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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission File No. 0-28910
GENERAL CREDIT CORPORATION
(Name of Small Business Issuer in Its Charter)
New York 13-3895072
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
370 Lexington Avenue, Suite 2000
NEW YORK, NEW YORK 10017
(Address of principal executive offices)
(212) 697-4441
--------------
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
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Title of each class Name of each exchange on which registered
COMMON STOCK, PAR VALUE $.001 PER SHARE Nasdaq
REDEEMABLE COMMON STOCK PURCHASE WARRANTS Nasdaq
</TABLE>
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports); and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No
[ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $2,412,672
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The aggregate market value of the voting stock held by non-affiliates of
the issuer based on the closing sales price of $1.25 of such common stock, as of
March 18, 1998, is $3,628,750 based upon $1.25 multiplied by 2,903,000 shares of
common stock outstanding as of March 18, 1998 held by non-affiliates.
As of March 18, 1998, the Company had a total of 3,438,000 shares (the
"Shares") of Common Stock, par value $.001 per share (the "Common Stock"),
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None.
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GENERAL CREDIT CORPORATION
FORM 10-KSB
FISCAL YEAR ENDED DECEMBER 31, 1997
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TABLE OF CONTENTS
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PART I............................................................................................................1
Item 1. Description of Business.........................................................................1
Item 2. Description of Property.........................................................................4
Item 3. Legal Proceedings...............................................................................4
Item 4. Submission of Matters to a Vote of Security Holders.............................................4
PART II...........................................................................................................4
Item 5. Market for Common Equity and Related Stockholder Matters........................................4
Item 6. Management's Discussion and Analysis or Plan of Operation.......................................5
Item 7. Financial Statements............................................................................7
Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure............7
PART III..........................................................................................................7
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act.............................................................................7
Item 10. Executive Compensation..........................................................................9
Item 12. Certain Relationships and Related Transactions.................................................13
Item 13. Exhibits and Reports on Form 8-K...............................................................13
SIGNATURES.......................................................................................................14
FINANCIAL STATEMENTS............................................................................................F-1
</TABLE>
<PAGE> 4
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL. General Credit Corporation (the "Company") was organized in
February 1995. From its inception through May 2, 1997, the Company's operations
were limited to administrative activities. On May 2, 1997, the Company acquired
substantially all of the assets of New York Payroll Factors, Inc. ("NYPF")
concurrently with the closing (the "Closing") of the Company's initial public
offering of securities (the "IPO") and commenced operations. For approximately
seven years, NYPF had been engaged in providing working capital financing to its
customers through the discounted purchase of checks (commonly referred to as
"Check Factoring"). Since May 3, 1997 the Company has provided check factoring
services to its customers, generally on a non-recourse basis with respect to its
customers except to the extent of forged signatures on and stop payments of the
purchased checks. In September 1997 the Company commenced purchasing credit card
sales slips on a discounted non-recourse basis. To date, the purchase of credit
card sales slips ("Credit Card Sales Slips") has not been a material part of the
Company's business. Upon the Closing of the IPO, the Company received net
proceeds of approximately $7,200,000 in consideration for the issuance of
900,000 Units, each Unit consisting of three shares of the Company's Common
Stock, par value $.001 per share (the "Common Stock") and six warrants, each
warrant entitling the holder thereof to purchase one share of Common Stock at
any time and from time to time through April 24, 2002 at an exercise price of
$3.375 per share. Pursuant to the acquisition of substantially all of the assets
of NYPF (the "NYPF Business Combination") in connection with the Closing, the
Company delivered the remaining balance to close the NYPF Business Combination
of $4,275,000 and issued a total of 125,000 shares of the Company's Common Stock
to Gerald Nimberg, a former affiliate of NYPF and currently the Company's
President in consideration for the business assets of NYPF.
The information relating to NYPF herein is based solely upon
information provided to the Company and its accountants by NYPF's management and
accountants. From January 1992 until May 2, 1997, NYPF provided working capital
financing to its customers through the discounted purchase of checks (commonly
referred to as "check factoring"), generally on a non-recourse basis except to
the extent of forged signatures on and stop payments of the purchased checks.
NYPF's former customers, most of which are currently the Company's customers as
a result of the NYPF Business Combination, are small- and medium-sized
independent contracting firms located in the New York City metropolitan area and
northern New Jersey area. Included among such 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 customers.
Occasionally, the Company purchases checks directly from the
manufacturers, construction firms and other businesses themselves. The Company's
customers, typical of garment industry contractors and other small-and
medium-sized vendors generally, face extraordinary periodic short-term cash
requirements. By factoring checks, customers can realize cash more quickly.
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. Currently, however, the
Company believes, based on an informal study by NYPF, that, including the
Company, 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
Company's customers are located.
OPERATING PROCEDURES. Management estimates that the Company 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 purchased
by the Company, and formerly NYPF, from each customer, whether the checks are
presented directly by the customer or through a broker, whether the checks
actually have been presented to the Company at the time of the Company's payment
to the customer, and whether those checks are post-dated. Management believes
that the dollar amount of checks purchased before they are presented to the
Company, and post-dated checks, is not material. The
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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 the Company'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 its customers
prefer the Company as opposed to more conventional financial institution
financing as a source of funds because (i) the Company does not require complex
credit agreements, credit evaluation of 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) the Company provides liquidity virtually upon
demand of its customers, in larger amounts daily than most financial
institutions are able to supply. In an attempt to limit its exposure arising
from a purchased check not being collectible, the Company's policy is rarely to
purchase any check with a face amount in excess of $50,000.
The Company's procedures include its entering into a Purchase and Sale
Agreement with each customer, including a list of the current customers of the
customer, stating the amount of the discount on checks to be purchased by the
Company from the customer, and providing, among other things, that (i) the
Company is not required to purchase any check having a face amount less than
$2,500, or not made payable to the order of the customer, or drawn on an account
of anyone other than a check maker approved by the Company, (ii) the customer is
responsible for losses resulting from forged or unauthorized signatures of
makers of checks or stop payments of checks, (iii) the customer represents to
the Company that, among other things, it owns the checks to be sold, each check
represents payment for merchandise or services actually delivered or performed
for a customer of the customer in a business and not a consumer transaction, and
each check is genuine and not subject to offsets or defenses. The Company
generally requires presentation of identification by each representative of a
customer seeking to sell a check to the Company. the customers can advise the
Company of check amounts and their requested bill denominations so that cash
envelopes are available when their representatives arrive at the Company's
offices. The Company also offers a door-to-door armed guard delivery service
upon the request of customers. Pursuant to banking resolutions and powers of
attorney in favor of the Company provided by each customer, the Company endorses
each purchased check beneath the endorsement of the customer before depositing
it in the Company's bank account.
SOURCES OF BUSINESS. During 1995 and 1996 and prior to the NYPF
Business Combination, the management of NYPF estimates that NYPF obtained, as a
percentage of its fee income (i) approximately 10% from sales representatives at
a weighted average fee income of 1.0%, and (ii) approximately 25% from NYPF's
independent contractor relationship with Ace Venture, Inc. ("Ace"), described
below, operating from premises located at 499 Seventh Avenue, New York, New York
(see "-- Commissioned Agent"). Prior to the NYPF Business Combination, NYPF had
maintained a sales representation relationship with one of its ten
representatives for more than three years.
COMMISSIONED AGENT. NYPF entered into an agreement with Ace as of
February 1, 1996, which the Company succeeded to in connection with the NYPF
Business Combination on May 2, 1997. Under the terms of that agreement, Ace,
which was otherwise unaffiliated with NYPF, was NYPF's (and later the Company's)
exclusive agent to arrange check factoring with prospective 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 fulfilled all of its requirements under that
agreement and maintained gross proceeds from the Asian Market of an average of
$700,000 per week, and Ace was required to refer all check factoring business
that Ace generated in the Asian Market, with no obligation of the Company either
to accept any particular Ace customer as a customer or to accept any minimum
aggregate check face amount of business referred to the Company through Ace. The
Company generally was required under that agreement to supply Ace's daily cash
funding requirement requested by Ace from the Company at least one week in
advance. Under that agreement, the Company, as successor to NYPF, agreed to pay
Ace a commission calculated as a percentage of the Company's fee income
resulting from Ace's efforts.
On September 30, 1997, the Company acquired Ace for a total purchase
price of $480,000, plus closing costs of $9,500 paid by the Company, consisting
of $100,000 cash and the delivery of two promissory notes in the aggregate
principal amount of $230,000 and $150,000, respectively, subject to adjustment
in the event certain sales are not generated as a result of the acquisition. As
a result of the acquisition by the Company of Ace, Dong Hyun Kang, the former
owner of Ace entered into an employment agreement with the Company providing for
a base salary of $130,000 per year and a bonus conditioned on certain sales
activities.
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COMPETITION. The Company 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 the Company. The
Company believes, based on an informal study by NYPF, that, including the
Company, there are approximately 20 check factoring firms operating in the New
York City "garment district," all within the same seven block area in which its
customers are located. The Company also competes with other regional factoring
companies that target clients similar to the clients of the Company, some of
which have operated in the markets serviced by the Company for a longer period
of time than the Company or NYPF. There can be no assurance that the Company can
continue to compete successfully with its competitors.
SECURITY. All Company 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 the Company's business requires it to maintain a significant
supply of cash in its stores, the Company 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
Company owned armored carriers.
EMPLOYEES. The Company's employees consist of its three executive
officers, Irwin Zellermaier, Gerald Nimberg and David Bader, 20 additional
full-time and six additional part-time employees. Messrs. Bader, Nimberg and
Zellermaier devote their full business time to the Company's business.
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, including check cashers
such as the Company, 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. Any series of transactions within any calendar
day that total more than $10,000, and that the Company has knowledge were
effected by or on behalf of the same person, must also be reported. In addition,
the Company is required to report any "suspicious or unusual activity" to its
Bank Secrecy Act examiner and the Internal Revenue Service. The civil penalty
imposed upon the Company and any director, officer or employee of NYPF willfully
violating these requirements is not more than the greater of the amount (not to
exceed $100,000) involved in the transaction (if any) or $25,000. Criminal
penalties for intentional violations include fines of up to $500,000, and up to
ten years imprisonment, or both.
During a typical week, approximately 25 of the Company's transactions
require the filing of a CTR. The Company believes its computerized daily
transaction reports, its staff training and supervision and its diligence and
persistence in obtaining from its customers the information required to be
reported assist the Company in complying with these reporting requirements, but
there can be no assurance that all information reported by the Company is
accurate, complete, and in accordance with such statute and regulations.
Although some states, including New York, have established limits on
check-cashing fees, management believes that these limits are not applicable to
its business and that, in any event, the Company's discount of the face amount
of checks that it purchases is within these limits. The Company 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.
3
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ITEM 2. DESCRIPTION OF PROPERTY
From February 1995 through the Closing, 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,
maintained its executive offices in approximately 1,000 square feet of space
located at 211 East 70th Street, New York, New York 10021. Upon the Closing, the
Company terminated its operations at 211 East 70th Street. The Company is
currently obligated under four separate noncancellable real property operating
lease agreements with unaffiliated third parties through January 31, 2002,
January 31, 2001, February 28, 2003 and August 31, 2000, respectively, for
office space of approximately 500 square feet, 2,000 square feet, 600 square
feet and 2,500 square feet, respectively, located at 201 Allen Street (on the
lower east side of Manhattan), 499 Seventh Avenue, and 1430 Broadway (both in
midtown Manhattan near the "garment district")and 370 Lexington Avenue, the
Company's midtown Manhattan headquarters. The Company's annual rental
obligation, in the aggregate, under these four leases is approximately $123,000.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material litigation. The
Company, as successor to 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 its financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended December 31, 1997,
no matters were submitted to a vote of security holders of the Company.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock and Warrants have been quoted on The Nasdaq
SmallCap Market ("Nasdaq") since April 28, 1997 under the symbol "LOAN" and
"LOANW". The following table sets forth the range of high and low closing sales
prices of the Common Stock and Warrants as reported by Nasdaq.
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HIGH LOW
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COMMON STOCK
1997
April 28 - June 30.................................................$3.25 $1.56
Third Quarter......................................................$2.56 $1.50
Fourth Quarter.....................................................$2.53 $1.50
1998
First Quarter through March 18, 1998...............................$2.13 $1.13
WARRANTS
1997
April 28 - June 30.................................................$0.69 $0.25
Third Quarter......................................................$0.47 $0.25
Fourth Quarter.....................................................$0.50 $0.22
1998
First Quarter through March 18, 1998...............................$0.34 $0.16
</TABLE>
The approximate number of holders of record of the Company's Common Stock, as
of March 18, 1998,
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amounts to 19, inclusive of those brokerage firms and/or clearing houses holding
the Company's shares of Common Stock for their clientele (with each such
brokerage house and/or clearing house being considered as one holder).
The Company has not paid or declared any dividends upon its Common
Stock since its inception and, by reason of its present financial status and its
contemplated financial requirements, does not contemplate or anticipate paying
any dividends upon its Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION OR PLAN OF
OPERATION OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
REPORT.
RESULTS OF OPERATIONS
Management of the Company does not believe that a discussion of the
Company's results for prior comparative year periods would be meaningful because
the Company's operations prior to the NYPF Business Combination were limited to
administrative activities. Further, information provided below for the year
ended December 31, 1997 reflects the Company's check factoring operations only
from May 3, 1997 through December 31, 1997 (the "Operational Period") as well as
the period from January 1, 1997 through May 2, 1997 when the Company's
operations were limited to administrative activities (the "Administrative
Period"). Comparative information for period prior to January 1, 1997 contained
in the Consolidated Financial Statements, commencing at page F-1 reflect the
Company's operations when they were limited to administrative activities.
For the year ended December 31, 1997 (consisting solely of operations
during the Operational Period), the Company derived fee income of approximately
$2,413,000 from the purchase of checks and Credit Card Sales Slips. The face
amount of checks purchased during the period ended December 31, 1997 (consisting
solely of operations during the Operational Period) was approximately
$220,000,000 and the face amount of Credit Card Sales Slips during the year
ended December 31, 1997 was approximately $835,000.
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) during the year ended
December 31, 1997 was approximately $1,942,000, including approximately
$1,893,000 of expenses incurred during the Operational Period. During the year
ended December 31, 1997, selling, general and administrative expenses
constituted approximately 82.05% of fee income.
For the year ended December 31, 1997, interest expense was
approximately $456,000, of which approximately $269,000 was incurred during the
Operational Period.
For the year ended December 31, 1997 the Company incurred non-cash
expenses of approximately $221,000 consisting primarily of depreciation and
amortization of the covenants not to compete and the good will related to the
NYPF Business Combination and the acquisition of Ace, all of which was incurred
during the Operational Period.
The extraordinary item of approximately $154,000 $(.06 per share)
relates to the prepayment penalty on the early extinguishment of notes retired
(the "Extraordinary Item").
Net loss for the year ended December 31, 1997 was approximately
$(395,000) or approximately $(.16) per share and net loss for the year ended
December 31, 1996 was approximately $(412,000) or a loss of approximately $(.23)
per share. For the Operational Period, the Company generated a net loss of
approximately $(159,000) or approximately $(.05) per share.
Earnings before taxes, depreciation and amortization before the
Extraordinary Item ("EBTDA") during the Operational Period was approximately
$120,000 or approximately $.03 per the weighted average number of shares
outstanding during the Operational Period. EBTDA is not presented as an
alternative to operating results or cash flow from operations as determined by
generally accepted accounting principles ("GAAP"), but rather to provide
additional
5
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information related to the ability of the Company to meet current trade
obligations and debt service requirements. EBTDA should not be considered in
isolation from, or construed as having greater importance than, GAAP operating
income or cash flows from operations as a measure of an entity's performance.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements generally increase proportionately
to the aggregate face amount of checks purchased, although more rapid collection
of purchased checks can mitigate the Company's cash needs.
The Company received the net proceeds from the IPO in May 1997. In
addition to the use of the net proceeds and proceeds received from operations,
the Company finances its operations principally through (i) short term working
capital loans in the aggregate amount of up to $500,000, which amounts are
typically repaid daily or every few days, provided by an unaffiliated entity,
and (ii) a long term working capital loan in the aggregate amount of $2.6
million (the "Long Term Loan") provided by a general partnership (the
"Affiliated General Partnership"), in part owned by Gerald Schultz, the former
owner of NYPF and Ann Nimberg, the wife of Gerald Nimberg, the President of the
Company (collectively, the "Working Capital Loans"). Ann Nimberg has informed
the Company that she owns approximately 8% of the Affiliated General
Partnership. Pursuant to the terms of the Long Term Loan, the Affiliated General
Partnership has established a credit facility in favor of the Company in the
aggregate principal amount of $2.6 million. The Company has the right to borrow
from the Affiliated General Partnership an amount based upon funds derived from
the purchase of checks by the Company. Borrowings under the Long Term Loan bear
interest at the rate of 24% per annum. Interest only is payable monthly by the
Company under the Long Term Loan on the outstanding principal amount borrowed.
All accrued but unpaid interest as well as the principal amount owed under the
Long Term Loan is due in February 2001. The Long Term Loan may be prepaid by the
Company provided the Company pays to the Affiliated General Partnership at the
time of such prepayment an additional amount as a prepayment premium equal to
the sum of approximately $312,000. The Company's repayment obligations under the
Long Term Loan are secured by, among other things, all of the Company's fixtures
and equipment at the Company's leased premises located at 499 Seventh Avenue,
201 Allen Street, and 370 Lexington Avenue, New York , New York. As of December
31, 1997, the outstanding amount owed pursuant to the Working Capital Loans was
approximately $2,550,000, approximately $2,300,000 of which is owed pursuant to
the Long Term Loan.
The Company is currently seeking additional debt or equity financing to
fund expansion of the Company's business. There can be no assurances that
additional financing will be available on terms favorable to the Company, or at
all. If adequate funds are not available or are not available on acceptable
terms, the Company may not be able to fund growth, take advantage of certain
acquisition opportunities or respond to competitive pressures.
As of December 31, 1997 the Company had available cash and cash
equivalents of approximately $1,794,000.
EFFECTS OF INFLATION
The Company believes that the results of its operations could be
materially impacted by inflation, including increases in interest rates
generally, if inflation materially adversely affected the operations of the
Company's customers and their customers, and if inflation materially increased
the interest payments on the Company's working capital loans (e.g., if the
Company entered into larger lines of credit in lieu of its maintaining some of
the current bank deposits against which it negotiates checks purchased by it).
YEAR 2000 COMPLIANCE
The Commission has issued Staff Legal Bulletin No.5 (CF/IM) stating
that public operating companies should consider whether they will suffer any
anticipated costs, problems or uncertainties as a result of the "Year 2000"
issue, which affects existing computer programs that use only two digits to
identify a year in the date field. The Company anticipates that its business
operations will electronically interact with third parties very minimally, and
the issues raised by Staff Legal Bulletin No. 5 are not applicable in any
material way to its contemplated business or operations. Additionally, the
Company intends that any computer systems that it will purchase or lease will
have already addressed the "Year 2000" issue.
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FORWARD LOOKING INFORMATION MAY PROVE INACCURATE
This Annual Report on Form 10-KSB contains certain forward-looking
statements and information relating to the Company that are based on the beliefs
of management, as well as assumptions made by and information currently
available to the Company. When used in this document, the word "anticipate,"
"believe," "estimate," and "expect" and similar expressions, as they relate to
the Company, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions,
including those described in this Annual Report on Form 10-KSB and the Company's
Registration Statement on Form SB-2 (SEC File No. 333-09831) declared effective
by the Securities and Exchange Commission on April 25, 1997. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated or expected. The Company does not intend to
update these forward-looking statements.
ITEM 7. FINANCIAL STATEMENTS
The financial statements included herein, commencing at page F-1, have
been prepared in accordance with the requirements of Regulation S-B and
supplementary financial information included herein, if any, has been prepared
in accordance with Item 310(a) of Regulation S-B.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On September 5, 1997, the Company dismissed Coopers & Lybrand LLP
("Coopers & Lybrand") as the Company's independent auditors and retained
Cornick, Garber & Sandler, LLP as the Company's independent auditors for the
fiscal year ended December 31, 1997. The Company's decision to retain Cornick,
Garber & Sandler, LLP was approved by the Company's Board of Directors and the
Company's Audit Committee. In connection with the services rendered by Coopers &
Lybrand, the Company reported that for the fiscal years ended December 31, 1995,
December 31, 1996 and for the subsequent interim periods there were no
disagreements between the Company and Coopers & Lybrand on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
Coopers & Lybrand, would have caused Coopers & Lybrand to make reference to the
subject matter of the disagreement. Further, the Company believes there are no
reportable events as defined by Item 304(a)(1)(iv)(B) of Regulation S-B.
Coopers & Lybrand's reports on the Company's financial statements for
the years ended December 31, 1996 and 1995 contained an explanatory paragraph to
the effect that the Company's ability to commence operations was dependent on
the Company obtaining adequate financial resources through a contemplated public
offering, or otherwise, which raised substantial doubts about its ability to
continue as a going concern.
A copy of Coopers & Lybrand's letter addressed to the U.S. Securities
and Exchange Commission was filed as an exhibit to the Company's Form 8-K filed
with the Commission on September 11, 1997.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
A. IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.
The current directors and executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
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<S> <C> <C>
Irwin Zellermaier(1) 73 Chairman, Chief Executive Officer, Director
Gerald Nimberg 54 President, Chief Operating Officer, Director
David Bader 54 Vice President, Secretary, Treasurer, Chief Financial
Officer, Director
Vincent J. Putignano(1)(2) 52 Director
Brien G. Reidy(1)(2) 46 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 May 2, 1997, has been engaged in investment banking and management
consulting as a sole proprietorship for more than five years. Since January 1,
1990, he has been associated as an independent contractor with Eagle Funding, a
mortgage broker with respect to commercial properties.
GERALD NIMBERG, President and Chief Operating Officer and Director of
the Company since May 2, 1997, and Vice President and Chief Operating Officer of
NYPF since May 1993 until the Closing. 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, had 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.
CONFLICTS OF INTEREST
None.
8
<PAGE> 12
B. SIGNIFICANT EMPLOYEES.
None.
C. FAMILY RELATIONSHIPS.
None.
D. OTHER: INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation of the
ability and integrity of any executive officer during the past five years.
