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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________________ to ______________________
Commission File No. 0-6729
FIRST MONTAUK FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
New Jersey 22-1737915
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
328 Newman Springs Road, Red Bank, NJ 07701
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 842-4700
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
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(Title of class)
[Cover Page 1 of 2 Pages]
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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
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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: $28,342,203.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act).
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
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(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date 7,920,106
DOCUMENTS INCORPORATED BY REFERENCE
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PART I
ITEM 1. BUSINESS
Introduction
First Montauk Financial Corp. ("FMFC") is a holding company, which,
through its wholly-owned subsidiary, First Montauk Securities Corp. ("FMSC"), is
primarily engaged in the operation of an investment banking and securities
brokerage firm. FMFC also sells insurance products through its subsidiary
Montauk Insurance Services, Inc. ("MISI") and equipment leases through Montauk
Advisors, Inc. ("MAI"). FMSC is a broker-dealer registered with the Securities
and Exchange Commission ("SEC"), a member of the National Association of
Securities Dealers, Inc. ("NASD"), the Municipal Securities Rule Making Board
("MSRB"), and the Securities Investor Protection Corporation ("SIPC"). FMSC's
business activities consist primarily of retail sales and trading of listed and
unlisted equity and fixed-income securities; sales of government, municipal and
corporate securities; options; commissions earned from individual and
institutional securities transactions; and market making activities. FMSC
expanded its services to include the addition of investment banking activities
and began offering investment advisory services beginning in fiscal 1995.
FMSC is currently licensed to conduct its broker-dealer business in 48
states and the District of Columbia. FMSC maintains approximately 115 branch
and/or satellite offices, all of which are maintained by affiliates. The
Company has approximately 346 registered representatives and services
approximately 25,000 retail customer accounts.
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FMSC's primary method of operation is through its affiliate program. The
affiliate program is designed to attract experienced brokers with existing
clientele who desire to operate their own office. To become an affiliate of
FMSC, a registered representative enters into an affiliate agreement which
entitles him to obtain a significantly higher percentage of the commissions
generated by his sales than a registered representative would normally receive.
Based on the experience of FMSC's management, and information derived from
professional associations, FMSC believes that standard commission payout rates
for registered representatives of retail firms is approximately 40%-50%, whereas
FMSC pays affiliates approximately 80%-85%. An affiliate establishes his own
office and is solely responsible for the payment of all expenses associated with
the operation of his office, including rent, utilities, furniture, equipment,
stock quotation machines, and general office supplies. FMSC receives a
percentage (generally 15%-20% after deduction of clearing costs) of the
affiliate's commissions with no operating expenses directly attributable to the
maintenance of the specific affiliate office. It is through this affiliate
program that FMSC has expanded its customer base and retail activities by adding
brokers with established clientele.
FMSC has also expanded its general securities business by adding
registered representatives to the main corporate office. FMSC may consider
establishing additional branch offices at sites and locations to be selected,
the timing and location of which will be based upon prevailing business and
economic conditions.
In 1991, MISI was formed for the purpose of offering and selling
variable annuity, variable life, as well as traditional life and health
insurance products. Currently, MISI is
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licensed in the states of Alabama, Alaska, Arizona, California, Connecticut,
Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, New Jersey,
New York, North Carolina, Pennsylvania, South Carolina, Virginia, Washington,
Wisconsin and Wyoming. Applications are pending with other states. MISI derives
revenue from insurance-related products and services from the existing base of
FMSC's Registered Representatives who are insurance licensed.
In 1993, the Company formed Montauk Advisors, Inc. ("MAI") as a
wholly-owned subsidiary. MAI engages in the sale of equipment leasing contracts
as agent for various leasing companies. The equipment financed includes copiers,
facsimile machines and other business machines. These leases are sold to various
customers from which MAI derives a commission.
FMFC and its subsidiaries each maintain their principal executive
offices at Parkway 109 Office Center, 328 Newman Springs Road, Red Bank, New
Jersey 07701, telephone (908) 842-4700.
GENERAL BUSINESS DEVELOPMENTS
DURING MOST RECENT FISCAL YEAR
In early 1995, FMSC became registered with the Securities and Exchange
Commission as an Investment Adviser for the purpose of providing investment
advisory services and fee-based managed accounts to clients of FMSC. Currently,
FMSC is licensed as an Investment Advisor in the States of California,
Connecticut, Florida, Indiana, New Jersey, New York, North Carolina,
Pennsylvania, Texas, and West Virginia. Additional state applications are
currently pending. It is anticipated that when the registration procedures
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are complete, FMSC will derive revenue by providing investment advisory services
to FMSC's existing client base as well as to additional clientele seeking
fee-based managed accounts.
DESCRIPTION OF BUSINESS
FMSC is a New Jersey based broker-dealer registered with the Securities
and Exchange Commission, and a member of the National Association of Securities
Dealers, Inc., the Municipal Securities Rule Making Board and the Securities
Investor Protection Corporation. Its business activities include sales and
trading of listed and OTC equity and fixed-income securities; sales of
government, municipal and corporate securities; options; commissions earned from
individual and institutional securities transactions and market making
activities. FMSC is registered to conduct its business in 48 states consisting
of Alaska, Alabama, Arizona, Arkansas, California, Colorado, Connecticut,
Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maryland, Massachusetts (conditional approval), Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New
Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas,
Utah, West Virginia, Washington, Wisconsin, Wyoming, Vermont, Virginia, and the
District of Columbia.
As of March 12, 1996, FMSC operated 115 affiliate branch and satellite
offices in addition to its main office located in Red Bank, New Jersey. There
are approximately 346 registered representatives in these affiliate offices, as
well as 49 support staff employees in the main office. Branch
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and satellite offices are located in 28 states:
AFFILIATE BRANCH/
SATELLITE/OFFICES
STATE
Alaska 1
Alabama 1
Arizona 1
California 8
Connecticut 1
Florida 11
Georgia 2
Hawaii 1
Illinois 2
Indiana 1
Massachusetts 1
Maryland 1
Minnesota 1
Mississippi 1
North Carolina 7
New Jersey 19
Nevada 1
New York 22
Ohio 4
Oklahoma 1
Pennsylvania 13
Rhode Island 1
South Carolina 1
Texas 2
Virginia 4
Washington 4
Wisconsin 1
West Virginia 2
FMSC transacts business in the following areas in:
<TABLE>
<S> <C>
Equities:
Listed &
Over-The-Counter 42%
Municipal, Government 26%
Corporate Bonds 5%
Unit Investment Trusts, 2%
Mutual Funds 11%
Options 11%
Insurance 3%
</TABLE>
Approximately 85% of the customers accounts are cash accounts. The
balance of the accounts consists of margin, Individual Retirement Accounts
("IRA") and KEOGH accounts.
Approximately 50% of the over-the-counter equities and 90% of the fixed
income transactions are transacted on a principal basis, with the balance
representing agency transactions.
The following table reflects FMSC's various sources of revenues and the
percentage of total revenues that each source represents for the periods
indicated. Revenues from agency transactions in securities for individual
customers of FMSC are shown as commissions. Revenues from transactions in
securities for individual customers where FMSC acted in a principal capacity are
reflected in principal transactions. Also reflected in principal transactions
are trading profits from market making and other trading activities.
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<TABLE>
<CAPTION>
Period
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Year Ended December 31, 1995
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Amount Percent
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Commissions:
Equity Securities,
Options and Mutual Funds .......... $17,113,296 60.4%
Principal Transactions:
Equity Securities,
Municipal, Government and
Corporate Bonds ................... $ 9,763,940 34.5%
Interest and Other Income (1) ............. $ 1,076,718 3.8%
Investment Banking (2) .................... $ 388,249 1.3%
Total Revenues ............................ $28,342,203 100.0%
</TABLE>
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1. "Other Income" consists primarily of rental income and dividends.
2. Investment banking revenues consists of selling concessions and other
income from syndicate activities and placement agent fees.
REGISTERED REPRESENTATIVE RECRUITMENT AND
REGISTERED REPRESENTATIVE AFFILIATE PROGRAM
FMSC derives its customer base from its registered representatives'
accounts. FMSC's goal is to recruit well-trained, experienced registered
representatives who require little training and who have proven production
records with an established customer account base.
Since all registered representatives are paid on a commission earned
basis, the costs associated with the hiring of new registered representatives
are limited to general expenses consisting of training, lectures and compliance
and operational manuals.
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Competition among securities brokerages and registered representatives
is keen. It is believed that any larger, more established securities firms with
greater financial resources possess an advantage in competing with FMSC and
attracting representatives, clients and investment dollars. (See "Business -
Competition".)
THE AFFILIATE PROGRAM
FMSC's affiliate program is designed to attract professionals in all
phases of the financial services industry to affiliate with FMSC as registered
representatives. Currently FMSC has 115 locations operated by registered
representatives participating in the affiliate program.
The program's goal is to recruit securities brokers with a sufficient
level of commission brokerage business to enable the individual to independently
support his own office. The program also enables financial professionals such as
insurance agents, real estate brokers, financial planners, tax preparation
experts and accountants who already provide some type of financial or brokerage
services to their clients, to become a registered representative with FMSC. This
is intended to allow the professional to offer securities products and services
to their clients. Each would operate in his own office or location which will
function as a satellite office of FMSC.
In each case, the affiliate is solely responsible for the payment of all
expenses associated with the operation of his office location, including rent,
utilities, furniture, equipment, stock quotation machines, supplies etc. Under
the program the affiliate receives a significantly higher percentage of the
commissions generated by his sales than
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a registered representative would normally receive. Based on the experience of
FMSC's management, and information derived from professional associations, FMSC
believes that standard commission payout rates for registered representatives of
retail firms is approximately 40% to 50%, whereas FMSC pays affiliates
approximately 80% to 85%. An affiliate establishes his own office and is solely
responsible for the payment of all expenses associated with the operation of his
office, including rent, utilities, furniture, equipment, stock quotation
machines, and general office supplies. FMSC receives a flat percentage
(generally 15% to 20% after deduction of clearing costs) of the affiliate's
commissions with no operating expenses directly attributable to the maintenance
of the specific affiliate office. It is through this affiliate program that FMSC
will seek to expand its customer base and retail activities by adding brokers
with established clientele.
For FMSC's percentage of commission obtained, FMSC provides full support
services to each of the affiliates including listed stock and options
execution, over-the-counter stock trading, research, compliance, supervision
and related services. Currently, Schroder, Wertheim & Co., Inc. transacts
clearing services for FMSC, and E.D. & F. Man International Securities,
Inc. and others provide execution services.
Each affiliate is required to obtain and maintain in good standing each
license required by the NASD and the SEC to conduct the type of securities
business in which the affiliate will engage and to register in the various
states in which he intends to service customers. If the affiliate wishes to
expand his operation, he controls the hiring and immediate supervision of any
additional registered representatives subject to FMSC's policies and procedures
and overall supervision. If the affiliate office contains three or
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more registered representatives, the affiliate must obtain a principal's license
to insure proper supervision. The office will then will be designated as an
Office of Supervisory Jurisdiction.
FMSC is ultimately responsible for supervising each and every affiliate
and related registered representative. FMSC can incur substantial liability from
improper actions of any of the affiliate representatives. Effective January 1,
1996, the Company implemented a professional liability errors and omissions
insurance program which provides coverage for actions taken by the Company's
registered representatives, employees and other agents in connection with
the purchase and sale of securities and the administration of individual
retirement plans. The program provides coverage for each incident up to
$1,000,000 with an aggregate policy limit of $5,000,000, with a deductible per
incident of $25,000, the first $5,000 of which is the responsibility of
individual representatives. Each registered representative is assessed a premium
which is payable monthly. The policy excludes claims involving the sale of
low-priced or "penny stocks" or partnerships, criminal or deliberate fraudulent
acts, defamation and company sponsored employee benefit plans, as well as other
exclusions.
There are other, larger broker-dealers with greater resources than FMSC,
engaged in similar programs with whom FMSC must compete. These companies, some
national in scope, compete with FMSC to attract registered representatives as
well as clients. Some of these companies are larger, well-known firms with
substantially greater financial and other resources than those of FMSC. (See
"Business-Competition".)
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RETAIL COMMISSION BUSINESS
A substantial portion of FMSC's revenues are currently and will be
in the future be derived from commissions from retail (individual) and
institutional customers on brokerage transactions in exchange-listed and
over-the-counter equity securities. Brokerage commissions are charged on both
exchange and over-the-counter transactions in accordance with a schedule which
FMSC has formulated. FMSC believes, based on the experience of FMSC's management
and information derived from professional associations, that its fee structure
is at a level equivalent to the industry standard for full service brokerage
firms.
INVESTMENT BANKING ACTIVITIES
The corporate finance function of the Company will seek to raise capital
for corporations in a variety of businesses. In June, 1994, FMSC completed its
first underwriting of an initial public offering for $5,125,000 of the common
stock of Manhattan Bagel Company, Inc. This was the first public offering in
which FMSC has acted as the managing underwriter. FMSC also participated in
other underwritings of corporate securities as a syndicate or selling group
member. FMSC acted and participated as a syndicate or selling group member in
approximately 67 offerings in fiscal 1995.
FMSC believes that there will be numerous corporate finance candidates
to whom FMSC may provide underwriting and other investment banking services. It
is anticipated
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that potential underwriting opportunities in which FMSC may act as managing
underwriter will be presented by FMSC's officers, directors, employees and
professional advisors. The Company has utilized and will continue to utilize the
services of outside consultants to assist the officers in making corporate
finance decisions.
Participation as a managing underwriter or in an underwriting syndicate
or a selling group, involves both economic and regulatory risks. An underwriter
may incur losses if it is unable to resell the securities it is committed to
purchase, or if it is forced to liquidate its commitment at less than the
purchase price. In addition, under federal securities law, other laws and court
decisions with respect to underwriters' liabilities and limitations on the
indemnification of underwriters by issuers, an underwriter is subject to
substantial potential liability for misstatements or omissions of material facts
in prospectuses and other communications with respect to such offerings. Acting
as a managing underwriter increases these risks. Underwriting commitments
constitute a charge against net capital and FMSC's ability to make underwriting
commitments may be limited by the requirement that it must at all times be in
compliance with the Net Capital Rule. See "Net Capital Requirements".
FMSC also acted as a placement agent in two private placements during
the last fiscal year. FMSC will continue to review potential private offerings
in the future.
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PRINCIPAL TRANSACTIONS
Market-Making. FMSC acts as both principal and agent in the execution of
its customers' orders in the over-the-counter market. FMSC buys, sells and
maintains an inventory of various securities in order to "make a market" in
those securities. In executing customer orders for over-the-counter securities
in which it does not make a market, the Company charges a commission and acts as
agent with another firm which is a market-maker. However, when the buy or sell
order is in a security in which FMSC makes a market, the Company may act as
principal and purchase from or sell to its customers at a price which is
approximately equal to the current after-dealer market price plus or minus a
mark-up or mark-down.
Trading profits or losses depend upon the skills of the employees
engaged in market-making activities, the capital allocated to positions in
securities and the general trend of prices in the securities markets. Trading as
principal requires the commitment of capital and creates an opportunity for
profits and risk of loss due to market fluctuations. FMSC will take both long
and short positions in those securities in which it makes a market.
INVESTMENT ACTIVITIES
FMSC also seeks to realize investment or trading gains by purchasing,
selling and holding securities for its own account. FMSC intends to commit the
capital necessary for use in its investment activities. The amount of such
capital to be committed at any particular time will vary according to market,
economic and other factors, including the other aspects of the Company's
business.
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RESEARCH SERVICES
Securities research is intended to play a significant role in FMSC's
business as a service to its customers. Research activities include the review
and analysis of general market conditions, industries and specific companies;
the issuance of in-depth written reports on companies, with recommendations of
specific action to buy, sell or hold; the furnishing of information to retail
and institutional customers; and responses to inquiries from customers and
account executives. Research services are directed primarily at identifying
attractive investment opportunities in small, medium and emerging growth
companies, and in special situation investments. FMSC presently conducts a
limited amount of research activities directly through a research analyst
employed by it. These direct research activities principally relate to the
preparation of specialized reports on selected securities for general
distribution to FMSC's retail customers, and/or research assistance to the
Company's retail sales force.
INVESTMENT ADVISORY SERVICES
FMSC has formed a division which shall engage in investment advisory
services for its clients. FMSC is now beginning to offer professionally managed
accounts, discretion portfolio management services, private client account
management, and limited financial planning services to its clients on a fee
basis.
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Many of FMSC's competitors have similar programs in place and the
ability to offer these additional services will assist FMSC in effectively
competing for qualified registered representatives who desire professionally
managed accounts for their customers.
COMPETITION
FMSC encounters intense competition in all aspects of its business and
competes directly with many other securities firms for clients as well as
registered representatives. A significant number of such competitors offer
their customers a broader range of financial services, have substantially
greater resources and may have greater operating efficiencies. Retail firms such
as Merrill Lynch Pierce Fenner & Smith Incorporated, Smith Barney, Inc. and
Paine Webber Incorporated dominate the industry; however, the Company also
competes with numerous regional and local firms. In addition, a number of firms
offer discount brokerage services to individual retail customers and generally
effect transactions at lower commission rates (as low as 50% of standard
commission rates) on an "execution only" basis without offering other services
such as investment recommendations and research. The further expansion of
discount brokerage firms could adversely affect the Company's retail business.
Moreover, there is substantial commission discounting by full-service
broker-dealers competing for institutional and individual brokerage business.
The possible increase of this discounting could adversely affect the Company.
FMSC also competes for experienced brokers with other firms offering
an independent affiliate program such as Robert Thomas Securities, Inc.,
Linsco/Private Ledger Corp. and Investment Management & Research, Inc.
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Other financial institutions, notably commercial banks and savings and
loan associations, offer customers some of the services and products presently
provided by securities firms. In addition, certain large corporations have
entered the securities industry by acquiring securities firms. While it is not
possible to predict the type and extent of competitive services which banks and
other institutions ultimately may offer to customers, FMSC may be adversely
affected to the extent those services are offered on a large scale.
FMSC competes through its advertising and marketing programs for
registered representatives interested in joining its affiliate program. FMSC
has also implemented a customized software program to better service its
affiliates and to attract new brokers. The system will enable brokers at any
office to instantly access customer accounts, determine cash positions, send
and receive electronic mail, receive research reports and compliance memoranda,
through a computer work station.
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ADMINISTRATION, OPERATIONS, TRANSACTION
PROCESSING AND CUSTOMER ACCOUNTS
FMSC currently utilizes the services of Schroder Wertheim & Co., Inc.
as its clearing broker (the "Clearing Broker"). FMSC does not hold any funds or
securities of its customers.
The Clearing Broker, on a fee basis, processes all securities
transactions for FMSC's account and the accounts of its customers. Services of
the Clearing Broker include billing and credit control, and receipt, custody and
delivery of securities, for which FMSC pays a portion of the commissions it
receives from customer transactions. By engaging the processing services of a
clearing broker, FMSC is exempt from certain reserve requirements imposed by
Rule 15c3-3 under the Securities Exchange act of 1934 (the "1934 Act"). See "Net
Capital Requirements". The Clearing Broker is neither a partner nor a joint
venturer with FMSC, nor does the Clearing Broker have any direct or indirect
interest in FMSC, financial or otherwise, or any control of FMSC's business,
affairs or internal operations. The Clearing Broker, however, does provide
secured margin loans to FMSC and its customers to finance the purchase of
securities. Under its clearing agreement with the Clearing Broker, FMSC has
agreed to indemnify and hold the Clearing Broker harmless from certain
liabilities or claims.
As required by the NASD and certain other authorities, FMSC carries a
fidelity bond covering loss or theft of securities, as well as embezzlement and
forgery. The amount of the bond provides total coverage of $500,000 (with a
$10,000 deductible provision per incident). In addition, the accounts of its
customers are protected by the
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Securities Investor Protection Corporation ("SIPC") for up to $500,000 for each
customer, subject to a limitation of $100,000 for claims for cash balances with
an additional $25,000,000 of protection provided by a private insurance company
for the benefit of each customer. SIPC is funded through assessments on
registered broker-dealers. SIPC assessments were .00065% of net operating
revenues (as defined). Effective January 1, 1996, the Company implemented a
professional liability errors and omissions insurance program which provides
coverage for actions taken by the Company's registered representatives,
employees and other agents for actions in connection with the purchase and sale
of securities and the administration of individual retirement plans. The
program provides coverage for each incident up to $1,000,000 with an aggregate
policy limit of $5,000,000, with a deductible per incident of $25,000, the first
$5,000 of which is the responsibility of individual representatives. Each
registered representative is assessed a premium which is payable monthly. The
policy excludes claims involving the sale of low-priced or "penny stocks" or
partnerships, criminal or deliberate fraudulent acts, defamation and company
sponsored employee benefit plans, as well as other exclusions.
REGULATION
The securities industry is subject to extensive regulation under federal
and state laws. The principal purpose of regulation and discipline of
broker-dealers is the protection of customers and the securities markets rather
than protection of creditors and stockholders of broker-dealers. The SEC is the
federal agency charged with administration of the federal securities laws. Much
of the regulation of broker-dealers, however, has been delegated to
self-regulatory organizations, principally the NASD and the national securities
exchanges. These self-regulatory organizations adopt rules (subject to approval
by the SEC) which govern the industry and conduct periodic examinations of
member broker-dealers. Securities firms are also subject to regulation by state
securities commissions in the states in which they are registered.
The regulations to which broker-dealers are subject cover all aspects of
the securities business, including sales methods, trading practices among
broker-dealers, capital structure of securities firms, record keeping and the
conduct of directors, officers and employees. Additional legislation, changes in
rules promulgated by the SEC and by self-regulatory bodies or changes in the
interpretation or enforcement of existing laws and
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rules often affect directly the method of operation and profitability of brokers
and dealers. The SEC and the self-regulatory bodies may conduct administrative
proceedings which can result in censure, fine, suspension or expulsion of a
broker-dealer, its officers, representatives or employees.
NET CAPITAL REQUIREMENTS
As a broker-dealer, FMSC is subject to the SEC's Net Capital Rule which
is designed to measure the general financial integrity and liquidity of a
broker-dealer.
Net capital is defined as the net worth of a broker or dealer subject to
certain adjustments, and computed by FMSC pursuant to the "aggregate
indebtedness method". Aggregate Indebtedness is deemed to mean the total money
liabilities of a broker or dealer arising in connection with any transaction
whatsoever, and includes, among other things, money borrowed, money payable
against securities loaned and securities "failed to receive," the market value
of securities borrowed to the extent to which no equivalent value is paid or
credited. For broker-dealers using this method, the Net Capital Rule requires
that the ratio of aggregate indebtedness, as defined, to net capital, as
defined, not exceed 15 to l, and imposes restrictions on operations as described
below. In computing net capital, various adjustments to net worth are made with
a view to excluding assets which are not readily convertible into cash and
making a conservative statement of other assets, such as a firm's position in
securities. Compliance with the Net Capital Rule limits those operations of
securities firms which require the intensive use of their capital, such as
underwriting commitments and principal trading activities, and limits the
ability of securities firms to pay dividends.
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In addition to the above requirements, funds invested as equity capital
may not be withdrawn, nor may any unsecured advances or loans be made to any
stockholder of a registered broker-dealer, if, after giving effect to such
withdrawal, advance or loan and to any other such withdrawal, advance or loan as
well as to any scheduled payments of subordinated debt which are scheduled to
occur within six months, the net capital of the broker-dealer would fail to
equal 120% of the minimum dollar amount of net capital required or the ratio of
aggregate indebtedness to net capital would exceed 10 to 1. Finally, any funds
invested in the form of subordinated debt generally must be invested for a
minimum term of one year and repayment of such debt may be suspended if the
broker-dealer fails to maintain certain minimum net capital levels. For example,
scheduled payments of subordinated debt are suspended in the event that the
ratio of aggregate indebtedness to net capital of the broker-dealer would exceed
12 to 1 or if its net capital would be less than 120% of the minimum dollar
amount of net capital required.
At December 31, 1995, FMSC had net capital of approximately $908,704
which was $635,904 in excess of required net capital, and its ratio of aggregate
indebtedness to net capital was 4.5 to 1.
EMPLOYEES
The Company currently utilizes approximately 346 registered
representatives of which 304 are associated with affiliate offices. In addition,
the Company employs 49 support employees in the areas of operations, compliance,
accounting, administrative and clerical.
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There is an intense competition among securities firms for executives
with extensive sales experience. To a large degree, FMSC's future success will
depend upon its continuing ability to locate, hire and retain highly skilled
investment executives. FMSC considers its personnel relations to be good.
ITEM 2. PROPERTIES
OFFICES AND FACILITIES
The Company occupies 15,391 square feet at its executive offices which
are located at Parkway 109 Office Center, 328 Newman Springs Road, Red Bank,
New Jersey 07701. Under a lease agreement dated September 7, 1993, FMSC leases
a total of approximately 9,716 square feet for a term of 62 months ending
November 30, 1998. The basic rent is $14,978.83 per month and in addition to
the base rent, the Company pays as additional rent, a proportional share of any
increases in real estate taxes above the amount paid during the 1994 calendar
year, insurance premiums relating to the premises, and all utility charges
relating to the use of the premises. In June 1994, the Company leased an
additional 2,077 square feet for an additional monthly rent of $3,202.04 for a
period of one year with a one year option. In August 1995, the Company entered
into a sublease agreement with Pilot Laboratories, Inc. to sublet an additional
1,961 square feet of space adjacent to the Company's current offices. The
sublease requires a monthly payment of $2,860.00 and runs through October 31,
1997. The Company considers its present facilities to be adequate and suitable
for its present and anticipated future needs.
The Company also leased 1,637 square feet on the first floor of the same
building which houses the corporate headquarters for a monthly rent of $2,565.00
for a period of
21
<PAGE> 23
two years and seven months. This space has been subleased to one of the
Company's affiliates under the same terms and conditions as the master lease.
This office space contains the Company's administrative offices,
operational facilities, and approximately 33 registered representatives.
The use of facilities for all branch and/or satellite offices are
provided for by the individual registered representatives at such facility at no
cost, expense or obligation to the Company. Similarly, all furnishings,
fixtures, telephone systems, office equipment and quotation retrieval systems
are the responsibility of the affiliated registered representative at no cost,
expense or obligation to the Company.
ITEM 3. LEGAL PROCEEDINGS
Many aspects of the Company's business involve substantial risks of
liability. In recent years, there has been an increasing incidence of litigation
and arbitration involving the securities industry, including class actions which
generally seek rescission and
22
<PAGE> 24
substantial damages. The Company has been involved in the underwriting of
initial public offerings and other offerings by emerging growth companies, the
securities of which often involve a higher degree of risk than those of more
established companies. As an underwriter, the Company is subject to substantial
potential liability or material misstatements in or omissions from prospectuses
and other communications with respect to underwritten offerings of securities.
In 1995, FMSC was named as a defendant in a civil suit brought by
Escambia County, Florida ("Escambia") for alleged losses sustained on certain
securities purchased from FMSC. This matter was settled in March 1996. Under the
terms of the agreement, FMSC will pay Escambia the sum of $900,000; $600,000 of
which has already been paid with $300,000 due on August 1, 1996.
FMSC is also cooperating with various regulatory authorities which are
conducting inquiries into the Escambia transactions as well as other issues
related to FMSC's trading in mortgage-backed securities.
In 1995, FMSC settled an action pending in U. S. District Court relating
to the sale of stock in Delta Rental Systems, Inc. Under terms of the
settlement, the Company has made a cash payment of $204,188, net of an insurance
recovery.
23
<PAGE> 25
FMSC is also a respondent in certain pending customer arbitrations
relating to its securities business. These claims are in various stages of
progress and are being vigorously contested by FMSC. The ultimate outcome and/or
range of loss, if any, from these matters is not presently determinable.
ITEM 4. SUBMISSION OF MATTERS ON A VOTE OF SECURITY HOLDERS
Not Applicable.
24
<PAGE> 26
PART II
ITEM 5. MARKET OF AND DIVIDENDS ON THE COMPANY'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
A. PRINCIPAL MARKET
The securities of the Company, consisting of Common Stock are traded in
the over-the-counter market. Trading in the Company's Common Stock is reported
on the NASD Bulletin Board system and by the National Daily Quotation Service
published by the National Quotation Bureau, Inc. The Company believes that there
is an established public trading market for the Company's Common Stock based on
the volume of trading in the Company's Common Stock and the existence of market
makers who regularly publish quotations for the Company's Common Stock.
B. MARKET INFORMATION
The Company's Common Stock commenced trading in the over-the-counter
market in 1987.
The following is the range of high and low bid prices for such
securities for the periods indicated below:
25
<PAGE> 27
COMMON STOCK
<TABLE>
<CAPTION>
FISCAL YEAR 1995 HIGH LOW
<S> <C> <C>
1st Quarter $ .56 $ .22
2nd Quarter .91 .19
3rd Quarter 1.06 .50
4th Quarter 1.19 .50
<CAPTION>
FISCAL YEAR 1994 HIGH LOW
<S> <C> <C>
1st Quarter $2.75 $ .50
2nd Quarter 1.12 .34
3rd Quarter .75 .47
4th Quarter .47 .22
</TABLE>
26
<PAGE> 28
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1995 AS COMPARED TO FISCAL 1994
The Company reported record revenues and earnings in fiscal 1995. Total
revenues for 1995 increased by $9,241,816 to $28,342,203, or 48% over 1994,
while pre-tax profits increased by $935,001 to $1,251,936, or 295%. After-tax
income increased by $575,952 to $768,088, or 300%. One of the most significant
factors contributing to this improvement in operating results was an
increasingly favorable investment environment in the final three quarters
of 1995. In 1994 increases in interest rates adversely affected the stock and
bond markets, and negatively impacted the Company's revenues and profitability.
However, lower interest rates and the renewal of investor confidence in the
second quarter of 1995, continued throughout the year and for the U.S. equity
markets, which reached record highs, and produced record trading volume and
mutual fund investment.
Revenues from firm trading increased by 25% over 1994 levels from
$7,781,667 (41% of total revenues) to $9,763,940 (34% of total revenues). The
sources of revenue within this category underwent a significant change from
1994 to 1995. 1995 experienced record gains for the Company from market-making
and other equity trading activities as the stock markets rallied. These gains
as well as an overall increase in proprietary trading of municipal bonds and
unit investment trusts offset a significant reduction in profits from the
27
<PAGE> 29
sale of mortgage-backed securities ("MBS") by one of the Company's affiliate
offices ($4,009,979 in 1994 as compared to $361,158 in 1995). The MBS market has
suffered a dramatic drop in volume, precipitated by higher interest rates
commencing in the second quarter of 1994. The affiliate office was closed during
1995 and the Company has discontinued trading in the MBS area.
Commission income from the sale of listed and over-the-counter
securities, mutual funds, leasing, and other agency transactions rose 74% to a
record $17,113,296 (60% of total revenues) as compared to $9,861,294 (52% of
total revenues) in 1994. The largest increases came from stock and mutual fund
transactions as retail investment volume increased markedly in the second
quarter of 1995 and maintained record levels for the balance of the year.
The Company also began the sale of insurance products in 1995 and plans to
develop this area through increased marketing and wider distribution in 1996.
Investment banking revenues were $388,249 in 1995 as compared to
$766,013 in 1994. The decrease was attributable primarily to the Company's
completion of its first managed underwriting in 1994. The Company intends to
continue participating in syndications and exploring other opportunities in the
investment banking area, including securities private placements. The Company
has also purchased a minority interest in Environmental Coupon Marketing, Inc.
("ECM"), a privately-held marketer of recycling programs, and has loaned ECM a
total of $282,000 to date in short-term financing.
Interest and other income increased by 56% to $1,076,718 in 1995. The
increase was due primarily to a rise in interest income, which resulted from an
increase in the number of customer accounts. Rebates for clearing and other
services increased as well.
28
<PAGE> 30
During 1995 the Company paid commissions, employee compensation and
employee benefits of $19,542,578 (69% of total revenues) as compared to
$14,242,933 (75% of total revenues) in 1994. This category includes salaries,
commission expense, and fringe benefits for salaried employees. Commissions paid
to registered representatives for 1995 were $16,539,208 (58% of total revenues)
as compared to $12,372,338 (65% of total revenues) in 1994. Commission
compensation is directly related to the level of revenues generated from firm
trading, agency and investment banking activities. The dollar increase in 1995
resulted primarily from a higher volume of agency transactions. The decrease as
a percentage of total revenues was due mostly to lower payouts on proprietary
trading profits in 1995. In addition, the Company's in-house brokers were
responsible for a larger share of commission income in 1995. In-house brokers
usually receive a lower commission payout than independent affiliates but are
not generally required to pay their own overhead. Also accounting for the
decrease was the fact that clearing and other fees, which are charged directly
against broker payouts, were higher in 1995 due to the increase in agency
business.
