMIN P. FELDMAN AS RECEIVER
FOR 491-499 SEVENTH AVENUE [CORP.
Witness for Owner: ----------------------------------- SEAL]
By: /s/ BENJAMIN P. FELDMAN
- ---------------------------------- --------------------------------[L.S.]
Benjamin P. Feldman
Witness for Tenant: G.S. CAPITAL CORP [CORP.
----------------------------------- SEAL]
- ---------------------------------- By: /s/
--------------------------------[L.S.]
<PAGE> 9
RIDER ATTACHED HERETO AND MADE PART OF LEASE DATED AS OF THE 31ST DAY OF
JANUARY, 1996 BY AND BETWEEN BENJAMIN P. FELDMAN AS RECEIVER FOR 491-499
SEVENTH AVENUE, AS LANDLORD, AND G.S. CAPITAL CORP., AS TENANT, COVERING
SUITE 704 NORTH AT 491-499 SEVENTH AVENUE, NEW YORK, NEW YORK.
Wherever the terms, covenants and conditions contained in the printed portion
of this Lease shall be in conflict with any of the terms, covenants and
conditions in the Additional Clauses 41 through 87 that follow, the Additional
Clauses shall prevail.
41. DEFINITIONS AND CAPTIONS:
The captions, numbers and definitions herein are inserted only as a matter
of convenience and are not intended to define, limit, construe or describe the
scope or intent of any paragraph, nor in any way affect this Lease. In
conjunction herewith, the defined term "Landlord" as used in this Rider shall
be deemed to be one and the same as the defined term "Owner" as used in the
printed portion of this Lease.
42. BROKER:
Tenant represents and warrants that it has dealt with no broker except
S.L. Green Realty, Inc. and Winoker Realty Co., Inc. (the "Brokers") in
connection with the execution of this Lease or the showing of the Demised
Premises and agrees to hold and save Landlord harmless from and against any and
all liabilities from any claims of any broker (including, without limitation,
the cost of counsel fees in connection with the defense of any such claims)
except the Brokers.
43. "AS IS" CONDITION:
The Tenant has inspected the Demised Premises and agrees to accept the
same in its present "as is" condition, and the Landlord makes no representation
as to the condition of the premises, except Landlord shall (a) carpet the
demised premises in building standard colors and materials, and (b) deliver the
Air Conditioning Unit servicing the demised premises in good working order.
44. INDEMNIFICATION:
Tenant agrees to indemnify and save Landlord harmless against and from
any and all claims by or on behalf of any person or persons, firm or firms,
corporation or corporations, arising from any work or thing or circumstance or
occurrence whatsoever done by or on behalf of Tenant, in or about the Demised
Premises, and will further indemnify and save Landlord harmless against and
from any and all claims arising from any breach or default on the part of
Tenant in the performance of any covenant or agreement on the part of Tenant to
be performed, pursuant to the terms of this Lease, or arising from any act or
negligence of Tenant, or any of its agents, contractors, servants, employees,
invitees or licensees, and from and against all costs, reasonable counsel fees,
expenses and liabilities incurred in or about any such claim or action or
proceeding brought thereon; and in case any action or proceeding be brought
against Landlord, covenants to resist or defend, at Tenant's expense, such
action or proceeding by counsel reasonably satisfactorily to Landlord.
45. EXCULPATORY CLAUSE:
If the Landlord or any successor in interest be an individual,
receivership, joint venture, tenancy in common, co-partnership, unincorporated
association, or other unincorporated aggregate of individuals or a corporation
(all of which are referred to below in this Article 45 individually and
collectively, as a "Landlord Entity") , then, anything elsewhere to the
contrary notwithstanding,
<PAGE> 10
Tenant shall look solely to the estate and property of such Landlord Entity in
the land and Building of which the Demised Premises are a part, for the
satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) requiring the payment of money by Landlord Entity in the
event of any default or breach by Landlord Entity with respect to any of the
terms, covenants and conditions of the Lease to be observed and/or performed by
Landlord Entity, and no other property or assets of such Landlord Entity (or
the individual or entity which is the receiver, if the Landlord Entity is a
receivership) shall be subject to levy, execution or other enforcement
procedure for the satisfaction or Tenant's remedies.
46. TENANT'S REPRESENTATION:
Tenant covenants that it will not do or suffer to be done in or upon the
said premises any act or thing which shall damage the Landlord or its Tenants,
and covenants that no business shall be carried on, nor any act or acts
suffered or permitted to be done on said premises that in any manner conflicts
with, or is contrary, to any law.
Tenant covenants that if it performs any construction or alteration at
the Demised Premises in accordance with all of the other terms and conditions
of this Lease and, as a result of said construction, the normal heating
supplied by the Landlord is altered or reduced, then the Landlord shall not be
required to provide extra heat or perform any installations beyond what was
being supplied or provided prior to the Tenant's work.
47. INSURANCE:
Tenant covenants and agrees that at all times during the term of this
Lease, Tenant shall immediately secure, and thereafter maintain in full force,
during the term hereof, at its own cost and expense, comprehensive general
personal injury and property damage liability insurance against claims for
bodily injury, death and property damage, such insurance to afford minimum
protection during the term of this lease, of not less than $1,000,000 for
bodily injury or death and not less than $1,000,000 for property damage, as
well as fire and casualty insurance, together with extended coverage, in such
amounts as required by Landlord. Such insurance policies shall insure against
all costs, expenses and/or liability arising out of or based upon any and all
claims, accidents, injuries and damages whatsoever normally covered by such
insurance caused to any person or property, wherein such accident, damage or
injury occurred on or about the Demised Premises or the land and building of
which the Demised Premises are a part. Landlord and Landlord's mortgagee shall
be named as additional insureds in Tenant's policies. Such insurance shall be
carried by an insurance company or companies licensed to do business in the
State of New York and reasonably acceptable to Landlord. Upon commencement of
the term hereof, and thereafter at least ten (10) days prior to the expiration
of any such policy, Tenant shall deliver to Landlord the policy or policies of
insurance or certificates thereof and evidence of the payment of the premium
therefor. In the event Tenant shall fail to provide the aforesaid insurance
Landlord shall have the right, but not the obligation, after giving Tenant five
(5) days' written notice given in accordance with Article 28, to procure and
pay for any of such insurance and Tenant shall reimburse Landlord, on the
first of the following month, as additional rent, the cost thereof with
interest at the then maximum legal rate on the amount paid from the date of
payment to the date of reimbursement. Each such policy shall contain an
endorsement that such insurance may not be cancelled or amended except upon
thirty (30) days' written notice to Landlord. Tenant's failure to provide and
keep in force the aforementioned insurance shall be regarded as a material
default hereunder, entitling Landlord to exercise any or all of the remedies as
herein provided in the event of Tenant's default.
2
<PAGE> 11
48. LANDLORD'S ACCESS:
Tenant covenants and agrees that it will permit Landlord, its agents,
servants, employees, licensees, invitees and contractors, at any and all times
during regular business hours, to pass and repass on and through the Demised
Premises, or such portion thereof as may be necessary, in order that they or any
of them may gain access to any facilities of the Building. Landlord shall make
reasonable efforts to give Tenant advance notice of such entry and to avoid
disruption of Tenant's business activities. Tenant agrees further that it will,
during the entire term of this Lease, keep the Landlord informed of the
telephone numbers of at least three persons or parties having keys to the
Demised Premises in order that, in the event of an emergency which requires
Landlord to have access to such facilities during other than regular business
hours, Landlord may arrange with such persons or parties to be admitted to the
Demised Premises, provided, however, that if Landlord is unable to arrange for
admittance to the Demised Premises during any such emergency, or if time does
not permit the making of such arrangements, Landlord shall have the right to
gain admittance to the Demised Premises by forcibly or otherwise breaking into
the Demised Premises, and the sole liability of Landlord to Tenant in such event
shall be that Landlord shall be obligated to repair all damage caused by such
breaking in within a reasonable time after the occurrence thereof.
49. ELECTRICITY:
A. Landlord shall furnish to Tenant as an additional service included
in the fixed rent payable hereunder, the electric energy which Tenant requires
in the Demised Premises on a "rent inclusion" basis, through the presently
installed electrical facilities for Tenant's reasonable use in the Demised
Premises for lighting, light office equipment and the usual small business
machines, including small copying machines. Landlord shall not in anywise be
liable or responsible to Tenant for any loss or damage or expense which Tenant
may sustain or incur if either the quantity or character of electric service is
changed or is no longer available or suitable for Tenant's requirements, unless
caused by Landlord's negligence.
B. (1) Tenant acknowledges and agrees (i) that the fixed annual rent
hereinabove set forth in this Lease includes an Electricity Rent Inclusion
Factor (as hereinafter defined), of $6,003.25 per annum to compensate Landlord
for the electrical wiring and other installations necessary for, and for its
obtaining and redistribution of, electric current as an additional service; and
(ii) that said Electricity Rent Inclusion Factor (hereinafter called "ERIF"),
which shall be subject to periodic adjustments as herein provided, has been
partially based upon Tenant's estimated connected electrical load and hours of
use thereof for ordinary lighting and light office equipment, during ordinary
business hours. The "Electricity Rent Inclusion Factor" shall mean the amount
determined by applying the estimated connected electrical load and usage
thereof in the Demised Premises (as determined by the electrical consultant as
hereinafter provided) to the rate (including any taxes) charged for such load
and usage in the service classification in effect on the date which Landlord
purchased electric current for the entire Building from the public utility
corporation, which, as set forth in this Section 49(B), Landlord and Tenant
initially agree is $6,003.25 per annum. If the cost to Landlord of electricity
shall have been, or shall be, increased (whether such change in Landlord's
electric rates, charges, fuel adjustment, or service classifications, or by
taxes or charges of any kind imposed thereon, or for any other such reason,
then the aforesaid ERIF portion of the fixed rent shall be increased in the
same percentage.
(2) Any such percentage increase in Landlord's cost due to change
in Landlord's electric rates, charges, etc., shall be computed by the
application of the average consumption (energy and
3
<PAGE> 12
demand) of electricity for the entire Building for the twelve (12) full months
immediately prior to the rate change, other change in cost, or any changed
methods of or rules on billing for same, on a consistent basis to the new rate
and/or service classifications and to the immediately prior existing rate
and/or service classifications. If the average consumption of electricity for
the entire Building for said prior twelve (12) full months cannot reasonably be
applied and used with respect to changed methods of or rules on billing, then
the percentage increase shall be computed by the use of the average consumption
(energy and demand) for the entire Building for the first three (3) months
under such changed methods of or rules on billing, projected to a full twelve
(12) months; and that same consumption, so projected, shall be applied to the
rate and/or service classifications which existed immediately prior to the
changed methods of or rules on billing. The parties acknowledge that they
understand that it is anticipated that existing electric rates, charges, etc.,
may be changed by virtue of time-of-day rates or other methods of billing, and
that the foregoing reference to changes in methods of or rules on billing is
intended to include any such change. The parties agree that a reputable,
independent electrical consultant, selected by Landlord (hereinafter called
"Landlord's electrical consultant") shall determine the percentage for the
changes in the ERIF based on changes in Landlord's electric rates, charges,
etc.
C. (1) The parties agree that Landlord's electrical consultant may
from time to time make surveys in the Demised Premises covering the electrical
equipment and fixtures and use of current therein, and the connected electrical
load and usage portion of the ERIF shall be changed in accordance with such
survey, and the ERIF automatically redetermined, accordingly, by Landlord's
electrical consultant. The fixed rent shall be appropriately adjusted
effective as of the date of any such change in connected load and usage, as
disclosed by said survey. In no event is the originally specified $6,003.25
per annum ERIF portion of the annual fixed rent (as adjusted by any electricity
cost increases of Landlord) to be reduced.
(2) The determination of change in the ERIF by Landlord's
electrical consultant shall be binding and conclusive on Landlord and on Tenant
from and after the delivery of copies of such determination to Landlord and
Tenant, unless within thirty (30) days after the delivery of such copies,
Tenant disputes such determination. If Tenant disputes the determination, it
shall, at its own expense, obtain from a reputable, independent electrical
consultant its own survey of Tenant's electrical lighting and power load and
hours of use thereof, and a determination of such change in the ERIF in
accordance with the provisions of this Article 49. Tenant's consultant and
Landlord's electrical consultant then shall seek to agree on a finding of such
determination of such change in the ERIF. If they cannot agree, they shall
choose a third reputable electrical consultant whose cost shall be shared
equally by Landlord and Tenant, to make a similar survey, and the determination
of such ERIF change by such third electrical consultant shall be controlling.
(If they cannot agree on such third consultant, within ten (10) days, then
either party may apply to the Supreme Court in the County of New York for the
appointment of such third consultant.) However, pending such determination,
Tenant shall pay to Landlord the amount of ERIF as determined by Landlord's
electrical consultant, provided, however, if the amount of ERIF determined as
aforesaid is different from that determined by Landlord's electrical
consultant, then Landlord and Tenant shall make adjustment for any deficiency
owed by Tenant or overage paid by Tenant pursuant to the decision of Landlord's
electrical consultant.
D. Landlord reserves the right to discontinue furnishing electric
energy to Tenant at any time upon sixty (60) days' written notice to Tenant,
and from and after the effective date of such termination, Landlord shall no
longer be obligated to furnish
4
<PAGE> 13
Tenant with electric energy, provided, however, that such termination date
shall be extended for a time reasonably necessary for Tenant to make
arrangements to obtain electric service directly from the public utility
company servicing the Building. If* Landlord exercises such right of
termination, this Lease shall remain unaffected thereby and shall continue in
full force and effect; and thereafter Tenant shall diligently arrange to obtain
electric service directly from the public utility company servicing the
Building, and may utilize the then existing electric feeders, risers and wiring
serving the Demised Premises to the extent available and safely capable of
being used for such purpose and only to the extent of Tenant's then authorized
connected load. Landlord shall be obligated to pay no part of any cost
required for Tenant's direct electric service. If Landlord exercises such
right of termination, then from and after the date that Tenant commences
purchasing electricity from the public utility, the fixed annual rent payable
under this Lease shall be reduced to:
*Only in the event that this occurs to more than fifty-one percent (51%) of the
building tenancy.
<TABLE>
<CAPTION>
==============================================================
PORTION OF TERM AMOUNT
--------------------------------------------------------------
<S> <C>
From February 1, 1996 $41,477.00 per annum
through January 31, 1997
From February 1, 1997 $42,928.70 per annum
through January 31, 1998
From February 1, 1998 $44,380.40 per annum
through January 31, 1999
From February 1, 1999 $48,015.10 per annum
through January 31, 2000
From February 1, 2000 $49,543.20 per annum
through January 31, 2001
==============================================================
</TABLE>
E. (1) Tenant agrees not to connect any additional electrical
equipment of any type to the Building electric distribution system, other than
lamps, typewriters and other small office machines which consume comparable
amounts of electricity, without the Landlord's prior written consent, which
consent shall not be unreasonably withheld. Any additional risers, feeders, or
other equipment proper or necessary to supply Tenant's electrical requirements,
upon written request of Tenant, will be installed by Landlord, at the sole cost
and expense of Tenant, if, in Landlord's sole judgment, the same are necessary
and will not cause permanent damage or injury to the Building or the Demised
Premises, or cause of create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repair or expense or interfere with or
disturb other tenants or occupants.