E. COMPLIANCE WITH SECTION 16(A).
To the Company's knowledge, for the fiscal year ended December 31,
1997, and for the period ended March 20, 1998, no person who was a director,
officer or beneficial owner of more than ten percent of the Company's
outstanding Common Stock or any other person subject to Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") failed to file on a timely
basis, reports required by Section 16(a) of the Exchange Act other than one late
filed Form 4 filed by Gerald Nimberg, the Company's President and Chief
Operating Officer regarding an August 1997 gift of 10,000 shares by Mr. Nimberg
to his adult brother.
ITEM 10. EXECUTIVE COMPENSATION
A. DIRECTORS AND OFFICERS
DIRECTOR COMPENSATION
The arrangement for director compensation is $150 for each meeting of
the Board of Directors of the Company. Since the Company has no had no formal
Board meetings, no amounts have been paid to directors for attendance at
meetings.
EXECUTIVE OFFICER COMPENSATION
Other than Mr. Zellermaier, who received total compensation of
$132,764 in 1997, no officer or director employed by the Company received salary
and bonus exceeding in the aggregate $100,000 in the fiscal year 1997, 1996 or
1995. The following Summary Compensation Table sets forth the information
concerning compensation for services in all capacities awarded to, earned by or
paid to Mr. Zellermaier. No other person employed by the Company earned in
excess of $100,000 during the fiscal years ended December 31, 1997, 1996 and
1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Securities
Underlying All Other
Other Annual Options/ Compensation ($)
Name and Principal Position Year Salary($) Bonus($) Compensation ($) SARs (#)
Irwin Zellermaier, Chairman, Chief 1997 101,298 -- 31,466(1) 75,000/0 0
Executive Officer and Director of the
Company since February 1995. 1996 -- -- -- --
President from February 1995 until May
1997.
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 13
- -------------------------
(1) Represents payments made for Mr. Zellermaier's and his dependent's
medical insurance, Mr. Zellermaier's automobile expense allowance and
insurance covering Mr. Zellermaier's life, the beneficiary of which is
not the Company.
The following table sets forth information concerning stock option
grants made during 1997 to the executive officers of the Company.
STOCK OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
Percent of
Number of Securities Total Options Granted Exercise
Underlying to Employees in Market Price on or
Name Options Granted(1) Fiscal Year Date Of Grant(2) Base Price Expiration Date
------ ------------------ ----------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Irwin Zellermaier 75,000 39.5% $2.125 $2.125 November 3, 2000
Gerald Nimberg 65,000 34.2% $2.125 $2.125 November 3, 2000
David Bader 50,000 26.3% $2.125 $2.125 November 3, 2000
TOTAL 190,000 100%
</TABLE>
- ---------------------
1) All options are non-qualified options.
2) Based on the closing sales price of the Common Stock on November 4, 1997.
10
<PAGE> 14
The following table sets forth certain summary information concerning
exercised and unexercised options to purchase the Company's Common Stock as of
December 31, 1997 held by the executive officers. None of these executives
exercised any options during the year ended December 31, 1997.
STOCK OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-money Options
Shares Acquired Options at FY-end at FY-end
Name on Exercise (#) Value Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- --------------- ------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Irwin Zellermaier -- -- 75,000 / 0 $0 / $0
Gerald Nimberg -- -- 65,000 / 0 $0 / $0
David Bader -- -- 50,000 / 0 $0 / $0
TOTAL 190,000 / 0 $0 / $0
</TABLE>
B. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
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 receives an annual base salary of $160,000 per annum.
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 $20,800 per annum.
Further pursuant to the terms of his employment agreement, Mr. Zellermaier has
agreed not to compete with the Company during the term of his employment with
the Company and for a three-year period thereafter.
David Bader serves as the Vice President and Chief Financial Officer of
the Company pursuant to the terms of a ten-year employment agreement which
terminates in June 2006. Pursuant to the agreement, Mr. Bader is entitled to
receive an annual base salary of $85,000 per annum, effective as of May 2, 1997.
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 $7,240 per annum. Further pursuant to the terms of
his employment agreement, Mr. Bader has agreed not to compete with the Company
during the term of his employment with the Company and for a three-year period
thereafter.
Effective May 2, 1997, the date of the closing of the Company's initial
public offering of securities (the "Closing"), Gerald Nimberg and the Company
entered into a ten-year employment agreement which will terminate on May 2,
2007, pursuant to which Mr. Nimberg is 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 $120,000 per
annum, commencing on May 2, 1997, 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 $5,440 per
annum. Pursuant to the employment agreement with Mr. Nimberg, on the date of the
Closing, the Company became obligated to loan to Mr. Nimberg the sum of
$250,000, $50,000 of which has been loaned to date, which sum, with simple
interest calculated on the basis of the annual rate of 24%, is to be repaid by
Mr. Nimberg to the Company through payroll deductions over a period of time no
longer than ten years, interest only being payable during the first two years.
Further pursuant to the terms of his employment agreement, Mr. Nimberg has
agreed not to compete with the Company during the term of his employment with
the Company and for a three-year period thereafter.
11
<PAGE> 15
The agreement with each of Messrs. Zellermaier, Bader and Nimberg
provides that, if his employment is terminated by the Company for cause (as
defined in the agreement) or by voluntary unilateral decision by the employee
without cause, then the employee is entitled to his base salary under the
agreement earned, accrued vacation, and reimbursements of expenses, through the
date of termination. In addition, the agreement with each of Messrs. Zellermaier
and Bader provides that, if his employment is otherwise terminated, the employee
is entitled to receive, in one lump sum payment, the employee's total
compensation (base salary plus bonus) paid by the Company to the employee for
the six months prior to termination and all applicable allowances and
reimbursements to the date of termination.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 18, 1998, 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:
BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) PERCENT OWNED
- ------------------------------------ ------------------------ -------------
<S> <C> <C>
Irwin Zellermaier
211 East 70th Street
New York, NY 10021 455,000 (3) 13.0%
Victoria Kleinmunz(4)
17 Bayowski Road
West Orange, NJ 07052 150,000 (4) 4.4%
Gerald Nimberg
1009 Owl Place
Cherry Hill, NJ 08003 180,000 (5)(9) 5.4%
David Bader
38 Milton Road
Babylon, NY 11702 80,000 (6) 2.3%
Vincent J. Putignano
907 Palmer Avenue
Mamaroneck, NY 10543 10,000 (7) .3%
Brien G. Reidy
Seven Miller Lane West
East Hampton, NY 11937 10,000 (8) .3%
ALL OFFICERS AND DIRECTORS AS A GROUP(5) 745,000 20.4%
</TABLE>
- --------------------
(1) As used herein, "beneficial ownership" means the sole or shared power to
vote, or direct the voting of, a security, or the sole or shared power to
dispose, or direct the disposition, of a security. Except as otherwise
indicated, all persons named herein and therein have (i) sole voting power
and investment power with respect to their shares of the Company's Common
Stock, except to the extent that authority is shared by spouses under
applicable law; and (ii) record and beneficial ownership with respect to
their shares of the Company's Common Stock. For purposes of this table,
beneficial ownership is computed pursuant to Rule 13d-3 under the
Securities Exchange
12
<PAGE> 16
Act of 1934, as amended, (the "Exchange Act"); the inclusion of shares as
beneficially owned should not be construed as an admission that such shares
are beneficially owned for purposes of the Exchange Act. Under the rules of
the Securities and Exchange Commission a person is deemed to be a
"beneficial owner"of a security if he or she has or shares the power to
vote or direct the voting of such security or the power to dispose of or
direct the disposition of such security. Accordingly, more than one person
may be deemed to be a beneficial owner of the same security. Shares of
Common Stock subject to options to be held by persons listed in the table
that are exercisable within 60 days of the closing of the Merger are deemed
beneficially owned by such person and outstanding for the purposes of
computing such person's beneficial ownership and to the extent held by
officers and directors listed in the table, the beneficial ownership of all
directors and executive officers beneficial ownership as a group.
(2) Assumes no exercise of the 5,400,000 Common Stock Purchase Warrants
currently outstanding.
(3) Includes 75,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Zellermaier.
(4) Represents shares held by D.P. Morton & Associates, L.L.C., a private
entity investing for its own account, of which Victoria Kleinmunz is the
owner of 98% of the outstanding shares of common stock and the sole
director.
(5) Includes 65,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Nimberg.
(6) Includes 50,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Bader.
(7) Includes 10,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Putignano.
(8) Includes 10,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Reidy.
(9) Does not include 1,500 shares or 3,000 Warrants owned by Ann Nimberg,
Gerald Nimberg's wife, over which Gerald Nimberg disclaims beneficial
ownership. Does not include 10,000 shares owned by Richard Nimberg, Gerald
Nimberg's adult brother, over which Gerald Nimberg disclaims beneficial
ownership.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the employment agreement between Gerald Nimberg and the
Company, at the Closing, the Company became obligated to loan to Mr. Nimberg the
sum of $250,000, $50,000 of which has been loaned to date (the "Closing Loan")
which sum, with simple interest calculated on the basis of the annual rate of
24% is to be repaid by Mr. Nimberg to the Company through payroll deductions
over a period of time no longer than ten years, interest only being payable
during the first two years. Mr. Nimberg is current with respect to his repayment
obligations under the Closing Loan. Ann Nimberg has informed the Company that
she owns approximately 8% of the Affiliated General Partnership. Pursuant to the
terms of the Long Term Loan, the Affiliated General Partnership has established
a credit facility in favor of the Company in the aggregate principal amount of
$2.6 million. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION."
For the fiscal year ended December 31, 1997, there were no other material
transactions between the Company and any of its officers and/or directors which
involved $60,000 or more.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report
1. Financial Statements
Report of Independent Certified Public Accountants
Consolidated Balance Sheet dated as December 31, 1997
Consolidated Statements of Operations for the Years Ended
December 31, 1997 and 1996, Consolidated Statements of
Stockholders' Equity for the Years Ended December 31, 1997 and
1996 Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996 and Notes to Consolidated Financial
Statements
13
<PAGE> 17
2. Exhibits:
See Exhibit Index. The Exhibits listed in the accompanying
Exhibits Index are filed or incorporated by reference as part
of this report.
(b) Reports on Form 8-K:
1. Current Report on Form 8-K dated September 30, 1997 regarding
the acquisition of Ace Venture, Inc.
[THIS SPACE INTENTIONALLY LEFT BLANK]
14
<PAGE> 18
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GENERAL CREDIT CORPORATION
Date: March 24, 1998 By: /s/ Irwin Zellermaier
-------------------------------------------
Irwin Zellermaier, Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Irwin Zellermaier Chairman, Chief Executive March 24, 1998
- --------------------------------- Officer, Director
Irwin Zellermaier
/s/ Gerald Nimberg President, Chief Operating March 24, 1998
- -------------------------------- Officer, Director
Gerald Nimberg
/s/ David Bader Vice President, Secretary, March 24, 1998
- ----------------------------------- Treasurer, Chief Financial Officer,
David Bader Chief Accounting Officer, Director
/s/ Vincent J. Putignano Director March, 24 1998
- -------------------------------
Vincent J. Putignano
/s/ Brien G. Reidy Director March 24, 1998
- ----------------------------------
Brien G. Reidy
</TABLE>
15
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
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 Company.
2.2* Amendment to Amended and Restated Asset Purchase Agreement dated as
of September 6, 1996 among New York Payroll Factors, Inc. and the
Company.
2.3* Second Amendment to Amended and Restated Asset Purchase Agreement
dated as of January 30, 1997 among New York Payroll Factors, Inc.
and the Company.
2.4(2) Contract for Sale of Business between the Company and Ace dated
September 30, 1997 3.1* Certificate of Incorporation of the
Company.
3.2* Certificate of Amendment of Certificate of Incorporation of the
Company.
3.3* Amended and Restated By Laws of the Company.
10.1*(1) Employment Agreement dated as of June 1, 1996 between the Company
and Irwin Zellermaier.
10.2*(1) Employment Agreement dated as of June 1, 1996 between the Company
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 Venture, Inc.
10.7* Promissory note and option grant agreement dated February 7, 1996
made by the Company to David A. Viets.
10.8* Promissory note and option grant agreement dated February 7, 1996
made by the Company to M. S. Chen.
10.9* Promissory note and option grant agreement dated February 19, 1996
made by the Company to Dr. Isreal Kazew.
10.10* Promissory note and option grant agreement dated February 22, 1996
made by the Company to John G. Watson.
10.11* Promissory note and option grant agreement dated February 29, 1996
made by the Company 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.
10.16*(1) Form of Employment Agreement between the Company and Gerald
Nimberg.
10.17* Promissory note and option grant agreement dated April 23, 1996
made by the Registrant to Yung I. Park, M.D.
10.18* Promissory Note dated September 23, 1996 made by the Company to
Walter G. Romano, Jr.
10.19* Promissory Note dated September 30, 1996 made by the Company to
Nick Balson.
10.20* Promissory Note dated February 28, 1997 made by the Company to
Ronald M. Stein.
10.21* Promissory Note dated February 28, 1997 made by the Company to
Robert Stein.
10.22* Promissory Note dated February 28, 1997 made by the Company to Eric
Stein.
10.23* Promissory Note dated February 28, 1997 made by the Company to
Kinserd Limited Partnership.
10.24* Promissory Note dated February 28, 1997 made by the Company to S.J.
Workman.
10.25* Promissory Note dated February 28, 1997 made by the Company to Dan
Cohen.
10.26* Promissory Note dated February 28, 1997 made by the Company to
Jeffrey D. Greenhawt.
10.27* Promissory Note dated February 28, 1997 made by the Company to Jack
S. Greenman.
10.28* Promissory Note dated February 28, 1997 made by the Company to
Thomas Zotos.
10.29* Promissory Note dated February 28, 1997 made by the Company to
Reynaldo Martinez.
10.30* Redemption Agreement dated as of February 15, 1997 by and among the
Registrant, Irwin Zellermaier,
</TABLE>
16
<PAGE> 20
David Bader and D.P. Morton & Associates LLC.
10.31* Common Stock Redemption Agreement dated as of December 30, 1996 by
and among the Company, JMB Holding Inc. and Wall Street Equities,
Inc.
10.32* Extension of Lease dated as of January 17, 1997 between Allen
House, Inc., as agent for Landlord and Mersa Corp., as Tenant.
10.33(2) Promissory Note made by the Company to Dong Hyun Kang dated
September 30, 1997 in the principal amount of $230,000.00
10.34(2) Promissory Note made by the Company to Sue Yi dated September
30,1997 in the principal amount of $150,000.00.
10.35 Reserved.
10.36(3) Lease Agreement dated April 30, 1997 between 370 Lex, L.L.C., as
Landlord, and Carly Holdings, Inc., as Tenant.
10.37(3) Lease Agreement dated December 31, 1997 between Realties 1430, as
Landlord, and Carly Holdings, Inc., as Tenant.
10.38(1)(3) Amendment No. 1 to Employment Contract between the Company and
David Bader (1)
10.39(3) Loan Agreement dated February 10, 1998 between the Company and
Links Court #1 Associates in the principal amount of $2,600,000.00.
10.40(3) Promissory Note made by the Company to Links Court #1 Associates
dated February 10, 1998 in the principal amount of $2,600,000.00.
21.1(3) Subsidiaries of Registrant.
27.1 Financial Data Schedule for the Company as of and for the Year
Ended December 31, 1997.
- ---------------------
* Incorporated by reference to the Company's Registration Statement
on Form SB-2 declared effective on April 25, 1997 by the Securities
and Exchange Commission, SEC File NO. 333-09831.
(1) Contracts with executive officers.
(2) Incorporated by reference to the Company's Current Report on Form
8-K as filed with the SEC on October 10, 1997.
(3) Filed herewith.
17
<PAGE> 21
FINANCIAL STATEMENTS
F-1
<PAGE> 22
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
GENERAL CREDIT CORPORATION
We have audited the accompanying consolidated balance sheet of
GENERAL CREDIT CORPORATION AND SUBSIDIARIES as at December 31, 1997 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1997. 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 consolidated financial position of
General Credit Corporation and Subsidiaries as at December 31, 1997, and the
consolidated results of their operations and their cash flows for the year ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ Cornick, Garber & Sandler, LLP
----------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
NEW YORK, NEW YORK
MARCH 25, 1998
F-1
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
General Credit Corporation:
We have audited the accompanying statements of operations, shareholders'
deficiency, and cash flows of General Credit Corporation for the year ended
December 31, 1996. 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 statements of operations and cash flows 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 of the statements of operations,
shareholders' deficiency, and cash flows provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations, shareholder's deficiency, and
cash flows of General Credit Corporation for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. 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.
/s/ COOPERS & LYBRAND, LLP
Melville, New York
March 14, 1997
F-2
<PAGE> 25
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................ $ 1,794,338
Restricted cash (Notes 2 and 7) .................................................. 2,300,000
Receivables from customers and agents (Note 8 ) .................... $ 731,728
Less allowance for doubtful accounts ............................... 40,000 691,728
------------
Prepaid expenses and other current assets ........................................ 69,308
-----------
Total current asserts ..................................................... 4,855,374
Fixed assets, at cost, less accumulated depreciation
and amortization (Notes 3 and 7) ................................................. 171,903
Notes receivable from officer (Note 5) ............................................... 50,000
Goodwill and other intangibles, net (Note 2) ......................................... 5,103,017
Other assets ......................................................................... 80,018
-----------
Total ..................................................................... $10,260,312
===========
LIABILITIES
Current liabilities:
Notes payable (Note 7) ........................................................... $ 299,483
Accounts payable and accrued expenses ............................................ 400,588
-----------
Total current liabilities ................................................. 700,071
Long-term portion of notes payable ................................................... 2,622,738
Commitments and contingencies (Notes 5 and 11)
SHAREHOLDERS' EQUITY
Shareholders' equity:
Common shares, $.001 par value, 20,000,000 shares
authorized, 3,435,000 shares issued and outstanding .............$ 3,435
Additional paid-in capital ......................................... 7,742,093
Deficit ............................................................ 808,025) 6,937,503
-------------- -----------
Total .................................................................... $10,260,312
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 26
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996
----------- -----------
Fee income, net ................................. $ 2,412,672 $ --
----------- -----------
Selling, general and administrative expenses .... 1,976,743 103,325
Depreciation and amortization ................... 220,886 871
----------- ------------
2,197,629 (104,196)
----------- -----------
Income (loss) from operations ........ 215,043 (104,196)
Other income (expenses):
Interest expense, net ....................... 456,013 108,296
Forfeiture of deposit on acquisition (Note 4) -- 200,000
----------- -----------
Loss before extraordinary item ....... (240,970) (412,492)
Extraordinary item - early extinguishment
of debt (Note 7) ............................ (154,150) --
----------- -----------
Net loss ............................. $ (395,120) $ (412,492)
=========== ===========
Loss per share:
Loss before extraordinary item .............. $ (.10) $ (.23)
Extraordinary item .......................... (.06) --
----------- -----------
Net loss ............................. $ (.16) $ (.23)
=========== ===========
Weighted average number of common
shares outstanding (Note 2) ................. 2,474,041 1,758,000
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 27
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Total
Shareholders'
Additional Deferred Equity
COMMON STOCK Paid-in Offering (Capital
SHARES AMOUNT CAPITAL DEFICIT COSTS DEFICIENCY)
--------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 ....... 1,758,000 $ 1,758 $ 196 $ (413) $ (5,000) $ (3,459)
Options issued in connection
with bridge financing
(Note 7) ................... 10,980 10,980
Payments for offering costs .... (378,462) (378,462)
Net loss for the year ended
December 31, 1996 .......... (412,492) (412,492)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 ..... 1,758,000 1,758 11,176 (412,905) (383,462) (783,433)
Redemption of common
shares (Note 9) ............ (1,198,000) (1,198) (1,198)
Units issued in public offering,
net of costs (Note 9) ...... 2,700,000 2,700 7,156,567 383,462 7,542,729
Shares issued in connection
with acquisition (Note 4) .. 125,000 125 385,250 385,375
Shares issued in connection
with the prepayment of
debt (Note 7) .............. 50,000 50 154,100 154,150
Options issued to consultants
(Note 9) ................... 35,000 35,000
Net loss for the year ended
December 31, 1997 .......... (395,120) (395,120)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 ..... 3,435,000 $ 3,435 $ 7,742,093 $ (808,025) $ -- $ 6,937,503
=========== =========== =========== =========== =========== ===========
</TABLE>
The above amounts have been restated to give retroactive effect to the plan of
recapitalization (see Note 1).
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 28
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Net loss $ (395,120) $ (412,492)
Adjustment to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization ...................................... 220,886 70,351
Issuance of stock options .......................................... 35,000 10,980
Issuance of common stock relating to prepayment of debt ............ 154,150 --
Bad debt expense ................................................... 40,000 --
Change in assets and liabilities, net of effects of
acquisition of businesses:
Receivables from customers and agents ........................... (731,728) --
Prepaid expenses ................................................ (69,308) --
Other assets .................................................... (72,296) (5,425)
Accounts payable and accrued expenses ........................... 129,743 270,845
----------- -----------
Net cash used for operating activities ........................ (688,673) (65,741)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets ................................................. (123,891) --
Payment for purchases of businesses ...................................... (4,609,500) --
Loans to officer ......................................................... (50,000)
----------- -----------
Net cash used for investing activities ........................ (4,783,391) --
----------- -----------
Cash flows from financing activities:
Borrowings under long-term and short-term debt ........................... 2,550,000 --
Repayments of long-term and short-term debt .............................. (7,779) --
Borrowings under bridge financing ........................................ 366,390 518,000
Repayments of bridge financing ........................................... (884,390)
Net proceeds from issuance of units in public offering (less
offering costs paid of $557,271 in 1997 and $378,462 in 1996) ......... 7,542,729 (378,462)
Redemption of common stock ............................................... (1,198) --
Debt issue costs.......................................................... -- (68,480)
Repayment of loan payable to officer and shareholder ..................... -- (7,150)
Cash restricted for debt payments ........................................ (2,300,000) --
----------- -----------
Net cash provided by financing activities ..................... 7,265,752 63,908
----------- -----------
Net increase (decrease) in cash and cash equivalents ......................... 1,793,688 (1,833)
Cash and cash equivalents, beginning of year ................................. 650 2,483
----------- -----------
Cash and cash equivalents, end of year ....................................... $ 1,794,338 $ 650
=========== ===========
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements
F-6
<PAGE> 29
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
--------- --------
<S> <C> <C>
Supplemental information:
Interest paid during the year.................................................... $ 427,338 $ --
--------- --------
Income taxes paid during the year ............................................... $ -- $ --
--------- --------
Supplemental schedule of noncash investing and financing
activities:
Common stock issued in connection with
acquisition of business ................................................... $ 385,375
---------
Common stock issued in connection with
prepayment of debt ........................................................ $ 154,150
---------
Notes issued in connection with acquisition
of business ............................................................... $ 380,000
---------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-7
<PAGE> 30
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
General Credit Corporation (the "Company"), was incorporated in
February 1995, for the purposes of seeking out business opportunities, including
acquisitions. On May 2, 1997, the Company emerged from the development stage by
acquiring the operations of New York Payroll Factors, Inc. ("NYPF") (see Notes 2
and 4). Prior to May 2, 1997, the Company's activities were limited to
administrative activities.