For 1995 the Company paid salaries of $2,196,905 for management,
operations and clerical personnel, as compared to $1,441,266 in 1994. This
increase was due in part to the demands of the securities processing department,
which required additional trading assistants and back office staff to accomodate
this increase in ticket volume. The Company also added employees to its
computer, marketing, finance, operations, and compliance departments.
29
<PAGE> 31
Clearing costs increased from $1,828,197 (10% of revenues) in 1994 to
$3,112,474 (11% of revenues) in 1995 due to higher transactions volume. The
increase as a percentage of revenue was attributable to the lower production of
the Company's affiliate discussed above, whose trading carried significantly
lower clearing costs per revenue dollar than the other types of securities
transactions that replaced it. In particular, the 68% increase in agency and
mutual fund revenues resulted in higher ticket charges in 1995 than in 1994.
Communications and occupancy rose by $298,627 to $1,260,209 in 1995, an
increase of 31%. The increase is due to higher telephone charges, market data
services, and computer consulting costs resulting from the addition of trading
personnel, in-house brokers, and increased operating space.
Other operating expenses increased from $1,593,080 in 1994 to $2,982,254
in 1995. The increase was due primarily to expense provisions of approximately
$900,000 and $204,000, respectively, relating to the settlement of a lawsuit
with Escambia County, and another settlement with plaintiffs in a federal suit
involving the sale of shares in Delta Rental Systems, Inc. (See Notes 11 and
17 to the financial statements.)
30
<PAGE> 32
While the Company achieved substantial revenue growth in 1995, operating
results will continue to be sensitive to general economic conditions, business
fundamentals and market volatility.
FISCAL 1994 AS COMPARED TO FISCAL 1993
For the year ended December 31, 1994, the Company's gross revenues
remained relatively constant at $19,100,387 from $19,017,642 in 1993. Net firm
trading gains, representing gains and losses on proprietary trading of debt
instruments and over-the-counter equities, decreased in 1994 to $7,781,667 (41%
of total revenues) from $8,956,755 (47% of total revenues) in 1993. The
principal reason for the decrease was a smaller contribution from one of the
Company's affiliates from $5,352,985 (28% of total revenues) in 1993 to
$4,009,979 (21% of total revenues) in 1994. The affiliate had derived most of
its revenues from the mortgage-backed securities market, which suffered a
dramatic drop in volume in 1994 precipitated by higher interest rates. The
affiliate reduced its operations in the second half of 1994 and closed its
office in the first quarter of 1995. This reduction was partially offset by
trading gains in the municipal bond and Treasury markets. The Company intends to
increase its level of trading activity in the municipal and Treasury markets in
1995 by allocating additional capital and personnel to these areas. Equity
trading exhibited only marginal gains over 1993 as overall weakness
31
<PAGE> 33
and volatility in the stock markets, largely a consequence of six increases in
U.S. interest rates during 1994, adversely affected profitability. The Company
is continuing its efforts to expand its affiliate network to increase its
revenue base in general and to limit its reliance on the revenue production of
any one office, revenue source, or registered representative.
Commission income from the sale of listed and over-the-counter
securities, mutual funds and other agency transactions rose 9% to $9,861,294 in
1994 (52% of total revenues) as compared to $9,075,148 in 1993 (48% of total
revenues). The overall increase was due primarily to an increase in the number
of registered representatives affiliated with the Company from 267 in 1993 to
319 in 1994. Commissions on equity transactions accounted for most of the
increase, with mutual fund sales remaining constant for 1994. The Company also
earned approximately $174,000 on the sale of interests in equipment leases
during 1994. The Company expects to continue to market leases in 1995 through
its subsidiary, Montauk Advisors, Inc., subject to product availability.
Investment banking revenues increased to $766,013 in 1994 as compared to
$531,314 in 1993. The increase was due primarily to the successful completion of
the Company's first managed underwriting in the second quarter of 1994.
Interest and other income increased by $285,317 to $691,413 in 1994.
Most of the difference was attributable to a $183,000 increase in interest
income during the year. This resulted from a combination of higher interest
rates, an increase in the number of
32
<PAGE> 34
customer accounts, and higher earnings from larger firm inventory positions in
interest-bearing securities.
During 1994 the Company paid total compensation and benefits of
$14,262,933 (75% of total revenues) as compared to $15,072,621 (79% of total
revenues) in 1993. This category includes salaries, commission expense, and
fringe benefits for salaried employees. Commissions paid to registered
representatives for 1994 were $12,372,338 (65% of total revenues) as compared to
$13,606,899 (72% of total revenues) in 1993. Commission compensation is directly
related to the level of revenues generated from firm trading, agency and
investment banking activities. The decrease in 1994 was directly related to the
lower production of the affiliate office discussed above and a lower payout
percentage to that office commencing in the second quarter of 1994. The
Company's in-house brokers were also responsible for a larger share of
commission income in 1994. In-house brokers receive a lower commission payout
than independent affiliates but are not generally required to pay their own
expenses. In addition, clearing and other fees, which are charged against broker
payouts, were higher in 1994 due to the increase in agency business.
For 1994 the Company paid salaries of $1,441,266 for management,
operations and clerical personnel, as compared to $1,200,020 in 1993. The
increase was due to the need for additional staff to manage the expansion of the
Company's affiliate network and the increase in back office activity. The
Company anticipates an increase in 1995 salaries over 1994 levels due to further
back office and other corporate department personnel requirements, as well as
higher officer and management salaries.
33
<PAGE> 35
Clearing costs increased from $1,672,127 (9% of revenues) in 1993 to
$1,828,197 (10% of revenues) in 1994. The increase as a percentage of revenue
was attributable to the lower production of the Company's affiliate discussed
above, whose trading carried significantly lower execution costs per revenue
dollar than the other types of securities transactions that replaced it. In
particular, the 9% increase in agency revenues resulted in higher ticket charges
in 1994 than in 1993.
Communications and occupancy rose by $378,325 to $961,582 in 1994, an
increase of 65%. During the first quarter of 1994, the Company completed the
expansion of its corporate headquarters, which raised occupancy costs for the
entire year. Telephone expense and the cost of quotation and other market data
services increased approximately 70% to $611,939 due to the addition of bond
trading personnel and in-house registered representatives during 1994.
Other operating expenses increased from $918,513 in 1993 to $1,593,080
in 1994 due to a number of factors. Costs of advertising and marketing
literature incurred to promote the Company's affiliate program increased by 109%
to approximately $280,000 in 1994. The Company intends to continue its current
level of investment in advertising and promotion in order to attract additional
registered representatives and promote its services to retail customers. Legal
costs and bad debt expense increased by approximately $265,000 due to the
establishment of additional reserves for litigation and loans receivable, as
well as higher legal fees in 1994. Depreciation expense rose to $106,496 from
$41,340 due to the purchase of equipment and improvements to the Company's
headquarters in 1993 and 1994. General corporate overhead relating to the
34
<PAGE> 36
operation of the Company's expanded headquarters and the servicing of additional
in-house brokers accounted for the balance of the increase in 1994.
Interest expense increased in 1994 to $157,660 as compared to $70,008 in
1993 as a result of larger average margin loan balances during the current year
and the steady climb of interest rates in 1994. The Company's clearing firm
charges 1/2% above the broker call rate (7 3/4% at December 31, 1994) on net
debit balances in the Company's trading accounts.
The Company's effective tax rate increased in 1994 to approximately 39%
from (7.5%) in 1993. Most of the change resulted from the removal of the
valuation allowance in 1993 relating to the Company's available net operating
losses, and the tax effecting of those losses as permitted under SFAS 109,
"Accounting for Income Taxes."
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balances increased by $171,520 during 1995. A
substantial portion of the Company's assets are liquid, consisting of cash and
assets readily convertible into cash, such as trading inventories, which
generally consist of readily marketable securities, and receivables due from the
Company's clearing firm and other broker-dealers. These assets represented
approximately 80% and 81% of total assets at December 31, 1995 and 1994,
respectively. The balances in these accounts can experience significant
fluctuation, depending on market conditions, daily trading activity and customer
order flow, and investment opportunities. The Company monitors these accounts on
a daily basis in order to ensure compliance with regulatory capital requirements
and maintain liquidity.
35
<PAGE> 37
Operating activities contributed cash of $999,485 in 1995. This was
provided by net income for the year as well as an increase of approximately
$1,436,000 in accounts payable and accrued expenses, including the lawsuit
settlement provisions previously discussed. Most of the settlement liabilities
were paid during the first quarter of 1996, with the balance of $300,000 payable
on August 1, 1996. Commissions payable increased by approximately $714,000 as a
result of higher trading volume during the 1995 year. Income taxes payable
increased by $615,636 due to higher tax profits and a corresponding increase in
marginal tax rates. These payments were made during the first quarter of 1996.
Primarily offsetting these sources of operating cash were net increases in firm
inventories of $2,485,889.
Investing activities used cash of $619,167 in 1995. The Company
purchased approximately $436,000 of fixed assets during the year. The investment
consists primarily of telecommunications equipment and computer systems, and
reflects the Company's commitment to improving services to its brokers as a
means of attracting quality affiliates, and to increasing operating efficiencies
in order to process transactions with greater speed and accuracy. The Company
anticipates an increase in expenditures of approximately $250,000 for
communications and other equipment during 1996. The Company also invested
$60,000 in the stock of ECM and $282,000 in short-term loans. The first loan, in
the amount of $100,000, bears interest at the rate of 6% per annum and matures
on the earlier of a proposed private placement of ECM securities, or August 9,
1996. The second loan for $182,000 is non-interest bearing and may be converted
into
36
<PAGE> 38
up to 350,000 shares of ECM common stock at the rate of $.52 per share.
This loan matures on October 9, 1996. Both loans are unsecured.
Financing activities used cash of $208,798 in 1995. A total of $194,035
was used for the repurchase of 215,800 shares of the Company's Common Stock in
the open market under buy-back plans authorized by the Company's board of
directors.
At December 31, 1995, the Company's broker-dealer subsidiary had net
capital of $908,704, which was $635,904 in excess of the net capital required by
applicable securities regulations, and the ratio of aggregate indebtedness to
net capital was 4.5 to 1.
Management believes the Company's liquidity needs at least through the
next fiscal year will be provided by increasing operating revenues and margin
loans secured by trading inventories under an arrangement with its clearing
broker.
IMPACT OF INFLATION AND OTHER FACTORS
Management of the Company believes that the impact of inflation has an
effect upon the amount of capital generally available for investment purposes
and also may affect the attitude or willingness of investors to buy and sell
securities. The nature of the business of the Company's broker-dealer subsidiary
and the securities industry in general is directly affected by national and
international economic and political conditions, broad trends in business and
finance and volatility of interest rates, changes in and uncertainty regarding
tax laws, and substantial fluctuation in the volume and price levels of
securities transactions and the securities markets. To the extent inflation
results in higher interest rates and has other adverse effects on the securities
markets and the value of securities
37
<PAGE> 39
held in inventory, it may adversely affect the Company's financial position and
results of operations.
ITEM 7. FINANCIAL STATEMENTS
See Financial Statements attached hereto.
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
38
<PAGE> 40
PART III
ITEM 9. Directors and Executive Officers
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Herbert Kurinsky 64 Director, President and Chief
Executive Officer of FMFC
and of FMSC and Registered
Options Principal of FMSC
William J. Kurinsky 35 Director, Vice President,
Chief Operating and Chief
Financial Officer and
Secretary of FMFC and of FMSC
and Financial/Operations
Principal of FMSC
Brian M. Cohen 37 Vice President and General
and Municipal Securities
Principal of FMSC
Norma Doxey 56 Director
Ward R. Jones, Jr. 64 Director
David I. Portman 66 Director
</TABLE>
- - --------------------
The Company's Certificate of Incorporation provides for the
classification of the Board of Directors into three classes of Directors, each
class as nearly equal in number as possible but not less than one Director, each
director to serve for a three-year term, staggered by class. The Certificate of
Incorporation further provides that a Director or the entire Board of Directors
may be removed only for cause and only by the affirmative vote of the holders of
at least 70% of the combined voting power of the Company's voting
39
<PAGE> 41
stock, with vacancies on the Board being filled only by a majority vote of the
remaining Directors then in office. Cause is defined as the willful failure of a
director to perform in any substantial respect such Director's duties to the
Corporation (other than any such failure resulting from incapacity due to
physical or mental illness), willful malfeasance by a Director in the
performance of his duties to the Corporation which is materially and
demonstrably injurious to the Corporation, the commission by a Director of an
act of fraud in the performance of his duties, the conviction of a Director for
a felony punishable by confinement for a period in excess of one year, or the
ineligibility of a Director for continuation in office under any applicable
rules, regulations or orders of any federal or state regulatory authority.
All officers serve at the discretion of the Board of Directors. No
family relationship exists between any officer or director except for Mr.
Herbert Kurinsky who is the uncle of Mr. William J. Kurinsky; and Mr. Brian M.
Cohen who is a cousin of both Messrs. Kurinsky. The Company has established an
Audit Committee which does not include the Chief Financial or Chief Accounting
Officer of its subsidiary, but will include a "public director" as that term is
defined in Schedule E of the NASD By-Laws.
Herbert Kurinsky became a Director and President of the Company on
November 16, 1987. Mr. Kurinsky is a co-founder of First Montauk Securities
Corp. and has been its President, one of its Directors and its Registered
Options Principal since September of 1986. From March 1984 to August 1986, Mr.
Kurinsky was the President of Homestead Securities, Inc., a New Jersey
broker-dealer. From April 1983 to March 1984, Mr. Kurinsky was a branch office
manager for Phillips, Appel & Walden, a securities
40
<PAGE> 42
broker-dealer. From February 1982 to March 1983, Mr. Kurinsky was a
branch office manager for Fittin, Cunningham and Lauzon, a securities
broker-dealer. From November 1977 to February 1982, he was a branch office
manager for Advest Inc., a securities broker-dealer. Mr. Kurinsky received a
B.S. degree in economics from the University of Miami, Florida in 1954.
William J. Kurinsky became Vice President, a Director and Financial and
Operations Principal of the Company on November 16, 1987. He is a co-founder of
First Montauk Securities and has been one of its Vice Presidents, a Director and
its Financial/Operations Principal since September of 1986. Prior to that date,
Mr. Kurinsky was Treasurer, Chief Financial Officer and Vice President of
Operations of Homestead Securities, Inc., a securities broker-dealer. Mr.
Kurinsky received a B.S. from Rutgers University in 1984. He is the nephew of
Herbert Kurinsky.
Brian M. Cohen is a General Securities and Municipal Securities
Principal, of FMSC from August, 1986, to present. He is the manager of the
fixed-income and government securities department of FMSC. From August, 1984, to
August, 1986, he was a vice president and registered representative with
Homestead Securities, Inc. Mr. Cohen is a cousin to Mr.
Herbert Kurinsky and Mr. William Kurinsky.
Norma L. Doxey has been a Director of the Company since December 6,
1988. Ms. Doxey is the Vice President for Operations and a Registered
Representative with First Montauk Securities Corp. since September, 1986. From
August through September, 1986, she was operation's manager and a Registered
Representative with Homestead
41
<PAGE> 43
Securities, Inc. From July 1984 through August 1985 she held the same position
with Marvest Securities.
Ward R. Jones, Jr. has been a director of the Company since June, 1991.
From 1955 through 1990, Mr. Jones was employed by Shearson Lehman Brothers as a
registered representative, eventually achieving the position of Vice President.
Mr. Jones is currently a registered representative of First Montauk Securities
Corp. on a part-time basis.
David I. Portman has been a director of the Company since June 15, 1993.
From 1978 to the present Mr. Portman served as the President of Triad Property
Management, Inc., a private corporation, which builds, invests in and manages
real estate properties in the State of New Jersey. Mr. Portman was a Director of
Ultra Med, Inc. from 1986 to 1991, a high tech medical equipment manufacturer.
CERTAIN REPORTS
No person who, during the fiscal year ended December 31, 1995, was a
Director, officer or beneficial owner of more than ten percent of the Company's
Common Stock (which is the only class of securities of the Company registered
under Section 12 of the Securities Exchange Act of 1934 (the "Act") (a
"Reporting Person") failed to file on a timely basis, reports required by
Section 16 of the Act during the most recent fiscal year or prior years. The
foregoing is based solely upon a review by the Company of Forms 3 and 4 during
the most recent fiscal year as furnished to the Company under Rule 16a-3(d)
under the Act, and Forms 5 and amendments thereto furnished to the Company with
42
<PAGE> 44
respect to its most recent fiscal year, and any representation received by the
Company from any reporting person that no Form 5 is required.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid or accrued by the Company during the years ended December
31, 1995, 1994 and 1993 to each of the named executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation ------------
--------------------------------------------------- Securities
Name and Underlying
Principal Other Annual Options/SARs
Position Year Salary Bonus Compensation Granted(1)
- - --------- ---- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Herbert Kurinsky 1995 $131,000 $90,000.00 $ 8,594.28(2) 200,000
Chairman, Chief 1994 $110,000 - $ 19,683.80(2) 40,000
Executive Officer (3) 1993 $110,000 - $ 34,270.75(2) -
William J. Kurinsky 1995 $121,000 $90,000.00 $ 39,409.36(4) 200,000
Vice President, 1994 $110,000 - $ 16,771.87(3) 40,000
Chief Operating and 1993 $100,000 - $ 28,670.93(3) -
Financial Officer
and Secretary (5)
Brian M. Cohen 1995 $ 87,115.44 $15,000.00 $ 6,365.00(6) 5,000
Vice President and 1994 $ 75,000.02 $ 721.16 $ 23,824.36(6) 20,000
Gen'l Securities
Principal, FMSC
</TABLE>
- - ----------------
1) In 1994 the Board of Directors authorized a Grant to purchase 40,000
shares of the Company's Common Stock to each of Messrs. Herbert and
William
43
<PAGE> 45
J. Kurinsky, at exercise prices of $.75 and $.82, respectively. These
options have vested and are exercisable until December 19, 1999. In
1995, the Board of Directors authorized an additional Grant to
purchase 200,000 shares of the Company's Common Stock each to
Herbert Kurinsky and William J. Kurinsky at an exercise price of
$.75 and $.8352 respectively. Mr. Cohen was granted an option to
purchase 5,000 shares at $.75. These options have vested and are
exercisable until November 5, 2000 for Messrs. Kurinsky, and until
December 14, 2000 for Mr. Cohen. See "Aggregated Option/Sar
Exercises in Last Fiscal Year and Fy-End Option/Sar Values."
2) Includes: (i) for 1995, an automobile allowance of $8,594.28, (ii)
for 1994, commissions of $11,089.52 and an automobile allowance of
$8,594.28, (iii) for 1993, commissions of $25,642.75, and an
automobile allowance of $8,628.
3) Mr. Herbert Kurinsky is the beneficial owner of 61,518 shares of the
Company's Common Stock as of December 31, 1995, which shares had a
market value of approximately $53,828 as of that date, without giving
effect to the diminution in value attributable to the restriction on
said shares.
4) Includes: (i) commissions of $39,409.36, $16,771.87 and $28,670.93
for the years ended December 31, 1995, 1994 and 1993, respectively.
Does not include the value of an automobile purchased by the Company
for the exclusive use by Mr. William Kurinsky, with an annualized
lease value of $5,100 as provided by the IRS.
5) Mr. William Kurinsky is the beneficial owner of 1,051,171 shares of
the Company's Common Stock as of December 31, 1995, which shares had
a market value of approximately $919,775 as of that date, without
giving effect to the diminution in value attributable to the
restriction on said shares.
6) Includes: (i) commissions of $2,045.00 and an automobile allowance
of $4,320 for 1995; (ii) commissions of $19,624.36 and an automobile
allowance of $4,200 for 1994.
The Company pays directors, who are not employees of the Company, a
retainer of $250 per meeting of the Board of Directors attended and for each
meeting of a committee of the Board of Directors not held in conjunction with a
Board of Directors meeting. Directors employed by the Company are not entitled
to any additional compensation as such. It is anticipated that the Board of
Directors will meet on a regular quarterly basis in addition to such other
occasions as the business of the company may, from time to time, require.
44
<PAGE> 46
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table contains information with respect to the named
executive officers concerning options held as of the year ended December 31,
1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES IN OR BASE
NAME GRANTED(#) FISCAL YEAR PRICE ($SH) EXPIRATION DATE
---- ---------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Herbert Kurinsky 200,000 24% $0.75 11/05/00
William J. Kurinsky 200,000 24% $0.8325 11/05/00
Brian M. Cohen 5,000 .6% $0.75 11/05/00
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
SHARES NUMBER OF UNEXERCISED
ACQUIRED UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AS OF OPTIONS AT
NAME EXERCISE REALIZED DECEMBER 31, 1995 DECEMBER 31, 1995(1)
---- -------- -------- ----------------- --------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
Herbert Kurinsky - - 440,000/0 $93,000/$0
William J. Kurinsky - - 440,000/0 $64,500/$0
Brain M. Cohen - - 100,000/0 $26,125/$0
</TABLE>
(1) Based upon the closing bid price of the Company's on December 29, 1995
($.875 per share), less the exercise price for the aggregate number of
shares subject to the options.
EMPLOYMENT AGREEMENTS
In January 1996, the Company entered into new three-year employment
contracts with Herbert Kurinsky, as President and William J. Kurinsky, as
Executive Vice President. The contracts provide for base salaries of
$175,000 for the first year of the agreement for
45
<PAGE> 47
each, increasing in each case at the rate of 10% per year. Each would also
be entitled to receive a portion of a bonus pool consisting of 10% of the
pre-tax profits of the Company, to be determined by the executive management
(e.g. Herbert Kurinsky and William J. Kurinsky). The bonus pool would
require a minimum of $500,000 pretax profit per year in order to become
effective. Each is also entitled to receive commissions at the same rate as
paid to other non-affiliate registered representatives of the Company. They
are also entitled to purchase up to 20% of all underwriters and/or placement
agent warrants or options which are granted to First Montauk Securities
Corp. from FMSC upon the same price, terms and conditions afforded to FMSC
as the underwriter or placement agent. Each is further to be furnished,
during the term of his agreement, with health insurance benefits and life
insurance as generally made available to regular full-time employees of the
Company, and reimbursement for expenses incurred on behalf of the Company
and the use of an automobile or in the alternative an automobile allowance.
The contracts also provide for severance benefits equal to three times the
previous year's salary in the event either of the employees is terminated or
their duties significantly changed after a change in management of the
Company as defined in the agreement.
INCENTIVE STOCK OPTION PLAN
In September 1992, the Company adopted the 1992 Incentive Stock
Option Plan (the "1992 Plan"). The 1992 Plan provides for the grant of
options to purchase up to 2,000,000 shares of the Company's Common Stock and
is intended for employees of the Company and consultants. To date, options
to purchase a total of 1,961,000 shares of the Company's Common Stock have
been issued under the 1992 Plan. Under the terms
46
<PAGE> 48
of the 1992 Plan, options granted thereunder may be designated as options
which qualify for incentive stock option treatment ("ISOs") under Section
422A of the Code, or options which do not so qualify ("Non-ISOs").
The 1992 Plan is administered by the Board of Directors or by a Stock
Option Committee designated by the Board of Directors. The Board or the
Stock Option Committee, as the case may be, has the discretion to determine
the eligible employees to whom, and the times and the price at which,
options will be granted; whether such options shall be ISOs or Non-ISOs; the
periods during which each option will be exercisable; and the number of
shares subject to each option. The Board or Committee has full authority to
interpret the 1992 Plan and to establish and amend rules and regulations
relating thereto.
Under the 1992 Plan, the exercise price of an option designated as an
ISO shall not be less than the fair market value of the Common Stock on the
date the option is granted. However, in the event an option designated as an
ISO is granted to a ten percent stockholder (as defined in the 1992 Plan)
such exercise price shall be at least 110% of such fair market value.
Exercise prices of Non-ISO options may be less than such fair market value.
The aggregate fair market value of shares subject to options granted to a
participant which are designated as ISOs which become exercisable in any
calendar year may not exceed $100,000.
The Board or the Stock Option Committee, as the case may be, may, in
its sole discretion, grant bonuses or authorize loans to or guarantee loans
obtained by an optionee to enable such optionee to pay any taxes that may
arise in connection with the
47
<PAGE> 49
exercise or cancellation of an option. Unless sooner terminated, the 1992
Plan will expire in 2002.
In September 1992, the Company adopted the Non-Executive Director Stock
Option Plan (the "Director Plan"). The Director Plan provides for issuance of a
maximum of 1,000,000 shares of Common Stock upon the exercise of stock options
granted under the Director Plan. Options are granted under the Director Plan
until 2002 to (i) non-executive directors as defined and (ii) members of any
advisory board established by the Company who are not full time employees of the
Company or any of its subsidiaries. The Director Plan provides that each
non-executive director will automatically be granted an option to purchase
20,000 shares each September 1, provided such person has served as a director
for the 12 months immediately prior to such September 1st. Similarly, each
eligible director of an advisory board will receive on each September 1st an
option to purchase 10,000 shares of the Company's Common Stock each September
1st providing such person has served as a director of the advisory board for the
previous 12 month period.
The exercise price for options granted under the Director Plan shall be 100%
of the fair market value of the Common Stock on the date of grant. Until
otherwise provided in the Stock Option Plan the exercise price of options
granted under the Director Plan must be paid at the time of exercise, either in
cash, by delivery of shares of Common Stock of the Company or by a combination
of each. The term of each option commenced on the date it is granted and unless
terminated sooner as provided in the Director Plan, expires five years from the
date of grant. The Director Plan is administered by a committee of the
48
<PAGE> 50
board of directors composed of not fewer than three persons who are officers of
the Company (the "Committee"). The Committee has no discretion to determine
which non-executive director or advisory board member will receive options or
the number of shares subject to the option, the term of the option or the
exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan are not qualified for incentive stock option treatment.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 15, 1996, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
person known by the Company to own beneficially more than 5% of the Company's
outstanding shares of Common Stock, by each director of the Company, and by all
directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Directors, Officers Amount and Percentage
and 5% Shareholders (l) of Beneficial Ownership (2)
----------------------- ---------------------------
Number of Shares Percent
---------------- -------
<S> <C> <C>
Herbert Kurinsky 461,518(2) 5.5%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
William J. Kurinsky 1,491,171(2) 17.8%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
</TABLE>
49
<PAGE> 51
Directors, Officers Amount and Percentage
and 5% Shareholders (l) of Beneficial Ownership (2)
- - ----------------------- ---------------------------
<TABLE>
Number of Shares Percent
---------------- -------
<S> <C> <C>
Brian M. Cohen 101,000(3) 1.3%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Ward R. Jones 80,000(4) 1.0%
7 Leda Lane
Guilderland, NY 12084
Norma Doxey 35,000(5) *
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
David I. Portman 100,000(6) 1.3%
19 Pal Drive
Wayside, NJ 07712
All Directors and 2,268,689(2)-(6) 25.1%
Officers as a group
(6 persons in number)
</TABLE>
* Less than 1%.
(1) Unless otherwise indicated below, each director, officer and 5% shareholder
has sole voting and sole investment power with respect to all shares that he
beneficially owns.
(2) Includes vested and presently exercisable options of both Messrs. William
and Herbert Kurinsky, each to purchase 440,000 shares of Common Stock.
(3) Includes 100,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presently exercisable stock options.
(4) Includes 80,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presently exercisable stock options.
(5) Includes 35,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presently exercisable stock options.
(6) Includes 40,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presently exercisable stock options.
50
<PAGE> 52
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning the terms of the employment agreements entered
into between the Company and Messrs. Herbert Kurinsky and William J. Kurinsky,
see "Executive Compensation".
Advances and loans to the Company's three Executive Officers, Herbert
Kurinsky, William J. Kurinsky and Brian M. Cohen and Director Norma Doxey,
totaling $142,519 are unsecured and currently bear interest at the rate of 6%
per annum. These loans are due on demand. An additional loan of $13,005 to Mr.
Cohen is non-interest bearing and payable at the rate of $400 per month plus
10% of any commissions earned.
51
<PAGE> 53
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS
AND REPORTS ON FORM 8-K
(A) 1. Financial Statements
See Financial Statements Attached Hereto.
2. Exhibits:
Incorporated by reference to the Exhibit Index at the end of this report.
(B) Reports on Form 8-K
During the last quarter of the period covered by this Report, there were no
reports filed on Form 8-K.
52
<PAGE> 54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST MONTAUK FINANCIAL CORP.
By /s/ Herbert Kurinsky
-----------------------------
Herbert Kurinsky, President
Dated: April 10, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
/s/ Herbert Kurinsky April 10, 1996
- - ------------------------------------
Herbert Kurinsky
President, Chief Executive
Officer and Director
/s/ William J. Kurinsky April 10, 1996
- - ------------------------------------
William J. Kurinsky
Vice-President, Chief Operating
and Chief Financial Officer, and
Principal Accounting Officer,
Secretary and Director
/s/ Norma Doxey April 10, 1996
- - ------------------------------------
Norma Doxey, Director
/s/ Ward R. Jones, Jr. April 10, 1996
- - ------------------------------------
Ward R. Jones, Jr., Director
/s/ David I. Portman April 10, 1996
- - ------------------------------------
David I. Portman, Director
53
<PAGE> 55
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
First Montauk Financial Corp.
Red Bank, New Jersey
We have audited the accompanying consolidated statements of
financial condition of First Montauk Financial Corp. and subsidiaries as of
December 31, 1995, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for each of the years in the
two-year period ended December 31, 1995. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
First Montauk Financial Corp. and subsidiaries as of December 31, 1995, and the
results of its operations and its cash flows for each of the years in the
two-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
Schneider, Ehrlich, Sosinsky, Rodis & Wengrover, LLP
Woodbury, New York
March 6, 1996, except for Note 17,
as to which the date is March 28, 1996
<PAGE> 56
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 845,471
Securities owned, at market 7,114,507
Commissions receivable 383,868
Employee and broker receivables 357,525
Furniture, equipment and leasehold improvements - net 804,668
Notes receivable - ECM 282,000
Due from officers 155,524
Other assets 174,231
Deferred tax asset 369,173
-----------
Total assets $10,486,967
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Due to clearing organization $ 2,306,032
Securities sold, but not yet purchased, at market 166,382
Loan payable - bank 47,544
Commissions payable 1,467,190
Accounts payable 389,312
Accrued expenses 1,392,115
Income taxes payable 621,690
Other liabilities 495,756
-----------
Total liabilities 6,886,021
===========
Commitments and contingent liabilities (See Notes)
STOCKHOLDERS' EQUITY
Preferred Stock, 5,000,000 shares authorized, $.10
par value, no shares issued and outstanding --
Common Stock, no par value, 15,000,000 shares
authorized, 7,920,106 shares issued and outstanding 3,320,012
Additional paid-in capital 220,172
Retained earnings 60,762
-----------
3,600,946
-----------
Total liabilities and stockholders' equity $10,486,967
===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 57
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994
---- ----
Revenues:
<S> <C> <C>
Net firm trading gains $ 9,763,940 $ 7,781,667
Commissions 17,113,296 9,861,294
Investment banking 388,249 766,013
Interest and other income 1,076,718 691,413
----------- -----------
Total revenues 28,342,203 19,100,387
----------- -----------
Expenses:
Commissions, employee compensation and benefits 19,542,578 14,242,933
Clearing and floor brokerage 3,112,474 1,828,197
Communications and occupancy 1,260,209 961,582
Other operating expenses 2,982,254 1,593,080
Interest 192,752 157,660
----------- -----------
27,090,267 18,783,452
----------- -----------
Income before income taxes 1,251,936 316,935
Income taxes 483,848 124,799
----------- -----------
Net income $ 768,088 $ 192,136
=========== ===========
Per share of Common Stock:
Primary:
Net income $ .09 $ .02
=========== ===========
Number of shares 8,422,365 8,409,267
=========== ===========
Fully diluted:
Net income $ .09
===========
Number of shares 8,901,331
===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 58
FIRST MONTAUK SECURITIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994
---- ----
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
<S> <C> <C>
Net income $ 768,088 $ 192,136
----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 184,818 106,496
Commissions receivable (250,901) 20,491
Securities owned - at market (2,197,289) (58,006)
Other assets (34,863) 65,961
Due to clearing organization 26,781 (809,285)
Securities sold but not yet purchased (288,600) 357,627
Commissions payable 714,994 (431,247)
Accounts payable 63,363 78,219
Accrued expenses 1,372,891 --
Income taxes payable 615,636 25,279
Other liabilities 334,345 28,744
Deferred income taxes (309,778) 24,250
---------- ----------
Total adjustments 231,397 (591,471)
---------- ----------
Net cash provided by (used in) operating activities 999,485 (399,335)
---------- ----------
Cash flows from investing activities:
Due from officers (4,370) (24,926)
Employee and broker receivables 156,742 (303,813)
Capital expenditures (435,539) (340,491)
Notes receivable - ECM (276,000) --
Other assets (60,000) --
---------- ----------
Net cash used in investing activities (619,167) (669,230)
---------- ----------
Cash flows from financing activities:
Proceeds from exercise of warrants -- 776,908
Proceeds from loan payable -- 77,800
Payment of loan payable (25,934) (4,322)
Stock registration costs (2,814) --
Proceeds from exercise of stock options 13,985 --
Repurchase of common stock (194,035) --
Warrant exercise costs -- (10,000)
---------- ----------
Net cash provided by (used in) financing activities (208,798) 840,386
---------- ----------
Net increase (decrease) in cash and cash equivalents 171,520 (228,179)
Cash and cash equivalents at beginning of year 673,951 902,130
---------- ----------
Cash and cash equivalents at end of year $ 845,471 $ 673,951
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 59
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994
---- ----
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 192,752 $ 157,660
Income taxes $ 149,722 $ 51,045
Supplemental schedule of non-cash investing and
financing activities:
Conversion of shares issued with guaranteed
resale price to Common Stock $ -- $ 11,500
</TABLE>
See notes to consolidated financial statements.