(2) Tenant shall purchase at its own expense, all lighting tubes,
lamps, bulbs and ballasts used in the Demised Premises and shall pay all costs
for providing and installing same.
5
<PAGE> 14
50. FIXED ANNUAL RENT:
<TABLE>
<CAPTION>
==========================================================
PORTION OF TERM AMOUNT
----------------------------------------------------------
<S> <C>
From February 1, 1996 $47,480.25 per annum
through January 31, 1997
From February 1, 1997 $48,931.95 per annum
through January 31, 1998
From February 1, 1998 $50,383.65 per annum
through January 31, 1999
From February 1, 1999 $54,018.35 per annum
through January 31, 2000
From February 1, 2000 $55,546.45 per annum
through January 31, 2001
==========================================================
</TABLE>
Provided Tenant is not in default in the performance of its obligations
under the terms and conditions of the Lease, Tenant shall receive an abatement
of $3,456.42 against each of the monthly installments of fixed annual rent due
for the months of February 1996, March 1996 and February 1997.
51. REAL ESTATE TAX ESCALATION:
Tenant shall pay to Landlord, as additional rent, tax escalation in
accordance with this Article.
A. As used in this Article, the following definitions shall apply:
1. The term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the calendar year 1996.
2. The term "Percentage" shall be deemed to mean one and three
hundred seven (1.307%) percent.
3. The term "the Building Project" shall mean all of the land
together with the improvements thereon known as 491-499 Seventh Avenue, New
York, New York.
4. The term "Comparative Year" shall mean the respective twelve (12)
months following the Base Tax Year, and each subsequent period of twelve (12)
months.
5. The term "Real Estate Taxes" shall mean the total of all taxes
and special or other assessments and/or vault charges levied, assessed or
imposed at any time by any governmental authority or Business Improvement
District upon or against the Building Project, and also any tax or assessment
levied, assessed or imposed at any time by any governmental authority in
connection with the receipt of income or rents from said Building Project to
the extent that same shall be in lieu of all or a portion of any of the
aforesaid taxes or assessments, or additions or increases thereof, upon or
against said Building Project. If, due to a future change in the method of
taxation or in the taxing authority, or for any other reason, a franchise,
income, transit, profit or other tax or governmental imposition, however
designated, shall be levied against Landlord in substitution in whole or in
part for the Real Estate Taxes, or in lieu of additions to or increases of said
Real Estate Taxes, then such franchise, income, transit, profit or other tax or
governmental imposition shall be deemed to be included within the definition of
"Real Estate Taxes" for the purposes hereof. As to special assessments which
are payable over a period of time extending beyond the term of this Lease,
only a pro rata
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portion thereof, covering the portion of the terms of this Lease unexpired at
the time of the imposition of such assessment, shall be included in "Real Estate
Taxes". If, by law, any assessment may be paid in installments, then, for the
purposes hereof (a) such assessment shall be deemed to have been payable in the
maximum number of installments permitted by law and (b) there shall be included
in Real Estate Taxes, for each Comparative Year in which such installments may
be paid, the installments of such assessments so becoming payable during the
Comparative Year, together with interest payable during such Comparative Year.
6. The phrase "Real Estate Taxes payable during the Base Tax Year"
shall mean that amount obtained by multiplying the valuations actually used by
the City of New York, of the land and building of the Building Project (whether
same be actual or a transitional assessment) , for purposes of billing Real
Estate Taxes during the Base Tax Year by the Base Tax Year rate for each
$100.00 for such valuation.
B. In the event that the Real Estate Taxes payable for any Comparative
Year shall exceed the amount of such Real Estate Taxes payable during the Base
Tax Year, Tenant shall pay to Landlord, as additional rent for such Comparative
Year, an amount equal to the Percentage of the excess. By or after the start
of the Comparative Year following the Base Tax Year, and by or after the start
of each Comparative Year thereafter, Landlord shall furnish to Tenant a
statement of the Real Estate Taxes payable during the Base Tax Year and each
Comparative Year, which statement shall reflect the amount to be paid by the
Tenant pursuant to this paragraph 51. Tenant's obligation to pay the amount
herein provided for shall survive the expiration or earlier termination of this
Lease.
C. The amount due pursuant to the calculation provided for in sub-
paragraph B above shall be due and payable within ten (10) days after Landlord
shall have delivered to Tenant a statement setting forth the amount equal to
the Percentage of the excess and the basis therefor. Bills for such Taxes
shall be sufficient evidence of amount, for the purpose of calculating the
Percentage. In the event Tenant fails to pay its proportionate share when due,
Landlord shall be entitled, with respect thereto, to any and all remedies to
which Landlord may be entitled under this Lease for default in the payment of
rent. The failure of Landlord to bill Tenant for the additional rent due in
any fiscal year shall not prejudice the right of Landlord to subsequently bill
Tenant for such fiscal year or any subsequent fiscal year.
D. (1) Should the Real Estate Taxes payable during the Base Tax Year be
reduced by final determination of legal proceedings, settlement or otherwise,
then, the Real Estate Taxes payable during the Base Tax Year shall be
correspondingly revised, the additional rent theretofore paid or payable
hereunder for all Comparative Years shall be recomputed on the basis of such
reduction, and Tenant shall pay to Landlord as additional rent, within ten (10)
days after being billed therefor, any deficiency between the amount of such
additional rent as theretofore computed and the amount thereof due as the
result of such recomputations. Should the Real Estate Taxes payable during the
Base Tax Year be increased by such final determination of legal proceedings,
settlement or otherwise, then appropriate recomputation and adjustment also
shall be made and the amount due by the Landlord to the Tenant shall be paid
within ten (10) days after the recomputations. Should the Real Estate Taxes paid
during any Comparative Year be increased or decreased by a final determination
of legal proceedings, settlement or otherwise, then an appropriate
recomputation and adjustment shall be made between the Landlord and Tenant and
any amount owed by the Tenant shall be paid within ten (10) days after the
Tenant is billed therefor and be deemed additional rent, and any amount owed by
the Landlord to the Tenant shall be paid within ten (10) days of the
recomputation.
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(2) Tenant shall separately reimburse Landlord upon billing therefor
the Percentage of any legal or consulting fees incurred by Landlord in reducing
Real Estate Taxes for any Comparative Year.
E. Upon the date of any expiration or termination of this Lease (except
termination because of Tenant's default), whether the same be the date herein
above set forth for the expiration of the term or any prior or subsequent date,
a proportionate share of said additional rent for the Comparative Year during
which such expiration or termination occurs shall immediately become due and
payable by Tenant to Landlord, if not theretofore already billed and paid. The
said proportionate share shall be based upon the length of time that this Lease
shall have been in existence during such Comparative Year. Landlord shall, as
soon as reasonably practicable, compute the additional rent due from Tenant, as
aforesaid, which computations shall either be based on that Comparative Year's
actual figures or be an estimate based upon the most recent statements prepared
by Landlord and furnished to Tenant. If an estimate is used, then Landlord
shall cause statements to be prepared on the basis of the Comparative Year's
actual figures as soon as they are available, and within ten (10) days after
such statement or statements are prepared by Landlord and furnished to Tenant,
Landlord and Tenant shall make appropriate adjustments of any estimated
payments theretofore made, which shall survive any expiration or termination of
this Lease.
F. Any delay or failure of Landlord in billing for any additional rent
shall not constitute a waiver of or in any way impair the continuing obligation
of Tenant to pay such additional rent.
G. Notwithstanding any contrary or inconsistent provisions of this
Article 51:
Tenant shall pay to Landlord on the first day of each calendar month
during the term of this Lease an amount (the "Estimated Monthly Tax Payment")
equal to 1/12th of Landlord's estimate (in Landlord's sole discretion) of the
payment which will be due to Landlord from Tenant pursuant to Article 51(B) for
the next Comparative Year. Landlord shall provide such estimate to Tenant
together with the monthly billing of Estimated Monthly Tax Payment during each
calendar year. For example: if Landlord estimates that the amount payable by
Tenant pursuant to Article 51(B) for the Comparative Year 1997 will be $144
then Landlord shall provide Tenant such estimate together with a billing for
Estimated Monthly Tax Payment for each month of the term for the sum of $12;
and the Estimated Monthly Tax Payments shall each be $12 until such estimate is
revised. Notwithstanding the foregoing, after the sum actually payable for the
Comparative Year in question is determined, the Estimated Monthly Tax Payments
made or to be made for all calendar months included within such Comparative
Year shall be equitably adjusted, and any balance due Landlord or Tenant, as
the case may be, shall be paid forthwith.
52. INTENTIONALLY OMITTED
53. LATE PAYMENT CLAUSE:
It is agreed that the rental under this Lease is due and payable in equal
monthly installments in advance on the first day of each month during the
entire lease term. In the event that any monthly installment of rent, or any
other payment required to be made by the Tenant under this Lease shall be
overdue for a period (the "Late Period") of five (5) days, a late charge of
four (4) cents for each dollar so overdue may be charged by the Landlord for
each month, or fraction of each month, from its due date until paid, for the
purpose of defraying the expenses incurred in handling delinquent payments.
Although no late payment penalties shall accrue until the end of the applicable
Late Period, nothing
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contained in this Article 53 or elsewhere in this Lease shall prevent Landlord
from commencing legal proceedings against Tenant for the non-payment of rent or
additional rent if same is not paid upon the first day of each month during the
entire lease term.
54. ATTORNMENT:
A. Tenant agrees that if by reason of default on the part of
Landlord herein, under any ground or underlying lease or any mortgage affecting
Landlord's interest, a ground or underlying lessor or a mortgagee shall enter
into and become possessed of the real property of which the Demised Premises
form a part, or any part or parts of such real property, either through
possession or foreclosure action or proceedings, or through the issuance and
delivery of a new lease of the Premises covered by the ground or underlying
lease to a leasehold mortgagee, then, if this Lease is in full force and effect
at such time, Tenant shall attorn to such lessor or such mortgagee as its
Landlord; and in such event, such lessor or mortgagee shall not be liable to
Tenant for any defaults theretofore committed by Landlord and no such default
shall give rise to any rights of offset or deduction against the rents payable
under this Lease.
B. The provisions for attornment hereinbefore set forth shall not
require the execution of any further instrument. However, if such lessor or
mortgagee to which Tenant agrees to attorn, as aforesaid, reasonably requests a
further instrument expressing such attornment, Tenant agrees to execute the
same promptly and if Tenant fails so to do, Tenant hereby appoints Landlord
Tenant's attorney-in-fact to execute any such instrument for and on behalf of
Tenant.
55. ENTIRE AGREEMENT:
A. This Lease contains the entire agreement between the parties, and
any agreement hereafter made shall not operate to change, modify, or discharge
this Lease in whole or in part unless such agreement is in writing and signed
by the party sought to be charged therewith.
B. Tenant expressly acknowledges and agrees that Landlord and its
agents have not made and are not making, and Tenant, in executing and
delivering this Lease, is not relying upon, any warranties, representations,
promises or statements, except to the extent that the same are expressly set
forth in this Lease or in any other written agreement which may be made between
the parties concurrently with the execution and delivery of this Lease and
shall expressly refer to this Lease.
C. This Lease shall be governed in all respects by the laws Of the State of
New York.
56. SAVING PROVISION:
If any provision of this Lease, or its application to any situation shall
be invalid or unenforceable to any extent, the remainder of this Lease, or the
application thereof to situations other than that as to which it is invalid or
unenforceable, shall be not affected thereby, and every other provision of this
Lease shall be valid and enforceable to the fullest extent permitted by Law.
57. LEASE NOT BINDING UNLESS EXECUTED:
Submission by Landlord of the within Lease for execution by Tenant, shall
confer no rights nor impose any obligations on either party unless and until
both Landlord and Tenant shall have executed this Lease and duplicate originals
thereof shall have been delivered to the respective parties.
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58. ASSIGNMENT AND SUBLETTING, MORTGAGING:
A. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, or mortgage or otherwise encumber, all or
any part of its interest in this Lease, sublet the Demised Premises, in whole
or in part, or suffer or permit the Demised Premises or any part thereof to be
used by others, without the prior written consent of Landlord in each instance.
B. If Tenant shall desire to assign its interest in this Lease or to
sublet the Demised Premises, the Tenant shall submit to Landlord a written
request for Landlord's consent to such assignment or subletting, which request
shall be accompanied by the following information: (i) the name and address of
the proposed assignee or subtenant; (ii) the terms and conditions of the
proposed assignment or subletting; (iii) the nature and character of the
business of the proposed assignee or subtenant and its proposed use of the
Demised Premises; and (iv) current financial information and any other
information Landlord may reasonably request with respect to the proposed
assignee or subtenant. Landlord, by notice given to Tenant within thirty (30)
days after receipt of Tenant's request for consent, may terminate this Lease on
a date to be specified in said notice (the "Termination Date"), which date
shall be not earlier than one (1) day before the effective date of the proposed
assignment or subletting nor later than sixty-one (61) days after said
effective date. Tenant shall vacate and surrender the Demised Premises on or
before the Termination Date and the term of this Lease shall end on the
Termination Date as if it were the Expiration Date.
C. If Landlord shall not exercise its option to terminate this Lease
pursuant to subsection B above, Landlord shall not unreasonably withhold its
consent to the proposed assignment or subletting for the use permitted in this
Lease, provided that:
(1) The Demised Premises shall not, without Landlord's prior
consent, have been listed or otherwise publicly advertised for assignment or
subletting at a rental rate lower than the higher of (a) the Fixed Annual Rent
and all Additional Rent then payable, or (b) the then prevailing rental rate
for other space in the Building;
(2) Tenant shall employ, as exclusive renting agent for subletting
and assignment of this Lease, having the sole and exclusive right to lease,
Landlord's management agent for the Building or such broker as shall be
approved by Landlord;
(3) Tenant shall not then be in default hereunder beyond the
expiration of any applicable grace period;
(4) the proposed assignee or subtenant shall have a financial
standing, be of a character, be engaged in a business, and propose to use the
Demised Premises, in a manner in keeping with the standards of the Building;
(5) the proposed assignee or subtenant shall not then be a tenant,
subtenant or assignee of any space in the Building, nor shall the proposed
assignee or subtenant be a person or entity with whom Landlord is then
negotiating to lease space in the Building;
(6) the character of the business to be conducted in the Demised
Premises by the proposed assignee or subtenant shall not be likely to
substantially increase operating expenses or Building energy costs;
(7) in case of subletting, the subtenant shall be expressly subject
to all of the obligations of Tenant under this Lease and the further condition
and restriction that such sublease
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shall not be assigned, encumbered or otherwise transferred or the Demised
Premises further sublet by the subtenant in whole or in part, or any part
thereof suffered or permitted by the subtenant to be used or occupied by
others, without the prior written consent of Landlord in each instance;
(8) no subletting shall end later than one (1) day before the
Expiration Date nor shall any subletting be for a term of less than two (2)
years unless it commences less than two (2) years before the Expiration Date;
(9) no subletting shall be for less than the entire Demised
Premises;
(10) Tenant shall reimburse Landlord on demand for any costs,
including reasonable attorneys' fees and disbursements, that may be incurred by
Landlord in connection with said assignment or sublease; and
(11) Tenant and its subtenant shall execute and deliver an agreement
in form and substance satisfactory to Landlord in its sole discretion that
provides that upon default by Tenant in the payment of any rent or additional
rent pursuant to this Lease, Subtenant shall, at Landlord's option, pay any
rent and additional rent due under the sublease to Landlord, who shall offset
same against Tenant's obligation herein, and any amount so paid shall be offset
by Tenant as sublandlord against the obligations of the subtenant to Tenant.