Under its original certificate of incorporation, the Company was
authorized to issue 200 shares of its no par value common stock. Pursuant to a
plan of recapitalization, effective April 24, 1996, the Company increased the
number of authorized shares to 20,000,000 shares with a $.001 per share par
value and effected a 8,790 for one stock split in the form of a stock dividend
to shareholders of record. The accompanying financial statements have been
retroactively adjusted to reflect the foregoing recapitalization.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND OPERATIONS
The consolidated financial statements include the accounts of General
Credit Corporation and its subsidiaries, all of which are wholly-owned. 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 and, to a lesser extent, the discounted purchase of credit card sales
slips. Gross proceeds from the purchase of these checks and credit card sales
slips, since the acquisition of NYPF on May 2, 1997, are estimated to be
approximately $220 million in checks and $835,000 in credit card slips. The
Company's customers comprise numerous small and medium sized labor intensive
garment contracting firms located in the New York metropolitan area and other
northern New Jersey areas. Revenues, which are comprised of the discounted
portion of checks and credit card sales slips purchased, are recognized when
payment is made.
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
(vehicles, 3 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.
F-8
<PAGE> 31
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 value of
identifiable net assets acquired is recorded as goodwill which is being
amortized on a straight-line basis over twenty years. At December 31, 1997,
goodwill was $4,577,351, net of accumulated amortization of $152,340 for the
period from May 2, 1997 to December 31, 1997.
Amounts paid for covenants not-to-compete are stated at cost and are
amortized using the straight-line method over the non-compete period of five
years. At December 31, 1997, covenants not-to-compete were $525,666, net of
accumulated amortization of $56,334.
The Company continually evaluates the existence of goodwill impairment
on the basis of whether the goodwill is fully recoverable from projected,
undiscontinued projected 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, 1997.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments, purchased
with original maturities of three months or less, to be cash equivalents. At
December 31, 1997, the Company had $2,300,000 in restricted cash invested in
short-term, highly liquid investments. These investments collateralize a portion
of the Company's indebtedness (see Note 7).
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 FDIC insured amounts.
F-9
<PAGE> 32
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK (CONTINUED)
The Company believes the concentration of credit risk with respect to
receivables from customers is limited due to the large number of customers
comprising the Company's customer base and the fact that no single customer
represents more than 5% of the total. The Company performs ongoing informal
background and financial evaluations of its customers and does not require
collateral. The Company's agency agreements (see Note 8), have generated
approximately 21.2% of its fee income in 1997. The loss of these arrangements
could have a significant impact on the Company's financial position and results
of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents and receivables are reflected in the
accompanying balance sheets at amounts considered by management to reasonably
approximate fair value. It is not practicable to assess the fair value of the
Company's 10%, 22% and 24% notes payable (see Note 7) because management
believes such debt is not readily marketable due to the nature of its incurrence
and the Company's lack of operating history prior to 1997.
USES 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, and reported amounts of revenues and expenses during the reporting
period. Actual results could differ those estimates.
LOSS PER SHARE
Loss per share has been computed by dividing net losses by the weighted
average number of common shares outstanding. The effect of outstanding stock
options and warrants are not included as they would be anti-dilutive.
Retroactive restatement has been made to all share and per share
amounts for the recapitalization discussed in Note 1.
F-10
<PAGE> 33
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. FIXED ASSETS
Fixed assets consist of the following at December 31, 1997:
Furniture, fixtures and office equipment ............ $ 158,519
Vehicles ............................................ 23,371
-----------
Total .......................................... 181,890
Less accumulated depreciation and amortization ...... (9,987)
-----------
Net ............................................ $ 171,903
===========
Depreciation expense for the year ended December 31, 1997 was $9,987.
There was no depreciation expense for the year ended December 31, 1996.
4. ACQUISITIONS
NYPF
In 1996, the Company entered into a definitive agreement to acquire
NYPF and made non-refundable payments of $200,000. Since the acquisition did not
close by November 15, 1996, the closing date stipulated in the original
agreement, the deposit of $200,000 was expensed to operations during fiscal
1996. On January 13, 1997, the Company and NYPF entered into a new agreement to
acquire NYPF for $4,500,000 in cash and 125,000 shares of common stock. The
acquisition of NYPF was closed in May 1997 upon the conclusion of the public
offering (Note 9). The value assigned to the shares issued was $3.083 a share,
which equals their value in the public offering. This acquisition was treated as
a purchase for accounting purposes and the operations of NYPF have been included
in the consolidated statement of operations from May 2, 1997. The Company
recorded goodwill of $4,497,691 and a covenant not-to-compete of $350,000
relating to the NYPF acquisition.
ACE VENTURE, INC. ("ACE")
On September 30, 1997 the Company acquired the operations of Ace (an
exclusive sales agent of the Company) for $489,500 (which Includes legal costs
of $9,500). The purchase price was paid for by the Company by its issuance of
notes totalling $380,000 and cash of $109,500. The notes bear interest at 10% a
year and are payable in equal monthly installments of $7,040 for principal and
interest over 72 months to October 2003. This acquisition was treated as a
purchase for accounting purposes and the operations of Ace have been included in
the consolidated statement of operations from October 1, 1997. The Company
recorded goodwill of $232,000 and a covenant not-to-compete of $232,000 relating
to the Ace acquisition.
In addition, the Company entered into a ten year employment agreement
with the president of Ace at a base annual salary of $130,000, plus bonuses, if
certain sales volume is achieved. The base salary increases each year by 5% or
the increase in the consumer price index, whichever is greater.
F-11
<PAGE> 34
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS (CONTINUED)
The following unaudited pro forma results of operations assume each of
these acquisitions occurred as of January 1, 1996:
DECEMBER 31,
------------------------
1997 1996
---------- ----------
Net revenue ........................ $3,500,387 $2,605,549
Net income ......................... 264,342 298,180
Earnings per share (diluted) ....... .10 .12
The information utilized above for NYPF is based upon its audited
financial statements for the year ended December 31, 1996 and unaudited
financial information for the period from January 1, 1997 to May 1, 1997. The
information for Ace is based upon unaudited information for the period
commencing March 1, 1996 (inception) through December 31, 1996 and for the
period from January 1, 1997 to September 30, 1997. Pro forma per share amounts
are based on pro forma net income divided by the sum of average shares
outstanding each year, plus the number of shares issued to one seller and the
number of shares and warrants issued in the initial public offering to generate
net cash proceeds equal to the cash purchase price. The above pro forma
information does not purport to be indicative of the results of operations that
would have occurred had the transaction taken place at the beginning of the
periods presented, nor is it indicative of the future results of operations.
5. NOTES RECEIVABLE OFFICER
On November 12, 1997 and December 29, 1997, the Company advanced
$20,000 and $30,000, respectively, to one of its officers. The advances are
evidenced by unsecured notes due three years after issuance and bear interest at
24% a year. Interest income on these notes was $400 in 1997. These advances are
in connection with this officer's employment agreement under which the Company
has agreed to lend up to $250,000 to him.
6. OTHER ASSETS
Other assets are comprised of:
DECEMBER 31,
-------------------------
1997 1996
---------- ----------
Deposits ................................$ 26,490 $ 4,603
Prepaid consulting fee (see Note 9) ..... 48,000 --
Other ................................... 5,528 159
---------- ----------
Total $ 80,018 $ 4,762
========== ==========
F-12
<PAGE> 35
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. NOTES PAYABLE
<TABLE>
<CAPTION>
<S> <C> <C>
Notes payable are comprised of the following at December 31, 1997:
2% over prime rate note payable to a bank (A) .......... $ 250,000
24% note payable to a partnership originally
due June 1999 (B) ................................... 1,400,000
22% note payable to a partnership originally
due February 1998 (B) ............................... 900,000
10% notes payable relating to the
acquisition of Ace (see Note 4) due
October 2003. Monthly payments
of principal and interest total $7,040 .............. 372,221
-------------
Total 2,922,221
Less current maturities ................................. 299,483
-------------
Noncurrent portion of long-term debt .................... $ 2,622,738
=============
</TABLE>
F-13
<PAGE> 36
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. NOTES PAYABLE (CONTINUED)
Maturities of the noncurrent portion of long-term debt are as follows:
Year Ending December 31:
1999. . . . . . . . . . . . . . . . $ 54,664
2000. . . . . . . . . . . . . . . . 60,388
2001. . . . . . . . . . . . . . . . 2,366,712
2002. . . . . . . . . . . . . . . . 73,697
2003. . . . . . . . . . . . . . . . 67,277
------------
$ 2,622,738
============
(A) The Company has a $500,000 unsecured credit facility with a
bank, of which $250,000 is available for direct borrowings and
the balance can be borrowed against uncollected checks. The
note is currently being continuously renewed on a monthly
basis.
(B) A portion ($200,000) of the 24% notes is owed to the wife of
one of the Company's officers who is a partner in the
partnership. The notes are collateralized by receivables and
certain fixed assets and require the Company to maintain
collateral, in the form of checks or cash equal to the amount
of the loans. Interest on these notes was approximately
$242,000 in 1997.
In February 1998, the above 24% and 22% notes were combined
and an additional $300,000 was borrowed. The new note for
$2,600,000 is due in February 2001 and bears interest at 24% a
year, payable monthly. The loan has the same collateral
requirements as above and contains a covenant which limits
losses before depreciation expense and amortization of
goodwill to an amount not greater than $50,000 a year or in
any two consecutive quarters. In addition, there is a
prepayment penalty of $312,000 if the note is paid prior to
its due date.
During January and February 1997 and in 1996, the Company obtained
$66,390 and $518,000, respectively, of bridge financing to provide
interim working capital and pay for costs associated with the
public offering (see Note 9). These uncollateralized notes bore
interest at 12% a year and were paid upon closing of the public
offering. In addition, in 1996 certain bridge lenders received
options to purchase a total of 198,000 shares of the Company's
common stock at $1 per share for a term of one year from the
closing of the public offering. The options issued in connection
with the bridge financing were valued at approximately $11,000.
During February 1997, the Company borrowed $300,000 through the
issuance of notes to ten unrelated parties. These unsecured notes
bore interest at 18% a year and were paid upon closing of the
public offering. Interest was to be paid monthly commencing June 1,
1997 with the principal and all unpaid interest due on December 31,
2001. The notes contained prepayment clauses which were calculated
based on the provisions in the notes. The Company issued 50,000
shares of its common stock with a value (at the public offering
price per share of $3.083) totalling $154,150 to prepay the notes.
The $154,150 has been reflected in the consolidated statements of
operations as an extraordinary item for the early extinguishment of
debt.
F-14
<PAGE> 37
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
In addition to the employment contract discussed in Note 4, the Company
has employment contracts with its three executive officers that expire at
various dates through April 2007. The aggregate salary pursuant to these
contracts aggregates $365,000 a year excluding bonuses, fringe benefits and cost
of living increases. One of the officers is entitled to annual salary
adjustments for increases in the Consumer Price Index. These officers are
entitled to receive a lump sum payment equal to the employee's total
compensation paid for the six month period prior to termination if their
employment is terminated for other than cause or by their unilateral decision.
The Company is obligated under noncancelable real property operating
lease agreements. Minimum rents under these obligations are as follows:
Year Ending December 31:
1998 . . . . . . . . . . . .. . . . . . . . . . .$122,485
1999 . . . . . . . . . . . .. . . . . . . . . . . 132,245
2000 . . . . . . . . . . . .. . . . . . . . . . . 121,672
2001 . . . . . . . . . . . .. . . . . . . . . . . 45,516
2002 . . . . . . . . . . . .. . . . . . . . . . . 23,580
2003 . . . . . . . . . . . .. . . . . . . . . . . 3,667
These leases contain clauses with respect to related operating costs.
Rent expense was $56,977 and $-0- for fiscal 1997 and 1996, respectively.
The Company is contractually obligated pursuant to two agency
agreements with unrelated entities. These agreements provide that the entities
will refer certain check factoring customers to the Company for fees ranging
from 40% to 50% of the net fees revenues received. These agreements terminate in
January 2001. The Company makes noninterest bearing advances to these agents for
use in their check cashing activities. These advances are evidenced by notes and
are partially collateralized by personal assets of the agents; at December 31,
1997, such advances totaled approximately $253,000.
9. SHAREHOLDERS' EQUITY
COMMON STOCK REDEMPTION
In February 1997, the Company redeemed 1,198,000 common shares from its
shareholders for $1,198. The repurchased shares, which were cancelled, are
available for future issuance.
F-15
<PAGE> 38
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY (CONTINUED)
PUBLIC OFFERING
In April 1997 the Company sold 900,000 units to the public for $10 per
unit. Each unit consists of three shares of common stock and six redeemable
common stock warrants. Each warrant entitles to holder to purchase one
additional share of common stock at an exercise price of $3.375 from the
effective date of the offering through April 24, 2002. Upon certain conditions,
the Company is 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 offering, the Company granted the underwriter an
option to purchase up to 90,000 units at $16.50 a unit, exercisable during a
five-year period commencing on the effective date.
As additional compensation for the underwriter's services in connection
with the offering, the Company paid the underwriter a nonaccountable expense
allowance of 3% of the total purchase price and engaged the underwriter as a
financial advisor for a three-year period from the closing of the offering at a
total cost of $108,000 which was paid at closing.
The net proceeds to the Company after deducting the expenses of the
offering was $7,159,267.
NONQUALIFIED STOCK OPTIONS
On November 4, 1997, the Company issued to its three executive officers
options to purchase a total of 190,000 shares of the Company's stock. These
options are exercisable until November 3, 2000 at $2.125 per share. The Company
may receive income tax benefits for these options when they are exercised. Such
income tax benefits are credited to additional paid-in capital when realized. No
options have been exercised as of December 31, 1997.
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based
Compensation," for stock options granted to employees, officers and directors
and, therefore, applies Accounting Principles Board Opinion No. 25. Accordingly,
no compensation cost has been recognized for the stock options granted. If the
Company had elected to recognize compensation cost for the nonqualified options
granted based upon their fair values at the grant date consistent with the
method of SFAS No. 123, the net loss and loss per share on a pro forma basis for
the year ended December 31, 1997 would be as follows:
Net loss:
As reported $ (395,120)
Pro forma $ (619,928)
Loss per share:
As reported $(.16)
Pro forma $(.25)
F-16
<PAGE> 39
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY (CONTINUED)
NONQUALIFIED STOCK OPTIONS (CONTINUED)
The fair value of the Company's stock options used to compute the pro
forma net loss and net loss per share disclosures are their estimated present
values at grant date using the Black-Scholes option pricing model with the
following assumptions: expected volatility of 80.84%, risk free interest of
5.715% and an expected holding period of three years.
In addition, options to purchase a total of 30,000 shares of stock
were issued to three outside consultants in 1997 under the same terms described
above. The fair value of these options was $35,000 on the date of grant using
the Black-Scholes option pricing model utilizing the same assumptions described
above. This amount was charged to operations.
STOCK OPTION PLAN:
In March 1998, the Company adopted, subject to shareholder approval,
the 1998 Stock Option Plan ("Plan") which provides for the granting of options
to purchase up to 500,000 shares of common stock. The Plan provides for the
issuance of incentive stock options (as defined in the Internal Revenue Code)
and nonqualified options. The exercise price cannot be less than the fair market
value of the common stock on the date of grant, except options granted to the
holder of more than 10% of the outstanding common stock may not be less than
110% of the fair market value of the common stock on the date of grant. The term
of each option may not exceed ten years, except the term of incentive stock
options granted to a holder of more than 10% of the outstanding common stock may
not exceed five years. No options may be granted under the Plan after March 24,
2008. No options have been granted under this Plan.
10. INCOME TAXES
At December 31, the Company has net operating loss carryforwards of
approximately $702,000 for federal income tax purposes. These carryforwards
expire in 2011 and 2012. As a result of the public offering, in April 1996, the
amount of loss carryforwards which can be utilized to offset future taxable
income are limited to approximately $553,000 a year, plus any loss carryforwards
incurred after April 25, 1997.
While generally accepted accounting principles permit the recognition
of a deferred tax asset for the benefit of net operating loss carryforwards,
they also require the recognition of a valuation allowance against such asset
when it is more likely than not that such benefit will not be realized. As a
result of the Company's losses since inception and its relatively brief
operating history, it has recorded a valuation allowance equal to its net
deferred tax asset account.
F-17
<PAGE> 40
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
Deferred taxes relate to the following carryforwards and temporary
differences at December 31, 1997:
Deferred tax assets:
Net operating loss carryforwards $ 323,000
Allowance for doubtful accounts 18,000
------------
Total 341,000
------------
Less deferred tax liabilities:
Accelerated depreciation of property
and equipment 5,000
Accelerated amortization of intangible
assets 6,000
------------
Total 11,000
------------
Balance 330,000
Less valuation allowance 330,000
------------
Net deferred income tax assets after valuation
allowance $ --
============
11. PENDING CLAIM
A former bridge loan lender to the Company has claimed that he is owed
750,000 shares of the Company's stock and has threatened a lawsuit if his claim
is not satisfied. In management's opinion, this claim is without merit.
F-18
<PAGE> 41
LIST OF EXHIBITS
Exhibit
Number Exhibit Description
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10.36 Lease Agreement dated April 30, 1997 between 370 Lex, L.L.C., as
Landlord, and Carly Holdings, Inc., as Tenant.
10.37 Lease Agreement dated December 31, 1997 between Realties 1430, as
Landlord, and Carly Holdings, Inc., as Tenant.
10.38 Amendment No. 1 to Employment Contract between the Company and
David Bader (1)
10.39 Loan Agreement dated February 10, 1998 between the Company and
Links Court #1 Associates in the principal amount of $2,600,000.00.
10.40 Promissory Note made by the Company to Links Court #1 Associates
dated February 10, 1998 in the principal amount of $2,600,000.00.
21.1 Subsidiaries of Registrant.
27.1 Financial Data Schedule for the Company as of and for the Year
Ended December 31, 1997.
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EXHIBIT 10.36
AGREEMENT OF LEASE, made as of this 30th day of April 1997, between 370 LEX,
L.L.C., party of the first part, hereinafter referred to as CARLY HOLDING, INC.,
party of the second part; hereinafter referred to as TENANT.
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner
SUITE #2000 in the building known as 370 LEXINGTON AVENUE in the Borough of
Manhattan, City of New York, for the term of three (3) years, three (3) 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-seven, and to end on
the 31st day of August two thousand, both dates inclusive, at an annual rental
rate of:
SEE ATTACHED RIDER
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
provided such use is in accordance with the Certificate of Occupancy for the
building, if any, and or 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
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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:
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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
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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:
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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 OF LAW, FIRE INSURANCE, FLOOR LANDS:
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6. Prior to the commencement of the lease term Tenant is then in
possession, and at all times thereafter Tenant shall, at Tenant's sole cost and
expense, promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of the New York Board of Fire
Underwriters, or the Insurance Services Offices, 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 or the building (including the use
permitted under the lease):
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 thereto. Tenant shall not do or permit any act or thing to be done in or
to the demised premises which is contrary to law, or which will invalidate or be
in conflict with public liability, fire or other policies of insurance at any
time carried by or for the benefit of Owner. Tenant shall 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
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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:
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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:
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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
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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:
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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 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.
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(e) Nothing contained herein above shall relieve Tenant from
liability that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first 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 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 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:
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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.:
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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:
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12. Rates and conditions in respect to submetering or rent inclusion,
as the case may be,
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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:
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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.
VAULT; VAULT SPACE, AREA:
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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
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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:
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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:
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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
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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:
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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 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.
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REMEDIES OF OWNER AND WAIVER OF REDEMPTION:
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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
Page -10-
<PAGE> 11
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 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.
Page -11-
<PAGE> 12
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
a bated (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
Page -12-
<PAGE> 13
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 of any department or
subdivision thereof of any
Page -13-
<PAGE> 14
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:
- -----------
30. Anything elsewhere in this lease to the contrary notwithstanding,
if the New York Board of Fire Underwriters or the New York Fire Insurance
Exchange or any bureau, department or official of the federal, state or city
government recommended or require the installation of a sprinkler
Page -14-
<PAGE> 15
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.
SECURITY:
- ---------
32. Tenant has deposited with Owner the sum of $6,566.50 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
Page -15-
<PAGE> 16
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 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 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 EXCAVATING 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
Page -16-
<PAGE> 17
excavation, license to enter upon the demised premises for the purpose of doing
such work as said person shall deem necessary to preserve the wall or the
building of which demised premises form a part from injury or damage and to
support the same by proper foundations without any claim for damages or
indemnity against Owner, or diminution or abatement of rent.
RULES AND REGULATIONS:
- ----------------------
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 gents 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 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 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.
Page -17-
<PAGE> 18
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 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.
In Witness Whereof, Owner and Tenant have respectively signed and sealed
this lease as of this day and year first above written.
370 LEX L.L.C
Witness for Owner: By: /s/ [L.S.]
----------------------------
- ------------------
CARLY HOLDING, INC.
Witness for Tenant: By: /s/ Irwin Zellermaier [L.S.]
-------------------------------
Irwin Zellermaier, President
- ------------------
Page -18-
<PAGE> 19
RIDER ATTACHED HERETO AND MADE PART OF LEASE DATED AS OF THE 30 DAY OF APRIL,
1997 BY AND BETWEEN, 370 LEX L.L.C., AS LANDLORD, AND CARLY HOLDING, INC., AS
TENANT, COVERING SUITE #2000 AT 370 LEXINGTON 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 39 through 89 that follow, the Additional Clauses
shall prevail.
30. Tenant shall not be required to pay the first two months' rent
(i.e., June 1, 1997 - July 31, 1997.) Notwithstanding anything to the contrary
contained herein, all other rental obligations of Tenant set forth below are in
full force and effect.