<PAGE> 60
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1994 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balances at
January 1, 1994 7,582,967 $2,517,618 $ 427,021 $(899,462) $ 2,045,177
Stock registration costs -- -- (10,000) -- (10,000)
Exercise of warrants 517,939 776,909 -- -- 776,909
Conversion of shares
issued with guaranteed
resale price to
Common Stock 11,500 11,500 -- -- 11,500
Net income for the year -- -- -- 192,136 192,136
---------- ---------- --------- --------- -----------
Balances at
December 31, 1994 8,112,406 3,306,027 417,021 (707,326) 3,015,722
Exercise of stock options 23,500 13,985 -- -- 13,985
Stock registration costs -- -- (2,814) -- (2,814)
Repurchase of
common stock (215,800) -- (194,035) -- (194,035)
Net income for the year -- -- 768,088 768,088
---------- ---------- --------- --------- -----------
Balances
at December 31, 1995 7,920,106 $3,320,012 $ 220,172 $ 60,762 $ 3,600,946
========== ========== ========= ========= ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 61
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of
First Montauk Financial Corp. and its wholly owned subsidiaries
(collectively, the "Company"). The Company operates an
investment banking and securities brokerage firm through First
Montauk Securities Corp. ("FMSC"), and sells insurance products
and investments in equipment leases through two other
subsidiaries, Montauk Insurance Services, Inc. and Montauk
Advisors, Inc. All material intercompany accounts and
transactions have been eliminated in consolidation.
Principal transactions are recorded on a trade date basis.
Marketable securities are valued at quoted market value with
unrealized gains and losses reflected in principal transactions
in the Consolidated Statement of Operations. FMSC clears all
customer transactions on a fully disclosed basis through an
independent clearing organization, which carries all of the
accounts of FMSC's customers.
Fixed Assets
Furniture, equipment and leasehold improvements are stated at
cost. Depreciation is computed by applying the straight-line
method over the estimated useful lives of the related assets,
ranging from three to seven years. Leasehold improvements are
amortized on a straight-line basis over the length of the
related lease.
Statement of Cash Flows
For purposes of the Statement of Cash Flows, the Company
considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash
equivalents.
Income Taxes
The Company uses the liability method to determine its income
tax expense. Under this method, deferred tax assets and
liabilities are computed based on differences between financial
reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The
Company and subsidiaries file a consolidated federal income tax
return and separate state returns.
Earnings per Share
The computations of earnings per share were computed using the
weighted average number of shares outstanding adjusted for the
incremental shares attributable to outstanding options to
purchase common stock, as determined under the treasury stock
method.
<PAGE> 62
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Use of Estimates
Management uses estimates and assumptions in preparing these
financial statements in accordance with generally accepted
accounting principles. Those estimates and assumptions affect
the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities and the reported revenues
and expenses. Actual results could vary from the estimates that
were used.
New Accounting Pronouncement
In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based Compensation
("SFAS No. 123"). SFAS No. 123 establishes financial accounting
and reporting standards for stock-based employer compensation
plans. The financial accounting standards of SFAS No. 123
permit companies to either continue accounting for stock-based
compensation under existing rules or adopt SFAS No. 123 and
begin reflecting the fair value of stock options and other
forms of stock-based compensation in the results of operations
as additional expense. The disclosure requirements of SFAS No.
123 require companies which elect not to record the fair value
in the statement of operations to provide pro forma disclosures
of net income and earnings per share in the notes to the
consolidated financial statements as if the fair value of
stock-based compensation had been recorded. The disclosure
requirements of SFAS No. 123 are effective for financial
statements for fiscal years beginning after December 15, 1995.
The Company will provide the pro forma disclosures beginning in
1996 and will continue accounting for such plans under the
existing accounting rules.
NOTE 2 - SECURITIES OWNED AND SOLD BUT NOT YET PURCHASED
Marketable securities owned and sold but not yet purchased
consist of trading securities at quoted market values, as
indicated below:
<TABLE>
<CAPTION>
Sold but
not yet
Owned Purchased
----- ---------
<S> <C> <C>
Obligations of U.S. government and
its agencies $ 163,444 $ 18,467
State and municipal obligations 3,574,616 44,854
Corporate stocks and bonds 3,242,516 103,061
Options and warrants 133,931 --
---------- --------
$7,114,507 $166,382
========== ========
</TABLE>
<PAGE> 63
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3 - EMPLOYEE AND BROKER RECEIVABLES
<TABLE>
<S> <C> <C>
This account consists of the following:
Commission advances $ 74,388
Loans to brokers and non-executive employees 283,137
--------
$357,525
========
</TABLE>
Certain loans to brokers in the original amount of $189,600 are
evidenced by promissory notes. The notes provide for the
forgiveness of loan principal based on continued employment
with FMSC over various terms ranging from twelve to twenty-four
months. FMSC is amortizing these loans over their respective
terms through monthly charges to compensation. Loan
amortization was $65,000 and $52,000 for 1995 and 1994,
respectively.
Loans and advances are unsecured, with the exception of a loan
in the amount of $21,084, which is payable in monthly
installments of $1,500 including interest at 10% per annum. The
loan is secured by an investment.
NOTE 4 - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the
following:
<TABLE>
<S> <C>
Furniture and equipment $1,011,897
Leasehold improvements 129,360
----------
1,141,257
Less: Accumulated depreciation
and amortization (336,589)
----------
Total fixed assets $ 804,668
==========
</TABLE>
Depreciation expenses was $184,818 and $106,496 in 1995 and
1994, respectively.
NOTE 5 - NOTES RECEIVABLE - ECM
In 1995, the Company loaned a total of $282,000 to
Environmental Coupon Marketing, Inc. ("ECM"), a closely-held
marketer of recycling programs to retailers featuring store
coupons and cash incentives to consumers. The first loan, in
the amount of $100,000, bears interest at the rate of 6% per
annum and matures on the earlier of a proposed private
placement of ECM securities, or August 9, 1996. The second loan
for $182,000 is non-interest bearing and may be converted into
up to 350,000 shares of ECM common stock at the rate of $.52
per share. This loan matures on October 9, 1996. Both loans are
unsecured.
The Company has also purchased 150,000 shares of ECM common
stock for $.40 per share, or $60,000. This investment is
included in Other Assets in the accompanying Consolidated
Statement of Financial Condition.
<PAGE> 64
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 6 - DUE FROM OFFICERS
Advances to officers totaling $142,519 are unsecured and
currently bear interest at the rate of 6% per annum. These
loans are due on demand. Additional principal of $13,005 is
non-interest bearing and payable at the rate of $400 per month
plus 10% of any commissions earned. Interest on the loans
totaled $6,127 and $7,518 in 1995 and 1994, respectively.
NOTE 7 - DUE TO CLEARING ORGANIZATION
The Company pays interest to its clearing firm on net debit
balances in its proprietary accounts at the rate of 1/2% above
the broker call rate (7-1/4% at December 31, 1995).
NOTE 8 - BANK LOAN
This loan in the original amount of $77,800 is payable in
monthly principal installments of $2,161 plus interest at the
prime rate (8-3/4% at December 31, 1995). The loan is
collateralized by equipment with an approximate value at
December 31, 1995 of $87,000. Principal maturities are
scheduled as follows: 1996 - $25,932 and 1997 - $21,612.
NOTE 9 - ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<S> <C>
Reserves for legal matters $1,223,225
Other 168,890
----------
$1,392,115
==========
</TABLE>
NOTE 10 - INCOME TAXES
The net deferred tax benefits in the accompanying Statements of
Financial Condition include the following components:
<TABLE>
<S> <C>
Deferred tax assets $ 427,066
Deferred tax liabilities 57,893
----------
Net deferred tax benefit $ 369,173
==========
</TABLE>
Deferred tax items relate primarily to differences between the
financial and tax bases of fixed assets and certain receivable
and reserve accounts, as well as to net operating losses
available to offset future taxable income. As of December 31,
1995, the Company has consolidated federal net operating loss
carryforwards for tax purposes of approximately $212,000
expiring through 2006. The carryforwards are subject to
limitations on the amount that can be utilized by the Company
in a year due to change of ownership rules as defined by
applicable federal tax statutes. Approximately $110,000 per
year is available for use in future years. Unused losses can be
carried forward and added to the losses allowable in subsequent
periods.
<PAGE> 65
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 10 - INCOME TAXES - continued
The provision for income taxes consists of the following:
<TABLE>
<S> <C>
Currently payable:
Federal $ 620,196
State 181,315
---------
801,511
---------
Deferred:
Federal (213,867)
State (75,147)
Tax benefit of net operating loss carryforward (28,649)
---------
(317,663)
---------
Provision for income taxes $ 483,848
=========
</TABLE>
Following is a reconciliation of the income tax provision
(benefit) with income taxes based on federal statutory rates:
<TABLE>
<S> <C>
Expected statutory Federal income tax rate 34.0%
Non-deductible expenses .8
State taxes, net of federal benefit 6.1
Tax benefit of net operating loss carryforward (2.3)
----
Actual tax expense 38.6%
====
</TABLE>
NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The Company leases office facilities and equipment under
operating leases expiring at various dates through 1998.
Following is a schedule of future minimum payments due under
non-cancelable leases with terms in excess of one year:
<TABLE>
<C> <C>
1996 $ 240,917
1997 227,938
1998 213,358
---------
$ 682,213
=========
</TABLE>
Total rental expense amounted to $225,683 and $198,037 in 1995
and 1994, respectively.
Employment Agreements
Effective January 1, 1996, the Company approved new employment
contracts for two of its officers. The contracts will run for
three years, and provide for annual salaries of $175,000 for
the first year, with a provision for a 10% annual increase in
the second and third years. The agreement also provides for a
bonus pool of up to 10% of consolidated pre-tax profits. The
bonus pool becomes effective each year only upon the
achievement of pre-tax profits exceeding $500,000.
<PAGE> 66
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES - continued
Legal Matters
In 1995, FMSC was named as a defendant in a civil suit brought
by Escambia County, Florida ("Escambia") for alleged losses
sustained on certain securities purchased from FMSC. This
matter was settled in March 1996 (see Note 17). FMSC is
cooperating with various regulatory authorities that are
conducting inquiries into the Escambia transactions as well as
other issues related to FMSC's trading in mortgage-backed
securities.
In 1995, FMSC settled an action pending in U. S. District Court
relating to the sale of stock in Delta Rental Systems, Inc.
Under terms of the settlement, the Company will make a cash
payment of $204,188, net of an insurance recovery. The 1995
financial statements include a provision for this liability.
FMSC is also a respondent in certain pending customer
arbitrations relating to its securities business. These claims
are in various stages of progress and are being vigorously
contested by FMSC. The ultimate outcome and/or range of loss,
if any, from these matters is not presently determinable.
A former consultant to FMSC has asserted a claim for
approximately $930,000, representing amounts allegedly due him
under a consulting agreement and contract for computer systems
development. FMSC intends to contest this matter vigorously and
believes it has meritorious defenses to the claims. Further,
FMSC believes it has valid counterclaims against the consultant
for breaches of his obligations to FMSC in connection with the
performance of his consulting services.
Purchase Commitment
FMSC has entered into a three-year agreement with a telephone
service provider under which FMSC has committed to pay minimum
annual charges of $200,000, $325,000 and $325,000 in the first,
second and third years, respectively, in consideration for
discounts on data communications service during the commitment
period.
NOTE 12 - STOCK OPTION PLANS
In September 1992, the Company's stockholders approved the 1992
Incentive Stock Option Plan (the "1992 Plan") and the 1992
Non-Executive Director Stock Option Plan (the "Director Plan").
The Company has reserved 2,000,000 shares of its Common Stock
for issuance under the 1992 Plan. Options issued to employees
will qualify for incentive stock option treatment (ISOs). The
exercise price designated as an ISO shall not be less than the
fair market value of the Common Stock on the date of grant.
However, ISOs granted to a ten percent stockholder shall have
an exercise price of at least 110% of such fair market value.
At the time an option is granted, the Board of Directors shall
fix the period within which it may be exercised. Such exercise
period shall not be less than one year nor more than ten years
from the date of grant. The 1992 plan will expire in May 2002.
<PAGE> 67
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 12 - STOCK OPTION PLANS - continued
Options on 941,275 shares were exercisable at December 31,
1995. There were 39,000 shares available for grants under the
plan at December 31, 1995.
The Company has reserved 1,000,000 shares of its Common Stock
for issuance under the Director Plan. Options to purchase
20,000 shares of Common Stock are granted to each Non-Executive
Director on August 1 of each year, provided such individual has
continually served as a Non-Executive Director for the
twelve-month period immediately preceding the date of grant.
The options will expire in five years from the date of grant.
The exercise price of such options shall be equal to the fair
market value of the Company's Common Stock on the date of
grant. The Director Plan will terminate in May 2002.
Options on 88,000 shares were exercisable at December 31, 1995.
There were 820,000 shares available for grants under the plan
at December 31, 1995.
The following table summarizes activity under the plans:
<TABLE>
<CAPTION>
1992 Incentive Stock Option Plan 1992 Non-Executive Director Plan
Shares Price per Share Shares Price per Share
------ --------------- ------ ---------------
<S> <C> <C> <C> <C>
Options outstanding,
December 31, 1993 871,500 $.56 - $.6188 80,000 $.50-1.75
Options granted 350,000 $.41 - $2.625 60,000 $.6875
Options lapsed or
canceled (30,000) $.56 --
--------- -------
Options outstanding,
December 31, 1994 1,191,500 140,000
Options granted 823,500 $.56 - $1.00 40,000 $.875
Options lapsed or
canceled (54,000) $.75 - $2.625 --
Options exercised (23,500) $.41 - $ .75 --
--------- -------
Options outstanding,
December 31, 1995 1,937,500 180,000
========== =======
</TABLE>
NOTE 13 - STOCKHOLDERS' EQUITY
Preferred Stock
The Company is presently authorized to issue 5,000,000 shares
of Preferred Stock, none of which have been issued at December
31, 1995. The preference, if any, to be given to preferred
shares is determinable at the time of issuance.
Stock Repurchases
In May 1995, the Company's Board of Directors authorized the
repurchase of up to $100,000 of the Company's Common Stock. In
September 1995, the Board authorized a second buy-back plan for
the repurchase of up to 500,000 shares. During the buy- back
periods, the Company purchased a total of 215,800 shares in the
open market at
<PAGE> 68
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 13 - STOCKHOLDERS' EQUITY - continued
prices ranging from $.59 to $1.32 per share for a total cost of
$194,035. Both buy-back plans expired in 1995 and the
repurchased shares were canceled by the Company.
Warrants
In 1994, a total of 517,939 warrants to purchase common stock
at $1.50 per share were exercised for total proceeds of
$776,909. The warrants had been previously issued in connection
with the Company's public offering in 1990, and were registered
for public trading in 1993. The warrant exercise period expired
on February 7, 1994, at which time all unexercised warrants
were canceled.
Shares Issued with Guaranteed Resale Price
In 1994, a two-year put option obligating the Company to
repurchase up to 11,500 shares of Common Stock for $1.00 per
share expired. Upon expiration, a temporary equity account for
$11,500 was closed and the balance was reclassified to
permanent capital.
NOTE 14 - DEFINED CONTRIBUTION PLAN
The Company sponsors a defined contribution pension plan
[401(k)] covering all participating employees. The Company may
elect to contribute to the plan up to 100% of each
participant's annual contribution. Employer contributions for
1995 amounted to $36,122.
NOTE 15 - SIGNIFICANT CREDIT RISK
FMSC executes securities transactions on behalf of its
customers. If either the customer or a counter-party fail to
perform, FMSC by agreement with its clearing broker may be
required to discharge the obligations of the non-performing
party. In such circumstances, FMSC may sustain a loss if the
market value of the security is different from the contract
value of the transaction. FMSC as a non-clearing broker does
not handle any customer funds or securities. The responsibility
for processing customer activity rests with FMSC's clearing
firm.
FMSC seeks to control off-balance-sheet risk by monitoring the
market value of securities held or given as collateral in
compliance with regulatory and internal guidelines. Pursuant to
such guidelines, FMSC's clearing firm requires additional
collateral or reduction of positions, when necessary. FMSC also
completes credit evaluations where there is thought to be
credit risk.
FMSC as a part of its normal brokerage activities, assumes
short positions in its inventory. The establishment of short
positions exposes FMSC to off-balance-sheet risk in the event
prices increase, as the Company may be obligated to acquire the
securities at prevailing market prices. Securities sold but not
yet purchased amounted to $166,382 at December 31, 1995. FMSC
is a market maker in a number of securities and in this
capacity may have significant positions in its inventory or be
required to
<PAGE> 69
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 15 - SIGNIFICANT CREDIT RISK - continued
purchase significant positions in a volatile market. In order
to control this risk, security positions are monitored on at
least a daily basis, and there are regulatory guidelines that
limit the obligation of the market maker to purchase the
securities in a volatile market. Should FMSC find it necessary
to sell such a security, it may not be able to realize the full
carrying value of the security due to the significance of the
position sold. The criterion for determining whether an
individual security position represents a significant portion
of its issue is defined by SEC Rule 15c3-1 and is referred to
as "market blockage".
The Company maintains cash balances at various financial
institutions in the New York metropolitan area. The balances
are insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1995, uninsured cash balances totaled
$771,632.
NOTE 16 - NET CAPITAL REQUIREMENTS
FMSC is subject to the Securities and Exchange Commission
Uniform Net Capital Rule (Rule 15c3-1), which requires FMSC to
the maintenance of minimum net capital, as defined. At December
31, 1995, FMSC had net capital and minimum net capital
requirements of $908,704 and $272,800, respectively. FMSC's
ratio of aggregate indebtedness to net capital was 4.5 to 1.
NOTE 17 - SUBSEQUENT EVENT
On March 28, 1996, without admitting liability or wrongdoing,
FMSC reached an agreement with Escambia to settle the Escambia
claims. Under terms of the agreement, FMSC will pay Escambia
the sum of $900,000 in two installments: $600,000 immediately
and $300,000 on August 1, 1996. The 1995 consolidated financial
statements include a provision for this liability.
<PAGE> 70
EXHIBITS INDEX
The exhibits designated with an asterisk (*) have previously been filed
with the Commission in connection with the Company's Registration Statement on
Form S-1, File No. 33-24696, those designated (**) have been filed with the
Company's Form 10-KSB for the fiscal year ended December 31, 1993, those
designated (***) have been previously filed with the Company's Registration
Statement on Form S-3, File No. 33-65770, and pursuant to 17 C.F.R. Sections
201.24 and 240.12b-32, are incorporated by reference to the document referenced
in brackets following the description of such exhibits. Those designated (****)
denotes exhibits which have been filed with the Company's Form 10-KSB for the
fiscal year ended December 31, 1994, and (*****) denotes exhibits filed
herewith.
Exhibit No. Description
3.1* Amended and Restated Certificate of Incorporation adopted at 1989
Special Meeting in lieu of Annual Meeting of Shareholders.
3.2* Amended and Restated By-Laws.
4.1* Form of Common Stock Certificate.
4.4* Form of Underwriter's Warrant.
10.7* Sublease between Prime Asset Management Corp. and the Registrant
dated December 6, 1989.
10.8* Clearing Agreement between the Registrant and Wertheim Schroder &
Co., Incorporated dated January 21, 1991.
10.10* Lease Agreement between the Registrant and Hovchild dated May 25,
1990.
10.11*** Employment Agreement between First Montauk Financial Corp. and
Herbert Kurinsky dated January 1, 1993.
10.12*** Employment Agreement between First Montauk Financial Corp. and
William Kurinsky dated January 1, 1993.
10.13*** Lease Agreement between First Montauk Securities Corp. and River
Office Equities dated September 7, 1993.
<PAGE> 71
Exhibit No. Description
- - ----------- -----------
10.14**** Lease Addendum Agreement between First Montauk Securities Corp.
and River Office Equities dated June 21, 1994.
10.15***** Sublease Agreement between First Montauk Securities Corp. and
Pilot Laboratories, Inc. dated September 19, 1995, and Master
Lease Agreement between River Office Equities and Pilot
Laboratories, Inc. dated August 31, 1987.
10.16***** Office Lease Agreement between First Montauk Securities Corp. and
River Office Equities dated January 31, 1996.
28.1* 1992 Incentive Stock Option Plan.
28.2* 1992 Non-Executive Director Stock Option Plan.
<PAGE> 1
Exhibit 10.15
SUBLEASE dated this 19 day of September, 1995, by and between PILOT
LABORATORIES, INC., 328 Newman Springs Road, Red Bank, New Jersey, (hereinafter
called "Tenant") and FIRST MONTAUK SECURITIES CORPORATION, a New York
corporation, 328 Newman Springs Road, Red Bank, New Jersey, (hereinafter called
"Assignee"), for premises at 328 Newman Springs Road, Red Bank, New Jersey.
WITNESSETH
WHEREAS, Tenant entered into a certain lease agreement dated August 31,
1987, (hereinafter called the "Lease"), as tenant, with River Office Equities, a
New Jersey Partnership, (hereinafter called "Landlord"), as landlord, for a
portion of the third floor containing 1,961 square feet of gross rentable area
of Parkway 109 Office Center, 328 Newman Springs Road, Middletown, New Jersey
(hereinafter called the "leased premises"); and
WHEREAS, Tenant and Landlord entered into a First Amendment to Lease
(hereinafter Amendment) on October 30, 1992, to extend and amend the terms of
the Lease; and
WHEREAS, Tenant possesses all right, title and interest in and to the Lease,
as tenant, and desires to sell, assign and transfer the Lease to Assignee, and
Assignee desires to accept said sale, assignment and transfer upon terms and
conditions hereinafter set forth; and
WHEREAS, Assignee acknowledges receipt of copies of the Lease and First
Amendment to Lease, is fully familiar with and accepts the terms and conditions
of each as if it had been the original tenant under each; and
WHEREAS, the parties intend that the Assignee shall take possession of the
demised premises on or before October 1, 1995, but no sooner than Tenant's new
quarters are ready for occupancy;
NOW, THEREFORE, in consideration of one ($1.00) dollar and other good and
valuable consideration, the parties hereto covenant and agree as follows:
1. Tenant hereby sells, assigns and transfers to Assignee any and all of its
right, title and interest in and to the Lease and Amendment. The foregoing sale,
assignment and transfer is made without any recourse whatsoever to Tenant and
without any representation and warranties, express or implied, of any nature or
kind whatsoever.
2. Assignee hereby accepts the foregoing sale, assignment and transfer and
promises to pay all rent and additional rent and to faithfully perform all other
covenants, stipulations, agreements and obligations under
<PAGE> 2
the Lease and Amendment accruing on or after October 1, 1995, or otherwise
attributable to the period commencing on said date or on the date that Tenant
delivers possession to Assignee and continuing thereafter except for the payment
of rent, which shall commence on the first day of the second month Assignee
takes possession. Assignee shall indemnify, defend and hold Tenant harmless from
any and all claims, demands, actions, causes of action, suits, proceedings,
damages, liabilities and costs and expenses of every nature and kind whatsoever
which relate to the Lease or Amendment or the premises demised thereunder
arising on or after October 1, 1995, or on the date that Tenant delivers
possession to Assignee.
3. Unless and until such time that Landlord releases Tenant from any
liability under the terms and conditions of the Lease, Assignee shall not
change, modify or amend the Lease or First Amendment to Lease, in any way,
including the rental to be paid thereunder, without notice to and consent of
Tenant.
4. In the event Tenant is unable to deliver possession of the demised
premises to Assignee on October 1, 1995, the terms and conditions of this
Assignment of Lease shall be postponed until such time that Tenant has vacated
the demised premises and delivers possession to Assignee. It is the intent of
the parties to this Agreement that possession shall be delivered to Assignee on
or before October 1, 1995, but no sooner than Tenant's new quarters are ready
for occupancy. Nothing contained in this Agreement shall prevent the parties
from changing the effective date of this Agreement provided Tenant is able to
deliver possession to Assignee before October 1, 1995.
5. All notices or other documents under this Agreement shall be in writing
and delivered personally or mailed by certified mail, return receipt requested,
addressed to the parties at their last known addresses. Any notices delivered to
Assignee by Landlord shall simultaneously be sent to Tenant and nothing
contained in this Agreement shall prevent Tenant from curing any default of
Assignee where necessary to protect Tenant's rights or obligations under the
terms and conditions of the Lease. Tenant shall have the right but not the
obligation to cure such default and if Tenant cures such default, Assignee shall
pay to Tenant on demand the reasonable cost thereof including costs and
reasonable attorney fees.
6. The effective date of this Agreement shall be the date that Tenant
delivers possession of the demised premises to Assignee. This Agreement shall
terminate upon the expiration of the Lease and First Amendment to Lease.
<PAGE> 3
7. Assignee's obligation to pay the Annual Basic Rent and such Additional
Rent and charges as provided for in the Lease shall commence upon the first day
of the second month of this Agreement and Tenant shall be responsible for such
Annual Basic Rent and Additional Rent and charges for the first month of this
Agreement. In the event the date that Tenant delivers possession to the Assignee
is other than the first day of a calendar month, Tenant's obligation to pay the
Annual Basic Rent and Additional Rent shall be pro-rated for the balance of that
month.
8. Tenant represents that it has obtained the written consent of the
landlord for the assignment of the lease to Assignee.
9. Upon execution of this Agreement Assignee shall pay to Tenant the sum of
Two Thousand Eight Hundred Fifty-Nine and 79/100 ($2,859.79) representing the
security paid by Tenant to Landlord under the terms and conditions of the Lease.
Upon receipt of this payment, Tenant assigns to Assignee any rights it has to
the return of the deposit from Landlord upon expiration of the Lease.
10. This Agreement supersedes all agreements previously made between the
parties relating to this Assignment. There are no other understandings or
agreements between them.
11. No delay or failure by.either party to exercise any right under this
Agreement shall constitute a waiver of that or any other right, unless expressly
provided therein.
12. This Agreement shall be construed in accordance with and governed by the
laws of the State of New Jersey.
13. To the full extent permissible under the Bankruptcy Reform Act of 1978,
specifically Section 365 (11 U.S.C. 365) or any successor thereto, if Assignee
shall file a voluntary petition in bankruptcy or take the benefit of any
insolvency act or be dissolved or adjudicated a bankrupt or if a receiver shall
be appointed for its business or its assets and the appointment of such
receiver is not vacated within thirty (30) days after such appointment, or if it
shall make an assignment for the benefit of creditors, then and forthwith
thereafter the Tenant shall have all of the rights provided by law or in this
Agreement.
<PAGE> 4
IN WITNESS WHEREOF, the said parties hare hereunto set their hands and seals
or caused these presents to be signed by their proper offices and caused their
proper seal to be hereto affixed, the day and year first above written.
Witness: Pilot Laboratories, Inc.
/s/ ? By: /s/ Paul Morrisroe
- - ---------------------------- ---------------------------
PAUL MORRISROE, President
Witness: First Montauk Securities
Corporation
/s/ Corrine Kanterman By: /s/ ?
- - ---------------------------- ---------------------------
CORRINE KANTERMAN
STATE OF NEW JERSEY )
) SS.:
COUNTY OF MIDDLESEX )
BE IT REMEMBERED that on this 19th day of September 1995, before me, the
subscriber, personally appeared Paul Morrisroe the President of Pilot
Laboratories, Inc., who is the Tenant mentioned in the within Agreement, and
thereupon he acknowledged that he signed, sealed and delivered the same as his
act and deed, for the uses and purposes therein expressed.
/s/ Olga C. Carmen
----------------------------
OLGA C. CARMEN
NOTARY PUBLIC OF NEW JERSEY
MY COMMISSION EXPIRES ON MARCH 1, 2000
STATE OF NEW JERSEY )
) SS.:
COUNTY OF MONMOUTH )
BE IT REMEMBERED, that on this 31st day of August, 1995, before me, the
subscriber, personally appeared Herbert Kurinsky, the President of First Montauk
Securities Corporation, who is the Assignee mentioned in the within Agreement,
and thereupon he acknowledged that he signed, sealed and delivered the same as
his act and deed, for the uses and purposes therein expressed.
/s/ Patricia M. Kenny
----------------------------
PATRICIA M. KENNY
NOTARY PUBLIC OF NEW JERSEY
MY COMMISSION EXPIRES JAN. 18, 1996
<PAGE> 5
O F F I C E L E A S E A G R E E M E N T
BY AND BETWEEN:
RIVER OFFICE EQUITIES,
a New Jersey Partnership,
as "Landlord"
- and -
PILOT LABORATORIES, INC.,
a New Jersey Corporation,
as "Tenant"
PREMISES: Parkway 109 Office Center
Newman Springs Road
Borough of Middletown
Monmouth County, New Jersey
DATED: AUGUST 31, 1987
#11684-117
(HHB Leases #48)
PREPARED BY: H. HARDING BROWN, ESQ.
<PAGE> 6
TABLE OF CONTENTS
1. LEASED PREMISES .................................... 2
2. TERM OF LEASE ...................................... 5
3. RENT ............................................... 6
4. ADDITIONAL RENT .................................... 7
5. USE ................................................ 16
6. REPAIRS AND MAINTENANCE ............................ 16
7. LANDLORD'S SERVICES ................................ 17
8. INABILITY TO PERFORM ............................... 19
9. INSURANCE .......................................... 20
10. LANDLORD'S ACCESS FOR FUTURE CONSTRUCTION .......... 21
11. FIXTURES ........................................... 21
12. CHANGES IN OR ABOUT PREMISES ....................... 22
13. ASSIGNMENT AND SUBLETTING .......................... 22
14. FIRE ............................................... 24
15. COMPLIANCE WITH LOCAL RULES AND REGULATIONS ........ 25
16. TERMINATION ........................................ 27
17. INSPECTION BY LANDLORD ............................. 29
18. NOTICES ............................................ 29
19. NON-WAIVER ......................................... 29
20. ALTERATIONS OR IMPROVEMENTS BY TENANT .............. 30
21. NON-LIABILITY OF LANDLORD .......................... 31
22. CONDEMNATION ....................................... 32
23. INCREASE OF INSURANCE RATES ........................ 32
24. TENANT'S FIRE INSURANCE ............................ 33
25. INDEMNITY .......................................... 33
26. FORCE MAJEURE ...................................... 34
27. MORTGAGE PRIORITY .................................. 34
28. SURRENDER OF PREMISES .............................. 35
29. SIGNS .............................................. 36
30. ESTOPPEL CERTIFICATE ............................... 36
<PAGE> 7
TABLE OF CONTENTS (Cont'd)
31. TRANSFER BY LANDLORD ............................... 37
32. LIMIT OF LANDLORD'S LIABILITY ...................... 37
33. LANDLORD'S RIGHT OF ENTRY AND ALTERATIONS .......... 38
34. LANDLORD'S REMEDIES AND EXPENSES ................... 38
35. LANDLORD'S RESERVED RIGHTS ......................... 39
36. RULES AND REGULATIONS .............................. 39
37. WAIVERS ............................................ 40
38. WAIVER OF TRIAL BY JURY ............................ 40
39. SEVERABILITY ....................................... 41
40. QUIET ENJOYMENT .................................... 41
41. LEASE CONSTRUCTION ................................. 41
42. BINDING EFFECT ..................................... 41
43. DEFINITIONS ........................................ 42
44. PARAGRAPH HEADING .................................. 42
45. AMENDMENT AND MODIFICATIONS ........................ 42
46. EXECUTION AND DELIVERY ............................. 42
47. SCHEDULES .......................................... 42
48. BROKERAGE .......................................... 43
49. SECURITY ........................................... 43
50. RELOCATION ......................................... 44
51. MORTGAGEE NOTICE CLAUSE ............................ 44
52. OPTION TO RENEW .................................... 45
<PAGE> 8
REFERENCE DATA
Any reference in this Lease to the following subjects shall incorporate
therein the data stated for the subjects in this Reference Data:
LANDLORD: RIVER OFFICE EQUITIES
a New Jersey Partnership
LANDLORD'S ADDRESS: Raritan Plaza II
Edison, New Jersey 08837
TENANT: PILOT LABORATORIES, INC.
a New Jersey Corporation
TENANT'S ADDRESS: Prior to Commencement
267 Homestead Avenue
Avenel, New Jersey 07001
Upon Commencement
Parkway 109 Office Center
Newman Springs Road
Middletown, New Jersey 07748
LEASED PREMISES: Portion of Third Floor
Parkway 109 Office Center
Newman Springs Road
Middletown, New Jersey 07748
GROSS RENTABLE AREA
OF LEASED PREMISES: 1,961 square feet
NET RENTABLE AREA
OF LEASED PREMISES: 1,683 square feet
LEASE TERM: Five (5) years
SCHEDULED COMMENCEMENT DATE: November 1, 1987
ANNUAL BASIC RENT: See Article 3 - Rent
TENANT'S PERCENTAGE: 3.2 percent
PERMITTED USE: General offices
RIVER OFFICE EQUITIES,
a New Jersey Partnership
BY: /s/Mark Dubrow (L.S.)