(12) Notwithstanding any contrary or inconsistent provisions of this
Lease, in no event shall any sublessee or assignee of all or any portion of the
Demised Premises pursuant to this Lease utilize any portion of the Demised
Premises for any (a) telemarketing operation, (b) use by any government agency,
bureau or department, (c) guard service, (d) messenger or delivery service, (e)
immigration service, (f) school, (g) clinic, (h) medical use of any kind, (i)
hospital, (j) social service organization or (k) personnel or employment
agency.
If there is a dispute between Landlord and Tenant as to the
reasonableness of Landlord's refusal to consent to any subletting or
assignment, such dispute shall be determined by arbitration in the City of New
York in accordance with the prevailing rules of the American Arbitration
Association. The arbitrators shall be bound by the provisions of this Lease
and shall not add to, subtract from, or otherwise modify such provisions.
Notwithstanding any contrary provisions hereof, Tenant hereby waives any claim
against Landlord for money damages which it may have based upon any assertion
that Landlord has unreasonably withheld or unreasonably delayed any consent to
any assignment or a subletting pursuant to this Article. Tenant agrees that its
sole remedy shall be an action or proceeding to enforce such provision or for
specific performance.
D. Every subletting hereunder is subject to the express condition, and
by accepting a sublease hereunder each subtenant shall be conclusively deemed
to have agreed, that if this Lease should be terminated prior to the Expiration
Date or if Landlord should succeed to any portion of Tenant's estate in the
Demised Premises, then at Landlord's election such subtenant shall either
surrender that portion of the Demised Premises to Landlord within sixty (60)
days of Landlord's request therefor, or shall attorn to and recognize Landlord
as such subtenant's landlord under such sublease, and such subtenant shall
promptly execute and deliver any instrument Landlord may reasonably request to
evidence such attornment.
E. Tenant shall deliver to Landlord a copy of each sublease or
assignment made hereunder within ten (10) days after the date of its execution.
Tenant shall remain fully liable for the
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performance of all of Tenant's obligations hereunder notwithstanding any
subletting or assignment provided for herein and, without limiting the
generality of the foregoing, shall remain fully responsible and liable to
Landlord for all acts and omissions of any subtenant, assignee or anyone
claiming by, through or under any subtenant or assignee which shall be in
violation of any of the obligations of this Lease, and any such violation shall
be deemed to be a violation by Tenant. Notwithstanding any assignment and
assumption by the assignee of the obligations of Tenant hereunder, Tenant
herein named, and each immediate or remote successor in interest of Tenant
herein named, shall remain liable jointly and severally (as a primary obligor)
with its assignee and all subsequent assignees for the performance of Tenant's
obligations hereunder, and shall remain fully and directly responsible and
liable to Landlord for all acts and omissions on the part of any assignee
subsequent to it in violation of any of the obligations of this Lease.
F. Notwithstanding anything to the contrary contained in this Lease, no
assignment of Tenant's interest in this Lease shall be binding upon Landlord
unless the assignee, and, if the assignee is a partnership, the individual
partners thereof, shall execute and deliver to Landlord an agreement, in
recordable form, whereby such assignee agrees unconditionally to be personally
bound by and to perform all of the obligations of Tenant hereunder and further
expressly agrees that notwithstanding such assignment the provisions of this
Article shall continue to be binding upon such assignee with respect to all
future assignments and transfers.
G. If Landlord shall have consented to any assignment or subletting, or
if there is any transfer of this Lease by operation of law or otherwise, and if
Tenant shall receive any consideration from Its assignee or subtenant for or in
connection with the assignment of Tenant's interest in this Lease or the
subletting of the Demised Premises, as the case may be (including, but not
limited to, sums paid for the sale or rental of Tenant's fixtures, leasehold
improvements, equipment, furniture or other personal property less, in the case
of a sale thereof, the then net unamortized or undepreciated cost thereof
determined on the basis of Tenant's federal income tax returns) or, if Tenant
shall sublet the Demised Premises at a rental rate (including additional rent)
which shall exceed the Fixed Annual Rent and Additional Rent hereunder, Tenant
shall pay to Landlord, as additional rent the full amount of such excess.
*H. Any transfer, by operation of law or otherwise, of the interest of
Tenant in this Lease (in whole or in part) or of a fifty percent (50%) or
greater interest in Tenant (whether stock, partnership interest or otherwise)
shall be deemed an assignment of this Lease within the meaning of this Article.
(The issuance of shares of such stock to other than the shareholders of Tenant
existing as of the date of this Lease shall be deemed to be a transfer of such
stock for the purposes of this Article) . If there has been a previous transfer
of less than fifty percent (50%) interest in Tenant, any other transfer of an
interest in Tenant shall be deemed an assignment of the interest of Tenant in
this Lease within the meaning of this Article. Anything contained herein to
the contrary notwithstanding, the provisions of this section H shall not apply
to the sale of shares by persons other than those deemed "insiders" within the
meaning of the Securities Exchange Act of 1934, as amended, where such sale is
effected through any recognized exchange or through the "over-the-counter
market", unless the same be related to, result in or be the result of any
merger, consolidation, tender offer, takeover or other activity involving the
acquisition of control of Tenant by another unrelated corporation or legal
entity. All references to "Tenant" in this section H shall also be deemed to
refer to any immediate or remote subtenant or assignee of Tenant.
* This provision shall not apply to any initial public offering of Tenant's
Capital Stock or with respect to any transfer of Tenant's stock on any
recognized securities exchange shall not be deemed an assignment under this
lease.
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I. In the event that Tenant fails to execute and deliver any assignment
or sublease to which Landlord consented under the provisions of this Article
within forty-five (45) days after the giving of such consent, then Tenant shall
again comply with all of the provisions of this Article before assigning its
interest in this Lease or subletting the Demised Premises.
J. The consent of Landlord to an assignment or a subletting shall
not relieve Tenant from obtaining the express consent in writing of Landlord to
any further assignment or subletting.
K. If Tenant's interest in the Lease be assigned, or if the Demised
Premises or any part hereof be sublet or occupied by anyone other than Tenant,
Landlord may collect rent from the assignee, subtenant or occupant and apply
the net amount collected to the Fixed Annual Rent and all Additional Rent
herein reserved, but no such assignment, subletting, occupancy or collection
shall be deemed a waiver of the provisions of this Article or of any default
hereunder or the acceptance of the assignee, subtenant or occupant as Tenant,
or a release of all of the covenants, conditions, terms and provisions on the
part of Tenant to be performed or observed.
59. TENANT'S CERTIFICATE:
Tenant shall, without charge, at any time and from time to time within
ten (10) days after request by Landlord certify by written instrument, duly
executed, acknowledged and delivered, to any mortgagee, assignee or purchaser,
or any proposed mortgagee, assignee of any mortgage or purchaser, or any other
person, firm or corporation specified by Landlord.
(a) That this Lease is unmodified and in full force and effect (or, if
there has been modification, that the same is in full force and
effect as modified and stating the modification);
(b) whether or not to the Tenant's knowledge there are any existing
claims against the Landlord or any defenses, which would prohibit or
prevent the Landlord from enforcing the provisions of the Lease; and
(c) the dates, if any, to which the rental and other charges hereunder
have been paid in advance.
60. LANDLORD'S MANAGING AGENT:
Tenant agrees that all of the representations, warranties, waivers and
indemnities made in this Lease by Tenant for the benefit of the Landlord shall
inure to the benefit of the Landlord's managing agent, its officers, directors,
employees and independent contractors.
61. LANDLORD'S COSTS BY TENANT'S DEFAULTS:
If Landlord, as a result of a default by Tenant of any of the provisions
of this Lease, including the covenants to pay rent and/or additional rent,
makes any expenditure or incurs any obligations for the payment of money,
including but not limited to attorney's fees, in instituting, prosecuting or
defending any action or proceeding, such sums so paid or obligations so
incurred with interest and costs shall be deemed to be additional rent
hereunder and shall be paid by Tenant to Landlord within five (5) days of
rendition of any bill or statement to Tenant therefore, and if any expenditure
is incurred in collecting such obligations, such sum shall be recoverable by
Landlord as additional damages.
62. SPECIAL SERVICES:
Upon Tenant's request, Landlord or its managing agent may, but, except as
otherwise expressly provided in this Lease, shall
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not be obligated to, perform or cause to be performed for Tenant from time to
time various construction, repair and maintenance work, moving services and
other -types of work or services In or about the Demised Premises and the
building. If such work or services shall be performed for Tenant, Tenant
agrees to pay therefor, at Landlord's option, either the standard charges of
Landlord or its managing agent in effect from time to time, if any, or the
amount agreed to be paid for such services. Tenant agrees to pay all such
charges within ten (10) days after Landlord or Landlord's managing agent has
submitted a bill therefor and, unless otherwise expressly provided in writing,
such charges shall be payable as additional rental under this Lease and in the
event of a default hereunder Landlord shall have the same remedies that
Landlord would have in the event of default in the payment of annual rental.
63. MODIFICATION FOR MORTGAGE:
If, in connection with obtaining financing or refinancing for the
Building of which the Demised Premises form a part, a banking, insurance or
other institutional 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, perhaps, to the
extent that Tenant may be required to give notices of any defaults by Landlord
to such lender and/or permit the curing of such default by such lender 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 adversely affect the
leasehold interest hereby created.
64. CLEANING & RUBBISH REMOVAL:
Tenant, at its expense, and in a manner satisfactory to Landlord, shall
cause the Demised Premises thereof to be kept clean. Tenant shall utilize for
such cleaning only persons as designated by Landlord (in Landlord's sole
discretion). Landlord hereby designates First Quality Maintenance Ltd. as its
designated cleaning contractor. The cleaning of the Demised Premises shall
include but is not limited to all waxing, polishing, lamp replacement, cleaning
and maintenance work. Tenant shall, at Tenant's expense, remove all Tenant's
rubbish and trash to such area of the Building and at such time as Landlord
shall designate, and Tenant shall at Tenant's expense employ the carting
company designated by Landlord to dispose of such trash or rubbish.
65. EXTERMINATION:
Tenant, at its sole cost and expense, shall maintain such extermination
services as are necessary to keep the Demised Premises free of pests and vermin
at all times. Tenant shall utilize for such extermination services only
contractors designated by Landlord in Landlord's sole discretion.
66. ODORS:
A. Tenant shall not permit any unusual or obnoxious odors to emanate
from the Demised Premises. Tenant will, within five (5) days after written
notice from Landlord, install at its own cost and expense, reasonable control
devices or procedures to eliminate such odors, if any. In the event such
condition is not remedied@ within said five-day period, Landlord may, at its
discretion, either (a) cure such condition and thereafter add the cost and
expense incurred by Landlord therefor to the next monthly rental to become due
and Tenant shall pay. said amount as additional rent; or (b) treat such failure
on the part of Tenant to eliminate such obnoxious odors as a material default
hereunder entitling Landlord to any of its remedies pursuant to the terms of
this Lease. Landlord shall have the right to enter the Demised Premises at any
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time to inspect the same and ascertain whether they are clean and free of odors.
B. Tenant covenants that it will hold Landlord harmless against all
claims, damages or causes of action for damages arising after the commencement
of the term of this Lease and will indemnify Landlord for all such suits,
orders or decrees and permeation from the Demised Premises of unusual or
objectionable odors, and Tenant shall further covenant to pay any attorney's
fees or other legal expenses made necessary in connection with any claim or
suit as aforesaid.
C. In the event Landlord requires Tenant to install reasonable control
devices or procedures to eliminate such odors, the material, size and location
of such installations shall be subject to Landlord's prior written approval.
Such work shall not be commenced until plan and specifications therefor have
been submitted to and approved by Landlord.
67. FLOOR LOADS:
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. Tenant agrees to position all machines safes,
business machines, printing equipment or other mechanical equipment in such
locations as to minimize noise and vibration emanating therefrom. All of such
installations shall be placed and maintained by Tenant, at Tenant's sole
expense, in setting sufficient, in landlord's sole judgment, to absorb and
prevent vibration, noise and annoyance to other Tenants in Landlord's building.
All of such machines and/or equipment installed by Tenant in the Demised
Premises will not at any time be in violation of existing laws affecting the
Demised Premises or in violation of the Certificate of Occupancy issued for the
building of which the Demised Premises are a part.
68. AIR CONDITIONING & VENTILATION:
A. Tenant shall be permitted the use of and to operate the air
conditioning equipment, if any, serving the Demised Premises (the "Air
Conditioning Unit"). Tenant acknowledges and agrees that the Air Conditioning
Unit is Landlord's property, however, Tenant shall, nevertheless, keep,
maintain, repair, restore and replace the Air Conditioning Unit and all of the
ducts, dampers, registers, grilles and appurtenances utilized in connection
therewith; and, in addition, Tenant shall at all times during the term hereof
contract for and maintain regular service of said Air Conditioning unit and
related equipment with a recognized maintenance company and shall forward to
Landlord duplicate executed original copies of such contract and all renewals
and modifications thereof. Said contract shall include the thorough
overhauling of the system at least once each year and shall be kept in full
force and effect during the term of this Lease by Tenant. If Tenant fails to
make such repairs, restoration or replacement to, and maintain, such Air
Conditioning Unit and related equipment; or if Tenant fails to obtain or keep
the aforesaid service contract in force and effect, the same may be made,
performed, obtained or maintained by Landlord at the expense of Tenant and
such expense shall be collectible as additional rent and shall be paid by
Tenant within fifteen (15) days after rendition of a bill therefor. Any
restoration or replacement of all or any part of the Air Conditioning Unit and
related equipment shall be in quality and class equal to the original work of
installations.
B. Use of the Demised Premises, or any part thereof, to a manner
exceeding the design conditions thereof (including occupancy and connected
electrical load) for heating and/or air conditioning service in the Demised
Premises, or rearrangement of partitioning
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which interferes with normal heating and/or air conditioning service in the
Demised Premises, or the use of computer or data processing machines, may
require changes in the systems servicing the Demised Premises. Such changes so
occasioned, shall be made by Tenant, at Tenant's expense. Tenant agrees to
lower and keep closed the venetian blinds or other window coverings in the
Demised Premises whenever required for the proper operation of the air
conditioning service. No supplemental heating, ventilating or air conditioning
equipment shall be installed or utilized by Tenant in the Demised Premises
without Landlord's prior consent.