40. RENT:
Tenant shall pay to Landlord an annual rental rate as follows:
(a) For the period commencing August 1, 1997 and ending May 31, 1998,
the annual rental rate of $39,399.00 Dollars, payable in equal monthly
installments of $3,283.25, in advance, on the first day of each and every month
during said period.
(b) For the-period commencing June 1, 1998 and ending May 31, 1999, the
annual rental rate of $39,399.00 Dollars, payable in equal monthly installments
of $3,283.25, in advance, on the first day of each and every month during said
period.
Notwithstanding anything to the contrary contained in paragraph (b)
above, Tenant shall only be required to pay $1,641.63 per month for the months
of June, 1998 and July, 1998.
(c) For the period commencing June 1, 1999 and ending May 31, 2000, the
annual rental rate of $39,399.00 Dollars, payable in equal monthly installments
of $3,283.25, in advance, on the first day of each and every month during said
period.
(d) For the period commencing June 1, 2000 and ending August 31, 2000,
the annual rental rate of $39,399.00 Dollars, payable in equal monthly
installments of $3,283.25, in advance, on the first day of each and every month
during said period.
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 in
connection with the
Page -19-
<PAGE> 20
execution of this Lease or the showing of the Demised Premises other than
Lexington Real Estate Company and Newmark & Company Real Estate, Inc.
(collectively, the "Broker") and agrees to hold and save Landlord harmless from
and against any and all liabilities from any claims of any broker other than the
Broker, (including, without limitation, the cost of counsel fees in connection
with the defense of any such claims).
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 for the work that the Landlord has
obligated itself to perform, as more particularly described in the Work Letter
annexed hereto, if any.
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 the demised premises from 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, limited
liability company, unincorporated association, limited liability company, 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,
Tenant shall look solely to the estate and property of such Landlord Entity in
the land and Building of which the 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
of 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
Page -20-
<PAGE> 21
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 $5,000,000 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 therefore. 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 canceled 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
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
Page -21-
<PAGE> 22
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. As long as Tenant is not in default under any of the covenants of
this Lease Landlord shall furnish Tenant with all such electric energy
reasonably required in connection with the permitted use and occupancy of the
Demised Premises. In addition to all other rent and additional rent payable
herein, Tenant shall pay for the cost of such service at the rate of $3.00
(subject to survey) per square foot (subject to possible increase as hereinafter
set forth), which payments shall be made in equal monthly installments in
advance and shall constitute additional rent hereunder. At Landlord's option,
Landlord may at any time cause a survey to be made by an independent electrical
engineer or consultant selected by Landlord of the consumption of electric
energy in the Demised Premises. The survey will include a determination of the
power requirements of Tenant's equipment (including, but not limited to, any air
conditioning equipment provided by Landlord) and of the lighting in the Demised
Premises and a determination of the periods of use of such equipment and
lighting. The result of the survey will be projected with such adjustments as
Landlord determines to arrive at an estimate of the annual consumption of
electric energy in the Demised Premises. On the basis of said estimate, the
estimated cost attributable to the furnishing by Landlord of such quantity of
electric energy to the Demised Premises shall be determined. If such estimated
cost shall be greater than the sum set forth above, then the payment described
above shall be increased as of the date of such survey so as to reflect such
estimated additional cost. There may be, from time to time thereafter, a further
adjustment in such payment based on a survey as above provided, or if there is
any change in the cost attributable to the furnishing by Landlord of electric
energy to the Demised Premises. Notwithstanding any other terms and conditions
hereof, in~ the event that the cost to Landlord of furnishing electricity
service shall increase, then Landlord may, at its option to be exercised by
written notice to Tenant, increase the payment due hereunder by an amount equal
to the sum set forth above multiplied by the percentage increase in the cost to
Landlord. The increased additional rent payable by virtue of such notice shall
commence as of the date of said increase in the rate payable by Landlord to such
public utility. "Cost" as such term is used in this paragraph F shall be deemed
to include, without limitation, all sales, use, excise or other taxes. Under no
circumstances shall the electrical inclusion charge be less than the amount set
forth above.
B. Tenant's use of electric current 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. Tenant shall not make or
perform or permit the making of, any alterations to wiring, installations or
other electrical facilities in or serving the Demised Premises without the prior
consent of Landlord in each instance (which shall not be unreasonably withheld).
Should Landlord grant any such consent, all additional risers or other equipment
required therefore shall be installed by Landlord and the cost thereof
Page -22-
<PAGE> 23
shall be paid by Tenant upon Landlord's demand; any such work performed by
Landlord shall be comparable to costs payable for similar type installations
performed by owners of property similar to the Building.
C. Unless the same shall arise due to the willful act of Landlord in
default of any of the terms and conditions of this Lease, 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 company servicing the Building
with electricity or for any other reason whatsoever. Landlord shall not in any
other way 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
electrical services is changed or is no longer available or suitable for
Tenant's requirements.
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 sh.111 no longer
be obligated to furnish Tenant with electric energy, provided, however that such
termination' date may 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 exercise 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 servicing the
Demised Premises to the extent available and safely capable of being used for
such purposes and only to the extent of Tenant's then authorized connected load.
Landlord shall not be obligated to pay any part of any cost required for
Tenant's direct electrical service.
E. If any tax (other than a Federal, State or City Income Tax) is
imposed upon Landlord's receipt from the sale or resale of electricity to Tenant
by any Federal, State or Municipal Authority, Tenant covenants and agrees that
where permitted by law, Tenant's pro rata share of such taxes shall be passed on
to and included in the bill of, and paid by Tenant to Landlord.
50. RENT ESCALATION - COST INCREASE:
--------------------------------
(A) For purposes of the formula and other provisions set forth in this
Article and elsewhere in this Lease:
(1) "Rate" shall mean the minimum regular hourly wage rate, including
adjustments of every kind and nature (excluding, without limitation, all sums
paid for fringe benefits), prescribed for Porters (as hereinafter defined) for
Class A office buildings (or any successor category), pursuant to the present
and any successor agreement between the Realty Advisory Board on Labor
Relations, Incorporated (or any successor thereto) and Local 32B of the Building
Service Employees International Union, AFL-CIO (or any successor thereto),
covering the wage rates for porters in such buildings ("Agreement"), provided,
however, that, (a) if, at any time during the Term, regular employment of
Porters occurs on days or during hours when the overtime or other premium pay
rates are in effect pursuant to the Agreement, "Rate" shall mean the average
hourly wage rate, including adjustments of every kind and nature (excluding,
without limitation, fringe benefits) for the hours in a calendar week during
which Porters are regularly employed, and that, (b) if, at any time during the
Term, no Agreement exists, "Rate" shall mean
Page -23-
<PAGE> 24
the average minimum regular hourly wage rate, including adjustments of every
kind and nature (excluding, without limitation, fringe benefits) actually
payable to Porters at the rate for Porters employed at Class A office buildings
as such buildings are presently described in the Agreement, except that at no
time shall the amount payable be less than the amount being paid by the Tenant
pursuant to this paragraph at the time the rate ceases to exist.
(2) "Base Rate" shall mean the Rate in effect during the calendar year
in which this Lease is
(3) "Multiplication Factor" shall mean 1,713.
(4) "Porters" shall mean those employees who have been employed for ten
(10) years or more and who are engaged in the general maintenance and operation
of office buildings, claissified as "Others" in the current Agreement or,
failing such classification in any subsequent Agreemerit, the most nearly
comparable classification in such Agreement.
(5) *INTENTIONALLY DELETED
(6) *INTENTIONALLY DELETED
(B) If, in any year during the Term, the Rate exceeds the Base Rate,
Tenant shall pay Landlord an amount ("Expense Escalation") equal to the product
of the Multiplication Factor multiplied by 100% of the amount by which the Rate
exceeds the Base Rate, appropriately adjusted for any such period which is only
partially within the Term. The Expense Escalation shall be payable in equal
monthly installments, commencing with the first installment of Fixed Rent due on
or after the effective date of any increase in the Rate and continuing
thereafter until the effective date of any subsequent increase, whereupon such
installments shall be appropriately adjusted. Landlord shall furnish Tenant with
a statement itemizing Tenant's liability pursuant to this subdivision when ever
such liability arises or changes. Except as limited by Articles 9 and 10,
Tenant's obligation to make such payments shall survive the Expiration Date or
any sooner termination of this Lease Notwithstanding the foregoing, if, by
reason of any law or any rule, order,' regulation or requirement of any
governmental or quasi-governmental authority having or asserting jurisdiction
(collectively, "Law"), an increase in the Rate is reduced or does not take
effect, or increases in the Rate are limited or prohibited, then, for the period
covered by the Law ("Law Period"), the applicable increase ("Increase") in the
Rate for purposes of this Article shall be the increase in the Rate ("Prior
Increase") which most immediately preceded the effective date of the Law. The
Increase shall take effect on the date following the expiration of the period
for the Prior Increase and an equivalent Increase shall take effect on each
anniversary of such effective date during the Law Period.
(C) Each notice given by Landlord pursuant to subdivision (B) shall be
binding upon Tenant unless, within thirty (30) days after its receipt of such
notice, Tenant notifies Landlord of its disagreement therewith, specifying the
portion thereof with which Tenant disagrees. Pending resolution of such dispute,
Tenant shall, without prejudice to its rights, pay all amounts determined by
Landlord to be due, subject to prompt refund by Landlord (without interest) upon
any contrary determination.
(D) Landlord's failure to timely bill all or any portion of the Expense
Escalation (or any increase
Page -24-
<PAGE> 25
therein) for any period or periods during the Term (whether because of failure
to timely consummate an Agreement or because of error or oversight of Landlord
or its managing agent or for any other reason) shall not constitute a waiver of
Landlord's right to ultimately collect such amount, nor a waiver of Landlord's
right to bill Tenant at any subsequent time retroactively for the entire amount
so unbilled, which unbilled amount shall be payable within thirty (30) days
after being so billed.
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 rea estate tax escalation shall mean the year July 1,
1997./June:%O, 1998.
2. The term "Percentage" shall be deemed to mean .76%.
3. The term "the Building Project" shall mean all of the land
together with the improvements thereon known as 370 Lexington 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 real
property taxes and special or other assessments and/or vault charges levied,
assessed or imposed at any time by any governmental authority 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 and any Business
Improvement District Charges. 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 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
Page -25-
<PAGE> 26
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 Article 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 provide 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 therefore. 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 p~id 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 therefore, 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 recomputation. 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
therefore 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.
(2) Tenant shall separately reimburse Landlord upon billing therefore
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
Page -26-
<PAGE> 27
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.
52. * INTENTIONALLY DELETED
-----------------------
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 ten (10) 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 contained in this Article 53 or elsewhere in this Lease shall prevent
Landlord from commencing legal proceedings against Tenant for the nonpayment 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.
Page -27-
<PAGE> 28
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 o(
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.
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
Page -28-
<PAGE> 29
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) *INTENTIONALLY DELETED
(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 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
Page -29-
<PAGE> 30
(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 it 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 therefore, 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 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
Page -30-
<PAGE> 31
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 (excluding sums paid for
the sale or rental of fixtures and leasehold improvements installed by Tenant)
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 ease 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 (60%) 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.
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 Tenants 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
Page -31-
<PAGE> 32
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 reasonable attorney's fees, in instituting,
prosecuting or defending any action or proceeding to successful adjudication,
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 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 therefore, 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
Page -32-
<PAGE> 33
services. Tenant agrees to pay all such charges within ten (10) days after
Landlord or Landlord's managing agent has submitted a bill therefore 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:
---------------------------
Landlord, at its expense, shall perform building standard cleaning
services to the Demised Premises. Tenant shall use its best efforts to cause the
Demised Premises to be kept clean. In the event Tenant desires additional
cleaning services which are not deemed building standard, Tenant shall utilize
for such cleaning only persons as designated by Landlord. Landlord hereby
designates Superior Cleaning, L.L.C. as its designated cleaning contractor.
Tenant shall remove all Tenant's rubbish and trash to such area of the Building
at such time as Landlord shall designate and Landlord shall at Landlord's
expense employ a carting company to dispose of such trash or rubbish of normal
size and nature.
65. EXTERMINATION:
--------------
Landlord, at its sole cost and expense, shall maintain such
extermination services as are necessary to keep the Demised Premises free of
pests, I and vermin at all times.
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 therefore 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
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
Page -33-
<PAGE> 34
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 therefore 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. Landlord shall restore and replace the Air
Conditioning Unit and all of the ducts, dampers, registers, grilles and
appurtenances utilized in connection therewith at Landlord's cost and expense;
and, 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 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 therefore.
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 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
Page -34-
<PAGE> 35
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 therefore. 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
three 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 (6) days after
Landlord shall give a written notice of such default shall be deemed to be
deliberate and Landlord may thereafter serve 2 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, three times 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
Page -35-
<PAGE> 36
notice, 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. HOLDOVER:
---------
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
therefore 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
Page -36-
<PAGE> 37
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 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 DELETED
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 Premised or on the door or in the hallways on the floor on which the
Demised Premixes 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.
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 mechanics 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
Page -37-
<PAGE> 38
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.
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
Page -38-
<PAGE> 39
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.
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
Page -39-
<PAGE> 40
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. LANDLORD'S WORK:
----------------
Notwithstanding anything to the contrary contained in this Lease, the
Landlord shall perform certain work to the Demised Premises in good workman-like
manner, as more particularly set forth on the Work Letter annexed hereto and
made part hereof. The Landlord's obligation to perform same is subject to
compliance by Tenant with all of the Tenant's obligations under the Work Letter
and, in particular, the Tenant's requirement to deliver its written plans and
specifications, as more particularly set forth in the annexed document.
81. POSSESSION DATE:
----------------
June 1, 1997.
82. *INTENTIONALLY DELETED
83. USE AND OCCUPANCY:
------------------
Tenant shall use and occupy the Demised Premises in a high class manner in
accordance with Article 2 hereof.
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. 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.
85. *INTENTIONALLY DELETED
Page -40-
<PAGE> 41
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 demised hereunder in
the event of any termination pursuant to the provisions of Article 17, nor shall
it constitute Landlord as Tenants agent with respect to any relettinq 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. Tenant understands and agrees that Landlord is under, no obligation
whatsoever to mitigate damages in the event Tenant abandons the premises or is
evicted from the premises. Accordingly, Tenant shall remain fully liable for all
monetary obligations arising under the lease for the stated term of the lease.
88. Landlord agrees to perform the following work to the demised premises
in accordance with building standard materials and labor as follows:
1) soundproof the air conditioning room;
2) clean, patch and paint air conditioning room;
3) sink, range and refrigerator in air conditioning room to be in working
order;
4) re-lamp all fixtures and fix lenses where necessary;
5) refinish front door;
6) supply and Install new blinds;
7) patch and paint walls where necessary;
8) stretch and re-tack carpet;
9) change all entry door hardware to key and lock;
Page -41-
<PAGE> 42
10) replace one (1) door; and
11) insure electrical capacity for five (5) computers together with
appropriate electrical receptacles for same.
89. The standard building services are provided Monday through Friday
(excluding holidays) and include the following:
1) Nightly: waste paper removal, floor sweeping, low dusting and bathroom
cleaning.
2) Weekly: vacuuming.
3) Window washing provided three times per year.
All of the above services are provided at Landlord's expense. Building
management may be contacted for additional or supplemental services required for
your premises. These services are provided for a fee and include any additions
to the above list.
LANDLORD:
370 LEX L.L.C.
By:
-----------------------
TENANT:
CARLY HOLDING, INC.
By: /s/ Irwin Zellermaier
-----------------------
IRWIN ZELLERMAIER,
President
Page -42-
<PAGE> 1
EXHIBIT 10.37
STANDARD FORM OF LOFT LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
Agreement of Lease, made as of this 31st day of December, 1997, between REALTIES
1430, a New York general partnership, having an office at 575 Madison Avenue,
New York, NY 10022 party of the first part hereinafter referred to as OWNER, and
CARLY HOLDING, INC., a New York corporation, having an office at 370 Lexington
Avenue, New York, NY 10017 party of the second part, hereinafter referred to as
TENANT,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner
Suite 1100, as shown on the plan attached hereto in the building known as 1430
Broadway in the Borough of MANHATTAN, City of New York, for the term of FIVE (5)
YEARS and ONE (1) MONTH (or until such term shall sooner cease and expire as
hereinafter provided) to commence on the 1st day of February nineteen hundred
and ninety-eight, and to end on the 28th day of February two thousand and three
and both dates inclusive, at an annual rental rate of $22,000.00 for the period
February 1, 1998 (see Article 67 with regard to the Reduced Rent Period (i.e.
February 1, 1998 through February 28, 1998)) through February 28, 2003, the
expiration date of the term of this lease, 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
<PAGE> 2
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
-2-
<PAGE> 3
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 CLEANING:
- ----------------
5. Tenant will not clean nor require, permit, suffer or allow any
window in the demised premises to be cleaned from the outside in violation of
Section 202 of the New York State Labor Law or any other applicable law or of
the Rules of the Board of Standards and Appeals, or of any other Board or body
having or asserting jurisdiction.
REQUIREMENTS OF LAW, FIRE INSURANCE:
- ------------------------------------
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter Tenant shall, at Tenant's sole cost and
expense, promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer
-3-
<PAGE> 4
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 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:
- --------------------------------------------------------------
-4-
<PAGE> 5
8. Owner or its agents shall not be liable for any damage to property
of Tenant or of others entrusted to employees of the building, nor for loss of
or damage to any property of tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its agents, servants or
employees; Owner or its agents 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 re-occupied 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
-5-
<PAGE> 6
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 herein above 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. Rider to be added if necessary.
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
-6-
<PAGE> 7
Tenant shall have no claim for the value of any unexpired term of said lease.
Tenant shall have the right to make an independent claim to the condemning
authority for the value of Tenant's moving expenses and personal property, trade
fixtures and equipment, provided Tenant is entitled pursuant to the terms of the
lease to remove such property, trade fixtures and equipment at the end of the
term and provided further such claim does not reduce Owner's award.
ASSIGNMENT, MORTGAGE, ETC.:
- ---------------------------
11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant or the majority
partnership interest of a partnership Tenant shall be deemed an assignment. If
this lease be assigned, or if the demised premises or any part thereof be
underlet or occupied by anybody other than Tenant, Owner may, after default by
Tenant, collect rent from the assignee, under-tenant or occupant and apply the
net amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, undertenant 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 or 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
-7-
<PAGE> 8
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 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
-8-
<PAGE> 9
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 canceled 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
-9-
<PAGE> 10
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 (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
-10-
<PAGE> 11
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.
-11-
<PAGE> 12
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.
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
-12-
<PAGE> 13
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
-13-
<PAGE> 14
deemed to be other than on account of the earliest stipulated rent, nor shall
any endorsement or statement of any check or any letter accompanying any check
or payment as rent be deemed an accord and satisfaction, and Owner may accept
such check or payment without prejudice to Owner's right to recover the balance
of such rent or pursue any other remedy in this lease provided. All checks
tendered to Owner as and for the rent of the demised premises shall be deemed
payments for the account of Tenant. Acceptance by Owner of rent from anyone
other than Tenant shall not be deemed to operate as an attornment to Owner by
the payor of such rent or as a consent by Owner to an assignment or subletting
by Tenant of the demised premises to such payor, or as a modification of the
provisions of this lease. No act or thing done by Owner or Owner's agents during
the term hereby demised shall be deemed an acceptance of a surrender of said
premises and no agreement to accept such surrender shall be valid unless in
writing signed by Owner. No employee of Owner or Owner's agent shall have any
power to accept the keys of said premises prior to the termination of the lease
and the delivery of keys to any such agent or employee shall not operate as a
termination of the lease or a surrender of the premises.
WAIVER OF TRIAL BY JURY:
- ------------------------
26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of or in any way connected with this lease, the
relationship of Owner and Tenant, Tenant's use of or occupancy of said premises
and any emergency statutory or any other statutory remedy. It is further
mutually agreed that in the event Owner commences any proceeding or action for
possession including a summary proceeding for possession of the premises, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding including a counterclaim under Article 4 except for statutory
mandatory counterclaims.
INABILITY TO PERFORM:
- ---------------------
27. This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant to
be performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment,
fixtures or other materials if Owner is prevented or delayed from doing so by
reason of strike or labor troubles or any cause whatsoever beyond Owner's sole
control including, but not limited to, government preemption or restrictions or
by reason of any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions which have been
or are affected, either directly or indirectly, by war or other emergency, or
other Force Majeure Event.
-14-
<PAGE> 15
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 herein
above 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, SEE
RIDER _____% ($ ) of the total meter charges as Tenant's portion. Independently
of and in addition to any of the remedies reserved to Owner herein above or
elsewhere in this lease, Owner may sue for and collect any monies to be paid by
Tenant or paid by Owner for any of the reasons or purposes herein above set
forth.
SPRINKLERS:
- -----------
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
-15-
<PAGE> 16
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 $ NONE, 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 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 $5,499.99* as security
for
-16-
<PAGE> 17
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.
*Bears interest - See Rider Par. 63.
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.
-17-
<PAGE> 18
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.
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 diminution 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 servants, employees, agents, visitors or licensees.
GLASS:
- ------
37. Owner shall replace, at the expense of the Tenant, any and all
plate and other glass damaged or broken from any cause whatsoever in and about
the demised premises. Owner may insure, and keep insured, at Tenant's expense,
all plate and other glass in the demised premises for and in the name of Owner.
Bills for the premiums therefor shall be rendered by Owner to Tenant at such
times as Owner may elect, and shall be due from, and payable by, Tenant when
rendered, and the amount thereof shall be deemed to be, and be paid, as
additional rent.
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<PAGE> 19
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.
Space to be filled in or deleted. SEE RIDER PARAGRAPHS 41 - 68 ANNEXED
HERETO AND MADE A PART HEREOF.
-19-
<PAGE> 20
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
REALTIES 1430
By: Equities 40, L.L.C., its general partner
Witness for Owner: /s/
-----------------------------------------
BY: AUTHORIZED REPRESENTATVE [L.S.]
- ---------------------------
CARLY HOLDING, INC. [CORP. SEAL]
-----------------------------
Witness for Tenant: /s/
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BY: AUTHORIZED REPRESENTATVE [L.S.]
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RIDER AGREEMENT ATTACHED TO AND FORMING A PART OF LEASE DATED AS
OF DECEMBER 31, 1997 BETWEEN REALTIES 1430, AS LANDLORD, AND CARLY
HOLDING INC., AS TENANT.