-------------------------------------------
MARK DUBROW, General Partner
PILOT LABORATORIES, INC.,
a New Jersey Corporation
BY: /s/Paul Morrisroe (L.S.)
-------------------------------------------
PAUL MORRISROE
<PAGE> 9
THIS LEASE AGREEMENT, made this 31st day of August, 1987, between
RIVER OFFICE EQUITIES, a New Jersey Partnership, having an address at Raritan
Plaza II, Edison, New Jersey 08837, hereinafter called the "Landlord"; and
PILOT LABORATORIES, INC., a New Jersey Corporation, having an office at 267
Homestead Avenue, Avenel, New Jersey 07722, hereinafter called the "Tenant".
W I T N E S S E T H :
WHEREAS, the Landlord is the owner of certain lands and premises
located on Newman Springs Road, in the Township of Middletown, County of
Monmouth and State of New Jersey, which said lands and premises are more
particularly described by metes and bounds on Schedule "A" annexed hereto and
made a part hereof, (hereinafter referred to as the "Property"); and
WHEREAS, the Landlord has erected on the Property an office building,
containing approximately 62,233 square feet (hereinafter called the
"Building"); and
WHEREAS, the Tenant shall rent and occupy a portion of the third floor
of the Building, which floor space contains 1,683 square feet, outside outside
glass dimensions to center line of common wall (said 1,683 square feet
hereinafter called the "leased premises"), together with the right of Tenant to
use common area spaces of the Building, all in accordance with terms and
conditions hereinafter mentioned and the considerations herein expressed,
NOW, THEREFORE, in consideration of the covenants and conditions
hereinafter set forth and for other good and valuable considerations, the
Landlord does demise, lease and let unto the Tenant, and the Tenant does rent
and take from the Landlord the leased premises, and the Landlord and Tenant
mutually covenant and agree as follows:
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1. LEASED PREMISES
1.1 The leased premises consists of that portion of the third
floor of the Building containing l,683 square feet of office space, based on
outside outside of glass dimensions to center line of common wall (hereinafter
called "Net Rentable Area"), together with common area space hereinafter
referred to in Section 1.2. There shall be attributed to core and common area
space 16-1/2% of the 1,683 square feet of lease space equivalent to 278 square
feet, which totals 1,961 square feet of "Gross Rentable Area" upon which there
has been based the rental per square foot per annum and other charges as
hereinafter in this lease provided. The leased premises are outlined on the plan
attached hereto and made a part hereof, marked Schedule "B".
1.2 The use of the leased premises includes the right, in common
with other tenants of the Building, to use the common entranceways, foyers,
lavatories, stairways, elevators, plaza areas and parking areas.
1.3 The Landlord covenants and agrees with Tenant that it will
provide six (6) parking places for Tenant's use in common with other tenants of
the building for vehicles to be used by Tenant's employees, agents, servants or
invitees.
1.4 Upon execution of this lease, the Landlord shall forthwith
proceed with the preparation of the leased premises (hereinafter referred to as
"Landlord's Work") in substantial conformity with Schedule "C" (hereinafter
referred to as "Landlord's Workletter"). Tenant shall furnish to Landlord
Tenant's Plan on or before September 10, 1987. Tenant's Plan shall include a
kitchen which shall be subject to Landlord's approval but which shall be
installed by Landlord at Landlord's sole cost and expense. Tenant's plans
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shall be signed by Landlord and Tenant for identification as schedule "D",
annexed hereto and made a part hereof (hereinafter referred to as the "Tenant's
Plan"). In addition, Landlord shall prosecute construction required by Tenant's
Plan, (hereinafter referred to as "Tenant's Work"), which Tenant's Work shall be
performed in accordance with Schedule "C-1", annexed hereto and made a part
hereof (hereinafter referred to as "Tenant's Work Letter"). Prior to Landlord's
obligation to commence Tenant's Work Landlord shall furnish to Tenant in writing
the cost of Tenant's Work, which cost and the scope thereof shall be approved
by Tenant in writing. It is understood and agreed that Landlord shall construct
all improvements required by Tenant's Plan at Landlord's sole cost and expense,
based upon the grade of finishing set forth in Schedule "C" and notwithstanding
the unit amounts set forth in said schedule.* The costs attributable to Tenant's
Work shall be paid for by Tenant in accordance with the terms and conditions of
Schedule "C-1". For the purpose of this lease, Schedules "C" and "C-1" are
incorporated by reference here in as if fully set forth as terms and conditions
of the within lease.
1.5 The Tenant shall have the right to add to or delete from
Schedules "C", "C-1" and "D" in accordance with the following procedure: Any
request by Tenant to Landlord to add or delete work to be performed as provided
in Schedules "C", "C-1 and "D" shall only be made by a written request signed by
an authorized representative of the Tenant, hereinafter referred to as "Tenant's
Representative". Promptly upon receipt of said request, Landlord shall specify
to Tenant's Representative the additional cost of said work or the credit for
the deletion based on the costs provided in Schedules "C" and "C-1", or such
other costs as may otherwise
* Tenant work as identified in "Schedule D" will be performed at landlords sole
cost and expense. PEM 8-31-87
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be mutually approved by Landlord and Tenant in writing. Landlord shall advise
Tenant if the change will cause any delay in completion. If acceptable, Tenant's
Representative shall authorize in writing the additional work or deletion,
together with the cost thereof. The Landlord shall have no duty to commence with
additional work or the deletion of any work until such written authorization is
received. For the purposes of this lease, the final establishment of the scope
of work to be performed pursuant to Landlord's Workletter and in accordance with
Tenant's Plan (subject to the additions and deductions for cost pursuant to the
procedures hereinabove referred to) shall be hereinafter referred to as "Tenant
Fit-Up Work".
1.6 The Landlord and Tenant agree that the leased premises shall
be deemed "Ready for Occupancy" when:
(a) Landlord shall have given Tenant at least ten (10)
days' prior written notice of the date on which Landlord shall deliver
actual possession of the leased premises to the Tenant;
(b) Landlord shall have furnished to Tenant in writing a
certification by its architect that all work encompassed in Schedules "C",
"C-1" and "D" required for Tenant Fit-Up Work, together with any approved
additions or deletions therefrom, have been completed substantially in
accordance with Schedules "C", "C-1" and "D" (except for minor punch list
items, the completion of which does not materially affect or interfere with
the Tenant's use and enjoyment of the leased premises, but which will
thereafter be completed by the Landlord with reasonable diligence); and,
within three (3) working days thereafter, Tenant shall have inspected the
leased premises and accepted the same, or in lieu thereof advised Landlord
in writing wherein the Tenant Fit-Up Work to be completed is deficient;
(c) The Landlord has obtained and delivered to Tenant a
Certificate of Occupancy; and
(d) Landlord shall have delivered actual and exclusive
possession of the leased premises to Tenant free and clear of rubbish and
debris.
Tenant's acceptance of the leased premises shall not relieve Landlord of the
obligation to repair any defects, or act as a waiver of any of Tenant's rights
hereunder.
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1.7 The Landlord shall have the right to substitute for the
materials and equipment required to be constructed pursuant to Schedules "C" and
"C-1", materials and equipment of equal quality and standard provided said
substitutions conform with applicable building codes of governmental boards or
bureaus having jurisdiction thereof.
1.8 Anything in this lease to the contrary notwithstanding, it is
expressly understood and agreed that any and all improvements constructed by
Landlord for Tenant in accordance with Schedules "C" and "C-1" shall, upon
completion and installation, be deemed the property of the Landlord, including
any fixtures or equipment for which Landlord has provided allowances, if any, to
Tenant in accordance with Schedules "C" and "C-1". Tenant shall have no right to
remove blinds installed by Landlord.
1.9 Anything in this lease to the contrary notwithstanding, upon
establishment of excess cost required to produce Tenant Fit-Up Work, as the same
shall have been established pursuant to Article 1.4, the Tenant shall pay the
same to Landlord, upon completion, in the manner hereinafter provided in
Schedules "C" and "C-1".
2. TERM OF LEASE
2.1 The Landlord leases unto the Tenant, and the Tenant hires the
leased premises for the term of five (5) years to commence on November l, 1987,
or the first day of a calendar month on or following the date when the premises
are Ready for Occupancy (the "Commencement Date").
2.2 During any partial monthly occupancy prior to the
Commencement Date, Tenant shall be responsible to pay pro rata Annual Basic Rent
together with pro rata charges or Additional Rent as in this lease provided.
During said period of partial month occupancy the Tenant shall comply with all
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other terms and conditions of the lease upon the part of the Tenant to be
performed.
3. RENT
3.1 During the first two (2) months of the lease term, Tenant
shall have no obligation for the payment of any Annual Basic Rent or Additional
Rent, except for Tenant's Electric as hereinafter provided in Article 7. During
the third (3rd) and fourth (4th) months of the lease term, Tenant shall pay
monthly rent equal to SEVEN HUNDRED THIRTY-FIVE AND 38/100 ($735.38) DOLLARS per
month, plus Tenant electric. Commencing with the fifth (5th) month of the lease
term, Tenant shall pay Annual Basic Rent for the balance of the entire term in
the annual sum of THIRTY FOUR THOUSAND THREE HUNDRED SEVENTEEN AND 48/100
($34,317.48) DOLLARS, payable in equal monthly installments in advance in the
sum of TWO THOUSAND EIGHT HUNDRED FIFTY-NINE AND 79/100 ($2,859.79) DOLLARS,
promptly on the first day of each and every month during the term of this lease,
without demand and without offset or deduction, together with such Additional
Rent or charges required to be paid by the Tenant as hereinafter provided.
3.2 The Additional Rent to be paid by Tenant hereunder shall be
that amount and charges with respect thereto as hereinafter set forth in
Articles 4 and 7.
3.3 Any installment of rent accruing hereunder, and any other sum
payable hereunder by Tenant to Landlord which is not paid prior to the tenth
(10th) day of any lease month, shall bear interest at the per annum rate of
three (3%) percent over the prime rate charged by The Chase Manhattan Bank,
N.A., to its most favored borrowers (hereinafter in this lease referred to as
the "Premium Rate"), computed from the time when the same shall respectively
become due and payable
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until the same shall be paid, which shall reflect daily rate changes as
applicable.
4. ADDITIONAL RENT
Additional Rent shall be paid by the Tenant in accordance with
the provisions of this Article 4.
4.1 Additional Rent, taxes.
(a) In the event that the amount of real estate taxes,
assessments, sewer rents, rates and charges, state and local taxes, transit
taxes or any other governmental charge, general, special, ordinary or
extraordinary, hereinafter collectively called taxes (but not including income
or franchise taxes or any other taxes imposed upon or measured by the Landlord's
income or profits, except if in substitution for real estate taxes as
hereinafter provided) which may now or hereafter be levied or assessed against
the lands upon which the Building stands and upon the Building (hereinafter
collectively called the "Real Property") attributable to any tax year shall be
greater than the amount of taxes on the Real Property attributable to the Base
Year, then the Tenant shall pay to the Landlord, as Additional Rent, Tenant's
Percentage thereof. "Base Year" for purposes of this Article 4.1 shall mean the
tax rate in effect as of 1987 and the assessment shall be the calendar year in
which the building shall be fully assessed as a completed building. The Landlord
shall take the benefit of the provisions of any statute or ordinance permitting
any assessment to be paid in installments over a period of time, and Tenant
shall be obliged to pay only Tenant's Percentage of the installments of any such
assessment payable during the term of this lease or any renewal hereof. Tenant's
Percentage of required payment of Taxes as herein provided shall be included as
part of Operating Expenses as hereinafter provided in Article 4.2, and
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Tenant shall pay said obligation as applicable in the manner and in accordance
with the terms and conditions provided in Article 4.2. The amount of taxes for
the Base Year, against which Tenant's liability for Additional Rent in
subsequent years is determined, shall be the amount thereof finally determined
to be legally payable by legal proceedings or otherwise. In the event the amount
of taxes for the Base Year has not been finally determined by legal proceedings
or otherwise at the time of payment of taxes for any subsequent year, the actual
amount of taxes paid by Landlord for the Base Year shall be used in the
statement provided by Landlord as basis for Tenant's liability hereunder with
respect to such subsequent year. Upon final determination of the amount of taxes
for the Base Year by legal proceedings or otherwise, Landlord shall deliver to
Tenant a statement setting forth the amount of taxes for the Base Year as
finally determined and showing in reasonable detail the computation of any
adjustment due to Landlord by reason thereof. Any payment due to Landlord by
reason of such adjustment shall be paid as hereinbefore provided.
(b) If Landlord shall receive any tax refund or rebate in
respect of any tax year following the Base Year, Landlord may deduct from such
tax refund any reasonable expenses incurred in obtaining such tax refund, and
out of the remaining balance of such tax refund, Landlord shall pay to Tenant
Tenant's Percentage of the taxes being refunded.
(c) If the tax year for real estate taxes shall be changed,
then an appropriate adjustment shall be made in the computation of the
additional tax due to Landlord or any amount due to Tenant. The computation
shall be made in accordance with generally accepted accounting principles
applied on a consistent basis.
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(d) If the last year of the term of this lease ends on any day
other than the last day of a tax year, any payment due to Landlord or to Tenant
by reason of any increase or decrease in taxes shall be pro-rated and Landlord
and Tenant shall make any required adjustment within thirty (30) days after the
final taxes have been established for the operational year. This covenant shall
survive the expiration or termination of this lease.
(e) If at any time during the term of this lease the method or
scope of taxation prevailing at the commencement of the lease term shall be
altered, modified or enlarged so as to cause the method of taxation to be
changed, in whole or in part, so that in substitution for the real estate taxes
now assessed there may be, in whole or in part, a capital levy or other
imposition based on the value of the premises, or the rents received therefrom,
or some other form of assessment based in whole or in part on some other
valuation of the Landlord's real property comprising the demised premises, as if
such real property were the only property owned by the Landlord, then and in
such event, such substituted tax or imposition shall be payable and discharged
pro rata, as applicable, in accordance with the obligations set forth in this
Article 4, computed on the basis of such law promulgated which shall authorize
such change in the scope of taxation, and as required by the terms and
conditions of the within lease.
4.2 Additional Rent, Operating Expenses.
(a) In the event that the amount of Operating Expenses (as
hereinafter defined) for the Base Year (for the purposes of this Article 4.2
herein defined to be the first year of Tenant's occupancy) shall be less than
the amount of Operating Expenses for any succeeding calendar year,
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then Tenant shall pay to Landlord Tenant's Percentage of the increase in
Operating Expenses for said succeeding calendar year, such cost to be projected
and interpolated as it the Building were 95% rented during the Base year
hereinabove defined.
(b) For the purposes of this Article 4.2, "operating Expenses"
shall mean the following expenses paid or incurred by Landlord in connection
with the Building and the Property:
(A) wages, salaries, fees and other compensation and
payments and payroll taxes and contributions to any social security,
unemployment insurance, welfare, pension or similar fund and payments for other
fringe benefits required by law or by union agreement (or, if the employees or
any of them are non-union, then payments for benefits comparable to those
generally required by union agreement in first-class office buildings in the
Monmouth County area, which are unionized) made to or on behalf of all employees
of Landlord performing services rendered in connection with the operation and
maintenance of the Building and the Property, including, without limitation,
elevator operators, elevator starters, window cleaners, porters, janitors,
maids, miscellaneous handymen, watchmen, persons engaged in patrolling and
protecting the Building and the Property, carpenters, engineers, firemen,
mechanics, electricians, plumbers, persons engaged in the operation and
maintenance of the Building and Property, Building superintendent and
assistants, Building manager, and clerical and administrative personnel.
(B) The uniforms of all employees, and the cleaning,
pressing and repair thereof.
(C) Cleaning costs for the Building and the Property,
including the windows and sidewalks, all snow and rubbish removal (including
separate contracts therefor) and the costs of all labor, supplies, equipment and
materials incidental thereto.
(D) Premiums and other charges incurred by Landlord
with respect to all insurance relating to the Building and the property and the
operation and maintenance thereof, including, without limitation: fire and
extended coverage insurance, including windstorm, flood, hail, explosion, riot,
rioting attending a strike, civil commotion, aircraft, vehicle and smoke
insurance; public liability; elevator; workmen's compensation; boiler and
machinery; rent; use and occupancy; health, accident and group life insurance of
all employees; and casualty rent insurance.
(E) The cost of electricity, heat, water and sewer and
any and all other utility services
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used in connection with the operation and maintenance of the Building and the
property (excluding electricity and other utility services, if any, which are
paid directly by tenants). For the purpose of this Article 4.2(E), "cost of
electricity" shall include the cost of electricity for common areas attributable
to Building operation [i.e. mechanical equipment operation, common area
electricity usage, exterior lighting and, in general, all other electric utility
usage mutually enjoyed by all tenants (based upon the electricity rate to be
adjusted for summer and winter as applicable, and inclusive of demand charge,
energy charge and energy adjustment charge in effect as of the Commencement
Date)] reduced by amounts due from tenants for special electrical usage in
conjunction with elapsed time recorded usage for overtime operation of the
Building mechanical systems actually paid to Landlord pursuant to Article 7
hereunder, as said paragraph pertains to electrical usage only.
(F) Costs incurred for operation, service, maintenance,
inspection, repair and alteration of the Building, the Property, and the
heating, air-conditioning, ventilating, plumbing, electrical and elevator
systems of the Building (including any separate contract therefor) and the costs
of labor, materials, supplies and equipment used in connection with all of the
aforesaid items.
(G) Sales and excise taxes and the like upon any of the
expenses enumerated herein.
(H) Management fees of the managing agent for the Building, if
any. If there shall be no managing agent, or if the managing agent shall be a
company affiliated with Landlord, the management fees that would customarily be
charged for the management of the Building by an independent, first-class agent
in the Monmouth County area.
(I) The cost of replacements for tools and equipment used in
the operation and maintenance of the Building and the Property.
(J) The cost of repainting or otherwise redecorating any part
of the Building other than premises demised to tenants in the Building.
(K) Decorations for the lobby and other public portions of the
Building below the second floor.
(L) The cost of telephone service, postage, office supplies,
maintenance and repair of office equipment and similar costs related to
operation of the Building Superintendent's office.
(M) The cost of licenses, permits and similar fees and charges
related to operation, repair and maintenance of the Building.
(N) Auditing fees necessarily incurred in connection with the
maintenance and operation
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of the Building, and accounting fees incurred in connection with the preparation
and certification of a real estate tax escalation and the Operating Expenses
escalation statements pursuant to this Article 4.
(O) All costs incurred by Landlord to retrofit any portion or
all of the Building to comply with a change in existing legislation, whether
Federal, State or Municipal ; repairs, replacements and improvements which are
appropriate for the continued operation of the Building as a first-class
building.
(P) All expenses associated with the installation of any energy
or cost saving devices.
(Q) The pro rata share of all costs and expenses relating to
the Property and its maintenance, operation and repair of any common facilities
including, but not limited to, snow removal, landscaping and similar services.
(R) Any and all other expenditures of Landlord in connection
with the operation, repair or maintenance of the Property or the Building which
are properly expended in accordance with generally accepted accounting
principals consistently applied with respect to the operation, repair and
maintenance of first-class office buildings in the Monmouth County area.
(S) Taxes in excess of Base Year taxes paid in accordance with
the terms and conditions of Article 4.1 hereinbefore provided.
If Landlord shall purchase any item of capital equipment or make any capital
expenditure as described in subsections 0 and P above, then the costs for the
same shall be included in Operating Expenses in the year of installation and in
subsequent years amortized on a straight-line basis, over an appropriate period,
but not more than ten (10) years, with an interest factor equal to the prime
interest rate charged by The Chase Manhattan Bank, N.A., to its most favored
borrowers. If Landlord shall lease such item of capital equipment, then the
rentals or other operating costs paid pursuant to such leasing shall be included
in Operating Expenses for each year in which they are incurred. Notwithstanding
the foregoing, "Operating Expenses" shall not include expenditures for any of
the following:
(AA) The cost of any capital addition made to the
Building (other than that specified
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as part of Operating Expenses as provided above), including the cost to prepare
space for occupancy by a new tenant.
(BB) Repairs or other work occasioned by fire,
windstorm or other insured casualty or hazard, to the extent that
Landlord shall receive proceeds of such insurance.
(CC) Leasing commissions, advertising expenses and
other costs incurred in leasing or procuring new tenants.
(DD) Repairs or rebuilding necessitated by
condemnation.
(EE) Depreciation and amortization of the Building,
other than
(i) capital expenditures which under generally
applied real estate practice are expended or regarded as
deferred expenses;
(ii) capital expenditures appropriate to a
first-class office building or required by law as described in
subsection 0 above; and
(iii) capital expenditures designed to result
in savings or reductions in Operating Expenses as described in
subsection p above.
(FF) The salaries and benefits of executive officers of
Landlord, if any.
(GG) Any increase in the mortgage payments made by the
Landlord.
Operating Expenses shall be "net" and, for that purpose, shall be reduced by the
amounts of any reimbursement or credit received or receivable by Landlord with
respect to an item of cost that is included in Operating Expenses (other than
reimbursements to Landlord by tenants of the Building pursuant to Operating
Expenses escalation provisions). If Landlord shall eliminate the payment of any
wages or other labor costs or otherwise reduce operating Expenses as a result of
the installation of new devices or equipment, or by any other means, then in
computing the Operating Expenses the corresponding items shall be deducted from
the Operating Expenses allowance for the operating year.
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(c) As soon as reasonably feasible after the expiration of the
first twelve (12) month lease year (Base Year), Landlord will furnish to Tenant
a statement by an officer of Landlord showing in reasonable detail the Operating
Expenses for the Base Year. As soon as reasonably feasible after the expiration
of each twelve (12) month lease year after the Base Year, Landlord will furnish
to Tenant a statement by an officer of the Landlord showing in reasonable detail
the Operating Expenses for said twelve (12) month lease year, as compared to the
statement of the Operating Expenses for the preceding year. At the time of
rendering such statement, any adjustment due to the Landlord or Tenant under the
provisions of Article 4.2, shall be paid or credited as applicable as
hereinafter provided as follows:
(i) For the first twelve (12) month lease year (Base
Year), and upon issuance of the Base Year statement showing the
electricity for common area and fuel costs for entire Building computed
based upon the applicable rates, including demand charge, energy charge
and energy adjustment charges in effect at the Commencement Date, any
amount due to Landlord because of rate increases which occur during the
Base Year, and as shown on such statement of expenses, shall be paid by
Tenant within thirty (30) days after Landlord shall have submitted the
statement.
(ii) Commencing with the second year of the lease term,
Tenant agrees to pay, in addition to the Annual Basic Rent, a sum equal
to two (2%) per cent of such Annual Basic Rent in twelve (12) equal
monthly installments to be paid together with the monthly payments of
Annual Basic Rent required hereunder. At the end of the second lease
year, Landlord and Tenant shall adjust such additional payment in the
manner hereinafter set forth in subsection (iii) ;
(iii) Commencing with the third year of the lease term,
in the event the Tenant shall be required to pay Additional Rent for
Operating Expenses as in this Article 4.2 required, the Tenant agrees,
in addition to the Base Rent to be paid pursuant to Article 3, that it
will pay monthly 1/12th of the sum required to be paid as Additional
Rent attributable to Tenant's Percentage of Operating Expenses for the
prior lease year. Such monthly payment shall be made together with
Tenant's regular monthly base rental payment. At the end of each lease
year, there shall be an adjustment between the Landlord and Tenant with
respect to the aggregate of the monthly Additional Rent paid for
Operating Expenses
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so as to either require payment by Tenant to Landlord of any amount
required in excess of the twelve (12) monthly payments, based on the
prior year's Operating Expenses as hereinabove provided; or, in lieu
thereof, if applicable, the Tenant shall be credited with any
overpayment made in excess of required Operating Expenses for that
calendar year. Landlord shall furnish Tenant in any event with the
computation of detailed Operating Expenses to the applicable lease year
in the manner hereinabove provided, and any required payment to Landlord
or credit to Tenant, as applicable, shall be paid or made within thirty
(30) days after Landlord's demand and furnishing to Tenant the required
computation and statement of Tenant's Percentage of Operating Expenses
as above provided.
(d) Tenant or its representatives shall have the right to
request to examine Landlord's books and records with respect to the items in the
foregoing statement of operating Expenses during normal business hours at any
time within ninety (90) days following the delivery by Landlord to Tenant of
such statement. Tenant shall have an additional sixty (60) days to file any
written exception to any item of expense, however, nothing herein shall be
deemed to afford Tenant any right to withhold any payment due from Tenant to
Landlord; and, in the event of any such withholding of payment of Annual Basic
Rent, Tenant shall pay the Premium Rate, computed daily from the date of default
to the date of payment. Each expense for which Landlord shall bill Tenant as set
forth hereinabove shall be necessary and reasonable for the operation of the
Building and Property and shall be delineated by Landlord in detail to Tenant.
(e) If the last year of the term of this lease ends on any day
other than the last day of a calendar year, any payment due to Landlord or to
Tenant by reason of any increase or decrease in Operating Expenses shall be
prorated and Tenant shall pay any amount due to Landlord within thirty (30) days
after being billed therefor. This covenant shall survive the expiration or
termination of this lease.
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4.3 For the purpose of this lease, Tenant's percentage shall be
3.2%.
5. USE
5.1 The Tenant covenants and agrees to use and occupy the
leased premises for office purposes only, and for no other purpose.
5.2 The Tenant covenants and agrees that it will not use the
leased premises for any use which creates an extra hazard of fire or other
danger or casualty, or which will increase the rate which Landlord or other
tenants must pay to secure fire or liability insurance, or which will render the
building or its improvements uninsurable.
6. REPAIRS AND MAINTENANCE
6.1 During the term of this lease, the Landlord, at its
expense, shall keep in good order, safe condition and repair, the structural
parts of the building and common areas of which the leased premises are a part,
including the walls, roof, floor, foundation load bearing members, trusses and
joists, as well as all plumbing, utilities and facilities serving the leased
premises, except for repairs or maintenance occasioned by the negligence or
deliberate act of Tenant, or its agents, servants, employees and invitees which
shall be then repaired at the cost and expense of the Tenant.
6.2 The Landlord shall take good care of and maintain and
repair the lawns, shrubbery, driveway, sidewalks, entranceways, foyers, curbs
and parking area on the Property, and the Landlord shall provide snow removal.
6.3 Tenant agrees to keep the Leased Premises in as good repair
as they are at the beginning of the term of this lease, reasonable use and wear
thereof and damage by fire or other casualty not caused by Tenant excepted.
Tenant
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further agrees not to damage, overload, deface or commit waste of the premises.
Tenant shall be responsible for all damage of any kind or character to the
Leased premises, including the windows, floors, walls and ceilings, caused by
Tenant or by anyone using or occupying the premises by, through or under the
Tenant. Landlord shall repair the same as deemed necessary by Tenant or
Landlord, and Tenant agrees to pay the costs incurred therefor to Landlord upon
demand. Anything hereinabove contained to the contrary notwithstanding, it is
expressly understood and agreed that the Tenant shall, at its sole cost and
expense, be responsible for the repair, maintenance and replacement of any items
installed by Landlord for Tenant's use as leasehold improvements over and above
the improvements furnished by Landlord, in accordance with Schedule "C".
Landlord shall not be liable by reason of any injury to or interference with
Tenant's business arising from the making of any repairs, alterations, additions
or improvements in or to the leased premises or the Building or to any
appurtenances or equipment therein. There shall be no abatement of rent because
of such repairs, alterations, additions or improvements or because of any delay
by Landlord in making the same. Tenant shall give to Landlord prompt written
notice of any accidents to, or defects in plumbing, electrical, heating and
air-conditioning systems and apparatus located in the leased premises.
7. LANDLORD'S SERVICES
7.1 Landlord shall furnish the services for which the Building
is equipped, to the extent that the existing facilities for such services
permit, except that heat and air-conditioning, as required, shall be furnished
only between the hours of 6:00 A.M. and 6:00 P.M. Monday through Friday,
(Saturdays, Sundays and national holidays excluded).
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Landlord agrees at Tenant's request, and at a cost to be mutually agreed upon,
prior to the commencement date of this lease and as to be set forth in approved
plans and specifications, to install a by-pass switch for monitoring hours of
usage by Tenant solely for air-conditioning and heating during hours other than
as set forth hereinabove, and it is further agreed that Tenant shall pay to
Landlord the cost of said overtime usage as contemplated herein upon invoice
from Landlord to Tenant at the rate of $40.00 per hour during the first year of
the term hereof and thereafter, said hourly charge shall be increased annually
by the percentage increase in electric and gas utility rates for the Building
operation, if any.
7.2 Landlord shall furnish to Tenant a separate and independent
electric meter to measure Tenant's use of electric energy in the leased
premises, the cost of which shall be paid for by Tenant at its sole cost and
expense, which cost and expense shall not exceed the sum of FIVE HUNDRED AND
00/100 ($500.00) DOLLARS. Effective as of the Occupancy Date, electric energy
for Tenant's requirements shall be furnished for lighting, electric typewriters,
adding machines, copying machines, and any other similar electricity
requirements, as are customarily used in a general business office, not
including high energy computers. Any requirements for high energy computers
shall be only with the express written consent of Landlord who reserves the
right to require Tenant to pay any additional costs attributable to such high
energy use including any additional requirements for air-conditioning
attributable to such use.
7.3 Tenant agrees not to connect any additional electrical
equipment of any type to the Building electric distribution system over and
above that equipment shown on
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Tenant's Plan without the Landlord's prior written consent, however, Landlord
shall not unreasonably withhold such consent. Landlord shall not be liable in
any way to Tenant for any failure or defect in the supply or character of
electric energy furnished on the leased premises by reason of any requirement,
act or omission of the public utility serving the Building with electricity.
Tenant's use of electric energy in the leased premises shall not at any time
exceed the capacity of any of the electric conductors and equipment in or
otherwise serving the leased premises.
7.4 Janitorial services are as referred to on Schedule "E"
annexed hereto and made a part hereof.
8. INABILITY TO PERFORM
In case Landlord is prevented or delayed in furnishing any
service as set forth herein or otherwise by reason of any cause beyond
Landlord's reasonable control, Landlord shall not be liable to Tenant therefor,
nor shall Tenant be entitled to any abatement or reduction in Annual Basic Rent
by reason thereof, nor shall the same give rise to a claim in Tenant's favor
that such absence of Building services constitutes actual or constructive, total
or partial eviction or renders the leased premises untenantable. Landlord
reserves the right to stop any service or utility system, when necessary by
reason of accident or emergency, or until necessary repairs have been completed,
provided, however, that in each instance of stoppage, Landlord shall exercise
reasonable diligence to eliminate the cause thereof. Except in case of emergency
repairs, Landlord will give Tenant reasonable advance notice of any contemplated
stoppage and will use reasonable efforts to avoid unnecessary inconvenience to
Tenant by reason thereof. Landlord agrees, however, that
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it will use all reasonable efforts to obtain restoration of services based on
the then existing circumstances.
9. INSURANCE
Tenant shall keep in force at its own expense comprehensive
general liability insurance (including a contractual liability insurance
endorsement) in companies acceptable to Landlord sufficient to cover such
indemnification and naming as insured Landlord, owner of the Property,
Landlord's managing agent, if any, and Tenant against claims for "personal
injury", including bodily injury and death, in amounts not less than THREE
MILLION AND 00/100 ($3,000,000.00) DOLLARS, and for property damage in amounts
not less than ONE MILLION AND 00/100 ($1,000,000.00) DOLLARS, (or such higher
limits as may be determined by Landlord), and Tenant will further deposit the
policy or policies of such insurance, or certificates thereof, with Landlord.