C. No diminution or claim of constructive eviction shall or will be
claimed by Tenant by reason of any interruption, curtailment or suspension of
the air conditioning system.
69. GOVERNMENTAL REGULATIONS:
If, at any time during the term of this lease, Landlord expends any sums
for alterations or improvements to the building which are required to be made
pursuant to any law, ordinance or governmental regulation, or any portion of
such law, ordinance or governmental regulation, which becomes effective after
the date hereof, Tenant shall pay to Landlord, as additional rent, the same
percentage of such cost as is set forth in the provision of this lease which
required Tenant to pay increases in Real Estate Taxes, within ten (10) days
after demand therefor. if, however, the cost of such alteration or improvement
is one which is required to be amortized over a period of time pursuant to
applicable governmental regulations, Tenant shall pay to Landlord, as
additional rent, during each year in which occurs any part of the lease term,
the above-stated percentage of the reasonable annual amortization of the cost
of the alteration or improvement made. For the purposes of this Article, the
cost of any alteration or improvement made shall be deemed to include the cost
of preparing any necessary plans and the fees for filing such plans.
70. CONDITIONAL LIMITATION:
A. If Tenant shall default in the payment of the rent reserved herein,
or any item of additional rent herein mentioned, or any part of either during
any two months, whether or not consecutive, in any twelve (12) month period,
and (i) such default continued for more than five (5) days after written notice
of such default by Landlord to Tenant, and (ii) Landlord, after the expiration
of such five (5) day grace period, served upon Tenant petitions and notices of
petition to dispossess Tenant by summary proceedings in each such instance,
then, notwithstanding that such defaults may have been cured prior to the entry
of a judgment against Tenant, any further default in the payment of any money
due Landlord hereunder which shall continue for more than five (5) days after
Landlord shall give a written notice of such default shall be deemed to be
deliberate and Landlord may thereafter serve a written three (3) days' notice
of cancellation of this Lease and the term hereunder shall end and expire as
fully and completely as if the expiration of such three (3) 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
Landlord, but Tenant shall remain liable as elsewhere provided in this Lease.
B. In addition , if Tenant shall have defaulted in the performance of the
same or a substantially similar covenant hereunder, other than a covenant for
the payment of rent or additional rent, twice during any consecutive twelve
(12) month period and Landlord, in each case, shall have given a default notice
in respect of such default, then, regardless of whether Tenant shall have cured
such defaults within any applicable grace period, if Tenant shall again default
in respect of the same or a substantially similar covenant hereunder within a
twelve (12) month period after Landlord gave the second such default notice,
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Landlord, at its option, and without further notice to Tenant or opportunity
for Tenant to cure such default, may elect to cancel this Lease by serving a
written three (3) days' notice of cancellation of this Lease and the term
hereunder shall end and expire as fully and completely as if the expiration of
such three (3) day period were the day herein definitely fixed for the end and
expiration of this Lease and the term hereof, and Tenant shall then quit and
surrender the Demised Premises to Landlord, but Tenant shall remain liable as
elsewhere provided in this Lease.
71. HOLD-OVER:
If Tenant holds over in possession after the expiration or sooner
termination of the original term or of any extended term of this Lease, such
holding over shall not be deemed to extend the term or renew the Lease, but
such holding over thereafter shall continue upon the covenants and conditions
herein set forth except that the charge for use and occupancy of such holding
over for each calendar month or part thereof (even if such part shall be a
small fraction of a calendar month) shall be the sum of:
(a) 1/12 of the highest annual rent rate set forth on page one of this
Lease, times 2.5, plus
(b) 1/12 of the net increase, if any, in annual fixed rental due solely
to increases in the cost of the value of electric service furnished
to the premises in effect on the last day of the term of the Lease,
plus
(c) 1/12 of all other items of annual additional rental, which annual
additional rental would have been payable pursuant to this Lease had
this lease not expired, plus
(d) those other items of additional rent (not annual additional rent)
which would have been payable monthly pursuant to this Lease, had
this lease not expired,
which total sum Tenant agrees to pay to Landlord promptly upon demand, in full,
without set-off or deduction. Neither the billing nor the collection of use
and occupancy in the above amount shall be deemed a waiver of any right of
Landlord to collect damages for Tenant's failure to vacate the Demised Premises
after the expiration or sooner termination of this Lease. The aforesaid
provisions of this Article shall survive the expiration or sooner termination
of this Lease.
72. LIMITATION ON RENT:
If at the commencement of, or at any time during the term of this Lease,
the rent reserved in this Lease is not fully collectible by reason of any
Federal, State, County or City law, proclamation, order or regulation, or
direction of a public officer or body pursuant to law, Tenant agrees to take
such steps as Landlord may request to permit Landlord to collect the maximum
rents which may be legally permissible from time to time during the continuance
of such legal rent restriction (but not in excess of the amounts reserved
therefor under this Lease). Upon the termination of such legal rent
restriction, Tenant shall pay to Landlord, to the extent permitted by law, an
amount equal to (a) the restriction less (b) the rents paid by Tenant to
Landlord during the period such legal rent restriction was in effect.
73. BUILDING DIRECTORY:
At the written request of Tenant, Landlord shall list on the building's
directory the name of Tenant, any trade name under which Tenant has the right
to operate, any other entity permitted to occupy any portion of the Demised
Premises under the terms of this Lease, up to a maximum of three (3) listings
without charge to the Tenant. If requested by Tenant, Landlord may (but shall
not be
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required to) list the name of Tenant's subsidiaries and affiliates; however,
the listing of any name other than that of Tenant shall neither grant such
party or entity any right or interest in this lease or in the Demised Premises
nor constitute Landlord's consent to any assignment or sublease to, or
occupancy of the Demised Premises by, such party or entity. Except for the
name of Tenant, any such listing may be terminated by Landlord, at any time,
without notice.
74. ADDITIONAL RENT:
All payments other than the annual rental to be made by Tenant pursuant
to this Lease shall be deemed additional rent and, in the event of any
nonpayment thereof, Landlord shall have all rights and remedies provided for
herein or by law for nonpayment of rent. Tenant shall have fifteen (15) days
from its receipt of any additional rent statement to notify Landlord, by
certified mail, return receipt requested, that it disputes the correctness of
such statement. After the expiration of such fifteen (15) day period, such
statement shall be binding and conclusive upon Tenant. If Tenant disputes the
correctness of any such statement, Tenant shall, as a condition precedent to
its right to contest such correctness, make payment of the additional rent
billed, without prejudice to its position. If such dispute is finally
determined in Tenant's favor, Landlord shall refund to Tenant the amount
overpaid.
75. INTENTIONALLY OMITTED
76. SIGNAGE:
The Tenant shall not, without the prior written consent of the Landlord,
install nor continue the use of any signs on the windows of the Demised
Premises or on the door or in the hallways on the floor on which the Demised
Premises are located. The Tenant shall submit to the Landlord a rendering of
any new proposed sign which shall be uniform to those in the building. If the
Landlord gives its consent to a sign as provided for in this paragraph the
Tenant, at the Tenant's own cost and expense, shall keep such sign in good and
working condition. In addition, the Tenant shall pay, at its own cost and
expense, the Landlord's cost of the sign and its installation, plus a 15%
administrative charge.
77. MECHANIC'S LIEN:
A. Notice is hereby given that the Landlord shall not, under any
circumstances, be liable to pay for any work, labor or services rendered or
materials furnished to or for the account of the Tenant upon or in connection
with the Demised Premises, and that no mechanic's or other liens for work,
labor or services rendered or materials furnished to or for the account of the
Tenant shall, under any circumstances, attach to or affect the reversionary or
other estate or interest of the Landlord in or to the Demised Premises or in
and to any alterations, repairs or improvements to be erected or made thereon.
B. The Tenant shall not suffer nor permit, during the term hereby
granted, any mechanic's or other liens for work, labor, services or materials
rendered or furnished to or for the account of the Tenant upon or in connection
with the Demised Premises or to any improvements erected or to be erected upon
the same, or any portion thereof; and it is understood that Tenant shall obtain
and deliver unconditional written waivers of mechanic's liens as specifically
set forth in Article 3 of the printed form hereof. Nevertheless, Tenant shall
hold the Landlord and the Demised Premises harmless from all liens or charges,
of whatever nature or description, arising from, or in consequence of, any
alterations or improvements that the Tenant shall make, or cause to be made,
upon the Demised Premises.
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C. If a notice of mechanic's lien be filed against the Demised Premises
for labor or materials alleged to have been furnished, or to be furnished at
the Demised Premises to or for the Tenant or to or for someone claiming under
the Tenant; and if the Tenant shall fail to take such action as shall cause
such lien to be discharged within five (5) business days after the filing of
such notice; the Landlord may pay the amount of such lien or discharge it by
deposit or by bonding proceeding, and in the event of such deposit or bonding
proceedings, the Landlord may require the lienor to prosecute an appropriate
action to enforce the lienor's claim. In such case, the Landlord may pay any
judgment recovered on such claim. Any amount paid or expense incurred by the
Landlord, as in the clause provided, and any expense incurred or sum of money
paid by the Landlord by reason of the failure of the Tenant to comply with any
provision of this Lease, or in defending any such action, shall be deemed to be
additional rent for the Demised Premises, and shall be due and payable by the
Tenant to the Landlord on the first day of the next following month or at the
option of the Landlord, on the first day of any succeeding month. The receipt
by the Landlord of any installment of the regular stipulated rent hereunder or
any of such additional rent shall not be a waiver of any other additional rent
then due.
78. TENANT'S LIABILITY FOR CONSTRUCTION:
A. That in the event the Tenant performs any construction or
alterations at the Demised Premises, Landlord shall not be responsible for any
structural defect, latent or otherwise, in the premises, any equipment therein,
or for the removal of asbestos or change of conditions elsewhere in the
building or in the premises resulting from Tenant's construction or alteration,
or for any damages to same or to goods or things contained or placed thereon or
in the vicinity thereof.
B. Tenant will indemnify and save Landlord harmless from and against
any and all liabilities, obligations, damages, penalties, claims, costs, charges
and expenses including reasonable attorney's fees, which may be imposed upon
or incurred by or asserted against Landlord by reason of any of the following
occurring during the terms of this Lease:
(i) any work or thing done by Tenant or any agent, contractor,
employee, licensee or invitee of Tenant in, on or about the Demised Premises or
any part thereof;
(ii) any use, non-use, possession, occupation, condition, operation,
maintenance or management by Tenant of the Demised Premises;
(iii) all fines, suits, proceedings, claims, demands and actions
of any kind or nature whatsoever brought by anyone whomsoever arising or
growing out of or in any wise connection with the Tenant's use, operation and
maintenance of the Demised Premises;
(iv) any accident, injury, or damage to any person or property
occurring in the Demised Premises or any part thereof;
(v) any failure on the part of Tenant to perform or comply with any
of the agreements, terms, or conditions contained in this Lease on its part to
be performed or complied with. In the event that any action or proceeding
shall be brought by Landlord by reason of any claim covered by this paragraph,
Tenant, upon written notice from Landlord, will at Tenant's sole cost and
expense resist or defend the same; and
(vi) Tenant has been advised that Landlord makes no representation
as to the load bearing capacity of the structure.
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79. TENANT'S WORK:
Prior to the Tenant commencing any work respecting any alteration or
improvement at the Demised Premises, Tenant shall satisfy each and every
conditions set forth below.
(1) Tenant shall, at its sole cost and expense, supply Landlord with
professionally prepared plans and specifications. Landlord hereby reserves the
right to require certain revisions of such plans and specifications respecting
the design and/or cosmetic features reflected therein, but further agrees not
to unreasonably delay or withhold its consent for Tenant to be able to proceed
with the anticipated work reflected on said plans and specifications.
(2) Subsequent to the delivery and approval by Landlord of Tenant's
plans and specifications, Tenant shall employ its own contractor in connection
with the construction to be performed at the Demised Premises in accordance
with those approved plans and specifications. Tenant agrees that all work to
be performed shall be done in accordance with good and sound building standards
and shall be further performed in a professional workmanlike manner. All of
the Tenant's work shall be done in accordance with all governmental
regulations, with the Tenant being responsible at its own cost and expense for
obtaining permits and approvals, including asbestos inspection and removal, if
necessary, as well as sign-offs and compliance with the other provisions of
this Lease. Furthermore, Tenant agrees that all work to be performed by any of
the trades employed shall in no way affect work being performed at the building
by Landlord, or any other tenant, subtenant or occupant of the Building Project
(collectively, "Landlord's Authorized Entities"), or any of the unions of which
any of Landlord's Authorized Entities' contractors' employees may be members.
(3) Tenant shall provide Landlord with a payment and completion bond
covering any work to be performed by Tenant which runs in favor of Landlord,
and shall further issue to Landlord a hold harmless and indemnification
agreement relative to such proposed work.
(4) Tenant shall provide insurance coverage in amounts satisfactory to
Landlord and satisfactory to Landlord's lender which shall protect Landlord's
interest during the course of construction and, in addition thereto, Tenant
shall provide Landlord with a Certificate of Insurance reflecting such
coverage, and the naming of Landlord and Landlord's lender as additional
insureds.
In the event Tenant shall violate any of the above provisions, same shall
be considered a material breach under this Lease and Landlord shall be entitled
to immediately avail itself of all legal remedies that it is entitled to with
respect to such breach.
80. INTENTIONALLY OMITTED
81. OPTION TO CANCEL:
Landlord shall have the right to cancel this Lease effective as of any date
after July 31, 1997 by written notice given to Tenant no later than one hundred
eighty (180) days prior to said effective date.
82. INTENTIONALLY OMITTED
83. USE AND OCCUPANCY:
Tenant shall use and occupy the Demised Premises in a high-class manner in
accordance with Article 2 hereof.
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Tenant agrees that Landlord shall have the right to prohibit the continued
use by Tenant of any method of business operation, advertising or displays if,
in Landlord's opinion, the continued use thereof would impair the reputation of
the building in which the Demised Premises are located, or is otherwise out of
harmony with the general character thereof, and upon notice from Landlord,
Tenant shall forthwith refrain from or discontinue such activities. The
parties agree that any breach by Tenant of the provisions of this Article shall
constitute a material breach of this Lease on the part of the Tenant hereunder
which if not cured within three (3) days after notice from Landlord, shall, in
addition to all other rights and/or remedies available to Landlord under this
Lease or in law or in equity, constitute an event of default as defined in
Article 17 of this Lease.
84. SPECIAL PROVISIONS RE COURT ORDER:
The term of this lease shall be deemed to expire at the end of the fifth
(5th) year thereof unless an order of the Supreme Court of the State of New
York, the United States District Court, Southern District of New York, or other
applicable court is entered authorizing the Landlord to enter into a lease for
the entire term as set forth on page one of the printed form hereof.