41. RIDER TO ARTICLE 8:
(a) Neither Landlord nor Landlord's agents, employees, contractors,
officers, directors, shareholders, partners or principals (disclosed or
undisclosed) shall be liable to Tenant or Tenant's agents, employees,
contractors, invitees or licensees or any other occupant of the demised
premises, and Tenant shall save and hold Landlord, Landlord's agents, employees,
contractors, officers, directors, shareholders, partners and principals
(disclosed or undisclosed) harmless from any loss, liability, claim, damage,
expense (including reasonable attorneys, fees and disbursements), penalty or
fine incurred, in connection with, or arising from, any injury to Tenant or to
any other person or for any damage to, or loss (by theft or otherwise) of any of
Tenant's property or of the property of anyone else irrespective of the cause of
such injury, damage or loss unless due to the negligence, carelessness or
improper conduct of Landlord or Landlord's agents, employees, or contractors.
Landlord and Landlord's agents, employees and contractors shall not be liable
for any loss or damage to any person or property, to the extent of Tenant's
insurance coverage, even if due to the negligence, carelessness or improper
misconduct of Landlord or Landlord's agents, employees or contractors. Any
building employee to whom any property shall be entrusted by or on behalf of
Tenant shall be acting as Tenant's agent with respect to such property and
neither Landlord, nor Landlord's agents, employees or contractors, shall be
liable for any loss of or damage to any such property.
(b) Tenant shall obtain and keep in full force and effect during the
term of this lease, at Tenant's own cost and expense, to protect Landlord,
Landlord's agents, contractors, employees, mortgagees and ground lessors, and
Tenant as insureds (i) comprehensive public liability insurance to afford
protection against any and all claims for personal injury, death or property
damage occurring in, upon, adjacent to or connected with the demised premises,
the building and any appurtenances thereto, in an amount of not less than
$1,000,000. for injury or death arising out of any one occurrence, and $100,000.
for damage to property in respect of any one occurrence or in any increased
amount reasonably required by Landlord; and (ii) insurance against loss or
damage by fire (and such other risks and hazards as are insurable under then
available standard forms of fire insurance policies with extended coverage) to
Tenant's property in or about the demised premises for the full insurable value
thereof. Tenant shall carry builder's risk insurance, completed value form,
covering all physical loss, in an amount reasonably satisfactory to, and to
protect the Landlord and such others as Landlord shall designate, at all times
when Tenant is constructing any improvements, alterations, additions or other
installations in or about the demised premises.
(c) All such insurance shall be written in form and substance
satisfactory to Landlord by an insurance company with an A or better rating in
Bests' licensed to do business in New York State. Upon failure of Tenant to
procure, maintain and pay all premiums therefor, Landlord may, at its option, do
so, and Tenant agrees to pay the cost thereof to Landlord as additional rent
under this
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lease. Tenant shall cause to be included in all such insurance policies a
provision to the effect that the same will be non-cancelable and not permitted
to lapse except upon ten (10) days' prior notice to Landlord. On or prior to the
commencement date the original insurance policies or appropriate certificates
shall be deposited with Landlord. Any renewals, replacements or endorsements
thereto shall also be so deposited.
(d) Except to the extent expressly provided in Article 9 (e) , nothing
contained in this lease shall relieve either Landlord or Tenant of any liability
to the other, or to the insurance carrier of the other, which the other may have
under law or the provisions of this lease, by reason of any damage to the
demised premises or the building, as the case may be, by fire or other casualty.
42. RIDER TO ARTICLE 11:
(a) Except as otherwise provided in this Article, neither this lease
nor any part hereof, nor the interest of Tenant in any sublease or the rentals
thereunder, shall be, by operation of law or otherwise, assigned, mortgaged,
pledged, encumbered, or otherwise transferred by Tenant, Tenant's legal
representatives or successors in interest, and neither the demised premises nor
any part thereof nor any of Tenant's property which is part of the realty (the
land and/or the building) in or about the demised premises shall be encumbered
in any manner by reason of any act or omission on the part of Tenant, or anyone
claiming by, under or through Tenant, or shall be sublet, franchised, licensed
or used, occupied or utilized for desk space or for mailing privileges by anyone
other than Tenant, without the prior written consent of Landlord. A transfer of
more than fifty percent (5011) in interest of Tenant (whether such transfer
occurs at one time -or in a series of related transactions and whether of stock,
partnership interest or otherwise) by any party in interest shall be deemed an
assignment of this lease.
(b) Except as otherwise provided in this Article, if this lease be
assigned, whether or not in violation of the terms of this lease Landlord may
collect rent from the assignee. If the demised premises or any part thereof be
sublet or be used or occupied by anybody other than Tenant, whether or not in
violation of this lease, Landlord may, after default by Tenant and expiration of
Tenant's time to cure such default, if any, collect rent from the subtenant or
occupant. In either event, Landlord may apply the net amount collected to the
rent herein reserved, but no assignment, subletting, occupancy, or collection or
application of rent shall be deemed a waiver of any of the provisions of section
(a) above, or the acceptance of the assignee, subtenant, or occupant as a
tenant, or be deemed to relieve, impair, release, or discharge Tenant of its
obligations fully to perform the terms of this lease on Tenant's part to be
performed. The consent by Landlord to an assignment, transfer, encumbering or
subletting pursuant to any provision of this lease shall not in any way be
deemed consent to any other or further assignment, transfer, encumbering or
subletting. References in this lease to use or occupancy by anyone other than
Tenant shall include without limitation subtenants, licensees, franchisees and
others claiming by, through or under Tenant or under any subtenant, immediately
or remotely. The listing of any name, other than that of Tenant on any door of
the demised premises or on any directory or in any elevator in the building, or
otherwise, shall not operate to vest in the person so named any right or
interest in this lease or the demised premises, or
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be deemed to constitute, or serve as a substitute for, any consent of Landlord
required under this Article, and it is understood that any such listing shall
constitute a privilege extended by Landlord, revocable at Landlord's will by
notice to Tenant. Tenant agrees to pay to Landlord reasonable attorneys' fees
and disbursements incurred by Landlord in connection with any proposed
assignment or sublease, including the costs of making investigations as to the
acceptability of a proposed subtenant or assignee.
(c) Notwithstanding the provisions of sections (a) and (b) to the
contrary, provided Tenant is not in default in any of Tenant's obligations under
this lease, Tenant may, with Landlord's prior written consent, which shall not
be unreasonably withheld, sublet all or part of the demised premises for the
unexpired balance of the term of this lease less one (1) day to any corporation
or other business entity which controls, is controlled by or is under common
control with Tenant (herein referred to as a "related corporation") for any of
the purposes permitted to Tenant, subject, however, to compliance with Tenant's
obligations under this lease. For the purposes hereof, "control" shall be deemed
to mean ownership of not less than fifty (50%) percent of all of- the voting
stock of such corporation or not less than fifty (50%) percent of all the legal
and equitable interest in any other business entity.
(d) Notwithstanding the provisions of sections (a) and (b) to the
contrary, provided that Tenant shall not be in default in any of Tenant's
obligations under this lease, Tenant may, with Landlord's prior written consent,
which shall not be unreasonably withheld, assign its entire interest in this
lease to a "successor corporation". A "successor corporation" as used in this
lease shall mean W a corporation into which or with which Tenant, its corporate
successors or assigns, is merged or consolidated in accordance with applicable
statutory provisions for the merger or consolidation of corporations, provided
that by operation of law or by effective provisions contained in the instruments
of merger or consolidation the liabilities of the corporations participating in
such merger or consolidation are assumed by the corporation surviving such
merger or consolidation, or (ii) a corporation acquiring this lease and the term
and the estate hereby granted, the goodwill and all or substantially all of the
other property and assets (other than capital stock of such acquiring
corporation) of Tenant, its corporate successors or assigns, and assuming all or
substantially all of the liabilities of Tenant, its corporate successors or
assigns, or (iii) any corporate successor to a successor corporation becoming
such by either of the methods described in subdivisions W and (ii) ; provided
that, immediately after giving effect to any such merger or consolidation, or
such acquisition and assumption, as the case may be, the corporation surviving
such merger or created by such consolidation or acquiring such assets and
assuming such liabilities, as the case may be, shall have assets, capitalization
and net worth, similarly determined, equal to or greater than that of Tenant at
the beginning of the term of this lease or of Tenant, its corporate successors
or assigns, immediately prior to such merger or consolidation or such
acquisition and assumption, as the case may be, whichever is greater.
(e) No assignment made pursuant to section (d) or otherwise consented
to by Landlord shall be valid unless, within ten (10) days after the execution
thereof, Tenant shall deliver to Landlord a duplicate original instrument of
assignment and assumption, in form and substance satisfactory to
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Landlord, duly executed by Tenant and by the assignee, in which such assignee
shall assume performance of all of the provisions of this lease. No sublease
made pursuant to section (c) or otherwise consented to by Landlord shall be
valid unless, within ten (10) days after the execution thereof, Tenant shall
deliver to Landlord a duplicate original of any such sublease, in form and
substance satisfactory to Landlord, duly executed by Tenant and the subtenant,
subject and subordinate in all respects to this lease. No subletting or
assignment hereunder shall act to release or discharge Tenant from any of its
obligations under this lease or release or discharge any guarantor of this lease
from any of its obligations.
(f) Notwithstanding anything contained in sections (a) and (b) to the
contrary, but subject to the rights of Tenant under sections (c) and (d), in the
event that at any time Tenant desires to sublet all or any part of the demised
premises or to assign its entire interest in this lease, Tenant: (i) shall
submit to Landlord a notice stating the name and address of the proposed
subtenant or assignee, a detailed description of the business, character and
financial references (including its most recent balance sheet and income
statements certified by its chief financial officer or a certified public
accountant) of the proposed subtenant or assignee, and any other information
(financial or otherwise) reasonably requested by Landlord;
(ii) shall submit to Landlord a conformed or photostatic copy
of the proposed assignment or sublease, the effective date of which shall be at
least twenty (20) days after the date of the giving of such notice and which
shall be conditioned on Landlord's consent thereto and which shall be duly
consented to by any guarantor of this lease. Tenant agrees to indemnify Landlord
against liability resulting from any claims that may be made against Landlord by
the proposed assignee or sublessee, or by any brokers or other persons claiming
a commission or similar compensation in connection with the proposed assignment
or sublease; and
(iii) in the case of a proposed sublease, shall be deemed to
have granted Landlord the option, to be exercised within twenty (20) days after
receipt of all items to be submitted by Tenant pursuant to this section (f) ,
either (1) to sublet from Tenant such space so proposed to be sublet upon the
terms and conditions hereinafter set forth or (2) to cancel and terminate this
lease pursuant to section (g), if applicable, or (3) if any such proposed
sublease shall be for less than all or substantially all of the demised
premises, to cancel and terminate this lease only as to such portion of the
demised premises, to take effect as of the commencement date of such proposed
sublease; and
(iv) in the case of a proposed assignment of this lease,
shall be deemed to have granted Landlord the option, to be exercised within
twenty (20) days after receipt of all items to be submitted by Tenant pursuant
to this section (f) , either (1) to sublet the entire demised premises from
Tenant upon the terms and conditions hereinafter set forth or (2) to cancel and
terminate this lease pursuant to section (g) . No assignment of part of this
lease or of a portion of the demised premises shall be permitted.
(g) Subject to sections (c) and (d) of this Article, if Tenant's
request is for an assignment of this lease, or for a subletting of all or any
portion of the demised premises, then Landlord may, by
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notice given to Tenant within twenty (20) days after receipt of all items to be
submitted by Tenant pursuant to section (f) above, terminate this lease in the
case of an assignment or a subletting of all or substantially all of the demised
premises, or terminate this lease in part with respect to the portion of the
demised premises to be so sublet (the Recaptured Space"), if less than all or
substantially all of the demised premises, effective on a date to be specified
in said notice (Earlier Termination Date"), which shall be not earlier than one
(1) day before the effective date of the proposed assignment or subletting, nor
later than ten (10) days after said effective date. Tenant shall then vacate and
surrender the demised premises, or the Recaptured Space, as the case may be, in
accordance with the terms of this lease, on or before the Earlier Termination
Date, and the term of this lease as to the entire demised premises in the case
of an assignment or a request for the subletting of all or substantially all of
the demised premises, or only as to the Recaptured Space in the case of a
request for a partial subletting, shall end on the Earlier Termination Date as
if that were the expiration date set forth in this lease, and neither party
hereto shall have any further liability hereunder, or in the case of a
subletting rather than an assignment with respect to the Recaptured Space only,
except for such matters specifically stated herein to survive termination of
this lease.
(h) If Landlord shall elect to sublet such space or to terminate this.
lease in whole or in part, Landlord shall be free to, and shall have no
liability to Tenant if Landlord should, lease the demised premises (or such part
thereof) to Tenant's prospective assignee or subtenant. If this lease is so
terminated as to part of the demised premises or part of the demised premises is
sublet to Landlord, Tenant shall vacate and surrender such part of the demised
premises and Landlord, at Landlord's sole cost and expense shall (1) make such
alterations as may be required physically to separate such surrendered space
from the remainder of the demised premises and to comply with any and all
applicable laws, ordinances, orders, rules, regulations and other requirements,
and install all other equipment or facilities which may be required in order to
use such sublet portion as a unit separate from the remainder of the demised
premises, (2) repair or restore to tenantable condition any part of the
remainder of the demised premises which is physically affected by such
separation, if necessary, (ii) Tenant shall afford Landlord and its tenants
appropriate means of ingress and egress to and from such surrendered space and
(iii) in the event of a partial termination of this lease Landlord and Tenant
shall execute and deliver a supplementary agreement modifying this lease, as of
the day following such surrender, by eliminating the Recaptured Space from the
demised premises, reducing the rent allocable to the remainder of the demised
premises pro rata, on a square footage basis, and appropriately modifying the
other terms of this lease to reflect the elimination of such Recaptured Space
from the demised premises.
(i) In the event Landlord exercises Landlord's option to sublet such
space pursuant to section (f)(iii) or (f)(iv) above, such sublease by Tenant to
Landlord (or its designee) shall be at a rent equal to the lesser of (1) the
rentals set forth in the proposed sublease or (2) the rent for the entire
demised premises set forth in this lease (or a pro rata apportionment of such
rent if such sublease shall be in respect of less than the whole of the demised
premises) , and shall be for the same term as of that of the proposed further.
subletting (or for the entire balance of the term, less one (1) day, in the case
of a proposed assignment) and it is expressly agreed that the sublease shall
give Landlord the absolute right, without Tenant's permission, to assign such
sublease, or any interest
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therein and/or to further sublet the space covered by such sublease or any part
of such space and to make any and all improvements, alterations, additions or
other installations in such space. Any such assignment or subletting by Landlord
may be for any use that Landlord deems appropriate. At the expiration of the
term of such sublease, Tenant will accept the space covered by such sublease in
its then existing condition. The sublease shall also expressly negate any
intention that any estate created under such sublease be merged with any other
estate held by either of said parties.
(j) In the event Landlord does not exercise its option to so sublet
such space or to terminate this lease in whole or in part within the twenty (20)
day period specified in section (f), Landlord's consent to such subletting or
assignment, as the case may be, shall not be unreasonably withheld. However,
Landlord in any event shall not be obligated to consent to any sublease or
assignment of this lease unless:
(1) In the reasonable judgment of Landlord, the
proposed subtenant or assignee, as the case may be, is of a character and
financial worth such as is in keeping with the then standards of Landlord in
those respects for the building, and the nature of the proposed subtenant's or
assignee's business and its reputation is in keeping with the character of the
building and its. tenancies;
(2) The purposes for which the proposed subtenant or
assignee intends to use the demised premises or the applicable portion thereof
are uses expressly permitted by this lease;
(3) Tenant shall not have (i) advertised or
publicized in any way the availability of all or part of the demised premises
without Landlord's prior written consent, or (ii) listed or publicly advertised
the demised premises for subletting or assignment at a rental rate less than the
greater of (y) the rent then payable hereunder for such space or (z) the rent at
which Landlord is then offering to lease comparable space in the building;
(4) The rental rate under the sublease or assignment
is not less than the greater of (y) the rent then payable hereunder for such
space or (z) the rent at which Landlord is then offering to lease comparable
space in the building;
(5) The proposed occupancy shall not impose a
disproportionate burden upon the building equipment or building services;
(6) The proposed sublease or assignment shall
prohibit any assignment or further subletting;
(7) Tenant shall not be in default in the performance
of any of its obligations hereunder; and
(8) The proposed subtenant or assignee shall not then
be a tenant or occupant of the building, or a related entity, subsidiary,
division or affiliate of any such tenant or occupant,
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or a person, or entity then negotiating with Landlord for the rental of any
space or any government, governmental agency or entity, or autonomous
governmental corporation, or any entity having governmental immunity, or a
diplomatic or trade mission.
(k) In the event Tenant fails to execute and deliver any assignment or
sublease to which Landlord shall have consented within forty-five (45) days
after the giving of such consent, then Tenant shall again comply with all of the
provisions and conditions of this Article before assigning this lease or
subletting all or any part of the demised premises.
(l) Notwithstanding anything to the contrary contained herein, if
Landlord shall consent to any assignment or subletting, and Tenant shall either
W receive any consideration from its assignee (other than a successor
corporation) in connection with the assignment or this lease, Tenant shall pay
over to Landlord, as additional rent hereunder so much, if any, of such
consideration as shall exceed the brokerage commission incurred by Tenant for
such assignment or (ii.) sublet the demised premises to anyone (other than a
related corporation) for rents which for any period shall exceed the rents
payable for the subleased space under this lease for the same period, Tenant
shall pay Landlord, as additional rent hereunder, any "net profits" (as
hereinafter defined) that Tenant may derive from such subletting. "Net profits"
shall consist of such excess less the brokerage commission incurred by Tenant
for such subletting.
(m) If Landlord shall recover or come into possession of the demised
premises before the date herein fixed for the termination of this lease,
Landlord shall have the right, at its option, to take over any and all subleases
of the demised premises or any part thereof made by Tenant and to succeed to all
the rights of said subleases or such of them as it may elect to take over.
Tenant hereby expressly assigns and transfers to Landlord such subleases as
Landlord may elect to take over at the time of such recovery or possession, such
assignment and transfer not to be effective until the termination of this lease
or re-entry by Landlord hereunder or if Landlord shall otherwise succeed to
Tenant's estate in the demised premises, at which time Tenant shall upon request
of Landlord execute, acknowledge and deliver to Landlord such further
assignments and transfers as may be necessary to vest in Landlord the then
existing subleases. Every sublease hereunder is subject to the condition, and by
its acceptance and entry into a sublease each
subtenant thereunder shall be deemed conclusively to have thereby agreed, that
from and after the termination of this lease or re-entry by Landlord hereunder,
or if Landlord shall otherwise succeed to Tenant's estate in the demised
premises, such subtenant shall waive any right to surrender possession or to
terminate the sublease, and, at Landlord's election, such subtenant shall attorn
to and recognize Landlord as its Landlord under all of the then executory terms
of such sublease, except that Landlord shall not (i) be liable for any previous
act, omission or negligence of Tenant under such sublease, (ii) be subject to
any counterclaim or offset not expressly provided for in such sublease, which
theretofore accrued to such subtenant against Tenant, (iii) be bound by any
previous modification or amendment of such sublease unless expressly. consented
to in writing by Landlord or by any previous prepayment of more than one (1)
month's rent and additional rent which shall be payable as provided in the
sublease, (iv) be obligated to repair the subleased space or the building or any
part thereof in the event of total or substantially total damage or in the event
of partial condemnation or (v) be obligated
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to perform any work in the subleased space; and the subtenant shall execute and
deliver to Landlord any instruments Landlord may reasonably request to evidence
and confirm such attornment. Each subtenant or licensee of Tenant shall be
deemed automatically, upon and as a condition of occupying or using the demised
premises or any part thereof, to have given a waiver of the type described in
and to the extent and upon the conditions set forth in Article 9(e).
43. RIDER TO ARTICLES 16, 17 AND 18: DEFAULT.
(a) ACCELERATION OF RENT. In addition to Landlord's other remedies
under Article 18, at Landlord's sole option Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord, on demand, as and for
liquidated and agreed damages and not as a penalty, an amount equal to the
excess, if any, of the annual rent and additional rent reserved hereunder for
the unexpired portion of the term demised hereunder (measured from the latest of
the date of termination of this lease, the date of reentry, or the date through
which monthly deficiencies shall have been paid in full) over the fair and
reasonable rental value of the demised premises for the same period. In the
computation of such damages such excess of any installment of rent becoming due
hereunder after the date of termination over 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 (4%)
percent per annum.
(b) CONDITIONAL LIMITATIONS. This lease and the term and estate hereby
granted are subject to the limitations enumerated in Articles 16 and 17 and
hereinafter in this paragraph and for purposes of enforcement of Landlord's
remedies under this. lease or as provided by law such enumerated events of
default shall be deemed conditional limitations. In addition to those enumerated
in section (1) of Article 17 of this lease the term and estate hereby granted
are subject to the following further limitations (which shall be deemed added to
said section (1) of Article 17) : (i) if any event shall occur or any
contingency shall arise whereby this lease or the estate hereby granted or the
unexpired balance of the term thereof would, by operation of law or otherwise,
devolve upon or pass to any person other than Tenant, except as expressly
permitted by Articles 11 and 42 hereof; or (ii) there shall be any default by
Tenant under any other lease with Landlord which shall not be remedied within
the applicable grace or cure period, if any, provided therefor under such other
lease.
(c) BANKRUPTCY. Without limiting any of the provisions of Articles 16,
17 or 18, hereof, if pursuant to the Bankruptcy Code of 1978, as, the same has
been and may be hereafter amended, Tenant is permitted to assign this lease in
disregard of the restrictions contained in Articles 11 and 42 hereof, Tenant
agrees that (i) the trustee or assignee shall cure any default under this lease
and shall provide adequate assurance of future performance by the assignee
(which shall mean the deposit of cash security with Landlord in an amount equal
to the sum of one year, s annual and additional rent then reserved hereunder for
the calendar year preceding the year in which such assignment is intended to
become effective, which deposit shall be held by Landlord, without interest, for
the balance of the term of this lease as security f or the full and faithful
performance of all of the obligations under this lease on the part of Tenant yet
to be performed), and (ii) the assignee contemplated use of the demised premises
shall in no way diminish the reputation of the building as a first class office
building
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or impose any additional burden upon the building or its systems or impose any
service obligations upon Landlord (beyond those specifically required to be
provided by Landlord pursuant to this lease). If Tenant receives or is to
receive any valuable consideration for such an assignment of this lease, such
consideration, after deducting therefrom (A) the brokerage commissions, if any,
and other expenses reasonably incurred by Tenant for such assignment and (B) any
portion of such consideration reasonably designated by the assignee as paid for
the purchase of Tenant's property in the demised premises, shall be and become
the sole and exclusive property of Landlord and shall be paid over to Landlord
directly by such assignee. In addition, adequate assurance shall mean that any
such assignee of this lease shall have a net worth, exclusive of good will,
equal to at least fifteen (15) times the aggregate of the annual rent reserved
hereunder plus all additional rent for the preceding calendar year as aforesaid.