Said policy or policies of insurance or certificates thereof shall have attached
thereto an endorsement that such policy shall not be cancelled without at least
ten (10) days' prior written notice to Landlord and Landlord's managing agent,
if any, and that no act or omission of Tenant shall invalidate the interest of
Landlord under said insurance. Landlord and Tenant hereby release the other from
any and all liability or responsibility to the other or anyone claiming through
or under them by way of subrogation or otherwise for any loss or damage to
property covered by any insurance then in force, even if such fire or other
casualty shall have been caused by the fault or negligence of the other party,
or anyone for whom such party may be responsible, provided, however, that this
release shall be applicable and in force and effect only to the extent of and
with respect to any loss or damage occurring during such time as the policy or
policies of insurance covering said loss
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shall contain a clause or endorsement to the effect that this release shall not
adversely affect or impair said insurance or prejudice the right of the insured
to recover thereunder.
10. LANDLORD'S ACCESS FOR FUTURE CONSTRUCTION
The Landlord reserves the right to enter the Building, Property
and leased premises in connection with the construction and erection of any
additions or improvements to the Building and property of which the leased
premises are a part, provided that in the use of such right the Landlord shall
not unreasonably interfere with the use of the parking areas and driveways or
the Tenant's business.
11. FIXTURES
11.1 The Tenant may install and remove Tenant's property,
equipment and fixtures in the leased premises during the term of the lease. If
the Tenant moves out or is dispossessed, and fails to remove any such property,
equipment and fixtures after the last day for which all Annual Basic Rent is
paid, then the said property, equipment and fixtures shall be deemed at the
option of the Landlord to be abandoned, and Tenant shall reimburse to Landlord
the reasonable cost of removal thereof from the leased premises, including any
cost of disposal thereof.
11.2 The Tenant shall repair, at its cost and expense, any
damage to the leased premises resulting from the removal of its property,
equipment and fixtures. However, if Tenant fails to do so, it shall be
responsible to reimburse the Landlord for the reasonable cost of compliance with
the terms and conditions of the within covenant.
11.3 All installation and removal of Tenant's fixtures,
property and equipment shall be done in accordance with all applicable laws and
ordinances and the rules and
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regulations of all governmental boards and bodies having jurisdiction.
12. CHANGES IN OR ABOUT PREMISES
This lease shall not be affected or impaired by any change in
any sidewalk, alleys or streets adjacent to or around the Building, or in
parking regulations of the Township of Middletown or any County or State Agency
or Office.
13. ASSIGNMENT AND SUBLETTING
Tenant shall not assign, mortgage or otherwise transfer or
encumber this lease, nor sublet all or any part of the leased premises or permit
the same to be occupied or used by anyone other than Tenant or its employees
without Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed. It will not be unreasonable for Landlord to
withhold its consent if the reputation, financial responsibility, or business of
a proposed assignee or subtenant is unsatisfactory to Landlord, or if Landlord
deems such business to not be consistent with that of other tenants in the
Building, or if the intended use by the proposed assignee or subtenant conflicts
with any commitment made by Landlord to any other tenant in the Building, or if
the proposed subletting is to a prospective subtenant for less than fifty (50%)
per cent of the leased premises, provided that:
(A) Tenant's request for consent shall be in writing and
contain the name, address, and description of the business of the
proposed assignee or subtenant, its most recent financial statement and
other evidence of financial responsibility, its intended use of the
leased premises, and the terms and conditions of the proposed assignment
or subletting.
(B) Within fifteen (15) days from receipt of such request,
Landlord shall either: (a) grant or refuse consent; or (b) elect to
require Tenant (i) to execute an assignment of lease or sublease of
Tenant's interest hereunder to Landlord or its designee upon the same
terms and conditions as are contained herein, together with an
assignment of Tenant's interest as sublessor in any such
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proposed sublease, or (ii) if the request is for consent to a proposed
assignment of this lease, to terminate this lease and the term hereof
effective as of the last day of the third month following the month in
which the request was received.
(C) Each assignee hereunder shall assume and be deemed to have
assumed this lease and shall be and remain liable jointly and severally
with Tenant for all payments and for the due performance of all terms,
covenants, conditions and provisions herein contained on Tenant's part
to be observed and performed. No assignment shall be binding upon
Landlord unless the assignee shall deliver to Landlord an instrument in
recordable form containing a covenant of assumption by the assignee, but
the failure or refusal of assignee to execute the same shall not release
assignee from its liability as set forth herein.
(D) Landlord shall not be deemed to have unreasonably withheld
its consent if it shall in any instance refuse such consent to
subletting to more than two subtenants (including Tenant) for the entire
demised premises.
(E) The Landlord's consent shall not be required and the terms
and conditions of Article 13(B) shall not apply if the Tenant assigns or
subleases the premises to a parent, subsidiary, affiliate or a company
into which Tenant is merged or with which Tenant is consolidated, or to
the purchaser of all or substantially all of the assets of Tenant.
(F) If such consent to any subletting hereunder shall be given:
(i) such consent to assign this lease or to sublet
shall not release or discharge Tenant of or from any liability,
whether past, present or future, under this lease and Tenant
shall continue fully liable under this lease for any default
under or in respect of any of the terms, covenants, conditions,
provisions or agreements of this lease;
(ii) the subtenant or subtenants shall agree to perform
faithfully and be bound by all the terms, covenants,
conditions, provisions or agreements of this lease to the
extent of the space sublet;
(iii) an executed copy of each sublease and agreement
of assumption of performance by each of the subtenants (limited
to the extent of the space sublet) shall be delivered to
Landlord promptly upon execution;
(iv) (a) the Tenant shall pay to the Landlord monthly,
one-half of any increment in rent received by Tenant per square
foot per annum over the Annual Basic Rent and any Additional
Rent then in effect during the year of assignment or
subletting, which payment shall be made monthly together with
the required monthly payments of
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Annual Basic Rent to be paid pursuant to Article 3; and (b) if
Tenant receives any consideration or value for such assignment
or subletting Landlord shall be paid one-half of any such
consideration or value within 10 days after receipt of the same
by Tenant. As a condition hereunder, Tenant warrants and
represents to Landlord that it will furnish to Landlord a
copy of all pertinent documents with respect to any such
assignment or subletting so as to establish Tenant's obligation
to Landlord hereunder.
14. FIRE
14. 1 In case of any damage to the building on the property by
fire or other casualty occurring during the term of this lease or previous
thereto, which renders the leased premises wholly untenantable so that the same
cannot be repaired within one hundred twenty (120) days from the happening of
such damage, then the terms hereby created shall, at the option of the Landlord,
terminate from the date of such damage. In the event the Landlord elects to
terminate the lease for any reason which is due to the inability to restore the
same within the one hundred twenty (120) day period, Landlord shall notify the
Tenant, in writing, certified mail, return receipt requested, of such a fact
within thirty (30) days of the happening of the fire or casualty, and in such
event the Tenant shall immediately surrender the leased premises and shall pay
rent only to the time of such damage and the Landlord may re-enter and repossess
the premises discharged from this lease. In the event the Landlord can restore
the premises within one hundred twenty (120) days, it shall advise the Tenant of
such fact within thirty (30) days in writing, by certified mail, return receipt
requested, and the lease shall remain in full force and effect during the period
of Landlord's restoration, except that rent shall abate while the repairs and
restorations are being made, but the rent shall recommence upon restoration of
the premises and
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delivery of the same by the Landlord to the Tenant. Landlord agrees that it will
undertake reconstruction and restoration of the damaged premises with due
diligence and reasonable speed and dispatch.
14.2 If the building shall be damaged, but the damage is
repairable by Landlord's estimation within one hundred twenty (120) days, the
Landlord agrees to repair the same with reasonable promptness. In such event,
the rent accrued and accruing shall not abate, except for that portion of the
leased premises that has been rendered untenantable and as to that portion the
rent shall abate based on equitable adjustments as determined by Landlord.
14.3 In connection with Landlord's restoration as hereinabove
referred to, in determining what constitutes reasonable promptness consideration
shall be given to delays caused by acts of God, strikes, and other causes of
Force Majeure beyond the Landlord's control.
14.4 The Tenant shall immediately notify the Landlord in case
of fire or other damage to the premises.
14.5 Notwithstanding anything contained in 14.1 or 14.2 above,
if such repairs are for any reason not completed within one hundred twenty (120)
days, then the Tenant shall have the right to terminate this lease, and in such
event of termination Landlord and Tenant shall thereupon be released of
liability one to the other, and the within lease shall be deemed null and void.
15. COMPLIANCE WITH LOCAL RULES AND REGULATIONS
15.1 Landlord covenants and agrees with Tenant that upon
acceptance and occupancy of the leased premises, the leased premises will comply
with all statutes, ordinances, rules, orders, regulations and requirements of
the Federal State and Municipal Government and of any and all their
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departments and bureaus, and to the requirements of the Board of Fire
Underwriters or their equivalent in the State of New Jersey, which are
applicable to the use and construction of the same.
15.2 The Tenant covenants and agrees that upon and after
acceptance and occupancy of the leased premises, it will promptly execute and
comply with all statutes, ordinances, rules, orders, regulations and
requirements of the Federal, State and Municipal Government and of any and all
their departments and bureaus (provided same are applicable to Tenant's
occupancy or use of said premises) or to the reasonable rules promulgated by the
Landlord in writing for the correction, prevention and abatement of nuisances,
violations or other grievances, in, upon or connected with said premises during
said term and arising from the operations of the Tenant therein, at the Tenant's
cost and expense, subject to the right of the Tenant to contest the decision by
any such department or bureau as hereinafter mentioned. In the event the Tenant
contests any such governmental decision, it shall indemnify, defend and save the
Landlord harmless from any fine, penalty, costs and liability imposed upon the
Landlord as a result of Tenant's failure so to comply. The Tenant covenants and
agrees, at its own cost and expense; to comply with such regulations or requests
as may be required by the fire or liability insurance carriers providing
insurance for the leased premises, and will further comply with such other
requirements that may be promulgated by the Board of Fire Underwriters or their
equivalent in connection with the use and occupancy of the leased premises by
the Tenant in the conduct of its business. Anything hereinabove to the contrary
notwithstanding, it is expressly understood and agreed that the Tenant shall not
be required to make structural changes in
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the building if the same are required by governmental regulation, as the same
may be applicable as a matter of general application to the leased premises,
provided that the Tenant shall be required to make structural changes that may
be required by governmental regulation if directly attributable and resulting
from Tenant's occupancy and use of the building in the conduct of its business.
15.3 If the Tenant shall fail or neglect to comply with the
aforesaid statutes, ordinances, rules, orders, regulations and requirements or
any of them, failure of the Tenant to comply with the requirements of
subparagraph 15.1 above shall be deemed an item of default for which the
Landlord shall have recourse by termination of this lease or exercise of any
other rights reserved to the Landlord hereunder, in accordance with the terms
and conditions of this lease.
16. TERMINATION
16.1 If there should occur any default on the part of the
Tenant in the performance of any conditions and covenants herein contained, or
if during the term hereof the leased premises or any part thereof shall be or
become abandoned, deserted, or vacated, or should the Tenant be evicted by
summary proceedings or otherwise, the Landlord, in addition to any other
remedies herein contained or as may be permitted by law, may without being
liable for damages, re-enter the said premises and take possession thereof; and,
without being obligated to re-let the premises as agent for the Tenant or
otherwise, the Landlord may at its option re-let the premises and receive the
rents therefor and apply the same, first to the payment of such expenses,
including real estate brokerage, reasonable attorney fees and costs, as the
Landlord may have been put to in re-entering and repossessing
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the same and in making such repairs and alterations as may be necessary; and
second to the payment of rents due hereunder. The Tenant shall remain liable for
such rents as may be in arrears and also the rents as may accrue subsequent to
the re-entry by the Landlord, to the extent of the difference between the rents
reserved hereunder and the rents, if any, received by the Landlord during the
remainder of the unexpired term hereof, after deducting the aforementioned
expenses, fees and costs; the same to be paid as such deficiencies arise and are
ascertained by Landlord. Said deficiencies will be increased by the Premium Rate
retroactive to the date of re-entry by Landlord.
16.2 If the tenant defaults in the performance of any
conditions or covenants in this lease contained, or should the Tenant be
adjudicated a bankrupt, insolvent or placed in receivership, or should
proceedings be instituted by or against the Tenant for bankruptcy, insolvency,
receivership, agreement of composition or assignment for the benefit of
creditors, or if this lease, or the estate of the Tenant hereunder shall pass to
another by virtue of any court proceedings, writ of execution, levy, sale or by
operation of law, then in either of such events, unless they shall be cured
within thirty (30) days after receipt of written notice from Landlord or his
agent, the Landlord may, at any time thereafter, terminate this lease and the
term hereof, upon giving to the Tenant or to any trustee, receiver, assignee or
other person in charge of or acting as custodian of the assets or property of
the Tenant, thirty (30) days' notice in writing, of such termination. This lease
and the term hereof shall end on the date fixed in such notice as if the said
date was the date originally fixed in this lease for the expiration hereof.
Notwithstanding the termination, the Landlord may
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still enforce its rights reserved pursuant to sub-paragraph 16.1.
16.3 Anything in sub-paragraphs 16.1 and 16.2 above to the
contrary notwithstanding, any default by Tenant in the payment of rent or any
other monetary obligation shall be cause for termination if the same is not paid
promptly as required by the terms and conditions of the lease. Any other default
in the lease shall be cause for termination if the same is not cured within
thirty (30) days after written notice given in the same manner as provided in
sub-paragraph 16.2 above.
17. INSPECTION BY LANDLORD
The Tenant agrees that the said Landlord's agents, and other
representatives, shall have the right to enter into and upon the leased
premises, or any part thereof, at all reasonable hours without unduly disturbing
the operations of the Tenant for the purpose of examining the same or for making
such repairs or alterations therein as may be necessary for the safety and
preservation thereof.
18. NOTICES
All notices required or permitted to be given to the Landlord
shall be given by certified mail, return receipt requested, addressed to the
Landlord at the address set forth at the head of this agreement or such other
place as the Landlord shall designate in writing. All notices required or
permitted to be given to the Tenant shall be given by certified mail, return
receipt requested, addressed to the Tenant at the leased premises, or such other
place as the Tenant shall designate in writing.
19. NON-WAIVER
The failure of the Landlord or Tenant to insist upon strict
performance of any of the covenants or conditions
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of this lease or to exercise any option herein conferred in any one or more
instances, shall not be construed as a waiver or relinquishment of any such
covenants, conditions or options, but the same shall be and remain in full force
and effect. If the Landlord pursues any remedy granted by the terms of this
lease or the terms of applicable law, it shall not be construed as a waiver or
relinquishment of any other remedy afforded thereby.
20. ALTERATIONS OR IMPROVEMENTS BY TENANT
20.1 Tenant shall not do any painting or decorating, or erect
any partitions or make any alterations or improvements in the Premises, or do
any nailing, boring, or screwing into the ceilings, walls, or floors, without
the prior written consent of Landlord which shall not be unreasonably
withheld, provided Tenant shall have furnished to Landlord a plan and/or
specifications with respect to Tenant's proposed work. Unless objected to by
Landlord in writing, such work may be performed by Tenant or under the direction
of Tenant, at its cost. Nothing herein contained shall be construed to permit
Tenant at any time to make any structural modifications to the leased premises
or any alterations or modifications to existing Building systems in the leased
premises. Tenant hereby agrees that all alterations and improvements made in, to
or on the Premises shall, unless otherwise provided by written agreement, be the
property of Landlord and shall remain upon and be surrendered with the Premises.
At Landlord's request all such alterations and improvements shall be restored to
their original condition at Tenant's expense at the termination of this Lease.
20.2 Nothing herein contained shall be construed as a consent
on the part of the Landlord to subject the estate of the Landlord to liability
under the Mechanic's
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Lien Law of the State of New Jersey, It being expressly understood that the
Landlord's estate shall not be subject to such liability.
21. NON-LIABILITY OF LANDLORD
21.1 It is understood and agreed that Landlord, in its capacity
as Landlord and, if applicable, as builder or general contractor of the building
in which the leased premises are located, shall not be liable to Tenant,
Tenant's agents, employees, contractors, invitees or any other occupant of the
leased premises for any damage to property or for any inconvenience or annoyance
to Tenant or any other occupant of the leased premises or interruption of
Tenant's or such other occupant's business, arising out of or attributable to
(I) the design and construction of the leased premises and the building of which
the leased premises are a part; (ii) any maintenance, repairs, replacements,
additions, alterations, substitutions and installations made to the leased
premises and the building of which the leased premises are a part; (iii) the
failure of Landlord to perform Landlord's lease obligations; and (iv) any cause
or happening whatsoever, including negligence by Landlord and Landlord's agents,
servants and employees with respect to any of the events or occurrences referred
to in subdivisions (i) through (iii), or otherwise. The foregoing covenant is an
express inducement to Landlord to enter into the within lease and the Tenant
acknowledges that it understands the scope and consequence of Landlord's
exculpation as herein provided.
21.2 Anything hereinabove contained to the contrary
notwithstanding, the Tenant in all events shall assume all risk of damage or
loss to its property, equipment and fixtures occurring in or about the leased
premises,
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whatever the cause of such damage or loss, including
Landlord's negligence.
22. CONDEMNATION
If the whole or part of the leased premises shall be acquired
by Eminent Domain for any public or quasi public use or purpose so that the
premises cannot be used for its intended leased purposes, or if the parking
areas shall be taken by Eminent Domain and the Landlord shall not substantially
replace such parking areas so as to provide the parking spaces for Tenant
required pursuant to Article 1.3, then and in that event, the term of this lease
shall cease and terminate from the date that possession of the leased premises
is taken by the condemning authority in the Eminent Domain proceeding, or as the
result of the delivery of a deed in lieu of condemnation. The Tenant shall have
no claim against the Landlord for the value of any unexpired term of said lease.
No part of any award made to the Landlord shall belong to the Tenant, nor shall
the Tenant make any claim against the condemning authority for the value of its
leasehold. Anything hereinabove contained to the contrary notwithstanding, it is
expressly understood and agreed that without affecting Landlord's award as
hereinabove referred to, the Tenant may make such independent claim as the law
may allow with respect to Tenant's leasehold improvements, if any, trade
fixtures and equipment.
23. INCREASE OF INSURANCE RATES
If the rate which the Landlord must pay to secure fire
insurance shall be increased because of any change in occupancy or use of the
premises by the Tenant, or because of the Tenant's non-compliance with the
rules, regulations or requests of the fire insurance carrier, then such increase
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shall be paid by the Tenant to the Landlord as Additional Rent.
24. TENANT'S FIRE INSURANCE
The Tenant, at its own cost and expense, shall insure its own
fixtures, equipment and contents, it being expressly understood and agreed that
the same is not the responsibility of the Landlord nor shall it be liable
therefore.
25. INDEMNITY
Anything in this lease to the contrary notwithstanding, and
without limiting the Tenant's obligation to provide insurance pursuant to
Article 9 hereunder, the Tenant covenants and agrees that it will indemnify,
defend and save harmless the Landlord against and from all liabilities,
obligations, damages, penalties, claims, costs, charges and expenses, including
without limitation reasonable attorneys' fees, which may be imposed upon or
incurred by Landlord by reason of any of the following occurring during the term
of this lease:
(i) Any matter, cause or thing arising out of use, occupancy,
control or management of the leased premises and any part thereof;
(ii) Any negligence on the part of the Tenant or any of its
agents, contractors, servants, employees, licensees or invitees;
(iii) Any accident, injury, damage to any person or property
occurring in, or about the leased premises;
(iv) Any failure on the part of Tenant to perform or comply
with any of the covenants, agreements, terms or conditions contained in this
lease on its part to be performed or complied with.
(v) Subject to the exception set forth in Article 21.2
(non-liability of Landlord), the foregoing shall not require indemnity by Tenant
in the event of damage or injury occasioned by the negligence or acts of
commission or omission of the Landlord, its agents, servants or employees.
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Landlord shall promptly notify Tenant of any such claim asserted against it and
shall promptly send to Tenant copies of all papers or legal process served upon
it in connection with any action or proceeding brought against Landlord by
reason of any such claim.
26. FORCE MAJEURE
Except for the obligation of the Tenant to pay rent and other
charges as in this lease provided, the period of time during which the Landlord
or Tenant is prevented from performing any other act required to be performed
under this lease by reason of fire, catastrophe, strikes, lockouts, civil
commotion, acts of God or the public enemy, government prohibitions or
preemptions, embargoes, inability to obtain material or labor by reason of
governmental regulations or prohibitions, the act or default of the other party,
or other events beyond the reasonable control of Landlord or Tenant, as the case
may be, shall be added to the time for performance of such act.
27. MORTGAGE PRIORITY
This lease and the estate, interest and rights hereby created
are subordinate to any mortgage now or hereafter placed upon the Property, the
Building or any estate or interest therein, including, without limitation, any
mortgage on any leasehold estate, and to all renewals, modifications,
consolidations, replacements and extensions of same as well as any substitutions
therefor. Tenant agrees that in the event any person, firm, corporation or other
entity acquires the right to possession of the Property and the Building,
including any mortgagee or holder of any estate or interest having priority over
this lease, Tenant shall, if requested by such person, firm, corporation or
other entity, attorn to and become the tenant of such person, firm,
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corporation or other entity, upon the same terms and conditions as are set forth
herein for the balance of the lease term. Notwithstanding the foregoing, any
mortgagee may, at any time, subordinate its mortgage to this lease, without
Tenant's consent, by notice in writing to Tenant, and thereupon this lease shall
be deemed prior to such mortgage without regard to their respective dates of
execution and delivery, and in that event, such mortgagee shall have the same
rights with respect to this lease as though it had been executed prior to the
execution and delivery of the mortgage. Tenant, if requested by Landlord, shall
execute any such instruments in recordable form as may be reasonably required by
Landlord in order to confirm or effect the subordination of this lease and the
attornment of Tenant to future landlords in accordance with the terms of this
lease.
28. SURRENDER OF PREMISES
On the last day, or earlier permitted termination of the lease
term, Tenant shall quit and surrender the premises in good and orderly condition
and repair (reasonable wear and tear, and damage by fire or other casualty
excepted) and shall deliver and surrender the leased premises to the Landlord
peaceably, together with all alterations, additions and improvements in, to or
on the premises made by Tenant as permitted under the lease. The Landlord
reserves the right, however, to require the Tenant at its cost and expense to
remove any alterations or improvements installed by the Tenant and not permitted
or consented to by the Landlord pursuant to the terms and conditions of the
lease, which covenant shall survive the surrender and the delivery of the
premises as provided hereunder. Prior to the expiration of the lease term the
Tenant shall remove all of its property, fixtures, equipment and trade fixtures
from the premises. All property
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not removed by Tenant shall be deemed abandoned by Tenant, and Landlord reserves
the right to charge the reasonable cost of such removal to the Tenant, which
obligation shall survive the lease termination and surrender hereinabove
provided. If the premises be not surrendered to the end of the lease term,
Tenant shall indemnify Landlord against loss or liability resulting from delay
by Tenant in surrendering the premises, including, without limitation any claims
made by any succeeding tenant founded on the delay.
29. SIGNS
The Tenant shall only be permitted to install signage at the
leased premises in accordance with Building standard, and at such designated
locations as Landlord shall direct. The Tenant shall not have the right to put
any identifying signs on the exterior of the Building or roof thereof.
30. ESTOPPEL CERTIFICATE
Tenant agrees, from time to time as may be requested by
Landlord, to execute, acknowledge and deliver to Landlord all or any of the
following: an estoppel letter certifying to such party as Landlord reasonably
may designate, including any mortgagee, that this lease is in full force and
effect and has not been amended, modified or superceded, that Landlord has
satisfactorily completed all construction work required by this lease (subject
to completion of punchlist items) , that Tenant has accepted the leased premises
and is now in possession thereof, that Tenant has no defense offsets or
counterclaims hereunder or otherwise against Landlord with respect to this lease
or the leased premises and Landlord is not in default hereunder (or if any of
the foregoing not be the case, specifying in reasonable detail the extent and
nature thereof), that Tenant has no knowledge of any pledge or
36
<PAGE> 45
assignment of this lease or rentals hereunder, that rent is accruing under this
lease but has not been paid more than one month in advance and the date to which
rent has been paid; and any other instrument as may be reasonably requested to
be executed by Tenant by any mortgagee of the Property or Building or any
interest therein, so long as the rights of Tenant as provided for by this lease
are not materially affected by any such other instrument. Tenant's estoppel
letter shall be in the form as Landlord or its mortgagee shall hereinafter
proscribe.
31. TRANSFER BY LANDLORD
The term "Landlord" as used in this lease means only the owner,
or the mortgagee in possession, for the time being of the building or real
property (or the owner of a lease of the building or of the real property) so
that in the event of any transfer of title to or lease of said building or real
property, the said Landlord shall be and hereby is entirely freed and relieved
of all covenants and obligations of Landlord hereunder thereafter accruing, and
it shall be deemed and construed as a covenant running with the land without
further agreement between the parties or their successors in interest, or
between the parties and the transferee of title to or lessee of said building or
real property, that the transferee of the lessee has assumed and agreed to carry
out any and all covenants and obligations of Landlord hereunder.
32. LIMIT OF LANDLORD'S LIABILITY
In case the Landlord shall be a joint venture, partnership,
tenancy in common, association or other form of joint ownership, the individual
members or entities thereof shall have absolutely no personal liability or
obligation with respect to any provision of this lease, or any obligation or
37
<PAGE> 46
liability arising therefrom or in connection therewith, which covenant
hereinabove referred to, shall be deemed effective as of the date Landlord
completes and delivers the leased premises in accordance with the terms and
conditions of the lease and the plans and specifications herein provided.
33. LANDLORD'S RIGHT OF ENTRY AND ALTERATIONS
Landlord, or its agents, shall have the right at any time to
enter upon the leased premises to examine the same, to clean windows, or to make
such repairs, alterations or improvements as Landlord may deem necessary or
proper, and, during such operations, may close entrances, doors, corridors,
elevators and other facilities, all without any liability to Tenant by reason of
interference, inconvenience or annoyance; provided, however, that if such work
should materially reduce the area rented by Tenant, the rent paid by Tenant
shall be proportionately reduced, and further provided, that such work will be
done in such a manner as to cause the least possible interference, inconvenience
and annoyance to Tenant. However, this Article shall not be deemed as imposing
any duty on Landlord to undertake any of the acts specified therein.
34. LANDLORD'S REMEDIES AND EXPENSES
34.1 All rights and remedies of Landlord herein enumerated
shall be cumulative, and none shall exclude any other right or remedy allowed by
law. For the purposes of any suit brought or based hereon, this lease shall be
construed to be a divisible contract, to the end that successive actions may be
maintained on this lease on successive periodic sums which mature hereunder.
Notwithstanding the foregoing, Landlord agrees that all cognizable claims shall
be filed in one action.
34.2 Tenant shall pay, upon demand, all of the
Landlord's costs, charges and expenses, including the
38
<PAGE> 47
reasonable fees of counsel, agents and others retained by Landlord, incurred in
enforcing Tenant's obligation hereunder.
35. RESERVED RIGHTS
Landlord reserves the following rights:
(a) To have access for Landlord and other tenants of the
building to any mail chutes located on the premises according to the rules of
the United States Post Office.
(b) During the last ninety (90) days of the term of this lease
as extended, if during or prior to that time Tenant vacates the premises, to
decorate, remodel, repair, alter or otherwise prepare the premises for
reoccupancy.
(c) To show the premises to prospective tenants or brokers
during the last year of the term of this lease as extended and to prospective
purchasers at all reasonable times, provided prior notice to Tenant in each case
is given and Tenant's use and occupancy of the premises shall not be materially
inconvenienced by any such action of Landlord. Landlord may enter upon the
premises and may exercise any or all of the foregoing rights hereby reserved
without being deemed guilty of an eviction or disturbance of Tenant's use or
possession and without being liable in any manner to Tenant. Notwithstanding the
foregoing, Landlord agrees that it shall arrange said visitation only by
appointment with Tenant.
36. RULES AND REGULATIONS
Tenant, its employees, agents, servants, licensees and visitors
agree to comply with the rules and regulations with respect to the premises and
Building (hereinafter called the "Rules") as the same shall be applicable to all
tenants of the Building. The Rules are set
39
<PAGE> 48
forth at the end of this lease and are expressly made a part hereof as Schedule
"G". Landlord shall have the right to make reasonable additions and amendments
thereto from time to time; and Tenant, its employees, agents and servants, agree
to comply with such additions and amendments after notice from Landlord. All
notices with respect to the Rules shall be in writing. The Rules shall not deny
Tenant access to the leased premises in excess of the regular work week hours
defined in Article 7. Tenant further agrees to furnish to Landlord license and
car information as to its employees who may be using the parking lot as may be
required by the Landlord, and Tenant further agrees to comply with such
reasonable Rules or requirements in connection with the use of the parking
facilities as shall be made applicable to all tenants of the Building.
37. WAIVERS
No delay or forbearance by Landlord in exercising any right or
remedy hereunder or in undertaking or performing any act or matter which is not
expressly required to be undertaken by Landlord shall be construed,
respectively, to be a waiver of Landlord's rights or to represent any agreement
by Landlord to undertake or perform such act or matter thereafter.
38. WAIVER OF TRIAL BY JURY
It is mutually agreed by and between Landlord 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 against
the other on any matter whatsoever arising out of or in any way connected with
this lease, the relationship of Landlord and Tenant, Tenant's use of or
occupancy of the leased premises and/or any claim of injury or damage and any
emergency or any
40
<PAGE> 49
other statutory remedy. It is further mutually agreed that in the event Landlord
commences any summary proceeding for non-payment of Annual Basic Rent, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding.
39. SEVERABILITY
Each covenant and agreement in this lease shall for all
purposes be construed to be a separate and independent covenant or agreement. If
any provision in this lease or tile application thereof shall to any extent be
invalid, illegal or otherwise unenforceable, the remainder of this lease, and
the application of such provision, other than as invalid, illegal or
unenforceable, shall not be affected thereby; and such provisions in this lease
shall be valid and enforceable to the fullest extent permitted by law.
40. QUIET ENJOYMENT
The Landlord covenants and represents that the Landlord is the
owner of the premises herein leased and has the right and authority to enter
into, execute and deliver this lease, and does further covenant that the Tenant
on paying the rent and performing the conditions and covenants herein contained,
shall and may peaceably and quietly have, hold and enjoy the leased premises for
the term aforementioned.
41. LEASE CONSTRUCTION
The lease shall be construed pursuant to the laws of the State
of New Jersey.
42. BINDING EFFECT
The terms, covenants and conditions of the within lease shall
be binding upon and inure to the benefit of each of the parties hereto, and
their respective heirs, successors, executors, administrators and assigns.
41
<PAGE> 50
43. DEFINITIONS
The neuter gender, when used herein and in the acknowledgment
hereafter set forth, shall include all persons, firms and corporations, and
words used in the singular shall include words in the plural where the text of
the instrument so requires.
44. PARAGRAPH HEADING
The paragraph headings herein are inserted only as a matter of
convenience and for reference, and in no way to define, limit or describe the
scope of this lease nor the intent of any provision hereof.
45. AMENDMENT AND MODIFICATIONS
This lease contains the entire agreement between the parties
hereto, and shall not be amended, modified or supplemented unless by agreement
in writing signed by both Landlord and Tenant and the same shall not be valid
unless approved in writing by all mortgagees and holders of any estate or
interest in the Building or the Property by virtue of leases or other
instruments expressly referred to herein or which are then of record.
46. EXECUTION AND DELIVERY
These documents are submitted to the Tenant for consideration
purposes and shall not be binding on Landlord until fully executed in all parts
by Landlord and Tenant and exchanged.
47. SCHEDULES
The following Schedules are referred to in this Lease:
SCHEDULE "A" - Legal Description of Property
SCHEDULE "B" - Plan of Leased Premises
SCHEDULE "C" - Landlord's Workletter
SCHEDULE "C-1" - Tenant's Work Letter
SCHEDULE "D" - Tenant's Plan
SCHEDULE "E" - Janitorial Services
SCHEDULE "F" - Building Rules and Regulations
42
<PAGE> 51
48. BROKERAGE
The parties mutually represent to each other that Jacobson,
Goldfarb, and Tanzman and Coldwell Banker Commercial Real Estate Services of New
Jersey, Inc. are the sole brokers who negotiated and consummated the within
transaction, and that neither party dealt with any other broker in connection
with the within lease, it being understood and agreed that the Landlord shall be
responsible, at its sole cost and expense, to pay the real estate brokerage in
connection with this lease transaction, pursuant to written agreement entered
into simultaneously herewith.