85. MISCELLANEOUS PROVISIONS:
A. Prior to Tenant or any subtenant of Tenant moving out of the
Building, Tenant or such subtenant shall pay to Landlord a sum of money equal
to Landlord's estimate of costs which Landlord will incur in connection with
such move-out including, without limitation, payroll costs for freight
elevators operators and other building personnel. No move-out shall be
effected prior to such payment.
B. Tenant shall not permit any animals to be brought into any portion of
the Demised Premises or the building of which same form a part by Tenant or any
employee, servant, contractor or invitee of Tenant.
86. ADDITIONAL DEFAULT REMEDIES:
It is hereby agreed that in the event of the termination of this Lease
pursuant to the provisions of Article 17, notwithstanding the provisions of
Article 18, that Landlord shall, at Landlord's option, forthwith be entitled to
recover from Tenant as and for liquidated damages with respect to any such
lease termination, an amount equal to the rent reserved hereunder for the
unexpired portion of the term demised. In the computation of such damages, all
rent payable hereunder after the date of termination, shall be discounted from
the date installments of rent would be due hereunder if this lease had not been
terminated to the date of payment at the rate of four (4%) percent per annum.
In the event that the premises demised hereunder are relet after the date of
such termination and the date of the collection of the aforesaid liquidated
damages, then Landlord agrees that on the date (the "Normal Expiration Date")
which would otherwise have been the normal expiration of this lease but for the
termination of this lease pursuant to the provisions of Article 17, Landlord
shall pay to Tenant a sum equal to the fixed annual rent actually paid Landlord
(exclusive of any escalation payments, tax payments, fuel payments, operating
costs payments, percentage payments and the like whether denominated as rent or
otherwise) from the date of such termination to the Normal Expiration Date,
less any and all expenses of any type, kind or nature incurred by Landlord in
connection with the reletting of the Demised Premises whether foreseen or
unforeseen and whether ordinary or extraordinary as conclusively determined by
Landlord, provided, however, that such payment shall in no event exceed the
amount of liquidated damages actually paid by Tenant as aforesaid. The
foregoing, however, shall not imply any obligation upon Landlord to relet the
premises
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demised hereunder in the event of any termination pursuant to the provisions of
Article 17, nor shall it constitute Landlord as Tenant's agent with respect to
any reletting of such premises demised hereunder. Nothing herein contained
shall, however, limit or prejudice the right of Landlord to prove for and
obtain as liquidated damages by reason of any 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 than, equal to, or less than the amount
referred to above.
87. REPLACEMENT SPACE:
Tenant covenants and agrees that Landlord shall have the absolute and
unqualified right, upon notice to Tenant to designate as a replacement for the
Demised Premises that part of any floor in the Building that approximately
corresponds and is reasonably comparable to the Demised Premises. Such notice
shall specify and designate the space to be a replacement for the Demised
Premises. Notwithstanding such replacement, this Lease and all the terms,
provisions, covenants and conditions contained in the Lease shall remain and
continue in full force and effect, except that the Demised Premises shall be
and be deemed to be such replacement space (hereinafter called "Replacement
Space"), with the same force and effect as if the Replacement Space were
specified in this agreement as the Demised Premises.
In the event of the replacement of space as provided in above,
(1) if the Replacement Space has a rentable area less than the
rentable area of the Demised Premises, the annual fixed rent per Article 50 and
the tax escalation percentage per Article 51 from the date that Tenant takes
possession of the Replacement Space shall be decreased pro rata to reflect the
lesser number of rentable square feet in the Replacement Space;
(2) Landlord shall, at Landlord's expenses, prepare the Replacement
Space in substantially the same manner as the Demised Replacement and Tenant
shall have the right to remove any floor covering, wall covering, cabinet work,
and any other decoration in the Demised Premises to the Replacement Space, as
well as telephone lines and any other communication lines to the Replacement
Space;
(3) as soon as Landlord has completed preparing the Replacement
Space as set forth above, Tenant upon five (5) days prior written notice shall
move to the Replacement Space at Landlord's expense, and upon failure of Tenant
to so move to the Replacement Space, Landlord may, as Tenant's agent, remove
Tenant from the Demised Premises to the Replacement Space. Failure of Tenant
to move to the Replacement Space pursuant to this Article 87 shall be deemed a
substantial breach of this Lease; and
(4) upon request from Landlord, Tenant shall supply Landlord with
satisfactory proof of out of pocket expenses reasonably incurred by Tenant in
moving from the Substitute Premises to the Replacement Space, and Landlord
shall, within thirty (30) days of receipt thereof, reimburse Tenant, by way of
a credit or otherwise, for such expenses.
Following such replacement of space Landlord and Tenant shall, promptly at
the request of either party, execute and deliver an agreement setting forth
such substitution of space and the change (if any) in the annual fixed rent,
and rentable area in the appropriate places in this Lease.
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Exhibit 10.5
STANDARD FORM OF LOFT LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
Agreement of Lease, made as of this 4th day of May 1995, between MILLINERY
SYNDICATE, INC., a New York corporation, having an office at 575 Madison
Avenue, New York, NY 10022 party of the first part hereinafter referred to as
OWNER, and MERYKA, INC., a New York corporation, having an office at 201 Allen
Street, New York, NY 10002 party of the second part, hereinafter referred to as
TENANT,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner
ROOMS 507-508 ON THE FIRTH FLOOR, AS PER PLAN ATTACHED HERETO
in the building known as 55 West 39th Street in the Borough of MANHATTAN,
City of New York, for the term of FIVE (5) YEARS, TWO (2) MONTHS in the
Borough of MANHATTAN, City of New York, for the term of FIVE (5) YEARS,
TWO (2) MONTHS (or until such term shall sooner cease and expire as
hereinafter provided) to commence on the 1st day of JUNE nineteen hundred
and NINETY-FIVE, and to end on the 31st day of JULY TWO THOUSAND and both dates
inclusive, at an annual rental rate of $17,500.00
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(s) 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 as hereinafter
provided.
OCCUPANCY: 2. Tenant shall use and occupy demised premises for
administrative and executive offices
PAYROLL FACTOR: No on premises check cashing services permitted to the General
Public.
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, 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, whether structural or non-structural in
nature, caused by or resulting from the carelessness, omission, neglect or
improper conduct of Tenant, Tenant's servants, employees, invitees, or
licensees, and whether or not arising from such Tenant conduct or omission,
when required by other provisions of this lease, including Article 6. 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 form Owner, Tenant 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 5. Tenant will not clean nor require, permit, suffer or allow
CLEANING: 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 6. Prior to the commencement of the lease term, if Tenant is
OF LAW, then in possession, and at all times thereafter Tenant shall,
FIRE at Tenant's sole cost and expense, promptly comply with all
INSURANCE: 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 not do or
<PAGE> 2
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, its agents, servants or
employees; Owner or its agent 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 to be liable for any damage Tenant may sustain thereby and Tenant
shall not be entitled to any compensation therefore 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 attorneys 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, 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 reason 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 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 to 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
releasor's 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 benefitting 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 waivers 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 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:
12. Rates and conditions in respect to submetering or rent inclusion, as
the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time
of the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
ACCESS TO PREMISES:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to any portion of the building or which Owner may elect to perform in
the premises 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 premises 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> 3
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 obligation hereunder.
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 nor any person claiming through or
under Tenant, or by reason of any statute or order of court, shall thereafter
be entitled to possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 16 shall be applicable only to the party
then owning Tenant's interest in this 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 re-letting shall be deemed to be the fair and reasonable
rental value for the part or the whole of the premises so re-let during the
term of the re-letting. Nothing herein contained shall limit or prejudice the
right of the Owner to prove for and obtain as liquidated damages by reason of
such termination, an amount equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the proceedings in which,
such damages are to be proved, whether or not such amount be greater, equal to,
or less than the amount of the difference referred to above.
DEFAULT:
17. (l) 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 rent due and payable hereunder or failed to move into or take
possession of the premises within thirty (30) days after the commencement of
the 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) day period, and shall
not thereafter with reasonable diligence and in good faith, proceed to remedy
or cure such default, then Owner may serve a written five (5) days' notice of
cancellation of this lease upon Tenant, and upon the expiration of said five
<PAGE> 4
(5) days this lease and the term thereunder shall end and expire as fully and
as 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 otherwise, (a) the rent, and additional rent, shall
become due thereupon and be paid upon 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 representatives of Tenant shall also pay Owner as
liquidated damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between the rent hereby
reserved and or 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 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 therefor to
change the arrangement and or location of public entrances, passageways,
doors, doorways, corridors, elevators, stairs, toilets or other public parts
of the building and to change the name, number or designation by which the
building may be known. 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> 5
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 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 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,
<PAGE> 6
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, or
other Force Majeure Event.
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. If
the building or the demised premises or any part thereof is supplied with water
through a meter through which water is also supplied to other premises Tenant
shall pay to Owner, as additional rent, on the first day of each month, _____%
($ NONE) of the total meter charges as Tenant's portion. Independently of and
in addition to any of the remedies reserved to Owner hereinabove or elsewhere
in this lease, Owner may sue for and collect any monies to be paid by Tenant or
paid by Owner for any of the reasons or purposes hereinabove set forth.
Sprinklers:
30. Anything elsewhere in this lease to the contrary notwithstanding, if
the New York Board of Fire Underwriters of 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 expense, promptly make such
sprinkler system installations, changes, modifications, alterations, and supply
additional sprinkler heads or other equipment as required whether the work
involved shall be structural or non-structural in nature. Tenant shall pay to
Owner as additional rent the sum of $10.00, 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 5
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
<PAGE> 7
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 service, Owner may proceed diligently with alterations necessary to
substitute automatic control elevator service without in any way affecting the
obligations of Tenant hereunder.
SECURITY: 32. Tenant has deposited with Owner the sum of $4,374.99* as
security for the faithful performance and observance by
Tenant of the terms, provisions and conditions of this lease;
it is agreed that in the event Tenant defaults in respect of any of the terms,
provisions and conditions of this lease, including, but not limited to, the
payment of rent and additional rent, Owner may use, apply or retain the whole
or any part of the security so deposited to the extent required for the payment
of any rent and additional rent or any other sum as to which Tenant is in
default or for any sum which Owner may expend or may be required to expend by
reason of Tenant's default in respect of any of the terms, covenants and
conditions of this lease, including but not limited to, any damages or
deficiency in the reletting of the premises, whether such damages or deficiency
accrued before or after summary proceedings or other re-entry by Owner. In the
event that Tenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this lease, the security shall be
returned to Tenant after the date fixed as the end of the Lease and after
delivery of entire possession of the demised premises to Owner. In the event of
a sale of the land and building or leasing of the building, of which the
demised premises form a part, Owner shall have the right to transfer the
security to the vendee or lessee and Owner shall thereupon be released by
Tenant from all liability for the return of such security; and Tenant agrees to
look to the new Owner solely for the return of said security, and it is agreed
that the provisions hereof shall apply to every transfer or assignment made of
the security to a new Owner. Tenant further covenants that it will not assign
or encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted
encumbrance.
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 of the land and building) of which
the demised premises form a part, so that in the event of any sale or sales
of said land and building or of said lease, or in the event of a lease
of said building, or of the land and building, the said Owner shall be and
hereby is entirely freed and relieved of all covenants and obligations of Owner
hereunder, and it shall be deemed and construed without further agreement
between the parties 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 the 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.
*bears interest - See Rider Par. 57
<PAGE> 8
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 person shall deem necessary to preserve the wall or the building of
which demised premises form a part from injury or damage and to support the
same by proper foundations without any claim for damages or indemnity against
Owner, or dimunition or abatement of rent.
RULES AND REGULATIONS: 36. Tenant and Tenant's servants, employees, agents,
visitors, and licensees shall observe faithfully, 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 services, 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 thereof 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.
- --------------------------------- See Rider Paragraphs 41 - 61 attached
Space to be filled in or deleted. 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.
MILLINERY SYNDICATE, INC. [CORP.
Witness for Owner: -------------------------------SEAL]
/s/ H.A. GREEN By: /s/ ARNOLD STEINBERG
- ------------------------------- ------------------------------- [L.S.]
H.A. Green Arnold Steinberg
Witness for Tenant MERYKA, INC. [CORP.
------------------------------- SEAL]
/s/ GERALD NIMBERG
- ------------------------------- By: /s/ JERRY SCHULTZ
Gerald Nimberg ------------------------------- [L.S.]
Jerry Schultz
<PAGE> 9
RIDER AGREEMENT ATTACHED TO AND FORMING A PART OF LEASE DATED AS OF MAY 4, 1995
BETWEEN MILLINERY SYNDICATE, INC., AS LANDLORD, AND MERYKA, INC., AS TENANT.
41. (a) To the extent available from entity supplying the same (public or
private), or municipal or public utilities, servicing the locality in which
the building is located, Landlord shall cause to be furnished the electric
energy that Tenant shall reasonably require in the demised premises on a rent
inclusion basis. That is, there shall be no charge to Tenant for such electric
energy by way of measuring the same on any meter or otherwise, such electric
energy being included in Landlord's services which are covered by the fixed
rent reserved hereunder. Landlord shall not be liable in any way to Tenant for
any failure or defect in the supply or character of electric energy furnished
to the demised premises by reason of any requirement, act or omission of the
public utility or other entity (public or private) serving the building with
electricity or for any reason not attributable to Landlord. Tenant shall,
however, furnish and install all replacement lighting tubes, lamps, bulbs and
ballasts required in the demised premises, at Tenant's expense.
(b) Tenant's use of electric energy in the demised premises shall not at
any time exceed the capacity of any of the electrical conductors and equipment
in or otherwise serving the demised premises. In order to insure that such
capacity is not exceeded and to avert possible adverse effect upon the Building
electric service, Tenant shall not, without Landlord's prior written consent in
each instance (which shall not be unreasonably withheld), connect any
additional fixtures (except light duty office desk equipment), appliances or
equipment to the Building electric distribution system or make any alteration
or addition to the electric distribution system or make any alteration or
addition to the electric system of the demised premises existing on the date of
commencement of the term of this lease. Should Landlord grant such consent,
all additional risers or other equipment required therefor shall be provided by
Landlord and the cost thereof shall be paid by Tenant upon Landlord's demand.