(d) PERFORMANCE OF END OF TERM OBLIGATIONS. In addition, if this lease
is terminated under the provisions of Article 17, or if Landlord shall reenter
the demised premises under the provisions of Articles 17 or 18, Tenant agrees
that:
(i) the demised premises then shall be in the condition in
which Tenant has agreed to surrender the same to Landlord at the expiration of
the term hereof;
(ii) Tenant shall have performed prior to any such
termination any covenant of Tenant contained in this lease for the making of any
alterations or for restoring or rebuilding the demised premises or the building,
or any part thereof; and
(iii) for the breach of any covenant of Tenant set forth
above in this paragraph (d), Landlord shall be entitled immediately without
notice or -other action by Landlord, to recover, and Tenant shall pay, as and
for liquidated damages therefor, the cost of performing such covenant (as
estimated by an independent contractor selected by Landlord.
(e) DEFAULT INTEREST. In addition to any other remedies Landlord may
have under this lease, and without reducing or adversely affecting any of
Landlord's rights and remedies under Articles 16, 17, or 18 and under this
Article 43, if any annual rent, additional rent or damages payable hereunder by
Tenant to Landlord are not paid within ten (10) days after the due date for
payment thereof, the same shall bear interest at the annual rate of five (5%)
percent above the Prime Rate (as hereafter defined) or the maximum rate
permitted by law, whichever is less, from the due date thereof until Landlord's
receipt of payment thereof, and the amount of such interest shall be additional
rent hereunder. The term "Prime Rate" shall be equal to the fluctuating rate of
interest from time to time (during the period such payment is due) announced by
The Chase Manhattan Bank, N.A. or any successor thereto as its "prime rate." If
neither The Chase Manhattan Bank, N.A. nor any successor thereof announces such
a rate, reference shall be made instead to the most recent "prime rate"
published by The Wall Street Journal, or any successor to such publication. For
purposes of this paragraph, a rent bill sent by first-class mail, to the address
to which notices are to be given under this lease, shall be deemed a proper
demand for the payment of the amounts set forth therein.
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44. RIDER TO ARTICLE 22: END OF TERM.
(a) HOLD-OVER DAMAGES. If Tenant shall hold-over or remain in
possession of any portion of the demised premises beyond the expiration of the
term of this lease, Tenant shall be subject not only to a summary eviction
proceeding and all damages related thereto, but also to any damages arising out
of delay by Tenant in so surrendering the demised premises, including without
limitation any claims arising out of any lost opportunities by Landlord to relet
the demised premises (or any part thereof) or any claims by any succeeding
tenant (if the premises, or any part thereof, shall have been relet) founded
upon such delay. All damages to Landlord by reason of such holding-over by
Tenant may be the subject of a separate action and need not be asserted by
Landlord in any summary eviction proceedings against Tenant.
(b) WAIVER OF RICRHT TO A STAY. Tenant expressly waives, for itself
and for any party claiming through or under Tenant, any rights which Tenant or
any such party may have under the provisions of Section 2201 of the New York
Civil Practice Law and Rules and of any similar or successor law of same import
then in force, in connection with any hold-over proceedings which Landlord may
institute to enforce the provisions of this Article.
(c) MONTH-TO-MONTH HOLD-OVER TENANCY. In the event Tenant remains in
possession of the demised premises after termination of this lease without the
execution of a new lease with the Landlord, Tenant, at the option of Landlord,
shall be deemed to be occupying the demised premises as a tenant from
month-to-month, at a monthly rental equal to twice the rent and additional rent
payable during the last month of the term of this lease, subject to all of the
other terms of this lease insofar as the same are applicable to a month-to-month
tenancy. Notwithstanding the preceding sentence, the acceptance of any rent paid
by Tenant shall not preclude Landlord from commencing and prosecuting a
hold-over or summary eviction proceeding and the preceding sentence shall be
deemed to be an "agreement expressly providing otherwise" within the meaning of
section 232-c of the Real Property Law of the State of New York.
(d) SURVIVAL OF OBLIGATIONS. Upon the expiration or other termination
of this lease neither party shall have any further obligation or liability to
the other except as otherwise expressly provided in this lease (including,
without limitation, the obligations of Tenant provided in Article 3 hereof) and
except for such obligations as by their nature or under the circumstances can
only be, or by the provisions of this lease, may be, performed after such
expiration or other termination; and, in any event, unless otherwise expressly
provided in this lease, any liability f or a payment which shall have accrued to
or with respect to any period ending at the time of expiration or other
termination of this lease shall survive the expiration or other termination of
this lease.
45. RIDER TO ARTICLE 28: BILLS AND NOTICES.
(a) Except as otherwise expressly provided herein, all notices and
other communications (herein collectively called "notices"), other than bills,
statements and correspondence rendered by
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Landlord to Tenant in the ordinary course of Landlord's business (which may be
sent by regular mail or personally delivered to Tenant), given or required to be
given under or in connection with this lease, by either party hereto to the
other, shall be in writing and sent by registered or certified mail, return
receipt requested, postage prepaid, and W if to Tenant, sent to the attention of
David Bader, Chief Financial Officer, by certified mail, return receipt
requested, addressed as first set forth in this lease if mailed prior to the
commencement date, or to the building if mailed thereafter, or to such other
address as Tenant may designate for such purpose by notice to Landlord, with a
copy to Arnold Spiegel, Esq., 50 East 42nd Street, Suite 605, New York, NY
10017, and (ii) if to Landlord, addressed to Landlord's address as first set
forth in this lease, or to such other address as Landlord may designate for such
purpose by notice to Tenant. Any notice sent as aforesaid shall be deemed to
have been rendered or given two (2) business days after mailing.
(b) Tenant shall give prompt notice to Landlord of any accident,
emergency, occurrence for which Landlord might be liable, fire or other casualty
and all damages to or defects in the demised premises, the building or the
appurtenances thereto for the repair of which Landlord might be responsible or
which constitutes Landlord' s property. Such notice shall be given by telephone,
telegram or personal delivery to the address of Landlord then in effect for
notices (to be followed by a written notice conforming to the requirements of
section (a) of this Article 45).
46. RIDER TO ARTICLE 34: DEFINITIONS.
For the purposes of this lease and all agreements supplemental to this
lease, unless the context otherwise requires:
(a) The terms "include", "including" and "such as" and words of
similar import shall be construed as if followed by the phrase "without being
limited to". The words "herein" "hereof", "hereby", "hereunder" and words of
similar import shall be construed to refer to this lease as a whole and not to
any particular Article, section or provision unless expressly so stated.
(b) The term "obligations of this lease" and words of similar import,
shall mean the covenants to pay rent and additional rent and to perform all of
the other terms of this lease. Any provision in this lease that one party or the
other or both shall do or not do or shall cause or permit or not cause or permit
a particular act, condition or circumstance, shall be deemed to mean that such
party so covenants or both parties so covenant, as the case may be.
(c) The term "terms of this lease" or "terms of this Article" shall be
deemed to include all terms, covenants, conditions, provisions, obligations,
limitations, restrictions, reservations and agreements of this lease or such
Article, as the case may be.
(d) The term "consent" or "approval" shall mean prior consent and
approval in writing, and the consent or approval by either party to any
particular action shall not in any way be considered as relieving the other
party from obtaining the express consent or approval to any subsequent or
further action.
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(e) Each term, covenant, agreement, obligation or other provision of
this lease on Tenant's part to be performed shall be deemed and construed as a
separate and independent covenant of Tenant, not dependent upon any of the other
terms of this lease. This lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
lease to be drafted. In the event of any action, suit, arbitration, dispute or
proceeding affecting the terms of this lease, no weight shall be given to any
deletions or striking-out of any of the terms of this lease contained in any
draft of this lease and no such deletion or strike-out shall be entered into
evidence in any such action, suit, arbitration, dispute or proceeding nor given
any weight therein.
(f) The term "rental" or "rent" shall include the annual rental and
all additional rent.
(g) The term "Force Majeure" means any and all causes beyond
Landlord's control, including without limitation delays caused by Tenant,
governmental regulation, governmental restriction, strike, labor, jurisdictional
or other disputes, riot, accident, mechanical breakdown, or inability to obtain
labor, fuel, steam, water, electricity or materials, acts of God, war, enemy
action, civil commotion, fire or other casualty.
(h) Words and phrases in the singular shall be deemed to include the
plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender.
(i) The rule of "ejusdem generis" shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
(j) The term "and/or" when applied to one or more matters or things
shall be construed to apply to any one or more or all thereof as the
circumstances warrant at the time in question.
(k) The term "laws and requirements of any public authorities" and
words of similar import shall mean laws and ordinances of any or all of the
federal, state, city, town, county, borough or village governments and rules,
regulations, orders and directives of any and all departments, subdivisions,
bureaus, agencies or offices thereof, and of any other governmental, public or
quasi-public authorities having jurisdiction over the Building and/or the
demised premises, and the direction of any public officer pursuant to law,
whether now or hereafter in force.
(1) The term "mortgage" shall include a mortgage and/or a deed of
trust, and the term "holder of a mortgage" or "mortgagee" or words of similar
import shall include a mortgagee of a mortgage or a beneficiary of a deed of
trust.
(m) The term "person" shall mean any natural person or persons, a
partnership, a corporation, and any other form of business or legal association
or entity.
(n) The term "requirements of insurance bodies" and words of similar
import shall mean rules, regulations, orders and other requirements of the New
York Board of Underwriters and/or the
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New York Fire Insurance Rating organization and/or any other similar body
performing the same or similar functions and having jurisdiction or cognizance
over the Building and/or the demised premises, whether now or hereafter in
force.
(o). The term "Tenant" shall mean the Tenant herein named or ,any
assignee or other successor in interest (immediate or remote) of the Tenant
herein named, which at the time in question is the owner of the Tenant's estate
and interest granted by this lease; but the foregoing provisions of this
paragraph shall not be construed to permit any assignment of this lease or to
relieve the Tenant herein named or any assignee or other successor in interest
(whether immediate or remote) of the Tenant herein named from the full and
prompt payment, performance and observance of the covenants, obligations and
conditions to be paid, performed and observed by Tenant under this lease.
(p) The terms "Owner" and "Landlord" are used interchangeably in this
lease and have the same meaning so that references herein to Landlord shall also
mean Owner and vice versa.
47. RIDER TO ARTICLE 40: SUCCESSORS AND ASSIGNS.
The provisions of this lease are solely for the benefit of the parties
hereto and their respective successors and assigns, and shall not inure to the
benefit of, or be enforceable by, any third party, and specifically shall not
inure to the benefit of, or be enforceable by, any present or future tenant or
occupant of the building (other than Tenant).
48. REAL ESTATE TAX ESCALATION:
(a) Tenant shall pay to Landlord, as additional rent under this lease,
tax escalation ("Tax Escalation") in accordance with this Article:
(i) Definitions: For purposes of this lease, the following
definitions shall apply:
(1) The term "Base Tax" shall mean the Real Estate
Taxes payable for the Tax Year ending June 30, 1998. If the Taxes comprising the
Base Tax are reduced as a result of an appropriate proceeding or otherwise, the
Real Estate Taxes as so reduced shall for all purposes be deemed to be Real
estate Taxes for the Base Tax, and Landlord shall give notice to Tenant if the
amount by which the tax payments previously made were less than the tax payments
required to be made under this Article, and Tenant shall pay the amount of the
deficiency within ten (10) days after demand therefor.
(2) The term "Real Property" shall mean the land (the
"land") on which the building is located, the building (together with all
personal property located therein and all fixtures, facilities, machinery and
equipment used in the operation thereof) and all improvements on the land or in
the Building and all easement air rights, development or zoning rights over
other real property.,in vicinity of the building and all appurtenances to all of
the foregoing.
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(3) The term "Tax Year" shall mean each New York City
real estate tax year commencing on July 1st and expiring on June 30th in which
any portion of the term of this lease shall fall. If the present use of a July
1-June 30 New York City real estate tax year shall hereafter be changed, then
such changed tax year shall be used with appropriate adjustment for the
transition.
(4) The term "Real Estate Taxes" shall mean the total
of all taxes and special or other assessments levied, assessed or imposed at any
time by any governmental authority (including, without limitation, any district,
as such term is defined in Article 19-A of the General Municipal Law of the
State of New York) upon or against or with respect to the Real Property or any
part thereof (but excluding, however, any interest or other late payment charges
thereon so long as Tenant is current in the payments required to be made by it
to Landlord under this Article). If, due to a future change in the method of
taxation or in the taxing authority, or for any other reason any tax, or
assessment is levied, assessed, or imposed at any time by any governmental
authority in connection with the receipt of income or rents from the Real
Property, or a franchise, income, value added, use, transit, profit, or other
tax or governmental imposition, however designated, shall be levied against
Landlord or any owner of the Real Property in addition to or in substitution in
whole or in part for the Real Estate Taxes, or in lieu of additions to or
increases of the Real Estate Taxes, then such franchise, income, value added,
use, transit, profit, or other tax, assessment or governmental imposition shall
be deemed to be included within the definition of Real Estate Taxes for the
purposes hereof. In the event the present real property tax system is so
modified, substituted for, or changed, (in a manner not covered by the preceding
sentence), so that the resulting new system is such that the provisions of this
Article 48 cannot be implemented then, in such event, the parties shall agree
upon a substitute formula for upward or downward adjustment of annual rent in
lieu of the formula set forth in this Article 48 so as to reflect accrued and/or
accumulated downward or upward adjustments of rent made up to the time of such
change of the real property tax system and future adjustments under such new
system, and upon the failure of the parties to so agree to such a substitute
formula, it is hereby agreed that the matter shall be submitted to arbitration
before a single impartial arbitrator in accordance with the Real Estate
Valuation Arbitration Rules of the American Arbitration Association, or any
successor thereto, to so determine a substitute formula for the adjustment of
rent under this Article 48, and such arbitrator's award upon confirmation by the
court having jurisdiction shall be thereafter binding upon the parties to this
lease. If there are any assessments which are payable over a period of time
extending beyond the term of this lease, only a pro rata portion thereof
covering the portion of the term 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,
(1) such assessment shall be deemed to have been payable in the maximum number
of installments permitted by law without penalty and (2) there shall be included
in Real Estate Taxes for each Tax Year in which such installments may be paid
the installments of such assessment so becoming payable during such Tax Year,
together with interest payable during such Tax Year.
(5) The term "Tenant's Share", for purposes of this
lease shall mean 0.47%.
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(ii) In the event that the Real Estate Taxes payable for any
Tax Year shall exceed the Base Tax, Tenant shall pay as Tax Escalation to
Landlord, as additional rent for such Tax Year, an amount equal to Tenant's
Share of the excess. Before or after the start of each Tax Year, Landlord shall
furnish to Tenant a statement of Tenant's Share of Real Estate Taxes payable for
such Tax Year together with a copy of the tax bills for such Tax Year. If the
Real Estate Taxes for such Tax Year exceed the Base Tax, Tenant shall pay as
additional rent on the first (1st) day of each calendar month, together with
payment of rent, an amount equal to one-twelfth (1/12th) of Tenant's Share of
such excess. To the extent that at the time of furnishing any such statement the
aggregate monthly payments made for the preceding months of the Tax Year in
question are less than the amount which would have been paid if the installments
required pursuant to such statement had been made for such preceding months, the
deficiency shall be due and payable in full as additional rent together with the
regular monthly installment of rent next coming due. Landlord shall send (a) a
revised statement to Tenant during any Tax Year if Real Estate Taxes are changed
during such Tax Year, and an appropriate adjustment shall be made in the monthly
installments based thereon. If there is any difference between the amount Tenant
has paid for such tax year and the amount due Landlord hereunder for such Tax
Year then, after the end of such Tax Year, Landlord shall send Tenant a
statement of Tenant's Share of the Real Estate Taxes for such Tax Year and
within five (5) days after receipt of such statement Tenant shall pay Landlord
as additional rent any amount by which Tenant's share of the Real Estate Taxes
exceeds the aggregate monthly installments paid by Tenant during such Tax Year.
Any amount by which such aggregate monthly installments exceed Tenant's Share of
the Real Estate Taxes for such Tax Year shall be credited against rent and
additional rent hereunder.
(b) If, after Tenant shall have made a payment of additional
rent under this Article, and provided Tenant is not in default under this lease,
Landlord shall receive a refund of any portion of the Real Estate Taxes payable
for any Tax Year on which such payment of additional rent shall have been based,
as a result of a reduction of such Real Estate Taxes by final determination of
an application, legal proceeding, settlement, or otherwise, Landlord shall give
Tenant an appropriate credit against rent and additional rent hereunder, after
deducting therefrom all legal fees, expert fees, court costs and all expenses
and fees incurred in connection with obtaining such refund (prorated for any
partial year if appropriate) . Nothing herein shall be deemed to obligate
Landlord to seek a reduction in Real Estate Taxes or assessed valuation of the
Real Property.
(c) Except as elsewhere specifically provided in this
Article, any statement of the Tax Escalation furnished by Landlord as provided
above shall constitute a final determination as between Landlord and Tenant of
the Tax Escalation for the period represented thereby unless Tenant shall,
within thirty (30) days after it is furnished, give a notice to Landlord that it
disputes the accuracy or appropriateness thereof, which notice shall specify the
particular respects in which the statement is inaccurate or inappropriate.
Pending the resolution of such dispute, Tenant shall pay Tax Escalation to
Landlord in accordance with the statement furnished by Landlord.
(d) In no event shall the annual rental rate under this lease
for any year, or the
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items of the additional rent payable under any other provisions of this lease
during the term hereof, be reduced by virtue of this Article.
(e) If the commencement date of the lease term is not the first day of
a Tax Year, then Tenant's Share of Real Estate Taxes for such Tax Year shall be
prorated based upon the number of days of the term of this lease within such Tax
Year. Upon the date of any expiration or termination of this lease (except
termination because of Tenant's default in which event the amount otherwise to
be prorated in Tenant's favor shall instead be applied to reduce damages payable
by Tenant by reason of such default), whether the same be the date herein above
set forth for the expiration date of this lease or any prior or subsequent date,
Tenant's Share for such Tax year shall be prorated for the number of days of the
term of this lease within such Tax Year and, to the extent not theretofore
already paid, shall be immediately payable, subject to adjustment at the end of
such Tax Year as provided in this Article.
(f) Landlord's and Tenant's obligation to make the payments and
adjustments referred to in this Article shall survive any expiration or
termination of this lease.
(g) Any delay or failure of Landlord in billing any Tax Escalation
herein above provided shall not constitute a waiver of, or in any way impair the
continuing obligation of Tenant to pay, such Tax Escalation hereunder.
49. WAGE RATE ESCALATION:
The term "Basic Rate" means the regular hourly rate of wages, i.e.,
without fringe benefits, required to be paid to office building porters pursuant
to a collective bargaining agreement between the Realty Advisory Board on Labor
Relations, Inc. (or any successor thereto) and Local 32B-32J of the Building
Service Employees International Union AFL- CIO (or any successor thereto) on
December 31, 1998. If such collective bargaining agreement is not entered into,
or if such parties or their successors shall cease to bargain collectively, the
Basic Rate (or the regular hourly rate of wages, i.e., without fringe benefits,
required to be determined in order to establish, from time to time, any increase
in the annual rental rate payable by Tenant to Landlord pursuant to this
Article) shall be the average of the regular hourly rate of wages, i.e., without
fringe benefits, payable to, or. for the benefit of, office building porters
engaged in the general maintenance and operation of the building and payable
either by Landlord or by the contractor furnishing such services, but not in
excess of the hourly minimum rate of wages for office building porters engaged
in the general maintenance and operation of off ice buildings in the same
vicinity as the building. If in any calendar year during the term of this lease
such regular hourly rate of wages paid to office building porters exceeds the
Basic Rate, the annual rental rate payable under this lease shall be increased
by one cent ($.01) per square foot
of space in the demised premises for each one cent ($.01), or fraction thereof,
that such regular hourly rate of wages exceeds the Basic Rate. Landlord shall
notify Tenant of any such adjustment in the annual rental rate and shall furnish
to Tenant appropriate supporting data with respect thereto to the extent
available. Such adjustment in the annual rental rate shall commence as of the
effective date of such increase in wages, and shall be paid by Tenant to
Landlord as part of
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the monthly installments of annual rental which thereafter shall include
one-twelfth (1/12) of the annual amount of such adjustment until a new
adjustment becomes effective pursuant to the terms of this Article. Any such
adjustment for less than a full year or for less than a full month shall be
prorated accordingly. For the purpose of this Article, the Parties agree that
the demised premises shall be deemed to contain 880 square feet of space. The
Basic Rate is intended to be an index in the nature of a cost of living index
and is not intended to reflect the actual cost of wages for the building. Any
notice of adjustment sent by Landlord to Tenant shall constitute a final
determination as between Landlord and Tenant of the rental adjustment
established thereby unless Tenant shall, within thirty (30) days after it is
furnished, give a notice to Landlord that Tenant disputes the accuracy or
appropriateness thereof, which notice shall specify the particular respects in
which the statement is inaccurate or inappropriate. Pending the resolution of
such dispute, Tenant shall pay to Landlord the amounts described in Landlord's
notice to Tenant.
50. UTILITY COSTS ESCALATION:
(a) Tenant agrees to pay Landlord, as additional rent hereunder, in
the amount and manner provided in subparagraphs (b) and (c) of this Article, a
share of the Utility Costs (as hereinafter defined) incurred in the operation
and maintenance of the building of which the demised premises form a part.
"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 electricity, steam, gas and water (including sewer
rental) furnished to the building (including all rentable portions of the
building, whether or not separately metered and paid for by the tenants thereof,
and the public and common areas thereof),together with any taxes on such costs.