49. SECURITY
Upon execution of this lease, the Tenant shall deposit with the
Landlord the sum of TWO THOUSAND EIGHT HUNDRED FIFTY-NINE AND 79/100 ($2,859.79)
DOLLARS as security for the full and faithful performance of this lease upon the
part of the Tenant to be performed. Upon termination of this lease, and
providing the Tenant is not in default hereunder and has performed all of the
conditions of this lease, the Landlord shall return the said sum of TWO THOUSAND
EIGHT HUNDRED FIFTY-NINE AND 79/100 ($2,859.79) DOLLARS to the Tenant. Anything
herein contained to the contrary notwithstanding, it is expressly understood and
agreed that the said security deposit shall not bear interest. Tenant covenants
and agrees that it will not assign, pledge, hypothecate, mortgage or otherwise
encumber the aforementioned security during the term of this lease. It is
expressly understood and agreed that the Landlord shall have the right to
co-mingle the security funds with its general funds and said security shall not
be required to be segregated.
43
<PAGE> 52
50. RELOCATION
From time to time or at any time during the Term and on not
less than thirty (30) days' notice to Tenant, Landlord shall have the right to
move the Tenant out of the Leased Premises and into similar space of at least
equal area in the Building which shall have the same or similar exposure. In
such event Landlord shall remove, relocate and reinstall Tenant's equipment,
furniture and fixtures and redecorate the new space, similar to the old space,
all of which shall be done at Landlord's sole cost and expense, and for the
balance of the lease term, this lease shall continue in full force and effect
and shall apply to the new space as though this lease had originally been for
such new space.
51. MORTGAGEE NOTICE CLAUSE
Tenant agrees to give any Mortgagee, by registered mail, a copy
of any Notice of Default served upon the Landlord, provided that prior to such
notice tenant has been notified, in writing, (by way of Notice of Assignment of
Rents and Leases, or otherwise) of the address of such Mortgagees. Tenant
further agrees that if Landlord shall have failed to cure such default within
the time provided for in this lease, then the Mortgagees shall have an
additional thirty (30) days within which to cure such default or if such default
cannot be cured within that time, then such additional time as may be necessary
if within such thirty (30) days, any Mortgagee and/or Trust Deed Holder has
commenced and is diligently pursuing the remedies necessary to cure such default
(including but not limited to commencement of foreclosure proceedings, if
necessary to effect such cure), in which event this Lease shall not be
terminated while such remedies are being so diligently pursued.
44
<PAGE> 53
52. OPTION TO RENEW
Provided the Tenant is not in default pursuant to the terms and
conditions of this lease, the Tenant is hereby given the right and privilege to
renew the within lease, for one (1) five (5) year renewal period, to commence at
the end of the initial term of this lease, which renewal shall be upon the same
terms and conditions as in this lease contained, except that during said five
(5) year renewal period, Tenant shall pay Annual Basic Rent for the entire term
in the annual sum of FORTY ONE THOUSAND ONE HUNDRED EIGHTY AND 98/100
($41,180.98) DOLLARS, payable in equal monthly installments in advance in the
sum of THREE THOUSAND FOUR HUNDRED THIRTY-ONE AND 75/100 ($3,431.75) DOLLARS as
hereinabove provided in Article 3.
The right, option, and privilege of the Tenant to renew this
lease as hereinabove set forth is expressly conditioned upon the Tenant
delivering to the Landlord, in writing, by certified mail, return receipt
requested, nine (9) months' prior notice of its intention to renew, which notice
shall be given to the Landlord by the Tenant no later than nine (9) months prior
to the date fixed for termination of the original term of this lease.
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<PAGE> 54
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
or caused these presents to be signed by its proper corporate officers and
caused its proper corporate seal to be hereunto affixed, the day and year first
above written.
RIVER OFFICE EQUITIES
WITNESS: a New Jersey Partnership
/s/Patricia Ann Fudge BY:/s/Mark Dubrow (L.S.)
- - ------------------------ ------------------------------
PATRICIA ANN FUDGE MARK DUBROW, General Partner
ATTEST: PILOT LABORATORIES, INC.
a New Jersey Corporation
/s/ ? BY:/s/Paul Morrisroe
- - ------------------------ ------------------------------
PAUL MORRISROE
46
<PAGE> 55
STATE OF NEW JERSEY )
) SS.:
COUNTY OF MIDDLESEX )
BE IT REMEMBERED, that on this 31st day of August, 1987, before
me, the subscriber, personally appeared MARK DUBROW, General Partner of RIVER
OFFICE EQUITIES, a New Jersey Partnership, who, I am satisfied, is the Landlord
mentioned in the within Instrument, and thereupon he acknowledged that he
signed, sealed and delivered the same as his act and deed, for the uses and
purposes therein expressed.
/s/ Patricia Ann Fudge
----------------------------------------------
PATRICIA ANN FUDGE
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires July 24, 1989
STATE OF )
) SS.
COUNTY OF )
BE IT REMEMBERED, that on this day of August, 1987, before
me, the subscriber,
personally appeared who, I
am satisfied, is the person who signed the within Instrument as
of PILOT LABORATORIES, INC., a New Jersey Corporation, the
Tenant named therein, and he thereupon acknowledged that the said instrument
made by the corporation and sealed with its corporate seal, was signed, sealed
with the corporate seal and delivered by him as such officer and is the
voluntary act and deed of the corporation, made by virtue of authority from its
Board of Directors.
----------------------------------------------
<PAGE> 56
SCHEDULE "A"
BEGINNING at a point on the Northerly Right of Way line of Newman Springs Road
(Rt. 520), distant 740.56 feet from the intersection of the aforesaid Northerly
sideline of Newman Springs Road with the Easterly Right of Way line of Half Mile
Road; thence running
(1) North 5 degrees 35 minutes 55 seconds, East, a distance
of 544.39 feet to a point; thence
(2) South 84 degrees 24 minutes 05 seconds East, a distance
of 300.00 feet to a point; thence
(3) South 5 degrees 35 minutes 55 seconds West, a distance of 544.39 feet to
a point on the aforesaid Northerly sideline of Newman Springs Road;
thence
(4) Along the Northerly sideline of Newman Springs Road, North 64 degrees 24
minutes 05 seconds West, a distance of 300.00 feet to a point, said
point being the point and place of BEGINNING.
THE above premises are known and designated as Lots 3 and 3A in Block 295 on the
Official Tax Map of the Township of Middletown, Monmouth County, New Jersey.
<PAGE> 57
SCHEDULE "C"
Building Standards
1. Conditions for Landlord's Work
1.1 Landlord agrees that, at its expense, prior to commencement of
this Lease, it will provide the Building Standard work in the
demised premises as described below.
1.2 Building Standards shall mean the work described below.
1.3 Landlord shall use only new and first-class
materials and will perform all work in a good and
workmanlike manner.
1.4 Landlord will obtain and pay for all permits and inspections
required for occupancy, exclusive of any special permits or
approvals relating to Tenant's equipment or business
operations.
1.5 Landlord will furnish all labor, material and equipment
required to complete the Building Standard work and such
additional work as Landlord may agree to provide in accordance
with the final drawings and specifications approved by Tenant.
2. Signage:
Landlord will provide a directory at the main level lobby with
the name and location of Tenant indicated thereon, and Building
Standard suite entry signage on or adjacent to Tenant's main
entry door. Tenant shall not place signage outside of the
demised premises without Landlord's prior approval.
3. Partitions:
3.1 Demising partitions between tenants on multiple tenancy floors
will be two (2) sheets of 1/2" thick gypsum wall board, metal
studs and insulation. Gypsum wall board shall extend to
underside of floor above. One-half of required demising
partition will be provided for each Tenant.
3.2 Partitions within tenant spaces will extend from floor to hung
ceiling and will be metal studs with 1/2" thick taped gypsum
wallboard on both sides without insulation. Six (6) linear feet
of partition will be provided for each 100 square feet of
rentable area.
<PAGE> 58
3.3 Jogs, curves or angles in any partition will be considered as
Tenant Work. Partitions terminating in the building exterior
wall shall meet either a mullion or a column.
4. Doors:
4.1 Entry doors shall be 3'-0" x 8'-10" x-3/4" Solid Core with
plastic laminate surface, building standard lockset and mounted
in metal frame. One (1) Entry Door shall be provided, or as
required by code.
4.2 Interior Doors shall be 3'-0" x 7'-0" Birch Stain grade with
latchset. One Interior Door will be provided for each 500
square feet of net rentable area.
5. Lighting:
5.1 Fixtures to be 2 x 4, three light 40 watt, to be installed on
basis of one (1) fixture for each 880 square feet of rentable
area. Initial lamps will be provided as part of Landlord's
Work.
6. Electrical:
6.1 Outlets shall be 110V duplex grounding type wall receptacles in
interior or demising partition. One receptacle shall be
provided for each 150 square feet of net rentable area.
(Outlets existing in exterior walls shall count against said
allowance). Dedicated outlets or any outlet other than that
described above shall be considered as Tenant's Work.
7. Telephone:
7.1 The Landlord shall arrange with New Jersey Bell Telephone
Company for telephone service within the equipment room in the
building core.
7.2 All telephone work and wiring in partitions, floors and
ceilings to be arranged for by Tenant with New Jersey Bell
Telephone Company or other qualified installer selected by
Tenant. Landlord will coordinate work with other trades as
required. Completion or non-completion of the telephone work
will not delay Tenant's acceptance of the demised premises or
the payment of rent. All electrical load centers, special
wiring and plywood supplied by Landlord for telephone equipment
shall be considered as Tenant Work. Telephone wiring provided
by the Tenant shall meet all prevailing codes.
2
<PAGE> 59
8. Switches:
8.1 Landlord shall install one (1) single pole light switch per
room on partitions. Switches in open area shall meet Code
requirements.
9. HVAC:
9.1 Heating, ventilation and air conditioning will be provided by a
year - round system capable of maintaining a temperature of 78
degrees (+ 2 degrees F) and a maximum relative humidity of
fifty percent (50%) when outside conditions are 95 degrees F
DB, 75 degrees F WB, furnished and installed by Landlord. Heat-
ing cycle will maintain 70 degrees F (+ 2 degrees F) with
outside temperature 13 degrees F. Thermostatic settings shall
be subject to all applicable laws and any required compliance
certificates or other energy management forms.
9.2 If Tenant's equipment (i.e., computers , copiers, etc.)
requires air-conditioning above and beyond Building Standard as
outlined, said additional air-conditioning (including cost of
operation as stipulated in the Lease) shall be paid for by
Tenant as Additional Rent. Any special exhaust requirements
will also be considered Tenant's Work.
9.3 Landlord shall provide at predetermined locations, one (1)
thermostat for each 1,000 -+ square feet of rentable area.
Modifications to such predetermined locations shall be
considered Tenant's Work.
9.4 The system will be under computer energy management control set
for occupancy at 8:00 AM and shut down at 6:00 PM on normal
business days (holidays, Saturdays and Sunday excluded).
10. Ceilings:
10.1 Landlord shall provide and install a 2' x 4' acoustical tile
ceiling with white exposed suspension grid throughout rented
area. Ceiling height will be 9'-0" A.F.F. except where
otherwise noted.
11. Painting:
11.1 All surfaces of gypsum wall board shall receive two (2) coats
of flat latex paint, one (1) color per room, selected by Tenant
from Landlord's samples.
11.2 Metal doors, door bucks and other metal surfaces not having
factory finish shall receive two (2) coats of enamel paint over
one coat of primer as selected from Landlord's samples.
3
<PAGE> 60
11.3 painting, Finishing or Wall Covering, other than that described
above shall be considered Tenant's Work.
12. Floor covering and Vinyl Base:
12.1 Landlord shall supply and install one (1) color of Building
Standard Carpet (or one (1) color of 1/8" Vinyl composition
Tile in storage, computer areas, etc.) as selected by Tenant
from Landlord's samples throughout rented area.
Landlord shall provide, as an option to Tenant, an allowance of
$12.00 per square yard for carpet, including base.
13. Window Coverings:
13.1 Landlord shall provide and install horizontal thin-line blinds
on all windows in the rented area. Tenant shall not remove
thin-line blinds.
4
<PAGE> 61
FIRST AMENDMENT TO LEASE
BY AND BETWEEN:
RIVER OFFICE EQUITIES,
a New Jersey Partnership
("Landlord")
-and-
PILOT LABORATORIES, INC.,
a New Jersey corporation
("Tenant")
---------------------------------------
DATED: , 1992
---------------------------------------
LAW OFFICES
EPSTEIN, EPSTEIN, BROWN & BOSEK
505 Morris Avenue
P.O. Box 705
Springfield, Nev Jersey 07081
#11664-117
<PAGE> 62
(11684117.1ST)
(HHB-AGMTS #8)
(9-22-92) (af)
FIRST AMENDMENT TO LEASE, dated this 30 day of Oct. , 1992, by and
between RIVER OFFICE EQUITIES, a New Jersey Partnership, having an office at
Parkway 109 office Center, 328 Newman Springs Road, Red Bank, New Jersey 07701
(hereinafter called the "Landlord"); and PILOT LABORATORIES, INC., a New Jersey
corporation, having an office at Parkway 109 Office Center, Newman Springs Road,
Middletown, New Jersey (hereinafter called the "Tenant").
WITNESSETH
WHEREAS, the parties hereto have heretofore entered into a certain lease
agreement dated August 31, 1987 (hereinafter called the "Lease") in connection
with the leasing of a portion of the third floor, containing 1,961 square feet
or Gross Rentable Area, of Parkway 109 office Center, Newman springs Road,
Middletown, New Jersey (hereinafter called the "leased premises"); and
WHEREAS, the Tenant, pursuant to the Lease, has exercised Its option to
renew and extend the Lease for a further period of five (5) years, which
extended term shall commence as of November 1, 1992, and shall expire on October
31, 1997,
NOW, THEREFORE, in consideration of the sum of one ($1.00) DOLLAR and
other good and valuable consideration, the parties hereto covenant and agree as
follows:
1. The Lease is hereby extended for a further period of five (5) years,
which Lease extension shall commence as or November 1, 1992, and shall expire as
of October 31, 1997.
2. (a) Commencing November 1, 1992, the Tenant shall pay the Annual
Basic Rent of THIRTY FIVE THOUSAND TWO HUNDRED NINETY EIGHT AND 00/100
($35,298.00) DOLLARS per annum, payable in equal monthly installments in advance
in the sum of TWO THOUSAND NINE HUNDRED FORTY ONE AND 15/100 ($2,941.15) DOLLARS
per month, on the first day of each and every month during the extended term of
the Lease, without demand, offset or deduction. In addition to the Annual Basic
Rent hereinabove referred to, the Tenant shall pay such Additional Rent and
charges as in the Lease provided.
<PAGE> 63
(b) Notwithstanding the foregoing obligation of Tenant, it is
understood and agreed that Annual Basic Rent only shall abate for the following
months during the extended Lease term (the "Abatement Periods") :
(i) November and December, 1992;
(ii) January, 1993; and
(iii) February, 1994.
It is expressly understood and agreed that during the Abatement Periods all
Additional Rent and other Lease charges shall be paid by Tenant a& in the Lease
now required.
3. Article 4 of the Lease is hereby modified and amended so as to
substitute the calendar year 1993 as the Base Year for computation of Additional
Rent required to be paid by Tenant pursuant to Article 4.
4. Landlord agrees that It will, prior to November 1, 1992, at its cost
and expense, undertake the following work at the leased premises:
(i) Clean existing carpets; and
(ii) Paint the office where required.
5. Except as hereinabove referred to, all other terms and conditions of
the Lease shall remain in full force and effect, unimpaired and unmodified.
6. This Agreement shall be binding upon the parties hereto, their heirs,
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed by their proper corporate officers and caused their proper corporate
seals to be hereto affixed the day and year first above written.
WITNESS: RIVER OFFICE EQUITIES
a New Jersey Partnership
/s/ Patricia A. Fudge BY : /s/ Mark Dubrow (L.S.)
- - --------------------------- ------------------------------
PATRICIA A. FUDGE MARK DUBROW, General Partner
ATTEST : PILOT LABORATORIES, INC.
/s/ Teri Budzeh BY : /s/ Paul Morrisroe
- - --------------------------- ------------------------------
TERI BUDZEH PAUL MORRISROE, President
<PAGE> 64
LEASE AGREEMENT
BY AND BETWEEN
RIVER OFFICE EQUITIES
a New Jersey Partnership
"Landlord"
-and-
PILOT LABORATORIES, INC.,
a New Jersey Corporation
"Tenant"
------------------------------------------------
DATED: AUGUST 31, 1987
------------------------------------------------
LAW OFFICES
EPSTEIN, EPSTEIN, BROWN & BOSEK
505 Morris Avenue
P. O. Box 705
Springfield, New Jersey 07081
#11684-117
<PAGE> 1
Exhibit 10.16
OFFICE LEASE AGREEMENT
BY AND BETWEEN:
RIVER OFFICE EQUITIES,
a New Jersey Partnership,
as "Landlord"
-and -
FIRST MONTAUK SECURITIES CORPORATION
as "Tenant"
PREMISES: Parkway 109 Office Center
328 Newman Springs Road
Borough of Middletown
Monmouth County, New Jersey
DATED: January 31 , 1996
PREPARED BY: H. HARDING BROWN, ESQ.
<PAGE> 2
TABLE OF CONTENTS
1. LEASED PREMISES ........................................................ 1
2. TERM OF LEASE .......................................................... 2
3. RENT ................................................................... 2
4. ADDITIONAL RENT ........................................................ 3
5. USE .................................................................... 10
6. REPAIRS AND MAINTENANCE ................................................ 11
7. LANDLORD'S SERVICES .................................................... 12
8. INABILITY TO PERFORM ................................................... 13
9. INSURANCE .............................................................. 14
10. LANDLORD'S ACCESS FOR FUTURE CONSTRUCTION ............................. 15
11. FIXTURES .............................................................. 15
12. CHANGES IN OR ABOUT PREMISES .......................................... 16
13. ASSIGNMENT AND SUBLETTING ............................................. 16
14. FIRE .................................................................. 17
15. COMPLIANCE WITH LOCAL RULES AND REGULATIONS ........................... 19
16. TERMINATION ........................................................... 20
17. INSPECTION BY LANDLORD ................................................ 22
18. NOTICES ............................................................... 23
19. NON-WAIVER ............................................................ 23
20. ALTERATIONS OR IMPROVEMENTS BY TENANT ................................. 23
21. NON-LIABILITY OF LANDLORD ............................................. 24
22. CONDEMNATION .......................................................... 25
23. INCREASE OF INSURANCE RATES ........................................... 25
24. TENANT'S FIRE INSURANCE ............................................... 26
25. INDEMNITY ............................................................. 26
26. FORCE MAJEURE ......................................................... 27
27. MORTGAGE PRIORITY ..................................................... 27
28. SURRENDER OF PREMISES ................................................. 28
29. ESTOPPEL CERTIFICATE .................................................. 29
30. TRANSFER BY LANDLORD .................................................. 29
31. LIMIT OF LANDLORD'S LIABILITY ......................................... 30
32. LANDLORD'S RIGHT OF ENTRY AND ALTERATIONS ............................. 30
33. LANDLORD'S REMEDIES AND EXPENSES ...................................... 30
34. LANDLORD'S RESERVED RIGHTS ............................................ 31
<PAGE> 3
TABLE OF CONTENTS CONT'D.
35. RULES AND REGULATIONS ................................................. 31
36. WAIVERS ............................................................... 32
37. WAIVER OF TRIAL BY JURY ............................................... 32
38. SEVERABILITY .......................................................... 32
39. QUIET ENJOYMENT ....................................................... 33
40. LEASE CONSTRUCTION .................................................... 33
41. BINDING EFFECT ........................................................ 33
42. DEFINITIONS ........................................................... 33
43. PARAGRAPH HEADING ..................................................... 33
44. AMENDMENT AND MODIFICATIONS ........................................... 34
45. EXECUTION AND DELIVERY ................................................ 34
46. SCHEDULES ............................................................. 34
47. BROKERAGE ............................................................. 34
48. RELOCATION ............................................................ 34
SCHEDULE "A" - Legal Description of Property
SCHEDULE "B" - Plan of Leased Premises
SCHEDULE "C" - Janitorial Services
SCHEDULE "D" - Building Rules and Regulations
<PAGE> 4
REFERENCE DATA
Any reference in this Lease to the following subjects shall incorporate
therein the data stated for the subjects in this Reference Data:
LANDLORD: RIVER OFFICE EQUITIES
a New Jersey Partnership
LANDLORD'S ADDRESS: Parkway 109 Office Center
328 Newman Springs Road
Red Bank, New Jersey 07701
TENANT: FIRST MONTAUK SECURITIES CORPORATION
TENANT'S ADDRESS Parkway 109 Office Center
328 Newman Springs Road
Red Bank, New Jersey
(upon commencement)
LEASED PREMISES: Portion of 1st Floor
GROSS RENTABLE AREA
OF LEASED PREMISES: 1,637 square feet
NET RENTABLE AREA
OF LEASED PREMISES: 1,393 square feet
LEASE TERM: 2 years and 7 months
SCHEDULED COMMENCEMENT DATE: February 15, 1996
ANNUAL BASIC RENT: See Article 3 - Rent
TENANT'S PERCENTAGE: 2.7%
PERMITTED USE: General offices
RIVER OFFICE EQUITIES,
a New Jersey Partnership (Landlord)
By: /s/ Mark Dubrow (L.S.)
-------------------------------------------------
MARK DUBROW, General Partner
FIRST MONTAUK SECURITIES CORPORATION,
a New Jersey Corporation (Tenant)
By: /s/ ?
-------------------------------------------------
<PAGE> 5
THIS LEASE AGREEMENT, made this 31 day of January, 1996, between RIVER
OFFICE EQUITIES, a New Jersey Partnership, having an address at Parkway 109
Office Center, 328 Newman Springs Road, Middletown, New Jersey 07701
(hereinafter called the "Landlord"), and FIRST MONTAUK SECURITIES CORPORATION, a
New Jersey Corporation, having an office at Parkway 109 Office Center, 328
Newman Springs Road, Red Bank, New Jersey 07701 (hereinafter called the
"Tenant").
WITNESSETH
In consideration of the covenants and conditions hereinafter set forth
and for other good and valuable considerations, the Landlord does demise, lease
and let unto the Tenant, and the Tenant does rent and take from the Landlord the
Leased Premises, and the Landlord and Tenant mutually covenant and agree as
follows:
1. LEASED PREMISES
1.1 The Leased Premises consists of 1393 net square feet
located on the first (1st) floor of the Building containing 1637 square feet of
Gross Rental Area of office space, based on outside outside of glass dimensions
to center line of common wall (hereinafter called "Net Rentable Area"), together
with common area spaces attributable to all tenants of the Building. There shall
be attributed to core and common area space 2.7% of the Gross Rentable Area.
1.2 The use of the Leased Premises includes the right, in
common with other tenants of the Building, to use the common entranceways,
foyers, lavatories, stairways, elevators, plaza areas and parking areas.
1.3 The Landlord covenants and agrees with Tenant that it will
provide six (6) above-ground parking places for Tenant's use for vehicles to be
used by Tenant's employees, agents, servants or invitees.
1.4 The Leased Premises shall be accepted by Tenant in an "AS
IS" condition, except that Landlord shall undertake certain leasehold
improvements and modifications provided on the
<PAGE> 6
plans and specifications approved by Landlord and Tenant and annexed hereto as
Schedule "B". The cost of the work to complete Schedule "B" has been established
as the sum of TEN THOUSAND EIGHT HUNDRED AND 00/100 ($10,800.00) DOLLARS. Upon
completion of the work and delivery of the Certificate of Occupancy by Landlord
to Tenant, Tenant shall pay the Landlord, promptly, the sum of TEN THOUSAND
EIGHT HUNDRED AND 00/100 ($10,800.00) DOLLARS, representing the consideration
for Landlord installing Tenant's leasehold improvements.
2. TERM OF LEASE
The Landlord leases unto the Tenant, and the Tenant hires the
Leased Premises for the term of two (2) years and seven (7) months to commence
on (the "Commencement Date") and to terminate on November 30, 1998 (the
"Termination Date").
3. RENT
3.1 Except as hereinafter set forth in Article 3.2, Tenant
shall pay Annual Basic Rent for the entire term in the annual sum of THIRTY
THOUSAND SEVEN HUNDRED SEVENTY-FIVE AND 60/100 ($30,775.60) DOLLARS, payable in
equal monthly installments in advance in the sum of TWO THOUSAND FIVE HUNDRED
SIXTY-FOUR AND 63/100 ($2,564.63) DOLLARS, promptly on the first day of each and
every month during the term of this Lease, without demand and without offset or
deduction, together with such additional rent or charges required to be paid by
the Tenant as hereinafter provided.
3.2 It is expressly understood and agreed that on February 15,
1996, Tenant shall pay the Landlord the sum of ONE THOUSAND TWO HUNDRED
EIGHTY-TWO AND 32/100 ($1,282.32) DOLLARS for the period of partial occupancy
prior to the Commencement Date.
3.3 The additional rent to be paid by Tenant hereunder shall be
that amount and charges with respect thereto as hereinafter set forth in
Articles 4 and 7.
3.5 Any installment of rent accruing hereunder, and any other
sum payable hereunder by Tenant to Landlord which is not paid prior to the tenth
(10th) day of any Lease month, shall bear interest at the per annum rate of five
(5%) percent over the prime
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<PAGE> 7
rate charged by The Chase Manhattan Bank, N.A., to its most favored borrowers
(hereinafter in this Lease referred to as the "Premium Rate"), computed from the
time when the same shall respectively become due and payable until the same
shall be paid, which shall reflect daily rate changes as applicable.
4. ADDITIONAL RENT
Additional rent shall be paid by the Tenant in accordance with the
provisions of this Article 4.
4.1 Additional rent, taxes.
(a) In the event that the amount of real estate taxes,
assessments, sewer rents, rates and charges, state and local taxes, transit
taxes or any other governmental charge, general, special, ordinary or
extraordinary, hereinafter collectively called taxes (but not including income
or franchise taxes or any other taxes imposed upon or measured by the Landlord's
income or profits, except if in substitution for real estate taxes as
hereinafter provided) which may now or hereafter be levied or assessed against
the lands upon which the Building stands and upon the Building (hereinafter
collectively called the "Real Property") attributable to any tax year shall be
greater than the amount of taxes on the Real Property attributable to the Base
Year, then the Tenant shall pay to the Landlord, as additional rent, Tenant's
Percentage thereof. "Base Year" for purposes of this Article 4.1 shall mean the
tax rate in effect as of 1996. The Landlord shall take the benefit of the
provisions of any statute or ordinance permitting any assessment to be paid in
installments over a period of time, and Tenant shall be obliged to pay only
Tenant's Percentage of the installments of any such assessment payable during
the term of this Lease or any renewal hereof. Tenant's Percentage of required
payment of Taxes as herein provided shall be included as part of Operating
Expenses as hereinafter provided in Article 4.2, and Tenant shall pay said
obligation as applicable in the manner and in accordance with the terms and
conditions provided in Article 4.2. The amount of taxes for the Base Year,
against which Tenant's liability for additional rent in subsequent years is
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<PAGE> 8
determined, shall be the amount thereof finally determined to be legally payable
by legal proceedings or otherwise. In the event the amount of taxes for the Base
Year has not been finally determined by legal proceedings or otherwise at the
time of payment of taxes for any subsequent year, the actual amount of taxes
paid by Landlord for the Base Year shall be used in the statement provided by
Landlord as basis for Tenant's liability hereunder with respect to such
subsequent year. Landlord agrees to furnish to Tenant, together with the
statement hereinabove referred to, a copy of the final and preliminary tax bill
during each year of the Lease Term. Upon final determination of the amount of
taxes for the Base Year by legal proceedings or otherwise, Landlord shall
deliver to Tenant a statement setting forth the amount of taxes for the Base
Year as finally determined and showing in reasonable detail the computation of
any adjustment due to Landlord by reason thereof. Any payment due to Landlord by
reason of such adjustment shall be paid as hereinbefore provided.
(b) If Landlord shall receive any tax refund or rebate in
respect of any tax year following the Base Year, Landlord may deduct from such
tax refund any reasonable expenses incurred in obtaining such tax refund, and
out of the remaining balance of such tax refund, Landlord shall pay to Tenant
Tenant's Percentage of the taxes being refunded.
(c) If the tax year for real estate taxes shall be changed,
then an appropriate adjustment shall be made in the computation of the
additional tax due to Landlord or any amount due to Tenant. The computation
shall be made in accordance with generally accepted accounting principles
applied on a consistent basis.
(d) If the last year of the term of this Lease ends on any day
other than the last day of a tax year, any payment due to Landlord or to Tenant
by reason of any increase or decrease in taxes shall be pro-rated and Landlord
and Tenant shall make any required adjustment within thirty (30) days after the
final taxes
4
<PAGE> 9
have been established for the operational year. This covenant shall survive the
expiration or termination of this Lease.
(e) If at any time during the term of this Lease the method or
scope of taxation prevailing at the commencement of the Lease term shall be
altered, modified or enlarged so as to cause the method of taxation to be
changed, in whole or in part, so that in substitution for the real estate taxes
now assessed there may be, in whole or in part, a capital levy or other
imposition based on the value of the premises, or the rents received therefrom,
or some other form of assessment based in whole or in part on some other
valuation of the Landlord's real property comprising the demised premises, as if
such real property were the only property owned by the Landlord, then and in
such event, such substituted tax or imposition shall be payable and discharged
pro rata, as applicable, in accordance with the obligations set forth in this
Article 4, computed on the basis of such law promulgated which shall authorize
such change in the scope of taxation, and as required by the terms and
conditions of the within Lease.
4.2 Additional rent expense.
(a) In the event that the amount of Operating Expenses (as
hereinafter defined) for the Base Year (for the purposes of this Article 4.2
herein defined to be the calendar year 1996) shall be less than the amount of
Operating Expenses for any succeeding calendar year, then Tenant shall pay to
Landlord Tenant's Percentage of the increase in Operating Expenses for said
succeeding calendar year, such cost to be projected and interpolated as if the
Building were 95% rented during the Base year hereinabove defined.
(b) For the purposes of this Article 4.2, "Operating Expenses"
shall mean the following expenses paid or incurred by Landlord in connection
with the Building and the Property:
(A) wages, salaries, fees and other compensation and
payments and payroll taxes and contributions to any social security,
unemployment insurance, welfare, pension or similar fund and payments for other
fringe benefits required by law or by union agreement (or, if the employees or
any of them are non-union, then payments for benefits
5
<PAGE> 10
comparable to those generally required by union agreement in first-class office
buildings in the Monmouth County area, which are unionized) made to or on behalf
of all employees of Landlord performing services rendered in connection with the
operation and maintenance of the Building and the Property, including, without
limitation, elevator operators, elevator starters, window cleaners, porters,
janitors, maids, miscellaneous handymen, watchmen, persons engaged in patrolling
and protecting the Building and the Property, carpenters, engineers, firemen,
mechanics, electricians, plumbers, persons engaged in the operation and
maintenance of the Building and Property, Building superintendent and
assistants, Building manager, and clerical and administrative personnel.
(B) The uniforms of all employees, and the cleaning, pressing
and repair thereof.
(C) Cleaning costs for the Building and the Property, including
the windows and sidewalks, all snow and rubbish removal (including separate
contracts therefor) and the costs of all labor, supplies, equipment and
materials incidental thereto.
(D) Premiums and other charges incurred by Landlord with
respect to all insurance relating to the Building and the Property and the
operation and maintenance thereof, including, without limitation: fire and
extended coverage insurance, including windstorm, flood, hail, explosion, riot,
rioting attending a strike, civil commotion, aircraft, vehicle and smoke
insurance; public liability; elevator; workmen's compensation; boiler and
machinery; rent; use and occupancy; health, accident and group life insurance of
all employees; and casualty rent insurance.
(E) The cost of electricity, heat, water and sewer and any and
all other utility services used in connection with the operation and maintenance
of the Building and the Property (excluding electricity and other utility
services, if any, which are paid directly by tenants or which should be charged
to such other tenants). For the purpose of this Article 4.2(E), "cost of
electricity" shall include the cost of electricity for common areas attributable
to Building operation [i.e. mechanical equipment operation, common area
electricity usage, exterior lighting and, in general, all other electric utility
usage mutually enjoyed by all tenants (based upon the electricity rate to be
adjusted for summer and winter as applicable, and inclusive of demand charge,
energy charge and energy adjustment charge in effect as of the Commencement
Date) ] reduced by amounts due from tenants for special electrical usage in
conjunction with elapsed time recorded usage for overtime operation of the
Building mechanical systems actually paid to Landlord pursuant to Article 7
hereunder, as said paragraph pertains to electrical usage only.