In the event that the electrical service and riser system existing on the date
of commencement of the term hereof is sufficient to handle the requested
additional electrical needs of Tenant and Landlord expressly consents in
writing to Tenant's connection thereto Tenant shall pay to Landlord its pro
rata share of the total cost of purchase, connection and installation of an
additional electrical service and riser comparable to the existing electrical
service and riser being made available to Tenant in order to compensate
Landlord for the electric capacity being allocated to Tenant from such existing
electrical service and riser system (such connection charge being computed by
Landlord based upon its determination of the then
<PAGE> 10
current cost per amp per phase of total additional connected load), such charge
to be in addition to the increase in fixed rent hereinbelow provided. As a
condition to granting such consent, Landlord may require Tenant to agree to an
increase in the fixed rent to an amount which will reflect the value to Tenant
of the additional service to be furnished by Landlord, that is, the potential
additional electrical energy to be made available to Tenant based upon the
estimated additional capacity of such additional risers or such other
additional equipment. If Landlord and Tenant cannot agree thereon, such amount
shall be conclusively determined by a reputable, independent electrical
engineer, to be selected by Landlord and paid equally by both parties. Pending
such determination, if requested by Tenant, Landlord shall make such additional
electrical service available to Tenant provided Tenant agrees in writing to pay
the cost therefor in accordance with Landlord's initial determination while
such dispute is being determined. When the amount of such increase is so
determined, the parties shall execute an agreement supplementary hereto to
reflect such increase in the amount of fixed rent stated in this lease,
effective from the date such additional service is made available to Tenant;
but such increase shall be effective from such date even if such supplementary
agreement is not executed.
(c) Landlord reserves the right to discontinue furnishing electric energy
to Tenant in the demised premises at any time upon not less than thirty (30)
days notice to Tenant. If Landlord exercises such right of termination, this
lease shall continue in full force and effect and shall be unaffected thereby,
except only that, from and after the effective date of such termination,
Landlord shall not be obligated to furnish electric energy to Tenant and the
fixed rent payable under this lease shall be reduced by $2,500.00 per year. If
Landlord so discontinues furnishing electric energy to Tenant, Tenant shall
arrange to obtain electric energy directly from the public utility company
furnishing electric service to the Building. Such electric energy may be
furnished to Tenant by means of the then existing building system feeders,
risers and wiring to the extent that the same were available on the date of
commencement of the term hereof. All meters and additional panel boards,
feeders, risers, wiring and other conductors and equipment which may be
required to obtain electric energy directly from such public utility company
shall be installed by Tenant at its expense.
(d) Tenant agrees that Landlord is under no obligation to furnish electric
energy or any other utility service to the demised premises which are purchased
from the public utility company serving the locality in which the building is
located and Tenant obligations under this Paragraph 41 shall be unaffected if
Landlord contracts to purchase, and in fact furnishes, such electric energy
and/or other utility services from a private company or entity (whether or not
affiliated with Landlord). Tenant shall enter into such modifications of this
lease as Landlord may from time to time
2
<PAGE> 11
request in connection with any requirement of any public utility or any
requirement of law pertaining to utility services or charges therefor.
42. Tenant hereby covenants and agrees that for each tax year (or part of a
tax year) occurring within the term of this lease in which the total annual
real estate taxes which shall be imposed or assessed upon the land and building
of which the demised premises form a part shall exceed the tax base (as
hereinafter determined), Tenant shall pay to Landlord in advance in equal
monthly installments, as additional rent, a sum equal to 1.0% of such excess.
Any such percentage of such excess for less than a tax year shall be prorated
and apportioned. The term "tax base", shall mean the amount of the total
annual real estate taxes imposed or assessed upon said land and building for
such tax year as shall have ended on June 30, 1996. For the purposes of this
Paragraph 42, the term "tax year" shall mean the period of twelve (12) months
commencing on the first day of July of each year, or such other period of
twelve (12) months as hereafter may be duly adopted as the fiscal year for real
estate tax purposes. Appropriate credit shall be given for any refund obtained
by reason of a reduction in the assessed valuation by the Assessors or the Tax
Commission or the Courts. The original computations, as well as payments of
additional rent, if any, or allowances, if any, under the provisions of this
Paragraph 42, shall be based on the original assessed valuations with
adjustments, to be made at a later date when the tax refund, if any, shall be
paid to Landlord by the taxing authorities. Expenditures for legal fees and
for other similar expenses directly necessary to obtain the tax refund may be
charged against the tax refund before the adjustments are made for the tax
year.
43. The term "Basic Rate" shall mean the rate of wages paid to building
porters in and about said building (engaged in the general maintenance and
operation of said building) on December 31, 1995. If in any calendar year
during the term of this lease the rate of wages paid to such building porters
in and about said building shall exceed the Basic Rate, the annual rental
payable under this lease shall be increased by one cent (.01) per square foot
of space demised hereby per annum for each one cent (.01) or fraction thereof
that such rate of wages is over the Basic Rate. Landlord shall notify Tenant
whether or not an adjustment in the rental on this account is due and if so the
amount thereof. Such adjustment in rental shall commence as of the effective
date of such increase in such wages, and shall be paid by Tenant to Landlord
and from thenceforth all monthly installments of rental shall reflect
one-twelfth (1/12) of the annual amount of such adjustment until a new
adjustment becomes effective pursuant to the terms of this Paragraph 43. Any
such adjustment for less than a year or for less than a month shall be
prorated. For the purposes of provisions of this Paragraph 43, the demised
premises shall be deemed to be a floor area of 1,000 square feet.
3
<PAGE> 12
44. (a) Tenant agrees to pay to Landlord, as additional rent hereunder, in
the manner provided in subparagraph (b) of this paragraph, a share of the
utility-costs (as hereinafter defined) of maintaining the Building. "Utility
Costs" shall mean the total costs and expenses for utility services incurred in
operating and maintaining the Building, including, without limitation, the cost
of (i) electricity, steam, water and gas (including sewer rental) furnished to
the Building (including the public and common areas thereof), together with any
taxes on such utilities.
(b) Tenant's share of utility costs shall be 1.0% of the excess of the
amount of utility costs over the base year. "Base Year" shall mean a period of
twelve (12) consecutive full calendar months ending on June 30, 1996.
(c) As used herein, the "First Accounting Period" shall mean the period
comprising the twelve (12) full calendar months commencing July 1, 1996; and
each "Subsequent Accounting Period" shall mean each period of twelve (12) full
calendar months thereafter, during the term of this lease. Tenant's share of
increased utility costs over Base Year costs shall be payable as follows:
(1) During that portion of the term hereof falling within the first
accounting period (subject to adjustment as hereafter in subparagraph (c) , (3)
set forth, Tenant shall pay Landlord monthly in advance, on the first day of
each month, the sum of $5.00, as an estimate of Tenant's share of increased
utility costs; any partial month to be prorated.
(2) The foregoing estimated amount of Tenant's monthly share of
utility costs shall be adjusted and revised by Landlord as of the end of the
first and each subsequent accounting period during the term hereof on the basis
of the actual utility costs during the immediately preceding first or
subsequent accounting period, as the case may be, plus reasonably anticipated
increases in such costs. Upon Landlord furnishing to Tenant a written
statement setting forth such revised estimated utility costs, Tenant shall pay
Landlord such revised estimated share in monthly installments, in advance, on
the first day of each month until the next succeeding revision in such
estimate.
(3) Within ninety (90) days following the end of the first
accounting period and each subsequent accounting period, Landlord shall furnish
Tenant with a written statement covering the accounting period just expired
showing in reasonable detail the excess of total utility costs for such
accounting period over said costs for the Base Year and the payments made by
Tenant with respect to such accounting period. If Tenant's share of said
utility costs exceeds Tenant's payments with respect to such accounting period,
Tenant shall pay to Landlord the deficiency within ten (10) days after the
furnishing of said statement; and if
4
<PAGE> 13
said payments made by Tenant exceed Tenant's share of said utility costs,
Tenant shall be entitled to a credit for such excess against payments next
thereafter to become due to Landlord on account of Tenant's share of increased
utility costs.
(4) As to any accounting period, a portion only of which is
contained in the term of this lease, Tenant's obligation for a share of utility
costs shall be prorated on the basis of the actual number of days in the
portion of such accounting period contained in the term of this lease, as to
which Tenant's obligation shall survive the expiration of the term of this
lease.
(5) In the event of any dispute, Tenant shall pay the amount of
Tenant's bill or statement hereunder and such payment shall be without
prejudice to Tenant's position. If the dispute shall be determined in Tenant's
favor, by agreement or otherwise, Tenant shall be entitled to a credit against
payments next thereafter to become due Landlord on account of Tenant's share of
utility costs.
(6) Any such bill or statement rendered by Landlord to Tenant shall
be deemed binding and conclusively correct if Tenant fails to object hereto,
within thirty (30) days after the receipt thereof.
45. Notwithstanding the provisions of Paragraph 44, should Landlord exercise
its election to discontinue the Landlord's service of electricity as provided
in Paragraph 41, the escalation provided in Paragraph 44 shall not apply to
increases in the cost of electricity.
46. (a) It is understood and agreed that Tenant shall not bring in the
building lobby and its premises any type of bicycle, or motorbike.
(b) Tenant hereby agrees not to install venetian blinds in the demised
premises which are different in design, color, size and/or manner of hanging
than most of the venetian blinds installed in the other areas of the building
premises, it being the intention and desire of the parties hereto that all
venetian blinds in the entire building premises should be of uniform character,
color, size and design.
47. It is agreed that it shall be a reasonable objection on the part of the
Landlord to refuse consent to the Tenant herein to assign or sublet all or part
of the demised premises to any Tenant or occupant of the building premises at
55 West 39th Street, New York, New York or to any subsidiary, division,
related, allied or affiliate of any such Tenant or occupant of the building
premises at 55 West 39th Street, New York, New York.
5
<PAGE> 14
48. Tenant shall pay as additional rental $180.00 in advance on June 1st of
each year as Tenant's share of water and chemical treatment and maintenance of
the roof water tower for the air conditioning system. This amount may be
changed from time to time in accordance with the prevailing rate at 55 West
39th Street. It is further understood that the air conditioning equipment
servicing the demised premises may only be operated during the air conditioning
season hereby fixed as April 15th to October 15th in each year of the demised
term of this lease and from Monday through Friday from 8:00 A.M. to 6:00 P.M.,
and Saturday from 8:00 A.M. to 1:00 P.M. Landlord reserves the right to stop or
suspend the air conditioning system to make repairs and improvements to the
roof system, because of accidents or because of emergencies beyond the control
of the Landlord.
49. Tenant agrees to repair and maintain, at its expense, the air
conditioning unit(s) servicing the demised premises for the term of this lease
(including payment of any permit fees for the operation thereof) and employ, on
an annual service maintenance contract, a service company recognized as a
competent air conditioning service company (Landlord agrees that Edison Cooling
Co. shall be satisfactory). Since Tenant only occupies forty (40%) percent of
the total space serviced by the air conditioning system (which also services
Room 506), Tenant shall only be required to pay forty (40%) percent of the cost
of such repair and maintenance of such air conditioning system and of such
annual service maintenance contract.
50. It is understood and agreed that in the event that the rent reserved
herein shall not be collectible by Landlord by reason of the fact that there
shall be a commercial rent law or business rent law, or other law or regulation
in force prohibiting the Landlord from collecting same, then in that event the
Landlord shall have the option to cancel this lease upon written notice to
Tenant and upon so canceling this lease the Tenant shall become a monthly or
statutory Tenant at not less than the ceiling or emergency rent as may be in
force at that time.
51. It is understood and agreed that in the event that the present real
property tax system be modified, substituted, or changed into another tax
system by the government or governments or authorities having jurisdiction,
then in that event it is agreed between the parties that they will attempt to
agree upon a substitute formula for upward or downward adjustment of fixed rent
in lieu of the formula set forth in Paragraph 42 so as to reflect accrued
and/or accumulated downward or upward adjustments of rent made up to the time
of modification substitution or change of the real property tax system, and
upon the failure of the parties so agreeing to such a substitute formula, it is
hereby agreed that the matter shall be referred to an impartial arbitrator to
so determine a substitute formula for the adjustment of rent under Paragraph
42, and such arbitrator's award upon confirmation by the Court having
6
<PAGE> 15
jurisdiction shall be thereafter binding upon the parties to this lease.
52. Notwithstanding the provisions of Article 31, Landlord shall at its own
expense run freight elevators on business days from 8:00 A.M. to 12:00 noon and
1:00 P.M. to 5:00 P.M. with no freight elevator service on Saturdays, Sundays,
or Holidays.
53. Tenant shall look solely to the then interest of Landlord in the land and
the building of which the demised premises forms a part for the satisfaction of
any remedy of Tenant for failure to perform any of Landlord's obligations
hereunder. Neither Landlord nor any disclosed or undisclosed principal of
Landlord (or officer, director, stockholder, partner or agent of Landlord or of
any such principal) shall have any personal liability for such failure under
this lease or otherwise.
54. Tenant agrees not to allow any salesmen or other employees to loiter
about the hallways or other public portion of the building. Tenant further
agrees that the entrance door is to be closed at all times except for egress
and ingress and that the practice of keeping the entrance door open is
considered a violation of this lease. Tenant further covenants and agrees
that in the event of a violation of said provision, the Landlord may, at its
option, deem such violation a default on the part of the Tenant, and the rights
and remedies provided in this lease in the event of a breach thereof shall
thereupon be available to the Landlord.
55. Notwithstanding the provisions of Article 11 hereof:
(a) Landlord covenants that it will not unreasonably withhold its consent
to Tenant's subletting the demised premises or assigning this lease to any
persons, firms, or corporations for the unexpired balance of the term
hereunder, provided that, if Tenant shall, by notice in writing, advise
Landlord of its intention, from on and after a stated date, (which shall not be
less than sixty-five (65) days after date of Tenant's notice) to so sublet the
demised premises, or any portion thereof, or assign this lease then in such
event Landlord shall have the right, to be exercised by giving written notice
to Tenant within sixty (60) days after receipt of Tenant's notice, to recapture
the space described in Tenant's notice, and such recapture notice shall, if
given, cancel and terminate this lease with respect to the space therein
described as of the date stated in Tenant's notice. If Tenant's notice shall
cover all of the space hereby demised, and Landlord shall give the aforesaid
recapture notice with respect thereto, the term of this lease shall expire and
end on the date stated in Tenant's notice as fully and completely as if that
date had been herein definitely fixed for the expiration of the term. If,
however, this lease be canceled pursuant to the foregoing with respect to less
than the entire demised premises, the rent and additional rent herein reserved
shall be adjusted on the basis of
7
<PAGE> 16
the number of square feet retained by Tenant in proportion to the rent and
additional rent reserved in this lease, and this lease as so amended shall
continue thereafter in full force and effect. If Landlord, upon receiving
Tenant's said notice with respect to any such space, shall not exercise its
right to cancel as aforesaid, Landlord will not thereafter unreasonably
withhold its consent to Tenant's subletting the space covered by its notice or
assigning this lease provided that any such subletting or assigning complies
with the provisions of subsections (c) and (d) of this Paragraph 55 and
Paragraph 47 hereof. In the event that Tenant intends to sublet a portion of
the demised premises that does not have an independent entrance on the main
corridor, then the provisions of subparagraph 55 (b) shall apply as well.