(b) Tenant's share of Utility Costs shall be 0.47% of the excess of
the amount of Utility Costs for any Accounting Period over those for the Base
Year. "Base Year" shall mean the period of twelve (12) consecutive full calendar
months ending on June 30, 1998.
(c) As used herein, the "First Accounting Period" shall mean the
period comprising the twelve (12) full calendar months commencing July 1, 1998
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:
(i) During the 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 $10.00 as an estimate of Tenant's share of such
increased Utility Costs; any partial month to be prorated.
(ii) 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
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revised estimated share in monthly installments, in advance, on the first day of
each month, until the next succeeding revision in such estimate.
(iii) 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 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. Tenant shall have the right to inspect the books and
records of Landlord during business hours for the purpose of verifying the
information contained in the written statement furnished by Landlord to Tenant
covering each Accounting Period provided written request for such inspection is
made by Tenant to Landlord within fifteen (15) days following the receipt of
such written statement.
(iv) As to any Accounting Period, Tenant's obligation for a
share of Utility Costs shall be prorated on the basis of the actual number of
~ays in the portion of such Accounting Period contained in the term of this
lease, as to which Tenant's obligation shall survive the term hereof.
(v) In the event of any dispute, Tenant shall pay the amount
of Tenant's bill or statement as rendered by Landlord 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.
(vi) Any such bill or statement rendered by Landlord to
Tenant shall be deemed binding and conclusively correct if Tenant fails to
object thereto within thirty (30) days after the receipt thereof.
(d) Notwithstanding anything to the contrary contained in paragraph (a)
of this Article, if Landlord exercises its election under paragraph (c) of
Article 55 hereof to discontinue furnishing electrical service to the demised
premises as now required pursuant to said Article 55 then increases in
electricity costs accruing after such discontinuance shall not be included in
calculating Utility Costs for purposes of determining Tenant's share thereof.
51. ESTOPPEL CERTIFICATE:
(a) At any time and f rom time to time upon not less than ten (10)
days, prior notice by Landlord to Tenant, Tenant shall, without charge, execute,
acknowledge and deliver to Landlord a statement in writing, in recordable form,
addressed to such party as Landlord may designate,
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prepared by Landlord or in form satisfactory to Landlord certifying (i) that
this lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications), (ii) whether the term of this lease has commenced and rent
and additional rent have become payable hereunder and, if so, the dates to which
they have been paid, (iii) whether or not, to the best knowledge of the signer
of such certificate, Landlord is in default in performance of any of the terms
of this lease and, if so, specifying each such default of which the signer may
have knowledge, (iv) whether Tenant has accepted possession of the demised
premises, (v) whether Tenant has made any uncollected claim against Landlord
under this lease and, if so, the nature thereof and the dollar amount, if any,
of such claim, (vi) whether there exist any offsets or defenses against
enforcement of any of the terms of this lease upon the part of Tenant to be
performed and, if so, specifying the same and (vii) such further information
with respect to the lease or the demised premises as Landlord may reasonably
request, it being intended that any such statement delivered pursuant hereto may
be relied upon by any prospective purchaser of the building or any part thereof
or of the interest of Landlord in any part thereof, by any mortgagee or
prospective mortgagee thereof, by any lessor or prospective lessor thereof, by
any lessee or prospective lessee thereof, or by any prospective assignee of any
mortgage thereof.
(b) The failure of Tenant to execute, acknowledge and deliver to
Landlord a statement in accordance with the provisions of this Article within
said ten (10) day period shall constitute an acknowledgment by Tenant, which may
be relied on by any person who would be entitled to rely upon any such
Statement, that such statement as submitted by Landlord is true and correct.
Notwithstanding such acknowledgment, Tenant, at Landlord's option, shall be in
default thereunder for its failure to execute, acknowledge and deliver such
statement.
52. EXCULPATION:
Landlord and Tenant agree that in any action arising out of, or under,
this lease against Landlord hereunder, the enforcement or collection of any
judgment or arbitration award against, and the monetary liability of, Landlord
shall be limited to (a) the interests of Landlord in and to the Real Property
and the leasehold estate under any ground or underlying lease affecting the land
and/or Building and the rents and profits therefrom and (b) Landlord's interest
in this lease, and Tenant shall not enforce any judgment against, or attach, any
other assets of such Landlord, or of any disclosed or undisclosed principal of
Landlord (or of any officer, director, stockholder, partner or agent of Landlord
or of any such principal) in satisfaction thereof, and Tenant shall look only
and solely to such interests for the satisfaction of any right or remedy of
Tenant arising out of or under this lease, the relationship of Landlord and
Tenant hereunder or under law, or Tenant's use and occupancy of the demised
premises or other liability of Landlord to Tenant.
53. HAZARDOUS MATERIALS PROHIBITED:
Tenant shall not cause or permit any Hazardous Materials (hereinafter
defined) to be used, stored, transported, released, handled, produced or
installed in, on or from the demised premises or any other portion of the
Building. "Hazardous Materials", as used herein, shall mean any
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flammables, explosives, radioactive materials, hazardous wastes, hazardous and
toxic substances or related materials, asbestos or any material containing
asbestos, or any other substance or material as defined by any present or future
Federal, state or local environmental law, ordinance, rule or regulation,
including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act, as amended, and the regulations adopted and publications
promulgated pursuant to each of the foregoing. In the event of a breach of the
provisions of this Article 53, Landlord shall have the right, in addition to all
other rights and remedies of Landlord under this lease or at law, to require
Tenant at Tenant's sole expense, to remove any such Hazardous Materials from the
demised premises and dispose of the same off premises in the manner prescribed
for such removal and disposal by laws and requirements of any public
authorities. The provisions of this Article 53 shall survive the expiration or
termination of this lease. Further, Tenant shall carry, during the entire term
of this lease, adequate insurance in Landlord's reasonable opinion, against
liability claims based upon the existence, release, removal and/or disposal of
Hazardous Materials (the insurance requirements contained in Article 41 shall
apply to such coverage). Tenant's indemnity obligations conta.-'.ned in
paragraph (a) of Article 41 shall apply to any loss or damage suffered by
Landlord as a result of Tenant's breach of any of the provisions of this Article
53.
54. MISCELLANEOUS:
(a) If any provision of this lease or its application to any party or
circumstance is invalid or unenforceable to any extent under present or future
law, then and in that event, it is the intention of the parties hereto that the
remainder of this lease or the application of such provision to any other party
or circumstance shall not be affected thereby. Each provision of this lease
shall be valid and enforceable to the fullest extent permitted by law.
(b) Tenant shall not commence any action or proceeding against
Landlord brought or maintained pursuant to Article 9 of The Civil Practice Law
and Rules, Rule 23 of the Federal Rules of Civil Procedure, or any other statute
or rule permitting or governing class actions now or hereafter in effect, nor
shall Tenant participate by consent or otherwise in any such action or
proceeding brought against Landlord by any other party. If Tenant is named or
joined as a party therein, Tenant shall promptly withdraw from any such
action-or proceeding in accordance with applicable state or Federal law.
(c) It is understood and agreed that Tenant shall not bring into the
building lobby and/or the demised premises any type of bicycle or motorbike.
(d) 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,
it being the intention and desire of the parties hereto that substantially all
venetian blinds in the building should be of uniform character, color, size and
design.
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<PAGE> 41
(e) In the event of any inconsistency between any provision contained
in this Rider and the printed provisions of this lease the provisions of this
Rider shall be paramount and controlling.
(f) No agreement shall be effective to change, modify, waive, release,
discharge, terminate or effect an abandonment of this lease, in whole or in
part, including, without limitation, this paragraph (f), unless such agreement
is in writing, refers expressly to this lease and is signed by the party against
whom enforcement of the change, modification, waiver, release, discharge,
termination or effectuation of the abandonment is sought.
(g) Except as otherwise expressly provided in this lease, this lease
shall bind and benefit the successors and assigns of the parties hereto with the
same effect as if mentioned in each instance where a party is named or referred
to: provided, however, that (i) no violation of the provisions of Articles 11 or
42 hereof shall operate to vest any rights in any successor or assignee of
Tenant and (ii) the provisions of this paragraph shall not be construed as
modifying the conditions of limitation contained in Articles 17 and 43 hereof.
(h) If Tenant shall request Landlord's approval and Landlord shall
fail or refuse to give such approval, Tenant shall not be entitled to any
damages for any withholding by Landlord of its approval, it being intended that
Tenant's sole remedy shall be an action for specific performance or injunction,
and that such remedy shall be available only in those cases where Landlord has
expressly agreed in writing not to unreasonably withhold its consent or where as
a matter of law Landlord may not unreasonably withhold its consent.
(i) If an excavation shall be made upon land adjacent to or under the
building, or shall be authorized to be made, Tenant shall, afford to the person
causing or authorized to cause such excavation license to enter the demised
premises for the purpose of performing such work as said person shall deem
necessary or desirable to preserve and protect the building from injury or
damage to support the same by proper foundations, without any claim for damages
or liability against Landlord and without reducing or otherwise affecting
Tenant's obligations under this lease.
(j) The submission by Landlord of this lease in draft form shall be
deemed submitted solely for Tenant's consideration and not for acceptance and
execution. Such submission shall have no binding force or effect and shall
confer no rights nor impose any obligations, including brokerage 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.
(k) Irrespective of the place of execution or performance, this lease
shall be governed by and construed in accordance with the laws of the State of
New York. The table of contents, captions, headings and titles in this lease are
solely for convenience of references and shall not affect its interpretation.
(1) If under the terms of this lease Tenant is obligated to pay
Landlord a sum in addition to the annual rent and no payment period therefor is
specified, Tenant shall pay Landlord the amount
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<PAGE> 42
due within ten (10) days after being billed.
(m) Except as otherwise specifically provided herein to the contrary,
all bills, invoices or statements rendered to Tenant pursuant to this lease
shall be deemed binding and conclusive if, within thirty (30) days of receipt of
the' same, Tenant fails to notify Landlord in writing of its intention to
dispute such bill, invoice or statement.
(n) Notwithstanding anything to the contrary contained in this lease,
during the continuance of any default by Tenant, Tenant shall not be entitled to
exercise any rights or options, or to receive any funds or proceeds being held,
under or pursuant to this lease.
(o) Tenant represents and warrants:
(i) that there are no actions, suits or proceedings pending
or, to the knowledge of Tenant, threatened against or affecting Tenant, at law
or in equity or before any federal, state, municipal or governmental department,
commission, board, bureau, agency or instrumentality which would impair Tenant's
ability to perform its obligations under this lease;
(ii) that this lease has been duly authorized, executed and
delivered by Tenant and constitutes the legal, valid and binding obligation of
Tenant; and
(iii) that the consummation of the transactions hereby
contemplated and. the performance of this lease by Tenant will not result in any
breach or violation of, or constitute a default under, any lease, bank loan or
credit agreement to which Tenant is a party.
(p) Tenant acknowledges that it has no rights to any development
rights, "air rights" or comparable rights appurtenant to the Real Property, and
consents, without further consideration, to any utilization of such rights by
Landlord and agrees to promptly execute and deliver any instruments which may be
requested by Landlord, including instruments merging zoning lots, evidencing
such acknowledgment and consent. The provisions of this paragraph shall be
deemed to be and shall be construed as an express waiver by Tenant of any
interest Tenant may have as a "party in interest" (as such quoted term is
defined in Section 12-10 Zoning Lot of the Zoning Resolution of the City of New
York) in the Real Property.
(q) If any sales or other tax is payable with respect to any cleaning
or other services which Tenant obtains or contracts for directly from any third
party or parties, Tenant shall file any required tax returns and shall pay any
such tax, and Tenant shall indemnify and hold Landlord harmless from and against
any loss, damage or liability suffered or incurred by Landlord on account
thereof.
(r) Except for the space within the inside surfaces of all walls, hung
ceilings, floors, windows and doors bounding the demised premises, all of the
building, including, without limitation, exterior building walls, core corridor
walls and doors and any core corridor entrance, any terraces or roofs adjacent
to the demised premises, and any space in or adjacent to the demised premises
used for
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<PAGE> 43
shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities,
sinks or other Building facilities, and the use thereof, as well as access
thereto through the demised premises for the purposes of operation, maintenance,
decoration and repair, are reserved to Landlord and persons authorized by
Landlord.
(s) Landlord shall have the right to erect and maintain sidewalk
bridges and/or scaffolding on or about the demised premises and/or the building.
(t) If at any time any windows of the demised premises are either
temporarily darkened or obstructed by reason of any repairs, improvements,
maintenance and/or cleaning in or about the building (or permanently darkened or
obstructed if required by law) or covered by any translucent material for the
purpose of energy conservation, or if any part of the building, other than the
demised premises, is temporarily or permanently closed or inoperable, the same
shall be without liability to Landlord and without any reduction or diminution
of Tenant's obligations under this lease.
(u) Landlord reserves the right, at any time, without it being deemed
a constructive eviction and without incurring any liability to Tenant therefor,
or affecting or reducing any of Tenant's covenants and obligations hereunder, to
make or permit to be made such changes, alterations, additions and improvements
in or to the building and the fixtures and equipment thereof, as well as in or
to the street entrances, lobby, doors, halls, passages, elevators, escalators
and stairways thereof, and other public parts of the building, as Landlord shall
deem necessary or desirable..
(v) Tenant shall not record this lease or any memorandum thereof.
(w) All additional charges required to be paid pursuant hereto
(sometimes referred to herein as "additional rent") shall be deemed to be rent
and Tenant's failure to pay additional rent shall be considered a failure to pay
rent hereunder and Landlord shall be entitled to all rights and remedies
provided herein or by law in connection therewith.
55. ELECTRICITY:
(a) To the extent available from an 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 (i.e. there shall be no charge to Tenant for such electric
energy by way of measuring the same by meter or otherwise, such reasonable usage
of electric energy being included as part of Landlord's services under this
lease covered by the annual rent reserved hereunder) , however, in the event
Tenant shall fail to pay any installment of rent or additional rent, Landlord
may, upon five (5) days, notice (which may be oral), discontinue the service of
electric current to the demised premises without releasing Tenant or Landlord or
from any liability under this lease and without Landlord's agent incurring any
liability for any damage or loss sustained by Tenant by such discontinuance of
service. Landlord shall not be liable in any way to Tenant for any change,
failure, inadequacy or defect in the supply or character of electric energy
furnished to the demised premises
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<PAGE> 44
by reason of any requirement, act or omission of the municipal or public utility
servicing the building and/or the demised premises with electricity, or for any
reason whatsoever not directly attributable to Landlord. Tenant shall furnish
and install all replacement lighting, tubes, lamps, bulbs and ballasts which may
be required from time to time in the demised premises at Tenant's sole cost and
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 and computers),
appliances or equipment to the building 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. As a condition to
granting such consent, Landlord may require Tenant to agree to an increase in
the annual rent payable hereunder in an amount which will reflect the value to
Tenant of the additional electrical 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 annual rent 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. Should Landlord
grant such consent, all additional risers or other equipment required therefore
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 prorata 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 as of the date of this lease at the rate of $103.75 per amp per phase
of total additional connected load).
(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 annual rent payable under this
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<PAGE> 45
lease shall be reduced by $2,640.00 per annum. 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 services to the demised premises which are
purchased from the public utility company serving the locality in which the
building is located and Tenant's obligations under this Article 55 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 request in connection with any
requirement of any public utility or any requirement of law pertaining to
utility services or charges therefor.
56. COMMERCIAL RENT CONTROL:
If any of the annual rent or additional rent payable under the terms
of this lease shall be or become uncollectible, reduced or required to be
refunded because of any applicable laws, ordinances, orders, rules, requirements
or regulations, Tenant shall enter into such agreement (s) and take such other
steps (without additional expense to Tenant) as Landlord may request and as may
be legally permissible to permit Landlord to collect the maximum rents which f
rom time to time during the continuance of such legal rent restriction may be
legally collected (but not in excess of the amounts reserved therefor under this
lease) Upon the termination of such legal rent restriction, (i) the annual rent
and additional rent shall become and thereafter be payable in accordance with
the amounts reserved herein for the periods following such termination and (ii)
Tenant shall pay to Landlord, to the maximum extent legally permissible, an
amount equal to (A) the annual rent and additional rent which would have been
paid pursuant to this lease but for such legal rent restriction less (B) the
annual rent and additional rent paid by Tenant during the period such legal rent
restriction was in effect.
57. AIR CONDITIONING:
Landlord shall furnish to the demised premises air conditioning from
April 15th through October 15th in each year of the term, without..charge for
electricity used in the operation thereof, on business days from 8:00 a.m. to
6:00 p.m., except on Saturdays when the hours shall be from 8:00 a.m. to 1:00
p.m., when required for the comfortable occupancy of the Tenant. Tenant agrees
to keep, and cause to be kept, closed all windows in the demised premises,
whenever the air conditioning system is in operation, and Tenant agrees at all
times to cooperate fully with Landlord, and to abide by all reasonable
regulations and requirements which Landlord may prescribe, for the proper
functioning and protection of said air conditioning system. Landlord reserves
the right to
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<PAGE> 46
interrupt, curtail, stop, or suspend such air conditioning when necessary by
reason of accident, or of repairs, alterations, or improvements in the judgment
of Landlord desirable and necessary to be made, or difficulty in securing
supplies or labor, or strikes, or any other cause beyond the reasonable control
of Landlord, whether such other cause be similar or dissimilar to those
hereinbefore specifically mentioned. No diminution or abatement of rent or other
compensation shall or will be claimed by Tenant, nor shall this lease, nor any
of the obligations of Tenant hereunder, be affected or reduced, by reason of any
such interruption, curtailment, stoppage or suspension of such air conditioning.
Any damage caused to air conditioning equipment as a result of the negligence
of, or the careless operation by, Tenant, or its agents, employees, licensees or
invitees, shall be repaired by Landlord at the cost and expense of Tenant, and
any such expense shall be paid by Tenant to Landlord upon demand therefor and
shall constitute additional rent hereunder.
58. FREIGHT ELEVATOR SERVICE:
Notwithstanding the provisions of Article 31, Landlord shall at its own
expense run freight elevator service on business days are 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.
59. TENANT'S CLEANING CONTRACTOR:
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, and/or a contractor or contractors
approved by Landlord in advance for any waxing, polishing and other maintenance
work in or to the demised premises and/or any of Tenant's personal property
therein, provided that the prices charged by such contractor(s) are comparable
to the prices charged by other reputable contractors for the same work. Tenant
shall not employ any other cleaning or maintenance contractor, or any
individual, firm or organization, for such purposes without Landlord's prior
written consent. If Landlord and Tenant cannot agree on whether the prices being
charged by the contractor(s) 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
directly performing any of the foregoing "in house" (except that Tenant must use
the cleaning contractor designated by Landlord for rubbish removal and pay the
cost thereof as provided in Article 62 hereof) . Notwithstanding the provisions
of section (d) of Article 31 of this lease, in addition to keeping the demised
premises clean at Tenant's expense, Tenant shall also pay to Landlord, or at
Landlord's direction directly to the cleaning contractor, 4.89% of the cleaning
expenses and cost of supplies for the cleaning of the common areas on the floor
(s) on which the demised premises are located (i.e. the public corridor(s) and
bathroom(s)).
60. ATTORNMENT:
Tenant covenants and agrees that, if by reason of a default upon the
part of the Landlord as
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<PAGE> 47
tenant under any underlying lease in the performance of any of the terms or
provisions of such underlying lease or if for any other reason of any nature
whatsoever, such underlying lease and the leasehold estate of Landlord as tenant
thereunder is terminated by summary proceedings or otherwise in accordance with
the terms of such underlying lease or if such underlying lease and such
leasehold estate is terminated through foreclosure proceedings brought by the
holder of any mortgage to which such underlying lease is subject or subordinate,
Tenant shall attorn to the landlord under such underlying lease or the purchaser
in such foreclosure proceedings, as the case may be, and shall recognize such
landlord or such purchaser, as the case may be, as the Tenant's Landlord under
this lease, unless the landlord under such underlying lease or the holder of any
such mortgage in any proceedings shall elect in connection therewith to
terminate this lease and the right of Tenant to the possession of the premises
demised hereby. Tenant agrees to execute and deliver at any time and f rom time
to time upon the request of Landlord, or of the landlord under any such
underlying lease, any instrument, which may be necessary or appropriate to
evidence such attornment and tenant hereby appoints Landlord its attorney- in-
fact, irrevocable and coupled with an interest, to execute and deliver, for and
on behalf of Tenant, any such instrument. Tenant further waives the provisions
of any statute or rule of law now or hereafter in effect which may give or
purport to give Tenant any right of election to terminate this lease or to
surrender possession of the premises demised hereby in the event such underlying
lease terminates or any such proceeding is brought by the landlord under any
such underlying lease or by the holder of any such mortgage and agrees that,
unless and until any such landlord or the holder of any such mortgage, shall
elect to terminate this lease and to extinguish the leasehold estate of the
Tenant hereunder this lease shall not be affected in any way whatsoever by any
such proceeding or termination.
61. GLASS REPLACEMENT:
Landlord shall replace at the expense of Tenant any and all window
glass damaged or broken from any cause whatsoever in and about the demised
premises. Landlord may insure and keep insured at Tenant's expense all glass in
the demised premises for and in the name of Landlord. Bills for the premiums
therefor shall be rendered by Landlord to Tenant at such times as Landlord 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.
62. RUBBISH REMOVAL:
In furtherance of Tenant's obligations under Articles 29 and 31, Tenant
shall pay to Landlord on the first day of each and every month during the term
of this lease, as additional rent hereunder, the sum of $25.00 per month to
cover the cost of rubbish removal for the demised premises. Removal of cartons,
tubes and cases shall be an extra charge. The foregoing monthly amount may be
changed by Landlord from time to time in accordance with the prevailing rate at
1430 Broadway.
63. SECURITY:
It is agreed that the security deposit shall be placed in an interest
bearing account with the
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<PAGE> 48
interest earned thereon to be accumulated in the security account and held as
additional security in accordance with Article 32.
64. DIRECTIONAL SIGN:
Tenant, at Tenant's sole cost and expense, may purchase and install at
a location in the common hallway a professionally lettered identification
directional sign (the size, design, method of installation and location thereof
to be subject to Landlord's prior approval, which shall not be unreasonably
withheld).
65. NO BROKER:
It is understood and agreed that no broker was involved in the leasing
of the demised premises.
66. LOBBY DIRECTORY:
Landlord agrees that Tenant shall be entitled to up to three (3)
listings (i.e. names) at no charge on the lobby directory. Future additions (if
space is available) or substitutions shall be paid for by Tenant at Landlord's
then rates.