(F) Costs incurred for operation, service, maintenance,
inspection, repair and alteration of the Building, the Property, and the
heating, air-conditioning, ventilating, plumbing, electrical and elevator
systems of the Building (including any separate contract therefor) and the costs
of labor, materials, supplies and equipment used in connection with all of the
aforesaid items.
(G) Sales and excise taxes and the like upon any of the
expenses enumerated herein.
(H) Management fees of the managing agent for the Building, if
any. If there shall be no managing agent, or if the managing agent shall be a
company affiliated with Landlord, the management fees that would customarily be
6
<PAGE> 11
charged for the management of the Building by an independent, first-class agent
in the Monmouth county area, not to exceed five (5%) per cent of the aggregate
gross rent collected.
(I) The cost of replacements for tools and equipment used in
the operation and maintenance of the Building and the Property.
(J) The cost of repainting or otherwise redecorating any part
of the Building other than premises demised to tenants in the Building.
(K) Decorations for the lobby and other public portions of the
Building below the second floor.
(L) The cost of telephone service, postage, office supplies,
maintenance and repair of office equipment and similar costs related to
operation of the Building Superintendent's office.
(M) The cost of licenses, permits and similar fees and charges
related to operation, repair and maintenance of the Building.
(N) Auditing fees necessarily incurred in connection with the
maintenance and operation of the Building, and accounting fees incurred in
connection with the preparation and certification of a real estate tax
escalation and the Operating Expenses escalation statements pursuant to this
Article 4.
(O) All costs incurred by Landlord to retrofit any portion or
all of the Building to comply with a change in existing legislation, whether
Federal, State or Municipal; repairs, replacements and improvements which are
appropriate for the continued operation of the Building as a first-class
building.
(P) All expenses associated with the installation of any energy
or cost saving devices, which costs shall be included as part of Operating
Expenses only if such installation results in actual cost saving. Such costs
shall be amortized over a ten- (10) year period and the annualized portion
thereof shall be included as part of Operating Expenses for the unexpired
portion of the Lease Term.
(Q) The pro rata share of all costs and expenses relating to
the Common Area of the Property and its maintenance, operation and repair of any
common facilities including, but not limited to, snow removal, landscaping and
similar services.
(R) Any and all other expenditures of Landlord in connection
with the operation, repair or maintenance of the Property or the Building which
are properly expensed in accordance with generally accepted accounting
principals consistently applied with respect to the operation, repair and
maintenance of first-class office buildings in the Monmouth County area.
(S) Taxes in excess of Base Year taxes paid in accordance with
the terms and conditions of Article 4.1 hereinbefore provided.
If Landlord shall purchase any item of capital equipment or make any capital
expenditure as described in subsections 0 and P above, then the costs for the
same shall be included in Operating Expenses
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<PAGE> 12
in the year of installation and in subsequent years amortized on a straight-line
basis, over an appropriate period, but not more than ten (10) years, with an
interest factor equal to the prime interest rate charged by The Chase Manhattan
Bank, N.A., to its most favored borrowers. If Landlord shall lease such item of
capital equipment, then the rentals or other operating costs paid pursuant to
such leasing shall be included in Operating Expenses for each year in which they
are incurred. Notwithstanding the foregoing, "Operating Expenses" shall not
include expenditures for any of the following:
(AA) The cost of any capital addition made to the
Building (other than that specified as part of Operating Expenses as
provided above), including the cost to prepare space for occupancy by a
new tenant.
(BB) Repairs or other work occasioned by fire,
windstorm or other insured casualty or hazard, to the extent that
Landlord shall receive proceeds of such insurance.
(CC) Leasing commissions, advertising expenses and
other costs incurred in leasing or procuring new tenants.
(DD) Repairs or rebuilding necessitated by
condemnation.
(EE) Depreciation and amortization of the
Building, other than
(i) capital expenditures which under generally
applied real estate practice are expensed or regarded as
deferred expenses;
(ii) capital expenditures appropriate to a
first-class office building or required by law as described in
subsection 0 above; and
(iii) capital expenditures designed to result
in savings or reductions in Operating Expenses as described in
subsection P above.
(FF) The salaries and benefits of executive officers of
Landlord, if any.
Operating Expenses shall be "net" and, for that purpose, shall be reduced by the
amounts of any reimbursement or credit received or receivable by Landlord with
respect to an item of cost that is included in Operating Expenses (other than
reimbursements to Landlord by tenants of the Building pursuant to Operating
Expenses escalation provisions). If Landlord shall eliminate the payment of any
wages or other labor costs or otherwise reduce Operating Expenses as a result of
the installation of new devices or equipment, or by any other means, then in
computing the Operating
8
<PAGE> 13
Expenses the corresponding items shall be deducted from the Operating Expenses
allowance for the operating year.
(c) As soon as reasonably feasible after the expiration of the
first twelve (12) month Lease year (Base Year), Landlord will furnish to Tenant
a statement by an officer of Landlord showing in reasonable detail the Operating
Expenses for the Base Year. As soon as reasonably feasible after the expiration
of each twelve (12) month Lease year after the Base Year, Landlord will furnish
to Tenant a statement by an officer of the Landlord showing in reasonable detail
the operating Expenses for said twelve (12) month Lease year, as compared to the
statement of the Operating Expenses for the preceding year. Landlord will, at
the request of Tenant, furnish such invoices and other documentation as Tenant
may reasonably require with respect to the statements to be furnished by
Landlord to Tenant as hereinabove provided. At the time of rendering such
statement, any adjustment due to the Landlord or Tenant under the provisions of
Article 4.2, shall be paid or credited as applicable as hereinafter provided as
follows:
(i) For the first twelve (12) month Lease year (Base
Year), and upon issuance of the Base Year statement showing the
electricity for common area and fuel costs for entire Building computed
based upon the applicable rates, including demand charge, energy charge
and energy adjustment charges in effect at the Commencement Date, any
amount due to Landlord because of rate increases which occur during the
Base Year, and as shown on such statement of expenses, shall be paid by
Tenant within thirty (30) days after Landlord shall have submitted the
statement.
(ii) Commencing with the second year of the Lease term,
Tenant agrees to pay, in addition to the Annual Basic Rent, a sum equal
to two (2%) per cent of such Annual Basic Rent in twelve (12) equal
monthly installments to be paid together with the monthly payments of
Annual Basic Rent required hereunder. At the end of the second Lease
year, Landlord and Tenant shall adjust such additional payment in the
manner hereinafter set forth in subsection (iii);
(iii) Commencing with the third year of the Lease term,
in the event the Tenant shall be required to pay additional rent for
operating Expenses as in this Article 4.2 required, the Tenant agrees,
in addition to the Base Rent to be paid pursuant to Article 3, that it
will pay monthly 1/12th of the sum required to be paid as additional
rent attributable to Tenant's Percentage of Operating Expenses for the
prior Lease year. Such monthly payment shall be made together with
Tenant's regular monthly base rental payment. At the end of each Lease
year, there shall be an adjustment between the Landlord and Tenant with
respect to the aggregate of the monthly additional rent paid for
Operating Expenses so as to either require payment by Tenant to Landlord
of any amount required in excess of the twelve (12) monthly payments,
based
9
<PAGE> 14
on the prior year's Operating Expenses as hereinabove provided; or, in
lieu thereof, if applicable, the Tenant shall be credited with any
overpayment made in excess of required Operating Expenses for that
calendar year. Landlord shall furnish Tenant in any event with the
computation of detailed Operating Expenses to the applicable Lease year
in the manner hereinabove provided, and any required payment to Landlord
or credit to Tenant, as applicable, shall be paid or made within thirty
(30) days after Landlord's demand and furnishing to Tenant the required
computation and statement of Tenant's Percentage of Operating Expenses
as above provided.
(d) Tenant or its representatives shall have the right to
request to examine Landlord's books and records with respect to the items in the
foregoing statement of Operating Expenses during normal business hours at any
time within ninety (90) days following the delivery by Landlord to Tenant of
such statement. Tenant shall have an additional sixty (60) days to file any
written exception to any item of expense, however, nothing herein shall be
deemed to afford Tenant any right to withhold any payment due from Tenant to
Landlord; and, in the event of any such withholding of payment of Annual Basic
Rent, Tenant shall pay the Premium Rate, computed daily from the date of default
to the date of payment. Each expense for which Landlord shall bill Tenant as set
forth hereinabove shall be necessary and reasonable for the operation of the
Building and Property and shall be delineated by Landlord in detail to Tenant.
(e) If the last year of the term of this Lease ends on any day
other than the last day of a calendar year, any payment due to Landlord or to
Tenant by reason of any increase or decrease in Operating Expenses shall be
prorated and Tenant shall pay any amount due to Landlord within thirty (30) days
after being billed therefor. This covenant shall survive the expiration or
termination of this Lease.
4.3 For the purpose of this Lease, Tenant's Percentage shall be
16%. Tenant's Percentage shall be revised as may be required if the Building is
increased or decreased in size.
5. USE
5.1 The Tenant covenants and agrees to use and occupy the
Leased Premises for office purposes only, and for no other purpose.
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<PAGE> 15
5.2 The Tenant covenants and agrees that it will not use the
Leased Premises for any use which creates an extra hazard of fire or other
danger or casualty, or which will increase the rate which Landlord or other
tenants must pay to secure fire or liability insurance, or which will render the
building or its improvements uninsurable.
6. REPAIRS AND MAINTENANCE
6.1 During the term of this Lease, the Landlord, at its
expense, shall keep in good order, safe condition and repair, the structural
parts of the building and common areas of which the Leased Premises are a part,
including the walls, roof, floor, foundation load bearing members, trusses and
joists, as well as all plumbing, utilities and facilities serving the Leased
Premises, except for repairs or maintenance occasioned by the negligence or
deliberate act of Tenant, or its agents, servants, employees and invitees which
shall be then repaired at the cost and expense of the Tenant.
6.2 The Landlord, as part of Operating Expenses, shall take
good care of and maintain and repair: (i) all other portions of the Building,
including common Areas and all Building systems incorporated therein; (ii) the
lawns, shrubbery, driveway, sidewalks, entranceways, foyers, curbs and parking
area on the Property; and (iii) provide snow removal.
6.3 Tenant agrees to keep the Leased Premises in as good repair
as they are at the beginning of the term of this Lease, reasonable use and wear
thereof and damage by fire or other casualty not caused by Tenant excepted.
Tenant further agrees not to damage, overload, deface or commit waste of the
premises. Tenant shall be responsible for all damage of any kind or character to
the Leased Premises, including the windows, floors, walls and ceilings, caused
by Tenant or by anyone using or occupying the premises by, through or under the
Tenant. Landlord shall repair the same as deemed necessary by Tenant or
Landlord, applying reasonable commercial standards, and Tenant agrees to pay the
costs incurred therefor to Landlord upon demand. Anything hereinabove
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<PAGE> 16
contained to the contrary notwithstanding, it is expressly understood and agreed
that the Tenant shall, at its sole cost and expense, be responsible for the
repair, maintenance and replacement of any items installed by Landlord for
Tenant's use as leasehold improvements over and above the improvements furnished
by Landlord, in accordance with Schedule "B". Landlord shall not be liable by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations, additions or improvements in or to the
Leased Premises or the Building or to any appurtenances or equipment therein.
There shall be no abatement of rent because of such repairs, alterations,
additions or improvements or because of any delay by Landlord in making the
same. Tenant shall give to Landlord prompt written notice of any accidents to,
or defects in plumbing, electrical, heating and air-conditioning systems and
apparatus located in the Leased Premises.
7. LANDLORD'S SERVICES
7.1 Landlord shall furnish the services for which the Building
is equipped, to the extent that the existing facilities for such services
permit, except that heat and air-conditioning, as required, shall be furnished
only between the hours of 8:00 A.M. and 6:00 P.M. Monday through Friday,
(Saturdays, Sundays and national holidays excluded). Landlord agrees at Tenant's
request, and at a cost to Tenant to be mutually agreed upon, prior to the
commencement date of this Lease and as to be set forth in approved plans and
specifications, to install a by-pass switch for monitoring hours of usage by
Tenant solely for air-conditioning and heating during hours other than as set
forth hereinabove, and it is further agreed that Tenant shall pay to Landlord
the cost of said overtime usage as contemplated herein upon invoice from
Landlord to Tenant at the rate of $40.00 per hour during the first year of the
term hereof and thereafter, said hourly charge shall be increased annually by
the percentage increase in electric and gas utility rates for the Building
operation, if any.
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7.2 Landlord shall furnish to Tenant a separate and independent
electric meter to measure Tenant's use of electric energy in the Leased
Premises, the cost of which shall be paid for by Tenant at its sole cost and
expense. Effective as of the Occupancy Date, electric energy for Tenant's
requirements shall be furnished for lighting, electric typewriters, adding
machines, copying machines, and any other similar electricity requirements, as
are customarily used in a general business office, not including high energy
computers. Any requirements for high energy computers shall be only with the
express written consent of Landlord who reserves the right to require Tenant to
pay any additional costs attributable to such high energy use including any
additional requirements for air-conditioning attributable to such use.
7.3 Tenant agrees not to connect any additional electrical
equipment of any type to the Building electric distribution system over and
above that equipment shown on Tenant's Plan without the Landlord's prior written
consent, however, Landlord shall not unreasonably withhold such consent.
Landlord shall not be liable in any way to Tenant for any failure or defect in
the supply or character of electric energy furnished on the Leased Premises by
reason of any requirement, act or omission of the public utility serving the
Building with electricity. Tenant's use of electric energy in the Leased
Premises shall not at any time exceed the capacity of any of the electric
conductors and equipment in or otherwise serving the Leased Premises.
7.4 Janitorial services are as referred to on Schedule "C"
annexed hereto and made a part hereof.
8. INABILITY TO PERFORM
In case Landlord is prevented or delayed in furnishing any
service as set forth herein or otherwise by reason of any cause beyond
Landlord's reasonable control, Landlord shall not be liable to Tenant therefor,
nor shall Tenant be entitled to any abatement or reduction in Annual Basic Rent
by reason thereof, nor shall the same give rise to a claim in Tenant's favor
that such absence of Building services constitutes actual or constructive,
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total or partial eviction or renders the Leased Premises untenantable. Landlord
reserves the right to stop any service or utility system, when necessary by
reason of accident or emergency, or until necessary repairs have been completed,
provided, however, that in each instance of stoppage, Landlord shall exercise
reasonable diligence to eliminate the cause thereof. Except in case of emergency
repairs, Landlord will give Tenant reasonable advance notice of any contemplated
stoppage and will use reasonable efforts to avoid unnecessary inconvenience to
Tenant by reason thereof. Landlord agrees, however, that it will use all
reasonable efforts to obtain restoration of services based on the then existing
circumstances.
9. INSURANCE
Tenant shall keep in force at its own expense comprehensive
general liability insurance (including a contractual liability insurance
endorsement) in companies acceptable to Landlord and naming as insured Landlord,
owner of the Property, Landlord's managing agent, if any, and Tenant against
claims for "personal injury", including bodily injury and death, in amounts not
less than THREE MILLION AND 00/100 ($3,000,000.00) DOLLARS, and for property
damage in amounts not less than ONE MILLION AND 00/100 ($1,000,000.00) DOLLARS,
and Tenant will further deposit the policy or policies of such insurance, or
certificates thereof, with Landlord. Said policy or policies of insurance or
certificates thereof shall have attached thereto an endorsement that such policy
shall not be canceled without at least ten (10) days' prior written notice to
Landlord and Landlord's managing agent, if any, and that no act or omission of
Tenant shall invalidate the interest of Landlord under said insurance. Landlord
and Tenant hereby release the other from any and all liability or responsibility
to the other or anyone claiming through or under them by way of subrogation or
otherwise for any loss or damage to person or property covered by any insurance
then in force, even if such loss or damage shall have been caused by the fault
or negligence of the other party, or anyone for whom such party may be
responsible, provided, however,
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that this release shall be applicable and in force and effect only to the extent
of and with respect to any loss or damage occurring during such time as the
policy or policies of insurance covering said loss shall contain a clause or
endorsement to the effect that this type of release shall not adversely affect
or impair said insurance or prejudice the right of the insured to recover
thereunder.
10. LANDLORD'S ACCESS FOR FUTURE CONSTRUCTION
The Landlord reserves the right to enter the Building, Property
and Leased Premises upon reasonable prior notice, except in emergencies, in
connection with the construction and erection of any additions or improvements
to the Building and Property of which the Leased Premises are a part, provided
that in the use of such right the Landlord shall not unreasonably interfere with
the use of the parking areas and driveways or the Tenant's business, or impair
Tenant's visibility to the exterior from existing windows, or impair access to
the Demised Premises.
11. FIXTURES
11.1 The Tenant may install and remove Tenant's property,
equipment and trade fixtures in the Leased Premises during the term of the
Lease. If the Tenant moves out or is dispossessed, and fails to remove any such
property, equipment and fixtures after the last day for which all Annual Basic
Rent is paid, then the said property, equipment and fixtures shall be deemed at
the option of the Landlord to be abandoned, and Tenant shall reimburse to
Landlord the reasonable cost of removal thereof from the Leased Premises,
including any cost of disposal thereof, subject to Tenant's obligations pursuant
to Article 20 as hereinafter provided.
11.2 The Tenant shall repair, at its cost and expense, any
damage to the Leased Premises resulting from the removal of its property,
equipment and fixtures. However, if Tenant fails to do so, it shall be
responsible to reimburse the Landlord for the reasonable cost of compliance with
the terms and conditions of the within covenant.
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11.3 All installation and removal of Tenant's fixtures,
property and equipment shall be done in accordance with all applicable laws and
ordinances and the rules and regulations of all governmental boards and bodies
having jurisdiction.
12. CHANGES IN OR ABOUT PREMISES
This Lease shall not be affected or impaired by any change in
any sidewalk, alleys or streets adjacent to or around the Building, or in
parking regulations of the Township of Middletown or any County or State Agency
or Office.
13. ASSIGNMENT AND SUBLETTING
Tenant shall not assign, mortgage or otherwise transfer or
encumber this Lease, nor sublet all or any part of the Leased Premises or permit
the same to be occupied or used by anyone other than Tenant or its employees
without Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed. It will not be unreasonable for Landlord to
withhold its consent if the reputation, financial responsibility, or business of
a proposed assignee or subtenant is unsatisfactory to Landlord, or if Landlord
deems such business to not be consistent with that of other tenants in the
Building, or if the intended use by the proposed assignee or subtenant conflicts
with any commitment made by Landlord to any other tenant in the Building, or if
the proposed rental rate is lower than the then current rate at which similar
space in the Building is being offered by Landlord, provided that:
(A) Tenant's request for consent shall be in writing and
contain the name, address, and description of the business of the
proposed assignee or subtenant, its most recent financial statement and
other evidence of financial responsibility, its intended use of the
Leased Premises, and the terms and conditions of the proposed assignment
or subletting.
(B) Within twenty (20) days from receipt of such request,
Landlord shall either: (a) grant or refuse consent; or (b) elect to
require Tenant (i) to execute an assignment of lease or sublease of
Tenant's interest hereunder to Landlord or its designee upon the same
terms and conditions as are contained herein, together with an
assignment of Tenant's interest as sublessor in any such proposed
sublease, or (ii) if the request is for consent to a proposed assignment
of this Lease, to terminate this Lease and the term hereof effective as
of the last day of the third month following the month in which the
request was received.
(C) Each assignee hereunder shall assume and be deemed to have
assumed this Lease and shall be and remain
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liable jointly and severally with Tenant for all payments and for the
due performance of all terms, covenants, conditions and provisions
herein contained on Tenant's part to be observed and performed. No
assignment shall be binding upon Landlord unless the assignee shall
deliver to Landlord an instrument in recordable form containing a
covenant of assumption by the assignee, but the failure or refusal of
assignee to execute the same shall not release assignee from its
liability as set forth herein.
(D) If such consent to any subletting or assignment hereunder
shall be given:
(i) such consent to assign this Lease or to sublet
shall not release or discharge Tenant of or from any liability,
whether past, present or future, under this Lease and Tenant
shall continue fully liable under this Lease for any default
under or in respect of any of the terms, covenants, conditions,
provisions or agreements of this Lease;
(ii) the subtenant or subtenants shall agree to perform
faithfully and be bound by all the terms, covenants,
conditions, provisions or agreements of this Lease to the
extent of the space sublet;
(iii) an executed copy of each sublease and agreement
of assumption of performance by each of the subtenants (limited
to the extent of the space sublet) shall be delivered to
Landlord promptly upon execution;
(iv) (a) the Tenant shall pay to the Landlord monthly,
one-half of any increment in rent received by Tenant per square
foot per annum over the Annual Basic Rent and any additional
rent then in effect during the year of assignment or
subletting, which payment shall be made monthly together with
the required monthly payments of Annual Basic Rent to be paid
pursuant to Article 3; and (b) if Tenant receives any
consideration or value for such assignment or subletting
Landlord shall be paid one-half of any such consideration or
value within 10 days after receipt of the same by Tenant. As a
condition hereunder, Tenant warrants and represents to Landlord
that it will furnish to Landlord a copy of all pertinent
documents with respect to any such assignment or subletting so
as to establish Tenant's obligation to Landlord hereunder.
14. FIRE
14.1 In case of any damage to the building on the property by
fire or other casualty occurring during the term of this Lease or previous
thereto, which renders the Leased Premises wholly untenantable so that the same
cannot be repaired within one hundred twenty (120) days from the happening of
such damage, then the terms hereby created shall, at the option of the Landlord,
or Tenant, terminate from the date of such damage, provided Landlord shall
advise Tenant, in writing, within thirty (30) days of such casualty that it
cannot repair the damage within one hundred twenty (120) days. In the event the
Landlord elects to terminate the
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Lease for any reason which is due to the inability to restore the same within
the one hundred twenty (120) day period, Landlord or Tenant shall notify the
other, in writing, by certified mail, return receipt requested, of such a fact
within forty (40) days of the happening of the fire or casualty, and in such
event the Tenant shall immediately surrender the Leased Premises and shall pay
rent only to the time of such damage and the Landlord may re-enter and repossess
the premises discharged from this Lease. In the event the Landlord can restore
the premises within one hundred twenty (120) days, it shall advise the Tenant of
such fact within thirty (30) days in writing, by certified mail, return receipt
requested, and the Lease shall remain in full force and effect during the period
of Landlord's restoration, except that rent shall abate while the repairs and
restorations are being made, but the rent shall recommence within ten (10) days
after restoration of the premises and delivery of the same by the Landlord to
the Tenant, together with a Certificate of Occupancy as required by applicable
governmental authority having jurisdiction thereof. Landlord agrees that it will
undertake reconstruction and restoration of the damaged premises with due
diligence and reasonable speed and dispatch. If a Certificate of Occupancy shall
not be required, the Premises shall be deemed restored when Landlord shall
certify to Tenant, in writing, that it has completed restoration.
14.2 If the building shall be damaged, but the damage is
repairable by Landlord's estimation within one hundred twenty (120) days, the
Landlord agrees to repair the same with reasonable promptness. In such event,
the rent accrued and accruing shall not abate, except for that portion of the
Leased Premises that has been rendered untenantable and as to that portion the
rent shall abate based on equitable adjustments as determined by Landlord. The
Leased Premises shall be deemed untenantable to the extent that access to the
Premises shall be denied which shall include unavailability of elevator service,
or if Tenant cannot conduct its business at the Premises in a normal manner as
heretofore conducted prior to the fire or casualty.
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14.3 In connection with Landlord's restoration as hereinabove referred
to, in determining what constitutes reasonable promptness consideration shall be
given to delays caused by acts of God, strikes, and other causes of Force
Majeure beyond the Landlord's control.
14.4 The Tenant shall immediately notify the Landlord in case of fire or
other damage to the premises.
14.5 Notwithstanding anything contained in 14.1 or 14.2 above, if such
repairs are for any reason not completed within one hundred twenty (120) days,
then the Tenant shall have the right to terminate this Lease, and in such event
of termination Landlord and Tenant shall thereupon be released of liability one
to the other, and the within Lease shall be deemed null and void.
15. COMPLIANCE WITH LOCAL RULES AND REGULATIONS
15.1 Landlord covenants and agrees with Tenant that upon
acceptance and occupancy of the Leased Premises, the Leased Premises will comply
with all statutes, ordinances, rules, orders, regulations and requirements of
the Federal State and Municipal Government and of any and all their departments
and bureaus, and to the requirements of the Board of Fire Underwriters or their
equivalent in the State of New Jersey, which are applicable to the use and
construction of the same.
15.2 The Tenant covenants and agrees that upon and after
acceptance and occupancy of the Leased Premises, it will promptly execute and
comply with all statutes, ordinances, rules, orders, regulations and
requirements of the Federal, State and Municipal Government and of any and all
their departments and bureaus (provided same are applicable to Tenant's
occupancy or use of said premises in the conduct of its business) or to the
reasonable rules promulgated by the Landlord in writing for the correction,
prevention and abatement of nuisances, violations or other grievances, in, upon
or connected with said premises during said term and arising from the operations
of the Tenant therein, at the Tenant's cost and expense, subject to the right of
the Tenant to contest the decision by any such department or bureau as
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hereinafter mentioned. In the event the Tenant contests any such governmental
decision, it shall indemnify, defend and save the Landlord harmless from any
fine, penalty, costs and liability imposed upon the Landlord as a result of
Tenant's failure so to comply. The Tenant covenants and agrees, at its own cost
and expense, to comply with such regulations or requests as may be required by
the fire or liability insurance carriers providing insurance for the Leased
Premises, and will further comply with such other requirements that may be
promulgated by the Board of Fire Underwriters or their equivalent in connection
with the use and occupancy of the Leased Premises by the Tenant in the conduct
of its business. Anything hereinabove to the contrary notwithstanding, it is
expressly understood and agreed that the Tenant shall not be required to make
structural changes in the building if the same are required by governmental
regulation, as the same may be applicable as a matter of general application to
the Leased Premises, provided that the Tenant shall be required to make
structural changes that may be required by governmental regulation if directly
attributable and resulting from Tenant's occupancy and use of the building in
the conduct of its business.
15.3 If the Tenant shall fail or neglect to comply with the
aforesaid statutes, ordinances, rules, orders, regulations and requirements or
any of them, failure of the Tenant to comply with the requirements of
subparagraph 15.1 above shall be deemed an item of default for which the
Landlord shall have recourse by termination of this Lease or exercise of any
other rights reserved to the Landlord hereunder, in accordance with the terms
and conditions of this Lease.
16. TERMINATION ION
16.1 If there should occur any default on the part of the
Tenant in the performance of any conditions and covenants herein contained after
required notice and expiration of applicable grace periods, or if during the
term hereof the Leased Premises or any part thereof shall be or become
abandoned, deserted, or vacated, or should the Tenant be evicted by summary
proceedings or
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otherwise, the Landlord, in addition to any other remedies herein contained or
as may be permitted by law, may without being liable for damages, re-enter the
said premises and take possession thereof; and, without being obligated to
re-let the premises as agent for the Tenant or otherwise, the Landlord may at
its option re-let the premises and receive the rents therefor and apply the
same, first to the payment of such expenses, including real estate brokerage,
reasonable attorney fees and costs, as the Landlord may have been put to in
re-entering and repossessing the same and in making such repairs and alterations
as may be necessary; and second to the payment of rents due hereunder. The
Tenant shall remain liable for such rents as may be in arrears and also the
rents as may accrue subsequent to the re-entry by the Landlord, to the extent of
the difference between the rents reserved hereunder and the rents, if any,
received by the Landlord during the remainder of the unexpired term hereof,
after deducting the aforementioned expenses, fees and costs; the same to be paid
as such deficiencies arise and are ascertained by Landlord. Said deficiencies
will be increased by the Premium Rate retroactive to the date of re-entry by
Landlord. For the purposes of this Lease, Premium Rate shall be the prime rate
then being charged by The Chase Manhattan Bank at its main office in New York
city, New York, plus one (1%) per cent per annum.
16.2 Except for monetary defaults as provided in Article 16.3,
if the Tenant defaults in the performance of any conditions or covenants in this
Lease contained, or should the Tenant be adjudicated a bankrupt, insolvent or
placed in receivership, or should proceedings be instituted by or against the
Tenant for bankruptcy, insolvency, receivership, agreement of composition or
assignment for the benefit of creditors, or if this Lease, or the estate of the
Tenant hereunder shall pass to another by virtue of any court proceedings, writ
of execution, levy, sale or by operation of laws then in either of such events,
unless they shall be cured within thirty (30) days after receipt of written
notice from Landlord or his agent, the Landlord may, at any time
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thereafter, terminate this Lease and the term hereof, upon giving to the Tenant
or to any trustee, receiver, assignee or other person in charge of or acting as
custodian of the assets or property of the Tenant, thirty (30) days' notice in
writing, of such termination. This Lease and the term hereof shall end on the
date fixed in such notice as if the said date was the date originally fixed in
this Lease for the expiration hereof. Notwithstanding the termination, the
Landlord may still enforce its rights reserved pursuant to subparagraph 16.1.
16.3 Anything in subparagraphs 16.1 and 16.2 above to the
contrary notwithstanding, any default by Tenant in the payment of rent or any
other monetary obligation shall be cause for termination if the same is not paid
promptly as required by the terms and conditions of the Lease. Any other default
in the Lease shall be cause for termination if the same is not cured within
thirty (30) days after written notice given in the same manner as provided in
subparagraph 16.2 above.
16.4 It is expressly understood and agreed that if the Lease is
terminated by the Landlord as permitted hereunder, Landlord agrees that it will
use reasonable efforts to mitigate Tenant's damages. For the purposes of this
Lease, it shall be conclusively presumed that Landlord has used reasonable
efforts to mitigate Tenant's damages if it enters into a written real estate
brokerage agreement with a recognized commercial broker in the Monmouth County
area authorized to rent the Leased Premises under then prevailing economic and
rental conditions.
17. INSPECTION BY LANDLORD
The Tenant agrees that the said Landlord's agents, and other
representatives, shall have the right to enter into and upon the Leased
Premises, or any part thereof, at all reasonable hours, upon reasonable prior
notice, without unduly disturbing the operations of the Tenant for the purpose
of examining the same or for making such repairs or alterations therein as may
be necessary for the safety and preservation thereof.
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18. NOTICES
All notices required or permitted to be given to the Landlord
shall be given by certified mail, return receipt requested, addressed to the
Landlord at the address set forth at the head of this agreement or such other
place as the Landlord shall designate in writing. All notices required or
permitted to be given to the Tenant shall be given by certified mail, return
receipt requested, addressed to the Tenant at the Leased Premises, or such other
place as the Tenant shall designate in writing.
19. NON-WAIVER
The failure of the Landlord or Tenant to insist upon strict
performance of any of the covenants or conditions of this Lease or to exercise
any option herein conferred in any one or more instances, shall not be construed
as a waiver or relinquishment of any such covenants, conditions or options, but
the same shall be and remain in full force and effect. If the Landlord pursues
any remedy granted by the terms of this Lease or the terms of applicable law, it
shall not be construed as a waiver or relinquishment of any other remedy
afforded thereby.
20. ALTERATIONS OR IMPROVEMENTS BY TENANT
20.1 Tenant shall not do any painting or decorating, or erect
any partitions or make any alterations or improvements in the Premises, or do
any nailing, boring, or screwing into the ceilings, walls, or floors, without
the prior written consent of Landlord which shall not be unreasonably withheld,
provided Tenant shall have furnished to Landlord a plan and/or specifications
with respect to Tenant's proposed work. Unless objected to by Landlord in
writing, such work may be performed by Tenant or under the direction of Tenant,
at its cost. Nothing herein contained shall be construed to permit Tenant at any
time to make any structural modifications to the Leased Premises or any
alterations or modifications to existing Building systems in the Leased
Premises. Tenant hereby agrees that all alterations and improvements made in, to
or on the Premises shall, unless otherwise provided by written agreement, be the
property of Landlord and shall remain upon and be
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surrendered with the Premises. At Landlord's request all such alterations and
improvements shall be restored to their original condition at Tenant's expense
at the termination of this Lease, which obligation on the part of Tenant is
imposed by Landlord as part of its consent to any work undertaken by Tenant as
permitted hereunder. Nothing hereinabove contained shall require the Tenant to
remove any of the improvements which shall be installed by Landlord in
accordance with Schedule "B".
20.2 Nothing herein contained shall be construed as a consent
on the part of the Landlord to subject the estate of the Landlord to liability
under the Mechanic's Lien Law of the State of New Jersey, it being expressly
understood that the Landlord's estate shall not be subject to such liability.