(b) Landlord covenants that it will not unreasonably withhold its consent
to Tenant's subletting a portion of the demised premises to any persons, firms
or corporations for less than the unexpired balance of the term hereunder,
provided that any such subletting complies with the provisions of subsections
(c) and (d) of this Paragraph 55 and Paragraph 47 hereof and provided further
that Tenant pays to Landlord all rentals received from such subtenants in
excess of the pro rata rentals per square foot reserved hereunder for the space
so sublet. In computing the excess of the pro rata rental per square foot,
Tenant covenants that the sublet space will be rented for a fair market value
rent and Tenant shall not deduct any brokerage commissions paid, alteration
expense, furniture rental consideration, advertising expense, legal fees or any
other miscellaneous expense.
(c) No sublease or assignment shall be made with a Tenant who shall be or
who shall seek to use any portion of the demised premises for occupancy for any
purpose other than that permitted in this lease.
(d) Any subletting or assignment hereunder shall not release or discharge
Tenant of or from any liability, whether past, present or future, under this
lease, and Tenant shall continue fully liable thereunder. The subtenant or
subtenants or assignee shall agree to comply with and be bound by all of the
terms, covenants, conditions, provisions and agreements of this lease to the
extent of the space sublet. Tenant shall deliver to Landlord promptly after
execution; an executed copy of each such sublease and an agreement of
compliance by each such subtenant or an assignment and assumption agreement
from an assignee, as the case may be.
56. In order to further effectuate a tight security program, Tenant covenants
and agrees to use only the contractors designated by Landlord to provide
cleaning services in the building of which the demised premises form a part or
contractor or contractors approved in advance for any waxing, polishing, and
other maintenance work of the demised premises and of Tenant's personal
property therein, provided that the prices charged by such
8
<PAGE> 17
contractor(s) are comparable to the prices charged by other reputable
contractors for the same work. Tenant covenants and agrees that it shall not
employ any other cleaning or other maintenance contractor nor any individual,
firm or organization for such purpose without Landlord's prior written
consent. If Landlord and Tenant cannot agree on whether the prices being
charged by the contractor designated by Landlord are comparable to those
charged by other reputable contractors, Landlord and Tenant shall each obtain
two (2) bona fide bids for such work from reputable contractors in New York
City, and the average of the four (4) bids obtained shall be the standard of
comparison. The foregoing shall not preclude Tenant or its employees from
performing any of the foregoing.
57. It is agreed that the security deposit will be placed in an interest
bearing account with the interest earned thereon to be accumulated in the
security account and held as additional security in accordance with Article
32.
58. If any installment of rent or additional rent is not paid by Tenant
within ten (10) days after the due date thereof, such installment shall be paid
by Tenant with interest thereon from the original due date thereof computed at
the rate of 20% per annum (however, not to exceed the maximum rate legally
payable by Tenant pursuant to applicable law).
59. Landlord and Tenant warrant to each other that Fashion Realty Group, Ltd.
was the sole broker involved in the leasing of the demised premises and
Landlord shall pay said broker's fee pursuant to separate agreement. Landlord
and Tenant covenant and agree that should any claim be made by any party (other
than Fashion Realty Group, Ltd.) for a brokerage commission, finder's fee or
other like compensation in connection with the negotiation for, or the
execution of, this lease on account of any dealings with a party hereto, such
party will indemnify and hold the other party harmless from any and all
liabilities and expenses, including reasonable attorney's fees and
disbursements, arising as a result thereof.
60. It is understood and agreed that during the period (the "Rent Abatement
Period") commencing upon the commencement date of the term of this lease (i.e.,
June 1, 1995) and ending on June 30, 1995, Tenant shall pay annual rent at
the reduced monthly rate of $208.33. The balance of the annual rent which would
have been due with respect to such Rent Abatement Period is hereby waived.
Following expiration of the Rent Abatement Period, the partial abatement of the
annual rent shall cease and Tenant shall pay the full rent specified herein.
Provided Tenant has theretofore fully complied with all the terms and covenants
of this lease (including, but not limited to, payment of all rent and
additional rent), Tenant's rental obligation for the month of May, 1996 also
shall be at the reduced monthly rate of $208.33, the balance of the annual
9
<PAGE> 18
rent which would have been due with respect to such month to be waived.
61. It is understood and agreed that Tenant is renting the demised premises
in an "as is" condition, except that Landlord, at Landlord's sole cost and
expense, shall perform the following work in and to the demised premises:
(1) paint entire demised premises (building standard), colors to be
off-white or pastel only;
(2) furnish and install new 2' x 2' exposed spline fissure ceiling
tile, with 2' x 2' and/or 2' x 4' fluorescent light fixtures with prismatic
lenses and all necessary air conditioning diffusers; and
(3) furnish and install new Merit grade carpeting - to be selected by
Tenant from New York Carpet stock.
10
<PAGE> 19
[FLOOR PLAN]
55 West 39th Street
(212) 752-7474
STEINBERG & POKOIK MANAGEMENT CORP.
Real Estate
Howard A. Baum 575 Madison Avenue
New York, NY 10022
<PAGE> 20
Address 55 West 39th Street
New York, NY
Premises Rooms 507-508
===========================================================
MILLINERY SYNDICATE, INC.
TO
MERYKA, INC.
===========================================================
STANDARD FORM OF
[SEAL] LOFT [SEAL]
LEASE
The Real Estate Board of New York, Inc.
(c)Copyright 1994. All rights Reserved.
Reproduction in whole or in part prohibited.
===========================================================
Dated May 4, 1995
Rent Per Year $ 17,500.00
Rent Per Month $ 1,458.33
Term Five Years, two months
From June 1, 1995
To July 31, 2000
Drawn by
-----------------------------------------
Checked by
----------------------------------------
Entered by
----------------------------------------
Approved by
---------------------------------------
==========================================================
ACKNOWLEDGEMENTS
<TABLE>
<S> <C>
CORPORATE TENANT INDIVIDUAL TENANT
STATE OF NEW YORK, ss.: STATE OF NEW YORK, ss.:
County of County of
On this , day of , 19 , before me On this , day of , 19 , before me
personally came personally came
to me known, who being by me duly sworn, did depose and say that he
resides in to me known and known to me to be the individual described
in and who, as TENANT, executed this foregoing instrument
and acknowledged to me that he executed the same.
that he is the of
the corporation described in and which executed the foregoing ---------------------------------------
instrument, as TENANT; that he knows the seal of said corporation;
that seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
-------------------------------------------------------
</TABLE>
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant therefore shall further, at Tenant's expense, keep the
sidewalk and curb in front of said premises clean and free from ice, snow, dirt
and rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
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 clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be
swept or thrown from the demised premises any dirt or other substances into any
of the corridors or halls, elevators, or out of the doors or windows or
stairways of the building and Tenant shall not use, keep or permit to be used
or kept any foul or noxious gas or substance in the demised premises, or
permit or suffer the demised premises to be occupied or used in a manner
offensive or objectionable to Owner or other occupants of the buildings by
reason of noise, odors, and or vibrations, or interfere in any way, with other
Tenants or those having business therein, nor shall any animals or birds be
kept in or about the building. Smoking or carrying lighted cigars or
cigarettes in the elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises of the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory inlet shall be inscribed, painted or affixed for each Tenant
by Owner at the expense of such Tenant, and shall be of a size, color and style
acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the demised premises on the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly
prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises, ice, drinking
water, towel and other similar services, or accept barbering or bootblacking
services in the demised premises, except from persons authorized by Owner, and
at hours and under regulations fixed by Owner. Canvassing, soliciting and
peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building all persons who
do not present a pass to the building signed by Owner. Owner will furnish
passes to persons for whom any Tenant requires same in writing. Each Tenant
shall be responsible for all persons for whom he requests such pass and shall
be liable to Owner for all acts of such persons. Notwithstanding the
foregoing, Owner shall not be required to allow Tenant or any person to enter
or remain in the building, except on business days from 8:00 a.m. to 6:00 p.m.
and on Saturdays from 8:00 a.m. to 1:00 p.m. Tenant shall not have a claim
against Owner by reason of Owner excluding from the building any person who
does not present such pass.
11. Owner shall have the right to prohibit any advertising by any
Tenant which in Owner's opinion, tends to impair the reputation of the building
or its desirability as a loft building, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, an inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or
emanate from the demised premises.
13. Tenant shall not use the demised premises in a manner which disturbs or
interferes with other Tenants in the beneficial use of their premises.
<PAGE> 1
EXHIBIT 10.6
February 1, 1996
This contract is between New York Payroll Factors, Inc. ("Supplier") and Ace
Ventures Inc. ("Agent"). This contract sets forth a facility sharing
arrangement and compensation of the agent by the Supplier on a commissioned
basis.
Under this contract, the Supplier shall utilize the Agent as its sole agent to
sell and service the Asian market in midtown Manhattan. The Supplier shall not
offer its services to the Asian market in midtown Manhattan through any other
agent provided that Agent fulfills all of its requirements under this contract
and, in addition, attains and maintains an average of $700,000 per week, or
more, in Asian business within 13 weeks from the opening of a joint place of
business which is now planned to be located at 499 7th Avenue, or at such other
place as both parties may mutually agree.
The Agent shall focus on the Asian market (the Korean, the Chinese, and the
other Asian Market Garment Industry). The Agent shall refer all of its clients
to the Supplier. The Supplier shall have no limitation as to whom it serves.
The Agent shall submit a Daily Fund Requirement to the Supplier one week in
advance inclusive of Saturdays and bank holidays, if needed, and the Supplier
shall supply the daily funds to meet the requirement. The expected weekly
funds requirement will be of $1.5 million or more within 13 weeks after the
opening of the aforementioned Midtown location.
Both parties will make their best efforts to plan for, and meet, the supply
requirements; however, if the Agent's projected requirements are 20% or more
above its actual sales for two consecutive weeks, the Supplier may, beginning
in week 3, supply the average amount sold in the prior two weeks without
penalty or breach of this contract.
The Supplier shall pay the Agent 40% for 1/2 of the gross sale and 50% for the
other 1/2 of the gross sale on Fridays, Saturdays, or bank holidays. This
term applies only if the Agent's weekly gross sale is $1,000,000 or more. If
the weekly gross sale is less than $1,000,000, the Supplier shall pay the Agent
40% of the gross sale on Fridays, Saturdays, or bank holidays. Any other days
of the week it shall be 50% of the gross sale. The 40% rate will increase to
50% regardless of the day when, and if, the company goes public. Agent shall
be responsible for all checks cashed and all cash taken from the office for
deliveries. However, the Supplier shall make every effort to assist Agent
collect bad, lost, or stopped checks.
The Supplier shall have the right to set the terms of sale including, but not
limited to, establishing procedures and requiring the completion of forms which
comply with federal, state, or banking regulations. In particular, the Agent
agrees to obtain a customer's federal tax ID, and such other information which
the IRS requires, if that company receives more than $10,000 in any given day.
The Agent also agrees not to violate any US laws or customs.
The Agent shall hire Asian messengers as it sees fit and the Supplier shall
assist these messengers (to the extent it is able) to obtain gun permits,
licenses, and training.
<PAGE> 2
The Agent and the Supplier shall equally share the costs of setting up the new
office and facilities. Such costs shall include - to the extent necessary to
make the site both functional and insurable - site construction, phones, alarm
system, and attorney review of the lease. The Agent shall hire the contractors
with consultation from the Supplier and Supplier shall select the equipment
with consultation with the Agent.
The Agent and the Supplier shall equally share the occupancy costs including
rent, common area charges, if any, electric, phone, trash removal, site
security deposit, and the office insurance.
If the Supplier quits the business, the Agent may continue to occupy the site
provided the landlord agrees to the sublet and also releases the Supplier from
any further liability under the lease. Further, the Agent must reimburse the
Supplier for whatever security deposit it paid.
The Agent shall pay its own operating costs for tellers, sales, marketing,
messenger, and delivery services. The Supplier shall pay its own costs for
securing, insuring, and delivering the cash to the site, and for money
counting, bookkeeping, and accounting at the site.
This contract shall remain in effect for the duration of the lease period from
the date of its executing and, thereafter, it shall automatically renew for one
year periods provided that neither party has breached any provision of this
agreement. At the end of the contract, either party may buy the equipment
purchased during the start-up; the higher bid wins. Equipment, if any,
purchased after start-up shall belong to the buying party.
Nothing herein shall be construed so as to limit the Supplier from selling
direct to any customer of any nationality wherever located as long as it is not
done on the premise of 499 7th Avenue. Further, nothing herein shall be
construed so as to limit the Supplier from acquiring other Asian business and
servicing it directly.
This agreement shall be governed by the laws of the State of New York. Both
parties agree to submit any disputes which arise hereunder to the American
Arbitration Association for binding arbitration. If one party is found to have
breached any provision of this agreement, then the breaching party shall pay
the non-breaching party's reasonable legal costs in adjudicating the matter as
well as any costs necessary to remedy the breach.
If the breach(es) continue after the breaching party has been ruled against,
then, in the case where the Agent was the breaching party, the Supplier, at its
option, may retain new agent(s) to take the Agent's place and the Agent shall
vacate the premises. If the Supplier was the breaching party and fails to
remedy the causes of the breach, then the suppliers and the Supplier shall
vacate the premises.
If any provision of this contract shall be found to be illegal, then such
provision shall be deemed to be stricken from this contract and all other
provisions shall remain in full force and effect.
Unless otherwise notified, all notices shall be dent to the names and addresses
submitted bellow.
<PAGE> 3
If the foregoing is acceptable, please sign and return this contract.
BY /s/ Gerald Schultz BY /s/ Sue Yi
------------------------------------- -------------------------------
Gerald Schultz, President Sue Yi, President
New York Payroll Factors, Inc. Ace Ventures, Inc.
WITNESSED BY /s/ Daphnie Key DATE 2/28
--------------------------- -----------------------------
Notices to New York Payroll Notices to Ace Ventures, Inc.
Factors, Inc.
- --------------------------------------- ---------------------------------
- --------------------------------------- ---------------------------------
- --------------------------------------- ---------------------------------
<PAGE> 1
EXHIBIT 10.7
PRIVATE PLACEMENT MEMORANDUM
LOAN UNIT VALUE $50,000 DATE: February 7, 1996
General Credit Corporation ("GCC") promises to repay David A. Viets ("Lender")
at 15102C Kelbaugh Road, Thurmont, MD, 21788 or such other place as the Lender
may designate in writing, the sum of Fifty Thousand Dollars ($50,000.00) with
interest which will commence to accrue starting on February 7, 1996, on the
unpaid principal at the rate of twelve percent (12%) annually. Additionally,
GCC grants to Lender an option to purchase thirty thousand (30,000) shares of
GCC's common stock for one dollar (1.00) per share. Such option shall expire
one year from the date of the closing for GCC's public offering.
The unpaid principal and accrued interest shall be payable at the closing of
the public offering of GCC's securities. All payments on this obligation shall
be applied first in payment of accrued interest and any remainder in payment of
principal.
If any one or more of the provisions of this obligation are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this obligation shall be paid in the
legal currency of the United States. GCC waives presentment for payment,
protest and notice of protest and nonpayment of this obligation.