67. REDUCED RENT PERIOD:
Tenant shall not be obligated to pay annual rent during the period
commencing on February 1, 1998 and ending on February 28, 1998) (the "Reduced
Rent Period"). However, during such Reduced Rent Period, Tenant shall pay for
its electric consumption in the amount of $220.00 per month and rubbish removal
in the amount of $25. 00 per month (aggregating $245. 00 per month) .
68. LANDLORD'S WORK.
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:
(a) furnish and install dry wall partition to receive
information window which is presently installed in Room 507 at 55 West 39th
Street and will be relocated to the demised premises (casing to be block wall
faced with sheetrock);
(b) shampoo and stretch carpeting, as required; and
(c) paint walls in demised premises with a building standard
paint job (color to be off-white or pastel only).
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<PAGE> 1
EXHIBIT 10.38
AMENDMENT NO. 1 TO EMPLOYMENT CONTRACT
BETWEEN
GENERAL CREDIT CORPORATION
AND
DAVID BADER
<PAGE> 2
AMENDMENT NO. 1 TO EMPLOYMENT CONTRACT
--------------------------------------
THIS AMENDMENT NO. 1 TO THAT CERTAIN EMPLOYMENT CONTRACT is made and
entered as of the 26th day of January 1998 ("Contract"), between GENERAL CREDIT
CORPORATION, a New York corporation ("EMPLOYER"), and DAVID BADER ("EMPLOYEE").
R E C I T A L S:
- - - - - - - -
A. The parties have entered into that certain Employment Contract dated
as of June 1, 1996 among EMPLOYER and EMPLOYEE (the "Contract").
B. EMPLOYEE is the Vice President and Chief Financial Officer of
EMPLOYER.
C. The parties desire to amend the Contract to the extent and in the
respects set forth in this Amendment No. 1.
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:
1. Article II of the Contract is hereby amended in its entirety to read as
follows:
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.
2. Except to the extent expressly set forth in this Amendment No. 1, the
Contract shall remain in full force and effect in accordance with its terms.
1
<PAGE> 3
IN WITNESS WHEREOF, EMPLOYER and EMPLOYEE have caused this Amendment
No. 1 to be executed on the day and year first above written.
"EMPLOYER"
GENERAL CREDIT CORPORATION
By: /s/ Gerald Nimberg
----------------------------
Authorized Representative
"EMPLOYEE"
/s/ David Bader
--------------------------------
David Bader
2
<PAGE> 1
EXHIBIT 10.39
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of the 10" day of
February, 1998 is made and entered into on the terms and conditions set forth,
by and between LINKS COURT #1 ASSOCIATES (the"Lender") and GENERAL CREDIT
CORPORATION (the "Borrower").
RECITALS
A. The Borrower has requested and the Lender has agreed to establish, a
credit facility in favor of the Borrower, in the aggregate principal amount of
Two Million Six Hundred Thousand ($2,600,000.00) Dollars (the "Loan" or the
"Loan Amount") and Borrower, upon the terms and agrees to make one or more
credit loans to the Borrower, upon the terms and conditions set forth in this
Agreement and that certain NonNegotiable Secured Corporate Promissory Note of
ever date herewith (the "Note"), a copy of which is attached hereto and
incorporated by reference hereby as Exhibit "A". Subject to the provisions of
this Agreement and the Note, the Borrower may borrow, repay and re. borrow any
amount of the Loan Amount.
B. The Loan Amount shall be deposited into an account at Fleet Bank,
Now York, New York (the "Loan Account") or such other FDIC. insured. banking
institution within the unilateral discretion of the Borrower (the "Bank") and
the Loan Account shall be in the name of General Credit Corporation or such
other name, as directed by the Borrower (the "Loan Account").
C. All withdrawals from the Loan Account shall require the consent of
the Lender and the Borrower and shall be made upon the terms and conditions of
this Agreement: provided, however, the Lender shall have the right to withdraw
funds from the Loan Account up to the Loan Amount without the 'consent of the
Borrower in the event an interest payment on the Note has not been made within
10 days of the date which it was due (a "Payment Default"). The Borrower hereby
agrees to place in escrow with counsel to the Lender written evidence of its
authorization to allow the Lender to withdraw funds from the Loan Account in the
event of a Payment Default, such escrow to be held substantially upon the terms
and conditions of that certain Escrow Agreement attached hereto and Incorporated
by reference hereby as Exhibit "B".
D. The proceeds of the Loan shall be used by the Borrower to purchase
checks on a non-recourse basis.
E. The Borrower shall have the right for the term of this Agreement to
borrow from the Lender amounts up to 100% of the total account balance
(including funds on deposit but not yet cleared). The Borrower shall have' the
right to borrow from the Lender $2,600,000.00 outstanding on any one day but
only up to $1,000,000.00 in advance in any one business day provided, however,
that any amounts borrowed must be replaced with an equal amount of a deposit of
checks by the end of the business day in which the funds are borrowed. the
Borrower will be allowed to make a cash deposit of up to $100,000.00 to the
Lender or its agent in lieu of the checks by the end of the business day to
repay any funds advanced to the Borrower. On Friday or the last
business day of the week, the Borrower may receive an advance of up to
<PAGE> 2
$1,300,000.00 provided, however, that the amount borrowed is replaced with an
equal amount of deposit of checks by the end of the business day. The Borrower
will be allowed to make a deposit of up to $300,000.00 to the Lender or its
agent in lieu of the checks by the end of the next business day to repay any
funds advanced to the Borrower. It shall not constitute a default if any bounced
checks are replaced within one (1) business day. If the funds are not replaced
by the aforementioned deposit, the Borrower shall pay a penalty of $10,000.00
per day until the money is replaced for a period not to exceed three (3)
business days except due to circumstances beyond the control of the parties. At
the end of three (3) business days, if the money is not replaced, the loan shall
be in default and subject, to call, except due to circumstances beyond the
control of the parties. Notwithstanding anything contained herein to the
contrary, the maximum amount that may be borrowed during the term of the Loan
shall not exceed $2,600,000.00 in the aggregate, on any one day. The parties
hereto shall use best efforts to cause the Bank to communicate daily to the
parties both the available balance and the total account balance.
NOW THEREFORE, in consideration of the agreement of the Lender to make
the Loan, the mutual covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Lender hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct and are
incorporated into this Agreement.
2. DESCRIPTION OF LOAN.
A. The Borrower shall have the right for the term of this Agreement to
borrow from the Lender amounts up to 100% of the total account balance
(including funds on deposit but not yet cleared). The Borrower shall have the
right to borrow from the Lender $2,600,000.00 outstanding on any one day but
only up to $1,000,000.00 in advance in any one business day provided, however,
that any amounts borrowed must be replaced with an equal amount of a deposit of
checks by the end of the business day in which the funds are borrowed. The
Borrower will be allowed to make a cash deposit of up to $100,000.00 to the
Lender or its agent in lieu of the checks by the end of the business day to
repay any funds advanced to the Borrower. On Friday or the last business day of
the week. the Borrower may receive an advance of up to $1.500,000.00 provided,
however, that the amount borrowed is replaced with an equal amount of deposit of
checks by the end of the business day. The Borrower will be allowed to make a
deposit of up to $300,000.00 to the Lender or its agent by the end of the next
business day to repay any funds advanced to the Borrower If the funds are not
replaced by the aforementioned deposit, the Borrower shall pay a penalty of
$10,000.00 per day until the money is replaced for a period not to exceed three
(3) business day. At the end of three (3) business days, if the money is not
replaced, the loan shall be in default and subject to call except for reasons
beyond the control of the parties. Notwithstanding. anything contained herein to
the contrary, the maximum amount that
- 2 -
<PAGE> 3
may be borrowed during the term of the Loan shall not exceed $2,600,000.00
outstanding on any one day but only up to $1,000,000.00 in advance in any one
business day provided, however, that any amounts borrowed must be replaced with
an equal amount of deposit of checks by the and' of the business day in which
the funds are borrowed. On Friday or the last business day of the week, the
Borrower may receive an advance of up to $1,300,000.00, provided, however, that
the amount borrowed is replaced with an equal amount of deposit of checks by the
end of the business day. The Borrower will be allowed to make a cash deposit of
up to $100,000.00 to the Lender or its agent by the end of the next business day
to repay any funds advanced to the Borrower. The parties hereto shall use best
efforts to cause the Bank to communicate daily to the parties both the available
balance and the total or account balance. It shall not constitute a default if
any bounced checks are replaced within one (1) business day. In the event the
1998 year end statement of profit and loss shows a net profit, after taxes, of
$200,000.00, the Borrower shall have the right to advance on Friday, or the last
business day of the Week, up to $1,500,000.00.
B. The proceeds of the Loan shall be advanced and re-advanced from time
to time to the Borrower as a single continuous revolving loan that allows the
Borrower to borrow, repay and re-borrow upon the terms and subject to the
conditions of this Agreement and the Note.
C. The maximum amount that may be borrowed during the term of the
Loan shall not exceed $2,600,000.00 in the aggregate in any one day.
D. For purposes of this Agreement, the term "available balance" shall
mean that amount held in the Loan Account which is available to be withdrawn as
confirmed by the Bank and the term "total account balance" shall mean the total
amount held in the Loan Account, inclusive of monies on deposit but not yet
cleared as confirmed by the Bank.
3. PAYMENTS. All payments made by the Borrower shall be applied first
to the payment of interest due to the Lender and then to the payment of unpaid
principal on the Note.
4. SECURITY. To secure the payment and performance of the Note the
Borrower shall deliver for the benefit of the Lender the following documents for
the purpose of conveying a priority security interest in the collateral
described therein:
(A) The Security Agreement dated as of the date hereof
between the Borrower and the Lender attached hereto and incorporated by
reference hereby as exhibit "C" (the "Security Agreement").
(B) UCC-1 Financing Statements approved for filing in
accordance with the applicable Uniform Commercial Code to perfect the security
interest created by the Security Agreement.
- 3 -
<PAGE> 4
5. ADDITIONAL ACQUISITIONS. Borrower shall not be permitted to make
any acquisitions over $500,000.00 from its current capital base without the
written consent of the Lender. Each year the amount of the acquisition approval
amount shall increase by the amount of the increase in retained earnings for the
previous year.
6. MISCELLANEOUS. This Agreement (including the exhibits and schedules
hereto) constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior negotiations,
understandings, agreements, arrangements and understandings, both oral and
written, among the parties hereto with respect to such subject Matter.
(A) AMENDMENT. This Agreement may not be amended or
modified in any respect, except to the mutual written
agreement of the parties hereto.
(B) NO THIRD PARTY BENEFICIARY. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person, firm, corporation, partnership, association or other entity, other than
the parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
(C) WAIVERS AND REMEDIES. The waiver by any of the parties
hereto of any other party's prompt and complete performance, or reach or
violation, of any provision of this Agreement shall not be construed as a waiver
of any subsequent breach or violation, and the waiver by any of the parties
hereto exercise any right or remedy which it may possess hereunder shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
(D) SEVERABILITY. The invalidity of any one or more of the
words, phrases, sentences, clauses, sections or subsections contained in this
Agreement shall not affect the enforceability of the remaining portions of this
Agreement or any part hereof, all of which are inserted conditionally on their
being valid in law, and, in the event that any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall be declared invalid by a court of competent jurisdiction, this Agreement
shall, be construed as if such invalid word or words, phrase or phrases,
sentence or sentences, clause or clauses, section or sections or subsection or
subsections had not been inserted.
(E) DESCRIPTIVE HEADINGS. Descriptive headings contained
herein are for convenience only and shall not control Or affect the meaning or
construction of any provision f this Agreement.
(F) COUNTERPARTS. This Agreement may be executed in any
numbers
- 4 -
<PAGE> 5
of counterparts and by the separate parties hereto in separate counterparts,
each of which shall be deemed to be one and the same instrument.
(G) NOTICES. All notices, requests, instructions, approvals and
other communications provided for herein and all legal process sin regard hereto
shall be in writing and shall be deemed to hi0e been duly given, when delivered
by hand by three (3) days after deposited in the United States mail, by
registered or certified mail, return receipt requested, postage prepaid as
follows:
If to LINKS COURT #1 ASSOCIATES: LINKS COURT #1 ASSOCIATES
1 Links Court
Huntington, NY 11743
Att: Gerald Schultz
If to GENERAL CREDIT CORPORATION: GENERAL CREDIT CORPORATION
370 Lexington Avenue
New York, NY 10017
Att: Irwin Zellermaier
G.S. CAPITAL CORP.
370 Lexington Avenue
New York, New York 10017
Att: Gerald Nimberg
or to such other address as any part hereto may from time to time designate in
writing delivered in a like manner.
(H) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. None of the parties hereto shall assign any of its
rights or obligations hereunder.
(I) APPLICABLE LAW. This Agreement shall be governed by, and
shall be construed, interpreted and enforced in accordance with the laws of the
State of New York.
(J) EXPENSES. Each of the parties hereto agrees to pay all of
the respective expenses by it in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
(K) AGENT. Neither party is hereby constituted an agent or
legal representative of the other party hereto and neither is granted any right
or authority hereunder to assume or create any obligation, express or implied,
or to make any representation, covenant, warranty or guaranty, except as
expressly granted or made in this Agreement.
- 5 -
<PAGE> 6
(L) OTHER DOCUMENTS. The parties hereto shall cooperate in the
effectuation of the transactions contemplated hereby and shall execute any and
all additional documents and shall take such additional actions as hall be
reasonably necessary or appropriate for such purposes.
Borrower represents that there was a profit for the period May
3, 1997 through and including December 31, 1997 before deductions for
depreciation and goodwill. In the event Borrower does not show a profit, Lender
may accelerate the loan. Simultaneously with its SEC filings for each quarter
but no later than sixty (60) days after the end of each quarter and seventy-five
(75) days after the end of each year. Borrower will provide Lender with a copy
of its profit and loss statement and balance sheet for the previous quarter.
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 PROVISIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
LINKS COURT #1 ASSOCIATES
By:______________________________
GENERAL CREDIT CORPORATION
By:________________________________
CONSENTED & AGREED TO:
G.S. CAPITAL CORP.
By:_____________________________
- 6 -
<PAGE> 1
EXHIBIT 10.40
GENERAL CREDIT CORPORATION
(A New York Corporation)
NON-NEGOTIABLE SECURED CORPORATE
PROMISSORY NOTE
$2,600,000.00
New York, New York February 10th, 1998
FOR VALVE RECEIVED, GENERAL CREDIT CORPORATION, a New York corporation
with offices at 370 Lexington Avenue, New York, New York 10017 (the "Borrower")
promises to pay to the order of LINKS COURT #1 ASSOCIATES, having an address
located at I Links Court, Huntington, New York 11743 (the "Lender") the
principal sum of Two Million Six Hundred Thousand ($2,600,000-00) Dollars under
the terms and conditions of that certain Loan Agreement dated as of the date
hereof, by and between the Borrower and the Lender (the "Loan Agreement') at the
Lender's offices or such other address as the Lender may provide for such
purpose, subject to the following terms. Capitalized terms not otherwise defined
herein shall have the same meanings assigned to such terms in the Loan
Agreement. All of the terms of the Loan Agreement are expressly made apart of
this Note by reference in the same manner and with the same effect as if set
forth herein at length. This Note is secured by the collateral as set forth in
the Security !Agreement.
1. BASIC TERMS,
(A) This Note shall bear Interest at the rate of twenty-four
(24%)percent per annum. Interest only shall accrue on the, outstanding principal
amount of this Note and shall be paid no later than the tenth day of each
calendar month, in arrears (the"Monthly Payment"). A late fee equal to 0.5% of
the principal amount owing on the Note shall be paid in the event the Monthly,
Payment, is not delivered on or prior to the eleventh of the month. All accrued
but unpaid interest as well as the principal amount of this Note shall be paid
in one installment on February 10", 200 1,
(B) This Note is non-negotiable and, no transfers or
divisions of this Note will be effected.
2. COLLATERAL.
Upon the terms and subject to the Conditions of the Security
Agreement, this Note is a secured obligation of the Borrower.
3. PREPAYMENT PRIVILEGE:
(A) This Note may not be prepaid in whole or in part except
as herein specifically provided. This Note may be prepaid in whole or in part,
provided that the Borrower pays to the Lender at the time of IWO prepayment an
additional amount
<PAGE> 2
(the "Amount") as a prepayment premium equal to the sum of $312,000.00.
4. MISCELLANEOUS PROVISIONS.
4.1 NOTICES:
Any demand or notice made or given by the Lender in
connection herewith shall be made upon or given to the Borrower by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the Borrower at its address first set forth above, but mailing
or giving or attempting to make or give any demand or notice shall not
waive any rights granted hereunder or otherwise, to act without demand or
notice.
4.2 ASSUMPTION, ASSIGNMENT AND TRANSFER:
This Note shall not be assignable or transferable and
any-assignment shall be void and ineffective.
4.3 EXPENSES:
In the event of any dispute arising I sing under this
Note, all costs and expenses (including without limitation reasonable attorneys
fees expenses of attorneys, in negotiations and trial and appellate litigation)
the prevailing party in any legal proceeding arising out of that dispute shall
be reimbursed to it by the other party to that dispute.
4.4 ENFORCEMENT:
No delay by the Lender in' enforcing any covenant or
right hereunder shall be deemed a waiver of such covenant or right and no waiver
by the Lender of any particular provision hereof shall be deemed a waiver of any
other provision or a continuing waiver of such particular provision, and, except
as so expressly waived, all provisions hereof shall continue in full force Ind
effect. The Borrower shall have no obligation to pay interest, or payments in
excess of the maximum rate of interest allowed to be contracted for by law, as
changed from time to time, applicable to this Note (the "Maximum Rate"). Any
interest in excess of the Maximum Rate paid or payable by the. Borrower (the
"Excess Sum") shall, not void this Note but shall be credited as payment of
principal. or. if the Borrower so requests in writing. returned to the Borrower,
or, it the indebtedness and other obligations evidenced by this Note have
- 2 -
<PAGE> 3
been paid in full, returned to the Borrower together with Interest at the same
rate as was paid by the Borrower during such period. Any excess sum credited to
principal shall be credited as of the date paid by the Borrower.
4.5 TIMELINESS:
Time shall be of the essence of this Note.
5. ACCELERATION:
UPON THREE (3) DAYS WRITTEN NOTICE BY THE LENDER TO THE BORROWER,
THIS NOTE WILL BE, IMMEDIATELY DUE AND PAYABLE UPON THE OCCURRENCE OF ANY OF
THE FOLLOWING EVENTS WITH RESPECT TO THE BORROWER:
(A) In the event an interest payment on the Note has not been made
within ten (10) days of the date which it was due.
(B) In the event the year end statement for the corporation shows a
loss of $50,000.00 or more before any deductions for depreciation and
goodwill.
(C) In the event there is a loss in excess of a total of $50,000.00
over any two (2) consecutive quarterly statements during any one year before
any deduction for depreciation and goodwill.
(D) In the event there shall be a sale, transfer, or liquidation of
the corporation through sale or transfer of assets, sale or transfer of a
majority of the outstanding and issued stock, merger or reorganization.
(E) Acquisition by the Borrower which requires the expenditure over
$500,000.00 from its current capital base without the written consent of the
Lender. The acquisition amount shall increase each year by the amount of the
increase in retained earnings for the previous year.
(F) In the event the Borrower had a lost for the fiscal year May 3,
1997 through and including December 31, 1907 before deductions for depreciation
and goodwill.
(G) The failure to provide the Lender, simultaneously with its SEC
filings for each quarter, but no later than sixty (60) days after the end of
each quarter and seventy-five (75) days after the end of each year, with a copy
of its profit and loss statement and balance sheet for the previous, quarter.
THIS NOTE WILL IMMEDIATELY BECOME DUE AND PAYABLE, WITHOUT NOTICE, UPON
THE OCCURRENCE OF ANY OF THE FOLLOWING EVENTS WITH RESPECT TO THE BORROWER:
(A) The filing of a petition in bankruptcy or a petition to take
advantage of any insolvency act; making an assignment for the benefit of its
creditors; commencement of a proceeding for the appointment of a receiver,
trustee, liquidator or conservator for
- 3 -
<PAGE> 4
either itself or for any substantial part of its property; filing of a petition
or action seeking reorganization, arrangement or similar relief under federal
bankruptcy laws or any other applicable laws of statutes of United States or any
state; or the commencement of proceeding similar to the foregoing by third or
other parties against the Borrower, which proceedings similar to the foregoing
by third or other parties against the Borrower, which proceedings are not
dismissed within thirty (30) days after commencement thereof.
(B) In the event of the termination of employment or reassignment for
any reason of Gerald Nimberg, including death or disability.
IN WITNESS WHEREOF, the Borrower has executed this instrument effective
this 10th day of February, 1998.
GENERAL CREDIT CORPORATION
By: /s/
----------------------
Irwin Zellermaier
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On the 10th day of February, 1998, before me personally came and
appeared IRWIN ZELLERMAIER, to me know, who being by me duly sworn, did depose
and say that he is the CHIEF EXECUTIVE OFFICE of GENERAL CREDIT CORPORATION, the
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation
and that he signed his name thereto by like order.
/s/
---------------------------
Notary Public
- 4 -
<PAGE> 1
EXHIBIT 21.1
List of Subsidiaries
1. G.S. Capital Corp.
2. Carly Holdings, Inc.
3. Meryka, Inc.
4. Mersa Corp.
5. General Armored Corporation
6. General Debit Corporation
7 General Check Cashing Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,094,338
<SECURITIES> 0
<RECEIVABLES> 731,728
<ALLOWANCES> (40,000)
<INVENTORY> 69,308
<CURRENT-ASSETS> 4,855,374
<PP&E> 181,890
<DEPRECIATION> (9,987)
<TOTAL-ASSETS> 10,260,312
<CURRENT-LIABILITIES> 700,071
<BONDS> 0
0
0
<COMMON> 3,435
<OTHER-SE> 6,934,068
<TOTAL-LIABILITY-AND-EQUITY> 10,260,312
<SALES> 2,412,672
<TOTAL-REVENUES> 2,412,672
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,197,629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 456,013
<INCOME-PRETAX> (240,970)
<INCOME-TAX> 0
<INCOME-CONTINUING> (240,970)
<DISCONTINUED> 0
<EXTRAORDINARY> (154,150)
<CHANGES> 0
<NET-INCOME> (395,120)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