21. NON-LIABILITY OF LANDLORD
21.1 It is understood and agreed that Landlord, in its capacity
as Landlord and, if applicable, as builder or general contractor of the building
in which the Leased Premises are located, shall not be liable to Tenant,
Tenant's agents, employees, contractors, invitees or any other occupant of the
Leased Premises for any damage to property or for any inconvenience or annoyance
to Tenant or any other occupant of the Leased Premises or interruption of
Tenant's or such other occupant's business, arising out of or attributable to
(i) the design and construction of the Leased Premises and the building of which
the Leased Premises are a part; (ii) any maintenance, repairs, replacements,
additions, alterations, substitutions and installations made to the Leased
Premises and the building of which the Leased Premises are a part; and (iii) any
cause or happening whatsoever, except for the gross negligence or willful
misconduct of the Landlord and Landlord's agents, servants and employees with
respect to any of the events or occurrences referred to in subdivisions (i) and
(ii), or otherwise. The foregoing covenant is an express inducement to Landlord
to enter into the within Lease and the Tenant acknowledges that it understands
the scope and consequence of Landlord's exculpation as herein provided.
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21.2 Anything hereinabove contained to the contrary
notwithstanding, the Tenant in all events shall assume all risk of damage or
loss to its property, equipment and fixtures occurring in or about the Leased
Premises, whatever the cause of such damage or 1066, including Landlord's
negligence.
22. CONDEMNATION
If the whole or part of the Leased Premises shall be acquired
by Eminent Domain for any public or quasi public use or purpose so that the
premises cannot be used for its intended leased purposes or if access to the
parking lot be denied, or if the parking areas shall be taken by Eminent Domain
and the Landlord shall not substantially replace such parking areas so as to
provide the parking spaces for Tenant required pursuant to Article 1.3, provided
in an area reasonably contiguous to the Building in which the Demised Premises
are located, then and in that event, the term of this Lease shall cease and
terminate from the date that possession of the Leased Premises is taken by the
condemning authority in the Eminent Domain proceeding, or as the result of the
delivery of a deed in lieu of condemnation. The Tenant shall have no claim
against the Landlord for the value of any unexpired term of said Lease. No part
of any award made to the Landlord shall belong to the Tenant, nor shall the
Tenant make any claim against the condemning authority for the value of its
leasehold. Anything hereinabove contained to the contrary notwithstanding, it is
expressly understood and agreed that without affecting Landlord's award as
hereinabove referred to, the Tenant may make such independent claim as the law
may allow with respect to Tenant's leasehold improvements, if any, trade
fixtures and equipment, and cost of moving and/or relocation.
23. INCREASE OF INSURANCE RATES
If the rate which the Landlord must pay to secure fire
insurance shall be increased because of any change in occupancy or use of the
premises by the Tenant, or because of the Tenant's non-compliance with the
rules, regulations or requests of
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the fire insurance carrier, then such increase shall be paid by the Tenant to
the Landlord as additional rent.
24. TENANT'S FIRE INSURANCE
The Tenant, at its own cost and expense, shall insure its own
fixtures, equipment and contents, it being expressly understood and agreed that
the same is not the responsibility of the Landlord nor shall it be liable
therefor.
25. INDEMNITY
Anything in this Lease to the contrary notwithstanding, and
without limiting the Tenant's obligation to provide insurance pursuant to
Article 9 hereunder, the Tenant covenants and agrees that it will indemnify,
defend and save harmless the Landlord against and from all liabilities,
obligations, damages, penalties, claims, costs, charges and expenses, including
without limitation reasonable attorneys' fees, which may be imposed upon or
incurred by Landlord by reason of any of the following occurring during the term
of this Lease:
(i) Any matter, cause or thing arising out of use, occupancy,
control or management of the Leased Premises and any part thereof;
(ii) Any negligence on the part of the Tenant or any of its
agents, contractors, servants, employees, licensees or invitees;
(iii) Any accident, injury, damage to any person or property
occurring in, or about the Leased Premises;
(iv) Any failure on the part of Tenant to perform or comply
with any of the covenants, agreements, terms or conditions contained in
this Lease on its part to be performed or complied with.
Landlord shall promptly notify Tenant of any such claim asserted against it and
shall promptly send to Tenant copies of all papers or legal process served upon
it in connection with any action or proceeding brought against Landlord by
reason of any such claim. The indemnity provided hereunder, however, shall not
be applicable to any of its efforts or instances in which a waiver of
subrogation of Tenant's liability has been obtained and/or provided as in this
Lease required.
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26. FORCE MAJEURE
Except for the obligation of the Tenant to pay rent and other
charges as in this Lease provided, the period of time during which the Landlord
or Tenant is prevented from performing any other act required to be performed
under this Lease by reason of fire, catastrophe, strikes, lockouts, civil
commotion, acts of God or the public enemy, government prohibitions or
preemptions, embargoes, inability to obtain material or labor by reason of
governmental regulations or prohibitions, the act or default of the other party,
or other events beyond the reasonable control of Landlord or Tenant, as the case
may be, shall be added to the time for performance of such act.
27. MORTGAGE PRIORITY
This Lease and the estate, interest and rights hereby created
are subordinate to any mortgage now or hereafter placed upon the Property, the
Building or any estate or interest therein, including, without limitation, any
mortgage on any leasehold estate, and to all renewals, modifications,
consolidations, replacements and extensions of same as well as any substitutions
therefor. Tenant agrees that in the event any person, firm, corporation or other
entity acquires the right to possession of the Property and the Building,
including any mortgagee or holder of any estate or interest having priority over
this Lease, Tenant shall, if requested by such person, firm, corporation or
other entity, attorn to and become the tenant of such person, firm, corporation
or other entity, upon the same terms and conditions as are set forth herein for
the balance of the Lease term. Notwithstanding the foregoing, any mortgagee may,
at any time, subordinate its mortgage to this Lease, without Tenant's consent,
by notice in writing to Tenant, and thereupon this Lease shall be deemed prior
to such mortgage without regard to their respective dates of execution and
delivery, and in that event, such mortgagee shall have the same rights with
respect to this Lease as though it had been executed prior to the execution and
delivery of the mortgage. Tenant, if requested by Landlord, shall execute any
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such instruments in recordable form as may be reasonably required by Landlord in
order to confirm or effect the subordination of this Lease and the attornment of
Tenant to future landlords in accordance with the terms of this Lease. With
respect to the existing mortgage encumbering the Building in which the Demised
Premises are a part, Landlord agrees that it will use its best efforts to obtain
an agreement of non-disturbance from the existing mortgagee in such form as such
mortgagee may reasonably require. Landlord agrees that with respect to any
future mortgages, it will use its best efforts to obtain an agreement of
non-disturbance in the event the existing mortgage is refinanced from such
substitute mortgagee .
28. SURRENDER OF PREMISES
On the last day, or earlier permitted termination of the Lease
term, Tenant shall quit and surrender the premises in good and orderly condition
and repair (reasonable wear and tear, and damage by fire or other casualty
excepted) and shall deliver and surrender the Leased Premises to the Landlord
peaceably, together with all alterations, additions and improvements in, to or
on the premises made by Tenant as permitted under the Lease. The Landlord
reserves the right, however, to require the Tenant at its cost and expense to
remove any alterations or improvements installed by the Tenant and not permitted
or consented to by the Landlord pursuant to the terms and conditions of the
Lease, which covenant shall survive the surrender and the delivery of the
premises as provided hereunder. Prior to the expiration of the Lease term the
Tenant shall remove all of its property, fixtures, equipment and trade fixtures
from the premises. All property not removed by Tenant shall be deemed abandoned
by Tenant, and Landlord reserves the right to charge the reasonable cost of such
removal to the Tenant, which obligation shall survive the Lease termination and
surrender hereinabove provided. If the premises are not surrendered at the end
of the Lease term, Tenant shall indemnify Landlord against loss or liability
resulting from delay by Tenant
28
<PAGE> 33
in surrendering the premises, including, without limitation any claims made by
any succeeding tenant founded on the delay.
29. ESTOPPEL CERTIFICATE
Tenant agrees, from time to time as may be requested by
Landlord, to execute, acknowledge and deliver to Landlord all or any of the
following: an estoppel letter certifying to such party as Landlord reasonably
may designate, including any mortgagee, that this Lease is in full force and
effect and has not been amended, modified or superseded, that Landlord has
satisfactorily completed all construction work required by this Lease (subject
to completion of punchlist Items), that Tenant has accepted the Leased Premises
and is now in possession thereof, that Tenant has no defense offsets or
counterclaims hereunder or otherwise against Landlord with respect to this Lease
or the Leased Premises and Landlord is not in default hereunder (or if any of
the foregoing not be the case, specifying in reasonable detail the extent and
nature thereof), that Tenant has no knowledge of any pledge or assignment of
this Lease or rentals hereunder, that rent is accruing under this Lease but has
not been paid more than one month in advance and the date to which rent has been
paid; and any other instrument as may be reasonably requested to be executed by
Tenant by any mortgagee of the Property or Building or any interest therein, so
long as the rights of Tenant as provided for by this Lease are not materially
affected by any such other instrument. Tenant's estoppel letter shall be in the
form as Landlord or its mortgagee shall hereinafter proscribe.
30. TRANSFER BY LANDLORD
The term "Landlord" as used in this Lease means only the owner,
or the mortgagee in possession, for the time being of the building or real
property (or the owner of a lease of the building or of the real property) so
that in the event of any transfer of title to or lease of said building or real
property, the said Landlord shall be and hereby is entirely freed and relieved
of all covenants and obligations of Landlord hereunder thereafter accruing, and
it shall be deemed and construed as a
29
<PAGE> 34
covenant running with the land without further agreement between the parties or
their successors in interest, or between the parties and the transferee of title
to or lessee of said building or real property, that the transferee of the
lessee has assumed and agreed to carry out any and all covenants and obligations
of Landlord hereunder.
31. LIMIT OF LANDLORD'S LIABILITY
In case the Landlord shall be a joint Venture, partnership,
tenancy in common, association or other form of joint ownership, the individual
members or entities thereof shall have absolutely no personal liability or
obligation with respect to any provision of this Lease, or any obligation or
liability arising therefrom or in connection therewith, which covenant
hereinabove referred to, shall be deemed effective as of the date Landlord
completes and delivers the Leased Premises in accordance with the terms and
conditions of the Lease and the plans and specifications herein provided.
32. LANDLORD'S RIGHT OF ENTRY AND ALTERATIONS
Landlord, or its agents, shall have the right at any time to
enter upon the Leased Premises to examine the same, to clean windows, or to make
such repairs, alterations or improvements as Landlord may deem necessary or
proper, and, during such operations, may close entrances, doors, corridors,
elevators and other facilities, all without any liability to Tenant by reason of
interference, inconvenience or annoyance; provided, however, that if such work
should materially reduce the area rented by Tenant, the rent paid by Tenant
shall be proportionately reduced, and further provided, that such work will be
done in such a manner as to cause the least possible interference, inconvenience
and annoyance to Tenant. However, this Article shall not be deemed as imposing
any duty on Landlord to undertake any of the acts specified therein.
33. LANDLORD'S REMEDIES AND EXPENSES
33.1 All rights and remedies of Landlord herein enumerated
shall be cumulative, and none shall exclude any other
30
<PAGE> 35
right or remedy allowed by law. For the purposes of any suit brought or based
hereon, this Lease shall be construed to be a divisible contract, to the end
that successive actions may be maintained On this Lease on successive periodic
sums which mature hereunder. Notwithstanding the foregoing, Landlord agrees that
all cognizable claims shall be filed in one action.
33.2 Tenant or Landlord shall pay, upon demand, all of the
Tenant's or Landlord's costs, charges and expenses, including the reasonable
fees of counsel, agents and others retained by Tenant or Landlord, incurred in
successfully enforcing the other's obligation hereunder.
34. LANDLORD'S RESERVED RIGHTS
Landlord reserves the following rights:
(a) To have access for Landlord and other tenants of the
building to any mail chutes located on the premises according to the rules of
the United States Post Office.
(b) During the last ninety (90) days of the term of this Lease
or any extension thereof, if during or prior to that time Tenant vacates the
premises, the Landlord shall have the right to enter the Leased Premises in
order to decorate, remodel, repair, alter or otherwise prepare the premises for
re-occupancy.
(c) To show the premises to prospective tenants or brokers
during the last year of the term of this Lease as extended and to prospective
purchasers at all reasonable times, provided prior notice to Tenant in each case
is given and Tenant's use and occupancy of the premises shall not be materially
inconvenienced by any such action of Landlord. Landlord may enter upon the
premises and may exercise any or all of the foregoing rights hereby reserved
without being deemed guilty of an eviction or disturbance of Tenant's use or
possession and without being liable in any manner to Tenant. Notwithstanding the
foregoing, Landlord agrees that it shall arrange said visitation only by
appointment with Tenant.
35. RULES AND REGULATIONS
Tenant, its employees, agents, servants, licensees and visitors
agree to comply with the rules and regulations with
31
<PAGE> 36
respect to the premises and Building (hereinafter called the "Rules") as the
same shall be applicable to all tenants of the Building. The Rules are set forth
at the end of this Lease and are expressly made a part hereof as Schedule "D".
Landlord shall have the right to make reasonable additions and amendments
thereto from time to time; and Tenant, its employees, agents and servants, agree
to comply with such additions and amendments after not ice from Landlord All
notices with respect to the Rules shall be in writing. The Rules shall not deny
Tenant access to the Leased Premises in excess of the regular work week hours
defined in Article 7. Tenant further agrees to furnish to Landlord license and
car information as to its employees who may be using the parking lot as may be
required by the Landlord, and Tenant further agrees to comply with such
reasonable Rules or requirements in connection with the use of the parking
facilities as shall be made applicable to all tenants of the Building.
36. WAIVERS
No delay or forbearance by Landlord in exercising any right or
remedy hereunder or in undertaking or performing any act or matter which is not
expressly required to be undertaken by Landlord shall be construed,
respectively, to be a waiver of Landlord's rights or to represent any agreement
by Landlord to undertake or perform such act or matter thereafter.
37. WAIVER OF TRIAL BY JURY
It is mutually agreed by and between Landlord 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 against the
other on any matter whatsoever arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant, Tenant's use of or occupancy of
the Leased Premises and/or any claim of injury or damage and any emergency or
any other statutory remedy.
38. SEVERABILITY
Each covenant and agreement in this Lease shall for
all purposes be construed to be a separate and independent covenant
32
<PAGE> 37
or agreement. If any provision in this Lease or the application thereof shall to
any extent be invalid, illegal or otherwise unenforceable, the remainder of this
Lease, and the application of such provision, other than as invalid, illegal or
unenforceable, shall not be affected thereby; and such provisions in this Lease
shall be valid and enforceable to the fullest extent permitted by law
39. QUIET ENJOYMENT
The Landlord covenants and represents that the Landlord is the
owner of the premises herein leased and has the right and authority to enter
into, execute and deliver this Lease, and does further covenant that the Tenant
on paying the rent and performing the conditions and covenants herein contained,
shall and may Peaceably and quietly have, hold and enjoy the Leased Premises for
the term aforementioned.
40. LEASE CONSTRUCTION
The Lease shall be construed pursuant to the laws of the State of
New Jersey.
41. BINDING EFFECT
The terms, covenants and conditions of the within Lease shall be
binding upon and inure to the benefit of each of the parties hereto, and their
respective heirs, successors, executors, administrators and assigns.
42. DEFINITIONS
The neuter gender, when used herein and in the acknowledgment
hereafter set forth, shall include all persons, firms and corporations, and
words used in the singular shall include words in the plural where the text of
the instrument so requires.
43. PARAGRAPH HEADING
The paragraph headings herein are inserted only as a matter of
convenience and for reference, and in no way to define, limit or describe the
scope of this Lease nor the intent of any provision hereof.
33
<PAGE> 38
44. AMENDMENT AND MODIFICATIONS
This Lease contains the entire agreement between the parties
hereto, and shall not be amended, modified or supplemented unless by agreement
in writing signed by both Landlord and Tenant and the same shall not be valid
unless approved in writing by all mortgagees and holders of any estate or
interest in the Building or the Property by virtue of leases or other
instruments expressly referred to herein or which are then of record.
45. EXECUTION AND DELIVERY
These documents are submitted to the Tenant for consideration
purposes and shall not be binding on Landlord until fully executed in all parts
by Landlord and Tenant and exchanged.
46. SCHEDULES
The following Schedules are referred to in this Lease:
SCHEDULE "A" - Legal Description of Property
SCHEDULE "B" - Plan of Leased Premises
SCHEDULE "C" - Janitorial Services
SCHEDULE "D" - Building Rules and Regulations
47. BROKERAGE
The parties mutually represent to each other that neither party
dealt with any broker in connection with the within Lease.
48. RELOCATION
From time to time or at any time during the Term and on not less
than thirty (30) days' notice to Tenant, Landlord shall have the right to move
the Tenant out of the Leased Premises and into similar space of at least equal
area in the Building which shall have the same or similar exposure, provided:
(i) the new space has the same configuration as the Leased Premises; (ii) that
the relocated space can house and accept all of Tenant's equipment; and (iii)
Tenant can be relocated without any interruption of its business operation. In
such event Landlord shall remove, relocate and reinstall Tenant's equipment,
furniture and fixtures and redecorate the new space, similar to the old space,
all of which shall be done at Landlord's sole cost and expense, and for the
balance of the Lease term, this Lease shall continue in full force
34
<PAGE> 39
and effect and shall apply to the new space as though this Lease had originally
been for such new space.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals or caused these presents to be signed by its proper corporate officers and
caused its proper corporate seal to be hereunto affixed, the day and year first
above written.
RIVER OFFICE EQUITIES,
WITNESS: a New Jersey Partnership
/s/ Barbara Harris By: /s/Mark Dubrow (L.S.)
- - ------------------------------- ------------------------------
BARBARA HARRIS MARK DUBROW, General Partner
FIRST MONTAUK SECURITIES CORPORATION,
a New Jersey Corporation
ATTEST:
/s/ Monica Harris By: /s/ ?
- - ------------------------------- ------------------------------
MONICA HARRIS
35
<PAGE> 40
STATE OF NEW JERSEY )
) SS.:
COUNTY OF MONMOUTH )
BE IT REMEMBERED, that on this day of January, 1996, before me, the
subscriber, personally appeared MARK DUBROW, General Partner of RIVER OFFICE
EQUITIES, Pa New Jersey Partnership, who, I am satisfied, is the Landlord
mentioned in the within Instrument, and thereupon he acknowledged that he
signed, sealed and delivered the same as his act and deed, for the uses and
purposes therein expressed.
/s/ Barbara L. May
-----------------------------------------
BARBARA L. MAY
A NOTARY PUBLIC OF NEW JERSEY
STATE OF NEW JERSEY ) MY COMMISSION EXPIRES SEPTEMBER 11, 1988
) SS.
COUNTY OF MONMOUTH )
BE IT REMEMBERED, that on this 15th day of February, 1996, before me,
the subscriber, personally appeared William J. Kurinsky who, I am satisfied, is
the person who signed the within Instrument as Executive Vice President of FIRST
MONTAUK SECURITIES CORPORATION, a New Jersey Corporation, the Tenant named
therein, and he thereupon acknowledged that the said instrument made by the
corporation and sealed with its corporate seal, was signed, sealed with the
corporate seal and delivered by him as such officer and is the voluntary act and
deed of the corporation, made by virtue of authority from its Board of
Directors.
/s/ Olga C. Carmen
-----------------------------------------
OLGA C. CARMEN
NOTARY PUBLIC OF NEW JERSEY
MY COMMISSION EXPIRES SEPTEMBER 11, 1988
<PAGE> 41
SCHEDULE "A"
BEGINNING at a point on the Northerly Right of Way line of Newman
Springs Road (Rt. 520), distant 740.56 feet from the intersection of the
aforesaid Northerly sideline of Newman Springs Road with the Easterly Right of
Way line of Half Mile Road; thence running
(1) North 5 degrees 35 minutes 55 seconds, East, a distance of 544.39 feet to a
point; thence
(2) South 84 degrees 24 minutes 05 seconds East, a distance of 300.00 feet to a
point; thence
(3) South 5 degrees 35 minutes 55 seconds West, a distance of 544.39 feet to a
point on the aforesaid Northerly sideline of Newman Springs Road; thence
(4) Along the Northerly sideline of Newman Springs Road, North 84 degrees 24
minutes 05 seconds West, a distance of 300.00 feet to a point, said point
being the point and place of BEGINNING.
THE above premises are known and designated as Lots 3 and 3A in Block 295
on the Official Tax Map of the Township of Middletown, Monmouth County, New
Jersey.
<PAGE> 42
SCHEDULE "B"
Plan of Leased Premises
<PAGE> 43
SCHEDULE "C"
------------
JANITORIAL MAINTENANCE SPECIFICATIONS
for
RIVER OFFICE EQUITIES
-----------------------------
Daily Janitorial Services Monday through Friday
Entrance Lobby and all Offices
1. Entrance lobby will be damp mopped and/or vacuumed nightly.
2. Remove fingerprints and smudges from all entrance glass doors.
3. Empty and clean waste receptacles, ashtrays. Remove waste to a designated
area.
4. Sweep and dust mop all flooring.
5. Vacuum clean all carpeting.
6. Dust and wipe clean furniture: desks, chairs, tables, bookcases,
filing cabinets, etc.
7. Dust all telephone equipment.
8. Dust all synthetic plastic on chairs and sofas.
9. Dust all paneling, moldings, baseboards, chair rails, and
10. Wash clean and disinfect all water coolers and fountains.
11. Sweep daily and wet mop as needed all stairways and rails.
12. Vacuum clean all elevators nightly.
13. Maintain slop sings and storage locker in clean and orderly condition.
Lavatory Areas
Thoroughly scour, disinfect, wash and rinse clean: basins, bowls, urinals and
toilet seats including undersides and underlip of bowls and urinals.
Clean, disinfect, and polish all bright work, enameled surfaces, and stainless
steel fixtures.
Mirrors and cabinets will be cleaned and polished. Remove spots and stains from
lavatory walls and partitions. Waste receptacles will be washed and disinfected.
Sweep, wash and rinse clean, using disinfectant cleaning solution, all lavatory
flooring, daily. Special attention will be given to area of flooring directly
under urinals and behind toilet howls.
Refill all soap, tissue, and towel dispensers.
Security
Notify owner of any faulty locks, lighting and electrical equipment and any
irregularities.
Upon completion of work, extinguish all lights (except those requested to be
left on), close all windows, lock all doors, and reset any alarm systems.
The Contractor will sign and be responsible for keys to the building, and the
keys will be maintained by a person on the job.
General Conditions
Our employees will immediately report to the proper management, any fires, items
in need of repair, hazardous conditions, leaky faucets, burned out lights, or
any other irregularities. All lost items which may be found, will be turned in
immediately. All company and building regulations will be strictly adhered to by
our
<PAGE> 44
employees and they will be instructed not to disturb any paper on desks or
cabinets of the clients. They will stay out Of all areas which are not under
service and restricted or prohibited to their use.
Lobby and Front Entrance
Constant attention will be given to keeping lobby and front entrance areas as
clean and attractive as possible. Floors will be vacuumed/damp mopped daily.
Furniture in waiting rooms or lobby will be dusted and/or washed. Glass inserts
of main entrance doors will be cleaned daily. Entrance glass will be thoroughly
washed inside and out once per month.
Corridors and Stairwells
All hallway corridors will be cleaned daily. Stairwells will be given special
attention. They will be swept and/or vacuumed daily. Washing will be performed
as needed.
Elevators
All elevators will be thoroughly vacuumed daily. Paneled walls will be polished
as often as needed. Door grooves will be vacuumed out as needed. Stainless steel
will be polished.
Floors (VAT)
All VAT flooring will be spray-buffed once per month.
Dust Mopping
All floors will be dust mopped nightly, with special treated long strand cotton
mops. These treated mops are replaced regularly with freshly treated and
laundered mop heads. This procedure insures the removal of all dust, leaving a
dust free floor. Special attention is given to out of the way areas, such as
corners and baseboards.
Carpeting
All carpetings are to be vacuumed, nightly, using a Hoover beater type vacuum
cleaner.
Room Trim
All windows sills, chair rails, baseboards, moldings partitions picture frames,
etc. below six foot heights, shall be dusted with a specially treated dust cloth
at regular intervals. Over six foot heights, shall be dusted on schedule,
including tops of partitions, transoms and doors.
Waste Receptacles
Waste receptacles will be emptied, waste removed and placed at assigned
locations, nightly, plastic liners will be placed in all waste baskets and
replaced as needed.
Furniture and Equipment
All furniture and equipment shall be dusted and polished with specially treated
dust cloths and dusting tools.
2
<PAGE> 45
Ash Trays
All ash trays will be emptied, and damp wiped nightly.
Drinking Fountains
All drinking fountains will be thoroughly cleaned nightly, using a neutral
cleaning agent with disinfectant added to assure bacteria free drinking
fountains.
Storage Space and Service Closet
Space will be assigned for the storage of all bulk supplies and equipment
necessary for the performance of the work under this contract. All service areas
will be kept in a clean and orderly condition
Window Cleaning
All exterior windows will be cleaned inside and outside, twice per year.
Insurance
Cleaning Service shall carry the following insurance:
Workman's compensation - Statutory Limits
Public Liability Insurance - Bodily Injury
$500,000/$1,000,000. Umbrella Wrap-Around all Inclusive
$2,000,000. Personal Bond in case of theft - $25,000 minimum
per incident.
3
<PAGE> 46
SCHEDULE "D"
BUILDING RULES AND REGULATIONS
1. Tenant shall not obstruct or permit its agents, clerks or servants to
obstruct, in any way, the sidewalks, entry passages, corridors, halls, stairways
or elevators of the Building, or use the same in any other way than as a means
of passage to and from the offices of Tenant; bring in, store, test or use any
materials in the Building which could cause a fire or an explosion or produce
any fumes or vapor; make or permit any improper noises in the Building; smoke in
the elevators; throw substances of any kind out of the windows or doors, or down
the passages of the Building, or in the halls or passageways; sit on or place
anything upon the window sills; or clean the windows.
2. Waterclosets and urinals shall not be used for any purpose other than
those for which they are constructed; and no sweepings, rubbish, ashes,
newspaper or any other substances of any kind shall be thrown into them. Waste
and excessive or unusual use of electricity or water is prohibited.
3. The windows, doors, partitions and lights that reflect or admit light
into the halls or other places of the Building shall not be obstructed. NO
SIGNS, ADVERTISEMENTS OR NOTIcES SHALL BE INSCRIBED, PAINTED, AFFIXED OR
DISPLAYED IN, ON, UPON OR BEHIND ANY WINDOWS, except as may be required by law
or agreed upon by the parties; and no sign, advertisement or notice shall be
inscribed painted or affixed on any doors, partitions or other part of the
inside of the Building, without the prior written consent of Landlord. If such
consent be given by Landlord, any such sign, advertisement, or notice shall be
inscribed, painted or affixed by Landlord, but the cost of the same shall be
charged to and be paid by Tenant, and Tenant agrees to pay the same promptly, on
demand. Landlord agrees that Tenant shall be suitably identified
4. No contract of any kind with any supplier of towels, water, etc.,
toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
paper, rubbish or garbage, or other like service shall be entered by Tenant, nor
shall any vending machine of any kind be installed in the Building, without the
prior written consent of Landlord.
5. When electric wiring of any kind is introduced, it must be connected
as directed by Landlord, and no stringing or cutting of wires will be allowed,
except within the prior written consent of Landlord, and shall be done only by
contractors approved by Landlord. The number and location of telephones,
telegraph instruments, electric appliances, call boxes, etc., shall be approved
by Landlord. No tenant shall lay linoleum or other similar floor covering so
that the same shall be in direct contact with the floor of the Premises; and if
linoleum or other similar floor covering is desired to be used, an inter-lining
of builder's deadening felt shall be first affixed to the floor by a paste or
other material, the use of cement or other similar adhesive material being
expressly prohibited.
6. Landlord shall have the right to prescribe the weight, size and
position of all safes and other bulky or heavy equipment and all freight brought
into the Building by the Tenant; and also the times of moving the same in and
out of the Building; and all such moving must be done under the supervision of
the Landlord. Landlord will not be responsible for loss of or damage to any such
equipment or freight from any cause; but all damage done to the Building by
moving or maintaining any such equipment or freight shall be repaired at the
expense of Tenant. All safes shall stand on a base of such size as shall be
designated by the Landlord. The Landlord reserves the right to inspect all
freight to be brought
<PAGE> 47
into the building and to exclude from the building all freight which violates
the lease.
7. No machinery of any kind or articles of unusual weight or size will
be allowed in the Building without the prior written consent of Landlord.
Business machines and mechanical equipment shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient in Landlord's judgment to
absorb and prevent vibration, noise and annoyance.
8. No additional lock or locks shall be placed by Tenant on any door in
the Building, without prior written consent of Landlord. Two keys will be
furnished Tenant by Landlord; two additional keys will be supplied to Tenant by
Landlord, upon request, without charge; any additional keys requested by Tenant
shall be paid for by Tenant at a charge of $1.00 per key. Tenant, its agents and
employees, shall not change any locks. All keys to doors and washrooms shall be
returned to Landlord at the termination of the tenancy, and in the event of loss
of any keys furnished, Tenant shall pay Landlord the cost thereof.
9. Tenant shall not employ any person or persons other than Landlord's
janitors for the purpose of cleaning the premises, without prior written consent
of Landlord. Landlord shall not be responsible to Tenant for any loss due to
theft or vandalism from the Leased Premises however occasioned. Landlord,
however, shall be responsible for any damage caused or due to the carelessness
or negligence of the Landlord, its agents, servants or employees in connection
with any such cleaning, subject to the terms and conditions of Article 21 of the
within lease.
10. No animals of any kind shall be brought into or kept in
or about the Premises.
11. The requirements of Tenant will be attended to only upon the
application at the office of the Building. Employees of Landlord shall not
perform any work for Tenant or do anything outside of their regular duties,
unless under special instructions from the office of the Landlord. Landlord
agrees to keep Tenant advised at all times of how to contact the Building
Manager.
12. The Premises shall not be used for lodging or sleeping
purposes, and cooking therein is prohibited. Vending machines for
coffee and rolls are permitted.
13. Tenant shall not conduct, or permit any other person to conduct any
auction on the premises, manufacture or store goods, wares or merchandise upon
the Premises, without the prior written approval of Landlord, except the storage
of usual supplies and inventory to be used by Tenant in the conduct of its
business; permit the Premises to be used for gambling, make any unusual noises
in the Building; permit to be played any musical instrument in the premises;
permit to be played any radio, television, recorded or wire music in such a loud
manner so as to disturb or annoy other tenants; or permit any unusual odors to
be produced upon the Premises. Tenant shall not occupy or permit any portion of
Premises leased to him to be occupied as an office for a public stenographer or
for the possession, storage manufacture or sale of intoxicating beverages,
tobacco in any form, or as a barber or manicure shop.
14. After 6:00 P.M. until 8:00 A.M. on weekdays, and at all
hours on Sundays and legal holidays, the Building is closed.
Landlord reserves the right to exclude from the Building during
such periods, all persons who do not present a pass to the Building
signed by Tenant. Each Tenant shall be responsible for all persons
for whom he issues such pass and shall be liable to Landlord for
all acts of such persons.
2
<PAGE> 48
15. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall be attached
or hung in, or used in connection with any window or door of the Premises,
without the prior written consent of Landlord. Such Curtains, blinds and shades
must be of a quality, type, design, and color and attached in a manner approved
by landlord.
16. Canvassing, soliciting and peddling in the Building are
prohibited, and Tenant shall cooperate to prevent the same.
3
<PAGE> 49
L E A S E A G R E E M E N T
BY AND BETWEEN
RIVER OFFICE EQUITIES
a New Jersey Partnership
"Landlord"
-and-
FIRST MONTAUK SECURITIES CORPORATION
a New Jersey corporation
"Tenant"
---------------------------------------------
DATED: January , 1996
---------------------------------------------
LAW OFFICES
EPSTEIN, EPSTEIN, BROWN & BOSEK,
A Professional Corporation
245 Green Village Road
P. O. Box 901
Chatham Township, New Jersey 07928
File No. 11684-203
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION - DECEMBER 31, 1995 AND CONSOLIDATED
STATEMENT OF INCOME AS ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10KSB DECEMBER 31, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 845
<RECEIVABLES> 384
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 7,115
<PP&E> 805
<TOTAL-ASSETS> 10,487
<SHORT-TERM> 0
<PAYABLES> 6,672
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 166
<LONG-TERM> 48
0
0
<COMMON> 3,540
<OTHER-SE> 61
<TOTAL-LIABILITY-AND-EQUITY> 10,487
<TRADING-REVENUE> 9,764
<INTEREST-DIVIDENDS> 1,077
<COMMISSIONS> 17,113
<INVESTMENT-BANKING-REVENUES> 388
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 193
<COMPENSATION> 19,543
<INCOME-PRETAX> 1,252
<INCOME-PRE-EXTRAORDINARY> 768
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 768
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