No renewal or extension of this obligation, delay in enforcing any right of GCC
under this obligation, or assignment by Lender of this obligation shall affect
the liability of GCC. All rights of the Lender under this obligation are
cumulative and may be exercised concurrently or consecutively at the Lender's
option.
This obligation shall be construed in accordance with the laws of the State of
New York.
Signed and attested to this 7th day of February, 1996, at
211 East 70th Street, New York, NY 10021
General Credit Corporation
By:
/s/ Irwin Zellermaier
---------------------------------------
Irwin Zellermaier
<PAGE> 1
EXHIBIT 10.8
PRIVATE PLACEMENT MEMORANDUM
LOAN UNIT VALUE: $100,000.00 DATE: February 7, 1996
General Credit Corporation ("GCC") promises to repay M.S. Chen ("Lender") at
890 Ridgewood Avenue, Oradell, N.J. 07649, or such other place as the Lender
may designate in writing, the sum of one hundred thousand dollars ($
100,000.00) with interest which will commence to accrue starting on February 7,
1996, on the unpaid principal at the rate of twelve percent (12%) annually.
Additionally, GCC grants to Lender an option to purchase sixty thousand
(60,000) shares of GCC's common stock for one dollar ($1.00) per share. Such
option shall expire one year from the date of the closing of GCC's public
offering.
The unpaid principal and accrued interest shall be payable at the closing of
the public offering of GCC's securities. All payments on this obligation shall
be applied first in payment of accrued interest and any remainder in payment of
principal.
If any one or more of the provisions of this obligation are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this obligation shall be paid in the
legal currency of the United States. GCC waives presentment for payment,
protest, and notice of protest and nonpayment of this obligation.
No renewal or extension of this obligation, delay in enforcing any right of
Lender under this obligation, or assignment by Lender of this obligation shall
affect the liability of GCC. All rights of the Lender under this obligation
are cumulative and may be exercised concurrently or consecutively at the
Lender's option.
This obligation shall be construed in accordance with the laws of the State of
New York.
Signed and attested to this 7th day of February, 1996, at
211 East 70th Street, New York, NY 10021
General Credit Corporation
By:
/c/ Irwin Zellermaier, President
- ---------------------------------------------
Irwin Zellermaier, President
<PAGE> 1
EXHIBIT 10.9
PRIVATE PLACEMENT MEMORANDUM
LOAN UNIT VALUE: $25,000.00 DATE: February 19, 1996
General Credit Corporation ("GCC") promises to repay Dr. Isreal Kazew
("Lender") at 2109 mt. Troy Boulevard, Pittsburgh, P.A. 15212, or such other
place as the Lender may designate in writing, the sum of twenty-five thousand
dollars ($ 25,000.00) with interest which will commence to accrue starting on
February 19, 1996, on the unpaid principal at the rate of twelve percent (12%)
annually. Additionally, GCC grants to Lender an option to purchase fifteen
thousand (15,000) shares of GCC's common stock for one dollar ($1.00) per
share. Such option shall expire one year from the date of the closing of GCC's
public offering.
The unpaid principal and accrued interest shall be payable at the closing of
the public offering of GCC's securities. All payments on this obligation shall
be applied first in payment of accrued interest and any remainder in payment of
principal.
If any one or more of the provisions of this obligation are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this obligation shall be paid in the
legal currency of the United States. GCC waives presentment for payment,
protest, and notice of protest and nonpayment of this obligation.
No renewal or extension of this obligation, delay in enforcing any right of
Lender under this obligation, or assignment by Lender of this obligation shall
affect the liability of GCC. All rights of the Lender under this obligation
are cumulative and may be exercised concurrently or consecutively at the
Lender's option.
This obligation shall be construed in accordance with the laws of the State of
New York.
Signed and attested to this 19th day of February, 1996, at
211 East 70th Street, New York, NY 10021
General Credit Corporation
By:
/c/ Irwin Zellermaier, President
- ---------------------------------------------
Irwin Zellermaier, President
<PAGE> 1
EXHIBIT 10.10
PRIVATE PLACEMENT MEMORANDUM
LOAN UNIT VALUE: $25,000.00 DATE: February
22, 1996
General Credit Corporation ("GCC") promises to repay John G. Watson ("Lender")
at 151 Foraythe Road, Mars, PA. 16046, or such other place as the Lender may
designate in writing, the sum of twenty-five thousand dollars ($ 25,000.00)
with interest which will commence to accrue starting on February 22, 1996, on
the unpaid principal at the rate of twelve percent (12%) annually.
Additionally, GCC grants to Lender an option to purchase fifteen thousand
(15,000) shares of GCC's common stock for one dollar ($1.00) per share. Such
option shall expire one year from the date of the closing of GCC's public
offering.
The unpaid principal and accrued interest shall be payable at the closing of
the public offering of GCC's securities. All payments on this obligation shall
be applied first in payment of accrued interest and any remainder in payment of
principal.
If any one or more of the provisions of this obligation are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this obligation shall be paid in the
legal currency of the United States. GCC waives presentment for payment,
protest, and notice of protest and nonpayment of this obligation.
No renewal or extension of this obligation, delay in enforcing any right of
Lender under this obligation, or assignment by Lender of this obligation shall
affect the liability of GCC. All rights of the Lender under this obligation
are cumulative and may be exercised concurrently or consecutively at the
Lender's option.
This obligation shall be construed in accordance with the laws of the State of
New York.
Signed and attested to this 22nd day of February, 1996, at
211 East 70th Street, New York, NY 10021
General Credit Corporation
By:
/c/ Irwin Zellermaier, President
- ---------------------------------------------
Irwin Zellermaier, President
<PAGE> 1
EXHIBIT 10.11
PRIVATE PLACEMENT MEMORANDUM
LOAN UNIT VALUE: $30,000.00 DATE: February 29, 1996
General Credit Corporation ("GCC") promises to repay Dominic Ricci ("Lender")
at 118 Doray Drive, Pittsburgh, P.A., 15237, or such other place as the Lender
may designate in writing, the sum of thirty thousand dollars ($ 30,000.00) with
interest which will commence to accrue starting on February 29, 1996, on the
unpaid principal at the rate of twelve percent (12%) annually. Additionally,
GCC grants to Lender an option to purchase eighteen thousand (18,000) shares of
GCC's common stock for one dollar ($1.00) per share. Such option shall expire
one year from the date of the closing of GCC's public offering.
The unpaid principal and accrued interest shall be payable at the closing of
the public offering of GCC's securities. All payments on this obligation shall
be applied first in payment of accrued interest and any remainder in payment of
principal.
If any one or more of the provisions of this obligation are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this obligation shall be paid in the
legal currency of the United States. GCC waives presentment for payment,
protest, and notice of protest and nonpayment of this obligation.
No renewal or extension of this obligation, delay in enforcing any right of
Lender under this obligation, or assignment by Lender of this obligation shall
affect the liability of GCC. All rights of the Lender under this obligation
are cumulative and may be exercised concurrently or consecutively at the
Lender's option.
This obligation shall be construed in accordance with the laws of the State of
New York.
Signed and attested to this 29th day of February 1996, at
211 East 70th Street, New York, NY 10021
General Credit Corporation
By:
/c/ Irwin Zellermaier, President
- ---------------------------------------------
Irwin Zellermaier, President
<PAGE> 1
EXHIBIT 10.12
PRIVATE PLACEMENT MEMORANDUM
LOAN UNIT VALUE: $ 25,000.00 DATE: March 4, 1996
General Credit Corporation ("GCC") promises to repay Anthony Fazio("Lender") at
217 Wilson Drive Pittsburgh, P.A., 15235, or such other place as the Lender may
designate in writing, the sum of twenty-five thousand dollars ($ 25,000.00)
with interest which will commence to accrue starting on March 4, 1996, on the
unpaid principal at the rate of twelve percent (12%) annually. Additionally,
GCC grants to Lender an option to purchase fifteen thousand (15,000) shares of
GCC's common stock for one dollar ($1.00) per share. Such option shall expire
one year from the date of the closing of GCC's public offering.
The unpaid principal and accrued interest shall be payable at the closing of
the public offering of GCC's securities. All payments on this obligation shall
be applied first in payment of accrued interest and any remainder in payment of
principal.
If any one or more of the provisions of this obligation are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this obligation shall be paid in the
legal currency of the United States. GCC waives presentment for payment,
protest, and notice of protest and nonpayment of this obligation.
No renewal or extension of this obligation, delay in enforcing any right of GCC
under this obligation, or assignment by Lender of this obligation shall affect
the liability of GCC. All rights of the Lender under this obligation are
cumulative and may be exercised concurrently or consecutively at the Lender's
option.
This obligation shall be construed in accordance with the laws of the State of
New York.
Signed and attested to this 4th day of March, 1996, at
211 East 70th Street, New York, NY 10021
General Credit Corporation
By:
/c/ Irwin Zellermaier, President
- ---------------------------------------------
Irwin Zellermaier, President
<PAGE> 1
EXHIBIT 10.13
PRIVATE PLACEMENT MEMORANDUM
LOAN UNIT VALUE: $25,000.00 DATE: April 2, 1996
General Credit Corporation ("GCC") promises to repay Regis Ferguson ("Lender")
at 1600 Pleasant Hill Road, Baden, PA, 15005, or such other place as the Lender
may designate in writing, the sum of twenty-five thousand dollars ($ 25,000.00)
with interest which will commence to accrue starting on April 2, 1996, on the
unpaid principal at the rate of twelve percent (12%) annually. Additionally,
GCC grants to Lender an option to purchase fifteen thousand (15,000) shares of
GCC's common stock for one dollar ($1.00) per share. Such option shall expire
one year from the date of the closing of GCC's public offering.
The unpaid principal and accrued interest shall be payable at the closing of
the public offering of GCC's securities. All payments on this obligation shall
be applied first in payment of accrued interest and any remainder in payment of
principal.
If any one or more of the provisions of this obligation are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this obligation shall be paid in the
legal currency of the United States. GCC waives presentment for payment,
protest, and notice of protest and nonpayment of this obligation.
No renewal or extension of this obligation, delay in enforcing any right of
Lender under this obligation, or assignment by Lender of this obligation shall
affect the liability of GCC. All rights of the Lender under this obligation
are cumulative and may be exercised concurrently or consecutively at the
Lender's option.
This obligation shall be construed in accordance with the laws of the State of
New York.
Signed and attested to this 2nd day of April, 1996, at
211 East 70th Street, New York, NY 10021
General Credit Corporation
By:
/c/ Irwin Zellermaier, President
- ---------------------------------------------
Irwin Zellermaier, President
<PAGE> 1
EXHIBIT 10.14
PRIVATE PLACEMENT MEMORANDUM
LOAN UNIT VALUE: $25,000.00 DATE: May 14, 1996
General Credit Corporation ("GCC") promises to repay Christopher J. Wetzel
("Lender") at 1613 Amicitia Lane, Sewickley, PA 15143, or such other place as
the Lender may designate in writing, the sum of twenty-five thousand dollars ($
25,000.00) with interest which will commence to accrue starting on May 14,
1996, on the unpaid principal at the rate of twelve percent (12%) annually.
Additionally, GCC grants to Lender an option to purchase Fifteen thousand
(15,000) shares of GCC's common stock for one dollar ($1.00) per share. Such
option shall expire one year from the date of the closing of GCC's public
offering.
The unpaid principal and accrued interest shall be payable at the closing of
the public offering of GCC's securities. All payments on this obligation shall
be applied first in payment of accrued interest and any remainder in payment of
principal.
If any one or more of the provisions of this obligation are determined to be
unenforceable in whole or in part for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this obligation shall be paid in the
legal currency of the United States. GCC waives presentment for payment,
protest, and notice of protest and nonpayment of this obligation.
No renewal or extension of this obligation, delay in enforcing any right of
Lender under this obligation, or assignment by Lender of this obligation shall
affect the liability of GCC. All rights of the Lender under this obligation
are cumulative and may be exercised concurrently or consecutively at the
Lender's option.
This obligation shall be construed in accordance with the laws of the State of
New York. If this agreement is not completed within six (6) months, the loan
will be returned with interest.
Signed and attested to this 14th day of May, 1996, at
211 East 70th Street, New York, NY 10021
General Credit Corporation
By:
/c/ Irwin Zellermaier, President
- ---------------------------------------------
Irwin Zellermaier, President
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 (File
No. 333- ) of our report, dated July 25, 1996, on our audit of the
financial statements of New York Payroll Factors, Inc. We also consent to the
reference to our Firm under the caption "Experts."
Melville, New York
August 8, 1996.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL
CREDIT CORPORATION FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND FOR THE
PERIOD FEBRUARY 10, 1995 (INCEPTION) TO DECEMBER 31, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> FEB-10-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,483
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,483
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,691
<CURRENT-LIABILITIES> 7,150
<BONDS> 0
0
0
<COMMON> 1,758
<OTHER-SE> (5,217)
<TOTAL-LIABILITY-AND-EQUITY> 3,691
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 413
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (413)
<INCOME-TAX> 0
<INCOME-CONTINUING> (413)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (413)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL
CREDIT CORPORATION FINANCIAL STATEMENTS AS OF MARCH 31, 1996 AND FOR THE
PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 78,624
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 78,624
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 203,082
<CURRENT-LIABILITIES> 233,356
<BONDS> 0
0
0
<COMMON> 1,758
<OTHER-SE> (32,032)
<TOTAL-LIABILITY-AND-EQUITY> 203,082
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,460
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,335
<INCOME-PRETAX> (23,795)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,795)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,795)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW YORK
PAYROLL FACTORS, INC. FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND FOR
EACH OF THE TWO YEARS IN THE PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,247,394
<SECURITIES> 0
<RECEIVABLES> 40,339
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,307,776
<PP&E> 66,390
<DEPRECIATION> 36,494
<TOTAL-ASSETS> 1,775,107
<CURRENT-LIABILITIES> 1,172,266
<BONDS> 0
0
0
<COMMON> 50,000
<OTHER-SE> 457,724
<TOTAL-LIABILITY-AND-EQUITY> 1,775,107
<SALES> 1,467,620
<TOTAL-REVENUES> 1,467,620
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 941,201
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 210,704
<INCOME-PRETAX> 315,715
<INCOME-TAX> 27,114
<INCOME-CONTINUING> 288,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 288,601
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW YORK
PAYROLL FACTORS, INC. FINANCIAL STATEMENTS AS OF MARCH 31, 1996 AND FOR THE
PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,976,830
<SECURITIES> 0
<RECEIVABLES> 35,541
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,040,867
<PP&E> 88,136
<DEPRECIATION> 38,864
<TOTAL-ASSETS> 2,518,552
<CURRENT-LIABILITIES> 1,987,483
<BONDS> 0
50,000
0
<COMMON> 0
<OTHER-SE> 406,220
<TOTAL-LIABILITY-AND-EQUITY> 2,518,552
<SALES> 479,605
<TOTAL-REVENUES> 479,605
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 189,534
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,229
<INCOME-PRETAX> 201,842
<INCOME-TAX> 3,902
<INCOME-CONTINUING> 197,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197,940
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
